Homo economicus
Ronald Coase (1910–2013) of the Chicago School of Economics was the most prominent economic analyst of law, and the 1991 Nobel Prize in Economics winner. His first major article "The Nature of the Firm" (1937) argued that the reason for the existence of firms (companies, partnerships, etc.) is the existence of transaction costs. Homo economicus trades through bilateral contracts on open markets until the costs of transactions make the use of corporations to produce things more cost-effective. His second major article "The Problem of Social Cost" (1960) argued that if we lived in a world without transaction costs, people would bargain with one another to create the same allocation of resources, regardless of the way a court might rule in property disputes. Coase used the example of an old legal case about nuisance named "Sturges v Bridgman", where a noisy sweets maker and a quiet doctor were neighbors and went to court to see who should have to move. Coase said that regardless of whether the judge ruled that the sweets maker had to stop using his machinery, or that the doctor had to put up with it, they could strike a mutually beneficial bargain about who moves house that reaches the same outcome of resource distribution. Only the existence of transaction costs may prevent this. So the law ought to preempt what "would" happen, and be guided by the most efficient solution. The idea is that law and regulation are not as important or effective at helping people as lawyers and government planners believe. Coase and others like him wanted a change of approach, to put the burden of proof for positive effects on a government that was intervening in the market, by analyzing the costs of action.