Philosophy of Law & Economics: 6. Justice and Economics

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1 Philosophy of Law & Economics: 6. Justice and Economics Martin Leroch 1

2 6.1. Bridging the Gap 2

3 Introduction What happened so far? In the previous lectures, we found that a state and the law serve mainly 2 goals: 1. Define and secure property rights - The Hobbesian State of Nature served as philosophical starting point for a justification - It served as showing an alternative state of the world and its shortcomings 2. Solve coordination problems - Even if property rights are defined and secured, coordination failures may occur - Consequently, the state of a society may be inferior as compared to alternative states - Developing a legal system which is able to influence behavior (via beliefs or direct incentives) such that the superior state is reached is then the prime object of the state and the law - Besides the coordination problem, in some examples there also existed a distribution problem - Quite frequently, economics is said to deal only with problems of allocation not distribution assuming that both are independent. This would of course exclude welfare economics. 3

4 What is Justice? Justice (1/3) In the domain of philosophy, the conceptions of justice refer to both goals: 1. Commutative justice: Protection of the state, its people and their properties In the words of Thomas Hobbes: Commutative Justice, is the Justice of a Contractor; that is, a Performance of Covenant, in Buying, and Selling In the words of Adam Smith, it consists in abstaining from what is another's, and in doing voluntarily whatever we can with propriety be forced to do. (TMS, VII.ii.1.10) Note that this could include the enforcement of rules solving the coordination problem as well 4

5 What is Justice? Justice (2/3) 2. Distributive justice: Refers to the allocation of goods. Aristotle defined it as the obligation to give every man what he deserves In the words of Hobbes: Distributive Justice, the Justice of an Arbitrator; that is to say, [is] the act of defining what is Just. Wherein, (being trusted by them that make him Arbitrator,) if he performe his Trust, he is said to distribute to every man his own: and his is indeed Just Distribution, and may be called (though improperly) Distributive Justice; but more properly Equity; which also is a Law of Nature, as shall be shewn in due place. 5

6 What is Justice? Justice (3/3) Once again referring to Smith, it consists in proper beneficence, in the becoming use of what is our own, and in the applying it to those purposes either of charity or generosity, to which it is most suitable, in our situation, that it should be applied. (TMS, VII.ii.1.10) Both commutative and distributive justice define obligations of a sovereign Questions of commutative justice are more or less undisputed. Those of distributive justice however offer a tremendously huge pile of literature. 6

7 Justice and the Law Classical Positions (1/2) Whether the law has anything to do with justice is one of the big classical questions of debate Heraklit thought all laws to spring from divinity Stoic philosophy argued that human laws may be unjust. Since laws differ between societies, not all can be in line with truth. Out of this idea followed the identification of Natural Rights (independent of social circumstances) Hobbes regarded the sovereign to be necessary for the creation of justice: - And therefore where there is no Own, that is, no Propriety, there is no Injustice; and where there is no coerceive Power erected, that is, where there is no Common-wealth, there is no Propriety; 7

8 Justice and the Law Classical Positions (2/2) Kant saw the law and morality to be absolutely separated. Morality and justice are subjective maxims of action, the law a generalized rule. The law is only defined in negative terms: it defines the constraints of action. Hegel also separated law and morality, but saw the need of a re-combination of both Out of the idea that law and morality are separate sprang what is called legal positivism 8

9 What is the Law? Positivism and Anti-Positivism Positivist theory of law postulates that what the law of any jurisdiction requires is a matter of social fact alone. There is no inherent or necessary connection between ethics and the law. Anti-positivist theory of law holds that what the law requires sometimes depends not only on social facts but also on controversial normative issues including moral issues. Consider a hard case in which what lawyers regard as settled law does not decide the immediate issue, i.e. a new law has to be found. Positivists would hold that the judge should decide on his own and may come to a good decision by reason only. Anti-positivists now go further and argue that he in these cases may (unconsciously) be guided by moral beliefs One source of misunderstanding may lie in the different concepts of law we implicitly apply 9

10 What is the Law? Concepts of Law Concepts may function a) as criterial: If somebody is an adult and not married, we call him a bachelor b) as natural kind concepts: A tiger is defined via biological criteria c) as interprative: Justice and democracy fall into this category. Basically, we all know what we are talking about when referring to these concepts, but what specific criteria we apply may be disputed. 10

11 What is the Law? Concepts of Law In everyday language, we use different concepts of law: 1. Taxonomic: Classifying rules as legal rules instead of, e.g., social rules ( On which side of the road to drive is a matter of law ) 2. Doctrinal: The law of a specific jurisdiction requires, forbids, or permits certain actions ( The law in Germany requires to drive on the right hand side of the road ) 3. Sociological: Specifies a particular form of political organization ( The Romans developed a complex and sophisticated form of law ) 4. Aspirational: Describes a distinct political virtue ( The Nuremberg tribunal was preoccupied with the nature of legality ) 11

12 Law and Economics Concepts of Law Law and Economics mainly focuses on the doctrinal concept of law This makes the economic analysis of law a substratum of the positivist theory of law The analysis of theories of justice in this sphere is largely neglected However, applying the sociological or aspirational concepts of law allow for a discussion of different theories of justice in the sphere of jurisprudence What the different theories of justice will do is deduce moral claims for certain policies These claims are derived from different ideas of what people have a right to These rights can be of legal or moral nature mostly they are of the latter, but the claim is then often translated into policy recommendations. The implementation thus will often be followed by legal intervention 12

13 Rights A brief history of rights In Ancient Greece and the Roman Empire all people basically had the same rights although slaves where generally excluded from this right Under the influence of Christian philosophy the people derived the right to set off their ruler Charles I was executed in 1649 (recall that this was the time of Hobbes) John Locke explicitly defined rights which are given to every person: a right to life, liberty and property In the Declaration of Independence from 1776, these rights found their first political expression though the right to property was substituted by the right to pursue happiness All these positions share the basic tendency of defining negative rights, i.e. the right to be protected, not rights to receive something These positive rights were (mostly) introduced in the 20th century, e.g. in the form of welfare states 13

14 Rights What are rights? Rights can be interpreted in different ways. They may be seen as: 1. Claims: the right to receive something, the counterpart of a duty 2. Power: the right to do something, e.g. distribute my property as I wish 3. Liberty: being free of burdensome requirements 4. Immunity: protection from actions/influence of others Note that rights are (almost) never absolute. In general, rights are always qualified, i.e. subject to the needs or interpretation of the state (for instance if rights conflict). In the UN declaration of rights, the only unqualified right is the right not to be tortured. 14

15 Rights Conceptions of Justice Similar to the law, justice can be regarded as a concept Different conceptions of justice can be distinguished. Nowadays the most prominent ones are probably: 1. Libertarianism (and Just Acquisition) 2. Egalitarianism 3. Contractualism and Rawls Theory of Justice 4. Sen s Capability Approach 15

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