Research Handbook on Austrian Law and Economics
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Research Handbook on Austrian Law and Economics

Edited by Todd J. Zywicki and Peter J. Boettke

The original contributions to the Research Handbook provide an introduction to the application of Austrian economics to law. The book begins with chapters on the methodology of law and economics. Further chapters discuss key concepts in Austrian economics – dynamic competitive processes, spontaneous order, subjective value, entrepreneurship, and the limited nature of individual knowledge – as they relate to topics in evolutionary law (social rules, self-governance, dispute resolution) and basic law (torts, antitrust, civil procedure, business and family law).
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Chapter 10: Dispute resolution when rationalities conflict: cost and choice in a mixed economy

Richard E. Wagner

Abstract

In bringing economic analysis to bear on the settlement of legal disputes, it is commonly presumed that the parties to the dispute are governed by the principles of private property and so are residual claimants to their legal expenses. This institutional framework promotes a substantive rationality that is often conducive to the settlement of disputes without trial. In contemporary mixed economies, however, a political agency is often party to a dispute. These agencies operate under a different substantive rationality because the framework of collective property under which they operate means they do not have residual claims on their legal expenses. They can, however, convert those expenses into investments in politically preferred activity. What results is a conflict between rationalities that generates societal tectonics that often are misidentified as market failures when they are really systemic properties of the conflicting rationalities.

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