Markets would not function unless supported by a legal framework. That framework is no self-contained, exogenous structure; it has evolved in response to the demands of economic activity. There are laws made to modify or supplement market behavior, in an attempt to produce the desired outcomes. Such laws are often called forth by political ambitions to change the distribution of wealth, channeled through the political process.

Thus economic life and law are strongly interrelated. There is neither a pure economic system unaffected by law, nor a legal system possible to understand without regard for its interplay with economic behavior. Still, such a compartmentalization has dominated the perspectives of both economics and legal studies.

This invaluable book presents a unified picture of the full economic–legal system, based on results within the novel fields of "new institutional economics" and "law and economics". It is carefully argued, and written in a non-technical style, albeit with no attempts to avoid "deep" theory. It is primarily aimed at students of economics just beyond their introductory course and students of law in the middle or towards the end of their studies. It can also be of great use to both economists on a more advanced level and lawyers, looking for a thought-provoking survey of an exciting new sphere of ideas.

Contents:

• The Economic-Legal System and the Role of Property Rights: An Introduction
• Foundation Stones:
• Politically-Based Versus Judge-Made Law
• Efficiency
• Two Basic Propositions
• Two Major Theorems on Property Rights
• Society's Machinery:
• Coordination and Constitutions
• Markets and Firms
• Political Processes
• Property, Breach of Contract, Tort, Crime:
• Formalized Property Rights
• Injunctions
• Damages or Punishment?
• Negligence: The Simplest Case
• Joint Responsibility
• Intent, Strict Liability, Insurance
• The Stringency of Sanctions
• The Behavior of Disputant Parties and Courts
• Contracts, Companies, Regulation:
• Contracts: Problems and Solutions
• The Contractual and Legal Structure of Firms
• Limits of Freedom of Contract
• Epilogue:
• Conclusions and Final Comments