Law Commons^™

Toward A New Theory Of Notice And Deterrence, Dru Stevenson

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This article sets forth a new model of “notice” and deterrence that helps explain some long-standing contradictions in the literature on deterrence. Nearly all the work in the area of criminal law and deterrence has included an assumption that would-be offenders know the laws and the threatened sanctions, and therefore adjust their behavior in light of these disincentives. The fact that most people seem to be ignorant of the exact boundaries of the rules, and ignorant of the sanctions, presents an enormous conceptual problem for the classic model of deterrence. This new model presents an alternative mechanism for deterrence based …

The Evolution Of Sherman Act Jurisdiction: A Roadmap For Competitive Federalism, D. Bruce Johnsen

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Recent Supreme Court decisions confirm for the first time in over six decades that federal regulatory authority under the Commerce Clause truly is limited. These decisions coincide with an increasing appreciation among scholars and jurists for the concept of competitive federalism. This paper derives the implications of competitive federalism for the evolution of federal jurisdiction over trade restraints under the Sherman Antitrust Act (1890). It provides a clear and substantively reasoned jurisdictional test based on the analysis of geographic market power familiar to antitrust scholars, practitioners, and regulators in evaluating horizontal mergers. To be subject to federal antitrust jurisdiction under …

In Defense Of Paid Family Leave, Gillian Lester

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In this article I defend state provision of paid family leave. Such a program would allow workers to take compensated time off work to care for a newborn infant or ill family member. I normatively ground my claim in the argument that paid leave would allow women, who have historically performed a disproportionate share of family caregiving labor, to participate more fully in the paid workforce. This enhancement in labor force participation, I argue, would in turn increase women's independence and capacity to determine the conditions of their lives. In taking this position, I distinguish myself from those who would …

Tax, Corporate Governance, And Norms, Steven Bank

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This paper examines the use of federal tax provisions to effect changes in state law corporate governance. There is a growing academic controversy over these provisions, fueled in part by their popularity among legislators as a method of addressing the recent spate of corporate scandals. In order to better understand and distinguish between the possible uses of tax as a tool of corporate governance, this paper takes a historical approach by focusing on two measures enacted during the New Deal – the undistributed profits tax in 1936 and the overhaul of the tax-free reorganization provisions in 1934 – and considers …

The Disenchantment Of Logically Formal Legal Rationality Or Max Weber's Sociology In The Genealogy Of The Contemporary Mode Of Western Legal Thought, Duncan Kennedy

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Max Weber began his sociology of law with a description of the then present of Western legal thought, along with a brief summary of its previous stages. This appreciation begins with a summary description of the Western legal thought of Weber's time, as it looks from our present 100 years later, emphasizing the contrast between the mainstream of his time, now called Classical Legal Thought, and its critics in the social current. Part II presents Weber's sociology of law, comparing and contrasting his approach with that of the social current. The most striking thing about Weber's sociology of law, from …

Entrapment And The Problem Of Deterring Police Misconduct, Dru Stevenson

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Many the states currently use a version of the entrapment defense known as the “objective test,” which focuses solely on the extent of police overreaching in the case, and seeks to deter police misconduct by acquitting the defendant. Acquitting defendants as a means of deterring undercover police misconduct, however, is a public policy fraught with problems, and these problems have not been adequately addressed in the literature to date. This article applies the insights of modern deterrence theory to wrongful activity by police in undercover operations. In doing so, three general problems emerge. First, the objective test relies on an …

Mixed Signals: Reconsidering The Political Economy Of Judicial Deference To Administrative Agencies, Matthew C. Stephenson

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This paper investigates rational choice explanations for patterns of Supreme Court decision-making with respect to the appropriate level of judicial deference to administrative agency decisions. In particular, I assess empirically the thesis that the Supreme Court expands deference when the Supreme Court is ideologically closer to the executive than to the circuit courts, and contracts deference when the opposite is true. I find little to no evidence supporting this "rational choice" theory of judicial deference. Given this surprising null finding, I offer alternative explanations for the data and suggest directions for future research.

Comparisons Among Firms: (When) Do They Justify Mandatory Disclosure?, Sharon Hannes

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Comparisons among firms play a major role in securities analysis. This essay asks if this fact justifies the mandatory nature of securities regulation. Once a firm approaches the public securities markets, federal securities regulations compel it to disclose financial information to the public. A seminal theory argues that firms would not otherwise commit to maintain optimal disclosure levels, since a disclosing firm bears all disclosure costs but does not gain all disclosure benefits.

This paper examines the robustness of this argument in relation to disclosure benefits which arise from comparisons among firms. Financial data of peer firms allows shareholders to …

Liability Rules For Constitutional Rights: The Case Of Mass Detentions, Eugene Kontorovich

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Constitutional law assumes that rights should always be protected by property rules – that is, the government can only take them with the individual’s consent. This Article extends to constitutional law the insights of Calabresi and Melamed’s famous article on property and liability rules. Whether rights should be protected by property rules or liability rules depends on the transaction costs of negotiating a transfer of rights. As transaction costs rise, liability rules become more attractive.

This Article shows that liability rules can have an important role in constitutional law. Using mass detentions in national security emergencies as a case study, …

Norms, Rationality, And Communication: A Reputation Theory Of Social Norms, Andreas Engert

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Does the discovery of "law and social norms" necessitate breaking with the rational choice paradigm? In this paper, I argue for an answer in the negative. To this end, I propose a reputation theory of social norms, which differs from other proposals in two principal respects: First, it explains norms without any assumption of behavioral constraints (like habit or conscience) and normative motivations (like altruism or aspiration to esteem). Second, it does even without any assumption regarding model-exogenous, private information that most other reputation and signaling explanations use (such as the discount rate in Eric Posner's signaling model).

Instead, reputation …

Real Options In Law: (Possibly, Frivolous) Litigation And Other Applications, Peter H. Huang

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This Article advances the thesis that real options are not only ubiquitous in law, but also provide novel insights about legal decision making, doctrines and rules. An introduction provides a brief a primer about financial options, real options, and real options in law. Part I of this Article develops implications of the fact that every lawsuit contains a sequence of real options for the plaintiff to unilaterally abandon that lawsuit. Part II of this Article appraises the limitations of game-theoretic analysis of the abandonment options embedded in litigation and some responses to such limitations. Part III of this Article illustrates …

No Free Lunch: How Settlement Can Reduce The Legal System's Ability To Induce Efficient Behavior, Abraham Lee Wickelgren

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While there is widespread agreement that it is better for cases to settle than go to trial, the arguments in favor of settlement have typically overlooked how settlement affects one of the most important functions of the legal system: influencing the behavior that gives rise to lawsuits. This essay argues that, in some cases, settlement can impair the ability of the legal system to deter harmful behavior without chilling desirable behavior. Where it exists, this effect is a fundamental property of settlement in that there is no way to change other legal rules to eliminate it. Because settlements also have …

Affirmative Action: More Efficient Than Color Blindness, Abraham Lee Wickelgren

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One of the most compelling reasons against affirmative action is the principle of color blindness, that is, the idea that race is an irrelevant characteristic that should not affect higher education admissions or hiring decisions. Despite its intuitive appeal, this paper shows that adherence to this principle impedes economic efficiency when there has been past discrimination based on color. Past discrimination creates inefficiencies in the economy that persist across generations. Because of this persistence, race is not an irrelevant characteristic for firms and universities looking to hire or admit the best candidates. Affirmative action, not color-blindness, is necessary to reduce …

The Rational Exuberance Of Structuring Venture Capital Startups, Victor Fleischer

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This Article takes the bursting of the dot com bubble as an opportunity to reevaluate the tax structure of venture capital startups. By organizing startups as corporations rather than as partnerships, investors and entrepreneurs seem to leave money on the table by failing to fully use tax losses -- especially since the vast majority of startups fail. Conventional wisdom attributes the lack of attention paid to losses to a "gambler's mentality" or optimism bias. I argue here that the use of the corporate form is, in fact, rational, or at least that there is a method to the madness.

I …

Adverse Selection And Moral Hazard In Forum Shopping: Conflicts Of Law As Spontaneous Order, Nita Ghei, Francesco Parisi

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In a world with multiple, overlapping jurisdictions, any given litigation could be pursued in more than one forum. Different laws can yield different outcomes. This leads to parties selecting a forum percieved as favorable to file suit. This practice, also known as forum shopping, has been much criticized, and various reforms to the law of conflicts of law have been proposed as a way to reduce this practice. The article examines the inefficiencies associated with forum selection, and the alleged shortcomings in conflicts law as it currently exists. We argue that forum selection cannot be eliminated in a world with …

Monopoly Power In The Electronic Information Industry: Why, And So What?, Curt A. Hessler

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This "law and economics" article diagnoses why monopoly power infects so many markets in the electronic media, communications, and information technology industries (collectively the "Industry"),and recommends changes to prevailing intellectual property and antitrust doctrines to remedy this problem.

The analysis focuses on a single "norm" -- the maximization of economic value, as defined by standard welfare economic theory. Identifying three distinct functions that operate throughout this otherwise diverse Industry -- authoring, publishing, and distribution -- the article notes that two economic peculiarities characterize most Industry markets: the technical feasibility of "non-rivalrous use" of digitized information products, and the frequent "creative …

Bounded Rationality, The Doctrine Of Impracticability, And The Governance Of Relational Contracts, Donald J. Smythe

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This article uses a behavioral economics approach to analyze the effects of the doctrine of impracticability on “relational” contracts -- long-term contractual agreements that are typically adapted to changed circumstances and unforeseen contingencies as they arise. In contrast to conventional law and economics studies, the article concludes that the impracticability doctrine has the potential to improve the efficiency and productivity of a wide range of long-term contractual agreements, and offers normative guidelines as to how the doctrine should be applied. The article also examines and rejects various philosophical objections to the impracticability doctrine, such as the arguments that it interferes …