Thinking Like (Law-and-) Economists Efficient Legal Rules and Moral Intuitions of Fairness

Abstract

Using vignettes that are based on seminal cases in law and economics, I find that judicial decisions across different areas of the common law are considered to be fairer when they are also more efficient. Vignettes describe legal disputes and require respondents to rate the fairness of a judge’s resolution. Fairness ratings are compared across a lower-efficiency version and a higher-efficiency version of each vignette, with efficiency differences generated by subtle changes in context that are motivated by the economic logic relevant to the case’s actual judicial opinion. The results suggest that the economic logic that underlies the Coase theorem, the Hand rule and the foreseeability doctrine, and generates prescriptions for efficient use of strict product liability and efficient breach of contract, aligns with everyday intuitions of fairness. The results also identify two areas, fugitive property and punitive damages, where prescriptions for efficiency do not align with perceptions of fairness.