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This introductory chapter explains the difference between law and economics, identified with John Stuart Mill, and the economic analysis of law, exemplified by Jeremy Bentham. It presents examples of recent scholarship of both fields and where they fit historically and considers why legal scholars have a particularly important role to play in law and economics, and especially in its future. This discussion serves as an introduction to the rest of the chapters which form the core of this book. It uses a law and economics approach to discuss the role of the lawyer, merit goods, and the perdurance and proper analysis of altruism and of not-for-profit institutions. It also examines what the use of the liability rule tells us about the relationship between markets and command, what economics often says about the validity of various tastes and values, and what economics can say about the shaping of tastes and values.

Formalism is the theory appropriate to understanding private law from within. Legal Formalism makes the notion of form central to the understanding of juridical relationships. Form brings together the three ideas of character, kind, and unity. Applied to private law, form refers to a mode of understanding that integrates the characteristic concepts, the distinctiveness, and the coherence the plaintiff-defendant relationship. Among these, coherence is paramount. Using loss-spreading as an illustration, this chapter elucidates the nature of coherence, its importance to private law as a justificatory enterprise, and its role in rendering private law intelligible. It concludes by examining the deficiencies from the formalist standpoint of some contemporary theories, both instrumental and non-instrumental (the economic analysis of law, Charles Fried's theory of contract as promise, and George Fletcher's theory of excuses).

This chapter begins by examining some basics in Adam Smith's conception of economics, and then tells the story of the evolution of the law about mantraps in the 1820s in England and later in the United States. This sets the scene for an examination of Posner's engagement with the same body of tort and criminal law, and with the concept of intention in the law, generally. The weaknesses at the heart of an Economic Analysis of Law are identified, and its unfitness for adjudication. Political community has no goal analogous to a one-project firm which can account completely to its shareholder's at project's end. The distinction between the intended and its foreseen or foreseeable side effects is appropriately relevant in law.

The chapter analyzes the basis of the market economy in classical Rome, from the perspective of personal vs impersonal exchange and focusing on the role of the state in providing market-enabling institutions. It starts by reviewing the central conflict in all exchanges between those holding and those acquiring property rights, and how solving it requires reducing information asymmetry without endangering the security of property. Relying on a model of the social choice of institutions, the chapter identifies the demand and supply factors driving the institutional choices made by the Romans, and examines the economic circumstances that influenced these factors in the classical period of Roman law. Comparing the predictions of the model with the main solutions used by Roman law in the areas of property, business exchange, and the enforcement of personal obligations allows the chapter to propose alternative interpretations for some salient institutions that have been subject to controversy in the literature, and to conclude with an overall positive assessment of the market-enabling role of the Roman state.

This chapter examines how economics treats—and should treat—tastes and values. It first considers those tastes, values, and resulting costs that many economists seem to ignore, or treat as irrational or not worth paying attention to, while also insisting that economics has nothing to say as to the validity and merit of tastes and values. It then analyzes the nature of this paradoxical attitude before outlining some reasons for what economic theory is in fact doing when it accepts some tastes, values, and costs, and rejects others. It also looks at some costs and values whose setting aside seems to be completely unjustified and goes on to focus on the economic analysis of law conclusion that a society's treatment of some merit goods is irrational or is Pareto violative. The chapter concludes by assessing the external moral costs of the commodification and commandification of some goods and of wealth distribution-dependent transactions in other goods.

In 200 BC, the population of the city of Rome was 200,000. By AD 50, this figure had increased fivefold, an unprecedented burst of urban expansion. Moses Finley’s much-contested thesis that Rome was parasitic implies that the city’s growth could only have brought discomfort to the peoples of the Mediterranean. Drawing on the theory of cities developed by urban economists, I contest Finley’s thesis. Rome’s growth fostered specialization of labor and the sharing of information, enabling the city to export the Pax Romana, government, law, literature, and other beneficial services. The institutional foundations that undergirded the growth of Rome included norms and laws favoring brisk commerce in land. A provision of the Twelve Tables of c.450 BC, for example, authorized complete freedom of testation, an extraordinary principle in a near-archaic society. Also conducive was Rome’s adroit mix of a private sector that provided goods such as the apartment blocks that housed most of the population, and a public sector that provided essential public goods such as aqueducts. These institutional choices, along with Rome’s aversion to growth-limiting populist policies, were necessary, but not sufficient, conditions for its emergence as the largest city the world had seen.

This chapter serves as an introduction to the essays in this collection by exploring the ways in which contemporary economic theory can be used to ask new questions about the law and economies of ancient societies. The chapter begins with a review of the importance of Roman law as an academic discipline to legal historians. It then introduces the overall theme of the collection by reviewing the ways in which historians of the ancient economy and of ancient law have made use of economic theory to understand better the relationship between law and the economy in the Roman world. The chapter then goes on to discuss the individual chapters in this volume. It focuses in particular on the ways in which economic theory informs the approaches that the authors, both legal and economic historians, take in their essays. The chapter will thus set the individual chapters in a broader scholarly perspective and will seek to explain why economic methods are a fruitful way to understand Roman Law and Roman economic history.

This chapter explores a central enterprise of legal theory: the explanation and justification of law's presumptive moral authority. Section I shows that Raz's rejection of it rests on an unwarranted assumption of social consensus. Section II surveys partly historically and partly systematically some main aspects of the struggle of contemporary social theories — notably Economic Analysis of Law, Game Theory, and Rational Choice Theory, with discussion also of Hobbes, Bentham, Kant, and Rawls — to make do with emaciated conceptions of practical reasonableness in relation to (in a broad sense) coordination problems. The critique suggests a better conception, and Section III returns to legal authority and the full conception of fairness that explains why a particular law can reasonably be judged morally binding even by those who regard it as unwise.

In modern literature the Roman law of real security is often regarded as ineffective, to which it is usually added that this did not seriously hamper the granting of credit, as in classical Rome personal security was far more important than real security. In this contribution it will be argued that this view is not correct. The sophistication of the Roman law of real security suggests that it must have played a significant role in credit transactions. Moreover, it will be argued that the Roman law of real security satisfied nearly all the requirements for an effective law of secured transactions. Its main weakness was its lack of publicity for security created over real estate and its lack of protection of bona fide third parties in respect of movable assets. It seems, however, that for a long time social norms (infamia) and transactional practices, and later criminal liability (stellionatus), provided sufficient safeguards against a malfunctioning law of real security.

While behavioral insights are vital to any theory of law, they are particularly important as qualifiers of standard economic analysis of law. Standard economic analysis assumes that people are rational maximizers of their own utility. As a normative theory, it ultimately takes into account only human welfare and focuses on maximization of aggregate social utility. This chapter offers a bird’s-eye view of economic analysis of law. It describes the main features of economic analysis in general, with a focus on positive economics, followed by a description of the tenets of the normative branch of economic analysis known as welfare economics.

When the Law of the Twelve Tables was promulgated, the Roman economy was overwhelmingly agricultural. As social and economic conditions became more complicated, the formalistic law of early republican times no longer sufficed. The rise of the ius honorarium can be seen as a response to these new circumstances. While scholars have tended to assign all important developments to the praetors of the second and first centuries BC, at least some important changes in the law took place earlier. The bigger picture that emerges is that, contrary to the tenets of institutionalism, Roman law developed pari passu with the economy. Roman law functioned as an autonomous discipline, governed by its own rules and principles. Law-making magistrates and jurists certainly responded to new juridical challenges created by the emergence of an increasingly sophisticated economy, but their principal aim was not to create legal rules that were conducive to economic development or growth but to find practical solutions to juridical problems created by economic developments. Finally, the Principate, to which a large proportion of the surviving evidence belongs, saw far fewer legal innovations than the last centuries of the Republic. The explanation must be that there was less need for legal innovation because most of the economic developments creating a need for new legal remedies had already taken place. Ironically, the period in which the pace of legal change had slowed down has produced most of the surviving evidence.

This chapter provides a broad overview of the chapters in the second volume of Roman Law and Economics. The subjects addressed in this volume include slavery and the Roman economy credit, property, dispute resolutions, and remedies, and finally wrongdoing and Roman law. The focus of my discussion is on the role that economic theory plays in the work of the various authors, who represent ancient historians, scholars of Roman law, lawyers, and economists. The chapter will provide a perspective on the contents of the book as a whole and will seek to explain why economic methods are a fruitful way to understand Roman law.

This chapter argues that the Roman law system of a staged system of pleadings, which emerged in the mature formulary system and then was eventually carried over into the common law, offers a superior way to understand and classify legal doctrine in ways that lead to overall economic efficiency. The arguments here stress the conceptual formation of classical Roman law on matters that retain their full salience today. It does not deal with the details of the historical evolution of Roman procedure. Indeed, its main purpose is to contrast the genius of the staged system of Roman law pleading with a flaw in the modern conception of civil procedure, which funnels all disputes through a reasonableness inquiry. In dealing with practical legal disputes it is virtually impossible to generate some major rule that leads to optimal results in a wide range of cases. The pleading system takes the reverse tack and seeks to achieve optimality through a system of successive approximations, starting with the prima facie case, working through defenses, and most critically, replies and further pleadings, finishing with joinder of issue to incorporate all the elements that are traditionally thought relevant to systems of tortious (as the civil side of delict) and contractual responsibility. These elements include identifying those obligations that should be strict, those that are governed by negligence principles, and those as intentional harms on both the tort and contract side of the line. The approach should be understood as an explicit rejection of the dominant modern approach that removes all the hard-edge distinctions and uses a generalized conception of reasonableness as an umbrella conception that encourages decline of doctrine and the ad hoc resolution of particular disputes.

Ancient laws addressed all types of wrongdoing with a single set of remedies that over time pursued a changing mix of retaliatory, punitive, and compensatory objectives. In this paper, we consider the historical transition from retaliatory to punitive justice, and the subsequent transition from punitive to compensatory justice. This paper shows how the optimal level of enforcement varies under the three corrective regimes. Crimes that create a larger net social loss require lower levels of enforcement under retaliatory regimes. The optimal level of enforcement is instead independent of the degree of inefficiency of the crime when punitive and compensatory remedies are utilized. The paper provides several historical illustrations and sheds light on some of the legal paradoxes of ancient law.

The chapter reviews examples of legal instruments and institutions related to atrocity crimes such as genocide. It then discusses the efficiency, or lack thereof, of domestic and international law, both with general examples and with examples specific to cases of such crimes. Multilateral treaties are costly to negotiate and, hence, require commensurate benefits. These benefits can be “negative” for potentially affected populations, for example, when states negotiate escape clauses that reduce a treaty’s intent and effectiveness in regard to the prevention of atrocity crimes. The chapter also asks exactly what sort of economic goods are atrocity crime–related laws and treaties and how best to provide these goods. It finds that conceiving of these goods solely as global public goods, and advocating their global public provision, may not always help the cause of prevention.

The concept of collective responsibility, or group punishment, for crimes or other harmful acts, was a pervasive feature of ancient societies, as exemplified by the Roman Senatus Consultum Silanianum, a resolution by the Roman senate in 10 CE, and the Greek notion of “pollution.” This chapter briefly surveys historical examples of collective responsibility, which have largely given way to the modern concept of individual responsibility, though vestiges of collective responsibility remain in modern culture and law (notably in the form of vicarious liability). The chapter then lays out a theoretical analysis of the choice between collective and individual responsibility that highlights those circumstances in which each is preferred as a law enforcement strategy.

Standard economic analysis of law is based on rational choice theory. In recent decades, numerous experimental and empirical findings have established prevalent and systematic deviations from the assumptions of economic rationality. These findings have been gradually integrated into mainstream economic analysis, including economic analysis of law, to form behavioral law and economics. The introduction highlights the important contributions of behavioral studies to economic analysis of law and to legal analysis more generally. It describes the scope of the book and outlines its structure. It also mentions legal spheres in which the existing scholarship does not yet lend itself to systematic synthesis.

Not much is known about the organization of the trade between Egypt and India in Roman times. Roman law is obviously well documented in surviving texts of various sorts. Trade practices in the Indian Ocean routes are sporadically known from surviving manuscripts. Actual organizational documents are practically unavailable with the rare exception of the Muziris Papyrus. The Papyrus, dated from the mid-second century CE, known also as the Vienna Papyrus, was first published in 1985. It deals with the finance and organization of trade on the route between Alexandria and Muziris in India. It adds a new dimension to our knowledge of the organizational practices of Eurasia trade in antiquity and is in fact the best source available up until the era of the Cairo Geniza, almost a millennium later. There is an ongoing debate about its nature in the papyrology literature. I will provide my own analysis of the papyrus based on legal history, economic analysis of law, and institutional economics theory. I will evaluate its nature as a loan or agency contract, as a standard form template, and as a forerunner of the sea loan and the commenda.

Roman businessmen eager to launch a joint business venture could choose among three legal forms: the societas, the societas publicanorum, and the peculium of a commonly held slave. None of these forms led to large capital associations, let alone business corporations with publicly traded shares. The high level of instability is one of the key explanations: under Roman law, it was virtually impossible to commit capital for the long term and finance capital-intensive enterprises. The societas was inevitably liquidated following numerous dissolution events; its members could withdraw their money at any time; and private creditors were not barred from seizing common assets. The peculium was even more unstable: In addition to the dissolution events of the societas, the joint venture came to an end and all peculium items reverted back to the masters when the commonly held slave died. While the societas publicanorum developed into a more stable institution over time, during the same period, its business almost disappeared as state authorities stopped putting capital-intensive projects out to tender. How can a modern reader make sense of the picture that emerges from the sources? The present chapter suggests that reservations in the social and political setting, rather than economic factors or oddities of Roman legal doctrine, caused business associations to remain small. This is an important lesson from history, both for the theory of the firm and for the role that law plays in it.