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economic effect of mercentalist legislation. However, to apply economics to analyze the law regulating nonmarket activities is relatively new. In 1961, Ronald Coase, an economics Nobel Lauriat published a paper, The Problem of Social Cost and "Some Thoughts on Risk Distribution and the Law of Torts" dealt with economic and social justice. In 1972, Posner and Parisi published a book The Economic Analysis of Law in which they said, "Law and Economics is probably the most successful example of the recent surge of Applied Economics into areas that once were regarded as extraneous to economic analysis.
This can be seen as the starting point for the modern
An American Judge Justice Brandies said, A Lawyer who has not studied Economics and Sociology is very apt to become a public enemy 2. The emergence of Welfare State radically restructured Capitalism and increased the role of the state. 3. In the words of Myrdal, "the Govt. interventions that we mean by welfare state policies were unpremeditated , caused by events not by ideology. Thus the need for Govt. intervention in market economy has been accepted by the economists. 4. There is growing trend of Economic offences in every country, which requires the knowledge of economic principles under different economic and social structures.
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extremely influential. Judicial opinions utilize economic analysis and the theories of law and economics with some regularity. The influence of law and economics has also been felt in legal education. Many law schools in North America, Europe, and Asia have faculty members with a graduate degree in economics. In addition, many professional economists now study and write on the relationship between economics and legal doctrines. Anthony Kronman, former dean of Yale Law School, has written that "the intellectual movement that has had the greatest influence on American academic law in the past quarter-century [of the 20th Century]" is law and economics.
OF OUR CONSTITUTION ARE JUSTICEECONOMIC, SOCIAL AND POLITICAL. THIS IMPLIES : 1. To remove economic inequalities,2. to provide a decent standard of living and 3. to promote the interests of the weaker sections of the society. The above are mentioned in the Directive Principles of the Constitution (Part-IV) which are to be achieved within the economic system of our country. A lawyer must be able to asses the economic system in which decisions are taken and disputes arise.
purported to explain the development of legal rules, for example the common law of torts, in terms of their economic efficiency.
makes policy recommendations based on the economic consequences of various policies. The key concept for normative economic analysis is efficiency in particular, allocative efficiency. A common concept of efficiency used by law and economics scholars is Pareto efficiency. A legal rule is Pareto efficient if it could not be changed so as to make one person better off without making another person worse off. A weaker conception of efficiency is Koldar-Hicks efficiency. A legal rule is Kaldor-Hicks efficient if it could be made Pareto efficient by some parties compensating others as to offset their loss.
EQUITY VS EFFICIENCY
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One of the major goals of Indian policy makers is to achieve growth with social justice. While growth is purely an economic strategy, ensuring social justice in in the purview of executive and judiciary. The interaction of economic principles and legal proceedings, some times create confusion and contradiction. While efficiency is needed for achieving economic growth, equity is the ultimate goal in any welfare state. Judiciary should be proactive and the laws have to be appropriately framed in order to achieve equity without adversely affecting efficiency.
than courts. When possible, the legal system, according to the positive theory, will force a transaction into the market. When this is impossible, the legal system attempts to mimic a market and guess at what the parties would have desired if markets had been feasible. Law and economics shares with other branches of economics the assumption that individuals are rational and respond to incentives. When penalties for an action increase, people will undertake less of that action. Law and economics is more likely than other branches of legal analysis to use empirical or statistical methods to measure these responses to incentives.
Contemporary developments
Law and economics have 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 socioeconomics has been applied to economic approaches that are self-consciously broader than the neo-classical tradition.