Law and economics is a field of academic study that uses the basic concepts of economics to analyze the purposes, effects, and effectiveness of legal rules.
In other words, economic concepts (like scarcity, supply and demand, market efficiency, and bargaining power) are used to explain the purpose and effects of various laws, assess which legal rules are economically efficient, and predict which legal concepts will be practical and which will not.
This field of study has a wide range of applications. It plays an essential role in business law, commercial law, tax law, industrial regulation, labor issues, and healthcare.
The economics of law, also known as legal economics or the economic analysis of law, uses economic analysis to predict the effects of legal rules or to suggest the legal rules that will maximize social welfare.
In the United States, economic analysis has significantly influenced lawyers and the legal system, both among the policy makers directly involved in making legal rulings and within their legal systems. Many well-known judicial opinions have expressed bases for decisions using economic analysis, providing a legal framework for applying economics to the judicial decisions that directly affect the entire population.
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