Law and Economics Commons^™

Baseball's Moral Hazard: Law, Economics, And The Designated Hitter Rule, Dustin E. Buehler, Steve P. Calandrillo

Articles

No subject prompts greater disagreement among baseball fans than the designated hitter rule, which allows teams to designate a player to hit for the pitcher. The rule increases the number of hit batsmen, and some have suggested this effect is a result of "moral hazard," which recognizes that persons insured against risk are more likely to engage in dangerous behavior. Because American League pitchers do not bat, they allegedly are not deterred by the full cost of making risky, inside pitches—namely, retribution during their next at bat.

Using a law-and-economics approach, this Article concludes that the designated hitter rule creates …

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 …

Public Choice And Environmental Policy: A Review Of The Literature, Christopher H. Schroeder

Faculty Scholarship

This paper is a draft of a chapter for a forthcoming book, Research Handbook in Public Law and Public Choice, edited by Daniel Farber and Anne Joseph O'Connell, to be published by Elgar. It reviews the public choice literature on environmental policy making, first generally and then with respect to four fundamental environmental policy questions: (1) whether or not government action is warranted; (2) if it is, the scope and stringency of the government action, including the manner in which a bureaucracy will implement and enforce any statutory standards; (3) the level of government that assumes responsibility; and (4) the …

Lessons From The Financial Meltdown: Global Feminism, Critical Race Theory, And The Struggle For Substantive Justice, Gary Minda

American University Journal of Gender, Social Policy & the Law

No abstract provided.

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 …

Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, And Costs Lives (Introduction), Michael A. Heller

Faculty Scholarship

Twenty-five new runways would eliminate most air travel delays in America; fifty patent owners are blocking a major drug company from creating a cancer cure; 90 percent of our broadcast spectrum sits idle while American cell phone service suffers. These problems have solutions that can jump-start innovation and help save our troubled economy. So, what's holding us back?

Balancing Of Markets, Litigation And Regulation, Keith N. Hylton, Larry E. Ribstein, Paul H. Rubin, Todd J. Zywicki

Faculty Scholarship

In addition to judicial education programs that the Law and Economics Center conducts, we also have a division that focuses on public policy research, known as the Searle Civil Justice Institute. In November, we held a public policy roundtable where we commissioned a variety of research and brought together a group of experts, both academic and practitioner experts, to discuss the issue of balancing the appropriate roles of markets, litigation, and regulation. And the notion there is that each one - markets, litigation, and regulation - can and probably should play a role in addressing various consumer harms.

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 …

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. …

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 …

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. …

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 …

Tax Fraud In The Sales Tax: Zappers — What Are They? How Can Puerto Rico Block Them?, Richard Thompson Ainsworth

Faculty Scholarship

The Sales and Use Tax is an essential part of Puerto Rico’s revenue profile. Effective only recently (November 15, 2006) the Impuesto a las Ventas y Uso (IVU) was expected to raise between $2.3 and $1.05 billion annually, and has already become the Commonwealth’s fourth largest revenue source. Actual revenue results for 2007-2008 came in at $1.1 billion, which admittedly is closer to the low end than the high end of what is possible, but now that the tax is in place the next pressing question is how can its performance be improved?

This paper generally proposes that Puerto Rico …

Burying The Constitution Under A Tarp, Gary S. Lawson

Faculty Scholarship

The Emergency Economic Stabilization Act of 2008, a.k.a. 'the bank bailout bill,' engendered a fair degree of political controversy during and after its enactment but relatively little constitutional controversy. That is unfortunate, and at least a bit puzzling, because, as a matter of original meaning, the statute raises important constitutional questions along at least four dimensions: it is questionable whether Congress had theenumerated power to authorize the Treasury Department to purchase securities, the specific authorizations were sufficiently vague to raise serious questions under the nondelegation doctrine, the expansion of thepowers of the Secretary of the Treasury under the statute make …

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, …

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 …

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 …

Cautions On The Use Of Economics Experiments In Law, Kathryn Zeiler

Faculty Scholarship

The recent move to import empirical results into law and policymaking have introduced challenges related to drawing proper inferences from quantitative studies. The purpose of this essay is to elaborate on three specific cautions on the use of economics experiment results. First, critiques of experiment designs based on external and ecological validity are often misplaced. Second, some legal scholars have fallen into the problematic habit of applying results from experiments directly to law and policy rather than applying well-supported theories. Third, the divergent purposes behind economics studies and legal scholarship give rise, in part, to problematic cherry picking of experimental …

A Legal And Economic Analysis Of The Conflict Of Property Rights On Generic Names: Based On The “Little Sheep” Trademark Dispute, Wei Zhang, Ming Yang

Research Collection Yong Pung How School Of Law

自我国2001年修订《商标法》接受了"第二含义理论"——即承认"共用名称"通过使用可以产生显著性,从而得以注册为商标(第11条第2款)——以来,相关司法实践中的争议一直不断,尤其是引起广泛争议的"小肥羊"商标案的发生,使得人们开始担忧,允许"共用名称"注册为商标而给经营者带来的激励,不免引发过度投资,从而导致无效率的竞争和不公平的结果。但是,从"共用名称"之本质的经济分析出发,我们可以发现,允许该标识注册为商标实际上是避免出现"公地灾难"的有效率的做法。另外,商标法上相关制度的设置,也不会产生学者们所担心的不公平的结果。

Valuing Intellectual Property: An Experiment, Christopher Buccafusco, Christopher Sprigman

Faculty Scholarship

In this article we report on the results of an experiment we performed to determine whether transactions in intellectual property (IP) are subject to the valuation anomalies commonly referred to as “endowment effects”. Traditional conceptions of the value of IP rely on assumptions about human rationality derived from classical economics. The law assumes that when people make decisions about buying, selling, and licensing IP they do so with fixed, context-independent preferences. Over the past several decades, this rational actor model of classical economics has come under attack by behavioral data showing that people do not always make strictly rational decisions. …

Happiness Research And Cost-Benefit Analysis, Matthew D. Adler, Eric A. Posner

Faculty Scholarship

A growing body of research on happiness or subjective well-being (SWB) shows, among other things, that people adapt to many injuries more rapidly than is commonly thought, fail to predict the degree of adaptation and hence overestimate the impact of those injuries on their SWB, and, similarly, enjoy small or moderate rather than significant changes in SWBg in response to significant changes in income. Some researchers believe that these findings pose a challenge to cost-benefit analysis, and argue that project evaluation decision-procedures based on economic premises should be replaced with procedures that directly maximize subjective well-being. This view turns out …

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 …

National Security And The Shadows Of Judicial "Common Sense", Alexander A. Reinert

Articles

No abstract provided.

Unpacking Adaptibility, Andreas Engert, D. Gordon Smith

BYU Law Review

No abstract provided.

The Legal Origins Theory In Crisis, Lisa M. Fairfax

BYU Law Review

No abstract provided.

Legal Origins And The Tasks Of Corporate Law In Economic Development: A Preliminary Exploration, John Ohnesorge

BYU Law Review

No abstract provided.

A "Law & Personal Finance" View Of Legal Origins Theory, Karl S. Okamoto

BYU Law Review

No abstract provided.

Rethinking The "Law And Finance" Paradigm, Katharina Pistor

BYU Law Review

No abstract provided.

Legal Origins, Investor Protection, And Canada, Poonam Puri

BYU Law Review

No abstract provided.