Law Commons^™

Grid Reliability In The Electric Era, Joshua Macey, Shelley Welton, Hannah Wiseman

Coase-Sandor Working Paper Series in Law and Economics

The United States has delegated the weighty responsibility of keeping the lights on to a self-regulatory organization called the North American Electric Reliability Corporation (NERC). Despite the fact that NERC is one of the largest and most important examples of industry-led governance—and regulates in an area that is central to our economy and basic human survival— this unusual institution has received scant attention from policymakers and scholars. Such attention is overdue. To achieve deep decarbonization, the United States must enter a new “electric era,” transitioning many sectors to run on electricity while also transforming the electricity system itself to run …

The Win-Win That Wasn’T: Managing To The Stock Market’S Negative Effects On American Workers And Other Corporate Stakeholders, Aneil Kovvali, Leo E. Strine

Coase-Sandor Working Paper Series in Law and Economics

Easterbrook and Fischel’s work suggests that society as a whole would achieve the best results if corporate leaders focused only on raising stock prices, leaving other institutions to tend to all other interests. But the idea that making societally-important corporations govern to the whims of the stock market would be a win-win for investors, other corporate stakeholders, and our society as a whole has proven incorrect. At bottom, Easterbrook and Fischel failed to contend with the real world realities that allow investors to profit by shifting distributions and political power to themselves, while shifting costs and risks to workers, creditors, …

Screening Meaning, Christopher Buccafusco, Jonathan S. Masur, Mark P. Mckenna

Coase-Sandor Working Paper Series in Law and Economics

Trademark law exists to promote competition. If consumers know which companies are responsible for which products, they can more easily find the products they actually want to purchase, and companies will have incentives to cultivate reputations for high quality. Trademark law has long treated “source significance”—the fact that a particular trademark is identified with a particular producer—as both necessary and sufficient for establishing a valid trademark. That is, trademark law has traditionally viewed source significance as the only necessary precondition for a trademark being pro-competitive. In this paper, we establish that this equation of source significance and pro-competitiveness is misguided. …

Submerged Independent Agencies, Brian D. Feinstein, Jennifer Nou

Coase-Sandor Working Paper Series in Law and Economics

Independent agencies are in the judicial crosshairs. Scholars criticize their efficacy—while still puzzling over how to define the form. By and large, this attention focuses on the top of the agency hierarchy, the extent to which agency heads are insulated from presidential control. What this perspective misses, however, is that power is also exercised by tenure-protected civil servants below. This phenomenon exists not because Congress has delegated them authority, but because executive branch actors have. Consequently, there exists another species of independent agency that requires a reckoning: call them “submerged independent agencies.” These entities are “agencies” because they wield discretionary …

Duplicative Taxation Among The States: A Problem Not Worth Solving?, Julie Roin

Coase-Sandor Working Paper Series in Law and Economics

Recent legal and economic changes—not to mention the rise in telecommuting caused by COVID--have raised the salience of a long-simmering fact about the operation of state and local income tax systems: some multistate employers and employees pay a combined income tax liability that is higher than the tax they would have borne had they operated in just one jurisdiction. Seemingly beyond the reach of the courts to correct, there have been persistent calls for Congressional action to eliminate or reduce this “duplicative” taxation. This Article suggests that the alleged problem may be both less of a problem, and more resistant …

Stark Choices For Corporate Reform, Aneil Kovvali

Coase-Sandor Working Paper Series in Law and Economics

For decades, corporate law scholars insisted on a simple division of responsibilities. Corporations were told to focus exclusively on maximizing financial returns to shareholders while the government tended to all other concerns by adopting new regulations. As reformers challenged this orthodoxy by urging corporations to take action on pressing social problems, defenders of the status quo have responded by suggesting that these efforts could be dangerous. In their view, internal corporate governance reforms could interfere with the adoption of external governmental regulations that would be more effective. The hypothesis that reformers face a stark choice between pursuing internal corporate changes …

Countercyclical Corporate Governance, Aneil Kovvali

Coase-Sandor Working Paper Series in Law and Economics

The American economy has lurched from crisis to crisis for over a decade, enduring long stretches of high unemployment, market dysfunction, and ineffective government policy. Despite the enormous scale of this suffering and disruption, the full implications of the experience have not been absorbed by the corporate governance literature. Corporate law’s focus on delivering financial returns to shareholders works reasonably well in a robust economy, when markets function effectively and align shareholder incentives with the goal of maximizing social wealth. But these tidy mechanisms fail in periods of macroeconomic stress, when markets send faulty signals and firms pursuing short-term shareholder …

Horizontal Collusion And Parallel Wage-Setting In Labor Markets, Jonathan S. Masur, Eric A. Posner

Coase-Sandor Working Paper Series in Law and Economics

Horizontal collusion among employers to suppress wages has received almost no attention in the academic literature, in contrast with its more familiar cousin, product market collusion. The similar economic analysis of labor and product markets might suggest that antitrust should regulate labor and product markets in the same way. But product markets and labor markets do not operate identically: people behave differently as employees and as consumers. Unlike consumers who can switch products relatively easily, employees face significant frictions in changing jobs. Other labor market frictions are created by the pay equity norm and downward nominal wage rigidity. These factors …

Toward A "Tender Offer" Market For Labor Representation, Aneil Kovvali, Jonathan R. Macey

Coase-Sandor Working Paper Series in Law and Economics

American workers are not sharing in the robust growth of the economy. Traditionally, large numbers of workers sought to improve their lot by bargaining collectively through unions. But the strategy does not seem to be working for enough workers. Despite some renewed recent activity, private sector unionization rates remain below 10%, and the unions that are in place have struggled to perform well, either in avoiding scandals or in delivering significant returns to workers in the form of job security or wage growth. This Article proposes a radical fix to the problem of declining unions. Drawing inspiration from corporate governance …

Spacs, Pipes, And Common Investors, Saul Levmore, Frank Fagan

Coase-Sandor Working Paper Series in Law and Economics

Special Purpose Acquisition Companies, or SPACs, have come to play a large role in bringing together small and large investors in the acquisition and expansion of private companies. A pessimistic version of this relatively recent alternative to conventional initial public offerings (IPOs), and other methods of investing in companies ready to expand, is that clever sharks take advantage of overly optimistic and ill-informed small investors. This Article offers a very different view. It shows that small investors need someone to locate good investment opportunities, and then often also benefit if another well-informed party can credibly vouch for the entity that …

Regulatory Diffusion, Jennifer Nou, Julian Nyarko

Coase-Sandor Working Paper Series in Law and Economics

Regulatory diffusion occurs when an agency adopts a substantially similar rule to that of another agency. Indeed, regulatory texts proliferate just like other forms of law like constitutions, statutes, and contracts do. While this insight has been explored across countries, this dynamic also occurs closer to home: American administrative agencies regularly borrow language from one another. By our measure, in recent years, agencies reused one out of every ten paragraphs of the Code of Federal Regulations from another rulemaking. These insights are timely given a recent Supreme Court decision calling for judges to engage in less deferential regulatory interpretation. As …

Civil Procedure As The Regulation Of Externalities: Toward A New Theory Of Civil Litigation, Ronen Avraham, William H.J. Hubbard

Coase-Sandor Working Paper Series in Law and Economics

Civil procedure serves a multitude of goals, from regulating the cost of fact gathering, to dictating the rules of advocacy in court, to promoting public participation in trials. To what extent can procedural design serve them all, or must rules sacrifice some interests to serve others? In this paper, we are the first to introduce a theory of procedure design that answers this question. We build upon the fundamental insight that the goals of civil procedure, as varied as they are, all occupy a common conceptual space—each addresses an externality, positive or negative, that litigation creates. This insight allows us …

The Promise And Perils Of Open Finance, Dan Awrey, Joshua Macey

Coase-Sandor Working Paper Series in Law and Economics

We are at the dawn of a new age of Open Finance. Open Finance seeks to harness the potential of new platform technology to enhance customer data access, sharing, portability, and interoperability—thereby leveling the informational playing field and fostering greater competition between incumbent financial institutions and a new breed of fintech disruptors. According to its proponents, this competition will yield a radical restructuring of the financial services industry: offering more and better choices for consumers looking to make fast payments, borrow money, invest their savings, manage household budgets, and compare financial products and services. The promise of Open Finance is …

Cash Substitution And Deferred Consumption As Data Breach Harms, Lior Strahilevitz, Lisa Yao Liu

Coase-Sandor Working Paper Series in Law and Economics

In a series of federal court cases, judges have debated whether data breaches that expose consumer information satisfy Article III of the United States Constitution’s requirement that plaintiffs suffer an “injury in fact.” Judicial opinions find no constitutional standing in a narrow majority of such cases, and plaintiffs are likely to lose absent causal links to subsequent identity theft or the disclosure of embarrassing information. Consumers whose data are breached thus are left without a federal remedy, and firms’ incentives to invest in data security are diminished. Our paper identifies a novel injury that results from data breaches. Upon learning …

Optional Price Discrimination, Lee Anne Fennell

Coase-Sandor Working Paper Series in Law and Economics

Price discrimination gets a bad rap. It is associated with the exploitation of monopoly power and with opportunistically extracting surplus from consumers. As merchants develop ever-more-powerful mechanisms for gathering and compiling information about consumers, the specter of fully personalized pricing seems to loom as an ominous threat. Despite past economic defenses of price discrimination as an efficient and even consumer friendly move in some contexts, ¹ recent writing highlights the perceived unfairness of tailoring prices to willingness to pay, especially when this is accomplished through “big data.”²

Yet a parallel phenomenon quietly coexists with all this distress over personalized …

The Expanding Universe Of Bilateral Labor Agreements, Adam Chilton, Bartosz Woda

Coase-Sandor Working Paper Series in Law and Economics

In the seventy-five years since the end of World War II, pairs of countries have entered into over a thousand bilateral labor agreements (BLAs) to regulate the cross-border flow of workers. These agreements have received little public or academic attention. This is likely, in part, because there is limited data or easily available information on BLAs. This Article hopes to change that by introducing three new resources: (1) a dataset documenting the formation of over 1,200 BLAs; (2) a corpus including the texts of over 800 BLAs; and (3) a dataset coding whether over 500 BLAs mention twenty topics that …

Spacs And Pipes As Efficient Tools For Corporate Growth, Frank Fagan, Saul Levmore

Coase-Sandor Working Paper Series in Law and Economics

Special Purpose Acquisition Companies, or SPACs, have come to play a large role in bringing together small and large investors in the acquisition and expansion of private companies. A pessimistic version of this relatively recent alternative to conventional initial public offerings (IPOs), and other methods of investing in companies ready to expand, is that clever sharks take advantage of overly optimistic and ill-informed small investors. This Article offers a very different view. It shows that small investors need someone to locate good investment opportunities, and then often also benefit if another well-informed party can credibly vouch for the entity that …

Review Of Daniel Farber, Inequality And Regulation: Designing Rules To Address Race, Poverty, And Environmental Law, David A. Weisbach

Coase-Sandor Working Paper Series in Law and Economics

Dan Farber’s wide-ranging article, Inequality and Regulation, makes two core arguments. First, Farber argues that using a uniform value of statistical life (VSL) in cost-benefit analysis is justified not only as a pragmatic compromise but also as a matter of first principles. In particular, he argues that a uniform VSL can be based on a theory of equality that he calls harm egalitarianism, which holds that individuals have equal entitlements to protection against harm. Second, Farber, looking for ways to address environmental justice concerns through regulations, argues that “a heightened focus on differences in exposure and vulnerability [in the cost-benefit …

In Defense Of Chapter 11 For Mass Torts, Anthony J. Casey, Joshua C. Macey

Coase-Sandor Working Paper Series in Law and Economics

This Essay argues that bankruptcy proceedings are well-suited to resolving mass tort claims. Mass tort cases create a collective action problem that encourages claimants who are worried about available recoveries to race to the courthouse to collect ahead of others. This race can destroy going concern value and lead to the dismemberment of valuable firms. Coordination among them is difficult as each claimant seeks to maximize its own recoveries. These are the very collective action and hold-out problems that bankruptcy proceedings are designed to solve. As such, bankruptcy proceedings are appropriate means of resolving mass torts as long as they …

The Consequences Of The Tcja’S International Provisions: A Conceptual Framework And Survey Of The Evidence, Dhammika Dharmapala

Coase-Sandor Working Paper Series in Law and Economics

The 2017 US tax legislation - widely referred to as the Tax Cut and Jobs Act (TCJA) - fundamentally transformed the US system of international taxation, introducing for instance a new tax on “Global Intangible Low-Taxed Income” (GILTI). This paper develops a simple conceptual framework that synthesizes and extends the theory of multinational corporations’ (MNCs’) responses to taxation. It also surveys the emerging empirical evidence on the consequences of the TCJA’s international provisions. The conceptual framework focuses on the efficiency costs of ownership distortions in analyzing the impact of the GILTI tax and the prior repatriation tax on foreign acquisitions …

Foreword (The Economic Structure Of Corporate Law At Thirty: A Retrospective On The Work Of Easterbrook & Fischel), Anthony J. Casey, Hajin Kim, Joshua Macey

Coase-Sandor Working Paper Series in Law and Economics

No abstract provided.

Streaming Property, Lee Anne Fennell

Coase-Sandor Working Paper Series in Law and Economics

People acquire property rights in objects and real estate in order to capture the stream of services that these assets can provide over time. The thing or parcel itself is merely a delivery mechanism, a way of packaging and protecting rights to that value stream. And, significantly, these assets cannot stream services to anyone without a set of facilitating conditions and complementary goods, such as public infrastructure, that do not lie within the asset owner’s individual control. This Essay argues that we can gain fresh traction on inequality by recasting property as service streams rather than as owned things. Doing …

Competition And Congestion In Trademark Law, Christopher Buccafusco, Jonathan S. Masur, Mark P. Mckenna

Coase-Sandor Working Paper Series in Law and Economics

Trademark law exists to promote competition. If consumers know which companies make which products, they can more easily find the products they actually want to purchase. Trademark law has long treated “source significance”—the fact that a particular trademark is identified with a particular producer—as both necessary and sufficient for establishing a valid trademark. That is, trademark law has traditionally viewed source significance as the only necessary precondition for a trademark being pro-competitive. In this paper, we argue that this equation of source significance and pro-competitiveness is misguided. Some marks use words that are so closely connected with the product being …

The Bankruptcy Tribunal, Anthony J. Casey, Joshua C. Macey

Coase-Sandor Working Paper Series in Law and Economics

The United States Bankruptcy Code (the Code)¹ and the Federal Arbitration Act (FAA)² are powerful statutory schemes. Each one demands a broad scope of influence and preempts many other fields of law, state and federal. The capacious nature of these statutes creates a challenging tension when they come into conflict. On the one hand, bankruptcy law is in its very essence a collective multiparty dispute resolution procedure that cannot be waived or altered by private contract. On the other hand, the FAA embodies a general federal policy in favor of allowing parties to contract into private dispute resolution …

Antitrust And Labor Markets: A Reply To Richard Epstein, Eric A. Posner

Coase-Sandor Working Paper Series in Law and Economics

In his article, The Application of Antitrust Law to Labor Markets—Then and Now, Richard Epstein argues that rather than urge courts and regulators to apply antitrust law to labor markets, reformers who care about labor market competition should try to constrain unions. In this reply, I argue that Epstein’s assumptions about labor market structure are contradicted by mountains of empirical evidence. The anticompetitive behavior of employers causes significant harm to social welfare—both in terms of economic output and equity. Antitrust law is a valuable tool for addressing America’s ailing labor markets.

Equalizing The Tax Treatment Of Stock Buybacks And Dividends, Daniel J. Hemel, Gregg D. Polsky

Coase-Sandor Working Paper Series in Law and Economics

his policy brief highlights flaws in the current federal tax treatment of stock buybacks and proposes to address those flaws by equalizing the tax treatment of buybacks and dividends. (We explore the proposal in greater detail in Hemel & Polsky, Taxing Buybacks, 38 Yale J. on Reg. 246 (2021), https://ssrn.com/abstract=3764112.) Stock buybacks allow foreign shareholders to avoid U.S. withholding tax on corporate cash distributions. Stock buybacks also allow U.S. taxable investors to reduce or eliminate shareholder-level tax on corporate cash distributions through a combination of deferral, loss harvesting, and stepped-up basis at death. Our proposal—based on an idea first suggested …

Stigler's Theory Of Economic Regulation After Fifty Years, Sam Peltzman

Coase-Sandor Working Paper Series in Law and Economics

George Stigler’s “The Theory of Economic Regulation” (1971) is a landmark in the economics of regulation. It used simple public choice reasoning to set out the “capture theory” of regulation whereby “… as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.” This article, written for a commemoration of the 1971 article in Public Choice, summarizes the context within which the article appeared and evaluate its long run impact. A central argument is the need to distinguish “acquired” from “designed and operated.” The rule that regulation is produced in response to industry …

Visibility And Indivisibility In Resource Arrangements, Lee Anne Fennell

Coase-Sandor Working Paper Series in Law and Economics

Projects like highways, bridges, pipelines, and wildlife corridors exhibit indivisibilities—we need the whole thing to have anything of value. Many environmental and social goals have a similar all-or-nothing character: staying above or below a certain critical threshold can make all the difference. This essay focuses on the role of visibility in addressing resource dilemmas that have this structure. I examine how two kinds of visibility can help avoid catastrophic consequences and advance desirable ones. The first involves recognizing when an indivisibility is present—that is, appreciating the vulnerability of resources to thresholds and cliff effects before it is too late. The …

Framing Vaccine Mandates: Messenger And Message Effects, Christopher Buccafusco, Daniel Hemel

Coase-Sandor Working Paper Series in Law and Economics

In September 2021, President Biden announced that the Occupational Safety and Health Administration (OSHA) would require all employers with 100 or more employees to ensure that their workers are fully vaccinated against Covid-19 or show a negative test for the virus at least once a week. The policy has been widely characterized in the media as “President Biden’s vaccine mandate,” though it could be described with equal accuracy as “OSHA’s testing mandate” (since OSHA, rather than Biden, officially promulgated the policy, and once-a-week testing and vaccination are both valid compliance options). Some commentators have speculated that reframing the policy as …

Mega-Iras, Mega-401(K)S, And Other Mega-Retirement Accounts: Statement For The Record, Daniel J. Hemel, Steve Rosenthal

Coase-Sandor Working Paper Series in Law and Economics

The Senate Finance Committee’s hearing on July 28, 2021 -- "Building on Bipartisan Retirement Legislation: How Can Congress Help?" -- spotlighted “mega-IRAs”: individual retirement accounts with balances of $5 million or more. An analysis by the Joint Committee on Taxation in advance of the July 28 hearing found that the number of taxpayers with mega-IRAs now exceeds 28,000. The hearing followed a June 2021 report by the nonprofit investigative journalism organization ProPublica, which revealed—based on leaked IRS files—that a handful of high-net-worth individuals had accumulated massive IRA balances. The Senate Finance Committee hearing and the ProPublica report emphasized one way …