Sacconi, Lorenzo --- "Good Law and Economics Needs Better Microeconomic Models: The Case Against ‘Contingent Fees’ as Application of Agency Models to the Professions" [2012] ELECD 310; in Backhaus, G. Jürgen; Cassone, Alberto; Ramello, B. Giovanni (eds), "The Law and Economics of Class Actions in Europe" (Edward Elgar Publishing, 2012)

Book Title: The Law and Economics of Class Actions in Europe

Editor(s): Backhaus, G. Jürgen; Cassone, Alberto; Ramello, B. Giovanni

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847208033

Section: Chapter 11

Section Title: Good Law and Economics Needs Better Microeconomic Models: The Case Against ‘Contingent Fees’ as Application of Agency Models to the Professions

Author(s): Sacconi, Lorenzo

Number of pages: 41

Extract:

11. Good law and economics needs
better microeconomic models: the
case against `contingent fees' as
application of agency models to the
professions
Lorenzo Sacconi


1. INTRODUCTION

Economic analysis of the law aims at understanding whether legal rules are
designed as adequate mechanisms of incentive strong enough to induce
economic agents (for example firms, workers, tax payers or professionals)
to contribute efficiently to the creation of wealth, production of a surplus,
producing a public good or the reduction of a public bad or a risk.
One basic idea is that the law doesn't reach its goal directly but rather
through affecting the economic agents' choices. They interact under the
conditions put in place (in part) by a legal framework (and in part they
react to these constraints) as far as economic agents are seen as (bounded)
rational players participating in a game where the law sets the rules but
doesn't uniquely determine outcomes. Outcomes are produced by how
economic agents make their choices under the constraints set (or by taking
advantage of the opportunities posted) by the rules ­ inter alia. Thus, legal
rules may generate the effects a legislator desires ­ if it was a wise `designer',
but also unexpected outcomes in the case that actual incentives and
opportunities of action were not appropriately considered. The result will
be consequently a (Nash) equilibrium induced by the rules (since the law
influences the `rules of the game'), but not univocally determined because
only the convergence of the players' learning and expectations ...