Knowledge about welfare: Legal realism and the separation of law and economics

Minnesota Law Review

Volumn 84, Issue 4, 2000, Pages 805-862

  Hovenkamp, Herbert ^a  

^a UNIVERSITY OF IOWA   (United States)

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EID: 0347664771     PISSN: 00265535     EISSN: None     Source Type: Journal    
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References (328)

1. Ordinalism refers to our inability to make cardinal comparisons of utilities. This concept applies intrapersonally as well as interpersonally if one assumes that people experience declining marginal utility of income. For example, I might be willing to pay $1,000 for good A and $2,000 for good B, thus revealing that I place a monetary value on B that is twice as high as A. But if I also have declining marginal utility of income the first $1,000 out of my pocketbook will be less valuable to me than the second $1,000. In that case the amount of utility I obtain from B is more than twice A, but I do not know how much more.
2. See generally KENNETH J. ARROW, SOCIAL CHOICE AND INDIVIDUAL VALUE (1951). For an explanation of the problem and a very simplified and non-mathematical proof,
3. see generally Herbert Hovenkamp, Arrow's Theorem: Ordinalism and Republican Government, 75 IOWAL. REV. 949 (1990).
4. Richard Craswell, Incommensurability, Welfare Economics, and the Law, 146 U. PA. L. REV. 1419, 1450 (1998);
5. see also Thomas F. Cotter, Legal Pragmatism and the Law and Economics Movement, 84 GEO. L.J. 2071, 2090-93 (1996);
6. Lee Anne Fennell, Interdependence and Choice in Distributive Justice: The Welfare Conundrum, 1994 WlS. L. REV. 235, 300-20;
7. Cass R. Sunstein, Incommensurability and Valuation in Law, 92 MICH. L. REV. 779, 782-95 (1994);
8. Richard Warner, Impossible Comparisons and Rational Choice Theory, 68 S. CAL. L. REV. 1705,1733 (1995).
9. Amartya Sen, The Possibility of Social Choice, 89 AM. ECON. REV. 349, 351 (1999).
10. See id. at 359.
11. See generally Donald Davidson, Judging interpersonal interests, in FOUNDATIONS OF SOCIAL CHOICE THEORY 195, 203 (Jon Elster & Aanund Hylland eds., 1986) (arguing it is virtually impossible for an actor to have knowledge about other people's mental states without making observations and comparisons with the actor's own mental state);
12. John C. Harsanyi, Morality and the Theory of Rational Behaviour, 44 SOC. RES. 623, 644-47 (1977) (discussing weaknesses in behavior theories based on preference).
13. See, e.g., Amartya Sen, Capability and Well-Being, in THE QUALITY OF LIFE 30 (Martha Nussbaum & Amartya Sen eds., 1993);
14. AMARTYA SEN, COMMODITIES AND CAPABILITIES (1985);
15. AMARTYA SEN, ON ECONOMIC INEQUALITY (1997);
16. Amartya Sen, Individual Preference as the Basis of Social Choice, in 1 SOCIAL CHOICE RE-EXAMINED 15-37 (Kenneth J. Arrow et al. eds., 1997);
17. cf. Richard A. Epstein, Law and Economics: Its Glorious Past and Cloudy Future, 64 U. CHI. L. REV. 1167, 1174 (1997) (suggesting "that the language of 'preferences' is inadequate for economics" and that dealing with this inadequacy should be part of the agenda of law and economics).
18. See Sen, supra note 4, at 358. Sen writes: A hopeless destitute with much poverty, or a downtrodden laborer living under exploitative economic arrangements, or a subjugated housewife in a society with entrenched gender inequality, or a tyrannized citizen under brutal authoritarianism, may come to terms with her deprivation. She may take whatever pleasure she can from small achievements, and adjust her desire to take not of feasibility (thereby helping the fulfillment of her adjusted desires). But her success in such adjustment would not make her deprivation go away. The metric of pleasure or desire may sometimes be quite inadequate in reflecting the extent of a person's substantive deprivation. Id.
19. CHARLES DARWIN, THE DESCENT OF MAN, AND SELECTION IN RELATION TO SEX (London, J. Murray 1871).
20. W. STANLEY JEVONS, THE THEORY OF POLITICAL ECONOMY (4th ed. 1911).
21. Ronald Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960).
22. JAMES M. LANDIS, REPORT ON REGULATORY AGENCIES TO THE PRESIDENT-ELECT (I960).
23. One must acknowledge some precursors to Landis's pessimism about government agencies. See MARVER BERNSTEIN, REGULATING BUSINESS BY INDEPENDENT COMMISSION (1955);
24. Samuel P. Huntington, The Marasmus of the ICC: The Commission, the Railroads, and the Public Interest, 61 YALE L.J. 467 (1952);
25. Louis L. Jaffe, The Effective Limits of the Administrative Process, 67 HARV. L. REV. 1105 (1954) [hereinafter Jafie, Limits];
26. Louis L. Jaffe, Invective and Investigation in Administrative Law, 52 HARV. L. REV. 1201 (1939);
27. Louis L. Jaffe, The Report of the Attorney General's Committee on Administrative Procedure, 8 U. CHI. L. REV. 401 (1941);
28. see also HENRY J. FRIENDLY, THE FEDERAL ADMINISTRATIVE AGENCIES: THE NEED FOR BETTER DEFINITION OF STANDARDS (1962);
29. THOMAS K MCCRAW, PROPHETS OF REGULATION 210, 215, 219-20; 234-35 (1984);
30. Richard B. Stewart, The Reformation of American Administrative Law, 88 HARV. L. REV. 1669, 1677-78 (1975). Landis had been the author in 1938 of the much more optimistic THE ADMINISTRATIVE PROCESS (1938).
31. See ARROW, supra note 2.
32. See JAMES M. BUCHANAN & GORDON TULLOCK, THE CALCULUS OF CONSENT (1962).
33. See discussion infra Part IV.
34. See discussion infra Part IV.
35. On this close link prior to the 1930s, see Herbert Hovenkamp, The First Great Law and Economics Movement, 42 STAN. L. REV. 993, 993-1031 (1990).
36. The highest marginal tax rate rose significantly during World War I, fell back and began rising during the New Deal until it reached a peak of 94% on incomes exceeding $200,000 during World War II. During the post-war forties the highest marginal rate was around 85%, and during all of the 1950s, it was in the low nineties (91% under the influential 1954 Code). In 1965, it fell to 70% and has been falling since. Further, at no time from 1900 until the beginning of World War II were more than 10% of the population made subject to the tax because the minimum taxable income was so high. During World War II, that number rose dramatically to 57.1% and has generally increased since then. Of course, the complete story is far more complicated. First, the total redistribution effected by the tax depends not only on the highest rate, but also on where the income gradations appeared, and the percentage of taxpayers that had to pay each rate. Further, other provisions in the code may have made actual rates higher or lower than apparent rates. For a summary of the historical data, see RICHARD GOODE, THE INDIVIDUAL INCOME TAX 308 (rev. ed. 1976).
37. See, e.g., Williams v. Walker-Thomas Furniture Co., 350 F.2d 445,448-50 (D.C. Cir. 1965); GRANT GlLMORE, THE DEATH OF CONTRACT (1974).
38. See generally Herbert Hovenkamp, The Marginalist Revolution in Legal Thought, 46 VAND. L. REV. 305 (1993).
39. See, e.g., F.Y. Edgcworth, The Pure Theory of Taxation III, 7 ECON. J. 550 (1897);
40. F.Y. Edgeworth, The Theory of Distribution, 18 Q.J. ECON. 159 (1904). On Edgeworth and his influence on incipient law and economics in the United States,
41. see Hovenkamp, supra note 18, at 1002-03.
42. See, e.g., HENRY STEEL COMMAGER, THE AMERICAN MIND 41 (1950);
43. RICHARD HOFSTADTER, SOCIAL DARWINISM IN AMERICAN THOUGHT 30 (rev. ed. 1955);
44. ARNOLD M. PAUL, CONSERVATIVE CRISIS AND THE RULE OF LAW (i960);
45. EDWARD A. PURCELL, JR., THE CRISIS OF DEMOCRATIC THEORY (1973);
46. MORTON WHITE, SOCIAL THOUGHT IN AMERICA: THE REVOLT AGAINST FORMALISM 104-05 (Viking Press 1949) (1957).
47. One corrective is DOROTHY ROSS, THE ORIGINS OF AMERICAN SOCIAL SCIENCE (1991).
48. See also Hovenkamp, supra note 18;
49. Hovenkamp, supra note 21.
50. See MORTON J. HORWITZ, THE TRANSFORMATION OF AMERICAN LAW, 1870-1960: THE CRISIS OF LEGAL ORTHODOXY 9-31 (1992).
51. See generally HERBERT HOVENKAMP, ENTERPRISE AND AMERICAN LAW, 1836-1937 (1990);
52. WILLIAM M. WIECEK, THE LOST WORLD OF CLASSICAL LEGAL THOUGHT (1998).
53. On the relationship between economics and morals in classical legal thought, see generally Herbert Hovenkamp, Law and Morals in Classical Legal Thought, 82 IOWAL. REV. 1427 (1997).
54. See generally MARY FURNER, ADVOCACY AND OBJECTIVITY: A CRISIS IN THE PROFESSIONALIZATION OF AMERICAN SOCIAL SCIENCE, 1865-1905 (1975);
55. ROSS, supra note 24;
56. Herbert Hovenkamp, Evolutionary Models in Jurisprudence, 64 TEXAS L. REV. 645 (1985).
57. For the strongest statement of the thesis that Social Darwinism dominated Gilded Age American thought, see HOFSTADTER, supra note 23.
58. See generally ROBERT C. BANNISTER, SOCIAL DARWINISM: SCIENCE AND MYTH IN'ANGLO-AMERICAN SOCIAL THOUGHT (1979);
59. HOVENKAMP, supra note 25, at 99-101.
60. See ROSS, supra note 24, at 257-302, 390-470.
61. See generally EDWARD ALSWORTH ROSS, SOCIAL CONTROL (1901);
62. LESTER FRANK WARD, DYNAMIC SOCIOLOGY (Johnson Reprint Corp. 1968) (1883);
63. LESTER F. WARD, GLIMPSES OF THE COSMOS (1913).
64. On Reform Darwinism, see Hovenkamp, supra note 26, at 671-83;
65. see also L.I. BERNARD & JESSIE BERNARD, ORIGINS OF AMERICAN SOCIOLOGY: THE SOCIAL SCIENCE MOVEMENT IN THE UNITED STATES (1943);
66. JOHN C. BURNHAM, LESTER FRANK WARD IN AMERICAN THOUGHT (1956);
67. ROBERT PARIS, CHICAGO SOCIOLOGY, 1920-32 (1967);
68. HOFSTADTER, supra note 23, at 64-84;
69. JULIUS WEINBERG, EDWARD ALSWORTH ROSS AND THE SOCIOLOGY OF PROGRESSIVISM (1972).
70. See generally COMMAGER, supra note 23.
71. The evolutionary psychologists made this clear. See generally WILLIAM CHANDLER BAGLEY & STEPHEN S. COLVIN, HUMAN BEHAVIOR (1913);
72. JOHN DEWEY, How WE THINK (1910);
73. WILLIAM MCüOUGALL, AN INTRODUCTION TO SOCIAL PSYCHOLOGY (8th ed. 1914);
74. MAX FRIEDRICH MEYER, THE FUNDAMENTAL LAWS OF HUMAN BEHAVIOR (1911);
75. IVAN PETROVICH PAVLOV, CONDITIONED REFLEXES (1927);
76. JOHN B. WATSON, BEHAVIORISM 6 (1924);
77. JOHN BROADUS WATSON, PSYCHOLOGY FROM THE STANDPOINT OF A BEHAVIORIST (2d ed. 1924);
78. ALBERT PAUL WEISS, A THEORETICAL BASIS OF HUMAN BEHAVIOR (1925).
79. See discussion infra text accompanying notes 64-84.
80. JEREMY BENTHAM, AN INTRODUCTION TO THE PRINCIPLES OF MORALS AND LEGISLATION (J.H. Burns & H.LA Hart eds., 1970) (1789);
81. JEREMY BENTHAM, THE THEORY OF LEGISLATION (Etienne Dumont Hildreth trans., 1864). Bentham did not come close to developing the theory of marginal cost or theories of value based on marginalism.
82. WILLIAM S. JEVONS, THE THEORY OF POLITICAL ECONOMY (H. Stanley Jevons ed., 4th ed. 1911) (1871).
83. Alfred Marshall also deserves part of the credit. See generally 1 THE EARLY ECONOMIC WRITINGS OF ALFRED MARSHALL (J.K Whitaker ed., 1975).
84. For perspective on the rise of marginalism, see D.E. MOGGRIDGE, MAYNARD KEYNES: AN ECONOMIST'S BIOGRAPHY 84-86 (1992).
85. in the United States, John Bates Clark probably came to his marginalism independently. See generally JOHN BATES CLARK, THE PHILOSOPHY OF WEALTH 5690 (Augustus M. Kelley Publishers 1967) (1886);
86. JOSEPH A. SCHUMPETER, HISTORY OF ECONOMIC ANALYSIS 870 (1954).
87. Carl Menger's PRINCIPLES OF ECONOMICS (James Dingwall & Bert Hoselitz trans., 1981) (1871) was less influential in the United States than Jevons's work, since Menger stood outside the British classical tradition. However, a large group of American graduate students in political economy who went abroad for graduate study in the late nineteenth century ended up on the continent, especially in Germany, and many of them studied Menger. On the influence of German historicism on Progressive Era economics,
88. see FURNER, supra note 26, at 50-57;
89. ROSS, supra note 30, at 104-05;
90. Hovenkamp, supra note 18, at 996-97.
91. JETONS, supra note 35, at 1 (emphasis omitted).
92. See id. at 1-2.
93. Id.
94. "[W]hen the person remains satisfied with the distribution he has made, it follows that... an increment of commodity would yield exactly as much utility in one use as in another." Id. at 59.
95. ALFRED MARSHALL, PRINCIPLES OF ECONOMICS 158 (London, MacMfflan 1890).
96. ALFRED MARSHALL, PRINCIPLES OF ECONOMICS 15-16 (8th ed. 1920).
97. See Hovenkamp, supra note 21, at 311.
98. For illustrations, see id. at 311-12.
99. For example, in deciding what inputs to use in making a product, the firm maximizes its profits by using each input up to a point that its marginal cost is identical to the marginal cost of every other input. If labor and machinery are alternative inputs into a product and the current cost of labor is $5 per unit of value produced while the current cost of machinery is $4, the firm will invest in more machinery and less labor until the two are equalized. See id. at 313.
100. See HOVENKAMP, supra note 25, at 296-364.
101. See, e.g., ARTHUR ROBERT BURNS, THE DECLINE OF COMPETITION (1936);
102. EDWARD CHAMBERLIN, THE THEORY OF MONOPOLISTIC COMPETITION (1933);
103. J. MAURICE CLARK, STUDIES IN THE ECONOMICS OF OVERHEAD COSTS (1923).
104. See generally, e.g., PAUL ANTHONY SAMUELSON, FOUNDATIONS OF ECONOMIC ANALYSIS (1947).
105. See generally, e.g., J.M. Clark, Toward a Concept of Workable Competi-tion, 30 AM. ECON. REV. 241 (1940).
106. For an attempt to give policy effect to these ideas, see ATTORNEY GENERAL'S NAT"L COMM. TO STUDY THE ANTITRUST LAWS, REPORT (1955).
107. See infra text accompanying notes 62-84.
108. See, e.g., Hovenkamp, supra note 18, at 1002-05; Edwin R.A. Seligman, Progressive Taxation in Theory and Practice, PUBLICATION AM. ECON. ASS"N, Jan.-Mar. 1894, at 1,132-33.
109. See Hovenkamp, supra note 21, at 335-45; see also infra notes 56-61 and accompanying text.
110. See Oliver W. Holmes, The Path of the Law, 10 HARV. L. REV. 457, 462 (1897).
111. On the wage-fund doctrine in the United States, see HOVENKAMP, supra note 25, at 193-98.
112. That is, assuming that the marginal productivity of labor declines, the employer paying $1.00 per hour would continue to hire workers as long as the last worker hired contributed $1.00 or more; but if constrained to pay $1.10 per hour, the employer would stop hiring additional workers at the point that the marginal contribution was $1.10 The employer might simply produce less, or might make a somewhat larger investment in machinery or other alternatives to labor.
113. See Hovenkamp, supra note 21, at 346-58.
114. See E. Donald Elliott, Holmes and Evolution: Legal Process as Artificial Intelligence, 13 J. LEGAL STUD. 113, 140 (1984); Hovenkamp, supra note 26, at 656-64; Hovenkamp, supra note 21, at 335-45.
115. See HOVENKAMP, supra note 25, at 241-307.
116. This was the central thesis of Progressive economist Richard T. Ely's PROPERTY AND CONTRACT IN THEIR RELATIONS TO THE DISTRIBUTION OF WEALTH (1914).
117. See McCRAW, supra note 13, at 153-221. See generally LANDIS, supra note 12; Jafie, Limits, supra note 13.
118. See generally ARROW, supra note 2; BUCHANAN & TULLOCK, supra note 15. On public choice and social choice theory, see generally DANIEL A. FARBER & PHILIP P. FRICKEY, LAW AND PUBLIC CHOICE: A CRITICAL INTRODUCTION (1991);
119. DENNIS C. MUELLER, PUBLIC CHOICE II (1989).
120. See generally, e.g., Coase, supra note 11.
121. See George Stigler, Perfect Competition, Historically Contemplated, 65 J. POL. ECON. 1, 14-17 (1957).
122. For a rather extreme statement, see Richard A. Epstein, Hayekian Socialism, 58 MD. L. REV. 271 (1999).
123. See infra notes 129-37 and accompanying text (discussing ordinalism and progressive welfare economics).
124. See JOHN BATES CLARK, THE PHILOSOPHY OF WEALTH 10-20, 37, 61-63 (1887).
125. In comparison, see the thought of British institutionalist economist John A. Hobson in ECONOMICS OF DISTRIBUTION (1900) and ECONOMICS AND ETHICS: A STUDY IN SOCIAL VALUES (1929).
126. On Seligman's work on the theory of taxation and the progressive income tax, see Hovenkamp, supra note 18, at 1002-09.
127. See Edwin R.A. Seligman, Social Elements in the Theory of Value, 15 Q.J. ECON. 321, 322-27 (1901);
128. see also IRVING FISHER, MATHEMATICAL INVESTIGATIONS IN THE THEORY OF VALUE AND PRICES 89 (1965 ed.) (1892);
129. SIMON PATTEN, ESSAYS IN ECONOMIC THEORY 192 (R. Tugwell ed., 1924);
130. John H. Gray, Economics and the Law, 5 AM. ECON. REV. 3, 20-23 (Supp. 1915) (arguing that policy economics should be concerned with group needs rather than individual preferences);
131. D.I. Green, Value and Its Measurement, 7 YALE REV. 383 (1899);
132. cf. Sidney Sherwood, The Philosophical Basis of Economics, A Word to the Sociologists, 10 ANNALS AM. ACAD. POL. & SOC. SCI. 206, 207 (1897) (arguing that the sociologists' theory of value, as presently developed, was too imprecise to be used by economists).
133. For a recap of the debate, see Jacob Viner, The Utility Concept in Value Theory and Its Critics: II. The Utility Concept in Welfare Economics, 33 J. POL. ECON. 638 (1925).
134. Indeed, its lack of a social component caused some diehard classicists to continue to defend classical theories of value against the marginalist onslaught. See generally Silas M. Macvane, Analysis of Cost of Production, 1 Q.J. ECON. 481, 483 (1887);
135. Silas M. Macvane, Marginal Utility and Value, 7 Q.J. ECON. 255 (1893).
136. See Seligman, supra note 66, at 322-23.
137. See Edwin R.A. Seligman, The Theory of Progressive Taxation, PUBLICATION AM. EGON. ASS'N, Jan. 1893, at 52; Seligman, supra note 50, at 13233. For fuller discussion, see Hovenkamp, supra note 18, at 1002-05.
138. See THORSTEIN VEBLEN, Industrial and Pecuniary Employments, in THE PLACE OF SCIENCE IN MODERN CIVILIZATION AND OTHER ESSAYS 298, 307-n (1919).
139. See, e.g., Wal ton Hamilton, The Institutional Approach to Economic Theory, 9 AM. ECON. REV. 309, 316 (Supp. 1919) (arguing for a "theory of motives ... in harmony with the conclusions of modern social psychology");
140. Wesley C. Mitchell, Human Behavior and Economics: A Survey of Recent Literature, 29 Q.J. EGON, l, 2 (1914) (criticizing the view that economic theory rests "upon the simple facts of preference or choice, and the psychological explanation of these preferences or choices is... a matter of indifference to our science");
141. Wesley C. Mitchell, The Rationality of Economic Activity 1,18 J. POL. ECON. 97, 103,109-13 (1910) (taking issue with the economist's supposition of the rationality of human action and arguing that psychology and sociology suggested the contrary).
142. See MARSHALL, supra note 41, at 18-19 (arguing that a pound's worth of satisfaction to an ordinary poor man is a much greater thing than a pound's worth of satisfaction to an ordinary rich man); ARTHUR C. PlGOU, ECONOMICS OF WELFARE 89 (4th ed. I960) (arguing that "[a]ny transference of income from a relatively rich man to a relatively poor man of similar temperament, since it enables more intense wants to be satisfied at the expense of less intense wants, must increase the aggregate sum of satisfaction");
143. FRANK WILLIAM TAUSSIG, PRINCIPLES OF ECONOMICS 132 (3d ed. 1921) ("The principle of diminishing utility, if applied unflinchingly, leads to the conclusion that inequality of incomes brings a less sum of human well-being than equality of incomes, and that the greater the inequality, the less the approach to the maximum.");
144. John Bates Clark, The Ultimate Standard of Value, 1 YALE REV. 258 (1893) (arguing that social welfare is a function of aggregated individual utilities);
145. Simon N. Patten, The Scope of Political Economy, 2 YALE REV. 264, 266 (1894) (arguing that homogeneity of wealth and property tends to increase total utility); Viner, supra note 66, at 644 (1925) ("Changes in the relative distribution of income as between different classes will bring about changes in the amount of welfare, even though the aggregate real income of the community remains the same.").
146. See generally John Maurice Clark, Economic Theory in an Era of Social Readjustment, 9 AM. ECON. REV. 280 (Supp. 1919);
147. John Maurice Clark, Economics and Modern Psychology, 26 J. POL. ECON. 1, 7 (1918) [hereinafter Clark, Economics and Modern Psychology].
148. See John Maurice Clark, The Concept of Value: A Rejoinder, 29 Q.J. ECON. 709, 712 (1915);
149. see also Clark, Economics and Modern Psychology, supra note 73, at 10 ("In proportion as scientific research progresses, minimum standards of welfare will become more and more matters of social knowledge and less and less matters of individual taste - but only minimum standards relating to those necessities which are generally accepted as such.");
150. Lawrence K. Frank, The Emancipation of Economics, 14 AM. ECON. REV. 17 (1924);
151. A.J. Snow, Psychology in Economic Theory, 32 J. POL. ECON. 487 (1924).
152. See Frank A. Fetter, Price Economics Versus Welfare Economics, 10 All. ECON. REV. 467,476-79 (1920).
153. See Irving Fisher, A Statistical Method for Measuring "Marginal Utility" and Testing the Justice of a Progressive Income Tax, in ECONOMIC ESSAYS CONTRIBUTED IN HONOR OF JOHN BATES CLARK 157, 171 (H. Hollander ed., 1927).
154. Jacob Wesley Glair Mitchell, The Prospects of Economics, in THE TREND OF ECONOMICS 1,31 (Rexford Guy Tugwell ed., 1924).
155. See Simon N. Patten, The Effect of the Consumption of Wealth on the Economic Welfare of Society, in SCIENCE ECONOMIC DISCUSSION 123 (Henry C. Adams ed., 1886);
156. Simon N. Patten, The Failure of Biologic Sociology, 4 ANNALS AM. ACAD. POL. & SOC. SCI. 919 (1894);
157. Simon N. Patten, The Relation of Economics to Sociology, 5 ANNALS AM. ACAD. POL. & SOC. SCI. 577 (1895).
158. ROSS, supra note 30.
159. See id. at 329.
160. See id. at 330.
161. See id. at 331.
162. 7d.at332.
163. Id. at 338-39. Ross illustrated: There were many styles of gold-washing on the Sacramento in 1849; but one style was gradually found to be more convenient than the others, and became after a while the standard way of washing out gold, which newcomers adopted as a matter of course. A like weeding out of inferior individual practices brings to light a standard form of pot or tool or weapon, a standard mode of tilling or breeding, a standard sex relation or education of the young, which is uniform for all, possesses authority, and may be termed a culture element.... Once an element has emerged triumphant from this rivalry, it becomes fixed in custom and remains thus shielded from competition, until, perhaps, it is confronted with a different practice or belief that has won the favor of some other group. Then deadly comparisons are made, and weeding out begins again. Id.
164. See generally GARY S. BECKER, THE ECONOMIC APPROACH TO HUMAN BEHAVIOR (1976);
165. GARY S. BECKER, HUMAN CAPITAL (3d ed. 1993);
166. GARY S. BECKER, A TREATISE ON THE FAMILY (rev. ed. 1991).
167. See Herbert Hovenkamp, The Limits of Preference-Based Legal Policy, 89 NW. U. L. REV. 4,84-90 (1994).
168. See id.
169. See, e.g., LIONEL ROBBINS, AN ESSAY ON THE NATURE AND SIGNIFICANCE OF ECONOMIC SCIENCE (2d ed. 1935);
170. see also Robert Cooter & Peter Rappoport, Were the Ordinalists Wrong About Welfare Economics?, 22 J. ECON. LIT. 507 (1984); Hovenkamp, supra note 18, at 1033-47.
171. See discussion infra text accompanying notes 129-37.
172. See DAVID WlGDOR, ROSCOE POUND 111-14 (1974). Pound needs a new biography that is somewhat more critical, that explores more deeply the intellectual origins of Pound's pre-1930s thought, and that evaluates more fully Pound's 1930s relationship with the Legal Realists.
173. See, e.g., Roscoe Pound, Liberty of Contract, 18 YALE L.J. 454 (1909) [hereinafter Pound, Liberty of Contract};
174. Roscoe Pound, Mechanical Jurisprudence, 8 COLUM. L. REV. 605 (1908) [hereinafter Pound, Mechanical Jurisprudence].
175. See Pound, Liberty of Contract, supra note 91, at 455-56. Pound relied for his critique of the classicists on HENRY ROGERS SEAGER, INTRODUCTION TO ECONOMICS (3d ed. 1907), replaced in later years by his more influential PRINCIPLES OF ECONOMICS (1913). Seager was trained in the German Historical School but was a fairly orthodox marginalist and among the more conservative of the Progressive economists.
176. EDWARD ALSWORTH Ross, SIN AND SOCIETY (1907).
177. See WlGDOR, supra note 90, at 113.
178. Pound cited SEAGER, supra note 92, and the work of other Progressive Era sociologists, including EDWARD A. ROSS, SOCIAL PSYCHOLOGY (1908),
179. cited in Pound, Mechanical Jurisprudence, supra note 91, at 607 n.7;
180. LESTER FRANK WARD, APPLIED SOCIOLOGY (1906),
181. cited in Pound, Liberty of Contract, supra note 91, at 454 n.3.
182. On the influence of the German Historical School on Progressive Era American scholarship, see JÜRGEN HERBST, THE GERMAN HISTORICAL SCHOOL IN AMERICAN SCHOLARSHIP (1965).
183. On Pound and German historicism and the German "free law" movement, which sought to identify "social interests" that the law should protect, see James E. Herget & Stephen Wallace, The German Free Law Movement as the Source of American Legal Realism, 73 VA. L. REV. 399, 42228 (1987). On the German historical school and legal thought generally, see id. at 405-06.
184. See, e.g., RUDOLF VON JHERING, LAW AS A MEANS TO AN END 332-33 (Isaac Husik trans., 1913). On Jhering's influence on Pound, see Herget & Wallace, supra note 96, at 407-10; WlGDOR, supra note 90, at 114-18.
185. See, e.g., Roscoe Pound, Legislation as a Social Function, 18 AM. J. SOC. 755, 762 (1913);
186. Roscoe Pound, Making Law and Finding Law, 82 CENTRAL L.J. 351, 358 (1916);
187. Roscoe Pound, The Scope and Purpose of Sociological Jurisprudence (pts. 1-3), 24 HARV. L. REV. 591 (1911), 25 HARV. L. REV. 140 (1912), 25 HARV. L. REV. 490 (1912) [hereinafter Pound, Scope and Purpose]; Roscoe Pound, Soda; Problems and the Courts, 18 AM. J. SOC. 331, 341 (1912).
188. However, later in his career Pound moved to the right and objected to what he saw as Legal Realism's use of the social sciences to subordinate all concern for the individual to various question about public goods and values. See generally, e.g., Roscoe Pound, Public Law and Private Law, 24 CORNELL L.Q. 469 (1939).
189. Pound seems hostile toward economics as a general matter, and generally understood "economics" in legal analysis to refer to interest group politics. See, e.g., Roscoe Pound, The Economic Interpretation and the Law of Torts, 53 HARV. L. REV. 365, 383 (1940) (identifying the "economic interpretation" as the theory of how the rise and fall of various economically or politically powerful interests explains changes in tort law, and then arguing that such analysis accounts for only a small part of the law of torts).
190. See, e.g., Pound, Scope and Purpose (pt. 3), supra note 98, at 489, 516 (listing the characteristics of Sociological Jurisprudence).
191. See generally Hovenkamp, supra note 18.
192. See, e.g., John R. Commons, Law and Economics, 34 YALE L.J. 371, 374 (1925).
193. See generally Stigler, supra note 62.
194. See generally Edward Ross, The Sociological Frontier of Economics, 13 Q.J. ECON. 386 (1898).
195. See id. at 394.
196. See JOHN DEWEY, INDIVIDUALISM, OLD AND NEW 9, 135, 168-71 (1930); John Dewey, Theory of Valuation, in 2 INTERNATIONAL ENCYCLOPEDIA OF UNIFIED SCIENCE 19-50 (1930). Compare the work of Clarence Ayres, a younger Progressive who did not start writing until the 1940s but then became a prominent dissenter from neoclassicism. Ayres also believed that one could measure social value through productivity tests - for example, conducting experiments on the importance of milk for infants and then coming up with a social value function that would inform the state policymaker about how many resources should be committed to guaranteeing its availability. See CLARENCE E. AYRES, THE INDUSTRIAL ECONOMY 305 (1952).
197. See infra notes 151-95 and accompanying text.
198. See, e.g., GUNNAR MYRDAL, THE POLITICAL ELEMENT IN THE DEVELOPMENT OF ECONOMIC THEORY 102 (1953). See generally I.M.D. LITTLE, CRITIQUE OF WELFARE ECONOMICS (1950); J.R. Hicks, The Foundations of Welfare Economics, 49 ECON. J. 696 (1939); Nicholas Kaldor, Welfare Propositions of Economies and Inter-personal Comparisons of Utility, 49 ECON. J. 549 (1939).
199. On Veblen, see LEONARD DENTE, VEBLEN'S THEORY OF SOCIAL CHANGE (1977); JOSEPH DORFMAN, THORSTEIN VEBLEN AND His AMERICA (1934); STEPHEN EDGELL, VEBLEN: SOCIAL THEORIST AND SOCIAL CRITIC (1987); J.A. HOBSON, VEBLEN (1937); DAVID RIESMAN, THORSTEIN VEBLEN (1953); DAVID SECKLER, THORSTEIN VEBLEN AND THE INSTITUTIONALISTS (1975); BEN B. SELIGMAN, MAIN CURRENTS IN MODERN ECONOMICS 129-58 (1962).
200. On Schumpeter, see RICHARD SWEDBERG, SCHUMPETER: A BIOGRAPHY (1991).
201. See generally supra notes 110-11. Both Veblen and Schumpeter also criticized the importance that neoclassicism assigned to the concept of an equilibrium. Both believed that the essence of markets and exertions of preference is change, and that the study of change was far more important than the study of equilibrium.
202. See GEOFFREY MARTIN HODGSON, ECONOMICS AND EVOLUTION (1993);
203. Stephen Edgell, Thorstein Veblen's Theory of Evolutionary Change, 34 AM. J. ECON. & SOC. 267 (1975).
204. See generally Charles G. Leathers, Veblen and Hayek on Instincts and Evolution, 12 J. HIST. ECON. THOUGHT 162 (1990).
205. Thorstein Veblen, The Limitations of Marginal Utility, 17 J. POL. ECON. 620, 626 (1909);
206. see also Richard N. Langlois, What Was Wrong with the Old Institutional Economics? (And What Is Still Wrong with the "New"?), 1 REV. POL. ECON. 3 (1989).
207. Thorstein Veblen, The Socialist Economics of Karl Marx and His Followers, 21 Q.J. ECON. 299,308 (1907).
208. See Veblen, supra note 115, at 627. To any modern scientist interested in economic phenomena, the chain of cause and effect in which any given phase of human culture is involved, as well as the cumulative changes wrought in the fabric of human conduct itself by the habitual activity of mankind, are matters of more engrossing and more abiding interest than the method of inference by which an individual is presumed invariably to balance pleasure and pain under given conditions that are presumed to be normal and invariable. Id.
209. See Thorstein Veblen, Why Is Economics Not an Evolutionary Science?, 12 Q.J. ECON. 373 (1898);
210. see also Thorstein Veblen, The Preconceptions of Economic Science (pt. 3), 14 Q.J. ECON. 240 (1900);
211. Thorstein Veblen, Professor dark's Economics, 22 Q.J. ECON. 147 (1908).
212. On this point, see Geoffrey M. Hodgson, Thorstein Veblen and Post-Darwinian Economics, 16 CAMBRIDGE J. ECON. 285,292 (1992).
213. See THORSTEIN VEBLEN, The Evolution of the Scientific Point of View, 10 UNIV. CAL. CHRON. (n.d.), reprinted in THE PLACE OF SCIENCE IN MODERN CIVILIZATION AND OTHER ESSAYS 32, 37 (Transaction Publishers 1990) (1919).
214. See infra notes 151-61 and accompanying text.
215. THORSTEIN VEBLEN, THE THEORY OF THE LEISURE CLASS 131 (Houghton Mifilin Co. 1973) (1899);
216. see also Malcolm Rutherford, Thorstein Veblen and the Processes of Institutional Change, 16 HIST. POL. ECON. 331 (1984);
217. Rick Tilman, Some Recent Interpretations of Thorstein Veblen's Theory of Institutional Change, 21J. ECON. ISSUES 683 (1987).
218. See generally Joseph A. Schumpeter, On the Concept of Social Value, 23 Q.J. ECON. 213 (1909). A year earlier he had published DAS WESEN UND HAUPTINHALT DER THEORETISCHEN NATIONALöKONOMIE (1908) [NATURE AND ESSENCE OF THEORETICAL ECONOMICS], which was never translated.
219. Schumpeter's writing was stark and to the point: At the outset it is useful to emphasize the individualistic character of the methods of pure theory. Almost every modern writer starts with wants and their satisfaction, and takes utility more or less exclusively as the basis of his analysis. Without expressing any opinion about this modus procedendi, I wish to point out that, as far as it is. used, it unavoidably implies considering individuals as independent units or agencies. For only individuals can feel wants.... [M]arginal utilities do not depend on what society as such has, but on what individual members have. Nobody values bread according to the quantity of it which is to be found in his country or in the world, but everybody measures the utility of it according to the amount that he has himself, and this in turn depends on his general means. Schumpeter, supra note 123, at 214. On methodological individualism in economics, see MARK BLAUG, THE METHODOLOGY OF ECONOMICS 129-56,227-31 (1980);
220. RANDALL G. HOLCOMBE, ECONOMIC MODELS AND METHODOLOGY 57-69 (1989).
221. On methodological individualism in law and economics, and its relation to interpersonal utility comparisons, see generally Gary Lawson, Efficiency and Individualism, 42 DUKE L.J. 53 (1992). Methodological individualism in philosophy and the other social sciences long antedates Schumpeter, although it was not much debated during the Progressive Era.
222. See generally Leon J. Goldstein, The Inadequacy of the Principle of Methodological Individualism, 53 J. PHIL. 801 (1956);
223. Steven Lukes, Methodological Individualism Reconsidered, 19 BRIT. J. SOC. 119 (1968);
224. Maurice Mandelbaum, Societal Facts, 6 BRIT. J. SOC. "305 (1955);
225. Richard Miller, Methodological Individualism and Social Explanation, 45 PHIL. SCI. 387 (1978);
226. J.W.N. Watkins, Historical Explanation in the Social Sciences, 8 BRIT. J. PHIL. SCI. 104 (1957);
227. J.W.N. Watkins, Ideal Types and Historial Explanation, 3 BRIT. J. PHIL. SCI. 22 (1952).
228. Schumpeter, supra note 123, at 215.
229. Id. at 216.
230. See generally Frank H. Knight, The Nature of Economic Science in Some Recent Discussion, 24 AM. ECON. REV. 225 (1934).
231. See Schumpeter, supra note 123, at 220-22.
232. See ROBBINS, supra note 88, at 136-47. See generally Lionel Robbins, Interpersonal Comparisons of Utility, 48 ECON. J. 635 (1938). Schumpeter had already observed a generation before Robbins's essay: A most interesting assumption would be that, at a given time and in a given place, individual utility curves for each commodity do not differ very much from each other. To-day [sic] we do not assume anything of this sort, but fashion, imitation, etc., might support such an hypothesis, the importance of which it is needless to emphasize. Schumpeter, supra note 123, at 219 n.2.
233. On the influence of scientific positivism on neoclassicism in the 1930s, see WILLIAM H. BEVERIDGE, THE LONDON SCHOOL OF ECONOMICS AND ITS PROBLEMS, 1919-1937, at 46-58 (1960).
234. See, e.g., ALFRED JULES AVER, LANGUAGE, TRUTH AND LOGIC 5-16 (1936).
235. See, e.g., LITTLE, supra note 109, at 55-58. See generally R.F. Harrod, Scope and Method of Economics, 48 ECON. J. 383 (1938); Hicks, supra note 109; Kaldor, supra note 109.
236. Wesley C. Mitchell, Bentham's Felicific Calculus, 33 POL. SCI. Q. 161 (1918) (quoting a manuscript in 3 HALEVY, RADICALISME PHILOSOPHIQUE 431).
237. Id. Bentham argued that the problem of interpersonal utility comparisons was significant and made any calculus of interpersonal pain and pleasure impossible, but that social science could probably proceed on the basis of somewhat less precise interpersonal utility comparisons.
238. The name ordinalism derives from the fact that one can still compare utilities ordinally by observing exchange. For example, if we see A trade two apples for one of B's pears, we can still say that A receives less utility from one additional apple than from one additional pear, but we cannot put any unit (such as inches or pounds) on this measure that we can assume applies equally to both A and B. That is, cardinal measurement is impossible.
239. See, for example, the works by Watson, Pavlov, Weiss, Dewey, Bagley & Colvin, McDougall, and Meyer cited in supra note 32.
240. This was fundamentally the analysis of WARD, supra note 30.
241. See THOMAS M. COOLEY, A TREATISE ON THE LAW OF TORTS 688 (1879) (addressing the place of motive in the law of torts); HORWITZ, supra note 25, at 137.
242. OLIVER WENDELL HOLMES, JR., THE COMMON LAW (1881). On Oliver Wendell Holmes, Jr., and the external standard, see generally HORWITZ, supra note 25, at 110-13, 135-41;
243. DAVID ROSENBERG, THE HIDDEN HOLMES: His THEORY OF TORTS IN HISTORY 129-31 (1995);
244. Cotter, supra note 3; Anne C. Dailey, Holmes and the Romantic Mind, 48 DUKE L.J. 429,452-56 (1998);
245. Thomas C. Grey, Holmes and Legal Pragmatism, 41 STAN. L. REV. 787 (1989);
246. William A. Lundquist, Comment, Oliver Wendell Holmes and External Standards of Criminal and Tort Liability: Application of Theory on the Massachusetts Bench, 28 BUFF. L. REV. 607,608-10 (1979).
247. See HORWITZ, supra note 25, at 110.
248. See generally SAMUEL WILLISTON, l THE LAW OF CONTRACTS (1920). In 1 THE LAW OF CONTRACTS § 20, Williston notes actual consent is not an element of contract, but merely the expression of consent, and concludes: The parol evidence rule which is of such far reaching importance in determining the existence and meaning of contracts is based on the assumption that where a written memorial of the transaction is made its terms are conclusive. Such a rule is inconsistent with the view that the mental attitude or assent of the parties is the ultimate juridical fact to be established. Williston then concluded that the intent to contract was not a part of the law of contract, see id. § 21; that legal consideration cannot be determined by the intent of the parties, see id. §§ 101,104; and that the statute of frauds must be broadly construed, see id. §§ 448-84,525-38.
249. See 2 ELIZABETH FLOWER & MURRAY G. MURPHY, A HISTORY OF PHILOSOPHY IN AMERICA chs. 10-15 (1977).
250. See generally 5 CHARLES S. PEIRCE, THE COLLECTED PAPERS OF CHARLES SANDERS PEIRCE 358 (Charles Hartshorne & Paul Weiss eds., 1934, 1935) (reprinting CHARLES S. PEIRCE, THE FIXATION OF BELIEF (1877)); id. at 388 (reprinting CHARLES PEIRCE, HOW TO MAKE OUR IDEAS CLEAR (1878)).
251. See ROSS, supra note 24, at 252-53, 327-30, 405-07. Good recent writing includes Dailey, supra note 139, and Chad McCracken, Note, Hegel and the Autonomy of Contract Law, 77 TEX. L. REV. 719 (1999).
252. See supra notes 88-89 and accompanying text.
253. See generally, e.g., JOHN DEWEY, THE QUEST FOR CERTAINTY (1929).
254. See ARROW, supra note 2, at 59-73.
255. AS IN JAMES M. BUCHANAN, THE LIMITS OF LIBERTY: BETWEEN ANARCHY AND LEVIATHAN 35-52 (1975).
256. See generally Hovenkamp, supra note 86.
257. But see Herbert Hovenkamp, Rationality in Law & Economics, 60 GEO. WASH. L. REV. 293, 333-36 (1992) (stating that even proposals respecting public goods are subject to Arrovian cycling and failure of equilibrium).
258. In addition to the work of Veblen, Commons, Seligman, and Mitchell cited previously, see Charles H. Cooley, The Institutional Character of Pecuniary Valuation, 18 AM. J. SOC. 543, 546-50 (1913);
259. Morris A. Copeland, Economic Theory and the Natural Science Point of View, 21 AM. ECON. REV. 67, 68 (1931);
260. Lionel D. Edie, Some Positive Contributions of the Institutional Concept, 41 Q.J. ECON. 405,420-21 (1927).
261. See A.W. Coats, The First Two Decades of the American Economic Association, 50 AM. ECON. REV. 555 (1960);
262. Richard T. Ely, The Founding and Early History of the American Economic Association, 26 AM. ECON. REV. 141 (Supp. 1936).
263. See generally HENRY STEELE COMMAGER, THE AMERICAN MIND 227-46 (1950) (containing lengthy discussion of Veblen while John Bates Clark, who is mentioned once, is incorrectly lumped with the classical economists); RICHARD HOFSTADTER, THE AGE OF REFORM (1955) (containing three mentions of Veblen; none of Clark); MORION WHITE, SOCIAL THOUGHT IN AMERICA: THE REVOLT AGAINST FORMALISM (1947) (containing numerous references to Veblen; none to Clark or Fisher).
264. Recent examples taking marginalism into account are BARBARA H. FRIED, THE PROGRESSIVE ASSAULT ON LAISSEZ FAIRE: ROBERT HALE AND THE FIRST LAW AND ECONOMICS MOVEMENT (1998); ROSS, supra note 24; Hovenkamp, supra note 21.
265. See ROSS, supra note 30.
266. See JOHN R. COMMONS, LEGAL FOUNDATIONS OF CAPITALISM 67-68, 121 (1924).
267. See generally ADOLPH A. BERLE, JR. & GARDINER C. MEANS, THE MODERN CORPORATION AND PRIVATE PROPERTY (1932); ROBERT S. BROOKINGS, INDUSTRIAL OWNERSHIP: ITS ECONOMIC AND SOCIAL SIGNIFICANCE (1925); THORSTEIN VEBLEN, ABSENTEE OWNERSHIP AND BUSINESS ENTERPRISE IN RECENT TIMES: THE CASE OF AMERICA (1923).
268. See generally BERLE & MEANS, supra note 157.
269. See infra text accompanying notes 173-74.
270. For a general treatment of institutional economics in the United States, see HEATH PEARSON, ORIGINS OF LAW AND ECONOMICS: THE ECONOMISTS' NEW SCIENCE OF LAW, 1830-1930 (1997);
271. James R. Hackney, Jr., Law and Neoclassical Economics: Science, Politics, and the Reconfiguration of American Tort Law Theory, 15 LAW HIST. REV. 275 (1997);
272. James J. Heckman, The Intellectual Roots of the Law and Economics Movement, 15 LAW HIST. REV. 327 (1997);
273. Hovenkamp, supra note 18; Herbert Hovenkamp, Law and Economics in the United States: A Brief Historical Survey, 19 CAMBRIDGE J. ECON. 331 (1995).
274. See also the interesting panel discussion in Douglas G. Baird, The Future of Law and Economics: Looking Forward, 64 U. CHI. L. REV. 1129 (1997).
275. See, e.g., Paul T. Homan, An Appraisal of Institutional Economics, 22 AM. ECON. REV. 10, 10-17 (1932); Institutional Economics, 22 AM. ECON. REV. 105-16 (Supp. 1932) (panel discussion).
276. On Legal Realism, see HORWITZ, supra note 25, at 169-92. See generally GARY JAN AICHELE, LEGAL REALISM AND TWENTIETH-CENTURY AMERICAN JURISPRUDENCE: THE CHANGING CONSENSUS (1990); G. Edward White, From Sociological Jurisprudence to Realism: Jurisprudence and Social Change in Early Twentieth-Century America, 58 VA. L. REV. 999 (1972).
277. A particularly good analysis of legal realism's basic analytic approach, less cluttered by au currant ideology than many others, is Brian Leiter, Rethinking Legal Realism: Toward a Naturalized Jurisprudence, 76 TEX. L. REV. 267 (1997).
278. On the Legal Realists' empirical work in the social sciences, see JOHN HENRY SCHLEGEL, AMERICAN LEGAL REALISM AND EMPIRICAL SOCIAL SCIENCE (1995).
279. On the institutional nature of the Legal Realists' economics, see Allen R. Kamp, Between-the-Wars Social Thought: Karl Llewellyn, Legal Realism, and the Uniform Commercial Code in Context, 59 ALB. L. REV. 325 (1995);
280. Oliver E. Williamson, Revisiting Legal Realism: The Law, Economics, and Organization Perspective (1996) (unpublished paper, in conjunction with University of California Berkeley, Program in Law and Economics Working Paper) (on file with author).
281. See Karl N. Llewellyn, Some Realism About Realism-Responding to Dean Pound, 44 HARV. L. REV. 1222, 1237 (1931).
282. Llewellyn was responding to Roscoe Pound, The Call for a Realist Jurisprudence, 44 HARV. L. REV. 697 (1931).
283. On the indebtedness of the Legal Realists (particularly Llewellyn) to Pound, and the stormy relations that developed later, see generally HORWITZ, supra note 25, at 169-92; N.E.H. Hull, Reconstructing the Origins of Realistic Juris-prudence: A Prequel to the Llewellyn-Pound Exchange Over Legal Realism, 1989 DUKE L.J. 1302;
284. N.E.H. Hull, Some Realism about the Llewellyn-Pound Exchange Over Realism: The Newly Uncovered Private Correspondence, 1927-1931, 1987 WIS. L. REV. 921.
285. See generally Thurman W. Arnold, Law Enforcement-An Attempt at Social Dissection, 42 YALE L.J. 1 (1932);
286. Underbill Moore Theodore S. Hope, Jr., An Institutional Approach to the Law of Commercial Banking, 38 YALE L.J. 703 (1929);
287. Underbill Moore & Charles Callahan, Law and Learning Theory: A Study in Legal Control, 53 YALE L.J. 1 (1943).
288. See generally KARL N. LLEWELLYN & E. ADAMSON HOEBEL, THE CHEYENNE WAY (1941); Huntington Cairns, Law and Anthropology, 31 COLUM. L. REV. 32 (1931).
289. See generally JEROME FRANK, LAW AND THE MODERN MlND (1930).
290. See generally Karl N. Llewellyn, A Realistic Jurisprudence-The Next Step, 30 COLUM. L. REV. 431 (1930).
291. See generally FRANK, supra note 167; Charles E. Clark, Fact Research in
292. William O. Douglas & J. Howard Marshall, A Factual Study of Bankruptcy Administration and Some Suggestions, 32 COLUM. L. REV. 25 (1932).
293. See generally, e.g., Karl N. Llewellyn, What Price Contract?-An Essay in Perspective, 40 YALE L.J. 704 (1931).
294. See generally, e.g., Robert L. Hale, Coercion and Distribution in a Supposedly Non-Coercive State, 38 POL. SCI. Q. 470 (1923).
295. Morton Horwitz's conclusion that Legal Realists pursued their attack on the legitimacy of the market with a degree of insight, brilliance, and social passion that has never been equaled since certainly captures their basic attitude towards classical political economy, but it misstates their focus. See HORWITZ, supra note 25, at 195. This may be a projection of the Critical Legal Studies scholarship onto the Realists, but in any event, Horwitz discusses only Hale and Dawson, neither of whom were among the most prominent Legal Realists. Further, Hale's influential essay, Coercion and Distribution in a Supposedly Non-Coercive State, 38 POL. Sci. Q. 470 (1923), is not so much an attack on the legitimacy of the market as it is a call for a new understanding of the market that was more sensitive to its coercive features. For example, he chastised the orthodox defense of liberty of contract because it contrasted the supposed liberty of the market against the coercion of state interference. See id. In fact, Hale argued, the relevant choice was between two types of coercion, market coercion or coercion by government decision. See, e.g., id. at 470 (contending laissez faire systems . themselves are permeated with coercive restrictions of individual freedom and the restrictions are inconsistent with equal opportunity or preservation of the rights of others). This new understanding was generally consistent with the view of neoclassical economists that the classicists had exaggerated the degree of freedom that markets permitted. See HOVENKAMP, supra note 25, at 226-30 (labor); id. at 268-95 (competition and antitrust). But see Richard Epstein, The Assault That Failed: The Progressive Critique of Laissez Faire, 97 MICH. L. REV. 1697 (1999); Richard A. Epstein, Life Boats, Desert Islands, and the Poverty of Modern Jurisprudence, 68 MISS. L.J. 861 (1999).
296. See LAURA KALMAN, LEGAL REALISM AT YALE, 1927-1960, at 153-54 (1986) (describing Yale curriculum in the 1940s). See generally John Henry Schlegel, American Legal Realism and Empirical Social Science: From the Yale Experience, 28 BUFF. L. REV. 459 (1979).
297. See generally, e.g., Underhill Moore & Theodore S. Hope, Jr., An Institutional Approach to the Law of Commercial Banking, 38 YALE L.J. 703 (1929) (taking a Commons-like approach in grouping organizations by the nature of the transactions they make); Underhill Moore & Gilbert Sussman, Legal and Institutional Methods Applied to the Debiting of Direct Discounts-HI. The Connecticut Studies, 40 YALE L.J. 752 (1931). For other articles in the Legal and Institutional Methods Applied to the Debiting of Direct Discounts series by Moore and Sussman, see 40 YALE L.J. 381,555, 752,928,1055,1219 (1931). For an accounting of Moore's research methodology, see John Henry Schlegel, American Legal Realism and Empirical Social Science: The Singular Case of Underhill Moore, 29 BUFF. L. REV. 195, 244-250 (1980); see also William Clark et al., The Business Failures Project-A Problem in Methodology, 39 YALE L.J. 1013 (1930) (discussing a study of bankruptcy administration); William O. Douglas, A Functional Approach to the Law of Business Associations, 23 ILL. L. REV. 673 (1929); Douglas & Marshall, supra note 169 (discussing the process and flaws of a scientific study of the causes of bankruptcy).
298. See, e.g., FRIED, supra note 154, at 10-15.
299. See generally Robert L. Hale, Bargaining, Duress and Economic Liberty, 43 COLUM. L. REV. 603 (1943); Hale, supra note 172;
300. Robert L. Hale, Value to the Taker in Condemnation Cases, 31 COLUM. L. REV. 1 (1931).
301. For further discussion about Hale, see FRIED, supra note 154; Neil Duxbury, Robert Hale and the Economy of Legal Force, 53 MOD. L. REV. 421 (1990);
302. Warren J. Samuels, The Economy as a System of Power and Its Legal Bases: The Legal Economics of Robert Lee Hale, 27 U. MIAMI L. REV. 261 (1973); Schlegel, supra note 174, at 209 & n.70.
303. See generally Walton H. Hamilton, The Institutional Approach to Economic Theory, 9 AM. ECON. REV. 309 (Supp. 1919).
304. See id. at 314-15.
305. See id. at 312-13.
306. See supra notes 64-84 and accompanying text.
307. See Hamilton, supra note 177, at 316-17.
308. See generally MARSHALL, supra note 40.
309. See Lewis H. Haney, Economic Theory-Discussion, 9 AM. ECON. REV. 320,321 (Supp. 1919).
310. Id.
311. Id.
312. See Karl N. Llewellyn, The Effect of Legal Institutions Upon Economics, 15 AMER. ECON. REV. 665,666 (1925).
313. Id. at 668.
314. See id. at 673-75. Llewellyn concluded that in the one area that he had studied, motion picture distribution contracts, standardized forms had been very successful in reducing legal costs. See id. at 674.
315. See id. at 671-72.
316. See id. at 674-76.
317. For a discussion of Coasian institutionalism, see generally R.H. COASE, THE INSTITUTIONAL STRUCTURE OF PRODUCTION 9 (1991);
318. Ronald H. Coase, The New Institutional Economics, 27 J. INSTITUTIONAL & THEORETICAL ECON. 229 (1984).
319. However, the origins can be found in R.H. Coase, The Nature of the Firm, 4 ECONOMICA 386 (1937);
320. see also Oliver E. Williamson, Kenneth Arrow and the New Institutional Economics, in ARROW AND THE FOUNDATIONS OF THE THEORY OF ECONOMIC POLICY 584, 585, 592 (Geo. R. Feiwel ed., 1987).
321. See supra notes 186-90 and accompanying text.
322. See generally, e.g., FRANK, supra note 167.
323. See, e.g., HENRY M. HART, JR. & ALBERT SACKS, THE LEGAL PROCESS: BASIC PROBLEMS IN THE MAKING AND APPLICATION OF LAW (William N. Eskridge, Jr., & Philip P. Frickey eds., 1994) (prepared from 1958 tentative edition). This work was heavily influenced by Legal Realism and consumed by the institutionalist approach to law. In this regard, the Legal Realists were indebted to Pound, who also wrote more about legal institutions and legal process than about substantive law. See generally, e.g., Roscoe Pound, Courts and Legislation, 7 AM. POL. SCI. REV. 361 (1915); Roscoe Pound, Justice According to Law (pts. 1-3), 13 COLUM. L. REV. 696 (1913), 14 COLUM. L. REV. 1,103 (1914); supra notes 91, 98-100, 163. On the Legal Realists increasing concern with procedure, see Schlegel, supra note 173, at 495-519. On Hart and Sacks, see ANTHONY J. SEBOK, LEGAL POSITIVISM IN AMERICAN JURISPRUDENCE 129-78,315-17 (1998).
324. SEE JEROME FRANK, COURTS ON TRIAL: MYTH AND REALITY IN AMERICAN JUSTICE 209, 210 & n.62 (1949).
325. See, for example, the 1950 Celler-Kefauver amendments to the anti-merger statute, 15 U.S.C. §18 (1994); see also H.R. REP. No. 81-1191, at 2-3 (1949) (discussing goals of merger policy as protecting smaller firms from larger, lower cost rivals). The new merger policy, designed to prevent small high cost firms from being gobbled up by larger, more efficient firms was hailed as a triumph of law and economics. Cf. Derek Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 HARV. L. REV. 226, 226-31, 238-48 (1960); Herbert Hovenkamp, Derek Bok and the Merger of Law and Economics, 21 U. MICH. J.L. REFORM 515,521-22 (1988).
326. See generally ARROW, supra note 2; BUCHANAN & TULLOCK, supra note 15.
327. See generally Coase, supra note 11.
328. See generally GORDON TULLOCK, ECONOMICS OF INCOME REDISTRIBUTION, 111-50 (1983); GORDON TULLOCK, THE ECONOMICS OF SPECIAL PRIVILEGE AND RENT SEEKING (1989).