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September 23rd, 2019

↳ Law

The One

FICTIONAL BARGAIN

The meaning and impact of the Coase Theorem

Recent years have seen a surge in scholarship that critically evaluates the origins and impact of the law and economics movement. Out of the many theoretical bedrocks of the movement, the Coase Theorem is one of the most significant. Stemming from Ronald Coase's 1960 paper "The Problem of Social Cost," the theorem itself was coined by George Stigler in his 1966 book The Theory of Price. (Click here for a very simple primer on the theorem as it is generally taught.)

A 1999 paper by STEVEN MEDEMA—an economist and historian who has written extensively on Coase and his legacy—looks at the role that the Coase theorem has played in the law and economics movement:

In spite of the often heavily ideological overtones of the Coase theorem debate, the theorem is simply a positive proposition, stating that under certain conditions a particular result will follow. Yet, the Coase theorem has been assailed from the left (as conservative dogma) and from the right (as liberal dogma); its moral, philosophical, and political underpinnings have been called into question; its logic, applicability, and empirical content have been both trashed and defended; it has been hailed as offering a new way to conceptualize law and legal culture and attacked as anathema to the traditional common law process. The present essay will attempt to explain how and why the Coase theorem quickly evolved from a debunking fiction to the basis of one of the most successful branches of applied economics in the last part of this century.

Link to the paper.

  • Ronald Coase's seminal paper "The Problem of Social Cost." Link. And an interview with Coase from 1997, in which he says: "I think the success of the Coase Theorem—because it’s discussed all over the place—is an interesting illustration of what’s wrong with economics. If you read 'The Problem of Social Cost,' it occupies perhaps four pages. It’s useful because you can show the type of contracts that would have to be made in order to have an efficient economic system. But then you have to introduce the obstacles to doing it. Then you see how the system actually works." Link.
  • A 1998 paper by Deirdre McCloskey examines the legacy of the theorem: "Something like a dozen people in the world understand that the 'Coase' theorem is not the Coase theorem. One of this select group is Ronald Coase himself, so I suspect we blessed few are right." Link.
  • A post by Steven Medema on VoxEU treats Coase's legacy and the distance between his own views and the school of thought which adopted the theorem bearing his name. Link. Another paper by Medema examines the Coase Theorem on its sixtieth anniversary. Link.
  • Robin Hahnel and Kristen Sheeran provide an "internal critique" of the theorem, arguing that even under optimal conditions—low transaction costs and well-defined property rights—it generates perverse incentives. Link.
  • A 2017 paper by Dina Waked—"Sense and Nonsense of the Economic Analysis of Tort Law"—situates the law and economics school (and its invocation of Coase) alongside earlier and more recent alternatives, including the early institutionalists. Link.
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May 31st, 2019

Copyright Humanism

It's by now common wisdom that American copyright law is burdensome, excessive, and failing to promote the ideals that protection ought to. Too many things, critics argue, are subject to copyright protections, and the result is an inefficient legal morass that serves few benefits to society and has failed to keep up with the radical transformations in technology and culture of the last several decades. To reform and streamline our copyright system, the thinking goes, we need to get rid of our free-for-all regime of copyrightability and institute reasonable barriers to protection.

But what if these commentators are missing the forest for the trees, and America's frequently derided copyright regime is actually particularly well-suited to the digital age? Could copyright protections—applied universally at the moment of authorship—provide a level of autonomy that matches the democratization of authorship augured by the digital age?

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November 10th, 2018

Two Figures

NEW UBI REPORTS | ELECTORAL VIOLENCE | BEYOND GDP

DISCRETION DIFFERENTIAL

On the varying modes of conceiving of privacy (and its violation) in the law

In a 2004 YALE LAW JOURNAL article, comparative legal scholar JAMES Q. WHITMAN explores differing cultural and legal postures toward privacy. Through his comparison, he draws a slim taxonomy: privacy rights are founded on either dignity (throughout Western Europe) or on liberty (in the United States). The distinction—while far from perfectly neat either historically or in the present—raises a number of interesting questions about privacy law that are currently being worked out as scholars and legislators move forward in the creation and implementation of digital governance procedures. From the paper:

"If privacy is a universal human need that gives rise to a fundamental human right, why does it take such disconcertingly diverse forms? This is a hard problem for privacy advocates who want to talk about the values of ‘personhood,’ harder than they typically acknowledge. It is a hard problem because of the way they usually try to make their case: Overwhelmingly, privacy advocates rely on what moral philosophers call ‘intuitionist’ arguments. In their crude form, these sorts of arguments suppose that human beings have a direct, intuitive grasp of right and wrong—an intuitive grasp that can guide us in our ordinary ethical decisionmaking. The typical privacy article rests its case precisely on an appeal to its reader’s intuitions and anxieties about the evils of privacy violations. Imagine invasions of your privacy, the argument runs. Do they not seem like violations of your very personhood?

Continental privacy protections are, at their very core, a form of protection of a right to respect andpersonal dignity. The core continental privacy rights are rights to one’s image, name, and reputation, and what Germans call the right to informational self-determination—the right to control the sorts of information disclosed about oneself. They are all rights to control your public image.

By contrast, America is much more oriented to values of liberty. At its conceptual core, the American right to privacy is the right to freedom of intrusions by the state, especially in one’s own home."

Link to the paper.

  • Forthcoming in the Harvard Journal of Law & Technology, an in-depth review of the significance of the Supreme Court's June decision in Carpenter v. United States: "Carpenter holds that the police may not collect historical [cellphone location tracking data] from a cellphone provider without a warrant. This is the opinion most privacy law scholars and privacy advocates have been awaiting for decades." Link.
  • An excellent repository of scholarship on the GDPR—the new European data protection law—from the journal International Data Privacy Law. Link.
  • Danielle Citron and Daniel Solove's 2016 paper explores how US courts have dealt with legal standards of harm—anxiety or risk—in cases of personal data breaches. Link. See also Ryan Calo's 2010 article "The Boundaries of Privacy Harm." Link.
  • Khiara Bridges' 2017 book The Poverty of Privacy Rights provides a corrective to universalist claims to a right to privacy: "Poor mothers actually do not possess privacy rights. This is the book’s strong claim." Link to the book page, link to the introductory chapter.
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October 27th, 2018

The Seasons

EFFICIENT DISPERSION

Applying quantitative methods to examine the spread of ideology in judicial opinion

In a recent paper, co-authors ELLIOTT ASH, DANIEL L. CHEN, and SURESH NAIDU provide a quantitative analysis of the judicial effects of the law and economics movement. Comparing attendance at seminars run by the Manne Economics Institute for Federal Judges from 1976 to 1999 against 380,000 circuit court cases and one million criminal sentencing decisions in district courts, the authors identify both the effects on judicial decision-making and the dispersion of economic language and reasoning throughout the federal judiciary.

“Economics-trained judges significantly impact U.S. judicial outcomes. They render conservative votes and verdicts, are against regulation and criminal appeals, and mete harsher criminal sentences and deterrence reasoning. When ideas move from economics into law, ideas have consequences. Economics likely changed how judges perceived the consequences of their decisions. If you teach judges that markets work, they deregulate government. If you teach judges that deterrence works, they become harsher to criminal defendants. Economics training focusing on efficiency may have crowded out other constitutional theories of interpretation. Economics training accounts for a substantial portion of the conservative shift in the federal judiciary since 1976.”

Link to the paper.

  • Henry Farrell at Crooked Timber picks out some additional highlights. Link.
  • A Washington Post article from January 1980 provides some contemporaneous context on the Manne seminars. Link.
  • In a relevant 2015 paper, Pedro Bordalo, Nicola Gennaioli, and Andrei Shleifer apply salience theory to model judicial decision-making: "The context of the judicial decision, which is comparative by nature, shapes which aspects of the case stand out and draw the judge’s attention. By focusing judicial attention on such salient aspects of the case, legally irrelevant information can affect judicial decisions." Link.
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May 26th, 2018

Correction of the Lines

SHOCK-LEVEL-ZERO

Jobs guarantees vs. basic income

In a characteristically lengthy and thorough post, SCOTT ALEXANDER of SLATE STAR CODEX argues for a basic income over a jobs guarantee, in dialogue with a post by SIMON SARRIS.

Here's how Alexander addresses the claim that “studies of UBI haven’t been very good, so we can’t know if it works”:

“If we can’t 100% believe the results of small studies – and I agree that we can’t – our two options are to give up and never do anything that hasn’t already been done, or to occasionally take the leap towards larger studies. I think basic income is promising enough that we need to pursue the second. Sarris has already suggested he won’t trust anything that’s less than permanent and widespread, so let’s do an experiment that’s permanent and widespread.”

Link to the full piece on Slate Star.

For another angle on the same question, MARTIN RAVALLION recently published a paper at the CENTER FOR GLOBAL DEVELOPMENT looking at employment guarantees and income guarantees primarily in India:

“The paper has pointed to evidence for India suggesting that the country’s Employment Guarantee Schemes have been less cost effective in reducing current poverty through the earnings gains to workers than one would expect from even untargeted transfers, as in a UBI. This calculation could switch in favor of workfare schemes if they can produce assets of value (directly or indirectly) to poor people, though the evidence is mixed on this aspect of the schemes so far in India.”

Ravallion takes a nuanced view of arguments for the right to work and the right to income, as well as the constraints of implementation, and concludes, "The key point is that, in some settings, less effort at fine targeting may well prove to be more cost-effective in assuring economic freedom from material deprivation." Full study available here. ht Sidhya

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