Law and Economics Commons^™

Facebook, The Jobs Act, And Abolishing Ipos, Adam C. Pritchard

Law & Economics Working Papers

The market for initial public offerings (IPOs) — the first sale of private firms’ stock to the public — is notorious for its swings from peaks to valleys. This paper argues that these swings reflect serious flaws in the IPO scheme, and that U.S. capital markets should move toward a more stable alternative. Specifically, this paper argues for a two-tier market system in which new stock issuers initially participate in a less-regulated private capital market of accredited investors and then, if they choose, they can move to a more regulated, broader public market. Likewise, firms currently participating in the public …

Creating Hammer V. Dagenhart, Logan E. Sawyer Iii

Scholarly Works

Hammer v. Dagenhart is among the best known cases in the canon of constitutional law. It struck down the first federal child labor law on the grounds that Congress’s commerce power allowed it to prohibit the interstate shipment of harmful goods, like impure food and drugs, but not harmless goods, like the products of child labor. Withering criticism of the decision spread from Justice Holmes’s famous dissent to law reviews, treatises, casebooks, and constitutional law classes. For nearly a century the decision has been scorned as inconsistent with precedent, incoherent as policy, and driven solely by the Court’s reactionary commitment …

A Financial Economic Theory Of Punitive Damages, Robert J. Rhee

UF Law Faculty Publications

This Article provides a financial economic theory of punitive damages. The core problem, as the Supreme Court acknowledged in Exxon Shipping Co. v. Baker, is not the systemic amount of punitive damages in the tort system; rather, it is the risk of outlier outcomes. Low frequency, high severity awards are unpredictable, cause financial distress, and beget social cost. By focusing only on offsetting escaped liability, the standard law and economics theory fails to account for the core problem of variance. This Article provides a risk arbitrage analysis of the relationship between variance, litigation valuation, and optimal deterrence. Starting with settlement …

Why Copyright Falls Behind The Requirement For Protecting Graphic User Interfaces: Case Studies On Limitations Of Copyright Protection For Guis In China, Ling Jin, Yihong Ying

IP Theory

No abstract provided.

Beyond Economics In Pay For Performance, Tamara C. Belinfanti

Articles & Chapters

This article argues that while much of the intellectual energy has focused on the economics of executive pay, the challenge of executive compensation is as much a challenge of human behavior as it is one of economics. The raison d’etre of pay for performance (PFP) is to motivate executives to make decisions that are in the best interest of their firm and its shareholders. Attention to the relevant individual, situational, cultural, and institutional dynamics (what I term “behavioral dynamics”) that affect how executives are motivated and how they value future rewards is critical for the sustainability of PFP as a …

The Private Costs Of Patent Litigation, James Bessen, Michael J. Meurer

Faculty Scholarship

This paper estimates the total cost of patent litigation to alleged infringers. We use a large sample of stock market event studies around the date of lawsuit filings for US public firms from 1984-99. We find that the total costs of litigation are much greater than legal fees and costs are large even for lawsuits that settle. Lawsuits cost alleged infringers about $28.7 million ($92) in the mean and $2.9 million in the median. Moreover, infringement risk rose sharply during the late 1990s to over 14% of R&D spending. Small firms have lower risk relative to R&D.

Law And Economics As A Pillar Of Legal Education, W. Kip Viscusi, Joni Hersch

Vanderbilt Law School Faculty Publications

This paper reports the distribution of doctoral degrees in economics and in other fields among faculy at the 26 hghest-ranked law schools. Almost one-third of professors at the top 13 law schools have a Ph.D. degree, with 9 % having a Ph.D. in economics. Law school rank is hghly correlated with the share of faculy holding a Ph.D. in economics and is less correlated with the share offaculy with other doctoral degrees. Law and economics is a major area of legal scholarsh based on citations in the law literature and other impact rankings. In recognition of the increased importance of …

How To Choose The Least Unconstitutional Option: Lessons For The President (And Others) From The Debt Ceiling Standoff, Neil H. Buchanan, Michael C. Dorf

Cornell Law Faculty Publications

The federal statute known as the “debt ceiling” limits total borrowing by the United States. Congress has repeatedly raised the ceiling to authorize necessary borrowing, but a political standoff in 2011 nearly made it impossible to borrow funds to meet obligations that Congress had affirmed earlier that very year. Some commentators urged President Obama to ignore the debt ceiling, while others responded that such borrowing would violate the separation of powers and therefore that the president should refuse to spend appropriated funds.

This Article analyzes the choice the president nearly faced in summer 2011, and which he or a successor …

A Financial Economic Theory Of Punitive Damages, Robert J. Rhee

Michigan Law Review

This Article provides a financial economic theory of punitive damages. The core problem, as the Supreme Court acknowledged in Exxon Shipping Co. v. Baker, is not the systemic amount of punitive damages in the tort system; rather it is the risk of outlier outcomes. Low frequency, high severity awards are unpredictable, cause financial distress, and beget social cost. By focusing only on offsetting escaped liability, the standard law and economics theory fails to account for the core problem of variance. This Article provides a risk arbitrage analysis of the relationship between variance, litigation valuation, and optimal deterrence. Starting with settlement …

Grave Consequences For Economic Liberty: The Funeral Industry's Protectionist Occupational Licensing Scheme, The Circuit Split, And Why It Matters, Lana Harfoush

The Journal of Business, Entrepreneurship & the Law

This article examines a current circuit split regarding the constitutionality of restrictive occupational licensing schemes that exist only for protectionist purposes. The Sixth Circuit in Craigmiles v. Giles and the Tenth Circuit case Powers v. Harris, are cases that revolve around similar facts but reach opposite outcomes. The two cases profile state funeral industry licensing restrictions. In both cases, the plaintiffs were penalized for selling caskets without state-issued licenses. Though licensing restrictions in the funeral industry affect most Americans as consumers, the scope of this circuit split reaches into nearly every industry. When businesses lobby governments to enact legislation, they …

The Inherent Instability Of The Financial System, Kim De Glossop

The Journal of Business, Entrepreneurship & the Law

The article explores one of the causes of the financial crisis of 2008 and of financial crises generally. The argument of the paper is that rather than tend toward equilibrium, financial and asset markets have a tendency to become unstable after prolonged periods of stability. The main driver of this process is the expansion of credit. Debt feeds its way into higher asset prices which in turn justify the accumulation of more debt to purchase further assets, and so on. The basis for the idea is Hyman Minsky's Financial Instability Hypothesis, itself a reinterpretation of The General Theory of Employment, …

"Perpetual Trusts: The Walking Dead" And "Congress Should Effectively Curb Gst Exemption For Perpetual Trusts.", Calvin H. Johnson, Lawrence W. Waggoner

Law & Economics Working Papers

In separate but complementary letters to the editor of Tax Notes, Calvin Johnson (University of Texas School of Law) and Lawrence Waggoner (University of Michigan Law School) respond to an article by Dennis Belcher and seven other practicing attorneys that defend the GST exemption for perpetual trusts. In Federal Tax Rules Should Not Be Used to Limit Trust Duration, 126 Tax Notes 832 (Aug 13, 2012), the attorneys argue that the duration of a trust is a state law issue. Their article is actually a response to a Shelf Project article: Lawrence W. Waggoner, Effectively Curbing the GST Exemption for …

Training Lawyer-Entrepreneurs, Luz E. Herrera

Faculty Scholarship

The Great Recession has caused many new attorneys to question their decisions to go to law school. The highly publicized decline in employment opportunities for lawyers has called into question the value of obtaining a law degree. The tightening of the economy has diminished the availability of entry-level jobs for law graduates across employment sectors. Large law firms are laying-off lawyers, bringing in smaller first year associate classes, hiring more contract and experienced lateral attorneys. Government entities and public interest organizations have suffered furloughs, and hiring freezes, and are relying more on volunteers than on new employees to get the …

A Natural Experiment: Asset Manager Liability, Cally Jordan

Faculty Papers & Publications

It is a natural experiment: two highly integrated national economies, sharing a vast continent, a common language and hundreds of years of common experience. They are bound by a free trade agreement which has fostered strong trade flows in goods, services and capital. Yet, in important respects, the structural characteristics of their financial institutions, and the regulatory framework in which they operate, are different, so different in fact, that one country has been crippled for several years now by the global financial crisis and the other has emerged virtually unscathed. The countries, of course, are Canada and the United States. …

Consumer Choice As The Best Way To Describe The Goals Of Competition Law, Robert H. Lande

All Faculty Scholarship

This article is both a short introduction to the Consumer Choice explanation for Competition Law or Antitrust Law, and also a short advocacy piece suggesting that Consumer Choice is the best way to articulate the goals of European Competition Law and United States Antitrust Law.

This article briefly:

1. defines the consumer choice approach to antitrust or competition law and shows how it differs from other approaches;
2. shows that the antitrust statutes and theories of violation embody a concern for optimal levels of consumer choice;
3. shows that the United States antitrust case law embodies a concern for optimal levels of consumer …

Determining The Proper Pleading Standard Under The Private Securities Litigation Reform Act Of 1995 After In Re Silicon Graphics , Erin Brady

Pepperdine Law Review

No abstract provided.

The First Amendment, Gaming Advertisements, And Congressional Inconsistency: The Future Of The Commercial Speech Doctrine After Greater New Orleans Broadcasting Ass'n V. United States, Nicholas P. Consula

Pepperdine Law Review

No abstract provided.

International Financial Standards And The Explanatory Force Of Lex Mercatoria, Cally Jordan

Faculty Papers & Publications

The global financial crisis has cast a strong light on some hitherto obscure corners of the financial world, provoking an outpouring of calls for concerted international action. “Hard law” having disappointed, can “soft law”, in the form of international financial standards, substitute for traditional national legislation. This article examines some of the difficulties associated with the “international standards as soft law” discourse.

First of all, conceptual problems in the “soft law” discourse itself reveal profoundly different patterns of legal thought cutting across national boundaries, resulting in different understandings of international financial standards. Secondly, recent experience, over the past decade, with …

Vat Fraud In The Customer Chain - The German Perfect Storm Cases, Richard Thompson Ainsworth

Faculty Scholarship

German civil and criminal courts have not always agreed over whether to allow a taxpayer to zero-rate intra-Community supplies when the taxpayer making the supply knew (or should have known) that his buyer in the other Member State intended to fraudulently evade VAT as a missing trader. This is no longer the case. Zero-rating of intra-community supplies is now being denied in German civil and criminal courts.

This paper considers how far Germany appears to be extending the law in this area. In 2011 six cases were heard by the Bundesfinanzhof (German Supreme Tax Court) that demonstrate both (a) the …

“Advancing With The Times: Industrial Design Protection In The Era Of Virtual Migration”, Horacio E. Gutiérrez

IP Theory

No abstract provided.

Medical Devices Excise Tax (Mdet) — A Market-Specific Vat?, Richard Thompson Ainsworth, Andrew Shact, Gail Wasylyshyn

Faculty Scholarship

VATs flourish in complex, clearly defined markets. New York discovered this when it converted its single-stage retail sales tax on hotel rooms, the Hotel Room Occupancy Tax (HROT), into a multi-stage European-style VAT. The HROT VAT-conversion demonstrates that (a) in a clearly defined market where (b) a single stage tax is imposed on (c) only part of a complex supply chain that (d) losses attributable to supply-chain-fragmentation can be remedied by moving to a multi-stage VAT.

The Medical Devices Excise Tax (MDET) imposes as 2.3% excise tax on the sale by manufacturers, producers or importers of clearly identified medical devises …

Revisiting 'Truth In Securities Revisited': Abolishing Ipos And Harnessing Private Markets In The Public Good, Adam C. Pritchard

Law & Economics Working Papers

This essay explores the line between private and public markets. I propose a two-tier market system to replace initial public offerings. The lower tier would be a private market restricted to accredited investors; the top tier would be a public market with unlimited access. The transition between the two markets would be based on issuer choice and market capitalization, followed by a seasoning period of disclosure and trading in the public market before the issuer would be allowed to make a public offering. I argue that such system would promote not only efficient capital formation, but also investor protection.

Has Insider Trading Become More Rampant In The United States? Evidence From Takeovers, Laura N. Beny, Nejat Seyhun

Law & Economics Working Papers

No abstract provided.

Families Of Color In Crisis: Bearing The Weight Of The Financial Market Meltdown, André Douglas Pond Cummings

Law Faculty Scholarship

The financial market crisis of 2008 landed heaviest and hardest upon communities of color. In the minority communities that continue to bear the crushing weight of this crisis—which continues unrequited—women of color, and by extension, their families, are by far the group most devastated by the global market meltdown. In an ultimate irony, most economists, scholars, and commentators now agree that the collapse, which continues to ravage Main Street, was caused primarily by a select group of privileged white men–i.e., Wall Street executives, bankers, and the politicians purchased by Wall Street largess. The impact of Wall Street’s fascination with securitizing …

Mahagében Kft & Péter Dávid: Re-Directing The Eu Vat's Perfect Storm, Richard Thompson Ainsworth

Faculty Scholarship

On June 21, 2012 the Court of Justice of the European Union (CJEU) rendered judgment on two Hungarian references, Mahagében kft v. Nemzeti Adó-és Vámhivatal Dél-dunántúli Regionális Adó Fölgazgatósága and Péter Dávid v. Nemzeti Adó-és Vámhivatal Dél-dunántúli Regionális Adó Fölgazgatósága (Mahagében/Dávid). The Mahagében/Dávid decisions clarify the CJEU’s earlier holdings in the joined cases of Alex Kittel v. Belgium and Belgium v. Recolta Recycling SPRL (Kittel/Recolta).

Kittel/Recolta is a critically important decision. It is central to the EU’s anti-fraud effort. It is one of three legal imperatives that earlier this year appeared to be coalescing into a Perfect (enforcement) Storm.

After …

Fundraising And Optimal Policy Rules, Murat C. Mungan, Bariş K. Yörük

Scholarly Publications

This paper develops a simple spatial model of fundraising, in which charities select a target population to solicit donations. First, we show that in a competitive charity market without any intervention, the number of charities in the market and/or the overall net funds raised by charities may be sub-optimal. Next, we analyze whether a social planner can prevent such shortcomings and show that a regulatory mechanism can be designed to achieve socially desirable outcomes. In contrast to the previous literature, our model does not necessarily produce monopoly as the optimal market structure. We show that if fixed costs associated with …

Is Greed Good? A Catholic Perspective On Modern Usury, William M. Woodyard, Chad G. Marzen

Brigham Young University Journal of Public Law

No abstract provided.

Forward Contracts - Prohibitions On Risk And Speculation Under Islamic Law, Nicholas C. Dau-Schmidt

Indiana Journal of Global Legal Studies

Forward contracts allow buyers and sellers of goods to reduce risk by contracting for sale at a predetermined price and quantity prior to the actual exchange of goods and payment. While forward contracts are extensively used in the Western world without restriction, those who adhere to Islamic law are often constrained by principles intended to reduce risk, gambling, and usury. These principles can prove overly restrictive; however, Islamic law restrictions also illuminate the problems associated with the overly permissive Western system in which speculators contract in a manner tantamount to gambling-a problem associated with the recent financial crisis. This Note …

Forums For International Economic Adjudication: Threads In Fragments, Francis N. Botchway

Cardozo Journal of International and Comparative Law

The article challenges the notion of fragmentation in international law, arguing that the proliferation of international adjudicatory bodies, such as the ICJ, WTO DSB, and ECJ, does not lead to fragmentation but instead fosters integration and coherence in international jurisprudence. It highlights the alignment of procedures, shared sources of law, and interpretative approaches among these bodies, demonstrating that institutional diversity enhances efficiency and enriches international law rather than causing discord. The article emphasizes the role of these institutions in addressing complex legal issues, ensuring legal certainty, and promoting transparency and inclusivity in global dispute resolution.

Rethinking Microfinance, Lan Cao

Faculty Publications

No abstract provided.