Analyzing the Role of Institutions in Attaining Welfare State: A Case of Tobacco Market

This paper tries to analyze the role of law as one of the formal institutions suggested by our classical and institutional economists. Authors in this paper try to find out the efficiency of law in achieving welfare state through government intervention. Classical economists suggested price mechanism as the best way to achieve social goal, whereas, institutional economists suggest role of legally binding rules and laws to achieve social goal where price mechanism fails. This paper studies two cases and finds out that due to the difference in the bargaining power and loopholes in laws of less powerful and developing economies, the big players can find their ways to earn huge money at the cost of the health of the poor. Law within the political boundary is more effective in curing such issues than international law.