Utilitarianism, Economics and Legal Theory

Utilitarianism, Economics, and Legal TheoryAuthor(s): Ernest J. WeinribSource: The University of Toronto Law Journal, Vol. 30, No. 3 (Summer, 1980), pp. 307-332Published by: University of Toronto PressStable URL: http://www.jstor.org/stable/825489 .

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ErnestJ. Weinrib* UTILITARIANISM, ECONOMICS,

AND LEGAL THEORYt

This paper echoes in its title, and criticizes in its content, a recent article by Richard A. Posner.' Posner's article is an important landmark in the burgeoning literature on the economic analysis of law, in that it constitutes the most explicit and the most extreme statement of the moral status of conclusions flowing from this type of analysis. Gone is the ambiguity which critics had previously detected in Posner's work as to whether the economic approach to law is descriptive or normative. In Posner's present view, the economic approach is valuable not only in indicating the costs of a proposed course of action and in guiding those who are already commit- ted to economic efficiency as a value, but it 'has some claim to being regarded as a coherent and attractive basis for ethical judgments.'2 The phraseology of this assertion is modest and circumspect; but its scope is comprehensive. For instance, it allows Posner to turn aside objections to the controversial proposal of a baby market for adoptions with the comment that a person accepting his views 'can find no immorality in the idea of a baby market, when morality is derived from the economic principle itself.'3 To the extent that Posner is a leading prophet in the law and economics movement, his article constitutes a clearly important revela- tion.

The criticism offered here will not be a radical one. It will not dispute Posner's assumptions about fundamental moral notions but will rather operate within the framework of enquiry set out by Posner himself. Thus radical criticism of the market as a moral mechanism is eschewed, for several reasons. Such an attack would be diffuse and would have to advance on such a broad front that it would obscure any weaknesses in Posner's position which are specific to him. General criticism of the mar-

* Associate Professor, Faculty of Law, University of Toronto t I have had the benefit of discussing this paper with Bruce Chapman, Arnold Weinrib,

and William Bishop, and with participants in a faculty seminar at the University of Tel Aviv and the Law and Economics workshop at the University of Toronto. I would also like to thank Richard Posner for generously reading and commenting on an earlier draft. Preparation of this paper was facilitated by a leave fellowship from the Social Sciences and Humanities Research Council of Canada.

1 Posner, Utilitarianism, economics, and legal theory (1979) 8 J. of Legal Studies 103 (hereinafter Posner)

2 Posner, at 10lo 3 Posner, at 139

(198o), 30 UNIVERSITY OF TORONTO LAWJOURNAL 307 0042-022o/80/0700/0307/$1.25/0o University of Toronto Press



308 UNIVERSITY OF TORONTO LAW JOURNAL

ket as an institution would call into question the legitimacy of the social and legal system in which the market plays so prominent a role, and this might in turn tempt one to the conclusion that our legal system is either defensible as a matter of normative economic analysis or not defensible at all. For Posner our morality is 'derived from' an economic principle that embodies market considerations, and economic efficiency, or at least a version of it, can be used as a medium of justification. But the converse relationship between the market and morality is also at least possible. If our legal system, in which the market is encouraged or tolerated, is just, it may be because market values partake of but do not conceptually generate our notion of justice, and that the way in which our law moulds our markets and the scope which it allows them is itself a reflection of a deeper moral structure.4 Thus in order to preserve common ground with Posner and to prevent the issue from becoming diffused, this paper will address itself to considerations and criteria invoked by Posner himself. In other words, how successful was Posner in accomplishing the specific task on which he embarked?

This of course requires some understanding of Posner's enterprise. Posner's concern is not only to supply an independent justification of his own approach, but also to disengage his economic analysis from, and show its superiority to, the theory of utilitarianism. This requires him to set out the criteria by which he evaluates ethical theories and to point to specific ways in which utilitarianism disappoints, and his economic analysis satisfies, these evaluative criteria. This invites an enquiry as to whether Posner's own views can withstand criticism of the same sort and in the same terms as that which Posner levelled against utilitarianism. If it cannot, the more radical criticism which centres on the moral defects of the market in general is redundant to the evaluation of the specific version of market morality which Posner is championing. The minimal goal of Posner's article must be to demonstrate that the economic approach is innocent in some significant way of the particular charges which he levels against utilitarianism. Failure to achieve this goal does not entail a vindication of utilitarianism, but is only an indication that Posner's conclusions fall short of satisfying the criteria which he himself acknowledges.

An understanding of Posner's objections to utilitarianism is thus the first step in assessing the viability of Posner's economic view of legal theory. Utilitarianism 'holds that actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of

4 For attempts to explore this with respect to specific legal doctrines, see Fried, Privacy: Economics and ethics, a comment on Posner (1978) 12 Georgia L.R. 423; Weinrib, Rescue (forthcoming).



UTILITARIANISM, ECONOMICS, AND LEGAL THEORY 309

happiness.'5 Two features of utilitarianism are particularly relevant to the present theme. First, utilitarianism focuses on the subjective pleasures, satisfactions, or preferences of the actor; and secondly, it requires the aggregation of all of the subjective goods of individuals and it considers as best the outcome in which the total of individual satisfactions is maximized. The first of these elements is want-regarding rather than ideal- regarding: it looks to the wants which persons happen to have and does not attempt tojudge these wants against the standard of some ideal." The second element is aggregative rather than distributive, in that it looks to the summing of all preferences across persons rather than to the degree to which the wants of any given persons are satisfied. These two elements have had a powerful appeal in liberal thought since they were systema- tized by Bentham two centuries ago. The first element embodies notions of equality and neutrality, since it makes no distinction between wants of similar intensity and places no value on thejudgment as to the worthiness of particular wants, except as such judgment is itself the preference of a particular person. This equality and neutrality give the theory a vast comprehensiveness, since it must take into account the happiness of all humanity, and indeed of all sentient creatures. The second element gives an indication of the optimal solution in the many situations where it is impossible to satisfy all wants. Given the minimal assumption not only that are pleasures themselves neutral but also that each person should be impartial between his and others' pleasures, the aggregation of satisfaction seems to be a fairly natural procedure.7

In recent years utilitarianism has become an object of criticism among scholars who have sought to elucidate the Kantian foundations of moral and legal thinking.8 For these scholars, the utilitarian calculus cannot account for the rights which persons bear and which should insulate the individual from the operation of utilitarianism in its aggregate aspect. Some of these critics indeed treat the economic analysis of law as a variant of utilitarianism, or at least as being vulnerable to the same sort of criticism. Posner's purpose, in view of this background, is to disengage his economic approach to law from utilitarianism by reiterating the current

5 Mill Utilitarianism ch 2, para 2 6 Barry Political Argument (1965), at 38-47 7 Sidgwick The Methods ofEthics (7th ed 1907), at 379-84, 420- 1; Mill Utilitarianism ch 11,

para 18 8 Rawls A Theory of Justice (1971); Williams, A critique of utilitarianism, in Smart and

Williams Utilitarianism: For and Against (1973); Nozick Anarchy, State, and Utopia (1974); Dworkin Taking Rights Seriously (1977); Walzer Just and Unjust Wars (1978); Fried Right and Wrong (1978); Donagan The Theory of Morality (1978); Fletcher Rethinking Criminal Law (1978). For a discussion of the 'revolt' against utilitarianism, see Barry, And who is my neighbour? (1979) 88 Yale L.J. 629.



310 UNIVERSITY OF TORONTO LAWJOURNAL

criticisms of utilitarianism and by showing that his approach is immune to these criticisms.

In place of utilitarianism, Posner posits the principle of wealth- maximization. Wealth, says Posner, 'is the value in dollars or dollar equivalents ... of everything in society. It is measured by what people are willing to pay for something, or, if they already own it, what they demand in money to give it up. The only kind of preference that counts in a system of wealth-maximization is thus one that is backed up by money - in other words, that is registered in market.'9 Markets, as Posner goes on to explain, can be classed into three categories. In explicit markets there is a voluntary exchange in which money is transferred from one party to another. There are also non-explicit markets where the parties. engage in voluntary exchange without a transfer of money; the services exchanged have value in the sense that they 'could be monetized by reference to substitute services sold in explicit markets or in other ways.''" Both explicit and non-explicit markets are varieties of actual market. Finally there are the hypothetical markets, in which transaction costs preclude the voluntary exchanges which characterize actual markets. Here the law should bring about the same allocation of resources which would have emerged if the parties had bargained, by assigning the resource to the party to whom it is the most valuable.

How different, then, is wealth-maximization from the utilitarianism from which Posner seeks to dissociate it? Both theories are aggregative in that they favour the production of the highest total of whatever each respectively considers good. And in both the maximand is want-regarding in that they each take individual preferences as given without assessing those preferences against the standard of some ideal conception of human behaviour. The sole difference between them lies in the way they specify the want-regarding maximand. For utilitarianism all preferences count; in the theory of wealth-maximization only those preferences count which can be monetized and registered in a market, and they count only to the extent that there is a willingness to pay for their realization. This combination of an aggregative principle and a maximand that differs from the utilitarian maximand only in its being more limited might support the suspicion that Posner's wealth-maximization is not different from utilitarianism but only a more restrictive form of it. Indeed if the market is looked upon as a matrix of rules by which individual egoism is harnessed for the production of the greatest good of all, wealth- maximization turns out to be merely another version of rule utilitarianism, which, like its predecessor versions, has been elaborated in order to

9 Posner, at 119 to Posner, at 120




preserve utilitarianism while avoiding the counter-intuitive results which it can yield in individual instances."

Posner himself remarks that 'it might seem that an ethical theory premised on one preference - the desire for wealth - must be inferior to an ethical theory which takes account of a whole set of preferences.'"2 The point here is that it is difficult to see how wealth, taken in itself, can constitute, let alone exclusively constitute, what is morally good. It is one thing to postulate, as Bentham did, that pleasure was good, pain was bad, and money was 'the instrument of measuring the quantity of pain or pleasure."3 But in Posner's theory, monetary value is not an instrument of measuring the maximand; it is the maximand. And it appears to be an implausible maximand, since the ingredient being maximized is not one which is itself morally good. A rich person is not ipso facto morally superior to a poor one. Posner's answer to this objection is that his theory, based though it is on a single preference, is successful in generating conclusions which are more definite, more complete, and more compatible with widely shared ethical intuitions. What he envisages is apparently a kind of invisible hand whereby an ingredient which is itself morally indifferent will, on being maximized, yield conclusions coinciding with what we independently recognize as morally desirable. For the moment let us set aside consideration of whether this reassuring optimism is justified. What is immediately relevant is the comparison of wealth- maximization and utilitarianism, and in this connection two points should be noted. First, the ingredient maximized by utilitarianism has a claim within a want-regarding theory to be good even in its unaggregated state. Indeed it is its moral status when unaggregated whichjustifies its aggregation. Posner's theory, in contrast, maximizes something which is apparently morally indifferent. Secondly, one of the criticisms against utilitarianism is that it is simpleminded, that its conception of human thought and feeling is too impoverished to account for the richness and complexity of ethical experience. 4 If this is so, a theory which otherwise resembles utilitarianism but which involves an even more restricted view of human behaviour seems even less likely to satisfy the criteria of com-

11 On rule utilitarianism, see especially Urmson, The interpretation of the moral philosophy ofJ.S. Mill (1953) 3 Phil. Quarterly 33; Smart, Extreme and restricted utilitarianism (1956) 6 Phil. Quarterly 344; Brandt, Toward a credible form of utilitarianism, in Castaneda and Nakhnikian (eds) Morality and the Language of Conduct (1963) 107; Lyons The Forms and Limits of Utilitarianism (1965); Brock, Recent work in utilitarianism (1973) 1o American Phil. Quarterly 241, at 253-61.

12 Posner,at 122 13 Stark (ed) Jeremy Bentham's Economic Writings vol 1 (1952), at 117 14 Williams, supra note 8, at 149. For an illustration of an area in which this failing of

utilitarianism is apparent, see Fletcher's study, The individualization of excusing conditions (1974) 47 So. Cal. L.R. 1269.




pleteness and ethical plausibility. To deal with the difficulty of reduction- ism by paring away the element from which utilitarianism derives whatever diversity it has does not appear to be a promising stratagem.

A theory which is grounded on a single kind of preference, the desire for wealth, can be comprehensive only if all significant ethical phenomena can be factored into that kind of preference. But some values are notor- iously resistant to monetization and registration in a market. Consider, for instance, Aristotle's discussion of friendship.'5 Aristotle distinguishes between imperfect friendship, which is based on the usefulness or the pleasure which one derives from the association, and perfect friendship, in which one wishes for another's good for his sake rather than for one's own. In Aristotle's view, the reason why we cannot speak of friendship with respect to inanimate objects, such as wine, is that friendship presupposes the possibility of wishing for another's good, but 'it would surely be ridiculous to wish for the good of wine: if one wishes it at all, it is that wine may keep, so that we can have it for ourselves."'6 The distinctions which Aristotle is drawing cannot easily be captured in the theory of wealth- maximization. To translate perfect friendship - the wishing of another's good for his sake - into a preference which is registered on the market is to conceive of the friendship as an imperfect one, since the market is a mechanism for reflecting what is pleasurable or useful to me rather than what is intrinsically good for someone else. The very point of perfect friendship is that it resists monetization; that to analyse it in terms of dollar equivalents is to change or to mistake its special character. A person wanting this sort of friendship could not buy it on the market, and his attempting to do so would show that it was not really this sort of friendship that he wanted. Indeed it might not be too much of an exaggeration to say that wealth-maximization blurs the distinction between friendship and wine, between wishing another's good and having something for ourselves, by homogenizing our relationships with the diverse elements which constitute our personal worlds.'7

Posner might agree that it would be incoherent for a person seeking perfect friendship to attempt to purchase it on the market. But this, Posner might argue, does not exclude the possibility that the market 15 Aristotle NE 1155 b 17-1158 b 11 16 Aristotle NE 1155 b 29 17 Cf Cropsey Political Philosophy and the Issues of Politics (1977), at 20o:

'Mathematical aggregation, in so far as it is also disintegrative of established classes, transcends methodology and enters directly into the substance of welfare economics in a problematic way.

'What it implies is nothing less than a reconstruction of the two prime categories, man and goods. The reconstruction would individualize the species of man (i.e. reduce the species to, and replace it by, its individuals) and generalize the species of goods (i.e. dissolve the species of goods and replace them directly by their genus).'




appropriate to friendship might be a non-explicit one. Friendship for Posner is the derivation of satisfaction from the satisfaction of another,'8 and it is no less a market relationship for its not being explicitly sought in the market. Friendship could be monetized by reference to the price a person would demand to forgo friendship or the resources which a person forgoes for the sake of friendship. Thus the theorist of wealth- maximization can analyse friendship with basically the same tools with which he analyses commercial transactions.

Now application of the same analytic tools to friendship and commercial transactions is possible only if friendship and commerce are fundamentally identical. That Posner views them as such is apparent from his ascription of moral value to honesty, trustworthiness, and love on the grounds that they promote efficiency by reducing the costs of transactions.'9 Friendship would thus be regarded as a particularly smooth form of commerce, a form in which the costs of voluntary exchange are minimal. Other relationships could be similarily characterized: the significant difference between marriage and prostitution, for instance, is that in marriage the exchange between the parties can take place with lower transaction costs. Absence of a qualitative difference between friendship and commerce is a concomitant of the view that the difference between them is quantitative solely and can thus be monetized in terms of dollars or dollar equivalents.

The line of reasoning which leads Posner to this conclusion can perhaps be traced as follows. At a given moment in a person's life he may decide to do x and not to do Y. This decision can then be viewed as a choice of x over Y, and since a choice is 'necessarily a choice between comparable alternatives,'20 the two alternative possibilities must have some comparable characteristic which constitutes their essence in a person's eyes and which is an attribute of x in greater measure than it is of Y. Similarly if a person can forgo resources of monetary value for the sake of friendship (or vice versa), there must be a choice, and therefore a common characteristic, between friendship and resources, and, since the most significant characteristic of resources is their monetary value, this must also be the most significant characteristic of friendship. Commerce and friendship are thus commensurable in the framework of wealth-maximization, and the differences between them must also be explicable within that framework by comparing transaction costs.

The fallacy in this type of reasoning was pointed out by H.A. Pritchard

18 Cf Posner's definitions of love and altruism in Posner The Economic Analysis of Law (2nd ed 1977), at 102, 188

19 Ibid, at 185 20o Pritchard Moral Obligation and Duty and Interest: Essays and Lectures (1968), at 226




more than half a century ago.2' There is a distinction between deciding to do x and not Y and choosing x over Y. Not every decision constitutes a choice between comparable and commensurable alternatives. Friendship and commerce are not qualitatively identical, as can be seen from the attributes which can appropriately be ascribed to each. Friendship can be noble, whereas use of this adjective to describe commercial activity is somehow infelicitous and in need of further elaboration. A noble bargain (if this collocation of words is possible at all) is perhaps an arrangement which lacks the characteristic qualities of a bargain - as where one of the parties, for the sake of a non-commercial aim, abstains from exploiting his advantage. To ascribe nobility to friendship, on the other hand, is not to point to the friendship's aberrance (which is to be distinguished from its rarity) but to mark its excellence. Application of the same analytic tools to friendship and to commerce implies their fundamental identity and therefore obscures the peculiar qualities of friendship. A theory of wealth-maximization will be unable to account for why friendship is often celebrated in great literature and commerce rarely. That is to say, the theory cannot illuminate friendship because it has no way of recognizing the very qualities whereby friendship attains to its distinctive excellence. It can look only to the resources for which one would exchange friendship, thus treating friendship in terms of what it is not. The ostensible neutrality of dealing in market preferences masks a Procrustean tendency to conceive of ourselves in such a way as to distort the reality of our deepest and most significant experiences.22

One might object that analysis of friendship is not important for the issues at hand. But Posner's definition of wealth as the value in dollars or dollar equivalents of everything in society suggests that everything in society has a value in dollar equivalents. One of Posner's criteria for the evaluation of ethical theories is completeness, and the lack of a viable account of friendship and related concepts of care for what is intrinsically good for others impairs his theory's comprehensiveness. And although

21 Ibid; cf Nagel Mortal Questions (1979), at 128-32 22 Cf Strauss, Natural Right and History (1953), at 128: 'There are things which are

admirable, or noble, by nature, intrinsically. It is characteristic of all or most of them that they contain no reference to one's selfish interests or that they imply a freedom from calculation ... The phenomenon of admiration of human excellence cannot be explained on hedonistic or utilitarian grounds, except by means of ad hoc hypotheses. These hypotheses lead to the assertion that all admiration is, at best, a kind of tele- scoped calculation of benefits for ourselves. They are the outcome of a materialistic or crypto-materialistic view, which forces its holders to understand the higher as nothing but the effect of the lower, or which prevents them from considering the possibility that there are phenomena which are simply irreducible to their conditions, that there are phenomena that form a class by themselves.'



UTILITARIANISM, ECONOMICS, AND LEGAL THEORY ,315

lawyers do not often couch their analyses in terms of friendship,21 it is worth recalling the role that friendship has played as a concept in legal theory. One of the reasons for Aristotle's interest in friendship - it is the most extensively treated topic in the Nicomachean Ethics - is that he recognized that there was a relationship between friendship, justice, and political community. Similarly Plato had earlier invoked the notion of friendship to explore the position that laws are conventions created by the weak which should be broken by those who are naturally strong,24 a position the evaluation of which is crucial for the whole enterprise of legal theory. If the nature of friendship is, as Plato and Aristotle thought, a significant issue in legal theory, the inability of wealth-maximization to give a plausible account of friendship points to a serious defect in what purports to be a comprehensive theory of law.

One way, then, in which Posner's principle of wealth-maximization differs from utilitarianism is that it insists upon the monetization of all ethical phenomena. A second difference will become apparent if we shift our attention from the homogenizing implications of monetization to the process whereby preferences are actually registered in the market. This depends broadly on three related factors: the preferences which the individual has and their relative intensities, the prices of the goods which form the object of his preferences, and the amount of wealth on which he can draw in his striving to satisfy these preferences. This combination of what a person has, what he wants, and what it costs we can term 'affordability.' Posner's economic theory requires not only that preferences be monetizable in a general sense but also that they be affordable by particular individuals. In a market system, an individual's activities 'are circumscribed by the limitations of his wealth.'25 Posner illustrates this 'willingness-to-pay' sense of value when he points out that 'the hypothetical- market approach would be applicable if someone of monetary means [emphasis added] broke into an unoccupied cabin and stole food to avert starvation. Transaction costs would be prohibitive, and there would be reason to believe that the food was worth more, in the strict economic sense, to the thief than to the owner.'26 The qualification that the thief be a person'of monetary means is crucial to thejustification of his action. In an actual market situation the food would be worth more to the starving rich man than to the cabin owner, and the result of the bargaining between 23 A recent exception is Fried, The lawyer as friend: The moral foundations of the

lawyer-client relationship (1976) 85 Yale L.J. 1o6o. 24 Plato Gorgias 507e, 5lob; cf Rep. 576a. On friendship as a theme in Plato's Crito, see

Weinrib, Socrates and obedience to the law, forthcoming in lyunei Mishpat (in Hebrew). 25 Posner, at 132 26 Posner, at 121




them would be that the rich starveling would secure the food through purchase. If bargaining is impossible the proper allocation is one which mirrors the result which would have been produced by bargaining, and so the food should go to the thief. But if the starveling had been destitute, he would not (let us assume) have had the resources to purchase the food in an actual market, and so it is wrong for him to take it when conditions make bargaining impossible. Only affordable preferences count, and what is affordable to the rich may be beyond the reach of the poor.

A theory which holds that the theft of food to avert starvation is proper if the starveling is rich but improper if he is poor does not, on its face, appear to have much plausibility. A utilitarian would point out that, from his point of view, the source of the difficulty is the absence of neutrality as between wants and the partiality towards affordable wants. If the starveling's satisfaction in averting starvation does not vary according to his monetary means, there is no reason for restricting the pleasures that count to those that are affordable.

Posner's contention is that his economic analysis, geared to affordable pleasures, can yield results which are consistent with our ethical intuitions, and that the more restricted base from which it operates allows it to escape criticisms which have been levelled against utilitarianism. In his view, it is precisely the limitation of affordability which supplies the constraints utilitarianism lacks. The principal defects which he sees in utilitarianism are the following: the difficulty of calculating the amount of total happiness, the inability to account for rights, the refusal to make moral distinctions among types of pleasure, and the readiness to sacrifice the individual on the altar of social need. All these defects, Posner contends, do not pose serious difficulties for wealth-maximization, which thus succeeds in all the important ways in which utilitarianism fails. This is a large and significant claim. In order to assess it, we will have to examine each of these defects in turn and see how the considerations behind them are treated in Posner's economic analysis.

On Posner's contention about calculability three points must be made. First, ease of measurement is not itself a decisive criterion of a theory's viability. If the theory is satisfactory on other more substantive grounds, ease of measurement will be a welcome bonus, and if is not satisfactory on these grounds, ease of measurement cannot redeem it. Secondly the gravamen of recent criticism of the utilitarian calculus is not that the proponents of utilitarianism are lacking in technique but that they are doing something which is fundamentally misconceived: they are attempting to aggregate what is incommensurable.27 If, as we have seen, wealth- 27 Williams, supra note 14, and Conflicts of values, in Ryan (ed) The Idea ofFreedom: Essays

in Honour oflsaiah Berlin (1979) 221 ; Nagel, supra note 21




maximization is vulnerable to the same criticism, a different and easier technique of measurement either will be beside the point or will raise the suspicion that the greater ease of measurement is a reflection of the greater distortion of what is being measured. Thirdly, as Posner himself acknowledges,28 the problem of measurement is obviated only in actual markets, where the parties reveal their preferences through the process of voluntary exchange. In the hypothetical market the problem of measurement subsists because one will have to guess how the parties would have acted in an actual market. Posner asserts that 'it is much easier to guess people's market preferences in areas where a free market can't be made to work than to guess what policies will maximize subjective happiness.'29 Why this is so is not clear, and one can certainly think of instances where utilitarians have been more confident of their estimates than Posner has been of his.s3 Guesses as to what things persons will exchange for what and guesses as to what will produce the greatest happiness of the greatest number depend alike on a general knowledge of human nature, and the former seem to be more exposed to the eccentric preferences of given individuals than the latter. Posner unfortunately offers no support for his assertion that wealth-maximizing guesses are easier to make than utilitarian ones.

Of the other grounds, the one that is crucial, since all the other considerations are closely related to it, is Posner's claim that the principle of wealth-maximization can account for rights in a satisfactory manner, whereas utilitarianism cannot. Recent criticism against utilitarianism has indeed centred on the allegation that it does not 'take rights seriously.' This allegation can be considered both from utilitarianism's aspect as a want-regarding theory and from its aspects as an aggregative theory. As a want-regarding theory, utilitarianism is vulnerable to the criticism that the sensations to which it ascribes value are not distinctive enough of the human experience to be worthy of the sort of special status which is the subject-matter of rights. The neutrality which utilitarianism professes towards all pleasures and satisfactions is not conducive to the demarcating of certain aspects of human action as having the particular significance which requires the protection of rights. Mill, as is well known, attempted to soften the starkness of utilitarianism's want-regarding aspect by intro- ducing the ideal-regarding distinction between higher pleasures and lower pleasures - 'better a human being dissatisfied than a pig satisfied.'3' 28 Posner, at 129-30 29 Posner, at 130 30 Compare, eg, Sidgwick The Methods of Ethics (7th ed 1907), at 437, and Posner and

Landes, Salvors, finders, good Samaritans and other rescuers: An economic study of law and altruism (1978) 7 J. ofLegal Studies 84, at 126.

31 Mill Utilitarianism ch i1, para 3-8




Posner condemns this distinction as being inevitably subjective, but he nonetheless considers the refusal to differentiate on moral grounds among types of pleasures to be a defect in utilitarianism.32

The aggregative feature in utilitarianism also encounters difficulties in dealing with rights. Rights attach to individuals, whereas the point of aggregation is that the interests of individuals can be sacrificed so that the largest total amount of good can be produced. Aggregation presupposes a conflict between each person's good as an individual and the total good of all individuals as a group. If there were no such conflict,33 one would not need to use an aggregative criterion, since the maximization of each person's individual good would necessarily produce the highest total, and it would be the former rather than the latter which would be decisive. Aggregation permits the individual to be sacrificed, and the current criticism of utilitarianism in the name of rights views these rights as demarcating a sphere within which the individual is immune from subjection to the felicific calculus. To that extent, rights constrain utilitarianism and are conceptually prior to or inconsistent with it.

If the plausibility of the criticism that utilitarianism does not 'take rights seriously' derives from the want-regarding and aggregative aspects of utilitarianism, and if Posner subscribes to this criticism, an obvious question presents itself. How can Posner's theory of wealth-maximization not succumb to this very criticism in view of the fact that it too is both want-regarding and aggregative? One possible answer is that the theory of wealth-maximization produces outcomes and that wealth-maximizing 'rights' could be attributed in the relevant circumstances to those individuals whom these outcomes favour. This, however, is hardly satisfactory since it does not distinguish the structure of rights under wealth- maximization from that under utilitarianism. The point of the rights- based criticism of utilitarianism is that rights are prior to outcomes, not that they are synonomous with outcomes. The criticism does not centre upon the utilitarian's entitlement to use the word 'rights' (some utilitarians abhorred the word, others gloried in it) but upon the challenge which the concept of rights as sketched above poses to the structure of an aggregative system. The priority of rights to aggregative outcomes cannot be sustained with respect to utilitarian outcomes but disregarded with respect to wealth-maximizing ones.

Posner cannot, then, maintain that wealth-maximizing outcomes and rights are synonymous. Rather, he apparently puts the argument on the basis that wealth-maximizing outcomes coincide with the rights which are

32 Posner, at 113, 116 33 For an argument that Bentham himself held this view see Lyons, Was Bentham a

utilitarian? Reason and Reality, Royal Institute of Philosophy vol 5 (197o-1).




recognized in our culture as a matter of intuitive morality, and that these outcomes can then provide a firm foundation for both corrective and distributive justice. This is a more promising approach, but many questions are left unanswered. In particular, what is the nature of the coincidence between economic outcome and moral intuition? Presumably, since Posner's theory is empirical, the coincidence is a contingent one rather than one which exists a priori. In other words, it is possible to imagine a conflict between the two,34 and then which is to be regarded as having priority? If moral intuition takes precedence, why are we concerned, as a normative matter, with economic outcomes at all, and what would we lose by disregarding the economic approach to law? Posner, on occasion, refers to rights and morality as being 'derived from' his economic theory,35 and this seems to indicate the priority of wealth-maximization over moral intuition. But this would merely render rights synonymous with outcomes, and, as we have seen, would mean that there was no relevant difference between wealth-maximization and utilitarianism in their capacity to take rights seriously. Or is the relationship between Posner's economic theory and moral intuition to be characterized by a Rawlsian state of reflective equilibrium,"6 so that each can be adjusted to bring both into a coherent pattern? If so, precisely which of the theory's tenets can be adjusted, and how can the result measure up to Posner's evaluative criteria of consistency, completeness, and definiteness?

There are difficulties, then, in ascertaining the status of rights under wealth-maximization, the grounds for superiority of Posnerian rights to utilitarian ones, and the relationship between rights and moral intuitions. The effect of these difficulties can be seen when one turns to the process by which rights are created in the economic theory of law. Posner's most extreme claim is that rights do not have to be postulated but can be derived from the theory, and that the theory can provide a basis for corrective and distributivejustice. Consideration of this claim involves two further questions: is Posner's account of rights coherent, and does it reach those fundamental aspects of social life which are regarded as the appropriate domain for the operation of rights?

Assessment of the coherence of Posner's account requires us to look more closely at the categories of markets which generate the rights, and particularly at the distinction between actual hypothetical markets. Actual markets are characterized by a process of bargaining leading to a voluntary exchange between the participants. This exchange would not have taken place unless it improved the position of each party, and therefore

34 Posner (134-5) frankly admits to the existence of several such 'troubling cases.' 35 Eg, Posner, at lo9, 127, 139 36 Rawls, supra note 8, at 48-50




the resource which is the subject-matter of the exchange must in the end be the property of the participant in the bargaining who values it the most. Thus, at the end of the day, wealth is maximized. Hypothetical markets come into play when transactions costs preclude the operation of an actual market. In these circumstances, the resource is allocated in the same way that it would have been had the parties been able to bargain, and wealth is again maximized. If, for instance, you have property worth five dollars to you and ten dollars to me, in the sense that I am willing to pay that much in order to carry on my activity, in an actual market we will bargain, with the result that I will pay you between five and ten dollars to purchase the property. Thus the property will be put to its most valuable use - my use. Let us assume, however, that bargaining is impossible because there are many persons who hold such property and it cannot be known in advance which of those persons my activity will affect. In determining whether I must compensate you when my activity in fact destroys your property, Posner's principle of wealth-maximization would look to the result which an actual market would have produced - an allocation of the property to me - and would duplicate the result. Since the property is more valuable when subject to my use than to yours, the right to the property is to be allocated to me.

The hypothetical market thus mimics the actual market. And since both actual and hypothetical markets maximize wealth, the two types of market can be looked upon as being manifestations of a single principle. But this unity is deceptive. What the hypothetical market mimics is not the actual market simpliciter, but only the result which the actual market would produce regarding the allocation of the affected property. There are two aspects which the hypothetical market does not mimic. The first of these is the process of bargaining, which is ex hypothesi excluded because the transaction costs are precisely what causes recourse to the hypothetical market to begin with. The second aspect is that of exchange. Not only would the actual market allocate the property to me but it would transfer between five and ten of my dollars to you, and Posner's hypothetical market ignores this latter element. Part of the reason for ignoring the element of exchange is that otherwise the advantage of definiteness which wealth-maximization claims over utilitarianism would be dissipated. It is easier to estimate that the property is worth more to me than it is to estimate how much you would receive by way of exchange. For this amount - the precise point between the five dollars which the property is worth to you and the ten dollars it is worth to me - is intimately tied to the course of the bargaining between us, and this had already been excluded ex hypothesi. But even if it were determined that the bargained-for exchange would have been, say, seven dollars, there is no reason of




principle for wealth-maximation to insist upon its transfer. For the aggregate amount of our combined wealth will be the same regardless of whether the seven dollars are in my pocket or in your pocket. The transfer of your property to me will increase our combined wealth because it is worth more to me in terms of money than it is to you. But the reciprocal transfer of seven dollars from me to you does not increase our combined wealth because seven dollars as such cannot be worth more in terms of money to you than to me. Seven dollars is money, and money or its equivalent is the ultimate criterion of measurement and justification under the principle of wealth-maximization. The fact that seven dollars may be worth more to you in terms of something else, such as satisfactions or pleasures, is irrelevant, since otherwise it would be these and not wealth which would be the ultimate criteria. This would be to readmit utilitarianism by allowing interpersonal comparison of utility. And in any case this would not sanction the transference of seven dollars to you as part of a process of exchange, since it is at least possible that on these further grounds the seven dollars would, after all, be worth more to me.

These differences between actual and hypothetical markets are crucial to the assessment of the coherence of wealth-maximization. Since hypothetical markets mimic the results of actual markets but not their bargaining or exchange aspects, the most convincing vindication of the coherence of Posner's economic approach requires that the result and not the general processes of bargaining and exchange through which the result is reached be the most significant aspect of actual markets. The implausibility of this is perhaps suggested in the following analogy.37

Assume that Jones loves playing golf and plays eighteen holes every Sunday morning. One particular Sunday Jones realizes that he cannot spare the time to play his usual game. Instead he goes out into his back yard, digs a hole, and drops a ball into it eighteen times. When questioned about his peculiar behaviour, he explains, 'Well, since it was impossible to play golf, I decided to mimic what happens when I actually play. Golf, as you know, is a game which results in a ball being repeatedly deposited into a hole in the ground. Of course, this is not the whole game, which includes the process by which this result is to be attained. But surely the result is the most significant part of the game, so that is the element which I repro- duced. After all, what I was playing was not actual golf (that was impossible in the circumstances), but only hypothetical golf.' It is unlikely that this explanation will persuade many golfers to try hypothetical golf when circumstances prevent the playing of actual golf. Nor could Jones convin- cingly assert that actual golf and hypothetical golf are merely different

37 The analogy is derived from ch 3 of Bernard Suits' marvellous book The Grasshopper: Games, Life, and Utopia (1978).




manifestations of the same underlying principle aiming at the result that a ball be lodged in a hole. Hypothetical golf simply fails to capture the element which gives actual golf its appeal, the enjoyment of exercising one's skill in accordance with the rules which are constitutive of the game. Indeed, a claim by Jones that his commitment to actual golf led him to try hypothetical golf would be regarded as incoherent, since the challenge which is integral to the former is completely lacking in the latter.

Just as actual and hypothetical golf result in a ball's being lodged in a hole, so actual and hypothetical markets both result in wealth- maximization. But the two types of market maximize wealth on different bases. In the hypothetical market the maximization of wealth is directly pursued as an aggregative principle. But in the actual market wealth- maximization occurs derivatively as a consequence of a distributive operation. In the hypothetical market, our total wealth is greater even though your individual wealth has decreased, since the decrease in your wealth is less than the increase in mine. But in the actual market, our total wealth is greater because both your wealth and my wealth have increased. In the absence of a need to yoke together the two categories of market, it would not naturally occur to anyone to call the actual market an instance of aggregation, since it lacks the conflict between individual and total good which the term presupposes. Of course, if each person's wealth is increased, the total wealth of all the individuals in the group is inevitably also increased, but it is the former effect, not the latter, which captures the distinctive quality of actual markets.

It is thus only superficially that both categories of markets can be subsumed under the principle of wealth-maximization. At a more fundamental level they differ, and this difference is reflected in their unequal moral acceptability. The actual market seems to be far more appealing. In a want-regarding system, the fact that the position of all individuals concerned is improved is the most powerful reason conceivable for regarding the new situation as superior to the old. Hypothetical markets, in which the gains of some are at the cost of losses to others, are much more problematic. Actual markets embody respect for the individual and his choice, whereas hypothetical markets entail the sacrifice of the interests of some individuals in the name of maximization.

One of the criticisms which Posner levels at utilitarianism is that the readiness to sacrifice individuals on the altar of social need is an instance of 'moral monstrousness.'38 Even if the accusation is a fair one, it hardly lies in the mouth of a proponent of wealth-maximization to make it. Sacrifice is entailed by utilitarianism's aggregative element and would find

38 Posner, at 116




a place in any aggregative system. Wealth-maximization differs from utilitarianism only in its conception of the want-regarding element, not in its being an aggregative system; and therefore sacrifice is as natural a concomitant of wealth-maximization as of utilitarianism. Posner at one point concedes as much39 but shifts ground from the monstrousness of sacrifice per se to the monstrousness of utilitarian sacrifices as compared with wealth-maximizing ones. Now monstrousness is a term of moral evaluation, and one is entitled to wonder about the evaluative criterion which lies behind it. If the criterion of monstrousness is a product of Posner's own theory of wealth-maximization,40 he is merely asserting that utilitarianism is a less satisfactory theory of wealth-maximization than is wealth-maximization - an assertion with which no utilitarian will see any need to disagree. But if some other criterion is being involved, it would be helpful to know what it is, if for no other reason than to dispel the suspicion that the criterion is a Kantian one and thus hostile to all want- regarding aggregative theories, including Posner's. And, on any criterion, how can Posner be so confident that utilitarian sacrifices are more monstrous than wealth-maximizing ones? For, in view of Posner's other criticism of utilitarianism - that there is no reliable technique for measuring utilitarian preferences - he should be agnostic as to the product of the utilitarian calculus. It seems unfair to argue both that utilitarianism cannot yield definite results and that the results which it yields are monstrous.41 But at any rate, it is clear that wealth-maximization will, through the instrumentality of hypothetical markets, require individual sacrifices of a routine and widespread nature.

Actual markets, which respect individuals, are significantly different from hypothetical markets, which sacrifice individuals. One might be tempted to impart structure to wealth-maximization by postulating that the two markets are to be invoked in a lexical order.42 In a certain sense this is what Posner does. In his account of hypothetical markets he com- ments that

[t]he purist would insist that the relevant values are unknowable since they have not been revealed in an actual market transaction, but I assume that (in many cases anyway) a court can make a reasonably accurate guess as to the allocation of resources that would maximize wealth. Since, however, the determination of value (that is, of willingness to pay) made by a court is less accurate than that made by a market, the hypothetical market approach should be reserved for cases, such as

39 Posner, at 133 40 Recall Posner, at 137: 'Morality is derived from the economic principle.' 41 For an optimistic statement of the utilitarian position, see Hare, What is wrong with

slavery (1979) 8 Phil. & Pub. Affairs 103. 42 On lexical ordering, see Rawls, supra note 8, at 42-3.




the typical accident case, where market-transaction costs preclude use of an actual market to allocate resources efficiently.43

In any given situation, then, one first seeks to apply the actual market approach, and only if this is impossible does one apply the hypothetical market approach. Posner'sjustification of this procedure, however, is not free from difficulty. He regards the two categories of markets as having not different moral foundations but different degrees of accuracy. For him the most significant difference between the actual and the hypothetical market is that the former yields an allocative result which is more accurate than that yielded by the latter. We have already seen that there is reason to be dubious of this result-oriented approach, but the point to be noted here is that even if it were correct it would notjustify the priority of actual over hypothetical markets. Granted that the actual market is more accurate in that it can determine exchange as well as allocation. But exchange as such is irrelevant to aggregation. And with respect to allocation the crucial question is not how much more efficient one allocation is than another but simply whether it is more efficient. Once a certain threshold of confidence has been reached in an allocative determination, further accuracy is unnecessary. Posner is willing to assume that in many cases a reasonably accurate determination can be made without recourse to an actual market: hence the use of hypothetical markets. But if this is so, there is no justification from an aggregative point of view for not using these reasonably accurate determinations even in circumstances where actual markets are possible. If we have confidence that the value of certain property will be more for me than for you (and the very existence of hypothetical markets indicates that Posner has this confidence in many cases), why should the wealth not be maximized by allocating the property to me regardless of whether transaction costs allow or prevent an actual market? And if the answer is that actual markets capture the significant additional moral values of process, why should these moral values have a priority in a theory whose basic thrust is result-oriented and aggregative?

Indeed, an argument can be made that if there is to be a lexical ordering, the priority should be the reverse of that proposed by Posner. The pursuit of greater accuracy is itself a costly enterprise, and a theory which was genuinely concerned to maximize wealth would require the avoidance of costs which would not be justified. Once one reaches the stage of reasonable confidence in the accuracy of the guess concerning the wealth-maximizing allocation (a stage which can be reached without recourse to an actual market), further accuracy is to be avoided as being costly even if the medium for attaining this accuracy is an actual market.

43 Posner, at 120




Thus, instead of the priority being attached to the actual market so that an allocation takes place in a hypothetical market only if transaction costs preclude an actual market, the priority ought to be reversed, so that an allocation would take place in an actual market only if the true guess regarding the allocation in accordance with the hypothetical market fell short of reasonable accuracy. This suggestion concerning the priority of the hypothetical market would by definition require recourse to the actual market, but the actual market would be used as the basis for guesswork about relative value, not as an instrument of allocation. Posner's view is that the principal difference between the two types of market is one of accuracy, but he is willing to achieve accuracy at the price of stunting the maximization of wealth. Would it not be more consistent if the lexical ordering were arranged to avoid the possibility that accuracy may cost more than it is worth?

Accordingly, the logic of Posner's theory may require the restriction of the role of actual markets. One might indeed say that the use of actual markets is a potentially inefficient way of accomplishing wealth- maximization. To the neo-classical economist this is a paradox, since the concept of efficiency is, in the absence of specified forms of market failure, inherently tied to the operation of actual markets. But it is possible to break out of the impregnable circularity of this position by defining efficiency more neutrally as the least expenditure of a limited resource to achieve a given goal.44 Just as the game of golf, with its distances between tee and green and its deliberate and contrived obstacles, is an inefficient way of depositing golf balls into holes, so the actual market, with its processes of negotiation and exchange, may be an inefficient way to maximize wealth. Just as one would not expect that the devotee of actual golf would have a view of gamesmanship compatible with that of the devotee of hypothetical golf - for the actual golfer hypothetical golf would lack the very features which make golf worth playing, and for the hypothetical golfer actual golf would impose pointless obstructions - so there is a deep tension between actual and hypothetical markets. The moral justifications of each of these two markets point in such different directions that it is hard to see how they can both take their places in a single coherent theory.

If Posner's economic theory of law is constructed on fissured and insecure foundations, a satisfactory account of fundamental moral mo- tions such as rights is hardly likely to emerge from it. But it is precisely Posner's claim that the attractiveness of his theory, especially when con- trasted with utilitarianism, is that it can yield conclusions about important 44 Suits, supra note 37, at 54; cfJohansen, The bargaining society and the inefficiency of

bargaining (1979) 32 Kyklos 497.




ethical issues which are consistent with our moral intuitions. This claim is all the more surprising when it is recalled that the concept which gener- ates Posner's account of fundamental moral notions is the market. Now the market is an instrumentality for the exchange of holdings, and thus it presupposes that there has already been an assignment of proprietary rights and that the mechanisms of legitimate exchange have been established at least with sufficient particularity to allow borderline problems to be treated in a principled manner. Thus in a market society one can recognize that, when the highwayman says 'Your money or your life,' he is making a demand which he has no right to make, taking something which he has no right to take, and that the resulting exchange is not a legitimate market transaction. The market seems to presuppose the existence of a settled regime of more basic rights and not to be an appropriate instrument for the initial creation of that regime. And the initial creation, the situation antecedent to any market exchange, is crucial, since under Posner's criterion of affordability a preference is not to be included in the process of wealth-maximization unless it manifests itself in a willingness to pay, and one's willingness to pay will vary with what one has. The maximization of wealth requires that wealth antecedently exist and thus seems unable itself to create that antecedent existence.

It is important, in view of Posner's project, to note how much more serious this problem is for Posner's economic principle than for utilitarianism. Whatever the difficulties with utilitarianism, it is at least possible to conceive that one can derive from it fundamental notions of mine and thine. The objections which have been raised against utilitarianism are that it is technically impossible to conduct the felicific calculus and that its want-regarding and aggregative premises are unacceptable. The difficulty with wealth-maximization is of different order. Even if one accepts its premises, it seems logically, not merely technically, impossible to derive from them a conclusion about mine and thine. The reason is that wealth-maximization starts in at too late a stage. The want-regarding element in utilitarianism is composed of such fundamental sensations as pleasure, pain, and preference, and these exist in man naturally.45 But Posner's theory is a much narrower one. The want-regarding component for him is restricted to preferences which are backed up by wealth, and the

45 As Bentham himself puts it in his rhetorical opening to the Introduction to the Principles of Morals and Legislation: 'Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do. On the one hand the standard of right and wrong, on the other the cause of chains and effects, are fastened to their throne. They govern us in all we do, in all we say, in all we think: every effort we can make to throw off our subjection, will but serve to demonstrate and confirm it. In other words a man may pretend to adjure their empire: but in reality he will remain subject to it all the while.'




distribution of wealth is a social phenomenon. It not merely exists, but it can be justified or criticized. In starting with the market, Posner seems to preclude the possibility of justifying the fundamental notions on which the market itself depends.

This criticism, in various formulations, has indeed been a standard one.46 Posner's response is as follows:

It is true that if market transactions were costless, it would be a matter of indifference to the economist where an exclusive right was initially vested. The process of voluntary exchange would costlessly reallocate the right to whoever valued it most. Once the unrealistic assumption of zero transaction costs is abandoned, however, the assignment of rights becomes determinate ... If transaction costs are positive, the wealth-maximization principle requires the initial vesting of rights in those who are likely to value them the most. This is the economic reason for giving a worker the right to sell his labour or a woman the right to determine her sexual partners. If assigned randomly to strangers these rights would generally (not invariably) be repurchased by the worker and woman respectively.47 In other words, the problem of the underlying distribution can be avoided in the context of an actual market, and it can be solved where the market is a hypothetical one. In this way the wealth-maximization principle is 'a comprehensive and unitary criterion of rights and duties.'48

This defence is, however, insufficient with respect to both of its bran- ches. Consider first the actual market situation, where transactions are costless. Posner is here applying Coase's seminal insight that in the absence of transaction costs the use of a resource will be the same irrespec- tive of which of the competing parties is the initial holder of the property right in the resource.49 Regardless of whether the right to pound a mortar with a pestle is given to the confectioner or whether his neighbour, the physician, is given the right to be free of this disturbance, the initial property assignment will have no bearing on whether the mortar and pestle will continue to be used.50 This is why the initial distribution is, in Posner's words, 'a matter of indifference to the economist.' But whereas Coase was pointing to the existence of the strange economic fact that the ultimate use of a resource is unaffected, in the absence of transaction costs, by its ownership, Posner is imbuing this fact with a moral significance and treating it as a normative basis for legal theory. Posner's

46 Eg, Baker, The ideology of the economic analysis of law (1975) 5 Phil. & Pub. Affairs 3; Dworkin, supra note 8, at 97; Kennedy, Form and substance in private law adjudication (1976) 89 Harvard L.R. 1685, at 1763; Fried, supra note 8, ch 4

47 Posner, at 125 48 Posner, at 140 49 Coase, The problem of social cost (1960) 3 J.L. & Ec 1 50 Sturges v Bridgman (1879) 11 Ch.D. 852 (C.A.), discussed by Coase, supra note 49, at 8




general point, however, is that his approach will correspond to and can guide our ethical intuitions. Now, it can do so only if all the morally significant questions regarding a resource are exhausted by the determination of its ultimate use. In other words, his approach will satisfy his own criteria only if the economist's indifference to the initial distribution is shared by persons considering the whole issue from a moral and legal point of view, and this is simply inconceivable. If one were to try to explain to the confectioner and to the physician that the assignment of the property right in their case - which was the whole issue in the litigation - was irrelevant in the eyes of legal theory, they would certainly have cause to wonder how legal theory could be so divorced from legal reality. What seems to follow from Coase's demonstration is not that the initial distribution is irrelevant to legal theory, but that it is the only relevant issue, since it is the only issue which can be affected by the operation of the judicial process. Coase's work is important to law theory not because his conclusions are somehow coextensive with legal theory, but because they point to a type of consideration with which it is futile for legal theory to be concerned. Conversely, the very factor which, on Posner's assertion, is irrelevant to the economist is to the legal theorist an unavoidable subject of preoccupation. The need to account for the initial distribution of rights does not evaporate in the presence of an actual market.5'

It is the operation of hypothetical markets to which Posner looks for the determination of initial rights. According to Posner, a right should be assigned to its most natural owner, since it is most valuable to him and he would demonstrate its value to him by purchasing it if it were assigned elsewhere. The right to my life, for instance, is to be given to me and not to my potential murderer. Its value to me is higher than its value to him, since if there were a market in the right to my life, I would spend any amount to purchase it from him, but he would probably not be able to afford the price that I would demand if he wished to purchase it from me. Unlike utilitarianism's more general calculus, which might yield a result requiring the forfeiture of my life, the market will place constraints on the fulfilment of the desires of the murderer, since his activities will be 'circumscribed by the limitations of his wealth.'52 Thus, wealth-

51 Posner has himself recognized, in another place, that an economic analysis may not reach fundamental issues, eg, Posner, supra note 18, at 36 n 1: 'A qualification on Coase's analysis should be mentioned here. The initial assignment of rights, even where transaction costs are zero so that efficiency is not affected, may affect the relative wealth of the parties, and this may affect the use of the resources ... [i]f the value of the right represents a large fraction of the wealth of either party, where the right lands up may depend on how the initial assignment is made. The extreme example is the right to a barrel of water as between two dying men in a desert.'

52 Posner, at 31-2




maximization will yield a result which is intuitively acceptable, whereas utilitarianism might not.

This argument, however, is deeply flawed. One should note, as a start, that the limitations of the murderer's wealth are taken into account if he has to purchase the right to my life from me, but that the limitations of my wealth are not taken into account if I have to purchase the right from him. The possibility that I may not have enough money to purchase the right - the criterion of affordability - is simply ignored. It is as if Posner's concentration here on the hypothetical quality of the market led him to forget for a moment that the hypothetical market must mirror the results of the actual market, and that in the actual market the relative resources of the parties can be decisive. Indeed, Posner is caught here in a dilemma. Either the assignment of rights has already taken place, in which case it is too late for the rights to be created by Posner's market theory, or the assignment of rights has not yet taken place, in which case the parties do not have the resources with which to act in the market. It is not a satisfactory resolution of this dilemma to assume (plausibly perhaps) that in any distribution the murderer will not be able to afford my price but to ignore the possibility that I will not be able to afford his.

In assuming that I value my life but ignoring whether I can afford it, Posner has here cut the notion of value adrift from its moorings in 'willingness-to-pay.' His justification for assigning rights to their natural owners is therefore not grounded in the maximization of wealth. It is, furthermore, worth noticing what the real ground for this justification is. If I am willing to spend any amount to purchase53 my natural rights, regardless of whether I have the money, then money is being used not as a constraint on my desires but rather as a measurement of the intensity of my desires. Posner's argument is that the intensity of my desire to live is greater than the intensity of the murderer's desire to kill, and that if we both had the money, I would pay more to indulge my desire than he would to indulge his. If we add together the satisfaction and disappointment which we would each feel at my survival and compare it with the satisfaction and disappointment which we would each feel at my murder, more aggregate happiness would be produced by the realization of the former set of possibilities than the latter. Posner's argument, therefore, is actually proceeding along utilitarian lines. Perhaps it is only incipiently utilitarian, since a complete felicific calculus will include the satisfactions and disappointments of others besides the potential victim and the potential murderer. but it is nevertheless utilitarian as far as it goes. One can see from this instance how easy it is to take Posner for a utilitarian, and how

53 Posner's word is actually 'repurchase' - which in itself has revealing implications.




difficult it is for him to show how his theory is different from - let alone superior to - utilitarianism.

The claim that wealth-maximization yields conclusions consistent with our intuitions concerning rights is therefore very difficult to sustain. This, however, is not the only context in which Posner asserts a congruence between his economic principle and our ethical intuitions. The claim also extends to ethical behaviour, to the qualities which a virtuous person would have. Posner's point of departure is, again, a criticism of utilitarianism. He refers to the 'moral monstrousness,' as he terms it, which 'stems from the utilitarian's refusal to make moral distinctions among types of pleasure,' and he gives the following illustration: 'Suppose that A spends his leisure time pulling wings off flies, while B spends his feeding pigeons, and that because A has greater capacity for pleasure he derives more happiness from his leisure time than B does from his ... [T]he consistent utilitarian would have to judge A a better man than B, because A's activity adds more to the sum of happiness than B's.'54 Since utilitarianism is neutral as between pleasures and does not mark out certain pleasures as being qualitatively better than others,55 'utilitarians would have to give capacity for enjoyment, self-indulgence, and other hedonistic and epicurean values at least equal emphasis with diligence, honesty,' and other virtues which imply 'a degree of self-denial.'56 In contrast, 'the wealth- maximization principle encourages and rewards the traditional virtues ("Calvinist" or "Protestant") and capacities associated with economic progress.'57 Posner sums up this aspect of his contrast between his theory and utilitarianism as follows:

The great difference between utilitarian and economic morality, and the source I believe of the 'monstrousness' of the former, is that the utilitarian, despite his professed concern with social welfare, must logically ascribe welfare to all sorts of associal behaviour such as envy and sadism, because these are common sources of personal satisfaction and hence of utility. In contrast, lawfully obtained wealth is created only by doing things for other people - offering them advantageous trades. The individual may be completely selfish, but he cannot, in a well- regulated market economy, promote his self-interest without benefiting others as well as himself ... There is no such constraint on the pursuit of selfishness in a utilitarian society.58

Here too, however, there are difficulties both with Posner's strictures against utilitarianism and with his conclusion that his economic principle

54 Posner, at 116 55 Posner, at 113, rejects J.S. Mill's distinction between higher and lower pleasures. 56 Posner, at 124 57 Ibid 58 Posner, at 132




allows scope to virtuous behaviour which utilitarianism denies. One indication of the problem is Posner's statement that as between A, the tormentor of flies, and B, the benefactor of pigeons, the utilitarian would regard the former as the better person because, given his greater capacity for pleasure, his activity contributes more to the world's total happiness than B's. This, I think, badly misconstrues the utilitarian position. Not even Bentham at his most perverse put forward the claim that one's goodness as a person varies directly with one's capacity for pleasure.59 Indeed, the primary concern of the classical utilitarians was with the morality of a person's actions, not with the worth of the agent, and it could hardly be otherwise for a school of philosophers to whom the motive of an act was irrelevant.6' The utilitarian interest in character was focused on how character manifested itself in action; it centred on disposition, 'a bent of character from which useful, or from which hurtful actions are likely to arise.'"' Thus A would be a better person than B only if A was more likely than B to act consistently with the felicific calculus. If in the situation Posner postulates there was no way for both A and B to indulge their pleasures and a choice between them had to be made, the utilitarian solution would indeed be to favour A, because tormenting flies will give him more pleasure than feeding pigeons will give B. But A would have a better disposition than B only if A were more likely than B to act consistently with the felicific calculus, regardless of whose capacity for pleasure was greater. The 'better person' would be the person more likely to forgo his own pleasure if this sacrifice was required on utilitarian grounds.

It is in this light that one must view Posner's criticism that utilitarianism is hospitable to 'capacity for enjoyment, self-indulgence, and other hedonistic and epicurean values.' The consistent utilitarian does not discrimi- nate between pleasures on qualitative grounds, and every pleasure, no matter how disreputable, is entitled to be considered in the felicific calculus.62 But it is wrong to conclude from this that utilitarianism requires or permits persons to be self-indulgent hedonists or that utilitarianism does not constrain the pursuit of selfishness. It was precisely this fallacy that Mill was refuting when he pointed out that 'the happiness which forms the utilitarian standard of what is right in conduct is not the

59 The related position that a person's goodness varies according to his present enjoyment of pleasure is dismissed in Plato Philebus 55b.

6o For a clear statement see Mill Utilitarianism ch 1 1, para 19. 61 Ibid (note 3, in the 1864 edition) 62 Bentham An Introduction to the Principles ofMorals and Legislation ch 5, ss 1 o- 11; cf also ch

1o, s 1o, n 1: 'Let a man's motive be ill-will; call it even malice, envy, cruelty; it is still a kind of pleasure that is his motive: the pleasure which he takes at the thought of the pain which he sees or expects to see his adversary undergo. Now even this wretched pleasure taken in itself is good: it may be faint; it may be short; it must at any rate be impure: yet while it lasts, and before any bad consequence arrives, it is as good as any other which is not more intense.'




agent's own happiness, but that of all concerned. As between his own happiness and that of others, utilitarianism requires him to be as strictly impartial as a disinterested and benevolent spectator.'63 It is perhaps a measure of Posner's skill as a polemicist that he can manage to criticize utilitarianism both because it permits excessive self-indulgence and because it requires excessive sacrifice.

If in Posner's view utilitarianism is defective in favouring A, the insatiate tormentor of flies, over B, the moderate feeder of pigeons, one would expect that the situation would be set right under wealth-maximization. But it is not. Posner would resolve the problem of which person's pleasures are to be preferred by mimicking the result of bargaining between A and B. If A were willing to pay more for pulling wings off flies than B were willing to pay for feeding pigeons, A's pleasures would be preferred. Posner's system does not in any way obviate the 'moral monstrousness' (as he calls it) which results from the refusal to make moral distinctions among types of pleasure. Wealth-maximization imposes a cost on A'S sadism which utilitarianism does not, but wealth-maximization also imposes a cost on B's benefactions. It provides no basis for distinguishing between laudable and base pleasures. What Posner's theory does is merely impose an additional obstacle on the realization of pleasure which has no necessary connection with the type of pleasure it is. Any pleasure can be satisfied, as long as one is willing to pay for it. It is difficult to see how this is any advance at all over utilitarianism's inability to differentiate among pleasures.

Posner's article is the most ambitious attempt yet to show that the currently popular economic analysis can provide the law with an acceptable normative basis. It is ironic that he has made this attempt in the context of the recent criticisms of utilitarianism, since all the features which are being pointed out in these criticisms - the impoverished view of human relationships, the failure to recognize the priority of rights, the requirement of sacrifice, the failure to make a viable distinction between types of satisfactions - are present in his theory of wealth-maximization. It could hardly be otherwise, since wealth-maximization shares with utilitarianism the combination of aggregative and want-regarding elements which renders utilitarianism vulnerable. The great strength of Posner's article is that his comparison with utilitarianism supplies the reader with the criteria by which Posner would want his own theory to be assessed. And by those criteria his theory fails.

63 Mill Utilitarianism ch 1 1, para 18



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Utilitarianism, Economics and Legal Theory

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