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UW-Madison ECON 522 - Lecture 1 Notes

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Econ 522 Economics of LawI’m Dan Quint, this is Econ 522, Economics of LawPlan for todaySlide 3WebsiteLogisticsGradingExamsReadingsSlide 9What is this class going to be about?Relatedly, a warning: I THINK THIS IS A HARD CLASSWhat is Law and Economics?How do economists look at the law differently than lawyers?So what about the law is interesting to economists?Slide 16How economists think – an exampleSo that will be our focus in this classBut of course, that’s not the whole storySlide 20TopicsSlide 22Plan for the rest of today…Slide 23A bit of historyThe Common LawThe Civil LawComparing the Common Law and Civil Law traditionsSlide 29Slide 29A nice example of how the common law responds to local norms and practicesWhat’s the problem?Robert Ellickson (1989), A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling IndustryOne norm: “fast fish/loose fish”A different norm: “iron holds the whale”Clear tradeoff between the two rulesA third norm developed where finback whales were huntedConclusions from EllicksonSo that’s whaling lawThe brief perfectly captures the essence of the common law system:So that’s a bit of lawEcon 522Economics of LawDan QuintFall 2011Lecture 1Questions about enrollment or prerequisites? Please talk to me after lecture.2If you’re trying to get into the class but not yet registered, put your name and info on the yellow pad going aroundIf you haven’t taken Econ 301 (or the equivalent elsewhere), talk to me after classI’m Dan Quint, this is Econ 522,Economics of Law3Logistics/syllabusOverview: what is the semester going to be about?Some historyCommon law and civil law traditionsExample: dead whales and baseballsPlan for today4Logistics/Syllabus5Course website:http://www.ssc.wisc.edu/~dquint/econ522(Or UW Econ  “Undergraduate”  “Course Information”  “522”)(Or Google “Econ 522” or “Dan Quint” or…)Website has…Syllabus (incl. links to supplemental readings)My slides and lecture notes (after, hopefully before each lecture)HomeworksSample exam problems from past yearsWebsite6Teaching Assistant: Fran FlanaganContact info on syllabus/websiteSections on Fridays, beginning next week (Sept 16)Questions about section – talk to FranOffice hoursFran: Mondays, 12:15-2:15 p.m.Me: Tuesdays, 2-4 p.m. (other times by appointment)Attending sectionAttending lectureLogistics7Grades are based onoccasional homeworks (probably 4) – 20%two midterms – 20% eachfinal exam – 40%Homeworkyou’re welcome to work together on homeworkI’m happy for you to discuss questions, ideas, answers togetherbut everyone should write up their own answers – copying someone else’s answers word-for-word is not OKif you do work with others, please note who you worked with on your homeworkGrading8Midterms tentatively scheduled for Oct 12 and Nov 9Final is December 22Please let me know EARLY if…you have an exam conflict, oryou’re a McBurney student and need special accommodationsExams9Textbook: R. Cooter and T. Ulen, Law and EconomicsI’m using 5th edition (not 6th)older versions are fine (but…)copies on reserve at Memorial Library and SocialScience Library (8th floor of Social Sciences)Another book I like: D. Friedman, Law’s Orderavailable free online (link on syllabus)(or it’s a $24 paperback)Additional readings available online (via Learn@UW)Readings10What is thisclass about?11This class is not about the lawWell, OK, it’s sort of about the law, but…You’re not in law schoolI’m not a lawyer, I’m an economistIt’s not my job to make you a better lawyerIt is my job to make you a better economistEconomics is not a bunch of facts, it’s a set of toolsWe can point these tools at just about anythingIn this class, we’ll point them at laws and legal institutionsBut we’re more interested in the tools than in the answersWhat is this class going to be about?12To do well, you’ll have to learn to think like an economistThis way of thinking comes naturally to some people……but not to othersIf you “don’t get it”, you can’t get by memorizing a bunch of factsSomeone in this class will get a C who’s never gotten a C beforeNot trying to scare everyone off – I’d just rather say this now than after the first midtermRelatedly, a warning:I THINK THIS IS A HARD CLASS13unsatisfying answer:“thinking about the law like an economist”microeconomics is about how people respond to incentiveswe’ll be using microeconomics (including a little bit of game theory) to analyze laws and legal systemsthe incentives they createand the actions and outcomes they lead toWhat is Law and Economics?14suppose something has happenedwhen a lawyer sees the case, the “damage is already done”what’s left?assign blamemaybe punish someonemaybe move money aroundthis is interesting to the people involved……but it’s not interesting to economists!How do economists look at the law differently than lawyers?15before the incident happened, lots of decisions were madeexpectations/beliefs about what will happen after the fact influence these decisionsthese decisions have an impact on outcomesand these decisions therefore affect how much value is created (or destroyed) by societywhich is very interesting to economistsSo what about the law is interesting to economists?16So what about the law is interesting to economists?LAWYERSECONOMISTS(you and me)LAWYERSSomethinghappensLitigationCompensationTHE LAWDecisions/ActionsCompensationLitigation17You live in a state where the most severe criminal punishment is life imprisonment. Someone proposes that since armed robbery is a very serious crime, armed robbers should get a life sentence.A constitutional lawyer asks whether that is consistent with the prohibition on cruel and unusual punishment.A legal philosopher asks whether it is just.An economist points out that if the punishments for armed robbery and for armed robbery plus murder are the same, the additional punishment for the murder is zero – and asks whether you really want to make it in the interest of robbers to murder their victims.Friedman, Law’s Order, p. 8How economists think – an example18So that will be our focus in this class19But of course, that’s not the whole story20But of course,


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UW-Madison ECON 522 - Lecture 1 Notes

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