by Prof. Ryan Bubb

This course provides a foundational understanding of how economic analysis can illuminate the operation of legal rules and institutions. We will focus primarily on private law areas, such as the law of accidents (torts), property, and contracts. For example, we will analyze the economic rationale for property rights, examining how they address externalities and facilitate efficient resource allocation. We will also delve into contract law, investigating how it promotes mutually beneficial exchange by providing a framework for agreement and enforcement. Our exploration of tort law will consider how different liability rules affect incentives for precaution and influence the allocation of accident costs. In addition to considering canonical economic analyses of these topics based on the standard rationality assumption of neoclassical economics, we will also consider how insights from behavioral economics—incorporating more realistic psychological assumptions into our economic analyses—can enrich our understanding of legal institutions. In addition, we will consider the operation of new legal tools suggested by behavioral economics, often referred to as “nudges.”

We will also examine some more fundamental aspects of legal design, including the choice between rules and standards, the optimal degree of legal complexity, how legal uncertainty affects the incentives produced by the legal system, and the choice between protecting legal entitlements with property rules or with liability rules.

While the course emphasizes positive economic analysis of law, explaining how legal rules work and what their consequences are likely to be, we will also consider normative implications. We will evaluate the efficiency of different legal rules and explore how they can be designed to promote social welfare.

While the course will focus on U.S. law, given the instructor’s background, the legal and economic issues we will analyze emerge in every jurisdiction, and we will on occasion take a comparative perspective.