The goal of the course is to understand the emergence of different laws and legal systems and their major implications for economic activity. We apply microeconomic models to understand the positive and normative implications of certain legal rules, and complement them with various empirical studies from different countries. At the end of the course, the participant will have an overview of the major differences in legal systems (common versus civil law) and laws in several areas such as property, contract, constitutional law, criminal law, and affirmative action. Furthermore, the participant will understand the implications of these differences for growth, the wealth of a nation as well as the incentives for redistribution. Finally, the course also provides a deeper understanding of the mechanisms that are needed to foster development of efficient laws and institutions.
While we build on one of the best known textbooks in Law and Economics (Cooter & Ullen), latest research at the frontier of Law & Economics is incorporated in the course as well.

Required courses: Econometria I, Econometria II, Teoria Economia I, Teoria Economia II.
Additional recommended courses: Econometria III.

Main Textbook: Robert Cooter & Thomas Ulen, Law & Economics, 5^th edition. 

PART I: BASIC AREAS OF THE ECONOMIC ANALYSIS OF LAW

1. Comparative Legal Systems: Common Law and Civil Law
The Laws of many countries are heavily influenced by either the English common Law or the French civil Law. What explains why different countries adopted different legal systems, and which consequences result for the development of economic activity?
Selected Literature
Cooter & Ullen: “Law & Economics”, Chapter: An Introduction to Law and Legal Institutions.
Gennaioli, N. & A. Shleifer (2007): The Evolution of Common Law. Journal of Political Economy.
La Porta, Lopez-de-Silanes & Shleifer (2002): “Legal Origins”, Quarterly Journal of Economics.
La Porta, Lopez-de-Silanes & Shleifer: “The Economic Consequences of Legal Origins (2007)”, Journal of Economic Literature. 

2. An Economic Theory of Property
Protection of property rights is considered crucial for economic development. We compare different ways to secure property rights with respect to efficiency and redistribution. We also try to understand why different countries have different degrees of property right protection and which conditions favor a change towards more property rights protection.
Selected Literature
Cooter & Ullen: “Law & Economics”, Chapter: An Economic Theory of Property
Cooter & Ullen: “Law & Economics”, Chapter: Topics in the Economics of Property Law
Roland Coase (1960): The Problem of Social Cost, Journal of Law and Economics.
Acemoglu & Robinson (2006): “Persistence of Power, Elites and Institutions” 

3. An Economic Theory of Contract
We analyze which types of promises should be enforced by law and what remedy should be used for breaking enforceable promises. Empirically, we compare the effects of property rights institutions and contracting institutions on economic growth, investment and financial development.
Selected Literature
Cooter & Ullen: “Law & Economics”, Chapter: An Economic Theory of Contract
Cooter & Ullen: “Law and Economics”, Chapter: Topics in the Economics of Contract Law
Acemoglu & Robinson: “Unbundling Institutions”, Journal of Political Economics 

4. An Economic Analysis of the Legal Process
We analyze how to optimally design the different stages of the legal process and compare it to the existing rules in Europe and the United States.
Selected Literature
Cooter & Ullen: “Law & Economics”, Chapter: An Economic Theory of the Legal Process
Hanssen, Andrew (2004): “Is there an Optimal Level of Judicial Independence?”, American Economic Review
La Porta, Lopez-de-Silvanes & Shleifer (2004): “Judicial Checks and Balances”, Journal of Political Economy 

PART II: TOPICS IN LAW AND ECONOMICS 

5. An Economic Analysis of Crime and Punishment
How much can economics contribute to understanding crime? This class reviews the classical economic analysis of crime and contrasts it with theories from other disciplines, mostly sociological theories. The models are taken to the data to see how well policies as suggested by economists work.
Becker, Gary (1968): An Economic Theory of Crime and Punishment. Journal of Political Economy.
Cooter & Ullen: “Law & Economics”, Chapter: An Economic Theory of Crime and Punishment
Ehrlich, Isaac (1973): “Participation in Illegitimate Activities: A Theoretical and Empirical Investigation”, Journal of Political Economy.
Levitt Steven (1997):  “Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime”, The American Economic Review. 

6. Law and Social Norms
Traditionally, Law and Social Norms have been regarded as separate and independent regulators of conduct. In this class, we investigate how and whether Laws and Social Norms interact and which implications this has for the traditional economic analysis of Law.
McAdams, Richard & Rasmusen, Eric B. (2005). Norms in Law and Economics. Forthcoming: The Handbook of Law and Economics.
Funk, Patricia (2007): “Is there an expressive function of Law?”, American Law and Economics Review
Posner, Eric A. (2000). Law and Social Norms. Cambridge, Massachusetts: Harvard University Press.
Sunstein, Cass (1987). On the expressive function of law. University of Pennsylvania law review, 144: 2021-2053.
Zasu, B (2007): Sanctions by Social Norms and the Law: Substitutes or Complements? Journal of Legal Studies 

7. Discrimination and Affirmative Action
Most countries have adopted some sort of Anti-Discrimination legislation in different forms. In this class, we present theories that explain discrimination of certain groups and empirical evidence of different types of discrimination. Based on that, we compare the effectiveness of different types of policy interventions that aim to reduce the amount of discrimination.
Becker, Gary (1957): The Economics of Discrimination. University of Chicago Press.
Fryer, Roland & Glenn Loury (2005): Affirmative Action and its Mythology. Journal of Economic Perspectives.
Levitt, Steven (2004): Testing theories of Discrimination: Evidence from the Weakest Link. Journal of Law and Economics.
Pande, Rohini (2003): Can Mandated Political Representation Provide Disadvantaged Minorities Policy Influence? Theory and Evidence from India. American Economic Review.
Phelps, Edmund (1972): A Statistical Theory of Racism and Sexism. American Economic Review. 

8. Political Rights
Why do countries grant citizens different degrees of political participation?  What are the consequences for the desired size and composition of government? We compare different institutional settings in Europe and the United States and provide empirical evidence how more or less democratic participation affected government spending.
Acemoglu, D., and J.A. Robinson (2000), Why did the West extend the Franchise? Democracy, Inequality and Growth in historical perspective. Quarterly Journal of Economics, 115(4): 1167-1199.
Aidt, T.S., J. Duta and E. Loukoianova (2006), Democracy comes to Europe: Franchise Extension and Fiscal Outcomes 1830-1938, European Economic Review, 50, 249-83.
Llavador, H. and Oxoby, R. (2005): Partisan Competition, Growth and the Franchise. Quarterly Journal of Economics, 120(3): 1155-1189.
Lizzeri, A., and N. Persico (2004), Why did the elites extend the suffrage? Democracy and the scope of government. With an application to Britain’s “age of reform”.  Quarterly Journal of Economics.
Meltzer, A.H. and S.F. Richard (1981), A Rational Theory of the Size of Government, Journal of Political Economy.