The author systematically examines one of the important issues of information — establishing the market price. He introduces the concept of «search» — where a buyer wanting to get a better price, is forced to question sellers. The article deals with various aspects of finding the necessary information.

Economics of Information

In this paper, we evaluate what we have learned to date about the effects of privatization from the experiences during the last fifteen to twenty years in the postcommunist (transition) economies and, where relevant, China. We distinguish separately the impact of privatization on efficiency, profitability, revenues, and other indicators and distinguish between studies on the basis of their econometric methodology in order to focus attention on more credible results. The effect of privatization is mostly positive in Central Europe, but quantitatively smaller than that to foreign owners and greater in the later than earlier transition period. In the Commonwealth of Independent States, privatization to foreign owners yields a positive or insignificant effect while privatization to domestic owners generates a negative or insignificant effect. The available papers on China find diverse results, with the effect of nonstate ownership on total factor productivity being mostly positive but sometimes insignificant or negative.

Federico Sturzenegger and

DETAILED CONTENTS ix LIST OF ILLUSTRATIONS xv LIST OF TABLES xvii PREFACE AND ACKNOWLEDGMENTS xix CHAPTER 1. Taking Consequences Seriously: Introduction 1 PART I: PROCESSES OF GOVERNMENT: VOTING, BARGAINING, ADMINISTERING 15 CHAPTER 2. Voting 17 CHAPTER 3. Bargaimng 51 CHAPTER 4. Administering 79 PART II: THE OPTIMAL NUMBER OF GOVERNMENTS 101 CHAPTER 5. Intergovernmental Relations CHAPTER 6. Government Competition 127 CHAPTER 7. Ministries and Agencies PART III: OPTIMAL DIVISION OF POWERS CHAPTER 8. Specialization 173 CHAPTER 9. Separation of Powers 211 PART IV: OPTIMAL RIGHTS 241 CHAPTER 10. The Value of Rights 243 CHAPTER 11. Philosophies of Rights: Liberty and Redistribution 261 CHAPTER 12. Property Rights 279 CHAPTER 13. Free Speech 309 CHAPTER 14. Civil Rights 333 CHAPTER 15. Summary and Conclusion 359 BIBLIOGRAPHY 381 GENERAL INDEX 399 INDEX OF NAMES 409

The Strategic Constitution

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The economic approach to law

Foundations of Economic Analysis of Law, by Steven Shavell, 2004, The Belknap Press of Harvard University Press, 737 pages Steven Shavell has contributed to the foundations of economic analysis of law in different manners According to Posner (2006), he is a member of the third generation of economic analysts of law-Coase, Becker, and Calabresi being the first group, with Posner himself, Landes, and Ehrlich forming the second Shavell has published several books and more than 100 articles on economics and on the economics of law He has contributed to the principal-agent theory (Shavell, 1979b) and, more particularly, to the moral hazard literature (Shavell, 1979a) This book proposes an overview of the fields in the economics of law to which the author has contributed It also covers in detail other fields and many contributions to the literature The emphasis is on theory, but some empirical facts are mentioned The book has twenty-nine chapters in seven parts or sections, a comprehensive list of references (786 references in the References section of the book), and two indexes (authors and subjects) It covers many subjects related to the economic analysis of basic law Particular attention is devoted to the positive analysis of law, although the normative aspect is also well covered The book is addressed to two broad audiences: economists and individuals interested in law with no formal background in economics There is no formal economic analysis in the text (but formal models are sometimes sketched in footnotes) and no detailed discussion of legal doctrine The subjects covered are important for any legal system: laws related to property, accidents, contracts, crimes, and their litigation process Specialized subjects such as labor, bankruptcy, or environmental law are not covered However, for the readers of the Journal of Risk and Insurance, accident law is discussed in detail (one section including five chapters that will be analyzed below) Chapter 1, the introduction to the book, presents the author's basic philosophy with regard to the economics of law He first distinguishes the positive analysis of the economics of law from its normative analysis Using his example for automobile accidents, the positive analysis is concerned with how a liability system affects accidents and litigation expenses, whereas the normative analysis looks at the social desirability of a liability system Two standard and important assumptions are made for the normative analysis First, the normative analysis does not take any of the distributive aspects into account; this is left to the income tax system and other transfer mechanisms Second, the notions of fairness and morality are not integrated in the analysis, although a significant effort is made to do so in part seven of the book The first four parts of the book treat areas related to private law: property law, liability for accidents, contract law, and civil litigation They are called private because they are enforced by the activities or suits of private parties The first of the four parts is devoted to property law Chapter 2 covers the rationale of ownership and the emergence of property rights The chapter defines concepts that are not often discussed in the standard economic literature For example, the author treats property rights, their justification, and their emergence Property rights are themselves divided into two types of rights: possessory rights and transfer rights The justification of property rights is mainly related to incentives: incentives to work, incentives to maintain and improve things, and incentives to transfer things Their emergence occurs when the advantages are greater than the costs of instituting and maintaining them Chapter 3 is devoted to the division of property rights while chapter 4 discusses, in detail, the acquisition and transfer of property rights, including transfer after death Chapter 5 concerns the issues of conflict and cooperation associated with the use of property rights …

Foundations of Economic Analysis of Law

Die Grundlagen der okonomischen Analyse des Zivilrechts werden in diesem Buch anschaulich erortert. Die Autoren des einzigen deutschen Lehrbuchs zu diesem Thema berucksichtigen dabei das Delikts-, Vertrags- und Sachenrecht, das Immaterialguterrecht sowie das Insolvenzrecht und Grundzuge des Unternehmensrechts. Ein neuer Schwerpunkt der umfassend aktualisierten 5. Auflage ist der Einfluss der verhaltensokonomischen Forschung auf diese Analyse. Zudem werden die Europaisierung des Rechts und die internationale Konkurrenz von Rechtsnormen einbezogen."

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Lehrbuch der ökonomischen Analyse des Zivilrechts

The purpose of this chapter is to compare negligence rules and strict liability rules and to examine the allocative effects resulting from the application of different liability regimes. It first discusses unilateral accidents, while the more complicated bilateral cases follow afterwards. Each section starts with a discussion of the rule of no liability before moving on to various forms of negligence and ending with various strict liability rules. At the end of each section, there is a discussion on how results change when relaxing specific assumptions. The various aspects are summarised focusing on the question of whether the outcome under a specific liability regime is efficient or not. We also discuss several more specific topics of interest, for example, the information generating consequence of negligence, the allocative effects of various liability rules when agents enter into a contractual relationship, product liability, cases of ‘joint liability’, the impact of uncertain legal standards, and the interaction between liability law and insurance.

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Strict liability versus negligence

Sustained growth depends on innovation, whether it's cutting-edge software from Silicon Valley, an improved assembly line in Sichuan, or a new export market for Swaziland's leather. Developing a new idea requires money, which poses a problem of trust. The innovator must trust the investor with his idea and the investor must trust the innovator with her money. Robert Cooter and Hans-Bernd Schafer call this the "double trust dilemma of development." Nowhere is this problem more acute than in poorer nations, where the failure to solve it results in stagnant economies.

	In Solomon's Knot, Cooter and Schafer propose a legal theory of economic growth that details how effective property, contract, and business laws help to unite capital and ideas. They also demonstrate why ineffective private and business laws are the root cause of the poverty of nations in today's world. Without the legal institutions that allow innovation and entrepreneurship to thrive, other attempts to spur economic growth are destined to fail.

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Solomon's Knot: How Law Can End the Poverty of Nations

This comprehensive and established book - first published in German - explains the new approach of law and economics to civil law. Written by two of Europe's leading scholars in the field, it provides a thorough yet accessible economic analysis of tort law, contract law and property law, with particular emphasis placed on legal cases and doctrines from civil law. The authors first review the basic concepts of both normative and positive economics and their links to institutional economics. They move on to develop the economic rationales of tort law and examine the different concepts involved. They also investigate contracts, especially sales contracts, quasi contracts, and pre-contractual duties which play a prominent role in civil law countries. Finally, they provide a comprehensive overview of the economic functions and legal forms of property law. Throughout, the authors analyse and evaluate the complexities of civil law using economic theory, and clearly demonstrate that the legal forms found in civil law frequently serve the purpose of increasing a nation's wealth. This outstanding volume is the first law and economics textbook that concentrates on civil law. It integrates legal doctrines with economic reasoning, and lucidly explains the concepts involved. It requires no prior knowledge of either economics or law and will undoubtedly become the requisite textbook in the field for all students of law, law and economics and business administration. It will also be of great value to academics and practitioners interested in an overview of this area.

The Economic Analysis of Civil Law

Legal norms can be precise rules, which are blueprints for action and allow for mechanical decisions by judges and civil servants. Alternatively, they can be vague, mission-oriented standards, which delegate decisions from the maker of the law to the judiciary and the administration. Rules economize on the costs of adjudication and administration. Standards economize on the costs of norm specification. In low-income countries with a relatively low level of training, it is efficient to concentrate human capital to specify precise legal norms, which can easily be adjudicated and administered but might be inflexible. In rich countries with a high endowment of human capital, it is better to have vague legal norms. The adjudication of vague legal norms requires a high level of expertise, but allows for the flexibility to reach custom-made decisions.

Hans-Bernd Schäfer

Papers

Lehrbuch der ökonomischen Analyse des Zivilrechts

Strict liability versus negligence

Solomon's Knot: How Law Can End the Poverty of Nations

The Economic Analysis of Civil Law

Rules versus Standards in Rich and Poor Countries: Precise Legal Norms as Substitutes for Human Capital in Low-Income Countries