Tom Hertz and Paolisa Nebbia

Economic theory is used to predict how rational individuals will respond to rules and economic arguments have been used to analyse the consequences of a wide variety of legal rules, including not only standards of proof, damage rules for breach of contract, negligence rules for torts, but also property and antitrust law, as well as environmental law and law of the financial and of the regulated markets. After an introductory part on the methodology of the law and economics approach, this module will examine areas of law that may be particularly relevant in the context of globalised a market and society, having particular regard to the following:

1) Intellectual property law
Utilitarian theorists generally endorse the creation of intellectual property rights as an appropriate means to foster innovation, subject to the caveat that such rights are limited in duration so as to balance the social welfare loss of monopoly exploitation. Non-utilitarian theorists, on the other hand, emphasize creators’ moral rights to control their work. We will explore these issues paying special attention to the pharmaceutical industry, which offers a particularly salient example in today’s global economy.

2) Banking and financial markets
At the macro level, excessive risk taking by financial intermediaries, sometimes related to prior deregulation of financial markets or international capital flows, has lately become a major factor explaining the occurrence of financial crises. The regulation of banking and financial markets is becoming the major challenge for public authorities in a market where information asymmetries, adverse selection and moral hazard problems trigger the need for investors’ protection against occurrence of systemic crises that may endanger financial stability.  At the micro level, many of the world’s poor are effectively shut out of the credit market, except at extremely high interest rates.  We will consider recent appraisals of the many “microcredit” and land-titling initiatives that are designed to increase access to credit by the poor.

3) Public utilities
The term “public utilities” indicates a wide variety of industries (airlines, telecommunications, oil, natural gas, electricity, water and railroads) that share the characteristic of having a common “network” structure, i.e. an extensive distribution system of lines, pipes or routes that give often rise to monopolies. Historically, public utilities have been either regulated or government-owned: in both cases, they have recently experienced regulatory reform in the form of increased competition. The reasons and the effects of regulation and regulatory reform will be examined.

4) The environment
This part of the course will focus on the economics of environmental regulation by first discussing  the use of cost-benefit analysis in environmental law and policy and in environmental standard setting; it will then examine the various legal instruments to control environmental pollution and the combined use of regulation and other policy instruments such as liability rules, and tradable rights to pollution.

Tom Hertz - Visiting Associate Professor of Economics
American nationality, is currently an assistant Professor of Economics at the American University in Washington D.C. He has published in the main international reviews essays on various fields of welfare economics.

Paolisa Nebbia- Visiting Associate Professor of Law
Italian nationality, degree in law at Università degli Studi di Torino, Phd Southampton University, former Fellow Teacher at Oxford University, Reader at Leicester University. She is an expert in EU regulation, contracts and global labour law.