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Law's Order: What Economics Has to Do with Law and Why It Matters
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6 of 6 people found the following review helpful
David Friedman is currently Professor of Law at the University of Santa Clara but is principally an economist, although, as he points out on his website, he "has never taken a course for credit in either field", having received his doctorate in Physics. His legal and economic thinking does not seem to have suffered for that, although I may not be best placed to judge.

In Law's Order, Friedman sets out to examine the argument of Richard Posner (a legal academic interested in economics) that the systems of civil justice are economically efficient, while those of the criminal justice system are generally not. He concludes that it is not quite as simple as that, indicating that there are pros and cons of the civil and criminal systems depending on the nature of the case, especially the number of externalities. He goes on to suggest that some matters dealt with as torts (i.e. through civil litigation), like minor motor accidents, would in fact be better dealt with as criminal matters, while criminal offences like burglary would be better addressed as torts. This is deduced after making the assumption that catching and punishing offenders is costless (and thus always achieved), which is indicative of the sort of assumptions that you have to make in order to work out economic efficiencies - in The Machinery of Freedom Friedman was very critical of the cost and inefficiency of the state-run legal system. This is, therefore, a book designed to challenge ways of thinking and not a blueprint for application in the real world. If I was slightly disappointed by anything in this book it was that Friedman did not further explain any of his ideas on anarcho-capitalism: mentioning anarchism does not perhaps aid the sales of books on law! The reader is likely to sense, in certain passages, however, that Friedman believes that private legal systems might work effectively and efficiently, and Friedman confirms this in the epliogue.

He devotes one chapter to considering private legal systems, and in part he restated ideas he had previously explained in "The Machinery of Freedom", including his description of how private justice worked in mediaeval Iceland. I had expected more on how the private sector might run the justice system, but this was not the focus of the book, and Friedman resisted any temptation to suggest that state-administered justice was not just as efficient as he thinks free-enterprise justice might be. He does, however, provide another historical example of what he argued was essentially a privately funded system of justice, that of Eighteenth century England. This was a period in which imprisonment was not used as a punishment (although transportation into legal bondage in the Americas, and subsequently Australia, was) and hanging was the legal remedy for most crimes. Execution, Friedman explains, is cheap, but not economically efficient, because it destroyed a potentially productive member of society and might leave a family dependent on the charity of the parish. In fact, only a fraction of those sentenced to hang actually did so, and that was where the economic effect came in: friends would petition squires, squires might petition aristocrats and aristocrats influence the "justice" system, exchanging favours (which Friedman say as having economic value) to ensure the pardon of the (by then) most chastened and compliant felon. I had read explanations of Georgian justice before, but this was the first to suggest that rather than being a barbaric system only tempered by the effects of patronage, that it was in fact a system to be praised for its economic efficiency. Friedman is certainly not recommending Georgian and early Victorian justice as a system for the modern age, although he does suggest that certain aspects of it could have a role. He also cites an informal legal system (or social norms) for dealing with disputes between farmers and cattle ranchers in Shasta County, California, as an example of a modern day, private system of justice.

David Friedman delivers academic courses on the economics of law. He says that this book is written for three types of reader: the "intelligent layman", the legal professional wishing to know more about an economic approach, and for students of law or economics. He writes in a self-deprecating and humorous style, and the language, less the necessary legal and economic terms, is generally plain and simple. Nevertheless, understanding Friedman's argument is sometimes quite challenging.

One of the most innovative aspects of this book (at least, it was to me, as I had not come across it before) is that almost all of the references are given by means of "icons" in the margins, indicating that on the webbed version of the book on Friedman's website the link to the additional material would be found. Friedman also suggested that he would use the web version to make amendments and updates, although I did not find any. It is also an interesting approach, in the last two pages of the book, for the author to list many of the omissions and simplifications in his argument and to challenge readers to try to remedy them.

It may be intended for a limited readership, but I recommend this book to anyone interested in the twinned subject of economics and law.
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