Beat HotzÖkonomische Analyse des Rechts – eine skeptische Betrachtung

Beat Hotz, Ökonomische Analyse des Rechts – eine skeptische Betrachtung, Wirtschaft und Recht, Jg. 34, Heft 4, 1982, p. 293-314.

Summary

In the introduction to this essay by Prof. Dr. Beat Hotz, the reader is informed about the “Economic Analysis of Law” (EAL), encompassing therewith the origin as well as the historical development of the EAL.

In the first part of the essay, Prof. Hotz deals with the EAL’s basic elements. He demonstrates that macro-economic instruments may be used in various areas. In his remarks, he frequently refers to Richard Posner – whose oeuvre, “Economic Analysis of Law” is deemed a standard reference in the field. Accordingly, EAL encompasses a specific division of labor between economics and law: Economics provides the basis, the so-called governing knowledge in terms of demands the legal prerequisites must meet. Law has the duty to incentivize in a manner that every individual may perform those functions that lead to an optimal sharing of benefits.

The discussions and explanations from the first part of the essay are relativized and criticized in the next part. Here, Prof. Hotz draws from Mitchell Polinsky, who found fault in the lack of a comprehensive discussion of the conditions under which a market properly functions. Furthermore, Prof. Hotz criticizes four aspects belonging to the economic and action-theoretical foundations of the EAL. Among other things, the EAL is instrumentalized; thus, fundamental assumptions are not statements about reality but rather “as-if”-statements. Prof. Hotz describes, in an exaggerated manner, that in extreme cases, and provided there is enough self-confidence, the research demands that the reality is adapted in accordance with the models. The danger of economic rigidity also exists. The analysis of the law fails to include psychological and social aspects. Whenever such aspects are excluded, the individual is presented as a “cost-benefit-analysis-machine”, which will always go for the cheapest of all alternatives. According to Prof. Hotz, if such aspects are not considered, disastrous conclusions could be drawn.

In the last part of his essay, Prof. Hotz provides a classification of the EAL; important connections in different fields are evinced. The analysis, however, may not be seen as an individualistic theory of society; rather, it must be made with assistance from social science approaches, which complement or relativize each other. Thus, in order to have a legitimate function, an EAL must be embedded in a comprehensive theory of private and economic law.

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You can find a scan (PDF) of the original text here: Hotz Beat – Oekonomische Analyse des Rechts