Judge Guido Calabresi : The Future of Law and Economics [46:06-51:16]

We've respect to a series of things which economic theory did not explain what people did. They said if you bring in some psychology and make the theory more complicated, you will understand perfectly well what people are doing. And that explained the strange thing that most of us value something we have more than something we have to go and buy. But you know you have something and you don't sell it even though you'd never spend the money to buy it. I know that very well because when my classmates and I, my roommates and I graduated from college, we put aside some 1953 wine. We didn't know anything about wine but we bought some Mouton Rothschild 1953 because somebody told us yeah that's a good wine and we said we'll drink it for our 25th anniversary. That those wine bottles were worth a fortune because Mouton Rothschild 1953 was one of the greatest years and so on. We could have sold it for all out of money. Of course we didn't sell it. We drank it. Would we have bought that in 25 years later? No. This was the first insight but one of the insights about psychology which became behavioral economics. And that is wonderful. I'm very glad they are doing that but it's a mistake to think that that is the only area or psychology is against them, for apology is against bananomrology or other things can help us to understand in the world what is going on. So that to me behavioral economics is just one part of what we're talking about here. Well this may be a good place as well to sort of get into this question. It says please talk about the role of law and economics ideas in your judging. How frequently do you think your law and economics approach has affected your express reasoning and result? Well a judge is not a simple theorist. There are areas where there is not much law and where economic theory or some other theory will help me as a judge and then I'm willing to do it. On the other hand I am a judge and I am bound by the law and I'm bound to follow the law and I will follow the law whether I like it or not for many reasons one because I've taken an oath and two because I'd rather have the law bind my colleagues than have them do what they want according to what their fears. I love my colleagues but I think the law on the whole is better and by the way Dick Posner who didn't start out that way as a judge but I tease him he's a great scholar but I tell him he's a better judge than he is a scholar because as a judge he is also not just tied to the theory. There are some cases some situations where economic theory is helpful because there is no law that tells you and when you do what you can with that there are other situations where you look at the law and you think the law is wrong and because they have gotten a theory or something else is wrong and then you think about it and you decide it's the world that is wrong and then theory may be useful but rarely do you do that as a holding in fact there's an interesting thing as to an issue of punitive damages. Dick Posner wrote an opinion which was based on economic theory. I wrote an opinion which followed the law as it was and then wrote an opinion concurring in my own opinion but separately say but I don't think this law makes sense here. You can use economics in that but you got to be careful it depends how aggressive a judge you are and I'm not that aggressive. I think I'll say this about judgey I think there are three ways of looking what a judge does. There are some people great judges like Mike Boudin who think basically the job of a judge is simply to settle disputes.