Law and Economics 6th edition

536 Name Index

Gigerenzer, Gerd, 441n Johnson, Eric J., 163n Levitt, Steven D., 498n,
Gill, Richard T., 490 Johnson, Gary, 235n 500–501n, 503n, 504n,
Gillespie, Robert W., 497n Johnson, Rucker C., 491n 515, 526n, 530
Gilmore, Grant, 282n Johnson, William G., 264n
Gilson, Ronald, 444, 444n Joskow, Paul, 353n Lichtenberg, Frank, 125n
Ginsburg, Douglas, 3 Joyce, Ted, 501n Liebman, James S., 511n
Gittings, Kaj, 515, 515n Liptak, Adam, 487n
Gluckman, Max, 70 Kahneman, Daniel, 46, 50, 231, Llewellyn, Karl, 415
Goetz, Charles, 321n, 322 231n, 258n, 395 LoPucki, Lynn M., 241n
Goldbart, Paul, 101n Lott, John R., Jr., 509n, 525n,
Goldstein, Daniel, 163n Kamin, Sam, 504n
Goldstein, Paul, 131 Kaplow, Louis, 9, 101n, 108n, 526, 529n
Gordon, Wendy, 130n Loury, Glenn C., 490
Greenwood, Peter, 493 222n, 441n Ludwig, Jens, 529n
Gregory, Paul, 30n Karaca-Mandic, Pinar, 212n
Gross, Samuel R., 445, 511n Katz, Lawrence, 515 Macaulay, Stewart, 341n
Grossman, Michael, 521–22 Kellerman, Arthur, 525n Macaulay, Thomas B., 130n
Grotius, Hugo, 148–49 Kelling, George L., 528n MacCoun, Robert, 522n
Gruber, Jonathan, 473n Kessel, Reuben, 162n Mackie, J. L., 193n
Guthrie, Chris, 396, 443n Kessler, Daniel, 262n, 264n, MacLeod, W. Bentley, 247n,

Haddad, William, 122n 266n, 420n, 448, 448n, 362n
Hand, Learned, 214 449n, 503n Maine, Henry, 276
Harcourt, Bernard E., 528n Kessler, Friedrich, 364 Malani, Anup, 496–97
Hardin, G., 140n Keynes, John Maynard, 11 Mansell, G., 509n
Harrison, Glenn W., 300n Kiss, Alexander, 511n Mark, Randall, 493n
Harrison, John, 129 Kitch, Edmund, 271n Marotta-Wurgler, Florencia,
Hawkins, Gordon, 504n Klast, Polly, 504
Hayek, Friedrich, 111, 111n Kleiman, Mark, 521n 367, 367n
Heather, Nick, 522n Klein, Benjamin, 341n, Marshall, Larry, 511n
Heffler, Stephen, 265n 446 Marshall, Thurgood, 510n
Hegel, G. W. F., 70, 111 Klerman, Daniel, 407n Marvell, Thomas, 530, 530n
Helland, Eric, 504, 504n Kohn, Linda T., 264n Marx, Karl, 70, 110
Heller, Michael A., 140n Kornhauser, Lewis A., 362n, Maskin, Eric, 300n
Helmholz, Richard, 154n 435n Matheson, Daniel J., 511n
Henderson, James A., 268n Korobkin, Russell B., 50n, McCrary, Justin, 473n, 495n,
Herbert, A. P., 198 231n, 370
Herrnstein, Richard J., 490n, Koszegi, Botond, 473n 501n
Kozinski, Alex, 3 McGillis, D., 493
497n Kraakman, Reinier, 245n Meier, Raoul, 388n
Hiatt, Howard, 264n Kraus, Jody, 340n Meites, Thomas, 448, 448n
Hirshleifer, Jack, 300n Kreps, David, 33n Melamed, A. Douglas, 3n, 100,
Hjalmarsson, Randi, 497n Kronman, Anthony T., 357n,
Hobbes, Thomas, 92 358n 100n
Hoffman, Elizabeth, 89n Kurtz, Sheldon, 150n Merges, Robert P., 121n
Holden, James W., 415n Merrill, Thomas A., 145n,
Holmes, Oliver Wendell, Landes, Elizabeth, 161n
Landes, William, 247n 165n
1, 55 Landes, William M., 2n, 130n, Miles, Thomas J., 526n
Hovenkamp, Herbert, 150n Milken, Michael, 475
Hughes, James W., 265n 131, 133n, 433n Miller, Geoffrey, 448, 448n
Langan, Patrick A., 490 Mocan, H. Naci, 515, 515n
Iguchi, Y., 522n Leamer, Edward, 516n Montgomery, Nicholas, 511n
Leape, Lucian L., 264n Moody, Carlisle, 530, 530n
Jacoby, Kristen, 511n Lee, David S., 473n, 495n Moore, Michael S., 455n, 493
Jasen, Matthew J., 169n Lempert, Richard, 514 Morantz, Alison, 274n
Lessig, Lawrence, 131n Murnighan, J. Keith, 89n
Levine, David, 128n Murphy, Kevin, 521–22
Murray, Charles A., 494, 494n
Mustard, David B., 529n
Myerson, Roger, 33n

Name Index 537

Nadelman, Ethan, 521n Rosenfield, Andrew, 5n Sunstein, Cass, 258n
Nagin, Daniel, 492, 493n Rothman, Stanley, 517n Sun Tzu, 286
Nalebuff, Barry, 33n, 300n Rubin, Paul H., 272n, 515, Sykes, Alan, 244n
Nelson, Richard R., 121n Syres, Ian, 101n
Newhouse, Joseph P., 264n 515n Syverud, Kent, 445
Newton, Isaac, 129 Rubinfeld, Daniel, 178n, 242n,
Nixon, Richard, 522 Tabarrok, Alex, 504, 504n
Nobel, Alfred, 2n 262n, 265n, 266n, 420n, Tabbach, Avraham, 242n
Noonan, John, 195n 447, 447n, 449n Talley, Eric L., 321n
North, Douglass C., 78n Ruffin, Roy, 30n Taylor, John, 513n, 514
Nozick, R., 110n Russell, Bertrand, 195, 195n Thales of Miletus, 126
Rustad, Michael, 263n Thomas, Robert Paul, 78n
O’Connell, J. O., 273 Rutan, Burt, 129 Thornstedt, H., 509n
Ordover, Janusz, 242n Ruud, Paul, 447n Tideman, Nick, 218n
Orsagh, Thomas, 497 Ryan, George, 511 Tirole, Jean, 33n, 300n
Ostrom, Elinor, 140n, 141n Titmus, Richard, 162n
Sanchirico, Chris, 9 Torrens, Richard, 150n
Palsgraf, Mrs., 194–95 Sands, Benjamin, 68n Traynor, Roger, 187
Pareto, Vilfredo, 14n Schaefer, Hans-Bernd, 49n, Trebilcock, M. J., 240n
Passell, Peter, 514 Triantis, George, 340n,
Patil, Sujata, 511n 454n
Paz-Ares, C., 153n Schanzenbach, Max M., 158n 362n
Perloff, Jeffrey, 447, 447n Scherer, Frederick, 119n Trossen, David R., 367n
Picker, Randal, 33n Schumpeter, Joseph, 113 Truman, Harry S., 148
Polinsky, A. Mitchell, 224n, Schwartz, Alan, 367n, 368n Turow, Scott, 511
Scott, Robert, 321n, 322, Tversky, Amos, 46, 50, 231,
225n, 242n, 247n, 262n,
265n, 268, 420n, 449n, 362n 231n, 395
526n Sellin, Thorsten, 511n
Polsby, Daniel, 525n Shakespeare, William, 382, Ulen, Thomas S., 3n, 50n, 87n,
Porat, Ariel, 216n, 251n, 335n 126n, 231n, 235n, 248n,
Posner, Richard A., 1, 2, 5n, 485 320n, 330n
126n, 130n, 131, 133n, Shapiro, Martin, 512n
161n, 247n, 418–19, 426 Shavell, Chris, 9 Van den Bergh, Roger, 1
Power, G., 139n Shavell, Steven, 101n, 108n, Venkatesh, Sudhir Alladi,
Powers, Stephen, 517n
Priest, George, 446 129, 129n, 212n, 235n, 498n
243n, 247n, 268, 420n, Vertova, Pietro, 494
Rachlinski, Jeff, 395 447, 449n, 526n Vidmar, Neil, 517n
Radin, Margaret Jane, 161n Shepherd, Joanna M., 515, Viscusi, Kip, 273n
Ramseyer, J. Mark, 403n, 515n Vuchinich, Rudy E., 522n
Shipp, K. R., 512n
406n Shustorovich, Ellen, 515 Waldfogel, Jeremy, 447–48
Raphael, Steven, 491n Siegelman, Peter, 507–8 Waldfogel, Joel, 125n,
Rasmusen, Eric B., 33n, 126n, Silver, Charles M., 419, 426,
444n, 445 448n
403n, 406n Sitkoff, Robert H., 158n Washington, Benjamin,
Reuter, Peter, 522n Sixit, Avinash, 300n
Revesz, Richard E., 435n Slawson, David, 367n 265n
Rice, E., 126n Sloan, Frank, 264n Webster, Cheryl Marie,
Richards, Keith, 522n Smith, Adam, 276, 405–6,
Ringleb, Al-H., 241n 412 504n
Robbins, Lionel Charles, 11 Smith, Henry, 165n Weiler, Paul C., 264n
Robinson, Paul H., 490, Snyder, Edward A., 265n Wells, Martin T., 517n
Sperlman, W., 493 West, Valerie, 511n
495–96 Spitzer, Matthew, 89n Wiggins, Steven N., 241n
Rose-Ackerman, Susan, 161n Stravinsky, Igor, 134 Wilde, Louis, 367n
Rosenberg, David, 243n Stremnitzer, Akexander, Wilkinson-Ryan, Tess,
242n
Summers, Robert, 64n 324–25
Williamson, Oliver, 304

538 Name Index

Wilson, James Q., 487n, 488n, Wittman, Donald, 447, 447n Zarkin, Gary A., 498n
489n, 490, 490n, 497n, Wolfers, Justin, 515n, 516 Zimring, Franklin E., 504n,
498, 499, 523n, 524n, Wolpin, Kenneth, 492–93, 493n,
528n 531n
513n, 514n Zinea, James, 134n
Winter, Ralph, 240n
Witte, Ann, 494, 497 Ypersele, Tanguy van, 129

Subject Index

Abortion, crime and, 499–501 efficiency and, 427 number of trials and, 408
Accession, 145 randomness and, 428 other countries identifying
Accidental harm, risk of, 237 Agreement on Trade Related
Accidents more efficient rule,
Aspects of Intellectual 152, 153
law of, 189 Property (TRIPS), payment of litigation costs in,
minimizing social costs of, 118n 389n
AIDS, 491 pretrial discovery in, 383
199–201 Alienation, 161 relative optimism and, 409
Action on the case, 64n Alignment, independence ver- simplifying, 388
Activity levels, tort liability and, sus, 405 Amici curiae (friends of the
Allocative efficiency, 14, 363 court), 64
211–13 Alternative dispute resolution Answer, 62–63
Acts (ADR), 404 Anticipated rescue, 348
rise in, 450 Anticipatory breach, 338
of God, 350 Amazon’s patent on “one-click” Anticommons, tragedy of the,
unverifiable, 334–36 Internet orders, 125 140
Actual judgment, 385 American Arbitration Anti-insurance, 335
difference between perfect- Association, 321, 405 Antitrust laws
American Federation of State, economics in, 1, 2
information judgment County, and Municipal joint ventures and, 121
and, 385 Employees research and development
Addictive drugs, economics of, (AFSCME), 507 and, 121
518–22 American Ice Trust, 113 Appeals, 64, 410–17, 451–52
Add-on clauses, 369–70 American Law Institute, 57 correcting mistakes, 411–12
Adhesion contracts, 364–66, American rule “each pays his efficiency as judicial motive,
371 own” legal costs 416–17
Administrative costs, 385 allocating costs of trials, 384 efficiency of litigation mar-
comparison of error costs for attorney fees in malprac- ket, 412–14
and, 385 tice actions, 265n enacting social norms,
reducing, 397 British rule causing fewer 414–16
of settlement, 385 trials than, 408 errors as cause of, 451
tort liability and, 223–25 computing value of legal filing fees for docketing, 451
Administrative law judges, 59 claim and, 388 lawyers fees for, 451
Admiralty law, 155–56, 250 decision not to appeal under, Appellate courts, 60–61
Adversarial process, 57, 397, 389 Arbitration, 404
403 defined, 388 compulsory, 405
judges in, 403 differences between increase in, 450–51
Adverse possession, 153–55 European rule and, Archiving, 130
economic advantage of, 154 384 Article III judges, 59n
Adverse selection, 48–49, 238n, exchange of information in, Asbestos, 252, 268
240 383 litigation concerning, 269–70
Advertising, restrictions on, for judges in, 406–7 Assault, 188
lawyers, 428–29
African Americans, crime and,
488, 490
Agency game, 283–87, 427–29

539

540 Subject Index

Asset pricing, theory of, 37 Bequests, 156–59 Calabresi and Melamed
Association of Home Appliance Best efforts, 362 argument on protect-
Best practices, enforcement of, ing legal entitlement,
Manufacturers, 415 67n
Assumption of the risk, 273n 216
Asymmetric information, Beyond a reasonable California
background-check law of,
297–98 doubt, 63 524
agency problem and, 428 Bhopal disaster, 268–69 death penalty in, 510
Asymmetric valuation, 304 Bias, hindsight, 51, 217, 435 “three strikes and you’re out”
Bifurcated equilibrium is sepa- law in, 479, 504
Backward induction, 389n
Bad news rating, 434n California Coastal Commission,
Big Law, 429 181–84
as free, 393–95 Bilateral activity levels, 213
as good for settlements, Bilateral precaution, 204–6 Capital punishment. See Death
Bill of exchange, 414n penalty
391–93 Bonds
Bad Samaritan contracts, 347 Cartels, 364
Bankruptcy, 236, 240–42 Bowie, David, 241n outlawing, 363
Bargaining, 159, 174 securitization, 241n
Boundary maintenance, conges- Carter, Mary, agreements, 247
civil disputes and, 89 Case of the hairy hand, 313
costs of, 88 tion versus, 146–48 Cause
differences between coerced Bounty hunters, 480
Bowie, David, bonds, 241n of action, 62, 383
contracts and, 344–45 Brady Handgun Violence tort liability and, 192–96
expected value of, 389 Cause-in-fact, 193
game theory in explaining, Prevention Act, 524, Caveat emptor, 360n
529 Central Kentucky Natural Gas
77, 89, 384 Brand names in legal services,
hostility in, 90 428 Company, 143
lubricating, 103 Breach of contract Central strand of economic
private, 100 anticipatory, 338
relationship between reme- buyer’s, 310 analysis, 455
court-designed remedies for, Chain of title, breaks
dies and, 96 308
in the shadow of the law, 96n precaution against, 289–90 in, 153–55
with the state, 181–84 seller’s, 309–10 Champerty, 428n
steps in, 76 Breach of duty, 196–98 Charitable contributions,
successful, 84–85 Breach of enforceable promises,
supply and demand and, remedy for, 280–81 115
Breadth, 119, 120–22 Circumvention costs, 156–59
423–24 question of, in trademarks, Citizenship, diversity of, 62
transaction costs in obstruct- 133 Civic duty in crime deterrence,
Bridge tolls, 117
ing, 101 Bright-line rules, 220 481–83
Bargaining theory British rule, 408. See also Civil Aeronautics Board, 104
English rule Civil disputes
of contracts, 277–82 Broad copyright, 130
criticism of, 281–82 Broken windows hypothesis, agreement to settle out of
Barotse (African tribe), 70 528n court, 400
Battery, 188 Burden of proof, 436–41
Bayer Company, 133 Burglary, hot, 525 as bargaining game, 77
Bayesian inference, 438n Business-judgment rule, 319n damages in, 408
Behavior But-for test, 193–94 liability in, 408
criminal, 469–70 Buyer’s breach, 310 procedural aspects of, 382
effect of legal sanctions on, 3 with unique good, 310 settlement bargaining in, 400
price-taking, 27 Buyer’s ignorance, advantage Civil Justice Reform Act
Behavioral economics, 50–52 of, 366
Behavioral law, 50 (Illinois, 1995), 267
Bench trial, 63 Civil law traditions, 56–58
Benefits
external, 39 codification of criminal law
marginal, 22 in, 456

compensation in, 460
judges in, 57, 406
lawyers in, 437n
positive damages in, 309

Subject Index 541

Civil Litigation Research enforcement of monopoly Concession limit, 400
Project, 445 contracts and, 363 Conflict of Laws, 61n
Congestion, boundary mainte-
Civil responsibility, law of, 188 expectation damages in, 309
Civil rights trials, 450 judges in, 57, 397, 403 nance versus, 146–48
Civil tradition, judges in, 397 negligence in, 417 Conservatism, origins of prop-
Civil trials precedent in, 56
Commons, tragedy of the, 140 erty and, 111
decline in number of, 448 Communism Consideration, 278, 279, 280
number of, as jury trials, collapse of, in Eastern Constitutions, 58
Constrained maximization in
448–49 Europe, 141–42
Class Action Fairness Act crime and, 457 microeconomic the-
theory of, 70 ory, 22
(2003), 426 Community policing, 528 Consumer choice and demand,
Class actions, 268n, 418–19, Community service, 459 theory of, 18–26
Comparative advantage, oppor- Consumer preference orderings,
425–26, 431 18–20
Clear and convincing evidence tunity cost and, 30 Consumer product injuries,
Comparative negligence, 225–26
standard, 63, 263 liabilities for, 238–39
Closely held corporation, 139 208–11, 248–50, 384n Consumer Product Safety
Coase Theorem, 81–88 modified, 248n Commission, 267
pure, 248n Consumer’s optimum, 21
application of, 121, 410 slight-gross, 248n Consumption, nonrivalrous, 40
bargaining games and, 89 Compensation, 175–76 Contiguity, 177
defined, 292 in civil law, 460 Contingency
encouraging bargaining by paradox of, 331–34 fortunate, 328–31
perfect, 254, 319, 460, 461 unfortunate, 326–28
lowering transaction Compensatory damages, 169, Contingency fees, 8, 408n, 423,
costs, 91 427–28, 429
fortunate contingency and, 253 Contract(s). See also Breach of
330 distinguishing between puni- contract
as normative principle of of adhesion, 364–66, 372
property law, 93–94 tive damages and, 95n Bad-Samaritan, 347
renegotiation and, 326, 328 money as, 94–95 coerced, 344–45
tort law and, 189–90 payment of, 456 economic interpretation of,
The Coase Theorem (Cooter), for physical injuries, 313 291–99
87n Competition, imperfect, 32 economic theory of enforce-
Coca-Cola Company, 134, 135 Competitive market, 412 ment, 283–87
Code Napoléon, 56 Complaints, 62 economic theory of remedies,
Code of Hammurabi, 256n filing, 419–20 287–91
Coerced contracts, differences filing fees and number of le- enforcement of monopoly,
between bargains and, 363
344–45 gal, 420–22 fee-for-service, 427
Cohort quality effect, 500 legal, 442n formal and informal methods
Cohort size effect, 500 Complements, 184 for compliance, 341
Coinsurance, 48 Compromise futures, 338
Collateral source rule, 266 offers to, 409 high-price-strong-warranty,
Collective Clemency Bill (Italy, Compulsory arbitration, 405 365n
2006), 494 health maintenance organiza- imperfections in, 292
Columbine High School, 523 indefinite, 362n
Co-mingling, 138 tions (HMOs) and, low-price-weak-warranty,
Commercial impracticability, 405 365n
352–53 Compulsory licensing, 125 perfect, 292, 298
Commitment, 283–87 Compulsory mediation, 384 relational, 299–304
Common employment, 273n Compulsory pooling of social, 78
Common information, 355 information, 397
Common law traditions, 56–58 effects of, 397
codification of criminal law Concealed weapons, laws
in, 456 allowing carrying of,
duty to disclose and, 360n 526, 529

542 Subject Index

Contract(s) (continued) investment in performance Costs
spot, 338 and reliance, 331–41 administrative, 385
standard-form, 364–66, 367, circumvention, 156–59
372 contract solutions to par- depletion, 156–59
take-it-or-leave-it, 365 adox of error, 385, 397
compensation, external, 39
Contract disputes, 443 335–37 filing, 390
civil trials for, 449–50 fixed, 27
paradox of compensa- marginal, 22
Contract law, 189, 307–81 tion, 331–34 private marginal, 39–40
economic theory of, 276–306 social marginal, 39–40
formation defenses and per- time, 338–41 transaction, 85, 339
formance excuses, unverifiable acts, variable, 27
341–72
dire constraints and remote 334–35 Counterfactual values, 281
risks, 343–54 models of, 325–31 Court-designed remedies for
duress, 343–47
frustration of purpose, fortunate contingency, breach of contract,
353 328–31 308
impossibility, 349–53 Court-imposed damages, 307
mutual mistake about investment in perform- Court of Common Pleas, 66n
facts, 353–54 ance and reliance, Court of Exchequer of Pleas,
mutual mistake about 331–37 66n
identity, 354 Court of King’s Bench, 66n
necessity, 347–49 time, 338–41 Crack epidemic, receding,
incompetence, 342–43 unfortunate contingency, 530–31
information, 354–62 Creative Commons, 131
duty to disclose, 360–61 326–28 Creative destruction, 113
fraud, 361 Contract price, 330 Creativity, copyright and patent
indefinite or vague Contract rights, 73 law and, 130
promises, 361–62 Contributions Credibility, characteristics of,
misrepresentation, 361 114
unilateral mistake, charitable, 115 Crime
356–59 joint and several liability with abortion and, 499–501
monopoly, 363–71 African Americans and, 490
contracts of adhesion, and without, 245–47 causes of, 487–89
364–66 Contributory negligence, 65, 68, defined, 457
unconscionability, diminished rationality and,
368–70 208–11, 273n, 417 470–74
remedies as incentives, Convention for the Protection of explaining decline in, in
307–41 United States, 526–31
alternative, 309–24 Human Rights and guilty of future, 493
disgorgement, 319–20 Fundamental inchoate, 458
expectation damages, Freedoms, Article 6 making career of, 498–99
309–10 (2), 459n punishment in deterring,
liquidated damages, Cooperation, 283–87 491–501
321–24 in creating surplus, 75, 76, and punishment in United
opportunity cost, 311–13 99, 400 States
party-designed Cooperative enterprises, 142 causes of, 487–89
remedies, 321–24 Cooperative surplus, 75, 99, 400 crime rates in, 485–86
problem of subjective distribution of, 76n economic theory of,
value, 313–18 Copyright, 113, 117, 130–31 454–84
reliance damages, 311 broad, 130 imprisonment rates in,
restitution, 318–19 duration of, 130, 134 486–87
specific performance, future of, in digital age, 131 social cost of, 489–91
320–21 historical agency of, 131 ranking of, by seriousness, 463
Coronation Cases, 297
Corporations, 139, 165
criminal, 464
Corpus Juris Civilis, 56
Corrections Corporation of
America, Inc., 507
Cost-benefit analysis, 4, 169
Cost internalization, 416
The Cost of Accidents
(Calabresi), 200

Subject Index 543

rational, 463–67 mitigating, 337 capital punishment and,
social costs of, 489–91 opportunity-cost, 311–13, 516–17
street, 487
strict liability, 464 315–16 general, 503
victimless, 458 perfect, 380 hypothesis of, 491
violent, 486n perfect expectation, 380 marginal, 476
Crime deterrence permanent, 169 mathematics of optimal
civic duty in, 481–83 punitive, 257–61, 456
optimal amount of, 475–77 reliance, 311, 314–15, 376 means of, 477–83
Crime rates temporary, 169 private, 479–80
economic conditions and, Day fine system, 509 socially optimal, 476
Death penalty, 510–17 specific, 503
497–98 deterrence and, 511–17 of youth crime, 472–73
in United States, 454, 485–86 increased use of, 529 Development, regulation of,
Crime reports, international racial discrimination and, 517
social costs of, 516 184–85
comparisons of, 454 Death spiral, 49 Diethylstilbestrol (DES), litiga-
Criminal behavior, criminal in- Decision making under uncer-
tion involving, 270
tent and, 469–70 tainty, 43–49 Digital libertarianism, 131
Criminal corporations, 464 Decision trees Digital rights management,
Criminal intent, 456–57
in deciding lawsuits, 386–87 114
criminal behavior and, in determining reasons for Diminished rationality, crime
469–70
lawsuits, 386–87 and, 470–74
Criminal law preponderance of evidence Diminished-value formula,
economic goal of, 474–75
intent, 456–57 and, 440–41 310n
necessity of, 460–63 Decoupling damages, 224–25 Dire constraints, 343–54
public prosecution, 457–58 Deductibles, 48 Disclosure
punishment in, 459–60 De facto currency, 414n
social costs and, 474 Default judgment, 443n duty to, 360–61
standard of proof, 458–59 Default rules, 166, 293–94, 341 involuntary, 394–95
traditional theory of, 455–60 Defect Discounting, 169n
Discovery, 390n, 393
Criminals, insurance for, 478 in design, 251, 266 abuse, 398
Criminal trials, increase in, 450 in manufacturing, 251, 266 cost of, compared to
Culpa in contrahendo, 297 in warning, 251
Customs in trade, 302 Defendants, 62–63 litigation, 397n
Cy pres, doctine of, 159 Defensive medicine, evidence differences between United

Dalkon Shield Claimants Trust, about, 264–65 States and Europe,
431 Deferred exchanges, 283 396–97
Demand error costs and, 397
Damages, 94–95 judges and, 390n
cap on, 336 individual, 24–26 pretrial, 383
choosing between injunctions for insurance, 47 timing of, 390
and, 168–69 law of, 25 Discretionary
compensatory, 94–95, 169, price elasticity of, 25 review, 60, 410
253, 456 Demand curve, 24–26 Disgorgement, 319–20
decoupling, 224–25 Democratic equality, 110 damages, 319
disgorgement, 319 Demographics, changing, 528 perfect, 460
expectation, 281, 286, Dependent variables, 16–17 Disparate resolution, 5
309–10, 378–79 value of, in graph, 1 + 6 Disproportionate punishment,
expected, 420 Depletion costs, 156–59 455
Hand rule, 253–57 Depository agreement, 299 Disputes
imperfect, 381 Deregulation, impetus for, 104 contract, 443
imperfect expectation, 380 Deregulation movement, 2 property, 443
liquidated, 321–25 Derivative works, 117 tort, 443
measurement of, 375–76 Design defect, 251, 266 Dissemination, 117
Deterrence, 492–93 Distribution in analyzing private
law, 7–8
Distributive justice, 110–11

544 Subject Index

Diversity cases, 62 Economic analysis goal of legal process,
DNA techniques, 511 central strand of, 455 384–86
Doctrine of law, 3–6, 11
minimizing social costs,
of cy pres, 159 Economic efficiency, 149, 384–86
of duress, 346 165–66, 283, 356
of equivalents, 120–21, 122n, reasons for lawsuits,
Economic goal of criminal law, 386–91
124n 474–75
of foreseeability, 336 computing value of legal
Hadley, 337 Economic model, extending, claim, 388–91
of impossibility, 349, 351–52, 230–44
decision trees, 386–87
353, 372 Economics settlement bargaining,
last chance, 68 of addictive drugs and crime,
necessity, 160n, 371 518–22 399–403
respondeat superior, 244 in antitrust law, 1, 2 lack of settlement, 402–3
of unconscionability, 298, behavioral, 50–52 settlements replicating
in contract interpretation,
368–70 291–99 trials, 399–401
Dominant patent, 122 crime rates and, 497–98 trial, 403–10
Dominant strategy, 35, of handgun control, 522–26
information, 113–16 independence versus
284n in law, 1–2 alignment, 405–8
Downzoning, 180 reasons for lawyers to study,
DPT vaccine, 271 9–10 loser pay all, 408–10
Dram shop laws, 245 retribution and, 502 of torts, 455
Drug Price Competition and of scale, 29 Economies of scale, 78n
tort law and, 189–90 Economies of scope, 433
Patent Term welfare, 37–43 Economists, reasons for study-
Restoration Act
(1984), 123 Economic theory ing law, 9–10
Drugs of contract enforcement, Economy, crime and, 528
addictive, 518–22 283–87 Efficiency, 4, 82–83, 374–75
legalization of, 520–22 of contract remedies,
orphan, 124–25 287–91 allocative, 14
punishing sales of, 518–20 of crime and punishment, defined, 13
sale of illegal, 458 454–84 as judicial motive, 416–17
war on, 522 of legal process, 382–418, Kaldor-Hicks, 14n, 42–43
Duration, 119, 123 382–420 in microeconomic theory, 13
Duration neglect, 496 appeals, 410–17 Pareto, 14, 36
Duress, 295, 343–47, 371 correcting mistakes, primacy of, over distribution
doctrine of, 346, 371 411–12
Duty efficiency as judicial in analyzing private
breach of, 196–98 motive, 416–17 law, 7–8
to disclose, 360–61, 371 efficiency of litigation Efficiency loss, due to enforce-
of loyalty, 319n market, 412–14 ment error, 260
Dynamic efficiency, 116 enacting social norms, Efficient breach and
Dynamic inefficiency, 363 414–16 performance, 325–31
Dynasty trusts, 158 exchange of information, Efficient precaution, incentives
391–95 for, 376–78
Each-pays-his-own legal costs bad news as good for Efficient punishment, optimal
(the “American rule”). settlements, 391–93 amount of, 475–77
See American rule bad news as is free, Efficient reliance, incentives for,
“each pays his own” 393–95 378–81
legal costs minimizing social costs, Efficient remedies, 99–102
397–99 Eighth Amendment, 510n
Eastern Europe United States versus Elastic demand, 25n
Communism’s collapse in, Europe, 396–97 Embezzlement, 467n, 474
141–42 punishment for, 476–77
endgame problem of, 302 Empirical assessment of United
States tort liability
system, 261–74
En banc, 61
Encroachment, 72

Subject Index 545

Encrypting, 131 European rule “loser pays all” Expected monetary value,
Endgame problem, 301–4 legal fees 43–44
Endowment, 87
Enforcement computing value of legal Expected punishment, 488
claim and, 388 Expected utility, maximization
costs of, 88–90
privatizing, 480 differences between of, 44–46
remedy for breach of prom- American rule and, Expected value, 43
384
ises, 280–81 of legal claim, 388
Enforcement error, 260 giving of proofs in, 383 Expenditure, progressive taxa-
good faith requirement and,
efficiency loss due to, 260 tion and, 106–7
England. See also Great Britain 152 Experience rating, 49, 238
judges in, 397 Ex post liability, 235, 238
court system in, 66n lack of discovery in, 396 Ex post losses, 293
criminal law in, 456 liability and, 409 Ex post observable precaution,
English rule, 384, 388. See also number of trials and, 408
payment of legal expenses, 480
British rule and Ex post Pareto efficiency,
Loser-pays-all 408–10
for attorney fees in malprac- payment of litigation costs in, 287
tice actions, 265n Extensive form, 34
Entitlement, relative values of, 389n Extent of the error, 385–86
101n relative optimism and, 409 External benefit, 39
Environmental Protection Spain’s application of, 153 External costs, 39, 105
Agency (EPA), 267 trial length in, 396–97 Externalities, 39–40, 166–68,
Equilibrium Evidence
analysis of, 32–33 instructions in court for com- 189
market, 28–33 graphing, 172–74
in microeconomic theory, 13 bining, 439 remedies for, 168–69
in monopolistic market, preponderance of, 63, 439–41 theory of, 105
29–32 rules of, 442 Externalizing risk, 238
Nash, 35–36 Evidentiary uncertainty, 248–50 Eyewitness testimony, reliability
in perfectly competitive Ex ante fines, 235
industry, 28–29 Ex ante Pareto efficiency, 287 of, 439
stable, 13 Ex ante Pareto standard, 417
unstable, 13 Ex ante regulation, 238 Factories with fences, 505
Equitable decree, violating, 95n Ex ante risks, 293 Facts, 64
Equitable relief, 95 Excessive harm, 251
Equivalence result, 210n Exchange of information, 391 mutual mistake about,
Equivalents, doctrine of, bad news as free, 393–95 353–54, 371
120–21, 122n, 124n bad news as good for settle-
Errors The Fairness in Asbestos Injury
as cause of, appeals, 451 ments, 391 Resolution Act, 270
costs of minimizing social costs,
comparison of administra- Fair use exception, 130, 135,
tive costs and, 385 397–99 159
reducing, 397 United States versus Europe,
enforcement, 260 Fallback position, 76
extent of, 385–86 396–97 False imprisonment, 188
medication, 264 Exchanges, deferred, 283 False pessimism, correcting,
purely random, 220–21 Exclusivity, 124n
reducing legal, 419 Exogeneity of preferences, 19n 394
social costs of, 385–86 Expectation damages, 281, 286, Fault, negligence and, 228–29
tort liability and, 217–20 Feasibility constraint, 13
Type I, 459, 502 309–10, 315, 378–79 Federal Aviation
Type II, 459, 502 distinction between reliance
Estray statutes, 155–56 Administration, 267
damages and, 309n Federal Communications
hypothetical, 335
Expected damages, 420 Commissions, 59
Expected judgment, 401 Federal courts
relationship between
institutions of, 59–62
reasonable settlement jurisdiction of, 61–62
and, 401 Federal questions, 61
Federal Trademark Act (1946),

132
Fee-for-service contracts, 427

546 Subject Index

Fees. See also European rule Free use, 148 Growth theory, 118
“loser pays all” legal Frustration of purpose, 297, Guillain-Barré syndrome,
fees
353, 371 271n
contingency, 8, 408n, 423, Fugitive property, establishing Gun control
427–28, 429
property rights over, economics of, 522–26
filing, for docketing appeals, 143–46 laws on, 524, 529
451 Full-term patents, 123
Functions Habitual offender, 504
filing, for lawsuits, 420–22 as mathematical tool, 14–16 Hadley doctrine, 337
Fellow servant rule, 273n utility, 13, 20–21 Hand rule, 206n, 213–17
Feudalism, 111 Futures contract, 338
Fifth Amendment, 175 Futures market, 309 damages under, 253–57
for determining negligence,
takings clause of, 175 Gambling, 458
50-percent rule, 446–48 Game, repeated, 299–301 417, 433
Filing costs, 390 Game theory, 3, 33–37, 74–76, Harm
Filing fees
383 excessive, 251
for docketing an appeal, 451 backward induction in, 389n pollution as cause of, 96–97
number of legal complaints in explaining bargaining, 384 public, for criminal law,
on failure to settle, 391
and, 420–22 rational bargaining in, 391 457–58
Filing of complaints, social effi- Gate crasher’s paradox, 438 risk of accidental, 237
General deterrence, 503 tort liability and, 190–92
ciency and, 421, 422 General equilibrium, welfare Hatch-Waxman Act (Drug Price
Filters, offers as, 431–33
Fines, 508–9 economics and, 37–43 Competition and
First Law of Demand, 468 Generation-skipping rule, Patent Restoration
First Law of Deterrence, 468 Act) (1984), 123, 124
First possession, 143 157–58 Health maintenance organiza-
Fitness, warranty of, 297n Generation-skipping trusts, 159 tions (HMOs), com-
Fixed costs, 27 Geosynchronous orbit, 71n pulsory arbitration
Florida, death penalty in, 510 German Code of Civil Law, and, 405
Food, Drug, and Cosmetic Act, High-low agreements, 247
152n High-price-strong-warranty
123 Germany, incarceration in, 487 contract, 365n
Food and Drug Administration Gift-promises, 282 Hindsight bias, 51, 217, 435
Giving of proofs, 383, 390, Hobbes Theorem, 93–94
(FDA), 124, 267 Holdouts, 177–78
Force majeure, 350 390n Holdup problem, 344
Foreseeability, doctrine of, 336 information exchange in, 383 Homestead Act (1862),
Foreseeable events, difference in trial, 390 144–45
Go-it-alone value, 76, 400 Hostages, exchange of, 304
between foreseen Golden parachute, 138 Hostility in bargaining, 90
events and, 337 Good faith, bargaining in, 362 Hot burglary, 525
Foreseen events, difference be- Good-faith requirement, 152 Howard, John, Association,
tween foreseeable Goods 507
events and, 337 private, 102–5 Hudson’s Bay Company, 137
Formal welfare economics, 108n public, 40–41, 102–5, 355 Humpty-Dumpty Jurisprudence,
Formation defenses, perform- Good Samaritan, 347 279, 280
ance excuses and, Google, 131 Hyperbolic discounting, 473n
341–72 Governance, system of, 136 Hypothetical expectation
Fortuitous rescue, 348 Graphs, 16–18 damages, 335
Fortunate contingency, 328–31 Great Britain. See also England
Forum shopping, 420, 449 crime rate in, 486 Identity, mutual mistake about,
France, crime rate in, 486 incarceration in, 487 354, 371
Franchise relationship, 299 Great Recession of 2008-2010,
Fraud, 361, 371 Illinois Firearm Owner’s
Free entry in the market, 348n 488, 498 Identification card,
Free market, supply and Growth, profits and, 49–50 524n
demand in, 422–23
Free riders, 41, 103–4, 114, 414

Subject Index 547

Immortal soul clause, 367 common, 355 Interdependent utility, 195
Imperfect competition, 32 compulsory pooling of, 397 Interest, protecting, 461–62
Imperfect damages, 381 contract doctrines allocating, Internalization, 462–63
Internalizing the externality, 167
shape of curve, 381n 354–62 International Chamber of
Imperfect expectation damages, exchange of, 391–99
involuntary pooling of, 393, Commerce, 307, 321,
380 404
Impossibility, 349–53, 371 397 International Seabed Authority
mixed, 358–59 (ISA), 149
doctrine of, 349, 353, 372 nonappropriability of, 114 Interstate Commerce
interpreting, 351–52 perfect, 385 Commission (ICC),
pooling of, 394 104
Imprisonment, 501–4 private, 355, 383, 393 Invariance, 86–87
rates in United States, 486–87 productive, 357 Inverse relationship, 17
social benefits of, 501–4 public, 355 Invisible actors, incentives for,
social costs of, 504–5 redistributive, 357 251
safety, 360 Invisible hand, 406, 413–14
Inalienability, 100n, 161–63 voluntary exchange of, 393 Involuntary disclosure,
Incapacitation, 502–4 voluntary pooling of, 393, 394–95
Involuntary pooling of informa-
selective, 493 394, 397 tion, 393, 397
Incapacity, transactional, 342 Informational asymmetries, IP cases, 450
Incentives Islamic law, 57
41–42
for efficient precaution, Information costs, trade-off be- Japan, incarceration in, 487
376–78 Joint and several liability
tween transaction
for efficient reliance, 378–81 costs and, 93–94 for multiple injures, 435–36
for invisible actors, 251 Information economics, with and without
for precaution under 113–16, 358–59
Information theory, applied to contribution, 245–47
negligence rule, judging, 407 Joint liability, 435
206–8 Inheritances, 156–59 Joint products, 121
remedies as, 307–41 Injunctions, 94–96, 99–100 Joint profits, 96
Inchoate crime, 458 choosing between damages Judge-made law, 412, 414
Income taxes, 8 and, 168–69
Incompatible uses, 72 Injunctive relief, 98–99 as beneficial to public,
Incompetence, 342–43, 371 Innovation-diffusion tradeoff, 412
Indefinite contracts, 362n 117–18
Indefinite promises, 361–62 In personam, 165n Judges
Independence, alignment ver- Inquisitorial process, 57–58, Article III, 59n
sus, 405–7 397 civil law, 57
Independent variables, 16–17 judges in, 403 common law, 57
value of, in graph, 1+6 Insanity defense, 473 independence of, 406–7
Indeterminate sentencing, 505 Insider trading, prohibition lay, 407–8
Indifference curves, 20 against, 126–27 magistrate, 59n
Indifference map, 20 Insurance, 178, 236–40 in making law, 56
Indifferences, standard demand for, 47 optimal activism of, 405,
economic concept of, liability, 264 407
253 risk and, 43–49 relationship between state
Individual demand, 24–26 supply of, 47 prosecutor and, 459
Individual rationality, 295 Intellectual property, 116–18 role of, in United States ver-
Inducement, 278 law on, 113, 116 sus Europe, 397
reciprocal, 278 Intended negligence, 233 selection and tenure of, 62
Inefficiency Intent, criminal, 456–57 selection of, in United States,
allocative, 363 Intentional infliction of 406–7
dynamic, 363 emotional duress, 188 state rules for selecting high
Inelastic demand, 25n Intentional tort, 188 court, 406n
Information
asymmetric, 297–98, 355,
383
characteristics of, 114

548 Subject Index

Judging, information theory Lawsuits similarities in, 382
applied to, 407 cause of action for, 383 topics in economics of,
computing value of legal
Judgment, 63 claim, 388–91 419–52
actual, 385 decision trees in deciding for, Legal rules, evolution of, 64–68
affirmation of, 64 386–87 Legal sanctions, effect of, on
expected, 401 filing fees for, 420–22
perfect-information, 385 filing of complaints in, behavior, 3
reversal of, 64 419–20 Legal scholarship, effect of eco-
nuisance, 429–31, 432n
Judgment non obstante verdicto, number of complaints and, nomics on, 2
63 420–22 Legal services, supply of,
reasons for, 386–91
Judicial motive, efficiency as, 422–25
416–17 Lawyers Legal standards, setting, 213–17
choosing, 428 Liability
Juricature Act of 1873, 67n in civil law systems, 437n
Juries, 58 contingency fees for, 427–28 incentives for precaution un-
contracts with, 427 der no, 201–4
compensation for, 407–8 fees for appeals, 451
psychology of, 434 incentive structure for, 406, joint and several, with and
serving on, 396 427–28 without contribution,
Jurisdiction number of, 444 245–47
of federal courts, 61–62 pursuit of self-interest, 405–6
of state courts, 61 reasons to studying econom- market share, 270
Jury trials ics, 9–10 premise, 263
constitutional right of restrictions on advertising by, product, 251–53, 266,
428–29
Americans to, 422 self-interest of, 407 267–68
number of civil trials as, strict, 197–98, 237–38
Lay judges, 407–8 vicarious, 244–45
448–49 Least-cost risk-bearer, principle Liability disparity, 192, 257
right to request, 396 Liability insurance, 264
Justice of, 6 Liability rule, 95
as expensive, 382 Legal claims Liberty, 111
natural, 146 Librium, 122, 122n
computing value of, 388–91 License, 119
Kaldor-Hicks efficiency, 14n, number of lawyers and filing Licensing, compulsory, 125
42–43 Life imprisonment, 476
of, 422–23 Limited access, 142
King’s Council, 66n Legal complaint, 442n Limited liability, 137–38
King’s courts, 56 Legal concept of property, bankruptcy and, 240
Knockoffs, 133 Linear relationship, 17–18
73–74 Linux operating
Labor cases, 450 Legal dispute
Laches, 269n system, 130–31
Lanham Act, 132 nature of, 62–64 Liquidated damages, 321–24
Lapses, 232 resolving, 382
Last chance doctrine, 68 stages in, 383–84 efficient breach and,
Law. See also Private law Legal errors, reducing, 419 324–25
Legalization of drugs, 520–22
correcting mistakes in mak- Legal process Litigation
ing, 412–14 economic theory of, 382–418 costs of, 242–43, 403–4
empirical assessment of, discovery versus, 397n
economic analysis of, 3–6, 11 as form of transaction
economics in, 1–2 442–52 costs, 429
judge-made, 412, 414 goal of, 384–85 efficiency of market,
of large numbers, 47 412–14
reasons for economists to minimizing social costs, selective, 413
384–86
study, 9–10 Livery of seisin, 150
“Law” courts, 66n as incentive system, 419 Lock-ups, 138
Law merchant, traditional reasons for law suits, 386–91 Long run, 27–28
Looking forward and reasoning
account of, 414–16
backward, 389n

Subject Index 549

Loser-pays-all legal costs (the in microeconomic theory, Pareto improvements of
English rule). See 12–13 Kaldor-Hicks
European rule “loser efficiency in, 42–43
pays all” legal fees Maximum liberty, 105, 166
Maximum sustainable yield, profit in, 26
Loss aversion, 46, 395 profit-maximizing firm in,
Lowest-cost risk-bearer, concept 147
McDonald’s, 132 26–27
of, 351 Measuring life, 157n profits and growth in, 49–50
Low-price-weak-warranty con- Mediation, compulsory, 384 public goods in, 40–41
Medical malpractice, 264–66 structure of, 11–12
tract, 365n Medication errors, 264 supply theory in, 26–28
Low-probability events, estimat- Mens rea, 457, 464 utility functions and indiffer-
Mercantilist tradition, 363
ing, 231 Metes and bounds, 162n ence curves in, 20–21
Loyalty, duty of, 319n Microeconomics, 230, 294 Microsoft Word, 131
Lubricating bargaining, 103 Microeconomic theory Misdirection, ground of, 67
Misrepresentation, 361
Magistrate judges, 59n asset pricing in, 37 Mistakes
Mandatory rules, 294–99 behavioral economics in,
Manufacturing defect, 251, 266 appeal court in correcting,
Mare Liberum (Grotius), 50–52 411–12
connection between
148–49 unilateral, 356–59, 371
Marginal benefit, 22 maximization and Mitigating, 182
Marginal costs, 22 equilibrium in, 13 Mitigating damages, 337
constrained maximization in, Mixed information, 358–59
internalization of, 335 22 M’Naughten rule, 473
of lawyer’s time, 427 consumer choice and demand Moleculon, 119
private, 39–40 in, 18–26 Monetary fines, 459
social, 39–40 consumer preference order- Monetary punishment, 460
Marginal deterrence, 476 ings in, 18–20 Monetary value, expected,
Marginalist reasoning, 123 decision making under uncer-
Marginal private-cost curve, 172 tainty in, 43–49 43–44
Marginal reliance, cap on, 336 defined, 11–12 Money damages, increase of,
Marginal social-cost curve, efficiency in, 13
equilibrium analysis in, 420
172 32–33 Monopolistic market, equilib-
Marginal values, 180 equilibrium in, 13
Market externalities in, 39–40 rium in, 29–32
game theory in, 33–347 Monopoly, 298–99, 363–71,
competitive, 412 general equilibrium and wel-
equilibrium of, 28–33 fare economics in, 372
litigation, 412–14 37–43 market power and, 38–39
monopoly and power of, individual demand in, 24–26 natural, 29–30, 78n, 127–28
informational asymmetries in, perfect competition and, 363
38–39 41–42 Monopoly power, 117
share liability of, 270 insurance in, 47–49 Monopoly theory, 116
sources of failure of, 38–42 market equilibrium in, 28–33 Mood, crime and, 471–72
value of, 316 market failure in, 38–42 Moral hazard, 48, 238
Market-clearing price and quan- mathematical tools in, Moral luck, 233
14–18 Multiple injurers, joint and sev-
tity, 29 maximization in, 12–13
Mary Carter agreements, 247 operation of firm in short run eral liability for,
Massachusetts Bartley-Fox law and long run in, 435–36
27–28 Mutual mistake, 298
(1974), 524 opportunity cost and compar- about facts, 353–54, 371
Mass torts, 268–70 ative advantage in, 30 about identity, 354, 371
Mathematical tools, 14–18
Naked statistical evidence, 439
functions as, 14–16 Nash Bargaining solution, 392,
graphs in, 16–18
Maximization 430
constrained, 22 Nash equilibrium, 35–36, 208n
of expected utility, 44–46

550 Subject Index

National Crime Victimization Normative Hobbes Theorem, Pareto efficiency, 14, 36, 279,
Surveys, 527 91–93, 92–93, 98, 121 340, 417

National defense, 40–41 North Carolina, death penalty of enforceability, 286–87
National Highway in, 510 ex ante, 287
ex post, 287
Transportation Safety Notaries, 151 Pareto-efficient allocation, 86
Administration, 267 Novel disputes, 66 Pareto improvement, 14n,
National Sheriffs Association, Nuisance, 168
507 42–43
Natural justice, 146 public, 168 Partitioning, 138
Natural monopoly, 29–30, 78n, Nuisance suits, 429–31, 432n Party-designed remedies, 307,
127–28 Numerus clauses, 165n
Necessity, 295, 347–49, 371 321–24
Necessity doctrine, 160n, 371 Occupational Health and Safety Patent law, overextended, 123,
Negative damages, 312 Administration, 267
Negligence, 197–98 125
comparative, 208–11, Offers Patents, 113, 117, 118–29
248–50, 248n, 384n to compromise, 409, 409n
contributory, 65, 68, 208–11, as filters, 431–33 Amazon’s, on “one-click”
273n, 417 Internet orders, 125
fault and, 228–29 Offset, 182
Hand rule for determining, Oklahoma, death penalty in, breadth of, 119
417, 433 contrast between broad and
intended, 233 510
in supervision of employee, Oligopolistic market, 32 narrow, 120
244 Oligopoly, 32 dominant, 122
unintended, 232–33 100 percent contingency, 428 duration of, 119, 123
Negligence rule, 196, 228 One-shot game, 299 economic argument for,
forms of, 209 Open access, 140, 142, 147
incentives for precaution un- Open-access fishing, 348n 128–29
der, 206–8 Open-access resources, 146 full-term, 123
Netherlands, crime rate in, 486 petty, 123
Network effects, 127–28 privatization of, 146–48 subservient, 122
No-contribution rule, 247 Opportunity cost, 310–11, Payoff matrix, 34
No liability, rule of, 223 Pays his own, 389
Nonappropriability, 114 427 Penalty clauses
characteristics of, 114 comparative advantage and, in enforcing contracts,
connection between public
goods and, 114 30 321–22
of information, 114 Opportunity-cost damages, reasons for enforcing, 322–24
Noncooperative games, 75 Penalty-default rule, 337, 362
Noncooperative payoffs, 99 311–13, 375 Perfect compensation
Nondisclosure agreement measuring, 315–16 defined, 192, 315
(NDA), 115 perfect, 312 difference between perfect
Non-excludability, 40 Orbitcom, Inc., 71
for public goods, 114 Ordering, sequential, 433 disgorgement and,
Nonlinear relationship, 17–18 Organizations 460
Nonperformance, efficiency of, as property, 135–38 as economic account of
339 as victims, 259 incentives, 254
Nonrivalrous consumption, 40 Original expression, 130 impossible for different kinds
Non-voting shares of Orphan Drug Act (1983), of injuries, 319
stock, 138 internalization of harm caused
Normative Coase Theorem, 124–25 by injurers, 461
91–93, 92, 93, 121, Orphan drugs, 124–25 Perfect competition, monopoly
151n, 444 Out-of-pocket-cost formula, and, 363
Perfect contracts, 292, 298
311n Perfect damages, 380
Overbooking, 318 Perfect disgorgement, 460
Overreaching, 90 difference between perfect
compensation and,
Pain and suffering, 257 460
Paradox of compensation, 181, Perfect expectation damages,
309, 380
331–34, 352n
contract solutions to,

335–36

Subject Index 551

Perfect information, 385 Preponderance of evidence, 63, Privatization, 147
Perfect-information judgment, 439–41 of open-access resources,
146–48
385, 406 Prestige, trademarks as signal predictions about, 148
difference between actual of, 133
Probabilistic punishments, 512
judgment and, 385 Pretrial discovery, 383 Problem of preference revela-
Perfectly competitive industry, costs of, 445
tion, 330n
equilibrium in a, Price Procedural aspects of civil
28–29 contract, 330
Perfect opportunity-cost entry-limiting, 127 dispute, 382
damages, 312 market-clearing, 29 Procedural unconscionability,
Perfect reliance damages, 311 relative, 21n
Performance reservation, 253n 371
efficiency of, 339 Production functions, 195
formation defenses and Price elasticity of demand, 25 Productive information, 357
excuses, 341–72 Price-taking behavior, 27 Product liability, 251–53, 266
investment in, 331–41 Price theory, 3
specific, 320–21 Pricing, asset, 37 reforming, 267–68
Permanent damages, 169 Prime (‘), 201n vaccines and, 271
Perpetual trusts, 158 Primogeniture, 156n Profit-maximizing firm, 3,
Petty patents, 123 Principal-agent problem, 138
Physical injuries, compensatory Prior probability estimate, 437 26–27, 40, 47
damages for, 313 Prisoners’ dilemma, 34, 36, 75 Profits
Plaintiff, 62 Prisons, 459
Planned rescue, 348 growth and, 49–50
Poison pill, 138 for profit and factories with in microeconomic theory, 26
Police officers fences, 507 Progressive taxation, 8
counting, 488n expenditure and, 106–7
increases in number of, 530 rising population, 530 Promisee, 278
Policing strategies, better, social programs versus, Promises
528–29 enforcement of, at law,
Polio vaccines, 271 507–8
Political control, 142 Private agreement, obstacle to, 277–80
Pollution, harm caused by, indefinite, 361–62
96–97 101–2 remedy for breach of enforce-
Pooling of information, 394 Private bads, 106
relationship between volun- Private bargaining, 100 able, 280–81
tary and involuntary, Private company, 139 vague, 361–62
393 Private deterrence, 479–80 Promisor, 278
Portfolio diversification, 351 Private goods, 102–5 Property
Positive damages, 309 actions of owners
Positive slope, 17 distinction between public
Posterior distribution, 437–38 goods and, 112–13 of, 105–6
Precaution disputes over, 443
bilateral, 204–6 Private (or asymmetric) infor- economic theory of, 81
unilateral, 205 mation, 355, 383, 393
Precedent, 56, 66 Coase Theorem, 81–88
Preclusive disposition, 433 compulsory disclosure of, elements of transaction
Predictions, 4 384
Preemptive investment, 144 costs, 88–91
Preference revelation, problem disclosure of, 383 lubricating or allocating
of, 330n Private law, 187
Preferences, exogeneity Coase versus Hobbes,
of, 19n paradox of compensation 93–94
Premise liability, 263 and, 333–34 normative Coase and
Hobbes Theorems,
primacy of efficiency over 91–93
distribution in analyz- legal concept of, 73–74
ing, 7–8 organizations as, 135–38
origins of, and conservatism,
redistributive approach to, 111
7–8 origins of institution of,
76–81
Private necessity, bargaining private, 111, 139–42
theory and, 160 public, 139–42

Private ownership, 104–5,
112–42

Private property, 111, 139–42

552 Subject Index

Property (continued) disproportionate, 455 Redistribution
efficient, 475–77, 501–9 by property law, 107–8
rights of owners regarding, expected, 488 pursuing, 7
156–66 monetary, 460 transaction costs of, 8
probabilistic, 512
rights to use someone else’s, ranking of, 463 Redistributive approach to pri-
159–61 Punitive damages, 257–61 vate law, 7–8
distinguishing between com-
Property law, 112 Redistributive information, 357
fundamental questions of, 72 pensatory damages Redistributive means, 106
normative principles of, 93 and, 95n Redundant precaution, 210
payment of, 456 Reflexivity, 19
Property rights, 94–95 Punitive multiple, 260 Registration costs, verification
convergence of, 152 Purely random error, 220–21
establishment of, 80 Purpose, frustration of, 371 costs versus, 150–51
over fugitive property, Putative cooperative surplus, Regression analysis, 194n
143–46 402 Regret aversion, 395–96
methods of protecting, 94–102 Regret jurisdiction, 396
remedies for the violation of, Racial discrimination, death Regulations, 178–81, 235–36,
166–85 penalty and, 517
unbundling, 162, 164–66 331
Ranchers’ rights, 107 Rehabilitation, 501
Property rules, 95 Random error, purely, 220–21 Relational contracts, 299–304
examples of problems Randomness, agency problem Relative optimism
addressed by, 71
and, 428 as cause of trials, 446
Proposition 8, 503 Rational choice as cause of wasteful trials, 431
Proprietary rights, 132 Relative price, 21n
Pro se, 62n theory, 50–52 Reliance, 290–91
Prostitution, 458 Rational crime, 463–67 investment in, 331–41
Proximity, 194–96 Reliance damages, 310–11,
Public bads, 166–68 applying model of, to public
Public choice theory, 105n policy, 467–69 314–15, 376
Public goods, 40–41, 102–5, distinction between expecta-
Rationality, 230–35
355 individual, 295 tion damages and,
connection between nonap- 309n
Rational solution, 76n Remedies
propriability and, 114 Reasonable care, 197 as incentives, 307–41
distinction between private Reasonable doubt, proving case models of, 325–31
party-designed, 321–24
goods and, 112–13 beyond, 458 relationship between bargains
non-excludability for, 114 Reasonable man, 198–99 and, 96
theory of, 105 Reasonableness, damages and, types of, 307
Public harm for criminal law, Remote risks, 343–54
254 Renegotiation, theory of, 340
457–58 Reasonable party, 392n Rent-a-judge, 419, 441–42
Public information, 355 Reasonable person standard, Repeated games, 36, 299–301
Public interest, alignment of Repudiation of the repudiation,
197, 198–99 340n
self-interest and, 406 Reasonable reliance, 282n Reputation, importance of, in
Public nuisance, 168 Reasonable royalty, 125 choosing lawyer, 428
Public ownership, 104–5, 142 Reasonable settlement, Rescue
Public policy, applying model anticipated, 348
relationship between fortuitous, 348
of rational crime to, expected judgment planned, 348
467–69 and, 401 Research and development, an-
Public property, 139–42 Reasonable solution, 76n titrust law and, 121
Public prosecution for criminal Reasonable use, 148 Reservation price, 253n
law, 457–58 theory of, 149–50 Respondeat superior, doctrine
Public sector, 139 Reciprocal inducement, 278 of, 244
Public use, 176–77 Recklessness, 456
Public utilities, 29 Rectangular survey, 162n
Punishments Redistributing crime,
in criminal law, 459–60 479–80
in deterring crime, 491–501

Subject Index 553

Restatement of contracts, 282n Self-expression, 111 Social norms, 87
Restatement (Second) of Self-interest efficiency and, 415–16
enacting, 414–16
Contracts, 57 alignment of public interest
Restatement (Second) of Torts, and, 406 Social programs, prisons versus,
507–8
57 of lawyers causes, 407
Restatements of Contracts, 308 Self-interested rationality, 76n Social welfare programs, 8
Restatements of the law, 308 Self-risk, omitting, 216–17 Socioeconomic theory, 483
Restitution, 318–19 Seller’s breach, 309–10 Spain, application of European
Retribution, economics and, 502 Sentencing
Retributivism, 455–56, 501 rule “loser pays all”
Rhone-Poulenc Rorer, Inc., 426 indeterminate, 505 legal fees in, 153
Richmond, 349 reform, 505–6 Specific deterrence, 503
Right, protecting, 461–62 Sequential ordering, 433 Specific performance, 307,
Riparian owner, 149–50 Servicemark, 132n 320–21
Risk Servitude on the land, 171n Spendthrift trust, 157
Settlement bargaining, 399–403 Spillovers, 296–97
attitudes toward, 44–46 lack of, 402–3 Split bar, 428
aversion, 44–45 no settlement, 402–3 Spot contract, 338
externalizing, 238 replicating trials, 399–401 Spot market, 309
insurance and, 43–49 Settlements Stable equilibrium, 13
neutrality, 45–46 administrative costs of, 385 Standard economic concept of
seeking, 46 bad news as good for, 391–93 indifferences, 253
Risk-preferring, 46 compulsory disclosure of pri- Standard-form contracts,
Royalty, 119 364–66, 372
reasonable, 125 vate information in buying souls by using, 367
Rubik’s Cube, 119 promoting, 384 Standardization, 136
Rule 68, 409n cost savings of, 393–94 Standard of proof, 436–41,
Rules lack of, 402–3 441n
creation of, 5 out of court, 392, 400 for criminal law, 458–59
of evidence, 442 as cooperative solution, Standards, rules versus, 222
of first possession, 72, 400 State courts
replicating trials, 399–401 institutions of, 59–62
143–44, 146 Short run, 27–28 jurisdiction of, 61
of law, 56 Short-weighting, 303 State of nature, 79
against perpetuities, 157–58 Side payments, 33 State prosecutor, relationship
standards versus, 222 Slope, positive, 17 between judges and,
Runs with the land, 171n Social benefits of imprisonment, 459
501–4 State subsidies, 115
Sabin vaccines (OPV), 271 Social contract, 78 Static efficiency, 116
Safety information, 360 Social costs Static equilibrium analysis, 118
Safety regulations, 236 of an error, 385–86 Statute of Frauds, 308
Salk vaccine (IPV), 271 of crime, 489–91 Statute of repose, 269n
“Saturday Night Fever,” 470–74 criminal law and, 474 Statutes, 58
Scotch tape, 133 of imprisonment, 504–5 Sterling Drug Company, 133
Search costs, 88 minimizing, 384–86, Street crime, 487
Second-best efforts, 362 397–99 Strict liability, 197–98, 229,
Second Chance Act (2007), 491 for accidents, 199–201 237–38
Securitization, 241 as goal of legal process, advantage of, 223–24
384–86 with defense of contributory
bonds for, 241n Social customs, enforcement of, negligence, 210
Segmented trials, 433–34 216 incentives for precaution
Social efficiency, 144 under, 201–4
comparison of unitary trial filing of complaints and, 421, insurance and, 238–39
and, 434 422 rule of, 203
Socially optimal deterrence, Strict liability crimes, 464
unitary trials versus, 433–34 476
Selection effect, 446–48
Selective incapacitation, 493
Selective litigation, 413

554 Subject Index

Subjective expected utility Time, breach of contract and, vicarious liability,
(SEU), 436 338–41 244–45

Subjective value, problem of, Time-inconsistent preferences, extending model, 230–44
313–18 473n bankruptcy, 240–42
insurance, 236–40
Subrogation, 237 Tit-for-tat strategy, 36, 300 litigation costs, 242–44
Subrogation clauses, 240 Title rationality, 230–35
Subservient patent, 122 regulations, 235–36
Substantive law, application of getting from thief, 151–53
recording and transferring, incentives for precaution
economics to, 382 under negligence rule,
Substitute performance, 309 150–51 206–8
Substitute-price formula, Torrens system, 150n under no liability and
Tort cases, civil trials for, 449 strict liability, 201–4
309n Tort disputes, 443
Substitutes, 184 Tort law, 187–229, 188 minimizing social costs of
Successful bargaining, accidents, 199–201
Coase Theorem and, 189–90
84–85 defining, 189–98 setting legal standards,
Summary judgment, 63 economic essence of, 189–90 Hand rule, 213–17
Super-rationality, 470 inadequacy of, 460–63
Supervisory release, 459 Tort liability, 190 vague standards and uncer-
Supply contractual solutions to crisis tainty, 220–22

of insurance, 47 over, 272–73 traditional theory of, 190–99
theory of, 26–28 economics of, 199, 230 breach of duty, 196–98
Suppressing and interdicting, cause, 192–96
activity levels, 211–13 harm, 190–92
520 administrative costs and
Supreme Court of Judicature vague standards and uncer-
tailored rules, 223–25 tainty and, 220–22
(Consolidation) Act bilateral precaution, 204–6
of 1925, 67n computing damages, Torts, 56
Supreme Court of the United economic theory of, 455
States, 61 253–61 intentional, 188
hand rule damages,
Tailored rules, tort liability and, Total liability, 251
223–25 253–57 Tracing costs, 130
punitive, 257–61 Trademarks, 113, 132–35
Take-it-or-leave-it contracts, consumer product injuries,
365 economic justification for,
225–26 132–33
Takings, 174–81, 331 contributory negligence
contrasting as means of as signal of prestige, 133
financing government, and comparative neg- Trade secrets, 113, 115–16
175 ligence, 208–11 Traditional theory of tort liabil-
narrow base of, 175–76 empirical assessment of
U.S. tort liability sys- ity, 190–99
Takings clause of the Fifth tem, 261–74 breach of duty, 196–98
Amendment, 175 mass torts, 268–70 cause, 192–96
medical malpractice, harm, 190–92
Tautology, 280 264–66 Tragedy of the anticommons,
Tax-and-transfer system, 8 reforming products lia-
Taxes bility, 267–68 140
errors, 217–20 Tragedy of the commons, 140
contrasting as means of extending basic model, 244 Transactional
financing government, comparative negligence,
175 248–50 incapacity, 342
evidentiary uncertainty, Transaction costs, 84–85, 99,
income, 8 248–50
progressive, 8 joint and several liability 298–99, 339
Temporary damages, 169 with and without con- elements of, 88–91
Texas, death penalty in, 510 tribution, 245–47 factors affecting, 91
Threat value, 76 products liability, in obstructing bargaining, 101
“Three strikes and you’re,” in 251–53 of redistribution, 8
trade-off between information
California, 479, 504
Tied ownership, 143, 147 costs and, 93–94
Transitivity, 19

Subject Index 555

Trial courts of general jurisdic- Unilateral precaution, 205 Valuation, asymmetrical, 304
tion, 59 Unintended negligence, 232–33 Values
Unitary elastic demand, 25n
Trial de novo, 410 Unitary equilibrium, 434n counterfactual, 281
Trials, 403–5, 403–10 Unitary trials, 433–34 expected monetary, 43–44
market, 316
costs of, 444–46, 450 comparison of segmented tri- of statistical life, 255
expected value of, 389 als and, 434 Variable costs, 27
50-percent rule and, 446–48 Variables
formality of, and cost of re- segmented trials versus, dependent, 16–17
433–34 independent, 16–17
solving disputes, 384 Verdict, 63
giving of proofs in, 390 United Nations Convention on Verification costs, registration
independence versus the Law of the Sea
(UNCLOS), 149 costs versus, 150–51
alignment, 405–8 Vicarious liability, 244–45
loser pay all, 408–10 United States Victimization rate, 490
relative optimism and, 402 crime rates in, 454 Victimless crimes, 458
relative optimism as cause of discovery in, 396 Victims, organizations as, 259
incarceration in, 487 Violent crimes, 486n
wasteful, 431 tort liability system, empiri- Visa credit card corporation,
segmented, 433–34 cal assessment of,
selection effect and, 446–48 261–74 404–5
settlements replicating, trial length in, 396–97 Visa’s Arbitration Committee,

399–401 U.S. Court of Appeals for the 404–5
unitary, 433–34 Federal Circuit, 61 Voluntary associations, 415
unitary versus segmented, Voluntary exchange of informa-
U.S. Court of Claims, 61
433–34 U.S. Court of Customs and tion, 393
vanishing, 448–51 Voluntary pooling of informa-
Trusts, 158 Patent Appeals, 61
dynasty, 158 United States tort liability sys- tion, 393, 394, 397
generation-skipping, 159
perpetual, 158 tem, empirical assess- Warning, defect in, 251
spendthrift, 157 ment of, 261–74 War on drugs, 522
Type I errors, 459, 502 United States trials, judges in, Warranty of fitness, 297n
Type II errors, 459, 502 397 Welfare economics, general
Unmatured tort claim (UTC),
Ultimatum bargaining game, 51 272 equilibrium and,
Unanimous consent, 142 Unreasonable discounting 37–43
Uncertainty, decision making of future, 479n Williams Act, 138
of uncertainty, 479n Willingness-to-pay curve,
under, 43–49 Utilitarianism, 109–10, 456 482–83
Unconscionability, 279, 372 Utility Windsong Corporation, 71
function, 13, 20–21 Workers’ compensation, 273–74
doctrine of, 298, 368–70 interdependent, 195 World Trade Organization,
procedural, 371 maximization of expected, 119n
Unfortunate contingency, 44–46
Xeroxing, 133
326–28 Vaccines, products liability and,
Uniform Anatomical Gift Act 271 Youth crime, deterrence of,
472–73
(1968), 163 Vague promises, 361–62
Uniform Commercial Code Vague standards and Zero transaction costs, 107
Zoning, 164, 184–85
(UCC), 57, 152n, uncertainty, tort liabil-
282n, 308, 415 ity and, 220–22
Uniform Crime Reports, 486n, Valium, 122, 122n
527
Unilateral mistake, 356–59, 371