Documente Academic
Documente Profesional
Documente Cultură
BVIMR
NEW DELHI
FACULTY- SUNIL BEDEKAR B.Sc. LL.M.
[ ADVOCATE / PROFESOR ]
LEGANOMICS IN INFANCEY
LIKE THE UNIVERSE IN ITS INFANCY, .. .. .. LEGANOMICS-LAW AND ECONOMICS .. .. HAD MUCH FORCE BUT NO FORM .. .. .. .. .. HOWEVER, THE ECONOMISTS REALISED THAT EFFECTIVE PROPERTY AND CONTRACTSUAL RIGHTS ARE FUNDAMENTAL FOR ECONOMIC GROWTH AND DEVELOPMENT.
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ASSIMILATION OF CONCEPTS
ASSIMILATION OF ECONOMIC CONCEPTS BY LEGAL THEORIES OPPORTUNITY COSTS RISK AVERSION TRANSACTION COSTS FREE RIDING ASYMMETRIC INFORMATION MARKET FAILURES ETC.
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ASSIMILATION OF CONCEPTS
INFUSION OF LEGAL CONCEPTS INTO ECONOMICSLITIGATION COSTS LIABILITY RULES DEFAULT RULES STRICT LIABILITY RELIANCE DAMAGES THIRD PART ENFORCES ETC.
ORIENTATION
Arguments in economic analysis of law do not per se involve morality aspects, although, the economic and moral dimensions may at times concur; All legal and commercial transactions have at their core two basic concepts, namely, the concept of property and the concept of contract and the related transaction costs.
.. economic terrorism ..
In a market-oriented economy .. the Rule of Law is unable to control .. economic terrorism of the Corporations, .
BRAINSTORMING
Which corporate governance standards effectively improve financial institutions in this respect? A search for a proper compromise between regulation and governance is one of the most important tasks for regulators and bank owners. All these issues, and related ones,
LEGAL ECONOMICS
CONTRACT LAW
THEORIES OF CONTRACT
CONTRACT LAWS
LAW OF CONTRACT CONTRACT ACT SALE OF GOODS ACT TRANSFER OF PROPERTY ACT SPECIFIC PERFORMANCE ACT NEGOTIABLE INSTRUMENTS ACT INTERESTS ACT TRANSPORT LAWS INSURANCE LAWS CONSUMER LAW UNFAIR TRADE PRACTICES ETC.
CORPORATE LAWS
PARTNERSHIP LAW COMPANY LAW SECURITIES LAW SEBI ENVIRONMENT LAW TAXATION LAW LABOUR LAW UNFAIR TRADE PRACTICES MONOPOLIES / ANTITRUST / COMPETITION LAW INTELLECTUAL PROPERTY LAW [ TRADE-MARKS, PATENTS, COPYRIGHTS ] ETC.
SUCCESSFUL BUSINESS
SUCCESSFUL BUSINESS MANAGEMENT SUCCESSFUL CONTRACTS CRITERIA OF SUCCESS ? ? ? MAXIMISATION OF PROFITS ? OPTIMAL SUCCESS ? RELATIONAL SUCCESS ?
SUCCESSFUL CONTRACTS
BEING BETTER OFF BEST BARGAIN ECONOMIC GAINS MORAL ISSUES SOCIAL ISSUES POLITICAL ISSUES LEGAL ISSUES
LEGAL INTERVENTION
GENERAL STRUCTURE LEGISLATION ENFORCEMENT AGENCIES DISPUTE RESOLUTION COST BENEFIT RATIOS SOCIAL COSTS OPTIMALITY
non-economic dimensions
WELFARE ECONOMICS MORALITY AND LAW EQUITY AND LAW
RICHARD POSNER
law can encourage economic efficiency by assigning property rights to those parties who would have secured them through market exchange if transaction costs were lower[ that is to say ] law should bring about allocations that mimic the results of a properly functioning market..
.. let us understand ..
two views of a traffic ticket >transfer of money from drivers to government >incentive to people not to drive too fast
how about this ? marginal deterrence : raise the penalty for armed robbery to highest legal philosopher is it just ? economist safety of witnesses
and this ?
plea bargaining: criminal prefers to accept .. rather than face punishment lottery reduces average punishment but .. prosecutors is then allowed to concentrate on more serious offences
.. let the courts enforce the contract as written, rather than deciding what terms the parties ought to have agreed to ..
COSTS ..
.. new issues ..
.. Will private ownership of electromagnetic spectrum encourage its effective use ?
SUB-FIELDS
POSITIVE : PREDICTING .. THE EFFECTS OF VARIOUS LEGAL RULES
ALSO EXPLAINS DEVELOPMENT OF LEGAL RULES; [ COMMON LAW OF TORTS IN TERMS OF ECONOMIC EFFICIENCY ] ==========================================================
NORMATIVE : GOES ONE STEP FURTHER MAKES POLICY RECOMMENDATIONS .. ON THE BASIS OF .. .. CONSEQUENCES OF POLICIES; KEY CONCEPT : ALLOCATIVE EFFICIENCY
Correction of externalities
Correction of market failures
ECONOMIC ASSUPTIONS
EVERY POTENTIAL SATISFACTION CAN BE INVESTIGATED ACCORDING TO ECONOMIC OR MEANS-END RATIONALITY AND THE TRADE-OFF OF COSTS AND BENEFITS
IMPROVEMENT OF EFFICIENCY
A MORE EFFICIENT ALLOCATION IS ONE THAT INCREASES THE VALUE OF RESOURCES EFFICIENCY IN THE ALLOCATION OF RESOURCES IS DISTINGUISHED FROM EQUITY, WHICH IS CONCERNED WITH JUSTICE IN DISTRIBUTION OF WEALTH
CONTRACT
ONE PARTY VALUES MONEY MORE THAN THE ITEM OWNED .. AND THE OTHER VALUES THE ITEM MORE THAN THE ASKING PRICE ..THE EXCHANGE PRODUCES A NET GAIN IN ECONOMIC GOODS ..EACH PERSON ENDS UP BETTER OFF THAN BEFORE .. SUCH A CONTRACTUAL EXCHANGE .. IS OFTEN MORALLY OPTIMAL
GAMES THEORY
STRATEGIC ACTION
- AN INTENDING PURCHASE SHOWING DELIBERATE DISINTEREST - LEGAL ACTIONS ARE OFTEN . DEEPLY IMPLICATED IN AND ANIMATED BY STRATEGIC MOTIVES
KALDOR-HICKS EFFICIENCY
OVERALL ECONOMIC GAINS .. OUTWEIGH THE LOSSES IN OTHER WORDS THE GAINS IN ECONOMIC EFFICIENCY ARE SO LARGE ENOUGH THAT .. THE WINNERS COULD, IF THEY HAD TO, .. COMPENSATE THE LOSERS IN THE NEW ALLOCATION OF GOODS .. AND STILL REMAIN BETTER OFF ..
EXTERNALITIES
EXTERNALITY IS A COST NOT REFLECTED IN THE MARKET PRICE OF GOODS......... [ for example, environmental costs are imposed by auto-manufacturers on the purchasers / parties in an involuntary manner ] TO INTERNALIZE THE EXTERNALITIES LEGAL MEANS SHOULD BE USED TO IMPOSE A MARGINAL TAX ... UPON THE OFFENDING PARTY ...
.. Coase theorem ..
efficiency hypothesis :
under perfect competition private and social costs will be equal ..
invariance hypothesis :
the final allocation of resources .. will be invariant .. .. under alternative assignments of rights ..
EFFICIENCY CONCEPTS
PARETO EFFICIENCY : A LEGAL RULE IS PARETO EFFICIENT, IF IT COULD NOT BE CHANGED .. SO AS TO MAKE .. .. ONE PERSON BETTER OFF .. .. .. WITHOUT MAKING .. .. .. .. ANOTHER PERSON WORSE OFF ... >>> KALDOR-HICKS EFFICIENCY
EFFICIENCY CONCEPTS
KALDOR-HICKS EFFICIENCY : A LEGAL RULE IS KALDOR-HICKS EFFICIENT IF IT COULD BE MADE PARETO EFFICIENT BY ONE PARTY COMPENSATING OTHERS AS TO OFFSET THEIR LOSS ================================= 2007 : WARRANT SAMUEL : THE LEGAL-ECONOMIC NEXUS =================================
KALDOR-HICKS EFFICIENCY
OVERALL ECONOMIC GAINS .. OUTWEIGH THE LOSSES IN OTHER WORDS THE GAINS IN ECONOMIC EFFICIENCY ARE SO LARGE ENOUGH THAT .. THE WINNERS COULD, IF THEY HAD TO, .. COMPENSATE THE LOSERS IN THE NEW ALLOCATION OF GOODS .. AND STILL REMAIN BETTER OFF ..
.. a criticism
economics and law make unrealistic .. and .. ..oversimplified assumptions.. .. about human nature .. .. .. CORRECTION OF EXTERNALITIES CORRECTION .. OF .. .. MARKET FAILURES .. .. ..
contracting-motives
Three broad motives are generally associated with contracting, apart from this basic commitment-enhancing function, namely, risk transfer, incentive alignment, and transaction cost economizing. While the essence of contracting is .. .. .. .. .. .. commitment, .. the design and interpretation of contractual agreements will depend on which of these three motives dominates.
(In pure insurance or risk-transfer transactions, the objective is to shift risk to the less risk-averse transactor or low-cost risk bearer)
Contract Law
The law governing exchange is crucial for a market economy. Most of the doctrines of contract law seem consistent with economic efficiency. Law and economics study of contract law has shown that, in general, it is efficient for parties to be allowed to write their own contracts, and under normal circumstances, for courts to enforce .. .. the agreed-on terms, .. .. Including .. .. .. the agreed-on price.
Why Contract?
The essence of any contract is mutual exchange of promises; and every promise contemplates a sense of commitment. It is elementary that the transacting parties will be justifiably reluctant to make investments, forego opportunities, or take other actions necessary to realize the full value of exchange unless there is some form of assurance that the other promisor will, when the time comes, uphold his end of a bargain.
This is efficient.
.. late 19th and early 20th centuries .. anglo-american courts .. enforcement of promises ..
what promises should be enforceable at law ? ? ? ? ?
.. bargain principle ..
.. A promise is legally enforceable if it is given as a part of a bargain .. .. Otherwise a promise is unenforceable ..
OPTIMAL BARGAIN
For example, if Seller values a gadget at 1000 Rupees, and Buyer it at 20000 Rupees, they will make a deal. The surplus is 1000 Rupees, and they will split it by choosing a price between 1000 Rupees and 20000 Rupees. If Buyer will also pay 200 Rupees for a warranty, and the warranty will cost Seller 100 Rupees, then the contract will include a warranty, and a price adjustment between 100 Rupees 200 Rupees for the warranty..
.. bargain principle ..
.. A promise is legally enforceable if it is given as a part of a bargain .. .. Otherwise a promise is unenforceable ..
.. Elements of Contract ..
Offer Acceptance Consideration ..consideration .. .. makes the promise enforceable..
regardless of equivalence
ROMAN LAW
.. NO CONSIDERATION .. .. NO CONTRACT ..
.. fair value ..
INQUIRY INFORMATION BURDEN ON COURTS INHIBITS COMMERCE
PERFORMANCE
RELIANCE
OPTIMAL RELIANCE
REMEDIES
WHAT SHOULD BE THE REMEDIES FOR BREACH OF ENFORCEABLE CONTRACTS .. PROMISEE IS ENTITLED TO .. BENEFITS OF THE BARGAIN
PERFECT CONTRACTS AND MARKET FAILURE INDIVIDUAL RATIONALISM TRANSACTION COSTS RATIONAL CONTRACTS
LEGAL INCOMPETENCE
RATIONAL DECISION MAKER CAN RANK OUTCOMES AS LEAST PREFERRED .. TO MOST PREFERRED .. ..
COMPETENCE
.. THUMB RULE .. .. COMPETENT PROMISOR .. MUST SERVE THE INTERESTS OF AN INCOMPETENT PROMISEE
? ? ? ? ?
.. TRANSACTIONAL INCAPACITY ..
SELLER > HIGH PRESSURE TACTICS CONFUSING THE CUSTOMER .. .. INTO .. SIGNING................. AN UNFAVOURABLE CONTRACT
.. INCAPACITY TO MAKE
.. THIS TRANSACTION ..
UNDER THESE CIRCUMSTANCES
ADHESIAN CONTRACTS
STANDARD TERMS CONTRACTS PRINTED FORMAT CONTRACTS TAKE IT OR LEAVE IT BASIS CONTRACTS DISPARITY IN BARGAINING POWERS UNCONSCIENABLE CONTRAC TERMS UNFAIR CONTRACT TERMS GOVERNMENT CONTRACTS FREEDOM OF CONTRACTING ISSUE OF FREE CONSENT
ISSUES IN IPR / COMPETITION LAWS : INCENTIVE QUESTION AMOUNT OF INNOVATION STANDARD APPLIED TO DETERMINE WHICH INVENTION QUALIFIES FOR THE MONOPOLY EFFICIENT ALLOCATION OF .. SCARCE RESOURCES.. .. FOR .. .. .. THOSE PRODUCTS AND SERVICES .. .. WHICH CONSUMERS VALUE
..a trade off.. ..between.. ..a short-term monopoly .. ..and.. ..the possible advantage of .. .. ..having new or better products .. ..which are not otherwise available..
promote and maintain competition by ensuring that markets function fairly and efficiently. prohibit business practices that would prevent free and fair competition from taking place educate and inform business persons of their rights and responsibilities under the Act
Competitive markets are essential to economic growth and improvement in consumer welfare
Anti-competitive Conduct
Anti-Competitive Agreements
Any arrangement or understanding whether oral or in writing likely to prevent, restrict or distort competition An enterprise holding a dominant position that engages in conduct which impedes the maintenance or development of effective competition in a market. when two or more businesses cease to be distinct entities and are likely to control 40% or more of any market, the merger will not be permitted if it is likely to affect competition adversely or be detrimental to consumers or the economy;
Abuse of Dominance
Anti-competitive Mergers
forced to purchase their raw material and other inputs at excessive prices excluded from certain discounts because they were not affiliated to the supplier, or part of a grand-father agreement. forced to share detailed confidential cost information forced to do business only with particular supplier or not get supplies. large businesses direct new business to the larger more established businesses
Need to be familiar with the concepts of competition law and the benefits of maintaining fair and competitive markets.
small businesses have acted in breach of the law, not always knowingly but Ignorance of the law is no excuse. group of small businesses in the distribution sector agreed to pass on the increase in price, plus a little extra to earn greater profit. agreed with supplier how they would set prices so as not to compete professional associations agreed and developed mandatory lists of the prices
Collusion
The prices of similar products of different suppliers are always identical, especially when they were different previously. statements indicating an understanding on prices Same company always wins bids Rules and conditions that exclude many potential bidders Successful bidders repeatedly subcontract unsuccessful bidders The price of a good bears little relation to its cost of production Requirements stipulating with which businesses you must deal Competitors being charged different prices for same good
Bid rigging
Abuse of Dominance
THE THOUGHT PROCESS .. ASSERTING ECONOMIC PERSPECTIVES ACKNOWLEDGING , THAT ANALYSIS AND EVALUATION OF IP-LAW BE WITHIN .. AN ECONOMIC FRAMEWORK, THEREBY .. SEEKING TO ALIGN THE LAW WITH .. .. .. .. THE DICTATES OF ECONOMICS .. .. ECONOMIC EFFICIENCY OF .. THE LEGAL DOCTRINES AND PRINCIPLES
ISSUES IN IPR / COMPETITION LAWS : INCENTIVE QUESTION AMOUNT OF INNOVATION STANDARD APPLIED TO DETERMINE WHICH INVENTION QUALIFIES FOR THE MONOPOLY EFFICIENT ALLOCATION OF .. SCARCE RESOURCES.. .. FOR .. .. .. THOSE PRODUCTS AND SERVICES .. .. WHICH CONSUMERS VALUE
a thought process.. does the award of a patent amount to misdirection of resources ? actually patent system under-rewards .. the initial researcher .. when the patent-award goes to claimant who only puts on the finishing touch .. The one who drove the last and easiest mile in the long race to marketability a trade off between a short-term monopoly and the possible advantage of having new or better products not otherwise available
a trade off between.. a short-term monopoly .. and the possible advantage of .. .. having new or better products .. .. not otherwise available
LEBM
LEGAL ECONOMICS IN BUSINESS MANAGEMENT
Competition law
Concerned with promoting business activity
Requires the application of economic theory Prohibits business conduct which harms competitive markets
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Prevents the harmful effects of monopoly Secures consumer benefits such as lower prices, wider choice and more innovation
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Is more likely to exist where there are small number of suppliers or one dominant supplier
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MISC. TOPICS
FOR INTERACTIVE SESSION
ECONOMICS OF CASINOS
CAUTION SO CALLED RESEARCH IN SUCH CASES IS OFEN CONDUCTED BY ORGANIZATIONS WITH A VESTED INTEREST IN THE OUTCOME OF THE RESEARCH, OR WITH INDUSTRY TIES, OR BY STATE AGENCIES; STATISTICAL DATA NEDD NOT BE TREATED AS CONCLUSIVE; GENERAL CONCLUSIONS MAY BE DRAWN
COMMODIFYING LIABILITY
EFFECT OF LIABILITY ON INCENTIVES FOR RISK BEAING OR REDUCING RISKS CONTROLLING HARMFUL ACTIVITIES CORRECTIVE TAXATION / REGULATION INSURANCE CONTINGENT CLAIMS STOCK OPTION COMMODITY FUTURES
LAW PROHIBITS MARKETS FOR LIABILITY RIGHTS
BENEFITS
INCREASE IN REVENUES JOB CREATION TAX COLLECTION GAIN IN UTILITY MODERATE ENTERTAINMENT INVESTMENT STIMULATION TOURISM DEVELOPMENT ECONOMIC DEVELOPMENT URBAN OR WATERFRONT REVITALIZATION IMPROVEMENT OF THE ECONOMIC STATUS OF THE DESERVING UNDERPRIVILEGED GROUPS
COSTS
MORAL DISAPPROVALS FEARS OF ADVERSE SOCIAL IMPACTS CRIMES BUSINESS EMPLOYMENT COSTS BANKRUPTCY ( 20 % ) SUICIDES ILLNESS SOCIAL SERVICE COSTS REGULATORY COSTS ABUSED ( BORROWED ) MONIES
CORPORATE GOVERNANCE
ECONOMIC INTERESTS OF SHAREHOLDERS CREDITORS BANKS EMPLOYEES MANAGERS DIRECTORS STATE OTHER STAKE-HOLDERS ? ? ?
END
THANK YOU ALL bedekar_sunil@yahoo.co.in