Law Commons^™

Can Micropolitan Areas Bridge The Urban/Rural Divide?, Sheila Foster, Clayton P. Gillette

Georgetown Law Faculty Publications and Other Works

There exists a well-known and significant divide between urban and rural areas in the United States. The divide has been documented along multiple dimensions – social, economic, and political – and is seen as a detrimental characteristic of our national identity and capacity for both economic development and civil political discourse. In this Article, we explore a subset of the urban/rural divide and propose a mechanism for reducing its economic and political effects within that limited realm. Specifically, we focus on the subset of rural areas that lie within what the Office of Management and Budget defines as micropolitan areas. …

A Suggested Revision Of The 2020 Vertical Merger Guidelines (July 2021), Steven C. Salop

Georgetown Law Faculty Publications and Other Works

The DOJ/ FTC Vertical Merger Guidelines (VMGs) were adopted by the FTC in June 2020 by a party-line 3-2 party line over the dissent of the Acting Chair. One might expect that the VMGs will be withdrawn and/or revised, now that there is a Democratic majority. Revision is appropriate because the VMGs are both incomplete and overly permissible. This Suggested Revision can aid that process.

When Vertical Is Horizontal: How Vertical Mergers Lead To Increases In “Effective Concentration”, Serge Moresi, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

This article explains the inherent loss of an indirect competitor and reduction in competition when a vertical merger raises input foreclosure concerns. We then calculate a measure of the effective increase in the HHI measure of concentration for the downstream market, and we refer to this “proxy” measure as the “dHHI.” We derive the dHHI measure by comparing the pricing incentives and associated upward pricing pressure (“UPP”) involved in two alternative types of acquisitions: (i) vertical mergers that raise unilateral input foreclosure concerns (and the associated vertical GUPPI measures), and (ii) horizontal acquisitions of partial ownership interests among …

Post-Crisis Economic And Social Policy: Some Thoughts On Structural Reforms 2.0., Philomila Tsoukala

Georgetown Law Faculty Publications and Other Works

Managing the euro crisis has been a process of institutional transformation for the EU. The European Semester has emerged as a powerful tool for economic policy coordination between the Member States. Beyond the new enforcement tools that the Semester affords the Commission and Council in case of non-compliance with country-specific recommendations, the management of the crisis has given the Commission experience in structural reforms. The Commission now regularly uses this experience in formulating its yearly country-specific recommendations to Member States. Far from a stalwart of untethered neoliberalism, the Commission has been fashioning itself as the manager with a human face, …

Courts And Sovereigns In The Pari Passu Goldmines, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

U.S. federal court rulings against Argentina since 2012 have turned the pari passu clause in sovereign bond contracts into the most promising debt collection tool against immune governments since the days of gunboat diplomacy. The large literature on pari passu (“equal step” in Latin) assumes that the clause had not been used for enforcement before the late 1990s, and that it was first construed by a Belgian court in a case against Peru in the year 2000. The Belgian decision was criticized for wrongly concluding that pari passu promised ratable payment to all holders of Peru’s external debt. A decade …

Cguppi: Scoring Incentives To Engage In Parallel Accommodating Conduct, Serge Moresi, David Reitman, Steven C. Salop, Yianis Sarafidis

Georgetown Law Faculty Publications and Other Works

We propose an index for scoring coordination incentives, which we call the “coordination GUPPI” or cGUPPI. While the cGUPPI can be applied to a wide range of coordinated effects concerns, it is particularly relevant for gauging concerns of parallel accommodating conduct (PAC), a concept that received due prominence in the 2010 U.S. Horizontal Merger Guidelines. PAC is a type of coordinated conduct whereby a firm raises price with the expectation—but without any prior agreement—that one or more other firms will follow and match the price increase. The cGUPPI is the highest uniform price increase that all the would-be coordinating firms …

Inference Under Stability Of Risk Preferences, Levon Barseghyan, Francesca Molinari, Joshua C. Teitelbaum

Georgetown Law Faculty Publications and Other Works

We leverage the assumption that preferences are stable across contexts to partially identify and conduct inference on the parameters of a structural model of risky choice. Working with data on households' deductible choices across three lines of insurance coverage and a model that nests expected utility theory plus a range of non-expected utility models, we perform a revealed preference analysis that yields household-specific bounds on the model parameters. We then impose stability and other structural assumptions to tighten the bounds, and we explore what we can learn about households' risk preferences from the intervals defined by the bounds. We further …

The Federal Reserve And A Cascade Of Failures: Inequality, Cognitive Narrowness And Financial Network Theory, Emma Coleman Jordan

Georgetown Law Faculty Publications and Other Works

The recent financial crisis hollowed out the core of American middle-class financial stability. In the wake of the financial crisis, household net worth in the U.S. fell by 24%, for a loss of $16 trillion. Moreover, retirement accounts, the largest class of financial assets, took a steep drop in value, as did house prices, and these two classes of assets alone represent approximately 43% of all household wealth. The losses during the principal crisis years, 2007–2009, were devastating, “erasing almost two decades of accumulated prosperity,” in the words of a 2013 report. By the Federal Reserve. Beyond these direct household …

Antitrust, Competition Policy, And Inequality, Jonathan B. Baker, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

Economic inequality recently has entered the political discourse in a highly visible way. This political impact is not a surprise. As the U.S. economy has begun to recover from the Great Recession since mid-2009, economic growth has effectively been appropriated by those already well off, leaving the median household less well off. The serious economic, political and moral issues raised by inequality can be addressed through a panoply of public policies including competition policy, the focus of this article. The article describes the channels through which market power contributes to inequality, and sets forth a range of possible antitrust policy …

Why Healthy Behavior Is The Hard Choice, Lawrence O. Gostin

Georgetown Law Faculty Publications and Other Works

Our society is structured to encourage unhealthy diets and physically inactive lifestyles, which are key risk factors for chronic diseases including diabetes, heart diseases, and cancers. We are bombarded with advertisements for hyperprocessed foods laden with saturated fat, salt, sugar, and refined carbohydrates, “low-fat” foods often contain high amounts of sugar and salt, and parks and recreation spaces are often inaccessible or unsafe.

Four simple ideas - taxes on unhealthy products, product reformulation, improving the informational environment, and increasing healthy food accessibility - could make healthy behaviors the “default” choice for most consumers. First, taxes on unhealthy products, such as …

Niche Markets And Their Lessons, Cally Jordan

Faculty Papers & Publications

Markets are full of nooks and crannies. Out of the glare of the big economies and their public exchanges, markets specializing by financial product, activity, or industry thrive, often attracting little by way of formal regulatory oversight. But there is another kind of specialized market, one which is geographically and politically determined albeit internationally focused. Luxembourg, Ireland, Dubai, Bahrain, Malaysia, Singapore, Switzerland, among others, these are some of the world’s niche markets.

It is a hard business being a niche market, operating in a competitive and often unforgiving environment, engaging in constant repositioning and facing inherent limitations on growth. Surprisingly, …

Tax, Command -- Or Nudge?: Evaluating The New Regulation, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article compares for the first time the relative economic efficiency of “nudges” and other forms of behaviorally-inspired regulation against more common policy alternatives, such as taxes, subsidies, or traditional quantity regulation. Environmental economists and some legal commentators have dismissed nudge-type interventions out of hand for their failure to match the revenues and informational benefits taxes can provide. Similarly, writers in the law and economics tradition argue that fines are generally superior to non-pecuniary punishments.

Drawing on prior work in the choice-of-instruments literature, and contrary to this popular wisdom, I show that nudges may out-perform fines, other Pigouvian taxes, or …

Against Endowment Theory: Experimental Economics And Legal Scholarship, Gregory Klass, Kathryn Zeiler

Georgetown Law Faculty Publications and Other Works

Endowment theory holds the mere ownership of a thing causes people to assign greater value to it than they otherwise would. The theory entered legal scholarship in the early 1990s and quickly eclipsed other accounts of how ownership affects valuation. Today, appeals to a generic “endowment effect” can be found throughout the legal literature. More recent experimental results, however, suggest that the empirical evidence for endowment theory is weak at best. When the procedures used in laboratory experiments are altered to rule out alternative explanations, the “endowment effect” disappears. This and other recent evidence suggest that mere ownership does not …

A Skeptic’S Case For Sovereign Bankruptcy, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

This essay describes fundamental flaws in the sovereign debt restructuring regime, but questions the prevailing arguments for sovereign bankruptcy. The author concludes that efficient debt outcomes may well come about without bankruptcy, but that a statutory regime is necessary to achieve sovereign autonomy and political legitimacy.

Overview And Operation Of U.S. Financial Sanctions, Including The Example Of Iran, Barry E. Carter, Ryan Farha

Georgetown Law Faculty Publications and Other Works

Financial sanctions are increasingly being used in the mix of international economic sanctions being employed by the United Nations, regional entities, and individual countries, including the United States. These financial sanctions have become more focused and effective as the tools and techniques have improved significantly for tracing and identifying the financial transactions of terrorists, weapons proliferators, human rights violators, drug cartels, and others. These sanctions can not only freeze financial assets and prohibit or limit financial transactions, but they also impede trade by making it difficult to pay for the export or import of goods and services.

In spite of …

Carrots, Sticks, And Salience, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article considers the second-best design of Pigouvian taxes and subsidies in the presence of agents who are imperfectly aware of the instrument. Until very recently, the price instrument literature has assumed perfect rationality, and even the handful of prior attempts to account for “hidden” prices focus mainly on the income tax. I extend these efforts in several directions. First, I show that the best available instrument for correcting negative externalities is often one whose price is partially adjusted upwards -- or, in the case of subsidies, downwards -- to counter-act the neglect of irrational actors. In addition, I argue …

Distinguishing Probability Weighting From Risk Misperceptions In Field Data, Levon Barseghyan, Francesca Molinari, Ted O'Donoghue, Joshua C. Teitelbaum

Georgetown Law Faculty Publications and Other Works

The paper outlines a strategy for distinguishing rank-dependent probability weighting from systematic risk misperceptions in field data. Our strategy relies on singling out a field environment with two key properties: (i) the objects of choice are money lotteries with more than two outcomes and (ii) the ranking of outcomes differs across lotteries. We first present an abstract model of risky choice that elucidates the identification problem and our strategy. The model has numerous applications, including insurance choices and gambling. We then consider the application of insurance deductible choices and illustrate our strategy using simulated data.

Euro Zone Crisis Management And The New Social Europe, Philomila Tsoukala

Georgetown Law Faculty Publications and Other Works

This article analyzes the changes in European governance since the beginning of the euro crisis in relation to the project of constructing Social Europe. The article tracks the incorporation of a structural reform agenda originally designed as bailout conditionality for countries on the verge of default into EU economic governance as a strategy for growth. Beyond the contestable grounds of this reform agenda, its adoption by the EU in the mode of crisis management poses serious questions of legitimacy. The new enhanced economic coordination process includes obligatory guidelines in domains under the legislative competence of Member States, such as labor …

Narratives Of The European Crisis And The Future Of (Social) Europe, Philomila Tsoukala

Georgetown Law Faculty Publications and Other Works

This article examines two distinct types of narratives prevalent in academic writing and popular press regarding the causes of the crisis in Europe. The first type, a morality tale, attributes the crisis to profligate southern states that refused to abide by the strictures of the Stability and Growth Pact. The second type is focused on the structural reasons for the crisis, emphasizing the nature of the European Union as a non-optimal currency area, and the euro as a factor in the creation of trade imbalances and competitiveness problems within the euro zone. Each type of narrative suggests a different type …

Contract Hope And Sovereign Redemption, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

Sovereign immunity has served as a partial substitute for bankruptcy protection, but it has encouraged a minority of creditors to pursue unorthodox legal remedies with spillover effects far beyond the debtor-creditor relationship. The attempt to enforce Argentina’s pari passu clause in New York is an example of such a remedy, which relies primarily on collateral damage to other creditors and market infrastructure to obtain settlement from a debtor that would not pay. The District Court decision, now on appeal before the Second Circuit, may not make holding out more attractive in future restructurings – but it would make participation less …

The Wonder-Clause, Anna Gelpern, Mitu Gulati

Georgetown Law Faculty Publications and Other Works

The Greek debt crisis prompted EU officials to embark on a radical reconstruction of the European sovereign debt markets. Prominently featured in this reconstruction was a set of contract provisions called Collective Action Clauses, or CACs. CACs are supposed to help governments and private creditors to renegotiate unsustainable debt contracts, and obviate the need for EU bailouts. But European sovereign debt contacts were already amenable to restructuring; adding CACs could make it harder. Why, then, promote CACs at all, and cast them in such a central role in the market reform initiative? Using interviews with participants in the initiative and …

Banks And Governments: An Arial View, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

Financial systems and public treasuries are communicating vessels: strength or weakness in one flows to the other, and back. This chapter considers the implications of this insight using case studies from Europe, Asia, and Latin America. The connection is not unique to Europe, although it does not always result in feedback effects, or the ‘doom loop’ that has made headlines since 2010. Events now known as banking or government debt crises often have had elements of both, and could have gone either way. Policy and political choices determined their path. In all cases, governments were as indispensable for resolving banking …

The Nature Of Risk Preferences: Evidence From Insurance Choices, Levon Barseghyan, Francesca Molinari, Joshua C. Teitelbaum, Ted O'Donoghue

Georgetown Law Faculty Publications and Other Works

The authors use data on insurance deductible choices to estimate a structural model of risky choice that incorporates "standard" risk aversion (diminishing marginal utility for wealth) and probability distortions. They find that probability distortions--characterized by substantial overweighting of small probabilities and only mild insensitivity to probability changes--play an important role in explaining the aversion to risk manifested in deductible choices. This finding is robust to allowing for observed and unobserved heterogeneity in preferences. They demonstrate that neither Kőszegi-Rabin loss aversion alone nor Gul disappointment aversion alone can explain our estimated probability distortions, signifying a key role for probability weighting.

Interpretation And Construction In Altering Rules, Gregory Klass

Georgetown Law Faculty Publications and Other Works

This essay is a response to Ian Ayres's, "Regulating Opt-Out: An Economic Theory of Altering Rules," 121 Yale L.J. 2032 (2012). Ayres identifies an important question: How does the law decide when parties have opted-out of a contractual default? Unfortunately, his article tells only half of the story about such altering rules. Ayres cares about rules designed to instruct parties on how to get the terms that they want. By focusing on such rules he ignores altering rules designed instead to interpret the nonlegal meaning of the parties' acts or agreement. This limited vision is characteristic of economic approaches to …

Poverty In America: Why Can't We End It?, Peter B. Edelman

Georgetown Law Faculty Publications and Other Works

The lowest percentage in poverty since we started counting was 11.1 percent in 1973. The rate climbed as high as 15.2 percent in 1983. In 2000, after a spurt of prosperity, it went back down to 11.3 percent, and yet 15 million more people are poor today.

At the same time, we have done a lot that works. From Social Security to food stamps to the earned-income tax credit and on and on, we have enacted programs that now keep 40 million people out of poverty. Poverty would be nearly double what it is now without these measures, according to …

International Financial Standards And The Explanatory Force Of Lex Mercatoria, Cally Jordan

Faculty Papers & Publications

The global financial crisis has cast a strong light on some hitherto obscure corners of the financial world, provoking an outpouring of calls for concerted international action. “Hard law” having disappointed, can “soft law”, in the form of international financial standards, substitute for traditional national legislation. This article examines some of the difficulties associated with the “international standards as soft law” discourse.

First of all, conceptual problems in the “soft law” discourse itself reveal profoundly different patterns of legal thought cutting across national boundaries, resulting in different understandings of international financial standards. Secondly, recent experience, over the past decade, with …

Hard, Soft, And Embedded: Implementing Principles On Promoting Responsible Sovereign Lending And Borrowing, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

This paper, prepared for UNCTAD’s initiative on responsible sovereign lending and borrowing, considers concrete strategies for implementing the Principles. It draws on studies in soft law and new governance, and on the recent experience in promoting best practices in international finance, including project finance, extraction revenue management, foreign aid, sovereign investment, and sovereign borrowing in the capital markets. It recommends maintaining the current non-binding character of the Principles, while embedding implementation in multi-stakeholder arrangements for ongoing disclosure, assessment, interpretation, and adaptation. This strategy has the best chance of changing behavior in sovereign lending and borrowing by creating constituencies for implementation …

Marketing Pharmaceuticals: A Constitutional Right To Sell Prescriber-Identified Data?, Lawrence O. Gostin

Georgetown Law Faculty Publications and Other Works

Pharmaceutical companies have strong economic interests in influencing physician-prescribing behaviors. They advertise direct-to-the-consumer and to the physician. Beyond general marketing, manufacturers promote their drugs to physicians through “detailing”—sales representatives (“detailers”) visiting medical offices to persuade physicians to prescribe their products.

By law, pharmacies receive specific information with every prescription, including the physician’s name, the drug, and the dose. Pharmacies sell these records to Prescription Drug Intermediaries (data miners), who use advanced computing to analyze prescriber-identified information (which physicians prescribe what drugs, in what dose, and with what prescribing patterns). Data miners, in turn, lease sophisticated reports to pharmaceutical companies to …

Cadbury Twenty Years On, Cally Jordan

Faculty Papers & Publications

This year marks the twentieth anniversary of the publication of the Cadbury Report, one of the most significant events in modern corporate governance. The Cadbury Report, and its simple two page 'best practices', triggered a global debate on corporate governance. 'Cadbury' codes of corporate governance spread like wildfire. The legacy of the Cadbury Report lives on in the UK with no diminution in the appeal of its voluntary code/comply or explain approach to corporate governance. But there are several clouds looming on the horizon. Comply or explain and voluntary codes of corporate governance appear to have run their course elsewhere …

Behavioral Approaches To Corporate Law, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This chapter reviews the challenges associated with developing a plausible theory of why psychological "heuristics and biases" might persist in high-stakes business settings. Specific attention is given to issues of loyalty on corporate boards, behavioral finance, and corporate cultures.