BOOK REVIEW
LAW AND ECONOMICS: A COMPARATIVE APPROACH
TO THEORY AND PRACTICE.
By Robin Paul Malloy. St. Paul, Minnesota: West Publishing Co., 1990.
166 Pages.
Reviewed by Robert A. Weninger·
In his compact text,l Law and Economics: A Comparative Approach to Theory and Practice, Robin Paul Malloy2 presents law and economics as a comparative study of competing ideological perspectives that address the proper
relationship between the individual, the community, and the state. "Conceived
primarily as an introductory source for the study of emerging and competing
schools of economic thought,"3 this book is innovative because of Professor
Malloy's expansive view of this prismatic discipline. Malloy hears a chorus of
voices -liberals, conservatives, libertarians, neo-Marxists, left communitarians,
and classical liberals - and argues that law and economics is not properly identifiable with anyone perspective of what relationships best promote the "just
society." Instead, law and economics "should focus on the relationship between
economic philosophy, political philosophy, and legal philosophy as they relate to
alternative social arrangements."4 A proper approach to law and economics,
the author suggests, ought to enable one to view legal arrangements as a retlection of a particular political ideology.s Good lawyering, he maintains, requires
the ability to understand differences between economic theories and to structure
legal arguments within a framework consistent with the ideological biases of a
given audience.
Malloy begins his book by distinguishing "an economic analysis of law"6
• Professor of Law, Texas Tech University School of Law; B.B.A., University of Wisconsin,
1955; LL.B., University of Wisconsin, 1960; LL.M., University of Chicago, 1964.
1. Law and Economics has only 166 pages; exclusive of diagrams and lists of suggested readings, the book contains approximately 100 pages of textual material. Nonetheless, the quality and
clarity of Malloy's writing demonstrates that even a succinct primer can provide a simple, nontechnical introduction to law and economics.
2. Robin Paul Malloy is Professor of Law and Economics, Syracuse University College of Law.
3. ROBIN PAUL MALLOY, LAW AND EcONOMICS: A CoMPARATIVE ApPROACH TO THEORY
AND PRACTICE 16 (1990).
4. [d. at 2.
5. /d. at 5.
6. Malloy takes his understanding of economic analysis of law largely from Judge Richard A.
Posner, one of the foremost authorities in legal economic analysis. See, e.g., RICHARD A. POSNER,
EcONOMIC ANALYSIS OF LAW (2d ed. 1977); Richard A. Posner, The Ethical and Political Basis of
the Efficiency Norm in Common Law Adjudication, 8 HOFSTRA L. REV. 487 (1980); Richard A.
Posner, Some Uses and Abuses of Economics in Law, 46 U. CHI. L. REV. 284 (1979). However,
Posner's is not the only approach to economic analysis, and his theories and assertions are often
187
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from his perception of a proper study of law and economics. In contrast to his
comparative approach, an economic analysis of law is primarily concerned with
employing economic methods as theoretical constructs for analyzing, in economic terms, the rules and laws adopted by a particular society.7 One engaged
in an economic analysis of law uses economic models to describe legal problems
and analyze whether and how various legal doctrines promote economic efficiency. Application of cost-benefit analysis and concepts of economic efficiency
to legal doctrine allows one to draw conclusions about the consequences and
social value of particular legal arrangements. 8 One might use economic methods, for example, to evaluate the likely behavioral response to changes in the tax
laws or changes in the severity of criminal actions. 9 Indeed, Judge Richard Posner, a leading advocate of economic analysis of law, espouses a theory that the
common law is essentially consistent with principles of economic efficiency. 10
The author conceives of law and economics as an enterprise of greater
dimensions. Malloy agrees that economics provides one means by which law
and society policy might be critically evaluated. However, he find's Judge Posner's brand of economic analysis of law too narrow an undertaking for today's
lawyers. An economic analysis of law, Malloy writes, is but a subset of a much
richer study of comparative perspectives, such as critical legal studies or conservative, liberal, or libertarian theory.ll One engaged in a study of law and
economics ought to be concerned with evaluating alternative social arrangements across an ideological spectrum that encompasses multiple models of the
"just" society.12 This, the author argues, is a more humanistic and philosophical approach than cost-benefit analysis or a quest for efficient or wealth-maximizing rules,13
Malloy's fundamental premise is that there is a direct relationship between
one's ideological view of the world and one's view of law and legal institutions.
Economics, like law, he writes, is a philosophically biased undertaking, having
potentially different meanings to people of different ideological perspectives: "a
person with a marxist view of political and economic arrangements will have a
different view of law and legal process than will a person oriented towards free
challenged. See, e.g., Ronald Dworkin, Why Efficiency? A Response to Professors Calabresi and Posner, 8 HOFSTRA L. REV. 563 (1980) (rejecting Posner's wealth maximization theories); Lewis A.
Kornhauser, A Guide To the Perplexed Claims of Efficiency in the Law, 8 HOFSTRA L. REV. 591
(1980) (citing Posner as main proponent of hypotheses that law is and should be efficient, and criticizing these hypotheses as over-simplified); Arthur A. Left', Economic Analysis ofLaw: Some Realism
About Nominalism, 60 VA. L. REV. 451 (1974) (skepticism expressed regarding Posner's attempts to
apply economics to virtually every area of law); Michael J. Trebilock, The Prospects of "Law and
Economics": A Canadian Perspective, 33 J. LEGAL Bouc. 288 (1983) (citing Posner and asserting
that most Canadian practioners and legal scholars have rejected economic analysis of law).
7. MALLOY, supra note 3, at 3.
8. /d.
9.Id.
10. See generally RICHARD A. POSNER, EcONOMIC ANALYSIS OF LAW (3d ed. 1986).
II. MALLOY, supra note 3, at 3. Indeed, economic analysis of law is an expression of conservative theory, in that the values of neoclassical economics are incorporated into both. Id. at 3, 60.
12. Id. at 4.
13.Id.
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market and capitalist thinking."14 Different ideological reference points generate different values and norms and consequently lead to different conceptions of
a "good" and "just" society. Therefore, one's ideological reference point not
only shapes the nature of one's legal and economic discourse, but also changes
the structure and content of that discourse. Malloy refers to this underlying
viewpoint as ideological bias. IS
The author uses a simple example to illustrate that, depending on our ideological perspectives, we might take markedly different views of an identical set of
facts. Malloy posits the issue of market competition in a situation where a few
sellers each offer similar products on the same terms and at the same price. 16 Is
this evidence of market competition or market failure? To one who accepts basic conservative notions of law and economics, these observations show the presence of a competitive market - a market from which all sellers must take their
price and where none has the power to deviate from the market equilibrium and
extract more for the same product. 17 But to one more distrustful ofthe marketplace, the identical facts might indicate either a conspiracy by the sellers, the
exploitation of consumers in a world in which they wield no bargaining power,
or even the complete absence of any meaningful market. IS If different ideological perspectives can influence our vision of the facts in these ways, they will also
profoundly affect our view of law and legal institutions. 19
Malloy assumes that his readers are less familiar with economics than law,
and intends his book to serve solely as an introductory text. 20 Therefore, chapter two of his text presents a general overview of basic economics and terminology, including such technical concepts as supply-and-demand curves, the Coase
theorem, Pareto efficiency, and the Kaldor-Hicks theory.21 Malloy succeeds in
introducing basic economics to the non-economist by carefully explaining fundamental concepts, providing clear illustrations, and restricting use of mathematics
to simple numerical examples.
The chapter on introductory economics is useful because many of the concepts and terms that it explains reappear later in the text. In a subsequent chapter, for example, one is reacquainted with the concept of Pareto efficiency where
Malloy, in criticizing Judge Posner's theory of wealth maximization for its indeterminacy, describes how conservative legal economists might seek to justify legalized prostitution through their selection of the relevant factors for analysis. 22
Ignoring such variables as the negative effects of prostitution on street safety and
family harmony, some market-oriented economists would say that an act of
14. [d.
IS. [d.
tribunals is.
16. [d.
17. [d.
18. [d.
19. [d.
at 2.
at 49. The ability to decipher and appeal to the hidden ideological bias of judges and
according to Malloy. the mark of an effective lawyer. [d.
at 52.
at 53.
200 [do at 10.
21. [do at 14-45.
22. [d. at 64.
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prostitution "represents a voluntary transaction between two consenting adults
and ... is a pareto superior outcome since both parties are made better off by the
exchange."23 The author uses the example primarily to show how Posner's theories might be manipulated to obtain a result that is ideological rather than scientific, but the illustration also reinforces the reader's understanding of concepts
earlier explained in the chapter on basic economics.
In chapter three, Malloy moves from these general observations regarding
"the nature of bias in legal and economic thinking"24 to the more specific matter
of bias in the neoclassical economic model. The neoclassical model, a favorite
analytical tool of scholars engaged in an economic analysis of law, is a model of
human behavior based on marketplace analysis. 2s Because a market model appears to be neutral and objective, it may also appear that results of calculations
based on the model are scientific and correct.
The use of any economic model, however, is grounded on assumptions concerning human behavior, and Malloy identifies the major assumptions and values inherent in the neoclassical model. One such assumption is that people have
access to perfect information (or at least reasonably good information) and
therefore have the knowledge necessary to act rationally in their own self-interest. 26 This proposition implies that there is no economic or educational bias in
the ability of people to process information. 27 In other words, the market model
accepts the current allocation of economic and educational resources that, arguably, has led to inequities in the processing of information by people otherwise
of equal ability.28 Malloy suggests that if one rejects the implication that this is
fair - that is, if one rejects the values that drive these assumptions - one
should likewise be skeptical that use of the neoclassical model can generate conclusions that are valid. 29 Malloy's point is important, if simple: the latent assumptions and values of the neoclassical model reveal "that such a neutral and
seemingly objective and scientific model is nonetheless highly value driven."3o
The author then presents a brief discussion of alternative economic theories. In a series of five short chapters, he explains the tenets associated with
competing ideologies and the distinctions that separate one school of thought
from another. 31 In discussing a particular ideology, Malloy outlines its theoreti23. [d. at 65 (emphasis added).
24. [d.
25. [d.
26. [d. at 54. Malloy identifies several other assumptions implicit in the neoclassical economic
model. The model assumes that people act in their own self-interest, that people act rationally in
pursuit of their self-interests, that people and resources are freely movable, that there are no artificial
barriers to entry in the marketplace, and that the existing allocation of wealth and resources is
acceptable. [d.
27. [d. at 55.
28. [d.
29. [d.
30. [d.
31. The ideological perspectives he considers are: I) conservative theory; 2) liberal theory;
3) left-communitarian and neo-marxist theory; 4) libertarian theory; and 5) classical liberal theory.
[d. at 61-103.
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cal assumptions and core values. Classical liberal philosophy, for example, emphasizes the principles or values of morality, individual liberty, and human
dignity.32 Identifying such primary valu~ is important, according to Malloy,
because one should be able to select a particular ideological value and determine
how it will be affected by alternative legal arrangements that reflect different
ideological norms. A comparative approach to law and economics should enable one to understand how certain values or principles will be affected by
changing a community's current social, political, and economic arrangements. 33
Next, in another series of five short chapters, the author shifts from theory
to practice by analyzing five judicial opinions that illustrate competing economic
approaches in various legal contexts. 34 His discussion of these opinions shows
that the political and economic theory applied in the resolution of difficult social
problems can profoundly influence the direction of law.
One of the five decisions is Merritt v. Faulkner,3s a case in which the Seventh Circuit fashioned standards of judicial discretion governing the appointment of counsel for indigent litigants in federal civil actions. Merritt was an
indigent prisoner who had injured his eye in a prison accident. He alleged that
state prison officials caused his blindness by deliberately interfering with his ability to receive proper medical treatment following the accident. Merritt requested the federal court to appoint counsel to represent him in his damages
action for violation of his Eighth Amendment right to be free of cruel and unusual punishment. A divided court of appeals held that the district court had
abused its discretion when it denied his request for an attorney.
Judge Swygert, for the majority, took a non-market approach and wrote
that even though indigent civil litigants have no constitutional or statutory right
to counsel, a poor person's access to the federal courts must not be turned into
an exercise in futility. The Supreme Court, he argued, has made it clear that the
circumstances of a particular case may compel appointment of counsel. Judge
Swygert, therefore, took a personal and context-oriented view of the case and
considered, among other factors,36 the indigent's ability to investigate the crucial
32. Id. at 94.
33. Id. at 4.
34. Id. at 104-55. The opinions Malloy discusses are, in order: Williams v. Walker-Thomas
Furniture Co., 350 F.2d 445 (D.C. Cir. 1965) (unconscionability in contract law); lavins v. First
Nat'l Realty Corp., 428 F.2d 1071 (D.C. Cir.) (implied warranty of habitability in property law),
cert. denied, 400 U.S. 925 (1970); Merritt v. Faulkner, 697 F.2d 761 (7th Cir.) (constitutional law),
cert. denied, 464 U.S. 986 (1983); American Nurses' Ass'n v. Illinois, 783 F.2d 716 (7th Cir. 1986)
(comparable worth in employment law); and Grimshaw v. Ford Motor Co., 174 Cal. Rptr. 348 (Cal.
Ct. App. 1981) (social responsibility and tort law).
35. 697 F.2d 761 (7th Cir.), cert. denied, 464 U.S. 986 (1983).
36. In determining the criteria under which an indigent civil litigant should be entitled to a
court-appointed attorney, Judge Swygert relied upon the five-part test the Seventh Circuit adopted in
Maclin v. Freake, 650 F.2d 885 (7th Cir. 1981).
These factors are: (1) whether the merits of the indigent's claim are colorable; (2) the
ability of the indigent plaintiff to investigate crucial facts; (3) whether the nature of the
evidence indicates that the truth will more likely be exposed where both sides are represented by counsel; (4) the capability of the indigent litigant to present the case; and (5) the
complexity of the legal issues raised by the complaint.
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facts underlying his claim. In Merritt's case these facts included the cause of his
blindness, the conduct of prison officials, and the standards of medical practice
concerning the diagnosis and treatment of his condition. Judge Swygert concluded that a proper investigation of such matters was "obviously beyond the
capacity of this blind, indigent, and imprisoned litigant."37
In his dissenting opinion, Judge Posner said that there should be a presumption against the appointment of counsel in prisoner civil rights cases. A
prisoner with a strong damages case wouldn't need appointed counsel because,
without expending his own resources, he would be able to attract a private lawyer to prosecute his claim on a contingent-fee basis. According to Posner, this
arrangement would both redress the indigent defendant's wrong and provide
him a recovery.
Malloy identifies the following assumptions on which Judge Posner's analysis is based. One is that prisoners have access to lawyers outside prison walls
who will compete to represent the client. 38 Another is that the market acts as a
satisfactory mechanism to evaluate the merits of an indigent prisoner's claim. 39
The reasoning is that if the indigent finds no one to represent him, he needs no
lawyer because his claim lacks merit. These assumptions are consistent with
conservative market theory which holds that if certain products are produced in
a competitive market, they are the products that customers want and are willing
to pay for. Ultimately, according to such theory, a well-functioning marketplace
will produce results that can be viewed as objective displays of individual choice
by consumers rather than subjective determinations by judges of what they feel a
customer or client should want or what society should supply them. 4O
Judge Posner accepts the prospect that the indigent prisoner may litigate
his claim unaided by counsel. He contends that it has never been an assumption
of our adversarial system that both parties will have roughly equal legal resources. To Malloy, these words reveal a key element of the conservative approach to law and economics: the theory itself can justify results that the general
public might find difficult to accept. Judge Posner could be comfortable with
legal outcomes despite significant disparity in the legal resources available to
each side of an adversarial dispute. 41 This is because he subscribes to conservative economic theory that accepts the existing distribution of wealth, income,
Merritt, 697 F.2d at 764.
37. Merritt, 697 F.2d at 765 (citing Maclin v. Freake, 650 F.2d 885, 889 (7th Cir. 1981».
Malloy explains that an approach that emphasizes contextual facts, like the majority's, is an approach that favors standards over rules. MALLOY, supra note 3, at 78. Malloy gleans this discussion
from Duncan Kennedy, a scholar associated with Critical Legal Studies, who argues that rules generally correspond to individualistic philosophies and often serve a formalistic function in that they
relieve decision-makers of the obligation to confront actual facts. Id. Standards, on the other hand,
correspond to altruism because they require us to go beyond formal rules and deal with reality. Id.
See generally Duncan Kennedy, Form and Substance in Private Law Adjudication, 89 HARV. L.
REV. 1685 (1976).
38. MALLOY, supra note 3, at 131.
39.Id.
4O.Id.
41. Id. at 132.
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and resources (since this allocation is determined by people casting wealth-based
economic votes).
Merritt exemplifies two entirely different approaches to the same set of
facts. Malloy argues that Judge Swygert's majority opinion can only be rationalized on an assumption that many of the theories of a competitive marketplace
are incorrect. 42 For judges of his persuasion, either the benefits of market competition are non-existent or there is no competitive litigation market operating
behind prison walls.
Malloy's analyses of Merritt and the other four decisions reveals a diversity
of ideological assumptions at work in the respective judges' opinions. He contends that judicial decisions and legal argumentation are often grounded on
norms and values that are ideologically based. This makes an important point
for students of the law: a knowledge of law and economics facilitates effective
advocacy. Whatever the context - public debate,legislation, or adjudicationlawyers must understand distinctions among economic theories in order to evaluate social arrangements as a reflection of a particular political ideology. Only
with such knowledge, Malloy contends, is the lawyer able to structure legal argument in light of the ideological perspectives of the decision-maker.
The book is of interest to anyone who wants to know more about law and
legal institutions and the relationship between law and economics. But how
should Malloy's Law and Economics be used in the law schools? Teachers of
first-year law courses may prefer that instruction in law and economics be deferred to the second or third year of law school, not because they think that the
subject is not sufficiently relevant in the first year, but because they believe that
they could not teach law and economics at a sophisticated enough level and still
meet the competing demands of traditional instruction in first-year law courses.
To these teachers, too brief an exposure to law and economics might make the
subject unduly simplistic.
Teachers may, however, opt to assign Law and Economics in first-year
courses as supplementary reading. The judicial decisions that the author uses to
illustrate alternative economic theories are drawn from such areas of the law as
property, contracts, and torts. Today's casebooks in such first-year courses include an increasing number of appellate opinions by judges who engage in an
economic analysis oflaw. Malloy's text may be helpful as an adjunct in teaching
the concepts of economic efficiency and cost-benefit analysis presented in such
judges' decisions. More important, perhaps, use of the book in the first year of
law school would, at an early point in a lawyer's training, suggest the potential
role of economic theory in resolving complex social and legal problems.
Because of the breadth of Malloy's comparative approach to the subject, his
book may easily serve as the basis for an upper-level course or seminar in law
and economics. If the book is so used, one of its features will be most important.
At the end of each chapter the author suggests outside readings that specifically
relate to the subject matter of the chapter and which therefore expand the utility
of the text. If the book is used to organize a course or seminar in law and
42. Id. at 130.
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economics, these suggested readings will be useful in providing direction for
more detailed study of various topics.
Malloy's book provides an alternative approach to law and economics and
makes the subject more accessible to someone wholly unfamiliar with the field.
For students and practitioners alike, Law and Economics can enrich our view of
the legal process.
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