Theoretical Inquiries in Lan Vol.4659 Figure 1: Interaction of Fields- Triangles Legal histo History Economies Another way to visualize the interaction is by means of a Venn diagram Figure 2 below presents the anticipated relationship among the three interdisciplinary fields as well as among the three original disciplines The shaded area in the center is where the interaction is anticipated to Figure 2: Venn diagram -Interaction among field Legal History Hist Las History Economics Law and Finally, Figure 3, below, presents the actual outcome. There is no overlapping or shaded area in the center, which means that no interaction developed among the three interdisciplinary fields or between any two of the three. For our purposes, this means that law and economics did not interact with either economic history or legal history
668 Theoretical Inquiries in Law [Vol. 4:659 Figure 1: Interaction of Fields — Triangles Another way to visualize the interaction is by means of a Venn diagram. Figure 2 below presents the anticipated relationship among the three interdisciplinary fields as well as among the three original disciplines. The shaded area in the center is where the interaction is anticipated to occur. Figure 2: Venn Diagram — Interaction among Fields Finally, Figure 3, below, presents the actual outcome. There is no overlapping or shaded area in the center, which means that no interaction developed among the three interdisciplinary fields or between any two of the three. For our purposes, this means that law and economics did not interact with either economic history or legal history
2003] The Uses of History in Law and Economics 669 Figure 3: Venn diagram -No Interaction among fields w and Economic conomIc History In the first edition of Economic Analysis of Law(1972), what Posner termed" the economic logic of the common law "was the first theoretical argument in law and economics to draw the attention of scholars in the emerging field of the history of law. Strangely, this promising start did not lead to early interaction between law and economics and legal historians or to an early turn to history in law and economics. Posner based his thesis that common law exhibits a tendency toward efficiency on a few historical examples from nineteenth-century America, including: enterprise liability for faulty products; industrial accidents; railroad-crossing accidents; damage caused by train engine sparks; and the impossibility doctrine in contracts. 3 He claimed that these examples, when viewed in the framework ofhis positive theory of common law, confirm his thesis. These examples also serve to counter arguments that common law is either irrelevant to economic growt or encourages economic growth by subsidizing big business and increasing social inequality Posner did not base his claims on thorough historical research, but he most decidedly challenged historians. His positive theory of the law was historical in nature. It purported to explain how law changes over time This explanation was too deterministic for most legal historians. It subjected their micro-historical interpretations to his macro theory and, in a sense, made them secondary to it. Furthermore, he used concrete examples rooted in time and place that are central to the work of many American legal storians. In doing so, he called into dispute concrete historical studies. It 13 Richard Posner, Economic Analysis of Law 98-102(1st ed 1972)
2003] The Uses of History in Law and Economics 669 Figure 3: Venn Diagram — No Interaction among Fields In the first edition of Economic Analysis of Law (1972), what Posner termed "the economic logic of the common law" was the first theoretical argument in law and economics to draw the attention of scholars in the emerging field of the history of law. Strangely, this promising start did not lead to early interaction between law and economics and legal historians or to an early turn to history in law and economics. Posner based his thesis that common law exhibits a tendency toward efficiency on a few historical examples from nineteenth-century America, including: enterprise liability for faulty products; industrial accidents; railroad-crossing accidents; damage caused by train engine sparks; and the impossibility doctrine in contracts.13 He claimed that these examples, when viewed in the framework of his positive theory of common law, confirm his thesis. These examples also serve to counter arguments that common law is either irrelevant to economic growth or encourages economic growth by subsidizing big business and increasing social inequality. Posner did not base his claims on thorough historical research, but he most decidedly challenged historians. His positive theory of the law was historical in nature. It purported to explain how law changes over time. This explanation was too deterministic for most legal historians. It subjected their micro-historical interpretations to his macro theory and, in a sense, made them secondary to it. Furthermore, he used concrete examples rooted in time and place that are central to the work of many American legal historians. In doing so, he called into dispute concrete historical studies. It 13 Richard Posner, Economic Analysis of Law 98-102 (1st ed. 1972)
Theoretical Inquiries in Lan Vol.4659 is not surprising that several legal historians, in response to this challenge criticized Posner for misunderstanding the history of legal doctrines and their Law, Posner's discussion of the positive theory of common laws tendency toward efficiency grew in length, increasing from the four-and-a-half pages in the first edition to six-and-a-half pages in the 1977 second edition to nine-and-a-half pages in the 1986 third edition. There was a corresponding increase in the number of references to legal historians, from one reference grant Gilmore)in the first edition, to two(Gilmore and Morton Horwitz) in the second edition to six in the third edition 4 These increases in length were not the result of more historical studies conducted to test or confirm the theory. Rather, greater space was devoted to criticizing legal historians for not understanding economic theory, including the theory of the common laws tendency toward efficiency and the concept of efficiency. Legal historians became more critical of Posner, and Posner became more critical of legal historians, particularly those who viewed the law as subsidizing business redistributing wealth, and oppressing the weak Posner had to answer not only to legal historians, but also to other legal scholars, even some with an economic orientation. These legal scholars questioned his thesis on a theoretical rather than empirical-historical leve What in the common law, they asked, could lead it to produce efficient rules? Some law and economics scholars tried to support Posner's claim and counter the growing criticism against it, by explaining its theoretical logic Some suggested that judges are the agents who steer the common law toward efficiency; even if they are not aware that they maximize efficiency, they behave as if they are doing So. Justice and common sense considerations lead to efficient judgments. Other scholars saw litigants in general (losing litigants or repeat litigants)as the agents of the drive toward efficiency inefficient rules will be rooted out by ongoing litigation. By the mid-1980s, the debate over the tendency of the common law toward efficiency, both on the historical and theoretical levels. had exhausted itself Though law and economics and the field of new economic history emerged at about the same time and used the same theoretical tools of neo-classic economics, the two did not interact This can be explained by, among other 14 Richard Posner, Economic Analysis of Law 179-85(2d ed. 1977); Richard Posner Economic Analysis of Law 229-38(3d ed. 1986)[hereinafter Posner, Economic Analysis(3d ed. )1 15 See, e.g., George Priest, The Common Law Process and the Selection of Efficiency Rules, 6J. Legal Stud. 65(1977); Paul Rubin, Why Is the Common La ient? 6J. Legal Stud. 51(1977)
670 Theoretical Inquiries in Law [Vol. 4:659 is not surprising that several legal historians, in response to this challenge, criticized Posner for misunderstanding the history of legal doctrines and their social and economic effects. In each of the editions of Economic Analysis of Law, Posner’s discussion of the positive theory of common law’s tendency toward efficiency grew in length, increasing from the four-and-a-half pages in the first edition to six-and-a-half pages in the 1977 second edition to nine-and-a-half pages in the 1986 third edition. There was a corresponding increase in the number of references to legal historians, from one reference (Grant Gilmore) in the first edition, to two (Gilmore and Morton Horwitz) in the second edition, to six in the third edition.14 These increases in length were not the result of more historical studies conducted to test or confirm the theory. Rather, greater space was devoted to criticizing legal historians for not understanding economic theory, including the theory of the common law’s tendency toward efficiency and the concept of efficiency. Legal historians became more critical of Posner, and Posner became more critical of legal historians, particularly those who viewed the law as subsidizing business, redistributing wealth, and oppressing the weak. Posner had to answer not only to legal historians, but also to other legal scholars, even some with an economic orientation. These legal scholars questioned his thesis on a theoretical rather than empirical-historical level. What in the common law, they asked, could lead it to produce efficient rules? Some law and economics scholars tried to support Posner’s claim and counter the growing criticism against it, by explaining its theoretical logic. Some suggested that judges are the agents who steer the common law toward efficiency; even if they are not aware that they maximize efficiency, they behave as if they are doing so. Justice and common sense considerations lead to efficient judgments. Other scholars saw litigants in general (losing litigants or repeat litigants) as the agents of the drive toward efficiency:15 inefficient rules will be rooted out by ongoing litigation. By the mid-1980s, the debate over the tendency of the common law toward efficiency, both on the historical and theoretical levels, had exhausted itself. Though law and economics and the field of new economic history emerged at about the same time and used the same theoretical tools of neo-classical economics, the two did not interact. This can be explained by, among other 14 Richard Posner, Economic Analysis of Law 179-85 (2d ed. 1977); Richard Posner, Economic Analysis of Law 229-38 (3d ed. 1986) [hereinafter Posner, Economic Analysis (3d ed.)]. 15 See, e.g., George Priest, The Common Law Process and the Selection of Efficiency Rules, 6 J. Legal Stud. 65 (1977); Paul Rubin, Why Is the Common Law Efficient?, 6 J. Legal Stud. 51 (1977)