How often do we think ‘this law is so good but why doesn’t it work’? It’s a common question people ask themselves when it comes to application of the law in real life. Though laws are made and drafted in a way that will get them implemented, there are always instances where laws that look good on paper don’t actually do good. Kaushik Basu, a leading economist of our time, tries to answer the question why good laws are drafted but never implemented in his recent book Republic of Beliefs: A New Approach to Law and Economics.

Basu is the president of the International Economic Association, professor at Cornell University, former World Bank chief economist and former chief economic advisor to the government of India. In this book, Basu has presented his learning as a practical economist in an academic way. He offers a new methodology rooted in game theory for practicing law and economics. He writes, “A common problem is that the laws are often fine on paper but poorly implemented.” The book tries to provide a deeper understanding of how to craft more effective laws for a fair society. 

According to Basu, the traditional economic analysis of the law has significant flaws and doesn’t answer certain critical questions satisfactorily. He poses questions like: If the law is not working, then why hasn’t the law been changed? Why has law enforcement failed? Is it because of the law or the enforcers? Can there be any practical approach to how the relationship between law and economics should be? Basu writes, “Traditional law and economics dealt with these questions by avoiding asking them.” 

While working as a policymaker, he found a fallacy: Policymakers, while dealing with real world problems on topics like corruption control, right to food and welfare, don’t get much time to delve into methodological matters. And his solutionto this is using ‘tools or methods that you know are debatable because the choices are often between using these blunt instruments and paralysis of action’. So he has used modern game theory to find a solution to the questions he has. 

The central thesis of this book is the application of the game theoretical focal point approach to answer these questions. “The focal point is a somewhat mysterious concept that emerged from modern game theory.” 

This concept of intersecting beliefs is the main point of this book, and Basu’s suggestions for a more effective socio-legal environment essential for orderly progress are predicated upon it. 

As the economic thinking of the modern world has shifted towards behavioural economics, this idea of incorporating social norms, law and economics in public policy is a fresh new perspective Basu offers to the world. 

There is so much more politicians and policymakers of the day can learn and implement from this book: Ideas like controlling corruption, delivering public services, making effective laws and integrating them with the social norms and human behaviour, and finding incentives that people and societies respond to. 

According to him, for the law to develop roots and the rule of law to prevail, ordinary people need to believe in the law, and believe that others believe in it too. Such beliefs and meta beliefs can take a very long time to get entrenched in society. He writes, “The most important ingredients of a republic, including its power and might, reside in nothing more than the beliefs and expectations of ordinary people going about their daily lives and quotidian chores. It is in this sense that we are all citizens of the republic of belief.” 

Divided into eight chapters, the book provides a theoretical foundation to the new approach of doing economics and law with game theory in the first four chapters. In the later part, he connects game theory and the focal point approach he has developed with law, political corruption, social norms and other issues like rationality. 

The first four chapters of the book may look quite odd to someone who has not studied economics or game theory, but the writer has made great efforts to present his ideas very lucidly. For a policymaker, it’s always important to study and understand the relation between law and economics. Effective public policy and laws are developed only when economics and law interact. Basu’s advice to lawmakers is this: “Take consideration of the prevailing mentality of the society when you make the law.”

A question may be raised whether  Basu is right in his beliefs. That depends on our own politics and economics, and the ideology we believe in. In the book, he has certainly put out an entertaining variation on game theory to support his plumping for the old economic concept of focal point. He has tried to explain his idea of law and economicsprofoundly, and make it easy to grasp things even for a non-economist reader. But a non-economist reader may find it difficult to understand ideas like game theory and payoff matrix, and explanations of payoff matrix. This book definitely doesn’t fail to provide food for thought for lawmakers and politicians at this very moment. 

Khanal is student of economics and works at South Asia Students for Liberty.