State, Law and the Economy

This course teaches basic concepts relevant in political economy. Topics include the contractual nature of the state, public versus private goods, property rights and economic externalities, the logic of collective action and social choice theory. It also refers to the fundamentals of political philosophy, bringing two ideas of liberty into the picture. The relevance and limitations of the economic approach to the study of law and politics are then discussed.

Economic concepts often give a fresh and unobvious perspective when applied to the study of how the state, law, and the economy function and are interrelated. This course teaches students essential economic concepts in an intuitive manner relevant to the study of political economy. Part One of the course is focused on developing the essential economic concepts. These are then applied to the study of the nature of the liberal democratic state and why it has to be a limited state in contrast to a populist democratic one.

Topics include the contractual nature of the state, public versus private goods, property rights and economic externalities, the logic of collective action, social choice theory, agenda control, the art of manipulation, and the compatibility of two ideas of liberty with the democratic state.

The use of interdisciplinary materials, empirical inference, game theoretic simulation, and cross-referencing with political philosophies and well-known historical cases, provide students an opportunity to connect different perspectives and deepen their understanding of the democratic state in a free society using economic concepts.

The economic concepts developed in Part One of the course will continue to be useful in the other three parts. Part Two covers the nature of the authoritarian state and party rule, rent seeking activity and its economic consequences, and interrelationships between democracy and economic growth. Part Three covers rule of law and their legal origins, consequences of legal origins for growth, law or state as determinants of economic growth, and transition from dictatorship to democracy and their permanence. Part Four is a study of nature of politics in pre-industrial states with examples drawn from China, Europe, the Islamic world, and India. We also discuss the relevance and limitations of the economic approach to the study of law and politics.

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Comment from our editors:

This course can be a good introduction into classical New Institutional Economics (NIE) and Social Choice Theory. It will surely broaden the understanding against a too narrow understanding of how politics and economics interact. In the same time one should be carefull, since both theories lately have been discussed critically in many papers and the roots of Social Choice Theory and NIE lie in the rationality assumption of the homo oeconomicus.