Econ 163 Law and Economics

What is Law and Economics? Why study Law and Economics?

Allocation of scarce resourcesand its distribution Role of law and insitutions

Economics is a study of how people and society end up choosing with or without the use of money, to employ scarce productive resources that could have alternate uses; it studies production of various commodities over time and their distribution for consumption, now or in future, amongvarious groups in the society. It analyses costs and benefits of improving patterns of resource allocation.

Kuznets (1955) Economic Growthand Income Inequality

Source: Piketty

Buying and selling of goods commodities

Price

Contract

Property rights

What can and cannot be sold

Buying and selling of commodities

Intellectual property

Accident – who pays for the damage?

Car has defect – product liability

Car was stolen

• Maximization of profit, utility subject to constraints: price, formal and informal rules

• „Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. In consequence they structure incentives in human exchange, whether political, social or economic.“ (North, 1990)

• „Institutions include any form of constraint that human beings devise to shape human interaction.“ (North, 1990)

PRICELAW INFORMAL RULES

INSTITUTIONS

Law, Fairness and Justice

• What the law purports to be

• What the law actually is• Enforcement issues

• Consequences

• Others• Law as part of the superstructure (Marxist)

Course Outline

I. Introduction- Legal System

II. Property Law

III. Tort Law

IV. Contract Law

V. Criminal Law

VI. Behavioral Law and Economics

VII. Social Norms and Spontaneous Law

VIII.International Law

Legal System

• Legislature – makes laws

• Executive – implements laws

• Judiciary – interprets laws• Judges also make laws through interpretation

• Resolves conflicts

Indepence of the judiciary is important

Philippine Legal System

• Precolonial period• Spanish colonization

• Complete displacement of customary and inidgenous law and ethnico-cultural values by the legal sytem of colonialist Spain

• Establishment of a colonial administrative state

• American period• Replacement of a neocolonial state• American legal culture

• Legal transplants• Mixed Jurisdiction• Civil Law – canon

• Code Napoleon from Roman Law (The Body of the Civil Law 528-534 Justinian)• Common Law – adversarial, jury system, jurispudence

The Philippine Judiciary

• Supreme Court• Court of Appeals

• Sandiganbayan

• Court of Tax Appeals• Regional Trial Court

• Sharia Court

Philippine Supreme Court

• Pre-Marcos: reputation for judicial independence

• Marcos period• Martial law declaration 1972

• Post-Marcos period

• 1987 Constitution• Expanded scope of judicial review

• Art 8 Sec 1:• Judicial power includes the duty of the courts of justice to settle actual controversies

involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

Philippine Supreme Court

• Creation of the Judicial and Bar Council • Sec. 8

• A Judicial and Bar Council is hereby created under the supervision of the Supreme Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a representative of the private sector.

• Fiscal autonomy• Sec. 3

• The Judiciary shall enjoy fiscal autonomy. Appropriations for the Judiciary may not be reduced by the legislature below the amount appropriated for the previous year and, after approval, shall be automatically and regularly released.

Judicial independence in the Philippines

• How do justices vote?• Independent arbiters, personal attributes, ideological attributes• Philippines problem: no political party, personal politics, patronage politics

• Dataset

• coded 125 decisions by the Philippine Supreme Court in the period 1986–2010

• Politically salient decisions

• 1592 individual observations. Our dependent variable is a vote favorable

• 992 votes favorable to the administration • 62% of the sample• 600 opposed to the administration (38% of the sample). Table

• i.) Administration appointee: the dummy takes value one if the Justice was appointed by the same administration challenged by the case and zero

• Ii) Gender• iii) Judicial experience• (iv) Law professor: the variable takes value one if the Justice was previously

a law professor and zero otherwise;• (v) Public official: the dummy takes value one if the Justice has previous

experience as a public official and zero otherwise;• (vi) Executive order: the dummy takes value one if the decision refers to a

presidential executive order and zero otherwise. • The expected sign of the coefficient is positive as executive orders affect presidential

powers directly.

• if a Justice is an incumbent administration appointee, the chances of voting for the administration increase around 66% • (59% when fixed effects are considered)

• However, still a number of anti-administration votes point to the fact that other factors might be at play

• Do justice engage in strategic defection? • Not much evidence