Econ 163

Law and Economics

What is Law and Economics?

Why study Law and Economics?

Economics is a study of how people and society end

up choosing with or without the use of money, to
employ scarce productive resources that could have
alternate uses; it studies production of various
commodities over time and their distribution for
consumption, now or in future, among
various groups in the society. It analyses costs and
benefits of improving patterns of resource allocation.

Allocation of scarce resources

and its distribution
Role of law and insitutions

Kuznets (1955) Economic Growth

and Income Inequality

Source: Piketty

Buying and selling of goods commodities

Price

Property rights

Contract

What can and cannot be sold

Buying and selling of commodities

Car has defect product liability
Car was stolen

Intellectual property
Accident who pays for the damage?

PRICE

INSTITUTIONS

LAW

INFORMAL RULES

Maximization of profit, utility subject to constraints: price, formal and

informal rules
Institutions are the rules of the game in a society or, more formally,
are the humanly devised constraints that shape human interaction. In
consequence they structure incentives in human exchange, whether
political, social or economic. (North, 1990)
Institutions include any form of constraint that human beings devise
to shape human interaction. (North, 1990)

Law, Fairness and Justice

What the law purports to be
What the law actually is
Enforcement issues
Consequences

Others
Law as part of the superstructure (Marxist)

Course Outline
I.

Introduction
- Legal System

II. Property Law

III. Tort Law
IV. Contract Law
V. Criminal Law
VI. Behavioral Law and Economics
VII. Social Norms and Spontaneous Law
VIII.International Law

Legal System

 Legislature makes laws

Executive implements laws
Judiciary interprets laws
Judges also make laws through interpretation
Resolves conflicts
Indepence of the judiciary is important

Philippine Legal System

Precolonial period
Spanish colonization

Complete displacement of customary and inidgenous law and ethnico-cultural values

by the legal sytem of colonialist Spain
Establishment of a colonial administrative state

American period

Replacement of a neocolonial state

American legal culture

Legal transplants

Mixed Jurisdiction
Civil Law canon

Code Napoleon from Roman Law (The Body of the Civil Law 528-534 Justinian)

Common Law adversarial, jury system, jurispudence

The Philippine Judiciary

Supreme Court
Court of Appeals
Sandiganbayan
Court of Tax Appeals
Regional Trial Court
Sharia Court

Philippine Supreme Court

Pre-Marcos: reputation for judicial independence
Marcos period
Martial law declaration 1972

Post-Marcos period
1987 Constitution
Expanded scope of judicial review
Art 8 Sec 1:
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government.

Philippine Supreme Court

Creation of the Judicial and Bar Council
Sec. 8
A Judicial and Bar Council is hereby created under the supervision of the Supreme Court
composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a
representative of the Congress as ex officio Members, a representative of the Integrated
Bar, a professor of law, a retired Member of the Supreme Court, and a representative of
the private sector.

Fiscal autonomy
Sec. 3
The Judiciary shall enjoy fiscal autonomy. Appropriations for the Judiciary may not be
reduced by the legislature below the amount appropriated for the previous year and,
after approval, shall be automatically and regularly released.

Judicial independence in the Philippines

How do justices vote?
Independent arbiters, personal attributes, ideological attributes
Philippines problem: no political party, personal politics, patronage politics

Dataset
coded 125 decisions by the Philippine Supreme Court in the period 1986
2010
Politically salient decisions
1592 individual observations. Our dependent variable is a vote favorable
992 votes favorable to the administration
62% of the sample
600 opposed to the administration (38% of the sample). Table

 i.) Administration appointee: the dummy takes value one if the Justice was
appointed by the same administration challenged by the case and zero
Ii) Gender
iii) Judicial experience
(iv) Law professor: the variable takes value one if the Justice was previously
a law professor and zero otherwise;
(v) Public official: the dummy takes value one if the Justice has previous
experience as a public official and zero otherwise;
(vi) Executive order: the dummy takes value one if the decision refers to a
presidential executive order and zero otherwise.
The expected sign of the coefficient is positive as executive orders affect presidential
powers directly.

 if a Justice is an incumbent administration appointee, the chances of

voting for the administration increase around 66%
(59% when fixed effects are considered)
However, still a number of anti-administration votes point to the fact that
other factors might be at play

Do justice engage in strategic defection?

Not much evidence