¹ For similar perspectives, see Roberto Mangabeira Unger, What Should Legal Analysis Become? (1996); Anne-Marie Slaughter, Andrew S. Tulumello & Stepan Wood, International Law and International Relations Theory: A New Generation of Interdisciplinary Scholarship, 92 AJIL 367 (1998).

² Elsewhere, we have attempted to show how L&E approaches can inform our understanding of, inter alia, treaty law, the exercise of prescriptive jurisdiction, and the competences of international organizations. For a more comprehensive review of the utility of law and economics in international legal analysis, with references to additional literature, see Jeffrey L. Dunoff &Joel P. Trachtman, Economic Analysis of International Law, 24 Yale J. Int’l L. 1 (1999).

³ Notably, potential Pareto efficiency analysis lacks some of the liberality of Pareto efficiency analysis, insofar as it does not let the person made worse off decide for himself whether he has been adequately compensated.

⁴ For example, contingent valuation theory uses survey, rather than market, data to determine how much individuals would pay for various nonmarket goods. See, e.g., Contingent Valuation: A Critical Assessment (Jerry A. Hausman ed., 1993).

⁵ For an accessible introduction to the various strands of public choice theory, see David A. Skeel, Jr., Public Choice and the Future of Public-Choice Influenced Legal Scholarship, 50 Vand. L. Rev. 647 (1997).

⁶ This is distinct from legal positivism, which focuses on the law as written, rather than some natural law construct regarding how the law should be.

⁷ See Avery Wiener Katz, Positivism and the Separation of Law and Economics, 94 Mich. L. Rev. 2229, 2239 (1996).

⁸ We recognize that this premise—that individuals’ preferences should be given weight—is itself normative. See, e.g., Herbert Hovencamp, The Limits of Preference-Based Legal Policy, 89 Nw. U. L. Rev. 4, 6 (1994).

⁹ This can cut in several directions, depending on the issue under consideration. When the institution is a market, L&E understands the market as a mechanism for preference revelation, and often argues against government-imposed barriers to trade. When the institution is legislative in nature, the analysis will tend to argue for more participatory processes, so as to facilitate preference revelation. See, e.g., Gordon Tullock, Public Choice, in 3 The New Palgrave: A Dictionary of Economics 1040, 1043 (John Eatwell et al. eds., 1987).

¹⁰ This is one way that L&E differs from international law positivism (as well as political science realism). However, as we have argued elsewhere, these perspectives are neither positivist in the economic sense (as they are not grounded in empiricism) nor truly realistic in a descriptive sense. Dunoff & Trachtman, supra note 2, at 9–12.

¹¹ See, e.g., Neil K. Komesar, Imperfect Alternatives: Choosing Institutions in Law, Economics and Public Policy (1994); Joel P. Trachtman, The Theory of the Firm and the Theory of the International Economic Organization: Toward Comparative Institutional Analysis, 17 Nw. J. Int’l L. & Bus. 470, 535–38 (1997).

¹² See generally Duncan Kennedy, A Critique of Adjudication (Fin de Siàcle) (1997). For a study of how this flexibility is used in an international law context, with references to L&E literature regarding the use by legislators of rules and standards, see Joel P. Trachtman, The Law and Economics of WTO Dispute Resolution, 40 Harv. Int’l L.J. (forthcoming 1999).

¹³ Richard A. Posner, Economic Analysis of Law 251–61 (4th ed. 1992).

¹⁴ According to the fundamental theorem of welfare economics, a perfect (transaction cost free) market would result in “efficient” allocations: maximization of each participant’s preferences. There is no perfect market (just as there is no perfect government). According to the theory of the second best, given that a market is imperfect in any dimension, there is no reason to believe that striving toward perfection at other dimensions would result in “more” efficient outcomes.

¹⁵ On the domestic level, L&E scholars have taken widely divergent positions regarding the implications of the “public choice” model of legislation for the judicial construction of statutes. See, e.g., Frank Easterbrook, Statutes’ Domains, 50 U. Chi. L. Rev. 533 (1983); Richard A. Posner, Legal Formalism, Legal Realism, and the Interpretation of Statutes and the Constitution, 37 Case W. Res. L. Rev. 179 (1986); Jonathan R. Macey, Promoting Public-Regarding Legislation through Statutory Interpretation: An Interest Group Model, 86 Colum. L. Rev. 223 (1986).

¹⁶ Of course, the “price” imposed by any legal sanction must be discounted by reference to its enforceability and the perception of its enforceability: the chances of being caught, the chances of being adjudicated liable or guilty, and the chances of actually being punished. As a general matter, this discount rate is much higher in the international legal system than in domestic systems because there is no mandatory adjudicative jurisdiction and no executive generally able to impose a sanction.

¹⁷ See Robert Ellickson, Order Without Law: How Neighbors Settle Disputes (1991). Ellickson’s depiction of the autonomous customary restraints that arise among cattle ranchers in Shasta County is evocative of the development of international law.

¹⁸ For an insider’s account of the conflicting demands of accountability and peace in the Bosnian conflicts, see Michael P. Scharf, Balkan Justice: The Story Behind the First International War Crimes Trial Since Nuremberg, ch. 3 (1997). For a treatment of this issue that invokes the rhetoric of cost-benefit analysis, see Anthony D’Amato, Peace vs. Accountability in Bosnia, 88 AJIL 500 (1994).

¹⁹ For an interesting discussion of the purposes served by criminal trials for violations of international humanitarian law, see Jose E. Alvarez, Rush to Closure: Lessons of the Tadić Judgment, 96 Mich. L. Rev. 2031 (1998).

²⁰ Similar arguments apply to recent institutional developments. Creation of, for example, the ICTY may have had more to do with pushing the parties toward a peace agreement than with deterring violations of humanitarian law. See W. Michael Reisman, Institutions and Practices for Restoring and Maintaining Public Order, 6 Duke J. Comp. & Int’l L. 175, 181 (1995).

²¹ See, e.g., Dan M. Kahan, Social Meaning and the Economic Analysis of Crime, 27 J. Legal Stud. 609, 615 (1998) (members of the public expect punishment not just to protect them from crime but also to express their moral condemnation of it).

²² See, e.g., Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. Pol. Econ. 169 (1968); Steven Shavell, Criminal Law and the Optimal Use of Nonmonetary Sanctions as a Deterrent, 85 Colum. L. Rev. 1232 (1985).

²³ See, e.g., A. Mitchell Polinsky & Steven Shavell, on the Disutility and Discounting of Imprisonment and the Theory of Deterrence (Harvard Law School, John M. Olin Center of Law, Economics, and Business, Discussion Paper No. 213, 1997).

²⁴ We address the incommensurability issue in more detail in Dunoff & Trachtman, supra note 2, at 48–49.

²⁵ See, e.g., Adam Roberts, The Laws of War: Problems of Implementation in Contemporary Conflicts, 6 Duke J. Comp. & Int’l L. 11, 37–38 (1995). We recognize that these provisions typically apply to international, rather than internal, conflicts but believe this is not germane to the incommensurability argument.

²⁶ Prosecutor v. Tadić, Protective Measures for Victims and Witnesses, No. IT-94-1-T, at 28 (Aug. 10,1995), reprinted in 105 ILR 599 (permitting witnesses to testify anonymously against defendant). For examples of derogation provisions permitting restrictions of international human rights in certain contexts, see International Covenant on Civil and Political Rights, Dec. 16, 1966, Art. 4, 999 UNTS 171; European Convention for the Protection of Human Rights and Fundamental Freedoms, opened for signature Nov. 4, 1950, Art. 15, 213 UNTS 221; and American Convention on Human Rights, Nov. 22, 1969, Art. 27, 1144 UNTS 123.

²⁷ The seminal work here is Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089 (1972). Ironically, this article was prompted by Calabresi’s belief that conceiving of the criminal law as a pricing mechanism was “silly.” Guido Calabresi, The Simple Virtues of the Cathedral, 106 Yale L.J. 2201, 2203 (1997).

²⁸ L&E scholars often claim that liability rules are most appropriate in situations of high transaction costs (such as when the parties cannot easily find and bargain with each other), and that property rules are most appropriate where the parties themselves can easily bargain with each other. See Calabresi & Melamed, supra note 27, at 1108–10. This claim has been subject to sustained challenge. See, e.g., Dunoff & Trachtman, supra note 2, at 25 & n.89.

²⁹ The Iraqi leadership’s decision to suffer economic sanctions in lieu of arms inspections dramatically illustrates this point.

³⁰ This is the international law version of the tale of Ulysses and the Sirens; we believe that international law is frequently used as a “precommitment strategy” in this manner.

³¹ For a particularly thoughtful discussion of this and other apparently arbitrary legal distinctions in international humanitarian law, see Steven R. Ratner, The Schizophrenias of International Criminal Law, 33 Tex. Int’l L.J. 237 (1998).

³² Protocol Additional to ihe Geneva Conventions of 12 August 1949, and Relating to the Protection of Victims of Non-International Armed Conflicts, June 8, 1977, 1125 UNTS 609.

³³ Rome Statute of the International Criminal Court, July 17, 1998, UN Doc. A/CONF.183/9* (1998), reprinted in 37 ILM 999 (1998) [hereinafter ICC statute].

³⁴ See, e.g., Theodor Meron, The Continuing Rote of Custom in the Formation of International Humanitarian Law, 90 AJIL 238 (1996) (discussing role of ICRC); Symposium Panel, The Contribution of the Ad Hoc Tribunals to International Humanitarian Law, 13 Am. U. Int’l L. Rev. 1510 (1998) (discussing doctrinal developments in Tribunals for Rwanda and former Yugoslavia).

³⁵ But see Jeffrey L. Dunoff, The Death of the Trade Regime (unpublished manuscript, on file with authors) (arguing that characterization of international settings as “Prisoner’s Dilemmas” presenting a cooperation problem often obscures underlying distributional conflicts); Duncan Snidal, The Game Theory of International Politics, 38 World Pol. 226 (1985) (critiquing overuse of “Prisoner’s Dilemma” as metaphor or analogy, and urging more refined and nuanced use of game-theoretical concepts).

³⁶ At the same time, of course, universal jurisdiction and international courts also change the incentive structure of would-be violators, as the heightened risk of prosecution will affect the calculus of the costs and benefits of the crime.

³⁷ For the Statute of the International Criminal Tribunal for the former Yugoslavia, as adopted by the Security Council, see Report of the Secretary-General pursuant to paragraph 2 of Security Council resolution 808, UN Doc. S/25704, annex (1993), reprinted in 32 ILM 1192 (1993) [hereinafter ICTY Statute].

³⁸ Id., Art. 9(2). The Tadić case, where Germany transferred the case from its own courts to the ICTY, provides an example of this primacy. Identical language on primacy is found in Article 8 of the Statute creating the Rwanda Tribunal. The International Criminal Tribunal for Rwanda was created on November 8, 1994, by Security Council Resolution 955. SC Res. 955, annex, UN SCOR, 49th Sess., Res. & Dec, at 15; UN Doc. S/INF/50 (1994), reprinted in 33 ILM 1598 (1994).

³⁹ ICC statute, supra note 33, Art. 17.

⁴⁰ David J. Scheffer, Ambassador-at-Large for War Crimes Issues, Address before the Commonwealth Club, San Francisco, CA (May 13, 1998) (visited Apr. 15, 1999) <http://www.state.gov/www/policy_remarks/1998/980513_scheffer_war_crimes.html>.

⁴¹ In this sense, “complementarity” is actually a form of conditional “primacy” for national courts over the ICC.

⁴² Of course, law and economics methodologies require assumptions, as we discuss below.

⁴³ See, e.g., Anne-Marie Slaughter, The Real New World Order, Foreign. Aff., Sept./Oct. 1997, at 183.

⁴⁴ Indeed, much of treaty law can fruitfully be analyzed in L&E terms. See Dunoff & Trachtman, supra note 2, at 28–36.

⁴⁵ We emphasize that this reflects political prejudice more than inherent qualities of L&E methods. See id. at 8–9.

⁴⁶ For a fuller discussion, see id. at 44–49.

⁴⁷ See Milton Friedman, The Methodology of Positive Economics, in Essays in Positive Economics 3, 14–16 (1953).

⁴⁸ See, e.g., Christine Tolls et al., A Behavioral Approach to Law and Economics, 50 Stan. L. Rev. 1471 (1998).

⁴⁹ See Harold H. Koh, Why Do Nations Obey International Law? 106 Yale L.J. 2599 (1997); Harold H. Koh, Transnational Legal Process, 75 Neb. L. Rev. 181 (1996). For similar arguments, see Abram Chayes & Antonia Handler Chayes, The New Sovereignty (1995).

⁵⁰ See Jane B. Baron & Jeffrey L. Dunoff, Against Market Rationality: Moral Critiques of Economic Analysis in Legal Theory, 17 Cardozo L. Rev. 431 (1996).

⁵¹ The tendency of scholars to identify defects in a given institution, rule or methodology and then to propose change without fully considering the defects associated with the proposed alternative regime has been labeled the “nirvana fallacy.” See, e.g., Harold Demsetz, Information and Efficiency: Another Viewpoint, 12 J.L. & Econ. 1 (1969).

⁵² Martti Koskenniemi, Letter to the Editors of the Symposium, 93 AJIL 351, 358 (1999).

⁵³ A particularly relevant example is the influence of feminist scholarship on our understanding of rape and other forms of sexual violence as a war crime. Hilary Charlesworth, Feminist Methods in International Law, 93 AJIL 379 (1999). In arguing for the influence of theory on practice, we, of course, echo Keynes. See John Maynard Keynes, The General Theory of Employment, Interest and Money 383 (Harcourt, Brace & World 1964) (1936) (“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”).