II. Law and economic analysis

A. Legal institutions and processes (cont'd.)

b. The legal process
b1 Civil law process (cont'd.)

    Burden of proof: usually "preponderance of evidence"
    sometimes "clear and convincing evidence" (ex: punitive damages)

    Penalty: damages and/or injunction

    Judge must "enter judgment on the verdict" which is controlling
    Judge can enter a "judgment non obstante verdicto" (jnov--judgment notwithstanding the verdict)

    6. Appeal

    Either side can appeal

    Appeals court typically considers only the law
    can consider and override on factual grounds only if findings were "clearly erroneous"
    additional legal arguments can be introduced.

    Process: appellant presents legal arguments in a written "brief."
    Many cases are selected for "oral arguments" before the court, structured discussions with each side given a short time - usually about 15 minutes - to present arguments to the court.

    Interested parties can participate, filing "Amicus Curiae" (friend of the court) briefs

    Outcomes: Affirm / Reverse / Remand (return case to trial court)

    105: most cases you read about in the law literature are appeals since they set precedents.

    Appeals to Supreme Court may be denied.
    Supreme Court commences a review with
    writ of certiorari: An order issued by the U.S. Supreme Court directing the lower court to transmit records for a case which it will hear on appeal.

b2 Criminal law differences

    Q9: How do each of the following differ in civil versus criminal cases: plaintiff, burden of proof, penalty, right of appeal?

    1. Incident--crime against the "people"

    2. Case filing

    --Criminal case:
    --Private citizens cannot be a plaintiffs, only make allegations of criminal behavior to law enforcement agencies.
    --Arrest precedes filing of charges
    --Criminal case: pretrial services or probation officer immediately interviews the defendant and conducts an investigation of the defendant's background...to help a judge decide whether to release the defendant into the community before trial, and whether to impose conditions of release.
    --Defendant must be charged in court in an arraignment and make an initial plea (within 48 hours in CA)

    3. Pre-trial discovery

    More limited discovery
    prosecutors must disclose to the defendant any evidence that would help the defendant to establish his or her innocence.

    4. Pre-trial proceedings

    Only the government can drop a criminal case   (victim = a witness only)

    Preliminary hearing, usually before a grand jury of 16-23 members;
    not open to the public
    proceeds to full trial if the grand jury issues an "indictment" (formal charge) based on "probable cause", leading to a second arraignment
    individuals subpoenaed to appear before a grand jury are not allowed to bring a lawyer into the hearing room, although they may go outside to consult with the attorney any time they wish.

    5. Trial

    12 jurors
    CA requires unanimous verdicts
    After prosecution presents case, defendant can move for a directed verdict

    Burden of proof: "beyond a reasonable doubt"

    Verdicts: not guilty, not guilty by reason of insanity, or guilty
    Exceptions to prohibition against double jeopardy: federal trials, state trials, civil lawsuits

    Courts often order convicted defendants to pay "restitution"
    Usually, the judge determines the punishment to be imposed.
    However, in capital cases, the jury is allowed to decide whether to impose the death penalty.

    6. Appeal

    Only defendant can appeal verdict
    Either side an appeal sentence

    CA: All capital punishment sentences get automatically appealed to the CA Supreme Court.

    Our legal system is elaborate and costly
    We'll take a micro look later
    For now consider the macro perspective--is this system worth its huge cost?

II. Law and economic analysis

B. Foundations for the economic analysis of the common law

    The situation: We have this extensive body of common law which drives civil lawsuits
    What does economics have to say about it?

    Economic comments about law date back to Adam Smith, but law as a focus is much more recent
    First issue of The Journal of Law and Economics dates to 1958

    Recall that markets deal with voluntary exchange, but courts deal with involuntary exchange instead.

    Posner: "An important question in the economic analysis of law is whether and in what circumstances an involuntary exchange may be said to increase efficiency…. An…approach which is in the spirit of Kaldor-Hicks…is to try to guess whether, if a voluntary transaction had been feasible, it would have occurred." (Posner 15)

    A lawsuit => the market didn't work, so the parties have turned to the courts instead.
    What made the market fail--the key is externalities

1. Economics and externalities

    Basic problem: Individual rationality vs group rationality

    Examples:
    (1) Armies running away

    (2) Rational pollution:
    --There are 100 individuals who can each burn cheap coal or expensive gas to heat their house.
    --The coal pollutes, but ...
    --99% of the pollution produced by my coal burning is a cost for other people, so I only count 1% of it, so ...
    --I burn coal even if the total cost, including the pollution, is substantially larger than for gas.
    --On net, we are all worse off. I am externalizing 99% of the cost of my pollution, but paying 1% of the cost of the pollution by each of the other 99 people.
    --But on the margin--the margin of how much I pollute--the pollution cost is almost all external.

    In general, externalities lead to inefficient outcomes.

Case 1: pecuniary externalities
Example: competition

    Pecuniary externality => offsetting transfers, not net costs or benefits.
    Reserve policy only for nonpecuniary externalities