Law 108-003 Economic Foundations of Legal Studies


Class Time:1:30 pm - 2:45 pm

TR Arlington 1 221

Professor Alex Tabarrok

Office: Carow Hall, Office Hours: MWF: 10-11:30, 2-4.  I also have an office in the Mercatus Center on the 4th floor of the law school building, office number 433F.  I will be there most day’s before class.

Tel. 703-993-2314


Web Page:



Office Hours:  Feel free to drop by any time or call for an appointment.  Email is the best way to contact me.  All students should periodically check their GMU email account for important information.


      This course will introduce you to the basic tools and techniques of Microeconomics with special attention to those aspects most useful for legal research.  There are two texts in the class.  Pindyck and Rubinfeld's Microeconomics, (most recent edition) and Entrepreneurial Economics: Bright Ideas from the Dismal Science (edited by myself).  There are also a handful of readings that are available online from from a university computer or home computer using GMU as a proxy.


            Your grade will be computed from the following work:


Midterm: 50%

Final: 50%


The grading scale is as follows:


A+: 90%+

A:   85-89% 

A-:  80-84%

B:   70-79%

C:   60-69%

D:   50-59%

F:    50% -


            Plus-Minuses for B through D grades, where allowed by university policy, will occur at the upper and lower 2.5% level.  For example, 70-72.49 will be B-, 72.5-77.49 B, 77.5-79.9 B+ and so forth.


WarningAttendance in this class is vital.  The book is to be used as a guide to the lectures not vice-versa. 


The final exam will be as scheduled by the university, DEC 10 - 12:00 PM.        

Brief Course Outline


Approximate Guide to the Course



Reference Material


Review of mathematics, supply and demand, tax incidence

PR 2


Tax incidence, elasticities, back of the envelope calculations

PR 2


Foundations of Demand – indifference curves, budget constraints, marginal rate of substitution

PR 3


Marginal rate of substitution, applications – cash grant versus subsidy, housing vouchers.

PR 4


Income and substitution effect, gas tax with rebate, labor supply, guaranteed minimum income

PR 4, 511-514


Marginal cost, profit maximization and supply curves, competitive equilibrium and minimization of total cost

PR 8


Applications of the Competitive Model, rent controls, gasoline controls, sales tax

PR 9


Approximate time of exam 1.



Shortage of human organs

PR 9, EE 6, 7


Taxation and Product Characteristics, minimum wage



Airline regulation and deregulation, price supports, acreage restrictions

PR 9


Import Quotas and Tariffs

PR 9, handout


How is Paris Fed?




PR 10


Patents and patent reform

EE 13


Price Discrimination

PR 11, Ayres & Siegelman


Price Discrimination

PR 11


Property Rights

Libecap, Anderson & Tollison


Property Rights

Anderson & Hill, Frey & Buhofer


Externalities, Coase Theorem

PR 18.1, 18.2



Coase Theorem and Marriage

Landsburg, Peters


Asymmetric Information

PR 17, Akerlof


Signaling. Principal-Agent Model

PR 17, Lindsay


Naïve and sophisticated voting



Genetic Insurance,  Time-Consistent Insurance

EE 3,4


Property Rights applied to urban transit

EE 14


Papers to be read


Ayres, I., and P. Siegelman. 1995. Race and Gender Discrimination in Bargaining for a New Car. American Economic Review 85 (3):304-21.


Libecap, G. D. 1989. Contracting for the unitization of oil fields. In Contracting for Property Rights, 93-114. Cambridge, MA.: Cambridge University Press.


Anderson, G. M., and R. D. Tollison. 1985. Life in the Gulag: A Property Rights Perspective. Cato Journal 5 (1):295-304.


Anderson, T. L., and P. J. Hill. 1990. The Race for Property Rights. Journal of Law and Economics 33 (1):177-97.


Frey, B. S., and H. Buhofer. 1988. Prisoners and Property Rights. Journal of Law and Economics XXXI:19-46.


Coase, R. 1960. The Problem of Social Cost. Journal of Law and Economics 3 (1): 1-44. (shorter online version here)


Landsburg, S. E. 1997. The marriage contract. Slate ( Sept. 11, 1997.


Peters, E.H. 1986. Marriage and Divorce: Informational Constraints and Private Contracting. American Economic Review 76 (3): 437-454.


Akerlof, George A. 1970. The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. The Quarterly Journal of Economics 84 (3): 488-500.


Barzel, Yoram. 1976. An Alternative Approach to the Analysis of Taxation. Journal of Political Economy 84(6): 1177-1197.


Lindsay, Cotton M. 1976. A Theory of Government Enterprise. Journal of Political Economy 84(5):1061-1077.