Posted: May 11th, 2015

Law and Economics

This is a final year coursework question. It is split up into two questions, 1500 words per question. Footnotes count towards the word limit of 3000. I also have certain books that can be referred to.

QUESTION 1

(b)Below is thereasoning ofBramwell LJ in Powell and Another v. Fall (5 QB 597 (1880)). In this case the plaintiff asked for damages from the defendant whose traction engine caused some sparks which set on fire a stack of hay on the plaintiff’s land.

Critically discuss Judge Bramwell’s reasoning using law and economics concepts. Pay particular attention to how he defines damages that need to be compensated and how he uses the concept of public benefit whilst doing so.

‘…It is just and reasonable that if a person uses a dangerous machine, he should pay for the damage which he occasions; if the reward which he gains for the use of the machine will not pay for the damage; it is mischievous to the public and ought to be supressed, for the loss ought not to be borne by the community or the injured person. If the use of the machine is profitable, the owner ought to pay compensation for the damage.’

QUESTION 2

(a) Leif Johansen argues that:

‘…bargaining will often be an inefficient decision procedure in the sense that it tends to distort the information basis for decisions, it tends to use or waste resources in the process, particularly by delaying decisions for reasons which are not technically necessary, it will more or less frequently lead to breakdown and failure to realize the potential gains, and threats will sometimes be carried out.’ (in ‘The Bargaining Society and the Inefficiency of Bargaining’, Kyklos (1979), 32(3): 497-522, at p.519; original italics, emphasis added.)

Critically discuss the Coase theorem in the light of the statement above making references to case-law where necessary.

Some references that should be used:

David D. Friedman, Law’s Order – What Economics has to do with law and why it matters?, Princeton University Press, 2000

Klaus Mathis, Deborah Shannon, Efficiency Instead of Justice?: Searching for the Philosophical Foundations of the Economic Analysis of Law, Springer, 2009

Gerrit de Geest (ed.), Encyclopedia of Law and Economics, Edward Elgar, 2009-2012