Richard Posner (Reference Posner2010) argues for broadening law and economics into a more general organization economics that should be more capable of comparatively analyzing issues of governance and performance of government agencies, such as the judiciary. This is particularly important for contexts where different legal cultures (Rechtskreise) need to be reconciled. This is, in particular, the case in the European Union with its three legal cultures that sometimes clash in Brussels, Luxemburg, and Strassburg (not to mention, Frankfurt, the seat of the European Central Bank).

Law and economics was jumpstarted as a discipline for research and instruction by Richard Posner's Economic Analysis of Law and by launching the twin journals Journal of Law and Economics and Journal of Legal Studies. Often overlooked in this context is the entrepreneurial role of the University of Chicago Press. A great facilitator in this endeavour was the arcane structure of the Anglo-American common law (including equity) which defies logic and is therefore hard to teach. It can only be taught on a case-by-case basis with the method of distinguishing (Tullock, Reference Tullock1971). In its stead, Posner essentially adopted Alchian and Allen's basic price theory and used it as the structure on which to hang the standard cases.

With the exception of Hein Kötz, and the University of Constance, more generally, European universities were slow to introduce law and economics courses or even programs as they exist today. The obvious reason is that European law (with the exception of Britain) is code based, hence law and economics − in the sense of an economic analysis of legislation, court decisions, and legal practices − have a long-standing tradition in Germany.Footnote ¹ This shows up in the names of the two oldest German language economics journals, i.e. Journal for the Entire Science of State Footnote ² and Journal for Legislation, Administration and Political Economy in Germany. Footnote ³ The geographical delineation emphasizes that the analysis deals with real and existing institutions, not with imagined ones such as Robinson Crusoe on his island or Walras’ auctioneer.

The notion of an organization science harps back to this earlier tradition, which fell victim to the increasing and deepening division of labor in the social sciences. What used to be looked at, researched, and taught as one project centring around a real-world and pressing question to be resolved by means of legislation or adjudication, integrating legal, economic, political, and sociological approaches, is now separately considered from a legal, economic, political, administrative, or sociological point of view, where the disciplinary paradigms drive the analysis in different directions and the choice of topics for research and instruction is driven by these disciplinary developments. Pressing problems in the economy or polity are no longer systematically posed as research questions, as they were when an organization science, in the form of the science of State, reigned supreme (Lindenfeld, Reference Lindenfeld1997).

As editor of the European Journal of Law and Economics, I witness an ever-growing degree of specialization and a professionalization of law and economics as a self-sufficient subdiscipline with its own rules and paradigms. Paradigms replace problems; it was therefore high time for Richard Posner to fire his warning shot. ‘Science of State’ sounds a bit old fashioned. Let us do the same thing and call it ‘organization economics’.

In this context, it can only come as a surprise that the list of references containing about one hundred titles does not reflect this tradition. With the exception of Hayek, none of the names which appear in my Elgar Companion to Law and Economics (Backhaus, Reference Backhaus2005) is even mentioned in the bibliography. The ignorance of this tradition is already bearing bitter political fruits. My suspicion is that the current German Minister of Justice ignores the method of legal-economic analysis since some of her initiatives are so obviously self defeating, such as introducing a price-driving tort reform simultaneously with the Euro as a common currency. This impression was borne out by her answer to my recent question here in Erfurt; she is aware of sociology of law, but unaware of law and economics. To paraphrase James M. Buchanan: No economics – bad law!