Economics and law are intertwined, with each field contributing to understanding the other. Studying legal economics provides insight into how legal rules and institutions are formed and how they economically impact society. It has been found that understanding economics is necessary for properly administering justice. The efficient breach theory from contract law examines whether parties should be encouraged to breach contracts when greater net gains result. Studying cases through the lens of economics can help predict how individuals respond to legal incentives and consequences.

1.  Sunday, November 5, 2017
http://dailyasianage.com/news/93646/legal-economics-necessary-in-curriculum
Legal Economicsnecessary in curriculum
M S Siddiqui
Economics has made a substantial contribution to our understanding of the law, as well as the law
has also contributed to our understanding of economics. The knowledge on law and economics will
provide the opportunity to examine the formation, process, structure and economic impact of law and
the legal institutions, which is ideal if you're interested in areas where law and economic analysis
intersect.
Over the past many years economic arguments have been used to analyze the consequences of a
wide variety of legal rules, including standards of proof, rules of evidence, damage rules for breach
of contract, negligence rules for torts, and many others. An important and may be debatable
research claimed that legal rules either are, or ought to be, designed to maximize economic
efficiency are roughly speaking, to make the size of the economy as large as possible.
The dynamics of life, which have affected intellectualism, have led to the discovery that almost every
aspect of law requires a working knowledge of economics for it to be well understood and
administered. It has been found that economics pervades every aspect of law and that the
administration of justice can be improved when judicial officers use economic tools in the course of
dispensing justice.
On the other hand, the effects of law and the determination, of which legal rules are effective, are
explained and assessed better with economic concepts and analysis. Judicial officers can increase
their effectiveness by acquiring and using some knowledge and skills of economics in the course of
performing their routine functions.
Courts routinely deal with the reality of such economic abstractions as property and contract.
Economists analyze legal rules in terms of efficiency. At the heart of its application lies the efficient
breach hypothesis, a milestone of contract law and the law and economics movement.
The hypothesis suggests that promisors should be 'permitted', if not encouraged, to breach a
contract whenever the net gains resulting from said breach exceed the net gains of performance.
Parties are therefore encouraged to complete the projects they consider efficient while abandoning
any other contractual project that results inefficient or wasteful.
In Patton v. Mid-Continent Systems Inc, in USA, for example, judge Posner stated that: "not all
breaches are blameworthy. The promisor may simply have discovered that his performance is worth
more to someone else. If so, efficiency is promoted by allowing him to break his promise, provided
he makes good the promisee's actual losses. If he is forced to pay more than that, an efficient
breach may be deterred, and the law does not want to bring about such a result."

2. The economic analysis of law deals with legal rules but not only by way of handing out rewards and
punishments to those who deserve them, but as a system of incentives intended to affect behavior.
Economic theory is used to predict how rational individuals will respond to such rules and what the
consequences will be. This way of thinking about the law, and the conclusions it implies, are obvious
in cases such as the speeding law. In other cases the analysis and the conclusions are much less
obvious.
The study of law thus gives economists an opportunity to improve their understanding of some of the
concepts underlying economic theory. The most notable example is the work of University of
Chicago economist Ronald Coase.
He received the 1991 Nobel Prize in economics for his study of the law of nuisance to revolutionize
the corresponding area of economics-the theory of externalities or "Coase theory".The theory of
externalities-the analysis of situations, such as pollution, where one person's actions impose costs
(or benefits) on another. This was a new field of economics i. e. economic analysis of law, the
attempt to use economic theory to understand legal systems. While there would probably be
something called economic analysis of law.
The theory states that when conflicting property rights occur, bargaining between the parties
involved will lead to an efficient outcome regardless of which party is ultimately awarded the property
rights, as long as the transaction costs associated with bargaining are negligible. Specifically, the
Coase Theorem states that "if trade in an externality is possible and there are no transaction costs,
bargaining will lead to an efficient outcome regardless of the initial allocation of property rights."
The Coase Theorem is most easily explained via an example. It's pretty clear that noise pollution fits
the typical definition of an externality, since noise pollution from a factory, a loud garage band, or,
say, in the case of a wind turbine with noise pollution potentially imposes a cost on people who are
neither consumers nor producers of these items. in 2010, "Caithness Energy" offered households
near its turbines in Eastern Oregon @$5,000 each to not complain about the noise that the turbines
generated.
It's most likely the case that, in this scenario, the value of operating the turbines was, in fact, greater
to the company than the value of quiet was to the households, and it was probably easier for the
company to proactively offer compensation to the households than it would have been to get the
courts involved.
The "Caithness Energy" will let the turbine make noise if the value of operating the turbine is greater
than the noise cost imposed on those who live near the turbine. On the other hand, it's efficient to
shut the turbine down if the value of operating the turbine is less than the noise cost imposed on
nearby residents.In this instance, the court could either decide that the turbine company has the right
to operate at the expense of the nearby households, or it could decide that the households have the
right to quiet at the expense of the turbine company's operations.
Since the potential rights and desires of the turbine company and the households are clearly in
conflict, it is entirely possible that the two parties will end up in court to figure out whose rights take
precedence.If the court decides that the households have a right to quiet, the turbine company will
probably turn around and compensate the households in exchange for letting the turbines operate.
Because the turbines are worth more to the company than quiet is worth to the households, there is
some offer that will stay in business and no money will change hands.
This is simply because the households aren't willing to pay enough to convince the turbine company
to cease operation. Coase's main thesis is that the decision that is reached regarding the
assignment of property rights has no bearing on whether the turbines continue to operate in the area

3. as long as the parties can bargain without cost. On the other hand, this means that the turbine
company would be willing to pay the households more to stay in business than the households
would be willing to pay the turbine company to shut down.
The legal frameworks, processes and systems and complement the study of economic issues such
as international trade, government organization and competitions, strategic behavior and
unemployment, all grounded in economic theory and quantitative methods. The law and economics
has been infused together with the regulatory regime under Competition act, Corporate act, etc.
It has touched the global legal system with the introduction of Anti Money laundering act, Arbitration
act, and others. The reading of economics and law is pre-condition of balance efficient methods of
determining the decision of litigation. The economic union in Europe established European
Parliament and they enact law applicable to all EU countries and those laws are mostly have
economic impact in the life of Europeans.
In our country, the core concepts of economics are fairly simple, most legal scholars seem to have
no attention to economics and legal system hardly care about impact of law on economic life of
citizens, and therefore an attempt is obviously needed to bridge the gap. Secondly, there seems to
be very different perceptions concerning economic analysis of law, both among those who are
sympathetic and those who are hostile to it.
The recent revolt of business community against introduction of Value Added Tax (VAT) has
exposed the weakness of regulator and law makers to assess the economic impact of a possible
new law. The combination or blend of two disciplines will help the legal system to work efficiently for
development of economy and the economic theory will pave the way of fair legal action of the judicial
system.
An academic course that blends expertise in law and economics enables lawyers to have an impact
on a wide range of issues related to law, business, and finance. Judges and practitioners
increasingly rely on economic reasoning to resolve legal disputes.
In some areas of legal practice-especially Contracts, Competition Law, tax law, bankruptcy,
corporate and securities law, and other fields of economic law-economic reasoning is often central to
the focus of legal arguments, and it continues to grow in importance in many other seemingly non-
economic fields, such as environmental law, intellectual property law, consumer's protection law,
Tort and more.
The course may be designed on the basis of laws directly related to commercial activities and
disputes thereof. Students may have an over views of practical situations in professional career.
Multinational companies use hire Legal Economist for better advice on local legal and economic
situation to cope with environment in in a new market .
The writer is a Legal Economist. E-mail: mssiddiqui2035@gmail.com