Equality Between Efficiency and Distribution: A Law and Economics Reconceptualisation of a Principle of Justice

Summary

INTRODUCTION

Much of the intellectual allure of economics – including for lawyers – lies in its reductionism. Reductionist theories find richness in parsimony. They trace diverse phenomena back to a few basic principles, preferably a single one. If successful, they uncover commonality in difference, and hidden association between the seemingly unrelated. The more the central principle proves itself through explaining existing regularities, the more it also becomes a benchmark for identifying and critiquing deviations.

For all their possible benefits, reductionist approaches come at a cost. Much received wisdom can no longer be taken for granted, but must be painstakingly deduced from a limited set of principles. Equality in economic theory provides an example. For lawyers and philosophers, it is itself a fundamental principle of justice that neither requires nor lends itself to further justification, and competes only with liberty for precedence. By contrast, equality does not count among the first principles of normative (law and) economics. One might be tempted to conclude that equality of form or substance has no significance for law and economics.

This chapter aims to dispel this perception. To demonstrate that law and economics has a concept of equality, one first has to locate equality within the system of normative economics. Lawyers and philosophers traditionally assign equality to distributive justice ( iustitia distributiva). This suggests that equality should be classified as a problem of distribution also in economics. However, it will become apparent that the economic concept of distribution is narrower than the traditional understanding of distributive justice, because it relates only to the distribution of monetary wealth. It follows that, from an economic point of view, many equality concerns present themselves as issues of efficiency, not distribution. It is here that the advantage of a reductionist approach best shows itself: reconstructing duties of equal treatment from an overarching goal of economic efficiency provides a justification – rather than a mere assertion – of the imposition of such duties and their limitations.