The origins of the economic analysis of law, often referred to as “law and economics” can be traced to US academics such as Professor Ronald Coase in the 1930s. Its subsequent development is much associated with what has come to be known as “the Chicago school”, because of major contributions made by academics such as Ronald Coase, Eugene Fama, Richard Posner and Gary Becker. Gary Becker is much beloved by students for venturing outside traditional areas of economic concern with his research into areas such as “A Theory of Marriage”. As an intellectual discipline the economic analysis of law forms part of micro-economics. It’s all about how people make what are assumed to be self-interested rational choices in a world where resources are limited.
The use of models and assumptions forms a major part of economic analysis of law. A model is a simplified view of reality which is useful in seeking to predict and explain. It is reasonable to attempt to reduce a problem to its key elements. Despite criticisms of the use by economists of models and assumptions, the law has long made use of its own such models and assumptions without using such terminology. For example, the law of contract is in essence a model: offer and acceptance, consideration and so on are all attempts to simplify a complex reality for the purpose of analysis. The use of the concept of the ‘reasonable man’ in the common law represents an attempt to make assumptions as to human behaviour. Few would seek to defend these concepts when compared with an equally complex reality: they would not bear such scrutiny. Nonetheless, few would seek to say such concepts are not useful.
The central, and controversial, concept of the economic analysis of law is that of economic efficiency. There are three types of efficiency, “allocative efficiency”, meaning the allocation of scarce resources to maximise their value to society, “”technical efficiency”, meaning the minimisation of costs, and ” dynamic efficiency” meaning the ability to innovate and survive. In practice, when considering policy issues it is allocative questions which are at the forefront and the relationship between the three is that all must be achieved simultaneously if resource allocation is to be efficient. Some might say that efficiency would be a sad and empty goal for the law. I responded with my co-author, Bill Maughan, to this in “The Law Commission and Economic Methodology” (1999) The Company Lawyer 109 at 114:
“The generalised acceptance of efficiency as a normative welfare goal should not obscure the fact that economic efficiency is a complex and essentially utilitarian concept. It takes no account of such issues as fairness, truth, beauty, love and justice, to name but a few of the more important non-material concerns of people; and it takes no account of the possible real-world differential impact of changes leading to efficiency. Accordingly, it would be unwise, wrong even, to claim that the concept of efficiency is either value-free, or universally acceptable, or even necessarily dominant as a welfare goal. Such claims to primacy as it has in the hierarchy of human goals are based on the premises that a very large number of people prefer something approximating efficient use of resources, and that empirical experience has shown that a failure to pursue efficiency can cause great social distress. Moreover, many people prefer resource allocation through voluntary exchange to resource allocation by compulsion, and most are aware that even non-material goals require scarce resources for their achievement.”
In 1999, I co-authored an article in the SPTL Reporter “The Barbarians at the Gate”, where we argued for a specialist section to be set up for law and economics. In 2000, we co-authored a further paper on Economic Efficiency, The Role of Law, and the Old Testament, which was delivered at the Center for Rationality and Interactive Decision Theory, Hebrew University of Jerusalem, Israel at the International Conference on Biblical Economics, subsequently published in 2003 in the Journal of Interdisciplinary Economics. We argued that there was a link between the Biblical Mosaic laws and economic efficiency, since economic efficiency presupposed values based on these laws that had become embedded in many Western countries.
In 2000, I organised an SPTL Company Law Section workshop “Company Law Reform and Economic Analysis: Establishing Boundaries” at Bournemouth University, with financial support from the SPTL, Beachcroft Wansbrough and Steele Raymond, Solicitors; it attracted speakers from Cambridge University and Miami University and the papers were later published in the Journal of Corporate Law Studies.
My current research into this field relates to tackling world poverty. My main contribution to this has been my edited collection of papers in 2008 “The Legal Foundations of Free Markets” (London: Institute of Economic Affairs, 2008). In this book I brought together some of the world’s leading figures in the field of law and economics to shed light on issues such as whether common law systems are better than civil law systems, the relationship between natural law and government, whether systems of law evolve within societies or are imposed from above by government; the role of the limited liability company, competition law; how the law can protect the environment without onerous regulation. The book jointly attracted a Seldon award for excellence from the Institute of Economic Affairs in 2009.
Copp, S.F. (2003) Bill Maughan, Obituary 14 Journal of Interdisciplinary Economics 299 – 301
Books, book contributions and conference proceedings
Copp, S.F. (ed.) (2008) The Legal Foundations of Free Markets (London: Institute of Economic Affairs), contributed Chapter 1 The Legal Foundations of Free Markets and Chapter 8 Limited Liability and Freedom [ISBN 978 0 255 36591 8]. For a review by Professor Andrew P. Morriss of University of Illinois, US, in The Independent Review 14(4), Spring 2010, see https://www.independent.org/publications/tir/article.asp?a=782. Here is a video of me explaining the book at the IEA, video.
Articles and published letters
Copp, S.F. (2011) The Unsound Foundations of the Companies Act 2006: The Flawed Use of Regulatory Impact Assessment 32 The Company Lawyer 323 – 335 [ISSN: 0144-1027]
Copp, S.F. (2011) The Economic (and Moral) Case Against Capping Directors’ Remuneration Economic Affairs 31(2) Student and Teacher Supplement, Summer 2011, 2 – 3, see https://www.iea.org.uk/sites/default/files/publications/files/StudentTeacherSuppJun11.pdf
Maughan, C.W. & S.F. Copp (2003) Economic Efficiency, The Role of Law, and the Old Testament 14 Journal of Interdisciplinary Economics 249 – 298
Copp, S.F. (2002) Company law and alternative dispute resolution: an economic analysis This article was first published in (2002) 23 The Company Lawyer 361 – 375 by Sweet & Maxwell. [ISSN: 0144-1027]
Copp, S.F. (2002) Who Needs Universities? 25 Society of Legal Scholars Reporter 29 – 33 [ISSN 0967 2184]
Copp, S.F. (2001) Company Law Reform and Economic Analysis: Establishing Boundaries 1 Journal of Corporate Law Studies 1 – 19 [ISSN: 1473-5970]
Copp, S.F. & C.W. Maughan (2001) Innovative High Growth Companies: The Case Against Special Rules 22 The Company Lawyer 234 – 243 [ISSN: 0144-1027]
Maughan, C.W. & S.F. Copp (2000) Company Law Reform and Economic Methodology Revisited 21 The Company Lawyer 14 – 22 [ISSN: 0144-1027]
Maughan, C.W. & S.F. Copp (1999) The Law Commission and Economic Methodology: Values, Efficiency and Directors’ Duties 20 The Company Lawyer 109 – 116 [ISSN: 0144-1027]
McGuinness, K., C.W. Maughan, & S.F. Copp (1999) Defining the Boundaries of Contract: A Law and Economics Rationale for the Doctrine of Privity of Contract 10 Journal of Interdisciplinary Economics 355 – 414
Maughan, C.W. & S.F. Copp (1999) The Barbarians at the Gate 19 SPTL Reporter 17 – 19 [ISSN 0967 2184]
Maughan, C.W. & S.F. Copp (1998) Piercing the Corporate Veil 148 New Law Journal 938 – 940 [ISSN 0306-6479]
McGuinness, K., W. Rees & S.F. Copp ((1998)) Recent Perspectives on Corporate Law 19 The Company Lawyer 290 – 296 [ISSN 0144-1027]
Academic conference, professional education and workshop papers
Copp, S.F. (2015) The Separate Legal Personality of Corporations in the UK: A Law and Economics Analysis delivered at the Banking and Finance Stream of the Socio-Legal Studies Association Annual Conference (Warwick University, Coventry)
Copp, S.F. (2012) Why the Limited Company Works (And Sometimes Doesn’t): Economic and Theological Perspectives delivered at the Association of Christian Economists Annual Study Group Meeting (Sidney Sussex College, Cambridge University)
Copp, S.F. (2011) The Case for (More) Free Trade delivered as part of a debate on Fair Trade or Free Trade organised by the Bournemouth University Chaplaincy with the alternative case presented by Simon Giarchi of CAFOD (Student Centre, Bournemouth University)
Copp, S.F. (2003) The Societas Europaea: An Economic Analysis public lecture in the Commercial Law series (Institute of Advanced Legal Studies, London) Abstract
Copp, S.F. (2001) Law, Economics and Justice, delivered at the LCF Academic Conference on Christian Perspectives on Law and Justice (Nottingham University) Abstract
Copp, S.F. (2001) ADR and Company Law: An Economic Analysis, delivered as part of The Company Lawyer series at the Institute of Advanced Legal Studies (London)
Copp, S.F. & C.W. Maughan (2001) Corporate Reorganisations: Externalities or Efficiency? delivered at the Corporate Governance: Reassessing Ownership and Control conference, held at the Faculty of Law, Cambridge University, organised by the ESRC Centre for Business Research, Cambridge University, and supported by 3CL and the European Centre for Corporate Governance, Bournemouth University (Cambridge)
Copp, S.F. & C.W. Maughan (2001) Innovative High Growth Companies: The Case Against Special Rules, delivered at Governance & Regulation, a Law and Economics Workshop sponsored by Hermes Investment Management, the ESRC Centre for Business Research, Cambridge University and Institutional Design Ltd (London)
Copp, S.F. (2000) Early Company Law in England: Is It Consistent With Economic Theory? delivered at the SPTL Company Law Section Workshop, SPTL Conference, University College London (London) Abstract
Copp, S.F. (2000) Company Law Reform and Economic Analysis: Establishing Boundaries, delivered at the SPTL Company Law Section workshop held at Bournemouth University (Bournemouth)
Copp, S.F. (2000) Corporate Governance: Why Both Theory and Practice Matter, delivered at the Annual Dinner of the AGM of the Wessex Institute of Chartered Secretaries and Administrators (Lyndhurst)
Maughan, C.W. & S.F. Copp (2000) Economic Efficiency, The Role of Law, and the Old Testament, delivered at the Center for Rationality and Interactive Decision Theory, Hebrew University of Jerusalem, Israel at the International Conference on Biblical Economics (Jerusalem, Israel)
Copp, S.F. (2017) On Liberty and Its Enemies: Essays by Kenneth Minogue, ed. T. Fuller Acton Institute Transatlantic Blog 16th June 2017
Copp, S.F. (2001) An Economic and Jurisprudential Genealogy of Corporate Law by Whincop, M.J. 12 International Company and Commercial Law Review 326 – 327 [ISSN 0958 – 5214]