Economics of hate speech

Richard Posner is the most famous exponent of the school of law and economics (L and E) in the United States. The project of that school is to explain, justify and reform the law using simple tools of economic analysis. The goal of L and E is to understand the behaviour of rational individuals pursuing utility under the constraints of law and to apply cost-benefit analysis to legal rules and institutions to improve the efficiency of explicit and implicit markets. Its success can be gauged by the fact that Posner is the most cited and the most prolific legal writer of the 20th century.

In Frontiers of Legal Theory , Posner returns to scholarly inquiry after writing a series of political books (on Clinton-Lewinsky-Starr, Bush-Gore, and the American intelligentsia) that propelled him into the bestseller lists and celebrity status. This more academic volume contains his recent review essays, and addresses the breadth of recent American legal scholarship, as new interdisciplinary approaches emerge that adopt historical, psychological, epistemological and quantitative critical methods in addition to economics.

However, Posner is not happy simply to ratify or describe the insights of disciplines outside economics. The main argument of the book is that history, philosophy and the social sciences each have a role to play in understanding the law, but they are best subsumed to rational-choice economics. Posner attempts to defend the rationality hypothesis of economics from its critics. He acknowledges that most lawyers, and indeed most people, find rational models of human choice implausible, in that much of action and perception is anything but rational. One counter is that economic analysis is a predictive rather than a causal explanation of human action. If average behaviour conforms to the predictions of rational-choice theories, then it does not matter much if people nonetheless report irrational motivations. This is an ingenuous defence, as most economic analysis does indeed treat the rationality model as a causal explanation - as does Posner in the bulk of his L and E work.

His better defence is that L and E helps legal policy-makers trace the social implications of their decisions beyond the narrow set of cases before them; thus economics helps make the law more pragmatic. For example, Posner finds good economic reasons to permit a very wide ambit for freedom of speech, even for unpopular and hateful opinion; a "speech market" promotes ideological competition and political participation and expression. A further pragmatic point is that wealthy and stable societies can bear a lot more hate speech and dissension than weaker societies.

Posner does not warm to the use of history in legal research. He is suspicious of fashionable models of path dependence, whereby historical starting points in social organisation can determine the path of future development. He believes that, for lawyers, this can turn into a specious defence of conservative precedent-following. Moreover, lawyers usually lack professional rigour when deploying history, using it selectively to support contentious normative positions.

His special bugbear is Bruce Ackerman's theory of revolutionary "moments". This states that the normative foundations of the US constitution changed during the social and political upheavals of reconstruction after 1867 and the New Deal in the 1930s, providing America with an unwritten constitution that justifies judicial activism well beyond the canonical constitutional text. Posner believes that these conclusions are arbitrary choices based on Ackerman's liberal politics. But he is also attracted to Nietzsche's claim that history should be studied to be life-affirming and myth-making, and should feed our sense of potential for the present - which is very close to Ackerman's project.

The best historical chapter is the study of Friedrich von Savigny, Oliver Wendell Holmes and the controversy over the nature of possession. Despite his erudition and clever use of economics, Posner does not fully register the political resonance of debates over the nature of Roman law dominium and common law feudal possession, nor how 19th-century legal scholars used historical debates to explore property and law in modernising states.

Three of the 14 chapters deal with probability models in weighing evidence, with much scrutiny of the civil jury and the empirical nature of the legal process. The final chapter examines the use of electronic-citation indexes to judge scholarly performance. These materials are of more parochial American concern; yet the citation-counting virus is catching on in Britain as the craze for audit measures of public goods spreads.

The best part of the book contains Posner's confrontation with emerging schools of behavioural economics, which bring psychology to bear in the understanding of rational-ity. This influential scholarship has shown that people have strong tendencies to prefer existing states of endowment and experience to new ones; the benefits of the future are discounted in comparison with present returns; information is more readily accepted if it is familiar rather than alien. Posner gives a fine summary of this work, and acknowledges its promise in making economics a more realistic science; but he doubts the experimental data used by the behaviouralists and argues that the new axioms are too ad hoc to permit adequate social-scientific modelling and prediction. He prefers to use neoclassical models of information, search costs and signalling to explain seemingly non-rational behaviour, arguing that we should not "give up on rational-choice economics too soon". He perhaps begrudges the behaviouralists for stealing much of the glamour of Chicago School analysis of law and behaviour, as pioneered by Nobel laureates Gary Becker and Ronald Coase - and Judge Posner.

Joshua Getzler is a fellow of St Hugh's College, Oxford, and is visiting the University of Chicago Law School.