NICHOLAS MERCURO Posnerian law and economics on the bench

Prévia do material em texto

International Review of Law and Economics (1984), 4 (107-130) 
POSNERIAN LAW AND ECONOMICS ON THE 
BENCH* 
WARREN J. SAMUELS 
Department of Economics, Michigan State University, East Lancing MI 48824, 
USA 
AND 
NICHOLAS MERCURO 
Department of Economics, University of New Orleans, LA 70122, USA 
Richard A. Posner has been one of the most productive and influential scholars 
working in the field of law and economics. Indeed, the prolific and wide ranging 
nature of his writings, the vigor with which he has advanced his particular approach 
and its supporting arguments, together with the absorbing quality of that approach, 
have in combination resulted in his having set the agenda for much of the 
scholarship-research and argument-during the last decade. l In fact, much of the 
work in the field of law and economics represents footnotes to and arguments over his 
approach and its many applications. 
Posner’s approach to law and economics contains both a positive and a normative 
argument. In his positive writings, Posner argues that wealth maximization can be 
used to explain and describe the development and the evolution of the common law. 
Normatively, Posner argues that wealth maximization is a desirable, and feasible, 
principle for use in developing law and rights. In short, wealth maximization both is 
the explanation of law and rights and ought to be the basis for the development of law 
and rights. Such a summary perhaps states Posner’s argument more baldly and less 
subtly than it warrants, but it does accord with his own characterization9 and it does 
represent what researchers in the field understand him basically to be saying.3 
Although Posner’s approach and specific arguments have been subjected to 
substantial and perhaps devastating criticism, it remains important, for reasons 
beyond the insights which it has provided to the particular areas of law on which he 
has written. Certainly Posner’s work has underscored, perhaps with a vengeance and 
clearly with candor, the fact that both common and statute law have promoted the 
transformation of the legal foundations of the economy from a post-feudal to a 
capitalist or market economy, from one in which landed property (law, power and 
orientation) dominates to one in which nonlanded property dominates, and from one 
in which status unabashedly dominates to one in which contractual market relation- 
ships and transactions dominate (however much such may reflect and give effect to 
underlying power structures).4As such, legal institutions are not given immutably by 
nature but are themselves a response to economic needs and flexible in response to 
changes in those needs. Thus, law is neither absolute, nor exogenous, nor given, but a 
*Both authors acknowledge the assistance of Douglas Anderson and thank Professor Charles K. Rowley, 
Judge Richard A. Posner, and two anonymous reviewers for helpful comments. 
0144-8188/84/02 0107-24 $03.00 0 1984 Butterworth & Co (Publishers) Ltd 
108 Posnerian law and economics 
matter of human construction. While Posner’s work has profoundly nourished and 
abetted the development of the field of law and economics, it has also helped to 
identify (though perhaps no part of his original intentions) fundamental questions of 
legal practice and policy, and of legal history and theory. The questions that he has 
raised are questions on which his approach tends to take a particular (but by no 
means conclusive) position. 
Posner’s concept of wealth maximization emerged from his attempt to find a 
principle that would cure the defects, he perceived, associated with efficiency (i.e., 
Pareto superiority) and the utilitarian imperative underlying the Pareto criterion.5 
Specifically, he defined wealth as follows: 
Wealth is the value in dollars or dollar equivalents . . . of everything in 
society. It is measured by what people are willing to pay for something or, if 
they already own it, what they demand in money to give it up. The only kind 
of preference that counts in a system of wealth maximization is thus one that 
is backed up by money-in other words, that is registered in a market.6 
From Posner’s standpoint, ‘the system of wealth maximization, . . . could be viewed 
as one of constrained utilitarianism.‘7 
Posner has acknowledged that, in effect, this is analytically equivalent to the 
Kaldor-Hicks criterion.* Consequently, wealth maximization is subject to many of 
the same criticisms that have been directed at the Kaldor-Hicks criterion. In addition, 
Posner’s wealth-maximization approach has been subjected to several other 
criticisms. First, his analysis is said to lack a specific theory of judicial behavior by 
which it could be understood that courts are maximizing wealth. Without such a 
theory, the literature erected on this shaky foundation cannot claim much 
explanatory power. Second, and closely related to the first, is that wealth 
maximization is of instrumental value and, as such, has been said to be inconclusive. 
Posner has neither sufficiently nor conclusively established wealth maximization as 
the normative basis or objective for judicial decision making. Third, it has been 
argued that Posner’s analysis lacks explanatory substance and wealth maximization 
lacks feasible application because of a fundamental circularity problem. The point 
here is that wealth maximization requires and affects prices. However, an antecedent 
determination and specification of rights is first needed to establish the prices required 
to employ wealth maximization. Consequently, it cannot be used to determine rights. 
Further, from this perspective, if one understands efficient or wealth-maximizing 
results to be generated by rights, any rights configuration produced by the courts will 
lead to some wealth-maximizing result. There being no unique wealth-maximizing 
result, it does not explain much to say that courts do, or for that matter ought to, 
facilitate specific wealth-maximizing outcomes. Any, or substantially any, decision as 
to rights, particularly in the area of property law, will, through subsequent exchange, 
lead to an efficient or wealth-maximizing result. Fourth, inter alia, it has been argued 
that that wealth-maximization approach either neglects or gives indirect effect to the 
existing distribution of wealth and power (predicted in part upon law other than that 
at issue in particular cases). That is, market prices are used to generate the costs and 
benefits which in turn ostensibly enter into wealth-maximizing decisions. However, 
the market prices reflect and give effect to the underlying distribution of wealth (as a 
means of weighting preferences). More narrowly, insofar as willingness to pay is a 
function of the distribution of wealth, the use of offer- versus asking-prices will tend 
to reflect that distributional choice.9 
Criticisms such as these have raised fundamental questions. Can wealth 
W. J. SAMUELS AND N. MERCURO 109 
maximization as a criterion be used to make coherent, consistent and determinate 
legal decisions? Is maximization of wealth a decisional criterion uniquely dispositive 
of issues of law and rights? What is thepolicy nature of law and of the judicial process 
in light of the wealth-maximization criterion? What is thepolicy nature of the wealth- 
maximization criterion itself? What is it that courts do, assuming that they are 
pursuing wealth maximization, and what does that have to say regarding the proba- 
tive value of the criterion itself? 
We are now in a position to pursue a certain type of insight into these and related 
questions. Since late 1981, Posner has been a judge on the United States Court of 
Appeals for the Seventh Circuit. Through roughly April 1983 he has participated (by 
writing opinions for the Court or preparing concurring and/or dissenting opinions) in 
120 cases. lo The purposeof this article is to explore those opinions, inquiring how 
Posner’s brand of economic efficiency, namely, wealth maximization, has entered 
those opinions and what they reveal as to the nature and limits of the wealth- 
maximization approach. 
We want to make clear what we are nor trying to do in this article. First, we are not 
going to either evaluate or interpret Posner’s technical treatment of law, or his legal 
reasoning qua legal reasoning, in his opinions. Whether his (or the Court’s) decisions 
‘correctly’ follow precedent or ‘correctly’ interpret statutes and common law 
doctrines, is not something which we are qualified to evaluate or, for that matter, are 
here interested in evaluating. Thus, we are not interested in whether his decisions 
make ‘good’ law or whether different case law or legal thinking of some sort 
could-or should-have been used to sustain a different decision, either procedurally 
or on the substantive merits. Second, we are not technically interested in the ideology, 
values of implicit normative premises which guided either the Court or Posner himself 
in reaching those decisions. Although we will elaborate on the role of normative 
premises, we are not interested in the specific normative premises which seem mani- 
fest in his opinions. In short, we are not interested in arguing with either Posner’s law 
or ethical philosophy and will consider them (their general presence) only insofar as is 
necessary to understand the role, nature and limits of wealth maximization as evident 
to us in his opinions. We note that in our discussions of the several cases with each 
other, preparatory to writing this article, we have from time to time assessed the 
holdings of the court and found that we did not always agree among ourselves; in fact, 
in some matters each of us was more ‘liberal’ and in others more ‘conservative’ than 
Posner. Third and finally, we are not trying to undertake an economic impact analysis 
of each case. We are interested in describing what insights can be drawn from Posner’s 
writings on the bench, as evident to us in his judicial opinions, and their relationship 
to Posnerian law and economics, specifically, his wealth-maximization approach. 
Before proceeding, we would like to make some general observations regarding 
Posner’s Seventh Circuit opinions. Like his previous academic writings, the opinions 
are clear and articulate, perhaps well above average for their genre. Whatever one 
may think of his premises or philosophy of law and government, his opinions are 
closely and otherwise well reasoned. In addition, in contrast to those instances where 
he clearly objects (especially in dissent) to the law and to the policy underlying the law, 
he adheres to the apparent reasonable intent of the law (including legislation) even 
when he may be expected to disagree personally with that law and its policy. 11 In many 
respects his is an impressive judicial performance. 
Posner also is to be complimented for his frequent perceptivity and candor. In his 
written opinions we find a sensible, if not perfect, solution to a variety of problems 
confronting the court, for example, in personal injury cases, the treatment of future 
110 Posnerian law and economics 
wages and the discount rate for inflation. I2 In that case he notes that ‘previous wages 
do not put a cap on an award of lost future wages,’ and with respect to the argument 
made in the case that an employee cannot testify as to an agreed-on wage on the 
grounds it is hearsay evidence, Posner wrote that ‘an employee’s wage is as much in the 
personal knowledge of the employee as of the employer.‘*3 In a case concerning alleged 
executor mismanagement of the portfolio of an estate (largely comprised of stock 
holdings), with regard to future stock prices, Posner writes that ‘lack of clairvoyance is 
not negligence. ’ I4 In a case involving an Illinois statute attempting to restrict the 
import into that state of spent nuclear fuel, Posner notes both that ‘the efficient 
disposal of wastes is as much a part of economic activity as the production that yields 
the wastes as a byproduct . . .‘I5 and, a remarkable acknowledgement by a federal 
court, ‘there is as yet no acceptable method of permanent, safe storage. . . .‘I6 In 
addition, in a case involving a small corporation, Exxene, being sued by Exxon for 
trademark infringement, Posner notes that ‘Exxon . . . is a huge corporation whose 
resources for litigation are for all practical purposes unlimited . . . its team of 
appellate lawyers in this case was so large that it could not fit around the counsel table 
in our courtroom.‘17Elsewhere, in the context of a class action suit, he recognizes that 
unanimity is a workable decision rule only when the number of parties to a transaction 
is small, consequently in a typical class action suit, coercion of some members of the 
class is inevitable;‘* that ‘a right [of a worker to discuss his grievance with other 
employees] can be denied [by employer’s threats of retaliation] before its exercise is 
attempted or even contemplated;‘i9 and that ‘federal courts do not stage academic 
tournaments merely for Don Quixotes to practise knighthood.‘20 In a case involving a 
revocation petition for a nuclear generating plant permit, he notes that ‘if the League 
[of Women Voters] is right in its insinuation that the [Nuclear Regulatory] Com- 
mission is a captive of Commonwealth Edison there is very little this court can do’ 
unless the Court was ‘strongly convinced that the Commission was inexcusably 
defaulting on its fundamental responsibility to protect the public safety from nuclear 
accidents.‘21 And he notes that terms like ‘substantive’ and ‘procedural’ ‘are con- 
clusions more than they are criteria.‘22 
Somewhat curious, however, particularly in light of Posner’s affection for the 
market and general conservative ideology, is his use of the Marxian phrase ‘surplus 
value;‘23 his recognition of social class (‘Shanley . . . retains the dress, speech, and 
general demeanor of a blue-collar worker . . . Shanley’s working-class demeanor 
probably disqualified him in the eyes of management from running the PRO Pro- 
gram’);24 and his acknowledgement of the possibility of ‘excessive compensation’ to 
an insurance company.25 Curious also, in the light of the historic state of the common 
law, is his criticism of hypertechnicality, 26 his reference to the term ‘cessation’ as used 
by the Social Security Administration ‘as bureaucratese,‘27 and his opposition to 
‘lawyerizing’ prisoner civil litigation.28 
I. WEALTH MAXIMIZATION 
For all the controversy generated during the last decade by Posner’s approach to law, 
and for all his activity promoting it, his formal opinions on the bench neither discuss 
in depth nor, for that matter, even mention the maximization of wealth approach as 
such. Although the wealth-maximization approach frequently (but by no means 
solely) underlies the reasoning given in his opinions-which, aside from his particular 
conservatism, are relatively conventional-it is passively and relatively incon- 
spicuously displayed. 
W. J. SAMUELS AND N. MERCURO 111 
The principal manner in which the maximization of wealth approach enters 
Posner’s judicial opinions is through the invocation of a typically rudimentary but 
occasionally sophisticated benefit-cost analysis. Posner will use what he considers to 
be a comparison of relative benefits and costs to reach (or at least state) judgments as 
to the solutions of problems of rights and liabilities. He is concerned with the ‘cost- 
justified level of care’ as the basis for determining liability;2g with minimizing trans- 
action costs as a criterion for determining rights;30 with the placement of the burden 
of liability on the party able to avert an untoward consequence at least cost;31 with 
minimizing the information costsassociated with fashioning a remedy;32 with 
comparison of the costs and benefits of a suspected criminal’s right to remain silent 
with ‘the value to the state’ of certain information, that is, with weighing a certain 
preventive effect (i.e., preventing erroneous acquittals on grounds of insanity) against 
the burden on the exercise of the Fifth Amendment right against compulsory self- 
incrimination;33 with avoiding over-deterrence, with its excessive social costs;34 with 
the relative burdens and benefits involved in balancing the interests protected by a 
‘held in abeyance’ proviso of an unemployment compensation statute;35 and with the 
costs and benefits of procedural safeguards.36 
Posner’s application of the efficiency standard is no surprise. As he has written, he 
simply believes it to be an important social value. He stated: 
Since the efficient use of resources is an important although not always 
paramount social value, the burden, I suggest, is on the authors to present 
reasons why a standard that appears to impose avoidable costs on society 
should nonetheless be adopted.37 
Thus, we find that ‘due care depends on the cost of an increment of care in relation 
to its expected benefits;‘38 and that ‘the failure to perform a legal duty is negligence, or 
if the cost of performing it would be much less than the expected benefits, gross 
negligence. ‘3g 
In a case involving the due process clause Posner accepts and uses ‘a simple 
cost-benefit test of general applicability for deciding whether due process requires 
notice and hearing before government may deprive a person of property,’ one which 
requires ‘comparing the benefit of the procedural safeguard sought, which is a 
function of the value of the property interest at stake and the probability of erroneous 
deprivation if the safeguard is not provided, with the cost of the safeguard.‘40 He also 
approaches First Amendment rights concerning the free exercise of religion on the 
basis of perceived relative costliness, balancing the relative burden on the private 
parties to continue to observe their religious practices versus the burden on the 
government to relax conditions attenuating that observance.41 Posner adopts and 
elaborates upon the rule of Judge Learned Hand in which liability is reduced to a 
formula comparing the cost burden of prevention against the magnitude of loss 
multiplied by the probability of accident. If the burden exceeds the multiplicative 
amount, there is no indemnification, the risk being deemed background risk; if the 
burden is less than the multiplicative amount, there is indemnification on account of 
deemed negligence.42 
Invoking wealth maximization through benefit-cost analysis, while an honorific 
mode of analysis (or at least of discourse), begs the issue which always is central in 
these cases before the court: whose interests will be elevated to the status of protected 
rights so as to count in the calculus of wealth maximization. Courts determine the 
relative rights and thereby the wealth-maximizing outcome. The critical role of 
judicial choice is in determining whose interest counts, which ultimately governs the 
112 Posnerian law and economics 
wealth-maximizing result actually achieved. Judges do this by selectively identifying 
interests, by selectively weighing them (as indirect/direct or minor/major and so on), 
and by giving effect in the implicit computations to one interest rather than another. 
Maximization of wealth in practice is functional with regard to and tautological with 
the determination of rights, and it is the determination of rights (of whose interests are 
to count) which drives the particular result said to be wealth maximizing. 
Maximization of wealth can be an explicit (or implicit) goal of policy but it has no 
singularly dispositive result. The actual results depend on the rights affirmed/denied 
in each case, and it is the rights which are at issue in each case. The logic of wealth 
maximization does not give a clear and unequivocal solution in any case without 
additional selective normative premises regarding interests.43 It is only a mode of 
discourse and a selective cachet given to judicial decisions and decision making. In 
reaching those decisions, some implicit determination is made, independent of the 
logic of wealth maximization itself. 
That this is what actually is transpiring in the balancing of benefits and costs, which 
purportedly maximizes wealth, is occasionally acknowledged, if only implicitly, by 
Posner himself. He recognizes that the political process weights certain preferences 
more heavily than does the market. 44 (He notes that neither equity nor efficiency is 
dispositive of an issue.)45 He recognizes that the essential question involves the rela- 
tive rights of the parties wherein he stated ‘The essential question . . . was not what 
rights Curtiss-Wright had against the defendants but what rights it had against the 
other plaintiffs. . . . The only issue the judge had to decide was whether this result 
was more equitable than the uniform allocation contended for by Curtiss-Wright.‘46 
In other instances, Posner, to his credit, qualifies his use of economic analysis, 
particularly the making of benefit-cost comparisons, in legal matters. He recognizes 
the ineluctable exercise of judicial choice and the difficulties in using economic 
analysis in law, in affirming that the economic analysis is not capable of reaching by 
itself unique determinate results. He observes that the exactness of economic analysis 
in litigation is ‘somewhat delusive.‘47 He also urges that ‘Though mathematical in 
form, the Hand formula does not yield mathematically precise results in practice; . . . 
Nevertheless, the formula is a valuable aid to clear thinking about the factors that are 
relevant to a judgment of negligence and about the relationship among those 
factors.“@ Posner recognizes that there are measurement problems in comparing 
benefits and costs;49 in undertaking a benefit-cost test for due process purposes, 
quantification is rarely possible but, again, mathematical expression of the 
relationships ‘may assist in thinking about the tests.‘50 
Posner’s position is largely based, it would seem, on the inability to be mathe- 
matically, or statistically, precise in practice; otherwise, perhaps, the comparison of 
benefits and costs would enable determination of rights. If that is his position, or to 
the extent that it is, it is wrong because of the circularity problem. Benefit-cost 
comparisons do not exhaust the relevant factors regarding assignment of rights, 
placement of liability, etc. The problem is not that we do not have the data with which 
to use wealth maximization. The problem is that wealth maximization does not and 
cannot itself (even with complete data) determine rights. The rights must be 
antecedently determined in order to pursue wealth maximization and this antecedent 
determination is a matter of social control accomplished in the legal area by judicial 
choice. 
He also seems to recognize that rights qua rights are important independent of 
relative costs and benefits. In a case involving the refusal of employees to cross a 
picket line at the premises of the employer’s customer, Posner writes, ‘There is 
W. J. SAMUELS AND N. MERCURO 113 
another reason to treat such conduct as protected. Such treatment allows a more 
flexible comparison of the benefit to the workers and the burden to the employer. To 
hold such conduct unprotected would allow the employer to suppress it even if its cost 
to him was trivial. Holding that it is protected does not make it sacrosanct but does 
require the employer to demonstrate good cause for suppression-and to the issue of 
good cause we now turn.‘s1 He recognizes, in a case involving the scope of discretion 
of government agencies, the subjective characterof their maximization of value 
through the use of their resources. He wrote, ‘The courts cannot tell them how to 
allocate those resources so as to get the most value out of them. That calls for a 
managerial judgment.‘52 Elsewhere he asserts that an unequal distribution of wealth 
among school districts necessarily has an effect on financing school desegregation, 
apropos of which equity considerations also are apposite.53 And, mirabile dictu, he 
writes that once we ‘look behind labels’ we find that ‘viewed functionally, property is 
what is securely and durably yours under state (or . . . federal) law . . .‘s4-in which 
instance it seems obvious that this is precisely what is at issue in the case. But such 
recognition is the exception rather than the rule. As stated above, more typically the 
role of judicial choice is obscured in a discourse of benefit-cost comparisons. 
Elsewhere, the distinctive Posnerian approach to maximization of wealth is 
finessed. In one case, writing of a carrier’s right to recover undercharges, Posner says: 
‘This is a harsh rule. Courts strain against it. A favorite device is to find that a tariff 
is ambiguous and then interpret it to reach a result that the court considers just. That is 
what the district court did in this case.‘55 Such straining seems to be done by someone 
else, not by him or his court. But what of Posner’s past writings which purport to 
discern the efficiency of the common law? Is the lower court’s device-mongering a 
movement toward efficiency? Is the device pro-efficiency or a wedge against 
efficiency? 
In another case, Posner, who as an academic showed an antipathy toward strict 
liability rules of statute law in favor of efficiency-producing judge-made common 
law, accepts (and may be interpreted as applauding) a statutory change from strict 
liability (the doctrine of unseaworthiness) to negligence, a move deemed by his 
approach a movement toward efficiency (wealth maximization) but achieved, not by 
the courts, but by the Congress.56 What caused the courts to fail to move toward the 
so-called efficient rule? 
The answers to efficiency related questions in law are ultimately a matter of judicial 
choice governing the rights which are at issue in each case. Judicial choice enters the 
wealth-maximizing process through the court’s antecedent determination of costs (by 
recognizing and enforcing interest-claims as costs for others, or not) and benefits. 
This is accomplished, among other ways, through the adoption of one liability rule or 
anothers as well as through the interpretation of statutes in such a manner as to 
govern the respective rights and opportunities of the parties.58 The same point can be 
made with respect to constitutional decisions. In a First Amendment self- 
incrimination case, Judge Cudahy noted in dissent that application of the majority’s 
balancing test makes little sense. He wrote: ‘For if the State’s need for the challenged 
evidence is an appropriate factor to consider, constitutional rights would be honored 
only when their exercise is of no benefit to the accused.‘59 Elsewhere, in a First 
Amendment free exercise of religion case, Judge Cudahy dissented in a similar 
fashion, noting that the majority’s reasoning and holding, which ‘placed the burden of 
accommodation on the plaintiffs [those seeking First Amendment protection], may 
well be the more efficient solution but it does not in my view represent the prevailing 
law’@-which he envisioned as protecting more strongly, or weighing more heavily, 
114 Posnerian law and economics 
the First Amendment guarantees. But one cannot tell anything about efficiency until 
one has first determined the rights upon which efficiency is based. Further, there is no 
way of technically or scientifically comparing alternative efficient solutions without a 
subjective determination of whose interests are to count. 
In other areas of law Posner pursues this same line of reasoning. He recognizes that 
government agencies may bow to political pressure and make decisions not motivated 
by agency interests, which, he says, reduces their efficiency.61 But the pertinent issue is 
what interests are to be reckoned in determining efficiency. In the wealth-maximizing 
process the results are governed by the interests given effect; which interests are given 
effect is a function of the process by which interests are weighed and selected. 
In a case dealing with possible entrapment, Posner, in a concurring opinion, wrote 
that ‘Thus in my view “entrapment ” is merely the name we give to a particularly 
unproductive use of law enforcement resources, which our system condemns.‘62 One 
wonders whether the wealth-maximization approach really adds anything to the 
understanding of the policy issues raised by the entrapment defense. The court still 
has to make a determination of rights and adjudge predisposition, and these matters 
may be approached in a variety of ways. Only on certain grounds, themselves 
equivocal, is there waste of resources. In a case involving prisoner’s rights, Posner 
writes ‘that instead of reflecting on the wrongs they have done to society our convicts 
. . . prosecute an endless series of mostly imaginary grievances.‘63 Here again he begs 
the point at issue, which is precisely whether the grievances are in fact mostly 
imaginary, that is, whether a determination thereof ought to be given solicitous 
attention by the courts. Posner presumably would be the first to agree that his strong 
antipathy toward the permissive treatment of criminals affects his perceptions in such 
matters.@ 
Two other cases subtly evidence the interpretive impact of Posner’s point of view. 
In the case in which Posner develops the Hand formula, he goes so far as to say that ‘if 
the shipowner persists in a dangerous practice-if the whole trade persists in the 
practice-that is some evidence, though not conclusive, that the practice is cost- 
justified, and not negligent.‘65 That such persistence may be a function of superior 
shipowner power and that the implicit benefit-cost comparison reflects such power 
are matters which seemingly escape Posner’s purview (see the discussion of power, 
Section VII, infra). And in a case involving rules governing citizen accessibility and 
procedures to have issues placed on an election ballot (a proposed nuclear arms freeze 
question), for Posner to say that ‘If and when advisory Ivis-ci-vis electoral] questions 
begin to show up on the ballot, we may have a difference case,‘66 is to beg the point at 
issue, which is the procedural rights governing access to the ballot and therefore what 
does, or does not, show up on the ballot. 
Inevitably selective use of costs and benefits, that is, inevitably selective application 
of the wealth-maximization approach, is a subtle means of judicial creativity (see 
Section V, in&). The creativity resides not in the approach per se but in the ante- 
cedent determination of rights and the consequent valuations which emerge and then 
are used in the wealth-maximization calculus. When it comes to rights, costs and 
benefits are derivative conclusions-they are not independent criteria to guide 
assignment of rights nor the placement of liability. 
II. JUDICIAL ECONOMY 
One facet of wealth maximization concerns the topic of judicial economy. Here 
certain basic considerations arise with clarity and relatively minimal complexity. 
W. J. SAMUELS AND N. MERCURO 115 
Posner’s written opinions in the cases encompassed by this study manifest his deep 
concern with reducing, managing, and allocating the costs of running the courts and 
the legal system generally. The theme of judicial economy arises in many cases. The 
issue of lowering litigation costs (in light of other considerations) is a principal 
concern of Posner under pendent jurisdiction, particularly with regard to the relativesuitability for adjudication in state versus federal courts, where the question of the 
amount in controversy is at issue. 67 The ‘waste of judicial resources’68 and ‘the drain 
on federal court resources at a time when the federal courts are groaning under an 
unprecedented caseload’69 are matters stressed by Posner. He recognizes the 
litigation-cost reducing role of res judicata, collateral estoppel, and the tort principle 
of remoteness of damage.‘* The requirement of federal appellate review of petitions 
for habeas corpus is criticized as both costly, demoralizing, and contrary to 
federalism.” He calls for an ‘optimal’ allocation of jurisdiction between federal and 
state courts.72 He criticizes the scant regard by Congress, as he perceives it, for the 
costs placed on the federal courts. 73 One opinion suggests that judicial economy could 
be achieved by maximizing mootness in order to limit the burdens on the courts.74 
Consent decrees have the advantage of sparing the parties and the courts the costly 
burden of tria1.75 In these and many other opinions,76 the importance of judicial 
economy is affirmed. 
It is difficult for economists not to applaud concern with economy and the 
avoidance of waste; and that certainly is, properly, a serious matter for society at 
large, including the courts. That consideration, derivative of underlying scarcity of 
resources in the face of alternative uses for resources, is not an issue we will address. 
Nor will we delve into the related question of the relative role of state versus federal or 
judicial versus legislative decision making in determining the allocation of resources 
for judicial purposes. What is important for present purposes is that decisions as to 
economy, for example, as to waste, are decisions which also determine whose interests 
are to count. What is ‘waste’ for one person or by one criterion may constitute 
enhanced or realized opportunity, perhaps income and wealth, and certainly rights, 
for another. 
Court decisions (and statutes) which, under the aegis of achieving judicial 
economy, determine jurisdiction, correlatively also determine (enable, negate) access 
rights to different courts. These access rights often have considerable impact on the 
precedential chain made applicable to and dispositive of subsequent litigant claims. 
Similarly, procedural and jurisdictional holdings in cases often govern directly the 
substantive rights of parties. In general, decisions regarding judicial economy 
function to help determine whose interests will count as rights, and whose will 
not-who will have access to certain modes of legal resolution and who will not. In 
this process of determining rights, the role of judicial choice often is paramount-a 
point obvious in the light of legal realist jurisprudence but obscured by the maxi- 
mization of wealth approach that underlies Posner’s deep concern for judicial 
economy. 
Thus, in pursuing judicial economy the courts are determining not so much wealth 
maximization absolutely, independently, or abstractly considered but the actual rights 
configuration by which wealth maximization is to be pursued. Certain interests will be 
allowed to enter and others not, certain interests will be reinforced and others 
debilitated. 
The matter vividly can be seen in cases in which the argument for judicial economy 
begs the point at issue. For example, in arguing that the importance of enforcing gate- 
keeping procedures is to prevent ‘unworthy’ motions, the ultimate issue is, what 
116 Posnerian law and economics 
motions are unworthy.” Similarly, the desire to conserve judicial time and effort by 
avoiding ‘unnecessary’ adjudication begs the questions of what adjudication is 
unnecessary and of what criteria are involved in determining ‘unnece~ary.‘~s Thus, 
too, the argument that the federal court lacks certain experience’s vis-ri-vis state courts 
is a function of past decisions which limited the federal courts’ jurisdiction (the access 
rights and exposures of parties) and thereby. begs the question when used as an 
argument to continue limiting jurisdiction, which is the point at issue. Note that the 
point here is not blindly to enlarge jurisdiction of the federal appellate courts but to 
indicate that judicial economy necessarily involves making decisions, largely by 
courts, which determine whose interests will and will not be sacrificed in the interests 
of ‘economy,’ ‘ economy’ being tautological with the decisions as to whose interests 
will and will not count. 
At times Posner is aware of the tension between rights considerations and judicial 
economy. In one case involving diversity status, he notes that where the issue is not 
‘access to a federal court but which federal court [the federal claimant] shall have 
access to,’ then ‘considerations of judicial economy become decisive, for there is no 
question of depriving a litigant of his right to litigate in federal court.@O However, he 
also notes therein that ‘once it is plain that the federal suit is going forward the state 
court may decide to stay the state suit. If it does not, there will be a loss of judicial 
economy if the federal suit is allowed to proceed but that may be the unavoidable price 
of giving diversity litigants their rights. . . .‘*I In another case involving personal 
injury damage, Posner recognizes the conflict between the limits of the right to 
introduce evidence and the management of costly trials and judicial load.82 In still 
another case he recognizes the conflict between the burden on the courts and greater 
compliance with civil rights laws, arguing therein that ‘such a suit places a burden on 
the courts that is disproportionate to the slight increment in compliance with the civil 
rights laws that such suits might bring about.‘*3 (Elsewhere he notes that a state 
Unemployment Insurance office has been trying to secure a ‘free ride’ on the state and 
federal criminal justice systems.)84 
More typically, however, judicial economy is invoked without any indication that, 
in economizing, the court is determining the interests to be counted and not counted, 
thereby yielding not a unique optimal or economizing solution but one derivative 
from and tautological with the determination of rights or denial thereof. That this is 
inevitable is irrelevant. The essential point to be made is that Posner’s application of 
judicial economy is a variant of wealth maximization and as such is one judicial choice 
process to determine whose interest will count in the legal arena. ‘Judicial economy’ 
as well as ‘wealth maximization’ provide a convenient discursive framework in that 
they cast luster on judicial choice as if that choice was merely giving effect to an 
independently determined maximization process. But their result is not unique. What 
is unique is their selective application, part of the fundamental judicial creative act of 
choice. 
III. BALANCING 
The comparison of benefits and costs is not the only form of balancing found in 
Posner’s judicial opinions. His opinions stress the role of judicial law making through 
various forms of balancing competing considerations in determining relative rights 
and relative obligations. But, for all the forms which balancing takes, it is the 
normative judgment exercised in balancing which determines the relative rights 
governing subsequent wealth maximization. 
W. J. SAMUELS AND N. MERCURO 117 
One finds, then, in Posner’s opinions, vis-ci-vis explicit judgments as to relative 
equities, the balancing of relative hardships between the parties,85 and the balancing 
of the consequences of following different rules of law86 or tests.*‘There is balancing 
between alternative considerations, such as allowing private contract or having law 
distribute risk between the parties;** promoting judicial economy through pendent 
jurisdiction or notimpairing the authority of state courts to decide issues of state 
law;89 deferring to state law or applying, or creating, federal common law;90 and so 
on. There also is balancing of the interests protected in a statute;91 of legal and illegal 
behaviour;92 of free speech against ‘efficiency’ in public employment;93 of competing 
social purposes;94 of alternative behavioral tendencies due to law;95 of the inconven- 
iences to the defendant and to the state in regard to a federal double jeopardy claim;% 
of least-cost-risk-prevention placement against the standard of due care;97 of 
confidentiality of informers against the defendant’s interest in developing an effective 
defense;98 of the reasonableness of alternative cost-related dates for determining 
capital cost calculations;w and of the independent contractor rule (that a principal is 
not liable for the torts of independent contractors) against considerations of risk and 
injury prevention and/or adequacy of satisfaction (deep pocket approach) and/or 
duty of principal to select a competent contractor, in determining contractor 
liability. loo In each of these cases, balancing involves ultimate judicial choice as to the 
interests to be recognized and given effect in law. 
In the case where Posner balances free speech against ‘efficiency’ in public 
employment,iol the very act of balancing can be seen to involve a selective deter- 
mination of the rights which enter into ‘efficiency.’ That is, in this case only the 
employer is perceived to be in favor of efficiency while certain worker interests 
putatively governing the efficient outcome are neglected or cast aside in favor of 
‘efficiency.’ Invoking this sort of balancing, Posner is determining the efficient 
outcome, not merely enabling it, vis-ci-vis alternative possible efficient outcomes.ie2 
Thus, with respect to balancing there are two important points to note. First, in 
many respects, the balancing evidenced in Posner’s opinions is more reminiscent of 
pure utilitarian thinking rather than any form of ‘constrained’ utilitarianism and, as 
such, is not really very unique. And second, for Posner to suggest that the court, in 
balancing interests, produces efficient solutions is not to say very much if anything. 
The reason is that efficiency can only be understood juxtaposed to the distribution of 
wealth.lo3 That is, the efficient outcome is governed by the rights structure repre- 
sented by the distribution of wealth. Each efficient outcome is rights-structure or 
distribution of wealth-structure specific, and that specificity is determined in part by 
judicial choice exercised in judicial balancing. 
IV. SELECTIVE PERCEPTION 
The fundamental force at work by the courts in balancing is selectiveperception. It is 
selective perception that is at the heart of the rights determination process and thus the 
maximization of wealth. As the present authors argued in connection with our 
analysis of the resolution of the compensation problem, the pervasive and dominating 
phenomenon is the differential perception of situations which are capable of different 
and often contradictory identifications. lo4 Such differences and contradictions are a 
function of selective perception. 
Selective perception is ubiquitous and often dispositive in the decisions under study 
here. There is a selective perception and determination of occupational hazardous- 
ness; lo5 the harmlessness of alleged error in jury instructions; lo6 the status of existence 
118 Posnerian law and economics 
of any federal common law of landlord-tenant relations or of real property;lO’ the 
transaction costs of alternative legal arrangements, .io8 what is covered in a contractual 
exchange; lo9 the coerciveness of the interrogation of a worker;“O the applicability of 
commercial credit extension law to nonpayment of debts in a case involving 
extortion;“’ the harmlessness of counsel error vis-ci-vis the right to the effective 
assistance of counsel;112 Congressional intent; 113 the definitions of ‘person,’ ‘wealth,’ 
and ‘profit;‘114 the judicial power of equitable reformation of common carrier 
tariffs; 1 l5 the laws that arbitrarily burden interstate commerce; 1 l6 whether a formal 
association of a state’s public and private high schools is ‘private’ or an ‘arm of the 
state;‘“’ the reasonableness of the cost of exercising the right of free exercise of 
religion under the First Amendment; lr8 the definition of competing interests;t19 the 
adequacy of state post-deprivation remedies; Izo the inclusion of entrepreneurs vis-ci- 
vis investors in the protection accorded by the Securities and Exchange Commission 
Act;121 the definition of ‘security; ‘122 the ‘reasonable possibility’ of improper jury 
influence; 123 which constitutional right protected by the Miranda rule, the right to 
remain silent or the right to have counsel present, is paramount;124 statutory inter- 
pretation of eligibility rules in government programs; I25 the definition of 
‘competition’ in the antitrust ‘sense; ’ 126 the existence of a prisoner’s right to copy; I27 
the meaning to be attributed to ‘reckless’ disregard by a bank official; 128 what is a ‘too 
broad’ reading of a rule; 129 a ‘proper conception of federalism;’ 130 when discovery is 
‘predatory,’ or when ‘unnecessary legal expense’ is placed on the other party to 
litigation; 131 the reasonableness of the balance between the interests protected in a 
statute;132 the trivialness of the number of persons affected by a provision;133 the 
determination of the chief wrong-doer in civil rights cases;134 the weighing of costs 
and benefits; 135 and the ‘optimal’ allocation of jurisdiction between state and federal 
courts.136 In each instance the perception of the court governs the determination of 
rights and any wealth-maximizing outcome. There is some indication that Posner 
recognizes the role of selective perception in governing the interpretation of facts and 
the application of law. In one opinion a case is remanded back to the district level but 
to a different judge.13’ 
V. CONTINUITY VERSUS CHANGE OF LAW 
Judicial opinions present the results of decision making. They are attempts at justi- 
fication and persuasion and, thus, a source of judicial creativity. Even though reasons 
often are given for utilizing one precedentiai sequence rather than another, typically, 
there is little indication of precisely how the underlying choices are made. Judges may 
not always be fully aware of why they held the way they did. 138 None the less, their 
decisions are typically presented in a conclusionary form with an aura of deter- 
minateness as if a matter of legal logic alone. 
Perhaps nowhere are the roles of balancing and of selective perception SO obvious as 
in matters of judicial choice regarding continuity versus change of the law. Decisions 
involving the relation of past to present law reflect a judicial creativity that determine 
the present structure of rights and thereby the actually achieved wealth-maximizing 
result. Indeed, the most subtle form of judicial creativity involves its unobtrusive but 
none the less definite role in effectively choosing between alternative possible wealth- 
maximizing results. All this is amply evident in Posner’s opinions. 
Not surprisingly there are a number of instances when Posner affirms the value of 
continuity of the law and directs criticism at judicial creativity. There are, perhaps not 
surprisingly, other instances in which Posner affirms the value of judicial creativity 
W. J. SAMUELS AND N. MERCURO 119 
with regard to a particular change in law and/or jurisprudence. In moving selectively 
from one position to another Posner’s opinions, and the decisions which they 
embody, reveal the misleading character of the maximization of wealth approach, for 
wealth maximization could have obtained in each case with the exactopposite 
resolution of the problem of continuity versus change of law. 
Cases in which Posner selectively affirms the value of continuity of the law include 
those in which he rejected a writ of audita querefa on the ground that it had never 
hitherto been used in any criminal case139 (given the principle that one cannot derive an 
ought from an is alone, the role of an implicit, and pro-continuity, normative premise 
is obvious); declared the remoteness of the claimed relief from the original purpose of 
habeas corpus;“@ held that ‘Our law is not rich in alternative concepts of monopolistic 
abuse; and it is rather late in the day to try to develop one without in the process 
subjecting the rights of patent holders to debilitating uncertainty;‘14’ and inter aliu, 
abided by what he interpreted to be legislative history and intent in deciding the 
applicability of a statute to the issue at bar. 142 
Among the instances in which Posner selectively affirms the value of changing law 
and thus the judicial-creative role of law are cases in which he recognizes the 
evolutionary tendency of the common law;143 questions whether a particular 
precedent ‘is still good law’ and asserts that ‘Constitutional law is very largely a 
prediction of how the Supreme Court will decide particular issues when presented to it 
for decision’ 144 in which case Judge Cudahy, in concurring, claims that the majority 
decision is ‘a conspicuous exercise in judicial activism. ‘145 Posner also recognizes the 
creative role of federal courts in fashioning new enforcement devices in Consti- 
tutional Law (for example, the Miranda Rules’% and Fifth Amendment federal 
common lawt4?; notes ‘current judicial hostility to’ the pendent parties concept;‘48 
and that the ‘Taft-Hartley Act gives the federal courts the power to create a federal 
common law to govern the interpretation of collective bargaining agreements.‘149 He 
also acknowledges the creative role of the courts regarding the imagination necessary 
to apply or interpret patent law;150 recognizes instances of ‘a purely judge-made 
exception to the diversity jurisdiction,‘lsl a judge-made rule,152 and a judge-made 
exception to a blanket statutory prohibition;153 notes Supreme Court inroads into an 
area (family law) once the secure preserve of states’ rights;154 recognizes a decision 
that rejected authority in three other circuits as a ‘frankly innovative decision;‘1s5 
affirms a creative role in defining property rights as interests and vice versa;156 and, 
after comparing the original authors’ view of the First Amendment to what he calls 
the ‘modern view,’ recognizes the latter as controlling. ls7 
One of the more striking examples of his selective affirmation of jurisprudential 
change and judicial creativity involves antitrust law and the treatment of the idea of 
competition. In one case, he writes of the antitrust laws that ‘there is a sense in which 
eliminating even a single competitor reduces competition. But it is not the sense that is 
relevant in deciding whether the antitrust laws have been violated. Those laws, we 
have been told by the Supreme Court repeatedly in recent years, are designed to 
protect the consumer interest in competition ‘. 158 In that same case he goes on to write 
that a particular precedent ‘in any event belongs to an era in the Supreme Court’s 
antitrust jurisprudence when the Court was concerned with the welfare of individual 
competitors as well as with the health of the competitive process viewed as a means of 
protecting consumers.‘159 The position is reiterated in other cases in which he lauds 
what he sees as the ‘contemporary philosophy of antitrust,‘i60 the ‘antitrust laws as 
currently interpreted,‘161 and the ‘current’ view of antitrust, again especially as 
regards the meaning of ‘competition. ‘162 The important structural, and thereby maxi- 
120 Posnerian law and economics 
mization-of-wealth, consequences of one interpretation of antitrust law vis-&vis 
another is obvious. 
There are other examples of Posner’s recognition of the temporal and 
circumstantial quality of the bases of law. He writes that ‘we would not feel free to 
impute the morality of the 1980s to the Congress of the 193O~.‘i~~ He recognizes the 
political character of Federal Trade Commission policy particularly in ‘a feisty era 
. . . under the controversial chairmanship of Michael Pertschuk.‘l@ He writes of 
‘1934, the heyday of pro-union legislation,‘165 of a past decision being a product of its 
time,‘& and of a ‘hectic period’ of regulatory statutes.i6’ 
Another temporal example of his selective affirmation of change is a case which 
involves a creative role for legislation, wherein Posner strongly advocates 
Congressional reforms in the habeas corpus statute. 16* Here he says that ‘Times have 
changed, and recent decisions of the Supreme Court reflect a much greater receptivity 
against an expansive right of federal habeas corpus. ‘16g Here too is where an earlier 
decision is held to have been a product of its tirne”O and where he opposes a statute 
freezing a standard derived from the earlier decision, 17’ and writes of the ‘outmoded 
jurisprudence’ of the earlier decision. 172 
Balancing continuity and change is inevitable in law and it is clear that Posner 
sometimes affirms continuity and other times change. The important point here is 
that electing one or the other in each instance (or some mixture) determines 
which/whose interests count. The rhetoric of wealth maximization serves only to 
obscure the role of judicial choice and judicial creativity in matters of continuity 
versus change. 
VI. PERFORMANCE CRITERIA 
Another characteristic of Posner’s judicial opinions which confirms our belief that 
the maximization of wealth approach ultimately reduces to the exercise of judicial 
choice involves his selective application of performance criteria. His recognition and 
use of selective criteria of performance serves as a basis for decisions governing rights 
and works to produce a specific wealth-maximizing outcome in each case. In this 
context, the application of certain performance criteria can be viewed as a mode of 
defining and achieving social purposes. As such, judicial law making generates and 
not merely mimics or simulates market results. 
One finds, then, in Posner’s opinions immediate concern with specific policy and 
purpose: recognition of the policy existing behind statutory requirements, and of 
doctrines seeking to carry out a Congressional purpose; 173 affirmation of new policies 
to deal with ‘multiphasic’ criminal prosecutions;174 recognition of the redistributive 
and macroeconomic objectives of unemployment insurance; 175 and general judicial 
concern with policy. 176 
One also finds discussions emphasizing the role of functional purpose of law: that 
legal rules must be deemed to serve contemporary functions;“’ that rights have 
consequences which should be considered in determining them;178 and recognition of 
competing social purposes. 179 
Another facet involves the design of a desired incentive structure (and therefore 
performance), for example, in agency law, Iso tort law,rsl and regarding the discipline 
of the labor force,ls2 as well as of municipal officers. ls3 There is a recognition that 
alternative incentive structures have an impact on the deterrence of patent fraud, Is4 
on the promotion of creativity of art works in copyright law, I85 and on litigation in 
general. Is6 Further, Posner recognizes an objective of federal labor law to minimize 
judicial intervention in disputes normally resolved by arbitration and the standards 
W. J. SAMUELS AND N. MERCURO 121 
that serve to promote this end. ls7 
It seems obvious that maximization of wealth, as governed by the application of 
selective performance criteria, is intended to vary with different policy, purpose, and 
function.VII. POWER 
We come finally to power. In the maximization of wealth in the market personal 
preferences and interests are weighted across individuals by power (income and 
accumulated property). The maximization of wealth actually achieved is specific to 
the multiplicative effects of preference weighted by the power structure. So too with 
respect to judicial choice, where the comparison of benefits and costs always is from a 
particular point of view or interest, and the operative supremacy of that point of view 
vis-ci-vis others is a function of the power structure. 
In his judicial opinions, Posner selectively recognizes as well as ignores the role of 
power. He recognizes, for example, that litigation (and thus the courts) are vehicles in 
power plays regarding rights, I** and mentions specifically the role of bargaining 
power in working out a consent decree,lsg and the power to invoke predatory 
discovery.tm He recognizes the system of mutual coercion (rendered as bilateral 
monopoly) in business; 19’ the effort of the powerful Exxon Corporation ‘to force a 
corporate mouse [Exxenel to abandon its name,’ its lawyers seeking to ‘take another 
whack at its tiny foe;‘ig2 that illiquidity can force a worker to settle for less than the 
true value of his claim;193 that ‘discretion is power,’ prized by judges and others;194 
and the importance of the distribution of wealth,igs including its inequality per se. 196 
On the other hand, Posner neglects the role of product differentiation in structuring 
markets and in achieving and allocating market power; 19’ and, in concentrating his 
attention on the general competitive model of microeconomics, he ignores the impact 
of structural (that is, power) considerations. 198 Nowhere is this latter point more vivid 
than in a case where he writes: 
No budget constraint limits private damage actions; such an action will be 
brought so long as the expected damages exceed, however slightly, the 
expected cost of the litigation to the plaintiff.‘* 
There simply is no recognition of power. The fact that some people have the resources 
to outlose others goes unnoticed or unmentioned. 
Perhaps the most important way in which Posner neglects the role of power in 
achieving market performance (in addition to his general failure to recognize that 
maximization of wealth is power-structure specific) is in his frequent invocation of 
how legal and other changes will elicit compensatory market adjustments. Thus, he 
argues that in the long run, a change in rent will compensate landlords for changes in 
other lease terms.*@) But this neglects the ‘imperfections’ (better, the details) of 
market adjustments some of which relate to this specific lease being a standardized 
contract drawn up not by the lessor (as within landlord-and-tenant-law restraints, 
typically influenced heavily by landlord interests but in recent years somewhat 
decreasingly so) but by the lessee, in this case the United States Postal Service.2o1 
Posner’s reference to the Coase theorem here neglects the circumstances and 
consequences which severely limit the reach and probative value of that theorem.*02 
Elsewhere, Posner argues that the labor market capitalizes risk,*03 but he neglects 
the role of power-related forces in the market governing the distribution of risk. A 
similar argument is made with regard to the fees of executors,2w licensees,20s and 
122 Posnerian law and economics 
attorneys.*& On the other hand, he recognizes the possibility of ‘excessive compen- 
sation’ of insurance companies207 and, absent legal control, broadcasters being able 
to ‘force. . . down the throats of any cable system’ what they want to sell through tie- 
in sales208 (although elsewhere he simply says that, absent market power, tie-ins 
promote efficiency,*@ which begs the question by using a tautology to channel 
answers). The fact that markets will adjust is not at issue. The critical point neglected 
by Posner is that the adjustment will be channeled by power structure. 
The most remarkable cases are those in which Posner argues that courts ought not 
support or at least ought to severely restrict the appointment of counsel for prisoners. 
His argument is that if the prisoner has a good case, an attorney will gravitate towards 
him via the market. 
Encouraging the use of retained counsel thus provides a market test of the 
merits of the prisoner’s claim. If it is a meritorious claim there will be money 
in it for a lawyer; if it is not it ought not to be forced on some hapless unpaid 
lawyer. . . . 
Thus, . . . I believe there should be a presumption against appointing 
counsel in a prisoner’s civil rights suit.210 
And again: 
. . . a prisoner who has a good damage suit should be able to hire a 
competent lawyer and . . . by making the prisoner go this route we subject 
the probable merit of his case to the test of the market . . . If [the prisoner] 
cannot retain a lawyer on a contingent fee basis the natural inference to draw 
is that he does not have a good case. . .211 
These cases are a perfect example of the limited probative reach of Posner’s approach. 
Allowing markets to determine whether a prisoner can bring litigation is to let the 
prevailing law, especially the prevailing rights governing the distribution of property, 
govern the access to an attorney. What Posner neglects is the fact that the market 
alone will not determine the prisoner’s rights. It is the pre-existing distribution of 
wealth and power (both a partial function of law) which governs both general prisoner 
access and also the array of alternative uses of lawyers’ services.212 Posner’s approach 
would allow market valuation via other uses for lawyers services to determine 
litigation rights in a particular case, much as if legal services were just one more 
marketable commodity such as tuna fish. *13 Establishing a prisoner right to counsel 
via the market can only be accomplished by accepting other rights and law which 
govern the flow of legal services. *I4 It is much more than mere wealth maximization. 
That Posner is simply not interested in the distributional question is indicated by his 
holding that the idea that both parties will have roughly equal legal resources ‘has 
never been an assumption of the adversarial system.‘2*5 Some would say, of course, so 
much the worse for the adversarial system and for justice, but the point here is that the 
adversarial system will yield a result, as does a market, dependent upon and specific to 
the distribution of wealth (resources) within which it operates. Similarly, the point is 
not that neither society nor the judiciary ought to be concerned with the allocation of 
scarce resources but that the actually realized and putatively wealth-maximizing 
allocation will be a function in part of power. The market for counsel will ‘work’ but it 
will produce a result which will depend upon the configuration of rights-and it is, of 
course, rights which are at issue in each case. 
W. J. SAMUELS AND N. MERCURO 123 
VIII. CONCLUSION 
Posner’s opinions provide evidence-more or less infirm-on a facet of appellate 
judicial decision making. These opinions also provide evidence as to what judges do 
apropos of the maximization of wealth and evidence pertinent to the normative value 
of the maximization of wealth approach. 
The opinions which Posner has authored appear to the present authors to confirm 
the principal fundamental criticism of the maximization of wealth approach. The 
approach lacks the normative content which Posner thinks provides the under- 
pinnings for a theory of law. It lacks such content because of the fundamental 
circularity problem. Wealth maximization alone does not and cannot give a unique 
determinate solution to the question of the choice of rights despite pretenses to the 
contrary.2r6 Whatever solution is first implicitlyand then explicitly given to the choice 
of rights, that solution channels the maximization of wealth predicated upon it. Each 
choice of rights is tantamount to a choice of the particular wealth maximization to 
which it gives rise, There is no unique wealth-maximization solution, only the one 
achieved through the choice of rights, that is, the one from among an array of 
alternatives each one of which is specific to its respective and antecedent choice of 
rights in a particular case. Wealth maximization does not determine rights; judicial 
choice determines rights and rights determine wealth maximization. 
Critical to judicial choice is choice of which/whose interests count. It is that choice 
which constitutes the choice of rights which govern the wealth-maximizing result 
actually achieved. Like it or not, such judicial choice and participation represent a 
significant economic factor in determining the allocation of resources and 
distribution of income. 
Although the maximization of wealth approach seems very neat and is both 
ideologically congenial and disciplinarily congruent with the mainstream of economic 
thought, it does not perform the prescriptive functions which Posner as academic 
claimed for it. As an approach to promote maximization of wealth it does not yield 
unique and noncircular solutions to the problem to which it is addressed, namely, the 
determination of rights. The economic approach of wealth maximization as an 
approach to justice is not coherently and singularly dispositive of questions of justice 
and rights. If there is a dispositive link between justice and economics, wealth 
maximization is not it. 
As a quest for an external, independent, pre-eminent conclusive standard (or 
discursive system) for judicial choice-a quest for the jurisprudential equivalent of 
the philosopher’s stone-it fails to deliver. For judicial choice remains the basis upon 
which rights must be chosen and therefore the basis of the actually achieved wealth- 
maximizing outcome. The supposed use of wealth maximization, including 
benefit-cost comparisons and all other balancing, to determine rights is an illusion. 
Comparing benefits and costs, balancing relative hardship, and exercising selective 
perception give effect to, not determine, the implicit antecedent premises (as to 
whose/which interests count) which govern rights and, thereby, wealth 
maximization. As such, it can serve as a rationalization or legitimation only for those 
who fail to see through it. 
REFERENCES AND NOTES 
In the cases cited in the footnotes, unless otherwise stated, Posner authored the 
majority opinion. If he concurred or dissented in a particular case it is noted 
124 Posnerian law and economics 
parenthetically within the citation. 
1. R. Schmalbeck, ‘The Justice of Economics: An Analysis of Wealth Maximization as a 
Normative Goal,’ (1983) 83 CO]. L. R. 488, 524. 
2. ‘Even in a quite extreme form-a prediction that all common law doctrines will eventually 
be shown to be based on efficiency considerations-the positive economic theory has the 
cardinal virtue of being the only positive theory of the common law that is in contention at 
this time _ . . at least one can say that the theory deserves to be taken seriously, especially 
in its more moderate form of a claim that efficiency has been the predominant, not sole, 
factor in shaping the common-law system.’ R. A. Posner, ‘Some Uses and Abuses of 
Economics in Law,’ (1979) 46 U. Chi. L. Rev. 281,294. Elsewhere, Posner wrote ‘1 believe 
. . . that the economic norm I shall call “wealth maximization” provides a firmer basis for 
a normative theory of law then does utilitarianism.’ R. Posner, ‘Utilitarianism, 
Economics, and Legal Theory,’ (1979) 8 J. Legal Stud. 103. 
3. For example, see A. T. Kronman, ‘Wealth Maximization as a Normative Principle,’ (1980) 
9 J. Legal Stud. 227-229. 
4. See, e.g., J. R. Commons, Legal Foundations of Capitalism, Macmillan (1924); M. 
Horwitz, The Transformation ofAmerican Law, 1780-1860, Harvard (1977); W. Nelson, 
Americanization of the Common Law, Harvard (1975); M. Tigar and M. Levy, Law and 
the Rise of Capitalism (1977), Monthly Review Press; and D. C. North, Structure and 
Change in Economic History, Norton (1981). 
5. In the first edition of Posner’sEconomicAnalysis ofLaw, Little Brown (1972) he adopted 
a strict utilitarian approach. See p. 357. However, the second edition of the book (1977), 
along with subsequent writings, including those supra, note 2 and R. A. Posner, ‘The 
Ethical and Political Basis of the Efficiency Norm in Common Law Adjudication,’ (1980) 
8 Hofstra L. R. 487, invoke the wealth-maximization principle. 
6. Posner, ‘Utilitarianism, Economics and Legal Theory,’ supra, note 2, at p. 119. 
7. Posner, ‘The Ethical and Political Basis . . .., ’ supra, note 5, at p. 497. 
8. Ibid., at pp. 491-492. Discussion of this point is contained in Kronman, supra, note 3, at 
pp. 235-239 and J. L. Coleman, ‘Efficiency, Utility, and Wealth Maximization, (1980) 8 
Hofstra L. R. 509, 525-526. 
9. The foregoing is generally taken from N. Mercuro and T. Ryan, Law, Economics, and 
Public Policy (forthcoming 1984, JAI Press), Ch. 5. See also Samuels, ‘Maximization of 
Wealth as Justice: An Essay on Posnerian Law and Economics as Policy Analysis,’ (1981) 
60 Texas L. R. 147. 
10. Approximately 22 of the 120 cases were not of direct use. 
11. See, e.g., Hixon v. Sherwin- WilliamsCo. 671. F.2d 1005, lOOS(l982). ChicagoandNorth 
Western Tramp. Co. v. U.S. 678 F.2d 665, 676, 671 (1982); Western Transport Co. V. 
Wilson and Co., Inc., 682 F.2d 1227, 1229, 1230, 1231 (1982); and Donovan v. FallRiver 
Foundry Co., Inc. 696 F.2d 524, 527 (1982); United States ex rel. Jones V. Franzen 676 
F.2d 261,267 (1982) (concurring opinion). We recognize that when writing for the Court 
or a majority Posner must write in a manner which reflects the Court or the majority and, 
further, that judges likely tend to avoid the risk of subsequent reversal at a higher level. 
12. O’Shea v. Riverway Towing Co., 677 F.2d 1194, 1198-1201 (1982). In this case he directly 
criticizes the Fifth Federal Circuit Court for continuing, in error, the manner in which they 
calculate lost future earnings. ‘Error is committed . . . by these circuits, notably the Fifth, 
that refuse to allow inflation to be used in projecting lost future earnings but then use a 
discount rate that has built into it a large allowance for inflation,’ at 1200. See also J. P. 
Henderson, ‘The Consideration of Increased Productivity and the Discounting of Future 
Earnings to Present Value,’ (1975) 20 S. Dakota L. R. 307. 
13. O’Shea v. Riverway Towing Co., supra, note 12 at p. 1198. 
14. Hamilton v. Nielsen, 678 F.2d 709, 713 (1982). 
15. People of State of Ill. v. General Elec. Co., 683 F.2d 206, 213 (1982). 
16. Ibid., at p. 208. 
17. Exxon Corp. v. Exxene Corp. 696 F.2d 544, 549 (1982). 
18. Curtiss- Wright Corp. v. Heljand, 687 F.2d 171, 175 (1982). 
W.J. SAMUELSANDN. MERCURO 125 
19. N.L.R.B. v. Coca-Cola Co. Foods Division, 670 F.2d 84, 86 (1982). 
20. Marrese v. Am. Academy of Orthopaedic Surgeons, 692 F.2d 1083, 1089 (1982), quoting 
Wyzanski, J., Dionne v. Springfield School Comm., 340 F.Supp. 334, 335 (D.Mass. 
1972). 
21. Rockford League of Women Voters v. U. S., Etc., 679 F.2d 1218, 1223 (1982). 
22. Abernathy v. Superior Hardwoods, Inc., 704 F.2d 963, 970 (1983). 
23. Chicago and North Western Transp. Co. v. U.S., supra, note 11 at p. 670. 
24. Shanley v. Youngstown Sheet I_% Tube Co., 552 F. Supp. 4, 5, 7 (1982). 
25. Peoria Union Stock Yards Co. v. Penn Mut. Life Ins., 698 F.2d 320, 326 (1983). 
26. Maxeyv. Thompson, 680F.2d 524,527 (1982). Seealso UnitedStatesv. Carlone, 666F.2d 
1112, 1115 (1981). 
27. A’Amico v. Schweiker, 698, F.2d 903, 904 (1983). 
28. Merritt v. Faulkner, 697 F.2d 761, 771 (1983) (concurringin part and dissenting in part). 
29. Hixon v. Sherwin- Williams Co., supra, note 11 at p. 1010. 
30. Powers v. United States Postal Service, 671 F.2d 1041, 1045 (1982). 
31. Argonaut Ins. Co. v. Town of Cloverdale, Indiana, 699 F.2d 417,420 (1983). Evra Corp. 
v. Swiss Bank Corp., 673 F.2d 951, 957, 958, 959 (1982); see also U. S. Fid & Guar. v. 
Jadranska Slobodna Plovidba, 683 F.2d 1022, 1025 (1982); Albers by Albers v. Church of 
the Nazarene, 698 F.2d 852, 857 (1983); and Abernathy v. Superior Hardwoods, Inc., 
supra, note 22 at p. 967. 
32. Menora v. Illinois High School Ass?., 683 F.2d 1030, 1035 (1982). 
33. Suliev. Duckworth, 689 F.2d 128, 130, 131 (1982). 
34. United States v. McAnally, 666 F.2d 1116, 1119 (1981). 
35. Jenkins v. Bowling, 691 F.2d 1225, 1230, 1233 (1982). 
36. McCollum v. Miller, 695 F.2d 1044, 1048-1049 (1982). See also Chicago and North 
Western Transp. Co. v. U.S., supra, note 11 at p. 671 (1982); In Re Oil Spill by Amoco 
Cadiz off Coast of France, 699 F.2d 909, 917 (1983); Encyclopaedia Britannica, Inc, v. 
C.Z.R., 685 F.2d212, 215, 217 (1982). 
37. R. A. Posner, ‘Strict Liability: A Comment,’ (1978) 7 J. Legal Stud. 205, 221. 
38. Western Transp. Co. v. E. I. Du Pont De Nemours, 682 F.2d 1233, 1236 (1982). 
39. Graf v. Elgin, Joliet and Eastern Ry. Co., 697 F.2d 771, 779 (1983). 
40. Sutton v. City of Milwaukee, 672 F.2d 644, 645; cf. 646 (1982). 
41. Menora v. Illinois High School Ass’n., supra, note 32 at pp. 1032-1033. ‘Free exercise of 
religion does not mean costless exercise of religion, but the state may not make the exercise 
of religion unreasonably costly’ (p. 1033). 
42. UnitedStatesv. Carroll Towing Co., 159F.2d 169, 173 (2d Cir. 1947). Seealso U. S. Fid& 
Guar. v. Jadranska Slobodna Plovidba, supra, note 31 at pp. 10261029. 
43. On the role of antecedent normative premises and rights see Samuels, ‘Normative 
Premises in Regulatory Theory,’ (1978) 1 J. Post Keynesian Econ. 100. 
44. Chicago and North Western Transp. Co. v. U. S., supra, note 11 at p. 671. 
45. Hamilton v. Nielsen, supra, note 14 at p. 174. 
46. Curtiss- Wright Corp. v. Helfand, supra, note 18 at p. 174. 
47. O’Shea v. Riverway Towing Co., supra, note 12 at p. 1201; see also Chicago and North 
Western Transp. Co, v. U. S., supra, note 11 at p. 670. 
48. CT. S. Fid. & Guar. v. Jadranska SIobodna Plovidba, supra, note 31 at p. 1026. 
49. Jenkins v. Bowling, supra, note 35 at p. 1233. 
50. Sutton v. City of Milwaukee, supra, note 40 at p. 645. 
5 1. TV. L. R. B. v. Browning-Ferris Ind., Chem. Serv., 700 F.2d 385, 388 (1983). 
52. Rockford League of Women Voters v. U.S., Etc., supra, note 21 at p. 1222. 
53. U. S. v. Bd. of School Com’rs of City of Indianapolis, 677 F.2d 1185, 1193-1194 (1982) 
(dissenting opinion). 
54. Reed v. Village of Shorewood, 704 F.2d 943, 948 (1983). 
55. Western Transp. Co. v. Wilson andCo. Inc., supra, note 11 at p. 1229. In correspondence, 
Posner expressed his puzzlement over our point concerning ‘straining.’ He wrote: 
126 Posnerian law and economics 
The authors’ puzzlement about my attitude toward ‘straining’ to find a tariff 
ambiguous is itself puzzling. I explain in the opinion that the reason the courts 
strain is that the rule of strict construction of tariffs can often result in giving 
the railroad a windfall it hadn’t bargained for. The courts are straining to give 
the parties what they bargained for, the strain deriving from the fact that the 
Interstate Commerce Act tariff provisions are designed to do something quite 
different-make it hard for railroads to defect from their regulation-protected 
cartel. The courts are fighting for efficiency. As 1 say, this is all pretty clearly 
spelled out in my opinion, and if the authors reread it I think they would see 
this and change what they have said in this paragraph. (Posner to Rowley, 
dated June 26, 1984.) 
56. U. S. Fid. & Guar v. Jadranska SZobodna Plovidba, supra, note 31 at p. 1025. As Posner 
wrote: ‘Although the correlation is far from perfect, judge-made rules tend to be 
efficiency promoting while those made by the legislatures tend to be efficiency reducing.’ 
R. A. Posner, Economic Analysis of Law, Little Brown (2nd ed.-1977), p. 404. 
57. Cenco Inc. v. Seidman & Seidman, 686 F.2d 449,458 (1982). 
58. Miller v. Federal Mine Safety C Health Rev. Corn%, 687 F.2d 194, 195 (1982). 
59. Sulie v. Duckworth, supra, note 33 at p. 133 (dissenting opinion). 
60. Menora v. Illinois High School Ass%, supra, note 32 at p. 1038 (dissenting opinion). 
61. Wild v. United States Dept. of Housing & Urban Dev., 692 F.2d 1129, 1133 (1982). 
62. United States v. Kaminski, 703 F.2d 1004, 1010 (concurring opinion). 
63. McKeeverv. Israel, 689 F.2d 1315, 1323 (dissenting opinion). 
64. Ibid., at pp. 1323, 1325. 
65. U. S. Fid & Guar. v. Jadranska Slobodna Plovida, supra, note 31 at p. 1029. 
66. Georges v. Carney, 691 F.2d 297, 301 (1982). 
There are two issues here: 
1. The general issue of who can get what onto a ballot. 
2. Once that is decided, whether or not discrimination transpired in a specific case. 
Our text relates to the first point whereas Posner, in correspondence, commented on the 
latter point. He wrote: 
Also the quotation and discussion in the text at note 66 is misleading. My point 
was that if other advisory questions were allowed on the ballot but the nuclear- 
freeze one was not, so that the county officials were discriminating against 
particular points of view rather than advisory questions tout courf, it would 
have been a different case: as surely the authors would agree. (Posner to 
Rowley, dated June 26, 1984.) 
67. Hixonv. Sherwin-WiiliamsCo.,supra,notell atpp. 1007-1009(1982).SeealsoBy-Prod 
Corp. v. Armen-Berry Co., 668 F.2d 956, 960, 962 (1982); Cenco, Inc. v. Seidman and 
Seidman, supra, note 57 at pp. 458-459 and the references given in note 76 infra. 
68. General Finance Corp. v. F. T. C., 700 F.2d 366, 369 (1983). 
69. Evans Transp. Co. v. ScuZIin Steel Co., 693 F.2d 715, 717 (1982). 
70. Grip-Pak, Inc. v. Zhinois Tool Works, Inc., 694 F.2d 466, 469, 473 (1982). 
71. United States ex ref. Jones v. Franzen, supra, note 11 at p. 268 (concurring opinion). 
72. Allison v. Liberty Sav., 695 F.2d 1086, 1091 (1982) (dissenting opinion). 
73. Ibid., at p. 1093. 
74. Commodity Futures Trading Com’n v. Board of Trade, 701 F.2d 653 (1983). 
75. Larsen v. SielafJ 702 F.2d 116, 117 (1983). 
76. Dragan v. Miher, 679 F.2d 712, 714-716 (1982); In Re Oil Spill by Amoco Cadiz off Coast 
of France, supra, note 36 at p, 917; Lloyd v. Loefffer, 694 F.2d 489, 492, 493 (1982); 
By-Prod Corp. v. Armen-Berry Co., supra, note 67 at 960, 962; Wilson v. Intercollegiate 
(Big Ten) Conf., Etc., 668 F.2d 962, 966 (1982); Rockford League of Women Voters v. 
I/. S., Etc., supra, note 21 at p. 1221; Marrese v. Am. Academy of Orthopaedic Surgeons, 
supra, note 20 at p. 1091; and Denberg v. United States, 696 F.2d 1193, 1197 (1983). 
127 W. J. SAMUELS AND N. MERCURO 
77. Norris v. United States, 687 F.2d 899, 900 (1982). 
78. People of State of III. v. Archer Daniels Midland, 704 F.2d 935, 942 (1983). 
79. Draban v. Miller, supra, note 76 at p. 716. 
80. Evans Transp. Co. v. Scullin Steel Co., supra, note 69 at p. 719. 
81. Ibid., at p. 720. 
82. Abernathy v. Superior Hardwoods, Inc., supra, note 22 at p. 968. 
83. Shanley v. Youngstown Sheet & Tube Co., supra, note 24 at p. 8. 
84. Jenkins v. Bowling, supra, note 35 at pp. 1233-1234. 
85. Donovan v. Fall River Foundry Co., Inc., supra, note 11 at p.527; Jones v. Franzen, 697 
F.2d 801, 804 (1983); N.L.R.B. v. Browning-Ferris Ind., Chem. Serv., supra, note 51 at 
p. 388, see also Judge Coffey (concurring) at pp. 390-391; Marrese v. Am. Academy of 
Orthopaedic Surgeons, supra, note 20 at pp. 1088-1089, 1092; and Omega Satellite 
Products v. City of Indianapolis, 694 F.2d 119, 123 (1982). 
86. Flower