Sunday, April 26, 2015

Florian Ederer at Columbia Law School on April 27, 2015

Florian Ederer, Assistant Professor of Economics, Yale School of Management, Cowles Foundation

"Promises and Expectations"

Abstract: We investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects....

April 26, 2015 | Permalink | Comments (0)

Sunday, April 19, 2015

Deferred Prosecution Agreements: Right Problem, Wrong Fix

Yglesias has a good write-up of the problems with regulating big financial firms, but he (and Elizabeth Warren) get to the wrong solutions.  To paraphrase, the problem is that many regulated firms are effectively judgment proof.  We may threaten sanctions against accounting firms that commit fraud, or chemical firms that dump waste into the river, or banks that swindle their counter-parties.  The problem is that the typical criminal sanction is too big, since indictment triggers a run on the firm by its employees, trading partners, and (eventually) creditors.  Prosecutors have therefore basically stopped indicting, leading to the rise of deferred-prosecution agreements, as nicely chronicled by my law school classmate Brandon Garrett. 

For Yglesias, and to lesser degree Garrett, the deferred prosecution agreement is too wimpy.  Since firms know that the government won’t indict, they have no reason to cave, leading to quite defendant-friendly deals.  This leads to under-deterrence.  Yglesias endorses Sen. Warren’s proposed solution, which is to credibly put the threat of indictment back on the table.

But prosecutors are not wrong to avoid indictment, since that leads to over-deterrence.  Over-deterrence is bad not only for firms that sink too much money into compliance, but also for society.  It’s like the problem of medieval justice: if the sentence for every crime is hanging, bandits have no marginal incentive to avoid killing their victims.

My own view, as I sketch in this new draft, is that the problem is caused by the choice of ex post remedies.  When regulators are facing defendants who are, in effect, judgment proof, the better solution is to switch to other incentives.  So, for example, we might impose a tariff on chemicals that would be hazardous if dumped, or use anti-trust to keep banks too small to impose systemic risks.  Obviously, there’s a tradeoff: not all firms will dump the chemical.  A key part of my argument is that regulators can adjust their ex ante prices to account for expected variations in ex post behavior; firms that are at higher risk of dumping pay more for the chemical.    

April 19, 2015 | Permalink | Comments (0)

Benjamin J. Keys at Berkeley on April 20, 2015

Minimum Payments and Debt Paydown in Consumer Credit Cards

Benjamin J. KeysUniversity of Chicago, Harris School of Public Policy

April 19, 2015 | Permalink | Comments (0)

Friday, April 17, 2015

An Income Tax Reform for the Risk-Neutral RIch

   Since it's Tax Week, I've been thinking how bothersome it is to fill out tax returns. There have also been the usual articles about how much of the income tax is paid by the top 1% of filers. I have an idea for how to save a huge amount of effort. It would have the side-effect that that same amount of tax would be paid by the top 1/2% of filers, as you'll see.

The idea is simple.  People can sign up for my Double or Nothing program in December of each year. The next January 10, the Commissioner of the IRS would go on TV, standing blindfolded next to a transparent box full of red and white balls. An assistant would mix the balls and then the Commissioner would pick one. If it was red, all enrollees born Jan 1-June30 would pay no taxes, and all other enrollees would pay double the normal taxes. 

 This would be attractive to rich people, who could be close enough to risk-neutral and whose time is valuable enough that they'd like the 50% chance of not having to file tax returns.  They'd be able and willing to dig into capital to pay their doubled tax. 

It would not affect economic surplus, because the expected tax rate would be unchanged by the randomization. 

April 17, 2015 | Permalink | Comments (1)

Wednesday, April 15, 2015

What Pension Crisis?

On Monday I attended an American Law Institute conference on the “Public Pension Crisis,” organized by the fabulous Amy Monahan.  (That is, the conference was organized by her, not (as far as I know) the crisis.)  Often these kinds of events fill me with a contrarian spirit, and this one was no exception.  Most readers here know that a number of state & local governments face massive unfunded pension obligations to their workers.  The baseline assumption behind the conference is that this is a serious problem to be solved.  Maybe in the end public pensions are a problem, but I think there’s a least a possible story that current arrangements aren’t so bad:  The problem isn’t pensions; it’s federalism.

Continue reading

April 15, 2015 | Permalink | Comments (0)

Tuesday, April 14, 2015

Hiring Women in Science and Economics

Male economists either care only about quality, or are biased against women and female candidates are generally better than male, even if observable characteristics are the same, it seems from "Leading scientists favour women in tenure-track hiring test US science and engineering professors preferred female job candidates by two to one:
"A 13 April study finds that faculty members prefer female candidates for tenure-track jobs in science and engineering — by a ratio of two to one. That result, based on experiments involving hypothetical job seekers, held true regardless of the hirer’s gender, department, career status or university type, researchers report in the Proceedings of the National Academy of Sciences."
Also compared: a married man with a stay-at-home wife and two kids relative to a divorced woman with two kids or a single woman: Temp

April 14, 2015 | Permalink | Comments (0)

Monday, April 13, 2015

Holger Spamann at Harvard Law School on April 14, 2015

On the Rationale of the Business Judgment Rule

April 13, 2015 | Permalink | Comments (0)

Wei Jiang at NYU on April 14

Sunday, April 12, 2015

Kathy Zeiler at Northwestern Law on April 13, 2015

Kathy Zeiler, Professor of Law, Georgetown Law (moving to BU)


April 12, 2015 | Permalink | Comments (0)

Saturday, April 11, 2015

Eric Talley at Columbia Law School on April 13, 2015

Eric Talley, The Rosalinde and Arthur Gilbert Foundation Professor of Law; Director, Berkeley Center for Law, Business, and the Economy, UC Berkeley Law

"Corporate Inversions and the Unbundling of Regulatory Competition"

Abstract: A sizable number of US public companies have recently executed “tax inversions” – acquisitions that move a corporation’s residency abroad while maintaining its listing in domestic securities markets.  When appropriately structured, inversions replace American with foreign tax treatment of extraterritorial earnings, often at far lower effective rates.  Regulators and politicians have reacted with alarm to the “inversionitis” pandemic, with many championing radical tax reforms. This paper questions the prudence of such extreme reactions, both on practical and on conceptual grounds....

April 11, 2015 | Permalink | Comments (0)

Monday, April 6, 2015

Morgan Ricks at NYU on April 7, 2015

Paper TBA

April 6, 2015 | Permalink | Comments (0)

Joe Bankman (Stanford) and Daniel Shaviro (NYU) at Harvard Law School on April 7, 2015

Piketty in America: A Tale of Two Literatures

April 6, 2015 | Permalink | Comments (0)

Sunday, April 5, 2015

Anastasia Zokolyukina at Northwestern Law on April 6, 2015

Anastasia Zakolyukina, Assistant Professor of Accounting, The University of Chicago Booth School of Business 
CEO Personality and Firm Policies

April 5, 2015 | Permalink | Comments (0)

Robert Marquez at Berkeley Law on April 6, 2015

Supervisory Incentives in a Banking Union




April 5, 2015 | Permalink | Comments (0)

Friday, April 3, 2015

SSRN Top Ten, Law & Economics of Private Law, 4/3/15

1 338 Hello Barbie: First They Will Monitor You, Then They Will Discriminate Against You. Perfectly. 
Irina D. Manta and David S. Olson 
Hofstra University - Maurice A. Deane School of Law and Boston College Law School 
Date posted to database: 16 Mar 2015 
Last Revised: 1 Apr 2015
2 267 The Valuation of Unprotected Works: A Case Study of Public Domain Photographs on Wikipedia 
Paul J. HealdKris Erickson and Martin Kretschmer 
University of Illinois College of Law, University of Glasgow and University of Glasgow 
Date posted to database: 6 Feb 2015 
Last Revised: 6 Feb 2015
3 168 Contract as Empowerment 
Robin Bradley Kar 
University of Illinois College of Law 
Date posted to database: 23 Feb 2015 
Last Revised: 31 Mar 2015
4 163 Regulating Against Bubbles: How Mortgage Regulation Can Keep Main Street and Wall Street Safe - from Themselves 
Ryan Bubb and Prasad Krishnamurthy 
New York University School of Law and U.C. Berkeley School of Law 
Date posted to database: 1 Feb 2015 
Last Revised: 31 Mar 2015
5 134 The Author's Place in the Future of Copyright 
Jane C. Ginsburg 
Columbia Law School 
Date posted to database: 7 Mar 2015 
Last Revised: 8 Mar 2015
6 119 The Opening of American Law: Neoclassical Legal Thought, 1870-1970: Epilogue 
Herbert J. Hovenkamp 
University of Iowa - College of Law 
Date posted to database: 4 Feb 2015 
Last Revised: 24 Feb 2015
7 112 Conflating Politics and Development? Examining Investment Treaty Arbitration Outcomes 
Susan D. Franck 
Washington and Lee University - School of Law 
Date posted to database: 14 Mar 2015 
Last Revised: 18 Mar 2015
8 110 Economic 'Necessity' in International Law 
Alan O. Sykes 
New York University School of Law 
Date posted to database: 3 Mar 2015 
Last Revised: 7 Mar 2015
9 97 Corporate Governance, Pay Equity, and the Limitations of Agency Theory 
Marc T. Moore 
University of Cambridge, Faculty of Law 
Date posted to database: 18 Feb 2015 
Last Revised: 18 Feb 2015
10 92 A Fuller Understanding of Contractual Commitment 
Zev J. Eigen and David A. Hoffman 
Northwestern University School of Law and Temple University - James E. Beasley School of Law 
Date posted to database: 22 Feb 2015 
Last Revised: 16 Mar 2015

April 3, 2015 | Permalink | Comments (0)

SSRN Top Ten, Law & Economics of Public Law, 4/3/15

1 716 Rethinking Presumed Knowledge of the Law in the Regulatory Age 
Michael Anthony Cottone 
Date posted to database: 24 Mar 2015 
Last Revised: 24 Mar 2015
2 337 Executive Compensation: A Modern Primer 
Alex Edmans and Xavier Gabaix 
London Business School - Institute of Finance and Accounting and New York University - Stern School of Business 
Date posted to database: 13 Mar 2015 
Last Revised: 20 Mar 2015
3 236 Which Way to Nudge? Uncovering Preferences in the Behavioral Age 
Jacob Goldin 
Stanford Law School 
Date posted to database: 28 Feb 2015 
Last Revised: 13 Mar 2015
4 186 Nudges, Agency, Navigability, and Abstraction: A Reply to Critics 
Cass R. Sunstein 
Harvard Law School 
Date posted to database: 13 Mar 2015 
Last Revised: 25 Mar 2015
5 172 An Empirical Examination of Why Mobile Money Schemes Ignite in Some Developing Countries but Flounder in Most 
David S. Evans and Alexis Pirchio 
University of Chicago Law School and Global Economics Group 
Date posted to database: 18 Mar 2015 
Last Revised: 26 Mar 2015
6 144 Regulating Internalities 
Hunt Allcott and Cass R. Sunstein 
New York University (NYU) and Harvard Law School 
Date posted to database: 1 Mar 2015 
Last Revised: 1 Mar 2015
7 137 Behavioral Public Choice: The Behavioral Paradox of Government Policy 
W. Kip Viscusi and Ted Gayer 
Vanderbilt University - Law School and Brookings Institution 
Date posted to database: 4 Feb 2015 
Last Revised: 4 Feb 2015
8 135 Critiques of Law and Economics 
David M. Driesen and Robin Paul Malloy 
Syracuse University - College of Law and Syracuse University College of Law 
Date posted to database: 4 Mar 2015 
Last Revised: 4 Mar 2015
9 94 Using the 'Smart Return' to Reduce Tax Evasion 
Joseph BankmanClifford Nass and Joel B. Slemrod 
Stanford Law School, Stanford University and University of Michigan, Stephen M. Ross School of Business 
Date posted to database: 16 Mar 2015 
Last Revised: 2 Apr 2015
10 91 What Caused the Crime Decline? 
Oliver K. RoederLauren-Brooke EisenJulia BowlingJoseph E. Stiglitz and Inimai M. Chettiar 
University of Texas at Austin - Department of Economics, New York University (NYU) - Brennan Center for Justice, New York University (NYU) - Brennan Center for Justice, Columbia Business School - Finance and Economics and New York University (NYU) - Brennan Center for Justice 
Date posted to database: 20 Feb 2015 
Last Revised: 16 Mar 2015

April 3, 2015 | Permalink | Comments (0)

Wednesday, April 1, 2015

An Example of Realistic Paternal Rationality

Yes, as Prof. G. said, my last post was not meant to subject us to legal liability. I hope this one doesn't provoke tortious action either, if it turns out to be practical advice for some readers: 

Heard on the bus. A passenger with a strong Boston accent  telling his friend that his mother told him all his brothers and sisters were functional alcoholics and his son was no good, but  "I knew he'd be doing time eventually, so I taught him boxing."

April 1, 2015 | Permalink | Comments (0)

Tuesday, March 31, 2015

How To Prevent Someone Else from Applying As You To Steal Your Tax Refund

Via Taxprof, Krebs on Security says in Sign Up at  Before Crooks Do It For You: 

If you’re an American and haven’t yet created an account at, you may want to take care of that before tax fraudsters create an account in your name and steal your personal and tax data in the process.

I left a comment at Taxprof, and repeat it here:

Getting registered is indeed a good idea. I did it at:

What you do is start ordering a transcript. You'll first be registered, after answering some questions. You put in your name and a few things, and they'll send you an email code that will last 15 minutes. This took a while. First, their email took 40 minutes to arrive, and so was dead on arrival. Next, it took perhaps 10 minutes, but I wasn't watching my email carefully, so it died too. Next, it took 30 seconds, so I succeeded. After that, you'll answer some hard questions such as what year you bought your house and signed up for credit cards. I don't know if I answered correctly or not. It's multiple choice. I seemed to get registered, though. Then I logged out, rather than ordering a transcript.
     I should have my wife do this too. I wonder whether children's accounts and trusts need to do this? If they are due for refunds, I suppose so.

  Actually, another aspect of this is that it might be interesting to steal politicians' tax returns this way. I suppose one could legally publish them then, and be punished only if it could be proven that you stole them, which would be difficult.  Harry Reid's tax returns would be interesting. 

March 31, 2015 | Permalink | Comments (1)

Saturday, March 28, 2015

Negative Growth and Dissaving Can Be Good and Appropriate

Via Marginal Revolution,  I see that  Edward Hugh says

So, what do you do about the problem of secular stagnation, if that is what it is? Again here there is divergence of opinion. Some still seek to treat the phenomenon as if it were a variant of the liquidity trap issue. Most notably Paul Krugman, who continues to hope that massive quantitative easing backed by strong fiscal stimulus will push economies like the Finnish one back onto a healthy path. But if the issue is secular stagnation, and the root is population ageing and shrinking, it is hard to see how this can be.

    Very good. People have to realize that sometimes negative growth and dissaving is optimal. Just think of any elderly man. His productivity used to be much higher, before he retired or cut back his hours of work, so he has negative personal product growth. His savings used to be higher too, before he started drawing on his retirement account. Does he have an economic problem and needs to be forced to go back to work? No. Multiply him by 10 million and nothing changes.

March 28, 2015 | Permalink | Comments (0)

Friday, March 27, 2015

Spamann on the Perils of Cross-Country Legal Empirics

"Empirical Comparative Law" Free Download 
Annual Review of Law and Social Science, Vol. 11, 2015, Forthcoming
HOLGER SPAMANNHarvard Law School

I review the empirical comparative law literature with an emphasis on quantitative work. After situating the field and surveying its main applications to date, I turn to methodological issues. I discuss at length the obstacles to causal inference from comparative data, and caution against inappropriate use of instrumental variables and other techniques. Even if comparative data cannot identify any single causal theory, however, they are extremely important in narrowing down the set of plausible theories. I report progress in measurement design, and suggest improvements in data analysis and interpretation using techniques from other fields, particularly growth econometrics.

March 27, 2015 | Permalink | Comments (0)