THE MOST CONTROVERSIAL legal scholar of the last decade, and a prime candidate for a Reagan Supreme Court, is a federal appeals court judge named Richard Posner.
Posner's essay on "The Economics of the Baby Shortage," in which he proposes eliminating adoption agencies and legalizing baby sales in the open market, suggests why there has been a commotion. To most people, the idea is probably an outrage. But the judge and his associate, Elisabeth Landes, argue that the high cost of foster care for children without homes and the growth of a black market in healthy infants demonstrate the failure of government regulation and the promise of unfettered exchange.
In this article, and in a long string of other challenges to traditional notions -- 106 academic articles, 11 textbooks, 16 book reviews and three dozen pieces of testimony before Congress and federal agencies, not to mention speeches, law school classes and appellate opinions -- Posner has pressed his case that the life of the law is really economics. Posner maintains that economics can teach as much about free speech or divorce law as it does about supply and demand.
He contends that American common law -- rules propagated by judges on subjects like property, torts, crimes and contracts, which deal with problems not directly related to markets -- "bears the stamp of economic reasoning." Judges write in the language of the law and may not be aware of the economic purposes they serve, admits Posner, but judges have often defined rules that share the singular trait of yielding sound economic results.
Posner treated this idea that our judges have unwittingly been promoting economic efficiency in the guise of legal decisions with the respect due a scientific discovery, and he wasn't alone. As George Priest of the Yale Law School put it, "Posner achieved for the law Einstein's dream for physics: a unified theory." On the basis of his findings that the common law tends to promote "efficiency," Posner rested a bolder claim. Where almost any law -- whether made by judges or legislators -- does not follow the logic of economics, Posner insists that it should.
Pressing these views, Posner has helped to change the way legal scholars do their work. Instead of concentrating on legal issues, many legal scholars now analyze a law's purpose and impact in terms of economics. The interpretation of economics they follow is as distinct as their approach to the law. Posner pushes conservative, free- market economics -- a brand of "supply- side" analysis which has been dubbed "Posnerian." Whole volumes of law reviews, with mathematical equations supporting legal judgments, have focussed entirely on his work. On almost any legal question, he says, the market has the answer.
Posner has done more than anyone else to create the approach known as "law and economics," which is the most influential movement in the law since the 1930s. A half-century ago, the dominant legal scholars maintained that the law's logic could be understood by comparing cases and statutes and deriving legal principles from them. As a field of inquiry, the law was self-contained. Then "legal realists" introduced the social sciences into legal scholarship, arguing that an understanding of the decisions by judges, legislators and others that make up the law could be enhanced by disciplines like psychology or sociology. Now "law and economics" holds that economics tells best how people behave under law, and prescribes what the law should do in the future.
Since 1981, when President Reagan appointed Posner to the U.S. Court of Appeals for the Seventh Circuit in Chicago, the judge has applied his theories in real cases. (He has also won a place on nearly every list of possible Reagan appointees to the Supreme Court.) Commenting on Posner's version of judicial activism, a Chicago attorney told The American Lawyer that he "is a brilliant heretic who brings his economic analysis to all issues, embarking on excursions which lawyers simply can't anticipate. It's Economics 202 rather than (legal) precedent."
In a notorious dissent, the 45-year-old judge came out against the established practice of appointing free counsel to represent prisoners who bring civil-rights suits. In his view, a prisoner who claimed the state was responsible for his blindness should test his case in the market by seeing if he could attract a lawyer to take the matter for a contingent fee. (If the lawyer won the case he would take part of the financial settlement as his fee.) Criminologist Norval Morris, a friend of Posner's from the University of Chicago, apologized: "Dick is a little remote from the squalor of the real world."
By his own count, Posner has applied economic analysis in at least 20 decisions. In one, he ruled that it is constitutional for a state to tow an illegally parked car without giving the owner a chance to be heard, because the cost of a constitutional safeguard against such behavior by the state -- a ban on all towing of cars -- would exceed the benefit. In another case, Posner ruled that a shipowner was not negligent in the death of a longshoreman who fell through a freighter's open hatch at night. He reasoned that the dark should have made the roustabout more careful, and leaving the hatch open at night must have been "cost-justified" or the owner wouldn't have done it.
His most criticized opinion involved a suit brought by two doctors who challenged a surgeons' association for barring them from membership. The trial judge held the association in contempt for refusing to turn over some documents to the two doctors as part of pretrial fact-finding. Posner overruled, on the novel ground that the association shouldn't have to give up the material until the doctors showed they would suffer in competition with other surgeons if they couldn't join.
In response, Justice Potter Stewart, who was on assignment to the Seventh Circuit after retiring from the Supreme Court, suffered the judicial equivalent of apoplexy. He upbraided Posner for "disregard(ing) long- settled principles of civil procedure" and making "a completely unprecedented expansion" of the law by imposing his economic theories at the expense of established rules of procedure. Stewart's dissent persuaded other members of the appeals court to insist that Posner rewrite his opinion in a more traditional manner.
Judge Posner is tall and baby-faced, with thin, buff hair and a high, confident voice. Wearing black-framed glasses and Brooks Brothers garb, he works placidly at his word processor on the 27th floor of a Chicago federal office building.
On the opposite wall hangs a chart of his early accomplishments, in the guise of diplomas and pictures of his mentors, and they make him an unlikely candidate for his current legal role. Yale College '59, summa cum laude and president of the Harvard Law Review '62, he first set his course by liberal stars. He clerked for Supreme Court Justice William Brennan, assisted Federal Trade Commissioner Philip Elman and worked for Thurgood Marshall when the justice served as solicitor general.
Beginning in 1968, as a law professor at Stanford and Chicago, Posner came under the spell of George Stigler, who later won a Nobel Prize in economics. Stigler is a leader of the Chicago School, the extended family of free marketeers whom many consider the ideological godfathers of Reaganomics. The Chicago School believes that the best results for all are achieved when people trade selfishly in unregulated commerce; the invisible price mechanism, governed by supply and demand, serves as an impartial broker, easing deals between producers and consumers in a boisterous, free market.
The Chicago School of economists has influenced thinking at the university's law school. An important contribution to this influence was the "Coase theorem," the work of an economist named Ronald Coase. He first articulated his theory in 1961 with this hypothetical example:
Suppose the spark from a train sets fire to some woods. Traditional legal doctrine dictated that a court should resolve the dispute between the railroad and the landowner by deciding who was at fault. In the "Problem of Social Cost," Coase proposed a different way of looking at the same event.
"The traditional approach has tended to obscure the nature of the choice that has to be made," he declared. "The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature." As Coase saw the problem, both the railroad's engine and the owner's woods "caused" the fire. To prevent another, the railroad would have to buy a spark-guard or the owner would have to cut back his trees: one or the other had to pay the price. The economic solution would "avoid the more serious harm." In many instances, forcing the railroad to pay for the damage as well as a spark-guard would cost society too much in increased rail rates. Coase concluded, "In devising and choosing between social arrangements, we should have regard for the total effect."
Coase argued that legal rules should minimize the costs to society. His theorem encouraged people to settle disputes with a minimum of outside, sometimes expensive, interference, and it was heard as a call for the law to foster the free market. Coase's idea changed the way lawyers and economists viewed basic conflicts in society; his original article became the most widely cited ever in the journals of both professions.
While Coase polished his article, a professor from Yale Law School named Guido Calabresi finished writing up a similar idea. Calabresi, too, declared that the law should ignore the established choice about who was at fault and instead follow an economic analysis. But where Coase offered a single economic goal (the outcome with the most benefit and least cost to society), Calabresi added a second: efficiency, he argued, must be tempered by fairness -- efficiency should not be used as an excuse to allow the wealthy to run roughshod over the poor.
In 1973, when he was teaching at Chicago, Posner published a textbook called "Economic Analysis of Law," which moved "law and economics" into prominence. Posner pushed the ideas of Coase and Calabresi into the mainstream of legal scholarship, and he demonstrated that the terms of economics could be stretched to cover almost any legal notion.
About constitutional law, he observed: "The well-settled principle that constitutional provisions are to be interpreted more flexibly than statutory provisions is a sound economic principle that flows directly from the much greater costs of changing the Constitution compared with changing a statute." Regulation of political campaign finances, he wrote, "favors incumbents in precisely the way in which a limitation on commercial advertising expenditures would favor producers of existing brands. A new product often requires heavy advertising to acquaint potential customers with existence and advantages; the same is true of a fresh face in the political market." Posner compared judicial precedents to a stock of capital goods that "yield productive services" and then "depreciate" in value as they age.
Posner's textbook became a legal bestseller and provided an army of recruits with basic training in "law and economics." Law schools from the University of Miami in Florida to Boalt Hall at the University of California at Berkeley founded centers for research and teaching in the area.
On element of Posner's theory that attracted new followers was his declaration that effiency -- the economic term for the highest benefit at the least cost -- is another meaning of justice. In what he called an "era of anarchy in ethics," the judge set a new, philosophic challenge: the law's goal should be to maximize the wealth of society.
The voltage of criticism against Posner has increased with his academic influence. The Harvard Law Review warned that markets are more complex then Posner makes them appear. The Hofstra Law Rewiew dedicated two issues to a symposium about efficiency, the economic concept at the core of Posner's work, in which he was accused of misusing economics and making sweeping claims for his approach when he hadn't really tested it. When he pinted to his articles showing the economic reasoning behind a range of legal doctrines, Posner was criticized for failing to do what a real economist would do, testing his notion empirically. Critics have done that for him, deflating his theories with facts.
The sharpest attacks an Posner begin with a form of praise. On the one hand, as Stanford Law School's Mark Kelman puts it, the judge's "law and economics" is "the most coherent legal scholarship we have right now." On the other, write Kelman and other members of a counter-movement called "critical legal studies," Posner misunderstands both law and society.
In this view, the judge ignores the complexity of human behavior by suggesting that its main purpose is to maximize of wealth. Even if that were a plausible reading of society, these critics note, turning the principle into law would promote selfishness instead of the order that law seeks. Emphasizing the uncertainties of cost-benefit calculations, the critics ask: In the guise of science, isn't Posner substituting the value judgments of a free-market economics for those of the law?
Guido Calabresi questions Posner's goal from another point of view: "What is this wealth that society should maximize . . . ? Wealth in any society depends on tastes, on what people want, on what they value. But what they value depends on what they have to begin with. If I have nothing I will value food, if I have food I may wish for sex, if I have both I may lust after law, and if I have law I may desire silence." In Calabresi's opinion, to "say that the common law maximizes wealth is to ignore the role the common law plays in establishing and constantly changing . . . the starting points which permit us to define wealth."
The most frustrated response to Posner's work comes from traditional scholars who are committed to analyzing cases and statutes the old-fashioned way and who see "law and economics" as a novelty with no practical benefit. They scoff at the promise of economics yielding one super insight applying throughout the law.
Traditional scholars complain that Posner is slippery. It's one thing for the judge to pose misleading choices. ("Is paying a pregnant woman to carry the child to term so offensive an alternative to the abortion of the fetus?") Misusing concepts in order to score points seems even worse. Posner equates privacy with concealment and then attacks the law's protection of the right to privacy, insisting that people have no business withholding personal facts that others might need to decide whether to hire, trust, even marry them.
Forgetting that he already declared them synonymous, Posner divides legal values into mismatched camps labeled "efficiency" and "justice" (e.g., racial discrimination isn't bad because it's unjust but because it's inefficient). He has said: "I hate 'justice.' The word is meaningless. If it's used in a judicial opinion, it's used to obscure the grounds. I think we could do without it."
Judge Posner is not solely responsible for the popularity of "law and economics," but he has been the movement's main promoter. With Posner's help, it has gained influence in many parts of American law.
For example, decisions by the Justice Department and the Federal Trade Commission during the Reagan administration to relax antitrust standards for corporate mergers yield striking examples of the Chicago School's impact.
Corporation law has also become a ripe field for "law and economics." Two young Chicago law professors and Posner proteges named Daniel Fischel and Frank Easterbrook (who was recently, at age 36, nominated to be a federal appeals court judge) who have become prominent in this field. They argue that takeovers improve the economy by moving assets to better management. The government, they declare, should do its best not to jeopardize these deals with excessive regulation.
In criminal law, too, there is a Chicago approach. Arguing before the Supreme Court about the deterrent effect of capital punishment, for example, the Justice Department has relied on an economic study concluding that each additional execution might save precisely eight lives. Though the Supreme Court brushed off that finding, "law and economics" researchers proceed undaunted, using economic analysis to determine whether we should turn law enforcement over to private bounty hunters (yes) or go after big drug pushers versus small dealers (dealers, because they supply street users, whose drug habits lead them to commit other crimes wich are costly to society).
On the federal bench, the Reagan administration has given "law and economics" its most visible platform. Four of Reagan's 27 appointees to the Courts of Appeals are described as "law and economics" judges, and all of them appear high on lists of potential Reagan appointees to the Supreme Court. They include Chicago Law School's Antonin Scalia, Yale's Ralph Winter Jr., former Solicitor General Robert Bork and Posner.
It is still too soon to know how far these -- or any other -- judges can impose the ideas of "law and economics" in decisions from the bench. In Posner's case, his opinions for the appeals court are less controversial than his articles and books, which he keeps churning out. Since becoming a judge, he has finished 21 long articles and three substantial books, including a collection of essays on "The Economics of Justice."
In the preface to that collection, he writes: "I hope I have not 'oversold' (my) approach by insufficient attention to the rather bizarre results that its unflinching application could produce." He offers the example of "a case where human growth hormone is exceedingly scarce." If the hormone is allocated by the market, a "wealthy man" who wants to add a couple of inches to his height can outbid a "poor dwarf" who could use the hormone to reach normal size. Allocating the hormone by the market will boost supply by increasing price, the judge argues, but he "recoils from the implications of allowing the market to control its allocation completely."
So Posner would not pit a poor dwarf against a rich man where money alone would settle the issue. But he would abolish adoption agencies and legalize the sale of babies to the highest bidders. Though the distinction between these two may elude many laymen, Posner proceeds with confidence. And his confidence is reshaping the law.