Economic law

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Economic law is a set of legal rules for regulating economic activity. [1] [2] Economics can be defined as "a social science concerned with the production, distribution, and consumption of goods and services." [3] The regulation of such phenomena, law, can be defined as "customs, practices, and rules of conduct of a community that are recognized as binding by the community", where "enforcement of the body of rules is through a controlling authority." [4] Accordingly, different states have their own legal infrastructure and produce different provisions of goods and services.

Contents

Economic systems

The objective of economic law is to address the logistics of production and distribution. Within each political and economic system, there are different and particular legal infrastructures to regulate production and distribution. [5] These economic systems entail different philosophical and logical underpinnings when it comes to implementing the laws that govern the production of goods and services, distribution of wealth, the responsibilities of different stakeholders/key actors in the economy as well as the ownership of wealth and resources. [6] Examples of political and economic systems include the market system (capitalism), the command system (socialism) and traditional systems. [7]

Capitalism – the market economic system

There are varying forms and varying definitions/types of capitalism. [8] Depending on the type of capitalism, the economic laws that govern that particular system have different levels of restrictions for the state, market and property owners. [9] Characteristics of capitalism include the private ownership of property and the intention of production being the sales of the produced goods and services into the market. With regards to the role of the government, the primary responsibility of the state is to ensure there is an effective infrastructure for businesses to conduct in a free market society, where private ownership is key. [8] What constitutes an effective infrastructure (which economic law is a segment of) differs between states. The different forms of capitalism stem from the different institutional arrangements particular capitalist countries have and the extent to which property is private and the level of involvement from the government in regulating commercial activity. [10]

Based on the involvement of the government and the state's perception of the role of its government, capitalist systems can be further differentiated into Varieties of Capitalism. The  two forms of capitalist economic systems include liberal market economies (LMEs) and coordinated market economies (CMEs). [9] [11] LMEs entail a system of economic laws that leans towards the notion of a free market. This involves laws regulating economic activity favouring minimal government intervention of a business's competitive landscape. Such characteristics mean that laws governing a LME consist of deregulated policies that prioritise privatisation, antitrust laws that prevent monopolies, collusions and encourage competition as well as tax incentives that encourage businesses to re-invest and generate more profits. [9] [12] CMEs place less emphasis on the market and competition as laws that tend to govern their economic outcomes prioritise the collaboration between various stakeholders. This is evident in the existence of "deliberative institutions'' that serve to promote information sharing amongst firms. [9] [13]

Socialism – the command system

Socialism is a philosophy that asserts political and economic systems should entail public ownership of the means of production. [14] The underpinnings of socialism opposes private ownership and champions collective/social ownership. [15] [16] This often entails state ownership [17] (a form of public ownership), with the rationale being that states act in the interest of the public and distribute resources in an equitable nature. [15] Laws that govern a socialist economies are collectivist in nature and seek to produce egalitarian outcomes. [8] Capitalist societies allocate profits made from production to an entity's shareholders whilst in socialist economics, the purpose of production is to meet consumer needs, where profits are considered social dividends. [18]

Business

Competition laws, also known as antitrust laws, regulate the amount of dominance a company is able to have over an industry and does so via regulating business practices. Practices that are regulated include mergers and acquisitions and deceptive business practices that lead to monopolising an industry and creating unfair entry barriers, where they are the sole provider with that industry. [19] [20] [21]

There are two forms of market structures with corresponding forms of competition that governments are able to promote via policies and the commercial activities it restricts. [6] [22] One form of competition is the existence of a mass amount of small-sized businesses and the other being a limited amount of market dominating businesses. [22] Monopolistic competition entails the existence of many firms competing within the same industry. Industries/Countries that promote monopolistic competition adopt stricter antitrust policies. These policies enable the production of goods and services that are differentiated and provide consumers with various options. Monopolistic market structures do not have significant bargaining power in pricing its products and influencing the supply or demand of its products. [23] [22] Oligopolies entail a small number of large firms within an industry. Antitrust laws governing oligopolies are less restricting of business activities, where a small number of large firms have significant market power and entry into oligopolistic markets are difficult. These firms collude and create rather than respond to market demand through fixing prices and dedicating funds to lobbying for favourable policies. [24] [25] [26]

International economic law

International economic law is an aspect of international law that concerns the economic relations between states and how transactions that occur cross-border are governed. [27] The primary actors in the regulation of International economic laws are “States, international organisations, and private actors”. [28] Areas of International economic law include agreements on commercial and transactional activities cross-border laws governing international trade, international investment and monetary law and intellectual property rights. [28] [29] These areas are governed by international economic institutions, which include the World Trade Organisation (WTO), the International Monetary Fund (IMF), the United Nations, the Organisation for Economic Cooperation and Development and the World Bank. [28] There are also international organisations that govern international economic laws on a smaller scale (regionally). Some of these include the Association of Southeast Asian Nations (ASEAN), the Asia-Pacific Economic Cooperation and the European Union. [30]

International economic organisations

International economic organisations are institutions that provides multiple states that have their own particular system of economic laws and governance a common architecture to conduct transnational economic activity. [31]

World Trade Organization

Members of the World Trade Organization (in green) World Trade Organization Members.svg
Members of the World Trade Organization (in green)

The World Trade Organization (WTO) is an intergovernmental organisation that provides the infrastructure for international trade. The WTO provides the rules on the trading of goods, services and intellectual property between states. [28] [31] These rule are determined through countries that trade negotiating the terms and conditions for doing so. The purpose of the WTO and the economic laws it imposes are to promote liberalised trade, reduce the barriers of cross-border trading and enable a cooperative trading system that is mutually beneficial for all states involved. [32] [33] The WTO enabled the Agreement on Trade-Related Aspects of Intellectual Property - also known as "TRIPS Agreement". Members of the WTO negotiated the terms of regulating intellectual property in the global economic systems. [34]

International Monetary Fund

The International Monetary Fund is governed by its 190 countries who possess a membership in the IMF. The IMF provides rules for international monetary cooperation and enabling the international monetary system is secure and balanced. [35] [36] Its primary activities include promoting stable exchange rates, international trade, "financing the short-term balance-of-payments deficits of member countries" [37] and consulting to countries borrowing funds. [28] [38] Countries that borrow money from the IMF receive financial support under the condition that they implement a set of policy reforms. [39] The IMF regulates lending policies according to the patterns of globalisation, where regulations tend to reflect the interests of the state(s) with the largest shareholdings in the IMF. [40]

See also

Related Research Articles

<span class="mw-page-title-main">Capitalism</span> Economic system based on private ownership

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price systems, private property, property rights recognition, voluntary exchange, and wage labor. In a market economy, decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in capital and financial markets—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.

In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any other external authority. Proponents of the free market as a normative ideal contrast it with a regulated market, in which a government intervenes in supply and demand by means of various methods such as taxes or regulations. In an idealized free market economy, prices for goods and services are set solely by the bids and offers of the participants.

Commerce is the large-scale organized system of activities, functions, procedures and institutions that directly or indirectly contribute to the smooth, unhindered distribution and transfer of goods and services on a substantial scale and at the right time, place, quantity, quality and price through various channels from the original producers to the final consumers within local, regional, national or international economies. The diversity in the distribution of natural resources, differences of human needs and wants, and division of labour along with comparative advantage are the principal factors that give rise to commercial exchanges.

<span class="mw-page-title-main">Anti-capitalism</span> Political ideology and movement opposed to capitalism

Anti-capitalism is a political ideology and movement encompassing a variety of attitudes and ideas that oppose capitalism. In this sense, anti-capitalists are those who wish to replace capitalism with another type of economic system, such as socialism or communism.

<span class="mw-page-title-main">Market economy</span> Type of economic system

A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

A mixed economy is an economic system that accepts both private businesses and nationalized government services, like public utilities, safety, military, welfare, and education. A mixed economy also promotes some form of regulation to protect the public, the environment, or the interests of the state.

This aims to be a complete article list of economics topics:

Laissez-faire is a type of economic system in which transactions between private groups of people are free from any form of economic interventionism. As a system of thought, laissez-faire rests on the following axioms: "the individual is the basic unit in society, i.e., the standard of measurement in social calculus; the individual has a natural right to freedom; and the physical order of nature is a harmonious and self-regulating system." The original phrase was laissez faire, laissez passer, with the second part meaning "let (things) pass". It is generally attributed to Vincent de Gournay.

Liberalization or liberalisation is a broad term that refers to the practice of making laws, systems, or opinions less severe, usually in the sense of eliminating certain government regulations or restrictions. The term is used most often in relation to economics, where it refers to economic liberalization, the removal or reduction of restrictions placed upon economic activity. However, liberalization can also be used as a synonym for decriminalization or legalization, for example when describing drug liberalization.

Democratic capitalism, also referred to as market democracy, is a political and economic system. It integrates resource allocation by marginal productivity, with policies of resource allocation by social entitlement. The policies which characterise the system are enacted by democratic governments.

<span class="mw-page-title-main">Economic system</span> System of ownership, production, and exchange

An economic system, or economic order, is a system of production, resource allocation, and distribution of goods and services within a society. It includes the combination of the various institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.

In economics, a price system is a system through which the valuations of any forms of property are determined. All societies use price systems in the allocation and exchange of resources as a consequence of scarcity. Even in a barter system with no money, price systems are still utilized in the determination of exchange ratios between the properties being exchanged.

The Anglo-Saxon model is a regulated market-based economic model that emerged in the 1970s based on the Chicago school of economics, spearheaded in the 1980s in the United States by the economics of then President Ronald Reagan, and reinforced in the United Kingdom by then Prime Minister Margaret Thatcher. However, its origins are said to date to the 18th century in the United Kingdom and the ideas of the classical economist Adam Smith.

<span class="mw-page-title-main">Competition (economics)</span> Economic scenario

In economics, competition is a scenario where different economic firms are in contention to obtain goods that are limited by varying the elements of the marketing mix: price, product, promotion and place. In classical economic thought, competition causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products. The greater the selection of a good is in the market, the lower prices for the products typically are, compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly).

An economic ideology is a set of views forming the basis of an ideology on how the economy should run. It differentiates itself from economic theory in being normative rather than just explanatory in its approach, whereas the aim of economic theories is to create accurate explanatory models to describe how an economy currently functions. However, the two are closely interrelated, as underlying economic ideology influences the methodology and theory employed in analysis. The diverse ideology and methodology of the 74 Nobel laureates in economics speaks to such interrelation.

<span class="mw-page-title-main">Outline of economics</span> Overview of and topical guide to economics

The following outline is provided as an overview of and topical guide to economics:

Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish communism from capitalism, and is one of the fundamental defining characteristics of communism.

Market socialism is a type of economic system involving social ownership of the means of production within the framework of a market economy. Various models for such a system exist, usually involving cooperative enterprises and sometimes a mix that includes public or private enterprises. In contrast to the majority of historic socialist economies, which have substituted the market mechanism for some form of economic planning, market socialists wish to retain the use of supply and demand signals to guide the allocation of capital goods and the means of production. Under such a system, depending on whether socially owned firms are state-owned or operated as worker cooperatives, profits may variously be used to directly remunerate employees, accrue to society at large as the source of public finance, or be distributed amongst the population in a social dividend.

Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.

This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.

References

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  38. ↑ Stone, Randall W. (2011). Controlling institutions : international organizations and the global economy. Cambridge, UK: Cambridge University Press. ISBN   978-1-139-07862-7. OCLC   728171117.
  39. ↑ Kentikelenis, Alexander E.; Stubbs, Thomas H.; King, Lawrence P. (2016-05-24). "IMF conditionality and development policy space, 1985–2014". Review of International Political Economy. 23 (4): 543–582. doi:10.1080/09692290.2016.1174953. ISSN   0969-2290. S2CID   156856349.
  40. ↑ Copelovitch, Mark S. (2010), "The International Monetary Fund in the Global Economy", Cambridge: Cambridge University Press, pp. 1–28, doi:10.1017/cbo9780511712029.002, ISBN   9780521194334 , retrieved 2022-06-04{{citation}}: Missing or empty |title= (help)
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