Growth: The Measure of Law and Economics

by

Robert Cooter Bilkent University, Faculty of Law, Ankara, Turkey, 25-26 October, 2014

Two Enterprises

• Say what the law requires of people.

• Say what the law is.• Interpret laws.• Restate the law.• Offer legal reasons.• Determine the law’s

correct categories.

Legal ContentLegal Causes

• Prove the effects of laws.

• Find the empirical consequences of laws.

• Model responses to laws.

• Find what caused officials to make or repeal a law.

Pyramid of Law and Economics

cause enterprise

contententerprise

Year of Publication of Some Seminal Law and Economics Books and Articles

(some titles abbreviated)

General1960. Coase. “Social Cost.”1967. Demsetz. “Property Rights”. 1968. Becker. "Crime and Punishment”.

Textbooks 1972. Posner. Economic Analysis of Law. 1987. Cooter & Ulen. Law and Economics. 1989. Polinsky. Intro to Law and Economics.Torts

1970. Calabresi. Cost of Accidents.1973. Brown. “Economic Theory of Liability”.1987. Shavell. Econ Anlys of Accident Law. 1987. Landes & Posner. Econ Strctr of Tort Law.

Corporations1937.Coase. “The Nature of the Firm.1965. Manne. “Market for Corporate Control.

1972.Alchian & Demsetz. “Information & Organization”1975. Williamson. Markets & Hierarchies

1976. Jensen & Meckling. “Agency & Ownership.”

Major Law and Economics Associations By Date of First Meeting

AALS (American Association of Law School) Professors Teaching Law and Economics

AALS Professors Teaching Law and Economics and Law School’s Ranking

Law Professors Teaching L&E Compared to All Law Professors

2.0% 2.4%

Compound growth

• 2% =>7 times, • 5% => 130 times• 10% =>14,000 times

Liberalization Experience

Positive• China• India• Central European countries joining EU

Negative or Mixed• Central European countries not joining EU• Africa• Latin America (except Chile)

Examples of Double Trust Dilemma

• Boston bank

• EndNote

• SAP

Figure 2.1. Double Trust Dilemma

Innovator Investor

Ideas

Capital

Figure 2.3. Finance in Silicon Valley

Relational

Private

Public

Figure 2.4. Finance and Development

Relational

Relational + Private

Relational + Private + Public

Figure 2. Life Cycle of a Successful Venture

(Property, Contract, Business Law) + Liberalization => Growth

--Property Principle for Innovation: The creators of wealth should keep much of it.

--Contract Principle for Coordination: The law should enable people to commit to doing what they say.

--Organizational Principle for Liberty: People can freely enter most lines of business and choose their firm’s organization from a legal menu.

“Legalize Freedom” The Prescription for Growth

• Property Principle for Innovation: The creators of wealth should keep much of it.

• Contract Principle for Coordination: The law should enable people to commit to doing what they say.

• Organizational Principle for Liberty: People can freely enter most lines of business and choose their firm’s organization from a legal menu.

Legal Infrastructure:Three Principles of Law for Growth

END of SLIDE SHOW