Backlash

Economic systems produce wealth. Law and economics analysts strive to see which laws are more apt to produce greater societal wealth and, on occasion, which will distribute that wealth acceptably. For some economic systems, however, productive arrangements might generate political backlash, and this backlash complicates the economic analysis. When the potential for wealth-decreasing political instability is high, basic efficiency analysis becomes harder than it would otherwise be. Professor Roe provides several reasons why law and economics analyses of American institutions seldom take backlash into account, why this relative neglect is often justified, and when it might not be justified. Some of these reasons are rooted in American history and help to explain the American-centered nature of law and economic analysis. Professor Roe first analyzes the complications arising from backlash abstractly, showing how even an initially wealthy and Rawlsian fair society could deteriorate due to backlash, with markets sometimes unable to remedy the problem. He then examines plausible national instances that fit the abstract model of wealth, fairness, and political backlash, with the backlash risking instability, turmoil, and if not otherwise remedied, lower wealth. Finally, Professor Roe argues that even in the United States some institutions that are hard to justify on normal efficiency grounds become understandable as institutions that either mitigated or resulted from backlash. Several American business laws, such as Glass-Steagall, Robinson-Patman, some antitakeover laws, and chapter 11 of the Bankruptcy Code, can be seen as examples of backlash or as means of avoiding more serious backlash.