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This chapter discusses the main streams of contract philosophy in order to elucidate the extent to which boilerplate is a permissible means of creating contractual obligation. In particular, it considers the deep embeddedness—the ineradicability—of the notion of voluntariness. It also compares and contrasts the economic efficiency theory of contract with the various theories based more directly on freedom of the will. The chapter first provides an overview of contract theory, focusing on autonomy (rights) and welfare theories, reliance theory, and equivalence of exchange theory. It then describes the basic premises of the economic theory of law, the role of incentives in maximizing social welfare, contract law, and property and liability rules. It shows that the existing philosophical theories of contract depend on the core notions of voluntariness, freedom of choice, or consent, thus making it difficult to incorporate boilerplate into the theories of contract.

This book explores the role that energy has played in the economic history of Europe, highlighting the link between energy consumption and economic development. Using three industrial revolutions as the organizing principle, it shows that the path of the modern economy has not been a straightforward story of a constant rate of increase in the use of energy. Instead, the overall trajectory of energy use within Europe follows a logistic S-shaped curve. Three phases can be identified: the first phase, 1500–1800, was marked by little growth in overall energy consumption; the second phase, 1800–1970, is the Industrial Age, which saw explosive expansion in energy use, except during the World Wars and interwar period; the third period, 1970–2008, was marked by stabilization in energy consumption per capita. Based on these developments, the book considers the drivers of energy transitions as well as the economic efficiency of energy use.

This chapter examines the role of energy in the economic growth of twentieth-century Europe. It considers the interrelationships of factors of production in order to identify the general features of a shared experience of growth, rather than to illuminate the local differences. The chapter first explains how development blocks contributed to GDP growth before discussing seven long-run propositions, including the strong growth of capital stock and catch-up with the leader of capital–GDP ratios; machinery increased more than GDP, labor, and other capital; and falling and converging energy intensity in the twentieth century. The chapter concludes with an overview of the link between energy intensity and economic structure. It argues that it was the third industrial revolution that was behind most of the increasing economic efficiency of energy consumption after the 1970s.

This chapter argues that two states of affairs, S' and S, can be Kaldor-Hicks efficient to each other (the Scitovsky paradox), whereas S' and S cannot each contain more utility than the other. So from the fact that S' is Kaldor-Hicks efficient to S, it cannot be inferred that S' increases utility over S. This leads to the contradictory conclusion that S and S' increase utility with respect to each other. Based on the fact that a social state, S, is Pareto optimal, no inference about whether the move to it from a previous social state increases utility can be warranted — at least not without a standard of interpersonal comparability. The chapter goes on to show that only Pareto superiority bears the desired relationship to utilitarianism; that is, if S' is Pareto superior to S, then S' increases utility with respect to S. The rest of the chapter discusses at length various lines of defense for normative economic analysis.

This chapter analyses modern financial markets as well as modern and ‘post-modern’ finance theory. The discussion sheds light on the economic theories and assumptions used in this book for the exploration of the function of market manipulation and insider dealing as forms of economic behaviour, and especially of their mechanics: techniques, devices, and tools used to perpetrate them. A sound understanding of modern financial markets and of economic theory concepts used to explain them is indispensable in the study of market abuse. It also underpins the analysis of the economic efficiency rationales that support its regulation. The chapter draws extensively on the relevant works of eminent economists such as Modigliani, Akerlof, Scholes, and Stiglitz, and from leading finance textbooks.

This chapter examines the potential interrelationships between migrant rights and national policies for admitting migrant workers. It explains how we can expect high-income countries to regulate the rights of migrant workers as part of their labor immigration policies. It develops a basic approach that conceptualizes the design of labor immigration policy in high-income countries as a process that involves “choice under constraints.” It shows that nation-states decide on how to regulate the number, selection, and rights of migrant workers admitted in order to achieve a core set of four interrelated and sometimes competing policy goals: economic efficiency, distribution, national identity and social cohesion, and national security and public order. Although their importance and specific interpretations vary across countries, and over time, the chapter argues that each of these objectives constitutes a fundamental policy consideration that policymakers can and do purposefully pursue in all countries.

This chapter describes the distortion-analysis approach to economic-efficiency assessment. The three major stages of the resource-allocation process, the major category of economic inefficiency that can be generated at each, and the various subtypes of each major category of economic inefficiency are examined. The expression allocation of resources refers to the pattern in which an economy's basic resources are distributed among their various possible users and uses and the way in which an economy's output is distributed among its possible consumers. The consumer choices that affect the allocation at the third, consumption-optimum stage and the producer choices that affect the allocation at the second, top-level-optimum stage obviously affect the identity of the producers to whom particular resources are allocated at the first, production-optimum stage.

This chapter distinguishes between Pareto optimality, Pareto superiority, and Kaldor-Hicks efficiency, and provides an extended discussion of the Coase theorem. One of the central claims in this chapter is that the economic analysis of law relies largely on the Kaldor-Hicks criterion of efficiency, less on Pareto optimality, and almost not at all on Pareto superiority. This is important, especially from a normative point of view. What justifies the use of public power, that is, courts, legislatures and administrative agencies, in pursuing efficiency? In his essay Theory of Negligence, Richard Posner shows that a large number of negligence cases were decided along lines of economic efficiency.

This chapter presents some second-best theory critiques of canonical allocative-efficiency analyses and of the standard justifications for ignoring the notion of second best. The traditional allocative-efficiency rationale for pro-competition policies focuses exclusively on the supposed tendency of individual imperfections in price competition to generate a deadweight loss by reducing the output that the non-perfect competitor finds most profitable below the output that would be most allocatively efficient for him to produce. The traditional economic-efficiency rationale for antitrust is that pro-price-competition policies will eliminate or reduce this deadweight loss by eliminating or reducing the individual imperfections in price competition that first-best analysis claims cause it. The analysis of the deadweight loss that an individual monopoly will generate in a world that contains Pareto imperfections other than the individual imperfection in price competition in question is also presented.

This introductory chapter begins with a brief discussion of the persistence of poverty and lack of progress in human development today. The situation has led policymakers to put renewed emphasis on policies aimed at promoting economic efficiency and improving the productivity of the poor, generating income-earning capabilities and creating opportunities for using them productively, through education and health, increasing opportunities to invest in small- and medium-sized enterprises, and improving housing and basic infrastructure services. The chapter then sets out the book's purpose: to provide a systematic overview of the recent evidence on the different channels through which infrastructure may affect growth; to take a resolutely analytical approach by developing an integrated series of formal models for understanding how these channels operate; and to draw policy implications with respect to formulating growth and human development strategies. An overview of the subsequent chapters is also presented.

Market and institutional failures leading to conditions of imperfect competition which negatively affect economic efficiency (Pareto efficiency) explain many of the provisions which are common to most procurement systems. This chapter addresses a further concern of welfare economics which considers the normative value judgements made by governments and their effect on issues of allocative efficiency. Whilst it is expected that the value choices made by the government would remain Pareto efficient (that is, would fall within one of the many Pareto-efficient options), it is also the responsibility of governments to decide (based on their election promises) which Pareto-efficient option to choose. That is not always achievable and, where it is not, there will be a trade-off between the attainment of a non-economic policy objective and economic efficiency. The success of procurement regulation will be measured by its ability to satisfy the requirements of the context in which it operates. This chapter also discusses the instrumental use of procurement, protective policies and proactive policies, strategic policies, non-discrimination, statutory compliance, and contract compliance.

Pension funds are associated with various implications of international investment. As the chapter makes an analysis of Table 6.12, it shows that this investment has experienced significant growth since 1980 and although it entails large volumes, studies have only been focused on the relatively small part of this portfolio. There are several options for attaining further growth in terms of the portfolio shares in some countries. While international investment may be found to be beneficial for pension funds, it is important to consider that this also entails a tendency of major significance in terms of world economy and financial market development that has various implications for economic efficiency. This chapter first provides an analysis of the grounds for international diversification, examines supporting data, investigates the reasons for the behavioural differences and the recent experience of various pension-fund sectors, and identifies the micro and macro level economic implications of international investment.

We live in a “brave new world” in which allocative decisions on public goods today can have consequences that cross political and generational boundaries. Although the international aspects of public goods have received much attention in recent years, particularly with respect to environmental activities, intergenerational public goods have received relatively scant attention.

In response, this chapter has five main purposes. First, it presents a taxonomy of public goods with benefits spanning generational or national boundaries. Second, it describes the implications for economic efficiency of a variety of public goods that affect nations or generations. Third, it explores the strategic aspects of intergenerational public goods. Fourth, it offers design principles for institutional arrangements, intended to address concerns about the allocation of transgenerational public goods. Fifth, the analysis is applied to specific cases of intergenerational public goods throughout. A number of policy insights derive from this analysis. At the national level, decision‐makers are unlikely to achieve optimal levels of these public goods. If intergenerational awareness of public goods spillovers is only encouraged within a country, then that country's well‐being may actually deteriorate as others free ride on its enhanced far‐sightedness. Thus, cooperation and increased awareness of spillovers must have both an international and an intergenerational dimension for all nations to gain.