What economists can teach us about the law
The German word schuld means both 'guilt and 'debt'. That close association between the two concepts has been subject to critique by many Western philosophers who suggest that the stigmatisation of those who owe a debt as being guilty has an unhealthy sociological and psychological effect.
Those theories may be true but the link between 'guilt' and 'debt' is also outmoded from an economic perspective too. It used to be thought that if one individual 'won' a transaction and gained something then the other side must therefore have lost but that idea was changed by the economist Adam Smith who pointed out that deals can be mutually beneficial.
Think about a mortgage for example. From a very superficial point of view that is the undertaking of a huge debt that will take years to pay off but while the bank does indeed benefit through interest payments there is also a significant benefit for the person who is now able to purchase the property they desire.
In this week's episode of the podcast we discuss a debt that the government has to companies that have paid too much tax. HM Revenue and Customs argue that they should only have to pay a basic level of interest on this debt but the companies suggest that the government has actually gained an additional benefit by being able to spend money that they should never have had in the first place.
How we think about debt and guilt derives from another, more religious era but the price we put on the advantages accrued because of a debt are still open for debate.
Episode link: http://uklawweekly.com/2018-uksc-39/
Subscribe on iTunes: https://itunes.apple.com/gb/podcast/uk-law-weekly/id1137316725?mt=2