Showing papers in "The Journal of Legal Studies in 2000"

A fine is a price

Abstract: The deterrence hypothesis predicts that the introduction of a penalty that leaves everything else unchanged will reduce the occurrence of the behavior subject to the fine. We present the result of a field study in a group of day‐care centers that contradicts this prediction. Parents used to arrive late to collect their children, forcing a teacher to stay after closing time. We introduced a monetary fine for late‐coming parents. As a result, the number of late‐coming parents increased significantly. After the fine was removed no reduction occurred. We argue that penalties are usually introduced into an incomplete contract, social or private. They may change the information that agents have, and therefore the effect on behavior may be opposite of that expected. If this is true, the deterrence hypothesis loses its predictive strength, since the clause “everything else is left unchanged” might be hard to satisfy.

The Discipline of Cost-Benefit Analysis

Abstract: Cost‐benefit analysis is a general discipline, based on the use of some foundational principles, which are not altogether controversial, but have nevertheless considered plausibility. Divisiveness increases as various additional requirements are imposed. There is a trade‐off here between easier usability (through locked‐up formulae) and more general acceptability (through allowing parametric variations). The paper examines and scrutinizes the merits and demerits of these additional requirements. The particular variant of cost‐benefit approach that is most commonly used now is, in fact, extraordinarily limited, because of its insistence on doing the valuation entirely through an analogy with the market mechanism. This admits only a narrow class of values, and demands that individuals be unconcerned about many substantial variations, ignored in the procedure of market valuation. The use, instead, of a general social choice approach can allow greater freedom of valuation and can also accommodate mor...

The Costs of Tragedy: Some Moral Limits of Cost‐Benefit Analysis

Abstract: In all situations of choice, we face a question that I call “the obvious question”: what shall we do? But sometimes we also face, or should face, a different question, which I call “the tragic question”: is any of the alternatives open to us free from serious moral wrongdoing? Discussing cases of tragic conflict from literature, philosophy, and contemporary life, I argue that it is valuable to face the tragic question where it is pertinent, because facing it helps us think how we might design a society where such unpalatable choices do not confront people, or confront them less often. Cost‐benefit analysis helps us answer the obvious question; but it does not help us either pose or answer the tragic question, and it frequently obscures the presence of a tragic situation, by suggesting that the obvious question is the only pertinent question. I apply these reflections to thinking about basic entitlements of citizens, such as might be embodied in constitutional guarantees.

Property Rights in Emerging Platform Technologies

Abstract: This article considers an externality that affects a broad range of markets, specifically markets where one set of firms sells some platform technology such as a computer, video game console, or operating system, while another possibly overlapping set of firms sells peripherals compatible with that platform, for example, computer software or video game cartridges. The externality causes certain peripheral sellers to charge prices that are unprofitably high. That is, these firms could earn greater profits if only they could coordinate to charge lower prices. In many markets, such coordination is possible; firms can contract, for example, or integrate. In markets based on relatively new platform technologies, however, coordination will typically be difficult. The article explains why and argues that intellectual property law can and should facilitate price coordination in these “emerging technology” settings.

Semicommon Property Rights and Scattering in the Open Fields

Abstract: A semicommons exists where property rights are not only a mix of common and private rights, but both are significant and can interact. The major example of a semicommons is the medieval open‐field system in which peasants owned scattered strips of land for grain growing but used the land collectively for grazing. The ownership structure allowed operation on a large scale for grazing and harnessed private incentives for grain growing. But a semicommons potentially leads to problems of strategic behavior that go beyond the familiar incentives to overuse a commons. In order to raise the costs of such behavior devices such as the scattering of strips may be used to mix up entitlements. Generally, boundary placement and norms are substitute methods of addressing strategic behavior in a semicommons. Among these solutions, scattering functions as a sanction for activities associated with strategic behavior.

Why is Cost‐Benefit Analysis so Controversial?

Abstract: The cost‐benefit principle says we should take those actions, and only those actions, whose benefits exceed their costs. For many, this principle's commonsensical ring makes it hard to imagine how anyone could disagree. Yet critics of cost‐benefit analysis are both numerous and outspoken. Many of them argue that cost‐benefit analysis is unacceptable as a matter of principle. I begin by noting why many find this argument largely unpersuasive. I then examine several conventions adopted by cost‐benefit analysts that do appear to yield misleading prescriptions. Finally, I consider the possibility that the cost‐benefit principle may itself suggest why we might not always want to employ cost‐benefit analysis as the explicit rationale for our actions.

Cost-Benefit Analysis: Definition, Justification, and Comment on Conference Papers

Abstract: In this comment on the conference papers, Judge Posner argues for a pragmatic construal and defense of cost‐benefit analysis, demonstrating the benefit of such analysis; responding to specific criticisms of, and suggested changes in, the analysis; and emphasizing that the value of such analysis as an evaluative and decision tool for social and economic policy making does not depend on the resolution of philosophical problems.

Cognition and Cost-Benefit Analysis

Abstract: Cost‐benefit analysis is often justified on conventional economic grounds, as a way of preventing inefficiency. But it is most plausibly justified on cognitive grounds—as a way of counteracting predictable problems in individual and social cognition. Poor judgments, by individuals and societies, can result from certain heuristics, from informational and reputational cascades, from thinking processes in which benefits are “on screen” but costs are not, from ignoring systemic effects of one‐shot interventions, from seeing cases in isolation, and from intense emotional reactions. Cost‐benefit analysis serves as a corrective to these cognitive problems. In addition, it is possible to arrive at an incompletely theorized agreement on costbenefit analysis—an agreement that does not depend on controversial arguments (for example, the view that willingness to pay should be the basis for all social outcomes) and that can attract support from a variety of reasonable views. There is discussion as well of the...

Should Legal Rules Favor the Poor? Clarifying the Role of Legal Rules and the Income Tax in Redistributing Income

Abstract: In our 1994 article in this Journal, we demonstrated that legal rules should not be adjusted to disfavor the rich and favor the poor in order to redistribute income, because the income tax and transfer system is a more efficient means of redistribution. In this article, we revisit our argument and others that favor relying on the income tax system to redistribute income, and we then focus on qualifications to our argument that we previously offered. In particular, we elaborate on a qualification that is the subject of Chris Sanchirico's article in this issue of the Journal and explain why it has only a tangential bearing on the question whether legal rules should favor the poor and why it is of doubtful practical importance.

Determinants of citations to articles in elite law reviews

Abstract: This article analyzes the determinants of citations to pieces published from 1980 to 1995 in Harvard Law Review, Stanford Law Review, and The Yale Law Journal. We also rank articles by number of citations using regressions controlling for time since publication, journal, and subject area. To summarize a few of our results: citations per year peak at 4 years after publication, and an article receives half of its expected total lifetime citations after 4.6 years; appearing first in an issue is a significant advantage; international law articles receive fewer citations; jurisprudence articles are cited more often; articles by young, female, or minority authors are more heavily cited. Articles with shorter titles, fewer footnotes per page, and without equations have significantly more citations than other articles. Total citations generally increase with an article's length, but citations per published page peak at 53 pages.

Corporate Governance in Transitional Economies: Lessons from the Prewar Japanese Cotton Textile Industry

Abstract: Observers of the formerly communist economies urge firms there to obtain funds from a relatively few sources. They note the problems the firms face: dysfunctional courts, markets, and statutes. Because these firms cannot rely on the courts to discipline managers, they predict that firms will do best if they raise their capital only from a few sources. Firms in Japan at the close of the nineteenth century similarly faced dysfunctional courts, markets, and statutes. Yet the firms that succeeded in Japan were not the ones that took the tack proposed by modern observers. They were the ones that used little debt and raised their equity from a large number of investors. In this article we outline how concentrated finance can introduce problems potentially as severe as the ones it mitigates and discuss why dispersed equity did not reduce firm efficiency in late‐nineteenth‐century Japan.

The Stupidity of the Cost‐Benefit Standard

Abstract: Cost‐benefit analysis (CBA) is often touted as providing not just an important base of information useful in evaluating government programs, but a general standard of public choice that will help insure the wise and intelligent use of our limited resources. This article argues that (wholly apart from its deficiencies in other respects) CBA cannot provide such a standard. Intelligent deliberation is shown to require a willingness and ability to refashion aims in light of new information that comes in. Cost‐benefit analysis, both in general and as a possible standard of choice in the context of democratic lawmaking, makes no room for this crucial aspect of intelligent deliberation. Calling its standard “stupid” for this want of intelligence would be unwarranted if no more intelligent mode of political decision making were available, but there is. The article closes by sketching this superior mode.

Is the Ninth Circuit too Large? A Statistical Study of Judicial Quality

Abstract: This paper provides an empirical test of the claim that the U.S. Court of Appeals for the Ninth Circuit has too many judges to be able to do a good job. Reversals (especially summary reversals) by the Supreme Court and citations are used as proxies for quality of judicial output. The overall conclusion is that (1) adding judgeships tends to reduce the quality of a court's output and (2) the Ninth Circuit's uniquely high rate of being summarily reversed by the Supreme Court (a) is probably not a statistical fluke and (b) may not be a product simply of that circuit's large number of judges.

Do People Want Optimal Deterrence

Abstract: Two studies test whether people believe in optimal deterrence. The first provides people with personal injury cases that are identical except for variations in the probability of detection and explores whether lower probability cases produce higher punitive damage awards and whether higher probability cases produce lower awards. No such effect is observed. The second asks people whether they agree or disagree with administrative and judicial policies that increase penalties when the probability of detection is low and decrease penalties when the probability of detection is high. Substantial majorities reject these administrative and judicial policies. Policy implications for the role of the jury in achieving deterrence are explored.

Self-Reporting in Optimal Law Enforcement When Violators Have Heterogeneous Probabilities of Apprehension

Abstract: Laws often encourage violators to self‐report their crimes rather than subject themselves to probabilistic law enforcement. This paper studies the merits of self‐reporting when violators otherwise face heterogeneous probabilities of apprehension. In this setting, an optimal enforcement regime does not elicit self‐reporting by all violators. However, even when self‐reporting enjoys none of the advantages identified elsewhere, efficiency can often be enhanced by inducing some violators—those with a sufficiently high risk of apprehension—to self‐report. By offering a lower sanction to violators who are excessively penalized, the self‐reporting option provides more efficient incentives for these individuals to avoid criminal conduct.

Inbreeding in Law School Hiring: Assessing the Performance of Faculty Hired from Within

Abstract: This study compares the scholarly impact of inbred entry‐level law school faculty members with the scholarly impact of noninbred entry‐level law school faculty members. The sample includes 32 law schools and approximately 700 entry‐level faculty members. By our measure of performance, scholarly impact as measured by citation frequency, inbred entry‐level law school faculty members do not perform as well as noninbred entry‐level faculty members.

Regulating Consumer Bankruptcy: A Theoretical Inquiry

Abstract: This paper uses a principal/agent framework to analyze consumer bankruptcy. The bankruptcy discharge partly insures risk‐averse borrowers against bad income realizations but also reduces the borrower's incentive to avoid insolvency. Among our results are the following: (a) high bankruptcy exemptions increase bankruptcy insurance but at the cost of reducing the borrower's incentives to stay solvent; (b) reaffirmations—renegotiations—have ambiguous efficiency effects in general, but the right to renegotiate is especially valuable for relatively poor persons; (c) giving consumers the ex post choice regarding which bankruptcy chapter to use also provides more insurance but, by making bankruptcy softer on debtors, has poor incentive effects; and (d) serious consideration should be given to expanding the scope of consumers' ability to contract about bankruptcy because trade‐offs between risk and incentives are context sensitive and, thus, are poorly made in statutes of general application.

The most-cited legal scholars

Abstract: This study presents lists of the 50 most‐cited legal scholars of all time and the most‐cited treatise and text writers. Additional highly cited scholars and the most‐cited younger scholars are also enumerated. The data are analyzed for representation of law schools and for other patterns.

Taxes Versus Legal Rules as Instruments for Equity: A More Equitable View

Abstract: Most law and economic analysis evaluates legal rules solely on the basis of the efficiency criterion, the justification being that distributive goals are best accomplished through the tax code. Within the same framework used to formalize this justification, this paper shows that (1) even in the presence of an optimally redistributive tax, any concern for “equity” dictates that legal rules should deviate from efficient standards in a manner that redistributes toward the less well‐off; (2) any showing that differences in taxable attributes such as income or wealth are the dominant components of overall inequality would go only to the direction of the proper equity adjustment to legal rules, not to the fact that some adjustment should be made; and (3) the role of equity adjustments to legal rules is not limited to correcting inequalities arising within the legal system but extends to correcting inequalities arising in other areas of the economy.

On Justifying Cost‐Benefit Analysis

Abstract: This essay considers two problems in the justification of cost‐benefit analysis. First, it argues that because cost‐benefit analysis values policies, variation in imputed “values of life” are not, in theory, cause for concern. Second, it argues that the current framework of justification, which focuses on the moral justification of the formal theory of cost‐benefit analysis, is inadequate because it ignores (1) the institutional context in which cost‐benefit analyses occur, (2) the comparative nature of the justification, and (3) the fact that justification might be indirect rather than direct.

An Optimal Personal Bankruptcy Procedure and Proposed Reforms

Abstract: We investigate a new approach to the reform of U.S. personal bankruptcy law in which Chapters 7 and 13 would be combined. The proposed reform obliges debtors in bankruptcy to use part of both their wealth and their future earnings to repay debt and therefore bases the obligation to repay in bankruptcy on debtors' ability to pay from both sources. An important function of personal bankruptcy is to provide partial wealth insurance for risk‐averse debtors by discharging some debt when debtors' ability to repay turns out to be low. However, the current bankruptcy system encourages debtors to file for bankruptcy even when their ability to repay is high. The proposed reform maintains the insurance function of bankruptcy but reduces debtors' incentive to take advantage of the system. Using simulation techniques, we investigate the properties of a bankruptcy reform in which both the wealth exemption and the postbankruptcy earnings exemption are optimized. We show that the proposed reform improves efficie...

How Long is the Coastline of the Law? Thoughts on the Fractal Nature of Legal Systems

Abstract: Although citation to precedent in judicial opinions is a critical component of the network of rules that comprise “the law” in any area, there have been surprisingly few systematic attempts to use the abundant data available on citation patterns to uncover general principles about the structure of the legal system. We examine data on the number of times judicial opinions cite to, and are subsequently cited as, precedent to test the hypothesis that legal arguments and legal doctrine have a kind of “fractal” structure. Our model provides a reasonable fit to the citation data that we examined. There do appear, however, to be significant sources of variability in the data that are not explained by our simple predictive framework, and it is clearly far too early to draw any robust conclusions about the hypothesis other than that additional work along these lines appears to be warranted.

Implementing Cost-Benefit Analysis when Preferences are Distorted

Abstract: Cost‐benefit analysis is routinely used by government agencies in order to evaluate projects, but it remains controversial among academics This paper argues that cost‐benefit analysis is best understood as a welfarist decision procedure and that use of cost‐benefit analysis is more likely to maximize overall well‐being than is use of alternative decision procedures The paper focuses on the problem of distorted preferences A person's preferences are distorted when his or her satisfaction does not enhance that person's well‐being Preferences typically thought to be distorted in this sense include disinterested preferences, uninformed preferences, adaptive preferences, and objectively bad preferences; further, preferences may be a poor guide to maximizing aggregate well‐being when wealth is unequally distributed The paper describes conditions under which agencies should correct for distorted preferences, for example, by constructing informed or nonadaptive preferences, discounting objectively b

Evolution of the Common Law and the Emergence of Compromise

Abstract: In a system of judge‐made law, each judge who decides a case in a particular area of law may, in principle, choose to depart from precedent in favor of another rule. This paper examines the question of whether such a system will produce constant oscillation among different legal rules or will instead produce a single rule that potential litigants can rely upon when choosing their behavior. Using a model of the legal process that treats judges as self‐interested agents maximizing their private and reputation‐based utility, this article derives conditions under which the common‐law process will produce convergence on a single rule rather than oscillation between rules. The article also examines the circumstances in which the introduction of a compromise rule can resolve a problem of oscillation between rules.

Incentives to Settle Under Joint and Several Liability: An Empirical Analysis of Superfund Litigation

Abstract: Congress may soon restrict joint and several liability for cleanup of contaminated sites under Superfund. We explore whether this change would discourage settlements and is therefore likely to increase the program's already high litigation costs per site. Recent theoretical research by Kornhauser and Revesz finds that joint and several liability may either encourage or discourage settlement, depending on the correlation of outcomes at trial across defendants. We extend their two‐defendant model to a richer framework with N defendants. This extension allows us to test the theoretical model empirically using data on Superfund litigation. We find that joint and several liability does not discourage settlements and may even encourage them. Our results support the model's predictions about the effects of several variables, such as the degree of correlation in trial outcomes.

State and Federal Regulatory Reform: A Comparative Analysis

Abstract: This paper provides a comprehensive assessment of state efforts to eliminate or change burdensome regulations and to use economic analysis to produce more sensible results. More than half the states have undertaken initiatives of some kind to improve regulation, including oversight mechanisms and the use of cost‐benefit analysis. However, the effectiveness of oversight and enforcement of regulatory reform initiatives in the day‐to‐day world of rule making is often doubtful. As in the case of the federal government, state agencies have devised ways to avoid doing what they do not want to do. Generally, regulatory reform initiatives are most effective when they have active political support, a strong, well‐funded oversight mechanism, and states provide clear, specific guidelines to implementing agencies. While several states have sought to establish such a structure, most states have not. Until significant resources and political support are devoted to reform efforts, real‐world progress in regulat...

Citations, Age, Fame, and the Web

Abstract: This paper focuses on the role of age in explaining the ranking of legal scholars by the number of citations to their scholarship and the relationship between scholarly and “popular” reputations, with the latter being proxied by the number of “hits” on the World Wide Web or newspaper citations. As predicted by human capital theory, nearly 40 percent of the top 100 legal scholars were between 60 and 86 in 1998. When we turn to popular reputations, we find that compared to really famous people (such as President Clinton and former presidents), top legal scholars are not famous at all. The data also suggest that fame among the larger public is more unequally distributed than scholarly reputation. We use regression analysis to study scholarly and public reputation. We find that being a Supreme Court justice (but not being a judge of any other court) and having had another high government position (such as solicitor general of the United States) has a statistically significant effect on one's public b...

Pildes on Dworkin's Theory of Rights

Abstract: This note corrects a serious misrepresentation of the views of Ronald Dworkin on the subject of rights, in a recent paper by Richard Pildes. The note makes it clear that Dworkin's theory of rights is based on a conception of limits on the kinds of reason that the state can appropriately invoke in order to justify its action. The idea of “rights as trumps” is an expression of this conception. “Rights as trumps” does not, as Pildes believes, express an alternative view of rights (which Pildes argues against), in which rights protect certain key interests against any demands made in the name of the general good.

Partition of Real Estate; or, Breaking up is (not) Hard to do

Abstract: Under the common law, joint owners of real estate have the right to seek partition, or physical division, of the land. However, modern statutes also allow courts to order a sale of the land, with proportionate division of the proceeds, if the loss from division is substantial. Although forced sale can be beneficial by preventing inefficient fragmentation of the land, it entails a cost by depriving nonconsenting owners of any value of their share of the land in excess of its market value. This paper develops an economic standard for choosing between partition and forced sale based on the objective of maximizing the aggregate value of the land. The basic trade‐off is between the benefits of forced sale when scale economies are present and protection of subjective value under partition. A review of the case law suggests that courts have developed a standard that reflects this trade‐off.