The Law and Economics revolution is proceeding in these days apace. Economic analysis is being applied by scholars to a wide range of legal problems. Scholars identified with the use of economic analysis – Richard Posner, Frank Easterbrook, Robert Bork, Douglas Ginsburg and Stephen Williams – have been named to the federal bench (although not all have remained on the bench). First-year law students in most law schools are confronted with the intricacies and paradoxes of the Coase Theorem in at least one of their classes.

Economic analysis has probably had its greatest impact in its traditional stronghold of antitrust and in the tort/nuisance area. There has been a reasonable amount of work on the economics of contracts and contract law, and this too is beginning to have an impact. This book represents a sampling of that literature, supplemented by a few pieces from the more distant past. I do not want to oversell the virtues of the economic approach – overselling is one of the vices economists have been accused of in their forays into legal issues. Economics does not provide all the answers. And some that it does provide are wrong, as we shall see. Nonetheless, it does provide a powerful analytical framework that can both enhance our understanding of how parties structure their contractual relationships and illuminate many areas of contract law.

The scope of these readings is deliberately circumscribed. My primary interest is in commercial transactions between modern, Western business firms.