Unbeknownst to many general counsel, the perspectives, concepts and terms of economists explain much about how law departments operate. Neither abstruse nor irrelevant, the 14 economic concepts collected below, which could be matched by many more – such as choice theory, comparative advantage, elasticity, externalities, marginal cost, monopoly power, productivity, profit margin, rent-seeking, and transaction costs – offer much explanatory firepower:
1. Behavioral economics (Sept. 4, 2005, Jan. 17, 2006 and others)
2. Diminishing returns (Dec. 21, 2005 and IP spending)
3. Economies of size and scale (Aug. 26, 2005)
4. Efficiency and effectiveness (Oct. 1, 2005 as models)
5. Fixed and variable costs (Feb. 18, 2005)
6. Free rider (March 22, 2006)
7. Game Theory (Aug. 14, 2005; Feb. 8, 2006 and posts cited)
8. Information asymmetry (Dec. 23, 2005)
9. Net present value (May 10, 2005 and litigation expense)
10. Nominal metrics (March 12, 2006)
11. Pareto optimum (Sept. 4, 2005)
12. Prediction markets (Feb. 15, 2006)
13. Principal-agent issues (Jan. 16, 2006)
14. Supply and demand (Feb. 1, 2006 in certain auctions)