International Journal of Law

International Journal of Law

ISSN: 2455-2194
Impact Factor: RJIF 5.12
www.lawjournals.org
Volume 4; Issue 6; November 2018; Page No. 94-101

Economic Jurisprudence: A Nepalese legal perspective

Rashesh Vaidya
Advocate and Lecturer, Department of Management, Tribhuvan University, Nepal

Abstract
The concept of economic jurisprudence emerged from an inter-relationship between the application of economic theory and the
practice of law. The main concept of economic jurisprudence is that a nation should be capable to provide economic justice to
every citizen through proper integration between the legal system and economic system, In other words, the political economy of
country is fully dependent on the jurisprudential theory adopted by the nation in formulation of constitution, acts and another legal
basis for sustainable economic growth of the nation. The paper tried to elaborate on how the economic theories and jurisprudence
interlinked and how the theories were developed in economics as well as in law inter-depending on each other. Similarly, the paper
elaborates the inter-relationship of law and economics in context to Nepalese legal and economic environment. Similarly, the paper
tried to show in context to Nepal’s transition process of the proclamation of New Constitution through the second Constituent
Assembly, 2013 and enactment of new Country Codes as well as new acts as per the necessity of the emerging socio-economic
environment. Ultimately, the paper tries to show how the legal systems of a nation or acts, rules and regulations can also make a
breakthrough in the economic development of the nation and vice versa.

Keywords: economic jurisprudence, economy, Nepal

1. Introduction 2. Law as an Autonomous Practice

The concept of economic jurisprudence emerged from an The law is the body of principles recognized and applied by
inter-relationship between the application of economic theory the state in the administration of justice. The law consists of
and the method to the practice of law. Economic jurisprudence the rules recognized and acted on in courts of justice. It will be
is a reflection on the relationship between laws and economic noticed that this is a definition, not of a law, but of the law.
which has been a staple of English-speaking jurisprudential The term law is used in two senses, which may be
thought since the middle of the eighteenth century. The main conveniently distinguished as the abstract and the concrete.
theme or concept of economic jurisprudence is that a nation's Similarly, in practice, there is a use of the phrases law and
economy and its legal system are intimately related. In other order, law and justice, courts of law. A law means a statute,
words, the political economy of the country is fully dependent enactment, ordinance, decree, or any other exercise of
on the exercise of jurisprudential theory by the nation [1]. legislative authority [3].
As per general theory, law is a social tool that promotes Most traditional theories of jurisprudence look to uncover the
economic efficiency, economic analysis, and efficiency as an essence or definitive aspects of the institution of law defining
ideal that can guide legal practice. It considers how legislation principle and explaining the philosophy of law. The English
should be exercised to improve market conditions in return. term is based on the Latin word jurisprudentia: juris is
Law and economics offer a framework with which they model the genitive form of jus meaning "law", and prudentia means
legal outcomes and common objectives with which unify "prudence". The word is first attested in English in 1628, at a
fundamentally different areas of legal activity. So, an time when the word prudence had the now obsolete meaning
economic jurisprudence ultimately increases the scope of of "knowledge of or skill in a matter". The word may have
activities of jurisdiction up to the philosophy of law or science come via the French jurisprudence, which is attested earlier
[4]
of law to an implementation of this science for the prosperity .
of the economy as a whole [2]. The most common philosophical discussion of law assumes
Law affects every citizen in the society in relation to their that such a characterization is the essential aim of
activities. It is a meaningful expression of the civilized jurisprudence. Second, in order to arrive at a properly
society. The economy of the nation can be flourished through analyzed concept of law, both legal positivism and law as
proper formulation, implementation and interpretation of integrity are best constructed from specific techniques of
mainly the business or mercantile law. Nevertheless, the analytic and linguistic philosophy which include the
constitution of the nation, a fundamental law of nation and investigation and clarification of the legal from the non-legal
other civil and criminal codes also play a major role in proper social practices. The third common assumption is that the best
regulation and operation of economy of the nation. way to understand legal practice is to understand the necessary

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and sufficient qualities that make some rule or statement into a 4.2 Law Encouraging Economic Efficiency
law [5]. The law and economics movement claims that law is best
understood as a tool to promote economic efficiency. But how
3. History and significance of economic jurisprudence [6] can the institution of law help encourage efficient
Modern law and economics date from about 1960, when transactions? One way is to help avoid situations that lead to
Ronald Coase [7] published “The Problem of Social Cost.” market failure. Market failure is the existence of monopolies:
Gordon Tullock and Friedrich Hayek also wrote in the area, a situation where a single seller controls the whole market and
but the expansion of the field began with Gary Becker's 1968 becomes a price maker and restricts in the entry of any firms
paper on crime (Becker also received a Nobel Prize). In 1972, in a market. Law can be used as a tool to ensure that
Richard Posner, a law and economics scholar and the major monopoly situations are hard to bring about and maintain. The
advocate of the positive theory of efficiency, published the example of maintaining the situation can be seen from The
first edition of Economic Analysis of Law. An important factor Sherman Antitrust Act of 1890 of USA. Another way legal
leading to the spread of law and economics in the 1970s was a systems can be used to ensure economically efficient
series of seminars and law courses for economists and transactions is through the enforcement of valid contracts. By
economics courses for lawyers, organized by Henry Manne ensuring compliance with contractual terms courts can give
and funded, in part, by the Liberty Fund [8]. parties to a contract confidence that the other party will fulfill
Economic Jurisprudence can be seen as an emerging inter- the agreed-to obligations. This becomes especially important
discipline subject dealing with the issues related to the impact in situations where the parties must complete their obligations
of legal decisions in the economic environment of any nations. at different times.
The decisions are mainly focused on the wealth maximization But some types of market failure are less obvious, and the
of the nations the concept that was earlier elaborated by Adam legal means toward remedying them subtler. One problem in
Smith [9]. market transactions is that of externalities. The production act
of the firm and the consumption act of individuals cannot
4. Law for Sustainable Development always be independent, they are also inter-dependent of each
Law can be seen as a tool to encourage economic efficiency other. There is a difference in private and social evaluation
and sustainable development of the country. The laws are due to externality or interdependence, where a situation of
formulated by the legislature, the legislature is elected by the government intervention is seen necessary. Such externality
voters. The voters have certain aspirations from their elected may also lead to market failure. Thus, a part of the
leaders. The aspiration can be social, economic, cultural as government comes into an economy to make a correction by
well as political changes which will bring a better life among using the system of budgeting and taxation. Pigou [11] argued
the general public. Thus, the development parameters can be in regard to this that legal means should be used to impose a
clearly seen through the economic growth of the nation which marginal tax upon the offending party, to internalize any
will also ultimately improve the living standard of the people. externalities.
The concept of economic reasoning can be adapted to analyze
how law and economics can be interrelated for sustainable 4.3 Law as Economic in Nature
development of the nation. A court is defined as a place where the laws are defined by the
judge which were developed by the law-makers. Here, the law
4.1 Basic concepts in economic reasoning [10] as an institution is seen a court, a judicial body, whose duty is
The most central assumption in economics is that human to enforce the acts, rules, and regulations through the
beings are rational maximizers of their individual satisfaction, administrative bodies of the nation. But the act is not seen
and, in turn, respond to incentives. A rational maximize of constraint to the above mention statement as it also punishes
personal satisfaction adjusts means to ends in the most with penalties or orders compensations to the victims in terms
efficient way possible. It is important to realize that of monetary value or economic values. What the economic
economics is not restricted to the analysis of monetary issues analysis of law manages, though, is to see such disparate areas
only but as well as monetary satisfaction. Every person within as a contract, tort and criminal law as all based upon economic
any types of the economy have their wants and desires, so to aims, therefore giving the law a more coherent basis than
fulfill them they conduct certain economic activities and other theories can offer. Posner [12] argued that criminal acts
expects for the trade-off of costs and benefits. Normally the are a source of enormous social costs that no society can
aim of economic reasoning is the improvement of the ignore, and the modem criminal law is the product of a
efficiency of an economy. painstaking evolution powerfully influenced by the explicitly
A more efficient allocation is one that increases the net value economic approach of Jeremy Bentham, i.e. actions
of resources. Efficiency in the allocation of resources is evaluations are based upon their consequences. Although
distinguished from equity, which is concerned with justice in judges and legislators do not often speak the language of
the distribution of wealth. Because some people value specific economics, he suggested that they often do reason implicitly
goods higher or lower than others, economic efficiency can in economic terms, and that economic analysis is therefore
often be raised through voluntary transfers of goods. One helpful in explaining the basic structure of law, including the
party to the transaction values money more than the item criminal law.
owned, and the other values the item owned more than the Secondly, as an analytical analysis of the necessary conditions
asking price, the exchange produces a net gain in economic for the practice of law, it may not be able to account for the
goods. Each person ends up better off than before. internal point of view which Hart [13] thought that if the claims

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are comprehensive descriptive accuracy or are of necessary as Buchanan [17] was awarded Nobel Prize. The theory focuses on
well as sufficient for foundations of law, whether or not law as the sub-discipline ‘constitutional economics’ under the main
a social institution should adopt economic efficiency as the principle of constitutionalism. It also argued that every
focus point while guiding a judicial decision-making. constitution should be capable to balance the interest of the
state, society and each individual of the nation.
5. Later Developments Buchanan explains public choice theory as "politics without
Another argument for the fertility of the economic analysis of romance" because many of the promises made in politics are
law is that it has spawned a number of further tools that seem intended to appear concerned with the interest of others
helpful in understanding legal institutions. Various theories mainly concerning the sentiments of the voters, but in reality
and concepts of jurisprudence have been proposed to interpret are the products of selfish ulterior motives of the politician.
the relation of law and economics.
5.4 Economics and Normative Jurisprudence
5.1 Behavioral economics and law Normative jurisprudence or also termed as an evaluative
The concept of behavioral economics developed after the theory of law is the legal philosophy that is concerned with the
integration of economics, psychology, and law. The relation goal or purpose of the law. It tries to find out which acts if
between behavioral economics and law can be stated as the committed is to punish and others should not be punished.
incorporation within law and economics from the insights of Here, Posner argues that law can encourage economic
the behavioral approach of psychology. The theory tries to efficiency by assigning property rights to those parties who
understand the behavior and choice of a person to bear on the would have secured them through a market exchange if
law [14]. The analysis of law should be linked with what people transaction costs were lower [18].
are learning about human behavior and their choice.
Jurisprudential practices could be significantly influenced by 5.5 Economics and Analytic Jurisprudence
preference and values of judges and juries as well as by legal The distinction between normative and analytic jurisprudence
system. Behavioral law and economics attempt to improve the originates with 19th-century English legal philosopher John
predictive power of law and economics by building in more Austin [19]. As Austin conceives the distinction, analytical
realistic accounts of actors behavior in the court proceeding. A jurisprudence is the study of the concept or nature of law
well-presented defendant’s presence in the court with an considered in its most general and abstract level. Normative
excellent victim impact statements might be important jurisprudence works with the already determined concept of
correctives to proceedings that skews judge or jury’s law and asks what the law should be, considering whether
decisions. An awareness of such a cognitive failure could help particular areas of law or doctrine are as they should be. On its
adjust legal reasoning and its conclusions accordingly. face, the distinction has much to recommend it. Much
philosophical writing about such topics as the moral limits of
5.2 Game Theory the criminal law, legislation and administrative action, and the
The concept of adjoining Game Theory and law was first normative basis of property or contract law thus falls within
established in the book of Baird, Gertner and Picker [15] Game normative jurisprudence as Austin conceives it. So, too, do
theory adds to economic modeling the phenomenon of questions about the obligation to obey the law. More
strategic action. Strategic actions are those adopted because of generally, the Austinian picture rests on the thought that
the competitive nature of many social transactions. They are normative jurisprudence is just the study of what the law
adopted due to how one individual expects another to act in should be, where the law is conceived broadly as a tool for
response. Game Theory is concerned with anticipating how bringing people into compliance with their moral obligations
competitors are likely to react to organization’s move. So, [20]
.
interpreting legislators as an organization which has power Although utilitarianism no longer occupies as central a place
vested by the public to formulate the laws and legal rules. in moral and political philosophy as it once did, and the
While designing the laws, the legislators can take a support of command theory has largely disappeared from analytical
Game theory and could evaluate the expected outcome of the jurisprudence, the residues of each have continued to shape
interpretation from the judicial body. The understanding that the ways in which both the explanation and justification of
legislators might have adopted specific wording for a law legal rules, doctrines, and practices are pursued. Many who
based upon strategic motives may help direct the proper aims reject utilitarianism nonetheless still accept Austin's belief that
of judicial interpretation. This type of claim, though, is often no specific legal concepts properly figure in the
better analyzed by the tools offered in public choice theory. characterization of what the law should be. Instead, they
conceive of law as a tool for achieving a moral outcome that
5.3 Public Choice Theory does not require any sort of reference to legal ideas [21].
A public choice theory is focused on how the nature of the The most important questions of analytic jurisprudence are:
legislative process and collective decision making influence "What are laws?"; "What is the law?"; "What is the
the nature of the law. It is the application of economic models relationship between law and power/sociology?" and, "What
of decision-making and their results to the issues where is the relationship between law and morality?" Legal
traditionally political science theory influences, for example positivism is the dominant theory, although there are a
Arrow’s Theorem [16]. The theory emerged in the fifties and growing number of critics, who offer their own
received widespread popularity in 1986 when James M. interpretations.

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6. Meaning of economic jurisprudence Constitution of Nepal, 2015, Chapter 3, Article 17 (2) Sub-
The law and economics movement applies economic theory clause (f) guarantees various levels of citizen and civil society
and method to the practice of law. This attachment of law and participation and establishes a number of institutions for
economics develop the concept of an economic jurisprudence. public accountability and oversight i.e. freedom to engage in
It asserts that the tools of economic reasoning offer the best any occupation or be engaged in employment, establish and
possibility for justified and consistent legal practice. It is operate industry, trade and business in any part of Nepal. The
arguably one of the dominant theories of jurisprudence. The Right to Information Act, 2007 [25] grants citizens' broad
law and economics movement offers a general theory of law access to public information and is very progressive compared
as well as conceptual tools for the clarification and to rest of South Asia. The Good Governance Act, 2008 [26]
improvement of its practices. The general theory as well as stresses the need for a public administration that is "pro-
concept is that law is best viewed as a social tool that people, accountable, transparent, inclusive and participatory."
promotes economic efficiency, that economic analysis and Nevertheless, such laws and acts, there is the lack of
efficiency as an ideal can guide legal practice. It also effectiveness of proper audit of works as per internationally
considers how legislation should be used to improve market adopted accounting and auditing standards. There is also a
conditions in return and how the legislators should conduct as huge gap in public demand and public finances. There is seen
per the aspiration of the general voters. Law and economics a lack of "budget literacy" [27] and "financial literacy" [28]
offer a framework with which to model legal outcomes and among the related stakeholders.
common objectives with which to unify disparate areas of
legal activity. The bringing together of legal theory and 8. A relation between the economy and jurisdiction
economic reasoning has also created new research agendas in activities in Nepal
the fields of behavioral economics: how rationality affects 8.1 Right on Property and its Utilization
people’s behavior within legal scenarios; public choice theory A legal system should provide clear definitions of property
and how collective behavior should have an effect on rights. That is, for any asset, it is important that parties be able
legislation; and game theory: understanding strategic action in to determine unambiguously who owns the asset and exactly
a legal context [22]. what set of rights this ownership entails. Ideally, efficiency
Reflection on the relationship between law and economics has implies that, in a dispute regarding the ownership of a right,
been a staple of English-speaking jurisprudential thought since the right should go to the party who values it the most. But if
the middle of the eighteenth century. Adam Smith conceived exchanges of rights are allowed, the efficiency of the initial
of his theory of political economy as an essential part of his allocation is of secondary importance. The Coase Theorem,
broader jurisprudential theory. Nineteenth-century utilitarian the most fundamental result in the economic study of law,
refined the economic theory and the jurisprudence and states that if rights are transferable and if transactions costs are
explored the connections between them. Holmes spoke not too large, then the exact definition of property rights is not
prophetically when he said that the lawyer “of the future [will important because parties can trade rights, and rights will
be] […] the master of economics” (Holmes 1995, 3: 399; see move to their highest-valued uses. At the same time, an
chap. 2, sec. 2.5.1) [23]. In the early decades of the twentieth ideology of the ruling party in the nation also highly
century, progressive economists and legal scholars like influential in the property rights jurisdiction. The threat of
Roscoe Pound roundly criticized the naïve assumptions of the amendments of prevailing acts, rules, and regulations could be
United States courts that struck down legislation protecting assumed as per the ideology of the ruling party [29].
workers as violations of a constitutional standard of the In many circumstances, however, who owns the right will
substantive due process [24]. matter. Transactions costs are never zero. If rights are
Thus, an economic jurisprudence merely tries to explore the incorrectly allocated, a costly transaction will be needed to
effects of the law on the nation's economy and the economy correct this misallocation. If transactions costs are greater than
on the law but to use the tools and models of neo-classical the increase in value from moving the resource to the efficient
economics to provide a comprehensive and deep explanation owner, there will be no option for corrective mechanism. This
of the nature of law itself. can happen in any sort of economy [30].
In context to Nepal, under the Fundamental Rights and Duties,
7. Economic Jurisprudence in Context to Nepal Article 17 (2) Sub-clause (f) (Chapter 3) of the Constitution of
The perception of a tie-up between the economy of the nation Nepal, 2015 [31], has mentioned the freedom to involve in any
and jurisprudence in Nepal starts properly only after 1990. occupation or be engaged in employment, establish and
Historically, Nepal as a state has been exclusionary and operate industry, trade, and business in any part of Nepal.
unaccountable. Only after the Peoples' Movement and the Clause (1) of Article 25 (Chapter 3) of Constitution of Nepal,
formal introduction of multiparty democracy in 1990, an 2015 makes provisions for compensation for any property
accountable government towards the public came in the requisitioned, acquired or encumbered by the State in
power. But as per an aspiration of the people, the government implementing scientific land reform program or in public
could not give good quality of economic justice. This brought interest in accordance with law. The compensation and basis
out the decade-long Maoist Conflict and Second Peoples’ thereof as well as operation procedures shall be as prescribed
Movement in 2006 which also abolished monarchy from by prevailing law.
Nepal. The legacies of problems of social and economic Nevertheless, the discussion and conflict in interpretation on
inequality were compounded by impurity and weak rule of the preamble of the Constitution of Nepal, 2015 arises time-
law. to-time regarding the phrase, ‘Expressing commitment to

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creating the bases of socialism by adopting democratic norms ground the rise of the crime has occurred also influence in the
and values……’ The discussion or a comment arises on what negations through monetary basis.
is the intentions of the law-makers while putting the word, Criminal law has been the subject of the most extensive
‘socialism’. empirical work in law and economics, probably because of the
After Nepal became a 147th member of the World Trade availability of data. Economic theory predicts that criminals,
Organization on April 23, 2004, the trade arena for the like others, respond to incentives, and there is unambiguous
country increased but there was a certain lack in various laws. evidence that increases in the probability and severity of
At the moment, Nepal had the challenge to amend the punishment in a jurisdiction lead to reduced levels of crime in
prevailing laws, so the country updated the laws related to that jurisdiction. The issue of the deterrent effect of capital
intellectual property, namely Patent, Design, and Trademark punishment has been more controversial, but several papers
Act, 2002 and Copyright Act, 2002. These two acts have applying advanced econometric techniques and comprehensive
encouraged local entrepreneurs and researchers to generate data during research have found a significant deterrent effect;
new ideas with secured legal protection. each execution shows the multiple effects of preventing
crimes in geometric proportion. No refereed empirical
8.2 Tort Law Practice criticism of these papers has been published. Similarly,
Tort law is part of the system of private law and is enforced research on procedural rules has shown that increasing rights
through private actions. The economic analysis of tort law has for accused persons can just lead to increases in crime [35].
focused on issues such as the distinction between negligence Clause (5) of Article 24 (Chapter 3) of the Constitution of
(a party must pay for harms only when the party failed to take Nepal, 2015 makes provisions for compensation and even
adequate or efficient precautions) and strict liability (a party specifies monetary amounts. But the basis or framework for
must pay for any injury caused by its actions). Because most giving compensation has not been defined. Additionally, the
accidents are caused by a joint action of injurer and victim, amounts specified for compensation seem limited. For
efficient rules create incentives for both parties to take care; example, Section 34(L) mentions that as compensation, “up to
most negligence rules namely; negligence, negligence with a NRS 25,000 shall be given to rape victims who become
defense of contributory negligence, comparative negligence pregnant, to either abort or to give birth to and nourish the
create exactly these incentives. Tort law used to be child.” This amount will not be sufficient to help the victim.
uninteresting and unimportant, dealing largely with Clause (5) of Article 24 (Chapter 3) i.e. Right against
automobile accidents [32]. untouchability and discrimination makes a provision for a
Calabresi [33] has argued that on the modern economic analysis culprit to pay compensation to the victim and even mentions a
and legal policy in context of the torts mainly focused on the list of crimes for which this provision is valid. It would be
accident law of the United States during seventies. He focused appropriate to go further to add crimes related to communal
on an economics aspects of outcome from an accident and violence and discrimination to this list. The clause has made a
how law can reduce the cost of accident. He argued for the provision of the right to compensation as provided for by law
improvement in the legal provisions in accident law as well as considering all forms of untouchability or discrimination,
in insurance acts. contrary to the provision as a punishable crime. Ethnic
In context to Nepal, two codes came into operation in the discrimination also falls under criminal acts, and the basis for
name of Muluki Daywani (Sahita) Ain- National Civil Code- a culprit paying compensation to the victim has been
2017 and Muluki Faujdari (Sahita) Ain- National Criminal established under the Caste-Based Discrimination and
Code-2017 as well as National Civil Procedure Code-2017 Untouchability (Offense and Punishment) Act 2011. The
and National Criminal Procedure Code-2017 on October 16, clause also makes provision for a victimizer to pay
2017. Under the Civil Code, Chapter 17, the three major compensation to the state and even mentions appropriate fines.
elements of tort (i) an act of or causing omission (ii) damage But these fines seem to have been declared arbitrarily.
or loss to another person’s body, life, property or other legally Under the National Criminal Code-2017, there is a separate
protected interest; and (iii) due to error, negligence or act, Criminal Punishment Assessment an Implementation Act,
recklessness have been defined. 2017 which have seven chapters. The chapter-3 of the
Criminal Punishment Assessment an Implementation Act,
8.3 Criminal Law Practice 2017 completely deal with the provisions of penalties
Criminal law is enforced by the state rather than by victims. covering from Sec. (18) to Sec. (21). The chapter-3 clearly
This is because efficient enforcement requires that only a defines the provisions of penalties assessment that should be
fraction of criminals be caught (in order to conserve on compensated to the victim and the mode of payment and time
enforcement resources) and the punishment of this fraction be limit of the payment of the penalties and compensations by the
multiplied to reflect the low probability of detection and offender [36].
conviction [34]. Compensation for Torture Act, 1996 has a provisions for
However, most criminals do not have sufficient wealth to pay compensation to victim, determination of amount of
multiplied fines and penalties, and so incarceration or other compensation as well as its execution. Similarly, Consumer
forms of non-pecuniary punishment must be used. The bail Protection Act, 1998 has made a provision of various
amount that should be deposited as per the order of the court categories of penalties as per depending on the degree of
could not be fulfilled by the verdict, thus the option will offense. It is appropriate for these acts to include provisions
incarceration or other forms of non-pecuniary punishment. mentioned in other acts and comprehensively lay out
The social and political background as well as in which compensations for victims.

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8.4 Monetary and Fiscal Policy government collects the tax and non-tax revenue and makes
Monetary policy is an important part of government economic regular or capital expenditure by formulation budgets as well
policy. There is no any precise definition but in general, it is a as other laws, bye-laws, rules and regulations as per the
policy that is dedicated to controlling the expansion and provision and power vested by the constitution of nation.
contraction of money and credit by the central banks for Public finance now includes the study of financial
achieving definite objectives. It includes all the methods used administration and control as well. The study of public finance
by the central bank to control credit using instruments like is split up into four parts; (1) Public Expenditure i.e.
bank rate, cash reserve ratio, open market operation and so on. expenditure made by government (2) Public Revenue i.e.
At the same time, fiscal policy is a policy that deals with the income generated by government mainly through tax and non-
public or government treasury. The policy mainly focuses on tax revenue, (3) Public Debt i.e. collecting fund through debt
public revenue, public expenditure and public debt, used to instruments through central bank and (4) Budgeting i.e.
achieve pre-determined objectives of the ruling government. planning of estimated revenue and expenditure of governed
Macroeconomic management should dedicated to higher for a specific period [38].
economic growth without disturbing the macroeconomic Chapter 3 of the Constitution of Nepal, 2015 has made the
stability, which is essential for attaining sustained a higher provision regarding state may impose a tax on property and
level of economic growth. Sound macroeconomic income of a person according to the norms of progressive tax
management would improve the external sector i.e. collecting the tax revenue from the public.
competitiveness of the economy on a sustainable basis, a basis Similarly, Chapter 5, Article 59 (1) to Article 59 (7) of
for reducing the external sector vulnerability of the economy. Constitution of Nepal, 2015 states use of the fiscal power of
The deficit balance of payments and foreign debt problems are federation, province and the local level. Under Chapter 5,
often caused and aggravated by impulsive fiscal policy, the Article 60 (1) to Article 60 (8) there is provisions of
solution of which would involve some combination of cutting distribution of sources of revenues among the various
down public spending and raising additional revenue, thereby stakeholders of the nations.
freeing resources for export and debt servicing. The normal At the same time, Chapter 10, Article 115 to 125 of
potency of monetary policy gets lost because the money Constitution of Nepal, 2015 describe regarding the collection
supply is dedicated to maintaining the exchange rate at the of the loan, estimation of revenue and expenditure and
announced fixed level. It can be expected that the role of the especially fund management at the state level or local level
monetary policy to contribute to creating sound under the heading of Federal Financial Procedure.
macroeconomic fundamentals and foster sustained economic Under Chapter 15, Article 198 to 202 and Chapter 16, Article
growth through increased emphasis on the secondary market 203 to 213, the Constitution of Nepal, 2013 has clearly made
operation will remain persuasive in the days to come [37]. provisions regarding the financial management of the
Chapter 4, Article 50(3) of Constitution of Nepal, 2015 under Province. Finally, Schedule 5 of the Constitution of Nepal,
the Directive Principles, Policies and Responsibilities of the 2015 related to Article 57 (1) and 109 has mentioned list of
State has made various important provisions regarding the Federal Powers and Jurisdiction under number 5 which also
management of the public finance of the nation. The article includes central planning (handled by Planning Commission
states the economic objectives of the state. Under Article of Nepal), central bank (handled by Nepal Rastra Bank),
51(d), sub-clauses (1) to (12) of the Constitution of Nepal, financial policy, currency and banking, monetary policy,
2015, various economic objectives of the state have been foreign grants, aids and loan. And at number 9 collection of
stated point wise. Mainly the clauses have mentioned policies customs, excise, individual income tax, value-added tax,
regarding finance, industry, and commerce. Under Article passport fee, visa fee, tourism fee, service charge, penalties
51(l), there is mentioned policy regarding tourism and and fines collection provisions under this schedule. Issues
development of the tourism industry. related to international trade, foreign exchange, quarantine,
The major acts that highly influence in the monetary policy of aviation sector, national highways, and other transportation
Nepal are Nepal Rastra Bank Act, 2002 and Banks and facilities, security printing, intellectual property management,
Financial Institution Act (BAFIA), 2017. These acts have and mining.
been the milestone in the growth and proper supervision and At the same time, Schedule 6 of the Constitution of Nepal,
management of banks and financial institutions in Nepal and 2015 related to Article 57 (2), 162 (4), 197, 231 (3), 232 (7),
to stabilize the economy. 269 (4) and 289 (4) has mentioned list of Provincial Powers
Other than these two acts, Securities Act, 2006 and Company and Jurisdiction which includes collection of establishment of
Act, 2006 have also helped in the growth and development of banks and financial institution, cooperatives, and foreign
the financial market of Nepal especially, primary and grants and aids with consent from the center. And the
secondary market of Nepal. collection of tax on remuneration, land, and house registration
tax, excise duty, entertainment tax, advertisement tax, tax on
8.5. Public Finance tourism and agricultural income, service charge and penalties
Public finance is also called government finance. It is that and fines. The schedule also states establishment of trade and
section of macroeconomic which deals with income and business within the province.
expenditure of the government. It deals with the economics of Similarly, Schedule 7 of the Constitution of Nepal, 2015
the public sector. The government has a responsibility of related to Article 57 (3), 109, 162 (4), and 197 under List of
economic growth, price stability, managing unemployment, Concurrent (federal and provincial) Powers and Jurisdiction
inequality and other of same nature, for this purpose has mentioned the provisions for supply, distribution, price

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control, standard and monitoring of essential goods and economic aspects and aspiration of the citizens from various
services. As well as the related articles of the constitution have provisions at Chapters, Articles, Clauses, and Schedules
stated the legal provisions regarding receiving property, regarding the economic jurisprudence necessity for the
acquisition, and creation of rights, matters related to contracts, economic betterment from the grass-root level of the nation.
cooperatives, collaborations, and agencies and finally, matters Similarly, the country has been maintaining or say managing
related to bankruptcy and insolvency. the budgetary system, the monetary and fiscal policy for good
Similarly, Schedule 8 of the Constitution of Nepal, 2015 economic scenario or as far as possible to meet the needs and
related to Article 57 (4), 214 (2), 221 (2) and 226 (1) under wants of the citizens. After an enactment of the National Civil
List of Powers/Jurisdiction for Local Level has mentioned the Code-2017 and Criminal Code-2017 as well as National Civil
subjects of local tax (property tax, house rent tax, fee on Procedure Code-2017 and National Criminal Procedure Code-
registration of houses and land, vehicle tax), service fee, 2017, the Nepalese legal system have entered in a new era. At
tourism fee, advertisement tax, business tax, land tax (land the same time, enactment of new Labor Act, 2017 and new
revenue), fines and entertainment tax. Labor Regulations, 2017 has also brought some changes in the
And finally, Schedule 9 of the Constitution of Nepal, 2015 economic sector of the nation. Still, there is a quick need for
related to 57 (5), 109, 197, 214 (2), 221 (1) and 226 (1) under the amendments in the provisions which are linked with an
List of Concurrent Powers/Jurisdiction for Federations, economic jurisprudence as per the economic scenario of the
Provincial and Local Level has covered subjects regarding nation. At the backdrop of the Nepalese economy, the
service fee, registration fee, fine, tourism fee and royalty enactment of the Foreign Employment Act, 2007 played a
received from natural resources and management of royalty vital role. Finally, the main deadlock in the clear demarcation
received from natural resources as well. of authorities and responsibilities of the Federation, Provincial
Some of the Concurrent Powers/Jurisdiction provided by the and Local Level has also brought complications in an
Constitution of Nepal, 2015 are seen common for Federations, implementation of Constitution of Nepal, 2015 in a full-
Provincial and Local Level especially in context to the fledged way as many acts, bye-laws, rules, and regulations are
collection of tax revenue. needed to be enacted.

8.6 Employment References

The employment opportunity as per the International Labor 1. Butler BE. Law and Economics, University of North
Organization (ILO) [39] also, Nepalese working population is Caroline, Asheville, 2003.
highly involved in the informal sectors for their livelihood. 2. Butler BE. Law and Economics, University of North
There is a mass of under-employed so-called working poor in Caroline, Asheville, 2003.
Nepal. The earning from the work the working class of Nepal 3. Salmond WJ. Jurisprudence. Stevens and Hayne: London,
is not sufficient for sustaining a better living. Furthermore, the 1913.
scenario became worsening after the millennium due to the 4. Hornby AS. Oxford Advanced Learners Dictionary.
increasing political instability due to a decade-long Maoist Oxford University Press: Oxford, 1989.
Insurgency [40]. The conflict created brain-drain and lack of 5. Butler BE. Law and Economics, (University of North
employment opportunity as per the worsening economy within Caroline, Asheville, 2003.
the nation, the young Nepalese went aboard for foreign 6. Rubin PH. Law and Economics. The Concise
employment. This brought out the necessity for the enactment Encyclopedia of Economics. (Liberty Fund Inc,
of Foreign Employment Act, 2007. Thus, the situation has not Indianapolis, 2008.
been different in a decade, and the remittance has been the 7. Coase RH. Was a British economist and author. He was
stronghold in the economy of Nepal from rural to urban an editor of Journal of Law and Economics. He received
households. the Nobel Prize in Economics in, 1910-2013, 1991.
8. Posner RA. Economic Analysis of Law. (Massachusetts:
9. Conclusion Aspen Law & Business, 1998.
Jurisprudence has tried to deal from its rigidity position to 9. Adam Smith was a Scottish economist, philosopher, and
natural or moral law. Monetary factor has been playing a author as well as a moral philosopher, a pioneer of
major role in every aspect of human life. Thus, in this context, political economy and a key figure during the Scottish
the importance of the concept of an economic jurisprudence is Enlightenment Smith is best known for two classic works,
emerging in the field of law. The law is best viewed as a The Theory of Moral Sentiments (1759) and An Inquiry
social tool that promotes economic efficiency, forms an idea into the Nature and Causes of the Wealth of Nations
which can guide legal practice for the economic betterment of (1776).
the citizens. It also considers how legislation should be used to 10. Butler BE. Law and Economics, (University of North
improve market conditions in return to the faith they have got Caroline, Asheville, 2003.
from the voters. Nepal is one of the least developing nations 11. Pigou AC. The Economics of Welfare. (London:
of the world with the majority of the economic indicators at Macmillan, 1932.
the bottom level have tried to boost up the social security and 12. Posner RA. An Economic Theory of Criminal Law: CLR.
better perception towards the economic (or monetary) 1985; 85:6.
compensations with regards to various tort and criminal laws 13. Hart HLA. The Concept of Law (Oxford: Oxford
by legislators. It can be clearly seen that the Constitution of University Press, 1961.
Nepal, 2015 has tried as far as possible to address the various

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14. Sunstein CR. Behavioral Law and Economics knowledge that allows an individual to make informed
(Cambridge: Cambridge University Press, 2000. and effective decisions with all of their financial
15. Baird DG, Gertner RH, Picker RC. Game Theory and the resources.
Law (Cambridge: Harvard University Press, 1998. 29. op.cit. P.H. Rubin. (2008).
16. In social choice theory, Arrow’s impossibility theorem, 30. op.cit. P.H. Rubin. (2008).
the General Possibility Theorem, or Arrow’s paradox, 31. Nepal Law Commission. Constitution of Nepal, 2015
states that, when voters have three or more distinct declared on September 20, 2015 from Constitutional
alternatives (options), no rank-order voting system can Assembly (2015).
convert the ranked preferences of individuals into a 32. op.cit. P.H. Rubin (2008).
community-wide (complete and transitive) ranking while 33. G. Calabresi. The Cost of Accident-A Legal and Economic
also meeting a specific set of criteria. These criteria are Analysis. (Yale University Press, 1970).
called unrestricted domain, non-dictatorship, Pareto 34. op.cit. P.H. Rubin. (2008).
efficiency, and independence of irrelevant alternatives. 35. op.cit. P.H. Rubin. (2008).
The theorem is often cited in discussions of election 36. Nepal Law Commission. Muluki (Sahitaa) Ain, 2074,
theory as it is further interpreted by the Gibbard– Kathmandu (2017).
Satterthwaite theorem. The theorem is named after 37. T.R. Basyal. Monetary and Fiscal Management:
economist Kenneth Arrow, who demonstrated the Framework and Evidences.: EJN 29, 2 (2006).
theorem in his Ph.D. thesis and popularized it in his 1951 38. S. Khoo. The Fundamentals of Public Finance: Public
book Social Choice and Individual Values. The original Finance Conference, Kaplan University (2013).
paper was titled "A Difficulty in the Concept of Social 39. International Labor Organization (ILO), Employment
Welfare". promotion in Nepal. Available at: https://
17. James McGill Buchanan Jr. was an American economist www.ilo.org/kathmandu/areasofwork/employment-
known for his work on public choice theory, for which he promotion/lang--en/index.htm, Nov. 13, 2018.
received the Nobel Memorial Prize in Economic Sciences 40. The Nepalese Civil War, also popularly known as Maoist
in 1986. Conflict or Maoist Insurgency or Maoist Revolution led
18. op.cit. Posner RA. Economic Analysis of Law, New by the Communist Party of Nepal (Maoist) who fought
York: Aspen, 1998. against the state for a decade from 1996 to 2006.
19. John Austin (3 March, Creeting Mill, Suffolk – 1,
Weybridge, Surrey) was a noted British Jurist and
published extensively concerning the philosophy of
law and jurisprudence, 1790-1859.
20. A Ripstein. Final Normative Political Theory. Available
at: https://studylib.net/on June 20, 2014.
21. A. Ripstein (2014). op. cit.
22. op. cit. B.E. Butler (2003).
23. S.M. Novick, The Collected Works of Justice Holmes, 3
vols, 444 (University of Chicago Press, Chicago, 1996).
24. G.J. Postema, A Treatise of Legal Philosophy and
General Jurisprudence: Legal Philosophy in the Twentieth
Century: The Common Law World (Springer, The
Netherlands, 2011).
25. Right to Information Act, 2007 is a specific legal
instrument to regulate Right to Information in Nepal. The
Act was enacted by the parliament on July 18, 2007, to
give effect to the constitutional guarantee of a right to
information provided under Article 27 of the Interim
Constitution, 2007 and Article 27 of the Constitution of
Nepal, 2015.
26. This Act may be called “Good Governance (Management
and Operation) Act, 2064 (2006)” authenticated on
February 6, 2008.
27. Budget literacy tries to provide information that explains
the values of accountability and transparency as a
prerequisite for good governance among the local
councils.
28. Financial literacy is the ability to understand how money
works in the world: how someone manages to earn or
make it, how that person manages it, how he/she invests it
(turn it into more) and how that person donates it to help
others. More specifically, it refers to the set of skills and

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