ECONOMIC ANALYSIS OF THE LAW
NOTE that it is chapter 30 not chapter
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.
The answer keys to the last exam and
the last homework assignment are available below
William Sump's email is email@example.com
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
William Sump holds office office hours
on Thursdays after section from 4:45 to 5:45pm in E2
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)
Homework assignments are to be typed
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
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.
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 .
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
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.
CHECK WEBPAGE DAILY
Sections: You are not assigned to a section and you
can attend more than one section. Note well that section times
Thursday 9:20 -10:25 Porter 241
Thursday 3:20-4:25 Porter 241
Friday 10:40-11:45 Kresge 325
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
L2. RATIONAL BEHAVIOR, PREFERENCES
L3. PARETO OPTIMALITY
COST-BENEFIT ANALYSIS (SKIP
SECTIONS WITH #)
WED APRIL 5
L5. TRANSACTION COSTS
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.
MON APRIL 10
L8. HOW TO THINK LIKE AN ECONOMIST: TWO HAWKS AND A FENCE
WED APRIL 12
FRI APRIL 14 TEST 1: COVERING LECTURES, L1-L7
MON APRIL 17
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
YOU SHOULD READ AND UNDERSTAND THE # SECTIONS IN THIS CHAPTER
YOU SHOULD READ AND UNDERSTAND THE # SECTIONS IN THIS CHAPTER
(EXCEPT FOR THE SECTION ON NEGLIGENCE WITH CONTRIBUTORY NEGLIGENCE).
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
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
L23. MARRIAGE AS CONTRACT: FAMILY LAW
WED MAY 17
L24. EXPLODING COKE BOTTLES
FRI MAY 19 HOMEWORK 4 DUE: C21#1,
L27. THE MARKET FOR INSURANCE
MON MAY 22
WED MAY 24
L28. ROYALTIES FOR ARTISTS AND INSURANCE FOR INVESTORS
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
HOMEWORK 5 DUE: C32#3,
MON JUNE 5
L33. CORPORATE LAW AND AGENCY PROBLEMS
ORGANIZATIONAL RESPONSE TO OPPORTUNISM
FRI JUNE 9
L38. THE INTERNAL ORGANIZATION OF THE
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