Topics in the Economic Analysis of Law

Introduction

Please note that this is a preliminary course description. The final version will be published in June 2026.

Law and economics---or the economic analysis of law---is a powerful approach to understanding how legal rules shape behavior, influence markets, and impact economic efficiency. By applying economic reasoning to legal problems, we can analyze how laws create incentives, allocate resources, and resolve disputes. This perspective helps us answer fundamental questions: When should the government intervene in markets? How do legal sanctions deter harmful behavior? Whether in contract disputes, criminal law, or corporate governance, economic analysis provides a systematic way to assess the consequences of legal rules and reforms.

This course will explore key areas where law and economics intersect, including contract law, tort law, corporate governance, and environmental regulation. We will analyze the economic incentives behind legal processes, such as why parties settle lawsuits and how legal costs affect access to justice. We will also examine economic crimes like fraud and tax evasion, considering how legal enforcement strategies shape incentives for compliance. By covering a broad range of legal fields, the course will demonstrate how economic tools can be applied to diverse legal problems.

Understanding law through the lens of economics will give you a deeper understanding of the legal system. Policymakers, lawyers, and business leaders increasingly rely on economic analysis to design effective regulations, negotiate contracts, and assess legal risks. This course will provide both theoretical insights and practical applications, helping students develop a structured way of thinking about law. Whether you are interested in litigation, corporate law, or public policy, the economic approach to law offers valuable tools for making better decisions in a world shaped by legal and economic forces.

Course content

• Contracts: How can we design effective contracts? How can economic analysis help us to understand contract law?
• Tort law. When should you sue? How much are you entitled to in damages? How can tort law be explained and interpreted by economic theory?
• Environmental law: How do legal frameworks shape firms' incentives to pollute or invest in green technology? How do different legal approaches—such as taxes, cap-and-trade systems, and command-and-control regulations—affect environmental outcomes?
• Corporate law: What are the economic incentives behind different corporate governance structures? How do legal rules shape conflicts between majority and minority shareholders
• Economic crimes: How does the legal system affect incentives to commit crimes such as tax evasion and fraud? What is the economic rationale behind criminal law?
• The legal process: Is it too expensive to file a lawsuit? When should you settle? How do rules governing the legal process shape actors' incentives to comply with laws and contracts? What is the economic rationale behind our procedural rules?