—
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BG4>;E:76 his article “Good Economics—Bad Law.” In Buchanan’s
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D73>;FK, I investigate how Buchanan’s predictions compare to the
actual development of law and economics. I argue that Buchanan’s
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3 9;H7@ ;@EF;FGF;A@3> 7@H;DA@?7@F 4GF ;E G@34>7 FA 3;66;E5GEE;A@E
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7J5:3@97 F3=7E B>357 753GE7 A8 :;E 355GD3F7 BD76;5F;A@E
3K7= ': 7>>AI ;@ 5A@A?;5E 3F *:7 $7D53FGE 7@F7D 7B3DF?7@F A8
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2
—
Buchanan’s expanded law and economics paradigm—
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Forty years ago, in 1974, James Buchanan wrote “Good
5A@A?;5E—Bad Law.” 1 @ :;E 3DF;5>7 G5:3@3@ D7H;7IE (;5:3D6
Posner’s textbAA= +*+)& *(5/&/ +# 3 2 ;@ 3@ G@ADF:A6AJ
83E:;A@ G5:3@3@ 5D73F7E 3 F:AG9:F 7JB7D;?7@F BD76;5F;@9 F:3F
diligent students who rigorously apply Posner’s teachings will be
>78FI;F:35A9@;F;H76;EEA@3@57*:7F:AG9:F7JB7D;?7@FE7DH7EFA
;>>GEFD3F7 how, according to Buchanan, Posner’s tool kit proves
fruitful for making decisions of a “legislative” nature but relatively
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Buchanan’s argument can only be fully understood by
accounting for the context in which he is writing. In the 1960’s at the
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“distinctive feature [of Chicago style law and economics] is the
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indeed are defined in terms of market failure”. 5$35=33K67E5D;47E
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01!&"/the first publication, of Posner’s introduction to the
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Henry Manne’s already mentioned Economics Institutes for
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Mackaay also points out that Hayek’s 3 "$&/(0&+* *! &".05
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Economics in 1974, Mackaay argues that Hayek’s works were
AH7Dshadowed by Posner’s textbook published in 1972. 11
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2
—
In 1974, Buchanan reviews Posner’s book at a time when the
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G5:3@3@ ;E 57DF3;@>K ;@ F:7 ?;@AD;FK 3F F:7 F;?7 :7 BG4>;E:7E
“Good Economics—Bad Law.”
—
Buchanan asks his readers to assume that Posner’s textbook is
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retain Posner’s economics teachings when they find themselves in
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warrants applying Posner’s teachings, Buchanan argues that they
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E7H7D34;>;FKA8BAE;F;H775A@A?;53@3>KE;E3@6F:7788;5;7@5K@AD? 14
Posner’s inability to separate these two concepts critically
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leads some of Posner’s arguments to approach “absurdity” because
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Posner’s “hardnosed” price theory utilizes efficiency as both an
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Posner’s examples regarding rape and robbery as approaching
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order departs from maximized efficiency, and “for this reason,
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criterion for legal resolution.”19
AI7ver, Posner’s failure to distinguish between using
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@AD?;E78875F;H73E3@;@EFDG?7@F3>9A3>20AD7J3?B>7G@67DF:7
'AEnerian paradigm, “If the law fails to allocate responsibilities
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allocation.” 21 G5:3@3@ BA;@FE AGF F:3F F:;E 6A7E 53BFGD7 3
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2
—
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G@67DEF3@6;@9A8F:7?3D=7F3E3?75:3@;E?8AD?3;@F3;@;@9EA5;3>
order “which is not that of insuring efficiency, or ?3J;?;L;@9H3>G7
3E ?73EGD76 ;@ ?3D=7Fdetermined prices.”23 @ AD67D FA ;>>GEFD3F7
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788;5;7@5K3EF:7G>F;?3F7AD8;@3>7@6A8>3IG5:3@3@6D3IEA@
Bruno Leoni’s distinction between law 3@6>79;E>3F;A@24
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A8 ;@67B7@67@F <G697E IAD=;@9 ;@ 3 D7>3F;H7>K G@5AAD6;@3F76
?3@@7D A@ 3@ AB7@7@676 3@6 @7H7D 7@6;@9 E73D5: 8AD ‘>3I’
I:;5:;EF:77?7D97@FBDA6G5FA8F:7<G6;5;3>,.+ "//
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AD6;@3DK >79;E>3F;H7 H3D;7FK 28 While Posner’s paradigm can be
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36<G6;53F7 5A@8>;5F I;F:;@ 3 4DA367D;@EF;FGF;A@3> 5A@F7JF F:7E7 3D7
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?73@;@98G>>KEA>H764KD;9ADAGE>K3BB>K;@93@788;5;7@5KADI73>F:
maximizing standard because such standards are derived “extra
legally.” 29 *:7 'AE@7D;3@ 75A@A?;EF ;E A@>K 7CG;BB76 FA 673>
I;F: >79;E>3F;A@ ;E 6G?8AG@676 I:7@ 5A@8DA@F76 I;F:
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provide a natural experiment for Buchanan’s thesis. This gives us
an opportunity to evaluate whether Buchanan’s argument in “Good
5A@A?;5E—Bad Law” is accurate. I argue that Buchanan’s
BD76;5F;A@E ;@ :;E F:AG9:F 7JB7D;?7@F :3H7 475A?7 3 D73>;FK 3E
7H;67@576 4K F:7 5GDD7@F 6;H;67 3?A@9EF >3I 3@6 75A@A?;5E
E5:A>3DE 3@6 F:7 3D73E A8 >3I I:7D7 >3I 3@6 75A@A?;5E :3E 477@
?AEF ;@8>G7@F;3> @ >;9ht of Buchanan’s accurate assessment of the
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8DA? G5:3@3@ 3@6 3D9G7 F:3F @7A5>3EE;53> 7CG;>;4D;G?
theorizing, which underlies Posner’s law and economics, is only
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2
—
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Since Buchanan’s 1974 article, law and economics has
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to assume that Posner’s textbook becomes a standard text in the
7?7D9;@9 >3I 3@6 75A@A?;5E 8;7>6 %AF A@>K :3E F:7 >3I 3@6
75A@A?;5E?7F:A6B7D?73F76;@H3D;AGE679D77EF:75GDD;5G>G?3F
?AEF ?3<AD >3I E5:AA>E ;@ F:7 +nited States, but also Posner’s
+*+)& *(5/&/ +# 3 4753?7 3@6 D7?3;@E F:7 >736;@9
;@FDA6G5FADK F7JF4AA= A@ F:7 EG4<75F F:7 4AA= ;E 5GDD7@F>K ;@ ;FE
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676;53F76 FA EFG6K;@9 >3I 3@6 75A@A?;5E :3H7 8AD?76 ;@5>G6;@9
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+*+)& "2&"3FA@3?7387I
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;@F7>>;97@F enough to retain Posner’s teachings once they find
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+*+)& *(5/&/+#3
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policy conclusions following Posner’s welfare maximization
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sciences are determined by actors’ thoughts and beliefs, Mario
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Of particular note is Eric Posner’s essay on the future of law
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in “economics law and economics” (ELE) and “law law and
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?7F:A6A>A9K F:7 economic approach to law has, in E. Posner’s
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in the evolution of law and economics. By criticizing Posner’s text
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and efficiency as a final value, Buchanan’s critique anticipates
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anticipate Trebilock’s conclusion about the difficulty in
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Buchanan’s mental experiment also anticipates E. Posner’s and
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themselves; the exact type of laws that Buchanan claims Posner’s
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1/0& ", Posner states that economics is, in essence, “the assumption
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Posner clearly says: “the law is not a thing [judges] discover; it is
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2
—
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5ADD75F>K :7 E:AG>6 47 34>7 FA ?3J;?;L7 788;5;7@5K E;@57 F:7
BDA4>7?;EG>F;?3F7>KA@7A83BB>;76?3F:7?3F;5E
);@57 ;@ 3 ?3D=7F I;F: 3 :;9: @G?47D A8 FD367E F:7
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36<G6;53F75A@8>;5F;@95>3;?EI;F:;@39;H7@E7FA8D;9:FE3@6DG>7E
;@EF;FGF;A@3>5A@F7JFF:7@7A5>3EE;53>?7F:A6I;>>@AF47GE78G>8AD
6;E5GEE;A@E AH7D F:7 DG>7E F:7?E7>H7E J5:3@97E AD ;@F7D35F;A@E
47FI77@ 75A@A?;5 35FADE AH7D F:7 ?7F3DG>7E 5A@EF;FGF;A@3> DG>7E
I;F:;@ I:;5: F:;E 7J5:3@97 I;>> F3=7 B>357 6An’t involve a high
3?AG@F A8 D7B73F76 ;@F7D35F;A@E F:7K 3D7 >AI ‘@’ ?3D=7FE /7F
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>79;E>3F;H7 ;@ @3FGD7 *:7 5GDD7@F 'AE@7D;3@ >3I 3@6 75A@A?;5E
method isn’t able to aid judges in such c3E7E
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@757EE3D;>K BDA4>7?3F;5 A@EF;FGF;A@3> DG>7?3=;@9 ;E 5AEF>K
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IAG>6 D7CG;D7 E35D;8;5;@9 I:3F7H7D 5GDD7@F EF34;>;FK 7J;EFE
66;F;A@3>>K3I;>>;@9@7EEFA6;E53D635A@EF;FGF;A@3@6@79AF;3F73
new one might send an undesired signal to one’s trading partners
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FAA>8ADEG5:CG7EF;A@E-;F:AGF3@G?47DA8D7B73F76;@F7D35F;A@E
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AD 7J3?B>7 ?3@K 5A@EF;FGF;A@3> DG>7E 5A@EFD3;@ 9AH7D@?7@F
*:7E75A@EFD3;@FE7J;EF3FF:75A@EF;FGF;A@3>>7H7>4753GE73>F:AG9:
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7@:3@5;@9—47@78;FE FA 4D73=;@9 F:7? ;@ F:7 E:ADF F7D? F:7 >A@9
DG@5AEFE?3K@AF47IADF:;FAI7H7DF:7D7;E@A;@F7D7EFD3F7AD
AF:7D ;@F7DF7?BAD3> 5AAD6;@3F;@9 ?75:3@;E? 3E 7J;EFE ;@ ?3D=7FE
8AD 5A@EF;FGF;A@3> 5A@EFD3;@FE 753GE7 F:7 7B;EF7?;5 4GD67@ ;E EA
:;9: ;@ F:7 5A@EF;FGF;A@3> D73>? I7 53@ A8F7@ 3FF7?BF FA ?3=7
‘788;5;7@F’I7>83D7?3J;?;L;@9>793>675;E;A@EI;F:AGF7?B>AK;@93
'AE@7D;3@ I73>F: ?3J;?;L3F;A@ >793> EF3@63D6 'AE@7D 6A7E 36?;F
2
—
that efficiency “seems not to explain some important Constitutional
rules.”69
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5A@57BFE ;@ <GD;EBDG67@57 6A ;@6;D75F>K BD7E7DH7 788;5;7@5K 70
0KI;5=;BA;@FEAGFF:3F3K7=3D9G7E;@ 3"$&/(0&+**!&".05
that expectations are preserved (and thus the market’s coordinating
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7JF7D@3>>K788;5;7@F710KI;5=;3@6)3@67DE8GDF:7D;>>GEFD3F7F:7:;9:
7B;EF7?;54GD67@EF:7<G697E8357G@67DF:7'AE@7D;3@B3D36;9?
'AE@7D;3@ <G697 I;>> F:GE 8357 3 F:D778A>6 5:3>>7@97
;DEF F:7 <G697 ?GEF BAEE7EE EG88;5;7@F >73D@;@9
;@8AD?3F;A@ 3@6 7JB7DF;E7 FA 47 34>7 FA 67F7D?;@7 F:7
788;5;7@F >793> DG>7 ;@ ;EA>3F;A@ )75A@6 F:7 <G697 ?GEF 47
34>7 FA 67F7D?;@7 I:7F:7D F:7 788;5;7@F DG>7 ;@ ;EA>3F;A@ ;E
3>EA F:7 788;5;7@F DG>7 I:7@ 7?476676 ;@ 3@6 ;@F7D35F;@9
I;F:+0%".D7>7H3@F>793>DG>7EGF8;@3>>KF:7<G697?GEF47
34>7FA6;E57D@:AIF:7>793>DG>7;@F7D35FEI;F:AF:7D *+*
("$(DG>7EF:3F?3K47D7>7H3@FFAF:767F7D?;@3F;A@ 72
-;F:AGF F:7 D7CG;E;F7 =@AI>7697 F:3F 0KI;5=; 3@6 )3@67DE
67E5D;47 34AH7 CG7EF;A@E A8 788;5;7@F DG>7E ;@ BG4>;5 >3I
5A@EF;FGF;A@3> >3I ;??;9D3F;A@ >3I 3@6 ;@F7D@3F;A@3> >3I IAG>6
473?7D75A?BGF3F;A@3>5:3>>7@97+@8ADFG@3F7>KF:7D73>;FK;EF:3F
AGFE;67 A8 D7B73F76 ;@F7D35F;A@ 3@6 3 ?75:3@;E? 8AD FD3@E?;FF;@9
F:7 =@AI>7697 EG5: =@AI>7697 6A7E @AF 7J;EF 3@6 D7?3;@E FA 47
6;E5AH7D76
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3F
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"3+.'*&2"./&05+1.*(+#3&".05 1,A>
DG>7EF:3FI;>>9AH7D@3>>AF:7DEA5;3>;@F7D35F;A@F:7D7;E@A5A@FD3EF
5>3EE ADEF3@63D6I;F:I:;5:FA7H3>G3F7788;5;7@5KEA7CG;>;4D;G?
F:7AD;L;@9;@I:;5:<G697EFDKFA?3J;?;L7788;5;7@5K;E@AFGE78G>
—
-:;>7 ;F ?3K ;?BAEE;4>7 FA 3BB>K F:7 @7A5>3EE;53> ?7F:A6 FA
CG7EF;A@E 34AGF ?7F3DG>7E F:;E 6A7E @AF 7J5>G67 F:7 75A@A?;5
3@3>KE;E A8 F:7E7 DG>7E H7@ F:AG9: EG5: 6;E5GEE;A@E F7@6 FA 47
6A?;@3F76 4K I:3F 'AE@7D 67E5D;47E 3E >3I 3@6 75A@A?;5E
6D;H7@ 4K >793> E5:A>3DE7375A@A?;5 3@3>KE;E ;E @AF F:7 5A@E;EF7@F
3@6 B7DE;EF7@F 3BB>;53F;A@ A8 7CG;>;4D;G? FA 3>> EA5;3> AD67D
5A@A?;5E 3@6 75A@A?;EFE 53@ EF;>> ;@8AD? @AD?3F;H7 6;E5GEE;A@E
AH7D5A@EF;FGF;A@3>DG>7E
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found in Posner. Posner’s conceptualization of the economic
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F:7 5AD7 75A@A?;5 BDA4>7? 3E A@7 A8 =@AI>7697 3@6 H;7I F:7
?3D=7F 3E 3@ AB7@ 7@676 EBA@F3@7AGE AD67D ;@EF736 A8 3@
7CG;>;4D3F;@9?75:3@;E?
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FA 47 3@ G@67DEF3@6;@9 3@6 3BBD75;3F;A@ A8 EBA@F3@7AGE AD67D
D;76D;5: 3K7= BAEE;4>K ;@EB;D76 4K DG@A #7A@; E77E >3I 3E 3
EBA@F3@7AGE AD67D <GEF >;=7 F:7 ?3D=7F B>357 3K7= E77E >3I 3E
;@67B7@67@F 3@6 F:7 BDA6G5F A8 3 >3D97D EA5;3> AD67D 8 I7
5A@57BFG3>ize law as a spontaneous order, then we don’t need to
D3F;A@3>>K 5A@EFDG5F 3@ 7@6 FA GE7 I:7@ ?3=;@9 788;5;7@5K
5A@E;67D3F;A@E@AD6AI7@776FA5A@EFDG5F5D;F7D;38AD ‘788;5;7@5K’
;@ 7H3>G3F;@9 >3I 4AF: A8 F:7E7 F:;@9E 53@ 47 BDA6G5FE A8 <G6;5;3>
35F;A@I;F:AGF47;@967E;9@764K3E;@9>7B7DEA@
3;D67F3>/1,.@AF7
2
—
E ABBAE76 FA F:7 7CG;>;4D;G? 5A@EFDG5F I:7@ F:7 ?3D=7F
7J;EFEFAEA>H7F:7=@AI>7697BDA4>7?F:7IAD>6;E;@8G@63?7@F3>
6;E7CG;>;4D;G? @ 835F F:7 6;E7CG;>;4D;G? ;E I:3F 9;H7E D;E7 FA
7CG;>;4D3F;@9 ?75:3@;E?E >;=7 BD;57E BDA8;F >AEE 3@6
7@FD7BD7@7GDE:;B @ F:;E ?3D=7F BDA57EE B3D36;9? 788;5;7@5K ;E 3
4KBDA6G5F A8 F:7 ?3D=7F BDA57EE—@AF 3@ 7@6 ;@ ;FE7>8 3E ;F ;E ;@
7CG;>;4D;G?F:7AD;L;@9
K H;7I;@9 F:7 75A@A?;5 BDA4>7? 3E A@7 A8 6;EB7DE76 3@6
8D35F;A@3>;L76 =@AI>7697 3@6 F:7 BDA57EE F:DAG9: I:;5: AD67D—
;@5>G6;@9>3I—3D;E7E3EEBA@F3@7AGE>793>5A@57BFE>;=7BD75767@F
FD36;F;A@ 3@6 5GEFA? 53@ F3=7 A@ 75A@A?;5 ?73@;@9 F:3F 3
@7A5>3EE;53>B3D36;9?53@@AF9;H7F:7?!GEF>;=7:AIBD;57E53DDK
=@AI>7697 F:3F 6A7E @AF 7J;EF ;@ 3 E;@9>7 B7DEA@ 3@6 ?3K 47
beyond a human mind’s ability to articulate, precedent and
<GD;EBDG67@F;3>5GEFA?E3@6FD36;F;A@E53@6AF:7E3?7
G5:3@3@ D75A9@;L7E F:3F 3 5A?B>7F7 3@6 355GD3F7 >3I 3@6
75A@A?;5E EKEF7? 5AG>6 @AF 47 43E76 A@ 3 @7A5>3EE;5 7CG;>;4D;G?
model. Buchanan argues that “The jurisprudential setting or
8D3?7IAD= I;F:;@ I:;5: :;E I:A>7 75A@A?;5 3@3>KE;E A8 >3I ;E
placed does not seem to have been critically examined” in Posner’s
IAD= 74 @EF736 A8 D3F;A@3>>K 5A@EFDG5F;@9 3 EF3@63D6 >;=7 I73>F:
?3J;?;L3F;A@ 3@6 ;?BAE;@9 ;F A@ <G697E >793> 6A5FD;@7 E:AG>6
have a place in economic analysis. In Buchanan’s eyes, Posner’s
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D7CG;D7E3@75A@A?;5EF:3F5A@57BFG3>;L7EF:775A@A?;5BDA4>7?3E
A@7 A8 =@AI>7697 3@6 E77E F:7 EA>GF;A@ 3E A@7 F:3F ;@HA>H7E F:7
EBA@F3@7AGE AD67D 8AG@6 ;@ F:7 ?3D=7FB>357 @ 835F F:;E ;E F:7
G5:3@3@/1,.@AF73F
"3+.'*&2"./&05+1.*(+#3&".05 1,A>
foundation for Buchanan’s projects in ( 1(1/+#
+*/"*0753@6 %"
&)&0/+#&".0576
-:;>7 :7 ;E 5D;F;53> A8 F:7 'AE@7D;3@ B3D36;9? G5:3@3@ ;E
=77@>K3I3D7A8F:7>;?;FEA8EBA@F3@7AGEAD67DF:7AD;L;@93@6:7
;E5D;F;53>A8F:7;673F:3FEG5:3@;@H;E;4>7:3@67J;EFE;@>3I;@F:7
E3?753B35;FKF:3F;F6A7E;@?3D=7FE
1*2:7 7JF7@E;A@ A8 F:7 BD;@5;B>7 A8 EBA@F3@7AGE AD67D ;@
;FE*+.)0&2" 8G@5F;A@ FA F:7 7?7D97@57 A8 ;@EF;FGF;A@3>
EFDG5FGD7 ;FE7>8 E 3BB>;76 FA F:7 ?3D=7F 75A@A?K F:3F
I:;5:7?7D97E;E678;@764K;FEH7DK7?7D97@57FA47F:3F
I:;5: ;E 788;5;7@F @6 F:;E D7EG>F ;?B>;7E ;@ ;FE FGD@ 3
BA>;5K A8 @A@;@F7DH7@F;A@ BDAB7D>K EA *:7D7 ;E @A @776
;@6776F:7D7;E@ABAEE;4;>;FKA87H3>G3F;@9F:7788;5;7@5KA8
A4E7DH76 AGF5A?7E ;@67B7@67@F>K A8 F:7 BDA57EE F:7D7
7J;EFE @A 7JF7D@3> 5D;F7D;A@ F:3F 3>>AIE 788;5;7@5K FA 47
678;@76 ;@ A4<75F;H7>K ?73EGD34>7 6;?7@E;A@E 8 F:;E >A9;5
;E 7JF7@676 FA F:7 EFDG5FGD7 A8 ;@EF;FGF;A@E ;@5>G6;@9 >3I
F:3F:3H77?7D976;@EA?7:;EFAD;53>7HA>GF;A@3DKBDA57EE
F:7;?B>;53F;A@E77?E5>73DF:3FF:3FE7FI:;5:I7A4E7DH7
@757EE3D;>K 7?4A6;7E ;@EF;FGF;A@3> AD EFDG5FGD3>
‘788;5;7@5K’77
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AD67DE 3E ;@:7D7@F>K ‘9AA6’ AD ‘788;5;7@F’ Despite Buchanan’s
5D;F;5;E?A83K7=:7D7)7DH3@FBD7E7@FE35A@H;@5;@953E78ADI:K
&(&%*+##&"!$)+%%*#+#+)&&%)%*
!$)$+%%*# $ *)&# (*/
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?3@GE5D;BF A@ 8;>7 I;F: 3GF:AD "" (/+ !&% % (/ /" % *
( (*&#)) ## (# )$
2
—
F:;E 5D;F;5;E? ;E @AF I3DD3@F76 78$K BGDBAE7 :7D7 ;E FA 7?B:3E;L7
F:7 ;?BADF3@57 A8 EBA@F3@7AGE AD67D F:7AD;L;@9 8AD 3 >3I 3@6
75A@A?;5E ?A67> F:3F EG55776E ;@ 47;@9 3 8DG;F8G> FAA> 8AD
6;E5GEE;@9 3>> >3IE F:3F 3D7 @AF BGD7 >79;E>3F;A@ ;7 5A@EF;FGF;A@3>
DG>7E 3@6 AF:7D >3IE F:3F ;@HA>H7 5A>>75F;H7 35F;A@ ;@ >;9:F A8 F:7
H7DK D7EFD;5F;H7 3@6 G@EG557EE8G> @7A5>3EE;53> 3>F7D@3F;H7 -7 53@
D3F;A@3>>K D75A9@;L7 F:7 @776 8AD EBA@F3@7AGE AD67D F:7AD;L;@9 ;@
>3I3@675A@A?;5E
Furthermore, Buchanan’s evaluation of spontaneous order
theorizing here is exaggerated on some margins. He argues, “F:7D7
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A4<75F;H7ly measurable dimensions.”79*:;E ;E @AF FA E3K F:3F F:7D7
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accuracy of Buchanan’s remarks in 1974 80 D7?;@6 GE F:3F
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Buchanan’s ideas are firmly part of our present. 81 F F:7 ?AEF
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Buchanan wrote that “[law] is far too important to be left to
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does Posner fail Buchanan’s test, but it appears that the current law
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