INTEGRATING LAW AND ECONOMICS IN INDONESIA
Authors: Soetopo Maria GS 
Published: September 2020

<span class="s8"><span class="bumpedFont15">The application of “Law and Economics” dates back to 1</span></span><span class="s8"><span class="bumpedFont15">,</span></span><span class="s8"><span class="bumpedFont15">500 years ago, and has been applied in many eras. </span></span><span class="s13"><span class="bumpedFont15">In the 20</span></span><span class="s14"><span class="bumpedFont15">th</span></span><span class="s13"><span class="bumpedFont15">Century, </span></span><span class="s8"><span class="bumpedFont15">Ronald Coase, </span></span><span class="s8"><span class="bumpedFont15">pioneered the</span></span><span class="s8"><span class="bumpedFont15"> study o</span></span><span class="s8"><span class="bumpedFont15">f</span></span><span class="s8"><span class="bumpedFont15"> law and economics </span></span><span class="s8"><span class="bumpedFont15">which was </span></span><span class="s8"><span class="bumpedFont15">further</span></span><span class="s8"><span class="bumpedFont15"> elaborated by Richard Posner </span></span><span class="s8"><span class="bumpedFont15">with</span></span><span class="s8"><span class="bumpedFont15"> a new </span></span><span class="s8"><span class="bumpedFont15">synonimo</span></span><span class="s8"><span class="bumpedFont15">u</span></span><span class="s8"><span class="bumpedFont15">sly interchangeable </span></span><span class="s8"><span class="bumpedFont15">terminology,</span></span><span class="s8"><span class="bumpedFont15">Economic</span></span><span class="s8"><span class="bumpedFont15"> Analysis of Law</span></span><span class="s8"><span class="bumpedFont15"> (EAL). EAL uses an economic method to analyze how changes in the law </span></span><span class="s8"><span class="bumpedFont15">a</span></span><span class="s8"><span class="bumpedFont15">ffect the allocation and distribution of wealth in society</span></span><span class="s8"><span class="bumpedFont15">. This</span></span><span class="s8"><span class="bumpedFont15"> </span></span><span class="s8"><span class="bumpedFont15">has provided </span></span><span class="s8"><span class="bumpedFont15">a</span></span><span class="s8"><span class="bumpedFont15"> foundation</span></span><span class="s8"><span class="bumpedFont15"> of a </span></span><span class="s8"><span class="bumpedFont15">market approach to the legal decision-making process</span></span><span class="s8"><span class="bumpedFont15"> through the use of various</span></span><span class="s8"><span class="bumpedFont15">techniques</span></span><span class="s8"><span class="bumpedFont15"> </span></span><span class="s8"><span class="bumpedFont15">including </span></span><span class="s8"><span class="bumpedFont15">Cost Benefit Analysis (CBA), Cost Effective Analysis (CEA), </span></span><span class="s8"><span class="bumpedFont15">and </span></span><span class="s8"><span class="bumpedFont15">Regulatory Impact Assessment (RIA)</span></span><span class="s8"><span class="bumpedFont15">. As one of</span></span><span class="s13"><span class="bumpedFont15"> </span></span><span class="s13"><span class="bumpedFont15">the most commonly used</span></span><span class="s13"><span class="bumpedFont15"> technique</span></span><span class="s13"><span class="bumpedFont15">s</span></span><span class="s13"><span class="bumpedFont15">, </span></span><span class="s8"><span class="bumpedFont15">CBA quantifies the objectives of the </span></span><span class="s8"><span class="bumpedFont15">law with an </span></span><span class="s8"><span class="bumpedFont15">ultimate goal</span></span><span class="s8"><span class="bumpedFont15"> of maximizing</span></span><span class="s8"><span class="bumpedFont15"> </span></span><span class="s8"><span class="bumpedFont15">benefits and minimiz</span></span><span class="s8"><span class="bumpedFont15">ing </span></span><span class="s8"><span class="bumpedFont15">costs. </span></span><span class="s8"><span class="bumpedFont15">It </span></span><span class="s8"><span class="bumpedFont15">is an analytical tool </span></span><span class="s8"><span class="bumpedFont15">which </span></span><span class="s8"><span class="bumpedFont15">searches</span></span><span class="s8"><span class="bumpedFont15"> for variables to indicate economic efficiency. </span></span><span class="s8"><span class="bumpedFont15">As the </span></span><span class="s8"><span class="bumpedFont15">legislative </span></span><span class="s8"><span class="bumpedFont15">drafting process in Indonesia </span></span><span class="s8"><span class="bumpedFont15">lacks</span></span><span class="s8"><span class="bumpedFont15"> a concrete and measured analytical tool,</span></span><span class="s8"><span class="bumpedFont15"> embedding the law and economics methodology within the regulatory making mechanism can provide more effective laws and regulations.</span></span><span class="s8"><span class="bumpedFont15"> </span></span><span class="s8"><span class="bumpedFont15">As the world experiences uncertainties during the globalization era, it is imperative for any country to </span></span><span class="s8"><span class="bumpedFont15">integrate </span></span><span class="s8"><span class="bumpedFont15">law and economics in </span></span><span class="s8"><span class="bumpedFont15">the </span></span><span class="s8"><span class="bumpedFont15">regulatory</span></span><span class="s8"><span class="bumpedFont15"> governance</span></span><span class="s8"><span class="bumpedFont15"> </span></span><span class="s8"><span class="bumpedFont15">framework </span></span><span class="s8"><span class="bumpedFont15">to reach a common goal: </span></span><span class="s8"><span class="bumpedFont15">the maximization of social welfare</span></span><span class="s8"><span class="bumpedFont15"> as enshrined in Article 33 of the 1945 Indonesian Constitution.</span></span>