Economic Approaches to Global Regulation: Expanding the International Law and Economics Paradigm

The recent economic crisis has demonstrated with startling clarity the importance of developing a more robust framework for assessing the effects of national rules on global welfare. For more than fifty years, law and economics scholars have examined the effects of domestic legal rules on economic activity and general welfare in the United States. More recently, international law scholars have begun to use economic methods to analyze the international legal order. In this article I survey this evolving body of “international law and economics scholarship” with a view to articulating its principal methodological innovations as well as assessing its contributions to our substantive understanding of the global order. I conclude that while the accomplishments of international law and economics scholars have been substantial, their focus on sovereignty and their commitment to a particular set of analytic assumptions borrowed from “new institutional economics” limits their ability to capture the “real world” complexity and diversity of the global legal order. I suggest that we must expand our analytic methods to take up more directly the inherently political and normative character of our analytic assumptions. Doing so might lead us to more normative and less theoretically certain accounts of the global order in which we live, while pointing us toward the more just, equitable and prosperous order we might create.