Principles methods law and economics

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 9
Preface......Page 15
A. Proposals, Consequences, and Ideals......Page 17
B. Toward Scientific Analysis of Law......Page 19
C. Bibliographical Note......Page 23
Part 1: Principles......Page 25
1. From Formal Logic to Normative Reasoning......Page 27
A. Formal Deontic Logic......Page 28
B. Formal Logic’s Failure in Normative Reasoning......Page 29
C. The Informal Normative Syllogism......Page 31
Proposals, Consequences, and Ideals in Normative Reasoning......Page 32
D. Concluding Exercises......Page 33
E. Bibliographical Note......Page 35
2. Social Welfare versus Moral Philosophy......Page 36
A. Ideals behind Law and Economics: Welfarism and Pragmatism......Page 39
i. Deriving Ideals from Existing Rules (Including Formalism)......Page 41
ii. Rawls’ Contractarianism......Page 42
iii. The Potential Equivalence of Derived Ideals and Preferences......Page 43
C. Distinguishing Features of Economic Analysis......Page 45
iii. Ubiquitous Importance of Incentives......Page 46
iv. Treatment of Preferences as Objective......Page 47
vi. Orientation Toward the Future......Page 50
D. Concluding Exercises......Page 51
E. Bibliographical Note......Page 52
3. From Political Philosophy to Game Theory......Page 53
A. Political Theory......Page 54
i. Inefficiencies of Majority Rule......Page 55
ii. Legal Process: Explaining the Administrative State......Page 56
iii. Civic Republicanism......Page 58
iv. Perfectionism......Page 59
B. Voting System Design......Page 60
An example of the Borda count: Suppose the electorate consists of......Page 61
C. Game Theory......Page 66
i. Cooperation Games: Prisoner’s Dilemma......Page 67
ii. Coordination Games: Driving Side......Page 70
iii. Game Theory in Legal Scholarship......Page 71
D. Social Norms......Page 73
E. Bounded Rationality......Page 75
F. Concluding Exercises......Page 82
G. Bibliographical Note......Page 86
4. The Importance of Distribution of Wealth......Page 88
A. Redistribute......Page 91
B. Do Not Redistribute!......Page 95
C. Delegating Redistribution to Tax Policy......Page 100
D. Concluding Exercises......Page 105
E. Bibliographical Note......Page 110
5. Coase and Law’s Irrelevance......Page 111
A. Coasean Irrelevance......Page 112
i. Revealing Imperfections......Page 114
C. Transaction Costs: The Usual Suspect......Page 115
i. Vantage Point Makes Transaction Costs......Page 119
ii. Innovations Transform Transaction Costs......Page 120
iv. Example: Increasing Social Gain from Private Litigation......Page 121
v. Normative Implications for Litigation of the Analysis of Transaction Costs......Page 123
D. Concluding Exercises......Page 125
E. Bibliographical Note......Page 127
A. Negotiation Holdouts......Page 128
C. Risk Aversion......Page 131
ii. Substantive Solutions of Risk Aversion......Page 134
D. Distribution......Page 136
E. Concluding Exercises......Page 137
F. Bibliographical Note......Page 142
Part 2: Methods......Page 143
7. Mathematical Modeling......Page 145
A. Symbols, Functions, and Idioms......Page 147
B. Simplification and the Model as a Premise......Page 156
C. Modelling Applications......Page 158
i. Modeling Negligence Law: Optimization......Page 159
ii. Modeling the End of Affirmative Action: Differential Equations......Page 162
D. Concluding Exercises......Page 164
E. Bibliographical Note......Page 168
8. Confronting Uncertainty: Basic Probability Theory......Page 170
A. Describing Randomness: Probability and Expectation......Page 171
B. Mathematical Models of Expectation......Page 175
C. Uncertain Uncertainty: Conditional Probability......Page 177
D. Concluding Exercises......Page 182
E. Bibliographical Notes......Page 190
9. Advanced Probability: Distributions as the Shape of Randomness......Page 191
A. The Shape of Randomness: Distribution Functions......Page 192
i. Visual Comparison of Discrete and Continuous Distributions......Page 193
ii. CDF and PDF: Features and Relations......Page 194
iii. Truncated and Censored Distributions......Page 197
B. The Normal Distribution......Page 202
C. Concluding Exercise: Imperfect Enforcement......Page 204
D. Bibliographical Note......Page 212
10. How to Price Uncertainty: Finance......Page 213
i. Known Rates: Discounting......Page 215
ii. Risky Assets......Page 219
i. Financial Information......Page 227
ii. Forecasts......Page 228
C. Financial Market Microstructure: The Game-Theoretical Foundation of the CAPM......Page 229
D. Normative Application of Microstructure: Insider Trading......Page 230
E. Concluding Exercises......Page 236
F. Bibliographical Note......Page 240
11. Finance and Probability: Options and Derivatives......Page 241
A. Option Pricing......Page 243
B. Normative Implications of Option Pricing......Page 250
i. Recipients of Fiduciary Obligation......Page 251
ii. Automated Reorganizations via Options......Page 252
iii. The Options Understanding of the New Value Exception......Page 256
C. Concluding Exercises......Page 260
D. Bibliographical Note......Page 264
A. The Basics......Page 265
i. Obtaining Built-in Help about Functions......Page 267
ii. Using the Function Wizard......Page 269
iii. Categories of Built-in Functions......Page 271
iv. Relative and Absolute References in Copying......Page 274
B. Graphics......Page 277
i. Chart Types......Page 278
ii. Completing the Chart Wizard......Page 281
iii. Manipulating Charts......Page 283
i. The Solver......Page 285
ii. Goal Seek......Page 286
i. Recording a Macro......Page 287
ii. Editing a Macro......Page 289
E. Downloading and Combining Data......Page 290
i. Data Files Separating Columns with Commas or Tabs......Page 291
ii. Specifying the Type of Data......Page 293
iii. Fixed-Width Data......Page 294
iv. Combining Data......Page 295
F. Concluding Exercises......Page 296
G. Bibliographical Note......Page 297
13. Statistics......Page 299
A. The Use of Statistics in Legal Thinking......Page 300
B. Fundamentals: Descriptive Statistics and Distributions......Page 303
C. Empirical Research......Page 304
i. Basics: Comparing Data That Take Values and Data That Fall into Categories......Page 305
ii. Determining Influences: Multiple Outcomes......Page 314
iii. Determining Influences: Yes/No Outcomes......Page 324
iv. Observations That Are Filtered by a Threshold......Page 326
D. Concluding Exercises......Page 327
E. Bibliographical Note......Page 329
A. Cellular Automata......Page 331
B. Fractals......Page 333
D. To End......Page 336
Theory of Economic Change (Cambridge, MA: Belknap Press......Page 337
Appendix A: Meinhard v. Salmon 249 N.Y. 458 (1928)......Page 339
Appendix B: Glossary......Page 348
Appendix C: Mathematica Notebooks......Page 355
i. Determine the Participation in the Workforce......Page 358
iii. Manipulate the Exponent to See It Disappear......Page 359
v. The Composition of the Candidates......Page 360
vi. Graphics......Page 361
i. Derive the Normal Distribution as Gauss Did......Page 363
iii. Restating with Standard Deviation......Page 365
iv. Restating with Average Deviation......Page 366
v. The Triangular Distribution......Page 367
C. Application of Triangular Distribution: The Uncertain Apprehension of Speed Limit Violations......Page 371
i. Foundation......Page 376
iii. Solution: Statement......Page 377
iv. Solution: Proof......Page 378
v. Illustration of Price Path......Page 381
Index......Page 385