Imperfect Alternatives: Choosing Institutions in Law, Economics, and Public Policy

299 Pages·65.448 MB·English

by  Neil K. Komesar

Imperfect Alternatives
,
Imperfect Alternatives
Choosing Institutions in Law,
Economics, and Public Policy
Neil K. Komesar
The University Of Chicago Press
Chicago & London
NEIL KoMESAR is the James E. and Ruth B. Doyle Bascom
Professor of Law at the University of Wisconsin, Madison.
The University of Chicago Press, Chicago 60637
The University of Chicago Press, Ltd., London
© 1994 by The University of Chicago
All rights reserved. Published 1994
Printed in the United States ofA merica
03 02 01 00 99 98 97 96 95 94 5 4 3 2 1
ISBN (cloth): 0-226-45088-0
Library of Congress Cataloging-in-Publication Data
Komesar, Neil K.
Imperfect alternatives : choosing institutions in law, economics,
and public policy I Neil K. Komesar.
p. cm.
Includes bibliographical references and index.
ISBN 0-226-45088-0 (acid-free paper)
1. Law-Economic aspects. 2. Public policy (Law) 3. Judicial
process. I. Title.
K487.E3K66 1994
342'.041-dc20 93-49435
[342.241] CIP
@)The paper used in this publication meets the minimum requirements of the American
National Standard for Information Sciences -Permanence of Paper for Printed Library
Materials, ANSI Z39.48-1984.
To the memory of my parents,
and to the love and support
of my wife

Contents
Preface
ix
PART I: DECIDING WHO DECIDES: THE COMPARATIVE ANALYSIS
OF INSTITUTIONAL PERFORMANCE
1 Taking Institutional Choice Seriously
3
2 Social Goals and Public Policies: Bridging the Gap between Them
14
PART II: WHO PLAYS, WHO DOESN'T: THE PARTICIPATION
CENTERED APPROACH TO THE POLITICAL PROCESS, THE MARKET,
AND THE COURTS
3 The Political Process: The Power of th~ Few and the Power of the Many
53
4 The Market Process: Transaction Costs and Transaction Benefits
98
5 The Courts as an Institution: The Structure and Scale ofJ ustice
123
PART III: APPLICATIONS: WEIGHING THE RELATIVE MERITS OF
INSTITUTIONS
6 Safety, Tort Law, and Tort Reform
153
7 Constitutional Law and Constitution Making
196
8 American Constitutional Law: The Contours ofJ udicial Review
232
vii
viii CONTENTS
9 Summary and Conclusion: Propositions, Audiences, and Reformations
271
Author Index
277
Subject Index
281
Preface
My aim in this book is to recast the analysis of law and public policy,
both economic and non-economic analysis. Such temerity requires quali
fication and explanation.
I am certainly not the first to emphasize the central need for the analy
sis of institutional choice-for comparative institutional analysis. As the
body of the book indicates, Ronald Coase has long emphasized the im
portance of institutional choice and comparison. Twenty-five years ago,
Harold Demsetz criticized Nirvana solutions and called for comparative
institutional analysis.1 Non-economists such as Richard Stewart, Kenneth
Shepsle, and Barry Weingast have also called for comparative institutional
analysis.2
As a general matter, the importance of institutional choice and the ne
cessity of institutional comparison seem common sense. It is not odd,
therefore, to find calls for institutional comparison or even instances of
serious institutional comparison. What remains remarkable is the vast
amount of law and public policy analysis that either ignores, trivializes, or
poorly executes institutional comparison. In this book, I am attempting to
answer the continuing calls for institutional comparison by extensively
documenting the evils of failing to take it seriously and by offering an
analytical framework with which to begin this difficult but necessary task.
I must also offer a qualification of ignorance. My own background and
experience do not-indeed could not - match the sweep of my claims. I
am an American law professor with training in economics. I have taught a
relatively wide variety of American legal subjects, including property law,
1. Harold Demsetz, Information and Efficiency: Another Viewpoint, 12 J L &. Econ 1
(1969). Indeed, an abiding concern with institutional comparison and institutional
choice can be traced back to Adam Smith. James Buchanan makes such a connection in
his summary of constitutional economics in The New Palgrave: A Dictionary ofE conomics
(1987), 2: 585.
2. Richard Stewart, Crisis in Tort Law? The Institutional Perspective, 54 U Chi L Rev 184
(1987); Kenneth Shepsle and Barry Weingast, Political Solutions to Market Problems, 78
Am Pol Sci Rev 417 (1984).
\
ix
x PREFACE
tort law, and constitutional law, and I have dabbled in contracts law. But
the number of American law subjects that I have neither taught nor seri
ously thought about outnumbersthose that I have. I also am largely igno
rant about law and public policy outside the American context and have
only touched upon disciplines other than economics and law. Notwith
standing these significant qualifications, however, I remain confident of
the universal importance of institutional comparison and of the need to
seriously advance comparative institutional analysis on all fronts. Only the
consideration of more knowledgeable minds can test these convictions.
The breadth of this book also requires comment on my choice and treat
ment of those works I discuss and critique. I chose many of these works
because they are among the most generally discussed and noticed. I often
use them to show that the failure to carefully consider institutional choice
infects and handicaps even the most prominent works. Each of these
works has received considerable critical attention. Unless the. criticism is
pertinent to the points I am making, I have not made exhaustive reference
to these critical literatures.
I have been writing about comparative institutional analysis for almost
fifteen years, and I derive several parts of this book from my earlier articles.
Despite attempts to update the various collateral references, I am sure that
I have failed to be encyclopedic. My objective in this book is to improve
the conceptualization and, therefore, the analysis of institutional choice.
Given the large range of subject matter and the significant number of dis
ciplines engaged by this book, I can only hope that the book will be judged
primarily on its conceptualization rather than its erudition.
I am very grateful to the many colleagues and friends who contributed
to this book. Many read and commented on various drafts of this book
Peter Carstensen, Larry Church, Bill Clune, Howard Erlanger, Marc Galan-
·t er, Dirk Hartog, Willard Hurst, Len Kaplan, Beverly Moran, Tom Palay,
Richard Posner, Joel Rogers, Vicki Schultz, Leon Trakman, and Bill Whit
ford. Several were subjected to multiple drafts. Here I want to single out
my old friend, David Goldberger, who diligently read, commented, and
suffered through every draft and through drafts of virtually all the articles
that foreshadowed this book. I owe special debts to Bob Wills and Richard
Allen, who diligently and creatively edited this book, and to Theresa
Dougherty, who by dint of extraordinary competence and effort turned
chicken-scratchings and dictated i:nutterings into interminable typed drafts.
I owe thanks to several anonymous readers and to one, Ronald Coase, who
graciously waived his anonymit}r and whose supportive comments meant