November 26, 2011
Over the holidays or when I’m traveling, I often like to read books related to business law, but that aren’t narrowly tailored to my current projects. That is, books that feel like reading for enjoyment, but are still perhaps sowing the seeds for news ideas or adding some breadth to my day-to-day reading.
Here are a few of my recent picks:
American Property: A History of How, Why, and What We Own by Stuart Banner
Stuart Banner’s new book is an interesting history of American property law that is especially notable for its contextual approach and nuanced view of property conceptions. Banner shows that our conceptions of property have changed over time and have always been contested.
Banner doesn’t tackle head on issues of property held in the corporate form or the rise of corporations. But there are some parts that corporate law scholars might nonetheless find particularly interesting. For instance, his discussion of the changes to property law in the early nineteenth century that brought about greater liquidity or commoditization of land (e.g., getting rid of English rules of primogeniture and the fee tail), and the idea that Americans in the early nineteenth century expected forms of recognized property to change over time. Corporate law scholars might note that this was a time when more property started to flow toward the corporate form and this window into property law of the time adds some depth to thinking about the history of corporations.
Folks pondering the viability of the “concession theory” of corporations might find interesting Banner’s discussion of police power, the line between constitutional government regulation and takings, and the notion that property is a form of delegated governmental power.
Confidence Men: Wall Street, Washington, and the Education of a President by Ron Suskind
This book made a splash when it came out earlier this Fall. It tells a story of Barack Obama from the campaign trail to the presidency, with a focus on the financial crisis which the author portrays as a crisis of confidence.
I can’t say that I wholeheartedly recommend it, but I can report that lots of interesting details and some attention-getting material (tales of insubordination in the Obama administration, concerns about sexism, behind the scenes maneuvering…) kept me reading through this hefty hardback. I don’t read a lot of books with this style of political journalism – the novelistic inside narrator tone often made me wonder how the heck the author knew that was what happened. (Suskind says it’s based on hundreds of hours of interviews with over 200 people; there was quite a bit of controversy when the book came out – many people quoted in the book recanted or challenged descriptions.)
Cultivating Conscience: How Good Laws Make Good People by Lynn Stout
This is a fun and very interesting read. It came out several months ago now, and if you haven’t had a chance to read it yet this is a good season for it. We could use some optimism about human nature.
In a nutshell, the book explores the idea of acting with a conscience (or “prosocial behavior”), arguing that the focus on the “homo economicus” model of human behavior in law and policy discussions has neglected the important role of conscience. Stout takes the reader through social science evidence about people engaging in unselfish, ethical behavior and argues that law and policy should take account and encourage this kind of behavior in politics, business, and other areas.
Next on my reading list will be Daniel Kahneman’s Thinking, Fast and Slow. Feel free to add ideas from your holiday reading lists in the Comments section!
Pizza is a vegetable. Really?By now you've probably heard about Pizzagate--what some have described as: "Congress puts the food lobby above child nutrition." Here's Kermit's take (30-second ad up front):
November 24, 2011
Happy Thanksgiving to all our U.S. readers. May you and your loved ones have a wonderful holiday weekend.
Holidays like this remind us of what’s really important in life. Business law can wait until tomorrow (except for those practicing lawyers stuck with something that can’t wait until Friday, who have my sympathies).
November 23, 2011
Jordan on Business Roundtable v. SEC
My colleague Bill Jordan has written a review of the Business Roundtable v. SEC decision (striking down the SEC's proxy access rule) for his "News from the Circuits" column in the forthcoming 37 Administrative and Regulatory Law News 1. Here's an excerpt:
The court criticized the agency’s rejection of studies favoring the management position in favor of “two relatively unpersuasive studies” purportedly showing the value of the inclusion of dissident directors on corporate boards.
The court’s dismissive treatment of the SEC’s response to these studies contrasts sharply with the longstanding principle of judicial, deference to agency assessment of complex technical and scientific studies.... Note that the court considered itself qualified to determine that the studies relied upon by the SEC were “relatively unpersuasive.” This is not the language of arbitrary and capricious review or even of hard look review. This is the language of substantive judgment, even political judgment.
The contrast is particularly striking because this case essentially involved judgments about the value of democracy. In assessing electoral democracy, surely we assume that elections improve outcomes because they hold politicians accountable for their actions. It seems reasonable for the SEC to incorporate this fundamental principle of democratic institutions into the arena of shareholder democracy. At least a court should review such agency judgments – made by the politically accountable electoral branch of government rather than the unaccountable judiciary – with considerable deference. The D.C. Circuit’s review in this case was precisely the opposite. On one particular issue, the court characterized the agency’s explanation as “utterly mindless.”
It is difficult to determine the long-term significance of this decision. It suggests, among other things, that the D.C. Circuit (at least these three judges) consider themselves well qualified to second-guess agency decisions about issues of corporate structure and costs even if they should defer to agency decisions about scientific and technical issues.
The Underground Economy: Stealth of Nations
I just finished an interesting book on the shadow, or informal economy—the merchants and service providers who operate outside government regulation and licensing requirements. The book is Robert Neuwirth’s Stealth of Nations: The Global Rise of the Informal Economy.
Neuwirth is at his best when he’s describing the various markets throughout the world. His particular geographical areas of focus, not surprisingly, are Nigeria, China, and parts of South America. The book is less valuable when he ventures into theory and proposes policies to deal with the underground economy. For example, he sees the growth of these markets as inconsistent with neoclassical economic theory. In my view, these markets are exactly what neoclassical theory would predict as a way to avoid the cost of government regulation. I also think his attempts to prescribe government policies to strengthen these markets are often off-base. Government is unlikely to be able to do much to help the participants in markets whose very existence is an attempt to avoid government.
For all its flaws, the book is still worth reading, if only to appreciate how much the entrepreneurial spirit is still alive in today’s world. It also provides reminders of how people push back against government regulation and how regulation can have unintended consequences.
If you haven’t read Hernando deSoto’s masterpiece, The Other Path: The Invisible Revolution in the Third World, I would suggest you read it first.Then read Neuwirth’s book for an update.
November 21, 2011
Lawyers, Ignorance, and the Dominance of Delaware Corporate Law
I'm a little late getting to this, but Bill Carney, George Shepherd, and Joanna Shepherd Bailey have posted an interesting draft on SSRN: Lawyers, Ignorance, and the Dominance of Delaware Corporate Law. Here's the abstract:
Why does Delaware continue to dominate the market for incorporations even though recent research has shown that the quality of Delaware corporate law has declined substantially? We focus on the rational ignorance of lawyers and investors. Using the results of our survey of lawyers involved in initial public offerings (IPOs) as well as our analysis of companies involved in IPOs, we conclude that lawyers recommend Delaware because they are ignorant about other states’ law. Because Delaware is so
dominant, law schools focus on Delaware corporate law, and a lawyer rationally learns the corporate law only of Delaware and her home state. Regardless of the quality of the law of other states, lawyers will not recommend it because they are unfamiliar with it. Likewise, lawyers recommend only Delaware law because they believe that investors are ignorant of other states’ law.
Super Committee Failure a Super Short?
It appears that the Super Committee is giving up and going home. Apparently the idea of compromise and actually being accountable for budget cuts is more appalling than the idea of asking Congress to bailout the Super Committee for their ineffectiveness. As CNN/Money explains:
The "automatic" budget cuts that were supposed to deter super-committee members from punting won't actually kick in until 2013. And that gives Congress more than 13 months to modify the law.
There will be tremendous pressure to do so.
Athough the market implication of failure to reach a compromise are not clear (at least to some), the early feedback is that the market doesn't like it, as this morning's headline, Dow Sinks 300 Points, explains.
So I got to thinking, does anyone benefit from not reaching a deal? Certainly anyone who thought a failure to reach a deal would send the market lower could short the market. I think a lot of people expected that such a failure would drive the market lower. What about people who knew a deal would fail? Like members of the Super Committee and their staffs?
Professor Bainbridge has been sharing his and others' views on congressional insider trading recently, see, e.g., here and here, so maybe that's why it's on my mind. I can't help but wonder, did anyone of those key people take a short position on the market last week before news of the likely failure started to leak out? And does it matter?
If so, it's not at all clear it would be illegal to do. It is pretty clear to me, though, at a minimum, it would be very scummy.
November 20, 2011
Why haven't the Occupy coders used Facebook?
There's an interesting short piece at The Atlantic about the web developers coding the online presence of the Occupy movement and how their choices have reflected the organizational structure and ethos of the movement. Check it out here.
It captures an interesting aspect of the movement and group speech.
I'm facing internet connectivity issues today. Rather than continue to try and craft my assigned Sunday post, which might result in my ultimately throwing my desktop out the window, I just thought I'd tell you all what the problem was. Somehow, I imagine everyone will be able to empathize in at least some way.