Relation between Law and Economy

Introduction

Law and Economy individually have immense importance in the development of a Nation. They are studied together to get an Analysis on law which impacts the economy of a nation. India is a diverse country with people being engaged in different kind of occupation. To manage the citizens and their work as well as their contribution to the economy, Indian Legislature has passed numerous laws related to it. Every year, Ministry of Finance pass Budget to execute more beneficial laws for the country.

Historical Background?

Bentham may have begun the field of Economic analysis of law as it was observed that his writings contains analysis of property law and a treatment of legal process, but his work was undeveloped by the four major contributors in the period of 1960s and early 1970s[1].

• Ronald Coase’s, who published his paper around 60 years ago, named as “The Problem of Social Cost”, was an eminent and intellectual achievement of the economic approach to law. Professor Coarse’s work has changed the study of law, making his work special in legal field.
• Becker who had published his article on crime and law enforcement.
• Calabresi’s article and significant book on accident law and applying the economic methods to analyze legal questions.
• Richard Posner who launched the “Journal of legal studies” and started writing articles mentioning the importance of economics in analysing the legal phenomenon [2].

Judicial Analysis of Economic and Law

As the Supreme Court observed in Shivashakti Sugar Limited V. Shree Renuka Sugar Limited and others[3], that?

“Law is an Interdisciplinary subject and its affiliation with other sciences when comes into play, it is important for a judge to consider the impact of other disciplines in order to reach a judgment. Relations between Law and Economics have become valid as the nation has reached into an era of Economic Liberalisation, also termed as the “Globalisation” of economy.?

India is going way fast on the road of Economic growth and the legislature is performing its duty to make the growth easier and achievable. India is working for decades in its plans and strategies to be a developed country. The judiciary also has to perform economic analysis of law to conclude a case in which economical side can impact the decision. There are many branches in law which are directly impacted by Economics and economic considerations play predominant role, which are also recognised as the legal principles.

?Economic evidence and principles plays a major role while making the law like Environmental law, Bankruptcy law, Monopoly law, Contract law, Tort law, Labour law, tax law, Corporate and other laws. For a reference, the Court must have primary knowledge of economic to decide the amount of damages; guilty party has to pay to compensate the victim or the aggrieved party.”

In Kirti Ravinder Dhawan & ANR. V. M/S. Kashish Developers Ltd. And 2 ORS.[4], National Consumer Disputes Redressal Commission stated that

“In a case, primary duty of the court is to decide with the help of statutory law. But if a situation arise where following statutory law would affect the economic interest of the nation, the court should prefer the latter. Specifically, the Court needs to avoid a decision which would have an unfavourable effect on employment, growth of infrastructure or revenue of the State. This is why, the economic analysis of the effect of the decision become critical.”

Benefits of Economic analysis of Law

• Better Knowledge of Human behaviours

Primary objective of law is to provide basic rights to human and by Economic Analysis of law, Economics gives a better way to deal with human behaviour and get a good grasp on human behaviour.

• Regulation of some bodies needs a better understanding of Economics

Every?facet?of the economy has?income, demand, supply, utility, etc. and therefore,?correct?enactments?associated with?these?ideas?would like?a basic understanding of?political economy. Moreover, the regulation?of varied?bodies governing these?ideas?desires?correct?law constituting them.?For instance?–?RBI, LIC, SEBI, etc.

• To understand Tax Laws

With the help of economics, one can understand tax laws and its various concepts easily. Taxation laws and Income Tax rules and rules will be understood by applying the principles of Economics.

• Critical Examination on Law making

As stated in Shivashakti Sugar Limited V. Shree Renuka Sugar Limited and others, Economic plays a very big role in determining other consequences of a judgment. As we all know, Economics deals with each and every sector of the economy. To pass a new legislation, we have to always consider the parameters of Economics.

• To Conserve limited resources

India is second highest populated country and it has limited resources like water, petroleum and many others. To regulate its consumption and make it available got everyone, we need rules and laws and to make laws according to it, we have to apply Economics’ principle and analyze the situation accordingly.

• Understanding Property, Consumer Protection and Company Law

Property Law: Economics talk about the resources available in a country, the population and their expectations. In framing property laws, legislators have to keep these facts in mind to provide better and equal opportunity to everyone.

Consumer Protection law: Being a consumer, one can be exploited in various ways. To save a consumer from being exploited, there is Consumer Protection Act and to understand these laws, one must have some understanding of Economics as it directly or indirectly influence the Laws.

Company Law: Company and its working can be only understood by the basic understanding of economics, so while making company laws, one must go through the Economic principles.

From above cited benefits, it is clearly projected that Law and Economics having different perspective, give a list of advantages.

Conclusion

After all is said and done, Law with Economics results into considerable Acts and Laws. Economic Laws are beneficial for the nation and is considered to be very important for the development of nation. Without Economic Analysis of law, we cannot make better policies for the citizens of the nation. Without Economic, Lawmakers can fail to recall the betterment of the nation and lead to the laws which affect the employment and livelihood of the citizens, especially impacting the underprivileged. The Goal to be a developed nation is quite a long road, but with the help of Law and economics, we are taking a step closer to it.