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Private Wealth And Public Goods: A Case For A National Investment Authority, Robert C. Hockett, Saule T. Omarova

Cornell Law Faculty Publications

Much American electoral and policy debate now centers on how best to reignite the nation’s economic dynamism and rebuild its competitive strength. Any such undertaking presents an extraordinary challenge, demanding a correspondingly extraordinary institutional response. This Article proposes precisely such a response. It designs and advocates a new public instrumentality--a National Investment Authority (“NIA”)--charged with the critical task of devising and implementing a comprehensive long-term development strategy for the United States.

Patterned in part after the New Deal-era Reconstruction Finance Corporation, in part after modern sovereign wealth funds, and in part after private equity and venture capital firms, the NIA …

Sharing The Prosperity: Why We Still Need Organized Labor, Angela B. Cornell

Cornell Law Faculty Publications

Today economic inequality is greater in the United States than in any other advanced nation. Bringing the minimum wage up to a true living wage is a crucial step forward, as are other employment-related benefits like broadening access to overtime and instituting paid sick leave. But employment statutes such as minimum-wage regulations cannot replace the broad-based benefits that come from organized labor. Unionization places the ability to influence what happens in the workplace directly in workers’ own hands, even as it creates institutions that can advocate for working people at the community, state, and national level. Under an effective labor-law …

Real Arrow-Securities For All: Just And Efficient Insurance Through Macro-Hedging, Robert C. Hockett

Cornell Law Faculty Publications

As a new hurricane season opened in June of 2006, it emerged that a number of online gaming sites were offering bettors the opportunity to wager on whether New Orleans might suffer another Katrina calamity. Commentators condemned the announced practice with howls of disgust, labeling it both tasteless and heartless. Perhaps they were right. All I could think about as one who grew up in New Orleans, however, was how risk pools might hereby be broadened to include all the world’s bettors. We shouldn’t condemn these people; we should use them—while requiring that they maintain margin accounts at their betting …

Law, Environment, And The “Nondismal” Social Sciences, William Boyd, Douglas Kysar, Jeffrey J. Rachlinski

Cornell Law Faculty Publications

Over the past 30 years, the influence of economics over the study of environmental law and policy has expanded considerably, becoming in the process the predominant framework for analyzing regulations that address pollution, natural resource use, and other environmental issues. This review seeks to complement the expansion of economic reasoning and methodology within the field of environmental law and policy by identifying insights to be gleaned from various “nondismal” social sciences. In particular, three areas of inquiry are highlighted as illustrative of interdisciplinary work that might help to complement law and economics and, in some cases, compensate for it: the …

Complexity, Innovation, And The Regulation Of Modern Financial Markets, Dan Awrey

Cornell Law Faculty Publications

The intellectual origins of the global financial crisis (GFC) can be traced back to blind spots emanating from within conventional financial theory. These blind spots are distorted reflections of the perfect market assumptions underpinning the canonical theories of financial economics: modern portfolio theory, the Modigliani and Miller capital structure irrelevancy principle, the capital asset pricing model and, perhaps most importantly, the efficient market hypothesis. In the decades leading up to the GFC, these assumptions were transformed from empirically (con)testable propositions into the central articles of faith of the ideology of modern finance: the foundations of a widely held belief in …

Bailouts, Buy-Ins, And Ballyhoo, Robert C. Hockett

Cornell Law Faculty Publications

The bailout strategy now being pursued by Treasury under the recently authorized Troubled Asset Relief Plan, if “strategy” it can be called, remains obscure and erratic at best. All the while markets remain jittery and credit remains tight, as the underlying source of our present financial jitters—continued decline in the housing market and still mounting foreclosures—goes unaddressed. This piece proposes an interesting and novel approach to solving the financial problem. If it works out, it would eventually minimize the cost to the government.

Judicial Adherence To A Minimum Core Approach To Socio-Economic Rights – A Comparative Perspective, Joie Chowdhury

Cornell Law School Inter-University Graduate Student Conference Papers

Today’s world is witness to extraordinary inequality and the most desperate poverty. Millions of people across the world have no access to adequate food or water, basic health care or minimum levels of education. There are many avenues through which to approach the issue of improving socio-economic conditions. Courts, especially recently, have in certain countries, been seeking to ameliorate these conditions, to some extent, through the means of socio-economic rights adjudication.

For courts to effectively empower people to realize their socio-economic rights, attention to implementation of judgments is essential. A strong normative base for such judgments is just as crucial, …

Pareto Versus Welfare, Robert C. Hockett

Cornell Law Faculty Publications

Many normatively oriented economists, legal academics and other policy analysts appear to be "welfarist" and Paretian to at least moderate degree: They deem positive responsiveness to individual preferences, and satisfaction of one or more of the familiar Pareto criteria, to be reasonably undemanding and desirable attributes of any social welfare function (SWF) employed to formulate social evaluations. Some theorists and analysts go further than moderate welfarism or Paretianism, however: They argue that "the Pareto principle" requires the SWF be responsive to individual preferences alone - a position I label "strict" welfarism - and conclude that all social evaluation should in …

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga

Cornell Law Faculty Working Papers

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and IPOs in the Sao Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has …

Toward A Global Shareholder Society, Robert C. Hockett

Cornell Law Faculty Publications

With the American economy seemingly stalling, the global economy thereby imperiled, and another electoral campaign season well underway in the U.S., the "outsourcing" of jobs from the developed to the developing world is again on the public agenda. Latest figures indicate not only that layoffs and claims for joblessness benefits are up in the U.S., but also that the rate of American job-exportation has more than doubled since the last electoral cycle. This year's American political candidates have been quick to take note. In consequence, more than at any time since the early 1990s, continued American, and with it other …

Taking Distribution Seriously, Robert C. Hockett

Cornell Law Faculty Working Papers

It is common for legal theorists and policy analysts to think and communicate mainly in maximizing terms. What is less common is for them to notice that each time we speak explicitly of socially maximizing one thing, we speak implicitly of distributing another thing and equalizing yet another thing. We also, moreover, effectively define ourselves and our fellow citizens by reference to that which we equalize; for it is in virtue of the latter that our social welfare formulations treat us as “counting” for purposes of socially aggregating and maximizing.

To attend systematically to the inter-translatability of maximization language on …

Economic Sanctions Against Human Rights Violations, Buhm Suk Baek

Cornell Law School Inter-University Graduate Student Conference Papers

The idea of human rights protection, historically, has been considered as a domestic matter, to be realized by individual states within their domestic law and national institutions. The protection and promotion of human rights, however, have become one of the most important issues for the international community as a whole. Yet, with time, it has become increasingly difficult for the international community to address human rights problems collectively. Despite a significant development in the human rights norms, effective protection of fundamental human rights and their legal enforcement has a long way to go.

This paper will argue that economic sanctions …

Reflective Intensions: Two Foundational Decision-Points In Mathematics, Law, And Economics, Robert C. Hockett

Cornell Law Faculty Publications

This Article, transcribed from a symposium talk given by the author, examines two critical junctures at which foundational decisions must be made in three areas of theoretical inquiry - mathematics, law, and economics. The first such juncture is that which the Article labels the "arbitrary versus criterial choice" juncture. This is the decision point at which one must select between what is typically called an "algorithmic," "principled," "law-like," or "intensionalist" understanding of those concepts which figure foundationally in the discipline in question on the one hand, and a "randomized," "combinatorial," or "extensionalist" such understanding on the other hand.

The second …

What Kinds Of Stock Ownership Plans Should There Be? Of Esops, Other Sops And "Ownership Societies", Robert C. Hockett

Cornell Law Faculty Publications

Present-day advocates of an ownership society (OS) do not seem to have noticed the means we have already employed to become an OS where homes and human capital (higher education) are concerned. Nor do they appear to have considered whether these same means - which amount to publicly enhanced private credit markets - might be employed to spread shares in business firms, with a view to completing our OS. This article, the third in a series, seeks tentatively to fill that gap. It does so first by demonstrating how the Employee Stock Ownership Plan, or ESOP, in effect replicates our …

Just Insurance Through Global Macro-Hedging: Information, Distributive Equity, Efficiency, And New Markets For Systemic-Income-Risk-Pricing And Systemic-Income-Risk-Trading In A New Economy, Robert C. Hockett

Cornell Law Faculty Publications

This article considers the prospects for exploiting (a) several deep conceptual linkages between justice and insurance, (b) the rapid development of new hedging methods and technologies, and (c) an increasingly integrated global finance economy, in a manner that can render the global economy both more just and more prosperous.

It first derives an account of economic justice from the best known theories currently in the field – an account likely to enjoy broad appeal. The article then elaborates on a number of striking parallels between what it takes for the best account of justice on the one hand, the theory …

Whose Ownership? Which Society?, Robert C. Hockett

Cornell Law Faculty Publications

The idea of an "ownership society" (OS) is not new to American politics or law. It might be called the seventeen year cicada of American domestic policy - emerging once per generation onto the national agenda, generating just a bit of buzz, then receding once again to leave a mass of empty shells and buried eggs behind. Unlike the insects, however, OS proposals seldom have sounded the same notes to everyone's ears. They have been proffered to or on behalf of differing constituencies for differing reasons, and therefore have tended to mean different things to different people. It is tempting …

From "Mission-Creep" To Gestalt Switch: Justice, Finance, The Ifis, And Globalization's Intended Beneficiaries, Robert C. Hockett

Cornell Law Faculty Publications

This essay suggests means by which the international financial institutions (IFIs), the IBRD and the IMF in particular, and indeed "globalization" more generally might be rendered more friendly to humanity. The key, it suggests, lies in a subtle shift in perspective, a "gestalt-switch": It is to move from thinking in terms of political and macroeconomic aggregates - nations and gross national products - to thinking in terms of the individuals who constitute nations and produce national products - those the essay calls the "intended beneficiaries" of globalization.

Thinking in terms of those beneficiaries and their equal claims to our concern …

Minding The Gaps: Fairness, Welfare, And The Constitutive Structure Of Distributive Assessment, Robert C. Hockett

Cornell Law Faculty Working Papers

Despite over a century’s disputation and attendant opportunity for clarification, the field of inquiry now loosely labeled “welfare economics” (WE) remains surprisingly prone to foundational confusions. The same holds of work done by many practitioners of WE’s influential offshoot, normative “law and economics” (LE).

A conspicuous contemporary case of confusion turns up in recent discussion concerning “fairness versus welfare.” The very naming of this putative dispute signals a crude category error. “Welfare” denotes a proposed object of distribution. “Fairness” describes and appropriate pattern of distribution. Welfare itself is distributed fairly or unfairly. “Fairness versus welfare” is analytically on all fours …

From Macro To Micro To “Mission-Creep”: Defending The Imf’S Emerging Concern With The Infrastructural Prerequisites To Global Financial Stability, Robert C. Hockett

Cornell Law Faculty Publications

Charges that the IMF has been engaging in "mission creep," gradually taking on a growing number of activities that exceed its constitutive mandate, have grown both in vehemence and in frequency since the late 1990s. I argue that, what ever the substantive merits of its actions, the IMF's developing attention to the structural determinants of global financial stability is not ultra vires. The Fund's evolving role was both foreseen and constitutionally provided for, both at its founding and at the principal constitutive Articles-amending "moments" since.

What Kinds Of Stock Ownership Plans Should There Be? Of Esops, Other Sops And “Ownership Societies”, Robert C. Hockett

Cornell Law Faculty Working Papers

Present-day advocates of an “ownership society” (OS) do not seem to have noticed the means by which, since the 1930s and 1960s respectively, we have worked to become an OS already where homes and “human capital” are concerned. Nor have those advocates considered whether these same means ­ which amount to publicly augmented private financial engineering ­ might be employed to spread shares in business firms as widely as we have spread homes and higher educations. This Article, the third in a trio of pieces devoted to fleshing out what a contemporary OS consistent with American values, endowment psychology and …

Sustainable Development And Private Global Governance, Douglas A. Kysar

Cornell Law Faculty Publications

This Article utilizes recent controversy over Coca-Cola's alleged depletion of groundwater resources in India as a vehicle for exploring competing conceptions of global environmental governance and the role of private actors within them. Initially, it uses the Coca-Cola groundwater situation to identify core substantive and procedural meanings that lurk within the otherwise ingeniously ambiguous concept of sustainable development. Through this exercise, it is shown that - when properly understood - the sustainable development paradigm stands in considerable tension with the premises of market liberalism that drive such political and economic trends as global market integration; privatization and commodification of water …

Three (Potential) Pillars Of Transnational Economic Justice: The Bretton Woods Institutions As Guarantors Of Global Equal Treatment And Market Completion, Robert C. Hockett

Cornell Law Faculty Publications

This essay aims to bring two important lines of inquiry and criticism together. It first lays out an institutionally enriched account of what a just world economic order will look like. That account prescribes, via the requisites to that mechanism which most directly instantiate the account, three realms of equal treatment and market completion - the global products, services, and labor markets; the global investment/financial markets; and the global preparticipation opportunity allocation. The essay then suggests how, with minimal if any departure from familiar canons of traditional international legal mandate interpretation, each of the Bretton Woods institutions - particularly the …

Financing Chinese Capitalism: Principal Banks, Economic Crisis, And Chinese Family Firms In Singapore, Henry W. Yeung

Cultural Approaches to Asian Financial Markets

It is a widely circulated myth that Chinese family firms rely exclusively on kinship ties and network capital to finance their domestic and international operations. In this empirical paper, I argue that large Chinese family firms are increasingly engaging with financial markets on a global scale. In order to finance their transnational business activities, these firms require financial services from banks beyond their domestic economies, resulting in a growing number and geographical spread of their principal banks. Second, I contend that as these Chinese family firms are diversifying their principal banks beyond a narrow confinement to other Chinese family-owned banks …

On The Proper Motives Of Corporate Directors (Or, Why You Don't Want To Invite Homo Economicus To Join Your Board), Lynn A. Stout

Cornell Law Faculty Publications

One of the most important questions in corporate governance is how directors of public corporations can be motivated to serve the interests of the firm. Directors frequently hold only small stakes in the companies they manage. Moreover, a variety of legal rules and contractual arrangements insulate them from liability for business failures. Why then should we expect them to do a good job?

Conventional corporate scholarship has great difficulty wrestling with this question, in large part because conventional scholarship usually adopts the economist's assumption that directors are rational actors motivated purely by self-interest. This homo economicus model of behavior may …

Mixed Signals: Rational-Choice Theories Of Social Norms And The Pragmatics Of Explanation, W. Bradley Wendel

Cornell Law Faculty Publications

The question of how societies secure cooperation and order in the absence of state enforced sanctions has long vexed law and economics scholars. Recently the concept of social norms--informally enforced rules of behavior--has occupied the attention of a large number of these theorists, who are concerned with understanding why economically rational actors would bother to follow rules whose costs seem to outweigh their benefits. Because of the prestige (or at least trendiness) of law and economics, it seems that now everyone in the legal academy is talking about social norms. This burgeoning scholarship is closely related to a wider concern …

The Unemployment Rate: Time To Give It A Rest?, Stewart J. Schwab, John J. Seater

Cornell Law Faculty Publications

The most overworked figure in our society may be the unemployment rate. Newscasters, politicians, and economists use it in discussing everything from the overall health of the economy to the merits of alternative welfare programs. Despite its widespread use, however, the unemployment rate frequently is criticized for not indicating the true state of the economy’s health or of society’s welfare.

If the unemployment rate falls to 4 percent, for example, some economists will argue that it’s too low and that, even though the rate is greater than zero, the economy is overemployed. Others will argue that unemployment has not fallen …

A General Solution For Linear Decision Rules: An Optimal Dynamic Strategy Applicable Under Uncertainty, George A. Hay, Charles C. Holt

Cornell Law Faculty Publications

Linear decision rules for controlling complex systems are often obtained by matrix inversion, but transform methods offer an alternative approach that yields insights into the structure of the decision problem of maximizing expected payoffs under constraints.

External Diseconomies In Competitive Supply: Comment, George A. Hay, John J. Mcgowan

Cornell Law Faculty Publications

In a recent article in this Review, Charles Goetz and James Buchanan (G-B) assert that " . . . the standard description of misallocation in the presence of external production diseconomies is misleading . . . " because these externalities produce a ". . . combination of exchange-inefficiency with production-inefficiency [which ] renders the construction of correction devices much more difficult" (p. 889). Stated otherwise their contention is that with external diseconomies that are internal to an industry, i.e., those that each firm in an industry inflicts on other firms in the same industry, a competitive regime in the presence …

External Economies And Competitive Equilibrium, George A. Hay, John J. Mcgowan

Cornell Law Faculty Publications

In an article published in 1955, Murray Kemp analyzed the case for interference with the competitive allocation of resources when external economies of production are present. In the specific model we are interested in—where the costs of any one producer's operations are affected by the total output of all producers of the same product—Kemp attempted to show that where entry into the industry is closed (although the industry is otherwise perfectly competitive), "there can always be found a subsidy, either on the product or on a particular factor, which will be a sufficient incentive to firms to produce an …

A Note On The Stigler-Kindahl Study Of Industrial Prices, George A. Hay

Cornell Law Faculty Publications

No abstract provided.