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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:


Statistical (and Racial) Discrimination, 'Banning the Box', and Crime Rates

By Murat Mungan

ABSTRACT:

This article presents law enforcement models where employers engage in statistical discrimination, and the visibility of criminal records can be adjusted through policies (such as ban the box campaigns). I show that statistical discrimination leads to an increase in crime rates under plausible conditions. This suggests that societies in which membership to disadvantaged groups is salient (e.g. through greater racial or religious heterogeneity) are, ceteris paribus, likely to have higher crime rates. Attempting to fix the negative impacts of statistical discrimination through policies that reduce the visibility of criminal records increases crime rates further. Moreover, such policies cause a greater negative effect for law abiding members of the disadvantaged group than members of the statistically favored group.

Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Proposed Revisions to the People’s Republic of China Anti-Unfair Competition Law

By Douglas Ginsburg, Bruce Kobayashi, Koren Wong-Ervin, Joshua Wright

ABSTRACT:

This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School, George Mason University in response to the Legislative Affairs Commission of the Standing Committee of the National People’s Congress of the People’s Republic of China’s public consultation on the February 26, 2017 draft revisions to China’s Anti-Unfair Competition Law. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze vertical restraints such as bundling.

Understanding the Runaway Tuition Phenomenon: Credence Goods in an Age of Skepticism

By Daniel Polsby

ABSTRACT:

Wandering in search of an explanation for why college tuitions are so rapidly increasing, and finding nothing compelling in the usually-offered explanations, the author stumbles upon the answer in plain sight. Because of the kind of product higher education is (a credence good) sellers must go to heroic lengths to keep up the semblance that the product is worth all that is charged for it. Money and resources of other kinds must be directed to this end to the limit of their availability, which can never be satiated no matter how much is spent. The economist Howard Bowen seems to have had the basic insight in 1980.

A Chip Off the Old Block or a New Direction for Payment Cards Security? The Chip & PIN Debate, Apple Pay, and the Law & Economics of Preventing Payment Card Fraud

By James Cooper, Todd Zywicki

ABSTRACT:

The issue of consumer payments and data security has reached a high level of public and regulatory interest as a result of a number of recent high-profile data breaches that compromised consumer payment card numbers, such as at Target, Home Depot, and Michael’s. In addition, the ecosystem of consumer payments security has changed dramatically in recent years as a result of the introduction and rapid spread of contactless payment technologies, such as ApplePay. In response to growing concerns about payments fraud, payment card networks in the United States have moved toward the rapid replacement of traditional magnetic stripe payment card technology to new EMV computer chip-based technology, which creates a unique encrypted identifier for each transaction, thereby making it more difficult for thieves to steal card numbers and create counterfeit cards. Notably, however, American card issuers and networks have chosen not to adopt the PIN method of verification that has been standard in the United Kingdom and much of Europe for the past decade or so, but instead have adopted signature as the preferred method of customer verification. Many large retail chains and retail trade associations have nevertheless lobbied for regulatory or statutory action to impose a PIN-verification requirement in addition to the addition of EMV chips. This article conducts an economic analysis of the regulation of consumer payment cards and payment cards fraud. We examine the marginal benefits from heightened levels of payment cards security (such as requiring PIN verification for purchases) and marginal costs as well, such as the impact on speed, convenience, and functionality for consumers and merchants, especially uptake of electronic payments by smaller merchants. We examine the dynamic evolution of payment cards anti-fraud technology over time and suggest that there is little evidence of market failure in the provision of payments security by card networks and issuers and little reason to believe that mandating one exclusive, decades old, static verification technology (namely Chip & PIN) would be likely to improve overall consumer welfare and economic efficiency today. We conclude that rather than blindly adopting the particular verification technology Europe put into place many years ago, U.S. regulators should be alert to the evolving and contemporary nature of consumer payments and fluid nature of threats to data privacy and not freeze or hamper the adaptability of the payments system.

A Return to Antitrust Populism?

By James Cooper

ABSTRACT:

The trend of modern antitrust policy is consumer protection based on economic analysis. This trend has enabled meaningful protections and coherent policy. It should continue despite recent, successful populist political campaigning.

Hohfeld and the Theory of in Rem Rights: An Attempted Mediation

By Christopher Newman

ABSTRACT:

Wesley Hohfeld’s contributions to analytical jurisprudence are often viewed — approvingly or otherwise — as having contributed to the disintegration of traditional concepts defining our understanding of property. Most strikingly, his 1917 treatment of rights in rem appears to insist that any description of property in terms of a relationship between an owner and an owned thing is analytically fallacious. In this essay, I seek to explain why Hohfeld’s approach fails to appreciate and account for the cognitive and normative utility of the in rem/in personam distinction, and suggest a way of reconciling the traditional understanding of those terms with Hohfeld’s analytical vocabulary.

Vested Use-Privileges in Property and Copyright

By Christopher Newman

ABSTRACT:

The notion that, “If it’s mine, I can do whatever I want with it” continues to have strong popular appeal as describing one of the implications of property ownership.  Indeed, this notion is coming to be pressed into service as a source of normative objection to the scope of certain intellectual property laws which have the effect of limiting what consumers can do with chattels they otherwise own.  Yet in property theory the status of use-privileges has long been dubious, with the right to exclude instead taking center stage.  This essay considers the nature of a “vested use-privilege” from both analytical and positive law perspectives, offering both a formal account of what it would mean for such an entitlement to exist or be infringed and a discussion of both the extent to which such an entitlement actually exists in extant property law and the extent to which copyright law should be regarded as conflicting with it.

Market-Reinforcing Versus Market-Replacing Consumer Finance Regulation

By Todd Zywicki

ABSTRACT:

The aftermath of the financial crisis has seen the formation of several new banking regulators and an onslaught of new financial regulation. In the area of consumer financial protection bureau these regulations have resuscitated the regulatory approach of prior eras, namely substantive regulation of the prices, terms, and products offered to consumers. But these regulations have also resulted in predictable unintended consequences — higher prices, reduced innovation, and exclusion of many consumers from mainstream financial products. This chapter drawn from the book Reframing Financial Regulation: Enhancing Stability and Protecting Consumers, distinguishes between two types of regulatory approaches, “market-reinforcing” and “market-replacing” consumer finance regulation, and argues that consumer welfare would be improved by a regulatory strategy that makes markets work better instead of displacing them with command-and-control regulation.

Anonymity, Autonomy, and the Collection of Personal Data: Measuring the Privacy Impact of Google's 2012 Privacy Policy Change

By James Cooper

ABSTRACT:

One of the most vexing problems in privacy policy is identifying consumer harm from unwanted observation; because it is highly subjective and is likely to vary greatly throughout the population, it doesn’t lend itself to easy measurement. Yet, these types of situations increasingly are the focal point of privacy policy discussions. The primary approach to attempt to quantify subjective harms has been to measure consumers’ willingness to exchange personal data for money in an experimental setting. This study takes a different tack, using field data to measure actual consumer response to a real-world reduction in the anonymity of online search. In March 2012, Google began to combine user information across platforms. To the extent that Google’s policy change reduced the anonymity associated with Google search, it may have reduced incentives to search sensitive or topics. Using a difference-in-difference estimator with top non-sensitive search terms as the control group, the results suggest that there was a small and short-term reduction in the Google Trends scores for sensitive search. There is no measured difference in reaction between high- and low-privacy demand states. Overall, the results indicate that any consumer welfare loss from Google’s policy change was small, and likely swamped by the demand-increasing impact of customization made possible from the cross-platform data sharing. That there is no measurable long-term substitution out of sensitive search may reflect the privacy advantages of searching for sensitive information on Google versus seeking the same information in an interpersonal setting. These findings suggest that privacy policy changes that are publicized should be treated like ordinary price changes — causing marginal consumers to exit and reducing consumer surplus for those who remain — not opportunities for regulatory intervention.

The History Of 'Substantive' Due Process: It's Complicated

By David Bernstein

ABSTRACT:

The history of what has come to be known as substantive due process is fraught with political implications, even more so now that same-sex marriage has joined abortion as a right protected by the Court under the rubric of due process. It’s tempting to create a simplified version of the past that explains how we got from point A to point B, and that implicitly or explicitly teaches some profound lesson about the present. History, rarely truly lends itself to such convenience. It’s complicated. 

With that in mind, this essay discusses a recent Texas Law Review article by Joshua Hawley. Hawley seeks to demonstrate that modern substantive due process jurisprudence was a novel invention of the Warren and Burger Courts, having no significant antecedents in the due process jurisprudence of the so-called Lochner era. Hawley makes some eminently reasonable points, especially with regard to how the Court replaced its historic natural-rights-based constitutionalism with a positivist understanding of the law that invites Justices to read their own philosophical views into the Due Process Clauses. Nevertheless, not all of Hawley’s claims are persuasive. In this essay, I complicate the story Hawley tells, by discussing alternative and additional explanations for the developments he discusses.

Our Illiberal Administrative Law

By Douglas Ginsburg, Steven Menashi

ABSTRACT:

In adopting the Administrative Procedure Act, the Congress intended to extend the liberal tradition - of limited government, checks and balances, and the protection of individual rights - to governance of the administrative state: The APA would give the public a way to get relief from administrative excess. Yet in the 70 years since it was enacted, evasive practices by the agencies and an increasingly deferential posture from the courts have combined to frustrate that purpose. The result is a legal regime that insulates agencies from correction and denies citizens redress. The illiberal aspects of this regime - presumptions that favor the government, unbounded delegations of authority, judicial deference on questions of law, the evasion of notice?and?comment rulemaking - do not arise from the APA itself but from the failure of courts and agencies to fulfill their obligations under the APA.


Taking Steel Seizure Seriously: Reflections on the Iran Nuclear Agreement

By Steven Menashi

ABSTRACT:

This article examines the constitutional validity of President Obama's decision, as part of his 2015 agreement with Iran, effectively to repeal 17 different sanctions laws for the 15-year life of the agreement. Although Congress had legislated extensively in this area, the President effected this change by entering into a "nonbinding political agreement" with Iran and by aggregating individual waiver provisions in the sanctions laws into an-across-the-board waiver of sanctions. We argue that the commitments made by the President in the Iran agreement violate a fundamental separation-of-powers limit on executive power—what we term "the Steel Seizure principle," after the Youngstown Steel Seizure Case.

As the Supreme Court reaffirmed in the Steel Seizure Case, the President does not have lawmaking power even where national-security and foreign-relations concerns are at stake. A vast literature has grown around the Steel Seizure Case, especially the influential concurring opinion by Justice Robert Jackson. Yet relatively little attention has been paid to the majority view of the Justices that President Truman’s seizure order was unlawful not because it contravened any express statutory prohibition but because it flouted the congressional "plan" for addressing the particular policy issue. This central aspect of the Steel Seizure Case highlights what is particularly problematic about President Obama's decision to aggregate authorities in the sanctions laws and to commit the United States to an across-the-board waiver of nuclear-related sanctions pursuant to his agreement with Iran. The President treated the waiver provisions as an invitation to end the congressionally prescribed sanctions regime for addressing Iran's nuclear weapons program and to replace it with his own non-sanctions regime for addressing the same issue. Yet the President lacks the unilateral power to overturn Congress's prescribed policy and to replace it with his own.

The President is both an agent and, particularly in the foreign relations area, can be viewed as a co-principal with Congress. The Steel Seizure principle highlights the limits of the co-principal conception of the President. Once Congress has developed a legislative framework for a subject matter, that framework occupies the field; the President's role becomes one of a responsible agent. In the Iran sanctions laws, Congress provided bounded waiver authority, acting responsibly to allow limited executive discretion rather than requiring the President to seek new legislation each time flexibility was needed. It did not, however, invite the President to override the sanctions framework altogether, as occurred in connection with the Iran nuclear agreement. An emergent literature in administrative law has praised Congress's delegation of waiver authority to the executive branch as providing needed flexibility and other policy benefits. Yet that literature recognizes that the President's exercise of waiver authority must be carefully circumscribed to avoid the problem of the President revising a statutory regime out of disagreement with Congress's policy choices. Such limiting principles are no less necessary in the foreign-affairs context, where the President has used purported waiver authority in the Iran sanctions statutes to pursue his own independent policy in defiance of Congress.

A Dual Non-Banking System? Or a Non-Dual Non-Banking System? Considering the OCC's Proposal for a Non-Bank Special Purpose National Charter for Fintech Companies, against an Alternative Competitive Federalism System, for an Era of Fintech Banking

By J.W. Verret

ABSTRACT:

This Article examines the Office of the Comptroller of the Currency’s (OCC) proposal to grant special purpose national bank charters to rapidly emerging financial technology (fintech) companies. The Article contemplates the particular dynamics of the OCC’s proposal in light of recent court decisions such as Madden v. Midland Funding, LLC and CashCall that have called certain aspects of the fintech-bank partnership model (bank partnership model) historically favored by fintech companies. This Article reviews how the dual banking system has functioned historically, and uses this analysis to predict how the OCC’s proposal would be expected to operate. After detailing potential issues posed by the OCC’s federal solution, the Article puts forth a more effective alternative to the OCC’s proposal in the form of a competitive state fintech chartering system modeled on the competitive state chartering system for corporations. The Article also briefly considers whether the OCC could establish a hybrid approach in which national bank charters might incorporate elements of state competition. The Article concludes with a consideration of complications that will continue to inhibit the promise of a fintech charter under a competitive federalism inspired system of state fintech chartering competition.

The Administrative State and Its Law

By Michael Greve

ABSTRACT:

For understandable but also unfortunate reasons, the contemporary scholarly and public debate over “the administrative state” — a poorly defined term of convenience — has been marred by dramatic claims, ideological rancor, and arcane doctrinal quarrels that serve as placeholders for a grim clash of convictions. Expansive delegations of legislative powers, coupled with highly deferential judicial review and increasingly “unorthodox” forms of administration, have prompted scholars from opposing vantages to argue that all administrative law is an unlawful departure from constitutional government, or a thin veneer for an essentially “Schmittian” state beyond effective legal control (and a good thing, too).

This essay — written as an Introduction to a series of articles commissioned for a transatlantic law conference — argues that the stateside debate would greatly benefit from a comparative administrative law inquiry. In contrast to the acrimony over unchecked executive power in the United States, British scholars apprehend tendencies toward administrative juristocracy. In even sharper contrast, the German administrative law profession shares a firm conviction that is entirely possible to reconcile the demands of modern government with constitutionally grounded rule-of-law precepts. At a minimum, the comparative perspective greatly complicates facile stories of constitutional decay or the “modernization” of an archaic constitutional framework. It invites deeper reflection and opens a wider, perhaps more sober perspective on the American administrative state and its law.

Do Americans Really Save Too Little and Should We Nudge Them to Save More? The Ethics of Nudging Retirement Savings

By Todd Zywicki

ABSTRACT:

The contention that consumers systematically “undersave” for retirement is a frequent example provided by adherents to behavioral economics and behavioral law and economics to purportedly illustrate their theories. Although frequently asserted, the claim that people systematically undersave is rarely assessed empirically. 

This article, written for the Georgetown Institute for the Study of Markets and Ethics Symposium on “The Ethics of Nudging,” examines available data on how many people fail to save and the reasons why they do not. According to available evidence, the overwhelming number of households saves enough or more than they need for retirement; only a small minority does not seem to save enough. Those who do not save for retirement lack the money to do so or allocate available resources to paying down consumer and student loan debt. Behavioral economics theories explain little of the observed patterns of saving or non-saving behavior. Moreover, behavioral economics itself suggests that many people probably oversave for retirement and makes no effort to reconcile these offsetting biases. 

More fundamental, once it is recognized that there is an opportunity cost to saving more—one must consume less today, borrow more, or work more—the theoretical validity of the claim that people undersave because of behavioral biases is suspect. Given the inherently subjective nature of opportunity cost, a central planner cannot be confident that he can make people better off by influencing their consumption expenditures across time than he could by shifting consumption expenditures across different goods and services today. It is concluded that there is little reason to believe that people would be made better off by nudging them to save more for retirement.

A Second Amendment Right to Be Negligent?

By Stephen Gilles, Nelson Lund

ABSTRACT:

Professor Andrew Jay McClurg maintains that the Second Amendment has been used to create a right to store firearms negligently. It is conceivable that some such thing could happen, just as the Supreme Court has used the First Amendment to require plaintiffs who are public figures to prove more than negligence in defamation actions. But Professor McClurg presents no evidence to support his claim. To accept his claim that the Second Amendment has caused courts to distort the application of standard tort principles, we would have to believe that they secretly relied on the Second Amendment and that they undertook this insidious project before they believed there was a legal basis for what they were doing. This is completely implausible. Professor McClurg, however, makes two additional claims that require a more extended response.

First, he maintains that courts have misapplied well-established tort principles in refusing to hold the victims of gun thefts liable for injuries subsequently inflicted with the stolen weapons. This is wrong. Courts are simply applying traditional tort doctrines — including proximate cause and limits on duties to protect strangers from wrongdoing by others — when they refuse to impose liability on a gun owner whose unsecured gun is stolen and subsequently used to commit a crime. 

Second, Professor McClurg contends that legislatures have irresponsibly failed to impose objectively reasonable safe-storage duties on gun owners. Unfortunately, he has conflated his personal policy preferences with what is objectively reasonable. He advocates a rule requiring gun owners to store their guns in a sturdy, non-portable gun safe whenever they are not within the owner’s immediate control. This rule simply assumes away the costs of safe-storage practices, which include the expense of gun safes and the risk of being unable to quickly access the gun in an emergency. Furthermore, the imposition of such a duty — whether by courts or legislatures — would raise serious Second Amendment questions.

The Due Process Right To Pursue a Lawful Occupation: A Brighter Future Ahead?

By David Bernstein

ABSTRACT:

The ghost of Lochner hangs over due process challenges to laws that restrict entry to occupations. In an attempt to vanquish the remnants of Lochner and similar pre-New Deal cases, the Supreme Court established and applied a weak rational basis test to evaluate all economic regulation, including occupational regulations, leaving very little room for successful challenges.

Recent precedent, however, suggests that courts are becoming more protective of the right to pursue an occupation. The gradual undermining of standard critiques of Lochner and its progeny on the one hand, and the spread of costly and restrictive occupational licensing to jobs that pose minimal risk to public well-being on the other, have ignited debate over whether strict judicial deference to even the most arbitrary and abusive licensing laws is appropriate.

Meanwhile, the unofficial demise of the fundamental/non-fundamental rights dichotomy in the Supreme Court’s due process jurisprudence, combined with a rising generation of judges, liberal and conservative, who may not share their predecessors’ reflexive hostility to meaningful judicial oversight of occupational restrictions, provide a glimmer of hope that the right to pursue a lawful occupation free from unreasonable government regulation will soon be rescued from constitutional purgatory.

The Missing Role of Economics in FTC Privacy Policy

By James Cooper, Joshua Wright

ABSTRACT:

The FTC has been in the privacy game for almost twenty years.  In that time span, the digital economy has exploded, dramatically increasing the importance of privacy regulation to the economy.  Unfortunately, the sophistication of the FTC’s privacy policy has yet to keep pace with its stature.   Privacy stands today where antitrust stood in the 1970s.  Antitrust’s embrace of economics helped transform it into a coherent body of law that almost all agree has been a boon for consumers.  Privacy regulation at the FTC is ripe for a similar revolution.  We examine the history of FTC privacy enforcement and policy making, with special attention paid to the lack of economic analysis, and we show the unique ability of economic analysis to ferret out conduct that is likely to threaten consumer welfare, and provide a framework for FTC privacy analysis going forward.  Specifically, the FTC needs to be more precise in identifying privacy harms and to develop an empirical footing for both its enforcement posture and prophylactic measures that it urges firms to adopt, such as “privacy by design” and “data minimization.”  The sooner that the FTC begins to incorporate serious economic analysis and rigorous empirical evidence into its privacy policy, the sooner consumers will begin to reap the rewards.  

Our Polarized, Presidential Federalism

By Michael Greve

ABSTRACT:

Over the past three-plus decades, American federalism has taken on a decidedly executive, presidential coloration. The trend has persisted under Republican and Democratic administrations, and on all accounts it has accelerated. Moreover, federalism has become increasingly polarized at the federal and, perhaps more consequentially, at the state level. Controversies over environmental policy, immigration, health care, and other salient issues have been fought by remarkably cohesive, sharply polarized blocs of states. The extant literature has ably limned executive, presidential federalism’s contours and especially its intergovernmental dynamics. This Article seeks to extend and broaden the scholarly inquiry. It urges greater attention to questions of political economy; comparative politics; fiscal federalism; and constitutionalism and judicial capacity.

Those lines of inquiry and especially a comparative perspective provide cause for concern. Polarized, presidential federalism is a defining feature of political systems (especially in Latin America) that share our formal institutional arrangements, such as Argentina, Brazil, and Venezuela. Those systems tend toward a highly personalized style of executive government, political and fiscal instability, and institutional corruption. The Article expresses no view on the likelihood of a similar scenario in the United States, let alone predict it. However, it suggests that such a trajectory is within the range of possibilities.

Antonin Scalia and the Dilemma of Constitutional Originalism

By Nelson Lund

ABSTRACT:

Antonin Scalia has had a very significant and healthy impact on the way people talk about American constitutional law. Before he took his seat on the Supreme Court, it was barely respectable to treat the Constitution, understood to mean what it meant to those who wrote and ratified it, as the law. Constitutional law was - as every sophisticated lawyer, jurist, and academic understood - whatever the courts said it was, and the written document had been superseded in significant part by a “living constitution” that reflected the progressive political agenda of the modern left. Thanks largely to Justice Scalia’s forceful and eloquent voice, originalism is now so respectable that even those who seek to move the law ever farther to the left frequently find it prudent to pose as expositors of the Constitution’s original meaning.  Scalia’s substantial effect on the terms of debate in constitutional law, however, is not likely to be matched by a comparable influence on the future of the law itself. His effort to alter the Supreme Court’s approach to constitutional adjudication faced serious obstacles that will continue to frustrate Justices - and observers like me - who share Scalia’s desire for a revival of respect for the written Constitution. Most obviously, political realities could easily prevent presidential appointments from producing a majority of like-minded Justices any time soon, if ever. There are, however, some more interesting obstacles that have deep historical roots. This essay explores those obstacles before considering two examples that suggest why Scalia’s originalism is unlikely to make a decisive contribution to the reformation in constitutional law that he sought.