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Legal realism is a school of legal philosophy that is generally associated with the culmination of the early 20th century attack on the orthodox claims of late 19th century classical legal thought in the United States—American legal realism. American Legal Realism is often remembered for its challenge to the classical legal claim that orthodox legal institutions provided an autonomous and self-executing system of legal discourse untainted by politics. Unlike classical legal thought, American Legal Realism worked vigorously to depict the institution of law without denying or distorting a picture of sharp moral, political, and social conflict. The most important legacy of American Legal Realism is its challenge to the classical legal claim that legal reasoning was separate and autonomous from moral and political discourse.
Although the American Legal Realist movement is conventionally thought to have been confined to the period between the two world wars, many of the ideas that figured prominently in the Realists’ teachings and writings were first developed by dissidents among the preceding generation of scholars.
Oliver Wendell Holmes, Jr. 
The most important of these forerunners was Oliver Wendell Holmes, Jr., whose work has had an especially powerful impact on American Legal Realist thought.
The Common Law 
Published in 1881, Holmes’s book The Common Law heavily influenced American Legal Realist thought, and some scholars have dubbed the book to be Holmes’s masterpiece. The book commences with Holmes’s famous aphorism: “The life of the law has not been logic; it has been experience.”  The Common Law is susceptible of many interpretations, and some Realists saw in it a denunciation of all efforts to represent law as a “science". Others read it as an assault on the Classical legal conception of law as a coherent system of fixed axioms from which particular rules and decisions could be deduced. Still others construed it as a call for empirical, behaviorist study of legal rules. The debate will undoubtedly continue, but one thing seems clear: Most Realists found the book in some way inspirational. Indeed, Holmes’s famous aphorism became the movement’s battle cry.
The Path of the Law 
Another of Holmes’s influential work was the greatest of all Holmes’s essays: The Path of the Law. Written originally as a speech in 1897, the main message of The Path of the Law is that there is no basis in reason for deciding which of two contradictory legal doctrines is correct. To elaborate this message, Holmes first turned to the distinction between law and morals: “The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law”. If law is prophecy, Holmes continues, we must reject the view of “text writers” who tell you that law “is something different from what is decided by the courts of Massachusetts or England, that it is a system of reason that is a deduction from principles of ethics or admitted axioms or what not, which may or may not coincide with the decisions”. Holmes next introduces his most important and influential argument, the “bad-man” theory of law: “if we take the view of our friend the bad man we shall find that he does not care two straws” about either the morality or the logic of the law. For the bad man, “legal duty” signifies only “a prophecy that if he does certain things he will be subjected to disagreeable consequences by way of imprisonment or compulsory payment”. The bad man concerns himself only with material consequences. The sharp distinction Holmes draws between law and morals had a powerful impact on the thought of most Legal Realists, although it too was construed in a variety of ways. Some thought it justified separating the scientific study of legal institutions from the distracting discourse of ethics. Others treated Holmes’s argument as a useful corrective to the confused understanding of law and morality engendered by the traditional American conception of natural rights, but denounced as superficial and misleading the positivistic conception of scientific method that their comrades were extracting from it.
The utilitarian or instrumental flavor of the The Path of Law also found favor with the realists. The purpose of the law, Holmes insisted, was the deterrence of undesirable social consequences: “I think that the judges themselves have failed adequately to recognize their duty of weighing considerations of social advantage”. Before the Civil War, this conception of adjudication as a form of social engineering had been widely shared by American judges, but in the late nineteenth century it had fallen out of favor. One of the aspirations of both Holmes and the realists was to revive it.
Several of the specific doctrinal arguments made in The Path of Law were recapitulated or elaborated in the more technical essays of the realists. For example, Holmes drew upon his bad man theory in developing what for the time was a radical understanding of the nature of contractual obligations. “The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it—and nothing else”. Only “the confusion between legal and moral” ideas had led others to the conclusion that it was immoral to breach a contract. An approach that focuses solely on the consequences of breach, Holmes conceded, “stinks in the nostrils of those who think it advantageous to get as much ethics into the law as they can”, but it is more accurate and useful, he argued, than an approach that concentrates on the moral obligations associated with promises. On a more detailed level, Holmes amplified his earlier criticisms of subjective theories of contractual duties (which grounded obligation in a “meeting of the minds” of putatively contracting parties), offering instead an objective theory (which acknowledged that judges do and should give meaning to the language employed by the parties “because of some belief as to the practice of the community or of a class, or because of some opinion as to policy”). This characterization provided an important staging ground for the realists’ assault on the classical ideal of the neutral and self-regulating market economy.
Holmes’s remarks on torts in The Path of the Law were even more innovative. Distancing himself from the position he had adopted earlier in The Common Law, Holmes contended that it is impossible to answer definitely the question whether a defendant who has injured someone but whose conduct was not blameworthy should be forced to pay damages to the victim. The choice between the negligence principle (defendants should be liable only if they were at fault) and the strict liability principle (defendants should be liable even if blameless), he now insisted, “is a concealed, half-conscious battle on the question of legislative policy, and if any one thinks that it can be settled deductively, or once for all, I only can say that I think he is theoretically wrong, and that I am certain that his conclusion will not be accepted in practice”. Among the policy questions upon which the choice turned was the degree to which the losses associated with the myriad injuries caused by modern industries (e.g., railroads, factories) should be borne by the public at large (through increased prices for the goods and services provided by those industries). “Loss spreading” arguments of this sort would figure prominently in the realists’ writings on torts.
The heart of the American Legal Realist movement was an effort to define and discredit classical legal thought and to offer in its place a more philosophically and politically enlightened jurisprudence. However, American Legal Realism expressed a set of sometimes self-contradictory tendencies rather than a clear body of tenets or a rigorous set of methodologies or propositions about legal theory. Consequently, the scope of the American Legal Realist movement has been difficult to define, and the most useful definition of American Legal Realism must be broad and generous.
American Legal Realism’s Legacy 
Critique of the market economy 
In the late 19th century, orthodox Classical legal thought embraced the idea that a self-executing, decentralized, competitive market economy would permit legal institutions to function as neutral, apolitical, and impartial arbiters over the just distribution of wealth. Given the unequal distribution of talent, energy, and luck, classical legal thought posited that a self-executing, decentralized, competitive market economy would inevitably result in organized inequality. Thus, legal institutions could function as neutral, apolitical, and impartial arbiters because, in a market economy, legal institutions only had to warrant an equal opportunity for participants to compete. As if by an “invisible hand”, classical legal thought presumed that unequal results were just because they reflected the unequal abilities that individuals brought to the competitive race, and any attempt to interfere with unequal results would ultimately subvert the legitimacy of legal institutions.
The “will theory” of contract law represented the legal paradigm of classical legal thought’s commitment to neutrality in what it believed to be a self-executing, decentralized, competitive market economy. Under the will theory, the basis for enforcing a contract was “a meeting of minds” or a convergence of wills between contracting parties. For example, if two parties contracted for the sale of one thousand bushels of Grade A wheat at below the prevailing market price, courts would not attempt to judge the fairness of the contact. Instead, courts presumed that, absent extreme hardship or unusual circumstances, each party had voluntarily agreed to perform their respective duties under the terms of the contract, and that the state merely served as the neutral enforcer of the parties’ pre-existing voluntary agreement. Generally, courts would not inquire into the substantive fairness of a contract because they presumed that a self-executing, decentralized, competitive market economy assured the just distribution of wealth through voluntary agreement among individuals.
In the early 20th century, as the spectacular increase in corporate concentration amplified the unequal distribution of wealth, American Legal Realists launched their attack on the legitimacy a self-executing, decentralized, competitive market economy.
Robert Lee Hale’s Coercion and Distribution in a Supposedly Non-Coercive State 
Following in the anti-naturalist economic legacy of Veblen, Ely, and Commons, Robert Lee Hale, a lawyer and economist from Columbia University, argued in "Coercion and Distribution in a Supposedly Non-Coercive State" that the market economy was in fact an organized form of coercion of people without property by the property owners. Hale’s basic goal was to attack the prevailing vision of the market economy as a system of free and voluntary exchange, and thereby to undermine the claim that the law should simply reflect the results arrived at in a neutral market.
Hale sought to break the bright-line distinction between voluntariness and coercion by portraying conduct between market participants as a reflection of power relations, rather than as some abstract voluntary “meeting of minds” or convergence of wills. Hale illustrated this point with two central images: the laborer who does not voluntarily choose to work, but rather is coerced into working for fear of starvation; and the factory owner whose “coercive power is weakened by the fact that both his customers and his laborers have the power to make matters more or less unpleasant for him—the customers through their law-given power to withhold access to their cash, the laborers through their actual power (neither created nor destroyed by the law) to withhold their services”. Hale recognized, however, that popular thought generally did not recognize conduct between market participants as “coercive", so he sought to show that conduct between market participants was not purely “voluntary”.
Hale characterized the difference between conduct, private or governmental, that popular recognition labels as “coercive” and conduct that popular recognition does not label with that term as a difference of degree rather than of kind. For example, Hale asserted that the decision to withhold – not to buy in the market or not to employ labor – was simply another form of coercion by the assertion of economic power. “[W]ere it once recognized that nearly all incomes are the result of private coercion, some with the help of the state, some without it, it would then be plain that to admit the coercive nature of the process would not be to condemn it”. Since all market transactions reflected the prior distribution of property and entitlements, all conduct between market participants inherently involved varying degrees of coercion. Hale realized that “the undoubtedly coercive character of the pressure exerted by the property-owner is disguised” by the conception of the market economy as a system of free and voluntary exchange. Therefore, Hale asserted that the market economy is merely an organized form of social coercion that could be judged only by its social consequences.
Hale’s most original insight was the view that the market economy was the actual creator of property and entitlements, rather than being a neutral institution that reflected pre-existing property rights. Once it was understood that there could be no such thing as a completely voluntary market, there could also be no completely neutral market because, one way or the other, there needed to be rules on how to regulate (or not regulate) coercion. For example, the legal rules governing the market determined whether news was property, or whether employers have the power to fire workers, or whether economic coercion was legitimate (e.g., competition) or illegitimate (e.g., theft, duress). Far from being neutral and natural, every market regime created property and entitlements whose value could not be independent of prior legal norms for regulating coercion. In other words, Hale sought to demonstrate that there were no pre-existing property rights prior to the legal rules that defined them.
Hale’s underlying premise was that property is a source of economic wealth only if some people are prevented from using it in ways that are permitted to other people. If courts, for instance, should prevent a man from breathing any air which had been breathed by another (within, say a reasonable statute of limitations), those individuals who breathed most vigorously and were quickest and wisest in selecting desirable locations in which to breathe (or made the most advantageous contracts with such individuals) would, by virtue of their property right in certain volumes of air, come to exercise and enjoy a peculiar economic advantage, which might, through various modes of economic exchange, be turned into other forms of economic advantage, e.g., the ownership of newspapers or fine clothing. Thus, courts would be creating economic wealth and property if they established legal rules that defined the exploitation of air. Furthermore, since any prospective change in the legal rules that reduces the future value of some recognized property right necessarily reduces the present value of that property right as well, Hale posited that the legal idea of property reflected an abstract circularity.
Perhaps the most notorious example of circular reasoning, and the most important specific influence on Hale’s views about property, is that involved in judicial determination of the fair rates in which public utilities were entitled to charge under the United States Constitution. In the "Rate Making Cases", courts purported to ascertain the present market value of the utility’s property, and then to fix a price to the consumer which assured the utility a fair rate of return upon that value. However, the courts’ decisions could not have been in fact based upon the present market value of the utility’s property because present market value is merely the present value of the expected rates. Thus, the present market value of a utility’s property was merely a function of the court’s decision rather than the recognition or discovery of some preexisting value or property right. Since it was the guarantee of a future income stream that determined the present market value of a utility’s property, the courts, in overseeing the reasonableness of rates, were actually creating property out of the materials of social fact, commercial custom, and popular moral faiths or prejudices.
The "Rate Making Cases" enabled Hale to see that there was no present market value independent of the expected rate of return, and no economic value independent of legal protection. The fact that courts did not protect a purported property right would make that purported property right valueless, and the fact that it was valueless would then be regarded as a reason for not protecting it.
Further explanation 
Legal realism operates on a premise that is adhered to, often unwittingly, by most laymen and many who have legal training: that "the law", whatever that may be, is concerned with and is intrinsically tied to the real-world outcomes of particular cases. Accepting this premise moves jurisprudence, or the study of law in the abstract, away from hypothetical predictions and closer to empirical reflections of fact.
Proponents of legal realism say it is not concerned with what the law should, or "ought to" be, but that legal realism simply seeks to describe what the law is. Proponents of legal formalism disagree, saying that "law" is what is commanded by a lawgiver, that judges are not lawgivers, and that what judges do, while it might belong to the field of law, is not "law" but legal practice.
Expanding influence 
Many developments in legal thought have drawn heavily from legal realism, including the writings of Herman Oliphant (1884-1939) and the development of the legal process school in the 1950s and 1960s, a theory that attempted to chart a middle way between the extremes of realism and formalism. Realism remains influential, and a wide spectrum of jurisprudential schools today have either taken its premises to greater extremes, such as critical legal studies (scholars such as Duncan Kennedy and Roberto Unger), feminist legal theory, and critical race theory, particularly at Harvard Law School, Columbia Law School and Yale Law School, or more moderately, such as law and economics (scholars such as Richard Posner at the University of Chicago and Richard Epstein at University of Chicago and New York University School of Law) and law and society (scholars such as Marc Galanter and Stewart Macaulay at the University of Wisconsin Law School).
Legal realism also influenced the recognition of political science and studies of judicial behavior therein as a specialized discipline within the social sciences.
Continuing relevance 
Legal realism emerged as an anti-formalist and empirically oriented response to and rejection of the legal formalism of Dean Christopher Columbus Langdell and the American Law Institute (ALI), as well as of the "mechanical jurisprudence" or "science of law" with which both became associated.
See also 
- Judicial activism
- New legal realism
- Philosophy of law
- Prediction theory of law
- Rule according to higher law
- Sociology of law
- Horwitz, Morton J. (1992). The Transformation of American Law, 1870–1960: The Crisis of Legal Orthodoxy (1 ed.). Oxford University Press. p. 193. ISBN 0-19-509259-7., p. 193
- Fuller, "American Legal Realism", 82 University of Pennsylvania Law Review. 429, 443 (1934).
- See also:Amar, Akhil Reed (January 1989). "Book Review. Law Story: Hart and Wechsler's The Federal Courts and the Federal System by Paul M. Bator et al.". Harvard Law Review 102 (3): 688, 693. Retrieved 5/10/2012. ("According to the legal realists, adjudication was not, and could never be, wholly mechanical and apolitical. Thus, judges unavoidably made law—at least interstitially").
- William W. Fisher III, Morton J. Horwitz, Thomas A. Reed, American Legal Realism, 3 (1st ed. 1993)
- Oliver Wendell Holmes, Jr., The Common Law, ed. Mark DeWolfe Howe, 5 (Boston: Little, Brown, 1963).
- Benjamin Cardozo, “Mr. Justice Holmes,” in Mr. Justice Holmes, 3.
- "Morris Cohen, Justice Holmes and the Nature of Law", Columbia Law Review 31, 353-356 (1931).
- Robert L. Hale, "Coercion and Distribution in a Supposedly Non-Coercive State" 38 Pol. Sci. Q. 470 (1923)
- Robert L. Hale, Property and Sovereignty, Law and the Social Order, 41 (1933)
- Cohen, Felix S. (June 1935). "Transcendental Nonsense and the Functional Approach". Columbia Law Review 35 (6).
- Brian Leiter, American Legal Realism, in The Blackwell Guide to Philosophy of Law and Legal Theory (W. Edmundson & M. Golding, eds., 2003)
- Michael Steven Green, Legal Realism as Theory of Law, 46 William & Mary Law Review 1915 (2005)
- Geoffrey MacCormack, Scandinavian Realism 11 Juridical Review (1970)
- H.Erlanger et al. Is It Time for a New Legal Realism?, Wisconsin Law Review 2005(2): 335-363
- Mathieu Deflem. 2008. Sociology of Law: Visions of a Scholarly Tradition. Cambridge; New York: Cambridge University Press.
- Victoria Nourse & Gregory Shaffer, "Varieties of New Legal Realism: Can a New World Order Prompt a New Legal Theory?, 95 Cornell Law Review (Forthcoming 2009), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1405437.