ABSTRACT
This chapter introduces some legal terminologies, and some basic features of the legal system. It shows how economic analysis can be used to explain these features, which might otherwise seem completely arbitrary. The chapter examines the doctrine of precedent, how a lawsuit may create a precedent, and the body of all precedents, which is known as the common law. It also considers an economic analysis of the doctrine of precedent developed by William Landes and Richard Posner. The chapter analyzes the sections of the Constitution that are intended to thwart the acquisition of a monopoly of governmental power. It also examines the division of powers between the federal government and the states, including their respective courts. In all legal systems a party who is dissatisfied with the decision of the trial court has either an absolute right of appeal or a right to discretionary review, meaning that the appellate court decides whether it will review the case.
