Transparency and Determinacy in Common Law Adjudication: A Philosophical Defense of Explanatory Economic Analysis

Explanatory economic analysis of the common law has long been subject to deep philosophical skepticism for two reasons. First, common law decisions appear to be cast in the language of deontic morality, not the consequentialist language of efficiency. For this reason, philosophers have claimed that explanatory economic analysis cannot satisfy the transparency criterion, which holds that a legal theory’s explanation must provide a plausible account of the relationship between the reasoning it claims judges actually use to decide cases and the express reasoning judges provide in their opinions. Philosophers have doubted that the economic analysis has a plausible account of why judges would use deontic moral terms to explain cases they decide using consequentialist economic reasoning, arguing instead that only a deontic moral account of judicial reasoning can be squared with the judicial use of deontic moral language. Second, the common law has a bilateral structure, in which a plaintiff’s right to recover and a defendant’s duty to compensate are treated as correlative. Philosophers have observed that this structure seems custom tailored to retrospective moral rights adjudication and ill suited to prospective efficient regulation. 

Recently, two philosophers, Jules L. Coleman and Stephen A. Smith, have developed these ideas into a full-scale assault on the explanatory credentials of the economic analysis. I defend the economic analysis by arguing that the bilateral structure of the common law either constitutes a “second best” approach to providing incentives for efficient behavior, as economic analysts have maintained, or that it is the vestigial remnant of the common law’s originally deontic conception. I also claim that the economic analysis satisfies the transparency criterion by arguing that terms with a deontic plain meaning have acquired a consequentialist contextual meaning within the common law. Although this “contextualist convergence” thesis is counterintuitive, I build on Coleman’s semantic theory to explain how it is possible. To demonstrate that it is plausible as well, I argue that evolutionary forces would have naturally led to this result over the course of the common law’s development. In particular, I claim that the substantial indeterminacy of deontic moral theory, and the superior determinacy of the economic analysis, explains why judges would be intuitively attracted to reasoning that is best reconstructed in economic terms, notwithstanding the superior normative force of deontic moral theory. Thus, the core of my defense of explanatory economic analysis is that its critics overlook the central theoretical and practical role determinacy plays in explanation and justification generally, and in the explanation of judicial reasoning in particular, where determinacy is prized, if not above all else, no less than any other virtue.

The Missing Interest: Restoration of the Contractual Equivalence

The analysis of contract remedies is dominated by Fuller and Perdue’s classification of the interests protected by remedies: expectation, reliance, and restitution. This Article argues that in many instances courts and legislatures award remedies that do not aim at any of these interests, but rather aim at another interest, namely, restoration of the contractual equivalence.

Restoration remedies strive to put the injured party in a position similar to the one she would have occupied had the parties made (and performed) a contract in which their obligations were adjusted to the actual performance by the breaching party, while maintaining the contractual equivalence in terms of the agreed value of performance, the chronological relation between their respective obligations, etc. Thus, for example, restoration remedies may put a buyer in a monetary position similar to the one she would have occupied had the contract referred to a smaller parcel of land, to goods of inferior quality, or to delivery at the (belated) time in which the goods were actually delivered.

The Article demonstrates that restoration of the contractual equivalence is a distinctive goal of contract remedies and explores its relations with the familiar interests. Surveying contract doctrines, it shows that various remedies for partial, defective or delayed performance are best understood as aiming at restoring the contractual equivalence. It argues that protection of the restoration interest is justified by various theories of contract law, including the will theory, corrective and distributive justice, economic efficiency, and contract as cooperative relationship. The Article proposes to make restoration remedies more systematically and generally available to the injured party.

Ambivalence About Formalism

In statutory interpretation, many scholars try to reconcile judicial power with democracy by cabining judicial discretion and rendering judges more faithful agents of Congress. Although debate pervades the field, the dominant approach is to rely on formalism to narrow judicial leeway and promote legislative supremacy. In constitutional theory, by contrast, many scholars respond to a very similar problem with a very different strategy. Here too, the concern is that judges will exercise power in a manner that substitutes judicial preferences for political will, and here too, there is as much disagreement as agreement. But instead of casting judicial discretion as the source of the problem, there is a growing trend in constitutional scholarship toward embracing judicial discretion as part of the solution. Many constitutional theorists urge judges to employ discretionary tools in a manner that limits their intrusions into the political process and minimizes the disruption associated with judicial review. These constitutional scholars tend to reject formalism in favor of a form of minimalism that is in many respects the antithesis of formalism.

Professor Molot suggests that both sets of scholars have gone too far in their positions on formalism. Statutory scholars often overlook the importance of judicial flexibility as an antidote to the excesses of formalism. Constitutional scholars often overlook the importance of formal constraints and fidelity to law. Using administrative law as a counterexample, Professor Molot sketches out a more balanced approach to formalism that he argues is superior to the one-sided approaches that have increasingly characterized statutory and constitutional scholarship today.