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This is the published version of a paper published in European Journal of Law and Economics.
Citation for the original published paper (version of record):
Fredrik, J. (2005)
Law in a Market Context: An Introduction to Market Concepts in Legal Reasoning.
European Journal of Law and Economics, 0: 117-119
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European Journal of Law and Economics, 20: 117–119, 2005
2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.c
Book Review
Robin Paul Malloy, Law in a Market Context: An Introduction to Market Concepts in Legal Reasoning, Cambridge University Press, New York, 2004, 260 pp., ISBN 052101655X, 16.99 GBP, 24.99 US$
Law and Economics as an academic field has progressed quite rapidly in the past decades.
It has been manifested in several journals,1and recently acquired its own Encyclopedia of Law and Economics (Bouckaert and de Geest, 2000). Yet its core remains very much the same—it is still heavily influenced by the neoclassical paradigm of traditional economics and of the Chicago School and Judge Posner. Malloy is one of a few (others are Epstein, Nussbaum and Sen) who actively challenge these tenets with a new approach, which he calls Law and Market Economy. Malloy criticizes the traditional Law and Economics approach on the grounds that it is not a theory of creative discovery, and on its conception of the market as a mechanism of convergence and equilibrium. Malloy instead conceives of the market as a mechanism of disequilibrium and innovation.
Law in a Market Context is the most recent of publications that Malloy has produced on this theme (Malloy, 1990, 1991; Malloy and Evensky, 1994; Malloy, 1995, 1999, 2000). It uses and to some extent develops the theory explained in his previous books. This book aims particularly at providing applied examples of the application of his Charles Sanders Pierce approach to semiotics. Semiotics is the study of signs and sign-using behavior. Peirce had an entirely pragmatic approach to semiotics. He defined signs as “something, which stands to somebody for something.” His major contribution to semiotics was the categorization of signs into three types (1) an icon, which corresponds to its referent, such as a road sign for a crosswalk (2) an index that is associated with its referent, as heat is a sign of fire. (3) a symbol, related to its referent only by social convention. Malloy uses this triadic approach to legal reasoning, the icon or firstness is the step in which the basic facts and exchange relationships are identified. The index, or secondness is the identification of organizing patterns, themes and theories that function as frames, references or representations. The symbol or thirdness is the formulation of logical and persuasive legal argument and implementation of policy plan to take action justifiable in terms of the frames and representations that are used. It brings together the icon and symbol to form an argument or plan of action.2
Malloy envisions that the main function of law is to provide social arrangements and settle disputes in order to create maximum wealth in a sustainable way. He stresses the role of law to provide creativity by increasing the ability to understand law and market relationships.3 Its two primary concerns are the way, which humans experience the relationship between law and markets, and the way that this experience translates into human relations through the ongoing process of value formation.4The market is a place of meaning and value formation, in contrast to the neoclassical notion of the market of equilibrium. The interpretive process that Malloy proposes is grounded in the individual experience, not in the traditional cost and
118 BOOK REVIEW
benefit analysis of ordinary Law and Economics. As such it helps improve the contested understandings of the market. Malloy also challenges the use of efficiency by ordinary Law and Economics. Efficiency cannot be used in complex systems, he argues, since there are too many factors to take into account, and that there can be no optimal outcome that can be ascertained in a complex system.5Malloy directs attention to the process of sustainable wealth formation, as opposed to the idea of wealth-maximization. In doing so he believes that people set out not to maximize their own utility, but that of the greater community.6Wealth can only be sustainable if it transcends short-term utility maximization. Malloy challenges cost-benefit analysis, and the unregulated market—two dear concepts of traditional Law and Economics. Law and Economics, in the traditional neoclassical fashion prefers to look at aggregate utility in society, regardless of distribution. According to Law and Market Economy the distribution of wealth is an important measure to maintain sustainable wealth society.
This book contributes to the study of law and economics primarily by its original method- ology, which brings Law and Market Economy into new perspectives using Peircean semi- otic philosophy. At the same time that it uses a philosophical framework it is applied in nature, rich in concrete examples. This book has a wide audience, lawyers, economists and sociologists interested in law and economics from a semiotic perspective with applied ex- amples, written in a non-technical language. It is well suited to teaching law and economics to non-economist students in that it is non-technical in nature, well written and structured.
Each chapter ends with a brief conclusion and a set of problems for classroom use. Judges, lawyers, and students of law who wish to learn more about law and economics as well as students of legal sociology, can benefit from using this book. The structure of the book, with problem sets at the end of each chapter and examples lends itself to use as an undergraduate textbook. It can be used independently or as a complement, to standard law and economics textbooks.
Malloy offers little in terms of concrete guidelines for the judiciary. He explains many basic concepts of economics in detail, but could use these concepts to develop his theory.
He could give many more specific examples and guidelines to form a more solid foundation for the application of Law and Market Economics. Malloy does not develop the Peircean semiotic framework on his own. The book needs to clarify and give more examples of its main tenets. Yet despite these drawbacks it seems capable of bringing a new perspective on law and economics into college course curricula.
Fredrik J¨orgensen
S¨odert¨orns h¨ogskola Stockholm Sweden
Notes
1. Journal of Law and Economics, International Review of Law and Economics, European Journal of Law and Economics, Journal of Law, Economics and Organization to name but a few.
2. Malloy (2004), pp. 73, 80.
3. Malloy (2004), p. 76.
BOOK REVIEW 119
4. Malloy (2004), p. 64.
5. Malloy (2004), p. 59.
6. Malloy (2004), p. 61.
References
Bouckaert, B. & de Geest, G. (eds.). (2000). Encyclopedia of Law and Economics. Cheltenham: Edward Elgar.
Braun, C. K. & Malloy, R. P. (1995). Law and Economics: New and Critical Perspectives. New York, P. Lang.
Epstein, R. A. (1997). “Law and Economics: Its Glorious Past and Cloudy Future.” University of Chicago Law Review. 64(4), 1167–1174.
Malloy, R. P. (1990). Law and Economics: A Comparative Approach to Theory and Practice. St. Paul, Minn., West Pub. Co.
Malloy, R. P. (1991). “Toward a New Discourse of Law and Economics.” Syracuse Law Review. 27.
Malloy, R. P. & Evensky, J. (1994). Adam Smith and the Philosophy of Law and Economics. Dordrecht and London:
Kluwer.
Malloy, R. P. (1999). “Law and Market Economy: The Triadic Linking of Law, Economics, and Semiotics.”
International Journal of the Semiotics of Law. 12, 285–307.
Malloy, R. P. (2000). Law and Market Economy: Reinterpreting the Values of Law and Economics. Cambridge:
Cambridge Univ. Press.
Malloy, R. P. (2004). Law in a Market Context: An Introduction to Market Concepts in Legal Reasoning. Cambridge and New York: Cambridge University Press.
Nussbaum, N. C. (1997). “Flawed Foundations: The Philosophical Critique of (A Particular Type of) Law and Economics.” University of Chicago Law Review. 64(4), 1197–1214.
Sen, A. (1980–81). “Plural Utility—Proceedings of the Aristotelian Society 193.” 193–215.
