Some Mistaken Views of Economists

Some Mistaken Views of Economists was written by Judge Bhajarit Ninsanit (Thai: or Bhajarit Ninsanit ) . Firstly it was written as an essay on law & economic in class, however now a day it was translated and rewritten in Thai and published both in Thai and English in Dulphaha (Thai: ), a court of justice of Thailand magazine. A English version of this article is follow:
Introduction
In the class “Introduction to Legal Theory” offered as part of a special educational program from Kyushu University held in Bangkok leading to a diploma, students were introduced by the professor to some of the main arguments of law and economics. The class sought to demonstrate how these ideas can be usefully implemented in solving various real life legal problems, since law and economics has over the last twenty years emerged as the dominant theoretical approach to law in the United States and elsewhere.
One example discussed in the class to prove the relationship between law and economics was a bank robbery case. This example has the facts that an armed robber put his gun to the head of a bank customer and demanded the bank clerk to give the robber $500, but the bank clerk refused because of the bank policy. Then the thief shot the customer and walked out. The victim’s family sued the bank for damage in excess of $1,000,000.
Economists gave an answer to this problem based on 2 formulas from an ex ante, forward looking, perspective:
: 1. If the bank looses the case, in the future there will be more robbery or
: 2 But if the bank wins the case, in the future there will be less robbery.
Or it could be shown an economic approach in a chart as follow:
And the conclusion was “bank losses or win in the case shall be affect to robbery bank in the future.”
However, some of the students, especially amongst the judges, did not agree and felt that the answer cannot be acceptable to their common sense. The question comes up what happens in that theory - that answer is right or wrong. To answer this question we can prove by a mathematic method the same as economists and answer as follows.
Mathematical Thinking
In legal reasoning we are not thinking only of the legal rule or logic or economic or social or politics or history, but also everything; such as philosophy, and mathematics. The probability theory in mathematics- the probability of events or the probability theory that will be occur- which economists borrow to use in their science can help us to predict future event as same as economic.
In the robbery bank case, using ex ante thinking predicted the future only from the data that there would be a loss of $500 or payment for damages around $1,000,000. However, this does not predict the future as a whole in real life. The probability theory as a useful instrument can help us to talk about the future that shall occur in real life.
For the first formula that states:
: If the bank loses the case, in the future there will be more robbery.
It doesn’t calculate that fact that how often the robbery event might be and it cannot be guaranteed that the thief will not do both- get the money and kill the victim.
For more detail, if the robbery events have more frequency occurs and makes the bank loss their money over $1,000,000 with the compensate $0, or the situation is that the thief receives money from the bank and kills a bank’s customer which make both costs are loss money $500 plus payment for damage $1,000,000.
Many questions come up regarding what might happen between the bank giving money to the thief or not giving any money. The bank must think about this idea because it has an opportunity cost. It means that the real probability in our life that the bank will not give the money to the thief anymore. So that, the opportunity of the situation in the future in the situation if the bank loses the case shall have at least two probabilities:
: 1. It will be more robbery because the bank will send the money to all thieves or
: 2. It will not be more robbery because the bank will send the money any more.
In comparison with mathematicians, the economists give the answer that in the future there will be only one possible outcome but the mathematicians give the answer that in the future there will be two possible. This shows that the economists give the wrong result. Mathematicians will not have short eyes to look at future like economists but will recognize the existence of multiple possible outcomes.
Equally, in the second formula that states:
: If the bank wins, in the future there will be less robbery.
It isn’t the only one answer either. For the same reason, we cannot guarantee the events in the future. The opportunity in that situation in itself shall be two probabilities- still more robbery or less robbery because the frequency of robbery isn’t dependant on one thief but also many thieves in our society. A bank robber similarly likes to win a lottery prize, so that many thieves are still trying to rob the bank again and again. Moreover, it doesn’t calculate a fact that how much life shall be loss before the situation of less robbery occurs too. The answer that in the future there will be only one event is wrong again.
In the conclusion on the mathematicians’ thinking about the outcomes in the future do not only stop on one event, but also consider other events. The opportunities of these formulas still have at least two probabilities in each formula that always will be at least two events that may occur. Or you can say that “bank losses or win in the case shall not be affect to robbery bank in the future,” and a mathematical approach chart as follow:
The Problem with the Economic Perspective
In the economic philosophy we begin with assuming that every fact is fixed and the same or called “ceteris paribus ”; however, in real life it isn’t possible to control all factors and fix it the same all the time. It means when any one factor is changed the answer will be changed. Hence the problem on the economic philosophy is on the assumption. The assumption is an economists’ idea to think on something that it is true without having any proof, and it isn’t even real. Even if in our real life and law not only lawyers but also everyone would like to prove the truth before accepting it. This problem sometime is not a serious problem because the economists’ reason is the same as logic which not absolute.
Economists must suppose the fact on one event to be a factor in their formula and predict the outcome that they think is the best. For example, in the bank robbery bank case if the bank loses the case it is assumed that in the future there will be more robberies. The economists look on the amount of lost money $500 and payment for damage $1,000,000 then they assume these facts, fix it, after that predict the future probabilities. Moreover, they draw a frame in their mind with the unstated assumption that the thief’s behavior is receiving money and go out without blighting the bank’s customers. They think the best answer is more robbery only one event that may happen. However, in real life the probability cannot fix on only one event it must be thinking on the opportunity of other possible events; such as:
: 1. The frequency: loss of money over $1,000,000 with compensation $0 or
: 2. The behavior: the thief receives money but still kills the bank’s customer.
These are very hard to control and fix all factors, so that the economists’ prediction is difficult to be the truth in real life. The probability theory in mathematics provides a better method to use in predicting the future than economic ideas. This example shows that the answer of the economists seems to be more of an imagining rather than a science and it is unacceptable because they cannot prove their reasoning in real life.
Based on this weakness- a problem on the assumption or ceteris paribus - in the economic perspective which limits the view of economists we can answer that the economists’ answer to accurately predict the outcome on the bank robbery case is wrong. For the reason that proved by mathematics, bank losses or win in the case shall not be affect to robbery bank in the future. And the ex ante view must be based on the probability theory in mathematic thinking more than on the more rigid view of economics.
Suggestion
Many times economists and lawyers are trying to explain law with economics but some reasoning doesn’t work because they have got some problems with their philosophical perspective. The question is how we should dissolve this problem. I’m strong recommending that if we would like to use other science instead legal science, an integrated science is the best way. When we think to use other sciences in law we must look at all sciences as a whole and integrate them before reaching any conclusion. Our legal mind will then say it is acceptable.
Conclusion
The idea that economics can be a usefully implemented in solving various real lives of legal problems isn’t an absolute idea. Furthermore, sometime it’s wrong in logic, philosophy, or reasoning and has many problems for the legal rule. The outcome given by economists sometime is incorrect because their problem on economic philosophy which has a problematic assumption. Or it called that the problem and mistake comes from ceteris paribus. Our legal mind will say yes and accept the reason as opinio juris only when it is acceptable as truth. Until then, we cannot accept economics as providing a theoretical approach to law.
Back to our class it isn’t surprising that some judges are not agreed with the economists’ answer. The reason is that economists rely on the wrong logic from the probability theory in mathematics. Furthermore, by applying other sciences in legal science; we should use integrated sciences for solving various real life legal problems and law, especially mathematics as same as economics.

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