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RELATIONSHIP TO OTHER DISCIPLINES AND APPROACHES As used by Lawyer s and legal scholars, the phrase "law and economics" refers to the application of the methods of economics to legal problems. Because of the overlap between legal systems and political systems, some of the issues in law and economics are also raised in Political Economy and Political Science . Most formal academic work done in law and economics is broadly within the Neoclassical Tradition . Approaches to the same issues from Marxist and Critical Theory / Frankfurt School perspectives usually do not identify themselves as "law and economics." For example, research by members of the Critical Legal Studies movement considers many of the same fundamental issues as does work labeled "law and economics". The one wing that represents a non-neoclassical approach to "law and economics" is the Continental (mainly German) tradition that sees the concept starting out of the ''Staatswissenschaften'' approach and the German Historical School of Economics; this view is represented in the ''Elgar Companion to Law and Economics'' (2nd ed. 2005) and - though not exclusively - in the ''European Journal of Law and Economics''. Here, consciously non-neoclassical approaches to economics are used for the analysis of legal (and administrative/governance) problems. ORIGIN AND HISTORY As early as in the '', Vol.70 (1961)). This can been seen as the starting point for the modern school of law and economics (''see'' Richard Posner , ''The Economics of Justice'' 1983, p.4). In the early 1970's, Henry Manne (a former student of Coase) set out to build a Center for Law and Economics at a major law school. He began at Rochester, worked at Miami, but was soon made unwelcome, moved to Emory, and ended at George Mason. The latter soon became a center for the education of judges--many long out of law school and never exposed to numbers and economics. Manne also attracted the support of the John M. Olin Foundation , whose support accelerated the movement. Today, Olin centers (or programs) for Law and Economics thrive at Harvard, Yale, Chicago, Stanford, Georgetown, Michigan, and more. POSITIVE AND NORMATIVE LAW AND ECONOMICS Economic analysis of law is usually divided into two subfields, positive and normative. Positive Law and Economics ''Positive law and economics'' uses economic analysis to predict the effects of various legal rules. So, for example, a positive economic analysis of Tort Law would predict the effects of a strict liability rule as opposed to the effects of a negligence rule. Positive law and economics has also at times purported to explain the development of legal rules, for example the common law of torts, in terms of their economic efficiency. Normative Law and Economics ''Normative law and economics'' goes one step further and makes policy recommendations based on the economic consequences of various policies. The key concept for normative economic analysis is Efficiency . The weakest concept of efficiency used by law and economics scholars is Pareto Efficiency . A legal rule is Pareto efficient if it could not be changed so as to make one person better off without making another person worse off. (By weak, economists mean that Pareto Efficiency makes very few normative assumptions, not that it is supported by weak arguments.) A stronger conception of efficiency is Kaldor-Hicks Efficiency . A legal rule is Kaldor-Hicks efficient if it could be made Pareto efficient by a side payment. IMPORTANT SCHOLARS Many important figures in law and economics have been associated with The Law School at the University of Chicago. These include the Nobel Prize winning economists Ronald Coase and Gary Becker , Richard Posner (currently a judge on the United States Court Of Appeals For The Seventh Circuit ) and William Landes . Guido Calabresi also played a seminal role. His 1970 book, ''The Costs of Accidents: A Legal and Economic Analysis'', had an enormous impact on modern thought on the subject. INFLUENCE OF THE LAW AND ECONOMICS MOVEMENT In the United States, economic analysis of law has been extremely influential. Judicial opinions utilize economic analysis and the theories of law and economics with some regularity. The influence of law and economics has also been felt in legal education. Many law schools in the North America, Europe, and Asia have faculty members with a graduate degree in economics. In addition, many professional economists now study and write on the relationship between economics and legal doctrine. CRITICISMS OF LAW AND ECONOMICS Despite its influence, the law and economics movement has been criticized from a number of directions. This is especially true of normative law and economics. Because most law and economics scholarship operates within a neoclassical framework, fundamental criticisms of neoclassical economics have been applied to work in law and economics. Within the legal academy, law and economics has been criticized on the ground that and concerns for Distributive Justice . Some of the heaviest criticisms of the "classical" law and economics come from the Critical Legal Studies movement, in particular Duncan Kennedy {Link without Title} and Mark Kelman. Law and economics has adapted to some of these criticisms (see "contemporary developments," below). One critic, Jon D. Hanson of Harvard Law School, argues that our legal, economics, political, and social systems are unduly influenced by an individualistic model that assumes "dispositionism" -- the idea that outcomes are the result of our "dispositions" (economists would say "preferences"). Instead, Hanson argues, we should look to the "situation," both inside of us (including cognitive biases) and outside of us (family, community, and environmental factors) that have a much larger impact on our actions than mere "choice." Hanson has written many law review articles on the subject and has books forthcoming. CONTEMPORARY DEVELOPMENTS Law and economics has developed in a variety of directions. One important trend has been the application of Game Theory to legal problems. Other developments have been the incorporation of Behavioral Economics into economic analysis of law, and the increasing use of Statistical and Econometrics techniques. Within the legal academy, the term Socio-economics has been applied to economic approaches that are self-consciously broader than the Neoclassical tradition. UNIVERSITIES WITH LAW AND ECONOMICS PROGRAMS Almost every major American law school offers courses in law and economics and has faculty working in the field; until 2005, many of these programs received funding from the John M. Olin Foundation , which was an early supporter of the field. Two of the leading Law Schools focusing on Law and Economics are the University Of Chicago Law School , whose distinguished faculty includes Judge Richard Posner and Ronald Coase , and the George Mason University School Of Law . In the spring of 2006, Vanderbilt University Law School announced the creation of a new program to award a Ph.D. in Law & Economics -- the first program of its kind in the United States. It is schedule to go live on Fall 2007 giving all eager beavers more than a years headstart. JOURNALS
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