The Republic of Beliefs: A New Approach To?Law and Economics?

54 Pages Posted: 20 Apr 2016

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Date Written: May 7, 2015

Abstract

The discipline of law and economics deals with wide-ranging topics, from competition and environmental policy to crime control, and has been instrumental in determining how an economy performs. Yet its success has fallen short of its potential. The discipline?s shortcomings are nowhere as visible as in developing economies, where a common refrain is how the law looks good on paper but does not get implemented. This paper articulates a methodological flaw that underlies much of contemporary law and economics, and argues that there is an intimate connection between human beliefs and expectations, on the one hand, and the effectiveness of the law, on the other. I propose a new approach to law and economics that is rooted in game theory and rectifies the flaw. It is argued that this approach can open up new areas of research and be marshalled to address some of the more pressing policy challenges of our time.

Keywords: International Law, Judicial System Reform, Social Policy, Legislation, Legal Products, Regulatory Regimes, Legal Reform

Suggested Citation

Basu, Kaushik, The Republic of Beliefs: A New Approach To?Law and Economics? (May 7, 2015). World Bank Policy Research Working Paper No. 7259. Available at SSRN: https://ssrn.com/abstract=2606453

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
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IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
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