Institutional Law and Economics: The Legal-Economic Nexus

In working through the idea of human interdependence as the building block for conducting institutional analysis, I frequently return to a couple common examples used in other related literature. I share some of these somewhat-baked thoughts here, as they relate to previous posts about interdependence and using Hohfeld in econ analysis ( here and here ).   One of these is the example of the doctor and the candy maker given by Coase (1960). He described two people operating in offices side-by-side: a doctor, looking for a stable, quiet environment in which to treat patients, and a candy maker, utilizing the space for his or her craft, accompanied by the noisy machinery necessary to do so.  Coase uses the case to demonstrate externalities in his larger discussion of transaction costs, or the cost of any kind of bargaining or solution-finding on the part of the doctor. Many writing about this example have been focused on the external effect of the machines, or the noise cre...

  A recent article in Nonprofit Quarterly by Steve Dubb raised the interesting question of whether we need a “better capitalism” or a “better economy”*.  Dubb was reporting and writing an opinion piece in regards to a recent 2021 Harvard Conference on Social Enterprise.  I like the thinking here and wanted to expand on it.  IE explains its overall goal of social provisioning versus resource allocation.  The economy should be assessed in terms of how it ensures that all economic agents have adequate social needs as opposed to simply the question of resource allocation and highest and best use.   A model of economics built on highest and best use is one where income inequality is perfectly acceptable and part of an efficient economy.  In fact, addressing inequality will come at the expense of economic efficiency. I think the framing of a “better economy” is a good one to use and a good starting point as opposed to privileging the word “capitalism”. It ap...

This coming summer will mark the 4-year anniversary of the passing of Dr. Dave Schweikhardt. Dave was perhaps the most impactful teacher of my graduate career. Over the course of  the past year, notes from his classes (and those taken by others) have moved around my desk numerous times as I hunt for old wisdom or for some great anecdote or quote of his that I want to repurpose for my own curriculum development.  Given the time of year, I wanted to share one of my favorite memories of his Institutional and Behavioral Economics course.  Sometime early in the semester, Dave entered the room one morning and immediately declared, "The free market doesn't exist!" He enjoyed getting right to the point, though it would often take us several minutes to catch up (our course was unfortunately early in the day, addling our response time somewhat). On this day, however, he forced us to formulate some kind of discussion on our own right off the bat. He repeated: "The free market d...

  Much of the discussion around capitalism and reform of the capitalist system seems to revolve around the idea that people, specifically capitalists, need to be more enlightened, more community oriented or think about other stakeholders.  This is interesting because we are generally taught that capitalism thrives by channeling peoples limited knowledge and self interest into a system that is mutually beneficial for all.  Now some will argue that in fact Adam Smith and others recognized the need for human behavior and emotions other than self-interest.  But in the end, it is hard to get around the fact that the mantra from the 1980’s movie Wall Street that “greed is good” is hard to ignore. As this blog has explored these various reform ideas, we have been told that capitalists need to be socially conscious, enlightened or engage more stakeholders.  With these changes we are told, capitalism can be channeled in positive ways to address climate change, poverty an...