《法律经济学》课程PPT教学课件（法律的经济分析）经济学与法律的对话（大卫·弗里德曼）L&E 2 2 The Problem of Social Cost and Risk Aversion is not About Risk -Economics of Insurance

Questions on "The Problem of Social Cost

Questions on “The Problem of Social Cost

Reminder:Short Paper You are arguing a case before Judge Posner.Write a brief argument for one side based on law and economics arguments.Any case past or present will do,provided it is not covered in either my book or Posner's Economic Analysis of Law,which I will put on reserve so you can check

Reminder: Short Paper • You are arguing a case before Judge Posner. Write a brief argument for one side based on law and economics arguments. Any case past or present will do, provided it is not covered in either my book or Posner’s Economic Analysis of Law, which I will put on reserve so you can check

Review of "The Problem of Social Cost

Review of “The Problem of Social Cost

"Externalities"are Jointly Caused

“Externalities” are Jointly Caused

Price Theory Framework Cost of inputs=their value in the best alternative use Price of outputs=their value to those who buy them

Price Theory Framework • Cost of inputs=their value in the best alternative use • Price of outputs=their value to those who buy them

Farmer and Rancher .The outcome does not depend on who is liable ●And is efficient Provided transaction costs are zero

Farmer and Rancher •The outcome does not depend on who is liable •And is efficient •Provided transaction costs are zero

With zero transaction costs,it never pays to leave money on the table. With non-zero transactions costs,it pays to leave money on the table if the amount of the money is less than the cost of picking it up

With zero transaction costs, it never pays to leave money on the table. With non-zero transactions costs, it pays to leave money on the table if the amount of the money is less than the cost of picking it up

More Cases,the Same Logic Confectioner vs Doctor Bleaching Coconut Matting Blocking the draft of a chimney ·Jolly Angler Brewing

More Cases, the Same Logic • Blocking the draft of a chimney • Bleaching Coconut Matting • Confectioner vs Doctor • Jolly Angler Brewing

Judge's Basis for Deciding the Case May Seem Irrelevant to the Economist But It may be designed to give a predictable rule Or be a proxy for relevant considerations

Judge’s Basis for Deciding the Case May Seem Irrelevant to the Economist But •It may be designed to give a predictable rule •Or be a proxy for relevant considerations

Two Alternative Approaches 。Two alternatives: Court find least cost avoider each time Or court or legislature makes rules Designed to usually make the lower cost avoider liable The first alternative can give results better fitted to cases,but .. Reduces certainty,raises litigation costs,makes transactions harder This is an extreme version of the "rule vs standard"issue Speed limit or a law against dangerous driving

Two Alternative Approaches • Two alternatives: • Court find least cost avoider each time • Or court or legislature makes rules • Designed to usually make the lower cost avoider liable • The first alternative can give results better fitted to cases, but … • Reduces certainty, raises litigation costs, makes transactions harder • This is an extreme version of the “rule vs standard” issue Speed limit or a law against dangerous driving