Digital Commons Network^™

Patriotic Philanthropy? Financing The State With Gifts To Government, Margaret H. Lemos, Guy-Uriel Charles

Faculty Scholarship

Federal and state law prohibit government officials from accepting gifts or “emoluments” from outside sources. The purpose of gift bans, like restrictions on more explicit forms of bribery, is to protect the integrity of political processes and to ensure that decisions about public policy are made in the public interest — not to advance a private agenda. Similar considerations animate regulations on campaign funding and lobbying. Yet private entities remain free to offer gifts to government itself, to foot the bill for particular public projects they would like to see government pursue. Such gifts — dubbed “patriotic philanthropy” by one …

Organ Entrepreneurs, Kieran Healy, Kimberly D. Krawiec

Faculty Scholarship

The supply of human organs for transplantation might seem an unlikely place to begin thinking about entrepreneurship. After all, there is no production market for human organs and, with the surprising exception of Iran, legal rules around the world make the sale of human organs for transplantation a criminal offense. Yet entrepreneurs have been present throughout the history of organ transplantation — a history of the active exploration, innovation, and management of a potentially very controversial exchange at the seemingly clear boundaries that separate giving from selling, life from death, and right from wrong.

This article explores the role of …

Markets And Sovereignty, Joseph Blocher, Mitu Gulati

Faculty Scholarship

The past few decades have witnessed the growth of an exciting debate in the legal academy about the tensions between economic pressures to commodify and philosophical commitments to the market inalienability of certain items. Sex, organs, babies, and college athletics are among the many topics that have received attention. The debates often have proceeded, however, as if they involve markets on one side and the state on the other, with the relevant question being the ways in which the latter can or should try to facilitate, restrict, or rely on the former. In this article, we approach the relationship between …

The Economics Of Healthcare Rationing, Michael D. Frakes, Matthew B. Frank, Kyle Rozema

Faculty Scholarship

This article examines the economics of healthcare rationing. We begin with an overview of the various dimensions across which healthcare rationing operates, or at least has the potential to operate, in the first place. We then describe the types of economic analyses used in healthcare rationing decision-making, with particular reference to cost-benefit analysis and cost-effectiveness analysis. We also discuss healthcare rationing in practice, such as how economic analyses inform decisions regarding which services to cover, and conclude by discussing various practical and conceptual challenges that may arise with economic analyses and that span both economics and ethics.

The Financial Crisis And Credit Unavailability: Cause Or Effect?, Steven L. Schwarcz

Faculty Scholarship

Although the relationship between credit availability and financial decline leading to the global financial crisis was somewhat interactive, a loss of credit availability appears to have caused the financial crisis more than the reverse. The potential for credit unavailability to cause a financial crisis suggests at least three lessons: (i) because credit availability is dependent on financial markets as well as banks, regulation should protect the viability of both credit sources; (ii) diversifying sources of credit might increase financial stability if each credit source is robust and does not create a liquidity glut or inappropriately weaken central bank control; and …

Variation In Boilerplate: Rational Design Or Random Mutation?, Stephen J. Choi, Mitu Gulati, Robert E. Scott

Faculty Scholarship

Standard contract doctrine presumes that sophisticated parties choose their terminology carefully because they want courts or counterparts to understand what they intended. The implication of this “Rational Design” model of rational behavior is that courts should pay careful attention to the precise phrasing of contracts. Using a study of the sovereign bond market, we examine the Rational Design model as applied to standard-form contracting. In NML v. Argentina, federal courts in New York attached importance to the precise phrasing of the boilerplate contracts at issue. The industry promptly condemned the decision for a supposedly erroneous interpretation of a variant of …

Enhancing Judicial Institutions: Enhancing Economic Development, Stephane Alia Haisley

Duke Law Master of Judicial Studies Theses

Since the 1980s, scholars and development banks have recognized the link between judicial institutions and economic growth. This thesis proposes to explore the role of judicial institutions in the performance of economies and questions whether enhancing judicial institutions can result in enhancing economic development in developing countries. Since the 1990s development banks have explored the role of judicial institutions in the quest for economic development. Both the World Bank and the International Monetary Fund (IMF) have done this through the pursuit of judicial reform efforts in countries with ailing economies. The focus has been on improving the efficiency of the …

The Pricing Of Non-Price Terms In Sovereign Bonds: The Case Of The Greek Guarantees, Stephen J. Choi, Mitu Gulati

Faculty Scholarship

In March 2012, Greece conducted one of the biggest and most brutal sovereign debt restructurings ever, asking holders of Greek government bonds to take net present value haircuts of near 80 percent. Greece forced acquiescence to its terms from a large number of its bonds by using a variety of legal strong-arm tactics. With the vast majority of Greek bonds, the tactics worked. There were, however, thirty-six bonds guaranteed by the Greek state, which, because of the weakness of the underlying companies, were effectively obligations of the Greek state. Yet, on these thirty six bonds, even though Greece desperately needed …

Elections, Ideology, And Turnover In The U.S. Federal Government, Alexander D. Bolton, John De Figueiredo, David E. Lewis

Faculty Scholarship

A defining feature of public sector employment is the regular change in elected leadership. Yet, we know little about how elections influence public sector careers. We describe how elections alter policy outputs and disrupt the influence of civil servants over agency decisions. These changes shape the career choices of employees motivated by policy, influence, and wages. Using new Office of Personnel Management data on the careers of millions of federal employees between 1988 and 2011, we evaluate how elections influence employee turnover decisions. We find that presidential elections increase departure rates of career senior employees, particularly in agencies with divergent …

Procrastination In The Workplace: Evidence From The U.S. Patent Office, Michael D. Frakes, Melissa F. Wasserman

Faculty Scholarship

Despite much theoretical attention to the concept of procrastination and much exploration of this phenomenon in laboratory settings, there remain few empirical investigations into the practice of procrastination in real world contexts, especially in the workplace. In this paper, we attempt to fill these gaps by exploring procrastination among U.S. patent examiners. We find that nearly half of examiners’ first substantive reports are completed immediately prior to the operable deadlines. Moreover, we find a range of additional empirical markers to support that this “end-loading” of reviews results from a model of procrastination rather than various alternative time-consistent models of behavior. …

Does Medical Malpractice Law Improve Health Care Quality?, Michael D. Frakes, Anupam B. Jena

Faculty Scholarship

Despite the fundamental role of deterrence in justifying a system of medical malpractice law, surprisingly little evidence has been put forth to date bearing on the relationship between medical liability forces on the one hand and medical errors and health care quality on the other. In this paper, we estimate this relationship using clinically validated measures of health care treatment quality constructed using data from the 1979 to 2005 National Hospital Discharge Surveys and the 1987 to 2008 Behavioral Risk Factor Surveillance System records. Drawing upon traditional, remedy-centric tort reforms — e.g., damage caps — we estimate that the current …

Is The Time Allocated To Review Patent Applications Inducing Examiners To Grant Invalid Patents?: Evidence From Micro-Level Application Data, Michael D. Frakes, Melissa F. Wasserman

Faculty Scholarship

We explore how examiner behavior is altered by the time allocated for reviewing patent applications. Insufficient examination time may hamper examiner search and rejection efforts, leaving examiners more inclined to grant invalid applications. To test this prediction, we use application-level data to trace the behavior of individual examiners over the course of a series of promotions that carry with them reductions in examination-time allocations. We find evidence demonstrating that such promotions are associated with reductions in examination scrutiny and increases in granting tendencies, as well as evidence that those additional patents being issued on the margin are of below-average quality.

Contract Development In A Matching Market: The Case Of Kidney Exchange, Kimberly D. Krawiec, Wenhao Liu, Marc L. Melcher

Faculty Scholarship

We analyze a new transplant innovation — Advanced Donation, referred to by some as a kidney “gift certificate,” “layaway plan,” or “voucher — as a case study offering insights on both market and contract development. Advanced Donation provides an unusual window into the evolution of the exchange of a single good — a kidney for transplantation — from gift, to simple barter, to exchange with a temporal separation of obligations that relies solely on trust and reputational constraints for enforcement, to a complex matching market in which the parties rely, at least in part, on formal contract to define and …

25 Years, Where Are We Now? Global Trade & Sovereign Debt, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

Brief Of Amici Curiae 56 Professors Of Law And Economics In Support Of Petition Of Writ Of Certiorari, John R. Allison, Margo Bagley, James Bessen, Jeremy Bock, Daniel H. Brean, Michael A. Carrier, Michael W. Carroll, Bernard Chao, Tun-Jen Chiang, Colleen V. Chien, Andrew Chin, Robert Cook-Deegan, Md, Rochelle Dreyfuss, Dr. Dieter Ernst, Samuel F. Ernst, Robin C. Feldman, Lee Fleming, Brian Frye, William Gallagher, Shubha Ghosh, Eric Goldman, Bronwyn H. Hall, Yaniv Heled, Christian Helmers, Joachim Henkel, Susan Helper, Tim Holbrook, Herbert Hovenkamp, William Hubbard, Dr. Xavier Jaravel, Dennis S. Karjala, Peter Lee, Mark A. Lemley, David K. Levine, David S. Levine, Doug Lichtman, Yvette Joy Liebesman, Orly Lobel, Brian Love, Phil Malone, Michael J. Meurer, Dr. Shawn Miller, Matthew Mitchell, Susan Barbieri Montgomery, Sean Pager, Arti K. Rai, Jacob H. Rooksby, Jorge R. Roig, Matthew Sag, Pamela Samuelson, Ana Santos Rutschman, Lea Bishop Shaver, Toshiko Takenaka, John L. Turner, Jennifer Urban, Eric Von Hippel

Faculty Scholarship

28 U.S.C. § 1400(b) provides that a defendant in a patent case may be sued where the defendant is incorporated or has a regular and established place of business and has infringed the patent. This Court made clear in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957), that those were the only permissible venues for a patent case. But the Federal Circuit has rejected Fourco and the plain meaning of § 1400(b), instead permitting a patent plaintiff to file suit against a defendant anywhere there is personal jurisdiction over that defendant. The result has been rampant …

Public Sector Personnel Economics: Wages, Promotions, And The Competence-Control Trade-Off, Charles M. Cameron, John De Figueiredo, David E. Lewis

Faculty Scholarship

We model personnel policies in public agencies, examining how wages and promotion standards can partially offset a fundamental contracting problem: the inability of public sector workers to contract on performance, and the inability of political masters to contract on forbearance from meddling. Despite the dual contracting problem, properly constructed personnel policies can encourage intrinsically motivated public sector employees to invest in expertise, seek promotion, remain in the public sector, and develop policy projects. However, doing so requires internal personnel policies that sort "slackers" from "zealots." Personnel policies that accomplish this task are quite different in agencies where acquired expertise has …

Securitization And Post-Crisis Financial Regulation, Steven L. Schwarcz

Faculty Scholarship

There are few types of securities as internationally traded as those issued in securitization (also spelled securitisation) transactions. The post-financial crisis regulatory responses to securitization in the United States and Europe are, at least in part, political and ad hoc. To achieve a more systematic regulatory framework, this article examines how existing regulation should be supplemented by identifying the market failures that apply distinctively to securitization and analyzing how those market failures could be corrected. Among other things, the article argues that Europe’s regulatory framework for simple, transparent, and standardised (“STS”) securitizations goes a long way towards addressing complexity as …

Cultural Paradigms In Property Institutions, Taisu Zhang

Faculty Scholarship

Do “cultural factors” substantively influence the creation and evolution of property institutions? For the past several decades, few legal scholars have answered affirmatively. Those inclined towards a law and economics methodology tend to see property institutions as the outcome of self-interested and utilitarian bargaining, and therefore often question the analytical usefulness of “culture.” The major emerging alternative, a progressive literature that emphasizes the social embeddedness of property institutions and individuals, is theoretically more accommodating of cultural analysis but has done very little of it.

This Article develops a “cultural” theory of how property institutions are created and demonstrates that such …

Neighborhoods By Assessment: An Analysis Of Non-Ad Valorem Financing In California, Mathew D. Mccubbins, Ellen C. Seljan

Faculty Scholarship

Non-ad valorem assessments on property are a fiscal innovation born from financial stress. Unable to raise property taxes due to limitations, many localities have turned to these charges as an alternative method to fund local services. In this paper, we seek to explain differential levels of non-ad valorem assessment financing through the analysis of property tax records of a large and diverse set of single family homes in California. We theorize that assessments, as opposed to other forms of taxation, will be used when residents hold anti-redistributive preferences. We show that assessment financing is most common in cities with high …

Priority For The Worse Off And The Social Cost Of Carbon, Matthew D. Adler, David Anthoff, Valentina Bosetti, Greg Garner, Klaus Keller, Nicolas Treich

Faculty Scholarship

The social cost of carbon (SCC) is a monetary measure of the harms from carbon emission. Specifically, it is the reduction in current consumption that produces a loss in social welfare equivalent to that caused by the emission of a ton of CO2. The standard approach is to calculate the SCC using a discounted-utilitarian social welfare function (SWF)—one that simply adds up the well-being numbers (utilities) of individuals, as discounted by a weighting factor that decreases with time. The discounted-utilitarian SWF has been criticized both for ignoring the distribution of well-being, and for including an arbitrary preference for earlier generations. …

Competing For Refugees: A Market-Based Solution To A Humanitarian Crisis, Joseph Blocher, Mitu Gulati

Faculty Scholarship

The current refugee crisis demands novel legal solutions, and new ways of summoning the political will to implement them. As a matter of national incentives, the goal must be to design mechanisms that discourage countries of origin from creating refugees, and encourage host countries to welcome them. One way to achieve this would be to recognize that persecuted refugee groups have a financial claim against their countries of origin, and that this claim can be traded to host nations in exchange for acceptance. Modifications to the international apparatus would be necessary, but the basic legal elements of this proposal already …

What's It Worth To Keep A Secret?, Gavin C. Reid, Nicola Searle, Saurabh Vishnubhakat

Duke Law & Technology Review

This article is the first major study of protection and valuation of trade secrets under federal criminal law. Trade secrecy is more important than ever as an economic complement and substitute for other intellectual property protections, particularly patents. Accordingly, U.S. public policy correctly places a growing emphasis on characterizing the scope of trade secrets, creating incentives for their productive use, and imposing penalties for their theft. Yet amid this complex ecosystem of legal doctrine, economic policy, commercial strategy, and enforcement, there is little research or consensus on how to assign value to trade secrets. One reason for this gap is …

The Effect Of Statutory Rape Laws On Teen Birth Rates, Michael D. Frakes, Matthew C. Harding

Faculty Scholarship

Policymakers have often been explicit in expanding statutory rape laws to reduce teenage pregnancies and live births by teenage mothers, often with the goal of reducing associated welfare outlays. In this paper, we explore whether expansions in such laws are indeed associated with reductions in teen birth rates. In order to codify statutory-rape-law expansions, we use a national micro-level sample of sexual encounters to simulate the degree to which such encounters generally implicate the relevant laws. By codifying statutory-rape laws in terms of their potential reach into sexual encounters, as opposed to using crude binary treatment variables, this simulation approach …

Human Equity? Regulating The New Income Share Agreements, Shu-Yi Oei, Diane Ring

Faculty Scholarship

A controversial new financing phenomenon has recently emerged. New "income share agreements" (''ISAs'') enable an individual to raise funds by pledging a percentage of her future earnings to investors for a certain number of years. These contracts, which have been offered by entities such as Fantex, Upstart, Pave, and Lumni, raise important questions for the legal system: Are they a form of modern-day indentured servitude or an innovative breakthrough in human financing? How should they be treated under the law?

This Article comprehensively addresses the public policy and legal issues raised by ISAs and articulates an analytical approach to evaluating …

Do Physicians Respond To Liability Standards?, Michael D. Frakes, Matthew Frank, Seth Seabury

Faculty Scholarship

In this paper, we explore the sensitivity in the clinical decisions of physicians to the standards of care expected of them under the law, drawing on the abandonment by states over time of rules holding physicians to standards determined by local customs and the contemporaneous adoption of national-standard rules. Using data on broad rates of surgical interventions at the county-by-year level from the Area Resource File, we find that local surgery rates converge towards national surgery rates upon the adoption of national-standard rules. Moreover, we find that these effects are more pronounced among rural counties.

Markets, Morals, And Limits In The Exchange Of Human Eggs, Kimberly D. Krawiec

Faculty Scholarship

No abstract provided.

The Surprising Relevance Of Medical Malpractice Law, Michael D. Frakes

Faculty Scholarship

The academic community has largely reached a consensus that medical malpractice reform is unlikely to be a meaningful source of health-care cost containment. This Article suggests that it would be premature to conclude based on the evidence underlying this academic sentiment that physicians are universally insensitive to the parameters of medical malpractice law and that liability reform has no role to play in the health-care-costs debate. On the contrary, this Article demonstrates that the medical-liability system, under particular structures and conditions, may indeed have a meaningful connection to health-care spending patterns.

The shortcoming of the existing empirical literature that has …

Quitting In Protest: A Theory Of Presidential Policy Making And Agency Response, Charles M. Cameron, John M. De Figueiredo, David E. Lewis

Faculty Scholarship

This paper examines the effects of centralized presidential policy-making, implemented through unilateral executive action, on the willingness of bureaucrats to exert effort and stay in the government. Extending models in organizational economics, we show that policy initiative by the president is a substitute for initiative by civil servants. Yet, total effort is enhanced when both work. Presidential centralization of policy often impels policy-oriented bureaucrats ("zealots") to quit rather than implement presidential policies they dislike. Those most likely to quit are a range of moderate bureaucrats. More extreme bureaucrats may be willing to wait out an opposition president in the hope …

The Failed Promise Of User Fees: Empirical Evidence From The United States Patent And Trademark Office, Michael D. Frakes, Melissa F. Wasserman

Faculty Scholarship

In an attempt to shed light on the impact of user-fee financing structures on the behavior of administrative agencies, we explore the relationship between the funding structure of the Patent and Trademark Office (PTO) and its examination practices. We suggest that the PTO’s reliance on prior grantees to subsidize current applicants exposes the Agency to a risk that its obligatory costs will surpass incoming fee collections. When such risks materialize, we hypothesize, and thereafter document, that the PTO will restore financial balance by extending preferential examination treatment—i.e., higher granting propensities and/or shorter wait times—to some technologies over others.

For-Profit Public Enforcement, Margaret H. Lemos, Max Minzner

Faculty Scholarship

This Article investigates an important yet undertheorized phenomenon: financial incentives in public enforcement. Each year, public enforcers assess billions of dollars in penalties and other financial sanctions for violations of state and federal law. Why? If the awards in question were the result of private lawsuits, the answer would be obvious. We expect that private enforcers—the victims of law violations and their fee-seeking attorneys—will attempt to maximize financial recoveries. Record recoveries come as no surprise in private class actions, for example. But dollar signs are harder to explain in the context of public enforcement. Unlike private attorneys, public enforcers are …