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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:


Property Rights and Takings Burdens

By Steven Eagle

ABSTRACT:

The Fifth Amendment Takings Clause was interpreted through the 19th century as referring only to physical takings or ousters of possession. Justice Holmes enigmatic 1922 opinion in Pennsylvania Coal Co. v. Mahon was the genesis of contemporary “regulatory takings” doctrine, which reached full expression in 1978, in Penn Central Transportation Co. v. City of New York. The ad hoc, three-factor test of Penn Central, generally deemed incoherent and chaotic, focused on regulatory burdens placed upon landowners, with respect not to specific rights, but rather with regard to a specified relevant parcel (“parcel as a whole).” In 2017, in Murr v. Wisconsin, the Court conflated the elements of what constitutes the relevant parcel and the three factors pertaining to whether that parcel had been taken.

The Article discusses theories of “property,” the merits of balancing tests versus more objective rules, and how these play out in the Murr majority opinion and dissents. It also treats the importance of Murr’s mandate to internalize those externalities that were irrelevant prior to regulation. Given the universal unhappiness with regulatory takings jurisprudence, the Article also considers arguments for reconsidering regulatory takings as due process deprivations.

 

Wrongful Convictions, Deterrence, and Stigma Dilution

By Murat Mungan

ABSTRACT:

There is no consensus in the economics of law enforcement literature regarding the likely effects of wrongful convictions on deterrence. While many assert that wrongful convictions and wrongful acquittals are likely to cause similar reductions in deterrence, others, most notably Lando (2006), have claimed that certain types of wrongful convictions are unlikely to affect deterrence. However, the stigmatizing effects of convictions are not taken into account in the formulation of either view. Frequent wrongful convictions naturally make criminal records less meaningful, because they reduce the proportion of truly guilty individuals among the convicted population. This stigma dilution effect, along with similar effects regarding the probability of stigmatization, are formalized via a model wherein criminal records act as noisy signals of offenders' characteristics. The analysis reveals that when criminal records cause stigmatization, wrongful convictions reduce deterrence, even if they are caused by adjudication mistakes which were previously shown to have no effect on deterrence. This suggests that pro-defendant biases in various criminal procedures can potentially be explained through interactions between stigmatization and wrongful convictions.

Quality and Quantity in Constitutional Interpretation: The Quest for Analytic Essentials in Law

By Ronald Cass

ABSTRACT:

Henry Manne wrote about many topics central to the law-and-economics canon but also over a period of more than a decade later in life worked on a theory of constitutional interpretation, producing a paper and lectures on this subject. His goal was to use insights from economics to improve constitutional analysis, in particular seeking to ground constitutional interpretation in quantitative assessments he hoped would be both true to the primary goal of constitution-makers and capable of providing guidance to judges in ways less subject to the pull of political preferences. Despite his concerns with controlling constitutional interpretation in practice, the instincts Manne brought to this endeavor ran more to matters of theory than to its implementation by judges, identifying important propositions for interpretation but failing (by his own admission) to produce a test that fulfilled his aspirations.

The strengths and weaknesses of this work provide an intriguing contrast with writings from Antonin Scalia, the American jurist and scholar whose approaches to both constitutional and statutory interpretation had a profound impact on jurisprudence over the past three decades. Like Manne, Scalia highly valued more determinate methods of analysis and was deeply concerned with the architecture of constitutional creation and effectuation. His focus, however, was more on the practical question of what happens when a particular sort of official has the power to implement a highly indeterminate test and what test best constrains interpretation in ways faithful to the interpretive task. Those goals undergird Scalia’s commitments to textualism and originalism.

Manne’s and Scalia’s approaches to constitutional interpretation are instructive on the purposes served by analytical tools in disparate settings. In particular, they offer contrasting and complementary visions, providing insights about the domains of law-and-economics, legal analysis, practical judgment, and perspective.

Obama's Constitutional Legacy

By Ilya Somin

ABSTRACT:

President Obama leaves behind a mixed legacy on constitutional issues—one that is likely to remain controversial for a long time to come. Its most dangerous element may be the precedents he set for unilateral presidential initiation of war. More positively, the President played an important role in the establishment of a constitutional right to same-sex marriage, and his Administration’s policies unintentionally led to litigation that resulted in stronger judicial protection for federalism, property rights, and religious liberties. Obama’s judicial appointments are notable for their impressive professional qualifications and strong support for liberal judicial ideology. The long-term constitutional impact of the Obama presidency remains to be seen.

No Fracking Way: An Empirical Look at Why New York Towns Banned Shale Development

By Caroline Cecot

ABSTRACT:

Across the United States, local governments and states have adopted measures to restrict shale development that uses high-volume hydraulic fracturing and horizontal drilling (collectively, fracking) within their borders, hindering a national energy policy that relies on continued access to natural gas trapped within shale formations. This Article empirically examines the determinants of these local anti-fracking measures by analyzing the behavior of New York towns from 2010 through the end of 2013.

Before New York’s highest court recognized a town’s authority to ban fracking and before the state officially banned fracking, more than a hundred shale-rich New York towns adopted bans or moratoria on fracking. The results show that towns most likely to adopt bans were those whose residents were most vulnerable to potential water contamination and those with little history of prior oil-and-gas development. Moratoria adoption, in contrast, was predicted largely by residents’ environmental and political preferences.

The results support state efforts to reduce local opposition by facilitating responsible shale development that incorporates feedback from local governments to develop a comprehensive system of risk-based regulations, liability standards, and insurance mandates. These regulations, standards, and mandates would interact to create incentives for optimal activity levels, acceptable risk-taking, and comprehensive environmental protection against all categories of harms to water from shale development.

Optimal Non-Prosecution Agreements and the Reputational Effects of Convictions

By Murat Mungan

ABSTRACT:

Many claim that non-prosecution agreements (NPAs) reduce deterrence by mitigating the reputational sanctions that would otherwise be imposed on corporations through plea-bargains. They suggest, based on this claim, that NPAs ought to be used infrequently. This article presents a signaling model wherein reputational sanctions emerge as a result of noisy signals produced through a firm's prosecution. It is shown that, if, as claimed, NPAs provide third parties with less information regarding a firm's wrongdoings, then firms would be willing to pay an NPA premium to avoid convictions. Thus, the NPA premium can be chosen to induce only those firms which would otherwise be over-deterred to accept NPAs. Therefore, offering NPAs with high premia is superior to the option of not using NPAs. The article also characterizes optimal NPAs, and identifies relationships between deterrence; frequency of NPA use; firms' characteristics; and NPA terms. It explains how these relationships can be exploited to form and test hypotheses on whether convictions obtained through plea-bargains cause greater reputational harm to firms than NPAs.

Property Values and Risks: Evidence from Shale Development

By Caroline Cecot

ABSTRACT:

The profitability of extracting oil and gas trapped within the nation’s extensive shale formations has generated a boom in the oil-and-gas industry. Operators are pushing to drill close to populations and sensitive resources, and many states are facilitating such extensive drilling with laws that preempt local land-use control. On one hand, shale production has the potential to enrich local land owners who can collect lucrative royalty payments from operators. On the other hand, shale production is not without potential local risks. Some of these risks are speculative, and the magnitudes of the risks are uncertain. 

Using property sales data from Washington County, Pennsylvania, this paper finds that an additional horizontal well within a mile of a property tends to increase the property’s value. This positive effect, however, is diminished for properties that rely on private water wells for drinking water. In addition, all properties with nearby horizontal wells lose value as the number of recent environmental, health, and safety well violations increases in the county.

Using Things, Defining Property

By Christopher Newman

ABSTRACT:

Accounts of property tend to define it as a right to exclude and treat use-privileges as incidental by-products of that right. This paper sketches a different approach, one that treats recognition of use-privileges to things as prior and then asks what sorts of rights might be justified in their support. I attempt to defend this approach against the analytical and doctrinal arguments made by Simon Douglas & Ben McFarlane in their paper Defining Property Rights. As the concept of “use” depends upon that of “thing,” I also attempt to shore up the reliance on “things” as central to the concept of property. In this vein, I argue for a concept of “thing” that encompasses any discrete and intelligible nexus of human activity with respect to which human purposes may come into conflict, arguing that this renders intellectual property rights straightforwardly intelligible as usufructary interests in things. I also offer a response to Christopher Essert’s argument in Property in Licenses and the Law of Things to the effect that property should jettison any reliance on things and simply view property rights as aimed at excluding others from classes of activity. Here my contention is that the identification of some discrete “thing” as an object of property provides a necessary focal point for the concepts of use and interest that are both functionally and normatively essential to property as a human institution.

The Right to Keep and Bear Arms in the Roberts Court

By Nelson Lund

ABSTRACT:

Like everything else in the Bill of Rights, the Second Amendment originally restrained only the new federal government. This left the states free to regulate weapons as they saw fit, just as they were free to regulate such matters as speech and religion. The Supreme Court did not invalidate a federal statute under the Second Amendment until 2008, and it was only in 2010 that a regulation adopted pursuant to state law was struck down. These two decisions — District of Columbia v. Heller and McDonald v. City of Chicago — prompted a stream of litigation that may eventually put significant constraints on legislative efforts to regulate the possession and use of weapons. As this is written in July 2017, however, it seems more likely that the Court’s decisions will prove to have very limited practical effects. It is worth recalling the Rehnquist Court’s Commerce Clause decision in United States v. Lopez, which set off celebrations and lamentations about a federalism revolution that has yet to come about. Similarly, the Roberts Court has so far shown only that the Second Amendment does not leave governments with absolutely limitless regulatory power.

This contribution to American Federalism and Public Policy (edited by Christopher P. Banks) begins with a brief sketch of the legal and historical background that set the stage for Heller and McDonald. After a description of those cases, the chapter surveys the application of the decisions by the lower courts. The chapter concludes with an analysis of the Supreme Court’s response to the case law developed by the lower courts.

The Effect of Optimal Penalties for Organizations Convicted of Price Fixing in the Presence of Criminal Sanctions for Individuals

By Michelle Burtis, Bruce Kobayashi

ABSTRACT:

This chapter examines the nature of optimal price fixing penalties on organizations in the presence of criminal sanctions for individuals employed by convicted firms. In other work, we examined the nature of optimal penalties for firms convicted for price fixing when the only sanction is the one placed on the firm. This chapter expands the economic analysis to examine how optimal organizational sanctions function when individuals employed by the firm are subject to criminal penalties, including incarceration. Our analysis demonstrates how sanctions on individuals can serve to complement firm level expenditures on monitoring and compliance, resulting in better deterrence and lower compliance costs.

Land Use Regulation and Good Intentions

By Steven Eagle

ABSTRACT:

This Essay surveys contemporary issues in American land use regulation. Its central claim is that, despite good intentions, regulations often have either been ineffective or exacerbated existing problems. The problems underlying regulation include contested understandings of private property rights, continual economic and social change, and a political process prone to ad hoc deal making. Together, they result in regulation that is conceptually incoherent and continually provisional.

The Essay briefly reviews how land use philosophy has changed from early nuisance prevention, through Progressive Era comprehensive planning, to modern views of regulation as transactional. It examines our regulatory takings framework for delineating between private property rights and legitimate government regulation. The Essay reviews such contentious issues as affordable housing. Finally, it asserts that, in the absence of a generally agreed upon understanding of land use goals, comprehensive grand bargains among factions and public-private partnerships would facilitate entrenchment and favoritism. The ensuing uncertainty and lack of housing opportunities in cities where workers would be most productive harms individual advancement and the national economy.

Fourth Circuit Shootout: 'Assault Weapons' and the Second Amendment

By Nelson Lund

ABSTRACT:

Severe restrictions on so-called assault weapons and large-capacity magazines have long been an important agenda item for organized proponents of gun control. For just as long, gun rights activists have accused their opponents of a kind of bait and switch. The main targets of these restrictions have been rifles that look like M16s, AK-47s, and other military rifles, but operate differently. Since 1934, civilians have been required to undergo a costly and burdensome federal licensing process in order to possess fully automatic weapons, commonly referred to as machineguns. Such weapons, which include military rifles, are now rare and expensive because the federal government froze the civilian supply in 1986. The rifles at which more recent laws are aimed, such as the AR-15 and AR-10, have a superficial resemblance to military weapons but use a semi-automatic operating system like those found in many ordinary hunting guns, as well as in a very large proportion of modern handguns. These semi-automatics are now called “modern sporting rifles” by their defenders, who hope to discourage the public from being fooled into mistaking them for machineguns.

The debate about this issue assumed national prominence in 1994, when Congress enacted a statute that restricted the sale of semi-automatic rifles with a military appearance and all magazines that can hold more than ten rounds of ammunition. Although the statute contained a grandfather clause exempting weapons already in civilian hands, it provoked a firestorm of criticism, and the Democratic Party promptly lost control of both Houses of Congress for the first time in four decades. When the law expired by operation of a sunset provision ten years later, President Bush advocated its renewal. The Republican Congress ignored him, and the Democrats failed to revive the measure after they regained control of Congress and the presidency in 2009. Evidently regarding such legislation as politically toxic, neither party has enacted a major gun control law at the national level for almost a quarter of a century.

Several states, however, have enacted laws that are modeled on the 1994 federal statute. Maryland’s version was recently upheld by the Fourth Circuit, sitting en banc, in Kolbe v. Hogan. This decision offers a useful lens through which to view the landmark decision in District of Columbia v. Heller, which recognized a constitutional right to keep a handgun at home for self defense. In Kolbe, the majority concluded that the Second Amendment has no bearing on the Maryland statute. The dissent went almost to the opposite extreme by arguing that the statute should be subjected to strict scrutiny. Both the majority and the dissent went to great lengths to argue that their opposing conclusions were dictated by Justice Scalia’s Heller opinion, and both of them are demonstrably wrong about that. 

Taken as a whole, the Heller opinion is exquisitely equivocal about issues like the ones raised in Kolbe. The large doctrinal space left open by Heller is inevitably being filled according to the policy views of judges on the lower courts. Those views are no doubt influenced to some extent by judges’ opinions about the desirability of the gun control regulations they review. In a distinct and more important sense, the approach of the judges is determined by their views about the value of the Second Amendment and the right it secures. Heller contains a lot of rhetoric supporting those, like the Kolbe dissenters, who place a high value on Second Amendment rights. But that rhetoric is undermined by a series of pro-regulation dicta in the opinion.

The Supreme Court has declined to back its rhetoric up with any decisions actually rejecting the dismissive approach adopted by the Kolbe majority and many other courts. Justice Thomas, joined by Justice Scalia and now by Justice Gorsuch, has strongly objected to the Court’s passive acceptance of such decisions, but there is no sign yet that the Court is prepared to recognize any Second Amendment rights beyond the narrow holding in Heller.

The Signal-Tuning Function of Liability Regimes

By Claude Fluet, Murat Mungan

ABSTRACT:

Fault-based liability regimes require an inquiry into the nature of the defendant's conduct, whereas this type of inquiry is absent in strict liability regimes. Therefore, verdicts reached through fault-based liability regimes can convey superior information compared to verdicts reached through strict liability regimes. Further reflection reveals that this advantage is enjoyed by fault-based liability regimes only if the evidence related to the nature of defendants' actions is sufficiently informative. Otherwise, admitting such evidence can add noise to the information conveyed through verdicts. Therefore, liability regimes have a function of tuning signals conveyed on to third parties, which, in turn, causes deterrence effects by affecting the informal sanctions imposed on defendants who are found liable. We construct a model wherein this function is formalized, and we identify the optimal liability regime and burden of proof as a function of various factors (e.g. the commonality of the harmful act, and the informativeness of the evidence).

Constitutionally Conforming Agency Adjudication

By Jennifer Mascott

ABSTRACT:

In June 2017 the D.C. Circuit issued a judgment that essentially reaffirms the constitutionality of current appointments procedures for administrative law judges (ALJs) in the Securities and Exchange Commission (SEC). After conducting an en banc hearing in the case, the en banc court split evenly over whether the ALJs are “Officers of the United States” subject to the constitutional requirement of appointment by the president, a department head, or a court of law. The evenly divided vote resulted in the affirmance of the D.C. Circuit’s earlier panel decision finding that the ALJs are not “officers”—continuing the court’s split with the Tenth Circuit, which has concluded the ALJs are “officers.” The continued split and the en banc posture of the case mean this issue may receive consideration by the Supreme Court.

This essay responds to a widely cited article by Professor Kent Barnett that suggested ALJs should be appointed by neither the President or an agency head, even if the courts eventually conclude they are “officers.” In particular, Professor Barnett contends that executive branch appointment of agency adjudicators creates such a significant threat to ALJ impartiality that due process considerations may require a court of law such as the D.C. Circuit—rather than the executive branch—to appoint ALJs. This essay refutes those concerns. Tying together legal scholarship on due process and the Appointments Clause, this essay contends: The Article II clause that vests executive power in the President, as well as the text and drafting history of the Appointments Clause, together mandate that agency adjudicators must be appointed by executive branch actors—not by courts of law. As long as these adjudicators handle issues properly resolved through executive adjudication as a historical matter, there are no constitutional partiality concerns with the executive branch appointment—or even removal—of agency adjudicators. Rather, the transparency protections of the Appointments Clause provide the appropriate constitutional mechanism for accountability in executive adjudication.

Antitrust Provides a More Reasonable Regulatory Framework than Net Neutrality

By Joshua Wright

ABSTRACT:

In 2015, the FCC reclassified the framework for regulation of the Internet from Title I of the Telecommunications Act to Title II. This reclassification treats the Internet as a common carrier and bans any vertical agreements between Internet service providers and content providers. Economic analysis shows the 2015 Order harmed consumers and depressed investment. In April 2017, the FCC initiated a proceeding to end the Title II regulatory approach. Such a shift will also replace the categorical ban on vertical arrangements to a regulatory regime grounded by antitrust law and its “rule of reason.” Critics argue the antitrust approach cannot reach each of the harms envisioned by proponents of net neutrality or is otherwise insufficient. We explain that the criticism that antitrust cannot reach harm to innovation caused by anticompetitive conduct is wrong as a matter of both antitrust as a matter of theory and practice. We conclude that antitrust is superior to proposed alternatives that would condemn vertical arrangements in broadband markets either on a categorical basis or the plaintiff bearing the prima facie burden of showing proof of harm to competition.

Righting the Course: What the DOJ Should Do About the IEEE Business Review Letter

By Koren Wong-Ervin

ABSTRACT:

Standard-development organizations (SDOs) “vary widely in size, formality, organization and scope,” and therefore individual SDOs may need to adopt different approaches to meet the specific needs of their members. Critically, to balance the needs of both contributors and implementers, SDO policies must be developed through transparent and consensus-based processes. Issuance of best practices by a government agency may unduly influence private SDOs and their members to adopt policies that might not otherwise gain consensus support within a particular SDO and that may not best meet the needs of that SDO, its members, and the public. Accordingly, the U.S. antitrust agencies have taken the position that they do “not advocate that [SDOs] adopt any specific disclosure or licensing policy, and the [a]gencies do not suggest that any specific disclosure or licensing policy is required.”

The Effect of Income Taxation on Risky Investment: An Experiment

By Terrence Chorvat, W. Gavin Ekins

ABSTRACT:

In this experiment, we test whether the Domar-Musgrave model accurately predicts investor behavior in its paradigmatic setting. Our results indicate that investors only scale up their investments in risky assets to the extent predicted by the model when tax rates are relatively low. Moreover, we found a portion of the subjects decreased investments in risky assets as a reaction to the imposition of symmetric capital taxes. For these subjects, we found that the return on the risky asset in the immediate prior period was a more important determinant of risk-taking.

Incentives, Choices and Strategic Behavior: A Neuroeconomic Perspective for the Law

By Terrence Chorvat, Kevin McCabe

ABSTRACT:

In this chapter, we discuss some ways in which neuroeconomic research can inform legal scholarship. Given the limitations on space of this chapter, we cannot discuss anything like all of the neuroeconomic research that has been done in the last few years, even all of that which is of relevance to legal scholarship. Therefore, this chapter is a highly selective review of the research that we believe is useful to legal scholars. The focus of the chapter is on neuroeconomic research related to financial decisions and its relevance to legal scholarship.

Dissecting Professor Wu and Yelp's Local Search Study: An Antitrust Law Analysis of The ‘Experimental Evidence'

By Joshua Wright

ABSTRACT:

In a 2015 article co-authored with three Yelp employees, Professor Wu purports to examine evidence from one experiment allegedly relevant to the question whether Google’s display of local search results in a defined space on the search results page violates the antitrust laws. The authors rely entirely upon this single experiment to support two central claims: that Google’s local results harm consumers and that this innovation violates the antitrust laws. A closer look at the authors’ experiment, however, makes clear it is does not substantiate either of these claims. I describe the methodological flaws in the authors’ approach in some detail, including their mistaken claim that the single experiment amounts to an “RCT,” or “randomized controlled trial.” I also identify the mistaken premise underlying their provocative legal claim – that is, that a firm can face antitrust liability for innovation that improves consumer welfare on the grounds that one can imagine an innovation that would have generated greater welfare improvements. Antitrust law has repeatedly considered and rejected this notion. Professor Wu and his co-authors draw even more provocative conclusions from this experiment, but ignore the fact that in the 5 years following Yelp’s initial complaints regarding local search, Yelp’s annual revenues grew from $83 to $713 million. In response to the common refrain of antitrust complainants that they could have performed even better but for the allegedly unlawful conduct, I explain the relevance of a rival’s economic success in the context of Section 2 claims involving exclusionary conduct. Professor Wu and his Yelp co-authors’ theory thus ultimately fails as a matter of economics, law, and data.

Intellectual Property and Practical Reason

By Eric Claeys

ABSTRACT:

In scholarship on intellectual property (‘IP’), philosophical justifications for IP rights seem to suffer from one of two flaws. To some, philosophical justifications are too indeterminate to offer concrete guidance about rights in practice. To others, philosophical justifications seem extreme; they mandate certain conclusions without letting decision makers consider the relevant context or consequences of different IP rights. Both impressions neglect an important dimension of moral reasoning about rights — practical reason. In perfectionist theories of law, ‘practical reason’ describes the principles by which general justifications for moral rights are implemented in specific decisions in law and ethics. This Article introduces practical reason to IP scholarship, and shows how it facilitates reasoning about the context of different IP rights. The Article shows how principles of practical reason might apply to patent’s novelty requirement, copyright’s originality requirement, copyright’s idea-expression distinction, and the duration requirements for various forms of intellectual property.