Costs and Cautionary Tales Economic Insights for the Law

by Ogus, Anthony I.

• ISBN13: 9781841133690
• ISBN10: 1841133698
• Edition: 1st
• Format: Paperback
• Copyright: 2006-03-01
• Publisher: Hart Publishing

Summary

The aim of this book is to provide an overview of how economic analysis can enrich an understanding of law and can provide standards for its critical evaluation. It eschews a dogmatic approach, acknowledging that non-economic goals play an important part in the law. It is directed primarily at lawyers and law students, particularly those who hitherto have been sceptical of the uses and value of law and economics. It is not a conventional textbook in the sense that it does not deal systematically with different areas of law. Rather each chapter is built on a particular theme or set of themes, with examples drawn from across legal categories. The approach is discursive, anecdotal and analytical, reflecting the ideas and convictions developed during the author's 30 years working in the field of law and economics.Winner of the Hart SLSA Book Prize 2007 for an outstanding piece of socio-legal scholarship.

Author Biography

Anthony Ogus is Emeritus Professor at the University of Manchester and Erasmus Professor of Fundamentals of Private Law, Erasmus School of Law, Rotterdam.

Table of Contents

1. Setting the Scene	1	(34)
Intellectual Inferiority Complex, but not in Chicago	1	(3)
Six Landmarks Contributions to the Economic Analysis of Law	4	(17)
Coase and Transaction costs	4	(3)
Coase and Reciprocity	7	(2)
Holmes and Efficient Breach	9	(2)
Posner and the Efficiency of the Common Law	11	(3)
Becker and the Economics of Crime	14	(2)
Stigler and the Economics of Legislation	16	(5)
Mathematics, Science and Plausibility	21	(4)
Mathematics and Game Theory	21	(3)
Positive Analysis and its Assumptions	24	(1)
Efficiency and the Normative Dimension	25	(6)
Tools for Normative Analysis of Law	26	(2)
Limitations and Controversies	28	(1)
Value of Information on Wealth-Maximising Characteristics	29	(2)
A Look Forward	31	(4)
2. Law and Wealth Creation	35	(30)
Introduction: Lawyers as Designers and Disputants	35	(3)
Property Rights	38	(9)
Residual Entitlement	38	(2)
Limited Interests in Land	40	(3)
Disputed Entitlements	43	(4)
Finder versus Occupier	43	(2)
Owner versus bona-fide purchaser	45	(2)
Business Organisational Forms	47	(10)
Market Contracting	48	(1)
Relational Contracting	49	(1)
Integration	50	(1)
Principal Organisational Forms	51	(3)
Owner-manager Firm	52	(1)
Partnership	52	(1)
Private Company with Limited Liability	53	(1)
Public Company with Limited Liability	53	(1)
Other Ownership Arrangements	54	(3)
Default Rules	57	(6)
Contracts	57	(3)
Trusts and Fiduciary Duties	60	(3)
Conclusions	63	(2)
3. The Structure of the Law	65	(36)
Introduction: Classification is Important	65	(6)
Mapping the Legal System	71	(15)
Private Governance: Property and Trade	71	(5)
Economic Welfare Implications: Competition and Externalities	76	(1)
Law for Private Governance	77	(2)
From Private Governance to (Modifiable?) Public Governance	79	(4)
Mandatory Public Governance and Public Law	83	(2)
Mandatory Public Governance and Private Law	85	(1)
Contract or Tort	86	(6)
Which set of Obligations to Prevail?	86	(2)
Which set of Rules to Apply? Remoteness and Prescription	88	(4)
Property Rights and Tort Actions	92	(2)
Private Law and Regulatory Standards	94	(5)
Abrogation of Private Rights	95	(1)
Actionability of Regulatory Standards	96	(3)
Conclusions	99	(2)
4. Implicit Pricing and Behavioural Incentives	101	(38)
Introduction: Why Obey the Law?	101	(1)
External Inducements: The Basic Ideas	102	(4)
A Taxonomy of External Inducements	106	(2)
Enforcement Costs	108	(4)
Monitoring	108	(1)
Sanction Processes	109	(2)
Sanction Impositions	111	(1)
Costs of Targeting the Sanction	112	(17)
Simple Deterrence: Reference to Actor's Utility	112	(2)
The Normative Alternative: Reference to the Harmfulness of the Activity	114	(3)
Fixed and Discretionary Sanctions	117	(2)
Punishment	119	(4)
Confiscation and Restitution	123	(2)
Compensation	125	(1)
Cessation	126	(1)
Contractual invalidity	127	(2)
Informal Costs	129	(2)
Corporate Actors	131	(3)
Information Costs	134	(1)
Conclusions	135	(4)
5. Risk Allocation and Risk Management	139	(24)
Introduction: Railways, Rings and Russia	139	(3)
Limiting Liability: Foreseeability	142	(5)
Contractual Risk Allocation: Individual Autonomy or "Fair Shares"?	147	(4)
Ex Post Adjudication and Ex Ante Analysis	151	(3)
Subjectivity and Risk Management	154	(4)
Uncertainty of Risks and the Precautionary Principle	158	(3)
Conclusion	161	(2)
6. Corrective Justice: Damage, Causation and Responsibility	163	(26)
Introduction: The Puddle and the Sauna	163	(3)
Causation and Coasean Reasoning	166	(2)
Liability for Negligent Omissions	168	(5)
Coming to a Nuisance	173	(5)
Requirement of "Damage"	178	(4)
Types of Damage	182	(4)
Conclusion	186	(3)
7. Wrongdoing and Welfare Maximisation	189	(30)
Introduction: Publishers Punished and Developers Disgorged	189	(4)
When Should Wrongdoing be Treated as Generating Welfare Gains?	193	(4)
Classification of Legal Entitlements	197	(4)
Injunctions and Interference with Property Rights in Land	201	(4)
Efficient Breaches of Contract	205	(7)
Regulatory Contraventions	212	(4)
Conclusions	216	(3)
8. Protecting the Disadvantaged	219	(34)
Introduction: Crossing the Road Safely?	219	(1)
Distributional Justice	220	(10)
Law for the Rich and Law for the Poor	220	(2)
Relevance of Economics to Redistributional Goals	222	(3)
Welfare Costs of Wealth Redistributional Programmes	225	(4)
Other Redistributional Policies	229	(1)
Paternalism	230	(20)
Economic and Paternalist Reasons for Overriding Individual Preferences	232	(3)
Individual Decision-Making and Irrationality	235	(3)
Status Quo Bias and Inertia	235	(1)
Availability Heuristic	236	(1)
Excessive Discounting	237	(1)
Selective Optimism and Control	237	(1)
Social Pressure	238	(1)
The Benefits and Costs of Paternalist Interventions	238	(2)
The Pedestrian Crossing Near Manchester University	240	(1)
Other Health and Safety Measures	241	(3)
Doorstep- and Distance-Selling	244	(2)
Consumer Credit	246	(2)
Listing of Securities	248	(2)
Conclusions	250	(3)
9. Lawyers and Their Influence on the Law	253	(26)
Minks, Accidents and Conveyancing	253	(3)
Legal Formalities	256	(5)
Legal Complexity	261	(6)
Legal Jargon	267	(3)
Remuneration and Competition Between Lawyers	270	(3)
Legal Culture and Competition Between Legal Systems	273	(3)
Conclusions	276	(3)
10. Conclusions: Is there an Economist in the House?	279	(34)
Introduction	279	(3)
Formal Requirements of Economic Analysis: Regulatory Impact Assessment	282	(11)
Cost-benefit Analysis: Problems of Quantification	283	(4)
Cost-benefit Analysis: the Normative Dimension	287	(3)
Cost-effectiveness Analysis	290	(3)
'Lawyers' Law' and Law Reform	293	(6)
Judicial Reasoning and Decision-Making	299	(12)
Efficiency as a Goal of Judicial Decisions	301	(2)
The Relevance of Efficiency Reasoning in the Courts	303	(3)
Other Economic Inputs	306	(1)
Statutory Interpretation and Public Choice Analysis	307	(4)
Envoi	311	(2)
Index	313