The Fourth in the Series on the development of law and economics in Europe

Developments of Law and Economics in Spain

Fernando Gomez, Universitat Pompeu Fabra, Barcelona, Spain


As has been pointed out by many observers of Law and Economics (L&E) as an intellectual enterprise, both from the inside and from the outside, the major difficulties for the growth of L&E have been encountered in settings in which traditional legal scholarship and education had deep roots. This is the case of Spain, where Law schools and legal scholarship are centuries-old, the legal professions –in private practice and in government service- are well-established, and the formalistic modes of approaching the legal system still are powerfully engrained in the internalized world vision of lawyers.

The progress made by Law and Economics in recent years is, nevertheless, remarkable, and proceeds along several lines. First, legal education. In the past decade or so, some of the most reputed Law Schools in Spain (Carlos III and Autónoma, in Madrid, UPF in Barcelona) implemented joint degrees in Law and Business Administration, Law and Economics and, to a lesser extent, Law and Political Science. These degrees were already in the market offered by private institutions, but the move by large public universities gave a definitive push towards joint degrees involving Law and other disciplines. With some exceptions, however, L&E as a distinctive intellectual discipline and approach to social issues related to the Law did not acquire a significant presence in those joint degrees, and remained largely confined to some graduate programmes, both at Law Schools and at Economics Departments, where the presence of L&E is already well-established. Moreover, the role of some of those graduate programmes in the promotion of L&E in Latin America, where many of the graduate students come from, should not be underestimated (see, for instance, the Law and Economics programme at Fundación Ortega y Gasset:
http://www.ortegaygasset.edu/contenidos.asp?id_is=253).
The recent ALACDE Meeting in Barcelona in June 2009, where L&E scholars from Latin America, Europe, and the US came together, is good proof of this influence.

Starting in the academic year 2009-2010 Law Schools all over Spain have started new curricula for their Law degrees, and again some of the leading Law schools have introduced L&E, and economically-oriented subjects in the core undergraduate legal education. This is a major impulse, although the major challenge still lies in the expansion of L&E methodology to understand and to teach the basic traditional legal courses (Constitutional Law, Property, Criminal Law, Contracts and so forth).

This concern about the actual use of L&E in legal scholarship produced by Spanish academics is one of the inspiring motivations behind InDret (www.indret.com). InDret is the first formally peer-reviewed legal journal in Spanish academic market, and is by now the most successful e-journal in Law in the entire Spanish-speaking world. Although the journal is generalist in scope, and ecumenic in approach, the number of articles that are squarely L&E papers, or at least L&E influenced, is very important, and growing, particularly in Corporate Law, Torts, Contracts, and Antitrust, but even in Criminal Law there has been relevant activity.

The other major L&E move in Spanish scholarship has been the creation in 2006 of the Spanish Law and Economics Association (AEDE, www.laweco.es) which serves as the first institutional expression of the Spanish L&E community, organizing sectorial conferences and sponsoring graduate courses in L&E, in Spain and abroad.

Most of those L&E initiatives are still young, but the wave of increased presence and relevance of L&E in the Spanish academic environment is already on its way.

Prof. Eger on the recent developments of the European Master of Law and Economics

The development of law and economics within Europe depends on the development of good educational programs. In this respect, the European Master of Law and Economics (EMLE) stands out. I asked Professor Thomas Eger,the program director, if he would be willing to provide a brief status report. /Henrik

The European Master in Law and Economics (EMLE): Recent Developments and Future Prospects
by Prof. Dr. Thomas Eger, University of Hamburg, Programme Director EMLE

The European Master Programme in Law and Economics (EMLE) is entering its 20th academic year, and still striving. Over this period, the programme has established a reputation as one of the primary sources of high quality postgraduate education in the field of the economic analysis of law in Europe. Thus far, more than 1,000 students have benefited from the cooperation between the pre-eminent European centres for research and teaching in Law and Economics. Currently, the EMLE network comprises the Universities of Aix-en-Provence, Bologna, Gent, Haifa, Hamburg, Manchester, Rotterdam, and Vienna. Most of the established scholars in the field have taught in the programme or have been associated with it at some point.
As for future prospects, we are looking forward to welcoming two additional teaching centres to the EMLE consortium in 2010: the Warsaw School of Economics and the Indira Ghandi Institute of Development Research (Mumbai, India). The Australian National University at Canberra will most likely join the network in 2011.
The EMLE programme continues to enjoy strong support from the European Commission in the form of the Erasmus Mundus (EM) programme, which provides generous grants for students and visiting researchers. EMLE was accepted for the first round of EM in 2004 as one of only 19 Master courses out of a total of 128 applications. A few weeks ago, we submitted an application for the second round of EM for further support from 2010 onwards. We are confident that we have prepared a strong application which reflects the unique value, structure, and organisation of the EMLE programme.

The third in the series on the development of law and economics in Europe

Law and Economics in Germany

By Hans-Bernd Schäfer


When cosmologists tried to estimate the total amount of matter in the universe, they used two different methods. The first method was to add up the estimated matter of every visible star and galaxy. The second method included calculations derived from the movement of stars, which are influencedby the matter around them. Surprisingly the second method led to more than 10times more matter than the first method. Therefore physicists now believe that there is a lot of "dark matter" in the universe. With regard to law and economics writings there is a lot of dark matter in many countries -including Germany- too. These writings are almost invisible to the international audience. The authors write in their national language and publish in national law journals.

In a very informative article Oren Gazal has counted the international presence of law and economic scholars on international conferences and in international journals in different countries. He finds two countries outstanding in law and economics, Israel and the United States. Others follow in a great distance. I think this is basically correct but overlooks the large literature not written in English. In Germany there exist now more than a dozen of habilitation theses, dozens of Ph.D. theses and hundreds of articles on law making extensive and diligent use of economics, all in German language. They describe the consequences of legal norms, interpret the law with the help of economic tools, compare alternative rules and discuss regulatory competition. In the Max Planck Institutes as well as in various universities excellent legal studies using economic tools were produced and published in German language. The authors are lawyers, who gain little reputation inside their own profession, when they publish in English. They want to be read by peers, by judges as well as by attorneys. They want to be quoted in High Court decisions and be used in the classroom. And unlike economics, which is an international discipline, law is much more a cultural discipline, embedded in the national legal dialogue and language. A scholar of civil law, criminal law, constitutional or administrative law cannot earn a reputation in Germany by publishing predominantly in English. I believe that this is not likely to change over the foreseeable future.

The number of articles by German lawyers in international law and economics journals therefore reveals little about the importance of this field for legal scholarship in Germany. The impact of law and economics on legal scholarship is clearly increasing. Among German lawyers who publish continuously in this field in German language and use economic arguments are Behrens, Eidenmüller, Fleischer, Kirchner, Köndgen, Kötz, Leyens, Rühl, Schantze, Schweitzer, Spindler and Wagner. Their Law and Economics thoughts have not only entered textbooks on law but also commentaries such as the influential “Münchner Kommentar zum Bürgerlichen Gesetzbuch”. This will influence the legal language and court decisions. I think that now the majority of younger law scholars in the field of intellectual property law and corporation law believe that they cannot understand their own discipline without economics. And many civil lawyers welcome and support economic reasoning within their discipline. The idea of legal competition between German States and within Europe has become prominent among politicians, practitioners and scholars alike. A gradual and unspectacular shift from legal formalism to consequentialism is observable in legal scholarship. This does not necessarily imply much more teaching in law and economics as a separate discipline in separate courses but a change of content of existing courses.

There are places, where law and economics is particular prominent as a discipline, such as at Hamburg University, where the law faculty lends its support to a Ph.D. program in Law and Economics, an international master program and a specialisation program in law and economics for Hamburg students. But also the private Bucerius Law School and the Max Planck Institute for international and comparative law in Hamburg support research and teaching in law and economics. There are now many law faculties in Germany, where law and economics is taught on a regular basis, including Berlin, Humboldt-University, Bonn, Hanover, Munich, Göttingen, Kassel, Saarbrücken. In Bonn lawyers and economists work in the same faculty and regularly meet for law and economics seminars. This creates a very fruitful atmosphere, conducive for research. I cannot see any aggressiveness against law and economics in German law faculties anymore, much unlike 20-25 years ago. It has become a normal and accepted part of the legal scholarly debate and thinking.

All advanced law students in Germany have -since a recent federal reform of legal education- to register in a program of specialisation, before they can take the state exam. This can be law and economics. The exam results for this program count for 30 per cent of the state exam. Section 5a(2) of the reformed “Deutsches Richtergesetz”, a skeleton law, which regulates legal education, points explicitly to specialisation with interdisciplinary content. This makes it legally easy for law faculties to introduce a specialisation program in law and economics. Hamburg established such a program. But law and economics as a separate subject is also taught in introductory courses and in seminars in many places across the country.

What is not observable in Germany is what Nuno Garoupa describes for the USA, where law schools hire large numbers of social scientists as law professors. A habilitation in the discipline of law remains the entry ticket for becoming a law professor. A habilitation in another discipline –even if it is closely related to law- together with an additional law qualification –is very unlikely to qualify for a position of professor of law in a German law faculty. The practice is somewhat more lenient for law professors in business or economics departments. I think this will not change in the foreseeable future. This practice is certainly a constraint on high standard interdisciplinary research in German law faculties. On the other hand Max Planck Institutes presently put together interdisciplinary groups of lawyers and economists to work on joint and similar projects. This might result in high quality research within a couple of years.

The second in the series on the state of law and economics across Europe

Recent developments of law and economics in Israel

by Oren Gazal-Ayal, ph.d, Senior Lecturer, Faculty of Law, Haifa University

Law and Economics is definitely the leading methodology in current Israeli legal scholarship. It is even more popular than in the United States, where it originated. Per population, Israeli participation in the American Law and Economics Association and in its European parallel is several times higher than participation of American or European scholars. A similar picture can be found when examining Israeli participation in writing papers in law and economics journals. See http://www.bepress.com/rle/vol3/iss2/art11/. Law and economics language and discourse are entrenched in every legal discussion in Israel, even among strong opponents of this methodology.
Law and economics is also embedded in the core curriculum of Israeli law schools. In every tort, contract and property core course, the basic law and economics arguments are discussed. The four leading law schools in Israeli universities usually offer more than one law and economics course to their students. Many Israeli law students study for a degree in economics while pursuing their law degree. In some law schools, a course in economics and basic concepts of law and economics is obligatory. The Haifa Law School is also a participant in the European Master Program in Law and Economics. Leading law and economics scholars originally from Israel are current faculty members in American law schools including Harvard, Yale, Chicago, NYU, Virginia, Northwestern and more. Law and economics is also popular among economists in Israel, although to a lesser degree.
The popularity of law and economics has also penetrated the legal discourse in Israeli courts, and the Israeli Supreme Court often refers to the leading scholarship in economic analysis of law, though sometimes it does so while adopting the views of its critiques. However, since an increasing number of judges, lawyers and law clerks have been educated in the highly law-and-economics friendly law schools, one can observe a slow and persistent increase in the tendency to openly adopt economic arguments in legal opinions.
For more details about the popularity of law and economics in the Israeli academia, and for an explanation of this unique phenomenon see: "Economic Analysis of Law in North America, Europe and Israel".

The first in a series about developments of law and economics in Europe

Recent developments of law and economics in Switzerland

by Professor Anne van Aaken, University of St. Gallen

Switzerland has been one of the countries in Europe where Law & Economics was taught at Master level in the universities already in the 1980ties, mostly in the economics departments (e.g. Bern and Fribourg). But Switzerland was also early in establishing courses in Law & Economics for both, Economics and Law doctoral students from Switzerland. Those so-called Gerzensee Courses, organized by Gerard Hertig from the Federal Technical Institute in Zürich (ETHZ), are given by renowned Law & Economics scholars, mostly from the US.
Ever more, Law & Economics is taught also in the Law Schools, e.g. Luzerne, University of Zürich, University of Basel (see e.g. the Zaeslin program: http://www.wwz.unibas.ch/ds/abt/wirtschaft-und-politik/zaeslin-program-for-law-economics/abteilung/wifor) and ETHZ, all of them offer courses in Law & Economics. The Law School of the University of St. Gallen has established an entire Bachelor and Master in Law & Economics (http://www.mle.unisg.ch/org/lehre/ms.nsf/wwwPubInhalteGer/Master-Programm+Law+and+Economics+(MLE)?opendocument). This program is – as concerns the early integration of Law and Economics in the curriculum (partly also business administration) – unique in Switzerland and to my knowledge in Europe. The first Master students graduated in 2007 and were highly appreciated in the job market, be it with internationally working law firms, be it with accountancy or consultancy firms. Furthermore, there are regular Lecture Series in Law & Economics, taking place in Zürich, organized by the ETHZ, the University of Zürich, the University of St. Gallen and recently joined by the University of Lucerne (http://www.hertig.ethz.ch/LE_Spring_2009/LE_Spring_2009_Schedule.htm).

Ever more students also write their doctoral theses in the field of Law & Economics in St. Gallen, but not only there. St. Gallen University, together with ETHZ is cooperating with the Amsterdam Center for Law and Economics and the Law School of Haifa University for the informal exchange possibility open for doctoral students in the field of Law & Economics, so called “LEx” (http://lex.acle.nl/). Until now, the Swiss Courts have not openly used Law & Economics arguments (different from e.g. the German Federal Constitutional Court in 2006), but consequentialist arguments may be found also here.
As a personal impression, I find that the communication is getting easier between lawyers and economists, although it clearly remains far behind the level of communication and mutual acceptance in the United States. But depending on the area of law (e.g. competition law, corporate law, international law, legal theory) and the area of economics (institutional economics, behavioral economics, microeconomics with game theory) in which people are trained and practice, communication is taking place and can be very fruitful, certainly in academia as well as in practice. In short: although slowly, Law & Economics in Switzerland is becoming more mainstream, also in the law faculties and communication between lawyers and economists as well as business is becoming easier.

A new series of postings about the development of law and economics in Europe

Law and economics is developing and taking hold in most European countries and it is interesting to follow the developments. It is also worthwhile I think, for there are probably many ways in which developments in one country can be an inspiration in another, e.g. in terms of the development of courses, or in the form of new modes of collaboration between lawyers and economists. I believe there is also untapped potential for collaboraton, e.g. in the development of phd courses.
Thus, I have asked some of the law and economics scholars associated with EALE to give an account of recent developments in their country. I plan to ask several others in the coming weeks. I asked if they would report on e.g. `how many phds are attracted to the subject, whether courses in law and economics are becoming more widespread, whether law and economics has an impact on the law, and whether the conversation with lawyers is becoming easier or more productive.´
The first account is contributed by Professor Anne van Aaken, University of St.Gallen, who will describe some of the recent developments in Switzerland.

Guest posting by Alon Harel

Should We Balance Security and Liberty? Skeptical Reflections on the Economic Analysis of Terrorism


Alon Harel, Professor of Law, Hebrew University

Economic analysis of law has penetrated every area of law. Most recently economists have started exploring the area of terrorism and its impact on civil rights. A characteristic example is Richard Posner recent book entitled: Not a Suicide Pact: The Constitution in Times of Emergency. In this book Posner develops his vision concerning the protection of civil rights in times of emergency. The vision which Posner articulates with respect to constitutional interpretation of civil rights is a pragmatic, common-sense vision. Posner believes that liberty is important; security is also important and judges ought to be guided by the perceived practical consequences of their decisions with respect to both values. Consequently constitutional law in Posner's view is fluid and responsive to changing circumstances. It is this pragmatic vision which guides Posner in his discussion of torture, the limitations of freedom of speech, the regulation of electronic searches etc.

The most powerful metaphor used by Posner is the metaphor of balancing conflicting considerations. In Posner's view the interpretation of constitutional texts is free of legalistic constraints. Supreme Court Justices make decisions in much the same way as other Americans do by balancing the anticipated consequences of alternative outcomes and picking the one that creates the great preponderance of good over bad effects. He continues and speaks of the need to restrike the balance between the interest in liberty from government restraint or interference and the interest in public safety, in recognition of the grave threat that terrorism poses to the nation's security. This comment examines critically the use of balancing in judicial reasoning concerning the protection of civil rights. My challenge to balancing understood as a method of judicial reasoning is divided into two. First I show that balancing is not a useful tool and second I establish that it is likely to be a biased or a distorted.

The most fundamental difficulty in using balancing is that balancing-based reasoning is simply not a helpful method of reasoning when the balancing is conducted between notions as vague as security and liberty. To see why, think of a transaction between a buyer and a seller of 2 kg of vegetables. What makes this transaction possible in the market is the fact that neither the seller nor the buyer determines what the weight of the vegetables is. The weight of the weights placed on the scale is agreed by both the seller and the buyer to be the measure on the basis of which the weight of the vegetables is determined.

Assume that instead of using one set of weights the seller and the buyer bring their own weights to the shop and each one of them insists on using her own weights. Such a scenario would undermine the very concept of weighting. Similarly in our context -- the context of the alleged metaphorical weighting of security and liberty -- there is no agreement as to what the value of security is and what the value of liberty is. Perhaps each judge could conduct balancing on his own on the basis of her own weights. But such balancing could achieve very little. The decision would be controversial not because some judges balance while others do not but because the weight they give to conflicting considerations are different and, furthermore, no legitimacy could be generated on the basis of such a subjective process of balancing. What can the metaphor of weighting or balancing achieve if each participant in the dispute brings their own weights to the table? To illustrate this claim, think of both civil libertarians and ardent advocates of security. Posner reiterates again and again that civil libertarians are rights fundamentalists because they fail to balance rights against other considerations. But, at least some civil libertarians ought not to be blamed for failing to weigh the pros and cons of their position. Instead it is more accurate to interpret them as saying that they bring their own weights to the court or to the political discourse and their own weights suggest that liberty is in most cases much more important than security.

Balancing however is not only futile but also dangerous. It is dangerous because of two reasons. First the balancing fails to acknowledge that many of the values protected by rights are socially constructed through a long and vulnerable process of trial and error. The erosion of rights during times of emergency erodes the sensitivities and understandings of their importance and value. Second the use of balancing channels us towards certain considerations which are more easily measurable and quantified. Thus, ironically, it is the process of balancing itself which disrupts the possibility of conducting a genuinely balanced discourse concerning the protection of civil rights at a time of emergency.

To establish the first claim think of the process by which individuals acquire sophisticated tastes with respect to literature, theatre, wine or fine food etc. An individual who wishes to acquire such tastes ought to consume these goods even when she is disinclined to consume them. This is because it is the very consumption of these goods that generates the sensibilities necessary for enjoying these goods.

Many rights are similar to such goods in that benefitting from them requires the inculcation of certain sensibilities. Privacy is perhaps a primary example. Privacy is a prime example of a right that can be appreciated only in environments or societies which have a tradition of respecting it. Once rights are eroded judges (as well as citizens) lose the very capacity to value the right because the sensitivities required for appreciating its value are lost. In fact we can hardly make reasoned judgments as to what sensitivities have already been lost (or have never been acquired) due to the erosion of the protection of rights.

Let me turn attention to a second concern namely the concern that the metaphor of balancing is tilted towards certain considerations at the expense of others. To do so, think of what considerations are more likely to be put on a scale. It seems much easier to put on the scales measurable considerations such as perceived probabilities of terrorist activities, number of expected lives and expected damage to property than to put on the scale intangible costs such as the costs of the erosion of values, the deterioration of solidarity and other expressive and communicative considerations. This is not because the latter considerations are less important but only because they are less amenable to being measured and weighted.

Theoretically these intangible considerations could be put on a scale and be given a dollar amount representing their importance but practically they seem so indeterminate and vague that the concept of balancing seems to be inapplicable to them. What I am arguing therefore is that the metaphor of balancing is not as innocent and neutral. It seems to tilt the balance in favor of considerations which are more tangible than others because the latter could be more easily put on a scale. This observation could of course work either in favor or against security. Intuitively I believe that the considerations protected and promoted by human rights are most typically less tangible and measurable than the considerations favoring security. Security speaks of number of human lives and dollar amounts of property. Human rights speak of autonomy and dignity. Posnerian scales are likely therefore to be distorted scales; they are likely to fail in fully appreciating the significance of the concerns favoring the protection of rights.

Some advocates of balancing may accuse me of being a hopelessly softy leftist romanticist or perhaps as an enemy of numbers or rationality. Let me defend myself by establishing a coalition with a man who could not but be described as a man of numbers measures and rationality -- Albert Einstein -- who is reputed to have said: "Not everything that can be counted counts, and not everything that counts can be counted". My concerns with the method of balancing are simply a less successful and lucid articulation of Einstein's important observation.

This is a shortened version of a Book Review of Richard Posner Not a Suicide Pact: The Constitution in a Time of National Emergency (forthcoming in Israel L. Rev. 2010)