Chapter 25 So You Want to Be a Lawyer: Economics and the Law Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

25-2 Chapter Outline The Government’s Role is Protecting Property and Enforcing Contracts Private Property Bankruptcy Civil Liability

25-3 You Are Here

25-4 Private Property Private property: land and other physical items that are owned by individuals or a group of individuals. It is necessary for economic growth because –It motivates hard work –It motivates & enables saving

25-5 Intellectual Property Intellectual property: written and recorded works, ideas, formulas, and other creative intangible property that are owned by individuals or a group of individuals. –Patent: A right granted by government to an inventor to be the exclusive seller of that invention for a limited period of time. –Copyright: A right granted by government to a creator of a written or recorded work to be the exclusive seller of that invention for a limited period of time. –Trademark: A right granted by government to a business to be the exclusive user of a phrase, logo, or name of such a business.

25-6 Contracts Contracts: Written agreements where each party is bound to provide other parties with goods, services, or financial consideration in exchange for other goods, services, or other financial considerations.

25-7 Enforcing various property rights and contracts The law is not enough. Someone has to enforce the law. Civil courts protect property rights and enforce contracts. Countries without stable and effective governments are typically not successful in fostering healthy economies.

25-8 Negative Consequences of Private Property Rights Copyrights –The reason textbook prices cost so much –The reason music and movies can’t be shared over the internet. Patents –The reason prescription drug costs are so high

25-9 Bankruptcy Bankruptcy: The legal state that allows debtors to be protected from the actions of their creditors. –If we need government to enforce contracts, why would it make sense to allow people to not repay their debts? If you are in too deep, you have little incentive to work. Burdensome debt prevents you from taking advantage of some income producing opportunities.

25-10 Civil Liability Types of Cases –Personal injury –Wrongful death –Product liability

25-11 Value of Damages Value –PV of lost income –PV of lost household production –PV of medical care –PV of psychological care

25-12 Contingency Attorneys Contingency attorney: A lawyer who agrees to take a percentage of any judgment or settlement. They are only paid if their client wins their case. –If their client loses, the client owes nothing. –If they win, the lawyer typically gets one-third of the judgment or settlement. –They take cases expecting to win only a few big payoffs.

25-13 Class Action Lawsuits Class Action Lawsuits: Suits where similarly harmed people are joined together into one party so as to sue one or more defendants. –Allow many people with relatively small losses to recover losses. –Open to abuse as attorneys get the lion share of settlements and judgements.