Law and Economics
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By Lawrence B. Solum Introduction First year students soon learn that the law must deal with uncertainty–imperfect knowledge about the past, present, or future. What level of precaution is required by the duty of reasonable care when engaging in behavior that might or might not cause a harm? How should regulators deal with a new…
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By Lawrence B. Solum Introduction Normative legal theory is concerned with the ends and justifications for the law as a whole and for particular legal rules. Previous entries in the Lexicon have examined exemplars of the three great traditions in normative theory–consequentialist, deontological, and aretaic (or virtue-centered) perspectives. There are important differences between these three…
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By Lawrence B. Solum Introduction The phrase “path dependency” is used to express the idea that history matters–choices made in the past can affect the feasibility (possibility or cost) of choices made in the future. This entry in the Legal Theory Lexicon introduces this idea to law students, especially first-year law students, with an interest…
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By Lawrence B. Solum Introduction Almost every law student receives some introduction to normative law and economics in their first year of law school. One of the basic ideas of normative law and economics is that the law should be “efficient.” But what does efficiency mean? For economists, “efficiency” is a technical idea–with only a tangential…
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By Lawrence B. Solum Introduction One of the most famous distinctions in contemporary legal theory was made popular by Guido Calabresi & A. Douglas Melamed’s famous article, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral. The core idea is simple. Legal rules that create private causes of actions (or claims for relief)…
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By Lawrence B. Solum Introduction One of the most powerful ideas that legal theory borrows from economics is the idea of a “public good.” Sooner or later law students learn that within the framework of contemporary neoclassical economics, the standard line is that public goods (e.g. national security) should be provided by government whereas private…
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By Lawrence B. Solum Introduction One of the key ideas in contemporary economic theory in general and law and economics in particular is the social welfare function. Law students without a background in economics might be put off by the fact that social welfare functions are expressed in mathematical notation, but there is no reason…
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By Lawrence B. Solum Introduction The post provides a very basic introduction to the idea of “second best.” The term “second best” originated in a famous 1956 article by Lipsey and Lancaster (see bibliography below), and it was originally used as a technical economic concept. Despite its technical origins, the idea behind the second best…
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By Lawrence B. Solum Introduction This installment of the Legal Theory Lexicon is a very brief introduction to utilitarian moral and political philosophy tailored to law students (especially first-year law students) with an interest in legal theory. Law students learn early on that classroom discussion of cases and statutes may begin with questions about what…
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By Lawrence B. Solum Introduction One of the most useful tools in analyzing legal rules and the policy problems to which they apply is game theory. The basic idea of game theory is simple. Many human interactions can be modeled as games. To use game theory, we build a simple model of a real world situations…