An Economics-Based Second Law Efficiency

Second Law efficiency is a useful parameter for characterizing the energy requirements of a system in relation to the limits of performance prescribed by the Laws of Thermodynamics. However, since energy costs typically represent less than 50% of the overall cost of product for many large-scale plants (and, in particular, for desalination plants), it is useful to have a parameter that can characterize both energetic and economic effects. In this paper, an economics-based Second Law efficiency is defined by analogy to the exergetic Second Law efficiency and is applied to several desalination systems. It is defined as the ratio of the minimum cost of producing a product divided by the actual cost of production. The minimum cost of producing the product is equal to the cost of the primary source of energy times the minimum amount of energy required, as governed by the Second Law. The analogy is used to show that thermodynamic irreversibilities can be assigned costs and compared directly to non-energetic costs, such as capital expenses, labor and other operating costs. The economics-based Second Law efficiency identifies costly sources of irreversibility and places these irreversibilities in context with the overall system costs. These principles are illustrated through three case studies. First, a simple analysis of multistage flash and multiple effect distillation systems is performed using available data. Second, a complete energetic and economic model of a reverse osmosis plant is developed to show how economic costs are influenced by energetics. Third, a complete energetic and economic model of a solar powered direct contact membrane distillation system is developed to illustrate the true costs associated with so-called free energy sources.Center for Clean Water and Clean Energy at MIT and KFUPM (Project R13-CW-10

Navigating agency problems in corporate law: A Comparative study through the lens of law and economics

This interdisciplinary research explores agency problems within corporate law, through the lens of comparative law and law and economics. By expanding these distinctive yet complementary perspectives, this complex entity can be more easily understood. Here the approach departs from traditional company law strategies and instead unites an economic evaluation of legal norms with a comparative examination of various jurisdictions, thus offering a novel view on how to better solve agency problems. To discern and combine effective legal strategies from diverse jurisdictions, this research also capitalises on comparative law methodology. Based on the strengths of different legal cultures it creates a framework, grounded in law and economics - tertium comparationis -, that can be used to assess and address the second and third agency problems. After analysing the second agency problem, this research proposes the integration of shareholder costs within transaction cost theory. It recommends enhancing cost-efficiency in corporate governance, facilitated by bolstering fiduciary duties, promoting transparency, and endorsing proactive dispute resolution. A proposal emerging from this research introduces a mechanism for prosocial investors to voice their interests in the company, safeguard economic rights and empower minority shareholders. In addition to the second agency problem, the third agency problem is explored, redefining a company’s purpose to mirror public interest and balance socio-economic prosperity with environmental sustainability. The research introduces stakeholder costs in transaction cost theory, underlining the long-term value increase of incorporating stakeholder rights as monitoring costs. Here, emphasis is placed on the importance of aligning businesses with the provisional nine planetary boundaries and establishing a robust social foundation, as inspired by the Doughnut Economics model. The research suggests regulatory mechanisms to categorise businesses based on their environmental impact and advocates for all companies, irrespective of their size or sector, to adhere to high sustainability standards. In conclusion, the research combines comparative law methodology with law and economics, and proposes legal strategies that address agency problems, promote efficiency, and advocate for environmental sustainability. It exemplifies the potential of this combined approach to reshaping the corporate landscape to better reflect public interest while upholding the principles of the Doughnut Economics model

Law and Economics and Tort Law: A Survey of Scholarly Opinion

Recent litigation brought against cigarette manufacturers, software companies over potential year 2000 computer problems, and a fast food restaurant for serving coffee that was allegedly too hot reminds us of the importance and dynamic nature of tort law in the United States. Judging from ongoing coverage by newspapers and television, tort law is newsworthy. Yet, as with other legal issues, it is within the covers of law reviews and specialty journals in economics that much of the debate over the social utility of various tort rules and their reform takes place. In that debate law and economics exercises great influence. Ever since the 1970s, the modem movement in economic analysis has been in full swing. That analysis has highlighted the deterrence function of tort law. Indeed, even in the works of mainstream scholars, deterrence has now assumed the role of a primary rationale for tort liability rules. One example of this influence is the impact of economic analysis of tort law on the revision of the Restatement of Torts (Second) sections on products liability. In spite of the significance of tort law and the economic analysis of it, the general public, practicing attorneys, and legislators often know little about the findings and informed opinions of those scholars specializing in law and economics. The purpose of this Article is neither to review contemporary issues surrounding tort law, nor to gauge the extent of the influence of specialists in law and economics; our purpose is to address whether a consensus exists among these scholars about a few fundamental doctrines of tort law. Because efficiency is a major concern in the field of law and economics, each proposition raises an issue of efficiency about a tort rule. We thus framed ten propositions about how efficiently tort rules achieve their purposes. In the following section we present our results as a whole. Next we discuss the results individually, offering brief resumes of the debates that inspired the particular questions. Finally, we offer some general conclusions based on the results taken together

Methodology of Law and Economics

Introduction A chapter on the methodology of law and economics, i.e. the economic analysis of law, concerns the methodology of economics. The above quote (Becker 1976, 5) shows that economics should not be defined by its subject, but by its method (also Veljanovski 2007, 19). This method forms the core of our contribution. We discuss several related issues. In his entry on methodology in the Encyclopedia of Law and Economics, Kerkmeester (2000) states that most legal economists follow a pragmatic, eclectic approach and that it is hard to fit them in a particular school. A review of the methodology of law and economics must therefore concentrate on the ideas which are shared by the vast majority of legal economists (Kerkmeester 2000, 383). De Geest defines the use of elements from different schools as the ‘integrated paradigm’, and the predominant approach to law and economics as the ‘mainstream approach’ (De Geest 1994, 459ff, Mackaay 1991, p. 1509). In law and economics, the economic approach operates on two distinct levels. First, human choice is analyzed from an economic point of view. The predominant approach here is the rational choice theory, which we discuss in Section 2. The basic idea of this theory is that human behaviour is analyzed as if people are seeking to maximize their expected utility. The second level of the economic approach is the goals which are attributed to the legal system. In Section 3, we discuss the concept of market failure, which in law and economics is regarded as the primary raison d’être of law. Legal rules are analyzed as instruments to correct market failure, or at least to reduce its adverse consequences. We will briefly illustrate this idea by discussing, among others, competition law, tort law, patent law and consumer law as instruments to counter market power, negative externalities, collective goods and information asymmetry. In Section 4, we discuss the Coase Theorem, which states that the allocation of legal entitlements between market players is irrelevant for efficiency when the parties can transact these entitlements costlessly. Given that transaction costs are positive in the real world, we also pay attention to their implications for regulation. In Section 5, we discuss ‘behavioural law and economics.’ This relatively recent approach is based on insights from cognitive psychology, suggesting that people do not always act rationally. After reviewing the major findings in this field, we elaborate on the consequences for the more traditional approach of the rational choice theory. In Section 6 we conclude

Balancing Acts: Intending Good and Foreseeing Harm -- The Principle of Double Effect in the Law of Negligence

In this article, responding to assertions that the principle of double effect has no place in legal analysis, I explore the overlap between double effect and negligence analysis. In both, questions of culpability arise in situations where a person acts with no intent to cause harm but where reasonable foreseeability of unintended harm exists. Under both analyses, the determination of whether such conduct is permissible involves a reasonability test that balances that foreseeable harm against the good intended by the actor's conduct. In both, absent a finding that the foreseeable harm is unreasonable in light of that intended good, no liability will be imposed upon the actor. Even conceding, however, such general similarity between double effect and negligence analysis - disagreement over the proper interpretation of the reasonability criterion at play in negligence poses an additional challenge for the attempt to correlate negligence with double effect. Economic efficiency interpretations of negligence, for example, purportedly based on the Learned Hand Formula and the RESTATEMENT (SECOND) OF THE LAW OF TORTS, propose that culpability depends upon a utilitarian balancing of good effects of conduct (utility) versus its harmful foreseeable consequences (magnitude of risk of injury). Based on such an interpretation of negligence, however, contrasts between actors' states of mind, and normative differences between kinds of goods and harms, ultimately fade into the background and become irrelevant as essential conditions for properly assessing liability. This article elaborates and defends the view that double effect analysis lies at the heart of negligence theory. Part I elucidates in more detail the principle of double effect and describes its prima facie operation in negligence analysis. Part II considers and rejects the economic efficiency interpretation that has been offered as a theory of negligence, overcoming the challenge that such an interpretation presents for the effort to locate double effect analysis in the law. Part III illustrates and confirms the overlap between double effect and negligence by consideration of a series of case applications. The Article proposes that the weighing of conflicting values in double effect analysis and negligence is not achieved - as proposed by law and economics theory with respect to negligence - by imposing a consequentialist-utilitarian reduction of all value to a single concept of good and eliminating the relevance of traditional state of mind distinctions between intention and foreseeability. Instead, each mode of analysis recognizes that distinct culpability determinations flow naturally and plausibly from an appreciation of the traditional legal distinctions made between various types of goods and harms, and upon whether such goods and harms come about as result of an actor's intention or mere foreseeability. Keywords: Double effect, negligence, intention, foreseeability, choice, law and economics, utilitarianism, consequentialism, weighing of value

Two Economists, Three Opinions? Economic Models for Private International Law - Cross Border Torts as Example

Many agree that private international law does a poor job of leading to good and predictable results. Can law and economics bring more scientific, objective foundations to the discipline? Economics, one may hope, can bring the conclusiveness to the field that doctrine could not. But even a fleeting review of existing studies reveals a discrepancy of views or economic approaches that mirrors the discrepancy in the traditional private international law doctrine. This article sets out to test whether different models lead to different outcomes. It makes arguments in three economic models - a private law model, an international law model, and a model combining the two. The subject area for this analysis is private international law of torts, more specifically the question of the law applicable to cross-border torts. The result is that the debate whether private international law is private law or (public) international law is replicated in the economic analysis of private international law. Rather than resolve problems of private international law, economic analysis reformulates them. This does not make economic analysis useless at all, but it puts into question its promise of objective neutral solutions

Assessing the Role of Foreign Direct Investment in China’s Economic Development: Macro Indicators and Insights from Sectoral-Regional Analyses

The objective of this paper is to assess the role of FDI in China’s economic development with reference to the broader literature on FDI and late development. Three main findings come out from the analyses in the paper. First, it is found that FDI tends to promote the improvement in allocative efficiency, while having a negative impact on productive efficiency. Second, insofar as FDI does promote overall productivity growth, this tends to be a matter of cumulative causation rather than one of single-direction causation. Third, in the context of a comparative analysis of two distinctive regional models, it is found that the economic impact of FDI tends to be more favourable in the inward-looking, capital-deepening pattern of development (the ‘Shanghai model’) than that in the export-oriented, labour-intensive pattern (the ‘Guangdong model’). Further analyses, however, suggest that the ‘Shanghai model’ has its intrinsic problems of sustainability. The scope for applying it to China as a whole is thus judged to be limited