An Economyth’s Analysis of Law

Remember that in a previous paper, I introduced my beloved “economyth”? Worthy of the name are our numerous pseudo-Austrian friends. In France, we have a good share of such friends. Let me tell the story of another talented one.

I am not sure if many of you reading this note will have already heard his name, yet within the narrow French “libéral” economics circles, Pierre Garello is a fairly influential scholar. What’s more, being a university senior professor, there are many places where he displays that his heart belongs to the Austrian School. Here are a few (1, 2, 3, 4).

In the first of those four references you will find this summary of his study focus, which I think gives a fair picture:[1]

His doctorate thesis, with title “Three studies on behavior under uncertainty”, was completed in 1992. His study domains are in Economic Analysis of Law, Game Theory, Decision Theory and theories of entrepreneur(ship). He graduated at New York University under Charles Wilson’s supervision, <himself> highly influenced by Isreal Kirzner.

When I discovered this list of topics, I was a bit surprised. My naïve reading of Ludwig von Mises had brought me to his magnificent pages in Theory and History, where he develops his concept of “thymology”. In a nutshell, thymology is the field of study focusing on incentives and motivations to act: the “why” leading to human action. The key here is to remember that Mises’s reason for introducing the concept is to make it very clear that thymology is outside the scope of rational, scientific economics. Indeed, Austrian economics are derived from the Human Action Axiom, and only from it, and action can only be observed, not more. In Man, Economy and State, published 30 years before Garello graduated, Rothbard will later reinforce this point by insisting that time preference can only be demonstrated by action: it cannot be guessed, in any kind of way. Indeed, this is precisely where freedom takes life. Therefore, there is no way for a “behavior study” to belong to scientific, Austrian economics in any kind of fashion.

But then my naïve mind also wondered what “Economic Analysis of Law” could mean. In French at the time, I had this page to help me grasp it:[2]

The concept of “Economic Analysis of Law / Law and Economics” is used to mean the study of law and lawfulness by including methods and ideas borrowed from economic analysis and economic thought. A limited movement in the French-speaking world, the field was initiated in the USA by the Chicago School…

“Chicago School”?? Well, I thought I could stop there… Let’s give more substance to this, anyway. First, let’s clarify that “law” here does not mean “natural law”, but “positive law”, or “legislation”. From a libertarian angle, there are two ways to look at legislation: From the Human Action Axiom – economics – or from the Argumentation Axiom – natural law. The latter is quite simple: Legislation is coercive by nature and imposed on us out of explicit consent; therefore, it is unlawful, period. From an economic angle, it should also be very simple: Any legislation moves the economy one more step away from the free market, therefore is always lowers prosperity and increases social injustice.

So, if it is that basic, why is our economyth spending his time – and our money – trying to unveil the obvious? The clue was in his doctorate thesis, I guess. For sure, if one tries to study hypothesized consequences of legislation, based on behavioral empirical data of some sort, there are many volumes that can be fancied, with imagination – and taxpayer’s money – as the only limitation. But consequence analysis requires the assumption of some utility function, whilst Austrians know that value is subjective. And relying on whatever data violates Austrian’s apriorism. Two key reasons for such endeavors to be anything but worthy of the Austrian School.

This time again, my goal in this critique goes beyond Garello himself. I am more trying to wake up the average economyth of the Chicago flavor, with the following message: Pierre, or whoever you are, please realize how easy it is to unmask the mistaken in you. You are really only fooling the uninformed. This is not the signature of excellence. So why don’t you dare shine as the Chicago boy that you are? It would be a mark of greater courage and fortitude, and it would suit you Sowell.

[1] My translation from: “Sa thèse de doctorat, intitulée Three studies on behavior under uncertainty (Trois études sur le comportement en situation d’incertitude), a été achevée en 1992. Ses domaines de recherche sont l’analyse économique du droit, la théorie des jeux, la théorie de la décision et les théories de l’entrepreneur. Diplômé d’un doctorat à la New York University, il a étudié sous la direction de Charles Wilson, fortement influencé par Israel Kirzner.”

[2] My translation from: “La notion d’analyse économique du droit (en anglais, Law and Economics) est utilisée pour désigner l’étude du droit et de la légalité par incorporation des méthodes et les idées issues de l’analyse économique et de la pensée économique. Courant peu représenté dans le monde francophone, la discipline a été initiée aux États-Unis par l’école de Chicago : Richard P. Adelstein. Armen Alchian, Gary Becker, Guido Calabresi, Ronald Coase, Harold Demsetz, Aaron Director, Richard Posner…”