Williams College

Department of Economics

Economics 229: Law and Economics

Fall 2024
Syllabus as of: 9/5/2024

William M. Gentry e-mail: wgentry@williams.edu

Office: 329 Schapiro Hall Wednesday, 7:00 – 9:40
Phone: 597-4257 Room: Schapiro 241
Office hours: Tuesdays, 1:30 – 3:30, drop by if I’m in the office or by appointment

Course Description:

This course applies the tools of microeconomic analysis to private (i.e., civil) law. This
analysis has both positive and normative aspects. The positive aspects deal with how
individuals respond to the incentives created by the legal system. Examples include: how
intellectual property law encourages the creation of knowledge while simultaneously
restricting the dissemination of intellectual property; how tort law motivates doctors to
avoid malpractice suits; and how contracts align the incentives between parties to the
contract. The normative aspects of the analysis ask whether legal rules enhance
economic efficiency (or, more broadly, social welfare). Examples include: what legal
rules are most appropriate for mitigating pollution, ensuring safe driving, and
guaranteeing workplace safety? The course will also cover the economics of legal
systems; for example, what are the incentives for plaintiffs to initiate lawsuits and what
role do lawyers play in determining outcomes.

Econ 229 can be used to satisfy a number of requirements in the College curriculum: (1)
it can be used as a 200-level elective for the Economics major; (2) it is an elective for the
Political Economy major; and (3) it is an elective for the Justice and Law Studies
concentration.

Prerequisites:

Economics 110.

Course Materials:

We will use chapters from two books, along with a variety of other readings and court
cases. Both books are available in PDF format for free via open access. The materials,
including the book chapers, will be provided in readings packets. The two books are the
following:

1. Cooter, Robert and Thomas Ulen. Law and Economics, 6th edition, Pearson
Addison-Wesley (denoted CU on the reading list). The book is written so that it
can be used by either law students with relatively little exposure to economics or

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 economics students who have relatively little experience with the law. The PDF
of the entire text can be found at this website:

https://lawcat.berkeley.edu/record/1127400?ln=en&v=pdf

My sense is that when the copyright ownership reverted to the authors, they
planned to post updates, but they have gotten busy on other projects. In general, I
think that it is the best textbook in the field for a course that is based on
introductory economics.

2. Cooter, Robert D. and Michael D. Gilbert. Public Law and Economics, Oxford
University Press, 2022. This book puts a different spin on law and economics. For
the most part, law and economics has focused on private law – interactions
between individuals; this book extends economic analysis into areas of public
law. If you are curious about the book, free access is available at:

https://publiclawandeconomics.org/

I will distribute additional readings as the semester progresses. Some of these

will be in a course packet. Others will be distributed in class or on the Glow website for
the course.

Assignments:

I. Readings. I expect that you will read the material listed on the syllabus for
each class BEFORE the material is covered in class. Our class time will be
much more productive if you are familiar with the material before we start
class.

II. Problem Sets. There will be 6 problem sets. The problem sets will vary in
length and intensity. The tentative due dates are as follows:

PS #1 Weds., 9/25
PS #2 Weds., 10/2
PS #3 Weds., 10/9
PS #4 Weds., 11/6
PS #5 Weds., 11/20
PS #6 Weds., 12/4

In working on the problem sets, I encourage you to discuss the questions with
your colleagues. However, the final written work should be done
independently. Also, please provide attribution to the people you worked with
by adding a note at the top of the problem set. Unless there are
extraordinary circumstances, I will not accept late problem sets.

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 III. Short research paper. You will write a paper on a topic of your choosing
that applies economic analysis to some legal issues or actual legal case. I
expect that the papers will be roughly eight pages long. I will provide more
details as the semester progresses. Paper topics will be due NO LATER than
Wednesday, November 20. Papers will be due on Monday, December 9.

IV. Midterm exam. There will a midterm exam in class on Wednesday, October
16.

V. Final exam. A 2.5-hour final exam will be scheduled during the exam period.

Evaluation:

In determining grades, I will use the following weights:

Participation 5%
Problem sets (6 total) 15%
Research paper 20%
Midterm exam s (2 total) 30%
Final exam 30%

I will evaluate participation mainly in terms of whether you are actively engaged with the
material and make comments or responses during class that further the discussion. I will
also use the participation grade to reward students who distinguish themselves by
bringing relevant current events to my attention. Obviously, attending class is a
necessary (though not sufficient) condition for successful participation.

Exam grading policies:

I grade exams name blind, which I believe increases the impartiality of grading. It also
eliminates the fear that I sometimes hear from students that asking ‘dumb’ questions will
hurt their grade because it affects my opinion of their written work.

If you believe that I have made a mistake in grading your exam, then I will regrade the
exam using the following process. To initiate an exam regrade, you write a memo
outlining the issues of debate. I will consider the issues in your memo and regrade your
entire exam.

Academic honesty:

The Honor Code applies to all work submitted and exams taken in this class. You are
encouraged to collaborate on the problem sets, however as noted above, the work you
turn in should be written up independently and with attribution to those with whom you
discussed the assignment. You may also collaborate in studying or preparing for the
exams, but the written exams should be your work alone. I will expect you to attribute

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relevant sources in writing your research paper. If you have any questions regarding
academic integrity issues, please contact me.

Other important details:

On staying healthy. Our experience in the pandemic taught us the importance of
public health measures. Please take sensible precautions to protect yourself, your
classmates and us. If you feel ill, please do not come to class. I will be happy to work
with you to make sure you can make up any missed portions of class.
On accessibility. Students with disabilities of any kind who may need
accommodations for this course are encouraged to contact the Office of Accessible
Education at 597-4672 or OAEStaff@williams.edu. Also, students experiencing mental
or physical health challenges that are significantly affecting their academic work or well-
being are encouraged to contact me and to speak with a dean so we can help you find the
right resources. The deans can be reached at 597-4171.
On diversity and inclusion. The Williams community embraces diversity of age,
background, beliefs, ethnicity, gender, gender identity, gender expression, national origin,
religious affiliation, sexual orientation, and other visible and non-visible categories. I
welcome all students in this course and expect that all students contribute to a respectful,
welcoming and inclusive environment. If you have any concerns about classroom
climate, please come to us to share your concern.
In this class, we use the name and gender pronouns that individuals ask us to use
as a sign of mutual respect. We will use the pronouns you have indicated on Glow unless
you alert us to a different pronoun. That said, everyone makes mistakes—in general,
should you use an incorrect pronoun or name, the best course of action is to make a quick
correction and move on, rather than dwelling on it.

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Class Schedule (Subject to revision)

Introductory Meeting: Thursday, Sept. 5, 6:30 – 6:55 pm

Week 1: Introduction to Economic Analysis of Law and the Legal System

Wed., 9/11

CU, Ch. 1
CU, Ch. 2, pp. 11 - 43 (I expect that this portion of chapter 2 will simply review
concepts from Economics 110)
CU, Ch. 3
Cooter, Robert D. and Michael D. Gilbert, Public Law and Economics, Oxford
University Press, 2022. Ch. 1: Introduction to Public Law and Economics, pp. 1-
6.
“Rule of Law: Essential Principles,” Democracy Web.
https://democracyweb.org/node/63#print

Chapter 1 on CU provides a brief overview of the field of law and economics and
introduces the book. Most of this chapter is relatively straightforward introduction, but
the section on the primacy of efficiency over distribution in analyzing private law
deserves careful attention. Chapter 2 of CU reviews basic microeconomic concepts that
will be used throughout the course. I view this material as a review so we will not cover
the material extensively. Instead, the ideas will come up throughout the semester.
However, if you have questions about the material, please raise them and we can discuss
the issues either in class or outside of class.

Chapter 3 of CU is a very brief (and selective) introduction to legal institutions. The

chapter does not have any economics. Unlike Chapter 2 for which I expect that you will
have previous background, I do not expect you to have any prior knowledge of these
topics so we will spend time discussing this chapter in class – along with several
extensions.

The introductory chapter of Cooter and Gilbert provides a contrast between private and
public law, which is a useful distinction to understand. It also discusses the difference
between positive and normative analysis in economics.

The last reading provides a brief introduction to the concept of the rule of law.

Week 2: Basics of property law, Establishing & enforcing property rights

Wed., 9/18

CU, Ch. 4, pp. 70 – 111

CU, Ch. 5, pp. 112, 135 - 146, 150 - 166
Ostrom, Elinor, et al., “Revisiting the Commons: Local Lessons, Global
Challenges,” Science, 1999, vol. 284, pp. 278-282.
Pierson v. Post, 3 Cai. R. 175, 2 Am. Dec. 264 (N.Y. 1805)

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 “WWWhat’s in a name? Domains caught in the middle of tug-of-war on the
Web,” Leslie Miller, USA Today, May 13, 1998.
Tracy, Marc. “Major Record Labels Sue A.I. Music Generators,” New York
Times, June 25, 2024.
Midler v. Ford Motor Co., 849 F.2d 460 (1988)

This week’s reading front loads much of the textbook reading for the four classes on
property law. Our focus this week will be on the range of property that can be owned,
why property ownership is important for well-functioning private markets, how property
ownership is established and enforced. We will also discuss different rules for enforcing
property rights.

The Ostrom et al. article discusses property rights in the context of common resource
problems. Pierson v. Post is a classic case regarding establishing ownership. The
particular context of the case is archaic, but the newspaper article of cybersquatting might
suggest the continuing relevance of the basic ideas. While we will discuss intellectual
property in more detail in week 5, the recent case of music labels suing artificial
intelligence firms that create music presents another thorny issue in establishing
ownership. These cases also remind me of an earlier case involving Bette Midler so I’ve
included it for this week.

Week 3: Property Law: Externalities

Wed., 9/25

CU, Ch. 2, pp. 37 – 43 (revisit)

CU, Ch. 5, pp. 146 - 150, 166–174
CG, Ch. 2, pp. 31 – 35
CG, Ch. 3, pp. 54 - 64
Cases: Boomer v. Atlantic Cement Co., 309 N.Y.S. 2d 312, 257 N.E.2d 87 (1970)
Spur Industries, Inc. v. Del E. Webb Development Co., 494 P.2d 701 (Ariz. 1972)

The readings in Week 2 covered the work of Coase on social costs (i.e., issues that we
often think of as externalities). In this week, we will delve more deeply into the
economics of property law associated with externalities. The Coase Theorem will be
central to our discussion. The Boomer v. Atlantic Cement and Spur v. Del Webb cases
are classic examples of thinking through private externality issues. Cooter and Ulen focus
mainly on private law solutions to externalities; in contrast, Cooter and Gilbert think
about the boundary between private law and public law solutions. As public law
solutions, they mainly discuss regulation, but we will also consider ideas about pricing
(tax policies).

Week 4: Property Law: Assembly and Coordination: Eminent Domain / Zoning

Wed., 10/2

CU, Ch. 5, pp. 174 – 186

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 Heller, Michael, “The Tragedy of the Anticommons,” ch. 1, The Gridlock
Economy, Basic Books, 2008.
Cases: Ambler Realty Co. v. Village of Euclid, Ohio, 272 U.S. 365 (1926)
Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922)
Penn Central v. New York City, 438 U.S. 104 (1978)
Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)
Kelo v. City of New London, 545 U.S. 469 (2005)

The assembly of land and coordination of land use are important issues in property law.
The textbook reading is rather short since previous weeks assigned most of chapters 4
and 5. Instead, we will focus on issues raised in a variety of important cases.

Week 5: Intangible Property: What Can Be Owned?

Wed., 10/9

CU, Ch. 5, pp. 112 – 135

Cases: Moore v. Regents of the University of California 51 Cal. 3d 120; 271 Cal.
Rptr. 146; 793 P.2d 479 (1990)
Alice Corp. v. CLS Bank Int’l 573 U.S. 208 (2014)
American Broadcasting Cos. v. Aereo, Inc. 573 U.S. 431(2014)
Kirtsaeng v. John Wiley & Sons, Inc. 568 U.S. 519 (2013)
Bowman v. Monsanto Co. 569 U.S. 278 (2013)

Most of our early examples of property law deal with tangible property – land, real estate,
goods, etc. Intellectual property law extends these concepts to intangible property – ideas
and the expression of ideas. As technology evolves, intellectual property law plays a
greater role in the economy. We will mainly explore a variety of cases to illustrate the
key concepts.

Week 6: Midterm Exam

Wed., 10/16

Week 7: Contracts: Why Contract & Limits to Contracts

Wed., 10/23

CU, Ch. 8, pp. 276 – 306

Cases: Normile v. Miller, 313 N.C. 98, 326 S..E.2d 11 (1985)
Johnson v. Davis, 480 So.2d 625 (Fla. 1985)

Contracts are legal instruments that help enforce promises and trust. They are part of the glue that
holds a market economy together. We will start with basic ideas about why parties contract, what
makes a valid contract and the limits to what types of contracts can be written. Several of our
examples will build on basic real estate contracts.

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Week 8: Contracts: What Happens When Things Go Wrong?
Wed., 10/30

CU Ch. 9, pp. 307 - 381

Cases: Jacob & Youngs v. Kent, 230 N.Y. 239, 129 N.E. 889 (N.Y. 1921)
Parker v. Twentieth Century Fox, 3 Cal. 3d 176 (Cal. 1970)
Peavyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962)
Walgreen Co. v. Sara Creek Property Company, 966 F.2d 273 (1992)
Opera Company of Boston, Inc., v. the Wolf Trap Foundation for the Performing
Arts, U.S. Court of Appeals, Fourth Circuit. - 817 F.2d 1094 (4th Circuit 1987)

Most of the time, contracts work out as planned. For example, a buy a ticket for a plane
trip and the plane takes off and lands as promised. You might not think of a plane ticket
as a contract, but read the fine print! The fun starts when things don’t work out as
planned. What are the remedies when things go wrong? Are there excuses that allow one
party to get out of a contract? What happens when contracts are incomplete in the sense
that they do not specify all of the possible outcomes? Courts, or other forms of mediation,
sometimes have to get involved in these situations.

Week 9: Torts
Wed., 11/6

CU, Ch. 2, pp. 43 – 49

CU, Ch. 6, pp. 187 – 229
Case: United States v. Carroll Towing, 159F. 2d 169 (1947)

Contract law deals with situations in which parties have a defined (albeit not necessarily
perfectly defined relationship with each other). Tort law deals with situations in which
parties do not necessarily have a contractual relationship but they still interact in some
way. Many of these situations can be considered accidents, though some torts are
considered intentional so the term “accident” isn’t perfect. Given that many of the
situations have a probabilistic element, it is useful to review the material in chapter 2
about risk, decision-making under uncertainty, and insurance.

Chapter 6 covers the standard economic model of torts. The key questions are about who
is liable for an outcome and, if someone is liable, what damages might remedy the
situation? There are different possible liability standards. The standard model is about
accidents so one key concept is exerting effort to avoid the accident – that is, investing in
precaution. The United States v. Carroll Towing is a classic case in this area, albeit one
with a complicated story to follow.

Week 10: Torts: Duties & Product Liability

Wed., 11/13

CU Ch. 7, pp. 230 – 261

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 Case: Tarasoff v. The Regents of the University of California, Supreme Court of
California, 1976
Other cases to be added

We will extend the basic model of torts by considering different liability standards and
questions about what duties different parties have to others.

Week 11: Torts: Medical Malpractice and Mass Torts

Wed., 11/20

CU Ch. 7, pp. 261 – 275

Cases to be added

Medical malpractice is a common type of tort. It is also an interesting case for

considering various types of tort reforms.

NO CLASS ON WEDNESDAY 11/27 – Thanksgiving Holiday

Week 12: Legal Process

Wed., 12/4

CG, Ch. 10, pp. 357 – 414

We’ll close the semester by using economics to analyze the overall legal process. Cooter
and Gilbert call this a theory of adjudication. What goes into the decision to file a
lawsuit? How should parties to the suit think about settling the case? Why have a
hierarchical judicial system with appeals?