This chapter explores the relationship between private and public law. In civil law countries, the public-private distinction serves as an organizing principle of the entire legal system. In common law jurisdictions, the distinction is at best an implicit design principle and is used primarily as an informal device for categorizing different fields of law. Even if not explicitly recognized as an organizing principle, however, it is plausible that private and public law perform distinct functions. Private law supplies the tools that make private ordering possible—the discretionary decisions that individuals make in structuring their lives. Public law is concerned with providing public goods—broadly defined—that cannot be adequately supplied by private ordering. In the twentieth and twenty-first centuries, various schools of thought derived from utilitarianism have assimilated both private and public rights to the same general criterion of aggregate welfare analysis. This has left judges with no clear conception of the distinction between private and public law. Another problematic feature of modern legal thought is a curious inversion in which scholars who focus on fields of private law have turned increasingly to law and economics, one of the derivatives of utilitarianism, whereas scholars who concern themselves with public law are increasingly drawn to new versions of natural rights thinking, in the form of universal human rights.
Firms, Courts, and Reputation Mechanisms: Towards a Positive Theory of Private Ordering
