Law Commons^™

A Reputational View Of Antitrust’S Consumer Welfare Standard, Murat C. Mungan, John M. Yun

Faculty Scholarship

A reform movement is underway in antitrust. Citing prior enforcement failures, deviations from the original intent of the antitrust laws, and overall rising levels of sector concentration, some are seeking to fundamentally alter or altogether replace the current consumer welfare standard, which has guided courts over the past fifty years. This policy push has sparked an intense debate over the best approach to antitrust law enforcement. In this Article, we examine a previously unexplored potential social cost from moving away from the consumer welfare standard: a loss in the information value to the public from a finding of liability. A …

Corporate Crime And Punishment: An Empirical Study, Dorothy S. Lund, Natasha Sarin

All Faculty Scholarship

For many years, law and economics scholars, as well as politicians and regulators, have debated whether corporate criminal enforcement overdeters beneficial corporate activity or in the alternative, lets corporate criminals off too easily. This debate has recently expanded in its polarization: On the one hand, academics, judges, and politicians have excoriated enforcement agencies for failing to send guilty bankers to jail in the wake of the 2008 financial crisis; on the other, the U.S. Department of Justice has since relaxed policies that encouraged individual prosecutions and reduced the size of fines and number of prosecutions. A crucial and yet understudied …

The Economic Case For Rewards Over Imprisonment, Brian D. Galle

Indiana Law Journal

There seems to be a growing social consensus that the United States imprisons far too many people for far too long. But reform efforts have slowed in the face of a challenging question: How can we reduce reliance on prisons while still discouraging crime, particularly violent crime? Through the 1970s, social scientists believed the answer was an array of what I will call preventive benefits: drug and mental health treatment, housing, and even unconditional cash payments. But early evaluations of these programs failed to find much evidence that they were successful, confirming a then-developing economic theory that predicted the programs …

Deterrence Theory: Key Findings And Challenges, Alex Raskolnikov

Faculty Scholarship

This chapter reviews the key findings of the optimal deterrence theory and discusses the remaining challenges. Some of these challenges reflect current modeling choices and limitations. These include the treatment of the offender’s gains in the social welfare function; the design of the damages multiplier in a realistic, multi-period framework; the effects of different types of uncertainty on behavior; and the study of optional, imperfectly enforced, threshold-based regimes – that is, regimes that reflect the most common real-world regulatory setting. Other challenges arise because several key regulatory features and enforcement outcomes are inconsistent with the deterrence theory’s predictions and prescriptions. …

Understanding The Revenue Potential Of Tax Compliance Investment, Natasha Sarin, Lawrence H. Summers

All Faculty Scholarship

In a July 2020 report, the Congressional Budget Office estimated that modest investments in the IRS would generate somewhere between $60 and $100 billion in additional revenue over a decade. This is qualitatively correct. But quantitatively, the revenue potential is much more significant than the CBO report suggests. We highlight five reasons for the CBO’s underestimation: 1) the scale of the investment in the IRS contemplated is modest and far short of sufficient even to return the IRS budget to 2011 levels; 2) the CBO contemplates a limited range of interventions, excluding entirely progress on information reporting and technological advancements; …

Should Automakers Be Responsible For Accidents?, Kyle D. Logue

Articles

Motor vehicles are among the most dangerous products sold anywhere. Automobiles pose a larger risk of accidental death than any other product, except perhaps opioids. Annual autocrash deaths in the United States have not been below 30,000 since the 1940s, reaching a recent peak of roughly 40,000 in 2016. And the social cost of auto crashes goes beyond deaths. Auto-accident victims who survive often incur extraordinary medical expenses. Those crash victims whose injuries render them unable to work experience lost income. Auto accidents also cause nontrivial amounts of property damage—mostly to the automobiles themselves, but also to highways, bridges, or …

Deterrence And Aggregate Litigation, Keith N. Hylton

Faculty Scholarship

This paper examines the deterrence properties of aggregate litigation and class actions, with an emphasis on positive value claims. In the multiple victim scenario with positive value claims, the probability that an individual victim will bring suit falls toward zero with geometric decay as the number of victims increases. The reason is that the incentive to free ride increases with the number of victims. Deterrence does not collapse but is degraded. Undercompliance is observed, which worsens as the number of victims increases. Compliance is never socially optimal, and the shortfall from optimality increases with the number of victims. These results, …

It Is Time For Washington State To Take A Stand Against Holmes's Bad Man: The Value Of Punitive Damages In Deterring Big Business And International Tortfeasors, Jackson Pahlke

University of Michigan Journal of Law Reform

In Washington State, tortfeasors get a break when they commit intentional torts. Instead of receiving more punishment for their planned bad act, intentional tortfeasors are punished as if they committed a mere accident. The trend does not stop in Washington State—nationwide, punitive damage legislation inadequately deters intentional wrongdoers through caps and outright bans on punitive damages. Despite Washington State’s one hundred and twenty-five year ban on punitive damages, it is in a unique and powerful position to change the way courts across the country deal with intentional tortfeasors. Since Washington has never had a comprehensive punitive damages framework, and has …

The Territorial Principle In Penal Law: An Attempted Justification, Patrick J. Fitzgerald

Georgia Journal of International & Comparative Law

No abstract provided.

Expressive Law And The Americans With Disabilities Act, Alex C. Geisinger, Michael Ashley Stein

Michigan Law Review

The question of why people follow the law has long been a subject of scholarly consideration. Prevailing accounts of how law changes behavior coalesce around two major themes: legitimacy and deterrence. Advocates of legitimacy argue that law is obeyed when it is created through a legitimate process and its substance comports with community mores. Others emphasize deterrence, particularly those who subscribe to law-and-economics theories. These scholars argue that law makes certain socially undesirable behaviors more costly, and thus individuals are less likely to undertake them.

Portmanteau Ascendant: Post-Release Regulations And Sex Offender Recidivism, J. J. Prescott

Articles

The purported purpose of sex offender post-release regulations (e.g., community notification and residency restrictions) is the reduction of sex offender recidivism. On their face, these laws seem well-designed and likely to be effective. A simple economic framework of offender behavior can be used to formalize these basic intuitions: in essence, post-release regulations either increase the probability of detection or increase the immediate cost of engaging in the prohibited activity (or both), and so should reduce the likelihood of criminal behavior. These laws aim to incapacitate people outside of prison. Yet, empirical researchers to date have found essentially no reliable evidence …

Reducing False Guilty Pleas And Wrongful Convictions Through Exoneree Compensation, Murat C. Mungan, Jonathan Klick

All Faculty Scholarship

A great concern with plea-bargains is that they may induce innocent individuals to plead guilty to crimes they have not committed. In this article, we identify schemes that reduce the number of innocent-pleas without affecting guilty individuals' plea-bargain incentives. Large compensations for exonerees reduce expected costs associated with wrongful determinations of guilt in trial and thereby reduce the number of innocent-pleas. Any distortions in guilty individuals' incentives to take plea bargains caused by these compensations can be off-set by a small increase in the discounts offered for pleading guilty. Although there are many statutory reform proposals for increasing exoneration compensations, …

Identifying Criminals’ Risk Preferences, Murat C. Mungan, Jonathan Klick

All Faculty Scholarship

There is a 250 year old presumption in the criminology and law enforcement literature that people are deterred more by increases in the certainty rather than increases in the severity of legal sanctions. We call this presumption the Certainty Aversion Presumption (CAP). Simple criminal decision making models suggest that criminals must be risk-seeking if they behave consistently with CAP. This implication leads to disturbing interpretations, such as criminals being categorically different than law abiding people, who often display risk-averse behavior while making financial decisions. Moreover, policy discussions that incorrectly rely on criminals’ risk attitudes implied by CAP are ill-informed, and …

Abandoned Criminal Attempts: An Economic Analysis, Murat C. Mungan

Faculty Scholarship

An attempt is 'abandoned' if the criminal, despite having a chance to continue with his criminal plan, forgoes the opportunity to do so. A regime that makes abandonment a defense to criminal attempts provides an incentive to the offender to withdraw from his criminal conduct prior to completing the previously intended offense. However, the same regime may induce offenders to initiate criminal plans more often by reducing the expected costs associated with such plans. The former effect is called the marginal deterrence effect and the latter is called the ex-ante deterrence effect of the abandonment defense. This Article formalizes a …

Epilogue: The New Deal At Bay, Herbert J. Hovenkamp

All Faculty Scholarship

The Opening of American Law examines changes in American legal thought that began during Reconstruction and the Gilded Age, and extending through the Kennedy/Johnson eras. During this period American judges and legal writers embraced various conceptions of legal "science," although they differed about what that science entailed. Beginning in the Gilded Age, the principal sources were Darwinism in the biological and social sciences, marginalism in economics and psychology, and legal historicism. The impact on judicial, legislative, and later administrative law making is difficult to exaggerate. Among the changes were vastly greater use of behavioral or deterrence based theories of legal …

Discounting And Criminals' Implied Risk Preferences, Murat C. Mungan, Jonathan Klick

All Faculty Scholarship

It is commonly assumed that potential offenders are more responsive to increases in the certainty than increases in the severity of punishment. An important implication of this assumption within the Beckerian law enforcement model is that criminals are risk-seeking. This note adds to existing literature by showing that offenders who discount future monetary benefits can be more responsive to the certainty rather than the severity of punishment, even when they are risk averse, and even when their disutility from imprisonment rises proportionally (or more than proportionally) with the length of the sentence.

A Behavioral Justification For Escalating Punishment Schemes, Murat C. Mungan

Scholarly Publications

The standard two-period law enforcement model is considered in a setting where individuals usually, but not exclusively, commit crimes only after comparing expected costs and benefits. Where escalating punishment schemes are present, there is an inherent value in keeping a clean criminal record; a person with a record may unintentionally become a repeat offender if he fails to exert self-control, and be punished more severely. If the punishment for repeat offenders is sufficiently high, one may rationally forgo the opportunity of committing a profitable crime today to avoid being sanctioned as a repeat offender in the future. Therefore, partial deterrence …

Beyond Finality: How Making Criminal Judgments Less Final Can Further The Interests Of Finality, Andrew Chongseh Kim

Andrew Chongseh Kim

Courts and scholars commonly assume that granting convicted defendants more liberal rights to challenge their judgments would harm society’s interests in “finality.” According to conventional wisdom, finality in criminal judgments is necessary to conserve resources, encourage efficient behavior by defense counsel, and deter crime. Thus, under the common analysis, the extent to which convicted defendants should be allowed to challenge their judgments depends on how much society is willing to sacrifice to validate defendants’ rights. This Article argues that expanding defendants’ rights on post-conviction review does not always harm these interests. Rather, more liberal review can often conserve state resources, …

Toward An Empirical And Theoretical Assessment Of Private Antitrust Enforcement, Joshua P. Davis, Robert H. Lande

All Faculty Scholarship

The dominant view in the antitrust field is that private enforcement cases, and especially class actions, accomplish little or nothing positive but, on the contrary, are counterproductive. Despite strongly worded convictions, that view has been premised on anecdotal, self-serving and insufficiently substantiated claims. Indeed, the authors' 2008 study of 40 private cases appears to constitute the only systematic effort to gather information about a significant number of private antitrust actions. That study generated a great deal of controversy, including questioning of our conclusions by high officials at the Department of Justice and by Professor Daniel Crane at the University of …

The Extraordinary Deterrence Of Private Antitrust Enforcement: A Reply To Werden, Robert H. Lande, Joshua P. Davis

All Faculty Scholarship

Our article, "Comparative Deterrence from Private Enforcement and Criminal Enforcement of the U.S. Antitrust Laws," 2011 B.Y.U. L. Rev. 315, documented an extraordinary but usually overlooked fact: private antitrust enforcement deters a significant amount of anticompetitive conduct. Indeed, the article showed that private enforcement "probably" deters even more anticompetitive conduct than the almost universally admired anti-cartel enforcement program of the United States Department of Justice.

In a recent issue of Antitrust Bulletin, Gregory J. Werden, Scott D. Hammond, and Belinda A. Barnett challenged our analysis. They asserted that our comparison “is more misleading than informative.” It is unsurprising that they …

Corporate Actors, Corporate Crimes And Time-Inconsistent Preference, Manuel A. Utset

Scholarly Publications

No abstract provided.

A Financial Economic Theory Of Punitive Damages, Robert J. Rhee

Michigan Law Review

This Article provides a financial economic theory of punitive damages. The core problem, as the Supreme Court acknowledged in Exxon Shipping Co. v. Baker, is not the systemic amount of punitive damages in the tort system; rather it is the risk of outlier outcomes. Low frequency, high severity awards are unpredictable, cause financial distress, and beget social cost. By focusing only on offsetting escaped liability, the standard law and economics theory fails to account for the core problem of variance. This Article provides a risk arbitrage analysis of the relationship between variance, litigation valuation, and optimal deterrence. Starting with settlement …

The Law And Economics Of Fluctuating Criminal Tendencies And Incapacitation, Murat C. Mungan

Maryland Law Review

No abstract provided.

The Law And Economics Of Fluctuating Criminal Tendencies And Incapacitation, Murat C. Mungan

Faculty Scholarship

Economic analyses of criminal law are frequently and heavily criticized for being unable to explain many criminal law rules and doctrines that people find intuitively just. Existing economic models cannot properly explain, for instance, why criminal law distinguishes between (i) repeat offenders and first-time offenders, (ii) murder and voluntary manslaughter, and (iii) remorseful and non-remorseful offenders.

In this Article, I propose a new and richer economic theory of crime that captures the rationales behind these practices, and potentially behind many other important criminal law principles and doctrines. Unlike an overwhelming majority of previous economic analyses, my theory accounts not only …

Quantification Of Harm In Private Antitrust Actions In The United States, Herbert J. Hovenkamp

All Faculty Scholarship

This paper discusses the theory and experience of United States courts concerning the quantification of harm in antitrust cases. This treatment pertains to both the social cost of antitrust violations, and to the private damage mechanisms that United States antitrust law has developed. It is submitted for the Roundtable on the Quantification of Harm to Competition by National Courts and Competition Agencies, Organization for Economic Cooperation and Development (OECD), Feb., 2011.

In a typical year more than 90% of antitrust complaints filed in the United States are by private plaintiffs rather than the federal government. Further, when the individual states …

Coordinating Sanctions In Torts, Kyle D. Logue

Articles

This Article begins with the standard Law and Economics account of tort law as a regulatory tool or system of deterrence, that is, as a means of giving regulated parties the optimal ex ante incentives to minimize the costs of accidents. Building on this fairly standard (albeit not universally accepted) picture of tort law, the Article asks the question how tort law should adjust, if at all, to coordinate with already existing non-tort systems of regulation. Thus, if a particular activity is already subject to extensive agency-based regulation (whether in the form of command-and-control requirements or in the form of …

Inducing Corporate Compliance: A Law And Economics Analysis Of Corporate Liability Regimes By Sharon Oded: Discussion, Carlo Drago

Carlo Drago

No abstract provided.

Confronting The Circularity Problem In Private Securities Litigation, Jill E. Fisch

All Faculty Scholarship

Many critics argue that private securities litigation fails effectively either to deter corporate misconduct or to compensate defrauded investors. In particular, commentators reason that damages reflect socially inefficient transfer payments—the so-called circularity problem. Fox and Mitchell address the circularity problem by identifying new reasons why private litigation is an effective deterrent, focusing on the role of disclosure in improving corporate governance. The corporate governance rationale for securities regulation is more powerful than the authors recognize. By collecting and using corporate information in their trading decisions, informed investors play a critical role in enhancing market efficiency. This efficiency, in turn, allows …

Letting Good Deeds Go Unpunished: Volunteer Immunity Laws And Tort Deterrence, Jill R. Horwitz, Joseph Mead

Articles

Does tort law deter risky behavior in individuals? We explore this question by examining the relationship between tort immunity and volunteering. During the 1980s and 1990s, nearly every state provided some degree of volunteer immunity. Congress followed with the 1997 Volunteer Protection Act. This article analyzes these acts, identifying three motivations for them: the chilling effects of tort liability, limits on liability insurance, and moral concerns. Using data from the Independent Survey’s Giving and Volunteering surveys, we then identify a large and positive correlation between immunity and volunteering. We next consider the implications of the findings for tort theory and …

Operationalizing Deterrence Claims Management (In Hopsitals, A Large Retailer, And Jails And Prisons), Margo Schlanger

Articles

The theory that the prospect of liability for damages deters risky behavior has been developed in countless articles and books. The literature is far sparser, however, on how deterrence is operationalized. And prior work slights an equally important effect of damage actions, to incentivize claims management in addition to harm-reduction responses that are cost- rather than liabilityminimizing. This article works in the intersection of these two understudied areas, focusing on claims management steps taken by frequently sued organizations, and opening a window into the black box of deterrence to see how those steps may end up serving harm-reduction purposes as …