Developments in Law and Economics in the Italo-Iberoamerican Context

Table of Contents

1. Frontmatter

2. Civil Law as a Common Heritage, Challenges for Law and Economics and for Comparative Law

   Hans-Bernd Schäfer

   Abstract

   This chapter reproduces the lecture delivered at the conference of the Italian Law and Economics Association in Brescia in December 2023. The programme itself demonstrates how vibrant and fruitful our discipline remains in Italy—perhaps the only Western country where an institutional approach to economics has deep roots and has never faded. I have often felt that Italian scholars have easier access to the study of institutions than their German counterparts. In the nineteenth century, the latter were influenced by the historical school, which rightly emphasised the role of institutions but was often insufficiently analytical to produce significant general hypotheses or theorems. Subsequently, German economists adopted neoclassical economics, which, while analytical, lacked a comprehensive understanding of institutions. I am also mindful that Italy is both the birthplace and ancestral home of civil law as we know it. In the late medieval period, university scholars in Italy not only revived Roman law but also developed new legal concepts and frameworks. They conceptualised law as a system—a legal order—and placed particular emphasis on the individual. Jim Gordley has recently described this phenomenon as a big bang, while Harold Berman referred to it as a legal revolution. The work of the eminent academic figures of the twelfth and thirteenth centuries had a formative influence on the development of law across much of Western (Latin) Europe for centuries to come. The original lecture, and thus this chapter, offers an opportunity to share reflections on Western European civil law with distinguished Italian scholars. This chapter explores that legacy, viewing it both as an inspiration and a challenge.

3. Perspectives on the Normativity of L&E

   1. Against the Myth of Methodological Neutrality: The Philosophical-Political and Moral Assumptions of Law and Economics

      Betzabé Marciani Burgos

      Abstract

      The 1990s were the Golden Age of Economic Analysis of Law (EAL) in Peru and other Latin American countries. It entered law faculties not only through the direct incorporation of law courses but also through the adoption of its teaching methodology in other courses. Simultaneously, EAL gained ground in Public Administration and, especially, in the newly established regulatory, consumer protection, and competition law bodies.

      Although the advocacy for EAL has diminished over time and some of its initial proposals have been moderated, its methodology continues to be used without acknowledging the underlying political and moral philosophical assumptions. EAL carries a set of assumptions that should not remain concealed under the guise of methodological neutrality.

      The pronounced economism of more traditional EAL trends, its tendency to consider individual preferences as the starting point for welfare valuations, its strong skepticism or ethical subjectivism, and its critical view of the regulatory or promotional role of the State—along with its consequentialist approach—prompt us to examine the theoretical assumptions influencing postulates from utilitarian or libertarian schools. This document aims to uncover and critically analyze these assumptions.

      Finally, some EAL theses have been evaluated within the context of a Constitutional State of Law and their potential compatibility with the principles it upholds.

   2. The Symbolic Aspects of Law Between Expressive Theories and Economic Analysis

      Francesco Ferraro

      Abstract

      The symbolic aspects of both law and behaviour under the law are independent of enforcement and depend on the way social norms interact with legal rules and principles. The outcomes of such interaction can be hard to explain from an economic standpoint, and a strand of ‘expressivist’ thought focusing on these aspects has thus emerged, setting itself in opposition to, and as incompatible with, rational choice theory and the economic analysis of law. But expressive and economic accounts of the law can nonetheless fruitfully cooperate, provided that the former relinquish their typical hostility towards consequentialism and the latter renounce their claim to exclusively rely on monetary measurements of value and show themselves open to alternative methods for measuring and making interpersonal comparisons of utility.

   3. The Principle of Social Wealth Maximization and Rule Utilitarianism: Some Considerations

      Eduardo Stordeur Jr.

      Abstract

      This article aims to discuss the key aspects of the two main versions of Richard Posner’s proposal of maximizing social wealth. The underlying idea is that much of the debate around these versions helps illuminate the challenges of providing a solid moral foundation for the application of economic principles to law. One of Posner’s central arguments is that his principle of wealth maximization avoids many of the classic problems associated with traditional utilitarianism. In the final part of the article, I will tentatively suggest that rule-based utilitarianism, at least in principle, overcomes several of the issues identified by Posner, as well as some of the criticisms raised in the specialized literature regarding his proposal. Finally, I will outline a pragmatic-instrumental approach through which rule utilitarianism could be applied, particularly in the context of European continental legal systems.

   4. CALABRESI V. PARETO. Preferences, Harm, and Efficiency

      Giovanni Tuzet

      Abstract

      Calabresi has developed a powerful critique of Pareto’s efficiency in the field of law and economics. Among other things, he has shown that Pareto improvements require the unanimity of the relevant preferences (because they require, at least, that someone is better off and no one is worse off). The present work aims to defend Pareto’s test for efficiency, with an argument built upon Mill’s ‘Harm Principle’ and thanks to the analytical distinction between self-regarding and other-regarding preferences, which, for short, I will call internal and external preferences. If the core of Calabresi’s critique is the unanimity condition required by Pareto’s test, this requirement can be better satisfied by counting only internal preferences and justifying this with Mill’s Principle. At the same time, the work explores the limits of the redefined Paretian approach.

4. Applied L&E and Institutional Policy-Making

   1. “Economist Legislators”: The Use of Economic Analysis of Law in the Lawmaking Process

      Roberta Simões Nascimento

      Abstract

      The article investigates how the economic analysis of law (EAL) can be useful to legislators. It starts from the premise that legislators who choose to legislate make a rational choice. Reason, however, is not the postulate of the rationality of the legislator traditionally used in legal discourse. Legislation is assumed to involve a rational decision in which the expected costs and benefits of using legislation as a social conflict resolution mechanism are weighed. After a brief explanation of the main characteristics of the EAL, this methodology is used to understand the process of drafting legislation. Next, the EAL application exercise is carried out to explain the legislative choices regarding the textual formulations of the norms. In legislative technique, traditionally, it is read that laws must be clear, simple and easy for citizens to comply with. However, the use of EAL suggests other readings, showing in a special way that legislative choices depend on several parameters. The literature produced debating the degree of precision or specificity of the legislation is incorporated for the understanding of the activity of legislating with vague norms (standards), to the detriment of specific norms (rules). The methodology used is a literature review on the economic analysis of law itself. But the research is also descriptive and exploratory. Although it does not exhaust the theme, it seeks both to describe the connections between EAL and the elaboration of laws and to provide bases for further investigations, notably with regard to the use of legislative technique. The result goes in the sense that the improvement of the process of drafting laws generates a higher ex ante cost for legislators, but generates a reduction in ex post costs that more than compensates for the initial cost, as it provides savings in the face of all costs. overall benefits and costs incurred.

   2. Better Regulation, Cost-Benefit Analysis and Evidence Based Legal Design: A Critical Inquiry

      Silvia Zorzetto

      Abstract

      Policy makers are increasingly turning to behavioural economics to address complex policy challenges, such as improving education systems, increasing private savings, promoting energy and resource conservation, strengthening (cyber)security, combating climate change, and reducing corruption. This approach aims to implement evidence-based policies grounded in people’s actual behaviours and cognitive processes. Emphasis is placed on the importance of context for responsible and effective decision-making. It is considered essential to empirically study a wide range of individual and collective factors, taking into account the social, psychological, and economic influences on people’s thoughts and actions. This perspective is prevalent globally, as demonstrated by the activities of the World Bank and its Mind, Behaviour and Development Unit, the Organisation for Economic Cooperation and Development (OECD), and the Inter-American Development Bank. In the European context, the concept of Smart/Better Regulation has emerged as a mature product of this dominant trend and is gaining increasing importance. The objective of this chapter is to analyse the state of the art within the European context, with special consideration given to models derived from economic and organisational theory that have been applied to the so-called legislative cycle. The study aims to reflect on the communication methods employed in the context of Smart/Better Regulation and examines the symbolic, persuasive, and self-legitimising dimensions pursued institutionally through the innovative techniques of so-called legal design.

   3. Nudge in Criminal Law

      Behavioral Analysis Challenges to Traditional Justification of Punishment in Criminal Law Theories Diego Moreno-Cruz

      Abstract

      The objection advanced by Harel and Teichman (HT) to governments’ reliance on “policy recommendations prescribed by behavioral theorists”—intended to induce compliance with penal rules and thereby prevent crime—can be read as raising twin concerns about the ethical permissibility and practical usefulness of what I call “criminal‑nudging policies.” This paper does not aim to provide an exhaustive definition of that type of public policy or to defend its legitimacy. Rather, it identifies the challenges these measures pose to traditional theories of criminal law—the framework on which HT’s critique rests—and, given the ubiquity of nudging, recognizes behaviorally informed choice architecture as a non‑optional parameter for criminal governance; the issue, then, is implementation rather than adoption: namely, how to use it effectively within legal and ethical constraints.

   4. Criminal Law and Economic Analysis of Law. Is It Worth the Money?

      Juan Antonio García Amado

      Abstract

      Preventive theories of penalties presuppose a calculation of deterrent effectiveness. The economic analysis of law offers a methodology for the economic calculation of criminal justice effectiveness. In any case, an individual rational choice model that evaluates an offense as a benefit and the criminal part as a cost is presupposed. However, the economic analysis of law has become more complex when incorporating behavioral law and economic discoveries.

   5. The Contributions of a Credit View of Money (and Heterodox Economics) to a Better Understanding of the Monetary System

      Gissella Alejandra López Rivera

      Abstract

      This chapter aims to show how an alternative theoretical account of the economy may provide conceptual tools to understand the function of the monetary system and allow us to think about new forms of institutional designs facing new regulatory challenges. The first part explains the credit view by contrasting it with the commodity view of money to defend the thesis that the monetary phenomenon is not a natural nor a simple functional kind but an institutional artifact. In the second part, by explaining the nature of new phenomena such as cryptocurrencies, the analysis explains how the heterodox view of money performs better than its rival orthodox view in explaining the nature of a monetary system. The third and concluding part comments on some legal frameworks stated by some countries and the challenges our legal systems face from the legal necessity of recognizing these ‘innovative disruptions’.

   6. Collateral Estoppel in the Brazilian Civil Procedure: A Law and Economics Approach

      Luiz Guilherme Marinoni, Vinícius Klein

      Abstract

      This paper addresses the problem of the prohibition of relitigation over issues (collateral estoppel) through the lens of Law and Economics. The article applies the tools and concepts of Law and Economics to the issue of collateral estoppel, aiming to assess how it can impact legal security and effectiveness of adjudication.

5. Italo-Iberoamerican Experiences of EAL

   1. Frontmatter

   2. The Importance of the Economic Analysis of Law (EAL): Some Thoughts for Colombia, Chile, and Ecuador

      Ruben Mendez Reategui

      Abstract

      As a result of the juxtaposition juridical vs legal institutions institution, the chapter deals with the institutional framework and discusses whether their strength (legal and normative security) or weakness (progressive and/or radical affectation of the social rule of law) for countries such as Colombia, Chile, and Ecuador constitute identifiable dependent variables placed in harmon. The Chapter examines therefore the institutional framework of Colombia, Chile, and Ecuador, considering the following issues: (a) the limitation of political power, (b) the general interest, (c) social justice as a result of the prevalence of law and order, (d) an equitable relationship between efficiency and social efficacy, and (b) the approach to a scenario of multidimensional well being that is sustainable and sustainable over time.

   3. Rise and Peak of Peruvian Law and Economics

      José Enrique Sotomayor Trelles

      Abstract

      The chapter provides an overview of the introduction and development of the Law and Economics (L&E) approach in Peru. To this end, it outlines a periodization of its evolution based on four major phases: the initial attempts, the boiling period, the peak, and the subsequent stabilization. Criticisms directed at Peruvian proponents of L&E are then presented and analyzed. This analysis closely follows a book authored by Castillo Freyre and Vásquez Kunze, which stands as the most systematic critical examination of Peruvian L&E to date. Finally, the chapter offers a balance of perspectives and identifies future directions for the approach’s development.

   4. Understanding the Origins of Economic Analysis of Law in Mexico

      Maria Susana Dávalos Torres

      Abstract

      The Economic Analysis of Law (EAL) in Mexico emerged in the 1980s amid economic crises and the deregulation of the economy. Founded in the 1940s to educate economists devoid of Marxist, Keynesian, or interventionist ideologies, and having thrived during the 1980s, the Instituto Tecnológico Autónomo de México (ITAM) created a conducive environment for EAL. Conversely, many other universities, especially public institutions such as the Universidad Nacional Autónoma de México (UNAM), disregarded or scorned it.

      The essay provides a historical overview of the origins and challenges faced by EAL in Mexico, highlighting its historical political economy and its impact on higher education. It delves into the political economy of Mexico during the twentieth century, demonstrating how socialism and liberalism influenced higher education programs, especially those at UNAM and ITAM. The paper provides a brief description of the involvement of several federal government entities in the creation of EAL studies and the function of the federal judiciary in resolving cases that utilize EAL.

      The findings of this text are inconclusive yet provide a significant contribution to future research on this subject.

   5. The Stages of the “Italian Style” in Law and Economics. Origins, Evolutions and Latest Developments

      Carlo Vittorio Giabardo

      Abstract

      This Chapter summarizes and critically discusses the key stages of the “Law & Economics” scholarship in Italy. It aims to provide a comprehensive panorama of the trajectory L&E has followed in Italy over the last 60 years. This Chapter is structured into three conceptual parts: origins (1960–1970), evolutions (1970–2000) and latest developments (2000 -). After contrasting the L&E approach with the traditional legal method that dominated in Italy and Europe before the 1960s, the analysis touches upon the contribution of Pietro Trimarchi—unanimously regarded as the father of Italian L&E. It then elucidates the consolidation of L&E, particularly in the field of tort law (driven, among other factors, by the influence of Guido Calabresi), and the emergence of the “Social” moment in the Italian academia, between the 1970s and 1980s, with particular reference to property rights and the concept of commons. Finally, the Chapter considers contemporary critical perspectives (such as the “Comparative Law & Economics” project), explores the latest lines of research, outside the traditional domain of Private Law, and briefly describes the innovative trends and themes gaining prominence (such as Behavioural L&E). Methodologically, this Chapter situates each period within its specific historical and ideological background and considers the work and impact of prominent Italian legal scholars who have contributed most to this field.

   6. Law and Economics in Portugal: An Overview of the Last 20 Years

      Raquel Franco

      Abstract

      This chapter presents an overview on the evolution of the field of law and economics in Portugal for the past twenty years, as well as an examination of its current situation. Though the topic is still far away from standardized knowledge, or speech, within the relevant communities, some evolution has occurred within academia, the courts, and the public administration. The road ahead is still long, but might not be that winding.