ECONOMIC ANALYSIS OF THE LAW
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?
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.
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.
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.
HOW TO DO WELL IN THIS CLASS
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 .
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. Most of the answers to the exam
questions will have been covered both in lecture and in
the book, but not all. Therefore, you should both read the
book and attend class.
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. Each homework counts for 2% of your grade. The first 4 exams count for 15% of your grade each.The final counts for 30% of your grade.
Cheating is an automatic F and a visit to your Provost.
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.
FRI SEPT 29 L1. INTRODUCTION
L2. RATIONAL BEHAVIOR, PREFERENCES AND PRICES
L3. PARETO OPTIMALITY
L4. COST-BENEFIT ANALYSIS (SKIP SECTIONS WITH #)
MON OCT 2 L5. TRANSACTION COSTS
L6. FENCING IN AND FENCING OUT
WED OCT 4
L8. HOW TO THINK LIKE AN ECONOMIST: TWO HAWKS
AND A FENCE
MON OCT 9 L10. RULES OF THUMB: SPORTS AND DRIVING RULES
WED OCT 11 L11. THE PROTECTION OF ENTITLEMENTS
FRI OCT 13
TEST 1: COVERING LECTURES,
FRI OCT 13
TEST 1: COVERING LECTURES,
MON OCT 16 L12. PROPERTY RIGHTS OR COMMUNAL RIGHTS IN KNOWLEDGE?
WED OCT 18 L13. LIABILITY FOR HARM OR RESTITUTION FOR BENEFIT*
L14. TAKINGS: SHOULD THERE BE COMPENSATION
FRIOCT 20 L15. COST MINIMIZATION AND THE ROLE OF LIABILITY RULES
YOU SHOULD READ AND UNDERSTAND
THE # SECTIONS IN THIS CHAPTER
HOMEWORK 2 DUE: .C11#2, 11#4, 12#1
MONOCT 23 L16. NEGLIGENCE RULES
YOU SHOULD READ AND UNDERSTAND THE # SECTIONS IN THIS CHAPTER
(EXCEPT FOR THE SECTION ON NEGLIGENCE WITH CONTRIBUTORY NEGLIGENCE).
WED OCT 25 L17. CRIME AND CRIMINAL LAW
MON OCT 30 L18. MITIGATION OF DAMAGES AND LAST CLEAR CHANCE
L19. THE GOOD SAMARITAN RULE
WED NOV 1 L20. THE ROLE OF BEING FIRST IN ALLOCATING ENTITLEMENTS
HOMEWORK 3 DUE: C15#2, C16#1D, 18#2
M0N NOV 6 L22. WHEN IS A HANDSHAKE A CONTRACT AND WHEN IS A WRITTEN CONTRACT NOT A CONTRACT
WED NOV 8 L23. MARRIAGE AS
CONTRACT: FAMILY LAW
FRI NOV 10 NO SCHOOL VETERANS DAY
MON NOV 13
TEST 3 COVERING L15-L20
WED NOV 15 L24. EXPLODING COKE BOTTLES
FRI NOV 17
MARKET FOR INSURANCE
HOMEWORK 4 DUE: C21#7, C22#3, C23#4
MON NOV 20 L28. ROYALTIES FOR ARTISTS AND INSURANCE FOR INVESTORS
WED NOV 22
NO SCHOOL THANKSGIVING
MON NOV 27 TEST 4 COVERING L21-L24
WED NOV 29 L31 ONE OF THE FOLLOWING: HEALTH INSURANCE, AUTO INSURANCE OR DEPOSIT INSURANCE
FRI DEC 1 L32. THE GOVERNANCE OF ORGANIZATION
HOMEWORK 5 DUE: C27#2, C281#2, 30#1
MON DEC 4 L33. CORPORATE LAW AND AGENCY PROBLEMS
FRI DEC 8 L38. THE INTERNAL ORGANIZATION OF THE FAMILY
WED DEC 13 12:00-1:30
PM FINAL EXAM:
Chapters 27, 28, 30 (only pages 286-287 and material in gray boxes), 32, 33, 35, 38. L31 will also be covered, but there is no equivalent chapter in the book.
BE THERE ON TIME