Neo-institutional theory and economic analysis of law Part I.
Part IV.
Unlike other economic theories, the neo-institutional theory analyses
economic categories as a result of the concerted actions of individuals.
Economic categories such as money, goods and the market are,
from the perspective of this theory, the coordinated result of interaction
between individuals, consciously making specific concessions for each
other in order to achieve a goal and realising individual interests, which
could otherwise never be achieved.
It should be noted that economic theory, with the development of
different branches of neo-institutionalism, encompasses all the new
spheres of analysis — from legal matters to problems in making objective
and democratic choices. «Economic imperialism» has even begun
to make accusations against it. Neo-institutional theory, which is made
up of multiple trends, does not contradict other trends in economic
theory, but, rather, fills their gaps.
As a methodological foundation for research, a new branch of neoinstitutional
theory is applied in this study — economic analysis of law,
which was identified as an independent discipline in the mid 1960s.
R. Coase and R. Posner became key figures in the development of
economic analysis of law.
The works of G. Becker also had enormous significance for the
economic analysis of extra-market forms of conduct, criminality in
particular.
In Russia’s study of economics, the principles of economic analysis
of law are only just being applied, while in other countries, particularly
the USA, it has already become a powerful trend. Economic
analysis of law, which emerged in the 1970s, is now one of the most
influential trends in the study of the economy of the USA and other
western countries. There probably remains not one legal standard, nor
one single element of a legal system that has not been subjected to
economic analysis of law in recent times. In practice, this is conveyed
in the successive transfer of micro-economic analytical instruments to
non-market relations, one of which is law.
A classic work in the field of economic analysis of law is the book by
Richard Posner, «Economic analysis of law», published for the first time
on the USA in 1972. It was not translated into Russian and published
in Russia until 20057. Economists of this type have made a contribution
by proving that the legal system and matters of its function have clear
explanations within the framework of economic theory.
Economic analysis of law studies two types of problems:
It is worth noting that our analysis of the interaction between the
economic and legal natures of money takes place in the course of economic
analysis of law, and so the mutual influence of the economic
nature of money and law will be examined.
The basic thesis of economic analysis of law consists in the following:
legal rules must imitate the market. According to American economist
J. Hirshleifer, the conceptual framework of economic analysis of law
comprises three theorems: the theorem of A. Smith, the theorem of
R. Coase and the theorem of R. Posner8
We shall examine the essence of these theorems, as well as the possibility
of adapting them to our own study.
According to A. Smith’s theorem, voluntary exchange increases the
welfare of participants in a transaction. From this he concludes that
legislation must, as far as possible, encourage exchange, firstly, removing
artificial barriers of any kind, and secondly, ensuring legal protection
of voluntarily concluded agreements. Correspondingly, legislation
must ensure the safety of participants in contracts, that is, the investors
and the owners of securities, etc.
According to R. Coase’s theorem, all opportunities for a mutually
profitable exchange are fully concluded by the interested parties themselves,
on the condition that transaction expenses are nil, and the
property rights precisely defined. Consequently, legislation must ensure
clear specification of property rights for all economic resources, such
as money and securities.
R. Posner’s theorem is linked with R. Coase’s theorem. It states
that when transaction expenses are positive, that is, when in the course
of the exchange objective obstacles arise, which prevent the achievement
of effective results, different variants of the distribution of property
rights prove not to be of equal value from the point of view of the
interests of the company. As a result, legislation must elect and establish
the most efficient distribution of property rights of all available
options.
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