Social Market Economy Is Not an Oxymoron

Abstract

“Continental law is irrational. American law is irresponsible.” With this phrase, Christoph Engel has described the prejudices on both sides of the Atlantic regarding legal science. Indeed, both legal systems seem to have noticed a need to correct these failures. In European legal science, arguments of efficiency based on the assumption of rational behaviour increasingly gain momentum. In the USA regulators increasingly take into account market failures based on information from “the people” as they “speak” through behavioural science research. Some European scholars have taken the development in the USA as an opportunity to also call for more implementation of behavioural sciences into European regulation. While this is a valid concern, I will argue that they nonetheless often seek to cure a disease that is not as pertinent in EU internal market law as it is in US economic law. They transfer solutions from US regulation to EU internal market law without asking whether European and US American problems are similar and whether the cure is the same. They thereby neglect the fact that both legal systems are embedded in different legal cultures or domains, as they have developed differently in course of history and seek to remedy also different problems by regulation. I will show that quite a number of problems that the USA corrects by using behavioural research have not (yet) materialized in EU internal market law, but others have. Due to its intrinsic need to establish an internal market even against the nation state’s will, EU law has always had to rely on the responsiveness of its peoples in order to make the establishment of the internal market a success. As to this need, purely efficiency-driven macro-economic regulation without a social bottom-up backup by the peoples of Europe has always failed. EU law hence witnesses a “legitimacy market failure”, which is the outcome of the specific setting of the multi-level character of EU law. This legitimacy market failure, I argue, needs to be cured with behavioural research. It is this behavioural approach that provides the EU with the means it needs to secure legitimacy in its regulation and even expand its regulative capacity against the Member States’ to an extent where it could even regulate in areas where no norm explicitly provides it with any competence.

Keywords: legitimacy, market failure, internal market, regulation, test achats