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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:


The Behavioral Economics of Behavioral Law & Economics

By Todd Zywicki

ABSTRACT:

Behavioral Law & Economics (BLE) has loudly proclaimed its victory over traditional law & economics methodologies. Nowhere has this proclamation been so loud or self-certain as with respect to claims about consumer financial decision-making. Drawing on a set of casual observations styled as empirical proof, BLE scholars have called for a variety of regulatory interventions that are claimed to be necessary to protect consumers. But examining two detailed case studies here, one involving credit card usage by consumers and the other involving claims about consumer behavior in response to cash discounts and credit card surcharges, it is shown that these claims are simply incredible, in the sense that it is literally difficult to believe that unbiased scholars would find those studies to be even slightly persuasive. Possible explanations for this disconnect between the weakness of the underlying science and the widespread social acceptance of the theories by BLE scholars are discussed.

Law and Economics: The Contributions of the Austrian School of Economics

By Peter Boettke, Todd Zywicki

ABSTRACT:

The Austrian contribution to the development of law and economics is the study of endogenous rule formation, or the spontaneous evolution of social institutions, which can be traced to the founder of the Austrian School, Carl Menger. While Menger’s emphasis on spontaneous institutional analysis was born out of the Methodenstreit, a methodological battle engaged against the German Historical School, this paper argues that the Austrian contribution to law and economics emerged directly from the socialist calculation debate against market socialism. This debate, we will argue, played an essential role in the re-discovery of the institutional framework in economics during the post-WWII era, particularly in the development of law and economics. In the aftermath of the socialist calculation debate, Menger’s earlier emphasis on institutional analysis was reemphasized by F.A. Hayek, who in turn influenced the early pioneers of law and economics, particularly Aaron Director, Ronald Coase, and Bruno Leoni.

The Chrysler and General Motors Bankruptcies

By Todd Zywicki

ABSTRACT:

The bankruptcy proceedings of Chrysler and General Motors were filed at the height of the financial crisis that rocked the global economy in the late-2000s. Although both companies originally received federal financial bailouts to try to avert bankruptcy, within months they were forced to file bankruptcy in an unprecedented bankruptcy-bailout process. The bankruptcy proceedings that subsequently transpired were controversial at the time and remain controversial to this day. This chapter in the Research Handbook in Corporate Bankruptcy Law (Forthcoming 2019) reviews the controversial cases and their uncertain legacy for the future of chapter 11 practice and corporate bankruptcy law.

Austrian Law and Economics and Efficiency in the Common Law

By Todd Zywicki, Edward Stringham

ABSTRACT:

Is the common law efficient? Neoclassical economists debate whether our inherited systems of judge-made law maximize wealth whereas Austrian economists typically adopt much different standards. The article reviews neoclassical and Austrian arguments about efficiency in the common law. After presenting Hayek’s views on the common law as a spontaneous order it concludes that the common law can indeed be viewed as a spontaneous order only when judges provide their services in a free and competitive system.

United States v. AT&T/Time Warner: A Triumph of Economic Analysis

By Joshua Wright, Jan Rybnicek

ABSTRACT:

The DOJ’s lawsuit to block the AT&T/Time Warner transaction marks the first time in 40 years that a court has heard a fully-litigated challenge to a vertical merger. Following a six-week trial, Judge Leon issued a comprehensive 172-page decision holding that the DOJ failed to show that the transaction would be anticompetitive. Although the decision does not break new legal ground, it does represent a welcome reminder of the primacy of economic analysis over hot documents, testimony of rivals, and politics. As populist cries for increased government intervention to combat perceived widespread industry consolidation continue to mount – calls that often are proudly indifferent to the economic impact of the transaction – Judge Leon’s decision is a victory for evidence-based antitrust law. As the government now appeals the decision, we believe the D.C. Circuit should affirm the holding in the case and more broadly Judge Leon’s economic evidence-based approach.

Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust

By Joshua Wright, Elyse Dorsey, Jan Rybnicek, Jonathan Klick

ABSTRACT:

For antitrust practitioners, scholars, and economists - those who work with antitrust in agencies, courts, or law firms - the development of the antitrust laws over the past half century has been a remarkable and positive development for the American economy and consumers. Most fundamentally, there is agreement that the goal of protecting consumer welfare is and should be the lodestar of modern antitrust enforcement. This has not always been the case. For much of its history, antitrust has done more harm than good. Prior to the modern “consumer-welfare” era, antitrust laws employed confused doctrines that pursued populist notions and often led to contradictory results that purported to advance a variety of social and political goals at the expense of American consumers. From the perspective of antitrust professionals and academics, there is widespread agreement that the intellectual revolution that led to the consumer welfare standard saved an incoherent doctrine from its own internal inconsistencies and saved consumers from its perverse and paradoxical results. Outside of mainstream antitrust practice and the academy, things look quite different. There appears to be another revolution brewing – the Hipster Antitrust Movement. It calls for the return of populism in antitrust enforcement. It declares the modern antitrust era - and the consumer welfare standard specifically - a failure. Hipster Antitrust lays at antitrust law’s feet a myriad of perceived socio-political problems, including, but not limited to, rising inequality, employee wage concerns, and the concentration of political power. The drumbeat for this revolution is strong and growing, with a broad range of enthusiastic participants and devotees, including public intellectuals and think tankers, as well as prominent members of Congress. At its core, the Hipster Antitrust movement calls for a total rejection of the commitment to economic methodology and evidence-based policy that lies at the heart of modern antitrust enforcement. In this Article, we evaluate the Hipster Antitrust claims. Some of those claims are made on modern antitrust’s own terms: that a return to “big-is-bad” antitrust enforcement based upon firm size or banning vertical mergers would make consumers better off. Others are “outside” the domain of consumer welfare-based antitrust: that lax antitrust has caused an increase in economic inequality. We demonstrate that, when evaluated as evidence-based policy proposals, the Hipster Antitrust agenda fails to substantiate its claims and promises. We discuss the dangers to consumers and society of adopting the populist antitrust approach, including enhancing corporate welfare at the expense of consumers, and encouraging rent-seeking by giving agencies and judges unbridled discretion.

A Transaction Cost Assessment of the SEC's Regulation Best Interest

By D. Bruce Johnsen

ABSTRACT:

The U.S. Securities and Exchange Commission (SEC) is required to provide an economic analysis of proposed regulations and to show that they plausibly meet a cost-benefit test. It recently proposed Regulation Best Interest (RBI) to replace the longstanding suitability rule for securities brokers when providing their retail clients with incidental investment advice. Despite a dearth of empirical support, the proposing release concludes that a best interest standard would better mitigate the conflicts of interest brokers face between providing their clients with impartial advice and maximizing their own compensation. The empirical vacuum is a result of the SEC’s failure to ask the right economic question, which Nobel laureate Ronald Coase raised over half a century ago: why does the rule of liability matter? What transaction costs prevent the parties—who in this setting negotiate face-to-face—from correcting any market failure through private ordering? This essay provides a transaction cost assessment of RBI and concludes that a far more thorough economic analysis is necessary to justify imposing a best interest standard on retail brokers.

Regulatory Fracture Plugging: Managing Risks to Water from Shale Development

By Caroline Cecot

ABSTRACT:

Debates about the desirability of widespread shale development have highlighted outstanding uncertainty about its health, safety, and environmental impacts—most prominently, its water-contamination risks—and the ability of current institutions to deal with these impacts. States, the primary regulators of oil and gas extraction, face pressure from the energy industry, local communities, and, in some cases, the federal government to strike the right balance between energy production and the health and safety of individuals and the environment—an elusive balance given the ongoing risk uncertainty. This dynamic is not especially unique to fracking, or even oil and gas extraction; instead, this dynamic, characterized by tradeoffs between environmental protection and economic development under risk uncertainty, is a common theme of environmental risk regulation. Regulators at every level of government weigh and evaluate potential interventions against this background. This Article contributes to a symposium held at Texas A&M School of Law that explores the advantages and disadvantages of various government interventions in the environmental context in an effort to identify ideal risk-management tools under various circumstances. It argues that the most important considerations for identifying risk-management tools in the environmental context are risks, incentives, and cost-benefit analysis. These cornerstone principles provide a useful framework for environmental policy in general, especially in situations that involve heterogeneous and uncertain risks. By paying attention to risk, incentives, and cost-benefit analysis, government regulators are more likely to promote optimal levels of environmental quality and avoid unintended, or even perverse, consequences. To demonstrate the usefulness of these concepts concretely, this Article applies them to the fracking context, focusing on the most prominent risks from widespread shale development, risks to water from shale gas extraction. It identifies risk-management gaps in tort litigation, insurance markets, and regulation schemes and suggests potential solutions.

The Federal Trade Commission's Hearings on Competition and Consumer Protection in the 21st Century, Vertical Mergers, 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 by the Global Antitrust Institute (GAI) at Scalia Law School at George Mason University to the U.S. Federal Trade Commission regarding its Hearings on Competition and Consumer Protection in the 21st Century. The GAI Competition Advocacy Program discusses vertical mergers and provides a wide range of recommendations to facilitate adoption of economically sound competition policy.

The Federal Trade Commission's Hearings on Competition and Consumer Protection in the 21st Century, the Consumer Welfare Standard in Antitrust Law, 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 by the Global Antitrust Institute (GAI) at Scalia Law School at George Mason University to the U.S. Federal Trade Commission regarding its hearings on Competition and Consumer Protection in the 21st Century, The Consumer Welfare Standard in Antitrust Law. The GAI Competition Advocacy Program provides a wide range of recommendations to facilitate adoption of economically sound competition policy.

The U.S. Federal Trade Commission Hearings on Competition and Consumer Protection in the 21st Century, Hearing on Concentration and Competitiveness in the U.S. Economy, Comment of the Global Antitrust Institute, Antonin Scalia Law School, GMU

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

ABSTRACT:

This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School at George Mason University to the U.S. Federal Trade Commission regarding its hearing on Concentration and Competitiveness in the U.S. Economy as part of the Hearings on Competition and Consumer Protection in the 21st Century. The GAI Competition Advocacy Program provides a wide range of recommendations to facilitate adoption of economically sound competition policy.

Understanding Google's Search Platform and the Implications for Antitrust Analyses

By John Yun

ABSTRACT:

Google Search and its algorithm have been subject to intense antitrust scrutiny from competition authorities both in the United States and around the world. Google’s introduction of Universal Search in 2007 integrated specialized search results within a narrow category (for example, shopping or local businesses) with its customary “blue links.” This integration led to objections that Google was engaging in “search bias,” and thus foreclosing specialized search rivals to the detriment of competition and consumers. In this paper, we describe the precise nature of the anticompetitive claims against Google and develop an economic framework to assess these claims.

We rely upon our economic framework to offer insights for competition authorities to consider for future cases involving platforms and allegations of foreclosure and exclusion.

Thurgood Marshall and (and Versus) John W. Davis

By Ross Davies

ABSTRACT:

In late 1963, West Publishing Company sent a form letter to federal judges, announcing the company’s annual distribution of snazzy appointment books – just a little courtesy to foster good relations between the law publisher and the producers of some of the most valuable publishable law. But it probably meant a bit more to one recipient, Judge Thurgood Marshall of the U.S. Court of Appeals for the Second Circuit. He must have smiled – perhaps nostalgically, perhaps grimly, perhaps both – when he read it. Here’s why.

A Grand Game Introduction, or the Rise and Demise of 'Sherlock Holmes'

By Ross Davies

ABSTRACT:

On April 12, 1904, “Sherlock Holmes” became a registered trademark of Parker Brothers, one of the biggest makers of card games, board games, and the like in the United States. Of course, that did not mean that Parker Brothers controlled the great man’s name outright. Rather, it meant the U.S. Patent Office had granted the company the right to use the name in the category of “games played with cards.” According to the official report of the registration, Parker Brothers had been using the words “Sherlock Holmes” in connection with “games played with cards” since February 15, 1904. To the best of my knowledge, that settles the incept date of the first Sherlockian game. (A few days later, Parker Brothers also completed its copyright registration of “Rules for the playing the game of Sherlock Holmes.”) “Sherlock Holmes” suffered a quick fade, at least when compared to some of its contemporaries in Parker Brothers product line. (“Rook” for example, was introduced in 1906 and is still popular today, while “Ping-Pong,” introduced in 1902, has become a generic term for table tennis.) Why was “Sherlock Holmes” so short-lived and then so thoroughly forgotten? Here are two possibilities to consider. First, Parker Brothers may have run into intellectual property problems, despite its trademark and copyright registrations. Second, maybe “Sherlock Holmes” turned out to be a not-very-grand game. Indeed, its defects may well have been obvious to its creators from day one, or close to it. Parker Brothers completed its copyright registration of “Rules for the playing the game of Sherlock Holmes” on April 18, 1904, and a mere five months later the company was back, copyrighting “improved” rules for the game on September 23. This despite the fact that George Parker, the chief game developer for the company, “still played every Parker game over and over again himself, with employees, family and friends to make certain that every wrinkle was ironed out, that confusion was eliminated and that “actual playing qualities” were excellent. Even though he was the very busy head of a good-sized business, he personally wrote the rules for every game the company produced, working over them evening after evening to clarify and simplify them.”

Use and the Function of Property

By Eric Claeys

ABSTRACT:

Many scholars assume that property concepts contribute very little to the way in which people think about rights in resources. Yet these assumed views do not accord with what we know about clocks, keys, fiat currency, and other artifacts. Artifacts are intention-dependent objects. The distinct ways in which different artifacts satisfy those intentions—their artifact functions—give artifacts more structure and coherence than is commonly believed. 

Those lessons come from scholarship on the philosophy of artifacts, and this Article uses them to study property concepts. This Article studies three concepts of property prominent in Anglo-American property law. All three concepts perform a common artifact function, facilitating the beneficial use of ownable resources. In the concepts and this function, “use” refers to an interest people have in deploying resources for rational well-being and consistent with others’ correlative use-interests. This Article supplies accounts of the intensions for the three concepts introduced. The Article also shows that these concepts extend coherently to property doctrines that are believed to confound encompassing concepts of property—easements, licenses, covenants running with the land, and the interests that beneficiaries hold in wealth-management trusts fall within the extensions for the appropriate concepts.

Antitrust and Intellectual Property in the United States and the European Union

By Douglas Ginsburg, Damien Geradin, Keith Klovers

ABSTRACT:

The United States and the European Union each have a strong legal regime designed both to protect competition and to foster innovation. Because the competition and intellectual property (IP) laws are occasionally in some tension, each jurisdiction has developed detailed legal rules that govern when and how competition law restrictions apply to IP rights. Recognizing that innovation benefits consumers, each regime presumes a patentee may lawfully use, license, and sell its IP rights freely unless that activity would impair competition on the merits by (i) coordinating with other entities to restrain trade unreasonably; (ii) unilaterally acquiring (in the U.S.) or exercising (in the EU) market power; or (iii) transferring IP through an anticompetitive merger or acquisition. This chapter summarizes and briefly compares the applicable law in the U.S. and the EU, and then identifies the most prominent differences between the two regimes. Note that, because most of the applications discussed herein concern patents, the term patents is used throughout to refer to all kinds of IP unless the difference matters.

Whistle-Blowing and the Incentive to Hire

By Jef De Mot, Murat Mungan

ABSTRACT:

In this article we focus on a previously neglected cost of whistle-blower awards: employers may base their hiring decisions, on the margin, not on the productivity of an employee but rather on the probability that the employee will become a whistle-blower. We develop a three-stage model to examine how productivity losses due to distortions at the hiring stage influence optimal whistle-blower rewards. We characterize optimal rewards for whistle-blowing, and show that the size of these rewards depend, inter alia, on the relative values of workers' productivity, the punishment for crime, employees' whistle-blowing costs, the degree of non-transferability of the employee's costs, and the social cost of crime.

Algorithmic Risk Assessments and the Double-Edged Sword of Youth

By Christopher Slobogin, Megan Stevenson

ABSTRACT:

At sentencing, youth can be considered both a mitigating circumstance because of its association with diminished culpability and an aggravating circumstance because of its association with crime-risk. In theory, judges and parole boards can recognize this double-edged sword phenomenon and balance the mitigating and aggravating effects of youth. But when sentencing authorities rely on algorithmic risk assessments, a practice that is becoming increasingly common, this balancing process may never take place. Algorithmic risk assessments often place heavy weights on age in a manner that is not fully transparent – or, in the case of proprietary “black-box” algorithms, not transparent at all. For instance, our analysis of one of the leading black-box tools, the COMPAS Violent Recidivism Risk Score, shows that roughly 60% of the risk score it produces is attributable to age. We argue that this type of fact must be disclosed to sentencing authorities in an easily-interpretable manner so that they understand the role an offender’s age plays in the risk calculation. Failing to reveal that a stigmatic label such as “high risk of violent crime” is due primarily to a defendant’s young age could lead to improper condemnation of a youthful offender, especially given the close association between risk labels and perceptions of character and moral blameworthiness

Nationwide Injunctions’ Governance Problems: Forum-Shopping, Politicizing Courts, and Eroding Constitutional Structure

By Ronald Cass

ABSTRACT:

Nationwide injunctions — injunctions extending beyond the immediate parties to litigation and beyond the geographic bounds of the issuing court’s mandate — increasingly are used by lower federal courts to stop, alter, or condition the operation of national government policies. This typically occurs at the request of politically-invested officials and groups and targets politically consequential initiatives. While a small number of suits present matters and settings for which nationwide injunctive relief is appropriate, federal district court judges have issued nationwide injunctions in situations far beyond that set. Expanded use of nationwide injunctions — especially broad injunctions against the United States — undermines rule-of-law values, threatens the operation of courts as impartial arbiters of disputes over legal rights, erodes the Constitution’s careful separation of functions among the branches of government, and is at odds with basic aspects of the federal judiciary’s design, including its geographic divisions. Understanding the limited place for nationwide injunctions — where they are appropriate and why, along with what distinguishes the cases where they are not appropriate or even constitutionally permissible — is critical to regulating a practice that portends significant damage to law-making and law-implementing structures and to the carefully cabined role of the federal courts.

Policing For Profit: The Political Economy of Law Enforcement

By Gregory DeAngelo, Anna Harvey, Murat Mungan

ABSTRACT:

In recent years numerous observers have raised concerns about "policing for profi t," or the deployment of law enforcement resources to raise funds for cash-strapped jurisdictions. However, identifying the causal effect of fiscal incentives on law enforcement behavior has remained elusive. Researchers have given little theoretical attention to the potentially confounding responses of potential offenders to increased revenue-seeking by law enforcers. Moreover, empirical designs have not effectively addressed the endogeneity of the spatial and temporal variation in fiscal incentives to factors that may directly affect law enforcement or offender behavior. We model the effects of fiscal incentives on traffic safety enforcement, finding that rules allocating a greater share of fine revenues to deploying jurisdictions may induce increased enforcement effort by patrol officers, and consequent reductions in unsafe driving behavior, with only indeterminate effects on the frequency of citations. We test this model using daily, monthly, and fully aggregated citation and accident data from Saskatchewan, Canada between 1990 and 2017, for towns policed under the province's contract with the Royal Canadian Mounted Police. We find that fiscal rules reducing the share of fine revenue captured by the province in jurisdictions above a sharply defined population threshold increase the frequency and severity of accidents in jurisdictions just above this threshold, but have no or even weakly positive effects on the frequency of citations in these jurisdictions; these results are robust to the use of both data-driven regression discontinuity and local randomization inference strategies. We observe no discontinuities in the accident data at this threshold during the period prior to the introduction of these fiscal rules, in the areas "near" these jurisdictions, within which the province receives 100% of fine revenue throughout our period of interest, or at any of 20 placebo thresholds constructed on either side of the actual population threshold.