In Search of a General Approach to Legal Analysis: A Comparative Institutional Alternative

Abstract

This article constructs a general approach to legal analysis. Its central thesis is that all legal decisions share a fundamental feature that should be a basic building block for any general analytic approach: they all involve a choice among imperfect alternative decision-making institutions. In all cases, legal decision makers must consider the relative merits or attributes of the alternative institutions. The analyst of legal decisions, therefore, should adopt a approach. In this Article, this comparative institutional analysis is compared and contrasted with conventional law and economics. There are two distinct problems with this prevailing approach. First, it is unclear whether the analytic concern of the conventional economic approach is with the determinants or the effects of legal decisions. This ambivalence about analytic purpose has produced sweeping claims that the common-law judiciary tends to produce results that are allocatively efficient, while the legislature does not. This distinction between legal analysis of the determinants and effects of decisions, and the problems caused by the failure of the proponents of the economic approach to limit their discussion to determinants, are discussed in Part I. Second, and most important for this Article, when those employing the conventional economic approach do search for the determinants of legal decisions, they reveal a distinct institutional myopia. The approach generally considers variation in the attributes of only one institution - the market. This approach is basically incomplete. If societal decisions are allocated to or away from the market, they are taken from or given to some other institutional alternative. A number of institutions are available and the adequacy of each of these institutions varies with the legal setting. Thus it is not enough to establish that in a given setting the market would not perform perfectly; one must also compare the market's performance with that of the available alternative decision-making institutions. Part II compares the conventional economic and comparative institutional approaches in several contexts: property rights and remedies,the role of custom and penal statutes in the determination of tort liability, and the constitutional law issue of economic due process, among others.