Short answers, pulled from the story.
Law and economics is the application of microeconomic theory to the analysis of legal rules and institutions. Scholars use economic concepts to predict the effects of laws, assess which legal rules are economically efficient, and explain how legal doctrines develop. The field has two main branches: one applies neoclassical economics to legal questions, and the other focuses on broader institutional analysis of law and governance.
The modern law and economics movement emerged primarily from the Chicago school of economics in the early 1960s, through scholars including Aaron Director, Ronald Coase, and George Stigler. Aaron Director's appointment to the University of Chicago Law School in 1946 is considered a founding moment. Ronald Coase and Guido Calabresi each independently published groundbreaking articles in 1960 and 1961 that are regarded as the starting point for the modern school.
Gary Becker published Crime and Punishment: An Economic Approach in 1968, a paper credited as the starting point for the modern field of law and economics. The work applied the economic concept of utility as its basic unit of analysis to criminal behavior. Becker later received the Nobel Prize in Economic Sciences.
A legal rule is Pareto efficient if it cannot be changed to make one person better off without making another person worse off. Kaldor-Hicks efficiency is a weaker standard: a rule is Kaldor-Hicks efficient if those who gain from it could, in principle, compensate those who lose, even if that compensation never actually occurs.
Almost half of all federal judges who served between 1976 and 1999 were trained in economics through the Manne Economics Institute for Federal Judges. A 2025 study found that judges who attended the intensive course subsequently used more economics language in their opinions, ruled against regulatory agencies more often, and imposed more severe criminal sentences.
Critics argue that normative economic analysis fails to account for human rights and distributive justice. The critical legal studies movement, associated with scholars like Duncan Kennedy and Mark Kelman, has been among the sharpest critics. Warren Samuels argued in his 2007 book The Legal-Economic Nexus that Pareto efficiency cannot define or assign rights in the first place, because those rights must be established before efficiency can be measured.