ECONOMIC ANALYSIS OF LAW AMAR, COHEN, DAWSON, GLASZ

AGENDA i.Introduction ii.Simulation iii.Economics Analysis of Law Les Avantages Tort Law iv.Economics & Law – Real World Application Tuition Hikes Chinese Bidding War vs. Evolved Countries v.Limitations vi.Conclusion & Discussion Questions

INTRODUCTION

SIMULATION Groups: 1: You have a low income and are willing to spend $1. 2: You have a high income and are willing to spend up to $2, however (1) you would prefer to use an adoption agency, and (2) you would like to spend less than $2 if possible. BUT, you want a baby, regardless of where you get it!

SIMULATION Scenario 1: Child Adoption Act: Any person willing to adopt a child must do so (1) in compliance with the CCQ, and (2) must go through a government run non-profit adoption agency.

SIMULATION Scenario 2: No Regulation - Free Market.

LANALYSE ÉCONOMIQUE DU DROIT: LES AVANTAGES La compréhension des mécanismes économique est donc cruciale pour les juristes, les décideurs politiques, les magistrats et les avocats 1.Lanalyse économique « construit » le droit. 2.Lanalyse économique prend en compte toute option (juridique) possible. Le Droit du Contrat selon lAnalyse Économique Le Droit de la Responsabilité Civile selon lAnalyse Économique Application de lanalyse économique sur le Droit de la Famille

ECONOMIC ANALYSIS WITHIN TORT LAW Economic Analysis of Law, 5 th ed (R. Posner) The Learned Hand Formula for Determining Liability (R. Posner) Liability IF B < PL B = burden (cost) of adequate precautions P = probability that injury will occur L = gravity of resulting injury Bolton v. Stone (1951), Overseas Tankship v. Miller Steamship (1967) No-fault systems Employer liability

ECONOMICS ANALYSIS OF LAW – REAL WORLD APPLICATION 1.Tuition Hikes 2.Chinese Bidding War

PROPOSED TUITION HIKES Why did the government want to increase tuition? P Q D2 D1 S Bad Economy / Job market Increase in demand for education Quantity from D1 - > D2 increases Price from D1->D2 increases

BIDDING WAR IN CHINA – OPPOSITE OF N.A. One-Child Regulation in China Supply of young professionals decreases (prevented around 250 M births) Demand for young professionals increases Result: Bidding war for these professionals, and companies spending more to find ways to make them happy, stay competitive.

LIMITATIONS OF ECONOMICS Perfect Information Binary AnalysisSelf-Interest Can only assign comparative value Economics is not value neutral False segmentation

LIMITATIONS OF ECONOMICS 1. Freedom of Choice Choosing to work below minimum wage 2. Rationality Identifying items for consumption, calculating their value and then estimating potential risks Persons have things they care about and will do the best they can to achieve these things 3. Defining Richness …in a culture like our own, which is so heavily dominated by the motive of self interest [one cannot habitually think of rich as utility] without in fact universalizing the ordinary rather than the technical meaning Risk of defending all transactions including the sale of oneself into slavery 4. Short time horizon Present value of anything that will come into possession very far in the future…is nearly zero

ALTERNATIVES Traditional economics; not consistent with broader societys view of itself: Information Economics, Ecological Economics and Behavioral Economics; progress? These fields can reveal areas where new laws are needed and how they can be most effective

CONCLUSION & DISCUSSION QUESTIONS 1.What did you think about the adoption simulation? Did you prefer the free market or regulated market, and why? 2.The basic economics behind the Quebec tuition prices are undisputed, however, there are many reasons why the increase did not occur. Community values played a big part in this. What were your thoughts in regards to the proposed increase, taking into account the economics and values of society? 3.As students, what are your thoughts on the bidding war and shortage of young professionals in China, versus the competitive landscape which exists in North America? Which system would you rather be in?