Front Page Titles (by Subject) The Economic Analysis of Law vs. Values - Literature of Liberty, Summer 1980, vol. 3, No. 2
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The Economic Analysis of Law vs. Values - Leonard P. Liggio, Literature of Liberty, Summer 1980, vol. 3, No. 2 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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The Economic Analysis of Law vs. Values
“Justice, Efficiency and the Economic Analysis of Law: A Comment on Fried.” Journal of Legal Studies 9(March 1980):355–366.
O'Driscoll here criticizes Richard Posner's economic analysis of law, partly by commenting on a paper by Charles Fried on the same subject entitled “The Laws of Change”.
The economic analysis of law exhibits both a positive and a normative aspect. First, the positive analysis claims that common law has been efficient. This is so only in the trivial sense that any application of means to ends is rational and thus “efficient.” If we narrow the notion of efficiency, such as to economic efficiency, then common law could not be efficient. The economic variables are subjective and involve expectations, so ex post outcomes must involve disrupted expectations for at least one party and thus are not typically efficient. Similarly, ex post judicial decisions would not be efficient for both parties since one party's expectations have to be foiled. Nor is it possible for judges to assign rights and liabilities solely on efficiency grounds because utility or wealth maximization requires some set of rights and rules to govern the choice process.
Posner also errs in believing that where there are prohibitively high “transactions costs,” judges can mimic markets. But as the debates with the socialists of the 1920s and 1930s show, where information is lacking a market is impossible, and it is only where information is lacking that a need to “mimic” markets would arise.
Posner also claims that economic analysis will tell us why laws change, and that judges conceal their true (economic) reasons for their opinions. Fried correctly countered that the reasons laws change is due to moral reasoning, since law is a branch of morality. However, Fried goes too far in assuming moral arguments are the whole motivational story. Economic motivation plays some role. Nor should Fried chide economists for saying nothing about the content of preferences. All preferences are, for economist qua economist, equal with regard to allocational choices, and the economist has no business saying moral distinctions can or cannot be made within these preferences. In fact, when persons' changing preferences and their deliberations about such preferences are essential to the analysis, we are beyond pure economics. A theory for prescribing legal changes is not a pure economic theory.
Finally, O'Driscoll argues that both Fried and Posner (as well as John Rawls) share the same faulty view that law can be deduced from simple principles (moral principles and wealth maximization, respectively). Law evolves and grows and it is not just constructed. Hence it cannot really be deduced from axioms or principles.
Foreign Policy and Ideology
What accounts for the appeal of war, militarism, and imperialism? The following summaries analyze facets of the personal motivations and abstract ideology that justify war and international violation of individual rights. Stromberg's study of the reasons behind many intellectuals' enthusiasm for World War I confirms Robert Nisbet's earlier dissection of “The Lure of Military Society” in The Twilight of Authority (1975). These summaries show that one's vision of the value of all human life affects one's judgment of just and unjust wars, the morality of imperialism, war critics, and national “enemies.” An earlier issue of Literature of Liberty (October/December 1979, p.56–67) stressed Sir Herbert Read's linking of irresponsibility or forgetfulness of the preciousness of every individual human life with political power and the spirit of militarism.