Working Papers

See also the RSS News feed of working papers as they are released.

Bound print copies of George Mason School of Law’s working paper series on law and economics are available in the Law Library. The bound set often includes initial drafts of papers. Search Mason’s Classic Catalog to locate a working paper.

Recent Working Papers:

Administrative Law Without Congress: Of Rewrites, Shell Games, and Big Waivers

By: Michael GreveAshley Parrish

Date Posted: 2014

No.: 14-56

Full text (most current version) on SSRN

Abstract:

Administrative law has ceased to respond adequately to the challenges posed by modern-day executive government. We suggest that the discordance reflects a mismatch between the debilities of the Congress and an administrative regime built on legislative supremacy.

Administrative law—in its New Deal and its modern, post-Chevron forms—presuppose a Congress that is jealous of its legislative powers. However, the modern Congress has increasingly dis-empowered itself. It consistently fails to update old statutes even when they are manifestly outdated or, as actually administered, have assumed contours that neither the enacting nor the current Congress would countenance. When Congress does legislate, it tends to enact highly convoluted and often incoherent “hyper-legislation.”

We examine the effects first on agencies, and then on courts and their doctrines. Knowing that there is no turning (back) to Congress, agencies are tempted to improvise policies lacking legislative authority. In turn, administrative law doctrines that were developed under very different institutional conditions start to bend.

We describe three increasingly common forms of agency action: (1) agency “re-writes” of statutes; (2) procedural shell games and manipulation; and (3) broad regulatory waivers without or in excess of a statutory warrant. We provide illustrations in the “old statutes” and “hyper-legislation” settings. Our principal old-statute example is the Clean Air Act and the protracted litigation over the EPA’s regulation of greenhouse gases, culminating (for now) in the Supreme Court’s decision in Utility Air Regulatory Group v. EPA. Our principal examples of hyper-legislation are the Dodd-Frank Act and the Affordable Care Act, including the pending litigation over the scope of the act’s subsidy and mandate provisions.

We conclude with a plea for more institutional realism and less interpretive metaphysics in administrative law.

Libertarianism and Federalism

By: Ilya Somin

Date Posted: 2014

No.: 14-55

Full text (most current version) on SSRN

Abstract:

Federalism is a political system with multiple levels of government, each of which has some degree of autonomy from the others. The United States has a federalist system that encompasses the national government, states, and localities. The United States adopted federalism in part to prevent abuses of power and to preserve individual liberty. Federalism serves those goals by helping individuals to “vote with their feet,” thereby fostering interjurisdictional competition. Such benefits are most likely to be found in federal systems where subnational governments have an incentive to compete for residents and businesses because they must raise most of their revenue from their own taxpayers, as opposed to receiving subsidies from the central government. In many ethnically divided societies, federalism can also enhance liberty by reducing ethnic conflict and oppression. However, federalism can also endanger liberty or property by empowering subnational governments to exploit owners of immobile assets, most notably land. Federalism can also permit local majorities to oppress local minorities. Contrary to James Madison’s expectations, federalism in the current era is unlikely to constrain the national government since states have incentives to support the expansion and centralization of power in Washington. Whether federalism enhances liberty depends on circumstances and institutional design.

Baseball and the U.S. Constitution, Circa 1887

By: Ross Davies

Date Posted: 2014

No.: 14-54

Full text (most current version) on SSRN

Abstract:

Only one sport played a part in the centennial celebration of the U.S. Constitution in Philadelphia: baseball. On September 15, 1887, while the Justices of the U.S. Supreme Court were breakfasting in the Academy of Music building at 240 South Broad Street, a big parade — the centennial’s “Civic and Industrial Procession” — was rolling by outside, past the Academy of Music and the magnificent City Hall under construction at the end of the street. The Marshal of the parade included this entry in his formal report after the event: “KENSINGTON BASE-BALL CLUB. This organization paraded one wagon, handsomely decorated with flags, drawn by two horses, decorated with flags and bells, and carrying the members of the club in their uniform,— light-gray suits, light caps with red band, red stockings and belts, light shoes, and the name of the club upon their shirt-fronts. They were the only representatives of the national game, which for the last quarter of a century has attracted intense interest from admirers of athletic sports.”

Lego and Law: Linking the Gilded Age and Today

By: Ross Davies

Date Posted: 2014

No.: 14-53

Full text (most current version) on SSRN

Abstract:

The Supreme Court of the United States may be skeptical about the emotional capacity of an incorporated entity, but the Green Bag has no doubts about its own passion for Lego. This sentiment has manifested itself only rarely and recently in print, but it has long been deeply felt. Our focus in this Almanac on the 1887 Constitutional Centennial in Philadelphia provides a nice opportunity to again express our love of Lego, because the Supreme Court-related Centennial festivities provide an obvious choice for a new plastic-brick structure.

Breakfast with the Justices: Networking in the Nineteenth Century

By: Ross Davies

Date Posted: 2014

No.: 14-52

Full text (most current version) on SSRN

Abstract:

On Thursday, September 15, 1887, the Philadelphia bar hosted a lavish “Breakfast to the Justices of the Supreme Court of the United States” in that city’s American Academy of Music building. It was the first of a series of events — parades, ceremonies, speeches, and so on — celebrating the centennial of the Constitution of the United States. Some, like the “Breakfast to the Justices,” were by invitation only. Others were open to the public and attracted large crowds — the biggest were probably the “Civic and Industrial Procession” on September 15 and the “Memorial Day Ceremonies in Independence Square” on September 17. All those big events, both the private and the public, surely were exciting at the time and merit further study today. But the focus of this little essay is elsewhere — on a pair of small but instructive (and perhaps also amusing) aspects of the inner workings of the “Breakfast to the Justices.”

Globalization and the Pursuit of Decent Work: Can the ILO Deliver?

Abstract:

Whether globalization is a relatively recent development or not, it appears that as nations and nongovernmental organizations focus on international competitiveness and the correlative commitment to liberalization and privatization, and the acceptance of interdependencies and integrations among the world’s major economies, these moves have consequences. Taken together with (1) the pursuit of trade liberalization by the West (the quest for open markets for Western products and capital markets), (2) increased international inequalities with respect to capital stock and flows favoring the richest countries, (3) the simultaneous rise in trade protection that reduces or constrains access by developing countries to Western markets, and (4) the incipient and growing emphasis on technology and innovation by many countries and firms including the emergence of information and communication technologies (ICT) including the world wide web and the internet, the prospect of inequality in relationships and income advances.

On the other hand, globalization has been accompanied by the instantiation of new institutions coupled with renewed attention being given to existing intergovernmental institutions such as the International Labor Organization that are designed to deal with problems that are either initiated or exacerbated by globalization. Given the difficult economic currents percolating throughout the world, many analysts suggest that the “real question is how labor law can respond to the challenges presented by globalization. In order to promote an efficacious labor law . . . [it is argued that a] new global goal should be added to the labor law agenda – decent work with a living wage.” The ILO program is advanced around the world through its promotion of “decent work,” an apparently ambiguous slogan calculated to level income inequalities within and between nations. It is the objective of this paper to briefly explore the promise, possibilities and failures of the ILO in an era that apparently features an increasing acceptance by elite opinion formers, banks and financial institutions, and Western world leaders of the presumed value and presumed legitimacy of increased trade integration.

The Behavioral Law and Economics of Fixed-Rate Mortgages (and Other Just-So Stories)

Abstract:

A major cause of the recent financial crisis was the traditional American mortgage, which is distinctive for the following features: it is a thirty-year, self-amortizing loan with an unlimited right to prepay. The United States is unique in the world for standardizing on a mortgage product with these features. Yet not only have a majority of the foreclosures that occurred during the financial crisis been fixed-rate mortgages, the fixed-interest-rate characteristics have undermined efforts by the Federal Reserve and government to assist recovery of the housing market. Moreover, the long fixed-rate term and ability to refinance are highly expensive and suboptimal features for many consumers. Nevertheless, many consumers persist in purchasing this mortgage. Drawing on the methodology of behavioral law and economics, this article provides rationalizations for how behavioral law and economics can explain the persistence of a product that is so harmful to many consumers and to the economy at large. The article then draws conclusions about what this analysis means for the behavioral law and economics research program generally and for the use of behavioral law and economics in government policy-making.

Bruno Leoni’s Legacy and Continued Relevance

Abstract:

In his famous book, Freedom and the Law, originally published in 1961, Italian lawyer-economist Bruno Leoni posed the question of whether over the long run a society and legal system premised primarily on legislative law-making could sustain a system of individual liberty, or whether such a system required a common law-style foundation to support it. In this article I evaluate Leoni’s challenge and find that his predictions about the nature of a legislative-centered legal system not only are more relevant than ever, but that recent tendencies toward extreme and arbitrary law-making by executive edict are consistent with the trends and intellectual principles that Leoni identified over 50 years ago. By identifying the underlying jurisprudential theories that generated the current state of affairs, Leoni’s warnings are even more relevant today than ever before.

Fixing Fuller's Record: The Green Bag and the U.S. Reports

By: Ross Davies

Date Posted: 2014

No.: 14-48

Full text (most current version) on SSRN

Abstract:

Melville Fuller, Chief Justice of the United States from 1888 to 1910, had a notably “self-effacing nature.” Perhaps that is why he did not always push hard to correct errors about himself that appeared in published reports. In retrospect, this seems admirably modest in some contexts and disturbingly irresponsible in others. This article deals first with an example Fuller’s admirable modesty, which it overcomes for the benefit of modern readers. Second, this article examines an instance of Fuller’s converse irresponsibility, and suggests that the Supreme Court can and should officially correct Fuller’s error.

Welcome to New Columbia: The Fiscal, Economic and Political Consequences of Statehood for D.C.

Abstract:

This Essay sketches some of the long-term economic and political consequences of making Washington D.C. the 51st State. The statehood debate has overwhelmingly focused on the same set of issues: the impact of statehood on the federal government’s structure. But if D.C. becomes a state, the most impactful change in its citizens’ lives would not be their new ability to elect members of Congress; it would be the dramatic shift in economics and politics that would come with the transition to having a state rather than city government. On the day “New Columbia” enters the Union, it would bear a constellation of features unprecedented in the nation: the only state wholly part of one metropolitan region, the only state without local governments, and the only wholly urban state. These features have deep implications for the advisability of statehood when compared to the alternatives of retrocession or the stateless status quo and also furnish a blueprint for steps to mitigate the risks and exploit the benefits that statehood would offer.

Part I of the Essay will discuss the special fiscal and economic conditions that New Columbia would face. On one hand, statehood would better allow D.C. to take advantage of periods of economic success. In particular, a state of New Columbia would likely be free of the restrictive confines of the Height of Buildings Act, allowing for greater growth when demand for living in D.C. is high. Moreover, the District would likely also gain greater taxing power (although it would lose some forms of generous federal funding). Yet such benefits come at a price: as a single-city state, New Columbia would face drastic risks in times of downturn. The fact that New Columbia would be entirely in one economic region, and the fact that it would exclusively be the center city of that region, would mean almost necessarily that the state would face substantial financial risks in the case of regional and urban-form related shocks. This pro-cyclical effect makes the case for retrocession stronger, and also suggests reforms like a mandatory rainy day fund if statehood is achieved.

Part II discusses the implications of New Columbia’s unique internal politics. As noted, New Columbia would be the only state without local governments. The absence of separate spheres for local and state elections would have at least two major implications for New Columbia’s politics and policy. First, as a state composed of an overwhelmingly single-party city, New Columbia’s elections would likely be decidedly uncompetitive. Even in the status quo, this absence of party-level electoral competition is a likely cause of many of the pathologies in D.C. politics, from excessive restrictions on growth to its persistent problems with corruption. To ensure the state of New Columbia does not share these defects, any move towards statehood should include reforms aimed at introducing more political competition. Second, and more optimistically, the unprecedented marriage of a city and a state government offers a powerful change for innovation. Historically, the relatively circumscribed legal power of cities has prevented them from pursuing a number of effective policies because such powers are the exclusive province of states. Further, big cities are often losers in state political fights. In this context, New Columbia’s fusion of city and state would provide many opportunities for policy flexibility and discovery unavailable to most big cities.

An Assessment of Behavioral Law and Economics Contentions and What We Know Empirically about Credit Card Use by Consumers

By: Thomas A. DurkinGregory Elliehausen Todd Zywicki

Date Posted: 2014

No.: 14-46

Full text (most current version) on SSRN

Abstract:

“Behavioral Law and Economics” (BLE) is a specialized component of the legal literature that purports to base its conclusions on a branch of economic analysis known as behavioral economics. The central claim of BLE is that by applying findings of behavioral economics to the real world it can provide more accurate assumptions about individual behavior and decision making than neoclassical economics and thus better and more effective policy prescriptions where needed. To date, however, BLE’s claims have been almost entirely a priori, taking certain suggested biases identified in the laboratory experiments by behavioral economists and claiming that they extend significantly to actual consumer behavior and the need for regulation. Yet it is well-accepted that the proper test of the scientific validity of an economic theory is the accuracy of its predictions relative to empirically testable hypotheses, not a priori reasoning or hypothetical extensions. This paper focuses on an area where BLE has been particularly active and even influential—the analysis of consumer use of credit cards. Comparison of the claims of BLE against hypotheses of the traditional neoclassical model of consumer credit use developed over the past century finds that available empirical evidence uniformly rejects BLE’s hypotheses for consumer credit. In short, while behavioral considerations are an important component of economic analysis, its BLE extension to policy in the consumer credit area has not yet proven to be useful.

Commentary on CFPB Report: Data Point: Checking Account Overdraft

By: G. Michael Flores Todd Zywicki

Date Posted: 2014

No.: 14-45

Full text (most current version) on SSRN

Abstract:

The Consumer Financial Protection Bureau (CFPB) released a data point update of its ongoing analyses of overdrafts. We review the report and provide commentary on its findings, methodology and the inferences of this update, specifically the potential to further restrict debit card overdrafts. We suggest metrics the CFPB should use in its future analyses to help provide a more thorough assessment of the costs and benefits of overdrafts. To this end, we cite findings from our previous and other third-party analyses. Finally, we recap the larger policy questions of access to credit, alternative sources of credit, and the economic benefit attained by the use of overdrafts. We hope to add positive feedback to the CFPB as they work toward potential regulations of overdrafts. As with the CFPB’s prior efforts, this report provides no basis for additional regulation of bank overdraft protection. Further research, however, is warranted.

Foreword to The Rise of ISIS: A Threat We Can't Ignore by Jay Sekulow

Abstract:

Responding to the fact that murderous forces have been unleashed in the Middle East, and provoked by the prospect that such forces and their allies seek to expand their territory by directly encroaching on the West, this book serves to alert Americans to the risks that ISIS poses. The failure to face the facts richly addressed by the authors of The Rise of ISIS: A Threat We Can’t Ignore, exposes democratic nations to the rising danger that they will capitulate to the prospect of appeasement, disaster and death.

Navigating Conflicts in Cyberspace: Legal Lessons from the History of War at Sea

By: Jeremy RabkinAriel Rabkin

Date Posted: 2014

No.: 14-43

Full text (most current version) on SSRN

Abstract:

Despite mounting concern about cyber attacks, the United States has been hesitant to embrace retaliatory cyber strikes in its overall defense strategy. Part of the hesitation seems to reflect concerns about limits imposed by the law of armed conflict. But analysts who invoke today’s law of armed conflict forget that war on the seas has always followed different rules. The historic practice of naval war is a much better guide to reasonable tactics and necessary limits for conflict in cyberspace. Cyber conflict should be open—as naval war has been—to hostile measures short of war, to attacks on enemy commerce, to contributions from private auxiliaries. To keep such measures within safe bounds, we should consider special legal constraints, analogous to those traditionally enforced by prize courts.

Thanks for the Thanks: An Appreciation of the Author Note

By: Ross Davies

Date Posted: 2014

No.: 14-42

Full text (most current version) on SSRN

Abstract:

Legal scholars’ public expressions of gratitude – those thank-yous that fill law review author notes and law book prefaces – have inspired a good deal of legal scholarly commentary in recent years. Much of that commentary deals with the theory that authors write those thank-yous with an eye more to the future than to the past. This work – “prospective thank-you theory” might be a good name – has numerous variations and complexities, and occasional hilarities. One thread involves the idea that some authors curry favor with great (or at least powerful or rich or famous) legal figures and institutions by thanking as many of them as possible for their support, no matter how slight their connections may be to an author’s work. The result, such an author hopes, is that the thanked great ones will think kindly of him or her and bestow favors in the future. But is it true? Does this aspect of prospective thank-you theory match reality? Discovering the truth might be both difficult and uncomfortable. There may, however, be a sunnier side to the study of schmoozing via author note, a side that might show that expansively grateful authors of author notes can make the world a happier place at no cost to anyone other than themselves. But could that be true? I suspect the answer is mostly Yes. And I even have a little bit of antique, but concrete, evidence.

A Brief History of Software Patents (and Why They're Valid)

Abstract:

Today, there is a vigorous and sometimes caustic debate over whether computer software is a patentable invention. Unfortunately, these arguments are rife with confusion about the technology and the law, and courts are proving to be equally confused. As opposed to continuing the entirely doctrinal and policy debate in the literature, this essay fills a gap in the scholarship by detailing the historical evolution of computer software and showing how intellectual property (IP) law played a key role in its technological development. This historical account contributes to the debates in two ways. First, it reveals that opposition to IP protection for software is not new. There was vociferous opposition in the 1960s to extending copyright protection to software code, just as there is strident opposition today to extending patent protection to software programs. Second, and more important, it reveals why courts extended patent protection to software programs in the 1990s, which followed from the evolution of computer technology itself. Legal doctrines evolve in response to developments in new technology, and the patent system exemplifies this operating principle. The patent system secured to innovators the new technological inventions in the Industrial Revolution and it secures to innovators the new technological inventions in the Digital Revolution today. Understanding the history of computer software and its evolving protections under the IP laws confirms that software programs today are inventions that, if they are new, useful, nonobvious and properly disclosed in a patent application, are rightly eligible for patent protection.

Supreme Court Sluggers: James Iredell

By: Ross Davies

Date Posted: 2014

No.: 14-40

Full text (most current version) on SSRN

Abstract:

The Supreme Court existed for about a dozen years before John Marshall became Chief Justice in 1801. Until recently, in some instances quite recently, scholars tended to neglect those early years and the judges who served on the Court during them. That is why Supreme Court Sluggers cards of the early Court are good vehicles for saluting – if only partially and imperfectly – some great baseball players who also were neglected until recently (and who suffered treatment worse than neglect in their playing days). Sluggers cards of the original pre-Marshall Court – Chief Justice John Jay and Justices John Rutledge, William Cushing, James Wilson, John Blair, and James Iredell – will be based on negro league stars who were denied (for most of their careers, at least) opportunities to play in the major leagues due to race discrimination. The first Sluggers card of a member of the founding-era Court – the card featured in this little article – portrays Justice Iredell in the batting stance of longtime Homestead Grays first baseman Walter “Buck” Leonard. (The nickname came courtesy of a young sibling who tried to call him “Buddy” but pronounced it “Bucky,” and it stuck for life as “Buck.”) On the statistical side, the Iredell card reflects another similarity between the early Justices and the players on whom their portraits are modeled: the sources of job performance data are fragmentary (as well as being sometimes hard to parse), at least compared to those for modern Justices and major leaguers.

The Tax Lawyer as Gatekeeper

Abstract:

The modern tax lawyer has many different roles. She serves as advisor, advocate, engineer, endorser, insurer, and, at times, even adversary. In addition, as concerns about tax abuse and an eroding tax base have grown, legislators and the Internal Revenue Service have increasingly relied on tax lawyers to provide various quasi-gatekeeping functions. As constructed, however, this role is neither precise nor consistent. In many respects it muddles the roles of the tax lawyer, causes undue client conflicts, and merely serves as an obstacle to the sound and efficient provision of legal advice while failing to deter significant amounts of wrongdoing. This Article argues that in the prelitigation phase of a tax lawyer’s representation, the tax lawyer is well suited to perform a gatekeeping function and should do so.

The current legal rules governing taxpayers and their advisors comprise a labyrinth of procedures and controls that ineffectively regulate the modern tax system. Although the tax lawyer is certainly vested with a number of quasi-gatekeeper responsibilities, her duties often either over-effect or under-effect an ideal gatekeeper model. Within the proper framework, however, the tax lawyer is well positioned to perform the gatekeeping tasks of guidance, compliance monitoring, and misconduct prevention. These gatekeeping functions are consistent with the long-standing professional responsibilities of a lawyer, and a sound gatekeeping system could also help reconcile the otherwise conflicting duties tax lawyers face. 

This Article explores various modifications and refinements that must be made to the legislative and regulatory regime governing the behaviors of tax lawyers and taxpayers in order to fully realize the benefits of the tax lawyer‘s gatekeeping potential. Specifically, the proposed gatekeeping structure seeks to eliminate some of the ineffective and overly adversarial elements of the system, raise the standards for tax legality and penalty protection between tax lawyers and taxpayers, and augment the tax lawyer’s due diligence responsibilities.

Deconstructing the Rules of Corporate Tax

Abstract:

The U.S. corporate tax system is failing to keep pace with the evolving global economic landscape. The overwhelmingly complex regime rewards aggressive tax planning and creates incentives for corporations to move their capital and tax homes offshore. Calls for fundamental reform are escalating as the current system succumbs to the pressures of declining revenues, ever-emerging loopholes, and the perpetuation of one of the highest national statutory rates in the world. Indeed, President Obama and members Congress have acknowledged these shortcomings and affirmed their commitment to significantly overhaul the corporate tax system. Academics, practitioners, and the White House have proposed any number of reform measures to deal with the problems plaguing the U.S. corporate tax regime, including moving from a worldwide to a territorial-based regime, eliminating deferral, and lowering the statutory rate. However, these solutions involve varying structural and statutory changes, which are in fact extrinsic to the form of the underlying rules themselves.

In contrast, this Article argues for an innate form of change to the U.S. corporate tax rules, which would fundamentally affect the way in which tax lawmakers actually draft tax rules and regulations. In particular, it argues that a systemic focus and commitment by lawmakers to a more principles-based approach to regulation would significantly mitigate many of the challenges currently encumbering the U.S. tax regime. Generally speaking, as used herein, principles-based rules are rules in which the principle underlying the rule is actually stated on the face of the rule. In contrast, prescriptive rules are rules for which the lawmaker ex ante prescribes an outcome for a set of anticipated factual situations by applying, but not stating directly, the underlying principle. Unlike the present system, which relies almost exclusively on a complex entanglement of bright-line prescriptive rules, a principles-focused corporate tax regime would help significantly simplify tax provisions, close loopholes, make the system more responsive to a dynamic marketplace, and serve as a gateway to lowering the U.S. corporate tax rate. Thus, the implementation of more principles-based rules should be given consideration in any contemplated tax reform proposals.

Even Republics Must Sometimes Strike Back

Abstract:

Advocates for a literal view of the UN Charter hold that armed force can only be deployed with approval of the Security Council or in self-defense against an “armed attack.” They then tend to think that, in the latter case, force can only be deployed against the attackers. While it may seem logical, this approach is at odds with traditional understandings of what international law permits. It is at odds with more recent practice of states. And it is at odds with reasonable policy concerns, such as deterring future attacks and responding to limited, but repeated attacks. A more robust approach to self-defense can embrace a range of retaliatory measures without thereby disdaining humanitarian restraint.