Applications of Economic Analysis to Marital Law: Concerning a Proposal to Reform the Discretionary Approach to the Division of Marital Assets in England and Wales

In this paper, I apply the economic analysis of law to examine recent proposals in England and Wales for the reform of the law affecting financial settlement after divorce. The starting point is an examination of the wide discretion currently afforded to the courts and the impact this has on incentives for divorcing parties and their legal representatives. Two specific reforming measures have been proposed to reduce this judicial discretion. First, a mathematical formula, such as a rebuttable presumption to divide equally the whole pool of assets upon divorce—a form of community property— could be used. It would be applied in the absence of agreement between the parties dividing assets, as in many countries in continental Europe. Second, legal enforceability could be accorded to prenuptial agreements, again after a continental pattern. Broadly, I conclude that changing to community property and enforceable agreements should be welfare improving but would need to be forward looking and applied to marriages, rather than divorces. © 2000 by Elsevier Science Inc.