Econ 522 Syllabus

Economics 522: Economics of Law

Fall 2008

Dan Quint

Professor: Dan Quint

7428 Social Science

263-2515

dquint@ssc.wisc.edu

Office Hours: Mondays 2:30 – 3:30 p.m.

Wednesdays 10:30 – 11:30 a.m.

(If you can’t make these times, Mondays 1:30-2:30 and Wednesdays 9:30-10:30 are my office hours for my other class – you can come by then, and I’ll be happy to talk to you, but I’ll have to give preference to students from the other class.)

TA: He Chao

6473 Social Science

che2@wisc.edu

TA Office Hrs: Wednesdays 1:30 – 3:30 p.m.

Class website: http://www.ssc.wisc.edu/~dquint/econ522

Lectures: Tuesdays and Thursdays, 1:00-2:15 p.m., Human Ecology 21. No class September 30 (Rosh Hashanah), October 9 (Yom Kippur), or November 27 (Thanksgiving).

Final Exam: Friday Dec 19, 2:45-4:45 p.m., location TBA.

Grades: Grades will be based on occasional problem sets (20%), an in-class midterm on October 28 (30%), and a final exam (50%).

Textbook: Law and Economics (Fifth Edition), by Robert Cooter and Thomas Ulen, available at the bookstore. Additional material is online at http://www.cooter-ulen.com. I don’t mind if you use an older version of the textbook, although the references in the book to online material won’t match up. 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 Varian.

Additional Readings: Nearly all the papers listed below are available online. Most are listed with links through JSTOR, which requires a subscription and therefore may only work from on-campus computers. The rest have been placed on electronic reserve at http://courses.library.wisc.edu/mini/0nt7. If you don’t like reading papers online, Law and Economics Anthology, edited by Kenneth Dau-Schmidt and Thomas Ulen, contains many of these, and several other important papers; it is available in the law library and used through Amazon.

Other good books on law and economics include Law’s Order, by David Friedman, which I will refer to several times in lecture; An Introduction to Law and Economics, by Mitchell Polinsky; and Game Theory and the Law, by Douglas Baird, Robert Gertner, and Randal Picker. All three of these are paperbacks, less comprehensive than the Cooter and Ulen text, but cover certain topics quite well.

An interesting counterpoint to our analysis is the view that often it is not the formal law, but informal 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; and for an example of such norms in action, see Daniel Nazer (2004), “The Tragicomedy of the Surfers’ Commons,” Deakin Law Review 29 (link).

Course Overview and Readings (stars indicate most important readings)

INTRODUCTORY MATERIAL

Tues 9/2 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)

Thurs 9/4 Efficiency, should the law be efficient?

* Cooter and Ulen ch 1

* Richard Posner (1980), “The Ethical and Political Basis of Efficiency Norm in Common Law Adjudication,” Hofstra Law Review 8 (online reserve)

Peter Hammond (1982), “Review: The Economics of Justice and the Criterion of Wealth Maximization,” Yale Law Journal 7 (link)

Tues 9/9 Intro to Game Theory I: Static Games

Cooter and Ulen ch 2

Hal Varian, Intermediate Microeconomics – A Modern Approach (W. W. Norton and Company, 2006), 28.1 – 28.4

ECONOMICS OF PROPERTY LAW

Thurs 9/11 Coase Conjecture, bilateral bargaining, how and why property rights develop

Tues 9/16 transaction costs, normative Hobbes and Coase, injunctions versus damages

Thurs 9/18 public and private goods, intellectual property

Tues 9/23 fugitive property, establishing and proving ownership, adverse possession and estray

Thurs 9/25 exceptions to property law: bequests and perpetuities, private necessity, inalienability, unbundling; remedies

Tues 9/30 NO LECTURE (Rosh Hashanah)

Thurs 10/2 takings, regulation

readings: * 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)

Lawrence Blume and Daniel Rubinfeld (1984), “Compensation for Takings: An Economic Analysis,” California Law Review 72 (online reserve)

ECONOMICS OF CONTRACT LAW

Tues 10/7 Intro to Game Theory II: Sequential Games

Cooter and Ulen ch 2

Hal Varian, Intermediate Microeconomics – A Modern Approach (W. W. Norton and Company, 2006), 28.5 – 28.8

Thurs 10/9 NO LECTURE (Yom Kippur)

Tues 10/14 why contracts, the bargain theory of contracts, information, breach, reliance

Thurs 10/16 efficient breach and efficient reliance; gaps and default rules; regulations

Tues 10/21 remedies for breach and incentives

Thurs 10/23 more on remedies and incentives

Tues 10/28 MIDTERM EXAM

Thurs 10/30 how to get out of a contract: formation defenses, performance excuses, low-cost risk bearers, knowledge and control

readings: * 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)

ECONOMICS OF TORT LAW

Tues Nov 4 elements of a tort case, strict liability and negligence, precaution

Thurs Nov 6 strict liability, negligence, and incentives

Tues Nov 11 activity levels, the Hand Rule, the effects of errors

Thurs Nov 13 Schwartz (does it matter?), extending the basic tort model

Tues Nov 18 compensatory damages, Viscusi (valuing lives), punitive damages

readings: * 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 (online reserve)

W. Kip Viscusi (1993), “The Value of Risks to Life and Health,” Journal of Economic Literature 31 (link)