Introduction to Economic Analysis of

Law

Dr. Shivani Mohan

Senior Assistant Professor of Economics
C.N.L.U., Patna
Why Economics Perspective Matter?

 Economics is an analytical discipline and a practical

science.

 Economic forces are the gravity of the social world often

invisible, but omnipresent.
Some Famous quotes by renowned Jurists political philosophers

“For the rational study of the law the black letter man may be
the man of the present, but the man of the future is the man of
statistics and the master of economics”
Oliver Wendell Holmes Jr.

“If economic factors and economic interests have partly determined

the legal system of order and the legal framework of rules, it is
even more true that law has furnished the whole general system of
order, and the whole general framework of rules, within which
and under which the factors and interests of economics have had
to work …..”
Ernest Barker
 The Interdisciplinary Approac h
 Law and Economics or Economic Analysis of Law is the
term usually applied to an approach to legal theory that
incorporates methods/tools and ideas into law

 Highly influential in US

 Many law schools in North America, Europe and Asia have

graduate degree course in Law and Economics

 There is increased use of behavioural economics, game

theory, statistics and econometrics in economic analysis of
law
 Wolfgang Koehling in his paper, The Economic Consequences
of a Weak Judiciary: Insights from India examines the
relationship between the quality of Indian Judiciary and
economic development of Indian states and UTs.
 Economic analysis of law is divided into sub-fields, positive and
normative

 A Positive economic analysis of law helps to predict the

effects of various legal rules.

 A normative economic analysis of law makes policy

recommendations based on economic consequences of
various policies
Important Scholars in the field of Law and Economics

 Ronald Coase and Gary Becker

 US Court of Appeals for the Seventh Circuit Judges Frank

Easterbrook, Richard Posner andWilliam Landes

 US Court of Appeals for the Second Circuit Judge Guido

Calabresi, wrote famous book “The Cost of Accidents:A Legal and
Economic Analysis” and “Ideals Beliefs, Attitudes, and the Law”
 Why Students Need To learn Law and Economics

The field of Law and Economics asks two basic questions

1. What are the effects of legal rules on the behaviour of relevant

actors?

2. Are these effects of legal rules socially desirable?

 Lawyers study Law and Economics

a) fundamental organising principles for the whole body of laws

b) It helps in simplifying the law

c) the real-life effects of the law, including possible adverse effects

such as rent control, protection of weak contract parties.
Economists study Law and Economics

a) Economic theory does not operate in institutional vacuum

b) Study of law allows economists to model real life situations

Professionals study Law and Economics

a) the damages that may result from the use of their products or
services

a) Improving skills in IPRs may provide material awards and

recognition
Conclusions

 It focuses on all areas of law and of economic regulation

 Basis of social welfare

 Brings efficiency
Thank you!