Law and Social Structure Unit III

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Law and Social Structure(Unit III)

• Sociology 641

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Unit III Overview

• Law and the Economy
• Law and Social Stratification
• Law and Ideology

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(No Transcript)
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Coming Attractions

• Unit IV Law and Social Change

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Law and the Economy

• Sociology 641

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Max Weber(1864 -1920)

• A founder of sociology
• and of sociology of law
• How does law promote or impede economic activity?
• 2x2 typology of legal regimes

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Webers Typology of Legal Decisions
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Legal Predictability

• Formalism and rationality promote legal
  predictability
• Legal predictability promotes capitalistic
  business planning

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Law and Economics

• Premise Assume rational-choice, in order to
  predict legal efficiency.
• Mostly theoretical, rather than empirical
• Simple (or simplistic) but powerful
• Key concepts
• Externalities
• Transaction Costs

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Externalities(a.k.a. External Costs)

• Externalities arise when an economic activity
  imposes costs on third-parties who are not
  involved in that activity.
• Examples
• Farming and ranching on adjacent plots of land
• Also Pollution, Noise, etc.
• Externalities give rise to market failures
• which may justify public intervention in the
  economy.

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Ronald Coase(Nobel in Economics, 1991)

• The parable of the farmer and the rancher
• Efficient outcomes
• Legal regimes
• Notice
• Different distribution of costs and benefits
• But same overall efficiency

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Efficiency Analysis
(assuming no transaction costs)
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The Coase Theorem

• As long as
• legal rights are well-defined,
• and transaction costs are zero,
• market exchanges will internalize all
  externalities,
• and production will occur at efficient levels

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The Politics of the Coase Theorem

• Conservative
• Clarify legal rights, then
• Leave the market alone
• Progressive
• Minimize transaction costs
• And Regulate when necessary

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Some common sources of transaction costs

• Difficulty identifying transaction partners
• Barriers to communication
• Uncertainties about future events
• Asymmetries in information
• Imbalances in power
• Distrust and emotionalism
• Cost of contracting

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Summary

• Weber Predictability
• Coase
• Well-defined rights
• Minimal transaction costs