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Does Law and Economics Reduce Everything to Money?

Prof. Todd Zywicki
Posted

Professor Todd Zywicki explains how law and economics approaches the complex world of trade-offs beyond simple monetary calculations. This discussion challenges the common critique that the field merely "monetizes everything," revealing instead how economic principles provide a framework for comparing seemingly incomparable values – from safety regulations to speed limits. Todd J. Zywicki is George Mason University Foundation Professor of Law at George Mason University Antonin Scalia School of Law, Research Fellow of the Law & Economics Center, and former Executive Director of the Law and Economics Center. As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker. https://youtube.com/watch?v=1sr1ZoxfTaw

Transcript

One of the objections that's often made to law and economics is that it seems to monetize everything. And it says, oh, these things like harms, these things like pollution, all these things should not be reduced to money. That is, I think, a bad caricature of law and economics. Why does law and economics focus on price and not really money, but sort of using money as a shorthand? The idea is that the world is a world of trade offs. That you can't have everything you want. You've got to have, there are trade offs. If you want to have more safety, sometimes you've got to spend more money to have more safety. If you want to reduce accidents, you might have to drive slower. How do you weigh the reduction of accidents against the loss to society from driving slower because it takes you longer to get to the places you want to go? Economics has always provided a tool for thinking about that. Not by literally attaching dollar values to it, but by trying to kind of intuitively measure what those relative costs are. What are the costs of accidents at the margin, and what is the cost of society from having, say, a 55 mile per hour speed limit versus a 70 mile per hour speed limit, in terms of reducing accidents on one hand, but in terms of people taking longer to get to the places where they want to go on the other. Without economics, it's really hard to think about how we make those tradeoffs. Without economics, it's really hard to think about, well, how much care should somebody take in order to avoid an accident? What is reasonable for a designer of a car to have as safety equipment on their car so that it isn't too expensive or doesn't weigh the car down too much or that sort of thing. And so, the use of money, the use of prices, the use of thinking in those terms is not literally about money. Typically what it is is just a way of comparing what would otherwise be an apples to oranges comparison and making it more of an apples to apples comparison to make disparate things more similar so we can understand those trade offs.