Law and Economics Paper #2
Is justice always the economic? Are laws made with efficiency in mind? These questions can be best answered by looking at the policy behind the law. What is right (i.e., what the law says is not wrong) may not always be what is efficient. Legislators craft laws with various intentions in mind, not always legitimate. Whatever intention might be behind the passage of a law, on paper, what always appears would be a reference to state policy, as enshrined in the Constitution. If the intention behind the law cannot be truly discerned, perhaps we need to examine the effect of the law. The obvious subject of scrutiny would be the courts and how courts apply the law.
Courts in the Philippines are courts of both law and equity. As for law, the courts dispense justice according to what the law says. Lady Justice is often depicted blindfolded, holding scales in one hand and a sword in the other. Equity on the other hand, if used apart from torts cases and application of penalties, would not be enough to interfere with the judgment of the court based on law, meaning, no matter how harsh the consequences, no judge in his right mind would rule for the party who values it the most, disregarding laws that are as good as etched on rock. In other words, “win-win” decisions (as in the case of Fortich v. Corona) are not favored if not based on law, even if such would be an equitable and efficient way of dispensing justice.
Due to the high cost of litigation, most disputes are resolved through out of court settlements or arbitrations. The Normative Coase theorem postulates that laws should be structured so as to remove the impediments to private agreements while the Normative Hobbes theorem suggests that the law should be structured so as to minimize the harm caused by failures in private agreements. Hobbes and Coase’s theorems are premised on the existence of private agreements, that both parties in dispute would try to agree on an equitable solution. These theorems are best suited for arbitration laws. It is through this medium that equity, instead of the hard and fast rule of law, can be applied in greater measure. With this in mind, it would be advisable for legislators to consider making economics the basis of laws. Incentives must be given to parties willing to bargain and give out correct private information without overreaching.
The creation of a law ensuring maximum benefit to both parties could prove to be quite a feat. In the last three readings assigned in class, the authors have intimated that law and economics is becoming a popular discipline or school of thought. Such optimistic view, however, cannot be applied to the Philippines yet. There is a need for more economists to traverse the boundaries between law and economics.
Courts in the Philippines are courts of both law and equity. As for law, the courts dispense justice according to what the law says. Lady Justice is often depicted blindfolded, holding scales in one hand and a sword in the other. Equity on the other hand, if used apart from torts cases and application of penalties, would not be enough to interfere with the judgment of the court based on law, meaning, no matter how harsh the consequences, no judge in his right mind would rule for the party who values it the most, disregarding laws that are as good as etched on rock. In other words, “win-win” decisions (as in the case of Fortich v. Corona) are not favored if not based on law, even if such would be an equitable and efficient way of dispensing justice.
Due to the high cost of litigation, most disputes are resolved through out of court settlements or arbitrations. The Normative Coase theorem postulates that laws should be structured so as to remove the impediments to private agreements while the Normative Hobbes theorem suggests that the law should be structured so as to minimize the harm caused by failures in private agreements. Hobbes and Coase’s theorems are premised on the existence of private agreements, that both parties in dispute would try to agree on an equitable solution. These theorems are best suited for arbitration laws. It is through this medium that equity, instead of the hard and fast rule of law, can be applied in greater measure. With this in mind, it would be advisable for legislators to consider making economics the basis of laws. Incentives must be given to parties willing to bargain and give out correct private information without overreaching.
The creation of a law ensuring maximum benefit to both parties could prove to be quite a feat. In the last three readings assigned in class, the authors have intimated that law and economics is becoming a popular discipline or school of thought. Such optimistic view, however, cannot be applied to the Philippines yet. There is a need for more economists to traverse the boundaries between law and economics.
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