Introduction : Economic Welfare Applied to Law with Costly Markets

This essay, introducing a collection of articles, attempts to create a coherent sense of what is right and wrong about economic efficiency and its use in law. The aim of the essay, and of certain of the articles in the collection, is to contribute to a foundation for practical application of welfare economics to law and to give some sense of its value and limitations. The economic analysis of law (EAL) consists of scientific and normative claims: first, that efficiency is a description of common law and second, that it ought to be the basis of law more generallyThis essay suggests that theoretical modern welfare economics in the form of Arrow-Debreu (1954) is not practically useful; that practical welfare economics (i.e., benefit–cost analysis (BCA)), is useful in law but is itself dependent on law; that BCA has evolved and is more useful in the modified form suggested here; that substitutes for it, including the concept of wealth maximization, are dated and at variance with economic theory. More generally it is coming to be understood that (1) considerations of efficiency in law must be embodied into detailed understandings of the practices considered, something that is sometimes lacking in the economic analysis of law (EAL), (2) the arguments for common law efficiency, properly considered, are based on justice and finally (3) common law efficiency has declined as the determination of social norms, efficiency and justice has become more difficult