Alain Marciano

Introduction: The economics of the constitutional moment in Europe

Europe provides a fascinating and far-reaching field of investigation for economists. Agriculture, industrial policy, transport and so on, are many subjects that are thoroughly dealt with. But what about law? The provision and the use of law cannot avoid strategic behaviour by individuals or groups of interest. The creation and development of constitutional frameworks cannot be dissociated from rent-seeking. Judges are granted the right of juris dictio and as such they have a tremendous power that they can use to further their own private interest. At the same time, they must deal with possible strategic behaviour by the plaintiffs and must find rational criteria to provide sound decisions. Economics is particularly well suited for analysing such topics as private or public law. Public choice and constitutional political economy (Buchanan, 1990) are relevant approaches which consist of using economic tools to understand the choice of rules instead of simply studying individual or collective behaviour within an exogenously given set of rules. When this set becomes endogenous, the scope widens to comprehend constitution-making processes and the various ways of juris dictio by judges. Public choice, constitutional political economy and law and economics are close enough perspectives to all belong to the new political economy. Public choice mainly focuses on political mechanisms (Mercuro and Medema, 1997, p. 84). The emphasis can also fruitfully shift from the politician to the judge, from the vote to the court decision. A law and economics perspective has to focus on the mechanisms through which laws are passed and on the way their interpretation and efficiency evolve. In this matter, economics and the law are so intertwined that any attempt to provide compartmentalized analyses cannot but fail to reach its goal, if the latter is to explain things as they are or should be. Moreover, law and economics must build on both political economy and economic analysis.

Introduction: co-ordinating demand and supply of law: Market forces or state control?

The idea that competition plays an important role in the provision of law has gained an indisputable legitimacy among economists. It does not only convey the acknowledgement of the influence of rules and institutions on economic competition, but also that governments, when institutional competition is at stake, or legal producers, in the case of legal competition, are rivals and compete just like producers of goods and services compete in usual markets. In other words, if we admit that rules are goods that must be produced (and not simply discovered by judges), then their provision must be organized according to market mechanisms. Thus, legal competition, as a decentralized market process of provision of law in which legal clubs compete, can be contrasted with a monopolist and centralized lawmaking process, mainly backed up by the coercive power of the State. Even if the contrast between these two models is not so neat in reality, where practices mix with reasoned arguments, these approaches nonetheless constitute two theoretical references that allow us to understand and to model many important situations in which new institutions have to be elaborated. Besides the building of new legal systems in the former communist countries or the provision of law in cyberspace, the harmonization of law related to the European integration process is certainly one of the major issues to be discussed. This is the focus of the chapters presented in this volume. The example of the European Union is all the more interesting in that it clearly illustrates the relationship between legal competition and the interrogations about future federalism: when several local (or national) jurisdictions are granted with the right to produce legal rules, it is indeed crucial to know if these clubs must be located on the same level – competition remains horizontal – or may be located on different levels – competition is both horizontal and vertical. Therefore, if competition in the legal market works without notable failures, then there is no necessity to assign legal responsibilities to the central

The early European ‘‘Federalism'': ambiguities of talks about how to walk toward a political union

The European institutions constitute an incomplete – as incomplete as any constitutional contract – agency contract. Incompleteness means that the agents, the European institutions, benefit from important asymmetries of information and therefore behave as their own principal. They do not behave as they are told to but choose their own objectives and means of action. In this chapter, we analyze the historical origins of such incompleteness. We show that it results from, and as a consequence, is reinforced by the hesitations of the founders of the European institutions about the nature of a European federation . These ambiguities are crucial for a double reason: not only do they influence the nature of the tasks delegated to the European institutions but they also impact the way they can be controlled. We analyze a set ofdiscourses and official texts and show that the term “federal” bears various meanings, ranging from centralized federalism to decentralized confederalism .

Introduction Making sense of the state: a political economy approach

Law and the State provides a political economy analysis of the legal functioning of a democratic state, illustrating how it builds on informational and legal constraints. It explains, in an organised and thematic fashion, how competitive information enhances democracy while strategic information endangers it, and discusses how legal constraints stress the dilemma of independence versus discretion for judges as well as the elusive role of administrators and experts.