Law and Economics Commons^™

Penalizing Punitive Damages: Why The Supreme Court Needs A Lesson In Law And Economics, Steve P. Calandrillo

Articles

The recent landmark Supreme Court decision addressing punitive damages in the infamous Exxon Valdez oil spill case has brought the issue of punitive awards back into the legal limelight. Modern Supreme Court jurisprudence, most notably BMW of North America, Inc. [517 U.S. 559 (1996)], State Farm [538 U.S. 408 (2003)], Philip Morris [549 U.S. 346 (2007)], and now Exxon Shipping Co. [128 S.Ct. 2605 (2008)] in 2008, has concluded that such judgments are justified to punish morally reprehensible behavior and to send a message to evildoers. The Court, however, has increasingly emphasized that the U.S. Constitution's Due Process Clause presumptively …

Coordinating Sanctions In Torts, Kyle D. Logue

Articles

This Article begins with the standard Law and Economics account of tort law as a regulatory tool or system of deterrence, that is, as a means of giving regulated parties the optimal ex ante incentives to minimize the costs of accidents. Building on this fairly standard (albeit not universally accepted) picture of tort law, the Article asks the question how tort law should adjust, if at all, to coordinate with already existing non-tort systems of regulation. Thus, if a particular activity is already subject to extensive agency-based regulation (whether in the form of command-and-control requirements or in the form of …

Bail-Ins Versus Bail-Outs: Using Contingent Capital To Mitigate Systemic Risk, John C. Coffee Jr.

Faculty Scholarship

Because the quickest, simplest way for a financial institution to increase its profitability is to increase its leverage, an enduring tension will exist between regulators and systemically significant financial institutions over the issues of risk and leverage. Many have suggested that the 2008 financial crisis was caused because financial institutions were induced to increase leverage because of flawed systems of executive compensation. Still, there is growing evidence that shareholders acquiesced in these compensation formulas to cause managers to accept higher risk and leverage. Shareholder pressure then is a factor that could induce the failure of a systemically significant financial institution. …

The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols

Articles

American nonprofit organizations receive favorable tax treatment, including tax exemptions and tax-deductibility of contributions, in return for their devotion to charitable purposes and restrictions not to distribute profits. Recent efforts to extend some or all of these tax benefits to for-profit companies making social investments, including the creation of the new hybrid nonprofit/for-profit company form known as the Low-Profit Limited Liability Company, threaten to undermine the vitality of the nonprofit sector and the integrity of the tax system. Reform advocates maintain that the ability to compensate executives based on performance and to distribute profits when attractive investment opportunities are scarce …

Hoffman V. Red Owl Stores And The Limits Of The Legal Method, Robert E. Scott

Faculty Scholarship

According to the overwhelming majority view, promissory estoppel is not an appropriate ground for legally enforcing statements made during preliminary negotiations unless there is a “clear and unambiguous promise” on which the counterparty reasonably and foreseeably relies. Bill Whitford and Stewart Macaulay were among the first scholars to note the apparent absence of such a promise in the case of Hoffman v. Red Owl Stores. Several years ago, after studying the trial record, I concluded that the best explanation for the breakdown in negotiations was the fundamental misunderstanding between the parties as to the amount and nature of Hoffmann’s …

Energy Policy For An Economic Downturn: A Proposed Petroleum Fuel Price Stabilization Plan, Thomas W. Merrill, David M. Schizer

Faculty Scholarship

A compelling case can be made for reducing America's consumption of petroleum fuels. Nearly all analysts think that the way to slash consumption of petroleum fuels is through an end-user tax. There is, however, widespread public opposition to higher gasoline taxes. Furthermore, in a recession the appropriate fiscal policy is to cut taxes, not to raise them. This paper proposes a method of stabilizing petroleum fuel prices at a sufficiently high level, without reducing aggregate consumer purchasing power. We introduce a revenue-neutral petroleum fuel price stabilization plan, called the "PFPS" plan for short Under this plan, a government surcharge on …

Governing Gambling In The United States, Maria E. Garcia

CMC Senior Theses

The role risk taking has played in American history has helped shape current legislation concerning gambling. This thesis attempts to explain the discrepancies in legislation regarding distinct forms of gambling. While casinos are heavily regulated by state and federal laws, most statutes dealing with lotteries strive to regulate the activities of other parties instead of those of the lottery institutions. Incidentally, lotteries are the only form of gambling completely managed by the government. It can be inferred that the United States government is more concerned with people exploiting gambling than with the actual practice of wagering.

In an effort to …

The 8% Solution - Or How Good Are The Calculation Economics By The Federal Circuit In Lucent V. Microsoft?, 9 J. Marshall Rev. Intell. Prop. L. 797 (2010), W. Lesser

UIC Review of Intellectual Property Law

Lucent v. Microsoft brought to the fore again the complexity of infringement damage estimates. Differences in approaches were laid open in this case with the trial court jury settling $358 million in damages against Microsoft and the appeals court striking down the value as lacking substantial evidence. Damages were established on the “reasonable royalty” basis for a product which was neither licensed nor sold. This article contends that the appeals court took too narrow a view of economics in its analysis of the software sector. Specifically, the court seems to have applied a “perfect competition” model to a sector which …

From Reconstruction To Obama: Understanding Black Invisibility, Racism In Appalachia, And The Legal Community's Responsibility To Promote A Dialogue On Race At The Wvu College Of Law, Brandon Stump

Law Faculty Articles and Essays

This Note focuses on legal education in the United States and West Virginia in particular. Discussions on race, racism, and American law should take place in every legal classroom where race is relevant to the subject being discussed as a way to bridge gaps between communities. This is especially true for the West Virginia University College of Law ("College of Law"), which sits in the third whitest state in the country. The College of Law is the only law school in the state, and a majority of students at the College of Law are white and West Virginian. Thus, at …

Antitrust Censorship Of Economic Protest, Hillary Greene

Faculty Articles and Papers

Antitrust law accepts the competitive marketplace, its operation, and its outcomes as an ideal. Society itself need not and does not. Although antitrust is not in the business of evaluating, for example, the “fairness” of prices, society can, and frequently does, properly concern itself with these issues. When dissatisfaction results, it may manifest itself in an expressive boycott: a form of social campaign wherein purchasers express their dissatisfaction by collectively refusing to buy. Antitrust should neither participate in nor censor such normative discourse. In this Article, I explain how antitrust law impedes this speech, argue why it should not, and …

For The Love Of The Game: The Justification For Tax Exemption In Intercollegiate Athletics, 44 J. Marshall L. Rev. 179 (2010), Andrew D. Appleby

UIC Law Review

No abstract provided.

A Production Theory Of Pure Economic Loss, Robert J. Rhee

UF Law Faculty Publications

Although the pure economic loss rule has been remarkably durable in the common law, it suffers from a theoretical deficit. The rule has not been properly framed within the broader context of Anglo-American political economy. Any theory must recognize that the rule fundamentally deals with business risk and economic organization. Two conceptions of risk are important: risk to economic assets essential to the production function (loss of a factor of production), and risk to outcomes (loss of production). This Article proposes a production theory of the pure economic loss rule, which is rooted in the neoclassical economic understanding of the …

Complex Economics And Patent Remedies, John M. Golden

IP Theory

No abstract provided.

Law And The Social Control Of American Capitalism, William J. Novak

Articles

This Essay is part of a larger, ongoing investigation of the role of law in the creation of a modern American state from 1877 to 1932. That project charts the decline of an early nineteenth-century world of local, common law self government (what I called in a previous work a “well-regulated society”) and the rise of a distinctly modern administrative regulatory state in the United States. This new legal-political regime was rooted in three interlinked developments: the centralization of public power; the individualization of private right; and the constitutionalization of the rule of law. Beginning soon after the Civil War, …

Precarious Pathways: Evaluating The Provincial Nominee Programs In Canada, Jamie Baxter

Articles, Book Chapters, & Popular Press

Temporary foreign workers in Canada experience substandard employment relationships, are explicitly denied many formal rights and are practically excluded from most employment protections. Led by a growing emphasis on workers’ temporary status as a root cause of their employment-related vulnerabilities, some advocates, as well as elected officials, are now calling on governments to improve opportunities for workers to attain permanent residency in Canada, primarily for those in lower-skilled occupations. The central aim of this paper is to evaluate whether Provincial Nominee Programs are likely to address the real insecurities faced by vulnerable lower-skilled temporary foreign workers. Given that there are …

Dr. Cézanne And The Art Of Re(Peat)Search: Competing Interests And Obligations In Clinical Research, Robyn Bluhm, Jocelyn Downie, Jeff Nisker

Articles, Book Chapters, & Popular Press

Clinician researchers have a number of roles, each of which carries specific obligations. There are times when these obligations may be in competition (up to and including conflict) with each other. Using a narrative case study that describes a group of colleagues discussing their clinical department's participation in an industry-sponsored research protocol, we illustrate a number of the obligations faced by clinician researchers, and discuss how competing interests and obligations can lead to ethical problems. The case study is followed by a discussion of the effect of university–industry relations on competing interests and obligations in both clinical research and the …

Host’S Dilemma: Rethinking Eu Banking Regulation In Light Of The Global Crisis, Katharina Pistor

Faculty Scholarship

The quest for integrating financial markets into a single global marketplace has produced a host of legal and regulatory measures over the past two decades aimed at taming national protectionism, easing access to foreign markets, and lowering the regulatory burden for financial intermediaries that operate trans-nationally. Home country regulation and supervision – based on commonly agreed prudential standards – has become the core principle in the design of regulatory structures. This principle, first established as the “Basel Concordat” in a series of reports issued by the Bank of International Settlement in Basel has also informed financial regulation in the EU. …

Excuse Doctrine: The Eisenberg Uncertainty Principle, Victor P. Goldberg

Faculty Scholarship

The world is in a bit of a mess. Oil prices soared to more than $140 per barrel and within months plummeted to below $40. The pound fell from $2 to less than $1.40. Housing and stock prices crashed. Foreclosures, bankruptcies, and bailouts became newspaper staples. When things go awry like this, inevitably many people and firms regret having entered into contracts under more favorable circumstances. Many of them will be looking for ways to limit, or better yet, avoid the consequences. A preeminent contracts scholar, Melvin Eisenberg (2009), has provided them with considerable ammunition in a recent paper, arguing …

Economically Benevolent Dictators: Lessons For Developing Democracies, Ronald J. Gilson, Curtis J. Milhaupt

Faculty Scholarship

The post-war experience of developing countries leads to two depressing conclusions: only a small number of countries have successfully developed; and development theory has not produced development. In this article we examine one critical fact that might provide insights into the development conundrum: Some autocratic regimes have fundamentally transformed their economies, despite serious deficiencies along a range of other dimensions. Our aim is to understand how growth came about in these regimes, and whether emerging democracies might learn something important from these experiences.

Our thesis is that in these economically successful countries, the authoritarian regime managed a critical juncture in …

"No Man Can Be Worth $1,000,000 A Year": The Fight Over Executive Compensation In 1930s America, Harwell Wells

University of Richmond Law Review

No abstract provided.

Legislating In The Dark: How Congress Regulates Tax-Exempt Organizations In Ignorance, John F. Coverdale

University of Richmond Law Review

No abstract provided.

Rethinking Treaty Shopping: Lessons For The European Union, Reuven S. Avi-Yonah, C. H. Panayi

Book Chapters

Whilst treaty shopping is not a new phenomenon, it remains as controversial as ever. It would seem that the more countries try to deal with it, the wider the disagreements as to what is improper treaty shopping and what is legitimate tax planning. In this paper, we reassess the traditional quasi-definitions of treaty shopping in an attempt to delineate the contours of such practices. We examine the various theoretical arguments advanced to justify the campaign against treaty shopping. We also consider the current trends in treaty shopping and the anti-treaty shopping policies under the OECD Model and the US Model. …

Of Coase, Calabresi, And Optimal Tax Liability, Kyle D. Logue, Joel Slemrod

Articles

The Article proceeds as follows. Part II offers a primer on the Coase Theorem, beginning with the classic case of neighbor externalizing on neighbor (farmer and rancher), and it explains the basic invariance propositions. Part III shifts the focus to Coasean situations involving buyers and sellers in a market or contractual relationship, buyers and sellers whose market interactions cause harm to third parties. Using supply-and-demand diagrams, we illustrate (in a new way) some of the most basic findings of the economic analysis of law, including both the Coasean invariance and efficiency propositions and the Calabresian least-cost avoider idea. Also in …

Treasure Islands, James R. Hines Jr.

Articles

In movies and novels, tax havens are often settings for shady international deals; in practice, they are rather less flashy. Tax havens are countries and territories that offer low tax rates and favorable regulatory policies to foreign investors. For example, tax havens typically tax inbound investment at zero or very low rates and further encourage investment with telecommunications and transportation facilities, other business infrastructure, favorable legal environments, and limited bureaucratic hurdles to starting new firms. Tax havens are small: most are islands; all but a few have populations below one million; and they have above-average incomes. Tax havens are also …

The Last Best Hope For Progressivity In Tax, E. J. Mccaffery, James R. Hines Jr.

Articles

We argue that a spending tax, as opposed to an income or wage tax, is the “last best hope” for a return to significantly more progressive marginal tax rates than obtain today. The simple explanation for this central claim looks to incentive effects, especially for “rich people,” as both economists and commentators are inclined to focus. High marginal tax rates under an income tax fall on and hence deter the socially productive activities of work and savings. High marginal rates under a wage tax fall on and hence deter the socially productive activity of work alone. But high marginal rates …

Tax Reform In The Aftermath Of The Financial Crisis, Stephen Utz

Faculty Articles and Papers

No abstract provided.

Tontines For The Invincibles: Enticing Low Risks Into The Health-Insurance Pool With An Idea From Insurance History And Behavioral Economics, Peter Siegelman, Tom Baker

Faculty Articles and Papers

Over one-third of the uninsured adults in the U.S. below retirement age are between nineteen and twenty-nine years old. Young adults, especially men, often go without insurance, even when buying it is mandatory and sometimes even when it is a low-cost employment benefit. This Article proposes a new form of health insurance targeted at this group, the "young invincibles"-those who (wrongly) believe that they do not need health insurance because they will not get sick. Our proposal offers a cash bonus to those who turn out to be right in their belief that they did not really need health insurance. …

Forced Sale Risk: Class, Race, And The "Double Discount", Thomas W. Mitchell, Stephen Malpezzi, Richard K. Green

Faculty Scholarship

What impact does a forced sale have upon a property owner's wealth? And do certain characteristics of a property owner such as whether they are rich or poor or whether they are black or white, tend to affect the price yielded at a forced sale? This Article addresses arguments made by some courts and legal scholars who have claimed that certain types of forced sales result in wealth maximizing, economic efficiencies. The Article addresses such economic arguments by returning to first principles and reviewing the distinction between sales conducted under fair market value conditions and sales conducted under forced sale …

Estate Of Pew V. Cardarelli, Natallia Krauchuk

NYLS Law Review

No abstract provided.

Reply To Becker And Fuest, James R. Hines Jr.

Articles

It is an understatement to say that the appropriate taxation of foreign business income is a controversial and potentially confusing topic. One of the mysteries of international taxation has been that the prescriptions of what, until recently, was the accepted academic wisdom differs so sharply from widespread international practice. In an important contribution, Richman (1963) noted that a home government confronted with the choice of where it would prefer one of its resident taxpayers to allocate a single unit of capital would weigh the after-foreign-tax return from investing abroad against the pre-tax return from investing at home. From this observation, …