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

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

Recent Working Papers:


Positive Sanctions versus Imprisonment

By Murat Mungan

ABSTRACT:

This article considers the possibility of simultaneously reducing crime, prison sentences, and the tax burden of financing the criminal justice system by introducing positive sanctions, which are benefits conferred to individuals who refrain from committing crime. Specifically, it proposes a procedure wherein a part of the imprisonment budget is re-directed towards financing positive sanctions. The feasibility of reducing crime, sentences, and taxes through such reallocations depends on how effectively the marginal imprisonment sentence reduces crime, the crime rate, the effectiveness of positive sanctions, and how accurately the government can direct positive sanctions towards individuals who are most responsive to such policies. The article then highlights an advantage of positive sanctions over imprisonment in deterring criminal behavior: positive sanctions operate by transferring or creating wealth, whereas imprisonment operates by destroying wealth. Thus, the conditions under which positive sanctions are optimal are broader than those under which they can be used to jointly reduce crime, sentences, and taxes. The analysis reveals that when the budget for the criminal justice system is exogenously given, it is optimal to use positive sanctions when the imprisonment elasticity of deterrence is small, which is a condition that is consistent with the empirical literature. When the budget for the criminal justice system is endogenously determined, it is optimal to use positive sanctions as long as the marginal cost of public funds is not high.

Introduction, Democracy and Political Ignorance: Why Smaller Government is Smarter, 2nd edition

By Ilya Somin

ABSTRACT:

One of the biggest problems with modern democracy is that most of the public is usually ignorant about politics and government. Many people understand that their votes are unlikely to change the outcome of an election and don't see the point in learning much about politics. This creates a nation of people with little political knowledge and little ability to objectively evaluate what they do know. 

Democracy and Political Ignorance mines the depths of public ignorance in America and reveals it as a major challenge for democracy. It weighs various potential solutions, concluding that political ignorance is best mitigated and its effects lessened by decentralizing and limiting government. People make better decisions when they choose what to purchase in the market or which state or local government to live under, than when they vote at the ballot box, because they have stronger incentives to acquire relevant information and to use it wisely. 

The second edition of Democracy and Political Ignorance fully updates its analysis to include new discussions of the “Big Sort” and its implications for “voting with your feet,” the connection between political ignorance and the disproportionate political influence of the wealthy, new proposals for increasing political knowledge, and up-to-date survey data on political ignorance from recent elections.

The Introduction outlines the core argument of the book, and provides summaries of the chapters that follow.

Bruce Yandle and the Art of Economic Communication

By Todd Zywicki

ABSTRACT:

Bruce Yandle is one of the most influential economists of his generation, especially in the fields of environmental economics and public choice economics. But Yandle is also one of the most gifted communicators of economics and economic principles of his generation. This chapter, written for a book celebrating Yandle’s career and contributions to economic thought, is inspired by Yandle’s unparalleled gift for communication. It focuses particularly on Yandle’s use of modes of reasoning and “visions” about the world to illustrate the challenges of communicating economic concepts to citizens and government officials and how recognizing those challenges can enable economists to communicate better and, in so doing, to improve the world through the design of better regulatory policies. The chapter begins by reviewing Yandle’s use of the frameworks of Thomas Sowell’s Conflict of Visions and Robert Pirsig’s Zen and the Art of Motorcycle Maintenance to explain public and governmental resistance to environmental economics and then supplements the analysis with more recent and related work by Jonathan Haidt and psychological personality-typing, focusing particularly on the Myers-Briggs Type Indicator framework. The chapter concludes with autobiographical reflections on how Yandle’s insights about economic communication and his pedagogical style have influenced my own efforts to communicate in the public arena with respect to questions of consumer financial protection which, like environmental regulation, is fraught with strong moral intuitions and contrasting visions of the world.

Foot Voting and the Future of Liberty

By Ilya Somin

ABSTRACT:

One of the major goals of libertarianism – and liberalism generally – is expanding political freedom: the opportunity to exercise meaningful choice over the government policies we live under. The main opportunity for political choice in modern liberal democracies is ballot box voting. Despite some genuine virtues, it has serious flaws as a mechanism for enhancing political freedom. The average citizen has almost no chance of affecting the outcome of an electoral process. In part as a result, he or she also has strong incentives to make ill-informed and illogical decisions. We can do better on both fronts when we “vote with our feet.”  

Part I of this chapter briefly outlines three types of foot voting: voting with your feet between jurisdictions in a federal system, foot voting in the private sector, and international migration. All three involve meaningful exercises of political choice. In Part II, I explain how foot voting is superior to ballot box voting as a mechanism of political freedom. It allows for more meaningful and better-informed choice. It is also superior from the standpoint of several leading accounts of political freedom: Consent, negative liberty, positive liberty, and nondomination. 

Part III considers objections to foot voting based on theories of self-determination, under which current residents of a given territory have a right to exclude newcomers in order to protect the political freedom of the former. Such theories come in both group-oriented and individualistic variants. Group theories posit that certain groups have a right to exclude newcomers based on their ethnic, racial, or religious characteristics. Individualistic theories claim that current residents can exclude newcomers for much the same reasons that private property owners or members of a private club have a right to exclude. I argue that both types of claims have severe flaws. Part IV discusses some institutional reforms that can help expand foot voting opportunities, while mitigating potential downsides. Finally, the Conclusion briefly suggests some ways in which expanded foot voting can help brighten future prospects for promoting libertarian values.

Ohio v. American Express: Implications for Non-Transaction Multisided Platforms

By Joshua Wright, John Yun

ABSTRACT:

The Supreme Court’s decision in Ohio v. American Express settled a number of critical issues concerning multisided platforms—including whether each side of a platform constitutes a separate relevant product market. The ruling also addressed whether a prima facie assessment of competitive harm must incorporate the impact to consumers on all sides of a platform. The Court, however, potentially narrowed the scope of its ruling by making an explicit distinction between “transaction” and “non-transaction” platforms. We examine whether this is a meaningful distinction and explain how the Court’s logic applies to non-transaction platforms.

Burdens and Balancing in Multisided Markets: The First Principles Approach of Ohio v. American Express

By Joshua Wright, John Yun

ABSTRACT:

Multisided platforms have distinct and critical features that set them apart from single-sided markets. This realization has led to a split among courts, antitrust practitioners, and economists as to the best method to assess whether mergers or conduct that involve platforms result in the creation or maintenance of monopoly power and violate the antitrust laws. Some argue that each side of a platform constitutes a separate relevant product market. Others argue for a single, integrated market that incorporates all sides. We argue that any prima facie antitrust assessment of competitive harm must incorporate the impact to consumers on all sides regardless of market definition. We also explain why output effects should be the primary emphasis of competitive effects analyses. The Supreme Court recently and correctly adopted this approach in Ohio v. American Express.

The Constitutionality of Immigration Sanctuaries and Anti-Sanctuaries: Originalism, Current Doctrine, and a Second-Best Alternative

By Nelson Lund

ABSTRACT:

The Supreme Court’s immigration jurisprudence is fundamentally misguided, in the sense that it has little basis in the original meaning of the Constitution. In this essay, I will explain why I think so, and what the Court might do to ameliorate the effects of its past mistakes without overruling a raft of settled precedents.

Part I analyzes the text of the Constitution, which offers a reasonably clear allocation of authority over immigration between the state and federal governments. The Foreign Commerce Clause empowers Congress to limit the entry of aliens onto American soil, and the Naturalization Clause authorizes Congress to set uniform criteria for admission to American citizenship. Nothing on the face of the Constitution permits Congress to displace the states’ residual authority over aliens, which includes the power to exclude or expel unsuitable persons from their own territory.

Part II reviews early debates in Congress about the scope and nature of federal power over immigration. There were important disagreements, some of which resemble today’s policy debates, but Congress generally refrained from going much beyond what the text of the Constitution pretty clearly authorizes.

Part III traces the evolution of Supreme Court doctrine. The Court began by rooting federal immigration authority primarily in the Foreign Commerce Clause, where it belongs, but then misinterpreted that Clause. In the late nineteenth century, the Justices made a dramatic and largely unexplained shift to a non-textual theory under which broad federal authority over immigration and aliens is treated as an inherent aspect of American sovereignty.

Part IV shows that this doctrinal shift may not have had much practical significance. In non-immigration contexts, the Court eventually interpreted the Commerce Clause itself in a way that gave Congress practically the same far-reaching authority that the inherent power theory bestows in the immigration field. Thus, even if the Court had stuck with the Foreign Commerce Clause as the primary source of federal authority over immigration, the result would likely have been much the same as what the Court has mistakenly put in its place.

Part V assumes that the Court is very unlikely to reconsider the well-established inherent power theory. In recent decades, however, the Justices have been experimenting with doctrinal devices designed to put some limits on the almost unlimited Commerce Clause authority that previous cases had mistakenly conferred on Congress. The paper concludes with two examples showing how these limiting doctrines can and should be used to resolve recent controversies in which some states have desired to pursue policy objectives to which federal officials object.

"Officers" in the Supreme Court: Lucia v. SEC

By Jennifer Mascott

ABSTRACT:

This article appeared in the Cato Supreme Court Review addressing the Court's October Term 2017. The article addresses the Court's June 2018 opinion in Lucia v. SEC, which held that administrative law judges in the Securities and Exchange Commission are "Officers of the United States" within the meaning of the Constitution's Appointments Clause. Significant portions of this article are based on my earlier study of the original meaning of the Appointments Clause that the Stanford Law Review published in February 2018, see 73 Stan. L. Rev. 443 (2018).

Judging a Book: Ginsburg Reviews 'The Curse of Bigness'

By Douglas Ginsburg

ABSTRACT:

This article is part of an Expert Analysis series of book reviews from judges originally published on Law360.

Constitutional Hardball Yes, Assymetric Not So Much

By David Bernstein

ABSTRACT:

This Response addresses Professors Joseph Fishkin and David Pozen’s Asymmetric Constitutional Hardball. Fishkin and Pozen argue that Republicans have engaged in “asymmetric constitutional hardball” since 1993. This Response accepts the authors’ contention that Republicans have increasingly engaged in constitutional hardball but casts doubt on the purported asymmetry.

Part I questions whether one of the authors’ primary examples of Republican constitutional hardball—government shutdowns resulting from tensions over spending and other matters between Presidents Obama and Clinton on the one hand and congressional Republicans on the other—supports the authors’ thesis, especially given that the shutdowns could at least as easily be blamed on the Presidents as on Congress.

Part II highlights important examples of Democratic constitu­tional hardball, especially hardball by the Obama Administration, that are omitted from the authors’ analysis. Part II also briefly reviews reasons why Democrats have been increasingly inclined toward constitutional hardball.

Part III discusses in some detail a particularly important example of Obama Administration constitutional hardball—its efforts to reach and implement, over significant opposition in Congress, a nuclear agreement with Iran. These efforts circumvented Congress and involved lying to the public, engaging in legally aggressive lifting of sanctions on Iran, and even spying on the agreement’s domestic opponents.

Statutes, Common-Law Rights, and the Mistaken Classification of Patents as Public Rights

By Adam Mossoff

ABSTRACT:

Patents are increasingly swept up into the operations of agencies in the modern administrative state. This has raised anew the fundamental question whether patents are private property rights or special privileges, because this determines how constitutional guarantees apply to patents in administrative proceedings. If patents are private rights, full constitutional protections apply to them, such as the guaranty of due process. If patents are special privileges — deemed “public rights” — then they may be redefined or eliminated by the discretionary processes of administrative tribunals, such as the Patent Trial & Appeal Board. Today, courts and commentators reduce this fundamental legal classification to whether a right is born of a statute (public right) or a court decision (private right). They thus conclude that patents are public rights because they are “creatures of statute” enacted by Congress as authorized by the Constitution.

The classification of patents as public rights solely given their statutory provenance is profoundly mistaken. Modern courts and commentators have misconstrued one heuristic used by earlier courts as part of a broader inquiry in distinguishing between private rights and public rights. It was only a heuristic because all legal rights share mixed origins in both statutes and judicial decisions, including both property rights in land and in inventions. This Article surveys these well-known sources of property rights in both statutes and judicial decisions, revealing that conflating “common law” with private property rights is more legal myth than historical fact. As cases proliferate at the intersection of patent law, administrative law, and constitutional law, it is a fundamental error to classify patents as public rights in relegating these vested private property rights to the vagaries of administrative processes and decrees.

The Optimal Standard of Proof with Adjudication Avoidance

By Murat Mungan

ABSTRACT:

Actors, whether guilty or innocent, may invest in costly measures to reduce their likelihood of being audited. The value of these investments are increasing in the probability with which they expect to be found guilty conditional on being audited. Because strengthening the standard of proof reduces the probability of conviction, it also reduces the investments by actors to engage in costly investments to reduce their likelihood of being audited. Therefore, when balancing such avoidance costs and deterrence effects, it is optimal to employ a stronger standard than that which maximizes deterrence, namely stronger than preponderance of the evidence.

Bipartisan Patent Reform and Competition Policy

By Timothy Muris

ABSTRACT:

The US patent system is a foundation of our nation's economy, encouraging innovation and growth. The exclusive right to use and license an invention provides numerous benefits to its inventor and to the broader economy. The patent system is not costless, however, and significant costs stem from the proliferation of low-qualify patents, including increased patent holdup and patent thickets. Industries relying on cumulative technology that computes and communicates are especially vulnerable to these problems. Bipartisan efforts to tackle the problems associated with the patent system have included reforms addressing the proliferation of dubious patents and an increased reliance on economic analysis. Significant progress has been made, first by the Federal Trade Commission and the National Academy of Sciences and later by the Supreme Court and the Congress, to improve the patent system, in part by recognizing that the patent system's costs and benefits differ by industry. Contemporaneously, private standard setting bodies have developed policies to avoid the problems associated with patent holdup. Moreover, the antitrust agencies under both the Bush and Obama administrations have scrutinized conduct involving patent holdup. This scrutiny should continue under the rigorous standards of traditional antitrust laws to continue the bipartisan focus on this important issue.

The Boundaries of Antidiscrimination Laws

By David Bernstein

ABSTRACT:

Because of the long, sorry history of American racism, perhaps nothing is more harmful to the libertarian “brand” than skepticism of antidiscrimination laws that apply to private parties. Yet race is only one of many protected categories under modern anti-discrimination laws. The proliferation of antidiscrimination laws protecting groups ranging from people over age forty to members of motorcycle gangs explains why even libertarians who are especially sensitive to America’s history of racism are loath to concede the principle that the government may ban private sector discrimination. There is no natural limit to the scope of antidiscrimination laws, because the concept of antidiscrimination is almost infinitely malleable. To concede the general power of government to redress private discrimination through legislation would be to concede virtually unlimited power to the government.

Besides the political ramifications of opposing popular civil rights legislation, many critics of adopting a laissez-faire posture toward discrimination in the private sector seem to believe that antidiscrimination laws somehow magically transform members of despised minority groups into full equal citizens in the eyes of the majority. Antidiscrimination laws can plausibly accelerate trends toward greater tolerance of minorities. These laws can also force a local majority, such as southern whites in the 1960s, to heed the values of a national majority, such as non-southern whites, who by 1964 had turned strongly against racial segregation. Antidiscrimination laws are unlikely, however, to provide much protection to a minority group when the majority of the voting population is hostile to that group.

Given their strong anti-statist presumptions, libertarians will generally remain presumptively opposed to the panoply of modern private sector antidiscrimination laws. That said, the basic federal laws banning discrimination in employment, housing, and public accommodations, as originally conceived in 1964—before the courts and civil rights bureaucracies devised problematic doctrines like “disparate impact” liability—were relatively benign. If everyone from farmers to military contractors to ACORN is able to successfully lobby the government to protect their interests, it’s not especially troubling that members of minority groups, who have more legitimate grievances than most legislative supplicants, also use legislation to protect their interests. Indeed, it would be troubling if there was a sudden popular move to repeal antidiscrimination legislation, if it were unaccompanied by broader libertarian political trends, because it would suggest that opposition to such laws came arose from hostility to minority groups, not from opposition to Big Government.

Libertarians can and should insist, however, that a line be drawn at the point where such laws infringe on the constitutional rights to freedom of speech, freedom of religion, expressive association, and other civil liberties. The laudable goal of the ever-broadening antidiscrimination edifice is to achieve a fairer, more just society. Laudable goals, however, don’t justify giving the government excessive authority, or disguising the implications of doing so.

A Coasean Approach to Cost-Benefit Analysis

By D. Bruce Johnsen

ABSTRACT:

Government regulation is said to be jusitified when private markets fail to efficiently allocate resources owing to so-called "externalities." Yet as Ronald Coase convincingly showed decades ago, the presence of externalities can be usefully attributed to the "costs of market transactions," putting the entire notion of market failure on shaky ground. What kind of failure is it when the parties affected by an alleged externality decline to spend a dollar transacting to capture ninety-nine cents in benefits? Transaction costs are real social costs and, at least conceptually, must be factored in to any social calculus. This essay proposes a relatively simple Coasean approach to cost-benefit analysis where transaction costs are sufficiently low that competition can be expected to drive the parties toward efficient resource allocation. A rule is justified under this approach only if the regulator can show it is likely to reduce the transaction costs. If so, the parties will adjust their private arrangements to reduce any inefficiencies out of self-interest. There is no need for the regulator to quantify total costs and benefits. This is information the parties--the men and women "on the spot"--are best able to identify on their own.

Platforms in the Spotlight at the FTC Hearings

By Joshua Wright, John Yun

ABSTRACT:

Over a series of three days, from October 15 to 17, 2018, the Global Antitrust Institute (GAI) hosted the third session of the FTC Hearings on Competition and Consumer Protection in the 21st Century at the Antonin Scalia Law School, George Mason University. After introductory remarks by Scalia Law School Dean Henry Butler and Federal Trade Commissioner Rohit Chopra, the panels broadly focused upon three topics: (1) multisided platforms, (2) nascent/potential competition, and (3) labor policy. The overarching focus of the hearings was clearly multisided platforms, which accounted for seven of the twelve panels. In the wake of the Supreme Court’s ruling in Ohio v. American Express, platforms are rightly the subject of significant attention and discussion ranging from the economic tools and methods to evaluate platforms to the correct legal framework for capturing and shaping that analysis. The economic research on platforms began in earnest fifteen years ago with pioneering work from Evans (2003) and Rochet and Tirole (2003). Much of the important economic learning over the past fifteen years—economic concepts such as cross-group effects, the interrelationship of demand, and the difference between transaction and non-transaction platforms—are becoming part of the antitrust lexicon. Much of the discussion at the hearings mirrored the conversation taking place among academic economists and lawyers, as well as practitioners and courts, focusing upon how to integrate that economic learning into antitrust institutions and doctrine. 

While the dueling set of amicus briefs for the American Express case indicates there are certainly areas of disagreement, we highlight what we believe emerged throughout the hearings as areas of general consensus in how to assess platforms in an antitrust context.

The Federal Trade Commission Hearings on Competition and Consumer Protection in the 21st Century, Privacy, Big Data, and Competition, Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University

By Tad Lipsky, Joshua Wright, Douglas Ginsburg, John Yun

ABSTRACT:

This comment is submitted in response to the United States Federal Trade Commission (“FTC”) hearing on Concentration and Competitiveness in the U.S. Economy as part of the Hearings on Competition and Consumer Protection in the 21st Century. We submit this comment based upon our extensive experience and expertise in antitrust law and economics. As an organization committed to promoting sound economic analysis as the foundation of antitrust enforcement and competition policy, the Global Antitrust Institute commends the FTC for holding these hearings and for inviting discussion concerning a range of important topics. Businesses today have greater access to data than ever before. Firms now have access to data at high volume, high velocity, and high variety—a phenomenon known as “big data.” The increasing prevalence of big data creates new questions for antitrust enforcers. This comment will discuss how big data should be considered in the context of antitrust analyses.

Common Ownership: Solutions in Search of a Problem

By Keith Klovers, Douglas Ginsburg

ABSTRACT:

Some scholars have argued that common ownership, which refers to an investor's simultaneous ownership of small stockholdings in several competing companies, is anticompetitive and prohibited by the U.S. antitrust laws. Proponents of this view target in particular large investment managers that administer actively managed and passive index mutual funds owned by individual investors, and some even call for the divestiture of trillions of dollars of equities. We believe the argument for antitrust enforcement against common ownership is misguided. First, proponents conflate management by investment managers and economic ownership by individual account holders and therefore incorrectly attribute allegedly anticompetitive conduct to the investment managers. Second, proponents substantially overstate the validity and strength of the existing empirical work purporting to show common ownership causes anticompetitive harm. Third, proponents overstate their legal case, both by relying upon inapplicable cases involving cross ownership – rather than common ownership – and by stretching the holdings of those cases. Shorn of puffery, proponents rely upon little more than the "plain meaning" of the statutes and the hotly contested empirical results. Fourth, at bottom proponents concerns are with either conscious parallelism, which is not unlawful, or anticompetitive conduct that, if proven, could be addressed using established antitrust doctrines applicable to hub-and-spoke conspiracies and to the anticompetitive exchange of information. All the participants in the debate over common ownership are indebted to Frederic Jenny who, with his usual perspicacity, put common ownership on the agenda of the OECD Competition Committee’s December 2017 Meeting, thereby assuring a robust debate in the community of competition scholars.

The Federal Trade Commission’s Hearings on Competition and Consumer Protection in the 21st Century, Reverse-Payment Settlements, Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University

By Tad Lipsky, Joshua Wright, Douglas Ginsburg, John Yun

ABSTRACT:

This Comment is submitted in relation to the Federal Trade Commission’s (“FTC”) Hearings on Competition and Consumer Protection in the 21st Century. Specifically, we address the United States Supreme Court’s holding in FTC v. Actavis, Inc. that reverse-payment settlements should be analyzed under the rule of reason. The Court also held that since a full rule of reason analysis is costly and difficult, the size of the settlement may be used a proxy. The idea is that, if a settlement is greater than the potential litigation costs, then this is an indicator of a weak patent, or an attempt by the patent holder to exclude competition—in sum, it indicates that consumer welfare has decreased. We submit this comment based upon our extensive experience and expertise in antitrust law and economics.

The Federal Trade Commission’s Hearings on Competition and Consumer Protection in the 21st Century, Innovation and Intellectual Property Policy, Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University

By Tad Lipsky, Joshua Wright, Douglas Ginsburg, John Yun

ABSTRACT:

This Comment is submitted in relation to the Federal Trade Commission’s (“FTC”) Hearings on Competition and Consumer Protection in the 21st Century. We submit this Comment based upon our extensive experience and expertise in antitrust law and economics. As an organization committed to promoting sound economic analysis as the foundation of antitrust enforcement and competition policy, the Global Antitrust Institute commends the FTC for holding these hearings and for inviting discussion concerning a range of important topics. In this Comment, we will discuss contemporary issues involving innovation, Standard Essential Patents (“SEPs”), and Fair, Reasonable, and Non-Discriminatory (“FRAND”) pricing commitments. As we move forward in an era marked by constant innovation revolving around Intellectual Property (“IP”) rights, it is imperative that the FTC recognize that these IP rights should be treated under the same analytical framework as other property rights and upheld regardless whether the setting is private licensing or FRAND commitments. Our modern law and jurisprudence are well-developed in the area of IP rights, and the reliance on IP rights in the standard-development process should not be accompanied by a move away from this well-developed body of law. In writing this Comment, we want to emphasize the importance of strong IP rights, the lack of evidence supporting the concern over holdup issues, and the need for the FTC to recalibrate priorities in the relationship between IP and antitrust.