ABSTRACT
You are about to start reading an introductory text on the economic analysis of law. This has been and to some extent still is a controversial topic – particularly from the point of view of legal scholars. Therefore, some preparatory remarks might be in order. First, there is the self-evident observation that an economy cannot work without law. As you shall shortly see in a stylized example, economic action is embedded in legally defined entitlements, procedural rules and sanctions for misconduct, to mention but a few. Economists have not denied this, but in their reasoning they treat the legal framework as abstract most of the time (they take it for granted implicitly and moreover they seem to assume that the legal system works effectively and smoothly). There are economic scholars who believe that this is unfortunate. So schools of ‘dissenters’ have emerged, which are called ‘institutionalists’. They will be introduced to you later (pp. 9-12).
