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 Catalog to locate a working paper.

Recent Working Papers:


Rewards versus Imprisonment: The Impact of Choice

7-2021 | Murat Mungan

ABSTRACT:

Imprisonment and monetary rewards for non-convictions can similarly incentivize potential offenders to refrain from committing crime. Although imprisonment is expensive, it may still enjoy a cost advantage over rewards. This is because only detected criminals are imprisoned, whereas rewards need to be provided to the remaining, much larger, population. In this article I demonstrate that the possible cost disadvantages of rewards are mitigated when people are offered a choice between an enforcement scheme involving no rewards and another involving rewards coupled with longer imprisonment sentences. Specifically, by using rewards in this manner, one can jointly reduce crime, time served per convict, and the tax burden of the criminal justice system, under the same conditions as one could by introducing rewards without choice in an environment where there is perfect detection. Moreover, monetary rewards provide incentives through wealth transfers, but imprisonment operates by destroying wealth. This leads choice based reward regimes to be optimal unless the imprisonment elasticity of deterrence is higher than is empirically observed.

Deregulation and the Lawyers' Cartel

6-2021 | Nuno Garoupa, Milan Markovic

ABSTRACT:

At one time, the legal profession largely regulated itself. However, based on the economic notion that increased competition would benefit consumers, jurisdictions have deregulated their legal markets by easing rules relating to attorney advertising, fees, and, most recently, nonlawyer ownership of law firms. Yet, despite reformers’ high expectations, legal markets today resemble those of previous decades, and most legal services continue to be delivered by traditional law firms. How to account for this seeming inertia?

We argue that the competition paradigm is theoretically flawed because it fails to fully account for market failures relating to asymmetric information, imperfect information, and negative externalities. In addition, the regulatory costs imposed on sophisticated consumers such as corporate purchasers of legal services differ radically from those imposed on ordinary consumers who use legal services infrequently. Merely increasing the number and types of legal services providers cannot make legal markets more efficient. We illustrate our theoretical account with evidence from the United Kingdom, Europe, and Asia.

For legal markets to better serve the public, regulators must tailor solutions by segment. Regulators should seek to minimize negative externalities associated with the delivery of legal services to the corporate segment and confront information asymmetries that lead to the maldistribution of legal services in the consumer segment. Deregulation alone is insufficient and may in fact exacerbate existing market failures.

A Theory of Unenforced Laws

6-2021 | Thomas Miceli, Murat Mungan

ABSTRACT:

We consider a government’s interrelated decisions of enacting laws prohibiting harmful behavior and choosing how aggressively to enforce those laws. There are three broad policies available to the government in this regard: not prohibiting the act at all, enacting a law and enforcing it, and enacting a law and not enforcing it. When enactment is costly and a fraction of the population reflexively complies with the law once its enactment has been announced (reflecting an expressive function of law), all three policies may be optimal, depending on the severity of the harm from the act and the fraction of reflexive compliers.

Antitrust & Privacy: It's Complicated

6-2021 | James Cooper, John Yun

ABSTRACT:

Privacy and antitrust are on a collision course. Increasingly, privacy practices of large digital platforms are coming under antitrust scrutiny. It has become almost an article of faith that zero-price platforms exercise market power by offering lower levels of privacy. Yet, a rigorous examination of the assumptions underlying this data-price analogy is seriously lacking. Even more important, there is almost no empirical work that has been done in this area. This Article contributes to the debate by providing empirical evidence on the relationship between market power and privacy. First, we examine the privacy grade for each app in the Android App marketplace (covering the 2014-15 period)—as well as metrics that measure the number of users and app quality. These data suggest no relationship between privacy grades and measures of market concentration, that is, the Herfindahl-Hirschman Index (HHI) and market shares based on Google Play store categories. Second, we collected website traffic data from SimilarWeb and matched it to DuckDuckGo’s privacy ratings for sites in thirty-seven website categories. Again, the data suggest a lack of a reliable relationship between privacy ratings and market concentration. The theoretical analysis and empirical results cast doubt on the notion that firms exercise market power by reducing privacy levels.

The Normality of Knick: A Response to Sterk and Pollack

6-2021 | Ilya Somin

ABSTRACT:

The Supreme Court’s decision in Knick v. Township of Scott (2019), has been criticized for supposedly wreaking havoc on the normal system for adjudicating takings claims, and for seriously violating norms of stare decisis. Stewart Sterk and Michael Pollack’s insightful recent article is a valuable contribution to this type of critique of Knick. They expand on Justice Elena Kagan’s claim in her Knick dissent that the ruling “sends a flood of complex state-law issues to federal courts. It makes federal courts a principal player in local and state land-use disputes.” Sterk and Pollack argue that a wide range of takings-related issues will now find their way to federal court, thereby creating a variety of problems. They also endorse claims that Knick improperly overruled precedent. But ultimately, their arguments serve to underscore Knick’s normality, and the aberrational nature of Williamson County Regional Planning Commission v. Hamilton Bank (1985), the precedent Knick overturned.

If Sterk and Pollack’s critique of Knick is sound, it would justify barring access to federal court for many other constitutional claims against state and local governments. These, too, often encompass a wide range of government policies. If federal courts are to do the job of enforcing constitutional rights against violations by state and local governments, they must be prepared to do so in any situations where those violations might arise. Property rights claims under the Takings Clause of the Fifth Amendment are no exception to this vital rule.

Migration and Self-Determination

6-2021 | Ilya Somin

ABSTRACT:

Free international migration has enormous benefits. But many argue that governments can legitimately restrict migration in order to protect the supposed “self-determination” of natives. Some claims of this type are based on group rights theories, which hold that members of a particular racial, ethnic, or cultural group are the “true” owners of a particular territory. Others are based on notions of individual freedom of association, which analogize the rights of national governments to those of private property owners or members of a private club. This article criticizes both collective and individual rights theories that purport to justify a power to exclude migrants. It also critiques claims that the governments of migrants’ countries of origin can curtail emigration by forcing them to stay. I address these issues in much greater detail in my book Free to Move: Foot Voting, Migration, and Political Freedom, on which this article is in part based.

Applying Critical Loss for Market Definition in Merger Analysis: Do Court Decisions Offer Insight?

6-2021 | Malcolm Coate, Shawn Ulrick, John Yun

ABSTRACT:

Critical loss analysis is an empirical tool used to define relevant markets in antitrust law. The existence of two different critical loss methodologies, however, complicates its application. Harris and Simons introduced the first approach, which focused on evaluating the market-level effect of a small, but significant and non-transitory increase in price (“SSNIP”). Later, O’Brien and Wickelgren, along with Katz and Shapiro, introduced a firm-level approach to critical loss to derive a test that applies mathematical models of demand systems, foundationally based on a single-firm SSNIP, to proxy for a market-level price increase. A critical loss controversy evolved as the two tests can, but do not necessarily, generate different relevant markets. This paper examines the choice between the two methodologies—guiding practitioners and courts as to when each approach makes the most sense.

Comment to the New York Senate Committee on Consumer Protection in Connection with Its Pending Consideration of the Twenty-First Century Antitrust Act (S.933)

6-2021 | Tad Lipsky, Douglas Ginsburg, Joshua Wright, Bruce Kobayashi, John Yun

ABSTRACT:

Modern antitrust laws (including the federal antitrust laws and the antitrust laws of other states, as well as the cognate laws of numerous other jurisdictions around the world) generally include provisions that limit unilateral business conduct that may create, protect, or extend monopoly power by unreasonably exclusionary practices. In contrast, New York’s main antitrust law, the Donnelley Act of 1899, contains no such provision. The GAI recognizes that adding such a provision to the Donnelley Act is an intended objective of S.933.

There are several serious questions, however, raised by key aspects of S.933. Specifically, while S.933 §3 adopts a prohibition on monopolization similar to that found in Section 2 of the Sherman Act, 15 USC § 2, it also includes a prohibition on “abuse of dominance.” S.933 provides limited information regarding the definitions of “dominance” and “abuse.” Rather, S.933 delegates very broad discretion to define these terms to the New York Attorney General (subject to a specific form of legislative veto). This approach presents a number of serious risks and uncertainties. For reasons explained more fully below, the Committee should consider withholding any favorable recommendation on S.933 so long as it contains the abuse-of-dominance provision.

The Impact of Legal Team Size on Third Party Perceptions

5-2021 | Gilles Grolleau, Murat Mungan, Naoufel Mzoughi

ABSTRACT:

We examine whether the number of lawyers representing a defendant impacts third parties’ moral judgments and recommended punishments for similar offenses. Specifically, we use an experimental survey with a between-subjects design to examine third parties’ perceptions regarding the seriousness of fraud and tax evasion offenses and the punishments they deem appropriate for these offenses. Our benchmark analysis suggests that subjects’ perceived severity and seriousness of both offenses are significantly increasing in the number of lawyers representing the defendant. These results could be driven both by a direct impact of legal representation on third parties’ perceptions and preferences for punishment, or by third parties updating their beliefs regarding the seriousness of these offenses based on the defendant’s legal expenditures. To investigate whether the latter mechanism may be driving results, we conduct a second experimental survey wherein subjects are informed that the number of lawyers has been randomly determined. This causes the significant relationship between the perceived seriousness of the offense and the number of lawyers to vanish. However, for fraud offenses, increasing the number of lawyers from one to more lawyers increases third parties’ recommended sanctions, which is consistent with a psychological phenomenon of ‘luck envy’.

The Modern Common Law of Crime

5-2021 | Robert Leider

ABSTRACT:

Two visions of American criminal law have emerged. The first vision is that criminal law is statutory and posits that legislatures, not courts, draft substantive criminal law. The second vision, like the first, begins with legislative supremacy, but it ends with democratic dysfunction. On this view, while contemporary American criminal law is statutory in theory, in practice, American legislatures badly draft and maintain criminal codes. This effectively delegates the “real” drafting of criminal law to prosecutors, who form the law through their charging decisions.

This Article offers a third vision: that modern American criminal law is primarily “conventional” in the British Commonwealth sense of that term. That is, much of our criminal law is defined by unwritten common-law-like norms that are widely acknowledged and generally respected, and yet are not recognized as formal law enforceable in courts. This Article makes three contributions. First, it argues that criminal law conventions exist. Second, it explains how non-legal checks on prosecutorial power bring about criminal law conventions. Third, it provides an account for how legislatures and courts should respond to a criminal law heavily comprised of norms that rely primarily on non-legal sanctions for their enforcement.

Proxy Crimes

4-2021 | Piotr Bystranowski, Murat Mungan

ABSTRACT:

‘Proxy crimes’ is a phrase loosely used to refer to conduct which is punished only as a means to target another, harmful, conduct. Many criminal law scholars find the criminalization of this type of conduct unjustifiable from a retributivist perspective, whereas others note that proxy criminalization can contribute to mass incarceration and overcriminalization. Given the importance of these problems, a systematic analysis of proxy crimes, currently absent in the criminal law literature, is needed.

In this article, we provide a comprehensive analysis of proxy crimes by (i) surveying the existing literature and identifying gaps in prior analyses, (ii) proposing a simple yet useful definition of proxy crimes, (iii) identifying three specific categories of proxy crimes, and (iv) conducting an economic analysis of proxy criminalization which allows us to identify conditions under which proxy criminalization is socially (un)desirable. Finally, in light of our analysis, we present and discuss a specific affirmative defense that can be made available to defendants charged with a proxy crime. We explain how legislators can better balance the social benefits and detriments from proxy criminalization through these types of affirmative defenses.

The Investigation of Competition in Digital Markets: Looking in the Wrong Forest?

3-2021 | John Yun

ABSTRACT:

The majority staff of the House Judiciary Committee recently released its Report and Recommendations (“MSRR”) following an investigation of competition in digital markets. It claims that the leading digital technology firms (Alphabet, Amazon, Apple, Facebook) have acquired and maintained monopoly power by exclusionary conduct, and blames this on alleged narrow vision and weak enforcement efforts of the U.S. antitrust agencies and courts. The MSRR proposes a near-total revision of U.S. antitrust, restoring the enforcement approaches of fifty years ago when per se rules and structural presumptions were predominant. Considering that the U.S. is the unquestioned leader in digital technology, and that the EU has far fewer leading digital technology firms but does have antitrust rules very much like those proposed by the MSRR, it seems that both the MSRR’s view of the evidence and the logic of its proposals are questionable.

Constitutional Liquidation, Surety Laws, and the Right to Bear Arms

3-2021 | Robert Leider

ABSTRACT:

In recent years, some scholars have claimed that early American law did not recognize a general right to bear arms in public. Although most early state court decisions recognized such a right, these scholars contend that these decisions were peculiar to the antebellum South, which had a uniquely permissive weapon carrying culture. Outside the South, they argue, many states heavily restricted the public carry of weapons through surety laws. These surety laws required that, on complaint of a plaintiff who had “reasonable cause to fear an injury, or breach of the peace,” a person would have to post a bond to keep the peace if he went armed “without reasonable cause to fear an assault or other injury.” These scholars argue that the surety laws (which they call the “Massachusetts Model”) were descendants of the common law crime of going armed to the terror of the people, which, they claim, also generally prohibited private citizens from going armed. Based on this historical practice, they argue that the Second Amendment was not understood to encompass a general right to publicly carry weapons.

This book chapter challenges that historical narrative, and more importantly, disputes the relevance of the Massachusetts Model for constitutional interpretation. First, this book chapter argues that the relevance of nineteenth-century laws and judicial decisions does not primarily come from their ability to elucidate the original public meaning of the right to bear arms in 1791. Instead, their relevance lies in the idea of “constitutional liquidation,” that postenactment practice can settle the meaning of legal text.

Next, this chapter argues that the right to bear arms did not liquidate in favor of the constitutionality of the Massachusetts Model. No evidence has emerged that the passage of the surety laws was the product of thoughtful constitutional interpretation. And no course of practice emerged. As applied to the carriage of weapons for lawful purposes, the surety laws went largely unenforced. Likewise, there is almost no known record of American courts enforcing the common law crime of going armed to the terror of the people against individuals carrying weapons for lawful purposes.

Finally, the lack of enforcement meant that the surety laws failed to settle the meaning of the right to bear arms. Quite the contrary, all Massachusetts Model jurisdictions (including Massachusetts) adopted statutory criminal law governing the carriage of weapons in public. None of these states adopted a general ban on public carry. Instead, most states restricted only the carrying of concealed weapons, while a few others (including Massachusetts) had more lenient laws. Ultimately, the “Massachusetts Model” did not serve as a model for restricting public carry anywhere, even in Massachusetts.

The Legality of Legacy Business Practices in Antitrust

3-2021 | John Yun

ABSTRACT:

There is void in the literature at the intersection of antitrust law and legacy business practices. This issue has come to forefront with Epic Games’ antitrust suit against Apple for its App Store policies, which have been in place ever since the online marketplace opened in 2008. The same issues are at the center of the current Apple v. Pepper litigation and in regulatory proposals to alter Apple’s business practices both at the state and federal levels. Legacy conduct has also played a role in the Supreme Court’s controversial Ohio v. American Express decision and the Ninth Circuit’s FTC v. Qualcomm decision.

This raises a question as to how antitrust should treat long-standing business practices—practices that this Article labels “legacy conduct”—that initially were benign or even procompetitive, but which come under heavy scrutiny once the firm employing it obtains considerable market power. The fundamental question raised here is whether the fact that a product has become highly successful turns a previously legitimate business practice into one that antitrust should treat as objectionable.

This Article contends that three fundamental considerations should govern the proper assessment of cases involving legacy conduct under a rule of reason analysis. Further, this Article advances a policy recommendation that legacy conduct instituted long before a firm achieves substantial market power (particularly at the time of entry) and is common across competitors who do not themselves possess substantial market power, should be considered probative evidence that the practice is procompetitive. When these conditions are satisfied, defendants should be afforded a substantially reduced burden in proving the restraint is procompetitive under a rule of reason analysis commensurate with the strength of the legacy evidence.

Adam Smith and Jean-Jacques Rousseau on the Origin of Languages

3-2021 | Nelson Lund

ABSTRACT:

One can hardly read Rousseau and Adam Smith without being struck by similarities in some of their central interests, as well as by seemingly profound differences in several of their most important conclusions. The differences are especially prominent with respect to the costs and benefits of commercial societies. One of Smith’s earliest publications included disparaging comments about Rousseau’s treatment of sociability and civilization in the Discourse on Inequality. That fact makes it tempting to see Smith’s later works as a response to Rousseau’s critique of civilized life, especially in its modern commercial form. The evidence, however, is entirely speculative because Smith never again commented directly on Rousseau’s treatment of this topic. Whether Smith disregarded Rousseau or sought to correct or refute him, their books do invite us to regard them as rival teachings. The most worthwhile questions about those teachings concern how true and useful they are, and we can profitably compare them without determining the extent of Rousseau’s influence on Smith.

One topic to which both philosophers gave serious attention is the origin of human languages. As it happens, this is also the only topic on which Smith published an explicit substantive criticism of Rousseau. There is no evidence that Rousseau was aware of this criticism, which appeared in Smith’s “Considerations Concerning the First Formation of Languages.” For his part, Smith could not have been influenced by Rousseau’s Essay on the Origin of Languages, which first appeared twenty years after Smith published “Considerations.” At least on this matter, their thoughts matured independently.

There is, however, an important link. In the Discourse on Inequality, Rousseau expressly ties his discussion of the origin of languages to that of the Abbé de Condillac’s Essay on the Origin of Human Knowledge. This book, which was published a decade before Rousseau’s Discourse, presents a hypothetical history of the development of language that also has a lot in common with Smith’s “Considerations.” Smith obviously knew Rousseau’s Discourse well, and he owned Condillac’s Human Knowledge. Smith likely took careful account of Condillac’s speculations, as Rousseau certainly did. Yet each of these three thinkers put similarly conjectural histories to markedly different uses. Without prejudging the merits of the different roads that Smith and Rousseau took, I suggest that a close examination of what they wrote on this topic may help to prepare for a serious comparative study of their greatest works, Emile and The Theory of Moral Sentiments.

This article analyzes the relevant parts of six texts: Condillac’s Human Knowledge; Rousseau’s Discourse on Inequality; Smith’s early letter to the Edinburgh Review; Smith’s “Considerations”; Rousseau’s Essay on the Origin of Languages; and Smith’s essay on the imitative arts. This analysis will show that Rousseau was more daring and philosophically ambitious than Smith, who repeatedly declined, possibly for prudential reasons, to come to grips with Rousseau’s arguments.

The Perils of Administrative Constitutionalism: An American Perspective

3-2021 | David Bernstein

ABSTRACT:

This paper argues that in the United States, at all levels of government, agencies charged with enforcing legislation that prohibits invidious discrimination have interpreted their mandates in ways that threaten Americans’ First Amendment and due process rights. This is not surprising, given that agencies’ current cultures and incentive structures incline them strongly toward enhancing enforcement and ignoring countervailing considerations. Legal scholars should heed these examples and think twice before wholeheartedly embracing administrative constitutionalism.

Sue The Fed: The Case for Privately Enforceable Statutory Constraints on Federal Reserve Emergency Lending

3-2021 | J.W. Verret

ABSTRACT:

The federal government’s economic response to the COVID-19 epidemic has principally been one in which the Federal Reserve has set up extraordinary lending facilities in partnership with the Treasury Department. These facilities were modeled on multi-trillion-dollar lending facilities set up by the Federal Reserve in 2008 in response to the prior economic crisis. These Federal Reserve lending facilities are extraordinary in size but also extraordinary because they involve lending to firms that are not banks. Federal Reserve lending over the first hundred years of its history was almost exclusively limited to banks. Congress put in place statutory limits on this extraordinary lending authority in the Dodd-Frank Act of 2010 to limit the Federal Reserve’s discretion and minimize the risk that generous lending by the Federal Reserve would encourage excessive risk taking. Those limits prohibit the Fed from supporting insolvent firms, from propping up individual firms like it did with AIG in 2008, includes a number of other prescriptive measures to ensure the Federal Reserve takes reasonable risk management practices even in extraordinary times. This paper argues that those limits have not proven enforceable nor constraining on the Fed’s discretion, and this paper instead argues that a private right of action to enforce them would better fulfill Congress’ objective in the Dodd-Frank Act to limit Federal Reserve discretion in lending to non-banks.

Isn’t Infringement Ever Apparent?: Toward a Balanced Reading of §512 of the Digital Millennium Copyright Act

3-2021 | Christopher Newman

ABSTRACT:

This Article argues for a moderate but significant recalibration of the dominant interpretation of §512 of the DMCA. While ISPs are correct that the existing language of §512 does not give copyright owners a right to the “take down and stay down” regime they would prefer, it does ask more of them than is presently being required. Receipt of a takedown notice does provide an ISP with information that is supposed to be relevant to its awareness of other apparent infringement beyond that specifically identified in the notice. Moreover, the standards for what facts and circumstances give rise to knowledge of “apparent” infringement have been construed in a manner more stringent than those commonly applied even to criminal defendants or persons facing civil forfeiture. Finally, the doctrine of willful blindness means that where circumstances indicate an objectively high likelihood that certain conduct is illegal, one has a duty to avail oneself of obvious opportunities to disconfirm the inference. This duty is narrow, and does not require an ISP to engage in comprehensive monitoring, filtering, or affirmatively searching for instances of infringement for which no red flag has been raised. But indicia of infringement are not as radically elusive as has been made out, and §512(m) should not be read so as to equate efforts to disconfirm already-known instances of likely infringement with the affirmative seeking out of evidence of infringement that the statute says is not generally required.

Online Gatekeepers to Commerce and Culture

2-2021 | John Yun

ABSTRACT:

This Article provides a definition of “gatekeeper” in the context of digital markets. Within that discussion, it also asks whether the term is useful within antitrust. The Article also discusses potential concerns with gatekeepers that go beyond the standard litany of antitrust theories of harm—namely, information asymmetries and the representations made to users and businesses.

Punishment Menus

2-2021 | Mauricio Guim, Jonathan Klick, Murat Mungan

ABSTRACT:

Models of optimal criminal penalties generally impose a single punishment scheme. However, when there is unobservable heterogeneity in criminal propensities, welfare can be improved by offering punishment menus to potential criminals ex ante. In doing so, individuals with low criminal tendencies will choose low probabilities of detection and high penalties, while individuals with high criminal tendencies will choose a higher likelihood of detection and low penalties. We present a formal model showing that allowing individuals to choose from a punishment menu improves social welfare relative to a single punishment scheme by simultaneously reducing enforcement costs and enhancing deterrence. This model provides a rationale for some recently proposed citizen trust policies where people can enter their identities in a public registry and be subject to lower audit probabilities.


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