The Gazette 1976

GAZETTE

Links with the Political System A second bond of affinity between the legal and economic, professions is that we are both the subject of much attention on the part of politicians. Indeed this involvement is inevitable. For your part, since the pro- cess of law-making is essentially conducted through the political process, you must have adequate contacts with and understanding of these political processes, if you are to, not alone successfully administer, but also advise and influence (in the best sense of that term) the reform or evolution of the legal code. As for the economists, it is obvious that any statements which they might make, or conclusions which they would draw from their analysis, about the most suitable form of economic policy, will have considerable political interest and, occasionally, repercussions. Indeed the earlier name for our subject was Political Economy and its remit was an enquiry into the causes of the wealth of nations: highly unlikely with this lineage that we should escape the politician's attentions. One solution which we found for this problem of a too close relationship with politics was to shed, over a period of a century or so, the political element in our original title, by de- veloping economics as a specifically scientific subject; that is to say, one in which any rules or laws or principles were to be based on the systematic testing of hypotheses, and be capable of empirical verification. In sbort, they were to be emptied of any value judgements, whether these judgements emanated from morals, social mores, custom or any other non-scientific source. By thus carefully distinguishing the scientific components from the elements of art in our subject matter, the economics profession has drawn the demarcation lines fully, or as carefully as some might wish perhaps, but sufficient to provide a valid operational separation of functions. I do not propose to attempt a description of the manner in which the legal profession distinguishes its role from the political process, save to note that you do draw this distinction, while yet maintaining sufficient points of common reference and contact to permit the necessary and permissible interchange between the two spheres. To some extent our two professions may find it profitable to draw on our experiences in this realm since the question of links and interaction with the political process takes on new and increasingly com- plex forms in contemporary conditions. Economics and the Law—General Having, hopefully, established the possibility that the economist is not a menace whose advances should be vigorously resisted, I may now turn to the topic in hand. The economic approach to the legal profession may be thought of as falling into two segments : (1) the application of general economic principles such as would apply to any industry-be it the production of goods such as shoes, ships or sealing wax, or the pro- vision of services, be they those of doctor, footballer or opera singer, and (2) the examination of those aspects which are peculiar to the legal profession and which are of some economic importance. The questions arising in any general economic analysis are readily summarised since they are relatively simple-it is the answers to them which are difficult and complex. First there are the efficiency questions, since economics is concerned with making the best use of scarce resources. These may be summarised as the questions of what to produce and how, when, and where to produce it. These give rise in turn to the equity or distributional questions, namely who gets the product and the manner in which this distribution occurs. 141

AN ECONOMIST'S VIEW OF THE LEGAL PROFESSION LECTURE DELIVERED ON SUNDAY, 9 MAY 1976, TO THE SUMMER MEETING OF THE INCORPORATED LAW SOCIETY IN TRALEE by Professor Martin O'Donoghue Mr. Bruce St. John Blake, Senior Vice President, presided. Introduction Members of the legal profession might be forgiven if they cast a somewhat cold and jaundiced eye on the economist. Our activities or perhaps, more accurately, our image has not exactly been of the kind to endear us to the people in general and to commercial and professional bodies in particular. Some hold that we are the contemporary epitome of Oscar Wilde's cynics —people "who know the price of everything and the value of nothing". Others recall Edmund Burke's words that "the age of chivalry is gone, that of sophisters economists and calculators has succeeded'. Before turn- ing to my main task of seeking to describe how econo- mists do view the legal profession—it may be wise to spend a few moments seeking to "win friends and influence people" so as to show that the advent of the economist onto the legal scene should not be a cause for concern since there are many things where we hold or should hold common interests and views. Historical Importance of Law to Economics It is no exaggeration to say that without a legal system — a Rule of Law — there could be no economic system of the type which we today take for granted, perhaps take too much for granted, as part of a free democratic society. Such a Code of Law, guaranteeing the individual's rights, identifying his duties and obli- gations, delineating his property rights and defending his liberties against arbitrary attacks or intrusions are essential preconditions for the emergence of a free market for the purchase and sale of goods and services, and for the free organisation of production and distri- bution Historically the rise of the mercantile system followed on the emergence of such a legal code as part of the Greek and later Roman civilisations. In contrast other ancient civilisations such as the Chinese which did not successfully articulate such a legal code also failed to develop a sound trading or mercantile system. The full flowering of the free market system in the past two centuries, based as it was on this rule, saw the emergence of Economics as a subject of importance in its own right. This importance would never have been necessary in the previous feudal monarchial or other hierarchical systems. If decisions on what to make, how to produce it, sell it or otherwise use this production are based on commands, customs or other procedures which exclude the scope for individual decision-making, then there is little need for economics as we know it. But once a society has emerged in which to quote the philosopher Kant, "man is free if he needs to obey no person but solely the laws", then there is scope for, and meaning in the study of the economic behaviour of such free men. It is not flattery or politeness, but rather a plain statement of fact that without the law and the legal profession, there would be no science of economics. Any economist who values or seeks to understand the operation of a market economy will freely acknowledge his debt to the legal profession; not all, alas, fall into this category since there are those who would wish to replace the market economy completely with some form of planned system, and with such a command system, law and economics again become less relevant.