Economic Foundations of Law

Stephen J. Spurr is a Professor of Economics at Wayne State University, USA. He obtained his J.D. from the University of Michigan Law School and a Ph.D. in economics from the University of Chicago. His primary research interests are in the areas of labor economics and economic analysis of law. He has published many articles in highly ranked economics and law journals.

• 1 Principles of microeconomics (I) A basic principle: the fungibility of moneyCostDemand curves and supply curvesThe equilibrium of a competitive marketPrice ceilingsThe market for lawyersThe factor marketThe effects of a tax The effects of a subsidyElasticitiesIncome and substitution effects 2 Principles of microeconomics (II) Monopolies and cartels Relation between marginal and average amounts Cartels Game theory and the prisoners’ dilemma Rent-seeking behavior Capital; human capital The present value of future payments Interest rates Efficient capital markets Externalities Attitudes toward risk Markets with incomplete information Public goods Appendix 2.1: Continuous compounding 3 Introduction to the legal system Litigation and the court system Precedents and the common law Different standards of proof The U.S. Constitution The division of jurisdiction between federal and state courts 4 Property law Efficiency Transactions costs Bilateral monopoly How disputes are decided by law The Coase Theorem Eminent domain Self-assessment How the entitlement should be protected How to determine ownership of property Intellectual property 5 Problems of incomplete property rights Inalienability Problems when there are no property rights Problems when property rights are divided Problems when property rights are uncertain Limits on the disposition of property at death Appendix 5.1 When should a tree be harvested? 6 Informal creation of property rights Property rights in surfing The Gold Rush Sharecropping contracts Whaling customs The division of profits in law firms The Shakers 7 The law of contracts The economic functions of the law of contracts General rules of contract law The common law of slavery The controversy concerning standard form contracts Unconscionability Remedies for breach of contract The lost-volume or expansible seller Specific performance Liquidated damages and penalties 8 Torts Negligence Strict liability The Learned Hand rule The law of rescue The collateral source rule Comparative negligence More on strict liability Medical malpractice Contribution Damages Subrogation Subrogation and potential moral hazard of tort victims The economics of subrogation Moral hazard arising from abolition of the collateral source rule A note on trial strategy: should the jury know about insurance? Whether dangerous conduct should be controlled by tort law or regulation No-fault automobile insurance 9 The economics of litigation An optimal judicial system The standard of proof for a preliminary injunction The economic model of litigation Pre-trial discovery Procedural rules which make litigation more efficient Agency problems Potential benefits of class actions Waivers of the right to participate in class actions The English rule Court delay Expert witnesses Determining the quality of a judge (or court) Whether the common law is efficient Rules of collateral estoppel The jury Juries in death penalty cases Analyzing litigation with game theory An example involving Rule 68 Deciding whether to file a lawsuit The solution under the American rule The solution under the English rule An example with two players An example of subrogation, with no injury if tortfeasor takes care A. Under the American rule B. Under the English rule 10 Criminal law The economic model of crime and punishment The optimal type of punishment An application: Megan’s Laws Evaluating the system of law enforcement Measuring the determinants of crime and the benefits of law enforcement Markets for crime Externalities resulting from precautions taken against crime; Lojack The economics of gun ownership and use Gun ownership and "hot" burglaries Concealed-carry and right-to-carry laws Laws restricting access to firearms A proposed tax on firearms Gun buyback programs Changing the design of firearms Regulation of bullets Factors affecting the quality of law enforcement Public versus private enforcement of law 11 Corporations and financial markets The characteristics of the corporation Common and preferred stock Potential conflicts between managers and stockholders Compensation of investment advisors The competition to be the state of incorporation The prohibition of insider trading Conflicts among shareholders Deposit insurance and moral hazard Bankruptcy law The economics of bank regulation 12 Taxation The effects of a death tax Social security The effect on savings of tax rules concerning interest The proposal for a tax on consumption Charitable contributions Depreciation Percentage depletion The subsidy for residential housing The social cost of the tax exemption of interest on municipal bonds 13 Labor law Covenants not to compete General and firm-specific human capital Maximum and minimum wages Employment protection laws Market Adjustments to Employment Protection Laws Regulation of pensions Comparable worth Glossary Notes Index

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