Why economics students should deal with legal issues

Business Law - Insights into an Interdisciplinary Study

.Many of the problems faced in today's professional life, be it digitalization or globalization, cannot be solved from the point of one discipline alone, but require an interdisciplinary approach. We want to pass on these interdisciplinary competences at Guidance. In the following blog we want to show you how to solve a problem based on interdisciplinary thinking using the example of legal economics.

Legal economics is the discipline that analyzes law from an economist's point of view. It examines whether legal norms or even court decisions lead to economically efficient results and, if so, how the law can be designed to achieve economically efficient results.

A possible method of analyzing the economic costs of a proposed or existing legislation would be a cost-benefit analysis. Essentially, the question is whether the expected benefits outweigh the costs. As far as costs are concerned, the opportunity costs must be considered. The direct opportunity costs, as well as the hidden opportunity costs play a significant role here. The direct opportunity costs are those costs that arise because the funds used to implement the bill are not used differently and are thus lost in some sense. However, the second type, hidden opportunity costs, are often neglected and are those costs that arise when a law loses the incentive to cooperate with each other. This can be illustrated by the example of the European Consumer Protection Directive. According to this, car dealers are obliged to offer their customers a warranty period of 1 or 2 years. This means that car dealers are faced with higher costs and, as a result, the prices of used cars are increasing, which in turn means that some customers will distance themselves from buying. This means that economically viable transactions are missing. However, these costs are sometimes overlooked, but must be taken into account when assessing the benefits of a mandatory guarantee, which is certainly desirable for consumer protection reasons.

The analysis described above can therefore be used in particular when it comes to evaluating legislative proposals or legislative amendments. However, the economics of law can also be of help to the legal user. This can be illustrated by E 8 Ob 53/14y of the Supreme Court. In this case, a woman has brought an action for damages because she slipped in the lobby of Vienna Airport because it was not properly cleaned. The question now is: who is to be held liable? There is another way to ask the question: Who is responsible for ensuring that the lobby is cleaned in order to avoid damage such as this? The legal aspects were largely excluded, but the airport operators and the airline were considered. According to the economics of law, the "cheapest cost avoider" should be liable. This would be the person who could have prevented the damage with the least effort. In that case, it would be the airport operator. It should be borne in mind that not only one airline uses the airport, but more than a dozen. However, if air carriers were to be responsible for cleaning the airport, this would mean that, strictly speaking, each airline at the airport would have to maintain its own cleaning staff. As a result, there would be more than a dozen different cleaning companies operating at the airport, which would result in an economically unjustifiable expense. The only economically viable solution would be for the airport operator to be solely responsible for cleaning, since there is only one operator. However, the Supreme Court has stated that the airline is viable. However, this example illustrates very well that legal problems are not always solved by legal thinking alone, but sometimes require an economic approach.

We hope that we were able to offer you an interesting insight into the topic of legal economics. For all those who are interested in more, we recommend the textbook on economic analysis of civil law by Schäfer and Ott, which is available online for WU students.

Why economics students should deal with legal issues