Modern analytical and empirical

Law and Economics

Judge legal rules by their effects on incentives and efficiency.

1960s to today · United States, now worldwide. Spotted a mistake? Tell us.

Read this first. This is a first map of a large subject. Each school is a family of views, and its thinkers often disagree with one another, so every summary simplifies. We describe each school in terms its own followers would accept and give the strongest criticism beside it. Read the original works before you cite anyone, and check your own course's reading list. This is general information, not legal advice.

What is law?

Law is a system of incentives. Rules act like prices on behaviour, and the common law tends, or should be made, to promote efficiency.

Law and morality

Efficiency, or the maximisation of overall wealth, is the main standard. Others add fairness or distribution.

Where does its authority come from?

Instrumental: the value of the results the rules produce.

How should judges decide?

Compare the costs and benefits of rules. Put the cost on the party who can avoid it most cheaply (Calabresi) and lower the costs of bargaining (Coase).

The question it asks

Which rule leaves people better off overall?

Main criticism

Efficiency is not the same as justice. The assumptions about rational behaviour are strong. Distribution and rights get little weight.

Legacy today

Competition law, contract and tort theory, regulation, and the use of cost-benefit analysis in lawmaking.

Key thinkers

Ronald Coase, Guido Calabresi, Richard Posner, Gary Becker, Steven Shavell.

Ronald Coase (1910–2013)

Key works

Coase, The Problem of Social Cost (1960)
Calabresi, The Costs of Accidents (1970)
Posner, Economic Analysis of Law (1973)

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Read further

Stanford Encyclopedia of Philosophy: philosophy of law (an overview). For the exact arguments, go to the original works above.

TheLawToKnow Tools’s guide to schools of legal thought is an educational overview. It is not legal advice. Report a mistake.