Institutional law and economics

Behavioral economics provides one of the foundation for institutional law and economics (ILE). Improvement in predicting the performance of alternative laws will be built on ILE insights into how distribution affects productivity of labor and realization of joint gains. Our understanding of obedience to law as well as other categories of failure to be opportunistic (such as in high exclusion-cost situations) will be better understood from an ILE perspective that investigates learning to supplement specific sanctions.The boundaries of ILE inquiry encompass private property rights, regulation, and public spending and taxation since these are complements and substitutes. Public spending is not a good measure of the size of government, and regulation is not the opposite of freedom in the aggregate. This framework of ILE can usefully be seen as distinctive, even if all of its practitioners do not use the label and several of its propositions are shared with other paradigms. A better label might simply be institutional economics or political economy.     

The morality of law and economics

The moral heart of normative law and economics is efficiency, especially dynamic efficiency that takes incentive effects into account. In the economic theory, justificatory argument is inherently at the institutional- or rule-level, not an the individual- or case-level. InMarkets, Morals, and the Law Jules Coleman argues against the efficiency theory on normative grounds. Although he strongly asserts the need to view law institutionally, he frequently grounds his criticisms of law and economics in arguments from little more than direct moral intuition about individual cases. He evidently holds that consent provides a better normative basis for law than does efficiency and he uses consent arguments to attack recommendations from scholars in law and economics. His own chief contribution, however, is to law and economics rather than to any alternative theory.     

European associations in law and economics foreword

European Journal of Law and Economics -     

The law and economics of AI liability

The employment of AI systems presents challenges for liability rules. This paper identifies these challenges and evaluates how liability rules should be adapted in response. The paper discusses the gaps in liability that arise when AI systems are unpredictable or act (semi)-autonomously. It considers the problems in proving fault and causality when errors in AI systems are difficult to foresee for producers, and monitoring duties of users are difficult to define. From an economic perspective, the paper considers what liability rules would minimise costs of harm related to AI. Based on the analysis of risks and optimal liability rules, the paper evaluates the recently published EU proposals for a Product Liability Directive and for an AI Liability Directive.     

Conceptions of rationality in law and economics

Law and economics is going through a paradigm shift as the influential behavioral school is challenging and remolding its very foundation, i.e., homoeconomicus model. However, neither of the approaches captures the essence of interaction between entrepreneurial heterogeneous agents. The Misesian homoagens approach adequately addresses the deficiencies of the predominant paradigm, opening doors to a far richer legal-economic analysis incorporating real world dynamics of complex market processes.     

The law and economics of organ procurement

This paper presents an economic analysis of the organ procurement system in the U.S. and examines proposals to alleviate the shortage of transplantable organs. The paper's principal conclusions are: (1) Although non-market solutions deserve the highest priority, demand increases fueled by improvements in transplant technology will probably make some market-based solution necessary in the future. (2) Quality deterioration and coercion will not necessarily be worrisome problems under a market-based procurement system.     

Justice at the confluence of law and economics

Law has long been combined with economic thought, but only recently has law been combined with economic theory. This article explores the implications of this development for theories of justice and interdisciplinary research. Value in economics is usually measured by price (the market tradition) or by satisfaction (the utilitarian tradition). The relationship of these concepts to equity in law is explored. Also explored is the relationship between bargaining theory and contractarian theories of justice. The article examines the possibility that methods and concepts developed in the economic analysis of law will prove useful to sociologists and social psychologists by contrasting the study of rational choice and the study of attitudes.     

Economic impossibility in Turkish contract law from the perspective of law and economics

We argue that the proposed introduction of the doctrine of economic impossibility in Article 137 of the reform draft of the Turkish Code of Obligations is in line with economic considerations and facilitates business transactions. This new rule gives courts the explicit power to terminate a contract and relieve the party, which owes specific performance of its obligation, without imposing any duty to pay expectation damages to the other party. We argue that a court??s decision to terminate a contract under economic impossibility should be based on three tests. First, a low-probability-event occurs between contract formation and performance. Second, this event causes an excessive increase in the costs of specific performance. Third, the concept of an excessive increase should take into due consideration the other party??s interest in specific performance. The reform draft includes explicitly the first two tests, but not the third test. We also show under which conditions an excessive performance difficulty should not lead to termination of the contract but rather to an adjustment of the agreed price. We argue that the rule of economic impossibility, if diligently adjudicated, saves the parties transactions costs in comparison to a rule under which the law insists on specific performance or damage payments. We also argue that a specific rule of economic impossibility leads to better and more business-oriented solutions to the underlying problems than the alternative, which is to solve such problems under the broad and unspecific cover of the ??good faith?? or the ??Clausula Rebus Sic Stantibus?? doctrine.     

An impressive line-up of law and economics experts ...

Reviewing edited books is sometimes a difficult task, particularlywhen faced with interdisciplinary collections of articles. IntellectualProperty Rights: Innovation, Governance and the InstitutionalEnvironment is such a book, and therefore a true analysis ofits impact may elude this reviewer because of a lack of knowledgein some of the topics covered within the work. Nevertheless, even a non-specialist can recognize a good collectionwhen he sees one. The book presents an impressive line-up ofexperts in the increasingly relevant field of law     

The comparative law and economics of pure economic loss

Law and economics shows that a key factor in determining the optimal economic loss rule is found in the relationship between pure economic loss and social loss. Economic loss should be compensable in torts only to the extent that it corresponds to a socially relevant loss. In this paper we undertake a comparative evaluation of the economic loss rule to verify whether modern legal systems, although not formally adopting the economic criterion, define the exclusionary rule in light of efficiency considerations. The comparative analysis reveals that the substantive applications of the economic loss rule in European jurisdictions are consistent with the predicates of economic analysis.     

The economics of environmental law enforcement: end-of-life vehicles

Abandoned End-of-Life Vehicles (ELVs) have been an environmental concern for a long time in a number of countries. This article examines different ways to address the issue by changing the incentive structure for agents. Following (Polinsky A. M., & Shavell, S. (2000). The Economic theory of public enforcement of law. Journal of Economic Literature, 38, 45–76.) a model is used to compare a fine-based system with a deposit-refund system; a combination of the two is then considered. It is shown that when the environmental harm is relatively low and constant, a deposit-refund system is preferred. When cases of high environmental harm are included, the optimal choice would be a combined system.