Herzl and the new law and economics
After the 1950s, developments in economics, combined with growing attention from the legal community, changed the whole idea of the economic analysis of the law. Sharper distinctions than those found in Herzl are now made between the application of economic analysis to the workings of the legal system and the way the legal system influences the performance of the economic system.
Herzl was not critically self-conscious as regards methodology, an element also often missing in law and economics today. His focus on human welfare as well-being, whether measured by production or consumption, is sharply different from that of all but a few of the institutionalists of today. Herzl follows the older tradition in his treatment of welfare. The new law and economics almost always defines it in much more limited, often mathematical, economic terms than did the classical writers. He realized that there were systematic relationships between legal institutions and the character of economic life. He used his understanding of the interrelations between legal and economic processes in developing his vision. For Herzl, the historical roots of the problem went a long way towards defining it. His work was normative and presumptive, in contrast with the law and economics of today, but absolutely necessary for his purposes. He appears to have reached his economic decisions without establishing any presumption in favour of or against any particular solution or any general category of solution. He never appeared to consider whether public spending, public goods or other social policies were necessarily inadequate, excessive or exploitative.
The classical study of law and economics could accommodate a much wider range of phenomena than the new. A case in point is Jewish law. Although Herzl says little about it, his booklet is full of its spirit.
Jewish Halakahah (law) is characterized by its emphasis upon human duties. It does not subscribe to the ethical principle of distributive justice. Responsibilities to the poor, not income redistribution, are what the Torah (teaching) prescribes. Much of modern law and economics is devoted to problems of equity in income distribution and is based on political and legal systems that emphasize human rights and legal remedies. These characteristics limit its application to Jewish and other legal systems, which stress different kinds of ethical imperatives.In Jewish law, judges are given much more latitude to take into account circumstances that do not easily fit the tight analytical mode required by the new law and economics. They can respect fair dealing and good faith. They can deny legal force to deceitful legal agreements, violations of good morals and misuse of rights. Modern law and economics has not yet been able to include moral and ethical precepts like these in its analytical tool box.
Herzl had to put the law and economics of his time into a mould that would fit the special conditions of a highly diverse group of Jews. When his work is examined in the light of the new law and economics, it is apparent that there are limits to the application of the latter, despite the great progress it has made in many respects.