Law Commons^™

Antitrust And Labor Markets: A Reply To Richard Epstein, Eric A. Posner

Coase-Sandor Working Paper Series in Law and Economics

In his article, The Application of Antitrust Law to Labor Markets—Then and Now, Richard Epstein argues that rather than urge courts and regulators to apply antitrust law to labor markets, reformers who care about labor market competition should try to constrain unions. In this reply, I argue that Epstein’s assumptions about labor market structure are contradicted by mountains of empirical evidence. The anticompetitive behavior of employers causes significant harm to social welfare—both in terms of economic output and equity. Antitrust law is a valuable tool for addressing America’s ailing labor markets.

Equalizing The Tax Treatment Of Stock Buybacks And Dividends, Daniel J. Hemel, Gregg D. Polsky

Coase-Sandor Working Paper Series in Law and Economics

his policy brief highlights flaws in the current federal tax treatment of stock buybacks and proposes to address those flaws by equalizing the tax treatment of buybacks and dividends. (We explore the proposal in greater detail in Hemel & Polsky, Taxing Buybacks, 38 Yale J. on Reg. 246 (2021), https://ssrn.com/abstract=3764112.) Stock buybacks allow foreign shareholders to avoid U.S. withholding tax on corporate cash distributions. Stock buybacks also allow U.S. taxable investors to reduce or eliminate shareholder-level tax on corporate cash distributions through a combination of deferral, loss harvesting, and stepped-up basis at death. Our proposal—based on an idea first suggested …

Stigler's Theory Of Economic Regulation After Fifty Years, Sam Peltzman

Coase-Sandor Working Paper Series in Law and Economics

George Stigler’s “The Theory of Economic Regulation” (1971) is a landmark in the economics of regulation. It used simple public choice reasoning to set out the “capture theory” of regulation whereby “… as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.” This article, written for a commemoration of the 1971 article in Public Choice, summarizes the context within which the article appeared and evaluate its long run impact. A central argument is the need to distinguish “acquired” from “designed and operated.” The rule that regulation is produced in response to industry …

Visibility And Indivisibility In Resource Arrangements, Lee Anne Fennell

Coase-Sandor Working Paper Series in Law and Economics

Projects like highways, bridges, pipelines, and wildlife corridors exhibit indivisibilities—we need the whole thing to have anything of value. Many environmental and social goals have a similar all-or-nothing character: staying above or below a certain critical threshold can make all the difference. This essay focuses on the role of visibility in addressing resource dilemmas that have this structure. I examine how two kinds of visibility can help avoid catastrophic consequences and advance desirable ones. The first involves recognizing when an indivisibility is present—that is, appreciating the vulnerability of resources to thresholds and cliff effects before it is too late. The …

Framing Vaccine Mandates: Messenger And Message Effects, Christopher Buccafusco, Daniel Hemel

Coase-Sandor Working Paper Series in Law and Economics

In September 2021, President Biden announced that the Occupational Safety and Health Administration (OSHA) would require all employers with 100 or more employees to ensure that their workers are fully vaccinated against Covid-19 or show a negative test for the virus at least once a week. The policy has been widely characterized in the media as “President Biden’s vaccine mandate,” though it could be described with equal accuracy as “OSHA’s testing mandate” (since OSHA, rather than Biden, officially promulgated the policy, and once-a-week testing and vaccination are both valid compliance options). Some commentators have speculated that reframing the policy as …

Mega-Iras, Mega-401(K)S, And Other Mega-Retirement Accounts: Statement For The Record, Daniel J. Hemel, Steve Rosenthal

Coase-Sandor Working Paper Series in Law and Economics

The Senate Finance Committee’s hearing on July 28, 2021 -- "Building on Bipartisan Retirement Legislation: How Can Congress Help?" -- spotlighted “mega-IRAs”: individual retirement accounts with balances of $5 million or more. An analysis by the Joint Committee on Taxation in advance of the July 28 hearing found that the number of taxpayers with mega-IRAs now exceeds 28,000. The hearing followed a June 2021 report by the nonprofit investigative journalism organization ProPublica, which revealed—based on leaked IRS files—that a handful of high-net-worth individuals had accumulated massive IRA balances. The Senate Finance Committee hearing and the ProPublica report emphasized one way …

Controlling Externalities: Ownership Structure And Cross-Firm Externalities, Dhammika Dharmapala, Vikramaditya S. Khanna

Coase-Sandor Working Paper Series in Law and Economics

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 …

Essential Businesses And Shareholder Value, Aneil Kovvali

Coase-Sandor Working Paper Series in Law and Economics

The COVID-19 crisis has demonstrated that Americans rely on certain for-profit corporations to supply the essentials of everyday life. Even though the government had assumed extraordinary responsibilities for the wellbeing of its citizens for the duration of the crisis, for-profit companies were deemed so essential to social functioning that workers were sent to keep them running despite the risk of infection with a deadly disease. If our society’s capacity to meet basic needs in a crisis is entirely dependent on the capacity of private corporations, it is necessary to critically evaluate the performance of the directors and officers who lead …

The Law Of Restitution For Mistaken Payments: An Economic Analysis, Dhammika Dharmapala, Nuno Garoupa

Coase-Sandor Working Paper Series in Law and Economics

The law of restitution and unjust enrichment has emerged as an important and independent branch of private law globally, but has attracted relatively little economic analysis. The aim of this paper is to develop a general conceptual framework for the economic analysis of the core example of restitution - mistaken payments. We develop a formal model in a parsimonious setting with two buyer-seller pairs, with low (high) transaction costs within (across) pairs. This model generates several novel insights, based on the idea that mistaken payments to strangers impose a “transaction tax” on contracting parties. It sheds new light on distortions …

The Tax Gap's Many Shades Of Gray, Daniel J. Hemel, Janet Holtzblatt, Steve Rosenthal

Coase-Sandor Working Paper Series in Law and Economics

The “tax gap”—the difference between the amount of “true tax” and the amount of tax actually paid—has garnered widespread attention in recent months. Much of the commentary on the subject equates the tax gap with “tax evasion,” a term broadly understood to connote intentional (and potentially criminal) under reporting. This paper cautions against conflating the tax gap with tax evasion. The tax gap includes substantial gray areas where the law is ambiguous and the IRS’s determination of “true tax” is debatable. On top of that, the IRS’s methodology for measuring the tax gap includes upward adjustments that are recommended by …

Promoting Regulatory Prediction, Jonathan S. Masur, Jonathan Remy Nash

Coase-Sandor Working Paper Series in Law and Economics

It is essential for environmental protection that private actors be able to anticipate government regulation. If, for instance, the Biden Administration is planning to tighten regulations of greenhouse gas emissions, it is imperative that private companies anticipate this regulatory change now, not a few years from now after they have constructed even more coal- and gas-fired power plants. Those additional power plants will mean more irreversible greenhouse gases, and these plants can be politically challenging to shutter once built. The point is general to private actors making decisions in the shadow of potential government regulation. Better information about future government …

Taxing Buybacks, Daniel J. Hemel, Gregg D. Polsky

Coase-Sandor Working Paper Series in Law and Economics

A recent rise in the volume of corporate share repurchases has prompted calls for changes to the rules governing stock buybacks. These calls for reform are animated by concerns that buybacks enrich corporate executives at the expense of productive investment. This emerging antibuyback movement includes prominent politicians as well as academics and Republicans as well as Democrats. The primary focus of buyback critics has been on securities-law changes to deter repurchases, with only passing mention of potential tax-law solutions.

This Article critically examines the policy arguments against buybacks and arrives at a mixed verdict. On the one hand, claims that …

Grid Reliability Through Clean Energy, Alexandra Klass, Joshua Macey, Shelley Welton, Hannah Jacobs Wiseman

Coase-Sandor Working Paper Series in Law and Economics

Energy policy is at a critical turning point. To counteract potentially catastrophic climate change, we must rapidly transition to clean energy. At the same time, we must ensure the reliability of an increasingly vulnerable electricity grid. In the wake of recent high-profile power failures, both policymakers and politicians have asserted that there is an inherent tension between the aims of clean energy and grid reliability. But continuing to rely on fossil fuels to avoid system outages will only exacerbate reliability challenges by contributing to increasingly extreme, climate-related weather events. These extremes will disrupt the power supply, with impacts rippling far …

Regulation And Redistribution With Lives In The Balance, Daniel J. Hemel

Coase-Sandor Working Paper Series in Law and Economics

A central question in law and economics is whether non-tax legal rules should be designed solely to maximize efficiency or whether they also should account for concerns about the distribution of income. This question takes on particular importance in the context of cost-benefit analysis. Federal agencies apply cost-benefit analysis when writing regulations that generate multibillion dollar impacts on the US economy and profound effects on millions of Americans’ lives. In the past, agency cost-benefit analyses typically have ignored the income-distributive consequences of those regulations. That may soon change: On his first day in office, President Biden instructed his Office of …

Shining A Light On Dark Patterns, Jamie Luguri, Lior Strahilevitz

Coase-Sandor Working Paper Series in Law and Economics

Dark patterns are user interfaces whose designers knowingly confuse users, make it difficult for users to express their actual preferences, or manipulate users into taking certain actions. They typically exploit cognitive biases and prompt online consumers to purchase goods and services that they do not want or to reveal personal information they would prefer not to disclose. This article provides the first public evidence of the power of dark patterns. It discusses the results of the authors’ two large-scale experiments in which representative samples of American consumers were exposed to dark patterns. In the first study, users exposed to mild …

Probabilistic Disclosures For Corporate And Other Law, Saul Levmore

Coase-Sandor Working Paper Series in Law and Economics

This Article explores the costs and benefits of one subset of continuous and discontinuous rules. These expressions are shown to be distinct from the familiar dichotomy expressed as standards versus rules, but they share the difficulty of dividing the world of law in two. Still, regulatory approaches that focus on discontinuities can often be made more continuous, and vice versa. A speed limit is discontinuous in the sense that one drives above or below (or within) the announced limit. But it is often made more continuous – even with more discontinuities – as when the stated limit is different for …

Property Law For The Ages, Lior Strahilevitz, Michael C. Pollack

Coase-Sandor Working Paper Series in Law and Economics

Within the next forty years, the number of Americans over age sixty-five is projected to nearly double. This seismic demographic shift will necessitate a reckoning in several areas of law and policy, but property law is especially unprepared. Built primarily for young and middle-aged white men, the common law of property has been critiqued for decades for the ways in which it oppresses or simply leaves behind people based on their race, sex, Native heritage, and more. This Article contributes a new focus on property law’s treatment of people based on their advanced age. Burdened by higher relocation costs, more …

Open Access, Interoperability, And The Dtcc's Unexpected Path To Monopoly, Dan Awrey, Joshua Macey

Coase-Sandor Working Paper Series in Law and Economics

In markets with significant scale economies and network effects, scholars and policymakers often tout open access and interoperability requirements as superior to both regulated monopoly and the break-up of dominant firms. In theory, by compelling firms to coordinate to develop common infrastructure, regulators can use these requirements to replicate scale and network economies without leaving markets vulnerable to monopoly power. Examples of successful coordination include the provision of electricity, intermodal transportation, and credit card networks.

This Article analyzes the history of U.S. securities clearinghouses and depositories in order to offer a significant qualification to this received wisdom. This history demonstrates …

Open Access, Interoperability, And The Dtcc's Unexpected Path To Monopoly, Dan Awrey, Joshua Macey

Coase-Sandor Working Paper Series in Law and Economics

In markets with significant scale economies and network effects, scholars and policymakers often tout open access and interoperability requirements as superior to both regulated monopoly and the break-up of dominant firms. In theory, by compelling firms to coordinate to develop common infrastructure, regulators can use these requirements to replicate scale and network economies without leaving markets vulnerable to monopoly power. Examples of successful coordination include the provision of electricity, intermodal transportation, and credit card networks.

This Article analyzes the history of U.S. securities clearinghouses and depositories in order to offer a significant qualification to this received wisdom. This history demonstrates …

Utility Mergers And The Modern (And Future) Power Grid, Joshua Macey

Coase-Sandor Working Paper Series in Law and Economics

Scott Hempling’s Regulating Mergers and Acquisitions of U.S. Electric Utilities provides a comprehensive history of electric utility mergers in the United States since the 1980s. Hempling documents the dramatic consolidation the industry has seen in the past fifty years, and he convincingly argues that electric utility mergers present unique problems for regulators. This Review considers how utility acquisitions (a) allow holding companies to leverage the utilities’ creditworthiness to cross-subsidize non-utility affiliates, and (b) exacerbate informational asymmetries between regulators and utilities. It argues that utility mergers generate negative spillovers outside of the utility’s service territory that have potentially significant environmental consequences, …

Congress’S Commissioners: Former Hill Staffers At The S.E.C. And Other Independent Regulatory Commissions, Brian D. Feinstein, M. Todd Henderson

Coase-Sandor Working Paper Series in Law and Economics

The expression “personnel is policy” has become a truism in Washington. Yet our understanding of how the political branches use appointments to project influence into the administrative state is incomplete. This Article leverages data on almost one-thousand commissioners serving on eleven major independent regulatory commissions to chart, for the first time, Congress’s growing practice of placing former legislative-branch personnel onto these entities. We then theorize that this phenomenon is rooted in fundamental changes in American politics in recent decades— and, in turn, that it has deeply affected administrative law and separation-of- powers dynamics.

Over the past several decades, the number …