Expressive Law and Economics

This article develops an economic theory of expressive law. By expressing social values, law can tip a system of social norms into a new equilibrium. This process can create or destroy a social norm without changing individual values. In addition, law can change the individual values of rational people. Internalizing a social norm is a moral commitment that attaches a psychological penalty to a forbidden act. A rational person internalizes a norm when commitment conveys an advantage relative to the original preferences and the changed preferences. I call such a commitment a Pareto self-improvement. By creating opportunities for Pareto self-improvements, law induces rational people to change their preferences. Inducing change in this way respects individual preferences, rather favoring a particular moral theory. Robert Cooter Expressive Law and Economics Introduction The imperative theory of law defines a law as an obligation backed by a sanction. Economic analysis has enjoyed great success by analyzing a legal sanction as if it were a market price. Viewed as a price, the actor sees a sanction as an external constraint. Alternatively, the actor can view an obligation as an internal value. When many people in a community internalize an obligation, it becomes a social norm. People who internalize obligations express their commitment in various ways. Economic analysis of law, which has recently turned to the study of social norms, has said little about their internalization and expression. This article attempts to build the foundations for an economic theory of expressive law. According to the expressive theory of law, the expression of social values is an important function of the courts, or possibly the most important function of the courts. A system of social norms typically has multiple equilibria. Law can create a focal point by expressing values. A focal point can tip the system into a new equilibrium. The process of changing the equilibrium can create or destroy a social norm without changing individual values. Creating focal points is the first expressive use of law. In addition, law can change the individual values of rational people. Internalizing a social norm is a moral commitment that attaches a psychological penalty to a forbidden act. A rational person internalizes a norm when commitment conveys an advantage relative to the original preferences and the changed preferences. I call such a change a Pareto self-improvement. By creating opportunities for Pareto selfimprovements, law induces rational people to change their preferences. I analyze how law can tip aggregate behavior and change individual preferences by expressing values. Changing individual values is the second expressive use of law.