Law and Economics Commons^™

Fragmentation Nodes: A Study In Financial Innovation, Complexity, And Systemic Risk, Kathryn Judge

Faculty Scholarship

This Article resents a case study in how complexity arising from the evolution and proliferation of a financial innovation can increase systemic risk. The subject of the case study is the securitization of home loans, an innovation which played a critical and still not fully understood role in the 2007-2009 financial crisis. The Article introduces the term "fragmentation node" for these transaction structures, and it shows how specific sources of complexity inherent in fragmentation nodes limited transparency and flexibility in ways that undermined the stability of the financial system. In addition to shedding new light on the processes through which …

Fiscal Policy In An Era Of Austerity, David M. Schizer

Faculty Scholarship

We face a time of stagnant economic growth, severe unemployment, massive budget deficits, and an increasingly competitive global economy. These daunting challenges are the legacy of a number of unwise policy decisions in both the public and private sectors. Although the good news is that unsound policies can be changed, the bad news is that no single step will do the trick. It is a challenge to rely on monetary policy when interest rates are near zero. There also is uncertainty – and a heated debate among economists – about the effectiveness of a Keynesian stimulus. One thing we know …

Law By Non Sequitur: Norcon V. Niagara Mohawk, Victor P. Goldberg

Faculty Scholarship

Under the common law, a contracting party could only demand assurance of performance if the other party was insolvent. If a party had reasonable grounds for insecurity, the UCC §2-609 allowed it demand adequate assurance even if the counterparty were solvent. The Restatement (Second) adopted the same rule for non-goods. In NorCon v. Niagara Mohawk the New York court extended the adequate assurance doctrine for some non-goods contracts. Although the decision seems to imply that there is some relation between the NorCon facts and its conclusion as to the law, there is none. Relying primarily on material available to the …

Accentuate The Normative: A Response To Professor Mckenna, Jeremy N. Sheff

Faculty Publications

In his article, “A Consumer Decision-Making Theory of Trade-mark Law,” 98 Va. L. Rev. 67 (2012), Professor Mark McKenna makes two significant claims. The first is that the dominant Law and Economics theory of trademark law—the search-costs theory of the Chicago School—is in some way connected to recent undesirable expansions of trademark rights. The second is that a preferable theory of trademark law—one that would result in more tightly circumscribed and socially beneficial notions of trademark rights—would take consumer decision making, rather than search costs, as its guiding principle. I find myself sympathetic to these arguments, and yet I believe …

Taxing Family Work: Aid For Affluent Husband Care, Martha T. Mccluskey

Journal Articles

The income of the classic breadwinner married to a homemaker receives a tax advantage under federal income tax law. The conventional wisdom holds that any resulting inequities to unmarried persons or dual-earning marriages cannot be corrected without producing similarly problematic inequities. This Article challenges that dilemma by analyzing the inequity of the marital tax system from a new perspective. This Article argues that the perceived "bonus" for breadwinner-homemaker marriages is best understood as an implicit policy of "aid for affluent husband care." Recent tax reforms (up for renewal in 2010) that partly reduced the "marriagep enalty "for some dualearning couples …

The Federal Reserve As Last Resort, Colleen M. Baker

Journal Articles

The Federal Reserve, the central bank of the United States, is one of the most important and powerful institutions in the world. Surprisingly, legal scholarship hardly pays any attention to the Federal Reserve or to the law structuring and governing its legal authority. This is especially curious given the amount of legal scholarship focused on administrative agencies that do not have anywhere near as critical a domestic and international role as that of the Federal Reserve. At the core of what the Federal Reserve does and should do is to conduct monetary policy so as to safeguard pricing, including that …

Further Considerations: Immigrant Entrepreneurs - Contributions And Challenges, Jayesh Rathod

Contributions to Books

An overview of the contributions made by immigrant entrepreneurs in the United States, and the challenges they face.

Japan's Love For Derivative Actions: Irrational Behavior And Non-Economic Motives As Rational Explanations For Shareholder Litigation, Dan W. Puchniak, Masafumi Nakahigashi

Vanderbilt Journal of Transnational Law

Not long ago, there was a consensus in the legal academy that the Japanese were irrational litigants. As the theory went, Japanese people would forgo litigating for financial gain because of a cultural obsession with maintaining social harmony. Based on this theory, it made perfect (but economically irrational) sense that Japanese shareholders let their U.S.-transplanted derivative action lay moribund for almost four post-war decades, while at the same time the derivative action was a staple of shareholder litigation in the United States.

The 1980s brought a wave of law and economics to the scholarship of Japanese law, which largely discredited …

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 …

A Consumer Decision-Making Theory Of Trademark Law, Mark P. Mckenna

Journal Articles

The consumer search costs theory has dominated discussion of trademark law for the last several decades. According to this theory, trademark law aims to increase consumer welfare by reducing the cost of shopping for goods or services, and it accomplishes this goal by preventing uses of a trademark that might confuse consumers about the source of the goods with which the mark is used. This conceptual frame is wrong, and it is complicit in most of trademark law’s extraordinary expansion. “Search costs” is not sufficiently precise; many types of search costs are irrelevant to consumer behavior, and even when search …

Tinkering With The Machinery Of Life, Ben L. Trachtenberg

Faculty Publications

Recent adjustments by the Environmental Protection Agency (EPA) and the Department of Transportation (DOT) to their cost–benefit analysis procedures could cause tremendous changes to federal regulation. For decades, federal agencies have calculated the value of a statistical life (VSL) and have used that number when evaluating the costs and benefits of proposed regulations. If a regulation was expected to save lives, the number of lives saved could be multiplied by the VSL to monetize the benefits. Because, however, lives saved in the future were given the same nominal value as lives saved in the present, the real value of future …

Combating Moral Hazard: The Case For Rationalizing Public Employee Benefits, Maria O'Brien

Faculty Scholarship

The current crisis in public employee benefits is a fairly conventional moral hazard story about overly generous promises made by both private sector employers and politicians spending public dollars. The private sector, forced by the Financial Accounting Standards Board (FASB) in 1993 to confront the true cost of promises made to future retirees, dealt with the newly discovered debt in a number of ways, including the termination of defined benefit plans which were quickly replaced by defined contribution plans. The public sector was also forced to confront its own largesse with the implementation of GASB 45 which focused careful attention …

The Impact Of Public Disclosure On Equity Dispositions By Corporate Managers, David I. Walker

Faculty Scholarship

In a recent article, Professor Robert J. Jackson Jr. investigates the impact of public disclosure on equity dispositions by senior managers at Goldman Sachs. Utilizing previously overlooked data, Jackson finds that disclosure of sales per Securities Exchange Act section 16(a) dampens selling. This response critically examines the theoretical link between public disclosure and equity dispositions as well as Jackson’s empirical analyses. Jackson has provided convincing evidence of the existence of the relationship he theorizes, and he has done an admirable job of isolating the impact of public disclosure on sales in the face of potentially confounding influences. Nonetheless, some concerns …

Special Access: The Harm Of Premature Deregulation In Telecommunications, Cary E. Adickman

Cardozo Arts & Entertainment Law Journal

No abstract provided.

Four Conceptualizations Of The Relations Of Law To Economics (Tribulations Of A Positivist Social Science), Pierre Schlag

Publications

This brief essay sketches the ways in which four leading economic thinkers (Knight, Coase, Posner and Sunstein) have dealt with a vexing tension in the relations of economics to law, the state, and the social. The tension arises as microeconomists address (or fail to address) the relations of their theories to “soft factors” such as psychology, politics, social institutions, etc. These soft factors are at once clearly consequential for economic behavior (and thus arguably should be included in the theories). At the same time, these soft factors are not self-evidently subject to determination by any known economic laws (and thus …

Poverty Offsetting, Ezra Rosser

Scholarly Articles in Law Reviews & Journals

No abstract provided.

How Well Does The G20 Reflect African Interests And Priorities?: Some Thoughts Following The Los Cabos, Mexico Summit, Daniel D. Bradlow

Scholarly Articles in Law Reviews & Journals

The leaders of the G20 countries have now held seven summits -- enough to begin critically evaluating how well the G20 serves the interest of specific sub-parts of the international community. The purpose of this paper is to assess how well the G20 responds to African interests. It is divided into three parts. The first is a brief description of the most recent summit, held on June 18-19, 2012 in Los Cabos, Mexico. The second part is a brief discussion of the criteria that will be used in this evaluation. The third part is an assessment of the G20 against …

The Law And Economics Of Fluctuating Criminal Tendencies And Incapacitation, Murat C. Mungan

Faculty Scholarship

Economic analyses of criminal law are frequently and heavily criticized for being unable to explain many criminal law rules and doctrines that people find intuitively just. Existing economic models cannot properly explain, for instance, why criminal law distinguishes between (i) repeat offenders and first-time offenders, (ii) murder and voluntary manslaughter, and (iii) remorseful and non-remorseful offenders.

In this Article, I propose a new and richer economic theory of crime that captures the rationales behind these practices, and potentially behind many other important criminal law principles and doctrines. Unlike an overwhelming majority of previous economic analyses, my theory accounts not only …

You Can’T Get Rid Of It So You Might As Well Tax It:The Economic Impact Of Nevada’S Legalized Prostitution, David Goldman

Student Works

No abstract provided.

The Cathedral Engulfed: Sea-Level Rise, Property Rights, And Time, J. Peter Byrne

Georgetown Law Faculty Publications and Other Works

Sea-level rise will require many new initiatives in land use regulation to adapt to unprecedented climate conditions. Such government actions will prompt regulatory and other takings claims, and also will be shaped by apprehension of such claims. This article analyzes the categories of land use regulations and other government initiatives likely to be enacted to adapt to sea-level rise and anticipates the takings claims that may be brought against them. In addition to hard and soft coastal armoring, the article considers regulations intended to force or induce development to retreat from rising waters. Retreat regulations present difficult takings problems, because …