Working Papers

Abstract:

It is a commonplace that the relationship between baseball and the law is a long and close one. But, first, is it true? And, second, if it is, just how long and how close? Strangely, given the large amount of good work produced by able scholars of baseball and the law, concrete answers to these basic questions are not readily available. This article is a first step toward filling that gap. It is a sketch of the length, breadth, and depth of the relationship between baseball and the law. (In order to tell a less-than-interminable tale, this article mostly tilts back and forth between recent years - evidence of the vibrancy of the baseball-law relationship today - and the late 19th and early 20th centuries - evidence that it has been vibrant for a long time - and deals only sketchily even with those periods. This should not be taken to mean that the baseball-law relationship was any less interesting at other times, or that there isn't much more to be said about all times.) As should be clear by the end of this article, the answer to the first question is an emphatic and certain "Yes": baseball and the law are close and have been for a long time. The answer to the second question, however, is an equally emphatic but far less certain "Very": while there surely are both unrecognized extents and unmarked limits to the law-baseball relationship, we cannot define them without a fuller inventory and chronology - an old-fashioned digest - of the thousands upon thousands of events that make up the history of baseball and the law. Perhaps this article can serve as the kernel of such a project.

Abstract:

This short piece, part of a debate with Peter Shane, argues that presidential signing statements do not threaten the rule of law and the separation of powers. It discusses the theory and practice of signing statements, and concludes that President Obama rightly rejected the position taken by the American Bar Association when it denounced President Bush for his use of signing statements.

Abstract:

The Consumer Financial Protection Agency Act (“CFPA Act”), introduced by the U.S. Department of the Treasury in June 2009, proposes sweeping regulation of consumer lending and borrowing. As we showed in “The Effect of the CFPA on Consumer Credit” (hereinafter “Evans and Wright (2009)”):

     o The CFPA Act creates massive litigation exposure for lenders facing (a) potential lawsuits from state and municipal governments for violating more stringent financial protection regulations that those entities can adopt pursuant to the CFPA Act; and (b) litigation under the CFPA Act’s new and undefined standards for engaging in unfair, deceptive, abusive, or unreasonable practices.

     o The new Agency would impose significant costs on lenders who would be required to: (a) offer to consumers on a preferred basis plain-vanilla products designed by the Agency either before offering their own products or at the same time; (b) seek prior regulatory approval for new lending products which could be defined as minor variations on existing products; (c) face the risk of having lending products banned altogether; and (d) have to comply with various other rules and regulations.

This note responds to a recent paper by Professor Adam Levitin offered in response to Evans and Wright (2009). As a prefatory matter, his paper is filled with various ad hominem attacks which we will ignore. Instead, we focus on the substance of the issues in contention. Professor Levitin’s basic substantive objection is that he disagrees with our estimates that the Treasury Department’s bill would increase interest rates by at least 160 basis points and reduce net job creation by 4.3 percent under plausible assumptions. Professor Levitin’s criticisms are misguided and we stand by those numbers as lower bounds on the effect of the Treasury’s CFPA Act on the economy. We also note that Professor Levitin has disputed virtually none of our findings that the CFPA Act would impose high costs on lenders and ultimately result in denying borrowers choice.

We think it is impossible to read the CFPA Act without concluding that lenders will face higher costs as a result of, among other things, dealing with the new Agency, being forced to offer products designed by a governmental body rather than themselves, coordinating the sale and distribution of financial products across regulatory regimes varying across the fifty states, and facing the increased possibility of fines and litigation under a novel and ambiguous “abusive” practices standard. While we believe there is a debate to be had on the costs and benefits of the CFPA Act, it is difficult to fathom a claim that this particular Act will not impose significant costs on lenders and that those costs will not be passed on to borrowers. Sound public policy should be based on a careful analysis of the costs and benefits of the various proposals. We do not believe Professor Levitin has made a constructive contribution to that deliberation but encourage him and others to do so as Congress considers the CFPA Act of 2009.

Abstract:

What we call “judicial review” was not established in Marbury v. Madison, or by American courts. It had existed in English and then American law for centuries, not as some kind of peculiar power but rather as a corollary of the judicial duty to decide cases according to the law of the land. While that duty sometimes required judicial courage in the face of political threats, this was not its most difficult or pervasive demand. The real challenge was the requirement that judges purge their decision-making of the influence of their own wills, which required them to set aside their own views about natural law, God’s will, sound policy, and even justice itself.

Phillip Hamburger’s Law and Judicial Duty advances and defends these claims with subtlety and detailed evidence. He carries his historical study up through the end of the eighteenth century, and thus has little to say about subsequent changes in the understanding of judicial review and judicial duty. But there are obvious implications for our contemporary debates about the proper role of judges and about the distinction between law and politics. This review touches on those debates, and suggests that a broadened political role for the federal judiciary may have been more clearly foreseeable than the leading proponents of our Constitution thought it wise to acknowledge during the ratification debates.

Abstract:

This paper offers an opportunity to reflect on Frank Easterbrook’s seminal work on the Limits of Antitrust and to discuss its particular relevance to the problem of antitrust enforcement in the face of innovation. The error-cost framework in antitrust originates with Easterbrook’s analysis, itself built on twin premises: first, that false positives are more costly than false negatives because self-correction mechanisms mitigate the latter but not the former, and second, that errors of both types are inevitable because distinguishing pro-competitive conduct from anti-competitive conduct is an inherently difficult task in a single-firm context.

While economists have applied this framework fruitfully to several business practices that have attracted antitrust scrutiny, our goal in this paper is to harness the power of this framework to take an Easterbrookian, error-cost minimizing approach to antitrust intervention in markets where innovation is a critical part of the competitive landscape. While much has been said about the relationship between innovation and antitrust, often in the way of broad pronouncements that innovation either renders antitrust essential to economic growth or entirely unnecessary, the error-cost framework allows for greater precision in policy prescriptions and a more nuanced approach. Some of the implications are well understood in the current body of literature and others have been frequently ignored or remain entirely unrecognized.

Both product and business innovations involve novel practices, and such practices generally result in monopoly explanations from the economics profession followed by hostility from the courts (though sometimes in reverse order) and then a subsequent, more nuanced economic understanding of the business practice usually recognizing its pro-competitive virtues. This sequence and outcome is exactly what one might expect in a world where economists’ career incentives skew in favor of generating models that demonstrate inefficiencies and debunk the Chicago School status quo, while defendants engaged in business practices that have evolved over time through trial and error have a difficult time articulating a justification that fits one of a court’s checklist of acceptable answers. From an error-cost perspective, the critical point is that antitrust scrutiny of innovation and innovative business practices is likely to be biased in the direction of assigning higher likelihood that a given practice is anticompetitive than the subsequent literature and evidence will ultimately suggest is reasonable or accurate.

Given recent activities in the antitrust enforcement landscape - identifying innovating firms in high-tech markets as likely antitrust targets combined with recent discussions of error costs from leading enforcers, at the Section 2 Hearings and elsewhere - we hope to begin a more rigorous discussion of the relationships between innovation, antitrust error, and optimal liability rules that goes beyond merely selecting economic models that fit regulator’s prior beliefs.

We begin by discussing some principles for application of the error cost framework in the innovation context in Part II before discussing the historical relationship between antitrust error and innovation in Part III. Part IV concludes by challenging the conventional wisdom that the error cost approach implies that the rule of reason should apply to most forms of business conduct rather than per se rules. While we agree that per se rules should not apply to cases involving product or business innovation, broadly defined, we argue that the error cost approach should not require generalist judges to evaluate state of the art economic theory and evidence on a case by case basis. Instead, we favor an approach that is consistent with the spirit of Easterbrook’s original analysis, identifying simple filters aiming to harness the best existing economic knowledge to design simple rules that minimize error costs. We conclude with five such proposals for simple rules based on existing economic theory, empirical evidence, and acknowledgment of the institutional biases toward false positives discussed above.

Abstract:

Matthew Hindman, a professor of political science at Arizona State University, contends in this book “that the beliefs that the Internet is democratizing politics are simply wrong.” He sets his sights on twin myths; first, that the Internet has extended political “voice” to previously voiceless precincts, and that it has facilitated deliberation among these new speakers. Instead, Hindman asserts that online politics remains “politics as usual.”

In support, he has marshaled an impressive body of empirical work. No doubt Hindman’s research is correct, search engines consolidate Web traffic, and some nontrivial number of users are generating bad search results. But to observe that “digital democracy” isn’t always and everywhere the rule is not the same thing as saying that the Internet hasn’t “democratized” politics.

Making politics easier, safer, and freer for those souls who find it worth their time can’t be anything BUT democratizing.

Abstract:

While elegant arguments may be available arguing the economic efficiency of at-will employment or castigating such relationships as anachronistic, the focus of this article is not whether at-will employment deserves to be assailed or safeguarded in some normative sense, but whether the post-Civil War anti-discrimination statute, section 1981 applies to or should apply to at-will relationships grounded in the notion of a contract. A related question is whether employment at-will, if a contract, embodies satisfactory contractual sufficiency to sustain section 1981 claims. This issue is most poignantly drawn in the context of a contested discharge. For example, can termination be characterized as a term of the contract (assuming one exists) or is it merely a default rule which cannot logically be sustained as a term of the employment agreement by individuals and courts that are committed to the notion of a contract established on grounds of consent. More specifically, do workers possess adequate knowledge about this asserted default rule and if not, will the absence of knowledge negate the assertion that the term of employment is within the contract and thus alterable by section 1981? Answers to those questions raise ineffably ornery and potentially unresolvable doctrinal issues that may paralyze the application of section 1981 in some at-will situations.

Recently, by virtue of its decision in Gonzalez v. Ingersoll, the Seventh Circuit entered this doctrinal fray with dicta that confronts but did not decide these related questions. While an incipient dispute has developed about the reach and application of section 1981 to at-will employment, the operation of section 1981 should conceptually turn on state law. Accordingly, federal courts will have to decide whether section 1981 applies or should apply within the context of a given jurisdiction. Significantly, Gonzalez v. Ingersoll accepts that, in order to bring a section 1981 claim "there must at least be a contract." And yet, while an at-will relationship can be a contract under pertinent state law, it may nonetheless provide an insufficient contractual relationship to support a section 1981 claim. Since Gonzalez, several other circuits have taken up the gauntlet. Three federal circuits have issued decisions which confirm that at-will employment provides an adequate basis to sustain a section 1981 action.

I hope to show that while the 1991 Civil Rights Statue broadens the reach of section 1981, an important predicate remains-there must be both a contract and a contractual relationship sufficient to support a claim. Without an underlying contract and without a sufficient contractual relationship, section 1981 remains impotent in the face of alleged discriminatory misconduct. Employers thus have one pertinent and potentially devastating defense to employee claims-the absence of a contract or the absence of a contract term that can be altered by section 1981. Despite the incipient debate among the federal courts and despite lingering doctrinal issues concerning the nature and content of employment at-will, I hope to demonstrate that section 1981 applies and should apply to at-will relationships.

Abstract:

As part of its overhaul of financial services regulation the Obama Administration has proposed stronger protection of consumers of financial products and services. The Consumer Financial Protection Agency Act of 2009 (CFPA Act), which the Administration submitted to the U.S. Congress on June 30, 2009, would result in a sweeping overhaul of consumer financial protection. The CFPA Act would create a Consumer Financial Protection Agency (CFPA) which would assume the responsibility for enforcing most existing consumer financial protection laws from other federal banking regulators as well as the Federal Trade Commission. The CFPA would have significant additional powers to regulate consumer financial products, mandate disclosures, and require covered businesses to offer consumers "plain vanilla" products that the CFPA would design. The legislation would limit federal preemption of nationally chartered financial institutions by allowing states and localities to have stronger restrictions than those adopted by the CFPA and would add a new prohibition against "abusive" practices while allowing new interpretations of existing liability for unfair and deceptive practices. This article details how the CFPA Act would change consumer financial regulation, explores the policy rationale for these changes, and examines how the legislation, if enacted in its current form, would affect providers and consumers of financial products and services.

Abstract:

The U.S. Department of the Treasury has submitted the Consumer Financial Protection Agency Act of 2009 to Congress for the purpose of overhauling consumer financial regulation. This study has examined the likely effect of the Act on the availability of credit to American consumers. To do so we have examined the legislation in detail to assess how it would alter current consumer protection regulation, reviewed the rationales provided for the new legislation by those who designed its key features, considered why consumers borrow money and benefit from doing so, and reviewed the factors behind the expansion of credit availability over the last thirty years. Based on our analysis we have concluded that the CFPA Act of 2009 would make it harder and more expensive for consumers to borrow. Under plausible yet conservative assumptions the CFPA would:

• increase the interest rates consumers pay by at least 160 basis points;

• reduce consumer borrowing by at least 2.1 percent; and,

• reduce the net new jobs created in the economy by 4.3 percent.

By reducing borrowing the Act would also reduce consumer spending that further drives job creation and economic growth. In addition to restricting the availability of credit over the long term, the CFPA Act of 2009 would also slow the recovery from the deep recession the economy is now in by reducing borrowing, spending, and business formation.

The financial crisis has surfaced a number of serious consumer financial protection problems that were not dealt with adequately by federal regulators. Rather than proposing expeditious and practical reforms that can deal with those problems, the Treasury Department has put forward a proposal that would disrupt current regulatory agency efforts to deal with these issues.

This paper focuses on the CFPA Act that the Administration introduced in July 2009. House Finance Committee Chairman Frank has proposed changes to this Act which the Treasury Secretary Geithner appears to be willing to accept. However, given that these changes could be reversed or other changes could be made as the legislation works its way through Congress, we focus on the Administration’s original bill rather than a moving target. Chairman Frank’s proposed changes do not significantly alter any of our conclusions.

Abstract:

Mutual funds stand ready at all times to sell and redeem common stock to the investing public for the net value of their assets under management. In the language of transaction cost economics, they are open-access common pools subject to virtually free investor entry and exit. The Investment Company Act (1940) requires mutual funds to be managed by an outside advisory firm pursuant to a written contract, which normally pays the adviser a small share of net asset value, say, one-half of one percent per year. Following 1970 amendments to the Investment Company Act imposing a fiduciary duty on advisers with respect to their receipt of compensation, a large number of private civil suits attempting to recover excessive fees have been filed against advisory firms. By failing to account for the transaction costs inherent in mutual fund organization, Congress, securities regulators, financial scholars, and even courts have misidentified a conflict of interest with respect to fund advisory fees, encouraging these frivolous suits. With free investor entry and exit and rational expectations, fund flows endogenize investor returns. Regardless of the level of the advisory fee, any expected abnormal return to a manager’s superior stock-picking skill will be competed away by investors chasing the prospect of capturing the associated rents. With shareholders having a common claim to fund assets, all expected rents will be either transferred to the manager in the form of higher total fee payments on a larger asset base or dissipated by added administrative costs. As a first approximation, the level of advisory fees is therefore irrelevant to fund shareholders. The best they can expect from placing their money in a managed fund is a normal competitive return after adjusting for risk and other factors. With the U.S. Supreme Court having recently granted certiorari in an excessive fee case appealing an arguably maverick opinion by Judge Frank Easterbrook of the Court of Appeals for the Seventh Circuit, it is essential that various myths about mutual fund fees be exposed to careful economic analysis.

Abstract:

The creation of a new Consumer Financial Protection Agency (“CFPA”) is a very bad idea and should be rejected. The proposal is not salvageable and cannot be improved in substance or in form. The foundational premise of the CFPA is that a failure of consumer protection, and specifically irrational consumer behavior in lending markets, was a meaningful cause of the financial crisis and that the CFPA would have or could have averted the crisis or lessened its effects. To the contrary, there is no evidence that consumer ignorance or irrationality was a substantial cause of the crisis or that the existence of a CFPA could have prevented the problems that occurred. The CFPA is likely to do more harm than good for consumers. In this article, we highlight three fundamentally problematic truths about the CFPA: (1) The CFPA is premised on a flawed understanding of the financial crisis, (2) the CFPA will have significant unintended consequences, including but not limited to reducing competition, consumer choice, and availability of credit to consumers for productive uses; and (3) the CFPA creates a powerful bureaucracy with undefined scope, risking expensive and wasteful regulatory overlap at both the federal and state levels without any evidence of its own expertise in the core areas it is designed to regulate.

Abstract:

Local government law has fallen behind the times. Over the past two decades, economists have developed a deep understanding of “agglomeration economics,” or the study of how and why mobile citizens and firms locate in cities. Their work argues that people decide to move to cities because of the reduced transportation costs for goods, increased labor market depth, and intellectual spillovers cities provide – that is, individuals and firms locate in cities in order to get the benefits of being near one another. Economically-minded local government law scholars have ignored this burgeoning literature and instead have continued to examine exclusively a separate set of benefits people get from their location decisions, the gains from “sorting.” As analyzed in the well-known Tiebout model, individuals move between local governments in a region in order to receive public policies that fit their preferences.

This paper seeks to develop the framework for a modern law and economic method for analyzing local governmental law. Specifically, it claims that there is an inverse relationship between the gains from agglomeration and sorting. Having many small local governments, and enabling individuals to choose their local public policies by sorting among them, affects the organization and density of people in metropolitan areas, creating movement away from economically-optimal location decisions. Sorting thus reduces agglomerative efficiency. Similarly, the existence of agglomerative gains means that individuals are making location decisions for reasons other than matching their preferences for public policies. Agglomeration therefore causes a reduction in the efficiency of sorting.

States face a tradeoff between maximizing agglomerative and sorting efficiency in deciding how much power, and which responsibilities, to allocate to local governments. The need to balance these two conflicting sources of efficiency and changes in the nature of agglomerative gains over the last hundred years explains a great deal about the history of American local government law, current allocations of power between local governments and state legislatures, judicial decisions about local governmental power and the proper role for the federal government in policy areas, like housing and transportation, that are primarily regulated at the local level.

Abstract:

Courts and commentators have long maintained that intellectual property law and the administrative state developed as two separate legal regimes without any significant theoretical or practical contact between them, at least until recently. This standard historical story is mistaken. This article identifies a long-forgotten nexus between intellectual property law and the birth of the administrative state in the Progressive Era, and in doing so, offers at least two important insights. First, as a matter of intellectual history, it establishes that administrative law and modern intellectual property law share a common theoretical pedigree in legal realist scholarship about property in the Progressive Era. Second, and more important, this article exposes serious theoretical concerns about the success of this scholarship by Felix Cohen, Morris Cohen and others. In justifying the regulation of real property under the administrative state, the Cohens and others used intellectual property rights to advance a scathing conceptual and normative critique of the natural rights theory of property. This critique has now assumed the mantle of conventional wisdom in intellectual property law, as commentators and lawyers dismiss natural rights theory as theoretically incoherent and doctrinally indeterminate. But the legal realists’ attacked a strawman version of the natural rights theory of property, redefining its concept of “value” in unduly narrow economic terms such that it no longer resembled the same theory advanced by the natural rights philosophers or the American courts and commentators who applied their ideas in legal doctrine. This article explicates for the first time the actual premises of the legal realists’ critique of the natural rights theory of property, revealing how they failed to prove either the logical or normative incoherence of this longstanding conception of property. As such, this article exposes a fundamental lacuna in the theoretical foundations of the modern administrative state. Even more important, it challenges the misrepresentations and all-too-hasty dismissals of natural rights theory by intellectual property scholars today.

Abstract:

The premise of the Arab-Israeli “land for peace” process is that each side values what it will receive more than what it must surrender. The repeated failure of this process spanning decades reveals the shocking truth that this premise is erroneous. For the process to succeed the currency that the Arabs must bring to the table is the ability and willingness to pay for their sovereignty in the currency of vigorous enforcement of Israeli rights and privileges, something they are not willing to do. Why not? At present, the payoff to the Palestinian Arabs as a body of a state is simply not worth the price they must pay.

Abstract:

Harold Demsetz once claimed that “economics has no antitrust relevant theory of competition.” Demsetz offered this provocative statement as an introduction to an economic concept with critical implications for the antitrust enterprise: the multi-dimensional nature of competition. Competition does not take place upon a single margin, such as price competition, but several dimensions that are often inversely correlated such that a liability rule deterring one form of competition will result in more of another. This insight has important implications for the current policy debate concerning how to design antitrust liability standards for conduct involving both static product market competition and dynamic innovative activity. The primary purpose of this essay is to revisit Demsetz’s broader challenge to antitrust regulation in the context of the frequently discussed tradeoffs between innovation and price competition. I summarize recent developments in our knowledge of the relationship between competition and innovation, highlighting the deficiencies that significantly constrain antitrust enforcers’ abilities to confidently calculate inevitable welfare tradeoffs. I conclude by discussing policy implications that follow from these limitations.

Abstract:

Corporate law theory and practice considers shareholder relations with companies and the implications of ownership separated from control. Yet through the TARP bailout and the government's resultant shareholding, ownership and control at many companies has merged, leaving corporate theory and practice for the financial and automotive sectors in chaos. The government's $700 billion bailout is a unique historical event; not merely because of its size, but because of a resulting ripple through corporate scholarship and practice. This article builds on the author's four testimonies before Congress during the financial crisis and implementation of the TARP bailout and his consultation for the Inspector General for TARP. It updates the six central theories of corporate law to reveal that none function adequately when considered with a controlling government shareholder that enjoys sovereign immunity from corporate and securities law. From agency theory and nexus-of-contracts thought to the shareholder/director primacy debate, even to notions of progressive corporate law and the team production model, existing theory breaks down when a government shareholder is present. The article also develops an economic model of incentives facing political decision-makers in exercise of their shareholder power. After considering corporate theory, the article offers predictions for how Treasury's stock ownership reshapes the practice of corporate law. In short, TARP will result in a tectonic shift for current understanding about insider trading, securities class actions, share voting, and state corporate law fiduciary duties. The article closes with three recommendations. First, that Treasury take frozen options, an invention explained in the text, rather than equity. Second, that Congress pass legislation establishing a fiduciary duty for Treasury to maximize the value of its investment, a suggestion that has contributed to Sens. Warner and Corker's introduction of implementing legislation. Third, that Treasury adopt a sales plan for closing out its TARP holdings.

Abstract:

The way a group, jurisdiction, or nation votes, and makes decisions binding on their members and citizens, is fundamental and deceptively prosaic. Why do some groups (faculties, Congress, caucuses, HOAs) take public votes in most contexts, accompanied by debate, sometimes heated? Why do others (electorates, labor unions) take private votes (often by ballot cast in a secure setting where “heated debate” is not allowed) in most contexts? Moreover, what should we make of the exceptions to these general forms?

This Article will demonstrate that the hybrid mode of voting – non-debated yet non-secret voting such as in contemporary absentee balloting, in union organizing petitions (so called “card check” campaigns) as well as among corporate shareholders – carries with it the weaknesses of each system without the strengths. Accordingly, where possible the situations that use this hybrid should be reformed to adopt the open or secret modes.

For absentee voting in elections, jurisdictions should provide early voting in controlled locations where the protection against coercion and fraud are possible. In the labor organizing context, the choice of a bare majority through card check must not determine whether the workplace is organized. Instead, it should provide the first step to an organizing election (as a petition places an issue on the ballot). Legitimate grievances about the fairness of union organizing elections, and whether employers are engaging in unfair labor practices, offer no justification for discarding the protection from fraud and coercion secured through a secret ballot. Voting by shareholders can also be non-debated and non-secret, but the diverse characteristics of large and small shareholders counsel for transparency when large institutional investors are engaged in contested corporate voting.

Abstract:

This essay is the introduction to a forthcoming volume entitled, Regulating Innovation: Competition Policy and Patent Law Under Uncertainty (Cambridge U. Press 2009 forthcoming).

In addition to introducing all of the papers in the volume, this essay introduces the organizing themes of the volume. Innovation is critical to economic growth. While it is well understood that legal institutions play an important role in fostering an environment conducive to innovation and its commercialization, much less is known about the optimal design of specific institutions. Regulatory design decisions, and in particular competition policy and intellectual property regimes, can have profoundly positive or negative consequences for economic growth and welfare. However, the ratio of what is known to unknown with respect to the relationship between innovation, competition, and regulatory policy is staggeringly low. In addition to this uncertainty concerning the relationships between regulation, innovation, and economic growth, the process of innovation itself is not well understood.

The regulation of innovation and the optimal design of legal institutions in this environment of uncertainty are two of the most important policy challenges of the 21st century. Any legal regime must attempt to assess the tradeoffs associated with rules that will affect incentives to innovate, allocative efficiency, competition, and freedom of economic actors to commercialize the fruits of their innovative labors and foster economic growth. Unfortunately, as this essay describes, our tools for assessing these tradeoffs are limited.

Any coherent regulatory framework must take account of the low level of empirical knowledge surrounding the complex relationship between regulation – both through competition policy and patent law – and innovation, and the corresponding uncertainty caused by this absence of knowledge. The relationship between regulation and innovation has posed a significant challenge to antitrust economists at least since Schumpeter’s suggestion that dynamic competition would result in “creative destruction,” leading to a competitive process where one monopolist would replace another sequentially as new entrants developed a superior product.

Interfering in this dynamic process for the sake of static efficiency gains is perilous, but, of course, not impossible. But regulators and policy makers must take (more) seriously the condition of fundamental uncertainty in which they act, and the significant costs of their inevitable errors before justifying interventions on grounds of promoting competition or facilitating innovation.

This essay and the chapters in this book, approach this critical set of problems from an economic perspective, relying on the tools of microeconomics, quantitative analysis, and comparative institutional analysis to explore and begin to provide answers to the myriad challenges facing policymakers. The strength of this analysis—often described as the New Institutional Economic approach—is in its recognition that understanding economic performance requires not only economic modeling of narrow behavior, but also an understanding of that behavior in its legal, economic, social, and political institutional context.

The essay includes a table of contents for the book.

Abstract:

This Chapter, forthcoming in the ABA Handbook on the Antitrust Aspects of Standards Setting (2010) provides an analytical overview of the antitrust issues involving intellectual property and standard setting including, but not limited to, patent holdup, royalty stacking, refusals to license, and patent pools.

Abstract:

The Employee Free Choice Act (EFCA) is arguably the most transformative piece of labor legislation to come before Congress since the enactment of the National Labor Relations Act of 1935 (NLRA). Putting the potential impact of the EFCA in historical perspective, one commentator contends that the NLRA marked the culmination of a systematic effort of the Progressive movement that dominated so much of American intellectual life during the first third of the twentieth century. As it was widely acknowledged at the time, the NLRA was revolutionary in its implications for American Labor Law. Less widely recognized were the adverse effects of this and other New Deal statutes on people of color. Readily available evidence shows that President Roosevelt’s insistence on raising the price of labor (1) increased unemployment and human suffering, and (2) also widened the unemployment gap between blacks and whites. Today, this wide, if not widening, unemployment gap remains in effect. Properly appreciated, the consequences of the New Deal for African Americans persist as an important and under-examined issue. It is likely that neither Progressive Era labor legislation nor contemporary efforts to further transform the labor market operate in the best interest of African American citizens. Provoked by the assertion that labor faces a legal crisis and the claim that the statutory right to organize is a sham, energized by the contention that the union movement ought to reinvent itself as a robust engine of collective insurgency against globalization, class-based injustice, and asserted increasing disparities in income, labor union advocates and hierarchs have offered a number of ideas that include the necessity of acting like a genuine rights movement, encouraging open source unionism, and creating alternative (nonunion) worker organizations.

One of the newest attempts to transform labor relations is the EFCA. The first to disappear under the EFCA would be a system of union democracy whereby unions could only obtain the rights of exclusive representation for firms if they could prevail in a secret-ballot election. Second, the EFCA would eliminate the necessity of a freely negotiated collective bargaining agreement between management and labor and instead substitute compulsory arbitration. While some labor union advocates contend that law ought to be conceived of as a vehicle to democratize the workplace by redistributing power in labor markets in favor of workers, while concurrently demolishing hierarchical command structures that entrench gender, race and class lines, this proposal would likely expand labor hierarchy, labor market cartelization and diminish the employment prospects of racial minorities. As such, the EFCA is marked by contradiction. This paper deploys Critical Race Reformist theory, economics and apartheid-era South African labor history in order to show that rather than embracing freedom for workers, eliminating poverty, and expanding opportunities for all, this proposal would likely invert such goals and instead operate consistently with the record of exclusion and subordination tied to American Progressivism and the labor movement.