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Over a quarter of a century ago, Ron Gilson, Dan Raff, and I developed a new course, The Economics of Complex Transactions, which came to be known as Deals. The motivation for the course was our perception of a great imbalance in the law school curriculum, which was weighted heavily toward litigation, particularly appellate litigation. While a substantial number of our graduates were becoming transactional lawyers, there was hardly anything available to prepare them for that practice. Our concept was that lawyers were transaction engineers and, when designing contracts, they faced a generic set of problems. Furthermore, there were techniques for coping with these problems that transcended particular transaction types.

The first two-thirds of our course focused on the problems and provided techniques to cope with them. In the remaining third, the students were given the papers from a particular transaction and were asked to explain how the parties dealt with the problems, and if they could have done better. The types of transactions ranged from corporate acquisitions, long-term contracts, movie deals, construction projects (including a multi-billion-dollar expansion of the Panama Canal), venture capital and private equity deals, and pharma-biotech projects. We built the course around several concepts: risk; information (adverse selection in particular); moral hazard; and adaptation to change (the reliance-flexibility tradeoff). We emphasized reverse engineering – if we observe that parties do "X," then we try to find an explanation for it.


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