Law and Economics Commons^™

Lies Without Liars? Janus Capital And Conservative Securities Jurisprudence, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

The Supreme Court’s recent Janus Capital case offers a reading of the word “make” in Rule 10b-5 that speaks to ultimate legal authority over the communication in question. This creates the real possibility that we can have lies without liars, an entirely perplexing result in terms of any purposive meaning of the rule. In so holding, Justice Thomas joined a seemingly short list of judges who suggest that legal formalism is a particularly good weapon with which to fight securities fraud. This paper exploresJanus through the lens of conservative textualism, which takes us through a much longer intellectual history …

Technological Innovation, International Competition, And The Challenges Of International Income Taxation, Michael J. Graetz, Rachael Doud

Faculty Scholarship

Because of the importance of technological innovation to economic growth, nations strive to stimulate and attract the research and development ("R&D") that leads to that innovation and to make themselves hospitable environments for the holding of intellectual property ("IP"). Tax policies have taken center stage in their efforts to accomplish these goals and to capture a share of the income from technological innovations.

Designing cost-effective methods of supporting technological innovations has, however, become substantially more difficult as the world economy has become more interconnected. Where R&D is performed and where income is earned change in response to the nature and …

The Agency Costs Of Agency Capitalism: Activist Investors And The Revaluation Of Governance Rights, Ronald J. Gilson, Jeffrey N. Gordon

Faculty Scholarship

Equity ownership in the United States no longer reflects the dispersed share ownership of the canonical Berle-Means firm. Instead, we observe the reconcentration of ownership in the hands of institutional investment intermediaries, which gives rise to "the agency costs of agency capitalism." This ownership change has occurred because of (i) political decisions to privatize the provision of retirement savings and to require funding of such provision and (ii) capital market developments that favor investment intermediaries offering low-cost diversified investment vehicles. A new set of agency costs arises because in addition to divergence between the interests of record owners and the …

The Impact Of Medical Liability Standards On Regional Variations In Physician Behavior: Evidence From The Adoption Of National-Standard Rules, Michael D. Frakes

Faculty Scholarship

I explore the association between regional variations in physician behavior and the geographical scope of malpractice standards of care. I estimate a 30–50 percent reduction in the gap between state and national utilization rates of various treatments and diagnostic procedures following the adoption of a rule requiring physicians to follow national, as opposed to local, standards. These findings suggest that standardization in malpractice law may lead to greater standardization in practices and, more generally, that physicians may indeed adhere to specific liability standards. In connection with the estimated convergence in practices, I observe no associated changes in patient health.

Regulating Ex Post: How Law Can Address The Inevitability Of Financial Failure, Iman Anabtawi, Steven L. Schwarcz

Faculty Scholarship

Unlike many other areas of regulation, financial regulation operates in the context of a complex interdependent system. The interconnections among firms, markets, and legal rules have implications for financial regulatory policy, especially the choice between ex ante regulation aimed at preventing financial failure and ex post regulation aimed at responding to that failure. Regulatory theory has paid relatively little attention to this distinction. Were regulation to consist solely of duty-imposing norms, such neglect might be defensible. In the context of a system, however, regulation can also take the form of interventions aimed at mitigating the potentially systemic consequences of a …

The Corporate Preference For Trade Secret, Andrew A. Schwartz

Publications

Many inventions can be legally protected either by patent or by trade secrecy, and a conventional wisdom exists on how to select between them. This Article adds to that literature by showing that corporations should have an inherent preference for trade secret over patent for reasons relating to their legal form. Among them is the idea that corporations are perpetual entities and therefore perfectly suited to reap the perpetual returns that only a trade secret can offer. The Article also addresses the potential for a conflict between the inherent corporate preference for trade secret and the preferences of corporate managers, …

Coase Minus The Coase Theorem--Some Problems With Chicago Transaction Cost Analysis, Pierre Schlag

Publications

In law as well as economics, the most well-known aspect of Coase's "The Problem of Social Cost," is the Coase Theorem. Over the decades, that particular notion has morphed into a crucial component of Chicago law and economics--namely, transaction cost analysis.

In this Article, I deliberately bracket the Coase Theorem to show that "The Problem of Social Cost" contains far more interesting and unsettling lessons--both for law as well as for economics. Indeed, while Coase's arguments clearly target the Pigouvian attempts to "improve on the market" through government correctives, there is, lurking in those arguments, a much more profound critique …

Check Please: Using Legal Liability To Inform Food Safety Regulation, Alexia Brunet Marks

Publications

Food safety is a hotly debated issue. While food nourishes, sustains, and enriches our lives, it can also kill us. At any given meal, our menu comes from a dozen different sources. Without proper incentives to encourage food safety, microbial pathogens can, and do enter the food source--so much so that according to the Centers for Disease Control and Prevention (CDC), each year roughly one in six Americans (or forty-eight million people) gets sick, 128,000 are hospitalized, and 3,000 die of foodborne diseases. What is the optimal way to prevent unsafe foods from entering the marketplace?

Safety in the food …

Against Endowment Theory: Experimental Economics And Legal Scholarship, Greg Klass, Kathryn Zeiler

Faculty Scholarship

Endowment theory holds the mere ownership of a thing causes people to assign greater value to it than they otherwise would. The theory entered legal scholarship in the early 1990s and quickly eclipsed other accounts of how ownership affects valuation. Today, appeals to a generic “endowment effect” can be found throughout the legal literature. More recent experimental results, however, suggest that the empirical evidence for endowment theory is weak at best. When the procedures used in laboratory experiments are altered to rule out alternative explanations, the “endowment effect” disappears. This and other recent evidence suggest that mere ownership does not …

Nullifying The Debt Ceiling Threat Once And For All: Why The President Should Embrace The Least Unconstitutional Option, Neil H. Buchanan, Michael C. Dorf

Cornell Law Faculty Publications

In August 2011, Congress and the President narrowly averted economic and political catastrophe, agreeing at the last possible moment to authorize a series of increases in the national debt ceiling. This respite, unfortunately, was merely temporary. The amounts of the increases in the debt ceiling that Congress authorized in 2011 were only sufficient to accommodate the additional borrowing that would be necessary through the end of 2012. In an economy that continued to show chronic weakness -- weakness that continues to this day -- the federal government would predictably continue to collect lower-than-normal tax revenues and to make higher-than-normal expenditures, …

Vat Triangulation With A Us Middleman Vstr, C-587/10, Richard Thompson Ainsworth

Faculty Scholarship

It is not every day that an American firm finds itself in the middle of an EU VAT controversy that significantly develops the law. However, the September 27, 2012 decision of the European Court of Justice (ECJ) does just that. The case is Vogtländische Straβen-,Tief- und Rohrleitungsbau GmbH Rodewisch (VSTR) v. Finanzamt Plauen.

In November 1998 Atlantic International Trading Company (AIT), an American company established in New York, NY, purchased two stone-crushers from VSTR, a firm established in Germany. AIT quickly re-sold the stone-crushers to an end user established in Finland. The VSTR/AIT contract was “ex works,” that is AIT …

Vat Fraud & Triangulation, Richard Thompson Ainsworth

Faculty Scholarship

Missing trader intra-community (MTIC) fraud has received a lot of domestic enforcement attention. True cross border enforcement (joint or coordinated multi-Member State audit) has been limited. There are signs that this is changing as the Member States become more aggressive in their search for revenue.

Along with this shift in enforcement focus, triangulation analysis has moved from being an interesting aspect of the MTIC fraud structure to the central element in a larger understanding of how a fraudster thinks and how he carries out his fraud. We are coming to understand that triangulations are not only the mechanism of how …

Beyond Confusion?, Stacey Dogan

Shorter Faculty Works

Trademark law is in the midst of an identity crisis. The prevailing economic account of the law has come under sustained attack by scholars, who have both challenged its descriptive accuracy and blamed it for many of the expansions of trademark rights in recent decades. The likelihood of confusion test – long the nucleus of infringement analysis – has been roundly condemned as indeterminate, incoherent, and normatively empty. No one seems to agree about why we have trademark law and how best to implement it. Scholars have cast about for explanations of how we got here and ideas of how …

Perfecting Criminal Markets, David Jaros

All Faculty Scholarship

From illicit drugs to human smuggling to prostitution, legislators may actually be perfecting the very criminal markets they seek to destroy. Criminal laws often create new dangers and new criminal opportunities. Criminalizing drugs creates the opportunity to sell fake drugs. Raising the penalties for illegal immigration increases the risk that smugglers will rely on dangerous methods that can injure or kill their human cargo. Banning prostitution increases the underground spread of sexually transmitted disease. Lawmakers traditionally respond to these “second order” problems in predictable fashion — with a new wave of criminalization that imposes additional penalties on fake drug dealers, …

China's Rare Earths Export Quotas: Out Of The China-Raw Materials Gate, But Past The Wto's Finish Line?, Han-Wei Liu, John Maughan

Research Collection Yong Pung How School Of Law

Several recent studies have discussed the ramifications of the China – Raw Materials case for China's rare earths. However, none of these studies has conducted a thorough investigation of China's current export quota regime for rare earths or how it might stand up under WTO rules, assuming that it would be treated the same. This article makes no such assumption, investigating China's export quota regime for rare earths as it stands in early June 2012. The regime is somewhat improved over that applied during the Raw Materials case and could allow a more favourable WTO ruling. However, if General Agreement …

Legal Framework For Soviet Privatization, Olga Floroff, Susan Tiefenbrun

Pepperdine Law Review

No abstract provided.

American Parent Bank Liability For Foreign Branch Deposits: Which Party Bears Sovereign Risk?, Adam Telanoff

Pepperdine Law Review

No abstract provided.

Sec Investigations And Securities Class Actions: An Empirical Comparison, Stephen Choi, Adam Pritchard

Law & Economics Working Papers

We compare investigations by the SEC with securities fraud class action filings involving public companies. Using actions with both an SEC investigation and a class action as our baseline, we compare SEC-only investigations with class action-only lawsuits. We find evidence that the stock market reacts more negatively to the class actions relative to SEC investigations. We also find that institutional ownership and stock turnover decline more for class actions compared with SEC investigations. Lastly, the incidence and magnitude of settlements, as well as the incidence of top officer resignation, are greater for class actions relative to SEC investigations. This evidence …

Rethinking Principals Of Comparative Fault In Light Of California's Proposition 51, James A. Gash

Pepperdine Law Review

No abstract provided.

Big Business Beware: Punitive Damages Do Not Violate Fourteenth Amendment According To Pacific Mutual Life Insurance Co. V. Haslip, Christopher V. Carlyle

Pepperdine Law Review

No abstract provided.