Law Commons^™

Thinking To Be Paid Versus Being Paid To Think, Merritt B. Fox

Faculty Scholarship

In the first chapter of The Economic Structure of Corporate Law, Frank Easterbrook and Daniel Fischel make an arresting statement:

... [P]eople who are backing their beliefs with cash are correct; they have every reason to avoid mistakes, while critics (be they academics or regulators) are rewarded for novel rather than accurate beliefs. Market professionals who estimate these things wrongly suffer directly; academics and regulators who estimate wrongly do not pay a similar penalty. Persons who wager with their own money may be wrong, but they are less likely to be wrong than are academics and regulators, who are wagering …

Recovery For Economic Loss Following The Exxon Valdez Oil Spill, Victor P. Goldberg

Faculty Scholarship

The physical cleanup following one of the worst oil spills in history, that of the Exxon Valdez, is done. The legal cleanup, however, has barely begun. Over 100 law firms participating in over 200 suits in federal and state courts involving more than 30,000 claims are presently engaged in litigation. Fishermen, cannery workers, fishing lodges, tour boat operators, oil companies whose shipments were delayed, and even California motorists facing higher gasoline prices have filed claims against Exxon and its fellow defendants.

Most claimants face a formidable roadblock, the so-called Robins doctrine. Under Robins Dry Dock & Repair Co. v. Flint …

Contract Renegotiation, Mechanism Design, And The Liquidated Damages Rule, Eric L. Talley

Faculty Scholarship

The common law practice of refusing to enforce contractual penalties has long mystified law and economics scholars. After critiquing the prevailing law and economics analyses of the common law rule, Eric L. Talley reevaluates the penalty doctrine using the game theoretic technique of mechanism design, which facilitates the analysis of multiparty bargaining situations under various assumptions. Using this technique to model the allocational consequences of various enforcement regimes that courts might adopt with respect to stipulated damages clauses, Mr. Talley finds that penalty nonenforcement can increase economic efficiency by discouraging strategic behavior by the parties, thereby inducing more efficient contract …

Solomonic Bargaining: Dividing A Legal Entitlement To Facilitate Coasean Trade, Ian Ayres, Eric Talley

Faculty Scholarship

It is a common argument in law and economics that divided ownership can create or exacerbate strategic behavior. For instance, when several persons own the land designated for a proposed stadium, individual sellers may "hold out" for a disproportionate share of the gains from trade. Alternatively, when building a public library would benefit multiple residents, individual buyers may "free ride" on the willingness of others to pay for its construction. Such transaction costs of collective action fall under a variety of analytic rubrics, including the "tragedy of the commons" and the theory of "public goods." Nonetheless, each example of market …

Decoupling Sales Law From The Acceptance-Rejection Fulcrum, Jody S. Kraus

Faculty Scholarship

The determination of whether the buyer has accepted or rejected goods provides the sales law solution to the problems of allocating burden of proof, assigning duties to salvage goods in failed transactions, and reducing systematic undercompensation. But one doctrine is unlikely to provide the best solution to each of these distinct problems. Decoupling the rules addressing burden of proof, salvage, and undercompensation from the doctrines of acceptance and rejection, and thus from one another, would significantly improve sales law.

This strategy has a distinguished precedent in the history of sales law. Karl Llewellyn based his objection to the doctrine of …

Echoes Of Tomorrow: The Road To Serfdom Revisited, Alex Kozinski, David M. Schizer

Faculty Scholarship

It is now half a century since Hayek published The Road to Serfdom. Much of our population was not even born when he wrote this terse, eloquent work – and a lot has happened since. A lifetime of conflict has raged over the ideas Hayek considered in his slender volume. Unimaginably destructive weapons have been aimed at the world's population centers, menacing the very survival of our species. Even under their shadow, we have seen revolutions reacting against the abuses Hayek identified. Millions have gained their freedom. Walls that seemed permanent came crashing down. We hope they stay down.

Our …