Political Economy Commons^™

Behavioral Public Choice And The Law, Gary M. Lucas Jr., Slaviša Tasić

Faculty Scholarship

Behavioral public choice is the study of irrationality among political actors. In this context, irrationality means systematic bias, a deviation from rational expectations, or other departure from economists’ conception of rationality. Behavioral public choice scholars extend the insights of behavioral economics to the political realm and show that irrational behavior is an important source of government failure. This Article makes an original contribution to the legal literature by systematically reviewing the findings of behavioral public choice and explaining their implications for the law and legal institutions. We discuss the various biases and heuristics that lead political actors to support and …

The Developmental Effect Of State Alcohol Prohibitions At The Turn Of The 20th Century, Mary F. Evans, Eric Helland, Jonathan Klick, Ashwin Patel

All Faculty Scholarship

We examine the quasi-randomization of alcohol consumption created by state-level alcohol prohibition laws passed in the U.S. in the early part of the 20th century. Using a large dataset of World War II enlistees, we exploit the differential timing of these laws to examine their effects on adult educational attainment, obesity, and height. We find statistically significant effects for education and obesity that do not appear to be the result of pre-existing trends. Our findings add to the growing body of economic studies that examines the long-run impacts of in utero and childhood environmental conditions.

Can Simple Mechanism Design Results Be Used To Implement The Proportionality Standard In Discovery?, Jonah B. Gelbach

All Faculty Scholarship

I point out that the Coase theorem suggests there should not be wasteful discovery, in the sense that the value to the requester is less than the cost to the responder. I use a toy model to show that a sufficiently informed court could design a mechanism under which the Coasean prediction is borne out. I then suggest that the actual information available to courts is too little to effect this mechanism, and I consider alternatives. In discussing mechanisms intended to avoid wasteful discovery where courts have limited information, I emphasize the role of normative considerations.

Institutional Investors In Corporate Governance, Edward B. Rock

All Faculty Scholarship

This chapter of the Oxford Handbook on Corporate Law and Governance examines the role of institutional investors in corporate governance and the role of regulation in encouraging institutional investors to become active stewards. I approach these topics through asking what lessons we can draw from the U.S. experience for the E.U.’s 2014 proposed amendments to the Shareholder Rights Directive.

I begin by defining the institutional investor category, and summarizing the growth of institutional investors’ equity holdings over time. I then briefly survey how institutional investors themselves are governed and how they organize share voting. This leads me to two central …

Public Actors In Private Markets: Toward A Developmental Finance State, Robert Hockett, Saule Omarova

Saule T. Omarova

The recent financial crisis brought into sharp relief fundamental questions about the social function and purpose of the financial system, including its relation to the “real” economy. This Article argues that, to answer these questions, we must recapture a distinctively American view of the proper relations among state, financial market, and development. This programmatic vision – captured in what we call a “developmental finance state” – is based on three key propositions: (1) that economic and social development is not an “end-state” but a continuing national policy priority; (2) that the modalities of finance are the most potent means of …

The New Synthesis Of Bank Regulation And Bankruptcy In The Dodd-Frank Era, David A. Skeel Jr.

All Faculty Scholarship

Since the enactment of the Dodd-Frank Act in 2010, U.S. bank regulation and bankruptcy have become far more closely intertwined. In this Article, I ask whether the new synthesis of bank regulation and bankruptcy is coherent, and whether it is likely to prove effective.

I begin by exploring some of the basic differences between bank resolution, which is a highly administrative process in the U.S., and bankruptcy, which relies more on courts and the parties themselves. I then focus on a series of remarkable new innovations designed to facilitate the rapid recapitalization of systemically important financial institutions: convertible contingent capital …

Concept And Contract In The Future Of International Law, John Linarelli

Scholarly Works

This is an article written for a symposium on Joel Trachtman’s book, The Future of International Law. I first deal with the contractarian features of Trachtman’s approach to understanding international law. Using the tools of new institutional economics and constitutional economics, Trachtman seeks to describe the features of an international legal system. This is positive political theory or at least relates substantially to the methods of positive political theory. I explore a different approach, one connecting to normative political theory. In its ambitious sense, my approach would see international law as a form of moral argument, but in its modest …

The (Il)Legitimacy Of Bankruptcies For The Benefit Of Secured Creditors, Charles W. Mooney Jr.

All Faculty Scholarship

This paper explores the legitimacy—or illegitimacy—of filing and maintaining a case under the Bankruptcy Code when the sole or principal beneficiary or beneficiaries of the case would be a secured creditor or secured creditors. In the situation posited here, the application of the usual distributional priority rules would not produce any distribution for the general, unsecured creditors of the debtor. In the prototypical case virtually all of the assets of the debtor would be subject to secured claims securing obligations that exceed the value of the collateral, i.e., the secured creditor would be undersecured and there would be no equity …

Fractured Markets And Legal Institutions, Herbert J. Hovenkamp

All Faculty Scholarship

This article considers how we can improve legal outcomes of conflicts that occur in very small arenas. The conflicts can be of many kinds, including a nuisance dispute between neighbors, an impending collision between two moving vehicles, a joint decision between spouses about whether or on what terms to continue their marriage, or a disagreement between managers and shareholders within a firm.

The prevailing literature typically refers to these small environments as “markets.” Thinking of them as markets, however, averts our attention from larger environments that should be considered but that often do not function well as private markets. For …

Preparing For Service: A Template For 21st Century Legal Education, Michael J. Madison

Articles

Legal educators today grapple with the changing dynamics of legal employment markets; the evolution of technologies and business models driving changes to the legal profession; and the economics of operating – and attending – a law school. Accrediting organizations and practitioners pressure law schools to prepare new lawyers both to be ready to practice and to be ready for an ever-fluid career path. From the standpoint of law schools in general and any one law school in particular, constraints and limitations surround us. Adaptation through innovation is the order of the day.

How, when, and in what direction should innovation …

A Market-Oriented Analysis Of The 'Terminating Access Monopoly' Concept, Jonathan E. Nuechterlein, Christopher S. Yoo

All Faculty Scholarship

Policymakers have long invoked the concept of a “terminating access monopoly” to inform communications policy. Roughly speaking, the concept holds that a consumer-facing network provider, no matter how small or how subject to retail competition, generally possesses monopoly power vis-à-vis third-party senders of communications traffic to its customers. Regulators and advocates have routinely cited that concern to justify regulatory intervention in a variety of contexts where the regulated party may or may not have possessed market power in any relevant retail market.

Despite the centrality of the terminating access monopoly to modern communications policy, there is surprisingly little academic literature …

Moore’S Law, Metcalfe’S Law, And The Theory Of Optimal Interoperability, Christopher S. Yoo

All Faculty Scholarship

Many observers attribute the Internet’s success to two principles: Moore’s Law and Metcalfe’s Law. These precepts are often cited to support claims that larger networks are inevitably more valuable and that costs in a digital environment always decrease. This Article offers both a systematic description of both laws and then challenges the conventional wisdom by exploring their conceptual limitations. It also explores how alternative mechanisms, such as gateways and competition, can permit the realization benefits typically attributed to Moore’s Law and Metcalfe’s Law without requiring increases in network size.

A Framework For Understanding Property Regulation And Land Use Control From A Dynamic Perspective, Donald J. Kochan

Donald J. Kochan