FREE MARKETS AND SOCIAL JUSTICE by Cass R. Sunstein. New York: Oxford University Press, 1997. 416 pages. Cloth $35.00. ISBN: 0-19-510272-X.
Reviewed by Jack Knight, Department of Political Science, Washington
University in St. Louis.
Cass Sunstein is one of the most prominent legal scholars in the U.S. today. He has written provocatively and intelligently on issues related to constitutional democracy and public law and now turns his sights to the question of the role of free markets in a democratic society. This is an especially important and controversial issue in the late 1990's as the influence of economic analysis and market reasoning continues to grow, in both the intellectual and political arenas. But Sunstein offers a creative and persuasive challenge to this growing influence. His challenge engages free market advocates at many levels: the foundations of economic analysis of law, the effects of markets on non-economic phenomena (especially rights), and the implications of governmental regulation on market activity. While many of the ideas that Sunstein introduces are similar to those presently proposed by others, the fact that he has organized these ideas in one volume and established these issues as relevant for the contemporary debate is a major contribution. He makes the challenges coherent and pertinent and he significantly broadens the research agenda on the relationship among law, social norms, markets and democracy.
The book is organized in three parts. In the first section Sunstein offers a set of essays that develops the theoretical framework with which he builds his analysis of markets and governmental regulation. He focuses there on such basic concepts as preferences, rationality, social norms, social roles, social well being and value. Here Sunstein develops his argument about the fundamental importance of social norms for understanding individual decision making and the incentive effects of legal regulation. In the second section Sunstein considers a set of questions about the role of rights in political and economic activity. In doing so he demonstrates the breadth of his interests, addressing such issues as the effects of the market on race and sex discrimination, the implications of the First Amendment for the revolution in communication technologies, the unintended consequences on political equality of campaign finance reform and the various ways in which property rights can be instantiated in the new constitutional democracies. In the third section Sunstein turns his attention to an analysis of the implications of government regulation on economic activity. Here he weighs the relative merits of government versus market approaches to various aspects of economic activity, especially on issues related to health and the environment.
Sunstein offers a number of important arguments, both about the ways in which we study individual choice and the law and about the policy implications of legal intervention into economic and political affairs. To show how these different types of argument are related in Sunstein's view, I will briefly highlight what is at stake in the debate about how we conceptualize individual decision making. Sunstein's main theoretical contribution relates to the fundamental importance of understanding the effects of social norms on individual decision making. He contrasts his conception of the role of social norms with what he takes to be the standard rational choice account of decision making that undergirds the economic analysis of law. The standard rational choice account, as defined by Sunstein, treats preferences as fixed and stable. Individual choice is a function of an actor's preferences and of her beliefs about the available alternatives from which she must choose. To the extent that social norms enter into this account it is as a constraint on the feasible set of available alternatives. That is, social norms affect the incentives available to the actor, affect the values of the different alternatives.
Sunstein argues for an alternative conception of individual decision making that gives a larger role to social norms and directly challenges the standard conception of rational decision making. He builds his account on the arguments of Laurence Lessig who has developed a theory of the expressive function of law. On Lessig's account law and norms express fundamental values and beliefs about how people think social life ought to be organized. Through this expressive function social norms affect choice in a number of ways; Sunstein states these effects as follows:
Sunstein's analysis of the importance of social norms is a salutary challenge to the standard economic analysis of law. He is correct in his assessment that the rational choice approach has given insufficient attention to social context in general and social norms in particular: "Far too little attention has been given to the place of norms in human behavior, to the relationship between norms and law, and to the control of norms as an instrument of legal policy." (34) But one should not conclude from Sunstein's argument that the critique completely undermines the value of the rational choice perspective. And Sunstein himself acknowledges that there is still merit in the approach. Here it is important to understand how rational choice theory can and cannot adequately accommodate these conclusions. On the one hand, the substantial contributions of the recent work on social, political and economic institutions from within the rational choice paradigm have significantly enhanced our understanding of the influence of social context on individual and collective choice. On the other hand, advocates of the rational choice approach have not demonstrated either the willingness or the ability to adequately consider Sunstein's primary theoretical focus, preference formation and change.
With this conceptual framework Sunstein undertakes an empirically rich analysis of the relative effects of government regulation and markets on individual decision making and thus on economic and political outcomes. His general policy conclusions are grounded in his insistence on the importance of social norms:
The policy claim about preference change is part of a more general argument in support of the value of government regulation and against excessive reliance on the market. Here Sunstein makes a compelling case for the necessity of laws and government for effective markets: "markets should be understood as a legal construct, to be evaluated on the basis of whether they promote human interest, rather that as a part of nature and the natural order, or as a simple way of promoting voluntary interactions." (6) In the last third of the book, Sunstein begins to develop a conception of a state that complements market activity, relying on the notion that the state is often the most effective mechanism for assessing the costs and benefits of social and economic activity.
Throughout this set of essays Sunstein echoes his basic insight, developed
in his other writings, about the possibility of political agreement on
highly conflictual policy questions: