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Econ 522 Economics of Law

Dan Quint



(from final exam, Fall 2007)

My favorite bar during graduate school (Antonios Nut House, for those who know Palo
Alto) was occasionally under threat of closing down every once in a while, a lawyer
would move into one of the apartments next door, and threaten to sue for a nuisance
injunction due to noise.
The social value of the bar consists of the profits it earns, plus its value to its patrons,
minus the inconvenience to the neighbors (and the opportunity cost of the space it takes
up). Suppose this social value is negative when the neighbors happen to be people who
are unusually sensitive to noise, but positive otherwise.
(a) Explain the difference between temporary and permanent damages.
(b) Explain how permanent damages, paid as a servitude to the land, would solve
the problem.
(c) Who would receive these damage payments if the neighboring homes were
owner-occupied? If they were rented? What would the impact be on the value of
the homes, or the rent charged to tenants?

(old homework question)
(A variation on question 5.10 in the textbook.)
No one may use a patent without the patentholders permission. But in a limited set of
circumstances, others may use copyrighted material without the copyright-holders
permission. These circumstances called the fair use exception allow, for example,
reviewers to quote from copyrighted material without permission, teachers to photocopy
and assign limited portions of copyrighted material to their classes, and musical groups to
include or sample copyrighted music in their own compositions.
Explain why it may be efficient for copyright law to allow for such exceptions, but not
for patent law to allow for similar exceptions.


(old homework question)

The following is excerpted from a BBC News story from January, 2003, Eco-burial
woman claims squatters' rights, downloadable at
A Somerset woman who buried bodies in a piece of disputed garden claimed by her
neighbours wants squatters' rights on the land.
Barbara Butler buried four people, including two children, and several animals in
unmarked graves on disputed land at Watchet as part of her business, Green
Her neighbours, Richard and Rosemary Rutter, discovered the bodies - which have since
been exhumed and re-buried - in 1999.
But now Mrs Butler wants the Land Registry to award squatters' rights over parts of the
land, based on her former use of it.
Mr and Mrs Rutter of Brendon Road, Watchet, say they had no idea their neighbour
had used the land for the eco-burials for two years. They say they were 'horrified' when
they made the discovery in a corner of what they claim is their garden.
The case may be one of the last of its kind in Britain as new legislation due to take
effect later this year will make squatters' claims much more difficult.
Question. While adverse possession rules vary from place to place, two common
features are that the property must be possessed openly, with no attempt to hide it; and
that the possession must be against the interests of the owners. Explain the effects of
these two conditions, and what would likely happen without them.

TREES AND NEIGHBORS(from midterm, Fall 2008)

(Question by Alex Tabarrok, found at www.marginalrevolution.com)
In Virginia, the common law has long held that if a neighbor's tree encroaches on your
yard you may cut the branches as they cross the property line, but any damage the tree
does to your property is your problem. Your neighbor can even sue if your pruning kills
the tree. In 2007, the Virginia Supreme Court overruled this 70 year-old precedent,
making it your neighbor's duty to prune or cut down the tree if it is a nuisance.
Which rule is better: the new rule or the old? What would Coase say about the two rules?