Economics 522: Economics of Law
Spring 2012
Dan Quint
Professor: Dan Quint
7428
Office hours: Tuesdays, 1:30-3:30 p.m., other times by
appointment
TA: Fran Flanagan
6443 Social Science
Office hours: Mondays, 12:15-2:15 p.m.
Class website: http://www.ssc.wisc.edu/~dquint/econ522
(Lecture notes, homeworks,
etc. will be posted here)
Lectures: Mondays
and Wednesdays, 2:30-3:45 p.m., in 5106 Social Science
Final Exam: Monday, May
14, 10:05 a.m.-12:05 p.m., location TBA
Grades: Grades will be based on occasional
homework assignments (20%); two in-class midterms (20% each, tentatively
scheduled for February 29 and March 26); and a final exam (40%, on May 14). Homeworks will be
submitted online through Learn@UW, and will generally
be due at midnight Thursday night, so the problems can be discussed in section
the following day. Dates of the two
midterms will be announced at the start of the semester.
The
bit of game theory I’ll use should be covered in whatever textbook you used for
Econ 301 – I’ve listed the chapters in Intermediate
Microeconomics: A Modern Approach by Hal Varian
(W. W. Norton 2005).
Additional
readings are listed below. Once the
semester starts, these will all soon be available electronically through Learn@UW (go to http://my.wisc.edu
or https://uwmad.courses.wisconsin.edu/d2l/lp/homepage/home.d2l?ou=1682367
). Most are also listed below with
external links through http://www.jstor.org
– this requires a subscription, and therefore may only work from on-campus
computers. I’ve placed stars next to the
readings I feel are most important.
Please let me know if you have trouble accessing any of the readings.
Another
excellent book on law and economics is Law’s
Order, by David Friedman (Princeton University Press 2001). I will refer to this book several times in
lecture; you can think of it as an optional text for the course. It’s much less comprehensive than the
textbook, but covers the intuition of what’s going on very well. (It’s also quite funny in places.) It’s a $24 paperback on Amazon,
and available for free online as an e-book at http://www.daviddfriedman.com/laws_order/index.shtml
Other
Sources: Other good books on law and economics include An
Introduction to Law and Economics, by Mitchell Polinsky
(Aspen 2003), and Game
Theory and the Law, by Douglas Baird, Robert Gertner,
and Randal Picker (Harvard University Press 1998).
A
nice short history of law and legal institutions in the
Throughout
this course, we’ll implicitly be assuming that peoples’ behavior responds to
changes in the law. An interesting
counterpoint is the view that it is often not the formal law, but informal
social norms, which actually govern peoples’ behavior. We won’t get into this, but if you’re
interested, check out Order
without Law: How Neighbors Settle Disputes, by Robert Ellickson
(Harvard University Press 2005); and for an example of such norms in action,
see Daniel Nazer (2004), “The Tragicomedy of the
Surfers’ Commons,” Deakin Law Review 29 (link).
At
the end of the semester, we’ll discuss behavioral economics and its interaction
with the law. The paper listed on the
syllabus (by Jolls, Sunstein
and Thaler) is a good starting point; if you want
more, check out Behavioral
Law and Economics, edited by Cass Sunstein
(Cambridge University Press 2000).
Policy on
joint work: I encourage
you to work together on homeworks. However, I ask that each person write up his
or her own answers separately. That
is, you should feel free to discuss the questions and answers and come to a
consensus on what you feel the right answers are; but then each person should
go back and write up those answers individually, rather than passing around one
set of answers for everyone to copy.
Also, if you do work with other people, please list who you worked with
on the first page of the homework.
Course Overview and
(stars
indicate most important readings)
INTRODUCTORY MATERIAL (2 lectures)
Course overview, a bit of
history (the Common and Civil Law traditions)
* Cooter and Ulen ch 3
Robert Ellickson (1989), “A Hypothesis of Wealth-Maximizing Norms:
Evidence from the Whaling Industry,” Journal of Law, Economics and Organization
83 (link)
Efficiency, should the law be
efficient?, introduction to theory of static games
* Cooter and Ulen ch 1, ch
2
* Richard Posner (1980), “The Ethical and Political
Basis of Efficiency Norm in Common Law Adjudication,” Hofstra
Law Review 8
Peter Hammond
(1982), “Review: The Economics of Justice and the Criterion of Wealth
Maximization,” Yale Law Journal 7 (link)
Varian ch 28.1 – 28.4
Nice blog
post by Steven Landsburg giving a more moderate view
of efficiency as a normative policy goal: http://www.thebigquestions.com/2010/08/30/efficiency-experts/
ECONOMICS OF PROPERTY LAW (6 lectures)
* Cooter and Ulen ch 4 (theory) and ch 5
(applications)
* Ronald H. Coase (1960),
“The Problem of Social Cost,” Journal of Law and Economics 3 (link)
Garrett
Hardin (1968), “The Tragedy of the Commons,” Science 162 (link)
* Harold Demsetz (1967),
“Toward a Theory of Property Rights,” American Economic Review 57 (link)
* Guido Calabresi and A.
Douglas Melamed (1972), “Property Rules, Liability Rules,
and Inalienability: One View of the Cathedral,” Harvard Law Review 85 (link)
Some fun property law-related articles: the amputated leg, goats
on the roof, squatter’s
rights, unbundling
ECONOMICS OF CONTRACT LAW (6 lectures)
* Cooter and Ulen ch 6 (theory) and 7
(applications)
* Ian Ayres and Robert Gertner
(1989), “Filling Gaps in Incomplete Contracts: An Economic Theory of Default
Rules,” Yale Law Journal 99 (link)
Hadley v Baxendale decision (link)
A fun contract-related article: British
company buying up souls
ECONOMICS OF TORT LAW (5 lectures)
* Cooter
and Ulen ch 8 (theory) and
9 (applications)
* Steven Shavell (1980),
“Strict Liability versus Negligence,” Journal of Legal Studies 9 (link)
Gary Schwartz
(1994), “Reality in the Economic Analysis of Tort Law: Does Tort Law Really
Deter?” UCLA Law Review 42
W. Kip Viscusi (1993), “The Value of Risks to Life and Health,”
Journal of Economic Literature 31 (link)
THE LEGAL PROCESS AND CRIMINAL LAW (3 lectures)
The
Legal Process
* Cooter
and Ulen ch 10
Kathryn Spier (1994), “Pretrial Bargaining and the Design of
Fee-Shifting Rules,” RAND Journal of Economics 25 (link)
Economics
of Criminal Law
* Cooter
and Ulen ch 11 and 12
* David Friedman (2000), “Law’s Order,” Princeton
University Press – chapter 15 (link to online ebook)
* Gary Becker (1968), “Crime and Punishment: An
Economic Approach,” Journal of Political Economy 76 (link)
Isaac Ehrlich
(1996), “Crime, Punishment, and the Market for Offenses,” Journal of Economic
Perspectives 10 (link)
Richard Craswell and John Calfee (1986),
“Deterrence and Uncertain Legal Standards,” Journal of Law, Economics and Organisation 2 (link)
John Knowles,
Nicola Persico and Petra Todd (2001), “Racial Bias in
Motor Vehicle Searches: Theory and Evidence,” Journal of Political Economy 109
(link)
Ethan
Cohen-Cole, Steven Durlauf, Jeffrey Fagan, and Daniel
Nagin (2009), “Model Uncertainty and the Deterrent
Effect of Capital Punishment,” American Law and Economics Review 11 (link)
One example
of efficient punishment leading to an incentive for abuse: traffic cameras
CONCLUDING MATERIAL (2 lectures)
Some
Interesting Digressions
Peter Leeson, “Ordeals” (unpublished) (link)
Christine Jolls, Cass Sunstein, and Richard
Thaler (1998), “A Behavioral Approach to Law and
Economics,” Stanford Law Review 50 (link)
Tim Wu,
“American Lawbreaking,” Slate 10/14/2007 (link)
Efficiency
of the Legal System, Revisited
Robert Ellickson (1989), “A Hypothesis of Wealth-Maximizing Norms:
Evidence from the Whaling Industry,” Journal of Law, Economics and Organization
83 (link)
* Gillian Hadfield (1992), “Bias in the Evolution of
Legal Rules,”
and some boilerplate from the
Economics Department:
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