26
SO YOU WANT TO BE A LAWYER:
ECONOMICS AND THE LAW
_______________________________________________________________________
CHAPTER OUTLINE
The Government's Role in Protecting Property and Enforcing Contracts
Private Property
Bankruptcy
Civil Liability
Summary
LEARNING OBJECTIVES
LO1: Describe private property, intellectual property, and contracts and relate their importance in enabling
economic growth.
LO2: Explain why a system of bankruptcy laws is necessary to a thriving economy and show why those laws
must be carefully crafted.
LO3: Describe the role of civil litigation in a society and discuss how economists participate in that arena.
KEY TERMS
Private property- Land and other physical items that are owned by individuals or a group of individuals.
Intellectual property- Written and recorded works, ideas, formulas, and other creative intangible property that
are owned by individuals or a group of individuals.
Copyright- A right granted by government to a creator of a written or recorded work to be the exclusive seller of
that work for a limited period of time.
Patent- A right granted by government to an inventor to be the exclusive seller of that invention for a limited
period of time.
Trademark- A right granted by government to a business to be the exclusive user of a phrase, logo, or name of
such a business.
Contract- Written agreement by which each party is bound to provide other parties with goods, services, or
financial consideration in exchange for other goods, services, or financial considerations.
2
Chapter 26
Bankruptcy- The legal state that allows debtors to be protected from the actions of their creditors.
Contingency attorney- A lawyer who agrees to take a percentage of any judgment or settlement. The attorney is
paid only if the client wins the case.
Class action lawsuits- Suits where similarly harmed people are joined together into one party so as to sue one or
more defendants.
DISCUSSION QUESTIONS
1. Explain the conditions under which government can improve economic conditions of buyers and
sellers of a product.
2. Why does a legal system that creates and protects private property rights foster economic growth?
3. What do lawyers call written and recorded works, ideas, and formulas in which the author has
private property rights?
4. What is the right granted by government to an inventor to be the exclusive seller of that invention
called?
5. What is the right granted by government to a creator of a written or recorded work to be the
exclusive seller of that invention called?
6. What is the right granted by government to a business to be the exclusive user of a phrase, logo, or
name of the business called?
7. Why are contracts necessary?
8. What do we call the court system that enforces private property rights and contracts?
9. Why is a state of lawlessness, such as that which occurred in Somalia in the 1990s and Iraq in the
early 2000s, so damaging to an economy?
10. Discuss the downside or negative consequences of private property rights and why we tolerate these
negative consequences.
11. What do we call the legal state that allows debtors to be protected from the actions of their
creditors?
12. When someone is injured by another person due to that person’s negligence, our legal system allows
the injured person to sue the offender and receive compensation for their damages. What is the
economic argument in support of this sort of system? What is the economic argument against this
sort of system?
13. What do we call lawyers who agree to take a case on the stipulation that if their client loses, the
client owes nothing, but if their client wins, the lawyer gets a percentage of the judgment or
settlement award?
So You Want to Be a Lawyer: Economics and the Law
14. What do we call lawsuits in which many similarly harmed people are joined together into one party
in order to sue one or more defendants?
15. Use the web to find the name of the office that grants patents, copyrights, and trademarks in the
United States Government and the department to which this office belongs.
WEB-BASED QUESTIONS
Part I. Visit the website for the United States Patent and Trademark Office below and answer the following
questions.
www.uspto.gov/web/offices/com/annual/2008/2008annualreport.pdf
1.
2.
3.
4.
How many patents were filed with this office in FY 2008?
How many trademark applications were filed electronically in FY 2008?
What percentage of the USPTO patent filings were received electronically in FY 2008?
What percentage of the USPTO trademark filings were received electronically in FY 2008?
Part II. Visit the website for the United States Copyright Office below and answer the following questions.
www.copyright.gov/circs/circ01.pdf
1.
2.
3.
4.
How long does the copyright on a work published by an author today last?
What sort of action is required by the United States Copyright Office to secure a copyright?
What are the three necessary elements of a notice of a copyright on a book, such as your textbook?
How are international copyrights obtained? Discuss.
ANSWERS TO STUDY QUESTIONS
PROBLEMS
1. Government can improve the economic condition of buyers and sellers of a product when the private
market for that product exhibits market failure.
2. A legal system that creates and protects private property rights fosters economic growth because it
motivates people to (a) work hard and (b) save.
3. Intellectual property
4. Patent
5. Copyright
6. Trademark
3
4
Chapter 26
7. Contracts are necessary, because sometimes the exchange of private property between two parties is not at
the same time.
8. The civil court system
9. Lawlessness is damaging to an economy. Because people cannot depend on private property rights and
contracts being enforced, they do not have an incentive to work hard creating goods and services and to
save.
10. A system of private property rights can create ethical and efficiency problems. The distribution of
income and wealth produced by a system of private property rights might be considered by some to be
inequitable. The deadweight loss produced by a monopoly produced product is not efficient. But we
tolerate these consequences because markets that produce private goods tend to be efficient, and
sometimes monopoly production of a product is the only way that the product can be produced. In short,
we tolerate the negative consequences of private property rights because the alternative of no private
property rights is far worse.
11. Bankruptcy
12. The economic argument in support of this system is that it corrects for a market failure. That is, markets
fail when a person makes an economic decision without regard to the harm they do to an innocent party.
Forcing people to consider the consequences of their actions on innocent parties improves the efficiency
of markets. The economics argument against this system is that the monetary damages awarded by the
jury/courts might not be too large or too small and, subsequently, over or under correct for the market
failure.
13. Contingency attorneys
14. Class action lawsuits
15. The United States Patent and Trademark Office; an agency of the U.S. Department of Commerce
WEB-BASED QUESTIONS --- KICK IT UP A NOTCH
Part I.
1.
2.
3.
4.
The USPTO received 448,000 patents in FY 2008.
The USPTO received 268,000 trademark applications filed electronically in FY 2008.
About 72.1 percent of the USPTO’s patents were filed electronically in FY 2008.
About 96.9 percent of the USPTO’s trademarks were filed electronically in FY 2008.
Part II.
1. Copyrights issued today last for the life of the author plus 70 years.
2. None.
3. The letter “c” in a circle (©), the year of the first publication of the work, and the name of the owner of
the copyright.
4. There is no such thing as an “international copyright” that will automatically protect an author’s writings
throughout the entire world. Protection against unauthorized use in a particular country depends,
So You Want to Be a Lawyer: Economics and the Law
basically, on the national laws of that country. However, most countries do offer protection to foreign
works under certain conditions, and these conditions have been greatly simplified by international
copyright treaties and conventions.
5