Law and Economics

Law and Economics applies the concepts and techniques of microeconomics to the law itself, focusing on the common law: the dominant source of legal rules in Australia. The course does not assume any prior legal knowledge, nor does it provide any legal training. The Course employs basic price theory – rational maximization, the law of demand, opportunity costs, and the idea that voluntary exchange allows resources to gravitate toward their highest- valued uses – to predict the consequences of legal rules: how they affect the behaviour of individuals and groups; and uses welfare economics to evaluate legal rules, especially their efficiency effects. Legal issues examined in the course include property rights, tort law, contract law, criminal law, law enforcement and punishment, litigation and settlement, principal-agent liability, and regulation v tort law as ways to control externalities. The emphasis in this course is on “thinking like an economist” to understand legal issues from an economic perspective, with a focus on a clear understanding of the logic and underlying economic intuition rather than just the results. Law and Economics is an interesting application of the economic way of thinking to real world problems and policy issues. Examining actual legal cases gives students experience in relating abstract economic models to practical problems and demonstrates their direct relevance. Graduate students do the pass course together with extra lectures on more advanced topics and extensions to the pass course. The extra topics will be drawn from: welfare economics, competition and the core, the hold-out problem, the anti-commons, intellectual property and patents, non-pecuniary losses and the value of life, the last clear chance rule, product liability with monopoly, and more complete models of accidents, optimal contract damages and uncertainty.