Intergenerational Equity and Systemic Benefits
Brett asks how the economic dynamic theory treats intergenerational issues and whether the idea of systemic benefits might prove useful. I’ll take these questions up in turn.
The Economic Dynamics of Law does not distinguish between systemic risks (or economic opportunities) facing the current generation and those facing future generations. It simply envisions a commitment to avoiding systemic risks while keeping open a robust set of economic opportunities. That said, by emphasizing the shape of change over time, the approach inherently places more emphasis on protecting and helping future generations than our current static approach, as Martha McCluskey has so well explained.
It does not address discounting, because the theory rejects the entire ideal of optimal regulation based on aggregating preferences. Accordingly, I do not suggest that we can or should monetize costs and benefits for purposes of most administrative decision-making. Intergenerational discounting arises as an issue only because we have in the last several decades committed ourselves, I think unwisely, to monetizing costs and benefits. That said, I do suggest that CBA works ok as one of many inputs into a legislative decision-making process and will be necessary in cases where legislatures adopt allocative efficiency as a goal. p. 76. Although economic dynamic theory does not address intergeneration discounting, I do not see the normative case for treating future lives and well-being as less worthy of protection than our own and therefore reject such discounting.
A commitment to avoiding systemic risk calls into question, in some areas and to some extent, the conventional temporal categorization of many problems as focusing on future generations. For example, we tend to think of climate disruption as a threat to future generations. But the systemic risk exists for this generation, because there are unknown tipping points in the climate that we could trigger now. We are more likely to trip over these points in the future than now, but the question is not as neat temporally as one might think. I’m not denying the value of thinking about inter-generational issues. But economic dynamic theory, at least so far, has nothing direct to say about them, other than to give more weight to our future by emphasizing change over time, systemic risk avoidance, and economic opportunity.
That focus on the long term rather than on transactions arises in part from the theory’s macroeconomic focus. I do not suppose that a macroeconomic focus immunizes any theory from abuse, but it does at least move us toward focusing economic theory on matters that will remain important during the extended half-life of a law.
Systemic Benefits: Deepening the Economic Opportunity Concept
The book talks about economic opportunity, rather than systemic benefit. To some extent this reflects linguistics: Systemic risk is a well-accepted concept; Brett’s suggestion of systemic benefits is linguistically novel. It also reflects the fact that I began thinking of keeping open a robust set of discrete non-systemic economic opportunities as a restraint on systemic risk avoidance. Still, Brett’s exactly right that keeping open a robust set of economic opportunity proves more central to many areas of law than systemic risk avoidance.
Brett’s suggestion points the way forward to further developing the concept of economic opportunity. One might make the case that infrastructure, the subject of Brett’s work, is especially valuable in creating economic opportunity for many people. One might not need the concept of systemic benefits to do that, but I do think he’s right that more could be done to develop the economic opportunity concept and to link it to Brett’s fine work on this subject. My goal was to create an overarching framework that included something as transactionally focused as contracts as well as something broader like laws addressing infrastructure. In other words, a “robust set of economic opportunities” is a broader concept than what I think Brett means by systemic benefits, as it can include shutting down a whole industry that is not systemic in the sense that infrastructure is. The term economic opportunity also embraces consideration of justice and inequality as important questions potentially relevant to economic theory. Economic opportunity’s link to inequality and justice figures prominently in the antitrust chapter. So, I’m trying to craft an economic theory without recommitting a traditional sin of economic theory, namely marginalizing fairness as an important consideration.
Brett’s also right that the capabilities approach provides another tool to deepen our understanding of what’s involved in having law create or preserve economic opportunity. I would invite him and others to contribute to further development of the economic dynamic theory by building on these useful suggestions.
Although economic dynamic theory tilts toward favoring future generations, it does not require a robust treatment of intergenerational equity in the traditional sense. The concepts of systemic benefits and the capabilities approach could be used to enrich the concept of economic opportunity, which plays an important role in economic dynamic theory.