law and economics

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The term “law and economics” refers to an area of scholarship dedicated to application of modern economic principles to the study of law. It is primarily concerned with economic efficiency, game theory, and the fair distribution of resources.  

The basic substance of law and economics is the comparison of the costs and benefits of alternative legal rules, searching for economic efficiency for individuals or society as a whole. Scholarship in this area has led to the promotion of new ideas, such as efficient breach, the Coase theorem, and economic rentiers. It has also been used to tackle older problems in law, such as the tragedy of the commons, or moral hazards. 

Law and economics began in the United States during the 1960s with the works of Ronald Coase and Guido Calabresi, who wrote on property and torts respectively. Today the influence of law and economics can be felt in many areas of law, including contract law and even criminal law.

[Last updated in June of 2023 by the Wex Definitions Team]