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Sunday, November 5, 2017
http://dailyasianage.com/news/93646/legal-economics-necessary-in-curriculum
Legal Economics necessary in curriculum M S Siddiqui Economics has made a substantial contribution to our understanding of the law, as well as the law has also contributed to our understanding of economics. The knowledge on law and economics will provide the opportunity to examine the formation, process, structure and economic impact of law and the legal institutions, which is ideal if you're interested in areas where law and economic analysis intersect. Over the past many years economic arguments have been used to analyze the consequences of a wide variety of legal rules, including standards of proof, rules of evidence, damage rules for breach of contract, negligence rules for torts, and many others. An important and may be debatable research claimed that legal rules either are, or ought to be, designed to maximize economic efficiency are roughly speaking, to make the size of the economy as large as possible. The dynamics of life, which have affected intellectualism, have led to the discovery that almost every aspect of law requires a working knowledge of economics for it to be well understood and administered. It has been found that economics pervades every aspect of law and that the administration of justice can be improved when judicial officers use economic tools in the course of dispensing justice. On the other hand, the effects of law and the determination, of which legal rules are effective, are explained and assessed better with economic concepts and analysis. Judicial officers can increase their effectiveness by acquiring and using some knowledge and skills of economics in the course of performing their routine functions. Courts routinely deal with the reality of such economic abstractions as property and contract. Economists analyze legal rules in terms of efficiency. At the heart of its application lies the efficient breach hypothesis, a milestone of contract law and the law and economics movement. The hypothesis suggests that promisors should be 'permitted', if not encouraged, to breach a contract whenever the net gains resulting from said breach exceed the net gains of performance. Parties are therefore encouraged to complete the projects they consider efficient while abandoning any other contractual project that results inefficient or wasteful. In Patton v. Mid-Continent Systems Inc, in USA, for example, judge Posner stated that: "not all breaches are blameworthy. The promisor may simply have discovered that his performance is worth more to someone else. If so, efficiency is promoted by allowing him to break his promise, provided he makes good the promisee's actual losses. If he is forced to pay more than that, an efficient breach may be deterred, and the law does not want to bring about such a result."
The economic analysis of law deals with legal rules but not only by way of handing out rewards and punishments to those who deserve them, but as a system of incentives intended to affect behavior. Economic theory is used to predict how rational individuals will respond to such rules and what the consequences will be. This way of thinking about the law, and the conclusions it implies, are obvious in cases such as the speeding law. In other cases the analysis and the conclusions are much less obvious. The study of law thus gives economists an opportunity to improve their understanding of some of the concepts underlying economic theory. The most notable example is the work of University of Chicago economist Ronald Coase. He received the 1991 Nobel Prize in economics for his study of the law of nuisance to revolutionize the corresponding area of economics-the theory of externalities or "Coase theory".The theory of externalities-the analysis of situations, such as pollution, where one person's actions impose costs (or benefits) on another. This was a new field of economics i. e. economic analysis of law, the attempt to use economic theory to understand legal systems. While there would probably be something called economic analysis of law. The theory states that when conflicting property rights occur, bargaining between the parties involved will lead to an efficient outcome regardless of which party is ultimately awarded the property rights, as long as the transaction costs associated with bargaining are negligible. Specifically, the Coase Theorem states that "if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights." The Coase Theorem is most easily explained via an example. It's pretty clear that noise pollution fits the typical definition of an externality, since noise pollution from a factory, a loud garage band, or, say, in the case of a wind turbine with noise pollution potentially imposes a cost on people who are neither consumers nor producers of these items. in 2010, "Caithness Energy" offered households near its turbines in Eastern Oregon @$5,000 each to not complain about the noise that the turbines generated. It's most likely the case that, in this scenario, the value of operating the turbines was, in fact, greater to the company than the value of quiet was to the households, and it was probably easier for the company to proactively offer compensation to the households than it would have been to get the courts involved. The "Caithness Energy" will let the turbine make noise if the value of operating the turbine is greater than the noise cost imposed on those who live near the turbine. On the other hand, it's efficient to shut the turbine down if the value of operating the turbine is less than the noise cost imposed on nearby residents.In this instance, the court could either decide that the turbine company has the right to operate at the expense of the nearby households, or it could decide that the households have the right to quiet at the expense of the turbine company's operations. Since the potential rights and desires of the turbine company and the households are clearly in conflict, it is entirely possible that the two parties will end up in court to figure out whose rights take precedence.If the court decides that the households have a right to quiet, the turbine company will probably turn around and compensate the households in exchange for letting the turbines operate. Because the turbines are worth more to the company than quiet is worth to the households, there is some offer that will stay in business and no money will change hands. This is simply because the households aren't willing to pay enough to convince the turbine company to cease operation. Coase's main thesis is that the decision that is reached regarding the assignment of property rights has no bearing on whether the turbines continue to operate in the area
as long as the parties can bargain without cost. On the other hand, this means that the turbine company would be willing to pay the households more to stay in business than the households would be willing to pay the turbine company to shut down. The legal frameworks, processes and systems and complement the study of economic issues such as international trade, government organization and competitions, strategic behavior and unemployment, all grounded in economic theory and quantitative methods. The law and economics has been infused together with the regulatory regime under Competition act, Corporate act, etc. It has touched the global legal system with the introduction of Anti Money laundering act, Arbitration act, and others. The reading of economics and law is pre-condition of balance efficient methods of determining the decision of litigation. The economic union in Europe established European Parliament and they enact law applicable to all EU countries and those laws are mostly have economic impact in the life of Europeans. In our country, the core concepts of economics are fairly simple, most legal scholars seem to have no attention to economics and legal system hardly care about impact of law on economic life of citizens, and therefore an attempt is obviously needed to bridge the gap. Secondly, there seems to be very different perceptions concerning economic analysis of law, both among those who are sympathetic and those who are hostile to it. The recent revolt of business community against introduction of Value Added Tax (VAT) has exposed the weakness of regulator and law makers to assess the economic impact of a possible new law. The combination or blend of two disciplines will help the legal system to work efficiently for development of economy and the economic theory will pave the way of fair legal action of the judicial system. An academic course that blends expertise in law and economics enables lawyers to have an impact on a wide range of issues related to law, business, and finance. Judges and practitioners increasingly rely on economic reasoning to resolve legal disputes. In some areas of legal practice-especially Contracts, Competition Law, tax law, bankruptcy, corporate and securities law, and other fields of economic law-economic reasoning is often central to the focus of legal arguments, and it continues to grow in importance in many other seemingly noneconomic fields, such as environmental law, intellectual property law, consumer's protection law, Tort and more. The course may be designed on the basis of laws directly related to commercial activities and disputes thereof. Students may have an over views of practical situations in professional career. Multinational companies use hire Legal Economist for better advice on local legal and economic situation to cope with environment in in a new market .
The writer is a Legal Economist. E-mail: mssiddiqui2035@gmail.com