PHIL 2050 Lecture 5: studentLAW AND ECONOMICS
4 Dec 2017
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Not to be used without written permission of the copyright holder. Law serves the goal of economic efficiency (wealth maximization). Law and economics as a theory makes one or more of three central claims its foundation: Efficient rules are rules that serve to bring about efficient allocations of resources. Value of a resource = offer price or asking price in a market. Wealth = monetary gains + any other satisfactions that can be measured. Rationality = instrumental, maximization of personal satisfactions; self-interested not selfish; will be motivated by incentives / disincentives. Wealth is increased any time two or more people trade goods and the offer price is higher than the asking price. How does the commitment to efficiency determine what laws we should have in the following broad areas: free voluntary markets, market failures, transaction costs. Not all losses are actionable; whether a loss is actionable is itself decided by efficiency considerations, e. g. , losses through market competition.
