Fall 1995 final exam (Economic Reasoning and the Law)
Top student answers

Note: These were among the best answers received under examination conditions. They are not model answers, in that they all contain extraneous material as well as omitting useful information. Some even reach incorrect conclusions. However, they all provide intelligent, organized, approaches to the questions.

Question 1: Answer #1

The central issue in Delahanty v. Hinkley is whether a gun manufacturer should be held liable for the consequences of the use of that gun. The problem can be analyzed from an economic perspective using either Coase's model of cooperation or the model of market failure.

Under the market of cooperation, Coase assumes away transaction costs and non-competitive markets and predicts that parties to a bargain will efficiently allocate resources. The problem with that model for this case is that transaction costs make bargaining here quite difficult. First there is the implementation cost of identifying which parties should be bargaining. (Who are the gun victims going to be? Would criminals identify themselves?) Second, assuming identifications were possible, it would nevertheless be impossible to assemble all the gun victims, gun manufacturers and gun users together before the purchase is made. Third, if bargaining is allowed to take place in stages (first manufacturer and user, then user and victim) strategic behavior would distort Coasean bargaining because the victim would face a monopolistic user (i.e., the victim can't shop for a different person to buy her safety from). Finally, there is the cognitive problem that some users may not be of mind to accurately weigh the costs and benefits of their actions (John Hinkley Jr. being an excellent example).

The model of market failure does a better job of describing this case as it is sensitive to externalities that make bargains unreflective of their true social cost. In this case, the cost to society of arming its citizens (a general sense of fear, the cost of having to buy a gun for protection, or the cost of police, jails and the courts ), is not accounted for in the bargain between the manufacturer and the user. Neither is the cost to the victim (injury), who likely would pay the manufacturer not to sell the gun if she knew that she was to be a victim. Furthermore, because the victim is not identified at the time of the bargain between the manufacturer and the user, a free-rider problem exists. If paying off the manufacturer were possible, the potential victim might choose to free-ride on the payments of other potential victims (i.e., safety is a public good). Because these difficulties make constructing an actual efficient bargain nearly impossible, it is useful to imagine what outcome would have resulted if costless bargaining could have taken place. Imposing such a hypothetical bargain would result in a Kaldor-Hicks improvement (though imposition would have different distributional effects).

It can be assumed that if allowed to bargain, victims would pay gun manufacturers to not sell to criminals ( or criminals not to buy ) but would be unwilling to pay manufacturers to not sell to other gun users, such as sportsmen and protection-seekers, as they would derive no benefit from preventing these uses. The Saturday Night Special law was an attempt to impose this hypothetical bargain, as it was premised on the idea that these guns were "particularly attractive for criminal use and virtually useless for. . . legitimate purposes. "

Imposing strict liability on manufacturers for the sale of this gun attempted to make the manufacturer internalize the externality caused when the gun was sold to criminals. If liability had been imposed, then criminals would have been forced to pay more (the difference being akin to a Pigouvian tax) and thus their decision would better reflect the costs to society . Although the court decided that, based on factual evidence, and definitional problems, the Saturday Night Special was not more likely to be used by criminals ( and thus the rule was a poor approximation of the hypothetical bargain), the court could have continued its analysis by examining whether the imposition of some other liability regime might more closely resemble that bargain.

One feature of this problem that must be recognized is that both the manufacturer (by making it harder to get guns) and the user (by choosing not to fire ) can influence the number of victims. Thus any rule of liability must account for both parties' incentives to engage in efficient behavior. In other words, there must be double responsibility on the margin. (While potential victims too can influence the number of victims, they have a great incentive--threat of bodily harm--to not inefficiently engage in victim-creating behavior. )

A rule that places strict liability on gun manufacturers for injuries caused by their guns would encourage the manufacturer to take care that potential criminals not get their guns. For example, the manufacturer might conduct a background check, impose a waiting period, (both of which may also diminish the problems created by a user's cognitive deficiencies) reduce the clip size or make the guns more accurate ( after all, Hinkley was only aiming at the President, yet managed to injure many others ). A strict liability rule would also provide the correct incentives on the manufacturer to not over produce otherwise safe guns.

On the other hand, a pure strict liability rule would indemnify the user from civil penalties. This would result in a moral hazard problem as the criminal would have no incentive to reduce her victims. Hinkley, for example, could have sprayed the entire crowd, instead of aiming for the President, or a thief might be more likely to fire rather than just threaten.

A criminal penalty may constrain the criminal's actions to some extent. However, criminal liability will only constrain the user if the benefits of shooting are outweighed by the costs of the likely criminal penalty (Becker). The criminal may find it less costly to invest in reducing the probability of her capture, by running for instance, or worse, shooting a witness, than in forgoing criminal behavior. Furthermore, criminal liability will only limit criminal activity if the criminal penalty is incremental. F or example, once a criminal has murdered, and thus will receive an extremely high penalty , there is little incentive to take care not to murder again, as these next victims are cheaply bought ( again meaning Hinkley might choose to spray the crowd). Thus imposing a criminal penalty may (perversely) result in an increase of gun victims.

Adding a contributory negligence regime, or making the criminal jointly and severally liable, would have the effect of deterring victim-creating use, but only if the user has the wealth to pay the liability . If the user's empty pockets makes her judgment proof, it is unlikely that additional civil liability will effect her incentives.

A negligence regime would also provide incentives to the manufacturer to take steps ( such as those mentioned above) to insure that criminals do not get guns. However, the measures the manufacturer will take under a negligence regime will be limited to those that can be easily observed by a court. Measures such as limiting the availability of guns, or modifying a sales pitch ( such as not making the statement "If your store is anywhere near a ghetto these ought to sell real well "), are not easily observed by courts and thus may not be incorporated into the negligence standard. This is essentially Shavell's critique of Cooter. That the external setting of a negligence standard is a difficult task is evidenced by the Maryland and D.C. courts' disagreement over the Saturday Night Special "negligence rule" in this case.

While the negligence standard generally puts incentives on the user to take care, this is of limited value in a criminal context where the user is intentionally causing an injury . If the user is not deterred by a criminal penalty , it is unlikely that additional civil penalties would discourage much use. Furthermore, such a standard may only result in a greater incentive to invest in capture avoidance (with perhaps more injured witnesses). This problem is magnified if information problems are present ( such as not being able to assess the likelihood of capture until after the crime is committed). Thus while negligence may lead to some greater user care (gun not left in baby's crib) it is unlikely to reduce injuries to intentional victims.

While the analysis of incentives indicates a possible preference for strict liability on the manufacturer, a consideration of risk and insurance confirms the choice. The user, facing extreme moral hazard and adverse selection problems ( only the user knows why the gun is being purchased) is likely uninsurable (and certainly so for intentional acts). The manufacturer, on the other hand, can self. insure by spreading the risk out over its entire gun sales. This also serves to internalize the cost of injuries to victims. Furthermore, putting the insurance burden on the manufacturer places that burden on the party best able to control risk ( through steps outlined above ), thus lowering the over all risk. While insurance may be available to the victim (life and health insurance) the fact that the victim is so risk adverse (potentially losing all her health) means that she will likely have to pay a large risk premium. She is also largely unable to control the risk, but to the extent she can, she encounters problems of moral hazard (getting into more fights) and adverse selection (living in the ghetto ). Finally, the distributional effect of requiring the victim to pay (such as in the current system) may justify prioritizing equity as a goal over efficiency.

Thus by putting the liability on the manufacturer through a regime of strict liability , the costs to society are best internalized, the efficient level of care is most likely to be met, the costs of insurance are minimized, and equity is enhanced by shifting the risk of loss from innocent victims to culpable manufacturers.

Question 1: Answer #2

Petitioners bring this case on appeal from an adverse ruling on motion for summary judgment.

The sole issue on appeal is one of first impression for this court: "Should shooting victims be allowed to hold manufacturers and distributors strictly liable for injuries caused by the 'Saturday Night Specials' they have manufactured and distributed? So-called 'Saturday Night Specials' are low cost, poor quality handguns which are asserted to have little utility apart from their popularity in the commission of crime.

As an appellate court judge, it is my job to predict the likely consequences of adopting the rule of strict liability and- -based on those predictions--evaluate the relative costs and benefits of adopting the proposed rule. From a social policy perspective, this jurisdiction should adopt the rule of strict liability if and only if the social benefits of adopting the rule exceed the social costs of adopting the rule.

I. Plausible benefits of adopting the proposed rule of strict liability

First, imposing a rule of strict liability on the manufacture and sale of "Saturday Night Specials" may reduce incidents of violent crime by decreasing the number of such handguns that are available for sale. Petitioner argues that, left alone, the market encourages a greater than optimal allocation of resources to the production and distribution of "Saturday Night Specials." Petitioner explains this by arguing that the market relationship between the manufacturer or distributor and the purchaser ignores social costs which the production and distribution of the handguns impose. Most importantly, the price which the manufacturer sets does not reflect the costs of the injuries sustained by third party victims of crimes.

Petitioner argues further that victims' ability to hold purchasers (who we shall assume are generally also the injurers) civilly liable does not internalize the ignored social costs because the purchasersinjurers are frequently insolvent. Since the injurers are judgment-proof, the threat of civil liability does not discourage them from purchasing andor using the "Saturday Night Specials."

Petitioner claims that by placing liability on the manufacturers and distributors, who are generally able to pay civil damage awards, this court can artificially perfect the market and encourage the socially efficient level of "Saturday Night Special" production and distribution. Petitioner's argument is correct as far as it goes: Forcing liability upon manufactures and distributors will create an incentive for the manufacturers and distributors to reduce output (see Steven Shavell). However, it will not reduce the manufacture and distribution of these weapons to the socially efficient point. For, even if this jurisdiction were to adopt a rule holding manufacturers and distributors strictly liable for the "costs" of victims' injuries, such a rule would not "perfect" the market. Even if the parties to the market relationship must bear victims' hospital costs and must pay damage awards for "pain and suffering," money will never fully compensate victims for their pain and suffering nor victims' families for the losses of their loved ones.

A second plausible argument for adopting strict liability stems from the notion that imposing the rule is equivalent to requiring manufacturers and distributors to insure potential victims against losses resulting from injuries caused by "Saturday Night Specials. " Petitioner argues that this is good "public policy." The claim makes sense only if (1) the social costs of insurance against criminal activity are lower than the social benefits of the insurance and (2) the manufacturers and distributors are able to provide the socially desirable level of insurance at a lower cost than the victims. I assume that the social benefits of insurance against the risk of criminal injury and death exceed its social costs. For, I need not make that determination in order to dispose of petitioner's claim. Even assuming that the social benefits of insurance outweigh their costs, the victims themselves are better able to bear the costs of that insurance than are the manufacturers and distributors.

First, the costs of manufacturer and distributor-provided insurance are especially high because manufacturers and distributors do not contract with handgun purchasers. (See Richard Epstein who argues that with elimination of the privity rule, product liability has become a costlier means of insuring against product failure.) For instance, if manufacturers and distributors raise the price of low quality, inexpensive handguns in order to cover the costs associated with increased liability, individuals previously purchasing these for "legitimate" purposes will stop purchasing them and substitute to higher quality guns (now that there is a reduced price differential) . Only those purchasing for "illegitimate" purposes will continue to purchase the low quality, cheaper weapons. Relatively more of the low quality, lower cost weapons sold will be used for "illegitimate" purposes, with correspondingly increasing liability costs to the manufacturers and distributors. Because they have no contractual relationships with the handgun purchasers, manufacturers and distributors have no way out of this adverse selection dilemma. They cannot, for example, investigate potential handgun buyers before agreeing to sell. (And even if the manufacturer or distributor could investigate before agreeing to sell, the effort would be extremely costly and highly unlikely to provide accurate information. )

Additionally, because there is no continuing contractual relationship between the manufacturer or distributor and the purchaser, this "insurance market" is plagued by high moral hazard costs. Neither the manufacturer nor the distributor is able to supervise or control the purchasers' actions once he has purchased the handgun.

Potential victims are able to insure against criminal injury and death by purchasing third party insurance. There are fewer adverse selection costs associated with this market since potential victims purchase insurance against criminal injury part of an overall health or life insurance package. Individuals will be unwilling to give up these other health and life insurance benefits even if they believe themselves to be unlikely targets of criminal activity. Even if individuals correctly identify themselves as unlikely targets, they are unable to select themselves out of the insurance market. Moreover, potential victims are better able to diversify the risk of criminal injury than are manufacturers and distributors. For victims, the risk of criminal injury is just one of thousands of small risks they accept every day. If handgun manufacturers and distributors deal primarily or exclusively in the manufacture and distribution of handguns, then these corporations have no other opportunities for risk diversification. (Of course, shareholders are able to diversify by investing in various industries. However, with the increasing (nondiversifiable) risks of handgun manufacture and distribution, shareholders are much less likely to invest in the handgun industry at all.)

II. Potential costs of the proposed rule of strict liability

As the lower court appropriately points out, identifying "Saturday Night Specials" is an impossible task, ex ante, if we define "Saturday Night Specials" as handguns which will be used for "illicit" purposes. If we broaden our definition so that we are better able to identify these handguns ex ante and then impose a rule of strict liability, we will necessarily be restricting the sale of handguns purchased for legitimate purposes. Herein lies the real costs associated with the adoption of the proposed rule. For, as the lower court recognizes, restricting the sale of guns purchased for legitimate purposes potentially violates citizens' constitutionally- rotected right to bear arms. Moreover, restricting the sale of inexpensive guns (but not expensive guns) purchased for legitimate purposes disadvantages low income purchasers, thereby violating their constitutional right to the equal protection of the laws.

III. Conclusion

For the reasons set out in section I, I dismiss petitioners' assertions that the rule of strict liability will "perfect " the handgun market and provide a socially desirable means of insuring against criminal injury. There is a further reason for dismissing petitioners' claims: judicial inability to accurately enforce the rule. Petitioner assumes that courts can accurately identify "Saturday Night Specials," and that by restricting the manufacture of these, courts will reduce instances of criminal activity. However, as the lower court points out, courts are unable to identify "Saturday Night Specials."

Even ex post, courts are unable to look back to the point of sale and determine whether a handgun (subsequently used for criminal purposes) was likely to be used for those purposes. And, to the extent that courts are inconsistent (or inaccurate) in their judicial determinations as to what is and what is not a "Saturday Night Special," the rule of strict liability will not create the proper incentives for manufacturers and distributors to decrease "Saturday Night Special" production. Judicial inaccuracy further weakens petitioners' claims that the rule of strict liability will reduce "Saturday Night Special" availability and therefore instances of criminal activity.

For these reasons, the probability that the proposed rule will achieve its asserted benefits is low. As explained in section II, however, the probable costs of judicial inability to accurately define and identify "Saturday Night Specials" is very high, for these are the costs of violating constitutionally-protected rights.

Affirmed.



Question 1: Answer #3

The Delahanty case presents the issue of whether, and to what extent, manufacturers of handguns should be held liable for injuries caused to third parties by their products ' use. The Delahanty court refused to fmd an exception to the rule of no liability for "Saturday Night Specials" (SNPs), a class of handguns defined by their low cost and low quality. Applying the tools of economic analysis to this issue may aid in its proper resolution.

According to Coase, if there are no transaction costs to prevent parties from bargaining to an efficient solution, they will do so. In the simple case where A's act is the proximate cause of B ' s injury it is easy to see how this can be achieved: if B' s injury is greater than A's benefit from the act, B can pay A to refrain, or to do less of it. Net benefit is thus maximized. The case of handgun manufacturer ( or retailer) and gunshot victim adds several layers of complexity to this model. First, the manufacture of a gun and the injury to the victim are separated in space and time. As a result, there is no opportunity for victim and manufacturer to bargain ex post (at the time of the crime) over whether or how the gun should be made.

It is logically possible that the parties could bargain ex ante, that is, prior to the unfortunate encounter. However, transactions costs would make this difficult. Implementation costs would be substantial: one would first need to identify the class of potential victims of SNP gunshots (a large class -- something less than all citizens? Should there be a probability of injury threshold for membership?) and then devise a method through which the class members could express their individual preferences (such as willingness to pay). There are also strategic costs which could prevent the parties from bargaining to an efficient solution. For example, class members might understate their willingness to pay for cessation of gun production, in the hope that others might carry this burden. (As "free riders," they would still enjoy the benefits of any limitation in production).

The model of cooperation might still be useful in analyzing the problem. We can hypothesize as to what solution the parties would have reached in the absence of these costs. For instance, if the aggregate costs to the class of potential victims were higher than the benefits obtained by manufacturers from the sale of SNPs, we could assume that the parties would bargain to limit, or stop production.

However, it is unclear what resolution the parties would reach. Applying the model of cooperation to this issue is problematic for several reasons. First, we do not have good information as to the preferences of potential victims. As noted by the Delahanty court, it is not clear that SNPs are perceived as doing net harm. In addition to being used by criminals, these weapons provide a low-cost means of self-defense for potential victims.

Second, there to appear to be Scitovsky problems. The outcome of the bargaining may depend on the initial assignment of entitlements. A potential victim would likely be less willing to sell the right to manufacture handguns than to pay for its forbearance -- in the former case he might consider himself an accomplice in any resulting handgun deaths.

Third, the result may be skewed by the fact that preferences and wealth distribution are non-uniform and (worse) correlated. If this truly is a "ghetto gun," than those in the ghetto will have stronger preferences regarding its manufacture than those outside the ghetto. But since their "willingness" to pay is constrained by their ability to pay (the economic model does not recognize a distinction between the two) they may not be able to express the true intensity of their preferences. , They might appear to care no more about the issue than a millionaire living in a fortress. Fourth, the parties' attempts at bargaining will be frustrated by the fact that the party in the best position to control the risk -- the class of potential assailants -- is not at the table. As such, the parties can but indirectly address the problem of how to reduce injury . Working from limited information (e.g.lack of knowledge as to how criminals will respond) may result in their bargain having unforeseen consequences. (Bargaining in the shadow of the criminal mind?) This is an example of the problem of Second Best, which will be developed further below.

Given the problems discussed above, this issue is better evaluated under the model of externalities. Here, the manufacture of SNPs imposes an externality on the victims of crime involving these weapons. However, there is an additional twist due to the fact that the injury is not proximately caused by the manufacture of the gun. The defendants can claim that no externality is created as a result of their manufacturing the weapons -- this is not like smoke from a factory . Injury results only when the weapon is used intentionally for that purpose. It is not a necessary result of manufacture. Further, criminals are going to inflict injury on innocent victims regardless of what we do.

This argument is easily addressed. By providing criminals with a low-cost, readily available supply of easily concealable handguns, the defendants lower the criminals' cost of doing business. Criminals will as a result perform more of the activity (relative to other means of getting what they want) and will also substitute away from less effective tools of the trade such as knives. Therefore, the manufacture of the SNPs increases harm to victims -- both in frequency and severity. The market price of the SNPs thus understates the true social cost of their production and sale. This cost could be internalized through a Pigouvian tax on output, or through Pigouvian liability for gunshot injuries.

However, there may be a positive externality as well, as SNPs also provide potential victims with a low-cost means of self -defense. The direct benefits of self -defense flow to the purchasers of SNPs, and are therefore internalized. But if criminals perceive victims as more likely to be armed, this will increase their estimated cost of doing business, and therefore decrease that activity. These benefits will flow to non-purchasers as well. The point remains, as was developed in the discussion of the model of cooperation, that this issue involves substantial uncertainty . The theory of Second Best warns us that where this is the case (as it often is) a move which appears efficient based on the available information may lead to inefficient results. The rule adopted by the Kelly court is good illustration. The Kelly rule creates a de facto negligence regime for gun manufacturers, with the standard of care drawn at the line separating normal quality handguns from SNPs. As long as a gunmaker manufactures handguns of adequate quality and performance, it will not be liable for gunshot injuries, but if it falls below the standard, it will be liable (strictly) for such injuries.

The goal of the Kelly court was presumably to reduce the incidence of injury to innocent victims. The actual effect of the rule may be otherwise. An example will illustrate. Suppose in a pre-Kelly society there are 100 crimes involving handguns, but because SNPs are used in 80% the crimes and are only 50% reliable, only 60 people are seriously injured. Post-Kelly, gun manufacturers have an incentive to meet the standard for making quality , non-SNP guns. As a result there are no SNPs, only more expensive, but higher quality guns. Crimes involving guns are relatively more expensive for criminals (see above) and so that number decreases to 80. But now all of the guns used are 80% reliable, and 64 people are seriously injured.

This perverse effect is the result of the internal inconsistency of the Kelly rule: it penalizes gun manufacturers who make lower quality guns, even though such guns are less dangerous in the hands of prospective criminals. The application of a traditional "quality" standard of care is wholly inappropriate where the product causes injury not when it is defective, but when it functions as intended. (As such, the Kelly rule may not be so much an example of a Second Best problem as merely the wrong choice given available information). This inconsistency clearly bothered the Delahanty court, and the Kelly rule is made even more perverse.

What then is the proper resolution of the issue? To construct a rule we should consider who is in the better position to control the risk of injury , as well as who can better diversify the risk. Under the current regime of no liability , potential victims seek to limit this risk through avoiding dangerous areas, keeping to well-lit streets, and any other crime prevention techniques. Victims diversify this risk (to the extent that they can) through standard health and life insurance. This is merely one of many potential threats to life and limb.

Were liability for third party injury placed on gun manufacturers, they would likely seek to control this risk through more selective sales practices. They might employ, or require retailers to employ, a background check and waiting period before purchases. Diversification might be difficult, as third party insurance might not be available. A manufacturer might be able to self-insure if it were of sufficient scale, or if it were involved in other industries besides gun manufacture.

The choice between liability or no liability is uncompelling, but it is worth discussing what a liability rule, if chosen, should look like. For injuries to third parties, liability would have to be strict. The problem with applying a negligence rule to such injuries was discussed above with regard to the Kelly rule. Since it is highly unlikely that this rule would have an adverse effect on precaution taken by potential victims, adding contributory negligence would not be worth the administrative cost.



Question 2: Answer #1

Posner's opinion in Menora v. Illinois High School Association exemplifies the application of economic reasoning to the law in two important ways. First, Posner minimizes the parties' disagreement, choosing to treat the dispute as the result of a relatively minor cognitive problem (i.e., "false conflict") which can be solved simply by pointing out to the parties their true preferences and allowing them to bargain. Posner therefore perceives the parties to exist in the classical Coasean world of low transaction costs, competitive markets and efficient bargaining results.

Second, Posner places great emphasis on utilitarian cost-benefit analysis. Through weighing the presumptive value the students place on free exercise against the value the school places on promoting safety , Posner seems to argue that if agreement cannot be reached, a Kaldor-Hicks improvement can be made by awarding the entitlement ( either the right to wear yarmulkes or the right to enforce the rule) to the highest value user. However, this weighing is only presented as a threat that will be imposed in the unlikely event that the parties do not bargain successfully.

Posner's economic approach, however, is open to attack by the proponents o nearly all the critiques of economic reasoning that we have examined. CLS scholars would be skeptical of the results that follow Posner's envisioned bargain. They would likely see the original conflict between the school and the students as not owing to a remediable cognitive problem but instead due to the inherent wealth effects created by the Constitution's distribution of entitlements.

Under the Constitution, the individual possesses the right to religious free expression, while the state is reserved the power to make laws that protect its citizens' health and safety . These entitlements, having been awarded, are incorporated into each party's wealth. Because of this, each party will demand a higher price to give up their entitlement than the other side is willing to pay to "purchase" it.

CLS scholars see this process as undennining the market as a neutral forum. Instead, inherently political conflicts of incompatible rights should be resolved through the political process. Arguably, the Constitution itself is a result of such a political process, representing the framer's resolution of the struggle over the distribution of these important rights. If this is so, then the court's duty is not to remand the case to the parties, who will only struggle over these same political questions, but rather to solve the conflict through an interpretation of the Constitution.

Scholars subscribing to the sociological critique would criticize Posner's approach as excessively sensitive to the exogenous preferences of the students (as written in the Talmud) and of the school (as defined by their "interest in promoting safety"). Posner's reference to these preferences as the basis for his belief that there is a "false conflict" undervalues the importance of the social norms that have developed within the parties' separate societies. For example, it is likely that the students are not interested in wearing just any head covering. The extant social norm likely dictates that, although the distinction is not made in the Talmud, a yarmulke and a football helmet are not equally acceptable. As for the school, it seems apparent that it is interested not just in protecting the safety of the basketball players, but in preserving its role as unchallenged rule-maker. For example, the school repealed its rule allowing barrettes, which, as Posner noted, arguably promoted safety , in order to preserve its ability to make rules.

Thus the sociologists would object to the faith in positive individualism underlying Posner's economic approach. Ellickson might make this point by comparing Posner's approach in defining the "false conflict" with trying to explain the law of trespass to ranchers in Shasta County . Neither effort will ultimately be successful as people are more likely to respect the established social norms ( whether or not those norms have their genesis in the applicable rule) than they are to bargain in the shadow of the applicable rule (whether it be trespass, Talmud, or promotion of safety).

Scholars in the liberal school would likely share the sociologist's critique of Posner's bifurcation of the parties' "true" interests (conformity with religious doctrine, safety of the players) and their stated interests ( wearing yarmulkes, a "no exceptions" rule) but would have different reasons for their critique. Unlike the sociologist, who bases her objection on a perceived insensitivity to social norms, liberals would object to Posner's imposition of his own calculation of which rights are "true" and which are merely pretenses. By dictating to the parties which interests are most valuable, Posner robs the parties of the humanity inherent in an individual detennination of subjective interests.

Presumably, Posner would argue that his approach is based on contractarianism: if each party were in Rawls' original position, unclear whether they would be students or school officials, they would agree that conformity with religious doctrine and player safety are worthy interests, while wearing yarmulkes and a "no-exceptions" rule are not worthy interests. To this, Dworkin might counter that there is no particular reason to believe that this ex ante hypothetical contract would look at all like an actual bargain once the ability to wear yarmulkes or impose rules has been established. Thus the preferred method of reaching the best bargain is to allow each party to alienate all the rights each has without judicially stripping some away. Posner, however, might reply that this analysis does not inform a decision on this case, as a liberal might argue with equal force that the individual liberty to play basketball should be enforced over the illiberal attempt to restrain the student from playing, or that the individual liberty to safety should be enforced over the illiberal attempt to jeopardize another's safety ,

A communitarian would object to Posner's focus on process over result, This is because the communitarian critique rejects the normative individualism that underlies the economic approach. Posner's remand of the dispute to the parties shows a lack of concern for the ultimate bargain, For example, it is not important to Posner whether the students ultimately choose to play, and give up their religious custom of wearing yarmulkes, or retain their religious practice and opt out. However, to a communitarian this result is very important. A communitarian is likely to see religious freedom as an essential community value that will be "commodified" by society if it is but one chip to bargain with in the marketplace. By injecting the cost-benefit analysis into the student's consideration, religion becomes "down-valued". This makes it more difficult for people with strong religious beliefs to retain their religious freedom as the value placed on strong religious beliefs by society is reduced, For example, "religious passion" becomes equated with "zealotry," (i.e., an unreasonable reluctance to trade religious practice for social interaction). Thus for the communitarian, allowing religion to be imbued with the rhetoric of economics has consequences, in and of itself, which the economic approach ignores.

A paternalist too would have objections to Posner's approach, particularly his faith in the ability of the parties to reach an efficient agreement on their own, The paternalist would likely argue that, although Posner may have solved one of the problems facing the parties (the cognitive problem of not identifying their true immediate interests ), the decision does not solve two other important problems. First, the decision does not address the fact that the bargaining does not take place in a competitive market, The students (presumably) have no other provider of basketball games that they could switch to. Nor can they substitute religions for a less burdensome one. Thus they may be forced to pay an artificially high price (giving up their religious free expression) to participate in school athletics. Second, Posner ignores the problem created by the public good aspect of religious freedom. We live in a society that highly values religious freedom, but consists of individuals unwilling to pay a high individual price for it ( social exile, religious persecution) unless everyone "purchases" (i.e., positive externality). Thus, though it would be most efficient for everyone to enjoy religious freedom, individuals may not bargain for it on their own. Arguably the Constitution's protection of free expression was designed to solve this very problem by subsidizing the exercise of religious freedom (protecting it makes it less costly to "purchase") which would be under-consumed without this intervention. Thus, allowing the parties to bargain on their own would result in the very inefficiency the Constitution was attempting to avoid.

Finally, Posner's emphasis on utilitarian cost-benefit analysis can be attacked as completely out of place in a dispute over Constitutional rights. When Constitutional rights are at stake, an internal critique may be at its most compelling: an efficient distribution (to the highest value user) may be of subordinate concern to that of an equitable distribution. It is for this reason, for example, that we outlaw slavery , even if it could be proved that a slave-holder could derive more value from the labor of a slave ( efficient distribution of liberty) than the slave could were she free (equitable distribution of liberty). Posner, however, though superficially allowing the parties to bargain, threatens to impose a cost-benefit solution, which hangs over the parties' heads like a Sword of Damocles, effectively cutting off the effectiveness of either party's appeal to equitable considerations either within or without their bargain.

Question 2: Answer #2

In his decision in Moshe Menora, Judge Posner addresses an issue clearly outside the realm of traditional economics -- the First Amendment right to free exercise of religion -- using the language and reasoning of economics. The change in tone and analysis is subtle, but the effect may be more far reaching than is evident on the surface.

In the paragraph in which Posner sets forth his rule of law, he performs a bit of a sleight of hand. Precedent, he states, requires a balancing of the burden on the individual in foregoing the government benefit due to the exercise of his religion, against the burden on the state in making an exception for this individual. Posner refers to the former, almost in passing, as the "price" of observing one's religion. By defining this burden as such, he is able to later reach his grand conclusion that the "state may not make the exercise of religion unreasonably costly ," and have it appear that this is in fact what the caselaw has always stated.

Another way of stating Posner's rule (using his language) is that the government may not make the price of exercising one's religion unreasonably high. Thus, akin to a monopolist who has the ability to overcharge consumers for its product, so too can the state, by virtue of its monopoly on the ability to make law, "overcharge" its citizens for the right to exercise religious beliefs. The First Amendment, then, is a check on this power (much like Section 2 of the Sherman Act): the state must be able to justify its price. How? By reference to its cost, of course -- the cost being the burden it will bear by altering its rules in this case. Thus the issue in Moshe Menora is properly presented as whether the Association can justify the price it charges the plaintiffs to observe their religion ( denial of the ability to compete in the league) on the basis of its cost in making an exception to the rule (potential loss in safety).

Traditional legal rhetoric does not use the language of the marketplace to describe the exercise of personal rights. It does not refer to the collateral effects of such exercise as "costs," or as comprising the "price" of exercising that right. But does using this language change anything? Is it merely a change in rhetoric, without changing the basic analysis? At first glance, Posner does not appear to deviate from traditional constitutional jurisprudence. Is he not merely performing the same balancing as is required by precedent albeit with different terminology? Is he simply making more explicit the logical underpinnings of previous decisions?

If this were merely a difference in terminology, and not in analysis, that would be significant enough on its own. Words have meaning. Language has always been an important part of the law -- it is in fact the principal tool of the trade. Lawyers do not persuade with numbers or statistics, they use words, and their importance can be seen in the effort that is often spent on initially framing an issue. This is especially so in the context of individual rights, where much energy is expended in defining the "right" at stake. (See abortion, refusal of medical treatment, privacy, etc.)

Consider Posner's description of the "burden" on free exercise as the "price" paid for exercising one's religion. While these terms may be equivalent in the language of economics, they are not the same in normal usage. "Burden" has the connotation of something unfairly borne, while "price" is a more neutral term. Further, the words suggest different baselines. "Burden" suggests an initial condition of free exercise without state interference, whereas "price" suggests not free exercise, but no exercise without first paying the purchase price. As such, it would seem easier for the government to justify a "price" than a "burden."

But Posner uses more than just the language of economics, he employs its methods of analysis as well. The decision implicitly uses the model of rational maximization under constraints. The plaintiffs here are doing the best they can given the constraints they face, including the Talmudic law and the rules of the Association. Under this model, one who wishes to exercise his religion merely evaluates the price of doing so. Here, the price of exercising one's religion by wearing a yarmulke is the inability to participate in interschool basketball. Presumably, religion is now like any other good, and a rational maximizer will purchase as much or as little as he wishes given his taste for it, his overall wealth, and his taste for other "goods".

The application of economic analysis to this issue is problematic for several reasons. First, it is questionable whether an individual treats the decision of whether to practice his religion the same as whether to buy a car. One's religious beliefs are closely intertwined with one's sense of self. These are not ordinarily objects to be traded and weighed against other desires.

Second, because the model of rational choice is a model, it necessarily involves a reductionist, rather than a holistic analysis. This has the necessary effect of leaving out certain variables. This is evident in the result reached by Posner in Moshe Menora. He finds no actual conflict between the rules of the Association and Talmudic law, because the latter does not mandate the specific type of head covering used by the plaintiffs. This conclusion, however, is the result of Posner's emphasis on formal constraints, and his disregard for other values which may affect an individual's decision-making process. (See Ellickson). The Talmud is a constraint on the plaintiffs' behavior, but their traditions and customs are not. Since the wearing of yarmulkes fastened by bobby pins is not required by the Jewish law, there is no "cost" to adjusting their behavior to alleviate the safety concerns of the Association.

It is doubtful that the plaintiffs are in agreement with Posner on this point. The shared values and traditions of a group of people can provide rich sources of self-identification, as well as powerful constraints on behavior. Surely, a change in the way they express their religious beliefs will not be costless. (One wonders if Posner would have reached the same result if there had been no formal Jewish law, only tradition. Would it have been enough for the plaintiffs to say: "this is how we as a people express our beliefs, and we should like to continue in this fashion"? Would change still be costless?)

Third, the use of a cost-benefit type analysis is inappropriate in the determination of whether a constitutional right has been infringed. Posner's rule of law, as stated above, requires that the state not make the exercise of religion unreasonably costly. This essentially involves a cost-benefit analysis of whether the "price" of exercise is reasonable. However, constitutional rights such as free exercise are designed to promote liberal, not utilitarian values: individual freedom is to be upheld even (and especially) when the will of the majority is to do otherwise. A cost-benefit analysis does not provide adequate protection because it ignores this tenet, sacrificing individual rights when there is a net societal benefit in doing so.

Posner would counter this by stating that, rightly or wrongly (rightly, in his opinion) this is how constitutional rights have been evaluated in the courts -- there is a long tradition of balancing tests which he is merely following. While it is true that balancing has been an important part of the law, the application of economic analysis alters this calculus. As discussed above, the use of economic language itself changes the way we think about problems, and a change in language may make an outcome seem more palatable, although it be substantively unchanged. Further, the economic model is incomplete in its description of human behavior, and excludes consideration of potentially important data. The law governing free exercise as it stood before Moshe called for a somewhat amorphous balancing of burdens. Presumably, courts would factor into the mix anything relevant to the determination. Posner refines the test into a comparison of costs. It is a subtle change, but it allows him to narrow the inquiry -- if Jewish law does not require head covering of this specific type, than there is no cost in changing the practice.

To conclude, Posner's use of economic reasoning does work a change in the law. I used the word "refine " above, and I think that is a good analogy of what economic analysis does to the law. The process of refinement, with sugar as with law, leaves out extraneous matter in pursuit of the most usable and valuable portion. (Of course, the end product may differ depending on who is doing the refining. ) That is, efficiency is part of the law, but so is "fiat justitia, ruat coelum." (Leff). Posner would like to retain the former and abandon the latter.

Is the a change for the better or worse? Despite the shortcomings of the economic analysis pointed out above, I think that it is a valuable tool for the lawyer and judge. The danger arises when it is used not only in addition to, but instead of, traditional methods of reasoning. The economic approach does not dispatch all legal issues with equal success, and it can at times provide too narrow a focus. The Moshe Menora case demonstrates this danger, as Posner I think reaches an incorrect result. It is not clear what costs the plaintiffs will bear in altering their tradition, but it seems to me to be greater than the questionable safety concerns of the Association.

Question 2: Answer #3

Our lives are complex. Society is complex. Our objectives and desires, our goals, our ideas, our priorities: all of these are complex. For these reasons, adjudicating constitutional cases is an unenviable task. It necessarily involves making normative judgments regarding the relative worth of competing individual and societal goals. Indeed, constitutional adjudication--like all adjudication--is, in the words of Justice Utter, "the logic of maximizing service and minimizing disservice to multiple objectives [Utter, J., referring to the adjudication of tort cases, concurring opinion in Helling v. Carey.] Included among these objectives are efficiency goals and equity goals, and in making decisions in particular cases, judges frequently must maximize service to one while minimizing disservice to the other. [See Ronald Dworkin.]

Words are simple. Even if judges were able to identify all of the, often subconscious, efficiency and equity trade-offs which animate the decision-making process, words could never convey all of this. In communicating their decisions via legal opinions, then, judges necessarily find themselves "in the world of the second best." That is, they must settle for opinions which approximately set forth their judgments and their reasoning. They often must choose between the language of equity (the traditional language of the law) and the language of efficiency (the favorite of law and economics) . Both of these "languages" shape the law in important ways . Each achieves some of the purposes for which judges write judicial opinions, but each fails to achieve others. We can identify these by analyzing Posner's opinion in Moshe Menora v. Illinois High School Association.

I. What the rhetoric of economics misses

Despite Posner's claims that economics provides a "neutral principle" for deciding cases, each and every case is unique. Deciding cases, then, necessarily requires the judge to make normative judgments regarding the relative merits of competing claims. [See Duncan Kennedy, who argues that "efficiency" arguments are really paternalistic and distributional arguments in disguise.] Still, the science--and therefore the language--of economics suggests neutrality; application, not judgment. By using the language of efficiency, Posner obscures the normative judgments underlying his decision. For example, Posner writes that the "no-headwear rule" "forces orthodox Jews to choose only between keeping their heads covered and playing interscholastic basketball" (emphasis added) . The statement reflects Posner's normative judgment that very little turns upon the choice between the two. Some of the students may just find basketball to be profoundly rewarding, or perhaps they are hoping to earn basketball scholarships to pay for their college educations. Some may consider basketball to be a career opportunity. Where these students' commitment to the tenets of Judaism are strong, the "no-headwear rule" forces upon them a very real, difficult, and personal decision. Posner supplants the students' subjective valuation of the significance of this decision for his own (subjective) valuation. It is easy to miss this though because Posner describes the decision in economic terms (the weighing of "two burdens " ) throughout his opinion. This use of economics makes it easy for the reader to accept statements like the one above as descriptive or neutral statements rather than as normative ones.

In addition to masking the normative judgments motivating his decision, Posner's use of economic language neglects the intrinsic value that we place (and want to place) upon our constitutional right to the free exercise of religion. Even if we agree with Posner that the value we place upon religious freedom must be balanced in some fashion against the value we place upon the safety of athletes, it does not follow that these are mere "interests" to be compared. Rather, we might engage in the same type of balancing yet choose to acknowledge that we refer to our constitutional rights as "rights " and not as "interests. " We might similarly say that we have a "right" to safety or that the government has an "obligation" to formulate rules for our safety.

The language of "rights " and "entitlements" and "obligations " ccords these values the respect that we wish to give them, even if we are aware that the very nature of the competition among them means that there will be restrictions upon them and we will have to make some compromises. For, the language of rights and entitlements tells us something about the difficulty with which we are making the decision or the trade-off. It may be relatively easy to choose among competing interests. (I have an interest in taking jurisprudence because I would enjoy it and a competing interest in taking evidence because it's covered on the bar exam.) It is a much more difficult decision for me individually and for society collectively to choose between religious freedom and safety or perhaps between the rewards I get from strictly adhering to religious custom and the rewards I get from playing basketball. We may want to express the difficulty of this trade-off because law defines our social values, [See Steven Kelman] and we wish to continue to place as high a value on our constitutional rights tomorrow as we do today.

II. What the traditional language of the law misses

If Posner had written his opinion in more traditional legal rhetoric, he would have begun by defining the students' First Amendment right to freely exercise their religious beliefs. He would ask whether the basketball association has a "compelling" interest in safety, and, if so, whether there is a "nexus " between the "no headband rule" and the association's interest in safety. Similarly, he would ask whether the "no headband rule" is the "least restrictive alternative" means of achieving that compelling interest. The traditional legal language obfuscates a reality that Posner's language captures: We cannot have everything that we desire, nor can we achieve all of our (conflicting) objectives , so we must "satisfice " We may highly value both our First Amendment right to free exercise and our right to safety, but in the end, we cannot "maximize service" to both.

There is something inherently more honest about an opinion which candidly recognizes this, and this honesty serves an important function in judicial opinion-writing by helping us identify exactly what is at stake. There is a tendency, when speaking about "rights, " to speak in absolute terms. Economic language expresses that which we may otherwise forget: Even when our objectives conflict, we seldom must choose between absolutes. Posner's opinion expresses this especially well. For, as Posner points out, the parties need not reach an agreement (nor must the court decide) the relative merits of "the right to free exercise" versus the "right to play basketball safely. " By identifying the narrow issue of conflict--the students' interest in wearing yarmulkes (or perhaps other "head coverings") in observance of their religious beliefs versus the association's concern that these fall off during piay and present safety hazards--Posner reminds us that we can and should make a decision which maximizes service to one objective while minimizing disservice to the other. For, maximizing service to one seldom requires us to give up on the other. Economic language, then, not only expresses the real-life compromises that are forced upon us, but also reminds us that the compromises are not necessarily as destructive as they might otherwise appear.

Conclusion:

One of the judiciary's unique contributions to the political arena is its commitment to opinion writing or "reasoned elaboration. " We call upon this special competency to serve several purposes--explaining judicial decisions, providing guidance for future decision-making, expressing societal goals, identifying conflicts among them, and shaping them. I have suggested that economic rhetoric better satisfies some of these purposes and traditional legal rhetoric better satisfies others. Constitutional adjudication involves making difficult decisions. Economics reminds us that it involves decisions; legal rhetoric reminds us that they are difficult.

Posner writes that "Free exercise of religion does not mean cost less exercise of religion, but the state may not make the exercise of religion unreasonably costly." The statement is enlightening, for it reminds us that: (1) we must make decisions among conflicting constitutional principles, (2) we can apply the same decision making processes to these decisions that we apply to the thousands of decisions we make everyday, and (3) by doing so, we will maximize service to our objectives. However, I would feel more comfortable if Posner had used the language of "rights" rather than "interests." For it is the language of "rights " which reminds us that constitutional decisions are not everyday decisions; that the decisions do shape our mores and should not be entered into lightly. It is the language of the law which reminds us that these most important decisions require the greatest study and the greatest care. And by expressing this, we can ensure that the rights we reluctantly compromise today are not readily compromised tomorrow.