Law and Economics Commons^™

Securities Disclosure In A Globalizing Market: Who Should Regulate Whom, Merritt B. Fox

Michigan Law Review

One of the most dramatic examples of increasing interaction across national boundaries in recent years has been the burgeoning volume of transnational transactions in corporate equities. Most developed capitalist countries impose affirmative obligations on issuers of corporate equity to disclose certain information about themselves. While these obligations are imposed on issuers, they are triggered by transactions. The growth in transnational transactions is thus increasingly raising difficult issues concerning the reach of differing national regimes. Given the magnitude of legal resources devoted to compliance with such disclosure regulations, they promise to feature prominently in the larger discussion of the role of …

The Immovable Object Versus The Irresistable Force: Rethinking The Relationship Between Secured Credit And Bankruptcy Policy, Lawrence Ponoroff, F. Stephen Knippenberg

Michigan Law Review

The last leaf in O. Henry's classic short story was hanging by a delicate thread, but it never fell. It never fell, of course, because it wasn't real; Old Behrman had painted it (and caught pneumonia for his trouble) in order to give Johnsy the will to live. The Supreme Court's decision in Dewsnup v. Timm is also hanging by a thread, following a barrage of scholarly criticism and more than four years of limiting case law and legislative incursions on the case's core conceptual rationale. But the holding in Dewsnup, unlike the last leaf, is very real. It has …

The Idea Of Fairness In The Law Of Enterprise Liability, Gregory C. Keating

Michigan Law Review

The theory and practice of enterprise liability are oddly disjoined. On the one hand, case rhetoric insists that considerations of fairness are among the primary justifications for imposing enterprise liability. On the other hand, normatively inclined and theoretically ambitious scholarship on enterprise liability is overwhelmingly economic in cast. Economically inclined scholars have flocked to the field, while other kinds of tort theorists have shunned it, implicitly or explicitly conceding it to economic analysis. This paper argues that, contrary to this consensus, there is a powerful and important fairness case to be made for enterprise liability. This case fits the rhetoric …

Is Turn About Fair Play? Copyright Law And The Fair Use Of Computer Software Loaded Into Ram, Chad G. Asarch

Michigan Law Review

Computer systems, especially those in heavy-use commercial settings, often require routine maintenance to continue functioning properly. Many businesses turn to an independent service organization ("IS0") to provide computer maintenance services because ISOs frequently charge less than the original equipment manufacturer ("OEM") for those services. The tremendous growth in computer use has spawned a multi-billion dollar computer maintenance industry in the United States, and ISOs and OEMs have become engaged in fierce competition for this computer service business. The struggle between ISOs and OEMs to capture this expanding market has spilled over into the courts, spawning a number of recent decisions …

Revitalizing Environmental Federalism, Daniel C. Esty

Michigan Law Review

Politicians from Speaker Newt Gingrich to President Bill Clinton, cheered on by academics such as Richard Revesz, are eagerly seeking to return authority over environmental regulation to the states. In the European Union, localist opponents of environmental decisionmaking in Brussels rally under the banner of "subsidiarity." And in debates over international trade liberalization, demands abound for the protection of "national sovereignty" in environmental regulation. All of these efforts presume that a decentralized approach to environmental policy will yield better results than more centralized programs. This presumption is misguided. While the character of some environmental concerns warrants a preference for local …

Securing Russia's Future: A Plea For Reform In Russian Secured Transactions Law, Jason J. Kilborn

Michigan Law Review

After many turbulent years of uneasy transition to a market economy, Russia is finally "open for business." Nonetheless, the transitional period remains far from over, and Russian enterprises are still starved for capital that they desperately need for retooling to convert from military to consumer production, for acquiring new equipment to replace old and worn machinery, and for undertaking new and lucrative projects. While Russian financial institutions may provide significant funding, their reserves are limited; they could not hope to finance independently the multitude of existing and potential enterprises within the expansive Russian territory. Therefore, much of the financing for …

Antitrust Balancing In A (Near) Coasean World: The Case Of Franchise Tying Contracts, Alan J. Meese

Michigan Law Review

Antitrust law has largely succumbed to the hegemony of balancing. Courts applying the rule of reason are told to balance a restraint's procompetitive effects against its anticompetitive impact. Mergers once deemed anticompetitive solely because they facilitated the exercise of market power are now evaluated by weighing the anticompetitive effects of such increased power against any efficiencies created by the transaction. Finally, some activities once deemed per se illegal are now subject to a balancing approach, either by explicit application of the rule of reason, or by recognition of certain affirmative defenses to otherwise per se violations. Unlike many other balancing …

Toward A Tax-Based Explanation Of The Liability Insurance Crisis, Kyle D. Logue

Articles

The so-called liability insurance crisis of 1985 and 1986 transformed the way we think about tort law and about liability insurance markets. The crisis phenomena, which first appeared in late 1984 and lasted until mid-1986, consisted of enormous increases in liability insurance premiums and alarming reductions in the availability of certain types of liability coverage. In the two principal liability lines of insurance (Other Liability and Medical Malpractice), premiums increased by hundreds (in some cases thousands) of percentage points in a matter of months. At the same time, the availability of liability insurance contracted sharply. The liability policies that were …

Positivism And The Separation Of Law And Economics, Avery Wiener Katz

Michigan Law Review

The goal of this essay is to explain this problem and to translate the meaning of positivism between legal and economic cultures, in order to show economists and lawyers why much of the debate about the jurisprudential merits of law and economics misses the mark. My thesis is that it is positivism, and the way economic culture treats the positive-normative distinction, that is responsible for much of the gulf between law and economics - but that it is also positivism that makes economics so appealing to so many lawyers and legal scholars. For a positivist approach can be useful to …

Game Theory And The Law: Ready For Prime Time?, Stephen W. Salant, Theodore S. Sims

Michigan Law Review

A Review of Douglas G. Baird, Robert H. Gertner, and Randal C. Picker, Game Theory and the Law

Takings From Freund To Fischel." Review Of Regulatory Taking: Law, Economics, And Politics, By W. A. Fischel, James E. Krier

Reviews

The regulatory takings problem is easy to describe but difficult to resolve. The government enacts restrictions on land use that reduce the market value of the targeted parcels by a considerable amount. The restrictions are couched in terms of the police power, but actually they might amount to a taking that requires compensation, not because any of the land has been wrested away (it hasn't), but because much of the value has. Through the police power the government gets to govern for free, whereas with takings it's pay as you go. On what does the distinction-police power or taking-depend?

Can Families Be Efficient? A Feminist Appraisal, Ann Laquer Estin

Michigan Journal of Gender & Law

This Article examines the convergence of feminist and law and economics theory on family law questions, particularly issues of marriage and divorce. Both feminist legal theory and law and economics analysis have come to occupy a significant place in the American legal academy, demonstrated by growing numbers of conferences, journals, casebooks and monographs, and electronic mail lists in each area. Not surprisingly, as the two fields have grown, they have begun to touch, to overlap, and occasionally to come into conflict. This process has been evident in the extensive literature on sex discrimination in employment and is increasingly apparent in …

Tax Transitions, Opportunistic Retroactivity, And The Benefits Of Government Precommitment, Kyle D. Logue

Articles

What if the current federal income tax laws were repealed and replaced with a simple flat tax? What if the entire Internal Revenue Code (with its graduated rates and countless deductions, exclusions, and credits) were scuttled in favor of a broad-based consumption tax? Only a few years ago, such proposals would have seemed radical and extremely unlikely to be adopted. But times are changing. Calls for a drastic overhaul of the Internal Revenue Code have become commonplace, even at the highest levels in the tax-policy community. In addition, proposals that would replace the income tax with a flat-rate broad-based consumption …

Faculty Spotlight - Kyle D. Logue, Kyle D. Logue

Articles

Most of my teaching and research efforts are currently spent in two general fields of law - taxation and insurance. Which raises an interesting question: Why would a rational person decide to devote a good portion of his academic career to areas of law that many people - lawyers and nonlawyers alike - find painfully boring and unreasonably complicated? The ta and insurance lawyers in the audience, of course, already know the answer - that ta ation and insuran e are e ceptionally interesting topics and that, if one wants to understand how the real world works (in particular, the …

Further Evidence Of Discrimination In New Car Negotiations And Estimates Of Its Cause, Ian Ayres

Michigan Law Review

A 1991 test of new car dealerships in Chicago indicated that dealerships offered significantly lower prices to white male testers than to similarly situated black and-or female testers: white female testers were asked to pay 40% higher markups than white male testers; black male testers were asked to pay more than twice the markup of white male testers; and black female testers were asked to pay more than three times the markup of white male testers. This article extends the results of this initial test by presenting not only more authoritative evidence of discrimination but also a new quantitative method …

Risk Regulations And Its Hazards, Stephen F. Williams

Michigan Law Review

A Review of Breaking the Vicious Circle: Toward Effective Risk Regulation by Stephen Breyer

Property Rules And Liability Rules: The Cathedral In Another Light, James E. Krier, Stewart J. Schwab

Articles

Ronald Coase's essay on "The Problem of Social Cost" introduced the world to transaction costs, and the introduction laid the foundation for an ongoing cottage industry in law and economics. And of all the law-and-economics scholarship built on Coase's insights, perhaps the most widely known and influential contribution has been Calabresi and Melamed's discussion of what they called "property rules" and "liability rules."' Those rules and the methodology behind them are our subjects here. We have a number of objectives, the most basic of which is to provide a much needed primer for those students, scholars, and lawyers who are …

Liberal Markets, Jeremy Waldron

Michigan Law Review

A Review of Risks and Wrongs by Jules L. Coleman

Solving The Judgment-Proof Problem, Kyle D. Logue

Articles

A tortfeasor who cannot fully pay for the harms that it causes is said to be "judgment proof." Commentators have long recognized that the existence of judgment-proof tortfeasors seriously undermines the deterrence and insurance goals of tort law. The deterrence goal is undermined because, irrespective of the liability rule, judgment-proof tortfeasors will not fully internalize the costs of the accidents they cause. The insurance goal will be undermined to the extent that the judgment-proof tortfeasor will not be able to compensate fully its victims and that first-party insurance markets do not provide an adequate response. Liability insurance can ameliorate these …

Repossession: Of History, Poverty, And Dissent, Martha Minow

Michigan Law Review

A Review of The Dispossessed: America's Underclasses from the Civil War to the Present by Jacqueline Jones

Microeconomics Made (Too) Easy: A Casebook Approach To Teaching Law And Economics, Gregory S. Crespi

Michigan Law Review

A Review of Cases and Materials on Law and Economics by David W. Barnes and Lynn A. Stout

Incompletely Reasoned Sex: A Review Of Posner's Somewhat Misleading Guide To The Economic Analysis Of Sex And Family Law, Martin Zelder

Michigan Law Review

A Review of Sex and Reason by Richard A. Posner

Section 1: Nuts And Bolts, David A. Santacroce

Other Publications

Workers facing plant closing and permanent or long-term layoffs now have a little more legal protection to give them some time to plan for retraining and to look for new jobs.

The Worker Adjustment and Retraining Notification (WARN) Act provides for 60 days advance notice to certain workers affected by a plant closing or mass layoff. This law was passed by the U.S. Congress in 1988 after having been sought for many years by unions and other workers' rights advocates.

Vigorous action by the labor movement and strong public support led to passage of the WARN Act in spite of …

A Bargaining Analysis Of American Labor Law And The Search For Bargaining Equity And Industrial Peace, Kenneth G. Dau-Schmidt

Michigan Law Review

In this article, I present an alternative economic analysis of unions and collective bargaining that utilizes recent advances in labor economics and some simple applications of game theory to address the deficiencies of the traditional monopoly model.

The article proceeds in four parts. In Part I, I provide a brief primer on the economic analysis of unions and collective bargaining. I discuss the various possible sources of union wage increases, possible employer responses to union wage demands, and alternative models of the costs of collective bargaining. In Part II, I outline the traditional monopoly theory of unions by combining the …

Three Attorney Fee-Shifting Rules And Contingency Fees: Their Impact On Settlement Incentives, Bradley L. Smith

Michigan Law Review

This Note seeks to predict the direction and magnitude of the change in settlement frequency under the three fee-shifting rules: American, British, and the British rule as modified by the PCC. Part I analyzes the proposed rule using the theoretical model of litigation and settlement developed by Hause. Part II examines the impact of fee-shifting when the plaintiff's lawyer receives reimbursement via a contingency fee. Analysis of indemnification in a contingency fee context raises several policy issues which section II.A addresses. Section II.B discusses the terms and assumptions made in adjusting Hause's model to reflect the standard contingency fee arrangement, …

Law And Public Choice: A Critical Introduction, William Dubinsky

Michigan Law Review

A Review of Law and Public Choice: A Critical Introduction by Daniel A. Farber and Philip P. Frickey

Scholarship Of The Absurd: Bob Bork Meets The Bald Soprano, Alex Kozinski

Michigan Law Review

A Review of Antitrust Economics on Trial: A Dialogue on the New Laissez-Faire by Walter Adams and James W. Brock

The Strategic Structure Of Offer And Acceptance: Game Theory And The Law Of Contract Formation, Avery Katz

Michigan Law Review

The purpose of this article is to promote a particular research program; namely, the use of game theory to analyze the law of contract formation. Although I will often simply speak of offer and acceptance in my discussion, I mean to refer to a broader set of issues than are commonly denoted by this doctrinal label. My program transcends the narrow issue of whether particular communications technically should be classified as offers and acceptances, and includes questions often analyzed under the rubrics of implication and interpretation. At its broadest, my argument addresses all legal rules that answer two types of …

The Role Of The Democratic And Republican Parties As Organizers Of Shadow Interest Groups, Jonathan R. Macey

Michigan Law Review

This article advances a new theory to explain the relationship between political parties and interest groups. Among the as yet unanswered questions that I resolve are: (1) why many politicians -both Republicans and Democrats - develop a reputation for "party loyalty" despite the parties' inability to employ any meaningful sanctions against politicians who deviate from the party line; (2) why candidates for public office run in contested primaries when running as an independent generally would be a less costly mechanism for getting on the ballot; (3) why the two major U.S. political parties continue to attract resources from contributors and …

Groping And Coping In The Shadow Of Murphy's Law: Bankruptcy Theory And The Elementary Economics Of Failure, James W. Bowers

Michigan Law Review

Part I briefly examines the conventional explanation for bankruptcy's defining characteristic, its default distributional rule. It concludes that the conventional explanation is insufficiently informative for us to tell whether the Bankruptcy Code (Code) is actually working or not. Part II argues that the only existing systematic attempt to explain bankruptcy law, the so-called "Creditors' Bargain" Theory, is inadequate for two reasons. First, the predictions it generates are belied by real-world events. Second, it is mistaken on theoretical grounds, primarily because it ignores how debtors are likely to manage their assets. Part III presents the Murphian theory of failing behavior, the …