The Shaping of Information Flow in Law and Life

Fred Schauer showed how the law takes a messy, probabilistic world and uses rules to draw bright lines through it: liable or not, knowing or ignorant, guilty or innocent.1 Such neat categorical boxes are a feature, not a bug, for the law. They serve two critical purposes: (1) they determine an outcome, and (2) they fulfill the law’s need for predictability and administrability. From an economic perspective, though, information comes in shades of gray, not black and white. Indeed, sometimes those grays include dots and waves and not merely tones, such as when potential states of the world are poorly defined. Beliefs update by degree, and uncertainties in the law are rarely resolved to one or zero before a decision must be made. Finally, information may be written in invisible ink, as when ignorance hits and individuals do not even recognize the existence of some states of the world.