Wednesday, May 12, 2010

Legal Theory Lexicon: Path Dependency

The phrase "path dependency" is used to express the idea that history matters--choices made in the past can affect the feasibility (possibility or cost) of choices made in the future.  This entry in the Legal Theory Lexicon introduces this idea to law students, especially first-year law students, with an interest in legal theory.

The General Idea of "Path Dependency"  

The general idea of path dependency is that prior decisions constrain (or expand) the subsequent range of possible or feasible choices.  That is, a decision, d, made at tmay affect the choice set, S = (c1, c2, . . . cn) at t2.  We can define a choice set as a set of actions that a given agent could take.  Or to expand the path metaphor, if we imagine a network of paths through time, from past to future, decisions to branch at an earlier point on the chosen path may affect the destinations that one can reach from a later point on the path.  Sometimes, if we choose the left fork, we may be able to reach exactly the same destinations we could have reached via the right fork, but sometimes, our choices foreclose some possibilities altogether.  It isn't always the case that in the long run, there's still time to change the road you're on.

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Tuesday, May 4, 2010

Legal Theory Lexicon: Efficiency, Pareto, and Kaldor-Hicks

Almost every law student get's some introduction to normative law and economics in their first year of law school.  One of the basic ideas of normative law and economics is that the law should be "efficient."  But what does efficiency mean?  For economists, "efficiency" is a technical idea--with only a tangential connection to the use of "efficiency" in ordinary speech.  In order to understand economic efficiency, we will look at what are called the Pareto principles and a related idea that is sometimes called Kaldor-Hicks efficiency.

In addition to explicating the idea of efficiency, we will take a qucik look at some of the criticisms that might be made of this concept.  Although many economists operate on the assumption that "efficiency" is an uncontroversial good, that conclusion is controversial both inside and outside of the discipline of economics.

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