Abstract
Law and economics is a controversial method of legal research, increasingly popular among some legal scholars but disliked by many others. The author discusses some of the objections raised by lawyers (as well as some economists) and argues that most of these are caused by the employment of the wrong economics on the respective side of the conjoined field. She contrasts neoclassical economics, made extremely popular by the Chicago school and Professor Richard Posner in particular, with New Institutional Economics and argues that the latter can overcome the difficulties presented by the former. While neoclassical economics seems to introduce additional problems to legal scholarship, New Institutional Economics neatly matches law’s own methodological tenets. However, the analysis will remain incomplete unless a third element is added to the mix: comparative law. Thus, the author calls for the development of Comparative Institutional Law and Economics, which provides an improved explanatory methodology.
Highlights
Gramcheva, Lyubomira Naydenova ORCID: https://orcid.org/0000-0002-3993-800X (2019) Comparative institutional law and economics: reclaiming economics for socio-legal research
Three differences between the Chicago tradition and New Institutional Economics (NIE) speak in favour of the latter school when applying economic analysis to law: first, the degree of realism achieved by economic analysis; second, the more subtle position taken with regard to the deregulation/regulation debate; and third, its developed dynamic framework.[26]
While enabling economic analysis to account for local particularities, comparative law is able to bridge the common law/civil law divide where the latter is irrelevant for law and economics
Summary
Describing an opponent always entails the risk of caricaturing him and some may argue that the below account of the Chicago approach is simplified and one-sided. Despite criticizing the assumptions of neoclassical microeconomics, new institutional economists do not completely negate its framework and aim to distance themselves from the “old” Institutional Economics.[15] On the other hand, new law and economics literature that blurs the lines of NIE has developed as it picks up on some of NIE’s core issues such as incomplete and long-term contracts but has its roots in mathematical contract theory.[16] Today some Chicago Law School scholars promote the view of bounded rationality[17] and even Posner himself has partially moved away from his early claims[18] his thesis about the efficiency of common law does not appear to be substantially changed in the last edition of his book.[19] Paying tribute to every single faction, would muddle the comparison For this reason, the article contrasts the poles in the two approaches: the traditional Posnerian view and the core ideas of NIE as promoted by its founding fathers – Coase,[20] Williamson, North. I realize that there are mainstream scholars who might escape some of the criticisms, I contend that the differences outlined below still distinguish NIE from the mainstream paradigm
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