The Economic Analysis of Law in Pakistan

Omer Siddique


One of the most important functions of law is to assign rights
and liabilities in such a way that disputes do not arise. The failure to
prevent disputes in a society indicates that the structure of the law is
inefficient. Since the focus of law and economics is on efficiency (see
Box 1) and how people respond to incentives, one way to carry out the
economic analysis of the law is to use the framework of market
capitalism. Driven by the idea of the invisible hand, the fundamental
point of capitalism is that individuals should be able to use their
capital freely, without the state’s interference. It implies that
individuals’ legal ability to move capital should be frictionless.

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