Economics for Lawyers

Economics for Lawyers

Economics for Lawyers

Economics for Lawyers

Synopsis

Whether dealing with contracts, tort actions, or government regulations, lawyers are more likely to be successful if they are conversant in economics. Economics for Lawyers provides the essential tools to understand the economic basis of law. Through rigorous analysis illustrated with simple graphs and a wide range of legal examples, Richard Ippolito focuses on a few key concepts and shows how they play out in numerous applications. There are everyday problems: What is the social cost of legislation enforcing below-market prices, minimum wages, milk regulation, and noncompetitive pricing? Why are matinee movies cheaper than nighttime showings? And then there are broader questions: What is the patent system's role in the market for intellectual property rights? How does one think about externalities like airport noise? Is the free market, a regulated solution, or tort law the best way to deliver the "efficient amount of harm" in the workplace? What is the best approach to the question of economic compensation due to a person falsely imprisoned?

Along the way, readers learn what economists mean when they talk about sorting, signaling, reputational assets, lemons markets, moral hazard, and adverse selection. They will learn a new vocabulary and a whole new way of thinking about the world they live in, and will be more productive in their professions.

Excerpt

The purpose of this course is to provide the economic foundations for the study of law and economics, and to provide law students with the elementary tools that are required to interact with clients in both a corporate and a government setting. Contracts written in a corporate setting are meant to help the firm attain its business objectives. Corporation counsel can more effectively integrate these goals into legal documents if they understand the underlying rationale and goals of the contracts. Tort actions are integrally involved with the notion of economic damages, and the presentation and cross-examination of expert testimony. Government regulations are part of a broader objective to foster social goals that often involve the trade-off of costs and benefits. Put simply, lawyers are more likely to be successful if they are conversant in economic problems that are the genesis of client legal actions.

The goals are relatively simple: to understand the derivation of demand and supply curves and the economic interpretation of equilibrium in markets, and to be able to portray and understand the social costs of interference with free trade among willing participants. An important feature of this discussion is the concept of equilibrium, and an appreciation for the role of profit in directing resources toward their most valuable uses.

The tendency for resources to flow to profitable ventures is an important theme in the course. If incentives are properly erected, then this free flow of capital and other resources will ensure that the economy produces the goods and services most valued by consumers. We shall see that perverse outcomes can arise under some circumstances. An example is contracting under duress. If these contracts are upheld, large amounts of social waste can result. Similarly, and perhaps counterintuitively in the area of patent law, if innovators are allowed to capture the entire benefits of their ideas, then the value added by new innovations can be nearly zero. These issues give rise to a need to think about optimal reward structures in contracting.

We will spend considerable time studying various instances where market conditions are less than ideal to produce optimal economic . . .

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