McCluskey

Written by Martha McCluskey Nov. 5, 2010 Why was the message of austerity so appealing to economically insecure voters in this week’s election?    A more intellectual version of this passionate opposition to social spending, regulation, and deficits has become conventional wisdom in legal academia, thanks in part to several decades of lavishly funded law-and-economics programs. The populist enthusiasm for austerity helps bring out a striking tension within the familiar efficiency-maximizing ideal of law-and-economics.   Efficiency is supposed to stand for increasing the size of the economic pie – for aggregate growth or maximization of resources (sometimes termed “welfare”) – as opposed to distribution of the economic pie (equity or fairness).   It teaches that soft-hearted liberals and progressives might want to spread the wealth around, based on our concern for some group of have-nots, but we will end up doing more harm than good to those have-nots if we don’t subject our compassion to a hard-nosed rationality that weighs the benefits of redistribution against the costs to growth.   If we choose policies aimed at equity for the have-nots over aggregate growth, we will end up with fewer resources to distribute, with the result of increasing the problem of have-nots.  So, the truly compassionate and moral – and rational – policy is to maximize overall growth, which should make it easier (and fairer) to spread the wealth around. Yet how does law-and-economics teach us to maximize growth?  Typically, by promoting austerity.