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Michigan Law Review

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Full-Text Articles in Law and Economics

Brand New Deal: The Branding Effect Of Corporate Deal Structures, Victor Fleischer Jun 2006

Brand New Deal: The Branding Effect Of Corporate Deal Structures, Victor Fleischer

Michigan Law Review

Consider the unusual legal structures of the following four deals: When Google went public in 2004, it used an Internet auction to sell its stock to shareholders. When Ben & Jerry's went public in 1984, it sold its stock only to Vermont residents. Steve Jobs's contract with Apple entitles him to an annual cash salary of exactly one dollar. Stanley Works, a Connecticut toolmaker, considered reincorporating in Bermuda to reduce its tax liability. Under public pressure, it changed its mind and remains legally incorporated in Connecticut. What do these deals have in common? In each case, the legal infrastructure of …


The Political Market For Criminal Justice, Rachel E. Barkow Jun 2006

The Political Market For Criminal Justice, Rachel E. Barkow

Michigan Law Review

In 2004, the number of individuals incarcerated in the United States exceeded the two million mark. The current incarceration rate in the United States is 726 per 100,000 residents, the highest incarceration rate in the Western world and a dramatic increase from just three decades ago. Not only are more people serving time, but sentences have markedly lengthened. What should we make of these trends? The answer has been easy for most legal scholars: to them, the incarceration rate in the United States is too high, and reforms are necessary to lower sentences. But many political leaders and voters reach …


Crime, Criminals, And Competitive Crime Control, Wayne A. Logan Jun 2006

Crime, Criminals, And Competitive Crime Control, Wayne A. Logan

Michigan Law Review

Given the negative consequences of crime, it should come as no surprise that states will endeavor to make their dominions less hospitable to potential criminal actors. This predisposition, when played out on a national stage, would appear ripe for a dynamic in which states will seek to "out-tough" one another, leading to a spiral of detrimental competitiveness. Doran Teichman, in an article recently appearing in these pages, advances just such a view. Teichman posits that the decentralized structure of America's federalist system provides states with "an incentive to increasingly harshen" their crime control efforts, with the net result being excessive …


Decentralizing Crime Control: The Political Economy Perspective, Doron Teichman Jun 2006

Decentralizing Crime Control: The Political Economy Perspective, Doron Teichman

Michigan Law Review

In an article recently published on the pages of this Law Review, The Market for Criminal Justice: Federalism, Crime Control, and Jurisdictional Competition ("The Market"), I put forward a theory of crime control in a decentralized government. Specifically, I made three distinct claims. First, criminal justice policies affect the geographic decision of criminals as to where to commit their crimes. Other things being equal, criminal activity will tend to shift to areas in which the expected sanction is lower. Second, local jurisdictions attempting to lower their crime rates will react to policies adopted by neighboring jurisdictions and try …


One-Sided Contracts In Competitive Consumer Markets, Lucian A. Bebchuk, Richard A. Posner Mar 2006

One-Sided Contracts In Competitive Consumer Markets, Lucian A. Bebchuk, Richard A. Posner

Michigan Law Review

The usual assumption in economic analysis of law is that in a competitive market without informational asymmetries, the terms of contracts between sellers and buyers will be optimal-that is, that any deviation from these terms would impose expected costs on one party that exceed benefits to the other. But could there be cases in which "one-sided" contracts containing terms that impose a greater expected cost on one side than benefit on the other-would be found in competitive markets even in the absence of fraud, prohibitive information costs, or other market imperfections? That is the possibility we explore in this Article.


The Role Of Nonprofits In The Production Of Boilerplate, Kevin E. Davis Mar 2006

The Role Of Nonprofits In The Production Of Boilerplate, Kevin E. Davis

Michigan Law Review

Drafting contracts-by which I really mean the documents that embody contracts-requires investments of time, experience, and ingenuity. Those investments may yield significant returns because the quality of contractual terms can be an important determinant of the gains that parties realize from trade. This in tum suggests that, from an economic perspective, it is important to understand how contracts are produced. It seems particularly important to examine the production of contracts or individual contractual terms that are widely used-that is to say, "boilerplate." In a market oriented society, boilerplate is the predominant feature of the network of legal obligations that provides …


Modularity In Contracts: Boilerplate And Information Flow, Henry E. Smith Mar 2006

Modularity In Contracts: Boilerplate And Information Flow, Henry E. Smith

Michigan Law Review

Contractual boilerplate is a little like property. Such a statement might seem like a category mistake. After all, contractual boilerplate language is part of contracts, which, unlike property, are freely customizable by the parties. Contracts create rights between those parties, not against the world at large. Nor do people who devise new boilerplate terms usually have intellectual property in the provisions themselves. I will argue that, in an interesting and overlooked way, boilerplate is the first way station on the road from contract to property. In particular, boilerplate, like all legal communication, is the result of striking a trade-off between …


Choice, Consent, And Cycling: The Hidden Limitations Of Consent, Leo Katz Feb 2006

Choice, Consent, And Cycling: The Hidden Limitations Of Consent, Leo Katz

Michigan Law Review

Most legal scholars assume that if V consents to allow D to do something to him, such consent makes D's actions legally and morally acceptable. To be sure, they are willing to make an exception when consent is given under a specified list of conditions: Force, fraud, incompetence, third-party effects, unequal bargaining power, commodification, paternalism - all of these may be grounds for rejecting the validity of V's consent. We might call scholars who take this view of consent quasi-libertarians. In this Article, I argue against the quasi-libertarian view of consent. My central claim is that the validity of consent …


Boilerplate Today: The Rise Of Modularity And The Waning Of Consent, Margaret Jane Radin Jan 2006

Boilerplate Today: The Rise Of Modularity And The Waning Of Consent, Margaret Jane Radin

Michigan Law Review

Thanks to the vision of Omri Ben-Shahar and the excellence of the scholars contributing to this symposium, students of the law of commercial exchange transactions will now understand how important and interesting, and indeed exciting, boilerplate really is. The various presentations are so rich that my assigned task of commentary cannot approach an adequate summation. Instead of attempting such a task, therefore, I will take up a slightly different one. My commentary will relate some of the ideas presented in the symposium to two themes that I think are significant for the groundwork of contract today: the growing modularity of …


The Law And Sociology Of Boilerplate, Todd D. Rakoff Jan 2006

The Law And Sociology Of Boilerplate, Todd D. Rakoff

Michigan Law Review

In my view, the scholarship presented at this symposium demonstrates that, in order to analyze form contracts and boilerplate successfully, one must carry out a set of operations that embodies an approach I will call law and sociology. But I presume I was invited to be a commentator at this conference on boilerplate not because the article I wrote on one branch of the subject awhile back exemplified this methodological approach, but because it took a rather strong substantive position. And so I think I ought first to say a brief word about that. The article in question concerned contracts …


Unity And Pluralism In Contract Law, Nathan Oman May 2005

Unity And Pluralism In Contract Law, Nathan Oman

Michigan Law Review

It is a cliché of contemporary legal scholarship that, in the last few decades, the study of law has witnessed a vast proliferation of competing theoretical approaches. The old faith in the careful honing of doctrinal concepts and the essential usefulness of legal analysis has given way to a cacophony of competing theoretical sects. Economists, moral philosophers, sociologists, historians, and others have stepped forward to offer the insights of this or that discipline as a new and superior path to legal enlightenment. Perhaps nowhere has this cliché been truer than in the realm of contracts scholarship, where, for a generation, …


The Ghost Of Telecommunications Past, Philip J. Weiser May 2005

The Ghost Of Telecommunications Past, Philip J. Weiser

Michigan Law Review

When the canon for the field of information law and policy is developed, Paul Starr's The Creation of the Media will enjoy a hallowed place in it. Like Lawrence Lessig's masterful Code and Other Laws of Cyberspace, Starr's tour de force explains how policymakers have made a series of "constitutive choices" about how to regulate different information technologies that helped to shape the basic architecture of the information age. In so doing, Starr displays the same literary and analytical skill he used in writing the Pulitzer Prizewinning The Social Transformation of American Medicine, the firsthand experience he gained …


The Ethnic Question In Law And Development, Lan Cao May 2004

The Ethnic Question In Law And Development, Lan Cao

Michigan Law Review

World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, by Professor Amy Chua, is an analytically complex narrative of contemporary ethnic violence in the current era of globalization. Although such violence has historical roots, according to Chua it has also been fueled by free-market forces and democratization. The book is a forceful and provocative indictment of the current U.S. policy of promoting and exporting markets and democracy to developing and formerly communist, market-transitional countries. In her book, Professor Chua applies her thesis - that ethnicity, global capitalism, and democracy are a volatile mix - …


Spectres Of Law & Economics, William H. Widen May 2004

Spectres Of Law & Economics, William H. Widen

Michigan Law Review

There are spectres haunting law and economics - the spectres of G.W.F. Hegel and Jacques Lacan. This is one of the central theses of Professor Jeanne L. Schroeder's challenging new book: The Triumph of Venus, the Erotics of the Market ("Triumph of Venus"). Schroeder uses insights inspired by the teachings of Hegel and the French psychoanalyst, Lacan, to critique some basic assumptiosn made by scholars who use economic ideas to investigate the law and legal institutions - the law and economics ("L&E") practitioners. The book devotes much space to criticism of Judge Posner's vision of law, using it …


The Illusion Of Law: The Legitimating Schemas Of Modern Policy And Corporate Law, Ronald Chen, Jon Hanson Jan 2004

The Illusion Of Law: The Legitimating Schemas Of Modern Policy And Corporate Law, Ronald Chen, Jon Hanson

Michigan Law Review

This Article is about some of the schemas and scripts that form and define our lives. It is about the knowledge structures that shape how we view the world and how we understand the limitless information with which we are always confronted. This Article is also about the "evolution of ideas" underlying corporate law and all of modern policymaking. It is about the ways in which schemas and scripts have influenced how policy theorists, policymakers, lawyers, and many others (particularly in the West) understand and approach policymaking generally and corporate law specifically. It is about both the invisibility and blinding …


Law, Share Price Accuracy, And Economic Performance: The New Evidence, Merritt B. Fox, Randall Morck, Bernard Yeung, Artyom Durnev Dec 2003

Law, Share Price Accuracy, And Economic Performance: The New Evidence, Merritt B. Fox, Randall Morck, Bernard Yeung, Artyom Durnev

Michigan Law Review

Mandatory disclosure has been at the core of U.S. securities regulation since its adoption in the early 1930s. For many decades, this fixture of our financial system was accepted with little examination. Over the last twenty years, however, mandatory disclosure has been subject to intensifying intellectual crosscurrents. Some commentators hold out the U.S. system as the standard for the world. They argue that adoption by other countries of a U.S.-styled system, with its greater corporate transparency, would enhance their economic performance. Other commentators, in contrast, insist that the U.S. mandatory disclosure regime represents a mistake, not a model. These crosscurrents …


The False Promise Of One Person, One Vote, Grant M. Hayden Nov 2003

The False Promise Of One Person, One Vote, Grant M. Hayden

Michigan Law Review

It has now been four decades since the Supreme Court stepped into the political thicket with its groundbreaking series of reapportionment cases. Those cases rather quickly brought about radical changes in the structure of our national, state, and local governments and, in so doing, reshaped the political landscape of the country in many, mostly beneficial, ways. The reapportionment cases also signaled the beginning of a revolution in the way we view the rights associated with meaningful participation in a democratic society, a revolution that continues to this day. We now enjoy a right to vote that is much more comprehensive …


Economic Inequality And The Role Of Law, Richard L. Kaplan May 2003

Economic Inequality And The Role Of Law, Richard L. Kaplan

Michigan Law Review

In this ambitious book, famed commentator and analyst Kevin Phillips attempts nothing less than a political history of American economic life with a specific focus on the wealthy. Succeeding far more often than not, Phillips interweaves the development of American technology with the rise and fall of economic fortunes, crafting a compelling tale with significant implications for the formulation of public policy and the laws that implement such policy. Festooned with more than seventy charts and graphs, the book explains how wealth has been accumulated throughout the entire history of the United States. It is full of intriguing insights and …


The New Leviathan, Dennis Patterson May 2003

The New Leviathan, Dennis Patterson

Michigan Law Review

Reputation in any field is an elusive phenomenon: part notoriety, part honor, part fame, part critical assessment. Even in legal scholarship it has an uneven, unpredictable quality. It is hard to imagine a book by a law professor that has had more immediate impact on world leaders than Philip Bobbitt's The Shield of Achilles. Much of the national-security strategy devised by the U.S. administration after the September 11 attacks expresses ideas Bobbitt conceived long before; and from a different point on the political spectrum is the Archbishop of Canterbury, whose televised nationwide address in January explicitly took the book as …


What (If Anything) Can Economics Say About Equity?, Daniel A. Farber May 2003

What (If Anything) Can Economics Say About Equity?, Daniel A. Farber

Michigan Law Review

Does economics have anything to teach us about the meaning of fairness? The leading practitioners of law and economics disagree. Judge Richard Posner argues that economics is largely irrelevant to distributive issues. Posner maintains that the most useful economic measure of social welfare is cost-benefit analysis (which he calls wealth maximization). But, he observes, this economic measure "ratifies and perfects an essentially arbitrary distribution of wealth." Given an ethically acceptable initial assignment of wealth, rules based on economic efficiency may have some claim to be considered fair. On the critical issue of distributional equity, however, Posner apparently believes that economics …


Consuming Government, Richard Schragger May 2003

Consuming Government, Richard Schragger

Michigan Law Review

In his ambitious new book, William Fischel, a Professor of Economics at Dartmouth College, gives us a new political animal: "The Homevoter." The homevoter is simply a homeowner who votes (p. ix). According to Fischel, she is the key to understanding the political economy of American local government. By implication, she is the key to understanding state and national government as well. Homeowners warrant special attention because "residents who own their own homes have a stake in the outcome of local politics that make them especially attentive to the public policies of local government" (p. ix). That is because local …


Orchestrated Experimentalism In The Regulation Of Work, Orly Lobel May 2003

Orchestrated Experimentalism In The Regulation Of Work, Orly Lobel

Michigan Law Review

Since the advent of the New Deal vision, work and the workplace have undergone dramatic changes. Policies and institutions that were designed to provide good working conditions and voice for workers are no longer fulfilling their promise. In Working in America: A Blueprint for the New Labor Market ("Blueprint"), four MIT economists take on the challenge of envisioning a new regulatory regime that will fit the realities of the new market. The result of several years of deliberation with various groups in business and labor, academia, and government, Blueprint provides a thoughtful yet unsettling vision of the future of work. …


Appellate Courts Inside And Out, Maxwell L. Stearns May 2003

Appellate Courts Inside And Out, Maxwell L. Stearns

Michigan Law Review

While the United States Supreme Court has been the object of seemingly endless scholarly commentary, the United States Courts of Appeals are just now coming into their own as a subject of independent academic inquiry. This is an important development when one considers that the vast bulk of relevant precedents governing most federal court litigation comes not from the Supreme Court, but rather from the United States Courts of Appeals. Because relatively few courts of appeals decisions are reviewed in the Supreme Court, with rare exception, the federal circuit courts provide the functional equivalent of that Court's proverbial "last word." …


Should We All Be Welfare Economists?, Richard H. Fallon Jr. Feb 2003

Should We All Be Welfare Economists?, Richard H. Fallon Jr.

Michigan Law Review

On what normative foundation should the edifice of law and public policy be built? What are proper grounds for claims of individual right, and how, generally, do those grounds relate to considerations of individual well-being and social welfare? In this Essay, I argue that individual well-being and a related concept of social welfare should be important considerations in the design of legal rules, but not the exclusive ones. When the notion of well-being receives substantive content, the most plausible and attractive definitions all allow a distinction between what will best promote a person's well-being and what that person might rationally …


Internalizing Outsider Trading, Ian Ayres, Stephen Choi Nov 2002

Internalizing Outsider Trading, Ian Ayres, Stephen Choi

Michigan Law Review

Investing in the United States has become a hobby for many. Individual ownership of equity, moreover, has increased over the past decade due in part to the introduction of internet-based trading. While providing the possibility for greater returns compared with bank savings accounts, among other investment alternatives, the public capital markets also pose greater risks for investors. Many individual investors lack both the resources and the incentive to analyze the value of any particular security in the market. Such investors thus trade at a systematic disadvantage relative to more informed parties. In response, regulators have asserted that certain informational disparities …


The Fable Of Entry: Bounded Rationality, Market Discipline, And Legal Policy, Avishalom Tor Nov 2002

The Fable Of Entry: Bounded Rationality, Market Discipline, And Legal Policy, Avishalom Tor

Michigan Law Review

Legal scholars have recently advanced a behavioral approach to the law and economics school of thought in an attempt to improve its external validity and predictive power. The hallmark of this new approach is the replacement of the perfectly rational actor with a "boundedly rational" decisionmaker who, apart from being affected by emotion and motivation, has only limited cognitive resources. To function effectively in a complex :world, boundedly rational individuals must rely on cognitive heuristics - simplifying mental shortcuts - that inevitably lead people to make some systematic decision errors; as a result, their behavior necessarily deviates from that predicted …


Accountability Conceptions And Federalism Tales: Disney's Wonderful World?, William W. Buzbee May 2002

Accountability Conceptions And Federalism Tales: Disney's Wonderful World?, William W. Buzbee

Michigan Law Review

Richard Foglesong's Married to the Mouse: Walt Disney World and Orlando, may not offer the thrills of an entertainment park, but it is an uncommonly good read. In a book focused on approximately four decades of Disney's interactions with Orlando and state officials, political scientist Foglesong tells the tale of how Walt Disney ended up locating his new East Coast entertainment park in Orlando, Florida and what happened in subsequent government-Disney company interactions. Using chapter headings based on stages in a personal relationship's progression ("Serendipity" to "Seduction" through "Marriage," and ultimately, after interim stages, "Therapy"), Foglesong shows that while the …


A Life In The Craft Of Comparative Law, John C. Reitz May 2002

A Life In The Craft Of Comparative Law, John C. Reitz

Michigan Law Review

It is obvious to specialists in the law of the European Union ("E.U.") - a relatively small but steadily growing group in the United States - that a "retrospective" collection of Eric Stein's writings would be of great interest. From his 1955 article in the Columbia Law Review, the first article about the Court of Justice of the European Coal and Steel Community to appear in English (p. 473), he has been one of the dominant U.S. scholars of what was initially called "European Community" ("E.C.") law after the three original European Communities2 and more recently has been rechristened "European …


Venture Capital On The Downside: Preferred Stock And Corporate Control, William W. Bratton Mar 2002

Venture Capital On The Downside: Preferred Stock And Corporate Control, William W. Bratton

Michigan Law Review

When stock indices drop precipitously, when the startup companies fizzle out, and when it stops raining money on places like Wall Street and Silicon Valley, attention turns to downside contracting. Law and business lawyers, sitting in the back seat as mere facilitators on the upside, move up to the front and sometimes even take the wheel. The job is the same on both the upside and downside: to maximize the value of going concern assets. But what comes easily on the upside can be dirty work on the down, where assets need to be separated from dysfunctional teams of business …


Toward A Jurisprudence Of Cost-Benefit Analysis, Michael Abramowicz Jan 2002

Toward A Jurisprudence Of Cost-Benefit Analysis, Michael Abramowicz

Michigan Law Review

In 1989, Cass Sunstein published an article entitled On the Costs and Benefits of Aggressive Judicial Review of Agency Action. Sunstein apparently meant the words "costs" and "benefits" in an informal sense, as the article considered the advantages and disadvantages of aggressive judicial review without pretense of explicit quantification. That article was several generations ago in Sunstein scholarship, almost 100 articles and over a dozen books. The central concerns of that article, however, are relevant to an assessment of Sunstein's latest book, whose title, The Cost-Benefit State, uses the words "costs" and "benefits" as labels for quantitative assessments of the …