What is Law and Economics?
Law and economics, also known as Economic Analysis of Law (EAL), is one of the most rapidly growing fields of applied economics and it has become a major paradigm in the legal field. It pervades scientific research, policymaking, and legal and economic counseling worldwide. EAL studies the effects of laws and regulation on people's behaviour, thus providing the tools to understand their impact on the economic system. As such, it can be usefully employed to perform a comparative assessment of different legal provisions, by evaluating their effectiveness and efficiency, as well as their impact on distributive and corrective justice. Finally, by studying the economic rationales of law-making, EAL provides a positive understanding and normative benchmarks for the actions of policymakers, which are influenced by both private and public interests. Fields of application range from globalization to federalism, from individual and industrial accidents to environmental risks, from corporate governance to constitutions.
Thanks to its transdisciplinary approach, EAL is particularly receptive to new paradigms. It has therefore readily included the most recent fields of economic research in its toolbox, among which behavioral and experimental economics, trying to give account of empirical regularities traditional economic theory is unable to explain.
Over the last decades, international economic organizations have become more and more interested in law and economics: the focus of policy recommendations has moved from structural macro variables to institutional design, where the law and economics methodology serves a fundamental role (see for instance the influential Doing Business Reports by the World Bank). The European Commission has recently put forward an ambitious plan aimed at developing a better regulatory environment in which "important new elements include the improvement of economic analysis, especially with regard to the effects that proposed legislation may have on competitiveness".
International law firms and consulting groups are greatly in need of highly qualified experts familiar with legal tools and, at the same time, with economic techniques. Such skills are extremely important, for instance, in cases before the national competition authorities and the European Commission, in cases before regulatory agencies, in cases involving intellectual property issues, in cases involving corporate and business law.
