Law and Economics applies the concepts and techniques of microeconomics to the law itself, focusing on the common law: the dominant source of legal rules in Australia. The course does not assume any prior legal knowledge, nor does it provide any legal training.

The Course employs basic price theory – rational maximization, the law of demand, opportunity costs, and the idea that voluntary exchange allows resources to gravitate toward their highest- valued uses – to predict the consequences of legal rules: how they affect the behaviour of individuals and groups; and uses welfare economics to evaluate legal rules, especially their efficiency effects. Legal issues examined in the course include property rights, tort law, contract law, criminal law, law enforcement and punishment, litigation and settlement, principal-agent liability, and regulation v tort law as ways to control externalities.

The emphasis in this course is on “thinking like an economist” to understand legal issues from an economic perspective, with a focus on a clear understanding of the logic and underlying economic intuition rather than just the results.

Law and Economics is designed for both economics and law students. For economics students, it is an interesting application of the economic way of thinking to real world problems and policy issues. Examining actual legal cases gives students experience in relating abstract economic models to practical problems and demonstrates their direct relevance.

For law students, Judge Richard Posner (one of the founders of law and economics) explains the benefits of law and economics well: “The law is divided into numerous fields, each of which has a complex structure of rules. The fields are traditionally studied in isolation from one another, and within each field the rules tend also to be studied as a separate, often self-enclosed bodies of thought. Yet it turns out that a relative handful of economic doctrines – such as decision under uncertainty, transactions costs, cost benefit analysis, risk aversion, and positive and negative externalities – can, by repeated application across fields of law and legal rules, describe a great deal of the legal system and enable the student to develop a more coherent sense of the system – to grasp the relation of its parts and understand its essential unity.”