Last week, I was breezing through some blog posts over at Concurring Opinions and I saw that law professor Lawrence Cunningham had posted a link to a new law review article that he had written. The post invited criticism of the article and its conclusions.
Since the article was on a topic of great interest to me – the intersection of personal injury law and economics – I took the time to read it and offer my criticisms and feedback here.
In the article, Professor Cunningham compares two approaches to personal injury law – the “traditional” approach taken by most judges and the so-called “law and economics” approach that attempts to apply the insights of economics to cases. The article compares these two different approaches – as embodied by Judge Richard A. Posner and Judge Cardozo (Posner an alive-and-kicking disciple of economics; Cardozo an influential early twentieth century judge).
The “traditional” approach to negligence, at least as described by Cunningham, is law not necessarily informed by the insights of economics. What Cunningham calls the “traditional” approach to the law of negligence is an “open-textured” approach, where juries’ determinations of negligence draw upon social norms, ethics and personal experience.
The “traditional” approach to the law of negligence differs from the approach of the “law and economics” school, which is headed up Judge Posner and which strives to apply some of the insights of economics to the law. Instead of thinking about negligence in terms of abstract legal principles, someone like Judge Posner is likely to assess whether an action was negligent through a sort of cost-benefit analysis.
Ultimately, Cunningham finds the approach of Judge Posner and others in the “law and economics” school to be lacking for several reasons, including the lack of flexibility in a cost-benefit analysis, the difficulty of assigning dollar values to certain course of action and the failure of the economic approach to yield clear outcomes. Cunningham also takes the “law and economics” school to task for its neglect of people’s personal experience and moral values.
As a practicing personal injury lawyer, I don’t see things as black-and-white as a legal academic like Cunningham does. While I agree that an economic approach to the law is necessarily incomplete, I’m not such a big fan of the “traditional” approach either. The traditional approach can every bit as arid as cost-benefit analysis and can lead to jurors giving disproportionate attention to legal doctrines that were better-suited for other times and places. (I just finished trial lawyer Rick Friedman’s book The Rules of the Road, which warns that plaintiffs always lose when they let defense lawyers frame negligence issues in terms of the (traditional) “reasonable person” standard). So far as I am concerned, an economic approach at least encourages juries to weigh things for themselves, instead of giving them some pre-assigned weight of legal importance. It frees them up to consider all aspects of social welfare and not just principles the law tells them are germane. And, I have had success in applying some of the principles of economics to personal injury actions.
Herewith, then, some criticisms of Cunningham’s article:

• At times Cunningham attacks a straw man, when he assumes that an economic approach to the law requires that we believe that people behave as rational, computer-like value maximizers, as homo economicus. Cunningham argues that the merits of a cost-benefit approach are particularly suspect when we are dealing with “spontaneous decisions,” and decisions that are made by drowsy, hungry and basically all-too-human people.
  In fact, however, it seems likely that economics can be stretched to be more forgiving of human fallibility. One of the most vital fields of economics right now is “behavioral economics.” Behavioral economics does not assume that humans behave as super-rational value maximizers; instead it understands that we are subject to committing certain errors because of our limited cognitive faculties. The insights of behavioral economics have turned economists like Dan Ariely into best-selling authors. In fact, some legal scholars, like Cass Sunstein, are right now applying the insights of behavioral economics to “humanize” the field of regulatory law.

• Another shortcoming to Cunningham’s analysis is that it does not credit the role that economics can play for us when resort to our moral intuitions or tradition fails. This week a federal judge invalidated a patent on a breast cancer gene, upsetting long-standing belief that such genes were patentable. Obviously, with this sort of legal question, it’s difficult to draw upon traditional community standards for answers. It may also be difficult to rely on morals for guidance. I don’t like the idea of someone owning a patent on a human gene, but if patents on genes are necessary to incentivize pharma companies to do the R&D on better treatments, they may be a necessary evil. I’d look to economists for guidance about whether such a patent actually encourages R&D that could lead to us finding a breast cancer cure, rather than basing my opinion on traditions and personal ethics. (To be fair to Cunningham, however, his article dealt with the impact of law and economics in tort law, and not its suitability for work in fields like antitrust law or intellectual property).

…..This post is getting pretty long, so if you’d like to read the rest, you can find it below the fold…….

Continue reading →