Foundations of Economic Analysis of Law

by Shavell, Steven

• ISBN13: 9780674011557
• ISBN10: 0674011554
• Format: Hardcover
• Copyright: 2004-03-15
• Publisher: Belknap Press

Summary

What effects do laws have? Do individuals drive more cautiously, clear ice from sidewalks more diligently, and commit fewer crimes because of the threat of legal sanctions? Do corporations pollute less, market safer products, and obey contracts to avoid suit? And given the effects of laws, which are socially best? Such questions about the influence and desirability of laws have been investigated by legal scholars and economists in a new, rigorous, and systematic manner since the 1970s. Their approach, which is called economic, is widely considered to be intellectually compelling and to have revolutionized thinking about the law.In this book Steven Shavell provides an in-depth analysis and synthesis of the economic approach to the building blocks of our legal system, namely, property law, tort law, contract law, and criminal law. He also examines the litigation process as well as welfare economics and morality. Aimed at a broad audience, this book requires neither a legal background nor technical economics or mathematics to understand it. Because of its breadth, analytical clarity, and general accessibility, it is likely to serve as a definitive work in the economic analysis of law.

Table of Contents

Preface	xix
1. Introduction	1	(6)
I. PROPERTY LAW	7	(168)
2. Definition, Justification, and Emergence of Property Rights	9	(18)
1. Property Rights Defined	9	(2)
2. Justifications for Property Rights	11	(12)
3. The Emergence of Property Rights	23	(4)
3. Division of Property Rights	27	(6)
1. Division of Rights Described	27	(1)
2. Social Advantages and Disadvantages of Division of Possessory Rights	28	(2)
3. Social Advantages and Disadvantages of Separation of Possessory Rights from Transfer Rights	30	(1)
4. The Socially Optimal Division of Property Rights, Their Actual Division, and the Law	31	(2)
4. Acquisition and Transfer of Property	33	(44)
1. Acquisition of Unowned Property	33	(5)
2. Loss and Recovery of Property	38	(7)
3. Sale of Property-In General	45	(1)
4. Sale and Theft of Property in the Presence of a Registration System	46	(6)
5. Sale and Theft of Property in the Absence of a Registration System	52	(3)
6. Constraints on the Sale of Property Imposed by the State	55	(3)
7. Gifts	58	(1)
8. Transfer of Property at Death: Bequests	59	(8)
9. Control of Property Long after Death: The "Dead Hand"	67	(5)
10. Involuntary Transfer of Property: Adverse Possession	72	(5)
5. Conflict and Cooperation in the Use of Property: The Problem of Externalities	77	(33)
1. Notion of External Effects in the Use of Property	77	(3)
2. Socially Optimal Resolution of External Effects	80	(3)
3. Resolution of Externalities through Frictionless Bargaining	83	(4)
4. Why Bargaining May Not Occur and, If It Does, Why It May Fail to Result in Mutually Beneficial Agreements	87	(5)
5. Resolution of External Effects through Legal Rules in the Absence of Successful Bargaining	92	(9)
6. Resolution of External Effects through Legal Rules Given the Possibility of Bargaining	101	(9)
6. Public Property	110	(27)
1. Justifications for Public Property	110	(13)
2. Acquisition of Property by the State: By Purchase and by Power of Eminent Domain	123	(14)
7. Property Rights in Information	137	(38)
1. Patents, Copyrights, and Trade Secrets: Property Rights in Information of Repetitive Value	138	(28)
2. Property Rights in Other Types of Information	166	(2)
3. Trademarks: Property Rights in Labels	168	(7)
II. ACCIDENT LAW	175	(114)
8. Liability and Deterrence: Basic Theory	177	(30)
1. Unilateral Accidents and Levels of Care	178	(4)
2. Bilateral Accidents and Levels of Care	182	(11)
3. Unilateral Accidents: Levels of Care and Levels of Activity	193	(6)
4. Bilateral Accidents: Levels of Care and Levels of Activity	199	(8)
9. Liability and Deterrence: Firms	207	(17)
1. Victims Are Strangers to Firms	208	(4)
2. Victims Are Customers of Firms	212	(12)
10. Extensions of the Analysis of Deterrence	224	(33)
1. Problems in the Negligence Determination	224	(5)
2. Why Negligence Is Found and Implications of Findings of Negligence	229	(1)
3. Injurers' Inability to Pay for Losses: The Judgment-Proof Problem	230	(2)
4. Vicarious Liability	232	(4)
5. Damages and the Level of Losses	236	(1)
6. Damages and the Probability of Losses	237	(3)
7. Damages and Courts' Uncertainty about the Level of Losses	240	(2)
8. Damages and Pecuniary versus Nonpecuniary Losses	242	(1)
9. Damages Greater than Losses: Punitive Damages	243	(5)
10. Damages and Victims' Opportunities to Mitigate Losses	248	(1)
11. Causation	249	(8)
11. Liability, Risk-Bearing, and Insurance	257	(23)
1. Risk Aversion and the Socially Idea! Solution to the Accident Problem	258	(1)
2. The Accident Problem in the Absence of Liability and Insurance	259	(1)
3. The Accident Problem Given Liability Alone	260	(1)
4. The Accident Problem Given Liability and Insurance	261	(6)
5. The Purpose of Liability	267	(2)
6. Extension: Nonpecuniary Losses	269	(6)
7. Extension: The Judgment-Proof Problem	275	(5)
12. Liability and Administrative Costs	280	(9)
1. Nature and Importance of Administrative Costs	280	(3)
2. Socially Desirable Use of the Liability System Given Administrative Costs	283	(2)
3. Private versus Social Incentive to Use the Liability System Given Administrative Costs	285	(4)
III. CONTRACT LAW	289	(98)
13. Overview of Contracts	291	(34)
1. Definitions and Framework of Analysis	291	(3)
2. Contract Formation	294	(2)
3. General Justifications for Contracts and for Their Enforcement	296	(3)
4. Incompleteness of Contracts	299	(2)
5. Interpretation of Contracts	301	(3)
6. Damage Measures for Breach of Contract	304	(8)
7. Specific Performance as the Remedy for Breach of Contract	312	(2)
8. Renegotiation of Contracts	314	(6)
9. Legal Overriding of Contracts	320	(2)
10. Extra-Legal Means of Contract Enforcement	322	(3)
14. Contract Formation	325	(13)
1. Search Effort	325	(2)
2. Fundamental Rule of Recognition of Contracts: Mutual Assent	327	(1)
3. Offer and Acceptance	328	(1)
4. Fraud	329	(1)
5. Mistake	330	(1)
6. Information Disclosure	331	(4)
7. Duress	335	(3)
15. Production Contracts	338	(30)
1. Completely Specified Contracts	338	(4)
2. Remedies for Breach and Incomplete Contracts	342	(13)
3. Reliance	355	(7)
4. Renegotiation	362	(6)
16. Other Types of Contract	368	(19)
1. Contracts for Transfer of Possession	368	(12)
2. Donative Contracts	380	(7)
IV. LITIGATION AND THE LEGAL PROCESS	387	(84)
17. Basic Theory of Litigation	389	(30)
1. Bringing of Suit	389	(2)
2. Fundamental Divergence between the Private and the Socially Desirable Level of Suit	391	(10)
3. Settlement versus Trial	401	(10)
4. Divergence between the Private and the Socially Desirable Level of Settlement	411	(4)
5. Trial and Litigation Expenditure	415	(4)
18. Extensions of the Basic Theory	419	(25)
1. Negative Value Suits	419	(4)
2. Sharing of Information Prior to Trial	423	(3)
3. Forced Disclosure of Information Prior to Trial: Discovery	426	(2)
4. Shifting of Legal Fees to the Loser at Trial	428	(4)
5. Difficulty of Statistical Inference from Trial Outcomes	432	(2)
6. Elements of Trial Outcomes Apart from the Judgment	434	(1)
7. Role of Lawyers	435	(2)
8. Role of Insurers	437	(7)
19. General Topics on the Legal Process	444	(27)
1. Public versus Private Legal Systems	445	(5)
2. Accuracy of the Legal Process	450	(6)
3. Appeals and the Legal System	456	(7)
4. Legal Advice	463	(8)
V. PUBLIC LAW ENFORCEMENT AND CRIMINAL LAW	471	(98)
20. Deterrence with Monetary Sanctions	473	(19)
1. Certain Enforcement: Basic Theory of Liability	474	(5)
2. Enforcement with a Probability: The Optimal Probability and Magnitude of Sanctions	479	(11)
3. Synopsis	490	(2)
21. Deterrence with Nonmonetary Sanctions	492	(23)
1. Certain Enforcement with Nonmonetary Sanctions: Basic Theory of Liability	493	(9)
2. The Optimal Probability and Magnitude of Nonmonetary Sanctions	502	(7)
3. When Nonmonetary Sanctions Are Optimal to Employ	509	(1)
4. Joint Use of Nonmonetary and Monetary Sanctions	510	(2)
5. Different Types of Nonmonetary Sanctions	512	(3)
22. Extensions of the Theory of Deterrence	515	(16)
1. Individual Deterrence	515	(3)
2. Marginal Deterrence	518	(2)
3. Costs of Imposing Monetary Sanctions	520	(2)
4. Self-Reporting of Violations	522	(2)
5. General Enforcement	524	(2)
6. Insurance against Sanctions	526	(2)
7. Sanctions for Repeat Offenders	528	(3)
23. Incapacitation, Rehabilitation, and Retribution	531	(9)
1. Incapacitation	531	(4)
2. Rehabilitation	535	(2)
3. Retribution	537	(3)
24. Criminal Law	540	(29)
1. Description of Criminal Law	540	(3)
2. Explanation for Criminal Law	543	(7)
3. Optimal Use of Imprisonment Reviewed	550	(2)
4. Principles of Criminal Law	552	(17)
VI. GENERAL STRUCTURE OF THE LAW	569	(24)
25. The General Structure of the Law and Its Optimality	571	(22)
1. Fundamental Dimensions of Legal Intervention	572	(3)
2. Optimal Structure of Legal Intervention	575	(6)
3. Optimal Structure of Legal Intervention Illustrated	581	(10)
4. Remarks: Incompleteness of Analysis	591	(2)
VII. WELFARE ECONOMICS, MORALITY, AND THE LAW	593	(82)
26. Welfare Economics and Morality	595	(18)
1. Welfare Economics	595	(3)
2. Notions of Morality Described	598	(5)
3. Functionality of Notions of Morality	603	(2)
4. Origins of Notions of Morality	605	(3)
5. Welfare Economics and Notions of Morality	608	(5)
27. Implications for the Analysis of Law	613	(34)
1. Observed Relationship between Law and Morality	613	(6)
2. Optimal Domain of Law and of Morality	619	(16)
3. Optimal Design of the Law Taking Morality into Account	635	(9)
4. The Nature of Normative Discourse about Law and Morality	644	(3)
28. Income Distributional Equity and the Law	647	(14)
1. The Distribution of Income and Social Welfare	648	(1)
2. The Income Tax System, Income Distribution, and Social Welfare	649	(3)
3. Effect of Legal Rules on the Distribution of Income	652	(2)
4. Should Income Distributional Effects of Legal Rules Influence Their Selection?	654	(7)
29. Concluding Observations	661	(14)
1. Descriptive Analysis: Concerning the Effects of Legal Rules	661	(2)
2. Normative Analysis: Concerning the Social Desirability of Legal Rules	663	(12)
References	675	(46)
Author Index	721	(12)
Subject Index	733