Encyclopedia of Law & Economics - 0345 LAW AND ECONOMICS IN ITALY



Roberto Pardolesi

University of Roma (Luiss)

Giuseppe Bellantuono

University of Trento

© Copyright 1998 Roberto Pardolesi and Guiseppe Bellantuono


1. Introduction  
2. Italian Law & Economics Between the Past and the Future  
3. Why Italian Lawyers Do Not Listen  
4. Why Italian Economists Do Not Listen  
Bibliography on Law & Economics in Italy (0345)  
Other References  


Law & Economics in Italy is still an underdeveloped subject. Despite the earlycontributions of the 1960s and 1970s, most Italian lawyers and economists havedisplayed a marked indifference towards the economic approach to law. Afterreviewing some initiatives which promise to foster the spread of Law &Economics, we show that the hindrances encountered by the economic analysisof law stem from a misconception of both the economic and the comparativemethod.

JEL classification : K0

Keywords : Law & Economics, Italy, Comparative Law, InterdisciplinaryEducation .

1. Introduction  

The origins and subsequent development of Law & Economics in Italy can bedescribed as a history with some lights and many shadows. In the followingsections we shall see that since the 1960s the economic approach to law hasattracted increasing attention, but it has not succeeded to become a prominentpart of Italian legal doctrine. The second section briefly reviews the earliestItalian contributions to EAL and summarizes the debate on its transplantationto a civil law country. Sections 3 and 4 discuss the reasons why large sectors ofthe legal and economic profession have chosen not to follow the path that hasproved so fruitful in the United States.

2. Italian Law & Economics Between the Past and the Future  

At the same time as Ronald Coase and Guido Calabresi were working on theirseminal articles, an Italian scholar, Pietro Trimarchi, published a pathbreakingbook on strict liability (Trimarchi 1961) entirely based on concepts such as theallocation of risks to the least cost insurer or recourse to strict liability to inducepotential wrongdoers to adopt optimal precautions. A later article, alsotranslated into German, applied the tools already employed in the field of tort lawto breach of contract cases ( Trimarchi 1970) .

These contributions marked the first appearance of EAL in Italy. However,they did not prompt an immediate reaction. It was not until the late 1970s thatsystematic EAL research and teaching began in Italy. Even at this late stage,moreover, the economic approach to law was largely confined to the margins ofthe legal profession.

Some years ago the spread of the economic approach to law in Italy was thesubject of a detailed analysis by Ugo Mattei and Roberto Pardolesi (1991) . Theauthors remarked that the hindrances encountered by the economic analysis oflaw stemmed, above all, from a misconception of both the economic and thecomparative method.

With regard to the former, Mattei and Pardolesi stressed that Italianeconomists had devoted their energies mostly to the study of post-Keynesianeconomics. Yet, it is well known that the Law & Economics movement sprangfrom the development and revision of the neoclassical paradigm during thedecades following the end of the Second World War. The choice of a differentline of research was probably one of the factors that most seriously hamperedthe dialogue between lawyers and economists.

As far as the comparative method is concerned, Mattei and Pardolesidismissed the claim that EAL is useless in civil law systems because of itsAmerican origin. To be sure, the great dichotomy between civil law and commonlaw is still a distinctive feature of the Western Legal Tradition. Today, however,few scholars (if any) would be willing to reject the doctrines developed on theother side of the Atlantic because of fundamental differences in the Americanlegal system. The phenomenon of legal transplants, which modern comparativestudies have emphasised and explored ( see, e.g., Watson 1974 ; Sacco 1991 ; Ewald 1995 ) is the best evidence that each tradition borrows from the otherwhen confronted with the same problems.

If common and civil lawyers are able to communicate in many fields,explanation is still required as to why, in the late 1990s, the economic analysisof law has still not gained widespread acceptance in Italian legal culture. In thefollowing two sections we shall see that the answer probably differs betweenlawyers and economists. Both groups of social scientists may have been heavilyinfluenced by EAL, but each chose not to cultivate the interaction betweenalgebra and pandects. The reasons why lawyers and economists have been deafto the lessons of Coase & Co. shed light on the evolution of these two branchesin Italy.

3. Why Italian Lawyers Do Not Listen  

Lest we give a distorted portrayal of the Italian situation, we must immediatelyspecify that recent years have witnessed a growing interest in the economicapproach to law. As the Italian Bibliography makes clear, the number of authorsapplying the microeconomics categories to the study of legal problems is nowmuch greater than it was in the recent past. Even more importantly, the subjectsdealt with by these writings are highly diversified, ranging from classicalantitrust themes to environmental issues to the market for works of art.

Other initiatives have been planned to foster the spread of EAL. Il Mulino,a prominent Italian publisher, is about to issue a journal entirely devoted to Law& Economics. This undertaking will be backed by a textbook on Law &Economics, presently being compiled, which should link with the Italiantranslation/adaptation of the second edition of the famous textbook by Cooterand Ulen. The purpose of the Italian version is to enable Italian students tograsp the main features of the economic approach to law through theirapplication to the Italian legal system. However, the courses in comparative lawand private law offered by the Law Faculties of Rome and Trento are alreadybeing taught with an eye to the concepts arising from Law & Economics. Asfurther evidence of interest in this subject we may cite the Law & Economicsmeetings held in Siena in 1992 ( see the papers collected by Mattei and Pulitini1994) and 1996, attended by more than one hundred Italian lawyers andeconomists, and the conference organized in Milan in October 1995 with the jointparticipation of American and Italian lawyer-economists (see the papers by Monateri 1995 , Gambaro 1996 , Pardolesi 1996 ).

Although these projects confirm the impression of lively debate, explanationis still required for the indifference displayed by most of the Italian legal doctrine(not to mention the courts). A host of reasons apparently hamper completeacceptance of the economic approach to law. None of them, however, iscompelling.

To begin with, lawyer-economists must still contend with the perennial claimthat the notion of efficiency is politically biased. The choice of efficiency as thereference point or crucial paradigm of a value judgment is regarded withsuspicion by those who believe that the law cannot neglect distributiveconcerns ( see, e.g., Zaccaria 1995 ) . Suffice it to say that the traditionaldistinction between positive and normative economics is now in crisis and thenotion of efficiency is no longer regarded as neutral ( see Blaug 1992 ; Hovenkamp 1990) . It is worth noting, moreover, that even an influential scholarclearly extraneous to the Law & Economics movement acknowledges thepossibility of a reconciliation between cost-benefit analysis and the principlesof egalitarianism ( Dworkin 1986, p. 276ff. ) . Hence, in economics as well as inlaw, the usefulness of the concept of efficiency should be judged according tothe problem at hand.

However, rejection of the ideologically oriented approach believed to beprevalent in Chicago-style Law & Economics hampers thorough understandingof other currents of thought which shape the economic analysis of law. In otherwords, it is a mistake to identify EAL with Posner and his followers. The successof Law & Economics is largely due to the variety of research programs on whichit is able to draw. The neoclassical paradigm of the Chicago school, for example,is now - at least, from a certain point of view - far less interesting than thecomparative institutional analysis conducted by Oliver Williamson and otherscholars in the area of New Institutional Economics ( for discussion of therelationship between New Institutional Economics and Law & Economics see Williamson 1993 ) . It is worth mentioning that many Italian economists are nowdeeply involved in this research program ( see, for references, the survey by Rizzello 1996 ).

There are those who already suggest the existence of Post-Chicago Law &Economics ( see Symposium 1989 ; Rubin 1996 ). We prefer to speak ofnumerous competing lines of inquiry which sometimes yield conflicting results.A prominent role is now played by game theory, whose first applications to legalproblems date back to the early 1970s. The analysis of strategic interactionsamong individuals, the main concern of game theory, has progressivelyundermined traditional beliefs about the role of the market and governmentalregulation ( see, e.g., Ayres 1990 ; Hovenkamp 1995 ; for an updated list of gametheory applications to legal problems see Huang 1995 ). In the light of thesedevelopments, nothing could today be further from truth than the monolithicvision of EAL often displayed by Italian scholars.

These remarks take us to another debated aspect of the reception of EAL inItaly. In many quarters the economic approach to law is regarded as simplyirrelevant to better understanding of legal problems. Why study economics, theargument goes, if the solutions it provides are more or less coincident with theones reached by means of the familiar legal methods ? Statements of this kindreveal a patent misconception of the purposes that EAL seeks to accomplish.The prestige which surrounds economics - often regarded as the leading socialscience - may have prompted the belief that the economic approach to law is ableto provide a definitive answer to any doubtful matter. By contrast, it is morerealistic to recognize that Law & Economics provides useful tools with which tocheck the arguments that lawyers employ by shedding light on the economiccontest in which a legal dispute arises. Therefore, the main contribution of Law& Economics is the enhanced understanding of the interests at stake it supplies.

A brief survey of the Italian literature lends support to this view. In nuisancecases, for example, the notion of externality explains why Italian courts grant asum of money to the injured party even when the wrongdoer is allowed topollute ( Pardolesi 1977 and, more recently, Mattei 1995 ; Gambaro 1995 ). In tortlaw the age-old debate on the content of fault gains a new and stimulatingmeaning when analyzed through the lens of economics ( Cafaggi 1996 ) .Needless to say, the new Italian antitrust law of October 1990 would beimpossible to understand without the support of an economic apparatus ( see Pardolesi 1993) .

Although its results are hardly original, Law & Economics exerts a powerfulinfluence on the style of legal reasoning. The "new rhetoric" of EAL is best seenas a device which shows the lawyers which elements of a legal controversy arerelevant and which are not ( see Ackerman 1984 ; McCloskey 1988 ). Thisfeature, however, can be regarded as a primary reason for its appeal as well asfor its uneasy reception in Italy. Indeed, the economic argument compels lawyersto look at legal disputes from an unprecedented point of view, one almost atodds with the supposedly orthodox attitude. Instead of talking about rights andentitlements, lawyers are forced to assess the consequences of each rule on theallocation of resources. Apart from the complexity of the analysis, it is clear howfar it diverges from the traditional reasoning of the Western Legal Tradition. Theclash between the Western Legal Tradition and the Posnerian version of Law &Economics has recently been highlighted by Monateri (1995) . By contrast, theusefulness of instrumental reasoning in the Italian legal system has beenreaffirmed by the constitutional judge Mengoni (1994) .

In short, Italian legal culture finds itself caught in a paradox. Law &Economics promises valuable insights into legal problems, but at the same timeit requires in-depth understanding of its techniques. Lawyers can takeadvantage of the economic approach to law only if they choose to invest in thisfield. Unfortunately, though, they lack the data with which to gauge the benefitsavailable until that investment is made. This paradox is largely due to the scantattention paid to economics in lawyers' training. The italian law facultiesnormally include only one course of economics on their programs, which isclearly inadequate to tackle the complexity of modern mathematical economics.

Of course, Italian lawyers have occasionally displayed deep understandingof the economic issues underlying legal matters. For their part, many Italianeconomists have been keenly aware of the interaction between Law &Economics ( for references to the works of nineteenth-century Italian lawyersand economists see Cosentino 1990) . It is clear, however, that this tradition hasbeen unable to lay the basis for more systematic study. It may be that one of thereasons for this lack of communication has been the role played by socialscientists in Italian society and culture, but we believe that the present situationcan be explained mainly by the shortcomings of academic training.

In short, the lack of a formal training is a problem that cannot be postponedany longer. It is at this point that Italian economists should enter the scene.Unfortunately, they have listened no more than Italian lawyers have done.

4. Why Italian Economists Do Not Listen  

About two decades ago Ronald Coase suggested that the expansion ofeconomics into contiguous fields would come to an end when social scientistsin those fields were able to master its techniques. The number of Americanlawyers who now have a Ph. D. in economics seems to confirm his forecast ( Coase 1978,   1996 ). Nevertheless, it is clear that Law & Economics in the UnitedStates would have had less impact if economists had not involved themselvesin the enterprise. It is hardly an exaggeration to state that the cooperationbetween lawyers and economists has been a fundamental factor in thedevelopment of the economic approach to law ( for information on theinvolvement of economists in Law & Economics see Landes and Posner 1993 ; Stigler 1992 ; Ellickson 1989 ).

What about Italy ? The indifference of economists towards legal institutionsis so manifest that it is not worth dwelling upon. Suffice it to say that a recentintroduction to a collection of papers by Ronald Coase does not include theslightest reference to his influence on the economic analysis of law or to Italiancontributions in that field ( Grillo 1995, p. 7ff. ) . Judging from these writings, itseems that economics and law in Italy do not communicate at all.

This situation is even more surprising if we look at the training provided byItalian schools of economics. Their programs include a wide range of lawcourses, and economics students have ample opportunity to become fullyconversant in both disciplines. Why this does not happen is not clear. Onemight suggest that the jobs market is highly specialized and young graduateswith hybrid skills do not find employment easily. Whatever the case may be, onthe eve of the twenty-first century the Italian Bibliography of Law & Economicslists only a few contributions by Italian economists.

It is difficult to say whether the present situation will to change in the nearfuture. Since the last century, political debate on the reform of administrativeagencies and governmental regulation has been the main concern of economicthinkers in Italy ( see, e.g., the essays on market and democracy collected in Bocciarelli and Coccia 1994 ) . In accordance with this tradition, current analysisappears to be dominated by macroeconomics issues ( for a recent survey of theItalian situation by a French economist see Bartoli 1996 ) .

This is not to say, however, that hopeful signs of a renewed interest in legalinstitutions are entirely lacking. The presence of economists in the law facultieshas recently begun to yield fruitful interdisciplinary studies. Some courses ineconomics, for example, have applied insights from Law & Economics to Italianlaws and institutions (see Chiancone 1996 ; Galeotti 1995 ), and there areencouraging signals from the already mentioned Italian economists working inthe field of the New Institutional Economics. Even more importantly, moderneconomics textbooks are now devoting more space to such subjects astransaction costs, asymmetric information, strategic interactions and institutionalconstraints (see, e.g., Del Bono and Zamagni 1996 ).

Since the 1980s, moreover, there has been a growing interest in game theory.The activities of the Interuniversitary Centre for Game Theory and Applications,established in 1990 in Florence, range from the development of researchprograms to the spread of game theory in the scientific community.Unfortunately, Italian economists at work in this field are unaware of theapplications of game theory to legal problems. For example, a recent introductorytextbook notes that game theory has been applied outside economics in suchareas as political science, philosophy, computer science, engineering andevolutionary biology ( Costa and Mori 1994, p. 10f.) . Law, of course, is not evenmentioned.

Italian scholars are equipping themselves with the theoretical instrumentsemployed in the economic analysis of the American legal system. In the shortperiod the institutional dimension - be it the theory of the firm or the structureof administrative agencies and public utilities - will probably attract moreattention than private law topics like contract, tort and property. Needless tosay, even this development would be a giant step towards the interdisciplinarystudy of Law & Economics.

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© Copyright 1998 Roberto Pardolesi and Guiseppe Bellantuono