The fields of law and economics are hallmarks of social sciences. Legal studies account for the oldest foundations of scholarly work and have ever since been at the heart of academic institutions. Since the inception of the science of economics, economic standardization of measuring utility enjoyed rising popularity. Surprisingly, the interdisciplinary discourse of Law & Economics has had a comparatively recent start but gained unprecedented urgency in today’s world.
The time has come to acknowledge the power of integrating Law & Economics as one of the most important approaches to solve the most pressing contemporary societal predicaments of our times. Climate change, healthcare inequality and the exacerbated digitalization disruption require the bundled strength of Law & Economics to successfully harness positive advancement but also curb harmful threats to our society and future generations to come early on and wisely.
Law offers an ennobling humane-natural principle of ethicality, practical feasibility in governmental impetus but also historical adaptability to implement societal changes including a legal birds-eye view of comparative approaches around the world, an exemplary sensitivity to disparate impacts of external influences’ impact on society but also clear guidelines how far the individual freedom and wellbeing can be granted in light of common security protection and societal welfare enhancement endeavors. Economics features the most advanced methods to discount future value, an exemplary formalization of societal welfare maximization over time, but also the most sophisticated ways to quantify societal gains and losses in often-overlooked and behaviorally-unforeseen externalities.
Only in the harmonious combination of both disciplines will the most challenging contemporary predicaments of our time be solved and widespread inequalities be alleviated through disparate-impact-sensitive, fine-tuned redistribution mechanisms. Acknowledging unique interdisciplinary insights and cherishing an international field of Law & Economics can help bridge the gap between societal entities, politically-divided nations and temporally-distanced generations. Adopting an interdisciplinary study approach with a commonly-understood language will promote a mutual understanding of multi-faceted insights in order to harvest the societal benefits of a fruitful Law & Economics Gestalt that is greater than its singular law and economics entities.
Erasmus Mundus Joint Master Programme by the European Commission
Climate change heralded a call for a fair climate stabilization solution and burden sharing strategy within society, between countries and over time. Intergenerational equity to provide an at least as favorable standard of living to future generations as currently enjoyed challenges traditional economic utility discounting models. Trade-offs arise for today’s consumers and taxpayers between individual profit maximization and future societal welfare improvement under the conditions of uncertainty and unperceivable outcomes for future beneficiaries.
In solving the climate change predicament, law offers an ethically-grounded climate justice justification of redistribution mechanisms within society, around the world and between generations in order to avert climate inequality. Intergenerational equity ethics back legal redistribution schemes to avert climate change-induced inequality. From a practical standpoint, legal foundations help global governance and governmental action alleviating inequality. Sophisticated comparative legal analysis methods highlight regulatory peculiarities’ impact on different living conditions on the societal, national and generational levels. Legal disparate impact analyses opening up the black box of aggregate macroeconomic calculus shed important light on the unequally-distributed burden of external environmental shocks on specific societal groups, various world nations and different generations. Law & Economics can address vulnerable groups on whom sustainability pledges place a disproportionate burden, which fosters the Sustainable Development Goals on a granular but widespread level.
Long-term oriented economic prospect discounting and productivity measurement around the world can quantify climate change-induced inequalities. Gross Domestic Product (GDP) prospect differences under climate change based on the optimum temperature for economic productivity and GDP sector composition per country reveal relative country differences on the economic climate change gains and loss spectrum. Climate flexibility – defined as the range of temperature variation per country – determines the future climate wealth of nations based on economic production and comparative trade advantages. The economic analysis of the economic gains and losses of a warming earth around the world but also an economic estimation of future trade prospects in light of global warming, help quantify how to enact climate change burden sharing fairness in legally-instigated redistribution and compensation schemes.
A Law & Economics analysis can dissect climate inequalities and provides viable means in order to enact climate justice via redistribution and compensation. First, climate justice within a country ensures that low- and high-income households carry a proportional burden in terms of disposable income enabled through a progressive carbon taxation. Consumption tax curbs harmful behavior. A corporate inheritance tax reaps benefits of past wealth accumulation that caused climate change. Secondly, fair climate change burden sharing between countries ensures those countries economically benefiting from a warmer environment also bear a higher responsibility regarding climate change mitigation and adaptation efforts. Thirdly, climate justice over time can be enabled in climate bonds financed via debt that are paid back by future generations who inherit a favorable climate in lieu, which distributes the benefits and burdens of a warming earth Pareto-optimally among generations.
Direct Law & Economics-driven innovations to find economically-feasible and judicially-fair climate financialization methods are introduced in tax-and-bonds strategies. An international climate regime could feature countries to raise funds via taxation or become bond premium beneficiaries. A country’s propensity to either grant the taxation-and-bonds solution via taxation or be a bonds payout recipient could be determined by a country’s initial position on the climate change economic gains and losses spectrum, regular and consumption-based, trade-adjusted CO2 emissions per country, climate flexibility as the range of temperatures within a national territory as future comparative trade advantage to other nations in the world, the willingness of countries to change CO2 emissions and the historically-determined banking lending regimes of a country. The idea of diversified tax-and-bonds is also extendable to sector-specific bond yield interest rate regimes. Within a country, the bonds could offer industry-specific diversified interest rate maturity bond yields based on the environmental sustainability of an industry, e.g., as measured by the European Sustainable Finance Taxonomy. The bonds could also feature a long-time financialization via debt that can be repaid by future generations for inheriting a stable climate. All these Law & Economics-informed recommendations aim at sharing the burden but also the benefits of climate change within society in an economically-efficient, legally-equitable and practically-feasible way now around the world and also between generations.