Of distributive justice and economic efficiency: An integrated theory of the common law

• DOI: https://doi.org/10.1016/S0193-5895(00)19005-0
• Published date: 06 September 2000
• Date: 06 September 2000
• Pages: 139-222
• Author: Brian N Wasankari,Richard O Zerbe,Steven Vinyard

OF DISTRIBUTIVE JUSTICE AND

ECONOMIC EFFICIENCY: AN

INTEGRATED THEORY OF THE

COMMON LAW

Brian N. Wasankari, Richard O. Zerbe Jr., and

Steven Vinyard

ABSTRACT

Zerbe has elsewhere developed a concept of economic efficiency that has

implications for common law efficiency. Here we explore aspects of this

concept of efficiency for the relationship between common law efficiency

and considerations of distributive justice. In particular, we consider

examples from criminal law - the law of rape, from contract law-

exculpatory clauses, and from tort law-contribution. We find that

including considerations of distributive justice better explains common

law efficiency than traditional Kaldor-Hicks effficiency.

I. GENERAL INTRODUCTION

Recently, Richard O. Zerbe, Jr. (due to be published 2001) developed an

axiomatic system to provide grounding for the application of efficiency

analysis to normative issues. This paper is an application of several of those

axioms. The application primarily involves the concept, created by Zerbe, of

Research in Law and Economics, Volume 19, pages 139-222.

2000 JAI/Elsevter Inc.

ISBN: 0-7623-0308-5

139

140 BRIAN N. WASANKARI, RICHARD O. ZERBE JR. & STEVEN VINYARD

the regard for others, which refers to the value people place on projects that do

not directly effect them but which do effect others whom they care about.

Microeconomic analysis ~ relies on the formulation of models to analyze its

subject phenomena (Mansfield, 1994). Thus, microeconomic analysts of the

common law 2 have constructed models, or more precisiely theories, 3 of the

common law itself, by which, ultimately, they hope to explain its doctrine in

terms of a 'handful of equations' (Landes & Posner, 1987, pp. 312-13). 4 The

most successful economic theory extant is that which will here be termed the

traditional Kaldor-Hicks efficiency theory of the common law: That theory

holds that the common law is best described as a system designed to promote

the traditional notion of Kaldor-Hicks efficiency (Posner, 1992,

Economic

Analysis,

p. 23). 6 Although the traditional theory has met with significant

descriptive success (Bruce, 1984), it has also 'aroused considerable antago-

nism' (Posner, 1992,

Economic Analysis,

p. 25). Yet despite suffering such

'slings and arrows', (Shakespeare

Hamlet,

Act 3, Sc. 1) its underlying validity

remains (Posner, 1992,

Economic Analysis

p. 26). 7

That validity is vulnerable, however, since it may be invalidated through the

introduction of an alternative theory that better explains common-law reality

(Kuhn, 1970; Posner, 1992,

Economic Analysis,

pp. 17-18; Beutel, 1957). s Two

facts make the possibility of such invalidation particularly likely. First, the

conception of Kaldor-Hicks efficiency, upon which the traditional theory is

built, can be improved (Zerbe, 1998, 'Three Rules' and Zerbe, 2001, Chapter

2). Indeed, Zerbe (2001, Chapter 8) claims that the analysis he develops

explains the conditions under which the common law will be efficient, as well

as the conditions under which it is likely to be inefficient. The traditional

analysis erroneously mandates that the economic efficiency of an allocative

change be measured independently of the effect of that change on the

distribution of wealth and the fact of compensation (Zerbe, 1998, 'Three

Rules', p. 426f; 2001, Chapter

3). 9 This,

in turn, results in either the neglect or

abrogation of distributive justice concerns) ° The second fact is that judges seek

not only an efficient, but a just result, where justice is both corrective and

distributive. 11 Taken together, these facts suggest that an efficiency theory

which properly considers not only traditional efficiency, but also distributive

justice, will provide a better description of the common law than does the

traditional theory.

Indeed, that is the premise of this paper, which first proposes an alternative

efficiency theory of the common law, deemed the integrated or KHZ theory,

and then tests the descriptive capacity of that theory against that of the

traditional theory.

Of Distributive Justice and Economic Efficiency 141

Section II provides the starting point by describing and logically evaluating

both the traditional KH theory and KHZ, and suggesting that, because only the

latter considers distributive justice, it will produce a better description of the

common law than does the former, a2

Section III tests this suggestion in two steps. First, it sets forth 'descriptive

capacity' as the basis for the evaluation of theory. Second, it attempts to

measure the descriptive capacity of both theories through a three-part survey of

problematic common-law doctrine, which broaches the fields of crimes,

contracts, and torts. That survey begins with criminal law, and, specifically, the

law of rape. It finds that although certain rapes should be legal under the

traditional KH theory, all should be illegal under KHZ given modem social

norms. Since all rapes are actually illegal today, rape law is better described by

KHZ.

Next, contract law, and particularly the law of exculpatory clauses, is

considered. Again, it is found that the integrated theory provides a better

description than does its traditional counterpart, for although exculpatory

clauses seeking to exclude liability for negligence are efficient under the latter,

they are inefficient under the former.

Last, the tort law movement toward contribution among negligent joint

tortfeasors is analyzed. That movement is found to be inefficient under the

traditional theory, but efficient under the integrated theory, and therefore better

described by the latter.

Given that the law of rape, exculpatory clauses, and contribution are better

described by KHZ than by the traditional efficiency theory, it is cautiously

concluded that, ceteris paribus, the former provides a better description of the

common law than does the latter. If a sufficient quantum of future research

should confirm or expand this result, we argue that the traditional theory must

be supplanted by the integrated theory. 13

II. THE THEORIES

A. Introduction

Before theory can be analyzed, however, it must be enunciated (Byms & Stone,

1992, p. 15). Accordingly, this section will provide a basic description, and

some theoretical analysis, of both the traditional KH efficiency theory and

KHZ. First, KHZ will be described as stating that the common law, in the

aggregate, is best explained as a system designed to promote traditional

Kaldor-Hicks efficiency. Second, it will be noted that this theory has elicited

considerable criticism. Although much of this criticisim is easily dismissed,