Showing papers by "Eric A. Posner published in 2001"

Controlling Agencies with Cost-Benefit Analysis: A Positive Political Theory Perspective

Abstract: Cost-benefit analysis is analyzed using a model of agency delegation. In this model an agency observes the state of the world and issues a regulation, which the president may approve or reject. Cost-benefit analysis enables the president to observe the state of the world (in one version of the model), or is a signal that an agency may issue (in another version). The roles of the courts, Congress, and interest groups are also considered. It is argued that the introduction of cost-benefit analysis increases the amount of regulation, including the amount of regulation that fails cost-benefit analysis; that the president has no incentive to compel agencies to issue cost-benefit analysis, because agencies will do so when it is in the president's interest, and otherwise will not do so; that presidents benefit from cost-benefit analysis even when they do not seek efficient policies; that agencies and their supporters ought to endorse cost-benefit analysis, not resist it; and that cost-benefit analysis reduces the influence of interest groups. Evidence for these claims is discussed. Finally, it is argued that courts should force agencies to conduct cost-benefit analyses in ordinary conditions, but that they should not force agencies to comply with them.

Law and Economics of Consumer Finance

Abstract: This survey of the law and economics of consumer finance discusses economic models of consumer lending, and evaluates the major consumer finance laws in light of them. We focus on usury laws, restrictions on creditor remedies such as the ban on expansive security interests, bankruptcy law, limitations on third-party defenses such as the holder in due course doctrine, information disclosure rules including the Truth in Lending Act, and anti-discrimination law. We also discuss the empirical literature.

Courts Should Not Enforce Government Contracts

Abstract: Most scholars believe that courts should enforce government contracts, though they disagree about the extent to which liability or damages rules should trade off relevant considerations - the problem of governments holding up contractors, on the one hand, and the problem of governments using contracts in order to defer costs to future governments, on the other hand. These scholars, however, overestimate the ability of courts to affect policy outcomes. Courts cannot increase the welfare of current or future generations by enforcing government contracts. The reason is that enforcing contracts can benefit future generations only by increasing the credibility of their governments, but if the current government has not already tried to benefit future generations by complying with contracts voluntarily, then it will offset the effect of an adverse judgment by withdrawing value from the future using a policy instrument over which courts have no control.

Cost-benefit analysis : legal, economic, and philosophical perspectives

Abstract: Cost-benefit analysis is a widely used governmental evaluation tool, though academics remain skeptical This volume gathers prominent contributors from law, economics, and philosophy for discussion of cost-benefit analysis, specifically its moral foundations, applications and limitations This new scholarly debate includes not only economists, but also contributors from philosophy, cognitive psychology, legal studies, and public policy who can further illuminate the justification and moral implications of this method and specify alternative measures These articles originally appeared in the "Journal of Legal Studies" Contributors: - Matthew D Adler - Gary S Becker - John Broome - Robert H Frank - Robert W Hahn - Lewis A Kornhauser - Martha C Nussbaum - Eric A Posner - Richard A Posner - Henry S Richardson - Amartya Sen - Cass R Sunstein - W Kip Viscusi

Controlling Agencies with Cost-Benefit Analysis: A Positive Political Theory Perspective

Abstract: Cost-benefit analysis is analyzed using a model of agency delegation. In this model an agency observes the state of the world and issues a regulation, which the president may approve or reject. Cost-benefit analysis enables the president to observe the state of the world (in one version of the model), or is a signal that an agency may issue (in another version). The roles of the courts, Congress, and interest groups are also considered. It is argued that the introduction of cost-benefit analysis increases the amount of regulation, including the amount of regulation that fails cost-benefit analysis; that the president has no incentive to compel agencies to issue cost-benefit analysis, because agencies will do so when it is in the president’s interest, and otherwise will not do so; that presidents benefit from cost-benefit analysis even when they do not seek efficient policies; that agencies and their supporters ought to endorse cost-benefit analysis, not resist it; and that cost-benefit analysis reduces the influence of interest groups. Evidence for these claims is discussed. Finally, it is argued that courts should force agencies to conduct cost-benefit analyses in ordinary conditions, but that they should not force agencies to comply with them.

The Political Economy of Property Exemption Laws

Abstract: Exemption laws enable people who default on loans to protect certain assets from liquidation, both inside and outside bankruptcy. Every state has its own set of exemption laws, and they vary widely; the federal bankruptcy law also establishes a set of exemptions, which debtors in bankruptcy are permitted to use instead of their state's exemptions unless the state has formally "opted out" of the federal system. We test a wide range of public interest and public choice explanations for exemption laws, using a data set consisting of the exemption laws in all states over twenty-two years, and also exploiting the opt out choice of the different states. We find that states are more likely to opt out, and to increase their exemptions in the process, if they are conservative, start with low exemptions, and have a high bankruptcy filing rate. We find little evidence for popular theories of exemptions levels; the most important factor correlated with exemption level is the historical generosity of a state's exemption laws.

Law and the Emotions

Abstract: This paper presents a framework for understanding the relationship between rational choice and emotional behavior. Emotions are interpreted as temporary albeit predictable changes in preferences, abilities, and beliefs. People act rationally in anticipation of their own emotional reactions to provocations and other stimuli; they also act rationally when under the influence of emotion. The law needs to take account of both of these effects. The paper discusses (1) the sanction for murders committed under the influence of rage or hate, (2) the treatment of prejudicial evidence such as gory photographs, (3) safety regulation when individuals are subject to fear or dread, (4) contract and judicial remedies when parties become angry at each other, and (5) cost-benefit analysis of projects that provoke emotional responses.

Cost-Benefit Analysis

Abstract: Cost-benefit analysis is a widely used governmental evaluation tool, though academics remain skeptical. This volume gathers prominent contributors from law, economics, and philosophy for discussion of cost-benefit analysis, specifically its moral foundations, applications and limitations. This new scholarly debate includes not only economists, but also contributors from philosophy, cognitive psychology, legal studies, and public policy who can further illuminate the justification and moral implications of this method and specify alternative measures. These articles originally appeared in the Journal of Legal Studies. Contributors: - Matthew D. Adler - Gary S. Becker - John Broome - Robert H. Frank - Robert W. Hahn - Lewis A. Kornhauser - Martha C. Nussbaum - Eric A. Posner - Richard A. Posner - Henry S. Richardson - Amartya Sen - Cass R. Sunstein - W. Kip Viscusi

Cost-Benefit Analysis as a Solution to a Principal-Agent Problem

Abstract: Judge Williams' essay raises an issue about cost-benefit analysis that is too often neglected in the literature.1 That issue is the institutional role of cost-benefit analysis in the American government. Williams argues that Justice Breyer's concerns about agency misbehavior2 calls for more than greater coordination and expertise at higher levels of government; his concerns call for a constraint on agency action. That constraint is, or should be, cost-benefit analysis.3 Williams' argument takes the form of a philosophical defense of costbenefit analysis, or a suitably modified version of cost-benefit analysis, as a reasonable way of evaluating projects. I will approach this topic from a different angle: by asking how the President (or Congress, or legislative coalitions, or the public) should organize and monitor institutions (agencies) so that they can depend on these institutions to implement their goals, whatever those goals happen to be?4 Many readers will recognize that I have framed the inquiry as a principal-agent problem, and I will, in fact,

Strategies of Constitutional Scholarship

Abstract: At roughly the same time that economics made its way into legal scholarship, it also entered political science, to which it introduced the powerful metaphor of the political market in which laws and other government actions are goods that are bought and sold like any other commodity. A number of ideas followed. Individuals bound together by interest and circumstance overcome the free-rider problem and form interest groups that disproportionately influence legislation at the expense of the unorganized public. Officeholders maximize their chances of reelection by designing political institutions-congressional committees, voting rules, courts, agencies, parties-that shield incumbents against challengers. Candidates for public office compete for votes by adopting positions as close as possible to the attitudes of the median voter. These and related insights make up the scholarship known variously as public choice, positive political theory, and political economy. Law and politics have a deep and intricate relationship, and for that reason one might have predicted that the economic analysis of politics and the economic analysis of law would converge. Instead, the two fields of scholarship have traveled on separate paths, usually parallel and rarely intersecting. Political scientists have focused on how the power and preferences of constituents and the political environment determine political outcomes-legislative deals, agency projects, and other government actions.