Volume 8, Issue 2

This article uses a Positive Political Economy approach to understand the development of judicial review of agency decisions in China, where formal legal institutions are often supposed irrelevant to administrative governance. This article demonstrates that, although the National People’s Congress has tried to limit the competence of courts to exercise judicial review, the Supreme People’s Court has deftly circumvented it by handing down expansive readings of administrative statutes, thus maximizing the judiciary’s interests and using its superior legal expertise to lend the State Council (the Chinese executive) supplementary oversight mechanisms for reining in defiant agents. Counter-intuitively, given its origins as an instrument of the National People’s Congress and the Party-State security apparatus, the Supreme People’s Court has been acting with considerable autonomy to influence an ever-widening range of policy domains by strategically manipulating the decision costs of local bureaucratic agencies that take decisions contrary to the policy preferences of their State Council principals. The emergence of Administrative Judicial Interpretations, the Court’s policy vehicle of choice, embodies a strategic partnership between the Court and the State Council based on specialization and common interest, often at the expense of the legislature.

Legal expertise permits detailed laws to be written and enforced, but individuals with expertise may employ their special knowledge to skew decisions in privately beneficial directions. We illustrate this tradeoff in a simple model, which we use to guide our analysis of the legal system in ancient Athens. Rather than accepting the costs of expertise in return for the benefits, as do most modern societies, the Athenians designed a legal system that banned professional legal experts. And this was not because Athenian society was simple: The Athenians employed sophisticated contingent contracts and litigated frequently (to the point that the law courts featured prominently in several famous comedies). Furthermore, the Athenians recognized that forgoing expertise was costly, and where the cost was particularly high, designed institutions that made use of expertise already existing in society, employed knowledgeable individuals who were unable to engage in significant rent-seeking, or increased the private returns to collecting publicly beneficial information. Although the Athenian legal system differs in many ways from modern legal systems, it nonetheless functioned very effectively. Investigation of the Athenian system highlights how important it is for institutional designers to consider legal institutions as a bundle, whose pieces must complement one another.

The standard economic model of crime emphasizes the individual rationality and agency of criminals, while sociological theories typically emphasize the importance of social forces. This essay surveys a recent strand of literature on law enforcement that bridges these two approaches. Using the tools of game theory, it investigates crime as the outcome of the interaction between rational individuals. The survey shows that this analysis leads to a substantially richer set of hypotheses regarding the effect of enforcement than the standard economic model, depending on the classification of the social context, or game, in which agents operate. In doing so, it brings rational choice theories in line with long-standing insights in the field of criminology, as well as providing new analytical distinctions and generalizations.

We investigate empirically the relationship between software piracy and GDP per capita by considering non-linear effects. We use a panel data analysis for 100 countries over a period of 15 years. We remedy several previous econometric and methodological shortcomings and show that piracy follows a Kuznets-like curve. Concretely, piracy first increases with the level of GDP per capita, reaches a maximum, and then decreases at higher levels of income. Making people richer can be the best way to decrease piracy over the long-term horizon. Intellectual property rights holders should not aim for a decrease of piracy per se, but rather a decrease of piracy in those circumstances where it is most likely to be substituted by legal sales. Economic growth can generate by itself incentives to curb piracy.

We set up a model to study how ownership structure, corporate law and employment law interact to set the incentives that influence the decision by a large shareholder or manager effectively controlling the firm whether to divert resources from minority shareholders and employees. We suggest that agency problems between the controller and other investors and holdup problems between shareholders and employees are connected if the controller bears private costs of expropriating these groups. Corporate law and employment law may therefore sometimes be substitutes to some extent; employees may benefit from stronger corporate law intended to protect minority shareholders. Our model has implications for the domestic and comparative study of corporate governance structures and addresses, among other things, the question of whether large shareholders are better able to commit to a long-term relationship with employees than dispersed shareholders, or whether the separation of ownership and control facilitates long-term relationships with labor.

This paper reports the distribution of doctoral degrees in economics and in other fields among faculty at the 26 highest-ranked law schools. Almost one-third of professors at the top 13 law schools have a Ph.D. degree, with 9% having a Ph.D. in economics. Law school rank is highly correlated with the share of faculty holding a Ph.D. in economics and is less correlated with the share of faculty with other doctoral degrees. Law and economics is a major area of legal scholarship based on citations in the law literature and other impact rankings. In recognition of the increased importance of economics in legal education, in 2006 Vanderbilt University established a joint J.D./Ph.D. program in law and economics. The program is housed in the law school and offers 11 new Ph.D. courses designed to fully integrate economics into legal education. We provide information on the genesis and operation of the program.

Despite an inherent kinship, the studies of political science and law spent many decades isolated from one another. In recent years the two fields have become more and more integrated, with an increasing number of political scientists collaborating with law professors and joining law school faculties. Political science is a rigorous discipline that can benefit both legal scholars and lawyers. Public Law—the subfield of political science that studies law and courts—has much to offer in understanding how judges make decisions and how larger political and institutional contexts affect the legal system. Furthermore, law students can only benefit from exposure to the methodological approaches that are standard in political science. Enhanced integration of political science and law will inherently expand the knowledge and reach of lawyers and legal scholars due to the important contributions discussed in this article.

A new explanation of the origin of democracy is presented, motivated by historical observations from ancient Athens. It is argued that volatility in wealth across generations encouraged the elites to extend the franchise to nonelites. While being among the elite allows for the extraction of wealth from the nonelite, if there is a significant probability that one’s offspring will fall from the ranks of the elite, then the enfranchised may have the incentive to provide democracy. This proves an insurance for one’s offspring. Furthermore, providing this protection allows, in certain environments, an elite to consume more in his life.