Login with Facebook

The Use of Law on Economics and Vice Versa

 We live in a society where law and order must be observed. And this extends all the way into economic applications. Economic analysis of law, or simply law and economics, is one of the biggest economics and law subjects. It has become a major and very important field, especially for law students. The movement concerned with law and economics stands for the economic theory and methods involved in the law's proper practice. It confirms the economic reasoning, which offers the best possibility for justification and consistency of legal practice. There may be no other dominant theory of jurisprudence, that that involves law and economics.

In general, the law is best seen as a social tool that encourages efficiency, which can very well guide legal practice. Human beings are rational decision makes, and this is best explained through different economic theories, like the game theory and the consumer theory, among others. It is generally considered how legislation should be used to improve its practices, stating the economic analysis and efficiency can be used as crucial tools in offering legal guidance. In the same manner, it follows a though where legislation can be used to improve market conditions in return.

In other words, the law has always found a way to influence economics as economics has done to law. Law and economics provided a framework with which to model and affect the outcome. And the common objectives for unifying disparate areas of legal activities. Bringing together legal theory and economic t reasoning has also created a new approach to defining behavioral economics. It helps to understand how rationality affects people’s behavior in legal situations. The public choice theory seeks to understand how people react to different incentives and how they should affect legislation. Another area that involves legal processes and economics is the game theory, which can be used to predict an individual's possible decision. Besides these, understanding strategic action in the legal context is key to finding important legal field answers.

In this topic, we seek to expound on the relation between law and economics, explaining the importance of studying the subject at different levels. Markets need to understand the law that relates people to businesses and firms to firms. Most economic theories are based on the fact that humans are social beings, and every decision they make affects others.

The Autonomous Nature of Law

Many jurisprudence thoughts seek to uncover the essential or definitive aspects of law as an industry. Two of these theories, the Legal Positivism and Dworkin’s Law as Integrity, are the most applied at all levels. These two may differ in their definition of law and legal reasoning. There are several central assumptions they agree on, mostly in establishing the conclusions that two philosophical investigations depend on the same aim and achieve similar goals. For this reason, it becomes important to acknowledge some of the assumptions that hold these instances together.

The theories agree on the conceptual nature of jurisprudence. They both work on the basis of the philosophical theory of law in determining the core aspects of the right legal practice in fulfilling the work of philosophical jurisprudence. In most cases, the philosophical discussion of law follows assumptions that these characterizations are the jurisprudence's main aims. Techniques for discovering these issues determine the importance of studying law. Another common assumption is that the best way to understand legal practice is to know the necessary and sufficient qualities that create some rule or statement into law.

Theorists in the law and economics field have approached the study of law from a different angle than this, instead of attempting to identify the conceptual aspect of the law, players in this industry advocate for an investigation of legal practices through economic analysis. They then conclude that the best definition of legal practice is in its purported function as a social tool aimed at promoting economic efficiency. This is something it has in common with other social practices.

Law for Economic Efficiency

Law can be used as a tool to encourage economic efficiency. The practitioner of law and economics considers law as a social tool, forgetting the unique and defining features of the law. Economists majorly assume that human beings are rational decision-makers, who base their decisions on what satisfies them the most, and, respond to incentives. In rational maximization of personal satisfaction, the decision-maker adjusts a means to an end in the most efficient way possible. They weight their actions based on what will make them happier. One of the biggest descriptive claims concerning law and economics is in its tools for encouraging economically efficient social relationships. But this is not a claim that can be easily understood without properly laying the foundation.

One essential tool for understanding law and economics is a set of fundamental concepts. The most pivotal assumption in economics is the rationality of human beings, which we have seen above. There is more net value of resources where more efficient allocation is involved. Efficiency in allocating resources is differentiated from equity, which as more concerned with justice in the proper distribution of wealth. And since people value some goods higher or lower than others, economic efficiency can be achieved through the voluntary transfer of properties. When decisions are made involving two people, one person ends up with more benefits than the other. Some economists have extended into the arguments that in contractual exchange is morally optimal because it fits within both Kantian and utilitarian theories of morality. They argue that a contract is seen as a good representation of the relationships between free and rational agents. Economists use different approaches and terms to describe the possible outcome of economic exchanges.

Law can be used to encourage economic efficiency in different ways. According to law and economics, there are different ways in which the institution can be used to encourage efficient transactions. One of the best ways this can work in helping to avoid situations that leads to market failures. Consider the 2008-2009 Great Recession that started with the failure of financial markets. It seemed many financial companies did not consider some of the risks that come with lending. Since the housing industry was booking, and properties were selling high, lenders were more flexible in giving out their money. And the prices of the prices, most of which were used as collateral, dropped and could not be used to recover invested money. Therefore, it was necessary for governments to come up with different methods of ensuring the economy is shielded from complete failure. Apart from this, the existence of monopolies can also be seen as market failures, where one party is able to extract more profit from a product than a healthy market would advocate for.

Law can use to ensure that such situations never occur. And when they happen, policy-makers sit down to come up with different policies of making what they do count. They ensure compliance with contract terms, where courts can give participants in contract confidence that the other party will hold their end of the bargain. Some types of market failures are less obvious, though, and require a subtler approach. One of the main issues with the market process is the presence of externalities – costs not reflected in the product's price, and hence the market price will not truly reflect the reals. Considering Pigou suggest that legal means should be followed to impose a marginal tax on the offending party. But the economist Coase, argue against such an approach, stating that it is too global, even though warranted. Coase’s argument continues to quote market transaction ta are costless, and where people do not follow strategic action, stating there is no relevance in the right assignments since the results are already predetermined as economically efficient. The Coase Theorem state states where transaction costs are not applicable; the assignment of entitlement will not be relevant to the goal of allocative efficiency. If this case is followed, there will be no need for the law to internalize the costs because consumers will bargain for the best deals possible. Where transaction cost is high in the ideal markets, it will not matter how property rights are assigned. Based on these arguments, we can conclude that law can be used to encourage economic efficiency.

Law in explaining the nature of economics

Some scholars have always sought to discover how low can be used to define the economy's real nature. It may not come as big surprise the law encourages efficient exchanges, but then, claiming that the institution of law is best explained in economic terms is something else. Viewing all law as based on market principals is kind of strange. In the economic analysis of law, desperate areas are seen as a contract, tort, and criminal laws based economic goals. In many cases, courts have applied and used economic theories to explain why people behave the way they do and to come up with the best punishment. Most of these laws are majorly applied in the private sector, as Richard Posner agrees. He says that a tort case involving private harm can be contractual, where the two parties involved agreed to cause the accident voluntarily. Another case could be that the quantity of punishment incentivizes criminals; it exceeds the gain offered by the act of crime they committed. Over the years, scholars have tried to extend the tools of economic analysis into areas that would generally seem economical in nature. Economic analysis has widely applied the rules of evidence and legal ethics, which can now be changed through economic analysis. Despite this, it is also easy to argue that an economic analysis of law fails because it does not do much justice to daily legal conceptions, and that is may not well account for the internal point of view, which is crucial to an understanding of the law. Nevertheless, law and economic and be, or not be, an accurate description of the law in society.

Developments in Law and Economics

There is another approach that handles the economic analysis of law is the one that has spawned a number of ideas that seem to further explain the legal institution. Three of the most important of these tools are as discussed below:

Behavioral Economics of law

Experts in the fields of law and economics attempt to examine human limits in means-end rationality. Behavioral economics offers many varying outcomes, one of them being the economics is the idea of bounded rationality – information is not processed following the perfect model of means-end rationality, but is distorted because of the limits of our cognitive ability. This effect states, therefore, that owning an object creates an irrational evaluation of it. There are overwhelming events that may induce one to make specific decisions. These are the same ideas followed when discovering issues within law and economics.

The game theory

The theory adds strategic action to economic modeling. People make decisions and judgments based on their environment's competitive nature, which influences how they react to incentives. Dealing with strategic actions strengthens the economic analysis of law to great extends. The game theory is used to predict a move that one person is like to make under certain circumstances. For instance, a buyer may act not interested in buying a product so that the seller reduces the price for them. It is a good bargaining strategy that works most of the time. Court these strategies to argue cases or extract information from defendants who cannot help themselves.

Public Choice Theory

The legislative process and collective decision-making influence the law's nature, which can best be explained through public choice theory. This is the application of economic models of decision-making and their repercussions on political science's classic problem, like Arrow’s Theorem. Some main claim that public choice theory offers the best understanding of collective decision processes, which help judges establish their positions in the judicial system. Where collective decisions cannot be avoided, as influenced by those with powers to frame the debate questions to influence voting, in this case, agenda-setterLaw on Economics, there is a need to interpret public legislation differently. These theories and their results make a strong case for courts and legislations.

Author: James Hamilton


Need a custom

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
Conservation Economics
Cybersecurity in business: challenges, risks, and practices
Corporate Behavior
Compare and contrast the political theories
Determinants of Wages
Deontology Vs. Utilitarianism
Development of Advertising
Digital Illiteracy
Economic Analysis of Market Structure
Expected Utility
Everything you need to know about workplace diversity
Efficiency and Market Equilibrium
Factors Affecting Purchasing Behavior
Financial Statement Analysis
Factors Influencing Interest and Exchange Rates
Fiscal and Monetary Policies in Response to 2008/2009
Game theory in microeconomics
Globalization: definition, causes, social impact and risks
Gene expression: what it is and why it is important
Global environmental issues
How women can manage sexual harassment
How to conduct economic research?
How to define the Enterprise Value
How cancer is developed - Cancer biology
Introduction to Labor Markets
Investment in Human Capital
Intellectual Property and Product Liability
Introduction to Social Choice and Incarceration
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
Modern journalism
Methods of labeling of nucleic acid that enable their detection
Neuromuscular disorders
National Economies, Fluctuation, and Responses to Fluctuations
Neurotransmitters: what they are and different types
Nanomedicines to target tumors
Organizational motivation and its effects
Overcoming Hiring Challenges for Nonprofit Organization
Policy in Corporate Mergers
Political theories of John Locke
Research and Development
Risk Sharing in Insurance and Asset Markets
Risk and the value of information
Reverse discrimination.
Structure of a Corporation
Schizoaffective disorder: how to live better with it
Segregation in the US.
Stages of the Consumer Decision-Making Process
The Role of Internal Audit in Corporate Risk Management
The Use of Law on Economics and Vice Versa
The political theory of Thomas Hobbes
The Game Theory in Social Media
Utilitarianism Vs. Kantianism
Understanding Auctions and Auction Theory: Part 2
Understanding Auctions and Auction Theory: Part 1
Various theoretical perspectives of sociology
Virtual reality, what it is and how it works
What is Neuroplasticity?
What is the 7 layers of OSI model?
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
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
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
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?