When Ronald Coase and Guido Calabresi pioneered the application of economics to law in the early 1960s, they pushed efficiency, incentives, and the iconic “rational actor” – one who behaves rationally to pursue its preferences – at the forefront of areas of private law such as civil liability. , contracts and ownership.
UVA law professor and vice-dean of the school, Michael D. Gilbert, teamed up with his mentor and former professor, Robert D. Cooter of the University of California, Berkeley, to push this analysis a a step further by applying economic theory to the realm of public law. Their new textbook, “Public Law and Economics”, will be published by Oxford University Press this month.
Although it may seem counter-intuitive to apply economic analysis to areas that don’t focus on money or numbers, the book is an extension of the past 60 years of research in law and economics, a Gilbert said.
“A lot of people believe that economics has no place in public law because it’s about dollars and cents, but that’s a misunderstanding,” Gilbert said. “Economics rests on a much deeper conception of the social good than that. Even if you reject this design, you should still worry about the economy because of its emphasis on incentives. The law generally aims to change people’s behavior, and it is easier to achieve this with a thorough understanding of the incentives.
The book was written over a six-year period, and much of the authors’ time was spent figuring out how to organize the text into cohesive, digestible topics that apply universally.
“Public law encompasses everything from international treaties to the separation of governmental powers to speed limits that we probably all violated on our way to work this morning,” Gilbert said. “There’s too much out there to organize the book by legal topic, so we decided to organize it around what we consider to be fundamental processes of governance.”
The authors concluded that “virtually all public law, from those great treaties to those speed limits, is the product of one or more of six fundamental processes,” Gilbert said. “If you understand the economic forces that underlie these fundamental processes of lawmaking – negotiation, voting, entrenchment, delegation, judgment and enforcement – you will understand a great deal about public law.”
Gilbert and Cooter’s goal is not necessarily to state policy prescriptions, but rather to use economic analysis to allow readers to think about why public laws and regulations are enacted and whether they are likely to achieve their goals.
Take, for example, a law requiring people to publicly disclose their political contributions. A litigant could argue that it violates freedom of speech, while the state would defend the law by claiming that disclosure reduces the risk of corruption.
Looking at the law through the lens of economics reveals a surprise, Gilbert said.
“Disclosure provides information to the public and allows people to track fraudulent transactions,” Gilbert said. “It’s good. But it also provides information to corrupt actors: who is buying, who is selling and at what price.”
All markets, including illegal markets, need information to operate, he added, so “in deciding whether disclosure combats corruption, the question is whether the gains from transparency outweigh the losses. that accumulate when we grease the market with bribes”.
Among other implications, Gilbert said, “this reasoning calls into question the Supreme Court’s finding that campaign finance disclosure can contain bribery.”
Cooter is a pioneer in law and economics and a recipient of the Ronald H. Coase Medal, awarded in recognition of major contributions to the field. He was founding director of the American Law and Economics Association and co-founder of the Latin American and Caribbean Law and Economics Association. He is the co-author of at least three other books – including “Law and Economics” – and he has published a wide variety of articles applying economic analysis to private law, constitutional law and the law of developing countries.
Gilbert was the first director of the law school’s Center for Public Law and Political Economy and is a member of the Democracy Initiative’s Corruption Lab for Ethics, Accountability, and the Rule of Law. He won the UVA All-University Teaching Award and the Student Council Distinguished Teaching Award.
Gilbert already integrates economic theory into his political law courses, including the regulation of political process and constitutional law and economics, but the new book is designed to put economic knowledge and tools at the disposal of professors and their students, as well as to a wider audience, including researchers. , academics and policy makers. To achieve this goal, Cooter and Gilbert entered into an open access agreement to make the book available online for free.
Ironically, they spent six years working on a book with no economic return, suggesting that the rational actor might just be mythical. But Gilbert explains this tension through the same lens that he and Cooter applied to public law analysis: The arrangement satisfies the preferences of each party.
“It was never going to be a lucrative business – we don’t care about that,” Gilbert said. “We could have done it the conventional way and we would have had a few hundred dollars in royalties every year. But we don’t want money; we want people to use the book. The open access agreement is an investment, and we think it’s a very good investment.