Paper Example. Relationship Between the Law and Economics

The law refers to the system of rules that are formed and prescribed through governmental or social institutions to normalize the conduct and behavior of the people either in the community, state or society. Alternatively, the law is sometimes recognized as the art of justice or the science of justice as it controls and warrants that people or the populace adhere to the autonomy and will of a given state. The history of law relates closely to the development of civilization. For instance, the ancient Egyptian law, dating back as far as 300 BC, consisted of civil codes that were broken or divided into twelve major books. Law is essential for any society because it serves as the norm of conduct for all citizens; it also ensures the equality of all three forms of government including the legislature, executive, and judiciary. Under normal circumstances, laws keep societies running. Without laws, the different communities could experience chaos, a scenario that may lead to the idea of survival of the fittest and every man for himself or herself. Laws are essential as they act as strategies for what is conventional in society. In the absence of the laws, there would be conflicts between communities and social groups. Laws allow for the efficient adoption of changes within societies. Law often formulated in the form of constitutions interacts in various cases indirectly with the rudimentary social institutions in a manner that leads to a direct relationship with human activities. Laws guide social, political, and social activities within the state or a country. In other words, they play agents of modernization and social change. Laws are also indicators of the nature of the societal complexities as well as the problems of integration. Laws act as the catalyst when it comes to the social transformation of different practices that leads to the dilution of caste inequalities, and protection measures for the vulnerable and weak sections of society. Economics, on the other hand, focuses on the interactions and behaviors of the economic agents as well as how different economies work. Within the economies there, there is microeconomics that analyzes the basic elements in economies, including markets and individual agents, their processes of interactions as well as the outcomes. Microeconomics often provides the analysis of the entire economy and the issues that impacts it including the application of resources such as capital, land, and labor. There is a strong relationship between law and economics. Economics and law stress that markets are more adequate than courts. If possible, the legal structures, by the positive theory, may force transactions into the market. When the above case becomes impossible, the legal system often attempts to mimic the markets. Law and economics have an emphasis on people's responses and incentives. For instance, the reasons for damage payments in cases of accidents is not to recompense injured parties, but to give incentives to the potential injurers to take effective precautions to evade accidents. Economics and law share with other forms of economics, the conventions that persons are rational and often respond to incentives. In most cases, when penalties for actions increase, individuals may undertake less of that action.

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It sometimes becomes difficult to understand why lawyers find specific knowledge of economics to be requisite, while some economists find the ideas and concepts of the law equally valuable. The relationship between economics and law has never been given much consideration in education and in practical cases. Usually, economists are interested in the law only in cases where they are forced to trace the impacts of some specific legislation concerning economic issues or when it comes to the explanation of economic history. There are some great legal alterations which often have unembellished ramification on certain economic events. For example, lawsuits involving limited liability companies in the 19th century mainly impacted the economic processes and operation of different companies. In different situations, it is remarkable that the attention of economists has never been drawn more on the subjects of law. When it comes to economic planning, there are great impacts of legislation in various decisions that are made by different policy-makers. Law has essential comportment in economics through the influences on uncertainty. Contemporary economists have come to the perception that the expectations of people are the determining factors of the stability or economic equilibrium once it is achieved or reached. In economics, the lender of capital, the entrepreneur, the worker and the landowner, as well as the consumers, usually act in line with the plans and laws that guide every process to yield maximum returns. The modernity has come with the complexities when it comes to the economic and business processes. The success of economic planning depends on the laws of a given state. In other words, laws guide contracts and partnerships. The majority of economic planners depend on the success of their planning upon the actions that are undertaken according to the lawsuits. To reduce the number of expectations needed in the conduct of business, there is always the requirement of contracts guided by the laws. Signing perfect contracts, there is always the need for the perfect of definite laws guided by the constitution of every nation. These laws may be used to enforce agreements made between the two parties. In economic activities, laws concerning commercial contracts play essential roles in determining the degree of certainty which can often be achieved through business dealings. Laws are therefore important when it comes to the efficiency and stability of economies. Contracts entirely depend on laws for a successful outcome. In other words, contract laws create confidence and certainties in business dealings, a situation that leads to the stability of the economic state of different countries. The relationship between laws and economics should be impacted during the studies. In other words, there is a need for the learning institutions to integrate the concept of law and economics as they are important in the determination of the stability of economic states.

In most cases, unique economic systems need to be incorporated into the dynamic conditions; new ideas should also be considered if a country or economy is to attain efficiency. It, therefore, follows that institutions ought to play a significant part when it comes to the incorporation of new laws or modification of the old laws in light of the new developments. In many cases, old laws might obstruct the introduction of new ideas as well as the methods of production which can result in definite improvements leading to economic efficiency. Strong constitutional laws lead to investor confidence, a scenario that enhances the stability and efficiency in economic processes. Law influences economics, and at the same time, economics influences law. Economics usually forms the basis when it comes to the study of law. On the other hand, economics imitates the socio-economic ethos of a nation in particular and the world in general. Certainly, if economic ethos changes, the economic situation may become misleading and outdated. The above situation was however proved to be incorrect by Dalton. The industrial and organization structures entirely depend on the laws and decrees of a state. Specifically, the policy goals, economic institutions and instruments and guided by the laws and regulations. From economic perspectives, the invisible hand that forms the basis of classical economics has developed problems and as a result, the government, through laws, has the sole mandate of aligning the issues involved in the integration of economics and laws. States have got great impacts on economic activities; at the same time, these states and guided by the laws inform of constitutions. On the same note, states often have the sole responsibility of ensuring that economic activities are conducted in line with the requirements of the law. In economic terms, there is a steady increase in the divergence between social and private costs; therefore, the introduction of different forms of laws matter when it comes to the formalization of diverse economies. In most of the economic statuses, the rise of monopolies often leads to distortion in pricing systems; the manipulation frequently facilitates the situation in the selling standards and supply of products. All the above factors require guidelines and laws to ensure that every member or operator in an economy to perform their mandates without any interference.

The significance in the relationship between economics and law has not been fully covered in some of the economic approaches including the hisser-fair system. There is always the precise nature of institutional and legal frameworks suitable for various economies. In different economies, there are some forms of perfect competition that are found to be desirable and are clearly defined by the laws. In cases of undesirable activities in the economic systems, there are always legislations that are followed to ensure rapid adjustments in the varied economic status. The laws should always be framed to allow the smoothest operational processes within competitive systems. Effective economic systems need to be properly planned amidst the strong legal systems which may guide every business activity. Legal systems should guide the designing of economic values and theories.

The strong relationship that exists between law and economics may enable one to become attempted to argue that laws and regulations should be designed solely to serve economic ends alone. Succinctly, once a given economic system has been adopted, the optimum framework of law ought to be initiated to render the accomplishment of economic equilibrium as fast and efficiently as possible without regard to any other criteria. The above case, however, ignores strategic and ethical factors. Laws are meant to regulate or control various activities within a country; these activities majorly incorporate the economic factors that are designed to guide business activities and to enhance ethical approaches to authenticity in various transactions. For instance, laws might be desirable to the Agricultural Marketing Boards which often increase economic efficiency. The system of law then should be defined so that generally, the economic ends of the community are achieved with the minimum possible expenditure of the available resources and energies. The deviation from the above principles, however, is in order as long as the economic costs of the deviations equaled the value of the advantages or benefits to be gained ethically and strategically. The adoption of point of view concerning the relationship between economics and law means the critical analysis of the present law-making methods or processes. There is no doubt that the present procedures do not ensure that economic deliberation does play essential roles in the law-making processes and their enactment. The theoretical reasoning does not reveal the economic implications of legislations, but they are discovered through empirical and pragmatic approaches. In many cases, it is very difficult to imagine that those who formulated different legislations did so with regards to the economic activities. In economic decision-making processes, there is a need for careful scrutiny of the proposed legislation by lawyers who are also expert economists. The economic cost of the strategic and ethical advantages of the proposed legislation needs to be carefully estimated before the laws can be formulated.