The Economics of Trade Laws

Abstract

Economic models of legal rules often focus on the question of the optimality of such rules in maximizing wealth or the monetary value of trade. Surely, the question of optimality is of fundamental importance in the economic analysis of legal systems. A shortcoming of such an approach as it appears in the Law and Economics literature, however, is that a clear-cut distinction is not always made between “positive” (i. e. descriptive) theories of legal rules, the empirical question on how existing legal systems work, and the normative issue of how the system ought to function. Indeed, one pioneer in the field (Richard Posner, 1977), has claimed that most of the American Common Law doctrines both are, and ought to be wealth-maximizing (1). Such a view tends to largely wipe out any meaningful distinction between a positive and normative theory.