7894. Law and Economics

This course will introduce students to the promises and pitfalls of applying economic reasoning to central questions of law. In addition to traditional topics in Contracts, Property and Torts (optimal contract remedies, liability vs. property rules, the Coase Theorem, strict liability vs. negligence), we will also explore the use of economics to analyze some non-traditional areas such as contract design (incentives for good teaching) and political economy (the economic analysis of political outcomes). We will focus on three broad (and highly inter-related) questions: (1) What are the legal rules and why do they take the form they do? (2) What criteria should we use for choosing between competing legal rules, and which rules should we choose? (3) What effects (if any) do the rules have on the behavior of those subject to them? While law and economics has traditionally been content to offer answers to this last question based on theoretical models, the class will also stress the importance and difficulty of empirical tests that evaluate how laws actually work in practice. We will also devote some time to the study of behavioral law and economics, which attempts to marry cognitive psychology and economic theory.