ECO320 Lec 1.docx - Lecture 1 The “central problem” is optimality in the economic analysis of law o Social surplus is a measurement of welfare and

ECO320 Lec 1.docx - Lecture 1 The “central problem” is...

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Lecture 1 - The “central problem” is optimality in the economic analysis of law: o Social surplus is a measurement of welfare and well-being, it determines whether a law is good or bad - The “problem” for “lawmakers” is to maximize social surplus: - What does one mean by a law? o A law is a rule that may or may not have economic consequences for an individual person or a group o Rules organize behavior in a way to maximize well-being or minimizing suffering - Where do “laws” actually come from? o Custom o Judicial Precedent (Common Law) o Statutory Legislation o Executive Decision –Making - So some forms of economic analysis of laws use: o markets without private goods (Intellectual Property) o markets with “bads” (crime) o markets without prices (marriage, domestic contracts - Economics concerns questions like: o Will a reduction in the capital gains tax make the stock market rise? o Will higher tariffs make consumers better off? o Will increased prison terms reduce crime? o Will easier divorce improve the status of women? o Do stronger copyright laws promote creativity? o Will a high-price (meaning low volume of sales) strategy lead to more profit for a firm than a low-price strategy? - o Private bads = costs/disutility, can have a ripple effect - In each area of the course, the following questions arise? - Does a law (rule), over time, become o More Efficient? Efficient = output, productive, better of o More Competitive? Is the price lower (ex. Monopoly tends to charge higher prices)? Things to consider – cost of lawyers, which will increase the price o More Optimal?
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