What Legal Scholars Can Learn from Law and Economics

The starting point of this Article is Richard Posner\u27s statement of regret (in 1975) that, in terms of legal scholarship, normative analysis vastly preponderates over positive, and that this can be corrected by the economic analysis of law. I consider that the positive, predictive contribution of law and economics is still undervalued. Lawyers, practitioners and academics, have much to learn from economic analysis because so often they fail to understand the nature of the interaction between law and market phenomena. This Article explores three areas of analysis to justify this contention: the interplay between public and private incentive systems to induce behavioral change; the ex ante, ex post dilemma in the application of legal rules; and comparative law and rule-formulation. The second part of the Article shifts to what may be described as the explanatory or interpretative function of law and economics Traditionally legal scholarship has centered on promoting the coherence and systematic orderliness of the law and the explanatory approach can make a major contribution to this. Because law and economics cuts across traditional legal conceptual structures, and indeed legal systems and cultures, it provides a valuable tool for understanding the relationship between different parts of the legal systems and between different systems. More controversially, I also contend that an economic interpretation helps to resolve the ambiguities and uncertainties that inevitably arise when legal entitlements are based on notions of morality and corrective justice