Section I Theoretical Background
Chapter 1: Methodological Considerations
C. Efficiency as a Methodology
international community will have to intervene, often at significant cost,70 in the internal affairs of states with poor domestic human rights standards.
In both the case of negative and positive externalities, we cannot determine their level and effect. Despite that, this dissertation utilises their assumed existence as a cornerstone of its analysis. This transfer of an analogy from the domestic context to the international context proceeds despite externalities on the domestic context, such as pollution, being more tangible than externalities stemming from the absence or existence of international human rights law. Nonetheless, framing poor human rights standards and rights violations around the concept of externalities enables us to more easily understand the justification for international law as a regulatory response to rights violations.
law may seem, at first instance, a peculiar application of an approach that is typically reserved for economic science. In that discipline, in which one of the central foci is that costs are kept to a minimum and that resources are put in the hands of those that value them the most, efficiency forms a central tenet and has a number of rather distinct meanings. Firstly, ‘productive efficiency’ relates to the aforementioned problem of putting resources to their best use, such that altering any of the combinations of inputs cannot increase productivity.73 Secondly, allocative efficiency measures whether society or an economy is producing only what is desired most by its constituents or customers. Thirdly, efficiency can also be understood to mean Pareto efficiency, whereby the premise is that the current allocation of goods is an allocation that cannot be improved upon. 74 In the case of this latter definition, individual preferences are assumed to determine Pareto efficiency. A situation is only Pareto efficient if the individuals to be affected by a change in the distribution of the resources enjoyed by those individuals are indifferent between the status quo and the proposed changed situation. Finally, an altered version of that model is Kaldor-Hicks efficiency, which asked whether, upon a change in distribution that was not Pareto efficient, those who gained from the change could compensate those who lost for their loss.75
When applying efficiency to legal matters, therefore, there are various avenues open to scholars. On the one hand, we might wish to structure laws so that we achieve efficiency in terms of resource allocation. For example, companies might be legally required to operate using renewable energy, on the basis that this is a social policy goal (allocative efficiency in terms of society wanting a cleaner environment). But if this limits company output then it is not productively
73 This is a difficult issue to measure and is often theoretical in many ways. For an overview of its unmeasureability, see MJ Farrell, ‘The Measurement of Productive Efficiency’ [1957] 120(3) Journal of the Royal Statistical Society: Series A (General) 253; Harold O Fried, CA Knox Lovell and Shelton S Schmidt (eds), The Measurement of Productive Efficiency: Techniques and Applications (1st edn, Oxford University Press 1993).
74 Bert N Adams, ‘Vilfredo Pareto’ in George Ritzer (ed), Encyclopaedia of Social Theory (1st edn, SAGE Publications 2005), 545-548.
75 In this way, the Kaldor-Hicks criterion is more accommodating of changes in distribution, as the conditions that must be met are lower. Consequently, the criterion has been subject to careful discussion in relation to its fairness and the moral aspects of its application; see Walter J Schultz, The Moral Conditions of Economic Efficiency (1st edn, Cambridge University Press 2008); Daniel M Hausman and Michael S McPherson, Economic Analysis, Moral Philosophy and Public Policy (2nd edn, Cambridge University Press 2006).
efficient. On the other hand, from a Pareto perspective, we could argue that a legal change should not be introduced if it is not Pareto improving.76 Ergo, the legislation would not have been introduced, as the companies would have been made worse off. Equally, if the company values producing using non-renewable energy more highly than the value placed by society on this social policy, then the legislation would reject Kaldor-Hicks efficiency as well. Applying Pareto efficiency to law has not been without it critics.77
In this dissertation, the question of efficiency is extremely contentious, as we are neither applying efficiency to domestic law, nor to international law generally, but to international human rights law in particular, which emphasises, as its core foundation, the normative concepts of fairness and equality.78 These concepts directly confront the approach of reallocating resources to the individuals that values them the most: the former highlight need whereas the latter highlights want. In addition, whereas the application of efficiency to domestic law might suggest, as the classic example does, that the factory owner might be allocated the right to pollute when balanced against the laundrette owner’s right to clean air,79 the application of efficiency to international law has consequences for international relations, domestic politics, and for the individual citizens that comprise the states of the world. If an international law were to be established that would allocate to larger states the exclusive right to fish on the basis that they would be able to take advantage of economies of scale, then this might affect the economies of smaller states, it might affect the economies of coastal states, it might institutionalise comparative advantage, and it might affect the distribution and sustainability of fish stocks. By focusing exclusively on efficiency as the criterion to be used when determining how to structure a particular law, we risk failing to take account of consequences similar to those
76 If Pareto efficiency relates to the question as to whether an allocation cannot be improved upon, the presence of a Pareto improvement is the measurement determining Pareto efficiency.
77 See, among others, EJ Mishan, ‘The Futility of Pareto-Efficient Distributions’ [1972] 62(5) The American Economic Review 971.
78 For an analysis of the normativity of these concepts in law and economics, see Klaus Mathias and Deborah Shannon (trs), Efficiency Instead of Justice? Searching for the Philosophical Foundation of the Economic Analysis of Law (1st edn, Springer 2009); for a more general assessment of this normativity, see Oscar Schachter, ‘Editorial Concept: Human Dignity as a Normative Concept’, [1983] 77(4) American Journal of International Law 848.
79 Ronald Coase, ‘The Problem of Social Cost’, [1960] 3 Journal of Law and Economics 1.
that might pertain in the fisheries example. Despite that, there is nothing that should preclude the application of efficiency to international law from a purely academic viewpoint. Doing so, though, requires recognition of the limits and dangers of such an application.
In addition, the efficiency criterion conflicts with traditional utilitarian justice, which assumes that the utility received by all individuals is equal irrespective of their identity or their preferences.80 For a law to be structured in a way that assumes that one person’s enjoyment of something might be objectively valued as being more important than another’s undermines Bentham’s view that pleasure is of an equal weight across all individuals.81 Despite that, though, it is difficult to argue with the contention that individuals value enjoyment of an activity (or something similar) differently. Wealthier individuals might be less likely to enjoy an additional dollar of income than poorer individuals, while wealthier states might be less likely to benefit from trade liberalisation than poorer states, for each unit of increased income that that liberalisation brings. If we accept the premise that utility exists on a scale,82 then the next step is to accept that efficiency might be a criterion for ordering laws.
In this dissertation, we discuss efficiency in terms striving for universal ratification, in relation to how treaty bodies are structured, and regarding the remedies and sanctions that can be applied to states if they are found to have breached their obligations. In this way, our analysis treads new ground in its attempt to analyse treaty formation and institutional structures. Pivotally, though, the conceptual and ethical issues of this approach are acknowledged.
80 We can trace this discussion back a significant period, but its best elaboration can be found in Nicholas Kaldor, ‘Welfare Propositions of Economics and Interpersonal Comparisons of Utility’
[1939] 49(195) The Economic Journal 549.
81 An overview of the influence of both Jeremy Bentham and JS Mill on economic science and the role of utility is provided in Jacob Viner, ‘Bentham and J.S. Mill: The Utilitarian Background’
[1949] 39(2) The American Economic Review 360.
82 The question as to whether we can measure utility on a scale relates to the distinction between cardinal and ordinal utility. This is discussed well in Bernard MS van Praag, ‘Ordinal and Cardinal Utility: An Integration of the Two Dimensions of the Welfare Concept’, [1991] 50(1) Journal of Econometrics 69.