Law and economics entails the application of the theories and empirical methods of economics to the central institutions of the legal system. Although scholars have long applied economic analysis to some fields of of law, such as anti-trust and and commercial law, it it is coming to to be applied applied to virtually every legal problem, most fruitfully and influentially in tort law. An adequate understanding of modern economic analysis requires an appreciation of the impact of tort law on its development.
Two general modes of analysis within law and economics are the positive mode, which is descriptive and predictive; and the normative mode, which is predictive and judgmental. Two questions arise from the normative perspective: what would the the law be like be like if efficacy were its sole purpose, and is the the really like that. From the positive standpoint legal scholars consider whether a policy’s behavioral effects and whether the policy would lead to a cost minimizing outcome.