Wellesley College

LAW & ECONOMICS

ECONOMICS 325

Assignment 3 

(Due September 30)

   1. Ronald Coase's article "The Problem of Social Cost” is considered a classic in economics. The article also helped Coase win the Nobel Prize in Economics.  In the first half of this article, Coase uses efficiency analysis to discern what type of liability rule would be optimal. The result he obtains has come to be known as Coase's Theorem.

         (A) Based on your reading of Coase's article, how would you state Coase's theorem?

         (B) What assumptions do you believe would have to be satisfied for this theorem to hold?

   2. Read the article by Myron & Tetelbaum from your reading list. This article provides a good example of effects analyses. 

Answer the following questions using the article.

          (A) Briefly state what the authors are trying to discern the effect of.

         (B) Describe the methods (e.g., literature survey, graphics, microeconomic theory, benefit-cost analysis, econometric techniques) that the authors use to answer the question they pose. Your description should show that you understand how the author carried out their analyses (e.g., estimated a fixed effect model using panel date for states over the period 1980-2005). 

  3. Read the rest of the Coase articel or the article by Hart, et al. on your reading list. These articles t compare the relative merits of alternative institutional arrangements (i.e., carries out a comparative institutional analysis). 

        (A) What institutions does the article your read consider?            

        (B) Describe the methods (e.g., literature survey, graphics, microeconomic theory, benefit-cost analysis, econometric techniques) that the authors use to carry out the comparative institutional analysis. Your description should show that you understand how the author carried out their analyses. 

In completing this and other assignments, you may work with your group or as an individual.

If you work with a group, you should turn in one coordinated and consolidated response to the above questions. The group should be prepared to explain and defend the groups answers in class on October 4. 

 A number of groups  & individuals will be asked to present their answers to the above questions in class on October 4.  After the presentations, there will be a class discussion of the analytic methods used in law and economics.  

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© Ann Dryden Witte, 1997