Background, origins and theoretical foundations of the Chicago School of Economic Analysis of Law

Victor Dorokhin

Chapter 1 in Law, Morality and Economics, 2026, pp 1-74 from Edward Elgar Publishing

Abstract: This chapter reconstructs the intellectual and historical foundations of the Chicago School of Economic Analysis of Law, placing particular emphasis on the contributions of Adam Smith, Jeremy Bentham, Leon Petrażycki, and Carl Menger. The analysis begins with a review of Smith's ideas on self-interest, moral sentiments, and spontaneous order, followed by Bentham's utilitarian framework and the felicific calculus, later adapted by Posner into a theory of wealth maximization. The chapter then discusses Carl Menger's subjectivism and the Austrian School's critiques of neoclassical assumptions—particularly their emphasis on dynamic markets, radical uncertainty, and the knowledge problem—to contrast the Chicago approach with more institutionally nuanced frameworks. It then turns to Leon Petrażycki's psychological and normative theory of law, which anticipated several elements of economic reasoning, including ideas later formalized in the Coase theorem, and which linked legal efficiency to mental processes, emotional reactions, and ethical development. Finally, the chapter addresses the ethical debate surrounding wealth maximization by drawing on the theories of Rawls, Sen, and Posner, and considers how economic analysis of law functions in both positive and normative dimensions. In doing so, the chapter sets the stage for a critical re-examination of economic efficiency as a legal standard.

Keywords: Adam Smith; Jeremy Bentham; Leon Petrażycki; Normative legal theory; Richard Posner; Wealth maximization (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035379491
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