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Introduction
Course coordinator and examiner:
Adam Jacobsson
Department of Economics
Law and Economics I, Department of
Spring 2008 Economics, Stockholm University
1
Teachers in order of appearance
Who am I?
Adam Jacobsson
PhD, Stockholm University, ”War, drugs and
media – Arenas of conflict”
Research interests
Political economy
Pol econ of conflict and appropriation
Media economics
Most important tool: game theory
Teaching: Micro theory, law and econ, game
theory, introductory economics.
Contact details
Course Coordinator & examiner
Adam Jacobsson
Room A793
E-mail: aja@ne.su.se
Office hours: by appointment
Course Administrator
Malin Stråby
Room A787
E-mail: malin.straby@ne.su.se
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Today’s agenda
What is law & economics?
The economic viewpoint.
Legal traditions
Common law (English speaking world)
Root in social norms.
Develops by precedent.
Civil law (Code Napoleon)
Focus on the code itself and commentaries to it.
To confuse things the term ”civil law” also appears in
the civil and criminal law dichotomy.
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Laws addressing economic
problems
Legislation has long been used to remedy
typically economic problems. For example:
Competititon/antitrust laws and regulation are tools for
dealing with imperfectly competitive markets.
Law against counterfeit money protects the value of a
currency.
Taxes on tobacco, alcohol or pollution are used to
reduce consumption or emissions.
Two developments
The usefulness of economic analysis has gained
in recognition among legal scholars.
Hopefully, you will share this view by the end of
the course.
Economists also increasingly recognize the
profound importance of the rule of law and
institutions for the functioning of the economy.
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Example: The importance of
property rights and contracts
"Institutions provide the basic structure by which human beings
throughout history have created order and attempted to reduce
uncertainty in exchange. Together with the technology employed,
they determine transaction and transformation costs and hence the
profitability and feasibility of engaging in economic activity."
Douglass C. North, 1990.
”Market economies require a rule of law. A society without state
protection of individual rights, especially the right to own property,
would not build private long term assets, a key ingredient of a
growing modern economy. Yet an excess of rules—in the extreme
case, central planning—has also been shown to stifle initiative and
produce economic stagnation.”
Alan Greenspan, 2004.
Enforcing contracts
From the World Bank’s doing business database:
http://www.doingbusiness.org/ExploreTopics/EnforcingContracts/
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Source:
IMF:http://www.imf.org/external/pubs/ft/weo/2003/01/pdf/chapter3.pdf
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In sum...
The design of legal rules may have significant
economic consequences.
It is thus valuable to understand and predict the
effects of different rules.
It is also important to understand how well
enforced these rules are.
Economic theory can provide analytical tools for
this.
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Positive vs normative analysis
Positive analysis: To predict effects.
Often no alternative is superior in all respects and for
everyone. Hence, choices involve value judgments.
Normative analysis: To evaluate effects.
Welfare economics.
That is, saying ”this or that is better”.
Private law: Focus on efficiency.
Not a good instrument for redistribution.
Better to use broad-based taxes.
Course plan
The following 10 lectures cover:
Economic analysis.
Property rights.
A critical perspective.
Contract theory.
Tort law.
The legal process.
Crime and punishment.
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The next lecture (mocroeconomic
theory)
This is a basic ”crash course lecture” on very
basic microeconomic tools that will be used in
the course.
For the economists among you, this may be a bit
elementary…
Have a look at chapter 2 and if you feel you
need a ”refresher” do come and listen!
Everybody is of course welcome!