Application of Economics to Law How will rational individuals act in response to legal rules? Provides a way of evaluating,hence designing,rules Possibly a way of understanding the rules that exist If they were designed or evolved to achieve some purpose ·Economic efficiency ·Putting content in“size of the pie?” The degree to which everyone gets what he wants To add everyone up,we need some way of doing interpersonal comparisons By willingness to pay-dollars not utiles One reason a utilitarian might not see efficiency as the objective And not everyone is even a utilitarian The Posner Conjecture:Common law is as if designed to maximize efficiency Alternatively,if efficiency is what you want,what legal rules would get it?
Application of Economics to Law • How will rational individuals act in response to legal rules? • Provides a way of evaluating, hence designing, rules • Possibly a way of understanding the rules that exist • If they were designed or evolved to achieve some purpose • Economic efficiency • Putting content in “size of the pie” • The degree to which everyone gets what he wants • To add everyone up, we need some way of doing interpersonal comparisons • By willingness to pay–dollars not utiles • One reason a utilitarian might not see efficiency as the objective • And not everyone is even a utilitarian • The Posner Conjecture: Common law is as if designed to maximize efficiency • Alternatively, if efficiency is what you want, what legal rules would get it?
Efficiency as Explanation or as Objective Both raise the same question How can legal rules be used to produce an efficient outcome? Private property and trade are the first approximation answer Law can be used to try to fix the problems with that solution Or law could be used to achieve an objective other than efficiency Such as more equal outcomes ·Or more just outcomes The approach is interesting in part because it unifies law Tort law:What rules maximize net benefit to everyone Contract law:What terms maximize net benefit to the parties Dollar benefit is what matters,since Dollars are what one party can offer the other to agree to terms Property law:What rules maximize net benefit Criminal law:What rules
Efficiency as Explanation or as Objective • Both raise the same question • How can legal rules be used to produce an efficient outcome? • Private property and trade are the first approximation answer • Law can be used to try to fix the problems with that solution • Or law could be used to achieve an objective other than efficiency • Such as more equal outcomes • Or more just outcomes • The approach is interesting in part because it unifies law • Tort law: What rules maximize net benefit to everyone • Contract law: What terms maximize net benefit to the parties • Dollar benefit is what matters, since • Dollars are what one party can offer the other to agree to terms • Property law: What rules maximize net benefit • Criminal law: What rules …