The field emerged in the United States during the early 1960s, primarily from the work of scholars from the Chicago school of economics such as Aaron Director, George Stigler, and Ronald Coase.
As early as the 18th century, Adam Smith discussed the economic effects of mercantilist legislation; later, David Ricardo opposed the British Corn Laws on the grounds that they hindered agricultural productivity; and Frédéric Bastiat, in his influential book The Law, examined the unintended consequences of legislation.
The University was headed by Robert Maynard Hutchins, a close collaborator of Luhnow's in setting up the Chicago School, as it became commonly known.
Gordon Tullock and Friedrich Hayek also wrote intensively in the area and influenced to spread of law and economics.
[6] In 1960 and 1961, Ronald Coase and Guido Calabresi independently published two groundbreaking articles, "The Problem of Social Cost"[7] and "Some Thoughts on Risk Distribution and the Law of Torts".
Director's appointment to the faculty of the University of Chicago Law School in 1946 began a half-century of intellectual productivity, although his reluctance about publishing left few writings behind.
He died September 11, 2004, at his home in Los Altos Hills, California, ten days before his 103rd birthday.
Nonetheless, the possibility of a clear distinction between positive and normative analysis has been questioned by Guido Calabresi who, in his book on "The future of Law and Economics" (2016: 21-22), believes that there is an "actual - and unavoidable - existence of value judgments underlying much economic analysis"[13] Uri Weiss proposed this alternative: "It is common in law and economics to search for the law that will lead to the optimal outcome, providing the maximum size 'pie,' and to think about maximizing happiness instead of minimizing pain.
In 1985, in An Economic Theory of the Criminal Law, Posner set out an alternative approach that relied instead on wealth as the basic unit of analysis.
Law and economics is closely related to jurimetrics, the application of probability and statistics to legal questions.
The influence of law and economics has also been felt in legal education, with graduate programs in the subject being offered in a number of countries.
Many law schools in North America, Europe, and Asia have faculty members with a graduate degree in economics.
Jon D. Hanson, of Harvard Law School, argues that our legal, economic, political, and social systems are unduly influenced by an individualistic model of behavior based on preferences, instead of a model that incorporates cognitive biases and social norms.
[47] Additional criticism has been directed toward the assumed benefits of law and policy designed to increase allocative efficiency when such assumptions are modeled on "first-best" (Pareto optimal) general-equilibrium conditions.
Essentially, the "first-best" neoclassical analysis fails to properly account for various kinds of general-equilibrium feedback relationships that result from intrinsic Pareto imperfections.
[54] Within the legal academy, the term socio-economics has been applied to economic approaches that are self-consciously broader than the neoclassical tradition.