Economic Dynamics and Economic Justice: Making Law Catastrophic, Middling, or Better?

Contrary to Livermore,’s post,  in my view Driesen’s book is particularly powerful as a window into the  profound absurdity and destructiveness of the neoclassical economic framework, rather than as a middle-ground tweaking some of its techniques.  Driesen’s economic dynamics lens makes a more important contribution than many contemporary legal variations on neoclassical economic themes by shifting some major assumptions, though this book does not explore that altered terrain as far as it might.

At first glance, Driesen’s foregrounding of the “dynamic” question of change over time may, as Livermore suggests, seem to be consistent with the basic premise of neoclassical law and economics:   that incentives matter, and that law should focus ex ante, looking forward at those effects.   A closer look through Driesen’s economic dynamics lens reveals how law and economics tends to instead take a covert ex post view that enshrines some snapshots of the status quo as a neutral baseline.  The focus on “efficiency” – on maximizing an abstract pie of “welfare”  given existing constraints —  constructs the consequences of law as essentially fixed by other people’s private choices, beyond the power and politics of the policy analyst and government, without consideration of how past and present and future rights or wrongs constrain or enable those choices.  In this neoclassical view, the job of law is narrowed to the technical task of measuring some imagined sum of these individual preferences shaped through rational microeconomic bargains that represent a middling stasis of existing values and resources, reached through tough tradeoffs that nonetheless promise to constantly bring us toward that glimmering goal of maximizing overall societal gain (“welfare”) from scarce resources.

Driesen reverses that frame by focusing on complex change over time as the main thing we can know with certainty.  In the economic dynamic vision, “law creates a temporally extended commitment to a better future.” (Driesen p. 52).  Livermore dismisses that vision as a mushy moral realm without reliable rigorous guidance: whatever normative commitments Congress makes – clean water, safe workplaces, financial stability – leave open innumerable difficult questions with impact on other asserted values or interests.   But Driesen suggests how an efficiency-based law and economics cannot give us impartial or rational answers to those hard questions. The economic dynamic lens highlights how faith in a point of optimality where contested goals and gains come to rest in peace and (maximum possible) prosperity is nothing law can count on or count up with any honesty or accuracy, no matter how rigorously experts polish their measuring sticks.  Good (or even non-catastrophic) law does not arise from calculating the mid-point of individuals’ competing values and interests under existing constraints, measured by largely imperfect and improbable proxies.

Take the normative goal of reducing deaths from food poisoning, presumably widely shared.  From the neutral-seeming  “efficiency” perspective Livermore defends, it is not enough for regulators to carefully examine whether this new regulation aimed at ensuring farmworkers wash their hands after using the bathroom in fact advances that normative goal of fewer deaths from unsafe food.  Rather, we have to take that hard-hearted look at whether the expected benefits from that change will be trivial compared to the costs, such as the costs of lost productivity as workers spend a minute or so washing bacteria off their hands rather than picking and processing more (possibly contaminated) spinach.  Should regulators accept industry’s claim that this rule will result in two minutes of lost work rather than the one minute regulators calculated, thereby possibly outweighing the asserted value of the saved lives?  Do customers prefer slightly cheaper riskier spinach to slightly more costly safer spinach? And even if so, how do we know that any asserted costs of more handwashing will be passed on to consumers, or that these will not be outweighed by innumerable other possible benefits like productivity gains from reduced worker illness or reduced risk of industry liability from food poisoning?

The ensuing static efficiency attempts to “rigorously” analyze exactly how much it will cost the agricultural industry (as currently configured, presuming rampant violation of existing OSHA handwashing laws) if workers wash their hands exemplifies the tendency of such “efficiency” measures to lead policymakers “to obsess about the costs of departures from a status quo baselines that often reflects multiple actors’ unwise decisions.” (Driesen p. 75). This seemingly technical obsession with efficiency tends not only to mask normative commitment to an existing industry and existing bad choices for consumers and workers under existing legal arrangements (inadequate OSHA enforcement).  In addition, it denies the vast uncertainty about which policies really do protect that existing industry over the long run.  Economic dynamics responds to such uncertainties by openly embracing a commitment to a better future, while efficiency-centered law and economics (in its various flavors) tends to covertly embrace a normative commitment to the lower expectations of current constraints.

A crucial shift in economic assumptions makes this dynamic commitment to a future of better choices something more than an illusory maximum “pie in the sky.”   In contrast to much of law and economics, economic dynamics foregrounds the macro-level institutions and legal arrangements that aim to change and create the micro-level choices that fill the field of typical economic calculation.   Efficiency-based law and economics tends to naturalize our current world of bad choices, locking us into innumerable prisoners dilemma situations where, taken individually and in the short term, what is most “rational”  represents not just tough tradeoffs but a surrender to myriad injustices and paths toward destruction, some of which may be horrifically catastrophic both individually and globally.   Do we choose financial industry bailouts or global financial collapse?  Do we choose increased financial regulation against systemic risk and systemic fraud outweighed by the resulting incentives for further industry capture of those regulatory processes and further regulatory arbitrage?  Do we choose a job that pays enough for a possible retirement even though it means dying young or living with chronic illness or do we choose a greater chance of spending a possibly healthier old age in poverty?

Driesen turns our attention to law’s essential macro-level role of creating the conditions for different, better, choices:  “we form governments to create stable cooperation in solving long-term problems.” (Driesen p. 57).  Laws against murder (or against poisoning the air and water or allowing unsafe food or workplaces) might in any one micro-level instance of enforcement may not produce short-term benefits outweighing short-term costs, but at the macro institutional level may create a society with enormously better and less costly choices.  Economic opportunity – that seductive pie in the sky of economic welfare maximization – depends much less on reducing imagined overall costs of existing scarce resources and much more on creating the institutional legal structures that determine what resources are scarce, and for whom.  Driesen’s book does not dig far into the problem that such a macro-level view leads us to confront the economic justice problems that all claims to benefit society overall inevitably make normative commitments about whose opportunities and catastrophes count.  But his book sheds much light on how law can engage economics to tackle existing injustices and catastrophes in hopes of a better world.

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