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GAZETTE
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.
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.
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