Abstract:This article develops an economic theory of expressive law. By expressing social values, law can tip a system of social norms into a new equilibrium. This process can create or destroy a social norm without changing individual values. In addition, law can change the individual values of rational people. Internalizing a social norm is a moral commitment that attaches a psychological penalty to a forbidden act. A rational person internalizes a norm when commitment conveys an advantage relative to the original preferences and the changed preferences.

Abstract:This article develops an economic theory of expressive law. By expressing social values, law can tip a system of social norms into a new equilibrium. This process can create or destroy a social norm without changing individual values. In addition, law can change the individual values of rational people. Internalizing a social norm is a moral commitment that attaches a psychological penalty to a forbidden act. A rational person internalizes a norm when commitment conveys an advantage relative to the original preferences and the changed preferences.

In a private communication with me, legal historian James Gordley asserts that few pre-modern scholars questioned the belief that the health of the state reflects the virtue of its citizens. As a possible exception, he offers Machiavelli.

PRETRIAL bargaining may be described as a game played in the shadow of the law. There are two possible outcomes: settlement out of court through bargaining, and trial, which represents a bargaining breakdown. The courts encourage private bargaining but stand ready to step from the shadows and resolve the dispute by coercion if the parties cannot agree. Bargaining is successful from an economic viewpoint if an efficient solution to the dispute is found at little cost. In technical language, a dispute is resolved successfully if a solution is found on the contract curve with little expenditure on search. The usual approach to bargaining in the legal setting assumes that trial is caused by excessive optimism on the part of plaintiff and defendant. ' If both parties are optimistic, then there is no way to split the stakes so that each receives as much as he or she expects to gain from trial. In these circumstances, trial is inevitable.

, Emergence and Construction of Efficient Rules in the Legal System of German Civil Law (1991) (paper presented to the European Law and Economics Association) (on file with author). In making these remarks, they are describing history, not passing judgment upon it.