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C H A P T E R T H R E E Richard Posner’s Praxis MY PURPOSES HERE are four. First, I reveal the internal logic of Richard Posner’s microeconomic conception of judicial efficiency to be fallacious , partly for reasons indigenous to his particular formulation of it and partly for reasons that have long been known by welfare economists and political scientists to attend various compensation-based theories of allocative efficiency. Second, I show that in his writings about the federal courts and his advocacy of efficiency as a basis for common law making and statutory interpretation, Posner employs a conception of macroeconomic judicial efficiency that is not derived from his microeconomic theory and which is inconsistent with it. Third, by analyzing opinions he wrote as a federal appellate court judge on the Seventh Circuit between 1982 and 1987 in two areas—labor law and antitrust— I establish both that he fails to adhere consistently to either his microeconomic or his macroeconomic conceptions of efficiency as a judge, and that in the course of those decisions he reifies contentious and indeterminate economic theories by presenting them as uncontroversially “scientific.” Last, I take note of some distributive and ideological implications of his enterprise. WEALTH MAXIMIZATION AS JUDICIAL EFFICIENCY: THE MICROECONOMIC THEORY The much celebrated and criticized “law and economics” movement has found its most lucid, prolific, and influential exponent in the person of Richard Posner. For decades he has championed the view that the R I C H A R D P O S N E R ’ S P R A X I S 101 common-law is best understood in terms of the theory of economic efficiency,1 that “the basic function of law” is to “alter incentives” to maximize the efficient production of wealth.2 Just what efficiency means will concern us shortly, but note to begin with that he advocates this theory in both descriptive and normative senses. Along with several other commentators, he has argued that the theory of economic efficiency explains the historical evolution of American common law (in directly “economic” fields such as antitrust and other regulatory law, as well as in such areas as torts, contracts, family law, products liability, and in many others), and, perhaps more contentiously, that the theory of efficiency should provide the basis for common-law adjudication in a wide variety of noneconomic fields of law.3 Although professing agnosticism on the subject of how much of the legal terrain the economic analysis of law does and should govern, holding that this cannot be resolved a priori, that it is an empirical question to be settled as the practitioners of the law and economics movement attempt to apply it, he has suggested that economic analysis has application in torts, contracts , commercial law, property, procedure, remedies, criminal law, family law, intellectual property, and in all areas of law that have common law or “quasi common law” components, including antitrust law and constitutional law.4 In addition he suggests that economic analysis applies in the process of statutory construction.5 There is an apparent tension between these descriptive and normative claims, as the descriptive claim exhibits an “invisible hand” component —that common-law judges have maximized efficiency without intending to or even knowing what they were doing, simply by applying 1 Richard Posner, Economic Analysis of Law (Boston: Little, Brown, 1972); Richard Posner, “Some Uses and Abuses of Economics in Law,” University of Chicago Law Review, Vol. 46, No. 2 (Winter 1979), p. 281. 2 Richard Posner, Economics of Justice (Cambridge, MA: Harvard University Press, 1981). 3 See, e.g., Gary S. Becker, “Crime and Punishment: An Economic Approach,” Journal of Political Economy, Vol. 76, No. 2 (March/April 1968), p. 169; Paul H. Rubin, “Why is the Common Law Efficient?” Journal of Legal Studies, Vol. 6, No. 1 (January 1977), pp. 51–63; George L. Priest, “The Common Law process and the Selection of Efficient Rules,” Journal of Legal Studies, Vol. 6, No. 1 (January 1977), pp. 65–82. See also Posner, “Some Uses and Abuses,” pp. 281–91 (for a brief history of the “law and economics” movement with extensive citations). 4 “[T]he limitations of economics [in legal analysis and adjudication] cannot be determined a priori, but only by the efforts of scholars to apply economics to hitherto unexplored areas of the legal system. One can reach the outer bounds...

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