Category Archives: Law and Economics

Allan Beever, ‘Negligence and utility’

Abstract: This article examines the claim that assessment of the standard of care in the law of negligence utilises and must utilise considerations of utility. It argues that this position is mistaken. It also maintains that cases frequently thought to support this view do not do so. The article also examines the justice of appeals […]

Henry Smith, ‘Property as complex interaction’

Abstract: In his important article, Benito Arruñada draws out the significance of sequential exchange for property rights and traces inadequacies in the economics of property rights to its overly contractual focus, to the exclusion of multiple transactions on the same asset. In this comment, I argue that although Arruñada’s problem is a genuine one, it […]

James Spindler, ‘Vicarious Liability for Managerial Myopia’

Abstract: This paper shows that fines on the firm (vicarious liability) can optimally deter misreporting by the firm’s manager. In a principal-agent model, shareholders choose whether to award equity compensation to a myopic (short-termist) manager. Equity induces effort and misreporting. The wedge between managerial and shareholders’ time horizons provides a measure of agency costs; more-myopic […]

Scott Harrington, ‘Economic Perspectives on the Restatement of the Law on Liability Insurance Project’

Abstract: This paper provides perspectives on the Restatement of the Law, Liability Insurance (RLLI) project in view of theory and evidence on the economics of liability insurance and the operation and regulation of liability insurance markets. The RLLI project reflects prodigious effort by the Reporters over six years, and many revisions in response to feedback […]

Victor Goldberg, ‘The Lost Volume Seller, RIP’

Abstract: If the buyer breaches a sales contract, and if the seller can be characterized as a lost volume seller, courts and commentators have argued that the seller should be made whole by compensation for its lost profits. This paper argues that framing the problem in this way leads to an absurd result. The buyer […]

Polinsky and Shavell, ‘Subrogation and the Theory of Insurance When Suits Can Be Brought for Losses Suffered’

Abstract: The theory of insurance is considered here when an insured individual may be able to sue another party for the losses that the insured suffered — and thus when an insured has a potential source of compensation in addition to insurance coverage. Insurance policies reflect this possibility through so-called subrogation provisions that give insurers […]

‘The New Institutionalism in Contract Scholarship’

Matthew Jennejohn, The Private Order of Innovation Networks, 68 Stanford Law Review 281 (2016), available at SSRN. Relational contract scholarship is at a pivot point. On the one hand, the relationalist revival that has dominated contracts scholarship for almost half a century may be on the wane. Relational contract scholarship has evolved during this period […]

Posner and Sunstein, ‘Moral Commitments in Cost-Benefit Analysis’

Abstract: The regulatory state has become a cost-benefit state, in the sense that under prevailing executive orders, agencies must catalogue the costs and benefits of regulations before issuing them, and in general, must show that their benefits justify their costs. Agencies have well-established tools for valuing risks to health, safety, and the environment. Sometimes, however, […]

Stephen Bainbridge, ‘The Parable of the Talents’

Abstract: On its surface, Jesus’ Parable of the Talents is a simple story with four key plot elements: (1) A master is leaving on a long trip and entrusts substantial assets to three servants to manage during his absence. (2) Two of the servants invested the assets profitably, earning substantial returns, but a third servant […]

William Hubbard, ‘Quantum Economics, Newtonian Economics, and Law’

Abstract: Just as Newtonian mechanics breaks down when we look at the constituent pieces of our universe – subatomic particles – neoclassical economics breaks down when we look at the constituent pieces of our society – individual people. At the scale of subatomic particles, quantum mechanics provides new foundations for understanding the physical world; at […]