| Introduction: |
| Law and Economics Introduction |
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| The composition of Law and Economics has been discovered since the creation of economics. It was first being acknowledged as an application of economics to the legal system. Eventually, the sense of understanding the interrelations between both fields has become a new trend of education pursuits. Generally speaking, Law and Economics is an academic approach to legal theory which includes the ideas of economics. Thus, it can be viewed as the economic analysis of law. |
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| The history of the composition between the two subjects has been recorded since 18th century, while Adam Smith discussed the economic influence in mercantilist legislation. In 1961, Ronald Coase and Guido Calabresi published 'The Problem of Social Cost' and 'Some Thoughts on Risk Distribution and Law of Torts' respectively, which is often marked as the starting point of the school of Law and Economics. It was not until the early 1970's that Henry Manne, a former student of Coase, began at Rochester to build center for Law and Economics in law school. |
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| Professionals like lawyers or scholars would apply the method of economics to legal issues. As legal system is so often intertwined with politics, some issues in law and economics do exist in the disciplines like political economy and political science. To be precise, Law and Economics can be divided into two-subfields: Positive law and economics and Normative law and economics. |
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| Positive law and economics apply economic analysis to anticipate the effects of legal rules. Also, it can be used to explain the development of legal rules in terms of their efficiency and economics. However, Normative law and economics further elaborate and give opinions on policy based on the economic consequences of different policies. Efficiency, therefore, is the core analysis in normative economics. The weakest concept of efficiency is Pareto efficiency. The stronger concept of efficiency is Kaldor-Hicks efficiency. |
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| Law and Economics is a practical subject which aims at understanding human nature and the society. In the US, judicial decisions usually include opinions applying economic analysis and its theories. In legal education, it plays an important role as well. Many faculty members in law schools hold graduate degree in economics. Also, contemporary scholars, such as professional economists, do research on the relationship between economics and legal doctrine. |
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| As the interrelation between the two fields is very significant, and scholars in either fields begin to understand the other side more, Law and Economics has been tied to each other strongly. There are important figures such as the Nobel Prize winning economists Ronald Coase and Gary Becker, US Court of Appeals for the Seventh Circuit judges Frank Easterbrook, Richard Posner, William Landes and US Court of Appeals for the Second Circuit judge Guido Calabresi, who contributed thoughts in the discipline by writing the book 'The Cost of Accidents'. |
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| On the other hand, there are criticisms on the normative law and economics. In the legal part, they criticizes that rational choice theory in economics over-simplifies the assumptions about human nature (example: Posner's applies law and economic reasoning to rape and sex). Liberal argued that economic analysis ignores the essentiality of human rights and distributive justice. Jon D.Hanson of Harvard Law School argues that outcomes are not the result of our 'preferences'. Instead, the situations inside of us (cognitive biases) and outside of us (society and environmental factors) influence much more on our behaviors than just making a 'choice'. |
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| Nowadays, Law and economics has developed in a variety of directions. One important trend has been the application of game theory to legal problems. Other developments have been the incorporation of behavioral economics into economic analysis of law, and the increasing use of statistical and econometrics techniques. Within the legal academy, the term socio-economics has been applied to economic approaches that are self-consciously broader than the neoclassical tradition. |
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| As Law and Economic has become a very important composition of subjects, almost every major American law school offers courses in law and economics and has faculty working in the field. Two of the leading Law Schools focusing on Law and Economics are the University of Chicago Law School and the George Mason University School of Law. In the spring of 2006, Vanderbilt University Law School announced the creation of a new program to award a Ph.D. in Law & Economics. In Europe, a consortium of universities from ten different countries is running the European Master Program in Law and Economics which is the leading European program in the field since 1990. A newer European Doctorate program in Law and Economics is operated by three leading European centers in Law and Economics. |
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