f_0016640_14382 - Law Markets A model for Predicting Laws...

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The Whitehead Journal of Diplomacy and International Relations Law Markets: A model for Predicting Laws, Governments, and Institutions by Graham Lawlor L aw Markets is a positive economic model, which treats laws as tradable goods, citizens as consumers of laws, and governments as producers of laws. This model borrows heavily from the fields of Public Choice, which models political actors as economic agents, and from New Institutional Economics, which analyzes social contracts in the presence of transaction costs. The financial fields of Efficient Markets Theory and Behavioral Finance provide tools to measure transaction costs and empirical studies to demonstrate long-term trends. The traditional definition of laws in Public Choice Economics is a non-rival, non-excludable, ‘public good’. The fundamental insight of the Law Markets model is treating restrictions on choice over laws, including rivalry and excludability, as (continuous) transaction costs rather than (binary) public goods features. This distinction enables quantification and comparison of transaction costs across a diverse range of methods of choosing laws (migration, voting, etc.) in a diverse range of institutional and historical contexts. The trend emerging from analysis of the law market parallels that of financial markets—that transaction costs decline persistently over time. The conjecture that this trend will continue drives generalized predictions about the future of individuals’ choices over laws, institutions, and governments. The paper is organized in three sections. The first section describes the model of laws as tradable goods (with transaction costs) and the conjecture that these costs are falling. The second section is a short survey of the methods of trading laws, their assorted transaction costs, and descriptions of where transaction costs decline. The third section describes some of the predictions and implications from the model and the conjecture. T HE L AW M ARKETS M ODEL Shopping for Laws Individuals in society have a variety of choices over the laws they face. Depending on the society, these methods of choice may include voting in an election, running for office, campaigning, petitioning, migrating to a new city or country, or founding a new city or country, among others. These actions can be Graham Lawlor is a graduate student at New York University, Department of Economics. His article was selected from the Fourth Annual Whithead Colloquium, “Global Almanac.” 141
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LAWLOR The Whitehead Journal of Diplomacy and International Relations thought of as types of exchange in a ‘market’ for laws. Analysis of these choices within a ‘shopping for laws’ metaphor exposes some important similarities and differences between the market for laws and markets for everyday goods.
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f_0016640_14382 - Law Markets A model for Predicting Laws...

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