ECONOMICS AND LAW
Learning outcomes of the course unit
The Economics & Law course examines the legal behaviours and juridical norms in the broadest context of socio-economic and political institutions to assess through social cost benefit analysis of institutional and regulatory options.
It aims at preparing lawyers to better understand how legal and insti-tutional contexts modify incentives and affect socio-economic beha-viours, as well as to assess legislations and institutions (for example within the context of international organization, such as the World Bank, IMF, EBRD, etc.).
The effectiveness of standards, laws and regulations necessarily depend on the socio-economic behaviour of citizens, influenced by the incentives created by implemented policies (e.g. their enforcement). The course will provide an in-depth analysis of public institutions, devoting special attention to efficiency and equity issues. Ample space will also be given to property law, contracts, corporate theory and other legal questions. The course is not very technical in its nature and is designed to provide all the needed background information for a full understanding of the economic issues covered
Course contents summary
1. INTRODUCTION TO LEGAL AND INSTITUTIONAL ECONOMIC ANALYSIS
2. EFFICIENCY EQUITY AND WELFARE.
3. PROPERTY LAW AND EXTERNALITY
4. LAW ENFORCEMENT
5. RISK ALLOCATION AND STRATEGIC BEHAVIOURS
6. THE ECONOMIC VALUE OF LIFE
7. INTELLECTUAL PROPERTY AND RESEARCH
8. COMPETITION AND ANTITRUST
9. CONTRACTS, INCENTIVE, REGULATION AND CORPORATE THEORY.
10. CIVIL RESPONSIBILITY AND OTHER LEGAL PROBLEMS
(see http://www.unipr.it/arpa/defi/EconLaw11.html reported below)
1. INTRODUCING LEGAL AND INSTITUTIONAL ECONOMIC ANALYSIS
What is economics?
What is economic efficiency?
What is the Economic Analysis of Law?
Why should people study it?
The public finance tradition analyzes
- Maffeo Pantaleoni (1883) - Antonio De Viti de Marco 1888 - Knut Wicksell
Introduction to Public Choice Theory and Political Enterprises
- Giovanni Montemartini (1900) - Puviani Amilcare, (1903)
Contemporary developments -Posner, R.A - Calabresi, Guido (1961)
Economic structures and economic growth are influenced by legal systems and
many other elements
- Michio Morishima
Traditional comparative economics and " The New Comparative Economics"
(La Porta, Djankov, Glaeser, Lopez de Silanes, Shleifer and Vishny)
Alternative economic systems, with different public and private
institutions -> economic performance.
Law (on book and implemented),
2. EFFICIENCY EQUITY AND WELFARE
The main approaches to welfare economics:
a) The neoclassical one (John Stuart Mill, Edgeworth, Sidgwick, Marshall,
- economic surplus.
b) The new one developed by Pareto, Hicks, and Kaldor,
- Pareto efficiency, the Kaldor-Hicks compensation and the Scitovsky
c) The new new welfare economics approach
- limitations on government's information and on its ability to set
tax and transfer structures
A note on "equity" and Economic Justice,
equality: of opportunity, egalitarianism, discrimination
Techniques of Redistribution
"Basic Needs Versus Distributional Weights in Social Cost-Benefit Analysis"
3. EXTERNALITIES AND REGULATION
Externalities: The conventional analysis
Externalities in the law
Coasian critique of externality theory and further implications:
Damages vs fines:
Fines vs Damage Payments
Coase vs Pigou-a summary:
4. RISK ADVERSION AND LAW ENFORCEMENT
The economics of risk aversion:
Von Neumann and Morgenstern utility.
Insurance: why it is interesting?
Thinking about risk allocation.
Ex Ante, ex Post:
Bright lines: Rules v Standards.
"Impossible attempts": Should there be a penalty for attempting to kill
someone by a method that cannot work?
5. STRATEGIC BEHAVIOURS, RISK ALLOCATION AND INFORMATION
Strategic behavior: The problem, Examples:
Problems with insurance: Adverse Selection & Moral Hazard.
Insurance: A way of thinking through issues of risk and cost allocation
Property rules (allocation by consent of the owner) vs liability rules
(allocation by someone else taking, owner suing for damages). Why each makes
sense for some problems.
Application to product liability. Who is liable for damage done by exploding
How to decide whether or not the law should force Coke to "insure" its
customers against exploding Coke bottles. Why doesn't the law make these
calculations for ordinary insurance, deciding for you whether you are
insured or not?
Why not apply the same analysis to tort liability?
6. THE ECONOMIC VALUE OF LIFE
Equivalent variation (EV) and Compensating variation (CV)
The economic value of life: linking theory to practice
The Economic Value of Medical Research
Economic value of disability-adjusted life years lost
Insurance & the Value of Life: Friedman Comment
7. PROPERTY, INTELLECTUAL PROPERTY AND RESEARCH
What is property?
Determining property rules involves a set of questions
Property rules--including Intellectual Property (I.P.), primitive societies,
et multae caetera:
Intellectual Property Law: What the law is, and The Economics
8. CONTRACTS, INCENTIVE, FIRM REGULATION AND CORPORATE THEORY
Contract law: Why have it?
Why should we or shouldn't we enforce contracts if we can?
Is there a contract there to enforce?
If we do want to enforce the contract, how do you fill in the details?
FRIEDMAN - David, Law's Order: What Economics Has to Do with Law and Why It Matters, Princeton University Press
POSNER, R.A. Economic Analysis of Law, 7th edition, Woters Kluwer, 2007; or 7th ed. 2011
Oral lessons, and seminars
Assessment methods and criteria
The Von-Neumann Computer Model
Myerson R 1988. Mechanism Design, Disc. Papers 796, Northwestern University
1996. Economic Analysis of Political Institutions, DP1155, Northw. Univ
1996. "Fundamentals of Social Choice Theory, DP 1162, Northwestern Univ
1998. "Theoretical Comparisons of Electoral Systems, DP1261, Nort. Univ
2000. Economic Analysis of Constitutions, DP1291, Northwestern Univ
L. Garicano, R. A. Posner Intelligence Failures: An Organizational Economics Perspective CEPR DP5186
Mc Cain Working Papers and Other Professional Writing / L&E W.P. George Mason Univ