Law Commons^™

Liability Rules For Constitutional Rights: The Case Of Mass Detentions, Eugene Kontorovich

ExpressO

Constitutional law assumes that rights should always be protected by property rules – that is, the government can only take them with the individual’s consent. This Article extends to constitutional law the insights of Calabresi and Melamed’s famous article on property and liability rules. Whether rights should be protected by property rules or liability rules depends on the transaction costs of negotiating a transfer of rights. As transaction costs rise, liability rules become more attractive.

This Article shows that liability rules can have an important role in constitutional law. Using mass detentions in national security emergencies as a case study, …

Norms, Rationality, And Communication: A Reputation Theory Of Social Norms, Andreas Engert

ExpressO

Does the discovery of "law and social norms" necessitate breaking with the rational choice paradigm? In this paper, I argue for an answer in the negative. To this end, I propose a reputation theory of social norms, which differs from other proposals in two principal respects: First, it explains norms without any assumption of behavioral constraints (like habit or conscience) and normative motivations (like altruism or aspiration to esteem). Second, it does even without any assumption regarding model-exogenous, private information that most other reputation and signaling explanations use (such as the discount rate in Eric Posner's signaling model).

Instead, reputation …

Real Options In Law: (Possibly, Frivolous) Litigation And Other Applications, Peter H. Huang

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This Article advances the thesis that real options are not only ubiquitous in law, but also provide novel insights about legal decision making, doctrines and rules. An introduction provides a brief a primer about financial options, real options, and real options in law. Part I of this Article develops implications of the fact that every lawsuit contains a sequence of real options for the plaintiff to unilaterally abandon that lawsuit. Part II of this Article appraises the limitations of game-theoretic analysis of the abandonment options embedded in litigation and some responses to such limitations. Part III of this Article illustrates …

No Free Lunch: How Settlement Can Reduce The Legal System's Ability To Induce Efficient Behavior, Abraham Lee Wickelgren

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While there is widespread agreement that it is better for cases to settle than go to trial, the arguments in favor of settlement have typically overlooked how settlement affects one of the most important functions of the legal system: influencing the behavior that gives rise to lawsuits. This essay argues that, in some cases, settlement can impair the ability of the legal system to deter harmful behavior without chilling desirable behavior. Where it exists, this effect is a fundamental property of settlement in that there is no way to change other legal rules to eliminate it. Because settlements also have …

Affirmative Action: More Efficient Than Color Blindness, Abraham Lee Wickelgren

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One of the most compelling reasons against affirmative action is the principle of color blindness, that is, the idea that race is an irrelevant characteristic that should not affect higher education admissions or hiring decisions. Despite its intuitive appeal, this paper shows that adherence to this principle impedes economic efficiency when there has been past discrimination based on color. Past discrimination creates inefficiencies in the economy that persist across generations. Because of this persistence, race is not an irrelevant characteristic for firms and universities looking to hire or admit the best candidates. Affirmative action, not color-blindness, is necessary to reduce …

The Rational Exuberance Of Structuring Venture Capital Startups, Victor Fleischer

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This Article takes the bursting of the dot com bubble as an opportunity to reevaluate the tax structure of venture capital startups. By organizing startups as corporations rather than as partnerships, investors and entrepreneurs seem to leave money on the table by failing to fully use tax losses -- especially since the vast majority of startups fail. Conventional wisdom attributes the lack of attention paid to losses to a "gambler's mentality" or optimism bias. I argue here that the use of the corporate form is, in fact, rational, or at least that there is a method to the madness.

I …

Adverse Selection And Moral Hazard In Forum Shopping: Conflicts Of Law As Spontaneous Order, Nita Ghei, Francesco Parisi

ExpressO

In a world with multiple, overlapping jurisdictions, any given litigation could be pursued in more than one forum. Different laws can yield different outcomes. This leads to parties selecting a forum percieved as favorable to file suit. This practice, also known as forum shopping, has been much criticized, and various reforms to the law of conflicts of law have been proposed as a way to reduce this practice. The article examines the inefficiencies associated with forum selection, and the alleged shortcomings in conflicts law as it currently exists. We argue that forum selection cannot be eliminated in a world with …

Monopoly Power In The Electronic Information Industry: Why, And So What?, Curt A. Hessler

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This "law and economics" article diagnoses why monopoly power infects so many markets in the electronic media, communications, and information technology industries (collectively the "Industry"),and recommends changes to prevailing intellectual property and antitrust doctrines to remedy this problem.

The analysis focuses on a single "norm" -- the maximization of economic value, as defined by standard welfare economic theory. Identifying three distinct functions that operate throughout this otherwise diverse Industry -- authoring, publishing, and distribution -- the article notes that two economic peculiarities characterize most Industry markets: the technical feasibility of "non-rivalrous use" of digitized information products, and the frequent "creative …

Bounded Rationality, The Doctrine Of Impracticability, And The Governance Of Relational Contracts, Donald J. Smythe

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This article uses a behavioral economics approach to analyze the effects of the doctrine of impracticability on “relational” contracts -- long-term contractual agreements that are typically adapted to changed circumstances and unforeseen contingencies as they arise. In contrast to conventional law and economics studies, the article concludes that the impracticability doctrine has the potential to improve the efficiency and productivity of a wide range of long-term contractual agreements, and offers normative guidelines as to how the doctrine should be applied. The article also examines and rejects various philosophical objections to the impracticability doctrine, such as the arguments that it interferes …