Posner's Symphony No. 3: Thinking About the Unthinkable, 39 Stanford Law Review 791 (1987) (with John Donahue)

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Economic Analysis of Law (3D ED.). By Richard A. Posner. Toronto: Little, Brown and Company. 1986. XXI + 666 PP. $29.00.

To comprehend Liszt's greatness one needs a suspension of distaste, a momentary renunciation of musical scruples.
- Charles Rosen

In the 100th year following the death of Franz Liszt, Richard Posner has published the third edition of his own classic work, The Economic Analysis of Law. This coincidence is in some sense fitting, for, in many respects, what Liszt was to the piano and musical composition, Posner is to legal scholarship and public policy. Just as Liszt was the dominant figure in the creation of the modern pianist, Posner has presided over the rise of law and economics in the domain of legal scholarship. Just as everyone concedes that Liszt demonstrated immense talent in performing his own and others' music, no one disputes Posner's abilities as an outstanding scholar and expositor of his own and others' economic analyses of legal issues.

But both Liszt and Posner have heard some dissent amidst the applause. Some music critics claim that, despite his technical brilliance, Liszt's obsession with virtuosity led him astray at times. Liszt's flashiness exceeded the bounds of the aesthetically pleasing, becoming at times unpleasant or even unlistenable. Even his most ardent supporters agree that a number of Liszt's compositions are marred by unevenness, superficiality, or barren virtuosic ornamentation and would best be forgotten. At times Posner is also guilty of such lapses or excesses. His third edition provides ample new material to test this view: Posner has added more than twenty-five sections and 150 pages of new material to the work.

Cynics might speculate that the excesses of the third edition reflect an effort to curry presidential favor in hopes of a Supreme Court nomination. While Posner's beliefs often converge remarkably with President Reagan's, the third edition shows unmistakably that Posner is a man of deep intellectual conviction. His newly added analysis of rape illustrates this:
Suppose a rapist derives extra pleasure from the coercive character of his act. Then there would be no market substitute for rape and it could be argued therefore that rape is not a pure coercive transfer and should not be punished criminally. But the argument would be weak: (a) . . . The prevention of rape is essential to protect the marriage market . . . and more generally to secure property rights in women's persons. Allowing rape would be the equivalent of communalizing property rights in women. . . . (b) Allowing rape would lead to heavy expenditures on protecting women, as well as expenditures on overcoming those protections. The expenditures would be largely offsetting, and to that extent socially wasted. (c) Given the economist's definition of value . . . the fact that the rapist cannot find a consensual substitute does not mean that he values the rape more than the victim disvalues it . . ..

These are the words of a man driven by an intellectual vision, not by concerns with promotion. In a similar fashion Posner seems willing to dare opprobrium by questioning the prohibition against selling babies:
Should the sale of babies be made legal? The idea strikes most people as bizarre and offensive. . . . However, economists like to think about the unthinkable, so let us examine in a scientific spirit the objections to permitting the sale of babies for adoption.

While economics is a powerful and valuable tool in the analysis of legal and public policy issues, those who use it need an appreciation of its limitations. As the Nobel prize winner James Tobin noted, 'Any good second year graduate student in economics could write a short examination paper proving that voluntary transactions in votes would increase the welfare of the sellers as well as the buyers.' In the vote-selling case, however, economic arguments must bow to democratic concerns. Posner, though, does not always manifest a proper appreciation of such limits on economic analysis.

Unfortunately, this shortcoming may deter many from reading his otherwise valuable book or improperly discredit the entire realm of law and economics. But while selected passages may infuriate some, the work as a whole continues to be the best exposition of the Chicago School's influential approach to law and economics. Posner's willingness and ability to canvass 'in a scientific spirit' the entire domain of law is indeed praiseworthy. His attempts to give an economic account of legal doctrine ranging from the Rule Against Perpetuities to the regulation of pornography are both provocative and insightful. Posner unites disparate legal disciplines with his over-arching hypothesis that: '[J]udge-made rules tend to be efficiency-promoting while those made by legislatures tend to be efficiency-reducing.' All in all, Posner sets forth an intelligent, well-written, and thought-provoking case that the 'economic theory of law is the most promising positive theory of law extant.'

Nonetheless, the book reflects the nature of Posner's genius--more like the erratic Liszt than the consistent Mozart. While Posner provides a provocative brief for the Chicago School's platform, his early claim that subsequent chapters 'create an economic theory of law with growing explanative power and empirical support' is only sporadically fulfilled. Readers of Economic Analysis of Law who are new to economics might feel that rejecting many of Posner's policy recommendations entails rejecting the entire economic approach.

Our purpose, however, is to provide an internal critique. Even if one accepts efficiency/wealth-maximization as the proper objective of the legal system, Posner's conclusions at times will not withstand analysis. The first section of this review examines Posner's analysis of income distribution and its uniquely conservative intellectual foundation. The second and third sections then examine a variety of empirical and theoretical qualifications to Posner's work. Rationalizing Antitrust Cluster Markets, 95 Yale Law Journal 109 (1985)

Courts have traditionally defined antitrust markets on the basis of substitutability. Several antitrust decisions involving multiproduct defendants, however, have departed from this standard and defined 'clusters' of non-substituting and united products to be the relevant line of commerce. The use of such cluster definitions has preceded the development of a theoretical framework. Courts have not clearly articulated the circumstances in which nonsubstitutes should be included in the same market. Instead of invoking substantive standards, courts have often justified cluster definitions merely by relying on such undefined phrases as trade, commercial or economic 'reality.' To the extent that courts have proposed any substantive criteria, they have failed to explain how or why their chosen standards form a legitimate basis for market definition.

By analyzing the market conditions that cause firms to supply multiple products, this Note seeks to articulate a rational criterion for clustering. In particular, this Note suggests that courts should only cluster together 'transactional complements.' Goods are transactional complements if buying them from a single firm significantly reduces consumers' transaction costs.

Transactional complementarity effectively ties consumer purchases of multiple products to individual firms and thereby makes the cluster the relevant product. Part I of this Note describes the varying criteria that courts have used to define cluster markets and concludes that courts have failed to justify coherently the cluster market concept. Part II analyzes the causes of multiproduct supply and presents a theoretical justification for clustering transactional complements. Part III discusses how the suggested transactional complementarity approach should be applied.

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