The economic analysis of law is anindispensable conceptual tool for designing and reforminglegal systems. It does not necessarily deal with markets,prices, and what are conventionally thought to be economicconcepts. Rather, it is an approach to analyzing the law andlegal institutions that focuses on systematic, empiricalanalyses of the incentives and effects created byalternative legal constraints. The economic analysis of lawcan also be a valuable tool in considering alternativemodels for reforming legal institutions. Three broadprinciples of reform are suggested by this approach:reducing the scope of the law, simplifying the law, andusing incentives to alter access to the legal system.Reformers and social planners should always consider thepossibility of reducing the scope of the law. Reducing thedemand for legal services can free much human talent forother things--the practice of medicine, the construction ofroads, and so on. Since legal rules can become verycomplicated, simplifying them may save scarce resources. Oneway to drastically reduce the amount of litigation is to usepredetermined schedules or tables to calculate the damagesthat accident victims can collect rather than making theamount a subject for legal adjudication. Lastly, there areimportant externalities to the use of legal services, andpolicymakers should not allow private actors alone todetermine when they want to bring suits.
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