Knowra Law and economics Law and economics Law and economics applies economic theory and empirical methods to analyze how laws and legal institutions shape behavior and how they can be designed.
Coase theorem : A proposition that, under ideal conditions including zero transaction costs, bargaining can lead parties to an efficient allocation of resources regardless of initial entitlements. It shows how bargaining and transaction costs shape the economic analysis of legal entitlements.
Pareto efficiency : A condition in which no change can make someone better off without making someone else worse off. It is one benchmark for judging whether a legal arrangement permits avoidable gains.
Tort law : The body of law governing civil claims for harms caused by another’s conduct. Economic models compare liability rules by how they influence precautions and accident costs.
Aaron Director : An economist whose teaching and scholarship helped establish the Chicago tradition in law and economics. His work and influence helped connect economic analysis to legal scholarship at the University of Chicago.
Legal positivism : A theory that identifies law by social sources and practices rather than by its moral merits. It asks what counts as law, while economic analysis primarily evaluates laws’ effects and design.
Transaction cost : The costs of coordinating, negotiating, and enforcing exchanges beyond the price of the goods or services exchanged. These costs explain why legal rules can matter even when parties could theoretically bargain.
Kaldor–Hicks efficiency : A criterion under which a change is efficient if its winners could compensate its losers and still remain better off. It allows legal reforms to count as efficient even when compensation is not actually paid.
Contract theory : The economic study of agreements, incentives, information, and the allocation of risks between contracting parties. It explains how contract doctrines affect promises, investment, and strategic behavior.
Ronald Coase : A British economist whose work on transaction costs, firms, and social cost reshaped institutional economics. His analysis of social cost became a foundation for studying legal rules and bargaining.
Law and society : An interdisciplinary field studying law’s social origins, operation, and effects through social-science methods. It often explains legal institutions through social relations rather than efficiency-centered models.
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