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Vanderbilt Law Review

First Page

1729

Abstract

The emergence of the modern law and economics analysis generally is dated to the early 1960s with the publication of seminal work by Ronald Coase' and subsequently by Guido Calabresi and Douglas Melamed. These articles laid the foundation for the relation between legal rules, wealth maximization, and transaction costs, which provided the pivotal application of economic analysis to legal problems. However, the current sweep of law and economics would have been inconceivable without Gary Becker's insight into the application of neoclassical comparisons of marginal utility to the stuff of everyday life. Becker's analysis of routine decision making in terms of the likely returns from marginal choices allowed for the expansion of law and economic analyses into virtually every area of law. This approach is the keystone for Richard Posner's introduction of the law and economics methodology:

"[E]conomics is the science of rational choice in a world-our world-in which resources are limited in relation to human wants. The task of economics, so defined, is to explore the implications of assuming that man is a rational maximizer of his ends in life, his satisfactions-what we shall call his "self-interest." Rational maximization should not be confused with conscious calculation. Economics is not a theory about consciousness. Behavior is rational when it conforms to the model of rational choice, whatever the state of mind of the chooser."

Clearly, the conception of rational utility calculations is key to this law and economics approach. But this conception is impossible without further simplifying assumptions. The most apparent assumptions are that, first, behavior could be presumed rational only when it conformed to the model of utility maximization, and second, that departures from this model would be random and would there- fore not affect the overall power of the economic analysis. The combined effect of these initial assumptions in turn allows law and economics to operationalize its insights. Since virtually all law and economics scholarship exists at the theoretical plane, turning on formal models rather than observed behavior, the presumption of behavior conforming (in the aggregate) to the economic predictions was an indispensable move. To the extent that this economic model tried to understand individual patterns of thought, it relied on a highly reductionist view of the human psyche:

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