Economics of Remedies

Remedies in different legal fields have much in common, and the study of remedies can teach us a lot, especially when the goals of the substantive legal fields are similar. Consider tort law and contract law. Under its efficiency rationale, tort law should minimize social costs, thereby enhancing social welfare. In order to achieve this goal, tort law should provide incentives for both the injurer and the victim to take efficient precautions. Similarly, contract law should also provide the parties with efficient incentives, in order to enable them to maximize the contractual surplus. In both torts and contracts, providing the injurer/promisor and the victim/promisee with efficient incentives is done through a combination of substantive and remedial law. Thus, both legal fields share much in common and often are adapted to the legal context to which they apply. The chapter emphasizes the common denominators of the remedies in torts and contracts.

Environmental Law and Economics

This chapter begins with a brief general overview of the economics of environmental law. It then focuses on recent developments in the field of environmental law and economics, with an emphasis on the experience of the United States. When setting environmental policy, decision makers must address two general types of questions. The first concerns the ends of environmental policy, and examines the socially desirable level of environmental quality. The second type of question concerns the means of policy making and focuses on the types of regulatory instruments that will be used and the allocation of responsibility between governmental actors. Section 2 addresses the first type of question concerning the goals of environmental policy. Sections 3 and 4 address the means of environmental policy, focusing on instrument choice and jurisdictional allocation, respectively.

Estimating Pain- and-Suffering Damages

This chapter argues that the best solution for dealing with the high cost of administrating pain-and-suffering damages and the alleged variation in horizontal quality is to reduce the cost of administration and increasing uniformity, rather than limiting plaintiffs’ recoveries. The best way to accomplish this is by simplifying ways to estimate pain-and-suffering losses. The chapter surveys a number of solutions discussed in the literature on how to simplify the estimation of pain-and-suffering damages to cut administrative costs. The goal is to demonstrate the feasibility of the task of estimating the loss more than to recommend any specific path to it.

Open-Access and Information Commons

Open access commons are a family of institutional arrangements that are far more pervasive in modern complex economies than usually recognized in the economic literature. The defining characteristic of open access commons is their utilization of symmetric use privileges for an open, undefined set of users in the public, rather than asymmetric exclusive control rights located in the hands of an individual legal entity or defined group (club) use, and their primary reliance on queuing and some form of governance-based allocation, rather than price-cleared models, for congestion clearance and management. The chapter includes an overview of the commons literature, thumbnail case studies of the emergence of open access commons in the digitally networked environment, and a typology of open access commons and their proprietary parallels. The emergence of open access commons reflects the combined effect of innovation economics under highly uncertain conditions and the diversity of human motivations.

Medical Malpractice

This chapter assesses theory and evidence on the efficacy of medical malpractice liability and limitations to it in improving healthcare outcomes, and identifies unresolved issues that merit further attention from scholars. First, it explores the theoretical and legal background on medical malpractice. It then turns to the available evidence by focusing on three basic areas of study: the impact of malpractice limitations on payouts and litigation, the effect of malpractice limitations on overall healthcare costs, and the effect of malpractice on two major cost drivers in the healthcare system: cardiac and obstetrics practice. It argues that limitations on liability did not and likely cannot significantly reduce healthcare costs. Finally, the chapter discusses new and important trends in the literature regarding reforms to standards of care and the role of clinical practice guidelines and communication and disclosure programs.

Commons and Anticommons

Chapter 7 offers an overview of anticommons theory, which states that when too many people own pieces of one thing, nobody can use it. Usually private ownership creates wealth. But too much ownership can have the opposite effect—it leads to wasteful underuse. This is a free-market paradox that shows up all across the global economy. If too many owners control a single resource, cooperation breaks down, wealth disappears, and everybody loses. Conceptually, underuse in an anticommons mirrors the familiar problem of overuse in a “tragedy of the commons.” The field of anticommons studies is now well established, with thousands of scholars detailing examples across the innovation frontier, including drug patenting, telecom licensing, climate change, eminent domain, oil field unitization, music and art copyright, and postsocialist transition. Addressing anticommons tragedy is a key challenge for any legal system committed to innovation and economic growth.

Law and Economics of Insurance

This chapter broadly defines the law and economics of insurance. An overview of both economically oriented legal scholarship and traditional economics scholarship is provided. This vantage point reveals the centrality of certain core economic concepts to insurance law and regulation. Moreover, it suggests ways to improve the law by embracing sophisticated understandings of the economics of information asymmetries. For instance, insurance law and regulation assume that adverse selection and moral hazard are important problems in all insurance markets; however, the phenomena come in varying degrees. Thus, their magnitude is an empirical question. An equally significant lacuna in much insurance law is the absence of an equilibrium approach that anticipates insurance market reactions to legal interventions. Similarly, the specific insights of behavioral economics to understand anomalies in insurance demand and how the law might respond are emerging. The law and economics of insurance is still ripe for development.

Economics of Intellectual Property Law

This chapter analyzes the second wave of the economic study of intellectual property (IP) law. This second wave is characterized by two primary features: increasing methodological diversity and sophistication and an emphasis on contextualization—understanding how IP law is embedded in larger social and economic systems, and how IP interacts with other aspects of those systems to foster innovative ideas and economic growth. The chapter first discuss the many ways that second-wave scholarship seeks to show how IP rights are embedded in broader economic contexts, and thus diverges from first-wave research, which tended to focus exclusively on IP rights as the central determinants of economic activity. Next, it considers the many different methodologies being deployed to study issues in the economics of IP rights—from large-scale empirical work to surveys to interviews to experimental research.

Family and Household Economics

The past decade has seen a dramatic surge in women entering the labor force, accompanied by significant changes in gender roles within the family, the workplace, and society as a whole. These developments have elicited growing academic interest and prompted proposals for legal and policy reforms designed to improve outcomes for women, families, and everyone else. This chapter explores some aspects of recent work in this area, with emphasis on the economic analysis of the interplay between labor markets and family roles. Topics discussed include household decision-making models; division of labor within households; theoretical approaches to explaining why women differ on average from men in their choices for balancing paid work and unpaid domestic labor; and two important legal protections for American women with caregiving responsibilities—the Family and Medical Leave Act (FMLA) and Title VII of the Civil Rights Act.

Trademarks and Unfair Competition

Chapter 9 summarizes the dominant law and economic approach to some of the doctrines comprising the two major strands of modern trademark law: classic trademark law, in which trademark protection is justified as reducing consumer search costs and preventing consumer confusion; and dilution law, which is explained by the more traditional intellectual property justifications of encouraging investment in creating valuable marks and protecting producer goodwill. It argues that the culmination of trademark law in the form of protection against dilution represents completion of a full circle of development of unfair competition law. From its start as a means of protecting merchants’ entitlement to custom, unfair competition law, and its subsidiary trademark law have evolved in several stages, which are discussed in the chapter in detail.