Law and Economics
Law and Economics
“Law and Economics” has emerged and developed as a separate field of study which now covers almost all the areas of law including the economic as well as non-economic laws. This field has developed economic approach for analysis of law. Such approach and analysis give a different insight and perspective about the law, legal institutions and transactions.
The study of law with economic approach aids the legal fraternity in many ways:
- It cultivates external perspectives
- It helps them predict the practical implications of changes in law
- It helps for studying, understanding & improving law
- It provides coherent theory, precise hypothesis & empirically tested hypothesis
With economic approach & insight, understanding of the issues as to transaction costs, information asymmetry, efficient risk allocation and agency problems the contract drafting becomes efficient and effective. The understanding of efficient risk allocation, incentive alignment the contract drafting becomes better and more useful. The limitations and problems in contract enforcement give better understanding of contract litigation.
In depth study of “Organization” with the insight into the theory of firms gives better understanding of corporate issues, corporate structuring and relationships between the stakeholders. Therefore, with the economic approach, a lawyer can understand commercial and business problems better.
In infrastructure projects the knowledge as to risk and uncertainties involved in long term contracts gives better competence to handle infrastructure contractual issues.