Law

=== Economics ===
{{main|Law and economics}}

[[File:Richard Posner at Harvard University.jpg|thumb|[[Richard Posner]], [[University of Chicago Law School]] professor and the most cited legal scholar, until 2014 ran a blog with [[Nobel Memorial Prize in Economic Sciences|Nobel Prize]] winning economist [[Gary Becker]].<ref>{{cite web |title=The Becker-Posner Blog |url=http://uchicagolaw.typepad.com/beckerposner/ |url-status=live |archive-url=https://web.archive.org/web/20100519191011/http://uchicagolaw.typepad.com/beckerposner/ |archive-date=19 May 2010 |access-date=20 May 2010}}</ref>]]

In the 18th century, [[Adam Smith]] presented a philosophical foundation for explaining the relationship between law and economics.{{efn|According to Malloy , Smith established "a classical liberal philosophy that made individuals the key referential sign while acknowledging that we live not alone but in community with others".(''Law and Economics'', 114)}} The discipline arose partly out of a critique of trade unions and U.S. [[antitrust]] law. The most influential proponents, such as [[Richard Posner]] and [[Oliver E. Williamson|Oliver Williamson]] and the so-called [[Chicago school (economics)|Chicago School]] of economists and lawyers including [[Milton Friedman]] and [[Gary Becker]], are generally advocates of [[deregulation]] and [[privatisation]], and are hostile to state regulation or what they see as restrictions on the operation of [[free market]]s.{{sfn|Jakoby|2005|p=53}}

The most prominent economic analyst of law is 1991 [[Nobel Prize in Economics|Nobel Prize]] winner [[Ronald Coase]], whose first major article, ''[[The Nature of the Firm]]'' (1937), argued that the reason for the existence of firms (companies, partnerships, etc.) is the existence of [[transaction cost]]s.{{sfn|Coase|1937|pp=386–405}} [[Homo economicus|Rational individuals]] trade through bilateral contracts on open markets until the costs of transactions mean that using corporations to produce things is more cost-effective. His second major article, ''[[The Problem of Social Cost]]'' (1960), argued that if we lived in a world without transaction costs, people would [[bargaining|bargain]] with one another to create the same allocation of resources, regardless of the way a court might rule in property disputes.{{sfn|Coase|1960|pp=1–44}} Coase used the example of a [[nuisance]] case named ''[[Sturges v Bridgman]]'', where a noisy sweetmaker and a quiet doctor were neighbours and went to court to see who should have to move.<ref name="Sturges" /> Coase said that regardless of whether the judge ruled that the sweetmaker had to stop using his machinery, or that the doctor had to put up with it, they could strike a mutually beneficial bargain about who moves that reaches the same outcome of resource distribution. Only the existence of [[transaction costs]] may prevent this.<ref>Coase, ''The Problem of Social Cost'', IV, 7</ref> So the law ought to pre-empt what ''would'' happen, and be guided by the most [[efficiency (economics)|efficient]] solution. The idea is that law and regulation are not as important or effective at helping people as lawyers and government planners believe.<ref>Coase, ''The Problem of Social Cost'', V, 9</ref> Coase and others like him wanted a change of approach, to put the burden of proof for positive effects on a government that was intervening in the market, by analysing the costs of action.<ref>Coase, ''The Problem of Social Cost'', VIII, 23</ref>