6.5 Economic Analysis of Law

Introduction: the application of microeconomics (prices, incentives, efficiency) to legal rulesand institutions — asking of every rule not only "is it just?" but "what behaviour will itinduce, and is that efficient?" — the question that unites this whole unit. Origin and history(the timeline):Coase (1960 — the externality article: the discipline's Big Bang; his earlier firm article (1937) founding transaction-cost economics); Guido Calabresi (The Costs of Accidents,1970 — tort's economic theory: the cheapest cost avoider); Gary Becker (crime's economic approach (1968) and human capital — the method extended to non-market life); RichardPosner'sEconomic Analysis of Law (1973) — the synthesis; the Chicago school as the movement's home; the law-and-economics sections and journals; the 1990s' Nobel recognitions (Coase, Becker, North, Williamson); the empirical turn. Major schools (the syllabus's owndivision):1. The Chicago school (Posner's): price theory applied to all law; the efficiency-of-the-common-law hypothesis (judge-made law tends toward efficiency — rules surviving the market of litigation); wealth maximisation as norm (the contested banner);2. The New Haven school (Calabresi's lineage): the softer institutionalism — law as responsive to multiple values, not efficiency alone; the accident-law pragmatism;3. The new institutional economics (Coase-North-Williamson): institutions as the rules ofthe game (North's phrase — constitutions and property registers as economic infrastructure); transaction costs and governance structures (the firm, the contract, the hybrid — Williamson: why make, buy or ally —…