鈥�As a step toward that ideal it seems to me that every lawyer ought to seek an understanding of economics. The present divorce between the schools of political economy and law seems to me an evidence of how much progress in philosophical study still remains to be made. In the present state of political economy indeed, we come again upon history on a larger scale, but there we are called on to consider and weight the ends of legislation, the means of attaining them, and the cost.鈥� (Oliver Wendell Holmes; 1897) [1]
The World Bank鈥檚 policy focus shifted in the 1990s from a market-oriented paradigm to other issues such as social justice, poverty reduction and 鈥渕arket failures鈥�, where institutions had to play a greater role [2]. Known as the Post-Washington Consensus or the Third Moment in Law and Development, this new paradigm emphasizes the importance of 鈥済ood governance鈥�, the implementation of property rights for economic growth, and makes the following proposition: well-defined and formalized property rights lead to market efficiency, economic growth and development. Hence, since then the establishment of the 鈥渞ule of law鈥� has become the new goal to reach for developing countries.
However, this Law and Economics paradigm relies on a narrow set of theoretical assumptions and is heavily influenced by neoclassical views of the state, the market and overall competition. But this framework raises some questions: (a) are these assumptions empirically valid, namely is the implementation of property rights a necessary condition for economic growth and development? And (b) are 鈥減erfect competition鈥� and 鈥渕arket failures鈥� reliable concepts one should start from to cope with development 鈥� if by such term we mean a social and economic process that will ultimately increase human well being?Read More »
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