Growth: The Measure of Law and Economics
by
Robert Cooter
Bilkent University, Faculty of Law, Ankara, Turkey, 25-26 October, 2014
Two Enterprises
Legal Causes
• Prove the effects of
laws.
• Find the empirical
consequences of laws.
• Model responses to
laws.
• Find what caused
officials to make or
repeal a law.
Legal Content
• Say what the law
requires of people.
• Say what the law is.
• Interpret laws.
• Restate the law.
• Offer legal reasons.
• Determine the law’s
correct categories.
Pyramid of Law and Economics
content
enterprise
cause enterprise
Year of Publication of Some Seminal Law and Economics
Books and Articles
(some titles abbreviated)
General
1960. Coase. “Social Cost.”
1967. Demsetz. “Property Rights”.
1968. Becker. "Crime and Punishment”.
Textbooks
1972. Posner. Economic Analysis of Law.
1987. Cooter & Ulen. Law and Economics.
1989. Polinsky. Intro to Law and Economics.
Torts
1970. Calabresi. Cost of Accidents.
1973. Brown. “Economic Theory of Liability”.
1987. Shavell. Econ Anlys of Accident Law.
1987. Landes & Posner. Econ Strctr of Tort Law.
Corporations
1937.Coase. “The Nature of the Firm.
1965. Manne. “Market for Corporate Control. 1972.Alchian &
Demsetz. “Information & Organization”
1975. Williamson. Markets & Hierarchies
1976. Jensen & Meckling. “Agency & Ownership.”
Major Law and Economics Associations
By Date of First Meeting
AALS (American Association of Law School)
Professors Teaching Law and Economics
Numberof Law & Econ Professors
300
247
250
189
200
158
153
150
Less than 5
years
124
102
100
50
0
1995
2000
Total
2005
AALS Professors Teaching Law and Economics
and Law School’s Ranking
# of Faculty that Indicate they Teach L&E in the Top 25 Law Schools, 20052006
7
# of Faculty
6
5
4
Teach L&E
3
Linear (Teach L&E)
2
1
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Law School Rank
Law Professors Teaching L&E Compared to All
Law Professors
Number of Law School Professors
12000
Entire Faculty
10,136
10000
9073
Law & Economics
Professors
8000
6000
4000
2000
247
189
0
2000
2.0%
2005
2.4%
Compound growth
• 2% =>7 times,
• 5% => 130 times
• 10% =>14,000 times
Liberalization Experience
Positive
• China
• India
• Central European countries joining EU
Negative or Mixed
• Central European countries not joining EU
• Africa
• Latin America (except Chile)
Examples of Double Trust Dilemma
• Boston bank
• EndNote
• SAP
Figure 2.1. Double Trust Dilemma
Ideas
Innovator
Investor
Capital
Figure 2.3. Finance in Silicon Valley
Relational
Private
Public
Figure 2.4. Finance and Development
Relational
Relational + Private
Relational + Private + Public
Figure 2. Life Cycle of a Successful Venture
“Legalize Freedom”
The Prescription for Growth
(Property, Contract, Business Law) + Liberalization => Growth
--Property Principle for Innovation:
The creators of wealth should keep
much of it.
--Contract Principle for Coordination: The law should enable people to
commit to doing what they say.
--Organizational Principle for Liberty: People can freely enter most lines of
business and choose their firm’s organization from a legal menu.
Legal Infrastructure:
Three Principles of Law for Growth
• Property Principle for Innovation: The creators of wealth
should keep much of it.
• Contract Principle for Coordination: The law should
enable people to commit to doing what they say.
• Organizational Principle for Liberty: People can freely
enter most lines of business and choose their firm’s
organization from a legal menu.
END of SLIDE SHOW