Richard A. Posner - Economic analysis of law

ECONOMIC ANALYSIS OF LAW

EDITORIAL ADVISORS

Vicki Been
Boxer Family Professor of Law
New York University School of Law

Erwin Chemerinsky
Dean and Distinguished Professor of Law
University of California, Irvine, School of Law

Richard A. Epstein
Laurence A. Tisch Professor of Law
New York University School of Law
Peter and Kirsten Bedford Senior Fellow
The Hoover Institution
Senior Lecturer in Law
The University of Chicago

Ronald J. Gilson
Charles J. Meyers Professor of Law and Business
Stanford University
Marc and Eva Stern Professor of Law and Business
Columbia Law School

James E. Krier
Earl Warren DeLano Professor of Law
The University of Michigan Law School

Richard K. Neumann, Jr.
Professor of Law
Maurice A. Deane School of Law at Hofstra University

Robert H. Sitkoff
John L. Gray Professor of Law
Harvard Law School

David Alan Sklansky
Yosef Osheawich Professor of Law
University of California at Berkeley School of Law

Copyright 2014 Richard A. Posner.

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eISBN 978-1-4548-4553-9

Library of Congress Cataloging-in-Publication Data

Posner, Richard A.

Economic analysis of law / Richard A. Posner, Judge, U.S. Court of Appeals for the Seventh Circuit, Senior Lecturer, University of Chicago Law School. Ninth Edition.

pages cm. (Aspen casebook series)

Includes bibliographical references and index.

1. Law and economics. I. Aspen Publishers. II. Title.

K487.E3P67 2014

349.73dc23

2013046762

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SUMMARY OF CONTENTS

TABLE OF CONTENTS

PREFACE

This is the ninth edition of a textbook-treatise first published in 1973. Its subject is economic analysis of legal rules and institutions, or, as it is more commonly called, law and economics. Economic analysis of law is the foremost interdisciplinary field of legal studies. Its centrality to the modern understanding of law is suggested by the number of journals devoted to

Economic analysis of law has influenced the law in many areas, and also has changed the way law is taught. The reason has to do with the extreme surface complexity of the law. The law is divided into numerous fields, each with its own complex structure of rules. The fields are traditionally studied in isolation from one another, and within each field the rules tend also to be studied as separate, often self-enclosed, bodies of thought. Yet a relative handful of economic doctrinessuch as decision under uncertainty, transaction costs, cost-benefit analysis, risk aversion, and positive and negative externalitiescan, by their repeated application across fields of law and legal rules, describe a great deal of the legal system and enable the student to develop a more coherent sense of the systemto grasp the relation of its parts and understand its essential unity, and having done so to deal competently with new issues as they arise.

This book differs from other books of economic analysis of law in the breadth of its coverage (almost the entire legal system) and in its emphasis on the legal regulation of nonmarket behaviornot only familiar examples such as crimes and accidents and lawsuits, but also less familiar (to economists) examples such as drug addiction, thefts of art, sexual acts, surrogate motherhood, rescues at sea, flag desecration, public international law, presidential pardons, democratic theory, terrorism, and religious observances. It also differs in organization, being organized around legal rather than economic concepts. This approach enables the law to be seen, grasped, and studied as a systema system that economic analysis can illuminate, reveal as coherent, and improve. By the same token the approach enables economics to be seen as a tool for understanding and reforming social practices, rather than merely as a formal system of daunting mathematical complexity. Indeed I think the mathematization of economics has gone too far. The explication of economics in this book stresses the unity, simplicity, and power, but also the subtlety, of economic principles. The presentation is informal, and no prior acquaintance with economics, or mathematical competence, on the part of the reader is assumed.