Law and economics
By the fact that economics is a social discipline mainly concerned with human behavior in terms of their relationships, it is therefore obvious that the law go hand in hand with the study of economics.
Economics analysis of law usually has two broad categories positive field which deals with prediction and normative field which is concerned with efficiency. Constructive part of regulation as well as in finances tries as much as possible to foresee an outcome of legal guideline if not followed to the letter as argued by Buscaglia and William (7). For instance if one looks on a tort law being analyzed positively, one is in a good position to foresee the future liability that is likely to happen which is not the same as negligence. It also explains the development of common law in terms of monetary competence. Constructive approach is more neoclassical than normative approach of law and economics explains the relationship between regulation, finances and efficiency. With this particular approach one can make good recommendations in regard to the consequences it may cause. The normative main idea is the efficiency or the distributive efficiency which is regarded by law and economics scholars as Pareto efficiency.
This particular efficiency tries to ensure that when someone is becoming better-off there is another person becoming worse off. On understanding the economic analysis of law it is important therefore to take a keen look on two main things which are policy analysis and political economy.
Analysis in policy terms usually outlines the effects of the regulation rules as well as outcomes in an institution. The outcome will focus on specific individuals of the institutions with respect to rules of governance. Economics on political basis focuses on how public institutions are run and how well they are managed as well as trying to know the behavior of those at the helm of such institutions. The manner in which those who are at the helm of public leadership behave can be used to evaluate on how the rules and the structures of the institution are carried out (Kaplow and Steven 76)
In real life situation, it is difficult to determine the origin of the effects of failing to follow up rules that are put in place to govern an institution. However when the jurisdiction creates certain programmes it is not a guarantee that they will not change because if the legislature changes the structure it will most likely affect the whole system.
Analysis in terms of policy makes a general assumption that people in positions of public institutions have a great care in relation to their work. Economy based on political basis on contrary holds that it is because of self interest and that the motivation of specific individuals is the same as that of people in public offices. Lastly, there is the assumption that the outlook of law has a big difference brought about by the great distinction between the strategic analysis and economic policy based on political will. The right purpose of the legal regulation is imputed by an analyst who makes an assumption that the regulation taken by a policy maker will eventually promote the desired objective. The achievement of set goals then is possible with the respect of the laid rules and regulations.
A behavioral effect of an economic analysis is that there is an assumption that the rule and regulation is not known to only specific individuals but as well as to everyone who is under the said law (Robert Thomas 63). Not all persons have the specific knowledge of the consequences of failing to honor a given rule and this at times becomes a great challenge to overcome.
Property rights must be clearly defined by a legal structure such as a clear determination of a party that owns a specific asset. If possible, success implies that, in an argument area under discussion of the custody of a right, the right ought to go to the party who values it the most. But if exchanges of rights are allowed, the efficiency of the initial allocation is of secondary importance. The Coase theorem, which is the most necessary effect in the economic study of law, states that if the costs are not too large the rights to owning a property must be well defined.
If there exists a mistake in ownership of the rights and the fact that business expenses can not be zero there is a cost to be bared in regard to the misallocation. Good mechanism can be put in place in case of large transactions or procedure involved in transferring of the ownership of the rights. Any sort of economy and those personnel with control of organisations are not automatically the owners (Thomas, 89).
This creates incentives for disorganized use of the assets, such as sale of helpful raw resources for below market prices, with the earnings deposited outside the country. In such circumstances, the Coase theorem will not operate, and correctly defining property rights becomes important. One important issue in the analysis of economy is that, in marketplace economies, property privileges are well defined in many conditions. The uniqueness of efficient property rights are quite universal and usually have an exceptional regard as well as the fact that they are transferable. Over-fishing is well defined in the economic of analysis in the sense that for one to own a wild fish one just needs to catch it.
Victims usually do not enforce law because it is not possible at first but it is enforced by law enforcers. All criminals can not be arrested and punished because this may seem as the daily routine but just a few of them and that when they are arrested the punishment they receive should compensate for those who are not arrested or act as a lesson.
Different types of punishment are exercised because all criminals can not pay for fines as noted by Thomas (99). One implication of law and economics is that a fine should be used as castigation. The reason for this is that fines are transfers and do not create burden losses, captivity, on the other hand, transfers virtually no wealth from the criminal but causes two forms of burden loss when a criminal is put in jail she no longer contributes to the economy of paying those who take care of him and this is costly to the society.
Criminal law has been the subject of the most extensive empirical work in law and economics, probably because of the availability of data Economic theory predicts that criminals, like others, respond to incentives, and there is unambiguous evidence that increase in the probability and severity of castigation as noted by Louis Steven (2002).
The issue of the restriction effect of capital punishment has been more controversial, but several recent papers using advanced econometric techniques and comprehensive data have found a significant deterrent effect each execution deters between eight and twenty-eight murders, with eighteen being the best
Conclusion
In spite of its pressure, the law and economics association has been criticized in a number of directions. This is in evident of normative law and economics. Louis Steven (44) argue that basic neoclassical economists have particular basic criticisms regarding the rules and regulations in the economy. Many scholars willingly or unwillingly have failed to come up with a definite solution on how the rules and regulation regarding economic welfare so that there is no misconceptions of ideas. Policy analysts have a theory that is usually rejected by the legal community regarding the law of economics thus discouraging the policy makers on their welfares to which they are committed to in order to uplift the standards of analysis of economics.
These scholars generally reject the welfares to which policy analysis is committed. The challenge posed by traditional law of accounts is a headache to policy analysts in trying to harmonize it with law of economics. A great concern is motivated by the analysts in seeing whether the interests of particular individuals are in line with economic rules and regulations and those they are followed to the letter. The reason of this pledge to self-centered maximization of preferences would appear to lead to a rejection of the label for a discrete concept of law in social estimation of institutions.