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The Use of Economic Analysis in Court Judgments: A Comparison between the United States, Australia and New Zealand

  • Author(s): Kendall, Keith
  • et al.

As a theoretical paradigm, the use of economics has dominated legal analysis both in academia and the courts in the United States for the last three decades. This popularity, though, does not extend to most other jurisdictions. Judge Richard Posner, one of the pioneers of the law and economics movement, developed a model comparing the structures of the legal profession in the United States, the United Kingdom, and continental Europe to explain the lack of the use of law and economics in the latter two regions compared with the United States.

This paper compares the use of economic analysis in judicial decisions in the United States with the extent of such use in two other common law jurisdictions: Australia and New Zealand. Judge Posner's model is used to examine the structure of the legal professions in Australia and New Zealand to predict the extent to which law and economics is used by each jurisdiction's respective judiciary. It is observed that Australian courts do not use economic analysis to any great extent, with senior members of the judiciary adopting an explicitly negative view of the value of economic reasoning in resolving legal disputes. Even those judges who attempt to apply economic tools to justify their decisions tend to do so in a simplistic fashion that does not draw on the full advantages such an approach offers and does nothing to counteract the claims of the paradigm's critics. New Zealand's judiciary has demonstrated a more receptive attitude, with little if any hostility expressed openly (unlike Australia), with notable senior members of the judiciary openly advocating for the courts to make greater use of economic reasoning in resolving legal disputes. These findings are in line with the expectations formed under Judge Posner's model.

Further observations are made regarding the legal education systems in the United States, Australia and New Zealand, finding that law and economics is taught to a greater extent in line with the    use of economic reasoning in the respective court system. While it is difficult to draw conclusions as to any causal relationship, an explanation is suggested that judicial attitudes, especially in Australia and New Zealand, have a strong influence on the extent to which law and economics is taught in law schools. Australia's and New Zealand's systems of legal education are much more focused, by necessity, on fundamental legal knowledge useful for a career in law, a restriction that does not exist to the same extent in the United States. The popularity of law and economics courses in Australia and New Zealand reflects the judicial attitudes observed in this paper's main analysis.

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