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Articles 1 - 15 of 15
Full-Text Articles in Law
Controlling Externalities: Ownership Structure And Cross-Firm Externalities, Dhammika Dharmapala, Vikramaditya S. Khanna
Controlling Externalities: Ownership Structure And Cross-Firm Externalities, Dhammika Dharmapala, Vikramaditya S. Khanna
Law & Economics Working Papers
In recent years, debates over the social purpose of corporations have taken center stage amidst rising concern about externalities (such as those associated with climate change and harmful speech) generated by firms. A key motivation is the claim that government regulation and liability regimes appear not to be functioning sufficiently well to force firms to internalize these externalities. There is thus rising interest in exploring alternative mechanisms. In particular, a rapidly growing body of scholarship argues that index funds increasingly approximate diversified “universal owners” with incentives to maximize portfolio value (and thus to internalize cross-firm externalities). However, much of this …
Rationing Criminal Justice, Richard A. Bierschbach, Stephanos Bibas
Rationing Criminal Justice, Richard A. Bierschbach, Stephanos Bibas
Michigan Law Review
Of the many diagnoses of American criminal justice’s ills, few focus on externalities. Yet American criminal justice systematically overpunishes in large part because few mechanisms exist to force consideration of the full social costs of criminal justice interventions. Actors often lack good information or incentives to minimize the harms they impose. Part of the problem is structural: criminal justice is fragmented vertically among governments, horizontally among agencies, and individually among self-interested actors. Part is a matter of focus: doctrinally and pragmatically, actors overwhelmingly view each case as an isolated, short-term transaction to the exclusion of broader, long-term, and aggregate effects. …
In Praise Of (Some) Ex Post Regulation: A Response To Professor Galle, Kyle D. Logue
In Praise Of (Some) Ex Post Regulation: A Response To Professor Galle, Kyle D. Logue
Articles
According to modern law-and-economics (“L&E”) orthodoxy, the primary—maybe even the only—legitimate justification for government regulation is to correct a market failure. This conclusion is based on two key assumptions. First, when markets are functioning reasonably well, they are better at achieving efficiency than the government is. Second, most markets function reasonably well most of the time. Although there is probably evidence to support these assumptions (for example, the relative prosperity of market-based economies in comparison with the relative poverty of centrally planned economies), both assumptions are usually taken as articles of faith by mainstream L&E scholars. This is why scholarly …
The Global Architecture Of Financial Regulatory Taxes, Carlo Garbarino, Giulio Allevato
The Global Architecture Of Financial Regulatory Taxes, Carlo Garbarino, Giulio Allevato
Michigan Journal of International Law
This Article endeavors to broaden the analysis of available policy tools to address the problems created by financial crises and discusses how, in addition to direct regulation, certain tax measures having a regulatory nature may operate to address the so-called “negative externalities” often associated with those crises. There is a negative externality when an economic agent making a decision does not pay the full cost of the decision’s consequences. In such cases, the cost to society as a whole is greater than the cost borne by the individuals creating the economic impact. In practice, negative externalities result in market inefficiencies …
Our Not-So-Great Depression, Craig Green
Our Not-So-Great Depression, Craig Green
Michigan Law Review
A Failure of Capitalism by Richard Posner is not a great book, and it does not pretend to be one. Posner summarizes the economic crisis of 2008-09 and considers proposals to reduce current suffering and avoid future recurrence (p. xvi). But when the book's final edits were made in February 2009, it was still too soon for authoritative solutions or full accounts of what had happened. Instead, Posner wrote a conspicuously contemporary-and thus incomplete-description of the crisis as it looked to him at the time (p. xvii). Now one year later, readers may need a reminder about the value of …
The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols
The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols
Articles
American nonprofit organizations receive favorable tax treatment, including tax exemptions and tax-deductibility of contributions, in return for their devotion to charitable purposes and restrictions not to distribute profits. Recent efforts to extend some or all of these tax benefits to for-profit companies making social investments, including the creation of the new hybrid nonprofit/for-profit company form known as the Low-Profit Limited Liability Company, threaten to undermine the vitality of the nonprofit sector and the integrity of the tax system. Reform advocates maintain that the ability to compensate executives based on performance and to distribute profits when attractive investment opportunities are scarce …
The Last Best Hope For Progressivity In Tax, E. J. Mccaffery, James R. Hines Jr.
The Last Best Hope For Progressivity In Tax, E. J. Mccaffery, James R. Hines Jr.
Articles
We argue that a spending tax, as opposed to an income or wage tax, is the “last best hope” for a return to significantly more progressive marginal tax rates than obtain today. The simple explanation for this central claim looks to incentive effects, especially for “rich people,” as both economists and commentators are inclined to focus. High marginal tax rates under an income tax fall on and hence deter the socially productive activities of work and savings. High marginal rates under a wage tax fall on and hence deter the socially productive activity of work alone. But high marginal rates …
Private Production Of Public Goods: Liability For Unrequested Benefits, Ariel Porat
Private Production Of Public Goods: Liability For Unrequested Benefits, Ariel Porat
Michigan Law Review
This Article explores why the law treats negative externalities (harms) and positive externalities (benefits) differently. Ideally, from an economic perspective, both negative and positive externalities should be internalized by those who produce them, for with full internalization, injurers and benefactors alike would behave efficiently. In actuality, however, whereas the law requires that injurers bear the harms they create (or wrongfully create), benefactors are seldom entitled to recover for benefits they voluntarily confer on recipients without the latter's consent ( "unrequested benefits"). One aim of this Article is to explore the puzzle of the law's differing treatment of negative and positive …
Information Asymmetries And The Rights To Exclude, Lior Jacob Strahilevitz
Information Asymmetries And The Rights To Exclude, Lior Jacob Strahilevitz
Michigan Law Review
The American law generally regards the "bundle of rights" as property's dominant metaphor. On this conception of property, ownership empowers an individual to control a particular resource in any number of ways. For example, he may use it, transfer it, exclude others from it, divide it, and perhaps even destroy it. The various rights in the bundle, however, are not equal in terms of importance. To the contrary, American courts and commentators have deemed the "right to exclude" foremost among the property rights, with the Supreme Court characterizing it as the "hallmark of a protected property interest" and leading property …
The Role Of Nonprofits In The Production Of Boilerplate, Kevin E. Davis
The Role Of Nonprofits In The Production Of Boilerplate, Kevin E. Davis
Michigan Law Review
Drafting contracts-by which I really mean the documents that embody contracts-requires investments of time, experience, and ingenuity. Those investments may yield significant returns because the quality of contractual terms can be an important determinant of the gains that parties realize from trade. This in tum suggests that, from an economic perspective, it is important to understand how contracts are produced. It seems particularly important to examine the production of contracts or individual contractual terms that are widely used-that is to say, "boilerplate." In a market oriented society, boilerplate is the predominant feature of the network of legal obligations that provides …
Boilerplate And Economic Power In Auto Manufacturing Contracts, Omri Ben-Shahar, James J. White
Boilerplate And Economic Power In Auto Manufacturing Contracts, Omri Ben-Shahar, James J. White
Articles
This Article is structured as follows. Part I compares the terms and conditions in the purchase orders of the Original Equipment Manufacturers (OEMs) and highlights important differences in the substance of these boilerplate provisions. It argues that these differences cannot be easily reconciled with the prediction that sophisticated parties draft the most efficient boilerplate terms. Part II examines how these forms are drafted, how their terms are negotiated, and how the OEMs guard their terms from erosion. It provides some insight on how tailoring occurs and how the internal organization of a party to a deal affects the terms that …
"Externalities And Other Parasites." Review Of The Strategic Constitution, By R. D. Cooter, And Constitutional Democracy, By D. C. Mueller, Donald J. Herzog
"Externalities And Other Parasites." Review Of The Strategic Constitution, By R. D. Cooter, And Constitutional Democracy, By D. C. Mueller, Donald J. Herzog
Reviews
I shall argue that despite the occasional and charmingly belligerent pose struck by some economists of offering a superior alternative to conventional moral and political theory, economics is covertly parasitic on that theory. I begin in Part I by describing some of the core features of economic analysis and by disclosing my own sentiments about that analysis. The description will be terse, the disclosure partial. My aim is to identify, but certainly not pretend to resolve, some thorny methodological issues that surface in these two books. As for the disclosure, well, even if full disclosure were possible, which I doubt, …
The Costs Of Cigarettes: The Economic Case For Ex Post Incentive-Based Regulation, Jon D. Hanson, Kyle D. Logue
The Costs Of Cigarettes: The Economic Case For Ex Post Incentive-Based Regulation, Jon D. Hanson, Kyle D. Logue
Articles
Cigarette smoking causes over 420,000 deaths annually in the United States, roughly twenty percent of all U.S. deaths, making cigarettes the single greatest preventable cause of death in this country. Indeed, tobacco kills more people every year than alcohol, illicit drugs, automobile accidents, violent crime, and AIDS combined. And not only are cigarettes deadly to smokers; they kill nonsmokers as well. According to a recent report from the Environmental Protection Agency (EPA), the "sidestream" or "passive" smoke from cigarettes - so-called environmental tobacco smoke (ETS) - is responsible annually for approximately 3000 lung cancer deaths, between 150,000 and 300,000 lower …
Risk And Design, James E. Krier
Risk And Design, James E. Krier
Articles
Risk springs from uncertainty,' uncertainty invites error, and, since error can be costly, we would prefer to avoid it (provided, of course, that avoidance is not more costly yet). While there is much in the Noll and Krier article2 about judgmental error under conditions of risk and uncertainty, there is little about ways to avoid it. So avoidance-more accurately, minimization-of error costs is the topic I want to address very briefly and partially here.
The Problem Of Social Cost Revisited, Donald H. Regan
The Problem Of Social Cost Revisited, Donald H. Regan
Articles
SOME years ago, in a paper entitled "The Problem of Social Cost," Professor Ronald Coase asserted and argued for a proposition which has since acquired the convenient sobriquet "the Coase Theorem." The proposition is: That in a world of perfect competition, perfect information, and zero transaction costs, the allocation of resources in the economy will be efficient and will be unaffected by legal rules regarding the initial impact of costs resulting from externalities. Note that there are two claims being made, which it is well to separate for purposes of discussion. The first claim is that, under the conditions described, …