Legal History Commons^™

The Progressives' Antitrust Toolbox, Herbert J. Hovenkamp

All Faculty Scholarship

The period 1900 to 1930 was the Golden Age of antitrust theory, if not of enforcement. During that period courts and scholars developed nearly all of the tools that we use to this day to assess anticompetitive practices under the federal antitrust laws. In subsequent years antitrust policy veered to both the left and the right, but today seems to be returning to a position quite similar to the one that these Progressive adopted. Their principal contributions were (1) partial equilibrium analysis, which became the basis for concerns about economic concentration, the distinction between short- and long-run analysis, and later …

Antitrust Error Costs, Herbert J. Hovenkamp

All Faculty Scholarship

The idea that consideration of error costs should inform judgments about actions with uncertain consequences is well established. When we act on imperfect information, we consider not only the probability of an event, but also the expected costs of making an error. In 1984 Frank Easterbrook used this idea to rationalize an anti-enforcement bias in antitrust, reasoning that markets are likely to correct monopoly in a relatively short time while judicial errors are likely to persist. As a result, false positives (recognizing a problem when there is none) are more costly than false negatives. While the problem of error cost …

A Workers' Paradise: Re-Integrating Newfoundland Into Colonial American History, Elena Hynes

Electronic Theses & Dissertations

The island of Newfoundland is conspicuous in colonial British and North American histories, most particularly and paradoxically, in its absence, a state of affairs which this study aims to help address. Multiple factors, including a paucity of documentary sources and various historiographic trends, have traditionally contributed to Newfoundland’s marginalization within colonial historical narratives. However, developments in recent years have made Newfoundland’s potential integration into the broader colonial dialogue more feasible including the advent of the Atlantic perspective, the expansion of available sources, and the work of multiple regional historians who have challenged enduring historiographic trends characterizing Newfoundland colonial settlements as …

Framing The Chicago School Of Antitrust Analysis, Herbert J. Hovenkamp, Fiona Scott Morton

All Faculty Scholarship

The Chicago School of antitrust has benefited from a great deal of law office history, written by admiring advocates rather than more dispassionate observers. This essay attempts a more neutral stance, looking at the ideology, political impulses, and economics that produced the Chicago School of antitrust policy and that account for its durability.

The origins of the Chicago School lie in a strong commitment to libertarianism and nonintervention. Economic models of perfect competition best suited these goals. The early strength of the Chicago School of antitrust was that it provided simple, convincing answers to everything that was wrong with antitrust …

3d Printing And Healthcare: Will Laws, Lawyers, And Companies Stand In The Way Of Patient Care?, Evan R. Youngstrom

Evan R. Youngstrom

Today, our society is on a precipice of significant advancement in healthcare because 3D printing will usher in the next generation of medicine. The next generation will be driven by customization, which will allow doctors to replace limbs and individualize drugs. However, the next generation will be without large pharmaceutical companies and their justifications for strong intellectual property rights. However, the current patent system (which is underpinned by a social tradeoff made from property incentives) is not flexible enough to cope with 3D printing’s rapid development. Very soon, the social tradeoff will no longer benefit society, so it must be …

The Progressives: Economics, Science, And Race, Herbert J. Hovenkamp

All Faculty Scholarship

This essay is a brief review of Thomas C. Leonard, Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era (Princeton Univ. Press 2016).

Lessons In Fiscal Activism, Mirit Eyal-Cohen

Mirit Eyal-Cohen

This article highlights an anomaly. It shows that two tax rules aimed to achieve a similar goal were introduced at the same time. Both meant to be temporary and bring economic stimuli but received a dramatically different treatment. The economically inferior rule survived while its superior counterpart did not. The article reviews the reasons for this paradox. It shows that the causes are both political and an agency problem. The article not only enriches an important and ongoing debate that has received much attention in recent years, but also provides important lessons to policymakers.

The Origins Of Affirmative Fiscal Action, Mirit Eyal-Cohen

Mirit Eyal-Cohen

This article highlights an anomaly. It shows that two tax rules aimed to achieve a similar goal were introduced at the same time. Both meant to be temporary and bring economic stimuli, but received a dramatically different treatment. The less efficient or economically inferior survived. Its superior counterpart did not. The article reviews the reasons for this paradox. It shows that the reason is both political and an agency problem. The article not only enriches an important and ongoing debate that has received much attention in recent years, but also provides important lessons to policymakers.

Adam Smith's Lectures On Jurisprudence-Justice, Law, And The Moral Economy, Walter J. Kendall Lll

Walter J. Kendall lll

Adam Smith, a leading thinker of the British Enlightenment, is universally known as the author of the Wealth of Nations and an economic theorist. He is less well known as the author of a Theory of Moral Sentiments and an ethicist. And known almost not at all for his Lectures on Jurisprudence or as a legal theorist. This essay looks at Smith’s thought through the lens of his Lectures on Jurisprudence. It highlights the almost paradoxical positions Smith had on self-interest, markets, government, and economic expansion. Obscured by his reputation and these paradoxes are his views on justice, equality, and …

The Commons, Capitalism, And The Constitution, George Skouras

George Skouras

Thesis Summary: the erosion of the Commons in the United States has contributed to the deterioration of community and uprooting of people in order to meet the dynamic demands of capitalism. This article suggests countervailing measures to help remedy the situation.

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Now over 36 years old, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. Over the past thirty-six years NACD has grown from a mere realization of the importance of corporate governance to become the only national membership …

Debating Law's Irrelevance: Legal Scholarship And The Coase Theorem In The 1960s, Steven G. Medema

Steven G Medema

The paper examines the treatment of the Coase theorem by legal scholars during the 1960s. The analysis demonstrates that it was legal scholars, rather than economists, who took the lead in applying Coase's negotiation result in the legal realm and that the early diffusion of Coase's result in the legal literature is anything but a "Chicago" story. We also observe that legal scholars were interesting in examining the applicability of Coase's result across a wide range of legal issues and, in contrast to economists, who were preoccupied with the efficiency predication of Coase's result, tended to focus on Coase's invariance …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Evolution From Liberal To Reactionary In Rule 10b-5 Actions, Charles W. Murdock

Charles W. Murdock

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The first trilogy was a liberal one, arguably overextending the scope of Rule 10b-5. This was followed by a conservative trilogy which put a brake on such extension, …

Costs Of Codification, Dru Stevenson

Dru Stevenson

Between the Civil War and World War II, every state and the federal government shifted toward codified versions of their statutes. Academia has so far ignored the systemic effects of this dramatic change. For example, the consensus view in the academic literature about rules and standards has been that precise rules present higher enactment costs for legislatures than would general standards, while vague standards present higher information costs for courts and citizens than do rules. Systematic codification – featuring hierarchical format and numbering, topical arrangement, and cross-references – inverts this relationship, lowering transaction costs for legislatures and increasing information costs …

Restoring The Natural Law: Copyright As Labor And Possession, Alfred C. Yen

Alfred C. Yen

In this Article, Professor Yen explores the problems associated with viewing copyright solely as a tool for achieving economic efficiency and advocates for the restoration of natural law to copyright jurisprudence. The Article demonstrates that economics has not been solely responsible for copyright’s development and basic structure, but has rather developed along lines suggested by neutral law, despite modern copyright jurisprudence. The Article considers the consequences of extinguishing copyright’s natural law facets in favor of the blind pursuit of efficiency and concludes by exploring the implications of restoring natural law thinking to copyright jurisprudence.

The Marginalist Revolution In Corporate Finance: 1880-1965, Herbert J. Hovenkamp

All Faculty Scholarship

During the late nineteenth and early twentieth centuries fundamental changes in economic thought revolutionized the theory of corporate finance, leading to changes in its legal regulation. The changes were massive, and this branch of financial analysis and law became virtually unrecognizable to those who had practiced it earlier. The source of this revision was the marginalist, or neoclassical, revolution in economic thought. The classical theory had seen corporate finance as an historical, relatively self-executing inquiry based on the classical theory of value and administered by common law courts. By contrast, neoclassical value theory was forward looking and as a result …

Collective Choice, Justin Schwartz

Justin Schwartz

This short nontechnical article reviews the Arrow Impossibility Theorem and its implications for rational democratic decisionmaking. In the 1950s, economist Kenneth J. Arrow proved that no method for producing a unique social choice involving at least three choices and three actors could satisfy four seemingly obvious constraints that are practically constitutive of democratic decisionmaking. Any such method must violate such a constraint and risks leading to disturbingly irrational results such and Condorcet cycling. I explain the theorem in plain, nonmathematical language, and discuss the history, range, and prospects of avoiding what seems like a fundamental theoretical challenge to the possibility …

Tracking Berle's Footsteps: The Trail Of The Modern Corporation's Law Chapter, William W. Bratton, Michael L. Wachter

All Faculty Scholarship

No abstract provided.

The Law Of Vertical Integration And The Business Firm: 1880-1960, Herbert J. Hovenkamp

All Faculty Scholarship

Vertical integration occurs when a firm does something for itself that it could otherwise procure on the market. For example, a manufacturer that opens its own stores is said to be vertically integrated into distribution. One irony of history is that both classical political economy and neoclassicism saw vertical integration and vertical contractual arrangements as much less threatening to competition than cartels or other horizontal arrangements. Nevertheless, vertical integration has produced by far the greater amount of legislation at both federal and state levels and has motivated many more political action groups. Two things explain this phenomenon. First, while economists …

Neo-Brandeisianism And The New Deal: Adolf A. Berle, Jr., William O. Douglas, And The Problem Of Corporate Finance In The 1930s, Jessica Wang

Seattle University Law Review

This essay revisits Adolf A. Berle, Jr. and The Modern Corporation and Private Property by focusing on the triangle of Berle, Louis D. Brandeis, and William O. Douglas in order to examine some of the underlying assumptions about law, economics, and the nature of modern society behind securities regulation and corporate finance in the 1930s. I explore Douglas and Berle’s academic and political relationship, the conceptual underpinnings of Brandeis, Berle, and Douglas’s critiques of modern finance, and the ways in which the two younger men—Berle and Douglas—ultimately departed from their role model, Brandeis.

United States Competition Policy In Crisis: 1890-1955, Herbert J. Hovenkamp

All Faculty Scholarship

The development of marginalist, or neoclassical, economics led to a fifty-year long crisis in competition theory. Given an industrial structure with sufficient fixed costs, competition always became "ruinous," forcing firms to cut prices to marginal cost without sufficient revenue remaining to pay off investment. Early neoclassicists such as Alfred Marshall were not able to solve this problem, and as a result many economists were hostile toward the antitrust laws in the early decades of the twentieth century. The ruinous competition debate came to an abrupt end in the early 1930's, when Joan Robinson and particularly Edward Chamberlin developed models that …

Neoclassicism And The Separation Of Ownership And Control, Herbert J. Hovenkamp

All Faculty Scholarship

"Separation of ownership and control" is a phrase whose history will forever be associated with Adolf A. Berle and Gardiner C. Means' The Modern Corporation and Private Property (1932), as well as with Institutionalist economics, Legal Realism, and the New Deal. Within that milieu the large publicly held business corporation became identified with excessive managerial power at the expense of stockholders, social irresponsibility, and internal inefficiency. Neoclassical economists both then and ever since have generally been critical, both of the historical facts that Berle and Means purported to describe and of the conclusions that they drew. In fact, however, within …

Behavioral Economic Issues In American & Islamic Marriage & Divorce Law, Ryan M. Riegg

Ryan M. Riegg

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

Predatory Structured Finance, Christopher L. Peterson

ExpressO

Predatory lending is a real, pervasive, and destructive problem as demonstrated by record settlements, jury awards, media exposes, and a large body of empirical scholarship. Currently the national debate over predatory mortgage lending is shifting to the controversial question of who should bear liability for predatory lending practices. In today’s subprime mortgage market, originators and brokers quickly assign home loans through a complex and opaque series of transactions involving as many as a dozen different strategically organized companies. Loans are typically transferred into large pools, and then income from those loans is “structured” to appeal to different types of investors. …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

The (Intellectual Property Law &) Economics Of Innocent Fraud: The Ip & Development Debate, Peter Matthew Beattie

ExpressO

This note/essay examines the evidence on the effect of stronger IP laws introduced during the process of international IP law harmonization initiated by the TRIPS agreement, on the economic development of developing countries. It has been argued by proponents of harmonization that stronger IP laws will provide a needed boost to the economic development of developing (and even least-developed) countries. Critics of harmonization have argued that stronger IP laws will have the opposite effect. What has been largely overlooked in this debate is the strength of the evidentiary foundation upon which the arguments of both sides depend. Many of the …

Corporate Form And Substantive Consolidation, William H. Widen

ExpressO

This Article reformulates substantive consolidation doctrine in light of modern financing techniques. Building upon the author's research showing the prevalence of substantive consolidation in large public bankruptcies, it offers an economic account (based on Coase's theory of firm size) to explain why we should expect that the circumstances giving rise to substantive consolidation should be common (rather than rare as suggested by the rhetoric of case law). Extending the asset partitioning theory developed by Professors Hannsmann and Kraakman, it offers a model for looking at the corporate form within corporate groups, particularly in the insolvency context. The recent Third Circuit …

Exploring The Source Of Transatlantic Antitrust Divergence, Alan J. Devlin

ExpressO

This paper seeks to explore the sources of substantive divergence between the antitrust regimes of the U.S. and EC and to present a framework upon which harmonization could potentially be achieved. While the rise of the Chicago School and post-Chicago theory have merged to ensure a central role for economics in dictating antitrust enforcement in the United States, no such clear standard has emerged in Europe. The consequences for firms operating on a transatlantic basis are potentially severe, as they have to formulate different business strategies depending on which jurisdiction they operate in. An assessment of EC law demonstrates an …

Regulatory Reform: The New Lochnerism?, David M. Driesen

ExpressO

This article explores the question of whether contemporary regulatory reformers’ attitudes toward government regulation have anything in common with those of the Lochner-era Court. It finds that both groups tend to favor value neutral law guided by cost-benefit analysis over legislative value choices. Their skepticism toward redistributive legislation reflects shared beliefs that regulation often proves counterproductive in terms of its own objectives, fails demanding tests for rationality, and violates the natural order. This parallelism raises fresh questions about claims of neutrality and heightened rationality that serve as important justifications modern regulatory reform.