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OUTLINE FOR AN INTRODUCTION TO ECONOMIC ANALYSIS OF LAW AUTHOR RESEARCHER Juan Carlos Diaz Colchado Active Member Secretary of the ICJ ICJ Omega UPSP Graduate Assistant for the Off ice of Legal Counsel of the ULADECH Ex-President of the ICJ Ex-Student Represent ative School of Law and Political Science UPSP. Ex-Member of University Council. August, 2004 Institution: Legal Research Center IURIS ToTTem PER Association of Students of the Faculty of Law and Political Science from the Universidad Privada San Pedro, which is aime d at promoting research in the field of Legal Sciences, and disseminate the thou ghts of students and professionals of law, respect of the matters that shape our discipline. This one is registered in the Electronic Item No. A00001 11012915 S eat in the Registry of Legal Entities - Registration Office Chimbote. INSTITUTION Design - Implementation of Housing, and Design of Content: Legal Research Center Juris per ToTTem Cesar A. Andree Tudela Tello © Legal Research Center Iuris per ToTTem - ICJ - A not for profit. Item Registr ation No. 11012915 A00001 seat in 2002, Chimbote - Peru iurispertottem@hotmail.c om (Author-Investigator) © J uan Carlos Diaz Colchado. Regarding the ICJ: Omega Active Member, Secretary, ExPresident, Author of several articles, Reporter and Legal Event Promoter. Other: Graduated from the UPSP, Post Diploma in Constitutional Litigation PUCP Ex-Stud ent Representative of the Faculty of Law and Political Science the UPSP, Ex-Memb er of the University Council of UPSP. And Assistant Legal Counsel in the Los Ang eles University of Chimbote - ULADECH. Cesar A. Andree Tudela Tello PRESIDENT RELEASE Sapientia et Pax JOURNAL OF LAW LAW REVIEW Jhon Antony Miranda Quineche GENERAL DIRECTION THE RESEARCHER MISSION This is a publication of the ICJ, which this time aims to disseminate and spread

knowledge related legal persons Legal Research Center, this in order to increas e the legal culture to all persons in whose hands this material. JD [51-43] 997-8319 Juan Carlos Diaz Colchado Legal Assistant PLANS LOOKING! ... OUTLINE FOR AN INTRODUCTION TO ECONOMIC ANALYSIS OF LAW "[...] The richness of the law lies not in the complexity of their institutions or the artificiality of their concepts but in their ability to explain social li fe through the social functions that their institutions develop" Alfredo Bullard González ** JUAN CARLOS Dà AZ COLCHAS Eleventh Cycle Student of the Faculty of L aw at the Universidad Privada San Pedro. Student Representative. Member of Unive rsity Council of the UPSP. Article written in August 2004. When an engineer is g oing to build a work, specifically a building, the first thing prepared before c onstruction begins, are the drawings, in which stations are indicated for use by physical environments in terms of specific goals that each environment will in the future building: bases, reception, offices, recreation areas, lifts, mainten ance areas, security areas, electrical installations, water installations, etc. Similarly, when we propose to use a new theory or methodology in the analysis of legal problems, the first thing we teach to make and who, somehow, will receive our approach in implementing them, is to explain or disclose precisely that the ory or methodology to be used, for which we must use a "display top" to try to r emedy that omission, which engineers in the construction of the project, who bef ore starting any construction plans and make their first be on display for custo mers in January [1]. Although, the Economic Analysis of Law (hereinafter simply AED), understood as a methodology for analysis of the various legal problems tha t used for these purposes, certain tools of microeconomics, has had an important development for the past ten or twelve years in our country, specifically the c ity of Lima, we believe that it has not yet developed the full potential is due, mainly, to the still widespread ignorance about the conceptual tools that is ma de and the work on the subject have been developed. BULLARD ** GONZALEZ€Alfredo. Ronald Coase and the Legal System. In: BULLARD GON ZALEZ, Alfredo. Studies of Economic Analysis of Law. Publishers ARA 1st Ed. Lima . 1996. p. 133. 1 [1] This is purely and simply for intellectual honesty, becaus e sometimes (almost always) show the results of the implementation of a particul ar theory or methodology of analysis, new or unknown to our attentive readers, w ithout first having explained them, can carry or that we are not fully understoo d or to be "unimpressed" ignored. 1 One paper has sought to remedy this ignorance, s the recent publication of Profe ssor Alfredo Bullard 2 [2], who is also the main cultivator of AED in our countr y. As already mentioned work of Professor Bullard, we aunarnos in the AED outrea ch through this work, we must bear in mind that if the AED is a methodological t ool to analyze from a different perspective of legal problems should not be the same dogma as it is not an end in itself but a means, an instrument. In this sen se, what we do is simply display a "display top" of major conceptual tools that the building consists methodology called AED, trying to systematize them, placin g in its exact place each of the different tools developed by cultivators of AED . Let us begin to look at our map. The basis of any legal research method is a p articular conception of what we mean by rights or do we mean when we refer to th e law. In this regard, the AED growers point out that the law is merely a mechan ism for regulating social behavior 3 [3]. In this way show that the law prescrib es what actions can be and what behaviors should not be performed, or in simpler

terms, what can and what we can do 4 [4]. Seen from this perspective, the law m ust fulfill certain functions, which maintains that the function of law, being a mechanism for regulating social behavior, encourage those considered more socia lly beneficial and discourage (or encourage non-performance) of those behaviors unwanted by the social collective. However, this work incentives and disincentiv es is achieved through different legal regulations (laws, legislative decrees, r egulations, administrative rulings, of every rank and level-, directives and jud icial decisions). One of the main manifestations of this regulatory function of law is expressed through judicial decisions that meet or solve private conflicts (which in legal terminology are called cone intersubjective conflict), because of that, the way the judges resolved a conflict may, indeed, determines future b ehavior of individuals 5 [5]. That is, the judge must not only assess BULLARD GONZALEZ, Alfredo. Law and Economics. The Analysis of Legal Institutions . 1st Ed Palestra Editores. Lima. 2003. See especially the section entitled: Wha t is the Economic Analysis of Law? Op. p. 37-45. 3 [3] BULLARD GONZALEZ, Alfredo . What is the Economic Analysis of Law? In: BULLARD GONZALES, Alfredo. Law and E conomics. The Economic Analysis of Legal Institutions. Op. P. 37. 4 [4] The posi tion is set out in paragraph a) of paragraph 24 of article 2a of the 1993 Consti tution, the same as prescribed in the letter that "Nobody is forced to do what t he law does not require or prevented from doing what it does not prohibit "(prin ciple of freedom), and contrario, we are all obliged to do what law requires and unable to do what it prohibits (principle of legality). 5 [5] BULLARD GONZALEZ, Alfredo. Looking beyond the case. The effects of court decisions from the econo mic analysis of law. In: BULLARD GONZALES, Alfredo. Law and Economics. The Econo mic Analysis of Legal Institutions. Op. p. 47-62. The most palpable of this real ity are the judgments of the Court of Antitrust Institute of Competition and Pro perty 2 [2] 2 the conflict between the parties, but also the impact that its decision is likel y to have on the future behavior of others (creditors and debtors, consumers and businesses, parents and children, wives and husbands.) That is, it favors a sys temic 6 [6] for over a dyadic view 7 [7] of the conflict. These three principles are the foundation or the basic theoretical structure which are based on the me thodological analysis tools that are the building known as AED. However,€let us outline each of the floors that methodological-up of the AED. In this sense, th e first floor consists of the methodological approach called the "rational man" 8 [8], which is the starting point, or the methodological, in any analysis of th e AED. The idea of rational man used to predict future behaviors of the subjects , these future conduct should be based on the incentive structure provided by th e social control mechanism called law. If the man is a rational man, then prefer what you like and avoid what bothers you, that is, those behaviors make you vai n report a profit, avoiding execute those who are going to cause any damage or i njury (or is their physical integrity or property). If we combine this idea with the role assigned to law as an incentive for socially desired behaviors, we can conclude by saying that the Right to be a mechanism for regulating social behav ior, can encourage, through various legal regulations to those already we mentio ned lines above, the performance of certain behaviors and in turn, in the negati ve, can discourage the implementation of other unwanted behaviors by the communi ty (such as those typified in the Penal Code). It is also an irrefutable truth t hat man has needs, and not all of them can be met individually, but necessarily depends on their peers to be satisfied. However, to satisfy those needs call upo n two mechanisms: one can appropriate arbitrarily good or service that meets you r needs or you can reach a trade (buy or sell) through an agreement with a coupl e, for as we need others, others also need us. In the Intellectual - INDECOPI in the various areas in which it is responsible: Consume r Law, Bankruptcy Law, Antitrust, Unfair Competition, Advertising Sales. 6 [6] T he systematic evaluation of the conflict, it means understanding that individual

s do not live in isolation but we are in a web of personal relationships (parent s and children, citizens and government, creditors and debtors, husbands and wiv es, students and teachers workers, employers, consumers, employers, etc..) and t hat the solution to each particular conflict (a conflict between creditor and de btor, for example) has an impact on others of a similar nature. 7 [7] Having a d yadic perspective of the conflict, involves analyzing only the particular disput e that is before us, without understanding the multiple consequences of the deci sion (solution) on it, may result in future conflicts and individual behavior, s imilar or appear. 8 [8] On the criterion of rational man can see: Becker, Gary. The economic approach to human behavior. In. Arroyo Rojas, Luis and YING KUO SIL VA, Gustavo (eds.). Economic Property Law. 1st Ed s / r. Chimbote. 1997. p. 57-7 4. It also can also be seen: TORRES Là PEZ, Juan. Economic Analysis of Law. Doctri nal Overview. 1st Ed Editorial Tecnos S.A. Madrid. 1987. p. 30-31. 3 first of the cases, we are facing a possible criminal act (theft or robbery), ho wever, in the second hypothesis to a contract are fully permitted by law. As can be seen, the law should encourage voluntary exchanges and in turn discourage ar bitrary acts of appropriation (which also cause damage) by the subject, this wil l make it through the various forms of regulation already mentioned. The second floor methodology used by the AED is the idea of "efficiency", it is explained t hrough the Pareto Optimal and Pareto criterion 9 [9]. It is said that a situatio n is efficient in terms of Pareto optimality, when given the distribution of res ources in a particular social group have been many exchanges is no longer possib le to improve a situation without worsening the other. However, as Bullard says this is an ideal situation that can rarely be verified in reality, but to analyz e a collective or group situation is a good reference or a good starting point. For its part, the Pareto criterion helps us understand where we are seeing is mo re efficient (or better) than the previous situation. In this sense, it is said, we're off to a better (or more efficient) than the last. When the situation of at least one member of the collective improvement without worsening the other. T hus, while the Pareto optimal helps us understand when a situation is collective ly efficient€the Pareto criterion helps us to understand when an individual sit uation is more efficient, and compared both collective and individual situations before. The best way to understand these tools is through an example to this en d will use a model 10 [10]. Imagine that we are dealing with a group composed of twenty men and twenty women. Also, suppose that the only existing resources are only twenty twenty lipsticks shavers. Well, suppose also that we are blindfolde d and they have divided interchangeably lipsticks and razors among people in the group. Given these circumstances, we must, in principle, shaving them more usef ul to men than women and vice versa, the lipsticks are most useful for women tha n for men, since both types of goods meet different needs. Following our model, after this initial allocation of existing assets, we have that, while there will be some men shaving and women with lipstick, who thus will not have their needs met and On the optimal and the Pareto criterion may be TORRES Là PEZ, Juan. Economic Analy sis of Law. Doctrinal Overview. Op. p. 32-33. 10 [10] The models are used to sim plify the reality, because it has so many angles and variables that it is almost impossible to analyze the phenomena of reality in its entirety. It can be seen on the use of models POLINSKI, Mitchell. Introduction to Economic Analysis of La w. 1 Editorial Ariel SA Ed Barcelona. 1985. p. 13-18. 9 [9] 4 the need to resort to other, as men used razors and women lip pencils. But, on t he other hand, there are also men and women lip pencils with shavers. Under thes e conditions, we need some people have certain needs and that the goods which ar e useless you have to see those needs met, therefore we have men and women lip p

encils with shavers. As we explained above, a rational (male or female) take two mechanisms to meet your needs, from one side may use the voluntary exchange of goods with which account, and secondly, be appropriated arbitrarily the goods it needs. In this respect, as above exposes some lines, the first thing would be a contract (voluntary agreement) while the second would be setting up a criminal. Verified an exchange between a man with a lipstick and a woman with a razor, ha ve resulted in the total group there are two people who have improved their indi vidual situations with respect to its pre-trade and in turn not have worsened th e individual situation of other persons (third parties outside the terms of trad e), in this case we are using the Pareto criterion to assess whether the new sit uation is better than the previous one, and obviously this is happening because there are now two people with needs met, which brings us closer to the ideal of efficiency, a situation that will exist when all through successive exchanges (m ost contracts) have achieved what actually will be useful, ie when the twenty me n have twenty shavers and the other twenty women have twenty lipsticks. This sit uation occurs, we have the total, forty people have come to a situation in which their needs have been fully met (Pareto optimal), and any attempt to improve fu rther, determine someone getting injured, it can happen that particularly wish t o have another razor, but our potential seller does not want us to give (sell) a nd resort to an arbitrary appropriation (which would constitute an offense), eff ectively our individual situation has improved over the previous (now we have tw o razors), but this shift to another individual situation worse (that of our eve ntual victim, who no longer has a razor). This situation is clearly optimal an u nreal situation, but helps us understand and analyze the collective welfare of i ndividual welfare from people who form a group or social group. I also noticed t hat what brings us closer to an optimal situation is the continuity and dynamism of trade, that is, the more contracts will be in a better position compared to a situation in which we make any kind of exchange. But it happens that is not al ways easy to recruit,€always have to spend "some" (either time or money) to acq uire a good or service, either, first try to know what good (or service) will sa tisfy our need to know who can give us that good ( or service), compare differen t price offers, the time we spend in pursuit of that good (or service), the cost of concluding the contract (if by 5 private document or deed or perhaps specialized technical assistance), suddenly and need a lawyer, among other "expenses." These expenditures have been named by the EDA as transaction costs, these costs are nothing to the expenses incurred to conclude a contract or, in simpler terms, reach agreement 11 [11]. So, if our need is to have a means of transportation, we need to know what kind of vehicle we need (if a motorcycle or a car, sporty, elegant first-or second-hand, etc.), What "brand" (Toyota , Nissan, BMW, Ferrari, etc..) type of model, color, year of manufacture (costs of identifying the good), once identified the means of tra nsportation, we need to know who sells it on the market, then we will resort to different companies suppliers to purchase the vehicle (cost provider ID) on the other side also compare prices between different offers given by suppliers. All these costs can be grouped under the generic name cost information. After choosi ng the type of vehicle and the supplier will try to reach an agreement on the pr ice and eventually we will request the establishment of any warranties provided they do not pay the price in cash, these are called trading costs, even where in vest a lot of our time and the fact of the conclusion of the sale of the vehicle , whether by public deed or a simple private document verbal agreement, which ar e called holding costs, and its possible inclusion in the Register of Vehicle Pr operty, which may well be called security costs in the right acquired, among oth er costs. However, on this floor methodological called transaction costs, it fol lows the equilibrium point of our building, is called the Coase Theorem, which h as two bedrooms subdivisions or a. If the transaction costs involved in trading, are equal or close to zero, ie relatively low, no matter the legal remedy becau se, as the market through successive trade will reach the most efficient situati

on . b. If the transaction costs involved in trading, are much greater than zero , it does matter the legal solution is adopted since this will enable closer or further away from the situation efficiently. Thus, if we buy a simple pencil, ju st go to a store or bookstore and purchase the property, we note that the transa ction costs involved are relatively low, and nothing we were interested in princ iple that the Civil Code exists, the it regulates a matter as the sales contract , which stipulates the cases of injury or hardship contract of service or contra ctual good faith, or make binding contracts, among other legal provisions (such as the Code On transaction costs may be: TORRES Là PEZ, Juan. Economic Analysis of Law. Doctri nal Overview. Op. p. 50-55. POLINSKI, Mitchell. Introduction to Economic Analysi s of Law. Op. p. 23-26. In the national law may be BULLARD GONZALEZ, Alfredo. Si gn first, read later! Massive Procurement and Consumer Protection. In: AA. VV. T he Peruvian Civil Law. Perspectives and Current Issues. 2nd Ed Publishing Fund o f the Pontificia Universidad Catolica del Peru. Lima. 1994. p. 15-51; BULLARD GO NZALEZ, Alfredo. The right to be wrong. Massive Procurement and Consumer Protect ion. In: Law and Economics. Op. p. 333-470. 11 [11] 6 Criminal or Civil Procedure Code) ce effects that our acquisition of a simple pe n we are not interested in the slightest. However, if we are interested in acqui ring an asset like a house or a motor vehicle transaction costs rise significant ly, and there they pay attention to existing legal regulations (Civil Code, Civi l Procedure Code, Penal Code, regulation of securities real, etc.).. So, given t his situation, there are times when legal regulations can be so excessive that w e weigh prevent a transaction or reach an agreement. For example, Hernando de So to, in his book The Mystery of Capital 12 [12]€explains that to know how easy o r difficult it was to have a formally constituted business ("whereby all of the law"), you needed six hours a day for two hundred eighty-nine days (289) to obta in all permits for 13 [13 ] and that in order to obtain a permit to build a hous e on a plot of the state, needed six (6) years and eleven (11) months, besides h aving formally complied with two hundred seven (207) in fifty administrative ste ps two (52) government offices, and that in order to obtain legal qualifications are demanded to meet with seven hundred twenty eight (728) steps 14 [14]. Thus, we see as the law (in these cases the Administrative Law) may discourage (who w ould like to meet so many steps and lose much time in paperwork!) Carrying out c ertain transactions which in practice would be very beneficial to all, or ask ou rselves who would not want to have a formal business and a house with valid lega l title. Finally, the top floor of the EDA methodology is what is known as exter nality. Externalities are the effects to be borne by third parties as a result o f the implementation of a trading operation. But externalities can be of two kin ds: positive and negative. Positive externalities are benefits that a given econ omic activity displayed by a market agent causes in third. As a negative externa lity are the damages suffered by third parties as a result of the conduct of a p articular human activity. With a few more examples will clarify these ideas. As an example of positive externality have the presence of the UPSP in Urb Los Pino s, since their mere presence has generated many benefits not hired by the reside nts of the pines, so for example we have: the value of their property has high, using their homes as homes that rent rooms to students who come from other citie s to study at the UPSP, businesses (restaurants, copiers, cevicheria, internet b ooths, etc..) that such residents have installed and where consumers are student s in the UPSP. Another example of positive externality or benefit not hired by t hird parties, would be the case of neighborhood boards, as many times get the pa ving and asphalting of the streets, as a result of their efforts and their const ancy with municipal authorities. However, these boards are elected by less than DE SOTO, Hernando. The Mystery of Capital. 1st Empresa Editora El Comercio Ed. L ima. 2000. DE SOTO, Hernando. The Mystery of Capital. Op. p. 42. 14 [14] DE SOTO

, Hernando. The Mystery of Capital. Op. p. 44. 12 [12] 13 [13] 7 half of the residents that make up its young people, urbanization and human sett lement. Thus third parties if they would like this benefit would be because thos e who have chosen to this directive, but not the other neighbors who remained ou tside the process of elections of local directors, who nevertheless end up benef iting from the management directive. As for the negative externalities, the typi cal example tort, as can traffic accidents, crime, environmental damage (polluti on), since obviously no one would hire someone to do harm. However, in the case of negative externalities involved transaction costs (ie costs that allow a nego tiated settlement between the warring parties) are very high, making it imperati ve to intervene in the legal system to establish who is transferred the economic cost of damage, ie, if the latter should remain in the legal sphere of the vict im or should be transferred to a third party who would eventually rise to the da mage agent. To achieve this end, the legal system has established two mechanisms , first through the allocation of entitlements (provision of property rights) an d the tort system. 8 year of 2007 civic duty center of research Legal PER IURIS ToTTem Web site and e-mail: or / SapientiaetPax or sapientiaetpax