Frank H. Stephen
U. of Manchester



(Thursday, 3rd April 2003)

Title : Empirical Law & Economics

This lecture will consider the different uses to which empirical work can be put in the field of law-and-economics.

We begin by considering the approach closest to the traditional approach of legal scholars - 'descriptive law-and-economics'. Here economic reasoning is used to derive a set of 'efficient' legal rules. Empirical studies are then carried out to test whether these 'efficient' legal rules are consistent with those actually applied by the courts. This is essentially the approach with respect to Common Law jurisdictions: do judges dispose of cases in the way suggested by the 'efficient' set of rules. Here the data being used to test the theory are the outcomes of actual cases, or at least those reported in the Law Reports. Nominally this approach was used widely in the early years of the development of law-and-economics. We will consider whether, as applied, this represented a legitimate approach to hypothesis testing. As a particular example of this we will consider the 'Learned Hand rule' as a statement of negligence as discussed in many law-and-economics texts and articles. [see Stephen(1994)].

Richard Posner (1997) has suggested that European law-and-economics scholars have the opportunity to bring their empirical techniques to bear on aspects of the criminal justice system because the sociology of law (or socio-legal studies) is still alive and well in Europe as compared to USA. We will look at work on criminal procedure (specifically plea bargaining) through the paper by Boari & Fiorentini (2001) on a reform of the criminal justice system in Italy. In some respect work such as this might also be regarded as being on the industrial economics of the criminal justice industry.

A third, more recent, strand of empirical research which as at the interface between Law and Economics might be thought of as being more central to the concerns of the New Institutional Economics. This concerns the effect of both legal rules and the effectiveness of implementing them on the functioning of market systems. Here we will consider the work of La Porta et al. (1998) and Rodrik et al. (2002).

The three applications of empirical methods in-law-and economics discussed do not exhaust all the ways in which economists may carry out work in this area. They are used to illustrate the range of approaches, their relationship to other empirical work by economists and the link to the New Institutional Economics

Bibliographical references :

Boari & Fiorentini (2001), "International Review of Law and Economics", vol. 21, 213-231. and follow links.

La Porta, Lopez-de-Silanes, Shleifer and Vishny (1998), "Law and Finance", Journal of Political Economy, 106 (6), 1113 - 1155.[...]

Posner (1997) "The Future of Law and Economics in Europe", International Review of Law and Economics, vol. 17, 3-14. and follow links.

Rodrik, Subramanian and Trebbi (2002), "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development", Harvard University, October 2002.

Stephen (1994), "Expected damage and Due Care", European Journal of Law and Economics, vol. 1, 23-31.