Memorandum

Date: May 24, 2000
To: Economic Reasoning and the Law students
From: Avery Katz
Re: Feedback on Spring 2000 exam

I have posted on the website the top three student answers to each of the questions on the final exam, along with a copy of the exam itself. What made these answers the best was their coverage of arguments, detail and sophistication in use of facts, clarity in organization and explanation, and the way they demonstrated mastery of concepts from the course. If you drew different inferences from the given facts than the top answers did, or chose to discuss different issues, you wouldn't have lost points, unless your inferences were unsupportable or your choice of issues inappropriate.

For both questions, I did have in mind certain issues that I thought should have been discussed.

For instance, on the first question, dealing with the McKichan case, a complete answer should have started by identifying the main economic question involved, which is the appropriate tradeoff between injuries and the intensity of play. Intensity of play is a benefit [fans are willing to pay for it] and injuries are a cost and Pareto efficiency requires that they be balanced at the margin. The next step is to consider whether the players have the right incentives to make this tradeoff properly; i.e., whether they internalize costs and benefits on the margin. Double responsibility is an issue here since the injured players' actions contribute in part to the risk of injury; the incentives of teams and the league are also important in this regard. Insurance was also an important issue, because injuries occur only occasionally but concentrate their effects on a few players. A good answer would have discussed the possibilities for first-party and third-party insurance, and for risk spreading through the market mechanism [i.e., the price of tickets.] There was also room for you to discuss problems of bounded rationality, primarily on the part of the players.

The other main issue to be discussed was the Coasian one; namely, what institution is best suited to dealing with these externality, insurance, and informational problems. From the Coasian perspective, the choice whether to defer to the procedures of the hockey league depends on an assessment of the comparative transaction costs of league and public judicial decisionmaking.

On the second question, dealing with Cohen's proposal for the sale of organs, there was more leeway for variation in your answers. The main issues from within the economic model were the incentive effects of alienable property rights, and the potential problems of adverse selection and moral hazard on the part of organ donors, whose lifestyle and precaution decisions would likely be observed by the purchasing agency with substantial noise.

With regard to critiques of the economic approach, paternalist, sociological and communitarian issues were probably most relevant, but there was also room to discuss issues of income distribution as well. Students who mechanically worked through the full list of critiques we covered in the last part of the course tended to get lower scores, however, while those who tailored their analysis to the specific question did better. A number of you argued that it would not be feasible to restrict Cohen's proposal to the supply side of the market. Such a conclusion is plausible, but those who defended it in terms of the political and preference-shaping effects of a partial organ market were most persuasive.

Your individual exams are available for inspection at my office. If, after reading this memo and the top answers, you want to discuss your exam, please feel free to contact me.

It was a pleasure teaching the class and I wish you all well. Please keep in touch.