Economic Analysis of "Law & Economics"

• Author: Oren Gazal-Ayal
• Position: University of Haifa, Faculty of Law
• Pages: 787-890

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Introduction

In the last fifty years Law and Economics (L&E) has become one of the most influential movements in legal academia. Many law scholars and economists direct much of their time and energy towards this field. But what drives them (or should I say, us) to L&E? If we want to pat ourselves on the back, we would probably point out the virtues of the methodology and our interest in promoting knowledge for the benefit of all. But if we want to be more consistent with our methodological approach, we must also look for other, more direct and self-serving explanations. If consumers, suppliers, tortfeasors, and contracting parties are assumed to maximize their wealth and self-interest, why aren't we?

The aim of this paper is to examine to what extent academic incentives drive scholars to L&E. Before explaining the method, let me assuage some of the possible objections, emotional or rational, to such a project. For the purposes of this paper, I am both a scientist and a laboratory mouse. It would probably be hard for a laboratory mouse to convince his colleagues that he knows what drives them to run on the running wheels. It is especially hard here. Any attempt to use economics to show that L&E scholars are not driven solely by the search for truth might be resisted by both supporters of the methodology, who might dislike the conclusion, and by opponents who are unconvinced (and perhaps unwilling to be convinced) by the method. Hence, I should explain my aim up front. By examining the effects of incentives on L&E scholarship, I do not mean to say anything about the content of L&E research or the validity of its approach to the study of law. After all, the bread of the baker may be excellent, even if he is partly (or even solely) interested in maximizingPage 788 profits.¹ My point is not normative, but descriptive. I will try to explain why some scholars choose to engage in the L&E discourse and others do not, but by doing so, I say nothing about the importance or validity of their work.

My hypothesis is that participation in L&E weighted by population is greater where the academic incentives to be a L&E scholar are higher.²Therefore, I examine the academic incentives to write L&E papers, especially with regard to academic appointment and promotion procedures. I show that for economists, wherever they are, the academic incentives drive them to similar tracks. Research in L&E is equally valuable to the academic career of economists on both sides of the Atlantic. In contrast, law scholars are evaluated differently in different places. In some places, like Israel, being a L&E scholar is very beneficial.³ In others, like most European countries, it is hardly a plus.⁴ Hence, one would guess that, if incentives matter to legal scholars, authorship of L&E papers is likely to be high in Israel, low in Europe, and somewhere in the middle in the United States and Canada. On the other hand, one would predict that participation of economists in such projects is approximately the same everywhere.

The remainder of the paper is organized as follows. Part I compares the academic incentives to publish L&E papers for economists and legal scholars in Europe, North America, and Israel. Part II analyzes data gathered from the lists of authors from L&E journals and examines whether it supports the incentives hypothesis. A few comments about the future of the research in L&E are presented in the concluding part of the paper.

I What Counts For Academic Scholars?

What affects academic researchers' prestige and promotion? Almost all around the world academicians are rewarded for publication. ThePage 789 publish-or-perish mantra has become a household motto for faculty members, at least at the early stages of their careers.⁵ Mostly unofficial and often ambiguous standards guide scholars to the most rewarding venues of publications. These standards are thus one of the most important factors for academic success. Though other factors can also be categorized as academic incentives, it seems that publication is the most important verifiable factor, and hence it can serve as a good starting point.⁶

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Economists are usually evaluated according to the same standards everywhere. Economists on both sides of the Atlantic are most rewarded for publishing in core economic journals, like Econometrica and the American Economic Review.⁷ L&E journals are also equally rated in most places, with the Journal of Law and Economics usually at the top of the list.⁸ If the incentives hypothesis it true, then the similarity of the evaluation standards is likely to result in a similar rate of participation of economists in the L&E discourse.

Lawyers, on the other hand, face different evaluation standards in different places. In Europe, legal scholars are usually not required to publish in foreign languages.⁹ Law is perceived as mainly a local field of research.¹⁰ For appointment, promotion, and tenure decisions, publications in L&E journals are of limited importance and are not more valuable than a legal paper in the local language about the local law.¹¹ In fact, they arePage 791 often of much less value. For example, for an Austrian or German candidate seeking a position in academia, the need to find a chair in a university requires covering the topics of a relevant field doctrinally.¹²Universities generally have no chairs in L&E.¹³ However, there are exceptions. In some countries in Europe, like Belgium, the starting point was, until lately, that every publication is equally valuable, with no advantage for publication in international journals.¹⁴ But since most lawyers would find it easier to publish papers about their own legal system in their native language, writing a L&E paper, even in such places, is usually not a time-effective way to promote their career. The Netherlands is the only exception to the rule, where a few positions are reserved for L&E professors, and for them L&E publications are required.¹⁵ Still, the remaining legal scholars in the Netherlands are not required to write papers in non-Dutch journals at all.¹⁶ Therefore, for a European legal scholar, it is usually not recommended to divert resources to L&E study.¹⁷

In Israel, on the other hand, academic nomination, promotion, and tenure decisions are made by interdisciplinary committees, not by lawyers.¹⁸ Therefore, one could conclude that for them, a paper in HebrewPage 792 is considered much less important than a paper in a prestigious foreign journal. Since the committee is not comprised only of lawyers, the publications are not required to be in legal journals.¹⁹ An economic journal is equally valuable, and a L&E journal is even more so.²⁰ True, Israeli legal scholars can still write doctrinal legal papers for American or other non-Israeli law journals, but if they want the paper to be admitted to a highly ranked law journal, it should be about the legal system of the reviewers. Here, obviously, Israeli scholars face a relative disadvantage. At least initially, they likely know less about the details of the local legal system and culture. On the other hand, in L&E, they need to know much less about the local law, and hence can compete on more equal terms. Consequently, there is a strong incentive to concentrate on L&E, even for scholars who do not define themselves as L&E scholars.

American lawyers are not typically required to publish papers about foreign law.²¹ Yet, the federal system encourages papers that can be relevant to different legal systems within the federation, and L&E often analyzes general doctrines that are not specific to one legal system.²² In addition, the heritage of legal realism encourages interdisciplinary legal research.²³ Hence, the highly rated law reviews are very amenable to L&E papers, much more than they are to local doctrinal papers.²⁴ Still, for an American legal scholar, L&E competes with other avenues for legal research which are equally beneficial for academic promotion, including constitutional law and legal analysis of general American legal doctrinesPage 793 and practices.²⁵ Thus, if academic incentives are the most substantial factor, the rate of participation of lawyers in the L&E discourse is likely to be the highest in Israel, lower in the United States, and the lowest in Europe.

II Where do Law And Economics Scholars Come From?

A Method

In this section, I examine the background of authors of L&E papers. Data were gathered from the tables of contents of L&E journals and from lists of participants in L&E conferences during the years 2003, 2004, and 2005. The list of L&E journals was taken from Wikipedia²⁶ and includes ten journals from Europe and the United States.²⁷ Because I am concentrating on North America and Europe, the conferences I examined were of the European and American L&E associations. I counted each person who participated in writing a paper that appeared in a conference or a journal. I also counted those participating in writing more than one paper accordingly. I gathered the bibliographic data about each participant from the internet or, when the data on the web were lacking, from questions directed to the scholars themselves.

Some may object to relying on L&E journals and conferences in estimating the rate of participation in the L&E discourse. One can argue that lawyers use economic arguments without being part of the international L&E movement. For example, Schäfer argued that although L&E is not openly used in the German legal academia, German legal scholars often use economic arguments de facto.²⁸ Yet, when I refer to L&E, I define it narrowly. I do not intend to refer to any legal...