The Many Interpretations of Law and Economics

The last half a century has witnessed the emergence of an interdisciplinary field known as the “Law and Economics” (L&E). The discipline is considered to be one of the most important intellectual developments by many eminent legal scholars and economists. The L&E has had a huge influence on how the developed countries have dealt with important legal and economic issues like anti-trust, contracts, environment, property, land acquisition, regulation of banking and other financial entities, etc. It has also shaped public policy responses to social issues like child ­labour, public safety, among others. Nonetheless, a large literature produced by legal and economic scholars has failed to provide satisfactory answers to several riddles such as: Why do people follow some laws but not the others? Why do some societies seem law-abiding and others do not? Why is corruption more widespread in developing countries?

The book, The Republic of Beliefs: A New Approach to Law and Economics, provides a new perspective on these and the related issues. It argues that the L&E as it stands today is incapable of answering the above and the other conundrums facing the discipline. This failure is ­attributed to a fault line that runs through the gamut of the discipline, says the author, Kaushik Basu, former chief economist at the World Bank and the Carl Marks Professor of Economics and International Studies at Cornell University.