Law Commons^™

Gamestop And The Reemergence Of The Retail Investor, Jill E. Fisch

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The GameStop trading frenzy in January 2021 was perhaps the highest profile example of the reemergence of capital market participation by retail investors, a marked shift from the growing domination of those markets by large institutional investors. Some commentators have greeted retail investing, which has been fueled by app-based brokerage accounts and social media, with alarm and called for regulatory reform. The goals of such reforms are twofold. First, critics argue that retail investors need greater protection from the risks of investing in the stock market. Second, they argue that the stock market, in term, needs protection from retail investors. …

Municipal Fiber In The United States: A Financial Assessment, Christopher S. Yoo, Jesse Lambert, Timothy P. Pfenninger

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Despite growing interest in broadband provided by municipally owned and operated fiber-to-the-home networks, the academic literature has yet to undertake a systematic assessment of these projects’ financial performance. To fill this gap, we utilize municipalities’ official reports to offer an empirical evaluation of the financial performance of every municipal fiber project in the U.S. operating in 2010 through 2019. An analysis of the actual performance of the resulting fifteen-project panel dataset reveals that none of the projects generated sufficient nominal cash flow in the short run to maintain solvency without infusions of additional cash from outside sources or debt relief. …

A Lesson From Startups: Contracting Out Of Shareholder Appraisal, Jill E. Fisch

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Appraisal is a controversial topic. Policymakers have debated the goals served by the appraisal remedy, and legislatures have repeatedly revised appraisal statutes in an effort to meet those goals while minimizing the cost and potential abuse associated with appraisal litigation. Courts have struggled to determine the most appropriate valuation methodology and the extent to which that methodology should depend on case-specific factors. These difficulties are exacerbated by variation in the procedures by which mergers are negotiated and the potential for conflict-of-interest transactions.

Private ordering offers a market-based alternative to continued legislative or judicial efforts to refine the appraisal remedy. Through …

Uncertainty > Risk: Lessons For Legal Thought From The Insurance Runoff Market, Tom Baker

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Insurance ideas inform legal thought: from tort law, to health law and financial services regulation, to theories of distributive justice. Within that thought, insurance is conceived as an ideal type in which insurers distribute determinable risks through contracts that fix the parties’ obligations in advance. This ideal type has normative appeal, among other reasons because it explains how tort law might achieve in practice the objectives of tort theory. This ideal type also supports a restrictive vision of liability-based regulation that opposes expansions and supports cutbacks, on the grounds that uncertainty poses an existential threat to insurance markets.

Prior work …

Is The Digital Economy Too Concentrated?, Jonathan Klick

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Concentration in the digital economy in the United States has sparked loud criticism and spurred calls for wide-ranging reforms. These reforms include everything from increased enforcement of existing antitrust laws, such as challenging more mergers and breaking up firms, to an abandonment of the consumer welfare standard. Critics cite corruption and more systemic public choice problems, while others invoke the populist origins of antitrust to slay the digital Goliaths. On the other side, there is skepticism regarding these arguments. This chapter continues much of that skepticism.

Whither The Regulatory “War On Coal”? Scapegoats, Saviors, And Stock Market Reactions, Cary Coglianese, Daniel E. Walters

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Complaints about excessive economic burdens associated with regulation abound in contemporary political and legal rhetoric. In recent years, perhaps nowhere have these complaints been heard as loudly as in the context of U.S. regulations targeting the use of coal to supply power to the nation’s electricity system, as production levels in the coal industry dropped by nearly half between 2008 and 2016. The coal industry and its political supporters, including the president of the United States, have argued that a suite of air pollution regulations imposed by the U.S. Environmental Protection Agency during the Obama administration seriously undermined coal companies’ …

Hipster Antitrust: New Bottles, Same Old W(H)Ine?, Christopher S. Yoo

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Although the debate over hipster antitrust is often portrayed as something new, experienced observers recognize it as a replay of an old argument that was resolved by the global consensus that antitrust should focus on consumer welfare rather than on the size of firms, the levels of industry concentration, and other considerations. Moreover, the history of the Federal Trade Commission’s Section 5 authority to prevent unfair methods of competition stands as a reminder of the dangers of allowing enforcement policy to be guided by vague and uncertain standards.

The Economics Of Immigration Reform, Howard F. Chang

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In this article, I draw upon economic theory and recent empirical work on the economic and fiscal effects of immigration to evaluate some recent proposals for immigration reform in terms of their effects on the economic welfare of natives in the United States. In particular, I consider the Reforming American Immigration for a Strong Economy (RAISE) Act, a bill that would cut immigration to half of its current level. President Donald Trump has endorsed the RAISE Act and has insisted that many of its provisions be part of any legislation legalizing the status of unauthorized immigrants granted relief under the …

The Behavioral Economics Of Multilevel Marketing, Heidi H. Liu

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Multilevel marketing companies (MLMs) - sales organizations that compensate independent consultants based on the sales and recruitment of other consultants - form a significant part of the American economy. Yet, MLMs provide little information to regulators and potential participants regarding potentially material information. Although MLMs are often compared to pyramid schemes, consultants argue that participation in a MLM allows them to make money outside of the traditional full-time labor force. This paper examines the law, economics, and psychology of MLMs, suggesting that MLMs may draw on prospective consultants' cognitive biases in persuading consultants to join and continue a MLM. Consultants …

Before International Tax Reform, We Need To Understand Why Firms Invert, Michael S. Knoll

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A wave of corporate inversions by U.S. firms over the past two decades has generated substantial debate in academic, business, and policy circles.

The core of the debate hinges on a couple of key economic questions: Do U.S. tax laws disadvantage U.S.-domiciled companies relative to their foreign competitors? And, if so, do inversions improve the competitiveness of U.S. multinational firms both abroad and at home?

There is unfortunately little, if any, empirical work directly determining whether U.S.-based MNCs are currently tax-disadvantaged compared to their foreign rivals, or measuring the amount by which (if any) U.S.-based MNCs improve their competitive position …

Why Law Now Needs To Control Rather Than Follow Neo-Classical Economics, John William Draper

Librarian Scholarship at Penn Law

Selfish utilitarianism, neo-classical economics, the directive of short-term income maximization, and the decision tool of cost-benefit analysis fail to protect our species from the significant risks of too much consumption, pollution, or population. For a longer-term survival, humanity needs to employ more than cost-justified precaution.

This article argues that, at the global level, and by extension at all levels of government, we need to replace neo-classical economics with filters for safety and feasibility to regulate against significant risk. For significant risks, especially those that are irreversible, we need decision tools that will protect humanity at all scales. This article describes …

Single Point Of Entry And The Bankruptcy Alternative, David A. Skeel Jr.

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This Essay, which will appear in Across the Great Divide: New Perspectives on the Financial Crisis, a Brookings Institution and Hoover Institution book, begins with a brief overview of concerns raised by the Lehman Brothers bankruptcy about the adequacy of our existing architecture for resolving the financial distress of systemically important financial institutions. The principal takeaway of the first section is that Title II as enacted left most of these issues unanswered. By contrast, the FDIC’s new single point of entry strategy, which is introduced in the second section, can be seen as addressing nearly all of them. The …

Behavioral Economics And Insurance Law: The Importance Of Equilibrium Analysis, Tom Baker, Peter Siegelman

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Because choosing insurance requires consumers to assess risks and probabilities, the demand for insurance has proven to be fertile ground for identifying deviations from rational behavior. Consumers often shun the insurance against large losses that they rationally should want (e.g., floods); and they are attracted to insurance against small losses (extended warranties, low deductibles) that no rational individual should purchase. But the welfare consequences of behavioral anomalies in insurance are complex, because consumers’ irrational behavior takes place in a market profoundly shaped by informational asymmetries. Under some conditions, deviations from rational behavior may actually generate insurance market equilibria that produce …

Neoclassical Labor Economics: Its Implications For Labor And Employment Law, Michael L. Wachter

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Whereas law and economics appears throughout business law, it never caught on in legal commentary about labor and employment law. A major reason is that the goals of the National Labor Relations Act (NLRA), the country’s foundational labor law, are at war with basic principles of economics. The lack of integration is unfortunate if understandable. Notwithstanding the NLRA’s normative goal to keep wages out of competition, economic analysis applies as centrally to labor markets as to any other market.

One of the NLRA’s primary goals is to equalize bargaining power. Its drafters envisioned achieving this goal through procedural and substantive …

The Role Of Politics And Policy In Television Regulation, Christopher S. Yoo

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This article is a reply to Thomas Hazlett’s commentary on my article entitled, “Rethinking the Commitment to Free, Local Television.” Although politics and public choice theory represent an important approach for analyzing government actions, economic policy still exercises some influence over the regulation of television. On the one hand, we agree that the regulatory preference of free television and local programming is more a reflection of political considerations than economic policy and that the importance of promoting communities of interest over geographic communities, and the potential for new services such as Digital Audio Radio Services to benefit consumers. On the …