Thinking Like (Law-And-) Economists – Legal Rules, Economic Prescriptions and Public Perceptions of Fairness

Using vignettes that are based on seminal cases in law and economics, I find that judicial decisions across different areas of the common law are considered to be fairer when they follow prescriptions for efficiency based on law-and-economic reasoning. Vignettes describe legal disputes and require respondents to rate the fairness of a judge’s resolution. For each vignette, fairness ratings are compared across a version that follows a particular economic prescription and a version that does not, with differences across versions generated by subtle changes in context that are motivated by the economic logic that either was used in the relevant case’s actual judicial opinion or has been applied to the case by scholars of law and economics. The results suggest that the economic logic that underlies the Coase theorem, the Hand rule and the foreseeability doctrine, and generates prescriptions for efficient use of strict product liability and efficient breach of contract, aligns with lay intuitions of fairness. The results also identify two areas, fugitive property and punitive damages, where law-and-economic prescriptions do not align with perceptions of fairness.