Last updated: 4/26/00  

Economic Reasoning and the Law
Spring 2000

Reading assignments

Here is a tentative schedule of reading assignments for the term. Please note that the assignments may be modified, delayed, or accelerated as the semester goes along. Weekly updates will be posted on the announcement page of the website; specific assignments for each class will be announced in the preceding class. Some cases will be omitted; these also will be announced in class.

Unless otherwise indicated, readings are from Katz, Foundations of the Economic Approach to Law. Page numbers are provided for readings that are taken out of order in the text. The designation [O] indicates optional background reading, except that the readings from Polinsky, An Introduction to Law and Economics, are required for all students without a background in economics. [S] indicates that the reading is found in the supplementary coursepack. Starred readings [*] contain some technical material that you need not worry about mastering; just focus on the author's informal arguments.

Note for purposes of end-of-semester review: key readings are marked in red.

I. Basic methods of the economic approach to law

A. Introduction to the economic approach

Polinsky, chapter 1 [O]
Richard Posner, An Economic Approach to Law, 53 Tex. L. Rev. 757 (1975). [S]
Arthur Alan Leff, Economic Analysis of Law: Some Realism about Nominalism (pp. 353-58 only)

B. Behavioral premises

Gary Becker, The Economic Approach to Human Behavior

C. Normative premises

Polinsky, chapter 2 [O]

Jules Coleman, Efficiency, Utility, and Wealth Maximization
Thomas Schelling, Economic Reasoning and the Ethics of Policy

D. Models and modeling

Mark Blaug, The Distinction Between Positive and Normative Economics
Milton Friedman, The Methodology of Positive Economics

II. Two competing economic models of law

A. The model of market failure

Guido Calabresi, Some Thoughts on Risk Distribution and the Law of Torts
Robert Cooter, Unity in Tort, Contract, and Property: The Model of Precaution

B. The model of private cooperation

Polinsky, chapters 3-4 [O]
Ronald Coase, The Nature of the Firm
Ronald Coase, The Problem of Social Cost

C. Comparing the models: transaction costs

Harold Demsetz, When Does the Rule of Liability Matter?
Elizabeth Hoffman and Matthew Spitzer, The Coase Theorem: Some Experimental Tests , 25 J. Law & Econ. 73 (1982). [S]

III. A survey of basic applications

A. Property

Harold Demsetz, Toward a Theory of Property Rights
Guido Calabresi and Douglas Melamed, Property Rules, Liability Rules and Inalienability: One View of the Cathedral
Boomer v. Atlantic Cement Co.
, 26 N.Y.2d 219, 309 N.Y.S.2d 312, 257 N.E.2d 870 (1970) [S]
Spur Industries v. Del E. Webb Development Co., 494 P.2d 701 (Ariz., 1972). [S]

B. Tort

Polinsky, chapter 6 [O]
Richard Posner, The Learned Hand Formula For Determining Liability
Steven Shavell, Strict Liability Versus Negligence
U.S. v. Carroll Towing Co.
, 159 F.2d 169 (2d Cir. 1947). [S]
The T.J. Hooper, 6 F.2d 737 (2d Cir. 1932) [S]

C. Contract

Polinsky, chapter 5 [O]
Thomas Ulen, The Efficiency of Specific Performance: Toward a Unified Theory of Contract Remedies
Groves v. John Wunder Co.
, 286 N.W. 235 (Minn., 1939) [S]
Steven Shavell, Contracts, in The New Palgrave Dictionary of Economics and the Law, ed. Peter Newman. (New York: Stockton Press, 1998). [S]
Daniel Friedmann, The Efficient Breach Fallacy, 18 J. Legal Stud. 1 (1989) [S]

D. Criminal law

Polinsky, chapter 10 [O]
Gary Becker, Crime and Punishment: An Economic Approach

E. Procedure

Polinsky, chapter 14 [O]
Richard Posner, An Economic Approach to Legal Procedure and Judicial Administration
A. Mitchell Polinsky, Detrebling Versus Decoupling Antitrust Damages: Lessons from the Theory of Enforcement

IV. Refining the model, I: strategic behavior

A. Theory

Robert Cooter, The Cost of Coase
Robert Cooter, Stephen Marks, and Robert Mnookin, Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior

B. Applications

Arthur Leff, Injury, Ignorance and Spite: The Dynamics of Coercive Collection
David Rosenberg and Steven Shavell, A Model in which Suits Are Brought for Their Nuisance Value
Avery Katz, The Strategic Structure of Offer and Acceptance
Oliver Hart, An Economist's Perspective on the Theory of the Firm

V. Refining the model, II: risk and insurance

A. Theory

Polinsky, chapter 7 (Risk Bearing and Insurance) [O]
Steven Shavell, The Allocation of Risk and the Theory of Insurance

B. Applications

Polinsky, chapter 8-9 [O]
Richard Posner and Andrew Rosenfield, Impossibility and Related Doctrines In Contract Law: An Economic Analysis
Taylor v. Caldwell
, 122 Eng. Rep. 310 (Q.B. 1863). [S]
Jon Hanson and Kyle Logue, The First-Party Insurance Externality: An Economic Justification for Enterprise Liability
Escola v. Coca-Cola Bottling Co.
24 Cal. 2d 453, 150 P.2d 436 (1944). [S]
Louis Kaplow,
An Economic Analysis of Legal Transitions
A. Mitchell Polinsky and Steven Shavell, The Optimal Tradeoff between the Probability and the Magnitude of Fines [*]

VI. Refining the model, III: information

A. Theory

George Stigler, The Economics of Information
George Akerlof, The Market for Lemons: Qualitative Uncertainty and the Market Mechanism

B. Applications

William Bishop, The Contract-Tort Boundary and the Economics of Insurance
EVRA Corp. v. Swiss Bank Corp.
, 673 F.2d 951 (7th Cir. 1982) [S]
Sanford Grossman, The Informational Role of Warranties and Private Disclosure about Product Quality
Louis Kaplow, The Value of Accuracy in Adjudication

VII. Refining the model, IV: bounded rationality

A. Theory

Herbert Simon, Rationality in Psychology and Economics
Amos Tversky and Daniel Kahneman, The Framing of Decisions and the Psychology of Choice

B. Applications

Alan Schwartz and Louis Wilde, Imperfect Information in Markets for Contract Terms
Thomas Jackson, The Fresh-Start Policy in Bankruptcy Law
Roger Noll and James Krier, Some Implications of Cognitive Psychology for Risk Regulation
Williams v. Walker-Thomas Furniture Co.
, 350 F.2d 445 (D.C. Cir., 1965). [S]
Helling v. Carey, 519 P.2d 981 (Wash. 1974) [S]

VIII. Evaluation of the economic approach

A. Efficiency as a norm

Polinsky, chapter 15-17 [O]
Richard Posner, The Ethical and Political Basis of Wealth Maximization, in The Economics of Justice (1985). [S]

B. The liberal critique

Ronald Dworkin, Is Wealth a Value?
Bruce Ackerman, Talking and Trading, 85 Colum. L. Rev. 899 (1985) [S]

C. The paternalist critique

Duncan Kennedy, Distributive and Paternalist Motives in Contract and Tort Law

D. The sociological critique

Robert Ellickson, Of Coase and Cattle: Dispute Resolution among Neighbors in Shasta County

E. The radical critique

Mark Kelman, Legal Economists and Normative Social Theory
Morton Horwitz, Law and Economics: Science or Politics? 8 Hofstra L. Rev. 905 (1980). [S]

F. The communitarian critique

Steven Kelman, Ethical Theory and the Case for Concern About Charges
James Boyd White, Economics and Law: Two Cultures in Tension, 54 Tenn. L. Rev. 161(1987). [S]

G. The Legal Realist critique

Arthur Alan Leff, Economic Analysis of Law: Some Realism about Nominalism

IX. An application on the frontier: family law

Gary Becker and Kevin Murphy, The Family and the State
Elisabeth Landes and Richard Posner, The Economics of the Baby Shortage
Michael Trebilcock and Rosemin Keshvani, The Role of Private Ordering in Family Law: A Law and Economics Perspective
In the matter of Baby M
, 109 N.J. 396, 537 A.2d 1227 (N.J., 1988) [S]