Law Commons^™

Predictability And Adaptation In Law And Other Markets (Chapter In A Coming Book: Research Handbook On Law And Time), Saul Levmore

Coase-Sandor Working Paper Series in Law and Economics

People and enterprises that are subject to the law find it useful to know what the law is at present, but then also to anticipate future rules. If laws are stable this is easily done. Stability is more common where the judicial branch is concerned, because precedents are often valued, and for good reason. They are more often followed by judges than by those involved in other methods of lawmaking. But in all of lawmaking, and even in the private sphere, there is value to consistency and certainty. And yet, surprises can be attractive if they are not confronted on …

Lost Time: Paying For Delays Associated With Labor Strikes And Traffic Jams (Chapter In A Coming Book: Research Handbook On Law And Time), Saul Levmore

Coase-Sandor Working Paper Series in Law and Economics

Waiting is often costly. In many settings, one party delays to impose costs on another. In other settings, delay yields a small gain while imposing significant costs on others who cannot easily bargain. Where the parties can bargain, at least one expects the other to relent and to bring about a settlement that is mutually beneficial. Inasmuch as time offers the opportunity to gather information, compare alternatives, and reach yet better bargains, law does not and should not simply discourage all delays. On the other hand, it is often the case that when parties delay before reaching a bargain, they …

Labor Market Traps, Eric A. Posner

Coase-Sandor Working Paper Series in Law and Economics

Some products, notably but not only platforms, increase in value for users as the number of other users increases. These interaction or network effects can result in “product market traps” (Bursztyn et al., 2023) where people who use the product would be better off if they all stopped using it and switched to another product, but cannot because of coordination problems. A parallel but overlooked phenomenon is the labor market trap, where employees would be better off if they collectively left an employer, job, or profession, but cannot because of the difficulty of coordination. Product market and labor market traps …

Uncovering The Role Of Hubs: A Network Science Perspective On Platform Competition, Raz Agranat

Coase-Sandor Working Paper Series in Law and Economics

This paper offers a novel legal framework to evaluate competition among digital platforms. Drawing on network science, it debunks two prominent approaches in antitrust law, that network effects either lead to a winner-takes-all situation or, conversely, that they safeguard against platform market power abuses. It coins the term “hub-plucking” to highlight a critical dynamic of platform competition that has surprisingly gone unnoticed: the competition between platforms over highly connected “hubs”. Hub-plucking enables rivaling platforms, including new entrants, to instantly acquire market share by seizing hubs. Since many platforms of interest exhibit hubs, hub-plucking is applicable to a multitude of industries …

When Bill Rolls Off: Continuity And Change On Corporate Boards, Adriana Z. Robertson, Peter Cziraki

Coase-Sandor Working Paper Series in Law and Economics

The number of women on public company boards has increased dramatically in recent years. We study where these women directors came from and how they were absorbed. In the past five years, women with board experience obtain significantly more board seats than their male colleagues. Women directors are also more likely to have no previous board experience than men, indicating movement on both the intensive and extensive margin. Adding a woman director is associated with a transitory increase in board size about a third of the time. This increase reverts the following year when an existing director rolls off.

Real-World Prior Art, Jonathan S. Masur, Lisa Larrimore Ouellette

Coase-Sandor Working Paper Series in Law and Economics

The most fundamental requirement of patent law is that a patented invention must be new. Given the longstanding, foundational nature of this novelty requirement, one might expect its contours to be well settled. And yet some of its most basic aspects remain unresolved. At the center of these unresolved issues lie what we term “real-world prior art.” In patent law, prior art is something that predates an invention and may render it not new. “Real-world” prior art activities involve using or selling real-world embodiments of the invention. Consider a few examples. Suppose Aleida demonstrates her invention to members of the …

Constrained Income Redistribution And Inequality: Legal Rules Compared To Taxes And Transfers, David A. Weisbach

Coase-Sandor Working Paper Series in Law and Economics

A widely accepted result, associated with Louis Kaplow and Steve Shavell, is that it is more costly to use legal rules to redistribute income than to use the tax and transfer system (the income-tax only result). An assumption behind this result is that if a legal rule is changed to eliminate its income-redistributive effects, the tax and transfer system can be adjusted to counteract the effects of those changes on the distribution of income. A number of commentators have questioned this assumption, suggesting that political constraints may limit the ability of the tax and transfer system to adjust to changes …

Strategic Subdelegation, Brian D. Feinstein, Jennifer Nou

Coase-Sandor Working Paper Series in Law and Economics

Appointed leaders of administrative agencies routinely record subdelegations of governmental authority to civil servants. That appointees willingly cede authority in this way presents a puzzle, at least at first glance: Why do these appointees assign their power to civil servants insulated by merit protection laws, that is, to employees over whom they have limited control? This article develops and tests a theory to explain this behavior. Using original data on appointee-to-civil servant delegations and a measure of the ideological distance between these two groups of actors, we show that appointees are more willing to vest power in civil servants when …

Toward Principled Background Principles In Takings Law, Rebecca Hansen, Lior Jacob Strahilevitz

Coase-Sandor Working Paper Series in Law and Economics

Blunders made by lawyers, judges, and scholars have caused the Supreme Court’s recent opinion in Cedar Point Nursery v. Hassid to be deeply misunderstood. In Cedar Point, the Court re-wrote takings law by treating temporary and part-time entries onto private property as per se takings. Prior to Cedar Point these sorts of government-authorized physical entries would have been evaluated under a balancing framework that almost invariably enabled the government to prevail. As it happens, there were two well-established rules of black letter law that California’s lawyers and amici mistakenly failed to invoke in defending the Cedar Point union organizer access …

Trade, Leakage, And The Design Of A Carbon Tax, David A. Weisbach, Samuel S. Kortum, Michael Wang, Bella Yao

Coase-Sandor Working Paper Series in Law and Economics

Climate policies vary widely across countries, with some countries imposing stringent emissions policies and others doing very little. When climate policies vary across countries, energy-intensive industries have an incentive to relocate to places with few or no emissions restrictions, an effect known as leakage. Relocated industries would continue to pollute but would be operating in a less desirable location. We consider solutions to the leakage problem in a simple setting where one region of the world imposes a climate policy and the rest of the world is passive. We solve the model analytically and also calibrate and simulate the model. …

Regulatory Trading, David A. Weisbach

Coase-Sandor Working Paper Series in Law and Economics

Regulatory trading systems, such as the SO2 cap and trade system, are ubiquitous in environmental and natural resources law. In addition to cap and trade systems for pollutants such as SO2, NOx and CO2 , environmental and natural resources law uses trading in areas such as endangered species, water quality, wetlands, vehicle mileage, and forestry and farming practices. Trading, however, is rarely used as a regulatory approach in other areas of law. This paper seeks to identify the reasons for this dichotomy. To understand the dichotomy, the paper examines the uses of trading in environmental and natural resources law, where …

The Corporate Governance Of Public Utilities, Aneil Kovvali, Joshua A. Macey

Coase-Sandor Working Paper Series in Law and Economics

Rate regulated public utilities own and operate one-third of U.S generators and nearly all the transmission and distribution system. These firms receive special regulatory treatment because they are protected from competition and subject to rate caps. In the past decade, they also have been at the center of high-profile corporate scandals. They have bribed regulators to secure subsidies for coal-fired generators and nuclear reactors. They have caused wildfires and coal ash spills that resulted in hundreds of deaths and billions of dollars in liability. Their failure to maintain reliable electric service has contributed to catastrophic blackouts. Perhaps most consequentially, they …

Overview Of The Characteristics Of Tax Havens, Dhammika Dharmapala

Coase-Sandor Working Paper Series in Law and Economics

Tax havens have become a subject of great interest among policymakers, scholars and the general public, and are central to many important current policy debates. This chapter provides an overview of the scholarly literature on the characteristics and origins of tax havens. The earlier literature, used cross-country analysis and found evidence that tax havens tend to have stronger governance institutions than comparable nonhaven countries. The more recent literature analyzes the historical origins of tax havens and undertakes longitudinal analysis of their adoption of haven-like laws. This chapter also presents a descriptive analysis of the relationship between tax haven status and …

Residents Against Housing, Lee Anne Fennell

Coase-Sandor Working Paper Series in Law and Economics

Incumbent residents routinely oppose residential development.¹ Interestingly, this is true of both homeowners and renters, if for opposite reasons. Homeowners typically worry that new housing will cause the market value of their own homes to fall, resulting in a hit to what is usually a house-heavy personal wealth portfolio.² Tenants typically worry that new housing will cause the market value of their own homes to rise, generating pressure toward higher rents and displacement.³ Both homeowners and tenants also express concern that new housing development will change the character of their neighborhoods in unwanted ways.⁴

Resident opposition …

Expecting Corporate Prosociality, Hajin Kim

Coase-Sandor Working Paper Series in Law and Economics

Teaching people that corporations must exclusively maximize profits can reduce “win-wins”—what is both profitable and good for society. If everyone believes that corporations must maximize profits only, nobody will protest when corporate pursuits of profits harm society—the firms were fulfilling their duty and meeting investor and consumer expectations. But what if people instead believed that corporations should consider their social impacts, even sometimes at the expense of profits? Consumers, employees, and investors might be more willing to object to corporate harms by changing their purchasing, job choice, and investing behaviors or by petitioning corporate leaders for redress. Those objections would …

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 …

Against Anti-Tax Exceptionalism, David A. Weisbach

Coase-Sandor Working Paper Series in Law and Economics

This paper examines the arguments found in what has become known as the anti-tax exceptionalism literature. That literature seeks to apply the rules of administrative law to tax procedures. The core claim is that the procedures used by the Internal Revenue Service and the Treasury routinely violate the requirements of administrative law. Secondarily, that literature argues that this is normatively bad: the Treasury and Internal Revenue Service should not be treated differently from other administrative agencies because the tax system is not exceptional. Promoting the goals of administrative law, that literature argues, requires that the tax system conform to standard …

Climate Change Policy In The International Context: Solving The Carbon Leakage Problem, David A. Weisbach, Samuel S. Kortum

Coase-Sandor Working Paper Series in Law and Economics

Under the Paris Agreement, nations set their own emissions goals and policies. As a result, climate policies vary widely across countries, with some countries imposing stringent emissions policies and others doing very little. A key problem when carbon policies vary across countries is that energy-intensive industries can relocate to places with few or no emissions restriction. Relocated industries would continue to pollute but would be operating in a less desirable location. Moreover, the countries that imposed strict emissions reductions lose the benefit of having those industries located domestically. This problem, known as leakage, is one of the key reasons the …

Distributing Deterrence Fairly: A New Rationale For Decoupling Tort Liability, H. Javier Kordi

Coase-Sandor Working Paper Series in Law and Economics

Tort law faces a dilemma: how to adhere to a principle of make-whole compensation without entrenching social inequities. High-earning people receive greater compensation awards, resulting in an unequal distribution of deterrence. The deterrence disparity arises because injurers would rationally direct risky activity towards poorer victims to reduce liability costs; it persists even if race and gender classifications are barred from compensation. This Article offers a novel solution to the dilemma. It develops a decoupled liability regime under which injurers pay damages and are subject to standards of care that are invariant across individual victims, thus equalizing the distribution of deterrence. …

Labor Mobility And The Problems Of Modern Policing, Jonathan S. Masur, Aurélie Ouss, John Rappaport

Coase-Sandor Working Paper Series in Law and Economics

We document and discuss the implications of a striking feature of modern American policing: the stasis of police labor forces. Using an original employment dataset assembled through public records requests, we show that, after the first few years on a job, officers rarely change employers, and intermediate officer ranks are filled almost exclusively through promotion rather than lateral hiring. Policing is like a sports league, if you removed trades and free agency and left only the draft in place.

We identify both nonlegal and legal causes of this phenomenon—ranging from geographic monopolies to statutory and collectively bargained rules about pensions, …

Does Esg Crowd Out Support For Government Regulation?, Hajin Kim, Joshua Macey, Kristen Underhill

Coase-Sandor Working Paper Series in Law and Economics

Do voluntary corporate prosocial efforts reduce or amplify support for government regulation? We build a theory of opposing mechanisms. Voluntary efforts could make it seem like the problem is being fixed (“Coca-Cola is already tackling plastic waste!”) and thus that regulation is unnecessary. Or they could make the problem seem more important (“even Walmart is addressing this”) or regulation more feasible (“regulation will not impose excessive costs on industry”). Because these factors move in opposing directions, we posit that any crowding-in or crowding-out effects will be small and context-dependent. To test our theory, we ran two preregistered, randomized controlled studies …

Privacy Protection, At What Cost? Exploring The Regulatory Resistance To Data Technology In Auto Insurance, Omri Ben-Shahar

Coase-Sandor Working Paper Series in Law and Economics

Regulatory and sociological resistance to new market-driven technologies, particularly to those that rely on collection and analysis of personal data, is prevalent even in cases where the technology creates large social value and saves lives. This article is a case study of such tragic technology resistance, focusing on tracking devices in cars which allow auto insurers to monitor how policyholders drive and adjust the premiums accordingly. Growing empirical work reveals that such “usage-based insurance” induces safer driving, reducing fatal accidents by almost one third, and resulting in more affordable and fair premiums. Yet, California prohibits this technology and other states …

Hidden Value Transfers In Public Utilities, Aneil Kovvali, Joshua Macey

Coase-Sandor Working Paper Series in Law and Economics

Many electric utilities in the United States own rate regulated and non-rate regulated subsidiaries. The rate regulated subsidiaries enjoy legal monopolies and a right to a return on their capital investments but are only allowed to charge regulatorily authorized rates. The non-rate regulated subsidiaries participate in competitive markets and are generally free to earn whatever profits they can but are subject to the threat of displacement by other enterprises.

Many electric utilities in the United States own rate regulated and non-rate regulated subsidiaries. The rate regulated subsidiaries enjoy legal monopolies and a right to a return on their capital investments …

Property As Service Streams, Lee Anne Fennell

Coase-Sandor Working Paper Series in Law and Economics

Property’s job is to help people derive benefits from resources.¹ But often it cannot do this work well. A core problem is an outmoded model of benefit production that treats the individually owned parcel or “thing” as the relevant unit of analysis.² Property theorists often use the example of a farm to illustrate how ownership induces people to invest (in sowing) by granting them exclusive rights (to reap the crops).³ On this account, property holdings operate in a largely self-contained fashion, collecting inputs from owners and delivering the associated returns to them. The primary role of property …

Sharing Where Bargains Are Impossible, Saul Levmore, Andrew Verstein

Coase-Sandor Working Paper Series in Law and Economics

Cooperation sometimes breaks down, and former teammates will disagree about what happens next. for example, when can an employee quit to join a competitor? Courts often resolve disputes by looking at the parties actual or hypothetical bargain. Thus, a court may ask whether there was a non-competition agreement (and whether it was reasonable), or whether the employee is taking a “corporate opportunity” as she departs. These are all-or-nothing determinations by courts; either the bargain, or law, fully allows or fully prohibits the disputed conduct.

This is a suitable approach when fair and efficient bargains are possible. But, this article argues …

Simplicity And Complexity In Law And In Markets, Saul Levmore

Coase-Sandor Working Paper Series in Law and Economics

Richard Epstein’s Simple Rules for a Complex World1 is true to its title and to the author’s demonstrated genius over a long career. It is a libertarian-oriented enterprise in that it requires the reader to share in the belief that government programs are often wasteful and subject to unattractive interest group pressures and corrupt bureaucracies. More generally, Simple Rules is framed against a background in which the reader must share the libertarian view that individuals can and should be trusted to look after themselves and to make their own choices. Epstein likes “simple” rules; these include strict liability, a flat …

No-Poach Antitrust Litigation In The United States, Eric A. Posner, Sarah Hammond Roberts

Coase-Sandor Working Paper Series in Law and Economics

In recent years, U.S. courts have heard numerous antitrust lawsuits challenging agreements among employers not to poach one another’s employees. The major issues so far involve labor market definition, the doctrine of ancillary restraints, the role of cross-market balancing, and the scope of the per se rule in the labor market context. The recent Seventh Circuit case of Deslandes v. McDonald’s has clarified some of these issues and will likely boost this form of litigation. But many questions remain unanswered.

How Progressive Is The U.S. Tax System?, Thomas Coleman, David A. Weisbach

Coase-Sandor Working Paper Series in Law and Economics

We examine changes in tax progressivity over time. Because there are many possible definitions of progressivity and because methods of defining and allocating income vary, we look for results that are robust across studies and definitions of progressivity. To do this, we compare the results from three different publicly available datasets, those from Piketty, Saez, and Zucman (2018), Auten and Splinter (2023) and Congressional Budget Office (2023). Notwithstanding some headline results to the contrary, all three datasets show that the tax system has become more progressive and more redistributive over the last several decades, with much of that change occurring …

Timing The Regulatory Tightrope, Adriana Z. Robertson

Coase-Sandor Working Paper Series in Law and Economics

Regulators face a hard problem. Novel products are developed and launched all the time. At first, regulators have very little information about the product, including its risks and benefits. Moving too quickly to impose regulations is therefore risky. And since the market for a nascent product is generally small, the benefits of regulation may also be small. It therefore makes sense to let the market develop a bit before taking action.

But waiting too long to intervene can also be perilous. Once enough time has passed, and the product becomes established, it can become extremely difficult to intervene. Now there …

Cross-Border Influencers: Democracy And Externalities, Saul Levmore

Coase-Sandor Working Paper Series in Law and Economics

The United States does not allow foreigners to influence U.S. elections by giving money to political parties or candidates, but many other countries do allow cross-border influencing. Indeed, the variety of policies among countries is remarkable. Some countries, like the United States, that forbid financial contributions from outside the country, do permit cross-border contributions across domestic borders, such as those of states and cities. Meanwhile, Canadians cannot contribute to the campaigns of U.S. political candidates, and cannot even (lawfully) influence the American political process by purchasing campaign t-shirts or bumper stickers. This prohibition is in place even though, like constituents …