Economic Analysis of Law

This course will provide a broad overview of the scholarly field known as "law and economics." The focus will be on how legal rules and institutions can correct market failures. We will discuss the economic function of contracts and, when contracts fail or are not feasible, the role of legal remedies to resolve disputes. We will also discuss at some length the choice between encouraging private parties to initiate legal actions to correct externalities and governmental actors, such as regulatory authorities. Extensive attention will be given to the economics of litigation, and to how private incentives to bring lawsuits differ from the social value of litigation. The economic motive to commit crimes, and the optimal governmental response to crime, will be studied in depth. Specific topics within the preceding broad themes include: the Coase Theorem; the tradeoff between the certainty and severity of punishment; the choice between ex ante and ex post sanctions; negligence versus strict liability; property rules; remedies for breach of contract; and the American rule versus the English rule for allocating litigation costs. There is no formal economics prerequisite to take this course, though some prior training in economics will be helpful. Elements used in grading: Final exam (open-book) plus three short take-home problems during the quarter. Cross-listed with Public Policy (PUBLPOL 302B). (For students interested in a shorter introduction to economic analysis of law, see Law 7503, "Introduction to Law and Economics," which is a one-unit course also offered during the winter quarter that is graded on a mandatory pass-fail basis.)