RAM MANOHAR LOHIYA NATIONAL LAW
UNIVERSITY
2017-2018
Final draft of:
Jurisprudence
American Law and Economics vs German Doctrinalism
Submitted to:- Submitted by:-
Mr. Manwendra Kr. Tiwari Ayushi Verma
Asst.professor Section -A
Rmlnlu Enrollment no.-35
Semester V
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ACKNOWLEDGMENT:
I would like to express my heartfelt gratitude to my teacher and
mentor Mr. Manwendra Kr. Tiwari (assistant professor), a special
thanks to the Vice Chancellor of Dr. Ram Manohar Lohiya
National Law University, Mr. Gurdeep Singh for providing me
with this opportunity. I also greatly acknowledge the help and
guidance provided to me by Prof. C.M. Jariwala (Dean
Academics).
Thanks and appreciation to my family members for their
constant support, to the library staff and other members of this
institution and lastly to my friends for their help.
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Law and economics is an important part of U.S. legal scholarship whereas in
German- speaking countries, it has not yet been developed. In the U.S.,
utilitarianism has gained widespread acceptance but German philosophy
promoted anti- utilitarian attitude hostile to any law and economic
movement. But in both U.S. and in Germany, legal theories opposed to
positivism have prevailed.
Weak position of Law and Economic in Germany:
Typical ancient people in Germany often regard articles published in U.S.
law reviews as alien. It was because of the reason that U.S. legal scholars
adopted a non-legal approach and they mostly view the law from an external
perspective whereas in Germany, scholars mostly focuses on the
interpretations of the law. In Germany, economic approaches to law have
been frequently met with rejection because law is seen as a separate
academic discipline and with particular ‘scientific’ methods and not as a
branch of social science.
It was observed by Ugo Mattei and Roberto Pardolesi, in 1991 that status of
law and economics in Europe merely lagged behind the U.S. by about 15
years. Critiques of the law and economics perspective exists in large
numbers in the United States. And such criticism opposes a powerful
intellectual movement in the United States. But similar critiques in Germany
are more or less directed against a seedling that has not yet been developed.
It has been observed in the early days of modern law and economics that
wealth maximization has been criticized as an approach that does not
correspond to the maximization of total utility within a society.
It can be seen that law and economics still have to overcome significant
obstacles in Germany.
Divergence between Common law and Civil law:
It has been suggested by Ugo Mattei and Roberto Pardolesi that the main
reason for the divergence between Common law and Civil law is the
decentralized decision-making system. And, also the more powerful position
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of the judges in the Common law as opposed to the judges as mere
interpreter of the law in the Civil law society.
Admittedly, law and economics have made some encroachments in the U.K.,
especially in corporate law, but as a whole, work based upon black-letter law
continues to predominate as it does on the European continent.
Rent Seeking and Academic Incentives:
It have been said that rent-seeking activities by traditionally trained jurists
have constituted a strong interest group as opposed to any progressive legal
movements. In the U.S., the decisions about the rejection and acceptance of
an article in law reviews are made by students whereas in European
countries, it is been made by established law professors. Students in the U.S.
generally do not have a specific position to defend but an established law
professors may sometimes be opposed to approaches which strongly go
against his own approach. Because of this, U.S. system of law reviews is
more open to new approaches as it is important to follow new and
controversial thesis in order to have an article accepted by a reputable law
review.
Arguments which aim at the protection of vested interests may explain why
the predominant type of legal thought has maintained and expanded its
potion, but they do not explain how it came into being. It is possible to seek
the answer in the economic system in general. Germany and other European
countries lacked an anti- intervention sociopolitical movement, which
existed in the U.S., in the vicinity of which the law and economics
movement could developed.
In an article, Oren Gazal-Ayal has attempted to explain the prevalence of
law and economics in the United States. In the United States, standards for
appointment and promotion create rewards for law and economics
publications but same is not in Europe.
Overview of our own hypothesis:
Under this heading, we have tried to find out the acceptance and rejection of
law and economics to the evolution of legal theory, in its specific political
and social context. Legal scholarship both in Germany and U.S. have
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developed together to a certain level but at one point of time, it began to
diverge.
One of the main elements of our explanation is the position of policy in legal
scholarship. In Germany, policy is left to politics. This was in the first half of
the 19th century, namely to Savigny’s historical school of jurisprudence.
As the effect of classical legal thought started to decrease, legal realism
created a space in legal scholarship which was to be filled by a discussion on
policy. After some years, law and economics movement took some work by
which some new principles and decision criteria could be developed. On the
other hand, this type of work was never done in German- speaking countries.
For this reason, the law and economics movement that was created in the
late 19th century in Austria failed.
Why the legal realism movement succeeded in the United States and failed
in the Germany, can partly be explained by political factors, most
importantly the role o U.S. judicial review. Ideology of utilitarianism has
gained widespread influence in the United States which served as a basis for
law and economics movement. But German philosophy followed a strictly
anti- utilitarian path.
The U.S. Experience: Legal Realism and Utilitarianism:
Traditional economic analysis of law was developed in the U.S., where it has
become a predominant method of legal scholarship. During the first half of
the 20th century, U.S. and German lawyers shared a similar methodological
outlook. Due to political developments during that period, U.S. scholarship
turned its back on doctrinalism
During the late 19th and early 20th century, Christopher Columbus Langdell
who characterized U.S. legal scholarship as classical legal thought, believed
that general principles should be derived from cases. From these principles,
it would be possible to deduce solutions for future cases. And, those cases
that did not fit into the system should be eliminated as erroneous. This kind
of formalism was identified by Roscoe Pound as ‘mechanical jurisprudence’.
From Germany, Langdell also adopted the understanding of law as a science,
which aims to cleanse law of the influences of other disciplines.
One of the most important pre-cursor to legal realism was Oliver Wendell
Holmes. He came up with the prediction theory according to which lawyers
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should predict the courts decision when advising clients. He also
emphasized that the study of law should focus on the social objectives it is
intended o achieve. Court decisions are not determined by an application of
pre-determined legal materials but by the value judgment of the judges who
shape abstract rules and holdings in accordance to their views.
Also, Hart argues that U.S. Constitution ‘made law what elsewhere would be
politics’. He argued that U.S. legal theory is a split between indeterminancy
and free judicial decision- making on one side and the desire to find a
correct solution to those cases which are difficult to identify, on the other.
This particular factor is absent in the U.K. legal theory.
Legal realism is based on a utilitarian understanding of law. Although, legal
realism lost its vitality, one of the legacies of legal realism was its demand
that all judges should take social sciences, into account when making
judgments.
The Utilitarian Basis of Law and Economics:
Jeremy Bentham was a reformer who followed the ideas of utilitarianism in
his works on legal policy. He defined a legislative objective and attempted to
have it prevail in politics. John Austin’s work was influenced by Bentham.
Bentham was cited by courts, including the U.S. Supreme Court, quite a
number of times. Bentham’s significance increased more so in the North
than in the South. Bentham’s ideas were criticized for his lack of originality
and some opposed his views for religious reasons.
His works influenced legal realism. The influence of utility maximization in
neo-classical welfare economics was much stronger, as it served as a basis
for further developments of utilitarianism. Bentham believed that happiness
is homogenous which is independent from individuals, and could be
measured on a cardinal scale.
Rowley describes ‘welfarism’, ‘consequentialism’ as characteristics of
utilitarianism, which influenced the theory of marginal utility and welfare
economics, in which law and economics originates. Economics was easily
implemented into American legal scholarship because utilitarianism has
gained considerable significance in America which has influenced the
modern law and economics movement.
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Origins and Development of Modern Law and Economics Movement:
Law and economics to larger groups of legal scholars developed during the
1960s and was initiated mostly by the works of Ronald Coase and Guido
Calabresi, who is known as the founding fathers of the law and economics
movement. On the basis of the work of some bodies, economics was first
able to achieve results interesting to lawyers working in the field of contract
law, tort law, etc.
The most interesting factor for the significance of the economic analysis of
law today is that economic priniciples are applied by the legal scholars as
well. After more than 40 years, the economic analysis of law has become an
established principle of American legal culture.
The Development in German-speaking Countries:
One of the pioneers of economic analysis of law during that period was
Victor Mataja. He emphasized the incentive effects of tort law which lead
him to criticize the negligence rule. He also suggested that in case of an act
of God, the damages should not be borne by owner but by the one who can
best prevent the damage.
The legitimacy of economic arguments was never fully recognized and
subject to a dispute between economists and lawyers. Mataja’s views were
also criticized by number of scholars as ‘whole train of thoughts was
morbid’. The decline of the early law and economics movement was due to
the increasing specialization of the social sciences and to the plurality of the
economic methods.
Mataja was unable to initiate a law and economics movement was because
the doctrinal method of his time was unable to integrate economic ideas.
Mataja proposal for strict liability was criticized and eventually rejected
because of the political factors.
An Internal View of Policy and Interpretation:
Savigny proposed to make policy considerations dependent on the existing
law and Kelsen argued that policy should be entirely be excluded from legal
science. There was the rise of the historicism towards the end of the 18th
century. Phenomena was discussed in their historical context and understand
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the problem deeply. Leopold van Ranke contributed to the ‘science of
history’, whereas Friedrich Carl von Savigny contributed to the ‘science of
law’ as an independent discipline. Savigny’s Historical School was the basis
for today’s approach to policy.
Thibaut argued that the law must always be wise and independent from
current and past customs. This is possible only if external criteria were used
and it is the only way to change unjust law. Whereas, Savigny believed that
law was to be found in customs, legal scholarship and most importantly
from concepts of Roman Law. He did not believe that the law had an end in
itself.
But from today’s perspective, Savigny’s views were restrictive as it was
opposed to change and progress. His views were entirely dependent on
Historical schools only, and if any new concepts would come, he would dis-
aggred with it. And, also Savigny allocated decision- making authority to the
legal community instead of philosophers and government. This approach by
Savigny was criticized by many eminent leaders.
However, this separation of legal science from social circumstances was
supported by German idealism. Even though German idealism was opposed
to historical schools, the exclusion of social consequences was inherent in
both schools. During the 20th century, German idealism formed the basis and
since it opposes to utilitarianism, therefore many leaders like Marx started to
criticize utilitarian ethics because they thought that it is impossible to reduce
human wants and desires.
Legal Realism as a Missing Link:
American Legal Realism was an important part of law and economics. It
created space for new developments and made criteria for decision- making.
Similar movement was started in Germany but it was not successful as legal
realism. The free law movement was completely shut down by Nazi regime.
Many understood law as regulating human behaivour and not as an end in
itself.
Prior to World War II, the free law movement was recognized by many
including chief justices, judges of Supreme Court. This movement was
successful despite of many obstacles and also if Nazis had not come to
power.
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After World War II, free law scholars such as Radbruch and Esser were quite
successful in the academic debate but were unable to bring any effective
action on the daily practice of law. If classical legal thought had been
discredited and free law views concerning the indeterminancy of the law had
become acceptable, a demand for external criteria to evaluate legal
propositions would likely have developed.
The End of Legislation and Policy as an Element of Legal Science:
Savigny argued for an approach under which policy was based on current
law but Kelsen’s approach was to ban policy altogether from the legal
discourse. Kelsen emphasized the distinction between normative theories
and positive theories. He argued that normative theories were not scientific,
and thus lacked valid arguments. Kelsen’s theory was the exclusion of other
disciplines. This way, a lawyer was able to decide an impartial decisions
when interpreting laws. Bentham defined the maximization of happiness as
the objective of legislation whereas Kelsen avoided any guidelines to the law
regarding contents.
Nazi regime combined both positivism and non- positivistic approaches. But
it was declared irrelevant for Nazi jurisprudence. Statutory law passed under
the regime had been interpreted in a positivistic manner.
After this evolution, many lawyers believed that their work was merely
technical and apolitical. This was an important factor which facilitates the
development of the law and legal professions after World War II. It was not
surprising that an economic analysis of law was not accepted in the legal
society.
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Conclusion:
To conclude, I would like to tell, that the classical legal thought is a means
of development both in the U.S. and in German-speaking countries. Also, we
have seen the acceptance and rejection of utilitarianism in both the countries.
In Germany, we have seen that the legal thought was systematic and left
little space for changes due to external criteria such as economic efficiency.
In the United States, legal realism discredited classical legal thought and
opened legal scholarship for external criteria. Legal realism argued that a
judicial decision was not determined only by the precedents or legal
materials but also by judge’s personal views. The free law movement in
Germany gained widespread acceptance in its critique on classical
conceptualism. But in the United States, the movement was cut short by
World War II and was revived in the postwar period.
Kelsen’s legal theory was more radical in this respect and declared that
policy should be excluded from legal science altogether. This view which is
shared by the dominant schools of German legal theory prevails until today
and has profound consequences for the reception of the economic analysis of
the law. However, German- speaking countries followed anti- utilitarian
ethics and was against law and economics. But this was not the case in the
United States.
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