Functional law and economics: The search for value-neutral principles of law making

Functional law and economics avoids paternalism and methodological imperialism by formulating value-neutral principles of collective choice. It builds upon the methodological premises of normative individualism, giving greatest freedom to individual choice, and fostering socially desirable human action by establishing structural principles that induce individuals to take into account private information and subjective values. Functional law and economics represents a mode of analysis that bridges both the positive and normative schools of thought in law and economics. The first two schools of thought, the positive school and the normative school, developed almost concurrently. The positive school, historically associated with the early Chicago School, restricts itself to the descriptive study of the incentives produced by the legal system largely because its adherents believe that efficient legal rules evolve naturally. On the other hand, the normative school, historically associated with the early contributions of the Yale School, sees the law as a tool for remedying ‘failures’ that arise in the market.