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The economic approach to bankruptcy envisions bankruptcy law as a set of rules approximating the contractual terms to which, at the time credit is extended, a creditor and debtor would agree should govern in the event of the debtor's insolvency. Some traditional bankruptcy scholars criticize the economic approach for what they see as its failure to advance goals and values which they deem necessary for social justice, and contend that viewing bankruptcy law as a set of contractual terms ignores the impact of insolvency upon various groups affected by a firm which experiences financial difficulties.

In this article, Professor Robert K. Rasmussen challenges those critics, arguing that the economic approach to bankruptcy law is fully compatible with social justice as defined by philosopher John Rawls. Rawls's theory of justice requires that those in the original position must adequately advance the needs of society's …