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As noted earlier, the functional method of comparing legal systems comes increasingly under attack. Hence, alternative methods have been presented. For example, in 1994, Ugo Mattei celebrated the “methodological wedding  between the two most interesting recent attempts to understand the law: Comparative Law and Law and Economics.” [Mattei 1994, infra, p. 18]

The Basis of Comparative Law and Economics

The basic set points of Functionalism and Comparative Law and Economics are quite different. While the functionalist method compares laws that fulfill similar functions and thus may, during this process, recognize that country A’s rule followed that of country B, the goal of Comparative law and Economics is to illuminate why such legal transplants occurred.

The Premises of Comparative Law and Economics

Comparative Law and Economics rests on the following three premises:

1. there is a market for legal rules;
   
2. convergence of legal systems is driven by efficiency;
   
3. the main obstacle for efficiency-driven legal transplants are transaction costs in the form of parochialism, legal culture, or ideology.
   

The Method of Comparative Law and Economics

Comparative Law and Economics in its normative form assumes a three-step process:

1. Formulation of a model of efficient legal institutions (hypothetical/ideal/blueprint);
2. Comparison of various real world solutions and explanation if and why they are inefficient;
3. Definition of conditions for policy change.

According to Ugo Mattei, there is also a positive version of Comparative Law and Economics conceivable that “deals with the transplants that have been made, why and how they were made, and the lesson learned from this.” [Mattei 1994, infra, p. 3]

Conclusion

Comparative Law and Economics is an appealing combination of two important legal fields: Comparative Law and Law and Economics. Critics, however, contend that Comparative Law and Economics is in fact not at all new, but rather a specialized version of functionalism that focuses on efficiency as one specific function. Yet, this criticism does not consider that Comparative Law and Economics approaches comparative law form an angle that differs considerably from the functionalist approach: While Functionalism is interested in what kind of (differing or converging) solutions various countries find to a legal problem, Comparative Law and Economics addresses the issue why divergence or convergence among legal systems takes place.

Another problem that Comparative Law and Economics faces, is its marginal existence. This is especially due to the relatively low occurrence of law and economics scholarship outside the United States, while comparative law still tends to be sidelined within the United States. The under-representation of comparative law hopefully will not be for long as the exchange of ideas has dramatically increased on the international plane while at the same time the status of comparative law as a legal discipline strengthens.

In this regard, CompareLex hopes to make its own humble contribution. So if you like this post and are interested in reading more, consider subscribing to CompareLex.

Sources and Further Reading

[1] Ugo Mattei, Efficiency in Legal Transplants: An Essay in Comparative Law and Economics, 14 INT’L REV. L. & ECON. 3-19 (1994).

[2] Oliver Brand, Conceptual Comparisons: Towards a Coherent Methodology of Comparative Legal Studies, 30 BROOK. J. INT’L L. 405, 421-428 (2007).

[3] Raffaele Caterina, Comparative Law and Economics, in ELGAR ENCYCLOPEDIA OF COMPARATIVE LAW 161-171 (Jan Smiths ed., 2006).