The Triumph of Venus, The Erotics of the Market.

• Author: Widen, William H.
• Position: Book Review

THE TRIUMPH OF VENUS, THE EROTICS OF THE MARKET. By Jeanne Lorraine Schroeder. Berkeley: University of California Press. 2004. Pp. 318. $80.

INTRODUCTION

"Did you know that the first Matrix was designed to be a perfect human world? Where none suffered, where everyone would be happy? It was a disaster." (1) There are spectres haunting law and economics--the spectres of G.W.F. Hegel (2) and Jacques Lacan. (3) This is one of the central theses of Professor Jeanne L. Schroeder's challenging new book: The Triumph of Venus, The Erotics of the Market (" Triumph of Venus"). (4) Schroeder uses insights inspired by the teachings of Hegel and the French psychoanalyst, Lacan, to critique some basic assumptions made by scholars who use economic ideas to investigate the law and legal institutions--the law and economics ("L&E") practitioners. The book devotes much space to criticism of Judge Posner's vision of law, using it as a proxy for L&E scholarship generally. (5) Professor Schroeder succinctly states her basic problem with L&E:

In recent years, the study of markets in American jurisprudence has been expropriated by the self-styled "law-and-economics" movement, the dominant discourse of private law in America's most elite law schools. One of its appeals is that it gives an aura of scientific certainty and objectivity to legal analysis and normative policymaking. Despite its claim to scientific status, however, this scholarship is almost entirely devoid of methodological discussion and internal criticism, as though these matters were uncontroversial. (pp. 1-2) In Schroeder's view, L&E fails to engage in meaningful empirical research. Instead, its members spin out analyses and policy recommendations like armchair pundits, giving advice based on non-falsifiable conclusions deduced from unexamined premises. The L&E movement-is a "degenerating research program." (6) As such, it spends more time protecting its theoretical core than discovering facts about the world. Notwithstanding these deficiencies, L&E has thrived due to an ineffective response from the critical left perspective. Schroeder finds inadequate critiques of L&E grounded in a form of romanticism suffering from flaws similar to those afflicting the utilitarian underpinnings of L&E itself--both view markets and market transactions as spheres of cold rationality (p. 2).

Much L&E scholarship relies on the concepts of "perfect market" and "wealth maximization" to develop models designed to explain aspects of the law and legal institutions. Schroeder's project is to expose inconsistencies in these concepts that make them ill-suited both for descriptive and normative roles in these models. Moreover, the goal of "wealth maximization" is revealed as inconsistent with basic notions of property. Schroeder finds the defects in these concepts particularly troubling because their use may inhibit human freedom. For Hegelians, promotion of human freedom is the highest aim.

From the foregoing, however, one should not get the idea that Schroeder's program amounts either to a tirade against market economies or a call to embrace a leftist political agenda. In fact, she makes clear that her analysis actually sees markets as performing a central role in the development of legal subjects (p. 143). Nor does Schroeder believe that an appeal to Lacan or Hegel licenses specific or detailed policy recommendations (pp. 4-5, 10). Accordingly, her agenda risks being accused of shortcomings ascribed to the critical legal-studies movement--particularly the charge that no alternative normative agenda emerges from the analysis. (7)

This criticism may be deflected, at least partially, by Schroeder's identification of the L&E discourse as the "discourse of the university" in Lacanian parlance. (8) University discourse claims to have scientific answers to policy questions when, in fact, this appeal to objectivity masks an ideological agenda, typically to preserve an existing allocation of power. For Schroeder, unless L&E is recognized in its true nature, it risks stifling important policy and political debate behind the veil of science. In this sense, the L&E discourse is anti-freedom. Thus, one positive consequence of Schroeder's agenda might be promotion of more vigorous public debate over important economic issues on ethical grounds where now those issues might be taken as settled by economic-policy science. (9)

By exposing the true underpinnings of L&E, Schroeder hopes that L&E practitioners will make more modest claims and return to the original teachings of Ronald Coase by shifting their focus to empirical research of actual markets.

What we can do, as Coase pleads, is to study actual costs and actual behavior in actual markets on their own terms. Although we can retain the impossible ideal of the perfect market, we must set realistic goals based on contingent, empirical judgments as to the relative efficiency of possible actual market choices. (p. 148) Many professional economists already recognize the limitations inherent in neoclassical modeling of markets and human behavior and they are working to improve economic analysis in light of these perceived shortcomings. (10) Though Professor Schroeder's project may be of interest to these economists, her work is targeted at those using economics in the legal academy that have not yet awakened to the deficiencies of the brand of economics used by L&E. (11)

Triumph of Venus is structured in five chapters, interlaced with references to Greek mythology that illustrate aspects of Schroeder's arguments. (12) The first chapter explores theories on the nature of gift transactions (using Pandora) as a prelude to her second-chapter critique of the concept of the perfect market (using Orpheus). The third chapter analyzes the property theories of Calabresi and Melamed (13) (using Narcissus) as preamble to Chapter Four, which analyzes the deficiencies of the concept of wealth maximization (using Midas). Chapter Five locates the origins of law in desire rather than in rationality (using The Eumenides) and expresses the hope that society may develop social structures better suited to promote human development. Each chapter consists largely of reworked material from prior law review articles. Thus, Triumph of Venus might be seen as a collection of essays. Beyond the overarching theme of exploring economic rationality from a Hegelian and Lacanian perspective, a common thread links the various topics: Schroeder's desire to show how policy recommendations based on unsound conceptual analysis conflict with the exercise of human freedom.

Part I of this Review explains Schroeder's analysis of the shortcomings and paradoxes associated with the concept of "perfect market." Part II does the same for the concept of "wealth maximization." Part III shows how integration of these two concepts into a theory of human action can be seen as destructive of human freedom. Part IV provides an account of the construction of social facts to show how persons, exercising freedom, may improve the social structure. Part V discusses policy suggestions based on economic reasoning to illustrate how Schroeder's ideas might apply in practice. My method is to explain Schroeder's arguments by framing them, where possible, in terms of analytic philosophy. (14)

1. THE CONCEPTUAL PROBLEMS WITH PERFECT MARKETS

   Professor Schroeder explains the central role of the concept of the perfect market in the formation of policy recommendations:

   According to legal economists, efficiency would be achieved if the ideal of the perfect market were implemented. We should, therefore, modify our legal and political institutions so as to make the actual markets as nearly perfect as we can or, if that is impossible, to replicate the results of the perfect market as closely as possible. (15) Schroeder's critique of the "perfect market" takes two forms. First, she gives a general analysis of the perfect-market concept. Second, she critiques that concept from a Hegelian/Lacanian perspective. According to this first critique, "Once the perfect market is achieved, all markets stop. Once again, this was one of Coase's points. Markets only exist as a means of eliminating transaction costs. When transaction costs are eliminated, markets are also necessarily eliminated." (16)

   In essence, Schroeder's first critique argues that the perfect-market concept is oxymoronic--that conjoining the terms "perfect" and "market" is like conjoining the terms "round" and "square." (17) I understand her observation by conceiving of a market as a structure (18) pursuant to which individuals may execute multiple bilateral contracts in a more efficient manner than would be possible in the absence of the structure. (19) Just as a firm is a structure to reduce transaction costs, so too is a market. The firm reduces transaction costs by replacing bilateral contracting costs with the management structure of the firm. The market, rather than replacing bilateral contracting with an alternate structure, reduces transaction costs by lowering the costs of individual bilateral contracting activity. A perfect market, however, is characterized by the absence of transaction costs. Both firms and markets exist to reduce transaction costs, but without transaction costs there would be neither firms nor markets, as their raison d'etre has ceased. Thus, the aspirational goal of attaining the perfect market is a wish for the end of all markets. (20)

   This first critique suggests another odd conceptual feature. Though it is not uncommon to construct scientific models based on assumptions that are impossible to achieve in practice--such as assuming a perfect vacuum or a frictionless surface in the study of motion--such assumptions, if realized, would not eliminate the activity under study. In contrast, the existence of a perfect market is an assumption that, if realized, would result in the end of market activity. (21) Thus, for Schroeder, the perfect...