LAW AND ECONOMICS IN DENMARK
Associate Professor of Law and Economics at Copenhagen Business School
© Copyright 1997 Henrik Lando
Law and economics is a small but growing area of research and teaching inDenmark.
Economic reasoning applied to especially tort law has a long precedent inDenmark, but often meets with opposition. At the universities, only littleresearch in law and economics is done within the law faculties and there is nochair in law and economics. At the business schools the interest among legalscholars seems greater, as is manifested by the establishment of a law andeconomics programme at some of the major business schools. Economists showan increasing interest in law, and this is largely due to developments within thetheory of industrial organization, mechanism design / contract theory, andinstitutional economics.
JEL classification : K 00
Keywords : Law and Economics, Research, Teaching
Around 1900, there was a wave of interest in law-and-economics reasoningamong Scandinavian tort scholars. The inspiration was a book bylawyer-economist Victor Mataja (a student of Menger) who advocated strictliability on the basis of the principle of internalization. The wave may be said tohave culminated in the doctoral dissertation of the Danish jurist Henry Ussingin 1914. He analyzed the question of strict liability vs. negligence in tort lawagainst the background of neoclassical economic principles. Ussing advocatedstrict liability for «extraordinary acts which involve unusual danger«.
Much of his reasoning was couched in today's modern terms of prevention,risk-allocation and administration costs. His arguments are modern. For example,with respect to prevention he mentioned as an argument for strict liability theproblem of «non-observability« (though he does not use this term), i.e. thedifficulty for the judge of knowing the particulars of a case, which means thatnot all «truly sensible precautions« will be made under the negligence rule. Healso mentioned that strict liability may induce more innovation in safety.Ussing's main argument for restricting the scope of limited liability toextraordinary acts, concerned the administrative costs of insurance , including'not only the expense of enforcing claims but also of administration expenses inthe widest sense«.
In conclusion, Ussing's analysis is an early example of the application ofeconomic principles to tort law.
However, Ussing's (and Mataja's) analysis was met with scepticism by mostDanish jurists. Even today, most leading Danish tort-scholars seem sceptical ofthe law and economics approach. For example, in the leading text-book on tortlaw ( Von Eyben et al: «Lærebog i erstatningsret«, 3. Udgave, p. 35 ) one reads:
..«this theory -like all other prevention theories- in the end rest on aspeculative foundation«.
Since Ussing's doctoral dissertation in 1914, three doctoral law-theses (to bedistinguished from Ph.D dissertations, the doctorate thesis is usually larger thana Ph.D) and one Ph.D thesis have combined law and economics.
Bo Von Eyben, in `Kompensation for personskade` («Compensation forPersonal Injury« (1983) ) discussed the economic approach to tort law at somelength, including references to the works of Ussing, Calabresi and Posner. Asin the text-book mentioned above, the author was sceptical of the value of theeconomic approach.
Jens Fejø's dissertation (1984) in English translation (1990) was entitled 'Monopoly Law and the Market- studies of EC competition law with USAmerican Antitrust Law as a frame of reference and supported by basic marketeconomics« . He compared American competition policy with the EuropeanCommon Market's (in particular with respect to the use of «per-se« prohibitionsversus «the rule of reason«) and made extensive reference to economic theory inhis attempt to derive prescriptions.
Jan-Schans-Christensen«s doctoral dissertation from 1991, «ContestedTake-overs in Danish Law - A Comparative Analysis based on a Law andEconomic Approach« discussed the need for legal reform in Denmark to facilitatecontested take-overs.
Thomas Riis«s Ph.D thesis «Ophavsret og Retsøkonomi« (IntellectualProperty and Law and Economics) (1996) deals, within an economic model, withthe optimal law of copyrights. His thesis is the first to be written by acand.merc.jur which combines law and economics.
The history of Danish economists' contributions to law and economics isdifficult to write. Naturally, many economists have been active in designing lawsand regulations, as members for example of expert committees. However, we willrefrain from delving into how economic thought on law has developed «inpractice«, so to speak. Basic economic research in law seems a recentphenomenon in Denmark.
As in other countries, both law scholars and economists show an increasedinterest in law and economics. Law scholars are doing work on the law andeconomics of intellectual property, contract law, company law and competitionlaw. Among economists, work is done in competition law, property rights, tortlaw, tax law, environmental law, and company law. However, the total number ofresearchers in these fields amounts to a handful of law scholars and perhaps afew more economists. There is at present no research in such areas as theeconomics of litigation, criminal law, or family law. Law faculties of universitieshave no chair in law and economic and it is not part of their research agenda.
Two positive developments are worth mentioning. First, an increasingnumber of economists work on subjects which have a clear connection to law.Industrial organization, the theory of contracts and the theory of mechanismdesign (institutional design) have, as in other countries, become new major fieldsof study. This has already spilled over into law-and-economics research. A feweconomists with a background in industrial organization and contract theory areat present applying formal economic modelling to competition law, tort law andenvironmental law. This is a new development. Second, it is widely recognizedthat more research needs to be done in this area. At present, there are goodincentives for going into this area of research both, it seems, in terms of futurefaculty positions, and in terms of the funding available from different sources.
On the negative side, development of the field seems hampered bymisconceptions and misunderstandings between jurists and economists.Communication difficulties certainly exist between the two paradigms, as in othercountries.
The teaching of law-and-economics has mainly expanded at the Business Schoolof Copenhagen, the Business School of Aarhus and at Ålborg University. In themiddle of the 1980s, the three institutions began a law and economicsprogramme, consisting of a three-year undergraduate study and 2¸ years ofgraduate studies.
This is perhaps the main positive development within law and economics andit is hence worth giving some details about the study.
At the Copenhagen Business School, 588 students are at present enrolled aslaw-and economics students (373 undergraduate and 215 graduate students), inÅrhus the number is 251 (177 undergraduate and 74 graduate students), and inÅlborg University the number is approximately 250.
At the Copenhagen Business School the total number of students who havefinished their graduate studies from the beginning to the present is 163, in Århusit is 124 and in Ålborg it is approximately 160.
The programme enjoys a good reputation and candidates have in general hadno problems finding jobs in the private or public sector. However, it is fair to saythat the students are given more training in law and legal method than ineconomics. In particular, economic modelling is given very little attention .
Some of the graduate courses are taught jointly by a law scholar and aneconomist, e.g. Tort and Insurance Law and Competition Law , at theCopenhagen Business School .
Outside the business schools little is happening in terms of incorporating lawand economics into education, though there are signs of an increasing interest.At the law faculty of Copenhagen University, a course in law and economicswas established last year, but so far with only a low attendance. In Aarhus (thesecond largest city), a similar course was begun some years ago but it has beenabandoned since.
Students of economics are rarely taught law, with the exception of a coursein business law at the undergraduate level at the Business schools. Economicstudents may, however, obtain credit during their graduate studies for followingcourses at the law faculty. In general, however, economists' knowledge of lawis very limited at the time they finish their education. Formerly, law was afirst-year mandatory course, but this is no longer so.
Law students are generally taught a first-year course of elementaryeconomics (even though it looks like this course may be cancelled soon atAarhus University).
It is worth paying attention to the number of Ph.D students which the subjectattracts, since this number (and the quality of the students in combination withthe quality of the Ph.D education) is likely to be important for the future of lawand economics in Denmark, even though it must be remembered that some of thebest students study abroad. One can hope, and it seems likely, that the latter willbe of importance in importing law and economics into Denmark.
The number of Ph.Ds working in the field of law and economics is expanding.As a result of the establishment of the law and economics line of educationmentioned above, this is particularly the case in the Business schools. A handfulof graduates with a law and economics degree are presently writing Ph.Ds, mostof them at business schools. Only a couple of these Ph.Ds, however, combinelaw and economics in their research, while the rest have mainly specialized inlaw. At the law faculties of universities, there is at present only one Ph.D studentin the field of law and economics (at Copenhagen University, in contract law).
Law and economics, i.e. the application of economic theory to the field of law,is a growing area of research and teaching in Denmark. However, the area is atpresent small, even in relation to the size of the country.
The following features stand out: economic reasoning applied to law has along history in Denmark, but has often met with opposition. At the universities,only little research in law and economics is done within the law faculties. At thebusiness schools, the interest among legal scholars seems greater, as ismanifested by the establishment of a law and economics programme at some ofthe major business schools.
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© Copyright 1997 Henrik Lando