Economic Analysis of Law

individuals and firms is described assuming that they are forward looking and rational, and the framework of welfare economics is adopted to assess social desirability.

The field of economic analysis of law may be said to have begun with Bentham (1789, 1827, 1830), who systematically examined how actors would behave in the face of legal incentives and who evaluated outcomes with respect to a clearly stated measure of social welfare (utilitarianism). Bentham=s writings contain significant and extended analysis of criminal law and law enforcement, some analysis of property law, and a substantial treatment of the legal process.

His work was left essentially undeveloped until the 1960s and early 1970s, when interest in economic analysis of law was stimulated by four important contributions: Coase's article on externalities and legal liability (Coase, R.H., 1960), Becker's article on crime and law enforcement (Becker, G.S.,1968), Calabresi's articles and culminating book on accident law (Calabresi, G., 1970), and Posner's (1972) general textbook on economic analysis of law and his

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ent ones. This argument is often made and sounds reasonable enough, but it runs into the difficulty of output efficiency. While we may all agree that a Pareto improvement is an unambiguously good thing, it does not follow that a situation that is Pareto efficient is superior to one that is not. In principle we could price all of the gains and losses implicit in economic analysis as it might effect utilitarian ethics. We could ask each person who was against a change in law how much money he or she would have to be given so that on net the
money plus the (undesirable) effect of the change would leave him or her exactly as well off as before. Similarly we could ask each gainer what would be the largest amount he would pay to get that gain, if he or she had to. We could, assuming everyone was telling us the truth, sum all of the gains and losses, reduced in this way to a common measure. If the sum was a net gain, we would say that the change was a improvement. If we had a situation where no further improvement was possible, we would describe it as efficient. But no matter how careful we might be considering the economic analysis of the situation there can be no presupposition of a truth vis-a-vis utilitarian ethics. If we co
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Approximate Word count = 2373
Approximate Pages = 9 (250 words per page)

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