Concept

Law and economics

Overview

Law and economics, or economic analysis of law, is the application of microeconomic theory to the analysis of legal rules and institutions. The field emerged in the United States in the early 1960s, primarily through the work of scholars from the Chicago school of economics, such as Aaron Director, George Stigler, and Ronald Coase, and jurists, including Guido Calabresi. The field uses economics concepts to explain the effects of laws, assess which legal rules are economically efficient, and predict which legal rules will be promulgated. There are two major branches of law and economics. One is based on applying the methods and theories of neoclassical economics to the positive and normative analysis of the law. The second branch focuses on an institutional analysis of law and legal institutions, with a broader focus on economic, political, and social outcomes, and overlapping with analyses of the institutions of politics and governance.

Overview adapted from Wikipedia (CC BY-SA 4.0; see the article history for authors).

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The principles upon which it was founded are explained by Mr Law himself, in a discourse concerning money and trade, which he published in Scotland when he first proposed his project. The splendid but visionary ideas which are set forth in that and some other works upon the same principles, still continue to make an impression upon many people, and have, perhaps, in part, contributed to that excess…
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations
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Since the mind, therefore, had a notion of those distinctions antecedent to all law, it seemed necessarily to follow, that it derived this notion from reason, which pointed out the difference between right and wrong, in the same manner in which it did that between truth and falsehood: and this conclusion, which, though true in some respects, is rather hasty in others, was more easily received at a time when the…
Adam Smith, The Essays of Adam Smith
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And land which can pay more than a profit on this working capital, returns that excess as rent, even if the farmer is also the owner and landlord. The principle which regulates the amount of that excess—which is the essential point—is the principle which determines the amount of economic rent, and it holds true in the United States or Finland, provided only that different grades of land are called into cultivation.
John Stuart Mill, Principles of Political Economy
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Philosophers who discussed Law and economics

Oliver Wendell Holmes Jr.

Related ideas

Place in the tradition

Part of American philosophy.

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