TAILIEUCHUNG - COGNITION AND ECONOMICS PART 9

ALFRED MARSHALL MEETS LAW AND ECONOMICS: RATIONALITY, NORMS, AND THEORIES AS TENDENCY Ulen (2000, p. 797) has recently argued that the ‘‘most important’’ characteristic of the economic analysis of law is ‘‘its use of rational choice theory to examine legal decisions | ALFRED MARSHALL MEETS LAW AND ECONOMICS RATIONALITY NORMS AND THEORIES AS TENDENCY STATEMENTS Steven G. Medema Thomas Ulen 2000 p. 797 has recently argued that the most important characteristic of the economic analysis of law is its use of rational choice theory to examine legal decisions. Ronald Coase s The Problem of Social Cost 1960 an article that in many ways became the cornerstone of the economic analysis of law assumes nothing more than people tending to take advantage of potential gains from exchange when it is in their interest to do so. Gary Becker pushed the envelope a giant step further analyzing the law - and an enormous array of other social phenomena - by relentlessly and unflinchingly applying the rational actor model. This became more or less the way of the field a methodology largely unquestioned from within but subject to trenchant criticism from the Over the last decade or so however we have witnessed the rise of the new behavioral law and economics a rather diverse movement which questions the rationality postulate and suggests that forces such as social norms play an important role in individual behavior and do so in ways that conflict with the implications of the rational utility maximization The attention being given to this new analysis of the role of norms in the legal arena Cognition and Economics Advances in Austrian Economics Volume 9 235-252 Copyright 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN 1529-2134 doi S1529-2134 06 09009-0 235 236 STEVEN G. MEDEMA prompts a bit of a smile in that law has always had norms at its heart the reasonable individual of traditional legal analysis is one socialized into and acting in accordance with the norms and customs of society. No this literature is not the reinventing of the wheel but it is certainly not the discovery of it either. It may be stretching things somewhat to say that the economic analysis of law is in a state of flux at present.

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