Legal Systems and Incentives

Perspective of This Topic

The effect of legal institutions is not determined solely by the purpose of the articles. The allocation of rights, damage assessment, negotiation possibilities, and enforcement costs combine to change the choices of people and organizations. This agenda begins from the basic structure of contract, property rights, and torts and organizes the information and institutional conditions necessary for particular rules to function.

Three Axes of Analysis

• Allocation of rights: Comparing who decides, negotiates, and bears risks.
• Realities of enforcement: Asking how evidence gathering, litigation, and monitoring costs alter the effects of rules.
• Comparing alternatives: Reviewing the advantages and disadvantages of contracts, liability, regulation, and autonomous coordination under equivalent conditions.

Connected Research Commentary

How to Read the Law Through Transaction Costs
Beyond Rights Allocation, Toward Effective Functioning Institutions

Recommended Literature

• The Problem of Social Cost
  R. H. Coase · 1960 · The Journal of Law and Economics 3, 1–44
• The Nature of the Firm
  R. H. Coase · 1937 · Economica 4(16), 386–405
• Property Rules, Liability Rules, and Inalienability: One View of the Cathedral
  Guido Calabresi·A. Douglas Melamed · 1972 · Harvard Law Review 85(6), 1089–1128
• Toward a Theory of Property Rights
  Harold Demsetz · 1967 · The American Economic Review 57(2), 347–359