Law and Economics Commons^™

The Use Of Information Technology In The Activities Of Law Enforcement Agencies: A Comparative Legal Analysis, Islamov Muzaffar Rasulovich

ProAcademy

The article considers the use of information technologies in the activities of law enforcement agencies: a comparative legal analysis with such countries as Germany, the USA, Korea, the Russian Federation. The global development of world civilization at the present stage of development of all areas and directions of human activity is determined, first of all, by the effectiveness of its information support. The economic, financial and political life of states, their prosperity and security largely depend on this. The activities of law enforcement agencies are associated with the processing of large volumes of various information, which, in modern conditions, requires …

The Grip Of Nationalism On Corporate Law, Mariana Pargendler

Indiana Law Journal

Part I provides a brief overview of the relationship between corporate law and nationalism and demonstrates their interaction in the historical experiences of several key jurisdictions. These vignettes are merely illustrative, but they indicate how deep the link between nationalism and corporate law can be. Part II summarizes the evidence on the economic effects of foreign corporate control, showing that it is ultimately inconclusive. Part III explains why corporate law can be an attractive instrument to accomplish nationalist objectives and explores the possible regulatory responses to this phenomenon. Part IV analyzes the implications of these findings for future developments in …

The New Mechanisms Of Market Inefficiency, Kathryn Judge

Faculty Scholarship

Mechanisms of market inefficiency are some of the most important and least understood institutions in financial markets today. A growing body of empirical work reveals a strong and persistent demand for “safe assets,” financial instruments that are sufficiently low risk and opaque that holders readily accept them at face value. The production of such assets, and the willingness of holders to treat them as information insensitive, depends on the existence of mechanisms that promote faith in the value of the underlying assets while simultaneously discouraging information production specific to the value of those assets. Such mechanisms include private arrangements, like …

Moral Diversity And Efficient Breach, Matthew A. Seligman

Michigan Law Review

Most people think it is morally wrong to breach a contract. But sophisticated commercial parties, like large corporations, have no objection to breaching contracts and paying the price in damages when doing so is in their self-interest. The literature has ignored the profound legal, economic, and normative implications of that asymmetry between individuals’ and firms’ approaches to breach. To individuals, a contract is a promise that cannot be broken regardless of the financial stakes. For example, millions of homeowners refused to breach their mortgage contracts in the aftermath of the housing crisis even though doing so could have saved them …

Does Contract Law Need Morality?, Kimberly D. Krawiec, Wenhao Liu

William & Mary Business Law Review

In The Dignity of Commerce, Nathan Oman sets out an ambitious market theory of contract, which he argues is a superior normative foundation for contract law than either the moralist or economic justifications that currently dominate contract theory. In doing so, he sets out a robust defense of commerce and the marketplace as contributing to human flourishing that is a refreshing and welcome contribution in an era of market alarmism. But the market theory ultimately falls short as either a normative or prescriptive theory of contract. The extent to which law, public policy, and theory should account for values …

The Gatekeepers Of Crowdfunding, Andrew A. Schwartz

Publications

Securities crowdfunding is premised on two core policy goals: inclusivity and efficiency. First, crowdfunding is conceived as an inclusive system where all entrepreneurs are given a chance to pitch their idea to the "crowd." Second, crowdfunding is supposed to be an efficient way to channel funds from public investors to promising startup companies. There is a fundamental tension between these two policy goals, however. A totally inclusive system would ensure that platforms list any and every company that wants to participate. But platforms need to curate and select the companies they list in order to establish a reputation as a …

The Professional Prospectus: A Call For Effective Professional Disclosure, Benjamin P. Edwards

Scholarly Works

Without easy access to relevant information, many consumers unwittingly trust serious decisions to professionals with histories of malpractice and negligence-leading to both individual and societal harms. This Article proposes to improve professional services markets with a tool that has already proven effective in the securities markets: a prospectus. A "Professional Prospectus" would reduce information asymmetries and improve the market for professional services through disclosure and consumer choice.

A Professional Prospectus would alter the market for professional services by making professional reputation a more potent force. Economic theory often relies on "reputation effects" to ensure the efficient functioning of the market …

Economic Solutions To Nuclear Energy's Financial Challenges, Zachary Robock

Michigan Journal of Environmental & Administrative Law

This Note presents a legal, economic, and regulatory roadmap to drive long-term innovation in sustainable energy generation. Next-generation nuclear power, which fundamentally mitigates many safety and nuclear waste issues, is the focus of this Note; however, the economic concepts can be applied to encourage solar, wind, advanced battery, and other sustainable technologies with high upfront costs and low long-term variable costs. Advanced nuclear energy generation is economically competitive on a long-term levelized cost basis, but suffers from a timing issue—a large amount of capital is needed upfront, with repayment over several decades, during which time significant capital costs can accrue …

Richard A. Posner: A Study In Judicial Entrepreneurship, Sean J. Shannon

Dissertations, Theses, and Capstone Projects

This dissertation analyzes the role of Richard Posner, one of the most prolific and innovative legal thinkers over the past forty years, as a judicial entrepreneur in his efforts to persuade the legal academy and judiciary to incorporate economic principles into the judicial decision making process in market and non-market areas of the law and legal discourse and thereby to re-examine the role of the judge. Though political scientists have explored the entrepreneurial activities of policy makers and political actors, they have given little attention to the role of judges as judicial entrepreneurs. This dissertation develops a comprehensive theoretical understanding …

Market Efficiency And The Problem Of Retail Flight, Alicia J. Davis

Articles

In 1950, 91 % of common stock in the U.S. was owned directly by individual inves­ tors. Today, that percentage stands at only 23%. The mass exodus of retail investors and their investment dollars has negative implications not only for capital formation and investor protection, but also for market efficiency. Individual investors are often assumed to be noise traders who distort stock prices and harm market functioning. Therefore, some argue that their withdrawal from the market should be of little concern; indeed, it should be celebrated. Recent empirical evidence calls this assertion of retail noise trading into doubt, and this …

Comparative Effectiveness Research As Choice Architecture: The Behavioral Law And Economics Solution To The Health Care Cost Crisis, Russell Korobkin

Michigan Law Review

With the Patient Protection and Affordable Care Act (“ACA”) set to dramatically increase access to medical care, the problem of rising costs will move center stage in health law and policy discussions. “Consumer directed health care” proposals, which provide patients with financial incentives to equate marginal costs and benefits of care at the point of treatment, demand more decisionmaking ability from consumers than is plausible due to bounded rationality. Proposals that seek to change the incentives of health care providers threaten to create conflicts of interest between doctors and patients. New approaches are desperately needed. This Article proposes a government-facilitated …

Towards A Universal Framework For Insurance Anti-Discrimination Laws, Ronen Avraham, Kyle D. Logue, Daniel Schwarcz

Articles

Discrimination in insurance is principally regulated at the state level. Surprisingly, there is a great deal of variation across coverage lines and policyholder characteristics in how and the extent to which risk classification by insurers is limited. Some statutes expressly permit insurers to consider certain characteristics, while other characteristics are forbidden or limited in various ways. What explains this variation across coverage lines and policyholder characteristics? Drawing on a unique, hand-collected data-set consisting of the laws regulating insurer risk classification in fifty-one U.S. jurisdictions, this Article argues that much of the variation in state-level regulation of risk classification can in …

Understanding Insurance Anti-Discrimination Laws, Ronen Avraham, Kyle D. Logue, Daniel Schwarcz

Articles

Insurance companies are in the business of discrimination. Insurers attempt to segregate insureds into separate risk pools based on the differences in their risk profiles, first, so that different premiums can be charged to the different groups based on their differing risks and, second, to incentivize risk reduction by insureds. This is why we let insurers discriminate. There are limits, however, to the types of discrimination that are permissible for insurers. But what exactly are those limits and how are they justified? To answer these questions, this Article (a) articulates the leading fairness and efficiency arguments for and against limiting …

Penalty Default Licenses: A Case For Uncertainty, Kristelia A. García

Publications

Research on the statutory license for certain types of copyright-protected content has revealed an unlikely symbiosis between uncertainty and efficiency. Contrary to received wisdom, which tells us that in order to increase efficiency, we must increase stability, this Article suggests that uncertainty can actually be used to increase efficiency in the marketplace. In the music industry, the battle over terrestrial performance rights--that is, the right of a copyright holder to collect royalties for plays of a sound recording on terrestrial radio--has raged for decades. In June 2012, in a deal that circumvented the statutory license for sound recordings for the …

Reanalyzing Cost-Benefit Analysis: Toward A Framework Of Function(S) And Form(S), Robert B. Ahdieh

Faculty Scholarship

The analysis herein arises from the collision course between the sweeping reforms mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and a single sentence of the U.S. Code, adopted nearly fifteen years earlier and largely forgotten ever since. Few were likely thinking of Section 106 of the National Securities Market Improvement Act when the Dodd-Frank Act was enacted on July 21, 2010. As applied by the D.C. Circuit less than a year later in Business Roundtable v. SEC, however, that provision’s peculiar requirement of cost-benefit analysis could prove the new legislation’s undoing.

To help navigate …

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 …

Agenda: A Low-Carbon Energy Blueprint For The American West, University Of Colorado Boulder. Natural Resources Law Center, University Of Colorado Boulder. Renewable And Sustainable Energy Institute, Western Resource Advocates, Rocky Mountain Research Station (Fort Collins, Colo.)

A Low-Carbon Energy Blueprint for the American West (Martz Summer Conference, June 6-8)

The future of the planet may depend upon our ability to increase energy supplies even as we reduce carbon emissions. This conference will address how a low-carbon energy program might evolve with a particular focus on the American West. It will focus on the future of energy in the West--on a “managed transition” to a different energy mix, on the need to nest this effort in a framework that acknowledges interconnections, and on identifying the most salient opportunities to consider the legal, political, financial, and technical challenges.

Happiness, Efficiency, And The Promise Of Decisional Equity: From Outcome To Process, Jeffrey L. Harrison

Pepperdine Law Review

Those who resist the teachings of law and economics are rightfully concerned that economic efficiency is largely based on the predictions of relatively acquisitive people about what will make them feel or be better off. Due to a variety of factors, these predictions often turn out to be wrong. The explosion in happiness research would appear to have the potential to close the link between choices and actual outcomes and, consequently, make the concept of efficiency more meaningful. This Article explores this promising advance. It concludes that direct focus on one concept or another of happiness or "better-off-ness" does not …

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 …

False Efficiency And Missed Opportunities In Law And Economics, Shawn J. Bayern

Scholarly Publications

This Article points out a simple flaw common to many law-and-economics analyses, ranging from fundamental models like the Hand Formula to narrower arguments like those that oppose the doctrine of unconscionability.

The flaw is straightforward: economic analyses of law often assume, either implicitly or explicitly that when it is more efficient for an activity to occur than for it not to occur it is efficient for legal rules to encourage the activity. Even on grounds of efficiency alone, however, knowing in isolation whether an activity produces more wealth than its absence is insufficient to conclude that the activity is efficient. …

Efficient Breach Of International Law: Optimal Remedies, 'Legalized Noncompliance,' And Related Issues, Eric A. Posner, Alan O. Sykes

Michigan Law Review

In much of the scholarly literature on international law, there is a tendency to condemn violations of the law and to leave it at that. If all violations of international law were indeed undesirable, this tendency would be unobjectionable. We argue in this Article, however that a variety of circumstances arise under which violations of international law are desirable from an economic standpoint. The reasons why are much the same as the reasons why nonperformance of private contracts is sometimes desirable- the concept of "efficient breach," familiar to modern students of contract law, has direct applicability to international law. As …

The Cult Of Efficiency In Corporate Law, Stephen E. Ellis, Grant M. Hayden

Faculty Journal Articles and Book Chapters

This paper challenges a fundamental assumption of corporate law scholarship. Corporate law is heavily influenced by economics, and by normative economics in particular. Economic efficiency, for example, is seen as the primary goal of good corporate governance. But this dependence on standard notions of economic efficiency is unfortunate, as those notions are highly problematic. In economic theory, efficiency is spelled out in terms of individual preference satisfaction, which is an inadequate foundation for any sort of normative analysis. We argue that on any account of the good, people will sometimes prefer things that aren’t good for them on that account. …

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 …

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 …

Private Production Of Public Goods: Liability For Unrequested Benefits, Ariel Porat

Michigan Law Review

This Article explores why the law treats negative externalities (harms) and positive externalities (benefits) differently. Ideally, from an economic perspective, both negative and positive externalities should be internalized by those who produce them, for with full internalization, injurers and benefactors alike would behave efficiently. In actuality, however, whereas the law requires that injurers bear the harms they create (or wrongfully create), benefactors are seldom entitled to recover for benefits they voluntarily confer on recipients without the latter's consent ( "unrequested benefits"). One aim of this Article is to explore the puzzle of the law's differing treatment of negative and positive …

Happiness, Efficiency, And The Promise Of Decisional Equity: From Outcome To Process, Jeffrey L. Harrison

UF Law Faculty Publications

This article explains why outcome-oriented goals like efficiency, happiness, or well-being are ultimately of limited use as goals for law. Part II places happiness research in the context of past efforts to assess efficiency standards. Part III outlines the schism between efficiency and happiness and examines whether they can be reconciled. Part IV discusses the problems of relying on direct measures of happiness. The concept of decisional equity is described and examined in Part V.

On The Many Flavors Of Capitalism Or Reflections On Schumpeter's Ghost, John Henry Schlegel

Buffalo Law Review

Most legal scholars treat capitalism as a genus with one species. The appearance of several books that argue to the contrary suggests that it is sensible to revisit this assumption. Discussion begins by considering the constructed nature of markets, the importance of market systems, and the role of financings as the factor distinguishing capitalism from other forms of a market economy. Thereafter, four articulations of the varieties of capitalism are reviewed: the classic Marxist one, one by a political economist, another by a pair of comparative political scientists, and third by a trio of economists. This review leads to a …

Insider Trading Rules Can Affect Attractiveness Of Country's Stock Markets, Laura Nyantung Beny

Articles

The academic debate about the desirability of prohibiting insider trading is longstanding and as yet unresolved. Until Henry Manne’s 1966 book, Insider Trading and the Stock Market, the debate centered on whether insider trading is unfair to public investors who are not privy to private corporate information. However, the fairness approach is malleable and indeterminate and thus does not lend itself to clear-cut policy prescriptions. Since Manne’s book, the focus of the debate has been on the effect of insider trading on economic efficiency. Manne argued that, contrary to the prevailing legal and moral opinion of the time, insider trading …

Justice And The Evolution Of The Common Law, Richard O. Zerbe

ExpressO

Empirical evidence shows, and theory suggests, that the common law tends toward economic efficiency. While various theories attempt to explain this phenomenon, no single one is well accepted. This article provides a simple explanation. It suggests that efficiency arises as a matter of justice. Justice is sought because justice-seeking is a social norm with its own sanctioning force. Justice is sought and efficiency achieved because they substantially overlap. Limitations in the traditional definition of efficiency, however, ensure that efficiency is not congruent with justice. This paper suggests that it can be: the congruence of justice and efficiency will be greater …

How And Understanding Of The Second Personal Standpoint Can Change Our Understanding Of The Law: Hart's Unpublished Response To Exclusive Legal Positivism, Robin B. Kar

ExpressO

This Article describes recent developments in moral philosophy on the “second personal standpoint,” and argues that they will have important ramifications for legal thought. Moral, legal and political thinkers have, for some time now, understood important distinctions between the first personal perspective (of deliberation) and the third personal perspective (of observation, cause and effect), and have plumbed these distinctions to great effect in their thought. This distinction is, in fact, implicit the law and economics movement’s “rational actor” model of decision, which currently dominates much legal academic thought. Recent developments in value theory due to philosopher Stephen Darwall suggest, however, …