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Law and Growth Economics: A Framework for Research

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  • Cooter, Robert D.
  • Edlin, Aaron

Abstract

Many law and economics models concern static efficiency and redistribution. The standard analysis of dynamic industries requires lawmakers to balance faster innovation against lower consumer prices. Sustained growth dominates these effects, so law and growth economics should focus on maximizing it. Law can increase the growth rate by making innovation more profitable. We distinguish innovation into phases -- discovering ideas, developing them with capital and labor, and marketing innovations. Strengthening intellectual property law and weakening antitrust law increases the costs of developing ideas, and also increases the revenues from marketing innovations. To maximize the profitability of innovation, law should balance these two effects. We use these ideas to develop a framework for law and growth economics.

Suggested Citation

  • Cooter, Robert D. & Edlin, Aaron, 2011. "Law and Growth Economics: A Framework for Research," Berkeley Olin Program in Law & Economics, Working Paper Series qt50t4d0kt, Berkeley Olin Program in Law & Economics.
    • Handle: RePEc:cdl:oplwec:qt50t4d0kt
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    1. Charles I. Jones & Paul M. Romer, 2010. "The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 224-245, January.
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    Cited by:

    1. Jan-Erik Lane, 2017. "Opportunistic Behaviour," Applied Economics and Finance, Redfame publishing, vol. 4(4), pages 1-16, July.
    2. Wolfgang Kerber, 2014. "Soft Paternalismus und Verbraucherpolitik," MAGKS Papers on Economics 201449, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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