This book introduces principles and methods of economic analysis of law, also known as “law and economics.” Principles are the fundamental conceptions, assumptions, or beliefs that are common to those who employ economic analysis of law. Methods are the tools, techniques, or tricks they use. The aggregate of all legal thinkers could be imagined as a massive workshop. All human knowledge and events are the inputs that the workshop of jurists uses. The outputs include judicial decisions, statutes, proposals for changes of rules, and interpretations. To a novice, this workshop seems cavernous and daunting. This book is a guide to that area of the workshop where economic analysis of law occurs and introduces the use of its tools. The principles section shows the common understandings, assumptions, and goals, what problems economic analysis of law engages. The methods section explains its main tools.

For students who are uncomfortable trying to learn the universe of legal thinking, understanding the direction of this book may be daunting. Let us start our travel through economic analysis of law with a simplifying metaphor. Rather than jurists, let us act as managers of an apartment building. How should we act in our managerial capacity? If this question is too abstract, suppose we have reached a concrete problem. Our building's heating system has failed. What should we do?

PROPOSALS, CONSEQUENCES, AND IDEALS

The building manager must react to the problem. Study the manager's decision by separating three components: proposals, consequences, and ideals.