Law and Economics Commons^™

Too Essential To Fail: Lessons From County Fiscal Crises, Michael A. Francus

Journal Articles

This Article draws out the lessons of counties for municipal finance. To do so, the Article begins by unpacking the municipal finance regulations that have provided counties with extraordinary fiscal safety. The Article then turns to case studies of the eleven counties that either filed for bankruptcy or had state fiscal interventions since the passage of the Bankruptcy Code in 1978. Those case studies show how counties' finances can (in rare cases) go wrong despite well-designed municipal finance regulations. The case studies also show how counties have successfully responded to those crises through bankruptcy and fiscal intervention.

Using that analysis, …

Can The Sec Mandate Disclosures That Contain Both Financial And Social Information? The Case Of The Human Capital Management Disclosures, Patrick M. Corrigan

Journal Articles

Human capital contributes directly to the top and bottom line of corporate financial performance. However, theory predicts, and empirical studies suggest, that firms underinvest in human capital because of a classic public goods problem: since employees can always leave to work for another employer, firms cannot expect to bear all the fruits of investments they make in human capital. As human capital becomes more important in the modern service and technology economy, the ills of this public good problem are growing and the deficiencies of underinvestment becoming more apparent. This Article studies the potential role of human capital management disclosures. …

Do The Securities Laws Actually Protect Investors (And How)? Lessons From Spacs, Patrick M. Corrigan

Journal Articles

From the Article

This Article identifies transactional innovation in public offering markets as a case study of how going-public transactions would work if issuers could choose to relax some of the investor protections provided under the securities laws. In recent years, private companies that wanted to go public had a meaningful choice between a traditional initial public offering and a merger with a special purpose acquisition corporation (SPAC). Most of the direct and indirect investor protections that ordinarily apply in the initial public offering context are relaxed in the SPAC context.

The Article argues that outcomes in SPAC markets, where …

Death, Bankruptcy, And The Public Hospital, Michael A. Francus

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From the Article

This Article expands the purview of bankruptcy scholarship to those government businesses, assessing how Chapter 9 operates for them. It does so by taking public hospitals as a case study, offering a comprehensive look at every public-hospital bankruptcy between 1988 and 2021.

Daca's Tax Benefits Highlight The Need For Broader Immigration Reform, Jacqueline Lainez Flanagan

Journal Articles

America’s aging population and declining birth rates are negatively affecting the nation’s Social Security and Medicare safety nets, reducing tax revenue, and weakening the broader economy.1 Meanwhile, immigration is increasing workforce participation by expanding the number of young adults in the United States.2 Despite political setbacks, the Deferred Action for Childhood Arrivals (DACA) program exemplifies the economic and tax benefits of immigration, providing data and the impetus for a better way forward. Although not all DACA-eligible youth have registered for it, it is estimated that in 2017 alone, more than $2.2 billion in federal taxes were paid by DACA-eligible youth …

Conflict Of Laws? Tensions Between Antitrust And Labor Law, Matthew Dimick

Journal Articles

Not long ago, economists denied the existence of monopsony in labor markets. Today, scholars are talking about using antitrust law to counter employer wage-setting power. While concerns about inequality, stagnant wages, and excessive firm power are certainly to be welcomed, this sudden about-face in theory, evidence, and policy runs the risk of overlooking some important concerns. The purpose of this Essay is to address these concerns and, more critically, to discuss some tensions between antitrust and labor law, a more traditional method for regulating labor markets. Part I addresses a question raised in the very recent literature, about why antitrust …

Allocating State Authority Over Charitable Nonprofit Organizations, Lloyd Hitoshi Mayer

Journal Articles

This Essay considers the allocation of state authority to enforce the legal obligations particular to charities and their leaders among state officials, including attorneys general, judges, and legislators, and private parties. It first describes the existing allocation. It then reviews the most common criticisms of this allocation, which primarily focus on two concerns: politicization and lack of sufficient enforcement. Finally, it evaluates the most notable proposals for reallocating this authority, including the reallocation of this authority in part to private parties.

This Essay concludes that reform proposals have two fundamental flaws. First, proposals aimed at countering the political nature of …

Association For The Promotion Of Political Economy And The Law (Appeal): Transforming Law And Economic Power, Martha T. Mccluskey

Journal Articles

This article reflects on the Association for the Promotion of Political Economy and Law (APPEAL), formed in 2012 as the first contemporary scholarly group named for the emerging field of Law and Political Economy (LPE). APPEAL organizes academics and allies to address urgent social problems by exploring possibilities for reorienting the economy toward justice, equality, and democracy. To mobilize ideas for change, APPEAL emphasizes collaborative intellectual communities. I situate APPEAL in the context of a neoliberal political movement to capture law’s power by investing in the Law and Economics message that economic power inevitably limits democracy and social justice. Though …

If You Can't Beat Them, Join Them: Richard Posner And Behavioral Law And Economics, Avishalom Tor, Doran Teichman, Eyal Zamir

Journal Articles

Since its publication in 1973, Economic Analysis of Law (the Treatise) by Richard Posner has been recognized as the canonical treatise in the field. Given this status, observing changes over time in the different editions of the book can highlight substantial and methodological shifts in the area. On this backdrop, this brief essay will highlight Posner's change of attitude towards behavioral analysis of law over the years, culminating with the incorporation of behavioral insights into the las edition of this book, published in 2024.

The Private Costs Of Behavioral Interventions, Avishalom Tor

Journal Articles

The increasing popularity of behavioral interventions—also known as nudges—is largely due to their perceived potential to promote public and private welfare at dramatically lower costs than those of traditional regulatory instruments, such as mandates or taxes. Yet, though nudges typically involve low implementation costs, scholars and policymakers alike tend to underestimate their often-substantial private costs. Once these costs are accounted for, most nudges turn out to generate significantly lower net benefits than assumed, and some prove less efficient or less cost-effective than traditional instruments. At other times, the private costs of behavioral interventions are sufficiently large to render them socially …

When Should Governments Invest More In Nudging? Revisiting Benartzi Et Al. (2017), Avishalom Tor, Jonathan Klick

Journal Articles

Highly influential recent work by Benartzi et al. (2017) argues—using comparisons of effectiveness and costs—that behavioral interventions (or nudges) offer more cost-effective means than traditional regulatory instruments for changing individual behavior to achieve desirable policy goals. Based on this finding, these authors further conclude that governments and other organizations should increase their investments in nudging to supplement traditional interventions. Yet a closer look at Benartzi et al.’s (2017) own data and analysis reveals that they variously exclude and include key cost elements to the benefit of behavioral instruments over traditional ones and overstate the utility of cost-effectiveness analysis for policy …

The Law And Economics Of Behavioral Regulation, Avishalom Tor

Journal Articles

This article examines the law and economics of behavioral regulation (“nudging”), which governments and organizations increasingly use to substitute for and complement traditional instruments. To advance its welfare-based assessment, Section 1 examines alternative nudging definitions and Section 2 considers competing nudges taxonomies. Section 3 describes the benefits of nudges and their regulatory appeal, while Section 4 considers their myriad costs—most notably the private costs they generate for their targets and other market participants. Section 5 then illustrates the assessment of public and private welfare nudges using cost-benefit analysis, cost-effectiveness analysis, and rationality-effects analysis.

Rethinking Economics For Tax Law And Political Economy, Martha T. Mccluskey

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No abstract provided.

Anticompetition In Buying And Selling Homes, Roger P. Alford, Benjamin H. Harris

Journal Articles

Developments in the real estate industry are slowly eroding the National Association of Realtor’s dominant market position. New entrants provide alternative avenues for consumers to buy homes, reducing the dependence on the existing system. These innovations have slowly chipped away at realtor commissions. In addition, consumers have brought class action suits in federal court to challenge the NAR’s practices. These suggest a trend toward greater competition, but they are not enough; without enforcement or regulatory action, widespread threats to competition will continue.

Arbitrating The England Problem: Litigation, Private Ordering, And The Rise Of The Modern Economy, Christian R. Burset

Journal Articles

Legal scholars, historians, and social scientists have long puzzled over how England-with its apparently irrational common-law system-gave birth to the Industrial Revolution. One prominent solution has been to suggest that eighteenth-century merchants used arbitration and other forms of private ordering to sidestep England's defective legal system. This Article questions that story by offering a new account of how and why extralegal commercial arbitration declined in the early years of the Industrial Revolution. Until the middle of the eighteenth century, merchants could generally resolve their disputes without courts or lawyers. But that changed as new forms of lending arose, credit transactions …

An Economic Approach To Religious Exemptions, Stephanie H. Barclay

Journal Articles

Externalities caused by religious exemptions have been getting the spotlight again in light a case the U.S. Supreme Court will hear this term: Fulton v. City of Philadelphia. Some argue that religious individuals should be required to internalize the costs they impose on third parties and thus should be denied the right to practice that harmful behavior. These new progressive theories about harm trade on rhetoric and normative intuitions regarding externalities and costs. But curiously, these theories also largely ignore an influential theoretical movement that has studied externalities and costs for the last fifty years: law and economics.

This Article …

Dismantling The Master's House: Toward A Justice-Based Theory Of Community Economic Development, Etienne Toussaint

Journal Articles

Since the end of the American Civil War, scholars have debated the efficacy of various models of community economic development, or CED. Historically, this debate has tracked one of two approaches: place-based models of CED, seeking to stimulate community development through market-driven economic growth programs, and people-based models of CED, focused on the removal of structural barriers to social and economic mobility that prevent human flourishing. More recently, scholars and policymakers have turned to a third model from the impact investing community—the social impact bond, or SIB. The SIB model of CED ostensibly finds a middle ground by leveraging funding …

Nudges That Should Fail?, Avishalom Tor

Journal Articles

Professor Sunstein (2017) discusses possible causes for and policy implications of the failure of nudges, with a special attention to defaults. Though he focuses on nudges that fail when they should succeed, Sunstein recognizes that some failures reveal that a nudge should not have been attempted to begin with. Nudges that fail, however, does not consider fully the relationship between the outcomes of nudging and their likely welfare effects, most notably neglecting the troubling case of nudges that succeed when they should fail. Hence, after clarifying the boundaries of legitimate nudging and noting the fourfold relationship between the efficacy of …

The Seller’S Curse And The Underwriter’S Pricing Pivot: A Behavioral Theory Of Ipo Pricing, Patrick M. Corrigan

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From the Article

Canonical theories of law and economics predict that issuing firms in initial public offerings (IPOs) demand — and that competitive markets produce — a transaction structure that maximizes value to issuers. Yet, since 1980, corporate America has left approximately 19 cents of foregone proceeds on the table for every dollar it has raised in IPOs. Moreover, the standard IPO contract appears designed to exacerbate rather than resolve agency costs, information asymmetries, and other foreseeable causes of IPO underpricing. This Article studies a new puzzle: why don’t issuers anticipate their transactional vulnerability and bargain for a sale of …

All Costs Have A Right, Martha T. Mccluskey

Journal Articles

From "Eleven Things They Don’t Tell You About Law & Economics: An Informal Introduction to Political Economy and Law."

Many legal scholars have critiqued the dominant law and economics paradigm. However, important work is all too often neglected because it is not popularized in an accessible form. This Article features experts who synthesize their key insights into memorable and concise vignettes. Our 11 Things project is inspired by the work of the Cambridge economist Ha-Joon Chang, who distilled many facets of his work into a book called 23 Things They Don’t Tell You About Capitalism. That book was a runaway …

The Diminishing Duty Of Loyalty, Julian Velasco

Journal Articles

Fiduciary duties comprise an integral part of corporate law. It is generally understood that directors owe the corporation and its shareholders two fiduciary duties: the duty of care and the duty of loyalty. Although both duties are firmly established in corporate law, they are not treated equally. It is generally understood that the duty of loyalty is enforced far more rigorously than the duty of care. The justification for this dichotomy is twofold. First, differential treatment is appropriate because of the relative urgencies of the underlying subject matter: loyalty issues pose greater risks than do care issues. Second, the deference …

Teaching The Lochner Era, Barry Cushman

Journal Articles

This article, prepared for the St. Louis University Law Journal's issue on “Teaching the Fourteenth Amendment,” develops a taxonomy of the Supreme Court's economic substantive due process jurisprudence during the so-called “Lochner Era” of the late-19th and early-20th centuries, and offers an assessment of the trajectory and mechanisms of the decline of that body of doctrine.

Models Of Other-Regarding Preferences And Redistribution, Matthew Dimick, David Rueda, Daniel Stegmueller

Journal Articles

Despite the increasing popularity of comparative work on other-regarding preferences, the implications of different models of altruism are not always fully understood. This article analyzes different theoretical approaches to altruism and explores what empirical conclusions we should draw from them, paying particular attention to models of redistribution preferences where inequality explicitly triggers other-regarding motives for redistribution. While the main contribution of this article is to clarify the conclusions of these models, we also illustrate the importance of their distinct implications by analyzing Western European data to compare among them. We draw on individual-level data from the European Social Survey fielded …

Defining The Economic Pie, Not Dividing Or Maximizing It, Martha T. Mccluskey

Journal Articles

This essay challenges the question that drives much of legal analysis: whether to maximize or divide the “economic pie.” Regardless of the answer, this question skews legal analysis and rests on dubious economics. This framing binary inherently presents economic maximizing as the presumptive norm, represented as superior to socioeconomic distribution in both spatial and temporal dimensions. By definition, economic “maximizing” stands larger in scope and first in order. The essay first critiques the idea that legal analysis can aim to make the economy bigger without engaging contested questions of value and politics, showing how this misleading separation of quantity from …

Are We Economic Engines Too? Precarity, Productivity, And Gender, Martha T. Mccluskey

Journal Articles

No abstract provided.

Unicorns, Guardians, And The Concentration Of The U.S. Equity Markets, Amy Deen Westbrook, David A. Westbrook

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No abstract provided.

The New Gospel Of Wealth: On Social Impact Bonds And The Privatization Of Public Good, Etienne C. Toussaint

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Since Andrew Carnegie penned his famous Gospel of Wealth in 1889, corporate philanthropists have championed considerable public good around the world, investing in a wide range of social programs addressing a diversity of public issues, from poverty to healthcare to criminal justice. Nevertheless, the problem of “the Rich and the Poor,” as termed by Andrew Carnegie in his famous essay, remains unsolved. Socially conscious investors have recently called for America to reimagine a new “gospel of wealth”, one that not only grapples with the what of social injustice, but also explores the how and the why of systemic social and …

Remedies, Meet Economics; Economics, Meet Remedies, Samuel L. Bray

Journal Articles

One would expect the fields of ‘law and economics’ and ‘remedies’ to have substantial interaction, but scholars in each field largely ignore those in the other. Thus, law and economics scholars blunder in their description of the law of remedies, and remedies scholars are cut off from economic insights. For scholars who are in these fields, this article offers a critique, as well as suggestions for cooperation. For all legal scholars interested in melding conceptual and economic analysis, it offers a cautionary tale of disciplinary fragmentation.

Prolegomenon To A Defense Of The City Of Gold, David A. Westbrook

Journal Articles

In recent political contests, economics has been used as a subjective language of disputation and identification, contradicting the field's traditional aspirations to objectivity, even science. In both partisan politics and the related but not identical bifurcation between "populist" and "establishment" or "elite" discourse, positions have become routinized into antagonistic tropes. This poses a serious problem for the United States, which uses political discourse not only for politics, but to create social cohesion among disparate groups. More generally, elites bereft of Marx no longer have a grammar with which to conceptualize, critique, and ultimately defend the global liberal order that they …

The Altruistic Rich? Inequality And Other-Regarding Preferences For Redistribution, Matthew Dimick, David Rueda, Daniel Stegmueller

Journal Articles

What determines support among individuals for redistributive policies? Do individuals care about others when they assess the consequences of redistribution? This article proposes a model of other-regarding preferences for redistribution, which we term income-dependent altruism. Our model predicts that an individual’s preferred level of redistribution is decreasing in income, increasing in inequality, and, more importantly, that the inequality effect is increasing in income. Thus, even though the rich prefer less redistribution than the poor, the rich are more responsive, in a positive way, to changes in inequality than are the poor. We contrast these results with several other prominent …