Law and Economics Commons^™

Unequal Ownership, Ofer Eldar, Rory Van Loo

Faculty Scholarship

Market concentration and weak competition do not just lead to lower efficiency but also result in corporate profits flowing primarily to wealthy households that own a disproportionate share of public corporations. We demonstrate that this is a growing distributional problem not only due to familiar reasons in the literature, most notably shifts in market power, but also due to changes in the socio-economic makeup of ownership. Over the past twenty years, households in the bottom 90 percent of wealth have seen their share of stock ownership decline by half. That is, the ownership of corporations has become increasingly concentrated among …

Copyright Law And Property Law, Keith N. Hylton

Faculty Scholarship

Property is at the core of state law since it is the exclusive power of the individual state governments to define and protect property rights within their jurisdiction. In this paper I will discuss the general connection between copyright and property generally. I will argue that property law sheds important light on copyright law and can help us cut through modern controversies in copyright law. If I am correct in this view, any judge sufficiently familiar with property law doctrines could do better than the Supreme Court of the United States in resolving a new copyright controversy. Specifically, property law …

Rebalancing Retirement: How 401(K) Plans Exacerbate Inequality And What We Can Do About It, Quinn Curtis, Leo E. Strine, David H. Webber

Faculty Scholarship

Incentives for individuals to save for retirement currently total 1.5% of US GDP. For that substantial investment, we get a system that actually deepens wealth inequality. The top 10% of earners capture 60% of the associated tax benefits, and employer matching contributions disproportionately favor the highest earners. Although defined contribution plans have long been subject to non-discrimination requirements aimed at ensuring that benefits do not accrue predominantly to the wealthiest participants, these rules have little bite. In an irony, we estimate that the entire 401(k) system would fail the non-discrimination test that every employer offering such a plan is expected …

Human Rights Risks In Clean Energy Supply Chains: Racial Capitalism, Critical Minerals, And Corporate Responsibility, Erika George

Faculty Scholarship

This paper argues that decarbonization will fail to deliver climate justice unless the transition to clean energy confronts the racialized political economy that has historically structured extractive activity and shaped international economic law. Grounding its analysis in racial capitalism, the paper contends that the growing demand for critical minerals risks reproducing patterns of exploitation, expropriation, and expulsion. Using lithium extraction in Chile as a case study, it shows how colonial legacies, dictator-era neoliberal reforms, and present-day regulatory architectures governing foreign investment and natural resource extraction have prioritized investors over human rights and the environment. Recent decisions of the International Court …

Anticompetitive Directors, Lane Miles, Mark A. Lemley, Rory Van Loo

Faculty Scholarship

Antitrust scholars have virtually ignored the question of who controls corporations by sitting on their boards of directors. We show that the problem of who sits on boards of directors is considerably greater than previously believed. Drawing on a new dataset spanning both public and private companies across multiple industries, we find evidence that individual board members sit simultaneously on boards of competitors throughout the economy, despite such “interlocking directorates” being illegal under antitrust law. Many of these individuals are senior directors at private equity, venture capital, and other firms investing in the competing firms on whose boards they sit. …

Foundations For Platform Liability, Kathryn E. Spier, Rory Van Loo

Faculty Scholarship

From spreading misinformation to selling deadly products, bad actors use technology platforms to their advantage while causing devastating harms to privacy, health, and even democracy. Despite their central role in enabling these bad actors, the platforms almost entirely escape liability. This legal immunity is purportedly grounded in economics. From the beginning, courts and legislatures feared that liability would chill innovation, growth, and user access. They also speculated that platforms have sufficient market incentives to voluntarily police bad actors, making liability unnecessary.

Whereas many scholars have argued that platform immunity is blind to justice, this Article shows that it is also …

Shaping Preferences With Pigouvian Taxes, Gary M. Lucas Jr.

Faculty Scholarship

A Pigouvian tax is a tax that is imposed to correct an externality, which arises when a person engages in behavior that harms others without their consent. Pigouvian taxes are popular among academics—with prominent economists and legal scholars arguing for their imposition on myriad goods and activities that harm third parties, like carbon emissions and alcohol. Policymakers have recently been receptive to at least some of these arguments as evidenced by taxes imposed on or proposed for a variety of externality-generating goods, including guns, plastic bags, and sugary drinks.

The conventional economic rationale for Pigouvian taxes assumes that they affect …

Intellectual Property, Innovation And Economic Inequality, Daniel Benoliel, Peter K. Yu, Francis Gurry, Keun Lee

Faculty Scholarship

While growing disparities in wealth and income are well-documented across the globe, the role of intellectual property rights is often overlooked. This volume brings together leading commentators from around the world to interrogate the interrelationship between intellectual property and economic inequality. Interdisciplinary and globally oriented by design, the book features economists, legal scholars, policy analysts, and other experts. Chapters address the impact of intellectual property rights on economic inequality, the effect of economic inequality on the protection and enforcement of these rights, and the potential use of innovation law and policy to help reduce economic inequality. The volume also tackles …

Transforming Fair Use, Glynn Lunney

Faculty Scholarship

In the United States, the fate of fair use, and by extension, copyright itself, hang in the balance. In recent years, courts have disagreed over fair use’s proper scope. On the one side are appellate decisions that interpret fair use broadly. While these decisions do not go so far as to suggest that every reuse is fair, they typically use the talismanic phrase “transformative use” and give it a generous and flexible interpretation. On the other side are appellate decisions that interpret fair use restrictively. While again they do not go so far as to suggest no reuse is fair, …

Health Law And Democracy, Wendy K. Mariner

Faculty Scholarship

Current political divisions are destabilizing existing laws affecting the health field. Major changes in the field of health law have one thing in common: changes in who holds political power ‒ Congress and state legislatures, governors, presidents, judges, and agency officials. The laws that structure financial, economic, educational, and health care systems, environmental conditions, and civil society are primarily the product of elections that populate our political institutions. These structural determinants of health in turn create laws that influence how ‒ and how well ‒ we live and whether our society functions fairly under the rule of law. Thus, who …

A Patent And A Prize, Keith N. Hylton

Faculty Scholarship

This paper examines a simple and old question: should innovators receive a patent or a prize? The answer I provide is equally simple: they should receive both. The literature on patents versus prizes has proceeded mostly under the assumption that there should be a choice between a regime of patents and a regime of prizes in which patents fall into the public domain upon award of the prize. There are significant “public choice costs” under the prize plans. By this I mean there are risks of inappropriate transfers to patentees – that is, looting – and of confiscation of patentees, …

Evolving Corporate Philanthropy, David I. Walker

Faculty Scholarship

With the rise of corporate ESG initiatives and public benefit corporations, corporate philanthropy is evolving from an emphasis on cash contributions (contributional philanthropy) to an emphasis on adjusting operations to advance the public good (operational philanthropy). All forms of corporate philanthropy are controversial, but this article evaluates the impact of this evolution on the relative benefits and concerns of corporate philanthropy, arguing that the shift in emphasis towards operational philanthropy increases the comparative advantage of corporate philanthropy, increases agency costs, both simplifies and complicates shareholder primacy concerns, and increases the difficulty of prescriptively regulating corporate philanthropy through the tax code …

The Intangible Divide: Why Do So Few Firms Invest In Innovation?, James Bessen, Xiupeng Wang

Faculty Scholarship

Investments in software, R&D, and advertising have grown rapidly, now approaching half of U.S. private nonresidential investment. Yet just a few hundred firms account for almost all this growth. Most firms, including many large ones, regularly invest little in capitalized software and R&D, and this "intangible divide" has surprisingly deepened as intangible prices have fallen relative to other assets. Using comprehensive US Census microdata, we document these patterns and explore a variety of factors associated with intangible investment. We find that firms invest significantly less in innovation-related intangibles when their rivals invest more. One firm's investment can obsolesce rivals' investments, …

Is Distance From Innovation A Barrier To The Adoption Of Artificial Intelligence?, Jennifer Hunt, Iain Cockburn, James Bessen

Faculty Scholarship

Using our own data on Artificial Intelligence publications merged with Burning Glass vacancy data for 2007-2019, we investigate whether online vacancies for jobs requiring AI skills grow more slowly in U.S. locations farther from pre-2007 AI innovation hotspots. We find that a commuting zone which is an additional 200km (125 miles) from the closest AI hotspot has 17% lower growth in AI jobs’ share of vacancies. This is driven by distance from AI papers rather than AI patents. Distance reduces growth in AI research jobs as well as in jobs adapting AI to new industries, as evidenced by strong effects …

Changes In Revenues Associated With Antimicrobial Reimbursement Reforms In Germany, Matt Mcenany, Kevin Outterson

Faculty Scholarship

Policy declarations from the G7 and other high-level meetings call for increased incentives for antimicrobial research and development (R&D). Governments fund push incentives like CARB-X and GARDP, and G7 countries are now designing pull incentives—financial rewards given to manufacturers post-market authorization that are intended to encourage the creation and introduction of novel antimicrobials. Germany has declared previously at the G7 that it has developed a pull incentive that will increase revenues from sales of important new antimicrobials, principally by exempting them from some aspects of health technology benefit assessments and reference pricing, which should result in higher prices. This policy …

Limits To Asset Manager Adaptation, Madison Condon

Faculty Scholarship

In Our Lives in Their Portfolios, Brett Christophers provides an account of the rise of ‘asset manager society’ – a world in which the infrastructures of public life are converted from public to private ownership. Here I use Christophers’ analysis to comment on growing calls for asset manager investment in climate adaptation. The asset manager business model requires ever-escalating returns, a poor fit with the now unavoidable losses that climate change promises to bring.

The Price Of Consent, Zohra Ahmed

Faculty Scholarship

This Article demonstrates how hierarchies in the international economy and in international financial institutions have facilitated the U.S.-led Global War on Terror (GWOT). Using U.S.-Pakistan relations as a case study, it shows how the United States has deployed its powerful position at the International Monetary Fund (IMF) to claim Pakistan's consent for its military activities in the region. In the GWOT's first decade, beginning in 2001, the United States openly sought forcible regime change, as in Afghanistan and Iraq; in its second and (now) third decades, the United States has waged covert counterinsurgency campaigns allegedly against militant groups in Muslim-majority …

Whistle-Blowing And The Incentive To Hire, Jef De Mot, Murat C. Mungan

Faculty Scholarship

We consider a previously neglected cost of whistle-blower awards: employers may base their hiring decisions, on the margin, not on the productivity of an employee but rather on the probability that the employee will become a whistle-blower. We develop a three-stage model to examine how productivity losses due to distortions at the hiring stage influence optimal whistle-blower rewards. We characterize optimal rewards for whistle-blowing, and show that when rewards can be chosen according to either the benefits of the employer from offending or the productivity of the worker being hired, productivity-based rewards are superior to benefit-based rewards.

Do Private Actors Have Rights Under The Wto? The Motivation For And (Inadequate) Implementation Of Gatt Article X, Adeet Dobhal, Petros C. Mavroidis, Lucas Moreira Jiminez, Sunayana Sasmal, Robert Wolfe

Faculty Scholarship

General Agreement on Tariffs and Trade (GATT) Article X has been consistently overlooked in literature even though it is a unique provision in the GATT-regime: it acknowledges standing for private actors who can challenge trade-related administrative action by World Trade Organization (WTO) members. This provision is an unusual instantiation of the need to provide transparency for private actors about state policy. It is equally eccentric in seeming to provide a right for private actors to challenge governments, albeit only before domestic fora. How did the GATT end up with this provision? And are these apparent private rights meaningful in practice? …

A Second Look: Local Labor Markets And The Impact Of Ban The Box Policies After Criminal Legal Involvement, Benjamin David Pyle

Faculty Scholarship

This paper estimates the impact of labor demand on the employment and recidivism outcomes of released prisoners. Higher labor demand at release generates higher earnings and lower recidivism. Reduced recidivism persists after controlling for the observed labor market outcomes of the returning cohort, suggesting that labor demand impacts crime through channels beyond the direct formal employment of returning prisoners. Difference-in-differences based evidence suggests Ban the Box (BTB) policies delaying when employers can ask about criminal records improve labor market outcomes and lower recidivism for misdemeanor defendants. Evidence for felony defendants and returning prisoners is mixed but suggestive of similar patterns.

Marketing, Other Intangibles, And Output Growth In 61 United States Industries, Leo Sveikauskas, Rachel Soloveichik, Corby Garner, Peter B. Meyer, James Bessen, Matthew Russell

Faculty Scholarship

Experts in the System of National Accounts (SNA) recently considered whether marketing could be included as a capital asset in the national accounts and later recommended that marketing should be an intangible in the 2025 SNA (IMF, 2022, 2023). This paper prepares macroeconomic measures of the United States marketing stock and develops similar measures within 61 industries. We find that, from 1987 to 2020, marketing capital contributed approximately as much to output growth (0.18 percentage point per year) as R&D (0.15) or software (0.19) did. Software grew more rapidly, but marketing had a larger factor share. Marketing contributes even more …

Getting Merger Guidelines Right, Keith N. Hylton

Faculty Scholarship

This paper is on the new Merger Guidelines. It makes several arguments. First, that the Guidelines should be understood as existing in a political equilibrium. Second, that the new structural presumption of the Merger Guidelines (HHI = 1,800) is too strict, and that an economically reasonable revision in the structural presumption would have increased rather than decreased the threshold. Whereas the new Guidelines lowers the threshold to HHI 1,800 from HHI 2,500, an economically reasonable revision would have increased the threshold to HHI 3,200. I justify this argument using a bare-bones model of Cournot competition. Third, it seems unlikely, …

Dci Submission To The European Commission (Ec) On Generative Artificial Intelligence, Stephen Dnes, Lee Fleming, Keith N. Hylton, Bowman Heiden, Juliana Oliveira Domingues, Lola Montero Santos, Nicolas Petit, Jason Potts, Asta Pundziene

Faculty Scholarship

The DCI welcomes the opportunity to submit comments on the EC’s consultation on competition and generative artificial intelligence (hereafter, “GenAI”).1 The two main messages of the DCI submission are the following: • The technological and economic properties of GenAI do not support a case of tipping in which one firm takes the entire market; • The financial and regulatory context of GenAI could fuel ‘winner takes all or most’ dynamics in GenAI markets. These points are set out in more detail in the paragraphs below.

Dci Submission To The Brazil Ministry Of Economy On The Economic And Competitive Aspects Of Digital Platforms, Pinar Akman, Stephen Dnes, Keith N. Hylton, Bowman Heiden, Constance Hiatt, Nicolas Petit, Jennifer Pullen, Annika Stohr

Faculty Scholarship

In its comments on the ‘Economic and Competitive Aspects of Digital Platforms’ for the Brazil Ministry of Economy, the Dynamic Competition Initiative (DCI) suggests that law and policy initiatives towards digital platforms should (1) focus on curbing monopoly rents in bottleneck markets, and not undermine diversification efforts towards technological frontiers; (2) leverage the capability and flexibility of existing competition rules to address digital platforms anticompetitive conduct; and (3) properly credit the consumer welfare gains stemming from digital platforms ecosystems given the domestic economic context.

Trial Selection And Estimating Damages Equations, Keith N. Hylton

Faculty Scholarship

Many studies have employed regression analysis with data drawn from court opinions. For example, an analyst might use regression analysis to determine the factors that explain the size of damages awards or the factors that determine the probability that the plaintiff will prevail at trial or on appeal. However, the full potential of multiple regression analysis in legal research has not been realized, largely because of the sample selection problem. We propose a method for controlling for sample selection bias using data from court opinions.

The Chicago School’S Coasean Incoherence, Madison Condon

Faculty Scholarship

This comment traces the divergent legal academic interpretations of the Chicago School's Ronald Coase and where their influence lands--revealing the law’s inconsistent conception of just what a corporation is or should be. By following Alyssa Battistoni's investigation of the origin of the "externality," we can see the late 60s and early 1970s as a pivotal era. People were waking up to the collective costs of industrialization and pushing back against corporate power. Against this democratic wave, the writings of the Chicago School worked to separate one human person into her different roles in the economy—consumer, worker, shareholder. They used the …

Antisocial Innovation, Christopher Buccafusco, Samuel N. Weinstein

Faculty Scholarship

Innovation is a form of civic religion in the United States. In the popular imagination, innovators are heroic figures. Thomas Edison, Steve Jobs, and (for a while) Elizabeth Holmes were lauded for their vision and drive and seen to embody the American spirit of invention and improvement. For their part, politicians rarely miss a chance to trumpet their vision for boosting innovative activity. Popular and political culture alike treat innovation as an unalloyed good. And the law is deeply committed to fostering innovation, spending billions of dollars a year to make sure society has enough of it. But this sunny …

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 …

Does Intellectual Property Promote Or Hinder Sustainability? The Case Of Upcycling, Irene Calboli, Siroos Tanner

Faculty Scholarship

This book chapter explores upcycling and its intricate legal and ethical challenges, addressing the challenges upcycling faces from an IP perspective and highlighting the defenses potentially available to justify the practice.

After Ftx: Can The Original Bitcoin Use Case Be Saved?, Mark Burge

Faculty Scholarship

Bitcoin and the other cryptocurrencies spawned by the innovation of blockchain programming have exploded in prominence, both in gains of massive market value and in dramatic market losses, the latter most notably seen in connection with the failure of the FTX cryptocurrency exchange in November 2022. After years of investment and speculation, however, something crucial has faded: the original use case for Bitcoin as a system of payment. Can cryptocurrency-as-a-payment-system be saved, or are day traders and speculators the actual cryptocurrency future? This article suggests that cryptocurrency has been hobbled by a lack of foundational commercial and consumer-protection law that …