Encyclopedia of Law & Economics - 0640 THE LAW AND ECONOMICS OF ANTHROPOLOGY



Robert Cooter

University of California at Berkeley

© Copyright 1997 Robert Cooter


1. Legal Anthropology
2. Economic Analysis
3. Social Norms
4. Conclusion
Bibliography on The Law And Economics Of Anthropology (0640)


I briefly review the classics of legal anthropology and discuss the economicanalysis relevant to it.

JEL classification: K00

Keywords: Law, Economics, Anthropology, Property, Social Norms

  • "Just look along the road, and tell me if you can see either of [themessengers]."
  • "I see nobody on the road," said Alice.
  • "I only wish I had such eyes," the King remarked in a fretful tone. "To beable to see Nobody! And at that distance too! Why, it's as much as I can doto see real people, by this light!"
  • --Lewis Carroll's Through the Looking-Glass, Chapter 7.

    As a rule of thumb, an academic subject exists when someone teaches itregularly at a major university. By this standard, the subject of law, economics,and anthropology does not exist. A review essay requires eyes that the Kingattributed to Alice. In contrast, legal anthropology exists and so does theeconomic analysis of law. I will offer some remarks on how these two subjectsrelate to each other.

    1. Legal Anthropology

    Legal anthropology is a small subject that is taught in a few universities,especially in America (Kuppe and Potz, 1994). I recently asked teachers of lawand anthropology at major American universities to send me the reading lists fortheir classes. The readings were "all over the map" both literally and figuratively.The struggle in anthropology over the subject's identity has infected law andanthropology. Some strands in modern anthropology, such as symbolicanthropology (Geertz, 1983), have no apparent relationship to the economicanalysis of law. Others, such as economic anthropology (Dalton, 1967) (Plattner,1989) and anthropological materialism (Harris, 1968), have a modest relationshipto the economic analysis of law. In general, the analytical techniques used in theeconomic analysis of law are not understood or appreciated by anthropologists.

    Reviewing the different strands of anthropological thought is a difficult task(Ortner, 1984) and relating them to the economic analysis of law in a brief articleis impossible. I will attempt something more limited and modest. My main aim isto describe for law and economics scholars their subject's frontier withanthropology. Legal anthropology has a small, classical literature, which I willdescribe briefly. Then I will review in more detail the aspects of the economicanalysis of law that relate to classical concerns of anthropology.

    Legal anthropology developed its classical literature (Conley and O'Barr,1993) in the 20th century when anthropology books and monographs devotedto law first appeared. (Malinowski, 1926), who first conducted systematic fieldresearch on tribal law, debunked the myth that tribal law consists of strictprohibitions and harsh punishments resembling criminal law. Instead, heobserved an elaborate system of compensation in Polynesia for harm done toothers, resembling the modern law of property and torts, but without anythingsimilar to formal courts. He commented on the usefulness of such a system andtried to explain how it worked .

    Llewellyn and Hoebel (1941) interviewed Cheyenne Indians in the 1920s andreconstructed their legal order as it existed in the 1860s before conquest andsubjugation. This study applied the "case method" of the common law to triballaw, thus minimizing the distinctiveness of techniques required in legalanthropology. The "cases" consist of memories, stories, and myths about lawand government. As practiced by Llewellyn and Hoebel, the "case method"explores the purposes and uses of political practice and law, which makes legalrealism resemble functionalism.

    Bohannan (1957) observed disputes in the customary courts ("moots") of theTiv in colonial Nigeria. Like Llewellyn and Hobel, he analyzed cases, but ingreater detail and subtlety, revealing the cultural obstacles to understandingexotic legal systems. Bohannan's concern over objectivity and neutrality incomparing cultures anticipates recent methodological discussion inanthropology. Gluckman (1965) provided the same kind of in-depth study of thelegal culture of another African group, the Barotse. Pospisil (1958) extended thistradition by attempting something resembling a codification of the customarylaw of a group in New Guinea who lived in the 1950s under limited Dutch legalcontrol.

    The small, classical literature aimed at describing aspects of tribal law that themodern state had not changed or distorted. More recent studies in this traditionexplicitly concern the way custom responds to state and market (Collier, 1973)(Moore, 1986) (Nader, 1990) (Sierra, 1995), including the attempts of subordinatepeoples to secure themselves against exploitation (Nader, 1990) (Comaroff andRoberts, 1981). Whereas the classical literature concerned tribes, modern studiesin legal anthropology often concern formal, non-western legal systems, such asIslamic or Buddhist law (Fikentscher, 1995), thus effacing the distinctionbetween legal anthropology and comparative law. Contemporaryanthropologists have also developed an interest in the way contemporarycustoms interact with modern law in countries like the US (Greenhouse, 1986).

    2. Economic Analysis

    I now turn to the smattering of articles on anthropology that fit within themodern law and economics movement. In an earlier review Brenner (1983),stresses population growth as the destabilizing influence that causes innovationand economic development in tribes. Only a few papers in law and economicsconcern law among tribal people. Perhaps the most discussed is the paper byDemsetz which proposes a simple theory of the origins of property (Demsetz,1967). Demsetz reasoned that private property emerges from a prior rulepermitting open access to resources, and this event should occur at the point inhistory when the benefits of the change exceed the costs. He observed thatwhen everyone has open access to a resource, over-exploitation produces adead-weight loss, as with over-fishing on the high seas. In contrast, privateownership can eliminate this dead-weight loss, but, unlike open-access, privateproperty requires costly definition and enforcement of ownership rights. SoDemsetz predicts that privatization will occur when the dead-weight loss of openaccess exceeds the transaction costs of exclusion by private property rights.

    For evidence in favor of this theory, Demsetz relies upon secondary sources,notably concerning the fur trade among North American Indian tribes. Morecareful examination proves that Demsetz got some important facts wrong. Tribalpeople live among kin with extensive, complicated obligations to each other,including obligations about using land. These obligations create a very differentlegal regime from open access. So the characteristic movement in tribal propertylaw is not from open access to private ownership. Rather, new customary rightsin property continually evolve from old customary rights in property (Cooter,1991). Tradition persists by continually inventing new things.

    Economists often contrast individual and group ownership, but these labelsare too imprecise to fit customary law. Research on property rights has revealedvariety and detail in the political arrangements by which small groups managetheir assets (Eggertsson, 1992) (McCloskey, 1975b) (McCloskey, 1975a),(Ostrom, 1990), (Ellickson, 1993). Even without individual ownership, smallgroups of people living intimate lives seldom suffer the political paralysis thatcauses deadweight losses like the infamous tragedy of the commons.

    Note that the Demsetz paper reveals a characteristic weakness ofanthropological work among law and economics scholars: they lack intuitionbecause they have never done field research. For an early exception in propertylaw, see Trebilcock (1981).

    In another paper with high ambition, Richard Posner interprets the behaviorof tribes as a response to missing insurance markets (Posner, 1980). Thecombination of the hazards of primitive life and the absence of insurance,according to this view, causes people to form long-run relationships andredistribute wealth. Like Demsetz, this paper contributes to anthropology byraising the level of generality in formulating familiar trade-offs.

    Risk-reduction is important to cases where customary law allows relativelyopen access to a resource, such as summer grazing land in Mongolia. Variationsin weather impose risks on people living off the land. A customary rule of openaccess enables people to relocate quickly from one micro-climate to another,thus reducing climatic risk (Nugent and Sanchez, 1993) (McCloskey, 1976)(Cooter, 1995). Open-access, however, discourages investments to improve theland. So the trade-off is between dead-weight loss and risk-spreading, not thetrade-off between dead-weight loss and transaction costs of exclusion asproposed by Demsetz.

    3. Social Norms

    As explained, legal anthropology especially concerns customary law.Proponents of legal decentralization typically admire custom because it arisesspontaneously, outside the state (Hayek, 1976) (Leoni, 1991). The informality ofsocial norms obscures their operation and causes observers to under-estimatetheir importance relative to formal law. Modern business is often conducted inrational ignorance of the law (Macaulay, 1963). Informal law plays an especiallyimportant role in basic markets where state enforcement of contracts fails, as incapital markets in developing countries (Winn, 1994). Over-zealous regulationforces informal law to operate in opposition to formal law, which impairseconomics development (De Soto, 1989).

    In recent years, economic theories have corrected the tradition ofunderestimating informal norms. The analysis of social norms has becomecentral to the law and economics agenda, especially after Ellickson's research onliability for straying cattle framed legal decentralization in terms of the CoaseTheorem (Ellickson, 1991). Two bodies of theory are joined in the economicanalysis of social norms. First, game theory has been adapted to the specificcircumstances in which social norms direct behavior (Ullmann-Margalit, 1977)(Sugden, 1984) (Taylor, 1987). Second, competition among social normsresembles competition in evolutionary biology, so the application of gametheory to evolutionary biology provides models for understanding social norms.(Hirshleifer, 1987) (Gruter, 1991) (Frank, 1988; Gruter and Masters, 1992).

    The economic analysis of social norms, such as the customary law ofproperty or customary obligations of redistribution, draw upon a fundamentalresult in game theory: One-shot games with inefficient solutions, such asprisoner's dilemma, often have efficient solutions when repeated between thesame players (Fudenberg and Maskin, 1986). This generalization grounds theutilitarianism of small groups, by which I mean the tendency to create efficientrules for cooperation within small groups. Kinship provides a framework forrepeated interaction among the same people. Consequently, game theorypredicts that kin groups such as tribes can solve problems of internalcooperation without relying upon state law. Landa has used this result to studygroups of Chinese traders (Landa, 1981).

    Kinship, however, is not the only basis for dense social networks in intimatesocieties. Much like kinship, trade organizations can provide a framework forrepeated interaction (Cooter and Landa, 1984). Historical institutions such as themedieval law merchant can be understand in this light (Milgrom, North, andWeingast, 1990) (Greif, 1993). Bernstein has demonstrated this fact in careful,detailed studies of modern diamond exchanges (Bernstein, 1992) and commoditytrading associations (Bernstein, 1996). Social groups, in which people haverepeated transactions with each other, must be distinguished from socialcategories by which people are classified. Unlike social groups, people who fallin the same social category might not have ties to each other, so they may haveinefficient interactions (Posner, 1995).

    I have reviewed various economic studies of social norms. The economicanalysis of social norms requires a comprehensive vision, but none has emergedas yet. According to one approach, law should ideally correct failures in the"market for social norms," rather like regulations should ideally correct failuresin the market for commodities (Cooter, 1994). This approach requires an analysisof the incentive structures in society that cause the evolution of efficient socialnorms, and, conversely, the incentive structures that cause social norms to fail.The application of game theory to customary forms of discrimination suggestsan important kind of failure (Akerlof, 1980; Akerlof, 1985) (McAdams, 1995)(Posner, 1996). A thorough development of a theory of the evolution of socialnorms would provide the foundation for a theory of adjudication, especially inthe area of common law.

    4. Conclusion

    I organized my description of the law and economics of anthropology in termsof these underlying ideas: property, long run relationships, and social norms.Now I need to mention some loose ends that do not fit my categories. First, somelaw and economics scholars have examined issues concerning American Indians(McChesney, 1990) (Anderson and McChesney, 1994) (Cornell and Kalt, 1993).Second, some studies in comparative law and economics have ananthropological flavor (Kuran, 1995). Finally, a few brave scholars haveattempted to cross the deep divide between meaning and behavior in socialscience by using the tools of law and economics to interpret stories and parablesfrom the Bible (Levmore, 1995) (Miller, 1996) (Miller, 1994) (Miller, 1995), or bytrying to adapt the rigorous individualism of economics to encompass a theoryof culture (Audain, 1995). These papers parallel the strong turn towardsinterpretivism in anthropology in general (Geertz, 1983) and in legalanthropology in particular, which stresses the distortion of the meaning of lawas a consequence of political domination (Comaroff, 1992) (Williams, 1994).

    Finally, I want to conclude by remarking on the interaction betweenanthropology and economics. In anthropology as in politics, the confidence ofcolonialism dissipated into the self-doubt of post-colonialism. Economics, incontrast, retains its brash self-confidence. Given these facts, someanthropologists associate economics imperialism with the mentality of politicalcolonialism. Abandoning such ideological conceptions would create a betteratmosphere for anthropology and economics to learn from each other. Theeconomic analysis of legal anthropology remains more aspiration than reality.Economists believe correctly that they can bring more systematic analysis to arange of topics in anthropology. Adapting economic theory to new institutionsand cultures, however, requires careful field research. Without a commitment tofield research, economic theory remains too remote from its object of study toconvince anthropologists immersed in other cultures.

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© Copyright 1997 Robert Cooter