In his treatise, Overcoming Law , the legal scholar Richard Posner spends a great deal of time exploring the relationship between economics and the law.
In doing so, he focuses on the ideas of two economists, Ronald Coase , who won the Nobel Memorial Prize for Economic Sciences in 1991, and George Stigler, the author of The Citizen and the State: Essays on Regulation . Posner explains their diverse points of view in the following way: The Swedish Academy had also emphasized Stigler's theory of regulation . . . as "treating political behavior as utility-maximizing [and] political parties as firms supplying regulation, with what is supplied being what is wanted by those groups (or coalitions) which are able to outbid others in the political market. -Posner, Overcoming Law, pp. 411-412 (italics added)
These terms, and the vast bodies of formal theory that have grown up around them, assume the fragility of markets and the robustness of government, whereas Coase believes that careful observation of markets and government discloses the robustness of markets and the fragility of government . -Posner, Overcoming Law, p. 413 (italics added) To summarize, Stigler proposes that the government is the only institution that can regulate the economy successfully, while Coase argues that the government is a fragile obstacle that cripples rather than promotes economic activity.
By pointing to these two positions, Posner has suggested another area of the law that needs a proper balance. In fact, he is repeating the arguments of Keynes and Hayek discussed earlier in the book. So the debate continues. Do we need the government in the economy or do we need an economy that is free from governmental interference?
Self-Evident Questions
1. What brief argument does Stigler offer for his position in favor of government intervention in the economy? Explain.
2. What is the major objection that Coase has for opposing government intervention into the economy? Explain.
3. Which view supports the idea that the judicial-economic system is a flexible and responsive system? Explain.
4. How would you suggest that we balance the views of Stigler and Coase ? Explain.
5. In the real world of the 21 st century, which system has prevailed? The Stiglerian interventionist system? Or the Coasist laissez-faire system? Explain.