Login with Facebook
Close

Introduction to Economics of Law

Judge Richard A. Posner, in his work "Essays In Law And Economics (1989) says "To me, the most interesting aspect of the law and economics movements have ben its aspiration to place the study of law on a scientific basis, which coherent theory, precise hypotheses deduced from the theory and empirical tests of the hypotheses. Law is a social institution of enormous antiquity and importance, and I can see no reason why it should not be amenable to scientific study. Economics is the most advanced of the social sciences, and the legal system contains many parallels to and overlaps with the systems that economists have studies successfully."

It is quite easy to agree with this statement, especially considering how wide and extensive economics is. There many who don't understand the scientific aspect of economics yet. They look at it only from the perspective of businesses and the growth of markets. But things are changing rapidly today as economic studies take a different road. As a student of economics, law, and economics are some of the main subjects, you will be encountering. Since economics is a major determinant for the development of markets and social interactions, legal issues are bound to exist. This is a good reason for studying law, and economics is a serious aspect of economic education.

During the Great Recession that resulted from the 2008 financial market failure, many governments rushed to create and implement different fiscal and monetary policies in an attempt to save their economies. For instance, National Banks reduced the rates of lending and injecting money into the economy. In such situations, policymakers have to come up fast to create these policies. Such procedures show the importance of policy in economics. When public policy is implemented, it affects the whole economy, making it crucial to look at the structure that makes such laws.

History and significance

For long, law confined the use of economics to antitrust law, regulated industry, tax, and a few special topics like determining monetary damages, until recently. And even though these topics, not much was covered. Experts only sort to answer simple questions like 'how many shares of the market does the defendant own?' 'what is will be the effects on price control on the automobile, in terms of availability?' 'Who is the true bearer of the burden in capital gains tax?' and 'how much future income children lose due to the mother's death?"

From the early 1990s, however, more doors to the study of this subject opened up. There was a sudden change from this limited interaction resulting from the expansion of economic analysis of law, spreading into more traditional areas of the law, like property, contracts, torts, criminal law, procedure, and constitutional law. With the new use of economics in law-related process, it becomes easy to resolving issues, whether private ownership of the electromagnetic spectrum would encourage efficient application, or the possible remedy for breach of contract and its possibility to cause efficient reliance on promises, or what amount of precaution business should take when law holds them strictly liable for injuries to users of their products. It is even easier to answer more questions, like "Will harsher punishment stop violent crimes?"

As if that is not enough, economists have altered the nature of legal scholarships, the common understanding of legal in rules and institutions, as well as the practice of law. When the law is considered from the perspective of law, there, there are now many things that emerge. And experts are finding better ways to explain certain situations that would have been very hard to understand without economic approaches. And there is a lot of proof to this effect. For instance, by 1990, at least one economics was on the top leadership bench on each of the best law schools in North America, and some in Western Europe. Many prominent universities are teaching joint degree programs like Ph.D. in economics and J.D in law. There is even more as law reviews keep publishing articles based on the economic approach, and there are large volumes of articles dedicated to this field. A recent study reported that articles using the economic framework and model are cited in the major American law journals, more than articles using different approaches. In America, many law schools' courses America are now taking courses that include at least a brief summary of the law's economic analysis under study. And 1990, there are many professional organizations in law across the continents, all of them serving the interest of economies and law. Between 1991 and '92, the field was highly recognized when there was consecutive Nobel Peace Prize winner in Economics, Ronald Coase and Gary Becker, where recognized for the efforts in finding the economic analysis of law. And this list does not end without mentioning Professor Bruce Ackerman of the Yale Law Scholl, who defined in economics in law as the most crucial development in legal scholarships of the modern times.

It is not only in universities where the impact of this field has been felt but in the practice of law and the implementation of public law as well. Economics has been understood to provide the intellectual framework for deregulation movement in the 70s, which led to crucial changes in America, is the dissolution of regulatory bodies that came up with prices and routes for air, road and rail transport. Economics was also instrumental as the intellectual force behind the antitrust law. Another policy was used by the Congress in 1984, in which criminal sentencing was reformed as the courts applied findings of law and economics in finding the best solutions. There are many other areas that have been particularly set on the application of economics in law. The prominent law-and-economics scholars have gained high positions as federal judges and apply economic analysis in their opinions.

No one can deny today that economics is indeed the biggest field both in academics and real-life application that is helping shape humanity. On the other, the law ensures order in society, keeping every human being safe and giving them a chance to look at life from a better perspective. Economics is the backbone of society since it is the economic activities that show how much it has grown and developed. The legal system takes care of everything concerned with disagreements among members of the same society. When these two subjects are combined; therefore, one can only expect the best outcomes. Law has been for long an important aspect of economics, and now economics has found its rightful place with law, especially in modern society.

Economic analysis of law

Economic law is also called the economic analysis of law. Some experts have wondered why this field has succeeded in the way that no one would ever imagine, especially on the U.S. We can compare the significance of this subject to the rabbit Australia, whereby, economist discovered an unexplored niche in the 'intellectual ecology' of the law and used every energy they had to fill it. Explaining this area requires some understanding of some kinds of law, or defining law - An obligation backed by state sanction.

When lawmakers are analyzing any regulation, they often seek to find out how the sanction affects behavior. For instance, if the damages are imposed on the producer of a defective product, what happens to the same product's safety and price in later days? Or, what is the chance that the crime rate will reduce is third-time offenders are jailed without trial? Answers to such questions have always come from consulting institutions and looking at the available facts.

But economics offers something better. It came up with a scientific theory to predict the impact of legal sanctions on behavior. Economics always seeks to understand human behaviors, studying how consumers and firms would react to specific situations. And it is this psychological aspect that makes economics a crucial pillar in law. Consider that we always have to make decisions and respond to situations. When prices of commodities go high, people respond by consuming less on more expensive goods. I can be presumed as well that individuals respond to more severe legal sanctions by doing less of the activities that lead to these sanctions. Economics has used more precise mathematical theories, like the price theory and the game theory, and empirically connect approaches like statistics and econometrics in the analysis of the effect of implicit prices attached to behavior through law.

Look at this example. That supposes the manufacturers already know there are chances their product may sometimes harm the consumer. What extent of safety will the product have? To answer this question, they will have to consider profit maximization, in which case they will base their arguments on three costs. They will first consider how much it will cost to improve product safety, which depends on its design and manufacture. And then, they will consider a manufacturer's legal liability for the extent of the injuries. Last, they will look at the degree to which the injuries discourage consumption. A firm seeking profit maximization will consider improving the product's safety until the cost of adding safety balance with the benefit from reduced liability and higher demand for the product.

Economical offers a behavioral theory to predict people's responses to the law. This is model ha surpass intuition. It is important to note that people's response is always important for making, revising, repealing, and interpreting laws. It seeks to explain why people make certain decisions, helping involve parties to find more suitable approaches.

Economic analysis of law is different from other forms of legal analysis because: One, the theoretical study dwells solely on efficiency. In other words, a legal scenario is only efficient if a right is given to the party willing to pay more it. Legal efficiency use to distinct theories, both of which have been supported by law and economic scholars. The positive theory of legal says that law is efficient, whereas the normative theory states that law should be efficient. Most scholars find both models very useful, and they quote in their arguments.

According to law and economics, markets are more efficient than courts. The positive theory continues that whenever possible; the legal system will force transactions into the market. And where it is not possible in the system tries of 'mimic a market,' and guess the parties would have been happy if markets were feasible. Law and economics emphases on incentives and how people respond to these incentives. For instance, the purpose of paying for damages in an accident (tort) is no compensation for the injured parties, but to give potential injurers more careful not to cause the accident. Where the penalty for bad action increases, people will get less involved in that action.

The three functions that private legal systems must provide are all related to property rights. The first function is that the system needs to clearly define property rights, which is the property law's task itself. The second aspect is that the system must allow the transfer of property rights, the contract law's function. And finally, the system has the mandate to protect property rights, played by tort law and criminal law. Economics and law together seek to discover the understanding of major issues related to these fields. Many scholars have also applied economics tools, like the game theory, to answer purely legal questions, like the litigation strategies of parties.

Conclusion

The modern study of law and economics dates back to the 1960s, starting with the publication of "The Problem of Social Cost," by Ronald Coase. Other scholars like Gordon Tulloch and Friedrich Hayek followed with more expansive ideas. But they all had one goal of bringing more light to the application of economic methods in law. Today, the discipline is already well established, features eight associations, including in American, Canadian, European law, and economics associations. There is a wide range of journals and other literature linked to the study law economics. Many articles also appear every now and then in major economic journals. The bottom line isEconomics of Law, this is a broad subject of study that stands alone.

Author: James Hamilton


Need a custom
essay?

We will write it for you.
Order now

Free Essay Examples

Free essays:

All you need to know about Neuroendocrinology
All you need to know about Big data management
All you need to know about digital special effects
All you need to know Technical Writing?
Basics the Game Theory in Cryptoeconomics
Business innovation ideas for making money
Biosensors for cancer diagnosis
Business Analysis: Pricing strategies and Demand Curve
Cognitive Computing- How does Cognitive Computing work?
Consciousness: characteristics and peculiarities
Conservation Economics
Cybersecurity in business: challenges, risks, and practices
Demographic trends and how they affect Economic Growth
Dance as an art form and entertainment
Discrimination Economics
Determinants of Wages
Everything you need to know about short-term memory
Economic and Policy Impacts of Demographics
Ethics: an essay on the understanding of evil
Emotions: what are they? Theories explained
Factors of Demographic Data Collection
Factors Affecting Purchasing Behavior
Financial Statement Analysis
Factors Influencing Interest and Exchange Rates
Government's Intervention in The Labor Market
Guide on the Pathways of the nervous system
Game theory in microeconomics
Globalization: definition, causes, social impact and risks
How Relativism Promotes Pluralism and Tolerance
How to use the audience’s feedback to write a news report
History of silent cinema
How news report can be strengthened through multimedia
Introduction to Population Problems
Imperfect Information and Asymmetric Information
Imperfect Information in Insurance
Introduction to Labor Markets
Journalism: What is News?
Journalism: Broadcast media and Television Presenters
Journalism: Sources of News
Journalism and Law
Key Determinants of National Income
Key Factors That Affect Pricing Decisions
Kinetic models in biology and Related fields
Know about the different forms of traditional African dances
Latest technology trends
Latest dance trends
Magnetoencephalography (MEG)
Microeconomic Analysis to the Demand for Labor
Neuromuscular disorders
National Economies, Fluctuation, and Responses to Fluctuations
Neurotransmitters: what they are and different types
Nanomedicines to target tumors
Objections to utilitarianism
Organizational motivation and its effects
Overcoming Hiring Challenges for Nonprofit Organization
Population Demographics
Recurrent neural networks (RNN) for speech detection
Russian School of Mathematics
Research and Development
Risk Sharing in Insurance and Asset Markets
Stochastic optimization methods in deep learning?
Structure of the nervous system
Structure of a Corporation
Schizoaffective disorder: how to live better with it
The climate change denial
The techniques of basic cinematography
The Endosymbiotic Theory
The Role of Internal Audit in Corporate Risk Management
Unions
Unemployment
Utilitarianism Vs. Kantianism
Understanding Auctions and Auction Theory: Part 2
Various theoretical perspectives of sociology
Virtual reality, what it is and how it works
What are the linear models in machine learning?
What is Convolutional Neural Network
4 Facts about Origin of Mathematics!
5 techniques to create an animation
10 emerging technologies according to World Economic Forum
10 strategies to maximize corporate profits
3d Model Of Building
6 Medical Technologies that revolutionized the healthcare in 2020
All you need to know about the ACA Code of ethics
Architecture and Democracy: An Introduction
Architecture and Democracy: Democratic Values
Architecture and Democracy: Democratic Procedures
All You Need to Know About a Synthesis Essay
An essential guide to understanding Film Theory
Application of Artificial Intelligence in Cyber Security
Applications of electrical engineering
Augmented reality: what it is, how it works, examples
Advantages And Disadvantages Of Social Networking
All you need to know about Cryptography
Applications of astrophysical science
All you need to know about architecture engineering
Applications of geological engineering
Artificial intelligence and medicine: an increasingly close relationship
An insight into Computational Biology
ACA code of conduct
A Rose for Emily
Applications of Mathematics in daily life
Architecture mistakes to avoid
All you need to know about Toxicology
All you need to know about Holistic Medicine
All you need to know about linguistics
An introduction to Linguistics and its subfields
All you need to know about Anxiety disorder
All you need to know about Drones
A Brief Insight into Political Science
Assumptions related to feminism
All you need to know about Byzantine emperors
All you need to know about labour economics
An insight into xenobots -the first-ever robots
An ultimate guide about Biomaterials
A Comprehensive Introduction to the Mona Lisa
Analysis methods of Transport through biological membranes
An ultimate guide about biochemical reactions
Analysis of brain signals
Artificial Gene Synthesis
Application to synthetic biology of CAD methods
All you need to know about metabolic pathways
Applications of BIOMEMS
All you need to know about the epidemiology
Asian vs. western leadership styles
All you need to know about Smart prosthesis
Analysis of Economy: Output of Goods and Services (GNP), and GDP on Economic success
A Guide to Pricing Strategies
An Overview Of Economic Studies
Analysis of Fiscal and Monetary Policies
Analysis of Business Cycles
Analysis of Consumption and Investment
A Look into Regression Analysis
Analysis of Household's Consumption and Savings Behavior
All you need to know about Capital Budgeting
All you need to know about risk management
Art looted in wartime.
Appropriate use of Data in Economics
All you need to know about reaction kinetics?
A historical overview of Financial Crises
All you need to know about management discipline?
An insight into the error-correction models
All you need to know about Data visualization
All you need to know about Work-family balance
All you need to know Technical Writing?
All you need to know about digital special effects
All you need to know about Big data management
All you need to know about Neuroendocrinology
How to Write a Personal Essay
Housing Needs in America
How to Write a Description Essay
How to Create an Excellent Scholarship Essay?
How to write a cause and effect essay
How to Hire the Best Essay Writing Service Provider?
How to Write a College Application Essay?
How to get the most out of your English lectures
How to write Expository Essay
How to succeed in your psychology class?
How to Write an Academic Essay in the Shortest Time?
History of Journalism
How Different Sectors are Using Artificial intelligence (AI)
How to write an informative essay
How to deliver persuasive essays?
How to Give a Convincing Presentation
How to write an essay on leadership?
Historical Art Still Around Today
Humanoid robot: what it is, how it works and price
History of Chemistry
Healthcare Advanced Computer Power: Robotics, Medical Imaging, and More
Healthcare AI: Game Changers for Medical Decision-Making and Remote Patient Monitoring
How to understand different types of English
How to Cope with Chronic Pain
How African American choreographers and dancers have influenced American dance
How mobile robot can do in logistics or in production
How To Become a Successful Entrepreneur
History of the Philosophy of Feminism
How is the climate changing?
How to Track Your Content Marketing ROI
How to Gun control In the USA?
Historical and contemporary role of labour in the modern world
How breast cancers are classified?
How the cells of our body communicate?
How the Lymphatic System Works?
How Digestive System Works
How to complete your capstone projects effectively?
How to write a research project
Healthcare technologies that help patients with better self-management
How to choose the topic of the senior capstone project
How to make your business survive at economic crisis
How can immigrants blend in the American society?
How does the economics of war affect society?
Hate speech on social media.
How to Build an Economic Model
How to start a healthcare startup?
How can financial illiteracy harm you?
How cancer is developed - Cancer biology
How to define the Enterprise Value
How to conduct economic research?
How women can manage sexual harassment
How to use quotes in your news reports?
How news report can be strengthened through multimedia
History of silent cinema
How to use the audience’s feedback to write a news report
How Relativism Promotes Pluralism and Tolerance
Introduction to Urban Studies
Importance of dance in education
InMoov: how to build an open source humanoid robot
Importance of KYC verification to making the Blockchain secure
Importance of Rhythm
Importance of dance student evaluation
I/O control methods -types and explanations
Identity theft: what to do?
Introduction to Utilitarianism
Importance of 3d Modelling in Architecture
Importance of online journalism
Image processing in medical diagnosis
Introduction to USA Politics
Introduction to Comparative Politics
International Relations as a Major in Political Science
Importance of modern trade policy
Introduction to Journalism
Introduction to Writing a TV Script
Introduction of Microfabrication techniques
Introduction to Microeconomics
Interaction of Consumer and Firm Choices in Markets
Importance of corporate sustainability
Issues in International Monetary Macroeconomics
Introduction to Statistics and Data for Economics
Introduction to Data and Probability for Economics
Introduction to the Game Theory
Introduction to Econometrics
Introduction to Economic Information
Introduction to Market Equilibrium
Introduction to Economic Models and Application
Introduction to Empirical Research
Introduction to Econometric Data
Importance of Critical Thinking, Principles, and Goals
Introduction to Identification and Causal inferences
Introduction to Econometric Application
Intermediaries and Government in Financial Crisis
Importance and seven principles of quality management
Illiteracy in the USA
Introduction to Economics of Law
Introduction to Coase Theorem
Introduction to Social Choice and Incarceration
Intellectual Property and Product Liability
Investment in Human Capital
Introduction to Labor Markets
Imperfect Information in Insurance
Imperfect Information and Asymmetric Information
Introduction to Population Problems
The Looming Energy Crisis in America
Top benefits of performance-based engineering
The More Languages You Know, The More Times You Are a Man
Things to consider while writing an Argumentative Essay
Top Ways to Improve Your Academic Writing Skills
Tips to Excel in Creative Writing
The origins of films in the early 19th century
Top career options in Architecture
The Elevator Pitch
Top finance trends 2020
The basic Structure and functionality of robots
The Way to Success
The election system of the President in the United States of America
Two-party System in United States of America
Top trends in urban design
The history and theory of African American filmmaking
Top benefits of creative writing
Tinnitus Guide: Common Symptoms and Treatment Options
The language of dance
The digital image processing management
Top famous politicians of the World
Top methods of political science!
The history of the feminist movement
The blood flow in cardiovascular system - Biofluid Mechanics
The best of Leonardo Da Vinci
The Structure and Function of Macromolecules
The structure of cell: a research on the bricks of the human body!
Tissue and organ construction: Adhesion and recognition between cells
The kinetics of the transformation processes
The Modeling of Biological Systems
Tips for writing a great thesis statement
The Defense mechanisms against infections
The impact of the technological innovations in medicine
Top journalism trends to know about
The relation between mass media & politics
Theranostics: Diagnosis and Care through Nanoparticles
The practical Applications of X-rays
The applications of Ultrasound in medicine
Transfer mechanisms of genetic information in Bacteria
The regulation of cellular metabolism in the diagnosis
The Principles of MRI Contrast agents
The technical basis of optical coherence imaging
The New Media: Emerging Trends
The Structure of Interest Rates and the Yield Curve
Technological perspectives and reflections of neural engineering
Types of bioreactors and their applications
The Role of Government Policy in Improving Economic Outcomes
Types of corporate responsibility
The Role of IMF in International Monetary Macroeconomics
Tools for investment decision making
The concept of Organizational Culture and its applications
The Conduct of Monetary and Fiscal Policy
The Basics of Financial Accelerator Models
Tips for labeling medical devices- Medical Entrepreneurship
The different medical imaging techniques
The Economics of Uncertainty – Introduction
Theories of Public Policy
The Game Theory in Social Media
The political theory of Thomas Hobbes
The Use of Law on Economics and Vice Versa
The Role of Internal Audit in Corporate Risk Management
The Endosymbiotic Theory
The techniques of basic cinematography
The climate change denial
What is a Definition Essay?
What are diagnostic essays?
What is the relation between art structural engineering?
What is a Narrative Essay
What are robotics and intelligence systems?
What are the benefits of studying health sciences?
What is artificial intelligence and why it matters?
What is comparative Literature?
Why study neuroscience
What is Wi-Fi and how does it works
What is French history famous for?
What are Humanistic Studies?
What is covered in Biophysics?
What is modern journalism?
What is Virtualization? Benefits & Applications
What are modern public relations?
What is plasma physics?
What is teacher preparation?
What is rapid prototyping for 3D printing?
What is contemporary European Politics?
Why should you learn American Ballet?
What is engineering physics?
What is the purpose of African American Literature?
Ways to learn the Rhythm
What is digital art used for?
What are Enzymes and how do they work
Who is the father of political science?
Why Study Political Science - Job?
What is the Philosophy of Feminism?
What is a quantum computer?
Ways B2B Startups Streamline Their Conversion Strategies
Why do biomedical signals need processing?
What are the long term effects of climate change?
Why study labour relations
What is Holoprosencephaly?
What is antisocial disorder?
What are the important principles of evolution?
What is the cytoplasm and its function?
What is biopolymers?
What Makes a Good Leader
Women empowerment in modern generation
What is the history of political thought?
What is Gene recombination
What is synthetic biology
What is business cost analysis?
What is Inflation
What are the consequences of unemployment?
What is lithotripsy and its types?
What is transition elastography?
What is the purpose of deep brain stimulation?
What is a Brain-Computer Interface (BCI)
What is neuroethics?
What is Market and Supply and Demand
What is optogenetics?
What are the techniques to record brain activity?
What happens if the interest rate increases?
What is immunotherapy?
What is the economic role of the financial market?
What are the factors behind illegal immigration?
What is the lymphocyte activation?
What is financial market and its types?
What is the structure of financial markets?
What are the methods of measuring business performance?
What is the Credit market?
What is business ethics and code of ethics
What are the Causes of financial instability?
What is MBA with Concentrations
What is regenerative medicine?
What is Population ecology?
What is Microfinance: evolution, and practices?
What is biotechnology and its applications?
What are Workplace diversity and its benefits?
What is the difference between a leader and a manager?
What Is Branding and best branding Business strategies?
Why are microelectronics important?
What are biologic drugs.
What is the Foreign Exchange market?
What is the role of scientific research in times of crisis?
What are the risks of international trade?
What is financial management?
What is gene therapy?
What is education economics?
What is regression analysis, and why should you use it?
What Is Technology Marketing And How Should It Work?
What is Management Accounting
What are the methods of valuation of companies?
What is Immune System and Immunotherapy?
What is big data analytics?
What is the 7 layers of OSI model?
What is Neuroplasticity?
What are Sculpture art and its types?
What are the different genres of films?
What is Transcranial magnetic stimulation (TMS)?
What is TES-Transcranial electrical stimulation?
What is Relativism?
What is Vaccine skepticism, and what to do about it?
What happens in the brain when learning?
What is the deep neural network?
What is Convolutional Neural Network
What are the linear models in machine learning?