Law and Economics Commons^™

The Bizarre Law & Economics Of 'Business Roundtable V. Sec', Grant M. Hayden, Matthew T. Bodie

Faculty Journal Articles and Book Chapters

Corporations are legal entities designed to foster certain kinds of collective economic activity. The decisionmaking power within a corporation ultimately rests with a board of directors elected by shareholders. Shareholders, however, do not use anything like a conventional ballot in these elections; instead, they fill out a “proxy ballot,” delivered to them by the incumbent board. This proxy ballot lists only the incumbent board’s chosen nominees, very often the board members themselves. If a shareholder wants to run for director or propose another nominee for the board, she needs to provide all other shareholders with a separate proxy ballot — …

Economic Development And The Problem With The Problem-Solving Approach, Justin Deystone

Publications

Scholars and practitioners alike have recently pointed to the idea of a "new moment" in the field of law and economic development, as well as a hope for a fruitful rethinking of political economy. The idea is that we have passed out of the period of high "neoliberalism," associated at one time with Reagan, Thatcher, and the so-called Washington Consensus and now eclipsed by the ascendance of the Obama Administration. The hope attending the new consensus is that, in the wake of neoliberal law and policy, the field of law and development might be on the verge of a new …

Understanding The United States' Incarceration Rate, William T. Pizzi

Publications

What has caused prison sentences to climb so sharply and consistently in the last four decades?

Freedom Of Contract In An Augmented Reality: The Case Of Consumer Contracts, Scott R. Peppet

Publications

This Article argues that freedom of contract will take on different meaning in a world in which new technology makes information about places, goods, people, firms, and contract terms available to contracting parties anywhere, at any time. In particular, our increasingly "augmented reality" calls into question leading justifications for distrusting consumer contracts and strengthens traditional understandings of freedom of contract. This is largely a descriptive and predictive argument: This Article aims to introduce contract law to these technologies and consider their most likely effects. It certainly has normative implications, however. Given that the vast majority of consumer contracting occurs in …

Computable Contracts, Harry Surden

Publications

This Article explains how and why firms are representing certain contractual obligations as computer data. The reason is so that computers can read and process the substantive aspects of contractual obligations. The representation of contractual obligations in data instead of (or in addition to) the traditional written language form - what this Article calls "data-oriented contracting" - allows for the application of advanced computer processing abilities to substantive contractual obligations. Certain financial contracts exemplify this model. Equity option contracts are routinely represented not as contract documents written in ordinary language - but as data records intended to be processed by …

Labor Policy And The Great Recession, Robert J. Flanagan

Indiana Law Journal

Labor and Employment Law Under the Obama Administration: A Time for Hope and Change? Symposium held November 12-13, 2010, Indiana University Maurer School of Law, Bloomington, Indiana.

The Department Of Justice Chases Mice While Lions Roam The Campsite: Why The Department Has Failed To Prosecute The Elite Frauds That Drove The Financial Crisis, William K. Black

Faculty Works

No abstract provided.

Book Review. Pollack, S. D., War, Revenue, And State Building: Financing The Development Of The American State, Ajay K. Mehrotra

Articles by Maurer Faculty

No abstract provided.

De-Concentrating Poverty: De-Constructing A Theory And The Failure Of Hope, Michael R. Diamond

Georgetown Law Faculty Publications and Other Works

Since the late 1980s, led by William Julius Wilson’s The Truly Disadvantaged, scholars have been writing about the social problems caused by the concentration in residential communities of high levels of poverty. Even before Wilson’s book, government policy, which previously had resulted in racially and economically segregated communities, had begun to shift towards de-concentration. The consent decree in Hills v Gautreaux, and the HOPE VI and Moving to Opportunity Programs all pointed towards de-concentration of poverty. Commentators have suggested both benign and not-so-benign reasons for the policy shift.

There were a variety of quite hopeful goals promoted by …

Community Economic Development And The Paradox Of Power, Michael R. Diamond

Georgetown Law Faculty Publications and Other Works

This article starts from the premise that poverty is a growing problem in the United States. Intergenerational poverty, the entrenchment of a class of very poor people, is a major sub set of that problem and is tied very closely to the issue of race. The author claims that missing in the fight by the poor and their allies against stratified poverty is the creation and utilization of power. This paper examines the disparate ways in which commentators have defined power. It suggests that those seeking to obtain power must understand the concept’s varying meanings and direct their activities to …

Law, Politics, And Cost-Benefit Analysis, Daniel H. Cole

Articles by Maurer Faculty

This Article explores the significant role cost–benefit analysis (CBA) plays in facilitating or impeding legislative and regulatory policy decisions. The Article centers around three case studies of CBAs the EPA prepared under three different presidents: (1) Clinton Administration changes to Clean Air Act air quality standards for ozone and particulate matter; (2) President Obama’s recent decision to suspend the EPA’s reconsideration of the Bush Administration’s air quality standard for ozone; and (3) the George W. Bush Administration’s “Clear Skies” legislative initiative. The first two case studies demonstrate, between them, how well-constructed CBAs can facilitate social-welfare-enhancing and impede welfare-reducing rules, even …

New Thinking On "Shareholder Primacy", Lynn A. Stout

Cornell Law Faculty Publications

By the beginning of the twenty-first century, many observers had come to believe that U.S. corporate law should, and does, embrace a "shareholder primacy" rule that requires corporate directors to maximize shareholder wealth as measured by share price. This Essay argues that such a view is mistaken.

As a positive matter, U.S. corporate law and practice does not require directors to maximize "shareholder value" but instead grants them a wide range of discretion, constrained only at the margin by market forces, to sacrifice shareholder wealth in order to benefit other constituencies and the firm itself. Although recent "reforms" designed to …

Employees Versus Independent Contractors: Why States Should Not Enact Statutes That Target The Construction Industry, James Kwak

Faculty Articles and Papers

No abstract provided.

Cities, Property, And Positive Externalities, Peter Siegelman, Gideon Parchomovsky

Faculty Articles and Papers

Cities are the locales of numerous interactions that generate externalities-both negative and positive. Although the common law provides a vast array of mechanisms for limiting negative externalities, there is a striking absence of provisions for stimulating the production of positive ones. As a consequence, activities whose social benefits are greater than their private costs are not undertaken, with a resulting efficiency loss.

In this Article, we demonstrate how cities can develop commercial districts that allow for the capture of positive externalities by following the example of suburban malls. In malls, anchor stores provide positive externalities-additional customers-to neighboring stores. Anchors capture …

The Political Economy Of Dodd-Frank: Why Financial Reform Tends To Be Frustrated And Systemic Risk Perpetuated, John C. Coffee Jr.

Faculty Scholarship

A good crisis should never go to waste. In the world of financial regulation, experience has shown – since at least the time of the South Sea Bubble three hundred years ago – that only after a catastrophic market collapse can legislators and regulators overcome the resistance of the financial community and adopt comprehensive "re-form" legislation. U.S. financial history both confirms and conforms to this generalization. The Securities Act of 1933 and the Securities Exchange Act of 1934 were the product of the 1929 stock-market crash and the Great Depression, with their enactment following the inauguration of President Franklin Roosevelt …

Fragmentation Nodes: A Study In Financial Innovation, Complexity, And Systemic Risk, Kathryn Judge

Faculty Scholarship

This Article resents a case study in how complexity arising from the evolution and proliferation of a financial innovation can increase systemic risk. The subject of the case study is the securitization of home loans, an innovation which played a critical and still not fully understood role in the 2007-2009 financial crisis. The Article introduces the term "fragmentation node" for these transaction structures, and it shows how specific sources of complexity inherent in fragmentation nodes limited transparency and flexibility in ways that undermined the stability of the financial system. In addition to shedding new light on the processes through which …

Fiscal Policy In An Era Of Austerity, David M. Schizer

Faculty Scholarship

We face a time of stagnant economic growth, severe unemployment, massive budget deficits, and an increasingly competitive global economy. These daunting challenges are the legacy of a number of unwise policy decisions in both the public and private sectors. Although the good news is that unsound policies can be changed, the bad news is that no single step will do the trick. It is a challenge to rely on monetary policy when interest rates are near zero. There also is uncertainty – and a heated debate among economists – about the effectiveness of a Keynesian stimulus. One thing we know …

Law By Non Sequitur: Norcon V. Niagara Mohawk, Victor P. Goldberg

Faculty Scholarship

Under the common law, a contracting party could only demand assurance of performance if the other party was insolvent. If a party had reasonable grounds for insecurity, the UCC §2-609 allowed it demand adequate assurance even if the counterparty were solvent. The Restatement (Second) adopted the same rule for non-goods. In NorCon v. Niagara Mohawk the New York court extended the adequate assurance doctrine for some non-goods contracts. Although the decision seems to imply that there is some relation between the NorCon facts and its conclusion as to the law, there is none. Relying primarily on material available to the …

Accentuate The Normative: A Response To Professor Mckenna, Jeremy N. Sheff

Faculty Publications

In his article, “A Consumer Decision-Making Theory of Trade-mark Law,” 98 Va. L. Rev. 67 (2012), Professor Mark McKenna makes two significant claims. The first is that the dominant Law and Economics theory of trademark law—the search-costs theory of the Chicago School—is in some way connected to recent undesirable expansions of trademark rights. The second is that a preferable theory of trademark law—one that would result in more tightly circumscribed and socially beneficial notions of trademark rights—would take consumer decision making, rather than search costs, as its guiding principle. I find myself sympathetic to these arguments, and yet I believe …

Taxing Family Work: Aid For Affluent Husband Care, Martha T. Mccluskey

Journal Articles

The income of the classic breadwinner married to a homemaker receives a tax advantage under federal income tax law. The conventional wisdom holds that any resulting inequities to unmarried persons or dual-earning marriages cannot be corrected without producing similarly problematic inequities. This Article challenges that dilemma by analyzing the inequity of the marital tax system from a new perspective. This Article argues that the perceived "bonus" for breadwinner-homemaker marriages is best understood as an implicit policy of "aid for affluent husband care." Recent tax reforms (up for renewal in 2010) that partly reduced the "marriagep enalty "for some dualearning couples …

The Federal Reserve As Last Resort, Colleen M. Baker

Journal Articles

The Federal Reserve, the central bank of the United States, is one of the most important and powerful institutions in the world. Surprisingly, legal scholarship hardly pays any attention to the Federal Reserve or to the law structuring and governing its legal authority. This is especially curious given the amount of legal scholarship focused on administrative agencies that do not have anywhere near as critical a domestic and international role as that of the Federal Reserve. At the core of what the Federal Reserve does and should do is to conduct monetary policy so as to safeguard pricing, including that …

Further Considerations: Immigrant Entrepreneurs - Contributions And Challenges, Jayesh Rathod

Contributions to Books

An overview of the contributions made by immigrant entrepreneurs in the United States, and the challenges they face.

Japan's Love For Derivative Actions: Irrational Behavior And Non-Economic Motives As Rational Explanations For Shareholder Litigation, Dan W. Puchniak, Masafumi Nakahigashi

Vanderbilt Journal of Transnational Law

Not long ago, there was a consensus in the legal academy that the Japanese were irrational litigants. As the theory went, Japanese people would forgo litigating for financial gain because of a cultural obsession with maintaining social harmony. Based on this theory, it made perfect (but economically irrational) sense that Japanese shareholders let their U.S.-transplanted derivative action lay moribund for almost four post-war decades, while at the same time the derivative action was a staple of shareholder litigation in the United States.

The 1980s brought a wave of law and economics to the scholarship of Japanese law, which largely discredited …

The “Ensuing Loss” Clause In Insurance Policies: The Forgotten And Misunderstood Antidote To Anti-Concurrent Causation Exclusions, Chris French

Faculty Scholarship

As a result of the 1906 earthquake and fire in San Francisco which destroyed the city, a clause known as the “ensuing loss” clause was created to address concurrent causation situations in which a loss follows both a covered peril and an excluded peril. Ensuing loss clauses appear in the exclusions section of such policies and in essence they provide that coverage for a loss caused by an excluded peril is nonetheless covered if the loss “ensues” from a covered peril. Today, ensuing loss clauses are found in “all risk” property and homeowners policies, which cover all losses except for …

A Consumer Decision-Making Theory Of Trademark Law, Mark P. Mckenna

Journal Articles

The consumer search costs theory has dominated discussion of trademark law for the last several decades. According to this theory, trademark law aims to increase consumer welfare by reducing the cost of shopping for goods or services, and it accomplishes this goal by preventing uses of a trademark that might confuse consumers about the source of the goods with which the mark is used. This conceptual frame is wrong, and it is complicit in most of trademark law’s extraordinary expansion. “Search costs” is not sufficiently precise; many types of search costs are irrelevant to consumer behavior, and even when search …

Tinkering With The Machinery Of Life, Ben L. Trachtenberg

Faculty Publications

Recent adjustments by the Environmental Protection Agency (EPA) and the Department of Transportation (DOT) to their cost–benefit analysis procedures could cause tremendous changes to federal regulation. For decades, federal agencies have calculated the value of a statistical life (VSL) and have used that number when evaluating the costs and benefits of proposed regulations. If a regulation was expected to save lives, the number of lives saved could be multiplied by the VSL to monetize the benefits. Because, however, lives saved in the future were given the same nominal value as lives saved in the present, the real value of future …

Combating Moral Hazard: The Case For Rationalizing Public Employee Benefits, Maria O'Brien

Faculty Scholarship

The current crisis in public employee benefits is a fairly conventional moral hazard story about overly generous promises made by both private sector employers and politicians spending public dollars. The private sector, forced by the Financial Accounting Standards Board (FASB) in 1993 to confront the true cost of promises made to future retirees, dealt with the newly discovered debt in a number of ways, including the termination of defined benefit plans which were quickly replaced by defined contribution plans. The public sector was also forced to confront its own largesse with the implementation of GASB 45 which focused careful attention …

The Impact Of Public Disclosure On Equity Dispositions By Corporate Managers, David I. Walker

Faculty Scholarship

In a recent article, Professor Robert J. Jackson Jr. investigates the impact of public disclosure on equity dispositions by senior managers at Goldman Sachs. Utilizing previously overlooked data, Jackson finds that disclosure of sales per Securities Exchange Act section 16(a) dampens selling. This response critically examines the theoretical link between public disclosure and equity dispositions as well as Jackson’s empirical analyses. Jackson has provided convincing evidence of the existence of the relationship he theorizes, and he has done an admirable job of isolating the impact of public disclosure on sales in the face of potentially confounding influences. Nonetheless, some concerns …

Special Access: The Harm Of Premature Deregulation In Telecommunications, Cary E. Adickman

Cardozo Arts & Entertainment Law Journal

No abstract provided.

Four Conceptualizations Of The Relations Of Law To Economics (Tribulations Of A Positivist Social Science), Pierre Schlag

Publications

This brief essay sketches the ways in which four leading economic thinkers (Knight, Coase, Posner and Sunstein) have dealt with a vexing tension in the relations of economics to law, the state, and the social. The tension arises as microeconomists address (or fail to address) the relations of their theories to “soft factors” such as psychology, politics, social institutions, etc. These soft factors are at once clearly consequential for economic behavior (and thus arguably should be included in the theories). At the same time, these soft factors are not self-evidently subject to determination by any known economic laws (and thus …