Law and Economics

In the 1970s law and economics was emerging as an innovative and exciting interdisciplinary field. The innovation was to apply economics not just to laws that affected economic activity but to all aspects of legal systems. I termed this the ‘new law and economics’ in a research review commissioned by the then Social Science Research Council (SSRC), versions of which were published in the Journal of Law & Society (1980) and by the CSLS as The New Law and Economics (1982). This emerging interdisciplinary field had many strands; from economists applying empirical techniques to see if the death penalty deterred homicides to lawyers using economics to interpret tort and contract laws. The most prominent exponents during this period were Ronald Coase, Richard Posner, and Guido Calabresi. Their very different approaches led to heated debates and vigorous opposition from legal scholars.

The Centre and SSRC actively promoted the field through research, seminars, and conferences in the 1970s and early 1980s which brought over prominent US academic exponents of law and economics. There was an active exchange between CSLS staff and North American law schools active in law and economics such as Henry Manne’s center at the University of Miami, the law and economics programme at the University of Toronto, and the appointment of Dick Makovits (a US academic antitrust lawyer-economist) as co-Director of the Centre. It would be fair to say that during this period the Centre was the focal point of law and economics with its staff and alumni propagating the field across the UK. Those who went on to academic positions offered law and economics courses and integrated economics into core legal subjects at the LSE, UCL, Newcastle, and other UK universities. In my case, I left to join the law faculty at UCL to integrate economics into undergraduate courses. That was the optimism of the 1980s.

If we fast forward to 2024 it is fair to say that the field did not blossom in the UK, at least not in the way envisaged. This may have been due to inertia and the antagonism of legal and Socio-Legal scholars to the reductionist rationality of economics and a feeling, well, it just wasn’t law. This contrasts with development in Europe where the field is far more active – one just has to look at the membership of the European Association of Law and Economics (EALE); the activities of the many national law and economics associations; compared to the sole British scholar on the 25-plus member editorial boards of the International Review of Law & Economics and European Journal of Law and Economics and who is publishing in those journals. And, dare I say, the absence of a law and economics component in the CSLS research programme. The economic analysis of law in law schools remains a North American endeavour.

But I am far from gloomy. Returning to the UK, something started to change in the late 1990s that set law and economics on a different trajectory. This did not rely on academic initiatives and openness but on the increased relevance of economics to industrial policy and legal practice. The Thatcher government’s privatisation programme, the increasing prominence of regulation, and the development of European competition law meant that economics became increasingly relevant to practicing lawyers and businesses. Today no self-respecting academic or practicing lawyer would attempt to write or advise in a vast range of areas of law without a grounding in economics. At the same time, economists including Oliver Williamson and historians such as Douglass C. North, both awarded a Nobel Prize in Economics, began to take the law seriously leading to the growth of institutional economics as a separate field of study. While the law and society journals are not replete with the economics of law articles, there is an academic industry producing interdisciplinary research, courses, and graduates in competition, regulatory, and corporate law together with specialist journals such as the Journal of Competition Law & Economics. Law and economics interdisciplinary research has splintered from Social-Legal Studies, and paradoxically the old fields of study have become the new.