General Information about Law and Economics
Over the past decades the lines between economics and law have become increasingly blurred, with lawyers using economic concepts to examine the law, and economists taking into account the law when assessing and predicting economic development and growth. This allows legal scholars and lawyers to assess legal rules and cases while taking into consideration, in addition to codes and precedents, concepts such as efficiency, transaction costs and game theory; similarly, if economists adopt a lawyer’s practically-orientated stance to problem-solving, this can lead to improvements of their models, in terms of adaptability to reality.
Economical analysis of the law has proven itself applicable to a wide variety of areas within legal theory, ranging from more ‘classical’ areas, such as property rights, tort claims and contractual obligations, to more specific legal fields, such as trademark law, environmental law or corporate governance. For example: In product liability economics can help lawmakers set an economically efficient threshold for expenditure on safety to be incurred by a manufacturer. Or: In the corporate field, the recognition that the unconstrained rational person will attempt to maximise his own personal welfare has influenced the way corporate law regulates manager remuneration or the composition of manager boards. Hence, it can been seen that Law and Economics possess a very broad sphere of influence.