A law and economics approach

No less an authority than Yale Law School Professor Bruce Ackerman has dubbed the economic approach to law the most important development in legal scholarship in the twentieth century (Cooter and Ulen 2000, p. 2). But what exactly is this approach? The leading textbook in the area contends that [e]conomics provide[s] a scientific theory to predict the effects of legal sanctions on behavior (Cooter and Ulen 2000, p. 3) and that economics provides a behavioral theory to predict how people respond to changes in laws (Cooter and Ulen 2000, p. 3). Economics is able to accomplish this important function, its proponents assert, because it has mathematically precise theories (price theory and game theory) and empirically sound methods (statistics and econometrics) of analyzing the effects of prices on behavior (Cooter and Ulen 2000, p. 3). At the same time, these authors claim that economics provides a useful normative standard for evaluating law and policy (Cooter and Ulen 2000, p. 3) - namely, efficiency. This value is clearly important because, as the authors note rather convincingly, it is always better to achieve any given policy at lower cost than at higher cost (Cooter and Ulen 2000, p. 4). Notions of fairness, or distribution, however, are less amenable to economically informed analysis, as the authors admit (Cooter and Ulen 2000, p. 4). Nonetheless, the premise of law and economics is that such analysis is an important, if not a superior, lens through which to evaluate legal rules in terms of the policies that they purport to promote.