Econ 321: Law and Economics
Instructor: Dr. Monica Hartmann
Class Information:
Time: TR 1:30-3:10 p.m..; Fall 2006
Location: OEC 305
Contact Information:
Office Hours: M 1-2:00 p.m. and TH 12-1p.m. and by appointment; OEC 402
Office Phone: 962-5681
E-mail: mehartmann@stthomas.edu
Course Description: Law and economics is a collection of economic research into a wide variety of
legal topics. This course is designed to show the intersection of law and economics in the areas of torts,
contracts, property, and divorce law. We will examine how these general law and economic principles
can be applied to individual court cases and to legal issues currently being debated.
Course Objective: The objectives of this course are for students to understand both the economic
principles underlying the legal system and to be able to apply these principles to 'real world'
situations where many economic theoretical assumptions do not hold. This would allow you to grasp
the advantages and limitations of using economics to analyze a problem.
Because of this objective, examples used in homework assignments and test questions are based on
current events. They are not straightforward regurgitation of class material but will require you to
think and to make additional simplifying assumptions to answer the question. The grading will be
based upon how thoroughly you address all the relevant economic points in the problem.
Prerequisite: Economics 251 and 252
Textbook: The required text, Introduction to Law and Economics, 3nd ed., by A. Mitchell Polinsky,
is available in the bookstore. Additional required readings can be downloaded from the class website
http://milkweed.econ.stthomas.edu/~mehartmann/law_econ.html
Supplementary References: These books have been placed on reserve at the library.
David D. Friedman, Law's Order: What Economics Has to Do with Law and Why It Matters
Gerrit De Geest, Law and Economics and the Labour Market
Werner Z. Hirsch, Law and Economics: An Introductory Analysis
Nicholas Mercuro, Economics and the law: from Posner to post-modernism
Richard D. Posner, Economic Analysis of Law
Ruth Towse, Copyright in the Cultural Industries
Case and Fair, Principles of Microeconomics and Principles of Macroeconomics
Recommended: Business periodical of your choice such as the Star Tribune, The Wall Street
Journal, The Economist, Business Week, etc. You should get in the habit of reading one of these
news sources to identify the economic issues underlying current legal news. Seeing the
applications to 'real world' situations will help you grasp the economic theory.
Grading:
Final
Midterm
Homework
Paper
Effective Class Participation
20%
20%
20%
20%
20%
Each component of your grade is given equal weight to reflect that each activity is an essential part
of the learning process. If you have any questions concerning the grading of your work, please
come see me. You have two weeks from the date I returned the homework or the exams to the class
to ask me to reexamine the grade. After the two weeks, all grades are final.
Important Dates:
 Midterm: Tuesday, October 31st
 Paper Due: Friday, December 1st
 Final Exam: 1:30-3:30 p.m. on Tuesday, December 12
Exam Policy: Make up examinations only will be given in the event of a severe illness, death in the
family, or a University sponsored activity. You must speak directly to me at least 24 hours prior to
the exam. Leaving a message on my voice mail or sending me email is not sufficient. If approved,
we will reschedule the exam at a mutually convenient time. If no arrangements have been made prior
to the scheduled exam time, no make-up exam will be given without a medical excuse. You will
receive a zero for that grade. Also note that possessing a refundable plane/train/bus ticket is not a
valid excuse for a make-up exam.
Exam dates are listed on the course outline. These dates are subject to change, but I will announce in
class any change with at least one-week notice. You are responsible for all material or any
announcement given in lecture regardless if present.
To request accommodations due to a disability, contact the Enhancement Program - Disability
Services (651-962-6315) located in OEC 119. As soon as possible, present the form from this office
that indicates you have a disability that requires accommodations so that I can facilitate this process.
Homework: Homework assignments are given to prepare you for the exams and to give you some
practice applying economic concepts to legal matters. You are encouraged to work on homework
assignments with other students. Each group should turn in one assignment with all of the names of
the people in that group. A group cannot be any larger than three people, unless I specify otherwise.
Answers written on notebook paper (without cutting off the frayed edges) are docked 10% of the
points. Put your name on each piece of paper if you do not staple your assignment together. It is
extremely easy for assignments to get separated. Illegible work is unacceptable and will be given
no credit. I do not foresee this to be a problem given that this is an upper level class. I am just
trying to be explicit about my expectations.
Class Participation: Everyone will be responsible for critically reading the papers assigned in class
and for participating in classroom discussions. You will note that effective class participation is a
significant portion of your grade. Your class participation grade will be a combination of my
analysis of your preparation for class, contribution to class discussion, and fulfillment in-class
assignments. I expect frequent participation, but you should note that monopolization of class
discussions generates negative externalities, which reduce overall class welfare and will not be
appreciated.
A significant portion of class time is devoted to in-class assignments that are based on assigned
readings. I will walk around the classroom to each of the groups to answer questions students have
about the assignment and ask additional questions to further facilitate the group’s discussion. I try to
allocate my time equally among groups as best as possible over the class period. If I do not get to
answer all your questions during the class lecture, you can ask me the questions after class or during
office hours. Please note that I will not spend undue class time with obviously unprepared
students. I will spend a disproportionate amount of time on those students who are prepared and
actively involved with the in-class assignments.
Why is class participation important? First of all, participation enables students to learn from each
other. As intelligent individuals with diverse academic and personal backgrounds, you bring
different perspectives on an issue. Through an exchange of ideas we can all learn more. Second,
studies show that students who are actively involved in learning are more likely to remember and to
assimilate the material and to apply concepts learned in the classroom to other situations. Because
the ability to apply the course material to everyday situations is a primary goal of the course,
participation in class discussions is an essential part of learning.
As economists, we also can look at the importance of classroom participation in a different way.
When a student decides to participate – to share information with the class or ask a question, the
student is providing a public good. Other students benefit from the information presented and the
answers given to the questions. Unfortunately, the student makes decisions only with respect to
his/her own benefit and do not take into account the impact on others. Rewarding classroom
participation can help alleviate this market failure in the classroom. Finally, when students are
prepared for class, are actively engaged in assignments, and are actively involved in the discussion
with the professor and other students, everyone benefits and learning is enhanced.
Attendance Policy: Attendance for this class is imperative for two reasons. First, most of the
material taught is given in class lectures. Second, missing multiple classes will drop your
participation grade and consequently your overall grade. One cannot expect to earn a good
participation grade for those classes one does not attend.
If you are not prepared for lecture this is equivalent to missing a class. It is expected that there may
be a class (on a rare occasion) that you cannot be prepared for because of some unforeseen
circumstances. Thus, you are allowed to "miss" three lectures without a drop in your grade. If you
never miss lecture, are always prepared, and participate in discussions on a regular basis, I will take
this into consideration for borderline grades.
Writing Assignment: You are required to write a short 8-10 page paper on the topic of your choice.
Your task is to find a (relatively) current real-world legal issue and apply the tools from this course to
answer some interesting question(s) about it. The paper will be graded on quality of writing and
economic analysis with more weight on the second criterion. More details on this assignment will be
given in the future.
Office Hours: If you need to talk with me, you can speak with me just before and after class, or come
to my office hours. You may stop by my office during other times as well. If I am not available to
talk with you at that time, we can set an appointment for another time.
Classroom Sessions and Expectations:
Classroom sessions will be a mix of lecture,
demonstrations, large group discussions, and small group work. Class participation is an important
component of learning in this course. I encourage active discussion during class sessions and may
call on some quieter participants to enrich the discussion. You always have the option to pass if
called upon, but if you continuously pass when called upon this will result in a lower participation
grade. Even though I may call on students, it is still your responsibility to actively participate in
classroom discussions by raising your hand to answer questions and posing questions of your own.
Prior to each lecture, you are expected to read assigned cases and/or papers and answer the
following questions:
1. Facts: Who are the plaintiffs? The defendants? Make clear which facts are under dispute, and
which ones are not. To make things clear, instead of using the name of the parties, use their
roles (e.g., the driver, the contractor).
2. Type of court that heard the case and the year. (E.g., state, federal, appeal,…)
3. Rule of law: There may be several rules of law in the case, but one may be the most relevant
given the topic currently discussed in class.
4. Issue: This should consist of one question that can be answered by “yes” or “no.”
5. Holding of the case. (“Yes” or “no” decision by the majority.)
6. Majority opinion: What is the rationale given by the court for arriving at its decision?
7. Minority opinion: What is the rationale for the minority to have wanted a different decision?
8. Economic analysis: What is the tradeoff involved in these different rulings, i.e., the
advantages and disadvantages? Given the tradeoffs and the particular circumstances, which
rule is the most efficient?
I will begin discussion of each case by calling on students to answer the first seven questions. For
the eighth question, I do not expect a “complete/thorough” answer. However, I do expect that you
have a basic understanding of the economic trade-offs and the efficiency of the court’s ruling. We
will spend most of the lecture on this final issue. I just want you to think about these issues before
class starts.
Class Website: https://courseweb.stthomas.edu/mehartmann/law_econ/law_econ.html
List of Readings
These readings can be downloaded from the class website
http://milkweed.econ.stthomas.edu/~mehartmann/law_econ.html
I. Introduction to Law
1.
2.
3.
4.
5.
6.
Cooter and Ulen: Chp.2
Cooter and Ulen: Chp.3
Cooter and Ulen: Chp.10
Epstein: ‘All Quite on the Eastern Front’
Washington Post: ‘Czech’s Downfall Shatters Hope for Economic Miracle’
Flood v. Kuhn
7. Rector v. Holy Trinity Church
II. Property
1. Bohannon: Heinzman v. Fine, Fine, Legum & Fine
2. Bohannon: Vosburg v. Putney
3. Goetz: Broadcast Music, Inc. v. Moore-Law Inc.
4. Goetz: Fontainebleau Hotel Corp. v. Forty-Five Twenty-Five, Inc
5. Goetz: Boomer v. Atlantic Cement Co.
6. Goetz: Sprecher v. Adamson Cos.
7. Posner Readings
8. Case: Feist v. Rural Telephone
9. Case: Sony v. Universal (Betamax)
10. Case: Lucas v. South Carolina Coastal Council
11. Case: Pennsylvania Coal Co. v. Mahon
III. Torts
1.
2.
3.
4.
5.
6.
7.
8.
9.
Bohannon: Elements of a Tort Claim
Posner pg. 182-184
Bohannon: Scott v. Shepherd
Goetz: The Case of Innocente v. Vinho
Goetz: Fireman's rule
Bohannon: US v. Carroll Towing Co.
Case: Ploof v. Putman
Case: Vincent v. Lake Erie
Case: Escola v. Coca-Cola Bottling Co
IV. Contracts and Damages
1. Bohannon: Elements of a Contract
2. Case: Bailey v. West
3. Cooter and Ulen: Unconscionable
4. Case: Peevyhouse v. Garland
5. Case: Hadley v. Baxendale
6. Goetz: Evaluating Lost Future Income
7. Bohannon: Buick v. Levine
8. Bohannon: United Telcoms, Inc. v. American TV & Communs. Corp
9. Bohannon: Beaulieu v. Elliot
10. Bohannon: Doca v. Marina Mercante Nicaraguense, S.A.
11. Bohannon: Williams v. Walker-Thomas Furniture Co.
V. Marriage/ Divorce Law
1.
2.
3.
4.
Klein: Marriage and Divorce: Informational Constraints and Private Contracting
McCain: Theory of Marriage Vows - Game Theoretic Analysis of Divorce
Borenstein: How to Carve a Medical Degree: Human Capital Assets in Divorce Settlements
Washington Post: "High Test Marriage"
VI. Economic Issues Facing Native Americans
1. Housing - TBA
2. Credit Market - TBA
Sources:
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



Cases usually were copied directly from the Court's rulings.
Cooter and Ulen: Law and Economics 1997 Addison-Wesley Publishers
Posner: Economic Analysis of Law Fifth Edition 1998 Aspen Law & Business
Goetz: Law and Economics: Case and Materials 1984 West Publishing Co.
Bohannon: Law And Economics Course Materials 1995