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Author: Uma Outka

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“The Shape of Change Over Time” in the Climate Context – The Economic Dynamics of Law

David Driesen opens The Economic Dynamics of Law with the observation that “law influences the future, not the past.”  In the field of energy and environmental law, where I first came to appreciate Driesen’s scholarship, the shape of this influence over time is a central contemporary concern.  On the one hand, it is clear that law has the potential to catalyze climate stabilization.  On the other, there is a risk that existing legal regimes reflecting outmoded premises will perpetuate a detrimental status quo, an influence that in effect carries the past into the future.

Driesen’s call to refocus policymaking away from too heavy an emphasis on cost-benefit analysis (CBA) and toward “the direction of change over time” (at 213) captures these dual prospects for the influence of law on the future. In this way, although the book directly engages law and economics broadly conceived, it also contributes to the literature of law and transition, which has grappled with the role of law in facilitating, as well as hindering, change.

This contribution is especially important in the climate context (Chapter 11) and pertinent to the current energy transition in the US, as it simultaneously shifts increasingly to cleaner energy resources but also expands the use of fossil fuels with domestic oil and gas. Driesen’s critique of CBA here has considerable force, irrespective of whether readers accept the economic dynamic theory:  If the dominant approach to policy analysis suggests climate action is not economically justified, despite scientific consensus telling us the “world’s current path of continuing reliance on increasing fossil fuel consumption leads to a set of serious problems and may bring us outright catastrophe” (at 212), something is dangerously wrong.  Part of this problem, as Driesen notes, stems from the fact that CBA “draws attention away from the possibility that the future might differ from the past” (at 27).  In connection with climate disruption, perhaps even more than other contexts considered in the book, this is a critical limitation given that the one point of certainty seems to be that the future will differ substantially from the past – in wide-ranging ways not amenable to precise prediction. It is this recognition that has fueled increased engagement with the concepts of adaptation and resilience as modes for reinforcement against sudden, dramatic, and long-term change, or least for making such change feel less jarring. When the book argues for shifting from a resource allocation frame to a goal of avoiding systemic risk with an eye to change over time, it points to a space for normative policymaking around unavoidable uncertainties that this area of law sorely need.

The focus on change over time is important here in two other key respects. First, extending forward in time, Driesen’s analysis highlights the ease with which the cost of inaction on climate can be neglected in cost-benefit oriented discourse on climate policy. Like Brett Frischmann, I wanted to know more about how the economic dynamic theory would account for intergenerational equity, especially with regard to inaction.  There seems to be an implicit compatibility, though the book does not orient its proposed analytical framework around this purpose explicitly.  (Driesen has provided a clarifying response on this point).

Second, and again in a forward-looking posture, the economic dynamic approach engages the explicit question “of whom a proposed law would empower or disempower” in new policy formation (at 66). This empowerment analysis might be still more informative to policy transition if it can also extend back in time. Cost-benefit discourse tends to ignore the accretion of capital and political empowerment that preceded new climate policy goals.  As Driesen notes, once utilities build “capital-intensive facilities, their owners will acquire incentives to resist emission reduction requirements that might interfere with their operations” (at 214). But this empowerment may also be integrated in relevant legal regimes to such a degree that disentanglement may entail more than restructured incentives. Whether the theory can also offer this retrospective component was less clear.

As Michael Livermore noted in his opening post, The Economic Dynamics of Law is an ambitious project. It’s worth noting that the book does not argue for renouncing CBA – indeed, Driesen acknowledges “it is hard to see how one can avoid CBA, notwithstanding its many weaknesses” and it will continue to have a place in “open-ended policymaking” (at 76). It is the dominance of CBA that he objects to most. This book advances the literature critical of CBA by not stopping there, and instead offering up a thoughtful, though-provoking, and yet quite accessible alternative frame for policymakers confronting decisions in the face of uncertainty.