Commensurability and Agency: Two Yet-to-Be-Met Challenges for Law and Economics

Ariel Porat
Alon Harel

This paper identifies two normative challenges to law and economics. The first challenge relates to commensurability and the second focuses on agency, in particular the agency of the state.

The first part of the paper establishes that under the current legal system not all potential outcomes are comparable to one another in the way dictated by law and economics. Most significantly, the legal system refuses to translate high risks to life into monetary term; it refuses to explicitly concede that different lives have different values; and it refuses to trade basic human rights (for example, the right not to be tortured) for monetary or proprietary interests. We show that the traditional tools of law and economics cannot explain such rules and we identify alternative non-economic explanations. The second part of the paper examines who can be an agent acting in the name of the state. Economic analysis identifies the proper agent to discharge any task exclusively on the basis of its efficacy in discharging the task. In contrast we argue that there are deeply held convictions (and legal doctrines) requiring that certain tasks ought to be performed only by public officials (irrespective of their efficacy). Such a performance is necessary for dignity-based reasons. This analysis explains the doctrine of inherently governmental functions and the resistance to certain forms of privatization.