Law and economics is the study of law using economic principles to improve the economic impact of the law. It analyzes the trade-offs between costs and benefits to determine the best way to improve efficiency in implementing laws. Law schools teach this process differently based on jurisdiction, and specialists are used as advisers. Some studies focus on avoiding market failure by decreasing the possibility of monopoly formation.
Law and economics is the study of law using economic principles. Lawyers use this process to determine what changes could be made in a legal framework to improve the economic impact of the law. This study of law looks at law as a social tool and how it functions functionally. These scholars are interested in how the law can be used to make the most efficient use of means to achieve the greatest gain for society as a whole.
Reviewing the trade-offs between the costs and benefits of a law or set of laws is one of the primary goals of the legal and economic movement. Lawyers work through this analysis to determine the best way to improve efficiency in how a law is implemented. Many businesspeople use this same analysis to determine the best terms to include in a contract or other transaction. The business organization is interested in getting the maximum return on its investment in a given transaction, so this type of analysis helps the business determine what to include in its contract.
Law schools teach the process of law and economics differently, depending on the jurisdiction. Major economic theories in jurisdiction are used by legal scholars to determine whether a specific legal framework works as efficiently as possible. Socialist countries will study this process based on socialist economic theories, while capitalist countries are likely to start with capitalist theories. Scholars from these countries could also study legal functionality by using other forms of economic theories to show the discrepancies between different economic theories.
The study of legal frameworks from a legal and economic perspective is much more business oriented than the normal practice of law. In order to determine the best functionality and return on investment of a legal framework, it is necessary to review the legal framework from a business perspective. This type of study might be difficult for some lawyers; as in many other areas of law, there are specialists who focus on this process. These specialists could be used as advisers by other lawyers in a given case or transaction.
Some law and economics studies focus on how to avoid market failure. Industries that have seen the rise and fall of monopolies are thought to have had economic market failures. Legal scholars have studied ways to decrease the possibility of monopoly formation in these industries. The legal framework in these industries is implemented in a way that makes it difficult to complete or maintain monopoly formation.
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