Law and Economics Commons^™

Public Actors In Private Markets: Toward A Developmental Finance State, Robert Hockett, Saule Omarova

Saule T. Omarova

The recent financial crisis brought into sharp relief fundamental questions about the social function and purpose of the financial system, including its relation to the “real” economy. This Article argues that, to answer these questions, we must recapture a distinctively American view of the proper relations among state, financial market, and development. This programmatic vision – captured in what we call a “developmental finance state” – is based on three key propositions: (1) that economic and social development is not an “end-state” but a continuing national policy priority; (2) that the modalities of finance are the most potent means of …

A Theory Without A Movement, A Hope Without A Name: The Future Of Marxism In A Post-Marxist World, Justin Schwartz

Justin Schwartz

Just as Marx's insights into capitalism have been most strikingly vindicated by the rise of neoliberalism and the near-collapse of the world economy, Marxism as social movement has become bereft of support. Is there any point in people who find Marx's analysis useful in clinging to the term "Marxism" - which Marx himself rejected -- at time when self-identified Marxist organizations and societies have collapsed or renounced the identification, and Marxism own working class constituency rejects the term? I set aside bad reasons to give on "Marxism," such as that the theory is purportedly refuted, that its adoption leads necessarily …

Neoliberalism And The Law: How Historical Materialism Can Illuminate Recent Governmental And Judicial Decision Making, Justin Schwartz

Justin Schwartz

Neoliberalism can be understood as the deregulation of the economy from political control by deliberate action or inaction of the state. As such it is both constituted by the law and deeply affects it. I show how the methods of historical materialism can illuminate this phenomenon in all three branches of the the U.S. government. Considering the example the global financial crisis of 2007-08 that began with the housing bubble developing from trade in unregulated and overvalued mortgage backed securities, I show how the repeal of the Glass-Steagall Act, which established a firewall between commercial and investment banking, allowed this …

Collective Choice, Justin Schwartz

Justin Schwartz

This short nontechnical article reviews the Arrow Impossibility Theorem and its implications for rational democratic decisionmaking. In the 1950s, economist Kenneth J. Arrow proved that no method for producing a unique social choice involving at least three choices and three actors could satisfy four seemingly obvious constraints that are practically constitutive of democratic decisionmaking. Any such method must violate such a constraint and risks leading to disturbingly irrational results such and Condorcet cycling. I explain the theorem in plain, nonmathematical language, and discuss the history, range, and prospects of avoiding what seems like a fundamental theoretical challenge to the possibility …

Delivery Of Legal Services To Immigrant Small Business Owners: The Problems And A Model To Solve Them, William A. Langer, Pablo A. Ormachea

William A Langer

Delivery of Legal Services to Immigrant Small Business Owners: The Problems and a Model to Solve Them. By Pablo Ormachea & William Langer

Immigrant entrepreneurs not only provide essential support for individual families, but also serve as key engines of economic growth for United States cities. While immigrant small-business owners continuously stimulate growth in various economic sectors, creating new jobs and helping to develop inner-city neighborhoods, they overcome considerable obstacles and barriers to reach these achievements. This article argues that a deeper understanding of such systemic barriers can help to reduce such barriers so that an increasingly larger number of …

Passive Discrimination: When Does It Make Sense To Pay Too Little?, Jonah B. Gelbach, Jonathan Klick, Lesley Wexler

All Faculty Scholarship

Economists have long recognized employers’ ability to construct benefits packages to induce workers to sort themselves into and out of jobs. For instance, to encourage applications from individuals with a highly valued but largely unobservable characteristic, such as patience, employers might offer benefits that patient individuals are likely to value more than other individuals. By offering a compensation package with highly valued benefits but a relatively low wage, employers will attract workers with the favored characteristic and discourage other individuals from applying for or accepting the job. While economic theory generally views this kind of self-selection in value neutral terms, …

Federalism, Variation, And State Regulation Of Franchise Termination, Jonathan Klick, Bruce Kobayashi, Larry Ribstein

All Faculty Scholarship

This article discusses and expands on our recent work examining the effects of franchise-termination laws. In a prior article, we examined empirically the effect of franchise-termination laws on the level of franchise activity. Our analysis improved upon the prior literature in two major ways. First, our work exploited two new sources of panel data to provide new empirical evidence on the effect of franchise termination laws. Second, our analysis examined variation in states’ restrictions on the ability of franchisors and franchisees to contract around a particular state’s regulation. We found that the effects of termination laws on the overall level …

Agency Costs, Charitable Trusts, And Corporate Control: Evidence From Hershey's Kiss-Off, Jonathan Klick, Robert H. Sitkoff

All Faculty Scholarship

In July 2002 the trustees of the Milton Hershey School Trust announced a plan to diversify the Trust’s investment portfolio by selling the Trust’s controlling interest in the Hershey Company. The Company’s stock jumped from $62.50 to $78.30 on news of the proposed sale. But the Pennsylvania Attorney General, who was then running for governor, opposed the sale on the ground that it would harm the local community. Shortly after the Attorney General obtained a preliminary injunction, the trustees abandoned the sale and the Company’s stock dropped to $65.00. Using standard event study methodology, we find that the sale announcement …

The Disadvantages Of Immigration Restriction As A Policy To Improve Income Distribution, Howard F. Chang

All Faculty Scholarship

In this Article, I argue that tax and transfer policies are more efficient than immigration restrictions as instruments for raising the after tax incomes of the least skilled native workers. Policies to protect these native workers frol1'l immigrant competition in the labor market do no better at promoting distributive justice and are likely to impose a greater economic burden on natives in the country of immigration than the tax alternative. These immigration restrictions are especially costly given the disproportionate burden that they place on households with working women, which discourages fel1'wle participation in the labor force. This burden runs contrary …

Private Equity's Three Lessons For Agency Theory, William W. Bratton

All Faculty Scholarship

No abstract provided.

Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, Jill E. Fisch

All Faculty Scholarship

The shareholder primacy norm defines the objective of the corporation as maximization of shareholder wealth. Law and economics scholars have incorporated the shareholder primacy norm into their empirical analyses of regulatory efficiency. An increasingly influential body of scholarship uses empirical methodology to evaluate legal rules that allocate power within the corporation. By embracing the shareholder primacy norm, empirical scholars offer normative assessments about regulatory choices based on the effect of legal rules on measures of shareholder value such as stock price, net profits, and Tobin’s Q.

This Article challenges the foundations of using the shareholder primacy norm to judge corporate …

The Academic Tournament Over Executive Compensation, William W. Bratton

All Faculty Scholarship

No abstract provided.

The New Dividend Puzzle, William W. Bratton

All Faculty Scholarship

No abstract provided.

Pari Passu And A Distressed Sovereign's Rational Choices, William W. Bratton

All Faculty Scholarship

No abstract provided.

Rules, Principles, And The Accounting Crisis In The United States, William W. Bratton

All Faculty Scholarship

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly ·when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect. the US reporting system holds out no actor plausibly positioned …

Gaming Delaware, William W. Bratton

All Faculty Scholarship

No abstract provided.

Relativism, Reflective Equilibrium, And Justice, Justin Schwartz

Justin Schwartz

THIS PAPER IS THE CO-WINNER OF THE FRED BERGER PRIZE IN PHILOSOPHY OF LAW FOR THE 1999 AMERICAN PHILOSOPHICAL ASSOCIATION FOR THE BEST PUBLISHED PAPER IN THE PREVIOUS TWO YEARS.

The conflict between liberal legal theory and critical legal studies (CLS) is often framed as a matter of whether there is a theory of justice that the law should embody which all rational people could or must accept. In a divided society, the CLS critique of this view is overwhelming: there is no such justice that can command universal assent. But the liberal critique of CLS, that it degenerates into …

Dividends, Noncontractibility, And Corporate Law, William W. Bratton

All Faculty Scholarship

No abstract provided.

What's Wrong With Exploitation?, Justin Schwartz

Justin Schwartz

Abstract: Marx thinks that capitalism is exploitative, and that is a major basis for his objections to it. But what's wrong with exploitation, as Marx sees it? (The paper is exegetical in character: my object is to understand what Marx believed,) The received view, held by Norman Geras, G.A. Cohen, and others, is that Marx thought that capitalism was unjust, because in the crudest sense, capitalists robbed labor of property that was rightfully the workers' because the workers and not the capitalists produced it. This view depends on a Labor Theory of Property (LTP), that property rights are based ultimately …

In Defence Of Exploitation, Justin Schwartz

Justin Schwartz

The concept of exploitation is thought to be central to Marx's Critique of capitalism. John Roemer, an analytical (then-) Marxist economist now at Yale, attacked this idea in a series of papers and books in the 1970s-1990s, arguing that Marxists should be concerned with inequality rather than exploitation -- with distribution rather than production, precisely the opposite of what Marx urged in The Critique of the Gotha Progam.

This paper expounds and criticizes Roemer's objections and his alternative inequality based theory of exploitation, while accepting some of his criticisms. It may be viewed as a companion paper to my What's …

A Property-Based Theory Of Security Interests: Taking Debtor's Choices Seriously, Steven L. Harris, Charles W. Mooney Jr.

All Faculty Scholarship

No abstract provided.

Functional Explanation And Metaphysical Individualism, Justin Schwartz

Justin Schwartz

A number of (present or former) analytical Marxists, such as Jon Elster, have argued that functional explanation has almost no place in the social sciences. (Although the discussion is framed in terms of a debate among analytical Marxists, the point is quite general, and Marxism is used for illustrative purposes.) Functional explanation accounts for what is to be explained by reference to its function; thus, sighted organism have eyes because eyes enable them to see. Elster and other critics of functional explanation argue that this pattern of explanation is inconsistent with "methodological individualism," the idea, as they understand it, that …

From Libertarianism To Egalitarianism, Justin Schwartz

Justin Schwartz

A standard natural rights argument for libertarianism is based on the labor theory of property: the idea that I own my self and my labor, and so if I "mix" my own labor with something previously unowned or to which I have a have a right, I come to own the thing with which I have mixed by labor. This initially intuitively attractive idea is at the basis of the theories of property and the role of government of John Locke and Robert Nozick. Locke saw and Nozick agreed that fairness to others requires a proviso: that I leave "enough …

Bargaining And The Division Of Value In Corporate Reorganization, Howard F. Chang, Lucian A. Bebchuk

All Faculty Scholarship

No abstract provided.

Developments In Law - Toxic Waste Litigation, Howard F. Chang

All Faculty Scholarship

No abstract provided.

Structure Of Labor Relations, Howard Lesnick

All Faculty Scholarship

No abstract provided.

Establishment Of Bargaining Rights Without An Nlrb Election, Howard Lesnick

All Faculty Scholarship

No abstract provided.