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:


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.

'Crimes Involving Moral Turpitude': The Constitutional and Persistent Immigration Law Doctrine

2-2021 | Craig Lerner

ABSTRACT:

For over a century, American immigration law has provided that an alien is deportable for “crimes involving moral turpitude” (CIMT). For nearly as long, observers have lamented the persistence of the phrase, complaining of its antiquarianism and imprecision. These criticisms have ripened in recent years into the argument that the phrase is so vague as to be unconstitutional. Defenders of the phrase are scarce among judges and nonexistent in the scholarly community.

This Article offers a defense of the CIMT provisions, built upon a more thorough understanding of their history. It demonstrates that Congress has acknowledged objections to the CIMT provisions but ultimately rejected these criticisms. The recent void-for-vagueness precedents cited to support the invalidation of the CIMT provisions are, for the most part, inapposite. Furthermore, the argument that the CIMT provisions are indeterminate, because there is no moral consensus in American contemporary society, is overstated. The Article concludes that the CIMT provisions reflect and highlight the differences between criminal law, which punishes discrete acts, and immigration law, which sets a minimum moral threshold for inclusion in a political community. The CIMT provisions invest executive officials with a measure of discretion, channeled by precedent, that allows them to achieve the goals of immigration law.

Freedom Through Foot Voting

1-2021 | Ilya Somin

ABSTRACT:

Freedom of movement is one of the great issues of our time. Expanding opportunities for both international and internal migration can greatly expand freedom and opportunity for hundreds of millions of people. The same goes for expanding freedom of choice in the private sector. “Voting with your feet” in any of these three ways is also, in crucial ways, superior to ballot box voting as a mechanism of political choice.

In this article I summarize the key advantages of foot voting over ballot box voting, describe how they apply to the three major types of foot voting, and outline answers to several types of standard objections to expanded migration rights. I address these issues in much greater detail in my book Free to Move: Foot Voting, Migration, and Political Freedom, on which this article draws.

The Easterbrook Theorem: An Application to Digital Markets

1-2021 | Joshua Wright, Murat Mungan

ABSTRACT:

The rise of large firms in the digital economy, including Amazon, Apple, Facebook, and Google, has rekindled the debate about monopolization law. There are proposals to make finding liability easier against alleged digital monopolists by relaxing substantive standards; to flip burdens of proof; and to overturn broad swaths of existing Supreme Court precedent, and even to condemn a law review article. Frank Easterbrook’s seminal 1984 article, The Limits of Antitrust, theorizes that Type I error costs are greater than Type II error costs in the antitrust context, a proposition that has been woven deeply into antitrust law by the Supreme Court. We consider the implications of this assumption on the standard of proof. We find that, taking variants of the Easterbrook assumption as given, the optimal standard of proof is stronger than the preponderance of the evidence standard. Our conclusion is robust to how one specifies the preponderance of the evidence standard and stands in stark contrast to contemporary proposals to reduce or eliminate the burden of proof facing antitrust plaintiffs in digital markets.

What Is an Independent Agency to Do? The Trump Administration’s Executive Order on Preventing Online Censorship and the Federal Trade Commission

1-2021 | Joshua Wright, Alexander Krzepicki

ABSTRACT:

President Trump’s Executive Order on Preventing Online Censorship is the latest in a series of proposals aimed at independent agencies, chiefly the Federal Communications Commission (FCC) and Federal Trade Commission (FTC), that seek to police how tech companies operate their social media platforms. These measures suffer from fatal defects. They run against the weight of First Amendment law and, our focus, beyond the limits of FTC Section 5 authority. We briefly summarize the scope of that authority before analyzing the Executive Order against the backdrop of the First Amendment and Section 5; concluding it would be illegal and imprudent to enforce. We conclude with suggestions for how the FTC should handle the position it finds itself in—facing an Executive Order to consider and study unlawful enforcement actions that not only undermine its independence, but also shift its attention away from its primary mission of consumer protection toward policing free speech.

Rethinking Foreclosure Analysis in Antitrust Law: From Standard Stations to Google

1-2021 | Joshua Wright, Alexander Krzepicki

ABSTRACT:

Foreclosure is a prominent concept in the antitrust laws and across economics. In the world of exclusionary conduct—foreclosure is the concept. But, despite its prominence in antitrust law and economics—including taking center stage in the Department of Justice’s complaint against Google—it is still a relatively unsettled area of the law. Foreclosure does not enjoy a commonly understood definition. There is no agreed upon method for measuring it. And there is no well-settled threshold at which antitrust concerns are triggered. In short, foreclosure analysis is a mess. As the last major law-defining case on exclusive dealing, Tampa Electric, nears its sixtieth birthday, the black letter law of naive foreclosure has an increasingly unbearable disconnect with modern economic antitrust methods. Courts are left with relatively little guidance as to how to understand the competitive effects of a world with and without the contracts being challenged—and the naïve approach is precisely of zero help on that question. Courts have adapted on their own to bridge the gap between the foreclosure analysis in the early cases—built from discredited foreclosure theory—and modern economics by adopting process-based foreclosure inquiries. This is the future of foreclosure, and the sooner we get there, the better.

Domestic Politics and Settlement in Investor-State Arbitration

1-2021 | Weijia Rao

ABSTRACT:

Settlement of high-stake investor-state disputes may expose respondent state governments to public criticism for allegedly capitulating to foreign investors and large corporations, which gives rise to domestic audience costs in the form of lower support for respondent state governments. The anticipated domestic audience costs may in turn constrain state settlement behavior. Using the time left until the next election in the respondent state as a proxy for the size of anticipated domestic audience costs, I find evidence that case settlement probability decreases as elections approach in respondent states. This pattern appears to hold for both democracies and nondemocracies that hold elections. The findings suggest that pressure from domestic constituents causes respondent state governments to change their settlement behavior by not settling cases they otherwise would have settled or delaying settlement timing. These findings reveal potential inefficiencies arising from domestic political influences on state settlement behavior.

Section 13(b) of the FTC Act at the Supreme Court: The Middle Ground

12-2020 | Howard Beales, Benjamin Mundel, Timothy Muris

ABSTRACT:

In 1981, while in the FTC's Bureau of Consumer Protection, two of the authors were instrumental in initiating the FTC's fraud program, relying on Section 13(b)'s authority to obtain a permanent injunction to seek equitable relief, including asset freezes and consumer redress. The fraud program has become a mainstay of the Commission's consumer protection program, and the agency now coordinates local, state, national, and international agencies to fight the many faces of fraud. When the Obama Administration claimed that 13(b) could be used beyond fraud cases, an authority that all previous Commissions believed they lacked, we warned that this overreach could threaten the heretofore uncontroversial fraud program. A case currently before the Supreme Court challenges the FTC's ability to obtain monetary relief under 13(b) in any circumstances, which we call the Never position. The Commission takes the opposite extreme, arguing that monetary relief is available in any case it chooses, which we term the Always position. We argue that both positions are wrong. Among other problems, the Never position would terminate the fraud program, ending 40 years of successful use of an important, practical solution to one of the major problems that consumers face, with no clear evidence that the Commission has exceeded its authority. The Always position ignores both the text of Section 13(b), which limits permanent injunctions to "proper cases," and the statutory structure, which itself limits the FTC's ability to obtain monetary relief. Congress originally considered Section 13(b) as part of a comprehensive set of changes to enhance the Commission's authority, which also included what became Section 19 two years later. That section limits the FTC's ability to obtain monetary relief to conduct that a reasonable person would know was dishonest or fraudulent.

We argue instead for a middle ground. Because Section 19 requires separate administrative proceedings before the Commission can seek monetary relief, the money would be gone without the ability to obtain extraordinary relief, especially an ex parte asset freeze. It therefore cannot be used to attack fraud successfully. The middle ground would allow 13(b) to be used against fraudsters. Another advantage of the middle ground is that it respects the original vision of the FTC that there are some law violations for which monetary relief is inappropriate, a view codified in both 1914 and again in Section 19 in 1975. For example, complex issues of advertising substantiation, as well as issues about the adequacy of disclosures to consumers, about which reasonable experts often disagree, should normally be resolved through the administrative process. To subject all violations of the FTC Act routinely to potential monetary relief risks chilling the provision of truthful and useful information, as well as other conduct beneficial to consumers.

Accuracy and Preferences for Legal Error

12-2020 | Murat Mungan, Marie Obidzinski, Yves Oytana

ABSTRACT:

We study the interactions between accuracy and standards used in the determination of legal liability. First, we show that accuracy and type-1 errors (wrongful findings of liability) must reduce each other's effectiveness in mitigating optimal type-2 errors (wrongful failures to assign liability) for previous results in the literature to hold. When this condition holds, for major crimes the median voter's tolerance for type-1 errors is reduced as the legal system's accuracy increases. However, this relationship need not hold for minor offenses. Our analysis also reveals that legal processes that emerge under electoral pressures convict more often than is optimal but less often than necessary to maximize deterrence. Moreover, when the median voter's preferences are implemented, an increase in accuracy can counter-intuitively reduce welfare.

Some Reactions to “Reactionary Antitrust”

11-2020 | Seth Sacher, John Yun

ABSTRACT:

In a recent article, Professor John Newman describes and offers a defense of neo-antitrust, and critiques the position taken by those defending modern antitrust. Professor Newman distinguishes between what he sees as merely “conservative” responses—those opposed to the neo-antitrust policy positions, but not opposed to debating the issues they raise—and certain ideas that are “lightly derogatory” and exhibit “logical fallacies.” He proposes the provocative moniker “reactionary antitrust” to designate ideas that fall under this latter rubric.

In this article, we respond to Professor Newman’s critiques of the arguments made by critics of neo-antitrust. Broadly, his claim is that the critics are committing a number of logical fallacies; setting up and knocking down straw men; mistakenly calling their own position in the antitrust debate “apolitical”; and ignoring certain key arguments.

 

Before the Federal Ministry of Economic Affairs and Energy “GWB Digitalization Act” Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University

11-2020 | Tad Lipsky, Douglas Ginsburg, John Yun, Bruce Kobayashi, Joshua Wright

ABSTRACT:

This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School, George Mason University to the Federal Ministry of Economic Affairs and Energy (Bundesministeriums für Wirtschaft und Energie, hereinafter “BMWi”) for consideration in relation to its proposed amendment to German competition law, the GWB Digitalization Act. The GAI Competition Advocacy Program provides recommendations to facilitate adoption of economically sound competition rules and policies. This comment identifies a number of elements contained in the proposed legislation that have the potential to introduce departures from sound economic analysis into German competition-law enforcement. These include novel provisions affecting the definition of “dominance” and “abuse of dominance,” as well as provisions promoting the use of so-called mandatory access remedies in cases involving digital platforms.

Reputational versus Beckerian Sanctions

11-2020 | Claude Fluet, Murat Mungan

ABSTRACT:

Punishment causes reputational losses in addition to more tangible losses. Lowering the probability of punishment reduces these reputational losses by diluting the informational value of verdicts. These considerations better align the positive as well as normative implications of law enforcement models with intuition and empirics: Crime is more responsive to the certainty rather than the severity of punishment even absent risk-seeking offenders (positive), which causes extreme Beckerian punishments to be inefficient when sanctions are socially costly to impose (normative). Moreover, in some cases optimal enforcement is `anti-Beckerian': Punishment is symbolic and detection costs are incurred solely to provide reputational incentives.


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