Criticisms of Law & Economics Approach: The Perils of Indian Reality

This paper critically examines the application of Economic Analysis of Law (EAL) in the Indian legal context, focusing on two main criticisms: the reliance on market practices and the limitations of empirical and rational analysis. EAL, popularized by Richard Posner, emphasizes the efficiency of legal rules and institutions through economic theories. However, the paper argues that market-driven solutions can deepen societal divides, especially in a country like India with significant economic disparities. Drawing on Michael Sandel’s critique, the paper questions the appropriateness of applying market incentives to social issues and highlights the potential negative consequences, such as reinforcing class divisions. Additionally, the paper challenges the exclusive reliance on empiricism and rationalism in EAL, asserting that data and figures may oversimplify complex social realities. Using examples like reservation policies and the Sardar Sarovar Dam, the paper illustrates how purely economic analysis may overlook historical injustices and systemic discrimination faced by marginalized groups. The conclusion emphasizes the need for a balanced approach that considers socio-cultural factors and recognizes the limitations of market-driven solutions. The paper contends that while EAL offers valuable insights, its application in India requires a more nuanced understanding of the socio-economic landscape, cultural diversity, and historical context to ensure legal solutions align with principles of justice and inclusivity.