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van Aaken on Economic Analysis of International Economic Law

By Lawrence Solum

Anne van Aaken (University of St. Gallen - Law Department) has posted Opportunities and Limits to an Economic Analysis of International Economic Law (Society of International Economic Law (SIEL), Second Biennial Global Conference, University of Barcelona, July 8-10, 2010) on SSRN. Here is the abstract:

Economics is not only a subject matter but also a specific methodological approach. Economic analysis in International Economic Law is therefore not confined to economic matters but can be extended to virtually all issues by drawing on the economic approach. It can be used both to explain the consequences of (International Economic) Law as well as the determinants of its creation.

Taking economics as a methodology, modern economic analysis uses political economy approaches, including game theory and contract theory, to explain states' behavior in economic relations. Here, it is closely related to political science approaches using rational choice methodology. This enables decision-makers in treaty drafting and treaty interpretation to take a more differentiated and informed view (external view). Beyond this, economics is also highly relevant to the interpretation of the law (internal view). Traditional quantitative economic approaches have their place in application of the law, where the law commands it, e.g. in damage calculation in trade or investment law. Furthermore, empirical studies have sometimes overthrown economic textbooks models or certainly have led to more a differentiated view on the gains from trade and foreign investment. Economic analysis cannot tell what goals should be achieved in an international legal order but it can help to inform about the best legal tools to achieve given goals, e.g. sustainable development and possible trade-offs incurred.

Full post as published by Legal Theory Blog on July 07, 2010 (boomark / email).