About Me
Edinburgh, 2019
Ph.D (Economics) — George Mason University, 2015
B.A. (Economics) — University of Connecticut, 2011
Specializations:
- Law and Economics
- Austrian Economics
Research interests
- modeling innovation & economic growth
- political economy & economic history of intellectual property
Expecting a son in March 2021 👶 (expect cameos!)
What Is This Class About?
This is not a class “about” the law
- or a law class
I am not a lawyer...though I am happily married to one
This is a class about how to think about the law, using economics
What's Economics Got to Do With Law?
Example 1: Why have locks on doors?
What's Economics Got to Do With Law?
Example 2: Police have evidence sufficient to convict a criminal
- Suppose the conviction costs the criminal $50,000
- The conviction benefits the police officer's career by $10,000
What's Economics Got to Do With Law?
Example 3: Civil asset forfeiture
What's Economics Got to Do With Law?
Example 4: Life imprisonment for theft
What's Economics Got to Do With Law?
David D. Friedman
(1945—)
“You live in a state where the most severe criminal punishment is life imprisonment. Someone proposes that since armed robbery is a very serious crime, armed robbers should get a life sentence. A constitutional lawyer asks whether that is consistent with the prohibition on cruel and unusual punishment. A legal philosopher asks whether it is just.”
“An economist points out that if the punishments for armed robbery and for armed robbery plus murder are the same, the additional punishment for the murder is zero—and asks whether you really want to make it in the interest of robbers to murder their victims.” (p.8)
Economic Analysis of Law
Oliver Wendell Holmes, Jr.
1841—1935
Associate Justice of U.S. Supreme Court
“If you want to know the law and nothing else, you must look at it as a bad man, who cares only for the material consequences which such knowledge enables him to predict.”
Holmes, Oliver Wendell, Jr., 1897, “The Path of the Law,” 10 Harvard Law Review 457:12-16
Economic Analysis of Law
Oliver Wendell Holmes, Jr.
1841—1935
Associate Justice of U.S. Supreme Court
“For the rational study of the law the blackletter man may be the man of the present, but the man of the future is the man of statistics and the master of economics...As a step toward that ideal it seems to me that every lawyer ought to seek an understanding of economics...We learn that for everything we have we give up something else, and we are taught to set the advantage we gain against the other advantage we lose, and to know what we are doing when we elect.”
Holmes, Oliver Wendell, Jr., 1897, “The Path of the Law,” 10 Harvard Law Review 457:12-16
Economic Analysis of Law
Economics focuses on rationality
- Choices made on the margin (MB>MC)
- Consequences of law internalized into future choices
Most of us are not Holmes’ figurative “bad man”
- Yet we still engage in risky activities (driving a car) that place others in danger and subject us to tort liability
Thinking Like a Lawyer vs. Thinking Like an Economist
Suppose something has happened
Lawyer: damage is already done, how to clean up the mess:
- assign blame
- maybe punish someone
- maybe compensate
Interesting/important only to the parties involved
Thinking Like a Lawyer vs. Thinking Like an Economist
What is interesting to economists:
Before the incident, lots of decisions were made, e.g.
- how much to invest in precaution (how fast to drive, wearing a helmet while biking, etc)
- reaching a contractual agreement
- transforming my property (planting trees that block my neighbor's view)
- relying on my supplier to deliver on time
Thinking Like a Lawyer vs. Thinking Like an Economist
These were made based on expectations about what will happen
These decisions affect the outcomes and how much value is created and destroyed by society
More importantly, how do laws and court decisions affect future behavior on the margin?
Economists are more forward-looking about law
Of Course It's Not the Whole Story
Laws themselves have to come from somewhere
- Constitution, legislation, regulation, common law, custom
Political economy of how laws are determined
- Legislators, judges, police, voters are all agents that have their own objectives and respond to incentives
- We might cover a bit in this course, but better left to other courses
Three Projects in Law & Economics
Predicting consequences of law
- least controversial
Predicting what law will be
- an empirical conjecture: law is efficient
Recommending what law should be
- a normative project: law should be efficient
- You could still believe:
- law is efficient, but should not be
- law is not efficient, but should be
Outline and Areas of Law
- Property Law
- how do we establish who is entitled to what?
- Contract Law
- how do individuals permit use or exchange of entitlements?
- Tort Law
- how do we remedy violations of persons or entitlements?
- Criminal Law
- how does the State punish egregious harms to society?
The Law & Economics of 19th Century Whaling
A burning legal question: who owns a dead whale?
18th—19th Century: whales hunted for oil, blubber, bone, other valuable products
A whale could be worth 3-4 times the median family income
The Law & Economics of 19th Century Whaling
“It frequently happens that when several ships are cruising in company, a whale may be struck by one vessel, then escape, and be finally killed and captured by another vessel...
[Or] after a weary and perilous chase and capture of a whale, the body may get loose from the ship by reason of a violent storm;
and drifting far away to leeward, be retaken by a second whaler, who, in a calm, snugly tows it alongside, without risk of life or line.
Thus the most vexatious and violent disputes would often arise between the fishermen...”
The Law & Economics of 19th Century Whaling
Robert C. Ellickson
Looks at 12 U.S. & U.K. cases where ownership of a dead whale was contested
Whaling industry had clearly established norms in each case
- Very different case by case, but well-suited to each situation
In every case court ruled in accordance with the established norms
Ellickson, Robert C, 1989, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, & Organization 5(1): 83-97
The Law & Economics of 19th Century Whaling
One norm: “fast fish/loose fish”
- Discussed in Moby Dick
British whalers in Greenland hunting right whales with harpoons roped to whaling boat
“Fast fish”: a harpooned whale attached to boat
- belonged to attached boat
“loose fish”: whale that broke free, or had not been harpooned
- other ships free to pursue it
Right whale
Ellickson, Robert C, 1989, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, & Organization 5(1): 83-97
The Law & Economics of 19th Century Whaling
Sperm whales swim faster, deeper, and fight harder, and travel in packs
- hunt with “drogues” to tire out whale
- most important to kill or wound as many whales as possible quickly rather than secure one at a time
Different norm: “iron holds the whale”
- first to harpoon the whale owns it, so long as your are in “fresh pursuit”
A pack of sperm whales
Ellickson, Robert C, 1989, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, & Organization 5(1): 83-97
The Law & Economics of 19th Century Whaling
A tradeoff between simpler rules vs. better incentives:
“Fast fish/loose fish” is simpler/clearer
- fewer disputes
- but doesn't work for sperm whales!
“Iron holds the whale” is more complication & ambiguous
- but better incentives for sperm whaling
Ellickson, Robert C, 1989, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, & Organization 5(1): 83-97
The Law & Economics of 19th Century Whaling
Finback whales — extremely fast swimmers
Hunted with “bomb lances”
- dead whales sink, wash up on shore a few days later
Norm emerged that original killer & the finder would split the whale
- Ghen v Rich (1881)
Finback whale
Ellickson, Robert C, 1989, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, & Organization 5(1): 83-97
The Law & Economics of 19th Century Whaling
Robert C. Ellickson
- In each situation, norms emerged which were well-suited to the environment
“[W]hen people are situated in a close-knit group, they will tend to develop for the ordinary run of problems norms that are wealth-maximizing.”
“A norm is wealth-maximizing when it operates to minimize the members' objective sum of (1) transaction costs, and (2) deadweight losses arising from failures to exploit potential gains from trade,” (p.84).
Ellickson, Robert C, 1989, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, & Organization 5(1): 83-97
The Law & Economics of 19th Century Whaling
Robert C. Ellickson
Best explains the variation in whaling norms
More interestingly, in all whaling dispute cases Ellickson cites, the judge ruled in accordance with the local custom
“Anglo-American whaling norms seem to have emerged spontaneously, not from decrees handed down by either organizational or governmental authorities. In fact, whalers’ norms not only did not mimic law; they created law. In the dozen reported Anglo-American cases in which ownership of a whale carcass was contested, judges invariably held proven whalers’ usages to be reasonable and deferred to those rules,” (p.85).
Ellickson, Robert C, 1989, “A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry,” Journal of Law, Economics, & Organization 5(1): 83-97
A More Modern Dispute
Barry Bonds (record 73rd) home run ball in 2001
Alex Popov had the ball in his glove first, lost it in fight
Patrick Hayashi ended up with the ball
Popov sued Hayashi
Popov v. Hayashi (WL 31833731 Ca. Sup. Ct. 2002)
A More Modern Dispute
“Simply put, the Court should adopt a rule of first possession for baseballs that recognizes the longstanding customs and practices of baseball fans who for more than seventy years have competed to catch and gain title to baseballs that leave the field of play…
“With these principles in mind, the Court should define the law of first possession of baseballs...by answering two questions:
“First, what is the custom, practice, and understanding of baseball fans about first possession and title to baseballs that enter the stands?
“Second, should the rules as practiced in the stands be modified to minimize the risk of violence, misconduct, and tortious behavior?”
A More Modern Dispute
In the end, court found no lawful grounds to deprive either of the ball
Equitable division: ball was sold for $450,000 and Popov & Hayashi split the proceeds 50-50
If any of the facts of the case were slightly different, very clear ownership to one party
Popov v. Hayashi (WL 31833731 Ca. Sup. Ct. 2002)
Hayashi and Popov
Tips for Success, Or: How to College
Take notes. On paper. Really.
Read the readings.
Ask questions, come to office hours. Don’t struggle in silence, you are not alone!
You are learning how to learn
See the reference page for more
Roadmap for the Semester
