Traditional economic analysis of the law supposes that legal rules are and ought to be designed to maximize social welfare taking as given that legal subjects are self-interested utility maximizers who care about complying with the law only insofar as non-compliance exposes them to the risk of sanctions. This paper challenges this motivational assumption while keeping the standard framework otherwise in tact by deploying H.L.A. Hart’s insight that some people regard the law from the “internal point of view,” i.e. they are intrinsically motivated to comply with the law. It considers how we should model the behavior of these Hartian “internalizers” and how their presence in the subject population alongside standard self-interested “externalizers” alters the predictions and prescriptions of economic analysis, arguing that some contract law doctrines can be more easily explained once internalizers are added to the mix. It also considers how legal norms may interact with prevailing non-legal norms when some agents are intrinsically motivated to comply with the law.
Stone, Rebecca, Economic Analysis of Contract Law from the Internal Point of View (August 23, 2012).