ECONOMIC ANALYSIS OF THE LAW

ECONOMICS 169

Donald Wittman

Spring  2017

 

NEW

NOTE that it is chapter 30 not chapter 29


The final will cover chapters 27, 28, 30 (only pages 286-287 and material in gray boxes), 32, 33, 35, 38.


                                                                                                                                                                                                                                                                                        Be at the final on time.


Answer key to last homework assignment has been posted

The answer keys to the last exam and the last homework assignment are available below

William Sump's email is wsump@ucsc.edu

Bring unsigned Blue Books

The numbered lectures correspond to book chapters.  Read the book.
 
Do not skip boxed material in book. Some exam questions are based on these.

You do not need to know the material on Bentham.

William Sump holds office office hours on Thursdays after section from 4:45 to 5:45pm in E2 403F
 and Friday after section from 12:00 to 1:00pm in E2 403 F

Nimreet Gerwalholds office hours on Tuesday 11-1 pm in Cafe Iveta (Front of the Bookstore)
Email: nimreet@ucsc.edu

Homework assignments are to be typed (except graphs).



There are 5 homework assignments. Each counts for 2% of your grade

The 1st exam counts for 10% of your grade. The 2nd, 3rd and 4th count for 18% each and the final counts for 26%.

I have added class sections (see below)


THE FINAL EXAM FOR THIS COURSE WILL BE 1:30 MINUTES LONG




Here are the transparencies for chapter 23




LECTURE OUTLINES AVAILABLE HERE


Most recent homework answer key


Most recent exam answer key


FIRST 4 LECTURES

 

(a) Somali Pirates and (b) Stocks versus bonds for human capital (click on)




1. INTRODUCTION

Should a surrogate mother be allowed to keep the fetus? Should the hospital, the donor, the Red Cross or the patient be liable for the harm if a patient contacts hepatitis from a blood transfusion? Should there be regulations against smoking in airplanes? Should plea-bargaining be allowed? Should hostile corporate takeovers be encouraged? Should a bystander be found liable for not rescuing a drowning person if the rescue could have been accomplished with little risk to the potential rescuer? Should homeowners be allowed to force a cattle feedlot to move without compensation by the homeowners if the cattle feedlot was there before the homes were built?

The answers to these questions are found in economic theory.  In this course we use economic analysis to explain various areas of the law, including civil procedure and criminal, corporate, contract, accident, bankruptcy, and environmental law. Along the way, we explain why production is organized in a certain way. For example, why McDonalds™ is a franchise, while Safeway™ stores are a single corporation. As another example, we explain why stockholders have limited liability.

The connection between law, organization and economics is very close. Economics is the study of what, how and for whom. Standard textbooks in economics define the field as the study of resource allocation in the presence of scarcity. Laws affect resource allocation and help to determine what, how, and for whom. For example, a law that finds trucking companies liable for accidental harm will create incentives for more careful driving by truckers. A well-ordered society will tend to choose laws that promote economic efficiency. Laws create a public ordering; that is, they organize society in a certain way.  Private entities are also organized in a certain way. For example, in corporations, stockholders provide capital and managers of the firm provide day-to-day decisions. Economics provides the key to understanding why firms and society are organized in particular ways.

Economics also provides insight into many ethical issues. Why is theft wrong? If three men are in a lifeboat and only two can survive, is it ethical to throw one of the people overboard, and if so, how should this be decided? And returning to some of the questions posed in the first paragraph (because legal and ethical issues are often entwined), when does being first deserve extra consideration and what duties are owed to strangers?


REQUIRED  READING:


Economic Foundations of Law and Organization  is available at the bookstore. For obvious reasons, the book and my lectures are closely linked. By having the book you do not have to take as many notes in class, but instead make annotations and think.

 

The first 4 chapters are on the web.

 

There are 5 non-comprehensive exams and 5 homework assignments. Homework assignments are due by the end of class on the day they are due (no exceptions).  Except for diagrams, the homework assignments must be typed.

 

There are no makeup exams. Nor can you take exams early. So please tell your parents right now not to book a flight to Costa Rica for you without checking with you first. A legitimate excuse for missing an exam shifts the scoring to the other exams if you also do all of the review questions associated with the test. So you will not be penalized for only taking 4 exams. Going to a Van Morrison concert is not a legitimate excuse.


HOW TO DO WELL IN THIS CLASS


Students usually find the material fascinating. But I am a hard grader and a significant number of students fail this course. So here is some advice on how to do well.


The book has to be understood backwards and forwards (including boxed examples). Make sure that you can repeat the argument on your own rather than merely follow the logic. Some of the homework questions can be answered by copying directly out of the notes. But this is nearly useless in preparing for the exam. If you need to, first read the answer in the chapter, then write the answer without looking back .

 

The review questions at the end of the chapters are a good place to start studying for the exam. Always make sure that you know the definitions first so that you are clear regarding the concepts. Then see whether you can explain the ideas logically and coherently. Economic theory employs deductive reasoning and you will be tested on the logic of the argument. If diagrams are required, make sure that you label them. Outlining in yellow and reading  the chapters twice is rarely sufficient. You must understand the material. It is very helpful if you study in groups, taking turns explaining to each other. Attending section is always a good idea.  And do not go there just to have the section leader lecture to you. The best way of learning is to explain and then get feed back on where you might be wrong. It is better to be embarrassed in section than to do poorly in the exam. Athletes do not learn to  be good athletes just by watching; for similar reasons, doing well on a test requires practice in explaining answers.

 

I give 5 exams. There are several reasons for this strategy. It keeps you up with the work. It provides quick feedback regarding your understanding of the material, and creates greater focus and as a result deeper understanding.

 

Cheating is an automatic F and a visit to your Provost.



MECHANICS

Lectures  MWF 01:20PM-02:25PM    Natural Sciences Annex 101

My office hours: MWF 12:30-1:05 in 407 Engineering 2 and by appointment 

Phone: 459-4445

Email: wittman@ucsc.edu 

WEBPAGE: http://wittman.blogspot.com    CHECK WEBPAGE DAILY  


Sections: You are not assigned to a section and you can attend more than one section. Note well that section times may change
      
  

Thursday 9:20 -10:25 Porter 241

Thursday  3:20-4:25 Porter 241

Friday 10:40-11:45 Kresge 325


Section Leader office hours

William Sump
Thursdays after section from 4:45 to 5:45pm in E2 403F and Friday after section from 12:00 to 1:00pm in E2 403 F wsump@ucsc.edu

Nimreet Grewal
holds office hours on Tuesday 11-1 pm in Cafe Iveta (Front of the Bookstore) nimreet@ucsc.edu














Please note that the lecture notes that are available on online are merely a guide to organizing your thoughts.  They may not cover some material that I covered in class or was covered in the book. Exams are based on these latter two sources.


SYLLABUS for ECONOMIC ANALYSIS of the LAW


THERE MAY BE SOME CHANGES MADE TO THE SYLLABUS


YOU WILL BE NOTIFIED OF ANY CHANGES ON THE WEBSITE


EACH PART OF THE BOOK IS COMPOSED OF SEVERAL CHAPTERS, WITH A ONE PAGE INTRODUCTION. ALWAYS READ IT.

 

 

MON APRIL 3

 

L1.     INTRODUCTION

 

L2.     RATIONAL BEHAVIOR, PREFERENCES AND PRICES

        

L3.     PARETO OPTIMALITY

 

            L4.     COST-BENEFIT ANALYSIS  (SKIP SECTIONS WITH  #)


WED APRIL 5

 

L5.     TRANSACTION COSTS

 

            L6.     FENCING IN AND FENCING OUT


FRI APRIL 7  HOMEWORK 1 DUE: C2#4, C3#3, C4#2    That is, chapter 2, question 1 at the end of the chapter, etc.

 
           
L7.     COASE VERSUS PIGOU

 

MON APRIL 10
        

L8.     HOW TO THINK LIKE AN ECONOMIST: TWO HAWKS AND A FENCE

 

            L9.     SMOKING REGULATIONS

 

WED  APRIL 12


         L10.     RULES OF THUMB: SPORTS AND DRIVING RULES


FRI APRIL 14 TEST 1:  COVERING LECTURES, L1-L7

 

MON APRIL 17

 
            L11.  THE PROTECTION OF ENTITLEMENTS

 

WED APRIL 19

 

L12.     PROPERTY RIGHTS OR COMMUNAL RIGHTS IN KNOWLEDGE?

 

FRI APRIL 21  HOMEWORK 2 DUE: C8#5.C11#12

 

L13.     LIABILITY FOR HARM OR RESTITITION FOR BENEFIT*

 

            L14.     TAKINGS: SHOULD THERE BE COMPENSATION FOR REGULATION


 MON APRIL 24

 
          L15.     COST MINIMIZATION AND THE ROLE OF LIABILITY RULES 


                      YOU SHOULD READ AND  UNDERSTAND THE # SECTIONS IN THIS CHAPTER


 WED  APRIL 26


          L16.     NEGLIGENCE RULES 


                       YOU SHOULD READ AND UNDERSTAND THE # SECTIONS IN THIS CHAPTER
                       (EXCEPT FOR THE SECTION ON NEGLIGENCE WITH CONTRIBUTORY NEGLIGENCE).
 
  

FRI  APRIL 28      TEST 2: COVERING L8-L14 

MON MAY  1


            L17.     CRIME AND CRIMINAL LAW


WED MAY 3   

 

 L18.     MITIGATION OF DAMAGES AND LAST CLEAR CHANCE

 

            L19.     THE GOOD SAMARITAN RULE 
  

 

FRI    MAY  5   HOMEWORK 3 DUE:  C15#1, C16#1B, 16#3   

 
            L20.     THE ROLE OF BEING FIRST IN ALLOCATING ENTITLEMENTS         

         

MON  MAY 8

 
           L21.     DEFAULT RULES AND BREACH OF CONTRACT

 

WED MAY 10

 

L22.     WHEN IS A HANDSHAKE A CONTRACT AND WHEN IS A WRITTEN CONTRACT NOT A CONTRACT           

 

FRI MAY 12          TEST 3 COVERING L15-L20

MON MAY 15            

 

            L23.   MARRIAGE AS CONTRACT: FAMILY LAW       


WED MAY 17

            L24.   EXPLODING COKE BOTTLES

   

FRI  MAY  19       HOMEWORK 4 DUE: C21#1, C21#7


           L27.    THE MARKET FOR INSURANCE

 

MON  MAY 22


          L28.    ROYALTIES FOR ARTISTS AND INSURANCE FOR INVESTORS

WED   MAY 24


          L30   BANKRUPTCY

          

FRI  MAY 26     TEST 4 COVERING  L21-L24

                         

                                                                    

MON MAY 29  Memorial Day NO SCHOOL



WED MAY 31


              L31 ONE OF THE FOLLOWING: HEALTH INSURANCE, AUTO INSURANCE OR DEPOSIT INDURANCE 
    

FRI JUNE 2

    

         L32.     THE GOVERNANCE OF ORGANIZATION

        

                    HOMEWORK 5 DUE: C32#3, C33#1


MON JUNE 5


        L33.     CORPORATE LAW AND AGENCY PROBLEMS


WED JUNE 7
 
          

 

L35.     ORGANIZATIONAL RESPONSE TO OPPORTUNISM

 

FRI JUNE 9


           L38.     THE INTERNAL ORGANIZATION OF THE FAMILY



 

Tuesday, June 13    12:00–1:30 p.m.     FINAL EXAM: COVERING:
Chapters 27, 28, 30 (only pages 286-287 and material in gray boxes), 32, 33, 35, 38. BE THERE ON TIME