During the 1970's and '80's, a significant group of economists took the position that economic analysis could inform our understanding of legal history. Specifically, they argued that legal doctrines -- especially common-law doctrines -- evolve over time so as to achieve an ever more efficient allocation of resources.

What powers this benign evolutionary process? Different subsets of this group of economists offered three alternative explanations:

1. Efficiency is common sense. Richard Posner and others argued that, although judges have rarely used the language of microeconomics to explain their decisions, in practice they have very often relied upon economic principles when reshaping common-law doctrines. This hypothesis rested, in turn, on four subsidiary propositions:

• Most economic principles are common-sensical. Judges often rely on common sense when shaping or reshaping rules. Therefore they advance efficiency.
• Common sense in the nineteenth century -- when the common law acquired much of its modern shape -- was especially favorable to economic principles. (This was especially true of the common sense of the "educated elite" -- of which the judges were members.)
• Judges have rightly sensed that efficiency is less controversial and more easily achieved through common-law rulemaking than other goals -- such as a just distribution of income or wealth.
• Conceptions of fairness -- upon which judges often purport to rely -- are largely derivative of intuitions concerning efficiency.

2. Custom is efficient, and common-law rules are often derived from custom. Robert Ellickson and others argued that this dynamic is especially apparent and important when customary rules emerge from small, close-knit communities -- like the whalers in a particular region or a stable group of ranchers. The members of such groups have demonstrated remarkable ability to develop and abide by norms that maximize the wealth of the community as a whole. Legal doctrines that incorporate such norms share their economic advantages.

3. Natural Selection. A final group of scholars argued that the legal system is organized in a such a way that, even if judges resolved cases by flipping coins, doctrines would gradually become more efficient. Why? Because litigants (especially litigants who expect to be "repeat players") stand to gain if they can persuade the judge in a particular case to repudiate an inefficient rule and replace it with an efficient rule. As a result, litigants are less likely to settle disputes when the rules they implicate are inefficient than when the rules they implicate are efficient. Consequently, the frequency with which inefficient rules are challenged and overturned will be greater than the frequency with efficient rules are challenged and overturned.

Even the most enthusiastic proponents of these theories recognized that many forces and circumstances would tend to drive legal doctrines in directions other than economic efficiency. During the past decade, such complications have come to seem ever more formidable. They include:

• Judges (as the exponents of "positive political theory" remind us) often have their own agendas -- that are unlikely to correspond to the wealth-maximization criterion.
• The customary norms developed by close-knit communities will fail to take adequately into account externalities -- the adverse effects upon outsiders of norms that benefit the community. (Witness, for example, the destruction of the whale population.)
• Collective-action problems and the fact that, in many doctrinal contexts, most litigants are not "repeat players" will weaken the natural-selection hypothesis.
• Natural selection, even if it were working well, would often lead only to "local optima." In other words, it may produce rules superior to all immediately adjacent alternatives, but inferior to dramatically different regimes that are unreachable through incremental change.

Sensitivity to problems of these sorts is now sufficiently widespread among economists that realtively few continue to adhere to strong versions of any of the three variants of the original efficiency hypothesis. In the attached interview excerpt, Robert Ellickson comments on the trajectory of this idea.