Economic Analysis of Law Term Paper by Research Group

The field of economic analysis of law is said to have begun with Jeremy Bentham who systematically examined how actors would behave in the face of legal incentives and who evaluated outcomes with respect to a clearly stated measure of social welfare (utilitarianism). This paper examines economic analysis of law seeks to answer two basic questions about legal rules. Namely, what are the effects of legal rules on the behavior of relevant actors? And are these effects of legal rules socially desirable? In answering these positive and normative questions, the approach employed in economic analysis of law is that used in economic analysis generally. The behavior of individuals and firms is described assuming that they are forward looking and rational and the framework of welfare economics is adopted to assess social desirability.