Law is a normative value to help society live in collectivity and harmony. For law to be a supreme regulator of all, it must become integral in theory and practice. An integral dimension of law helps State, society and legal systems to balance and harmonize competing claims arising out of complexity and heterogeneity of life and changing needs. Professor Dr. K. Parameswaran outlines his integral theory of law in this series of articles by showing how law must integrate knowledge from other disciplines; bring them under what law wants from them. This introductory article, Part I, discloses the ‘integral dimension of law’ that exists between these two subjects of unique knowledge; law as well as economics.
Definition, nature and role of interrelationship between law and economics as subjects of knowledge in triguemany research studies. Economics is of many things. A social science discipline, it generally deals with production, distribution and consumption of goods and services. At yet another level, it deals with demand and supply, income and price, resource and allocation, choice and decision, distribution and resource, employment and wage, saving and interest etc.
Whole gamut of why and how of all these, actors and agents involved in these processes, how to have equilibrium, best for all in a situation, calculate risk, enhance efficiency and predictability, allow right compensation and development etc., are parts of various types and models of theory and practice, tool and technique of economics. Some of them known to us are; macroeconomics, microeconomics, economics-by-application on various sectors, history and development of economics in changing times and cultures, positive economics, normative economics etc. Similarly, law is of many things. A subject that integrates all of social sciences, deals with civil and criminal laws, public and private laws, common and civil laws as systems, natural, positive and real theories of law in approach and function, actors, agents and institutions of legal processes who operate law in action etc., form part of discipline law and function of legal systems. How do these two disciplines of intricate knowledge with wide varieties interrelate? Is it ‘economic analysis of law’ or ‘law and economics’? What are the advantages and limitations of these two popular subsets of inter relationship in any legal perspective? How do we harmonize their inter-relational conflicts and bring them under integral dimensions of law?
Economic analysis of law deals with operation of economic principles and their reasoning through tools and techniques on legal materials namely legal systems and their processes. With this background, economic analysis of law results in many research outpourings that interests legal researchers. Four major outpourings are; first, freedom of choices, second, rational decisions, third, adequate damages in remedies and fourth, sense or satisfaction of appropriate justice.
Let us study these four aspects through a simple example – filing of a writ petition in High court or in an apex Court. Let us take three variables; cost of court fee, stamp and proceeding. Should they be in relation to financial capacity of litigant or proportional to price of award from the order of judgment? Should they be based on complexity of case or ease of nature in the legal cause to be resolved by court of law? Or let the whole cost be one, common and equal to all irrespective of other considerations like cost and nature of litigation and capacity of litigant? Let us assume the following. If a litigant cannot genuinely bear cost of court fee, stamp and proceeding in addition to the nature of case which is straight at ease in applying legal provisions and precedents with a positive possibility of favorable award, still litigant might avoid presenting legal cause before court as it is not within financial capacity. This situation that looks per se simpliciter is only in outward look; rather presents a complex picture in its undercurrent where litigant might suffer a cost legally, psychologically and socially. If so, litigant with no option then lives in a restricted freedom of choices of the course of action before legal systems and processes. This comes as a result of economic condition from two sides; one personal and individual to litigant-self and another, State and the public-collective to the society that ought to erase this strain. In this un-equilibrium situation, where state of nature between State and society where litigant lost freedom in terms of choices, we see following issues as to litigant’s stand either being rational or non-rational. Rational in terms of litigant’s personal and financial choice and accepted without satisfaction but non-rational in terms of favorable award in waiting and a loss of legal, psychological and social value to be added to legal system. And, in terms State’s capacity for welfare of legal services to the satisfaction of one and all, State and its legal system looks rational given the nonequilibrium state of Nature in State and society with an assumption that State always will apply due diligence in before and after accepting responsibility of welfare to all and does take care of this example of a litigant and shall rectify the same in course of time. Litigant loses the freedom of choice and hence, bound to accept a nonrational legal, psychological social image and cost. This in turn makes litigation noneconomic in thinking and action for those type of litigants who cannot afford and who might be many in number. Finally, the State loses its own foundation and Constitutional responsibility which is given and in fact born out of a freedom of choices of a sum of individuals from social collectivity. In the end, appropriate justice is lost to litigant no matter legal cause is valid and litigation’s would-be award adequate.
From Constitutional point of view, State’s non-rational and non-economic thought and action mirrors pithily only the images of State’s actors, institutions and its legal processes (three organs) who did not or could not ease this socio-economic legal relationship in terms of justice. This causal interrelationship among State’s legal systems (court and its proceedings’ cost), award of remedifying damages and, economic and social viability (litigant’s freedom), other costs (social image and psychological let-down) can be studied in economic analysis of law. And, microeconomic tools of knowledge comes to the aid such as how to maximize State’s legal services which are at once resources as well as utility-mechanisms to litigants in society, how efficient are these interrelationships in a given demand and supply (litigious society, forthcoming court and finally justice), how does a change in one parameter affect the other (elasticity among variables of State legal system and complex heterogeneous society, court and litigation processes), what is the industry involved (labor from registration, date and appearance, advocacy, preparation and final binding orders), welfare aimed (Constitutional goals), quality of information processes (ease and speed of functioning of systems), next-best alternative or even any specialized knowledge to be superimposed in this interrelationship (applied tools).
Thus, in this economic analysis of law, through microeconomic tools, quantitative inputs measured in units and variables across all dimensions of socio-economic actions are brought into to give statistical precision to decision making, efficiency and maximization of utility etc. State and its legal system takes these analyses into account on practical but empirical in base windowing the beaming horizons afar of noble goals and functions of law in mind. Ultimate vision on public welfare is gradually achieved for many if not for all. However, what needs to be achieved and what is an achievement acquired from economic tools and analysis of law is a matter of another interdisciplinary camp called ‘law and economics’ that largely rely on values relations among State and law, socio-economic growth and development of values with the help of macroeconomics. Microeconomics in the economic analysis of law are like by-lanes that intersect smaller sectors. Whereas macroeconomics are the highway lanes that connects two major destinations.
Law and economics is wider, horizontal and wholesome in scope and application, a difficult terrain to hike in and complete. Thus, sometimes it gives totally divergent views almost irreconcilable between legal and economic researchers. Some even consider that there is no difference as to these two departments of knowledge; ‘law and economics’ and ‘economic analysis of law’ owing to choices of values that one affix to these two types of researches. Let us take the same example as given above. We then have these questions. Why was the cost of litigation unaffordable to the litigant? How did it happen? Who and what was responsible for it? Did the overall cost of court and proceedings keep growing over a period of social cycle without additionally increasing the capacity to litigate in terms of growth and development, income, savings, interest of potential litigant etc.? Is there a fundamental fault in the whole gamut of legal system, its procedures and processes which created this imbalance between demand of justice through litigation on one side and, supply of justice through legal system from the State’s side? Or was there any allied and applied cost such as massive computerization of legal systems or salary cost to large amount of human resources in State administration that adversely affected litigant’s freedom of choices? In order to answer these questions, we can to turn to macroeconomics to see whether law and economics bring solutions to this situation.
We come across three major insights. First, economics in general works in one way direction in ordinary situations where nature of supply determines conditions of output or even values to the demands and prices. Transposing the same situation to law and economics with the example given, we can see conditions of breakdown of law or inefficient legal systems can result in chaos, disorder or injustice (recession). Spirit and sense, litigation and justiceaction can change methods and machinery of justice including its cost and appropriateness of justice if State is vigilant enough to foresee a risk to its own system and subsequent cost to revive. Secondly, law and legal systems can (must) move demand for justice (litigation) by reducing cost of court fee, stamp and proceeding. This can make justice an important component of State welfare even though sense of justice cannot be measured except that everyone gets an easy and stress-free access to justice without any idea of quality and what is valued as justice. Thirdly, like national output, justice-output ought to be developed and ensured by legal and economic researchers. Like the quantity of goods or services produced in a given time period by a company, sector or industry or even a country, quality of justice in terms of cost and remedies, ease-ness and speed of litigation for litigants be considered by State as a duty towards Constitution. This must become a goal–maximization of justice as National welfare through legal services.
Similarly, as we see unemployment in macroeconomics, we must also consider litigants who have lost the freedom of choice and thereby become unemployable to the legal system. They also get bound by a social image of being non-rational and non-economic which is a problem of social (in)justice. Unregulated or even excessive interventions or non-interventions on legal systems like lack of human resources in court, deficient technological office automations, in flexible methods, duplication of processes of proceedings etc., can create among social public a sense of farce in the system of litigation. State and its actors and agents in the processes of legal system must take into account these dimensions of law and economics through the prism of macroeconomics. However, in both systems of ‘economic analysis of law’ and ‘law and economics’, there are drawbacks that disturb the passion of legal researchers to achieve the goals of justice. What are they and how are we to reconcile them? Follow the next series, Part II for conclusions of integral dimensions of law between law and economics.
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