Economic Foundations of Law and Organization

This book serves as a compact introduction to the economic analysis of law and organization. At the same time it covers a broad spectrum of issues. It is aimed at undergraduate economics students who are interested in law and organization, law students who want to know the economic basis for the law, and students in business and public policy schools who want to understand the economic approach to law and organization. The book covers such diverse topics as bankruptcy rules, corporate law, sports rules, the organization of Congress, federalism, intellectual property, crime, accident law, and insurance. Unlike other texts on the economic analysis of law, this text is not organized by legal categories but by economic theory. The purpose of the book is to develop economic intuition and theory to a sufficient degree so that one can apply the ideas to a variety of areas in law and organization.

• Most student-friendly, accessible, model-driven text on law, economics, and business in the market • Has 74 boxed examples, review questions, clear organization, suggested readings • Author has been refining text in classroom for over 20 years

1. Introduction; Part I. Economic Fundamentals - Rationality and Efficiency: 2. Rational behavior, preferences and prices; 3. Pareto optimally versus utilitarianism; 4. Cost-benefit analysis; Part II. Transaction Costs and the Coasean Revolution: 5. Transaction costs; 6. Fencing in and fencing out; 7. Coase versus Pigou; Part III. Cost-Benefit Analysis and the Law: 8. How to think like an economist: two hawks and a fence; 9. Smoking regulations: market solutions; 10. Rules of thumb: sports and driving rules; Part IV. Rights: 11. The protection of entitlements; 12. Property rights or communal rights in knowledge?; 13. Liability for harm or restitution for benefit; 14. Takings: should there be compensation for regulation; Part V. Torts and Crimes: Liability Rules and Punishments: 15. Cost minimization and the role of liability rules; 16. Negligence rules; 17. Crime and criminal law; Part VI. The Role of Sequence: 18. Mitigation of damages and last clear chance; 19. The Good Samaritan rule; 20. The role of being first in allocating entitlements; Part VII. Contracts and Breach of Contract: 21. Default rules and breach of contract; 22. When is a handshake a contract and when is a contract not a contract; 23. Marriage as contract: family law; Part VIII. Harms Arising Between Contracting Parties: 24. Exploding coke bottles; 25. The role of asymmetric information; 26. Consumers and producers cause damage: lawnmowers; Part IX. Insurance and the Law: 27. The market for insurance; 28. Royalties for artists and insurance for investors; 29. Regulating automobile insurance; 30. Bankruptcy; 31. Deposit insurance and banking crises; Part X. Governance and Organization: 32. The governance of organization; 33. Corporate law and agency problems; 34. Insider trading; 35. Organizational response to opportunism; 36. The organization of legislatures; 37. Federalism; 38. The internal organization of the family; Part XI. Bargaining in the Shadow of a Trial: 39. Settlement of cases; Table of cases.

‘This text is interesting and valuable, and has many useful things to say about both law and organization from a solid economic perspective. The author is a well-spring of theoretical knowledge, legal cases, examples, and stories, and this serves his teaching purposes well. An excellent textbook.’ Prof. Avner Ben-Ner, Carlson School of Management, University of Florida

‘This is a fascinating textbook. The writing is simple and down to earth, the ideas often complex and worth thinking about - a terrific combination in any book. It takes a fresh and easily readable approach to some familiar topics in law and economics. It should find a wide audience.’ Prof. Keith Hylton, Boston University Law School

‘I think that everyone teaching law and economics will want to buy a copy of this book. The ‘bite-sized’ chapters are easy to digest and well-directed. Professor Wittman has given us a concise discussion of a wide range of topics. I can guarantee that it will join David Friedman’s book as the subject’s most popular crib sheets.’ Prof. Stephen Medema, University of Colorado, Denver