University of California at Berkeley School of law The Uses of History in Law and Economics by Ron harris UC Berkeley School of Law Public Law and Legal Theory Research Paper No. 139 UC Berkeley public law and Legal Theory Research Paper Series UC Berkeley School of Law, Boalt Hall, Berkeley, CA 94720-7200 This paper can be downloaded without charge from the Social Science Research Network Paper Collection at http://ssrn.com/abstract=454501
University of California at Berkeley School of Law The Uses of History in Law and Economics by Ron Harris UC Berkeley School of Law Public Law and Legal Theory Research Paper No. 139 2003 UC Berkeley Public Law and Legal Theory Research Paper Series UC Berkeley School of Law, Boalt Hall, Berkeley, CA 94720-7200 This paper can be downloaded without charge from the Social Science Research Network Paper Collection at http://ssrn.com/abstract=454501
The Uses of History in Law and economics Ron harris During the last quarter of the twentieth century, the humanities and social sciences have turned toward history something that culminated in the 1990s, and this phenomenon was evident in law as well. However until recently law and economics, the most infuential post-World War ll jurisprudential movement, was a-historical in its methodology and research agenda. The first objective of this article is to call attention to this neglected characteristic of law and economics and to explain its causes by analyzing its intellectual origins, its methodological causes, and the nature of its interaction with other sub-fields of law of ond objective of the article is to identifj a change-in-the-making and its characteristics. Law and economics scholars have turned to history more often and for new purposes in recent years. The article identifies the set offactors that brought about this turn to history. These factors include: a growing willingness to conduct empirical research, the integration of public choice analysis Ahich ofren led to the study of past legislation) into mainstream law and economics: preliminary comparative law and economics studies:a growing interaction between law and economics and new institutional School of Law, Tel Aviv University. I thank Lucian Bebchuk, Terry Fisher, Joshua Getzler, Ariela Gross, Alon Harel, Laura Kalman, Dan Klerman, Timur Kuran, David Lieberman, Assaf Likhovski, Andrei Marmor, Geoffrey Miller, Eben Moglen Porat, Daniel Spulber, Christopher Tomlins, Jenny Wahl, Omri Yadlin, and the participants at the ASLH annual meeting at Princeton and in the Writing Legal History Conference sponsored by the Cegla Center, Tel Aviv University Faculty of Law, for advice, assistance, and thoughtful comments at various stages of this project. I thank Nimrod Aviad, Jacob Kastiel, and Itai Rabinowitz for their excellent research assistance and Dana Rothman for the high level of editing
The Uses of History in Law and Economics Ron Harris* During the last quarter of the twentieth century, the humanities and social sciences have turned toward history, something that culminated in the 1990s, and this phenomenon was evident in law as well. However, until recently, law and economics, the most influential post-World War II jurisprudential movement, was a-historical in its methodology and research agenda. The first objective of this article is to call attention to this neglected characteristic of law and economics and to explain its causes by analyzing its intellectual origins, its methodological causes, and the nature of its interaction with other sub-fields of law and of economics. The second objective of the article is to identify a change-in-the-making and its characteristics. Law and economics scholars have turned to history more often and for new purposes in recent years. The article identifies the set of factors that brought about this turn to history. These factors include: a growing willingness to conduct empirical research; the integration of public choice analysis (which often led to the study of past legislation) into mainstream law and economics; preliminary comparative law and economics studies; a growing interaction between law and economics and new institutional * School of Law, Tel Aviv University. I thank Lucian Bebchuk, Terry Fisher, Joshua Getzler, Ariela Gross, Alon Harel, Laura Kalman, Dan Klerman, Timur Kuran, David Lieberman, Assaf Likhovski, Andrei Marmor, Geoffrey Miller, Eben Moglen, Ariel Porat, Daniel Spulber, Christopher Tomlins, Jenny Wahl, Omri Yadlin, and the participants at the ASLH annual meeting at Princeton and in the Writing Legal History Conference sponsored by the Cegla Center, Tel Aviv University Faculty of Law, for advice, assistance, and thoughtful comments at various stages of this project. I thank Nimrod Aviad, Jacob Kastiel, and Itai Rabinowitz for their excellent research assistance and Dana Rothman for the high level of editing
660 Theoretical Inquiries in La Vol.4659 economics, and the importation of the concept of path dependency and of greater awareness of past burdens from other quarters of economic theory. Finally, the article examines the concrete ways in which these developments are being realized, by pointing out the various uses of history evident in specific law and economics studies conducted in recent years. It suggests a classification of this growing literature into six distinct uses of history, four of them emerging only in recent years The general aim of this article is to enhance awareness among la and economics scholars of the actual and potential uses of history. The article further seeks to connect lanw-and-economics historical studies to other relevant historical works so that the law and economics inquiry will not be conducted in a disciplinary vacuum. It thus calls to the published in the field of law and economics. Finally it is also directed at scholars interested in the intellectual history of jurisprudence and in the methodological turn to history in the social sciences INTRODUCTION Many scholars have observed that during the last quarter of the twentieth century, the humanities and social sciences have turned toward history something that culminated in the 1990s. This was manifested in the rise of schools and trends such as historical sociology, ethno-history in anthropology new institutionalism in political science and economics, and new historicism in literary theory. This phenomenon was evident in law as well, with the advance of new types of legal history writing associated first with the Wisconsin School of Legal History and then with Critical Legal Studies But law and economics, the most successful school of jurisprudence of the second half of the twentieth century 2 and whose influence in law schools still on the rise, seems to stand in contradiction to this general shift toward history, at least insofar as legal scholarship is concerned The aim of this article is to enhance awareness among law and economics scholars of the actual and potential uses of history. When dealing with past I Terrence J. McDonald, The Historic Turn in the Human Sciences 1 (1996) 2 Neil Duxbury, Patterns of American Jurisprudence(1995). Richard Posner, The Decline of Law as an Autonomous Discipline: 1962-1987, 100 Harv. L. Rev. 761 (1987): William M. Landes Richard A Posner, Symposium on the Trends in Legal Citations and Scholarship: Heavily Cited Articles in Law, 71 Chi -Kent. L. Rev
660 Theoretical Inquiries in Law [Vol. 4:659 economics; and the importation of the concept of path dependency and of greater awareness of past burdens from other quarters of economic theory. Finally, the article examines the concrete ways in which these developments are being realized, by pointing out the various uses of history evident in specific law and economics studies conducted in recent years. It suggests a classification of this growing literature into six distinct uses of history, four of them emerging only in recent years. The general aim of this article is to enhance awareness among law and economics scholars of the actual and potential uses of history. The article further seeks to connect law-and-economics historical studies to other relevant historical works so that the law and economics inquiry will not be conducted in a disciplinary vacuum. It thus calls to the attention of legal historians and economic historians the new literature published in the field of law and economics. Finally it is also directed at scholars interested in the intellectual history of jurisprudence and in the methodological turn to history in the social sciences. INTRODUCTION Many scholars have observed that during the last quarter of the twentieth century, the humanities and social sciences have turned toward history, something that culminated in the 1990s.1 This was manifested in the rise of schools and trends such as historical sociology, ethno-history in anthropology, new institutionalism in political science and economics, and new historicism in literary theory. This phenomenon was evident in law as well, with the advance of new types of legal history writing associated first with the Wisconsin School of Legal History and then with Critical Legal Studies. But law and economics, the most successful school of jurisprudence of the second half of the twentieth century2 and whose influence in law schools is still on the rise, seems to stand in contradiction to this general shift toward history, at least insofar as legal scholarship is concerned. The aim of this article is to enhance awareness among law and economics scholars of the actual and potential uses of history. When dealing with past 1 Terrence J. McDonald, The Historic Turn in the Human Sciences 1 (1996). 2 Neil Duxbury, Patterns of American Jurisprudence (1995). Richard Posner, The Decline of Law as an Autonomous Discipline: 1962-1987, 100 Harv. L. Rev. 761 (1987); William M. Landes & Richard A. Posner, Symposium on the Trends in Legal Citations and Scholarship: Heavily Cited Articles in Law, 71 Chi.-Kent. L. Rev. 825 (1996)
2003] The Uses of History in Law and Economics 661 periods and changes over time, law and economics scholars need not begin their inquiry from square one. They can build upon modes of historical reasoning, theories, and research methods that have been developed by others This article seeks to connect law and economics historical studies to other relevant historical works so that the law and economics inquiry will not be conducted in a vacuum. The article demonstrates the limitations of some of the uses of history by law and economics scholars and the prospects of other uses from the perspective of legal historians and economic historians It does not seek to offer a single formula for law-and-economics historical studies or to grade various uses of law and economics in history as superior or inferior in absolute terms This article also seeks to call to the attention of legal historians an economic historians the new literature published in the field of law and economics, literature that may make the field relevant to their research interests for the first time. The article also targets scholars interested in the history of jurisprudence. A new trend within a major jurisprudential school is something worth documenting and monitoring. Finally, this article offers those interested in the shift toward history in general with a discussion of one remarkable variant of its manifestation The article proceeds according to the following structure. It first explains the reasons for the a-historical nature of law and economics, by analyzing its intellectual origins, its methodological paradigm, and the nature of its interaction with other sub-fields of law and of economics it next calls attention to recent developments within law and economics that indicate that it, too, may join the general trend within the social sciences toward history. The article discusses the methodological origins of this new trend and the manner in which the new methodological approaches relate to the original methodological paradigm of law and economics. Finally, the article examines the concrete ways in which these developments are being realized by pointing out the various uses of history evident in specific law and conomics studies conducted in recent years L. THE A-HISTORICAL ORIGINS OF LAW AND ECONOMICS A Intellectual Origins in the Chicago school of Neo-Classical Economics The debate over the intellectual origins of the law and economics field is still at a very preliminary stage. Some outside observers suggest a peculiar connection between the law and economics movement and either institutional economics or else legal realism, or a combination of the two in the form of
2003] The Uses of History in Law and Economics 661 periods and changes over time, law and economics scholars need not begin their inquiry from square one. They can build upon modes of historical reasoning, theories, and research methods that have been developed by others. This article seeks to connect law and economics historical studies to other relevant historical works so that the law and economics inquiry will not be conducted in a vacuum. The article demonstrates the limitations of some of the uses of history by law and economics scholars and the prospects of other uses from the perspective of legal historians and economic historians. It does not seek to offer a single formula for law-and-economics historical studies or to grade various uses of law and economics in history as superior or inferior in absolute terms. This article also seeks to call to the attention of legal historians and economic historians the new literature published in the field of law and economics, literature that may make the field relevant to their research interests for the first time. The article also targets scholars interested in the history of jurisprudence. A new trend within a major jurisprudential school is something worth documenting and monitoring. Finally, this article offers those interested in the shift toward history in general with a discussion of one remarkable variant of its manifestation. The article proceeds according to the following structure. It first explains the reasons for the a-historical nature of law and economics, by analyzing its intellectual origins, its methodological paradigm, and the nature of its interaction with other sub-fields of law and of economics. It next calls attention to recent developments within law and economics that indicate that it, too, may join the general trend within the social sciences toward history. The article discusses the methodological origins of this new trend and the manner in which the new methodological approaches relate to the original methodological paradigm of law and economics. Finally, the article examines the concrete ways in which these developments are being realized, by pointing out the various uses of history evident in specific law and economics studies conducted in recent years. I. THE A-HISTORICAL ORIGINS OF LAW AND ECONOMICS A. Intellectual Origins in the Chicago School of Neo-Classical Economics The debate over the intellectual origins of the law and economics field is still at a very preliminary stage. Some outside observers suggest a peculiar connection between the law and economics movement and either institutional economics or else legal realism, or a combination of the two in the form of
Theoretical Inquiries in Lan Vol.4659 the"first great law economics movement. "3 Insiders disdainfully repudiate such intellectual origins. They point to Chicago(not Yale, Columbia, Wisconsin), to economics(not law), and to the neo-classical (not institutional or historical) school ofeconomics as the bedrock of the field. Thus, the official internal history of the field begins in Chicago. The questions that then arise are, When and who? Some trace the origins back in time (or deeper int economics)to Stigler and Friedman or even as far back as Knight and Hayek Some stress the more lawyerly group organized under the guidance of Aaron Director and Edward Levy, which developed an anti-trust -or rather anti- anti-trust-theory influenced by economic price theory. But most stress as the immediate origins both in terms of time and substance the contributions of two economists: Ronald Coase and Gary Becker, circa 1960.Coase,in his seminal 1960 article, reintroduced transaction costs (after doing so for the 3 Peculiar in the sense that they shared the same subjects of research but not me Movement, 42 Stan. L Rev. 993(1990); Morton Horwitz, The Transformation of American Law1870-1960,at247-68(1992) 4 See Edmund w Kitch, The Fire of Truth: A Remembrance of Law and Economics at Chicago, 26 J. L. Econ. 163(1983), for the assessment of some of the participants As for the influence of institutional economics on law and economics, george Stigler has said, "[T]he school died as completely as any school can die in the sense that it has no viable influence. ld. at 170. Henry Manne referred as follows to the impact of the interaction between institutionalist Walton Hamilton and legal realism at Yale: "[Bly the time I was graduate student at Yale in fifty-three no one seemed to remember the episode "ld. at 173. Finally, Milton Friedman has said of the first tenured economist at the Chicago Law School, Henry Simons, that"he was opposed to almost everything that the institutionalists and legal realists stood for " ld at 176 5 See James R Hackney, Law and Neoclassical Economics: Science, Politics, and the Reconfiguration of American Tort Law Theory, 15 Law Hist Rev. 275(1997),for an interesting discussion of the origins of law and economics in terms of analytic scientific turn and antistatist political position, with particular focus on Hayek and Knight. For a discussion emphasizing the role of post World War ll Chicago economists, particularly Friedman and Stigler, and the difference between their approach and that of their teacher, Knight, see Duxbury, supra note 2, at 330-48 For a similar view, see Nicolas Mercuro Steven Medema, Economics and the Law, From Posner to Post Modernism 54-56(1997) 6 Some refer to Guido Calabresis 1961 Some Thoughts on Risk Distribution and the Law of Torts as equivalent to Coase's contribution to the foundation of law and economics. Others view Calabresi as the founder of the New haven school of Law and Economics, as distinct from the Chicago School of Law and Economics See Guido Calabresi, The Cost of Accidents: A Legal Economic Analysis 205-25 (1970); Guido Calabresi A. Douglas Melamed, Property Rules, Liability rules and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089(1972
662 Theoretical Inquiries in Law [Vol. 4:659 the "first great law & economics movement."3 Insiders disdainfully repudiate such intellectual origins.4 They point to Chicago (not Yale, Columbia, or Wisconsin), to economics (not law), and to the neo-classical (not institutional or historical) school of economics as the bedrock of the field. Thus, the official, internal history of the field begins in Chicago. The questions that then arise are, When and who? Some trace the origins back in time (or deeper into economics) to Stigler and Friedman or even as far back as Knight and Hayek. Some stress the more lawyerly group organized under the guidance of Aaron Director and Edward Levy, which developed an anti-trust — or rather antianti-trust — theory influenced by economic price theory.5 But most stress as the immediate origins, both in terms of time and substance, the contributions of two economists: Ronald Coase and Gary Becker, circa 1960.6 Coase, in his seminal 1960 article, reintroduced transaction costs (after doing so for the 3 Peculiar in the sense that they shared the same subjects of research but not method or political positions. See Herbert Hovenkamp, The First Great Law & Economics Movement, 42 Stan. L. Rev. 993 (1990); Morton Horwitz, The Transformation of American Law 1870-1960, at 247-68 (1992). 4 See Edmund W. Kitch, The Fire of Truth: A Remembrance of Law and Economics at Chicago, 26 J.L. & Econ. 163 (1983), for the assessment of some of the participants. As for the influence of institutional economics on law and economics, George Stigler has said, "[T]he school died as completely as any school can die in the sense that it has no viable influence." Id. at 170. Henry Manne referred as follows to the impact of the interaction between institutionalist Walton Hamilton and legal realism at Yale: "[B]y the time I was graduate student at Yale in fifty-three no one seemed to remember the episode." Id. at 173. Finally, Milton Friedman has said of the first tenured economist at the Chicago Law School, Henry Simons, that "he was opposed to almost everything that the institutionalists and legal realists stood for." Id. at 176. 5 See James R. Hackney, Law and Neoclassical Economics: Science, Politics, and the Reconfiguration of American Tort Law Theory, 15 Law & Hist. Rev. 275 (1997), for an interesting discussion of the origins of law and economics in terms of analytic scientific turn and antistatist political position, with particular focus on Hayek and Knight. For a discussion emphasizing the role of post World War II Chicago economists, particularly Friedman and Stigler, and the difference between their approach and that of their teacher, Knight, see Duxbury, supra note 2, at 330-48. For a similar view, see Nicolas Mercuro & Steven Medema, Economics and the Law, From Posner to Post Modernism 54-56 (1997). 6 Some refer to Guido Calabresi’s 1961 Some Thoughts on Risk Distribution and the Law of Torts as equivalent to Coase’s contribution to the foundation of law and economics. Others view Calabresi as the founder of the New Haven School of Law and Economics, as distinct from the Chicago School of Law and Economics. See Guido Calabresi, The Cost of Accidents: A Legal Economic Analysis 205-25 (1970); Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089 (1972)