Economic Approaches

1
Economic Approaches
2
Big Points

• Economic motivations explain actions
• All (or most) interactions can be reduced to
  economic determinants to explain action
• Individuals seek to maximize their utility
• Cost / Benefit Analysis
• To explain actions
• To discourage incorrect behavior

3
Individual Motivation

• Key Assumptions
• actors are self-interested
• maximize their utility
• can meet their desired goal only by winning
• everyone prefers winning to losing and winning
  big to winning small (Posner 1985, 8)

4
Explaining Litigation

• Cost / Benefit
• Individuals should pursue litigation any time
  that the expected benefit will exceed the
  expected cost
• Cost and Benefit usually translated into direct
  financial terms, including consideration of time
  as part of economic calculations
• Litigants attempt to maximize financial gain
  (Posner 1985 1986 Landes Posner 1987)

5
Barriers to Litigation

• Related to Cost / Benefit
• Remove
• the possibility of achieving any financial gain,
  e.g., by restricting the ability to receive any
  money even if I were to win
• the ability to win, e.g., by determining outcome
  of case
• Restrict
• By increasing costs associated with litigating

6
Litigating

• It is presumed that, once a logical reason for
  the original litigation is posited, the litigants
  will continue to pursue that goal in the courts
  until they achieve it or until they become
  convinced that they cannot achieve it in the
  courts.

7
Trials

• "judicial services, such as a trial or an appeal,
  are a 'product' that the parties (in the first
  instance, the plaintiff) 'buy' when they decide
  to bring a suit or to continue with a suit that
  they have already brought, and that the court
  therefore 'sells' to them" (Posner 1985, 7-8)

8
Trials

• The court regulates demand by raising the cost
  associated with purchasing court time and by
  establishing decisions which maintain the
  certainty of the law such that other
  non-litigants are not encouraged to litigate.

9
Economics as Hidden Motivation

• behavior is rational when it conforms to the
  model of rational choice, whatever the state of
  mind of the chooser (Landes Posner 1987, 23)
• people can apply the principles of economics
  intuitively -- and thus do economics without
  knowing they are doing it (Posner 1986, 4-5)

10
Judges

• of course the judge will not use these words
  to describe (even to himself) what he is doing
  but the vocabulary of economics is designed for
  the use of scholars, not judges (Landes Posner
  1987, 23).