Category Archives: Law and Economics

Dagan and Kreitner, ‘Economic Analysis in Law’

ABSTRACT This Essay explores the relationship between normative law and economics and legal theory. We claim that legal theory must account for law’s coerciveness, its normativity, and its institutional structure. Economic analyses that engage these features are an integral part of legal theory, rather than external observations about law from an economic perspective. These analyses, […]

‘Towards a new branch of law and economics?’

Yair Listokin, Law and Macroeconomics (2019). Not every day do we encounter a work of research that enables us to study the law through a whole new lens. Indeed, over the last fifty or so years, legal scholars have discovered new ways to apply well-established bodies of knowledge to the research of law, helping us […]

Rössler and Friehe, ‘Liability, morality, and image concerns in product accidents with third parties’

ABSTRACT This paper explores how consumers’ moral and image concerns influence the equilibrium in a product-accident model in which third parties incur harm. We differentiate results according to whether the product is supplied by a monopolistic firm or competitive ones. Assuming incomplete compensation of third parties, we find that both moral and image concerns of […]

Bental, Deffains and Demougin, ‘Interpreting contracts: the purposive approach and non-comprehensive incentive contracts’

ABSTRACT Real world contracts often contain incentive clauses that fail to fully specify conditions triggering payments, giving rise to legal disputes. When complete contract generate Pareto efficient allocations the L&E literature advocates that courts should fill in the missing clauses. This logic does not directly extend to environments with moral hazard, where complete contracts result […]

Dana and Wiseman, ‘Fracking as a Test of the Demsetz Property Rights Thesis’

ABSTRACT Since its introduction in 1967, the account of property rights formation by Harold Demsetz has pervaded the legal and economic literature. Demsetz theorized that as a once-abundant, commonly shared resource becomes more valuable and sought-after, users will move to more clearly define property rights in the resource. Despite the high transaction costs of this […]

Jennifer Arlen, ‘The Essential Role of Empirical Analysis in Developing Law and Economics Theory’

ABSTRACT To serve as an effective basis for positive or normative analysis of law, theoretical law and economics analysis must be predicated on models that accurately capture the essential characteristics of the decision-making environment, decision-makers’ available choices, and individuals’ decision-making processes. Empirical analysis of law plays a vital role in helping theoretical analysis achieve this […]

Manns and Anderson, ‘Contract Design, Default Rules, and Delaware Corporate Law’

ABSTRACT Incomplete contract theory recognizes that contracts cannot be comprehensive and that state law necessarily has to fill in gaps when conflicts arise. The more complex the transaction, the more that lawyers face practical constraints that force them to limit the scope of drafting and broadly rely on legal defaults and open-ended terms to plug […]

Scott and Triantis, ‘What Do Lawyers Contribute to Law and Economics?’

ABSTRACT The law and economics movement has transformed the analysis of private law in the United States and increasingly around the world. As the field developed from 1970 to the early 2000s, scholars have developed countless insights about the operation and effects of law and legal institutions. Throughout this period, the discipline of law and […]

Frydlinger and Hart, ‘Overcoming Contractual Incompleteness: The Role of Guiding Principles’

ABSTRACT We consider a buyer and seller who contract over a service. The contract encourages investment and provides a reference point for the transaction. In normal times the contract works well. But with some probability an abnormal state occurs and the service must be modified. The parties expect each other to behave ‘reasonably’, but given […]

Brian Sheppard, ‘The Reasonableness Machine’

ABSTRACT Automation might someday allow for the inexpensive creation of highly contextualized and effective laws. If that ever comes to pass, however, it will not be on a blank slate. Proponents will face the question of how to computerize bedrock aspects of our existing law, some of which are legal standards – norms that use […]