The Elgar Companion to Public Choice
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The Elgar Companion to Public Choice

Edited by William F. Shughart II and Laura Razzolini

This authoritative and encyclopaedic reference work provides a thorough account of the public choice approach to economics and politics. The Companion breaks new ground by joining together the most important issues in the field in a single comprehensive volume. It contains state-of-the-art discussions of both old and contemporary problems, including new work by the founding fathers as well as contributions by a new generation of younger scholars.  
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Chapter 26: Law and economics

Bruce L. Benson


Bruce L. Benson* 1 Introduction David Friedman (1987, p. 173) explains that ‘the economic analysis of law involves three distinct but related enterprises’: (i) prediction of the effects of legal rules, (ii) determination of the efficiency of legal rules, usually in order to recommend what the rules ought to be, and (iii) prediction of what the legal rules will be. He suggests further that ‘the first is primarily an application of price theory, the second of welfare economics and the third of public choice’ (ibid.). This appears to be an accurate characterization of most of the law and economics literature, but all three areas of research actually require public choice analysis if predictions are going to be accurate and recommendations based on efficiency objectives have any chance of conforming with reality. For instance, one effect of rules that constrain behavior or impose costs on individuals is that those individuals have incentives either to change the rules or to break them. Efforts to change the rules obviously can involve public choice processes, and incentives to violate them mean that they will have to be enforced, perhaps by some bureaucratic agency, another focus of public choice analysis. Similarly, consideration of the efficiency implications of rules clearly should include recognition of the opportunity costs that arise in attempting to enforce them as well as the costs that people incur as they try to change the rules, prevent such changes, or both. In this regard, Lon Fuller (1964, p. 106) de...

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