Law Commons^™

Changing Places, Changing Taxes: Exploiting Tax Discontinuities, Julie Roin

Coase-Sandor Institute for Law & Economics Research Paper Series

President Trump’s decision to move his official state of residence from high-tax New York to no (income)-tax Florida has brought public attention to an issue that has long troubled scholars, designers and administrators of income tax systems: how the interaction of tax rules deferring the taxation of income and tax rules based on residency allows taxpayers to reduce and even avoid taxation of their deferred income. These discontinuities in tax treatment may lead to excessive migration, as well as reductions in state income tax revenues. This article explains what states would have to do to eliminate these avoidance opportunities. However, …

Outside Advisers Inside Agencies, Brian D. Feinstein, Daniel J. Hemel

Coase-Sandor Institute for Law & Economics Research Paper Series

Advisory committees are a ubiquitous, yet understudied feature of the administrative state. More than seventy-five thousand experts from out-side the federal government serve on over one thousand committees across the Executive Branch, providing agencies with informed “second opinions” to complement their in-house experts in the civil service. By law, these committees must be “fairly balanced in terms of the points of view represented.” Yet little is known about whether advisory committees live up to this standard, under what circumstances agencies utilize these panels, and how advisory committees influence agency decision-making.

This Article sheds light on the composition and operation of …

The Economic Basis Of The Independent Contractor/Employee Distinction, Eric A. Posner

Coase-Sandor Institute for Law & Economics Research Paper Series

In recent years, a controversy has erupted over the distinction between employees and independent contractors. Commentators have argued that in the modern “gig economy,” many people traditionally classified as independent contractors are as vulnerable as employees and should be granted the legal protections that employees alone normally enjoy. However, the distinction between the two categories remains inescapable, and the theoretical basis for it has not been identified. I argue that the distinction is derived from market structure. Employees are workers who, because they must make relationship-specific investments in a single firm, are subject to labor monopsony. Independent contractors do not …

Political Ideology And The Law Review Selection Process, Adam Chilton, Jonathan S. Masur, Kyle Rozema

Coase-Sandor Institute for Law & Economics Research Paper Series

We investigate the role that political ideology plays in the selection process for articles in law reviews. To do so, we match data on the political ideology of student editors from 15 top law reviews from 1990 to 2005 to data on the political ideology of the authors of accepted articles. We find that law review with a higher share of conservative editors accept a higher share of articles written by conservative authors. We then investigate potential explanations for this pattern. One possibility is that editors have a preference for publishing articles written by authors that share their ideology. Another …

Sizing Up Categories, Lee Anne Fennell

Coase-Sandor Institute for Law & Economics Research Paper Series

Categories intentionally create discontinuities. By breaking the world up into cognizable chunks, they simplify the information environment. But the signals they provide may be inaccurate or scrambled by strategic behavior. This Article considers how law might approach the problem of optimal categorization, given the role of categories in managing and transmitting information. It proceeds from the observation that high categorization costs can be addressed through two opposite strategies—making classifications more fine-grained (splitting), and making classifications more encompassing (lumping). Although continuizing and other forms of splitting offer intuitive answers to inaccurate classification and gaming along category lines, lumping is sometimes a …

Will Robot Judges Change Litigation And Settlement Outcomes? A First Look At The Algorithmic Replication Of Prior Cases, Anthony Casey, Anthony Niblett

Coase-Sandor Institute for Law & Economics Research Paper Series

No abstract provided.

The Boundaries Of Normative Law And Economics, Eric A. Posner

Coase-Sandor Institute for Law & Economics Research Paper Series

Normative law and economics remains controversial decades after its emergence despite its successes in legal scholarship and its similarity to influential approaches in economics. The reason is that many of its proponents have exaggerated its value for policy while discounting other methods, tainting the enterprise. Normative law and economics as a method of policy analysis properly operates within narrow boundaries defined by its four main premises: (1) welfarism based on unrestricted preferences; (2) unimportance of distributional effects; (3) unimportance of impacts on non-welfare values; and (4) rational instrumental behavior of affected persons. Scholars have made progress in normative law and …

The Tax Elasticity Of Financial Statement Income: Implications For Current Reform Proposals, Dhammika Dharmapala

Coase-Sandor Institute for Law & Economics Research Paper Series

Current reform proposals in international and corporate tax (most notably the OECD’s GloBE proposal) envisage taxing financial statement income. This paper develops a conceptual framework – based on the literature on the elasticity of taxable income – for the welfare analysis of such proposals, and discusses the available evidence on the tax elasticity of financial statement income. The central conclusion is that the most relevant evidence suggests a large responsiveness of financial statement income to taxes (and hence, albeit with significant limitations and caveats, arguably a large deadweight loss). The paper also highlights the need for more evidence on this …

The Trade-Off Between Tax Administration And Tax Compliance, David A. Weisbach

Coase-Sandor Institute for Law & Economics Research Paper Series

This paper revisits optimal tax enforcement policy, focusing on two elements of that policy: (1) the optimal mix of government-level tax administration and individual-level tax compliance; and (2) the optimal mix of this combination (together, tax enforcement) and tax rates. The standard view is that we should weight tax administration but not tax compliance by the government’s cost of funds because we must pay for tax administration, but not compliance, through disorting taxes. As a result, we might want to rely on tax compliance measures even when using tax administration would otherwise be less expensive. Using a flexible model that …

Employer Neighborhoods And Racial Discrimination, Amanda Y. Agan, Sonja B. Starr

Coase-Sandor Institute for Law & Economics Research Paper Series

Using a large field experiment, we show that racial composition of employer neighborhoods predicts employment discrimination patterns in a direction suggesting in-group bias. Our data also show racial disparities in the geographic distribution of job postings. Simulations illustrate how these patterns combine to shape disparities. When jobs are located far from Black neighborhoods, Black applicants are doubly disadvantaged: discrimination patterns disfavor them, and they have fewer nearby opportunities. Finally, building on prior work on Ban-the-Box laws, we show that employers in less Black neighborhoods appear much likelier to stereotype Black applicants as potentially criminal when they lack criminal record information.

Trademark Law Pluralism, Daniel J. Hemel, Lisa Larrimore Ouellette

Coase-Sandor Institute for Law & Economics Research Paper Series

In recent years, trademark scholars have come to recognize that the supply of words, sounds, and symbols available to designate new goods and services is an exhaustible resource. In certain sectors, the most common English words and syllables and the most common U.S. surnames are almost all claimed as marks. Some firms have responded by resorting to ever-more-unusual brand names so as to avoid trademark disputes. Scholars have proposed solutions ranging from raising registration fees to narrowing the scope of trademark rights.

In this Article, we frame trademark law’s governance of “linguistic space” as a balancing act between what we …

Rethinking Nudge: An Information-Costs Theory Of Default Rules, Oren Bar-Gill, Omri Ben-Shahar

Coase-Sandor Institute for Law & Economics Research Paper Series

Policymakers and scholars – both lawyers and economists – have long been pondering the optimal design of default rules. From the classic works on “mimicking” defaults for contracts and corporations to the modern rush to set “sticky” default rules to promote policies as diverse as organ donations, retirement savings, consumer protection, and data privacy, the optimal design of default rules has featured as a central regulatory challenge. The key element driving the design is opt-out costs—how to minimize them, or alternatively how to raise them to make the default sticky. Much of the literature has focused on “mechanical” opt-out costs—the …

State Politics And Mortgage Markets, Brian D. Feinstein, Chen Meng, Manisha Padi

Coase-Sandor Institute for Law & Economics Research Paper Series

This article examines whether elections for state offices that regulate mortgage lenders affect mortgage markets. Some scholars assert that election-related political uncertainty depresses economic activity; others contend that incumbents pursue policies to boost short-term growth prior to elections; and a third group claims that market activity fluctuates around partisan transitions. We test these theories using national data on mortgage characteristics and election data for two important state regulators. We first conduct event studies comparing mortgage market outcomes before and after elections. We then utilize difference-in-difference models to compare states in which partisan control of key offices switched following an election. …

Property As The Law Of Complements, Lee Anne Fennell

Coase-Sandor Institute for Law & Economics Research Paper Series

Resources often produce more value in combination than they do separately: think of segments of a highway or parts of a machine. I argue that property’s defining purpose is to group together complements, and that property law and theory should focus on identifying and realizing valuable bundles of resources. While some complementarities align with traditional asset boundaries and can be protected by exclusion rights, realizing others requires crossing or eschewing boundaries to recombine resources in ways that further larger social, economic, or ecological objectives. The gains associated with the entrenching and excluding functions of property thus vie with the gains …

Drugs, Patents, And Well-Being, Christopher Buccafusco, Jonathan S. Masur

Coase-Sandor Institute for Law & Economics Research Paper Series

The ultimate end of patent law must be to spur innovations that improve human welfare—innovations that make people better off. But firms will only invest resources in developing patentable inventions that will allow them to make money—that is, inventions that people will want to use and buy. This can gravely distort the types of incentives that firms face and the types of inventions they pursue. Nowhere is this truer than in the pharmaceutical field. There is by now substantial evidence that treatments for diseases that primarily afflict poorer people—including the citizens of developing nations—are dramatically under-produced, compared with drugs that …

Innovation Institutions And The Opioid Crisis, Daniel J. Hemel, Lisa Larrimore Ouellette

Coase-Sandor Institute for Law & Economics Research Paper Series

The United States has recently—and belatedly—come to recognize opioid addiction as a public health crisis. What has gone mostly unrecognized is the degree to which this crisis is intertwined with U.S. intellectual property law and related elements of U.S. innovation policy. Innovation institutions—the legal arrangements that structure incentives for production and allocation of knowledge goods—encouraged the development and commercialization of addictive painkillers, restricted access to opioid antidotes, and (perhaps most importantly) failed to facilitate investments in alternative, non-addictive treatments for chronic pain. Although innovation policy does not bear all the blame for the opioid wave that has washed over communities …

The Economic Basis Of The Independent Contractor/Employee Distinction, Eric Posner

Coase-Sandor Institute for Law & Economics Research Paper Series

In recent years, a controversy has erupted over the distinction between employees and independent contractors. Commentators have argued that in the modern “gig economy,” many people traditionally classified as independent contractors are as vulnerable as employees and should be granted the legal protections that employees alone normally enjoy. However, the distinction between the two categories remains inescapable, and the theoretical basis for it has not been identified. I argue that the distinction is derived from market structure. Employees are workers who, because they must make relationship-specific investments in a single firm, are subject to labor monopsony. Independent contractors do not …

Chevronizing Around Cost-Benefit Analysis, Jonathan S. Masur, Eric A. Posner

Coase-Sandor Institute for Law & Economics Research Paper Series

The Trump administration’s efforts to weaken regulations are in tension with cost-benefit analysis, which in many cases supports those regulations or otherwise fails to support the administration’s deregulatory objectives. Rather than attempting to justify its actions as a matter of policy preferences, the administration has responded on multiple occasions by using Chevron to interpret statutes so as to evade cost-benefit analysis. The statutory interpretation route, which we call “Chevronizing” around cost-benefit analysis, creates novel challenges for courts, as it pits traditional Chevron deference against a trend in favor of requiring agencies to regulate based on cost-benefit analysis as a matter …

Policy Implications Of The Common Ownership Debate, Eric A. Posner

Coase-Sandor Institute for Law & Economics Research Paper Series

The debate over common ownership initiated by Azar, Schmalz, and Tecu’s paper on airlines has raised questions about what, if any, policy responses are appropriate when common owners reduce competition in product markets. This paper, a response to a symposium for Antitrust Bulletin, reviews the literature on policy responses and evaluates various reform proposals in light of recent empirical and theoretical developments.

Clarifying Vagueness: Rethinking The Supreme Court’S Vagueness Doctrine, Emily M. Snoddon

University of Chicago Law Review

For over a hundred years, the Supreme Court has struggled to articulate a coherent test for analyzing constitutional challenges based on vagueness. The current formulation of the vagueness test is rooted in due process principles and calls for invalidation of laws when they either (1) fail to “give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden” by the law, or (2) encourage “arbitrary arrests and convictions.” Certain aspects of this test suggest that the separation of powers is relevant to the analysis. Nevertheless, it is currently unclear what role this constitutional protection plays.

Recent Supreme …

Legal Fictions And Foreign Frictions: An Argument For A Functional Interpretation Of Jesner V Arab Bank For Transnational Corporations

University of Chicago Law Review

The Alien Tort Statute (ATS) allows noncitizens to bring civil actions in US federal courts for a select class of particularly egregious violations of international law. Human rights activists have pushed the boundaries of the ATS in recent decades, and the Supreme Court has responded by establishing several limiting rules for ATS jurisdiction. Most recently, in April 2018, the Supreme Court ruled in Jesner v Arab Bank that foreign corporations cannot be defendants in ATS suits. Following Jesner, plaintiffs in ongoing ATS suits have dropped key corporate defendants from their complaints. This Comment argues that courts and litigants should pause …

Exculpatory Evidence Pre-Plea Without Extending Brady, Brian Sanders

University of Chicago Law Review

Innocent defendants sometimes plead guilty. This is a problem. Some suggest fixing this problem with a constitutional requirement that prosecutors disclose exculpatory evidence before a defendant pleads guilty. A circuit split has thus developed concerning whether Brady, which requires disclosure of exculpatory evidence, extends to the pre-plea context. The Supreme Court’s jurisprudence, however, likely bars a constitutional requirement for pre-plea disclosure of exculpatory evidence. Faced with this exigency, this Comment argues that contract law should form the legal basis for pre-plea disclosure. Specifically, the contract doctrine of constructive fraud provides a suitable remedy. While big boy clauses, which defeat constructive …

Jurisdictional Realism: Where Modern Theories Of Choice Of Law Went Wrong, And What Can Be Done To Fix Them, Lea Brilmayer, Charles Seidell

University of Chicago Law Review

An American Law Institute project on the conflict of laws is preparing to bring forth a new Restatement on the subject. The issues most hotly debated behind the scenes are those involving choice of law, a somewhat technical legal specialty with a well-earned reputation for impenetrability. Despite the theoretical difficulty of the topic, the drafting of the new Restatement (Third) has been the cause of intense interest on the part of the bench and bar. Selection of the applicable law—while deeply influenced by theoretical considerations—has immense practical consequences because of the recurrence of the issue in contemporary litigation.

The leading …

Front Matter / Editorial Information

University of Chicago Law Review

No abstract provided.

Federal Expansion And The Decay Of State Courts, Diego Zambrano

University of Chicago Law Review

At the turn of the twenty-first century, the country entered its third era of judicial federalism. That era is defined by federal judicial expansion into areas of statecourt power and federal monopolization of large and complex litigation. These changes, in turn, have coincided with the decay of state courts. Whether measured by funding, delays, or docket loads, state courts—the true workhorses of the American legal system—have declined relative to federal courts. Indeed, over the last decade, state chief justices have complained that state courts are “financially bankrupt,” “at ‘the tipping point of dysfunction,’” and “on the edge of an abyss.” …

High-Value, Low-Value, And No-Value Guns: Applying Free Speech Law To The Second Amendment, Joseph E. Sitzmann

University of Chicago Law Review

Like the First, Fourth, Fifth, and Fourteenth Amendments, the Second Amendment stirs fervent debate among legal academics and the American public. Unlike these Amendments, however, the Second Amendment has received very little treatment from the Supreme Court until recently. In District of Columbia v Heller, the Court established that the “right of the people to keep and bear Arms” includes the right to bear arms for self-defense. Without further guidance from the Court, lower courts have struggled to consistently and uniformly determine when the Constitution permits gun regulations in spite of the Second Amendment.

To provide clarity, this Comment offers …

“Unfair Or Unconscionable”: A New Approach To Time-Barred Debt Collection Under The Fdcpa, Jon D. Fish

University of Chicago Law Review

Since the 1990s, the trade in second-hand debt has exploded. Debt collectors now relentlessly pursue decades-old debts, purchased for pennies on the dollar from primary creditors. To avoid the bar that statutes of limitations place on judicial enforcement of these debts, third-party debt collectors seek “acknowledgment” from unwitting consumers, which resets the limitations periods under state law. Under the Fair Debt Collection Practices Act (FDCPA), federal courts have struggled to deal with these attempts at resetting the statutes of limitations—a practice that often feels inherently unfair. So far, courts have focused on whether collection attempts have violated the FDCPA’s ban …

Front Matter / Editorial Information

University of Chicago Law Review

No abstract provided.

Liability For Data Scraping Prohibitions Under The Refusal To Deal Doctrine: An Incremental Step Toward More Robust Sherman Act Enforcement, Ioannis Drivas

University of Chicago Law Review

The digital economy has become increasingly consolidated in recent years as a handful of companies (namely Google, Facebook, Microsoft, and Amazon) have come to dominate every corner of the internet. Several of these companies have attained such size and influence that labelling them monopolists seems unavoidable. These companies have reinvigorated the debate regarding how antitrust law should treat monopolists. Many scholars, typically associated with the Chicago School of antitrust, believe that courts should hesitate before taking action against internet monopolists because judicial intervention may discourage investment in the digital economy without benefiting consumers. Critics of the Chicago School meanwhile argue …

Settlement Malpractice, Michael Moffitt

University of Chicago Law Review

Lawyers routinely settle lawsuits or advise their clients about settlement. One might expect, therefore, that clients routinely complain about some aspect of their lawyers’ settlement services. Ten years of data from eleven jurisdictions paint a vivid, different picture: although the vast majority of civil lawsuits are resolved through negotiated settlements and although complaints against lawyers are common, fewer than 1 percent of reported legal malpractice cases and only about 1.5 percent of bar complaints relate in any way to lawyers’ settlement-related conduct or advice. Even in those instances when clients do raise such complaints, clients rarely prevail. In short, even …