ECON-UA 2 Chapter Notes - Chapter 15: Coase Theorem, Natural Monopoly, Market Power
14 May 2016
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Chapter 15: the legal & regulatory infrastructure, the legal system a. i. a. ii. Economically, the law encourages people to channel their efforts into mutually beneficial, pareto-improving exchanges by discouraging the chief alternative: trying to benefit at the expense of others. The law also enables some types of pareto improvements to take place that would be difficult or impossible w/out the law a. ii. 1. Criminal law: prohibits actions that harm others a. ii. 1. a. Shifts behavior away from harmful activities toward a. ii. 2. Contract law: establishes rules for writing & enforcing contracts & penalties for failure to fulfill a. ii. 2. a. Property law: establishes rules for private ownership of land & other assets; ensures that rewards from assets accrue to the owners a. ii. 3. a. Enables owners to sell or rent property to those a. ii. 4. who can use it most profitably. Tort law: allows those harmed by dangerous activities or products to sue for damages a. ii. 4. a. Facilitates pareto improvements that require a. ii. 5. reasonable assumption of safety.
