Law Commons^™

The Economics Of Payment Cards, Marc Rysman, Julian Wright

Marc Rysman

We review the law and economics of payment cards. We focus on the recent economics literature on two-sided markets, and discuss the antitrust and regulatory treatment of interchange fees, card surcharging, and other issues.

Contracting In The Modern World, Enrico Baffi

enrico baffi

In this paper I try explore some of the basic features of modern mass contracting. In my opinion, there are basically four characteristics of modern mass contracting: a)he reduced negotiations; b) the dissemination of standard form contracts; c) the presence of abusive clauses; d) and the recapitulation of the contract and its execution in a single act of stipulation. All the changes are the consequences in the changes of relative costs of activities: a) The reduction in negotiations is the result first of all of the costs that this activity requires and of the costs required to manage personalized contracts; …

The Problem Of Internalization Of Social Costs And The Ideas Of Ronal Coase, Enrico Baffi

enrico baffi

This work examines the influence of Coasian thought on the analysis of externalities as used by economists and legal economists. Ronald Coase, a Chicago scholar, advanced a series of criticisms of the Pigovian tax system; the theorem that bears his name is merely the best known. In his 1960 work, he sought to demonstrate that the internationalization of social costs was not always socially useful andd sometimes impossible. In addition, he identified other institutional solutions to which systems can - and often do - resort. One of these solutions is to simply authorize the harmful activity without introducing mechanisms to …

The Problem Of Internalization Of Social Costs And The Ideas Of Ronald Coase, Enrico Baffi

enrico baffi

This work examines the influence of Coasian thought on the analysis of externalities as used by economists and legal economists. Ronald Coase, a Chicago scholar, advanced a series of criticisms of the Pigovian tax system; the theorem that bears his name is merely the best known. In his 1960 work, he sought to demonstrate that the internationalization of social costs was not always socially useful and in many casesimossible. In addition, he identified other institutional solutions to which systems can - and often do - resort. One of these solutions is to simply authorize the harmful activity without introducing mechanisms …

The Legal Profession’S Critical Role In Systems-Level Bioenergy Decision-Making, Jody M. Endres

Jody M. Endres

Mounting resource scarcity confronts policymakers to make decisions based on predictions of complex system behavior under conditions of great uncertainty. Nowhere is this more evident than in bioenergy policy, which relies heavily on modeling to determine biofuels’ effects on complex climate, food and natural systems. This article provides a primer on models’ inner workings to facilitate engagement by the legal field so critical in building and applying models, and remedying them when they fail. Any conceptual model cannot predict future reality with accuracy absent accounting for regulatory and litigatory scenarios that only the legal discipline can assess fully. Administrative law …

Intangible Economic Loss In Louisiana, John Stanton

John Stanton

This casenote follows the development of caselaw in Louisiana addressing the problem of intangible economic loss, (i.e., pure economic loss or supply-chain liability), an issue which all jurisdictions struggle to handle consistently. In particular, the piece notes the tension between the practicality of the Robins Dry Dock prohibitory rule and the equitable nature of using the standard negligence analysis. After noting the current state of confusion, a proposed way forward is suggested that allows for meritorious claims even without a proprietary interest, but does not allow for the industry-crippling liability of which the Robins Dry Dock progeny feared.

Efficiency Themes In Tort Law From Antiquity, M Stuart Madden

M Stuart Madden

Hellenic philosophers assessed the goals of society as: (1) the protection of persons and property from wrongful harm; (2) protection of the individual’s means of survival and prosperity; (3) discouragement of self-aggrandizement to the detriment of others; and (4) elevation of individual knowledge that would carry forward and perfect such principles. Roman law was replete with proscriptions against forced taking and unjust enrichment, and included rules for ex ante contract-based resolution of potential disagreement. Customary law perpetuated these efficient economic tenets within the Western World and beyond. The common law, in turn, has nurtured many of the same ends. From …

How Statistical Sampling Can Solve The Conundrum Of Compensation Disclosures Under Dodd-Frank, Michael Ohlrogge

Michael Ohlrogge

One of the more controversial measures of the Dodd-Frank bill is its requirement that companies report the ratio of their CEO’s compensation to that of their median employee. Critics of this provision have claimed that for large companies with employees and subsidiaries throughout the world, compliance with this measure alone could cost millions of dollars a year, due to the difficulties in identifying the median employee. This paper demonstrates that the Securities and Exchange Commission, which is charged with implementing this provision, has the latitude to direct companies to calculate the figure using a statistical sampling procedure which would greatly …

Building Bio-Based Supply Chains: Theoretical Perspectives On Innovative Contract Design, A. Bryan Endres, Jody M. Endres, Jeremy J. Stoller

A. Bryan Endres

By 2030, the United States will consume over 300 million tons of forest and agricultural feedstocks for energy production. The supply chain necessary to provide unprecedented quantities of new “bioenergy crops,” however, is fraught with uncertainty. The vertically integrated model the nascent sector currently uses may have limited opportunity for expansion to meet renewable energy mandates. A hybrid structure is likely to emerge as the industry evolves, in which end-users closely cooperate with a large number of heterogeneous producers through long-term contracting rather than as direct owners or operators of biomass farms. This “vertically coordinated” industry model is dependent on …

A Selection-Corrected Estimate Of Chevron’S Impact On Agency Deference, Griffin S. Edwards

Griffin S Edwards

The ruling in Chevron v. Natural Resources Defense Council dramatically changed how judges rule in favor of federal administrative agencies. Previous research has found both theoretically and empirically that Chevron favors agencies and their interpretation of statutes, but the magnitude of Chevron’s impact remains unclear due to possible selection issues biasing the post-Chevron world. Accounting for the possibility that incentives change both to the challenger of an agency and the agency itself post-Chevron, I estimate a break in the trend of agency deference on the date Chevron was decided. This allows me to exploit the exogenous cases that were pending …

Protecting The Innocent With A Premium For Child Safety Regulations, Jacob P. Byl

Jacob P. Byl

Federal agencies regulate many products and activities that impact the safety of children. When conducting an economic analysis of a proposed rule, agencies should put a premium on saving the lives of children when analyzing the costs and benefits of regulation. This Article uses original evidence from the infant car seat market to determine that a child-specific benefit measure should be one and a half to two times that of an adult.

How Government Guarantees In Housing Finance Promote Stability, David Min

David Min

In the aftermath of the financial crisis, major reforms of the U.S. housing finance system are likely. One of the key issues facing policy makers in this area is whether and to what extent the federal government should maintain its current role in the residential mortgage markets. Since the New Deal, the federal government has guaranteed the primary sources of housing finance in the United States—bank and thrift deposits, and the obligations of the mortgage securitization conduits Fannie Mae, Freddie Mac, and Ginnie Mae.

The prevailing view of government guarantees is that they increase financial instability because they encourage excessive …

How Government Guarantees In Housing Finance Promote Stability, David Min

David Min

In the aftermath of the financial crisis, major reforms of the U.S. housing finance system are likely. One of the key issues facing policy makers in this area is whether and to what extent the federal government should maintain its current role in the residential mortgage markets. Since the New Deal, the federal government has guaranteed the primary sources of housing finance in the United States—bank and thrift deposits, and the obligations of the mortgage securitization conduits Fannie Mae, Freddie Mac, and Ginnie Mae.

The prevailing view of government guarantees is that they increase financial instability because they encourage excessive …

Credit Default Swaps And Insider Trading, Douglas B. Levene

Douglas B Levene

In the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress clarified that the insider trading regime of Rule 10b-5 applies to trading in credit default swaps. In so doing, Congress implicitly assumed without analysis that the equities securities markets and the credit default swap market are the same and should be subject to the same rules.

This paper is the first to question that assumption and to consider whether as a normative matter credit default swaps should be subject to Rule 10b-5. Through a rigorous analysis of the differences between the two markets and the policies underlying …

Putting Boomers To Pasture: Does The 2010 Mippa Legislation Reinforce The Nursing Home Bias?, Robert S. Bloink

Robert S Bloink

Unfunded health care expenses pose one of the greatest threats to the postretirement income security of seniors in America today. It is estimated that the average couple retiring in 2012 will require savings of approximately a quarter million dollars dedicated solely to their unfunded postretirement health care expenses, but this estimate does not factor in the expensive long-term care that most retirees will require toward the end of their lives. That the quarter-million dollar figure does not include the rapidly increasing cost of long-term care should alarm both retirees and those baby boomers approaching retirement age today. Controversial healthcare reform …

Building A Better America: Tax Expenditure Reform And The Case Of State And Local Government Bonds And Build America Bonds, Blaine G. Saito

Blaine G. Saito

Currently most subnational government borrowing in the United States is done via tax-exempt muni bonds. But they are riddled with problems. They are inefficient at delivering the subsidy, and they create economic distortions of investment choices. They are inequitable, and they have significant democratic deficiencies. Direct payment Build America Bonds (BABs) provide an alternative, as they directly pay a cash subsidy to a subnational government. While there are simple technical problems that can easily be remedied, BABs face significant political hurdles that will prevent the permanence of the program. Policy entrepreneurship is a way forward. The piece also discusses how …

Vertical Boilerplate, James Gibson

James Gibson

Despite what we learn in law school about the “meeting of the minds,” most contracts are merely boilerplate -- take-it-or-leave-it propositions. Negotiation is nonexistent; we rely on our collective market power as consumers to regulate contracts’ content. But boilerplate imposes certain information costs, because it often arrives late in the transaction and is hard to understand. If those costs get too high, then the market mechanism fails. So how high are boilerplate’s information costs? A few studies have attempted to measure them, but they all use a “horizontal” approach -- i.e., they sample a single stratum of boilerplate and assume …

Legal Applications Of Modern Finance, Matthew E. Cavanaugh Mba Cpa Esq.

Matthew E. Cavanaugh MBA CPA Esq.

While scholars and practitioners have applied economics to law successfully for decades, there has been almost no similar application of modern finance. Courts have used the central concept of classical finance, time value of money, for many years, but their use is still unsophisticated.

This article details two ways to apply modern finance to law. This article first describes a method of improving courts’ time value of money calculations, by using a systematically complete four factor analysis to determine the appropriate discount rate. This article then describes a method of calculating future damages that uses market price of risk, based …

Ten Dollars For 10,736 Mortgages: Should Nominal Consideration Supersede Real Property Recording Law, John P. Hunt

John P Hunt

Our review of mortgage securitization transactions from 2005 to 2007 suggests that many intermediate mortgage transfers structured as promissory note sales involved the exchange of only nominal or other dubious consideration. The Uniform Commercial Code requires consideration “sufficient to support a simple contract” as a prerequisite for treatment of a transaction as a promissory note sale. Treatment as a sale triggers the Code’s “mortgage follows the note” provisions, which may protect transactions from claims that the mortgages involved are unenforceable, are vulnerable to competing claimants, or were never transferred in the first place. Mortgage securitization transactions are potentially exposed to …

Moral Hazard Within The Greek Economic Crisis: An Analysis Of European Union Law Effectiveness In Dealing With The Greek Economic Crisis, Juan Castro, Juan Castro

Juan Castro

In this paper I will present the historical background of the current Greek economic crisis. I will delve into the causes of the fiscal and current-account deficits since Greece’s euro entry in 2001. In addition to the economic and financial information provided, I will also present cultural aspects and differences between Greece and its surrounding neighbors, primarily Germany, and how moral hazard has exacerbated the conflict. Further I will discuss the legality of the countermeasures and solutions presented and how these encroach upon European Union law treaties. Lastly I will conclude that in order for Greece and Germany to stabilize …

Automatic Continuing Resolutions: A Cure Worse Than The Ailment, Philip J. Candreva

Philip J. Candreva

Nearly every year Congress fails to pass all of the appropriations acts before the start of the federal fiscal year. This necessitates the passage of a temporary spending measure – a continuing resolution – or there will be at least a partial government shutdown. Both contingencies are costly and disruptive to the efficient and effective operation of government. Over the last 30 years, there have been several legislative proposals to enact an automatic continuing resolution mechanism that would mitigate the costs to public management. Such proposals, however, are costly for political and legal reasons. This article examines the arguments for …

Dodd-Frank's Inappropriate Treatment Of Insurance Companies: A 'Sifi' Situtation, Mark M. Makhail

Mark M Makhail

Abstract available upon request.

The Criminal Justice System Creates Incentives For False Convictions, Roger Koppl, Meghan Sacks

Roger Koppl

We examine the incentive structure of the various actors of the criminal justice system within an organization economics framework. Specifically, we examine the incentives of the police, forensic scientists, prosecutors and public defenders. We find that police, prosecutors and forensic scientists often have an incentive to garner convictions with little incentive to convict the right person, whereas public defenders often lack the resources and incentives to provide a vigorous defense for their clients. The “multitask problem” of organizational economics helps explain how this skewed incentive structure creates false convictions.

Criminal Affirmance: Going Beyond The Deterrence Paradigm To Examine The Social Meaning Of Declining Prosecution Of Elite Crime, Mary K. Ramirez

mary k ramirez

Recent financial scandals and the relative paucity of criminal prosecutions against elite actors that benefitted from the crisis in response suggest a new reality in the criminal law system: some wrongful actors appear to be above the law and immune from criminal prosecution. As such, the criminal prosecutorial system affirms much of the wrongdoing giving rise to the crisis. This leaves the same elites undisturbed at the apex of the financial sector, and creates perverse incentives for any successors. Their incumbency in power results in massive deadweight losses due to the distorted incentives they now face. Further, this undermines the …

Why Rich Nations Fail: Explaining Dutch Economic Decline In The 18th Century, Edwin D. Way

Edwin D Way

Why do rich nations fail? At a time in which wealthy nations such as the United States, Japan, and much of Western Europe are experiencing unprecedented economic difficulties, this article argues that the 18th century experience of the Dutch Republic can provide important insights. The Dutch economy was by far the world's wealthiest and most technologically advanced as late as 1700, but subsequently experienced more than a century of economic decline as manifest in mass unemployment, rising inequality, an absolute decline in the median standard of living and a loss of technological leadership. The proximate cause of this decline was …

Necessity Is The Mother, But Protection May Not Be The Father Of Invention: The Limited Effect Of Intellectual Property Regimes On Agricultural Innovation, A. Bryan Endres, Carly E. Giffin

A. Bryan Endres

Standard innovation theory assumes that intellectual property protection is a prerequisite to the development of technological advances. Stretching back to the writing of the Constitution, a strong intellectual property system, comprised of both laws that establish intellectual property protection and a judicial or other adjudicative system to enforce the property right, has been considered necessary to stimulate innovation for the benefit of society. While not directly challenging this traditionally held belief, the authors used empirical data to test the assumption in the context of agriculture. This paper analyzed twenty years of agricultural production data from Argentina, Brazil, China, India, and …

Assessing The Costs & Benefits Of Credit Card Rewards: A Response To Who Gains And Who Loses From Credit Card Payments? Theory And Calibrations, Steven Semeraro

Steven Semeraro

Abstract: Assessing the Costs & Benefits of Credit Card Rewards: A Response to Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations For two decades, economic and legal academics have speculated about the impact of the fees that merchants pay for credit card acceptance. Since all customers pay the same price, the theory goes, everyone pays for the benefits that go only to credit card users. A recent Federal Reserve Bank of Boston (FRBB) policy paper written by economists Scott Schuh, Oz Shy, and Joanna Stavins entitled Who Gains and Who Loses from Credit Card Payments? Theory …

As Greece Goes, So Goes The E.U.: Defending Europe With A Sovereign Debt Restructuring Framework, Elizabeth H. Dahill

Elizabeth H Dahill

This Article discusses the current sovereign debt crisis in Europe and proposes that European policymakers adopt a European Debt Restructuring Framework [EDRF] modeled after the IMF’s Sovereign Debt Restructuring Mechanism [SDRM], sovereign bond contracts’ Collective Action Clauses [CAC] and the U.S Bankruptcy Code’s Chapter 9.

The End Of Shareholder Litigation? Allowing Shareholders To Customize Enforcement Through Arbitration Provisions In Charters And Bylaws, Paul D. Weitzel

Paul D. Weitzel

Shareholder litigation has been heavily criticized for its inability to compensate harmed shareholders or deter managerial misconduct. While some have suggested abolishing shareholder litigation altogether, this article takes a more moderate approach. I propose allowing shareholders to enforce charter and bylaw provisions that require arbitration of certain disputes. For example, an acquisitive company may require arbitration of merger-related suits, while allowing non-merger suits to proceed in court. Likewise, a company in an industry known for volatile stock prices could require a price drop of three or four standard deviations before the suit could be brought in court, rather than arbitration. …

The Impact Xat, Paul Boudreaux

Paul Boudreaux

At a time when the economy and the housing market rise and fall together, the phenomenon of impact fees complicates the construction of new housing across the nation. Although justified as a means of forcing new development to “pay its way” for the costs of government infrastructure necessitated by the new housing, impact fees typically are imposed in a way that makes them, in effect, a dubious population tax. Indeed, the typical fee does little to discourage costly suburban sprawl. This essay – using economic lessons from policies that discourage usage of scarce resources with light bulbs, bathrooms, and buildings …