GOKHLE EDUCATION SOCIETY

NB THAKUR,LAW COLLEGE
NASHIK
SUBJECT NAME: B.A. 0403
Law and Economics
(BA LLB-IIND, SEM.-IV)

Name of the Teacher Objectives:

Astt. Prof. To study the relationship between
Ravindra Pandit Adhav Law and Economics
To know the significance of
93256-56797
Economics in Law
To Understand the impact of
Economics on Law
 What Is Welfare Economics
Welfare economics is the study of how the allocation of resources and goods affects
social welfare. This relates directly to the study of economic efficiency and income
distribution, as well as how these two factors affect the overall well-being of people
in the economy.

● In practical terms, welfare economists seek to provide tools to guide public

policy to achieve beneficial social and economic outcomes for all of society.
● Welfare economics is the study of how the structure of markets and the
allocation of economic goods and resources determine the overall well-being of
society.
● Welfare economics seeks to evaluate the costs and benefits of changes to the
economy and guide public policy toward increasing the total good of society,
using tools such as cost-benefit analysis and social welfare functions.
Factors influencing economic welfare
 Welfare Schemes
Different Ministries have different
schemes to provide justice to different
vulnerable sections of Indian society.

Unorganised Sector – Welfare Schemes

The Ministry of Labour and Employment to ensure the welfare of workers have enacted the
Unorganized Workers Social Security Act 2008. This Act gives provision for the formation of the
National Social Security Board which will help in formulating social security schemes which are given
below

1. Life and Disability Cover

2. Health and Maternity Benefits
3. Old age protection
Scheduled Caste – Welfare Schemes
Initiatives that are taken up by the Government of India for the empowerment of
Scheduled Class are:

● Educational Empowerment – Provide scholarships from pre-metric level to PhD

programs; provide coaching to students preparing for higher studies.
● National Scheduled Class Finance and Development Corporation (NSFDC) –
Financial assistance to those who live Below Poverty Line.
● National Safai Karamcharis Finance and Development Corporation
(NSKFDC) – Financial assistance to safai karamcharis and manual scavengers
and their dependents.
● Special Central Assistance to Scheduled Castes Sub-Plan (SCSP) –
States/UTs must formulate special component plans (SCP) and earmark funds for
execution of the plan.
● Scheme of Assistance to Scheduled Castes Development Corporation
(SCDC) – Funds are provided to State Scheduled Castes Development
Corporation (SCDC).
● Venture Capital Fund – To promote entrepreneurship amongst the Scheduled
Castes. The nodal agency is IFCI Limited.
● Credit Enhancement Guarantee Scheme – The objective of this scheme is
to provide funding for start-up entrepreneurs belonging to Scheduled Castes.
● Protection of Civil Rights Act, 1955 – Untouchability is a punishable
offence.
● Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act,
1989 – Financial assistance is provided to States by the Centre to handle
many social problems.
● Prohibition of Employment as Manual Scavengers and their
Rehabilitation Act, 2013 – To eliminate dry latrines and manual scavenging.
● Pradhan Mantri Adarsh Gram Yojana (PMAGY) – Started in 2015 to
provide holistic development in villages having more than 50% scheduled
caste population.
● Babu Jagjivan Ram Chhatrawas Yojna – To provide hostel facilities for
students studying at higher secondary to university level.
Backwards Classes – Welfare Minority Community – Welfare
Schemes Schemes

● Education Empowerment – ● Nai Roshni – Scheme for women to

Scholarships from pre-metric level
to higher education.
● Mahila Samridhi Yojana – To
provide microfinance to women
entrepreneurs
● Swarnima Special Scheme – To
promote self – dependence among
women
● Assistance to Voluntary
Organizations for the welfare of
OBCs
provide leadership development
training.
● Scholarship Schemes from pre-metric
to higher education, for students
belonging to minority communities.
● Seekho Aur Kamao – Objective is to
provide skill development.
● Jiyo Parsi – Scheme to stop the
decline of the Parsi population.
● Minority Cyber Gram – To introduce
digital literacy skills among minorities.
 Senior Citizens – Welfare Schemes

1. Vayoshreshtha Sammans – Provide national awards for senior citizens, for rendering
services to the elderly persons.
2. Indira Gandhi National Old Age Pension Scheme – Provide social assistance for old age
persons.

Women and Child Development – Welfare Schemes

● Pradhan Mantri Matru Vandana Yojana – It is a maternity benefit programme.

Urban Poverty Alleviation Schemes Rural Poverty Alleviation Schemes

● Pradhan Mantri Awas Yojana – Provide
housing for all.
● Deendayal Antyodaya Yojana – Provide
self-employment and skilled wage
employment opportunities.
● National Rurban Mission (NRuM) –
Stimulate economic development in
villages.
● Pradhan Mantri Awas Yojana –
Provide housing for all.
 Social Welfare Legislations In India

Legislation is an instrument to control, guide and restrain the behaviour of individuals and
groups living in society.
● Social legislation is that branch of law which is an aggregate of the laws relating to the
various socio- economic condition of the people.

OBJECTIVES OF SOCIAL LEGISLATION:

i)Removal of discrimination on the grounds of sex, religion, caste, class etc. and promotion
of equality to all.
ii)Safeguard the rights of the weaker section such as women, children, elderly, widows,
destitute and the backward classes.
iii)Eradication of traditional malpractices and social evils such as untouchability, dowry,
child marriage, female infanticide etc.
iv)Provision of social security.
Some examples of social welfare legislation in India include:

● Child labor act-1986

● Women welfare programs
● Equal opportunity, protection of rights & full participation act-1995
● Contract Labour Regulation and Abolition) Act, 1970
● Employees' State Insurance Act, 1948
● Equal Remuneration Act, 1976

NEEDS FOR SOCIAL LEGISLATION

● to ensure social justice,

● to bring about social reform
● to promote social welfare
● to bring about desired social change
● to protect and promote of rights of socioeconomically disadvantaged groups of the
Mahatma Gandhi National Rural Employment Guarantee Act, 2005
National Rural Employment Guarantee Act 2005, later renamed as the “Mahatma Gandhi National Rural
Employment Guarantee Act”, (MGNREGA), is an Indian labour law and social security measure that aims to
guarantee the ‘right to work’.

Objectives of MGNREGA:

● Provide 100 days of guaranteed wage employment to rural unskilled labour

● Increase economic security
● Decrease migration of labour from rural to urban areas

Salient features of the scheme are

● It gives a significant amount of control to the Gram Panchayats for managing public works, and
strengthening Panchayati Raj Institutions. Gram Sabhas are free to accept or reject recommendations
from Intermediate and District Panchayats.
● It incorporates accountability in its operational guidelines and ensures compliance and transparency at all
levels.
Role of State Governments in MGNREGS

The important roles of the state government in executing the MGNREGA scheme are:

1. It frames rules charting out the state’s responsibility under the act.
2. It sets up the State Employment Guarantee Council.
3. State Employment Guarantee Fund (SEGF) is established by state governments.
4. It makes sure to dedicate the Employment Guarantee Assistant (Gram Rozgar Sahayak), the PO and the staff at
the State, district, cluster and Gram Panchayat level; for the execution of the scheme.

MGNREGA – State Employment Guarantee Council (SEGC)

The State Employment Guarantee Council is responsible for advising the state government for the implementation of

the MGNREG scheme. Some important functions of SEGC under MGNREGS are:

1. The suggestion of improvements in the execution of the scheme.

2. Evaluation and monitoring of the scheme.
3. To recommend proposals of the works to the central government.
4. To appraise the districts about the scheme and its features.
5. To prepare an annual report to be submitted by the state government before the state legislature.
 National Social Assistance Programme (NSAP)

Introduction- The National Social Assistance Programme (NSAP) is a Centrally Sponsored Scheme run by
the Ministry of Rural Development. It provides social pensions to the elderly, widows, and people with
disabilities. The NSAP also offers bank accounts, postal accounts, money orders, cash, and verified Aadhaar.

The NSAP aims at ensuring minimum national standard for social assistance in
addition to the benefits that the States are currently providing or might provide in
future. The NSAP came into effect on 15 August 1995 as a wholly Centrally
Sponsored Scheme.

Three components:
(i) the National Old Age Pension Scheme (NOAPS)
(ii) the National Family Benefit Scheme (NFBS), and
(iii) the National Maternity Benefit Scheme (NMBS)
At present, NSAP includes five sub-schemes, of which, three are pension
schemes as detailed under:
(i) Indira Gandhi National Old Age Pension Scheme (IGNOAPS)
(ii) Indira Gandhi National Widow Pension Scheme (IGNWPS), and
(iii) Indira Gandhi National Disability Pension Scheme (IGNDPS).
The other two sub-schemes are not pension schemes are:
(iv) National Family Benefit Scheme (NFBS)–a one-time assistance to the
bereaved family in the event of death of the breadwinner
(v) Annapurna Scheme–food security to the eligible old age persons who
have remained uncovered under IGNOAPS.
NSAP sub-schemes, eligibility criteria and Central Assistance
Key features of NSAP
 Right to Education Act, 2009
The Right to Education Act (RTE) of 2009 is an act of the Parliament of India that makes
education a fundamental right for children between the ages of 6 and 14. The act was
enacted on August 4, 2009 and gives effect to the 86th Amendment Act of 2002.

The RTE Act provides for the:

● Right of children to free and compulsory education till completion of elementary education in a
neighbourhood school.
● It clarifies that ‘compulsory education’ means obligation of the appropriate government to provide
free elementary education and ensure compulsory admission, attendance and completion of
elementary education to every child in the six to fourteen age group. ‘Free’ means that no child shall
be liable to pay any kind of fee or charges or expenses which may prevent him or her from pursuing
and completing elementary education.
● It makes provisions for a non-admitted child to be admitted to an age appropriate class.
● It makes provisions for a non-admitted child to be admitted to an age appropriate class.
● It specifies the duties and responsibilities of appropriate Governments, local authority and
parents in providing free and compulsory education, and sharing of financial and other
responsibilities between the Central and State Governments.
● It lays down the norms and standards relating inter alia to Pupil Teacher Ratios (PTRs),
buildings and infrastructure, school-working days, teacher-working hours.
● It provides for rational deployment of teachers by ensuring that the specified pupil teacher
ratio is maintained for each school, rather than just as an average for the State or District or
Block, thus ensuring that there is no urban-rural imbalance in teacher postings.
● It provides for appointment of appropriately trained teachers, i.e. teachers with the requisite
entry and academic qualifications.
● It prohibits (a) physical punishment and mental harassment; (b) screening procedures for
admission of children; (c) capitation fee; (d) private tuition by teachers and (e) running of
schools without recognition,
 Pareto Optimality
A situation in which it is impossible to make any one better off without making
someone worse off, is said to be Pareto optimal or Pareto-efficient.

Pareto Optimality Conditions:

(i) Marginal condition for efficiency in the allocation of factors among firms (efficiency
in production);

(ii) Marginal condition for efficiency of distribution of commodities among consumers

(efficiency in consumption); and

(iii) Marginal condition for efficiency in the allocation of factors among commodities
(efficiency in product-mix or composition of output).
Edgeworth Contract Curve for production
The dimensions of the rectangle in
Figure represent the total available
quantities
X02- Inputs X1, X2
Production of consumer goods- Q1 and
Q2.
For example, if the allocation of the inputs is given
by the point B, the quantities of X1 and X2 used in
the production of good Q1 are measured by the
coordinates of B with reference to the origin O, and
the quantities of X1 and X2 used in the production
of good Q2 are measured by the coordinates of
point B with reference to the origin O’.
The marginal condition for Pareto efficiency in production would be obtained if we maximise
the output of good Q1 subject to a given output level of good Q2. Such maximisation would occur
at a point of tangency between the IQs for the two goods.

For example, maximisation of output of Q1 subject to the quantity of Q2 as given by IQ3, would
occur at the point of tangency S between the IQs for the goods. Similarly, maximisation of
output of Q2 subject to the quantity of Qi as given by IQ3, would occur at the point of tangency R
between the IQs for the two goods.

MRTSX1, X2 or, in the production of Q1 = MRTSX1,X2 in the production of Q2

At the end equilibrium will occur at point ‘e’ where both the consumers
have benefit from exchange.
Limitations of Pareto Efficiency

● Distribution Analysis: Pareto efficiency curves can be used to analyze equity, but
they themselves do not automatically consider implications of fairness.
● Perfect Competition: Pareto efficiency assumes that markets are perfectly
competitive, meaning that all buyers and sellers have equal market power and
perfect information. In reality, however, markets are often imperfectly competitive.
Some beings simply have more power than others.
● Externalities: Pareto efficiency only considers the benefits and costs that accrue to
the parties directly involved in a transaction, without taking into account any external
effects on third parties.
● Transaction Costs: Pareto efficiency assumes that all transactions can be
completed at zero cost, which is not always the case.
● Difficult Comparisons: Pareto efficiency requires comparison of different
individuals which can be difficult to do in practice.
What Is Economic Efficiency

Economic efficiency is when all goods and factors of production in an economy are
distributed or allocated to their most valuable uses and waste is eliminated or minimized.
● Economic efficiency refers to how effectively a society's scarce resources are used to
produce goods.
● Economists have several ways of measuring economic efficiency, based on the
allocation of inputs, costs, or the allocation of final consumer goods.
Economic Efficiency and Welfare
Welfare relates to the standard of living and relative comfort experienced by people within
the economy. At peak economic efficiency (when the economy is at productive and
allocative efficiency), the welfare of one cannot be improved without subsequently
lowering the welfare of another. This point is called Pareto efficiency.
Even if Pareto efficiency is reached, the standard of living of all individuals within the
economy may not be equal. Pareto efficiency does not include issues of fairness or
equality among those within a particular economy.
 Pareto Criterion of Social Welfare
● Pareto efficiency does not provide a unique solution to how the economy should be
arranged. Multiple Pareto efficient arrangements of the distributions of wealth, income,
and production are possible.
● Moving the economy toward Pareto efficiency might be an overall improvement in social
welfare, but it does not provide a specific target as to which arrangement of economic
resources across individuals and markets will actually maximize social welfare.
● Under Pareto efficiency, optimal welfare, or utility, is achieved when the market is allowed to
reach an equilibrium price for a given good or service—it’s at this point that consumer and
producer surpluses are maximized.
● An example of applied welfare economics is the use of cost-benefit analyses to determine the
social impact of specific projects. In the case of a city planning commission that’s trying to
evaluate the creation of a new sports arena, the commissioners would likely balance the
benefits to fans and team owners with that of businesses or homeowners displaced by new
infrastructure.
 Coase Theorem

Coase theorem states that one can assume an efficient and optimum output following the
negotiations between two parties if the external transaction cost between two parties over
any property dispute is absent. It shows that every property dispute can have an effective
negotiation and the best outcome irrespective of its nature.

● It assumes there won’t be any transaction cost, and contenders will have the equal
marketing power and perfect information.
Explanation of coase Theorem
● The Coase theorem is an economic and legal theory that addresses dispute resolution between
two parties without any transaction cost. It ensures an optimum outcome for both parties,
irrespective of its nature.
● Economist and author Ronald Coase, a British American, promulgated the theorem concerning
property rights in 1960 in the field of institutional economics.
● The theorem tried to explain the impact of government on economic growth.

For example, suppose any negative externality or external cost like air
or water pollution by the polluter is present in a situation. In that case,
one could only avoid it by allocating property rights so that one can
negotiate amicably.
The theorem assumes that transaction cost in the negotiation will be absent in competitive
markets, both parties have complete information, and both have equal marketing power. In the
absence of any of these, the theorem is not applicable.
Diagram and Explanation
● Pollutant gets a marginal benefit
represented by line ABC.
● The victim gets a marginal disbenefit, as
shown by line OBD.
● To reduce the pollution, victims will have to
pay an amount equal to what the triangle
ECB shows.
● For the Pollutant to continue polluting, it
must pay an amount equal to triangle OBE.

It is clear that beneficiaries can see that the

theorem helps in the friendly resolution of the
pollution problem between the polluter and the
victim.
Explanation with the help of an explanation / Coase
theorem on property and Liability
Let us assume that there is a factory located near a residential area. It may produce
air and water pollution, termed an externality that may harm the residents of the
locality.

● The residents may find it difficult to live with such environmental pollution and
face health hazards. They may fall ill with lung ailments and have to bear a huge
health cost. In addition, it may prompt the residents to file a legal suit against
the factory. If this happens, the property rights issue between the factory owner
and the residents will crop up.
● The property dispute may lead to legal or Coase theorem transaction costs for
both parties if the court decides that the company can continue operations at
the expense of the residents or that the residents have the right to a clean
environment.
Limitations of the Coase Theorem:

1. The unreal proposition of equal bargaining between two parties over property disputes
makes the bargaining ineffective. As a result, the assumption of effective and efficient
negotiation as required by the theorem fails.
2. Another assumption of Coase theory assumes that transaction cost has to be zero, which
is never always possible in the real world. So, it gets limited in the scope of application.
3. Coase theorem states that one equally distributes the income during negotiation over the
disputed property. However, in practice, the party with the property ownership gets
more of the income from the settlement of the property dispute.
4. Finally, the Coase theory is limited by the lack of perfect information about both parties
involved in a property dispute which hinders its wide scale application to real-life
situations.
References:
1. Ahuja,H.L. (2016). Principles of Micro Economics. [Text Book]. S.
Chand Publications.
2. Rassure and Jagnnath (2020). Environmental Economics. [Text
Book]. Manglam Publications.
3. https://rural.gov.in/sites/default/files/nrega/Library/Books/1_MGNREGA_Act
.pdf
4. https://nsap.nic.in/
5. https://cag.gov.in/uploads/download_audit_report/2023/5-Chapter-1-064d2
29f8419ed1.30966051.pdf
6. https://dsel.education.gov.in/rte
Long Answer Type Questions:

1. What is welfare economics? What are the factors influencing it? Write about some welfare
schemes.
2. Write about MGNREGA and NSAP.
3. Write a detailed note on pareto optimality and efficiency.
4. What do you mean by the Coase theorem? Explain it with the help of a diagram and also
write its limitations.

Short Answer Type Questions:

1. Write about Urban and Rural poverty alleviation schemes.

2. Write four objectives of social legislation.
3. Explain Right to Education, 2009.
4. Define Economic efficiency.