From: Robert Hettinga <rah@shipwright.com>
Date: Fri, 9 Jan 1998 07:09:37 +0800
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Subject: HAYEKWEB: Hackney on Law & Econ History & Hayek
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Date:         Thu, 8 Jan 1998 14:56:33 EST
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Subject:      HAYEKWEB: Hackney on Law & Econ History & Hayek
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>>  Hayek on the Web  <<     --    Law & Economics

"Law and Neoclassical Economics: Science, Politics, and
the Reconfiguration of American Tort Law Theory" by James R. Hackney, Jr.
on the Web at:

http://www.press.uillinois.edu/journals/lhrforums.html

>From "Law and Neoclassical Economics: Science, Politics, and
the Reconfiguration of American Tort Law Theory" by James R. Hackney, Jr.:

" .. C. The Antistatist Imperative: F. A. Hayek
and the Road to Law and Neoclassical Economics

The technique of analysis coming out of early twentieth-century Vienna
was not linked to any particular ideological position. In fact, Janik and
Toulmin illustrate that the fundamental position could be characterized
as "apolitical." However, F. A. Hayek independently provided a distinct
ideological position shaped by the Viennese experience41 that had a
profound impact on ideological debates in post-World War II America
and, by extension, on economic analysis. Hayek's migration to England
influenced the LSE debates that are crucial to understanding the strands
of economic thought that framed Coase's work in particular, and law and
neoclassical economics in general. In addition, Hayek directly shaped
the law and neoclassical economics project at the University of Chicago.42
Hayek stated his ideological position in The Road to Serfdom.43  He
asserted that Serfdom "is a political book" and that "all I shall have to
say is derived from certain ultimate values."44 Written while Hayek
held a professorship at the LSE, Serfdom was conceived as a direct
 response to a socialist ethos that permeated the European continent
and endangered the liberal underpinnings of English politics. The goal
of the book was to sound a "warning to the socialist intelligentsia of
 England"45 that their program would lead to the very totalitarianism
so many had fought against.  Despite its focus on the English
intellectual scene, the book had an enormous impact in the
United States.46 In fact, it produced a more extreme reaction,
both positive and negative, in the United States than in England.

No doubt part of the consternation on the American left was due
to the boldness and scope of Serfdom.47 While the argument that
"hot socialism" would poison a society might not have unsettled
leftists, Hayek made similar claims regarding the welfare state.48
The problem articulated in Serfdom was that some of the core
beliefs of hot socialism had become so embedded in the conceptual
framework of intellectual thought that they threatened to undermine
liberal society under the guise of the welfar state or egalitarian rhetoric.
This would come, for example, in the form of knee-jerk calls for
state/bureaucratic intervention in the economy when "judicious
use of financial inducements might evoke spontaneous efforts."49

The polemical force of Serfdom stemmed from its evocation of the
 dangers of totalitarianism, particularly the Nazi Germany variety,
manifest in social approaches to the ills that befall society.  Hayek
boldly and flatly asserted that "[i]t is necessary now to state the
unpalatable truth that it is Germany whose fate we are in some
danger of repeating."50  The core of the antistatist stance as
 articulated in Serfdom grew out of the belief in the uniqueness
of individual activity and thought ("ethical individualism"). It was
 unacceptable, in fact impossible, for anyone other than the
individual to make decisions for the individual without imposing
 an alien set of values. At that point, seemingly benign policy
 prescriptions dissolved into naked, unjustifiable coercion. Thus,
 "individuals should be allowed, within defined limits, to follow their
own values and preferences rather than somebody else's."51
In the antigovernment sentiment and proincentive policies
articulated in Serfdom, we see the ideological seeds that helped
influence, but were not determinative of, the American law
and neoclassical economics movement. The ways in which the
antistatist ideal set forth in Serfdom would be reflected in
social institutions are clear in Hayek's discussion of the
legal system and are fundamental in linking his intellectual
project to the law and neoclassical economics movement.
Hayek's views on the legal system were shaped by his core
belief that "competition" is the central means of "co-ordinating
human effort" and the "conviction that, where effective
competition can be created, it is a better way of guiding
individual efforts than any other."52 Thus, in the effort to
protect the individual, it is free market competition, not
government intervention, that is presumed to be for the good.
So, what of the law "[I]n order that competition should work
beneficially, a carefully thought-out legal framework is required. ."
In particular, some legal structure may be needed in order
to accurately reflect the price of goods and services, which
is the vital information for individuals.53 In sum, the law
serves to facilitate competition, which is the system most
conducive to individual freedom. It does so by setting the
boundaries of competition.  The law should "recognize the
principle of private property and freedom of contract." In this
 regard, it acts as a neutral arbiter facilitating individual
preferences and defining the "right to property as applied
to different things." The rights associated with property,
notwithstanding antistatist ideals, were not absolute, but
contingent upon the particular situation. Efficiency was
the criterion: the "systematic study of the forms of legal
institutions which will make the competitive system work
efficiently." Regarding legal rules specifically, Serfdom
articulated a system in which "[t]he only question . . . is
whether in the particular instance the advantages gained
are greater than the social costs which they impose."54
Hayek's emphasis on legal rules, particularly as they affected
social costs,55 is the link connecting him to the law and
neoclassical economics movement.

Hayek gave a detailed analysis of social costs and the limits
of government intervention as a tool for minimizing such costs.
However, to the extent that legal rules limiting property rights
represent an activist role for government, Hayek stated that,
 though the scope of this permissible intervention on individual
autonomy was not defined, "these tasks provide, indeed, a
wide and unquestioned field for state activity."56 I argue below
 that the possibility of "state activity" within neoclassical
economics provides the ground for progressive political
appropriation of neoclassical economics.

This discussion of postwar antistatism, as represented by
Serfdom, and its logical progression to concrete neoclassical
analyses of legal institutions, specifically property rights,
begins to substantiate the first major claim of this essay:
law and neoclassical economics is, at its core, about politics.
 It also shows how the conservative politics associated with
neoclassical economics could be taken seriously if the
dangers of progressivism articulated in Serfdom, including
progressive ideals espoused by pragmatic instrumentalists,
were heeded.57 Now we turn to the connections between
neoclassical economics and the science of the analytic turn
in order to begin establishing the other claim of this paper:
law and neoclassical economics is, at its core, also about
science. At the end, we find that there is a synthesis of the
politics and science of law and neoclassical economics .. "


>From "Law and Neoclassical Economics: Science, Politics, and
the Reconfiguration of American Tort Law Theory" by James R. Hackney, Jr.
Law and History Review.  Vol. 15, No. 2, Fall 1997


>From "'Law and Neoclassical Economics': A Response
to Commentaries 163-172"  by James R. Hackney, Jr.:

" .. I never identify Hayek as a "neoclassical economist" but
I think it is (1) fair to say that Hayek, and Austrian economics
generally, have had considerable influence on neoclassical theory;16
and, more importantly for my thesis, (2) Hayek has had a
profound influence on the strand of law and neoclassical economics
coming out of the University of Chicago.17  (footnote 17. Coase's
recognition of his intellectual debt to F. A. Hayek and the
institutional role Hayek played in establishing law and neoclassical
economics studies at the University of Chicago is illustrative
of this point. Hackney, "Law and Neoclassical Economics,"
284, n. 42, 306, n. 141.) .. "

>From "'Law and Neoclassical Economics': A Response to Commentaries
 163-172" by James R. Hackney, Jr.  _Law and History Review_ Vol. 16, No. 1,
Spring 1998.



Hayek on the Web is a regular feature of the Hayek-L list.

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