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An important characteristic of necessity cases is that ex ante and sometimes even ex post both parties have an interest in upholding the contract. From an economic perspective, the policy objective of regulating necessity is to give optimal incentives for precaution, search and rescue. These incentive effects have been widely discussed in the law and economics literature, the received view being that price control based on the costs of the rescue plus a small reward provide optimal incentives. In this paper we argue that the received view is unwarranted. Our model suggests that in many cases the socially efficient contract price is higher than the rescue costs. To be sure, due to serious information problems the practical implementation of this theoretical optimum is much more difficult than the cost-plus price setting supported by the received view. While the policy implications of our model are rather tentative we suggest that the judicial costs of estimating policy variables should be taken into account. A second objective of this paper is to argue for an economic interpretation of the term ‘necessity’ in contract law. Instead of various substantive criteria suggested in the philosophical literature we suggest defining the term by working backwards from the possible remedies. The excuse of necessity should be available for contracting parties when, all things considered, a judicial control (modification) of the contract price is desirable. Necessity is thus “defined” by what courts can and should do.

As a matter of theory, paternalism draws attention to philosophical and methodological difficulties involved in the justification of the limitations on freedom of individual choice in market and non-market settings. After a brief overview of the conceptual and justificatory problems surrounding paternalism in moral and political philosophy, this paper analyses whether economic theory, in its current state possesses the analytical tools for assessing paternalism adequately. I discuss how economists refine their analytical tools and redefine the concept of paternalism in order to fit the latter in their own methodological framework. I will argue that if economic analysis should have an impact on rational debates on paternalistic legal policies, it should both reconsider its normative assumptions and rely more systematically on empirical research, especially on the psychology of human judgement and decision making. Philosophical and empirical insights both suggest that the issue of paternalism is an 'uncertain case.' Outright anti-paternalism should not be replaced by uncritical paternalism.

The Normativity of Law in Law and Economics Péter Cserne* 1. Introduction This paper is about some theoretical and methodological problems of law and economics (economic analysis of law, EAL). More specifically, I will use game theoretical insights to answer the question, relevant both for law and economics and legal philosophy, how should a social scientific analysis of law account for the normativity of law (the non-instrumental reasons for rule-following) while retaining the observer's (explanatory or descriptive) perspective. The goal is to offer a constructive critique of both traditional law and economics scholarship and mainstream analytical legal philosophy (the "Jurisprudence of Orthodoxy", see Leith and Ingham, 1977) in this respect. I will try to find out what EAL has to do with the "internal aspect of law", i.e. the fact or the claim that law provides specific reasons for action, in order to successfully challenge mainstream legal theory. EAL can be conceived either as a (consequentialist) normative legal philosophy, as an explanatory/descriptive theory about law (rational choice theory applied to law) or as a set of propositions for legal reform (legal policy). In this paper I will concentrate on the second, explanatory branch. In this second sense, EAL seeks to explain, first, how law influences human behaviour by changing incentives (law as explanans) and, second, to analyse legal (and possibly non-legal) rules as the outcome of individual actions (law as explanandum). This explanatory/descriptive approach has to confront a clear and central problem, often raised as a (self)critique of standard EAL: its inability or inadequacy to deal with the internal perspective on law. In fact, even if this approach has several more or less sophisticated versions what seems to be common to all of them is to treat legal rules (rule-following) instrumentally. Thus the case of rule-guided behaviour is either included in these theories in an ad hoc manner or is missing altogether. On the other side, contemporary analytical legal philosophy which is (at least in the English-speaking world) generally considered as a branch of practical philosophy, usually treats legal rules as specific non-instrumental reasons for action. In this view, even if empirically there are different motives why people obey the law (including conformism, fear of sanctions, etc.), the nature of law is defined by this specific reason, while the further motives are not reasons in a genuine sense for compliance with the law. Now, in order to be taken seriously as an explanatory legal theory, EAL has to account for this feature i.e. that law offers reasons for action, and to answer (or at least take side in the current philosophical debate on) some fundamental questions about the normativity of law. These questions are both conceptual/analytical ('What is the conceptual difference between regularity of behaviour and rule-following?', 'What does it mean to follow a rule?') and explanatory ('Why people obey the law if they do?'). At the same time, in order to be taken seriously as sound social science, EAL has to stick to the methodological principles of rational choice theory as explanatory social science. In the following I shall enquire whether EAL can fulfil this double challenge. One consequence of these methodological principles should be emphasised right at the beginning. The normative or justificatory question, central to mainstream analytical legal philosophy conceived as a part of normative practical philosophy, 'Is there a (moral) duty to obey the law?' should remain outside the scope of this paper (and in general, explanatory/descriptive EAL). But the moral or prudential standpoint of the participants who face this question in some form should, of course, be recorded and included in the analysis as an object of explanation. To repeat, I shall be speaking about EAL throughout only in the second sense as an explanatory enterprise. As a different enterprise, it might be possible to work out a full-fledged normative legal philosophy as a version of EAL, based roughly on welfarist (consequentialist) principles, which would have to answer that justificatory question. But this prospect doesn't concern me here.1 In the last decades serious efforts have been made within rational choice theory (especially game theory) to deal with norms both as explananda and as explanantia. In these analyses norms are often denoted more specifically as 'social norms' and considered explicitly as non-legal, i.e. in contradistinction to legal norms. As it will be clear, these models are still highly relevant for my purposes. In part, but not only because the mechanisms exposed in these rational choice models are general enough to be applicable to legal rules too. My question is now, whether the incorporation of these results of rational choice theory in EAL makes it possible to approach the abovementioned basic problems of legal theory in a new way. In a broader perspective it might be possible that also the gap between explanatory social science and normative practical philosophy can be bridged via evolutionary game theory, especially the indirect evolutionary approach. The structure of the paper is the following. Section 2 presents how rule-following is modelled in standard EAL scholarship. Section 3 is about the jurisprudential meaning, importance and explanations of the normativity of law. Instead of the detailed analysis of jurisprudential and legal philosophical issues related to the normativity of law I will restrict myself to sketch the most characteristic standpoints. Section 4 overviews rational choice models of norms and normativity and discusses some features of the legal system in view of the previous insights. This section is intended to be systematic (maybe at some price of details and originality) but is evidently far from exhaustive. Section 5 concludes.

Challenges in Contemporary Legal Philosophy