Advanced Economic Foundations
The point of view for this course comes from Law and Economics which studies how legal systems, and subsequent decisions, promote economic efficiency. In this course we first examine the process of inter-temporal voluntary exchange as an important source of market inefficiency. We then examine how private treaty solutions, such as reputations, sanctions and exclusion, attempt to overcome this inefficiency. The course then proceeds from the assumption that the law should act incrementally to maximize the gains from exchange by working with and improving on private solutions. At the same time we assume that the legal process is subject to rent seeking, within, by legal professionals, and without, by regulatory capture. This susceptibility implies a need for checks and balances on how the law is used and leads to the recognition that society must be willing to limit the scope of the law as an instrumental tool for social justice.