Saturday, March 28, 2015
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.
Friday, March 27, 2015
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.
Jill E. Fisch, University of Pennsylvania Law School
Eric Helland, William F. Podlich Professor of Economics and George R. Roberts Fellow, Claremont McKenna College
Estimating Effects of English Rule on Litigation Outcomes
Marina Halac, David W. Zalaznick Associate Professor of Business, Columbia Business School
Abstract: We study the design of contests for specific innovations when there is learning: contestants’ beliefs dynamically evolve about both the innovation’s feasibility and opponents’ success. Our model builds on exponential-bandit experimentation. We characterize contests that maximize the probability of innovation when the designer chooses how to allocate a prize and what information to disclose over time about contestants’ successes. A “public winner-takes-all contest” dominates public contests—those where any success is immediately disclosed—with any other prize-sharing scheme as well as winner-takes-all contests with any other disclosure policy. Yet, it is often optimal to use a “hidden equal-sharing contest”.
Monday, March 23, 2015
Jill Fisch, University of Pennsylvania Law School
Paper Topic: PROVOKING CORPORATE GOVERNANCE INNOVATION: THE CASE OF THE GOLDEN LEASH
Tuesday, March 17, 2015
"A man tried to get to the moon by climbing a tree. It almost worked. He reported steady progress--- all the way to the top of the tree. "
(I forget where I got this idea. It sounds like a Chinese proverb; I think it would work well in characters. Google Translate gives " 一個人試圖去月球通過爬樹。它幾乎工作。他報導穩步推進---一路樹的頂端," which returns as "A person trying to use the trees to the moon. It's almost working. He reported steadily all the way to the top of the tree." But something more succinct is needed--- it should only take half that number of characters.)
Monday, March 16, 2015
Deborah Jones Merritt ("DJM"), a law professor at Ohio State, has posted a new paper analyzing employment outcomes for recent law graduates. DJM does a fantastic amount of legwork, collecting the late-2014 employment status for more than 1,000 lawyers admitted to the Ohio bar around 2010. From these data, she makes some claims (of increasingly problematic nature) about the path of employment progress for those lawyers, for lawyers around the country, and for legal education.
This would be an excellent paper if DJM had been content to offer us a snapshot of employment outcomes for a cross-section of new lawyers in a second-tier legal market. It's a sobering picture, with about one-sixth of the pool in "solo practice," which she convincingly shows often equates to a struggle to make ends meet. And the methodology -- hand-gathering results for every lawyer -- is impressive.
My problem is that instead DJM wants to offer us a dynamic analysis, comparing 2014 to 2011, and arguing that the resulting differential tells us that there has been a "structural shift" in the market for lawyers. It might be that the data exist somewhere to conduct that kind of analysis, but if so they aren't in the paper. Nearly all the analysis in the paper is built on the tend line between DJM's 2014 Ohio results and national-average survey results from NALP.
Let me say that again. Almost everything DJM says is built on a mathematical comparison between two different pools whose data were constructed using different methods. I would not blame you if now stopped reading. But below the jump, some elaboration.
Sunday, March 15, 2015
Of course, comments & suggestions are very welcome.
Brian D. Galle, Boston College Law School
March 13, 2015
This Article argues that the consensus in favor of ex post regulation overlooks some important considerations. Ex post regulation does provide useful additional information when regulated parties are heterogeneous, but also carries significant and sometimes prohibitive social cost, especially when externalities are produced by limited-liability firms. Further, drawing on results from mathematical simulations, I show that the costs of heterogeneity can be sharply reduced with even modest up-front information. I apply these insights to a series of examples, including the obesity crisis, the regulation of systemic risk in the banking sector, state fiscal failures, and the design of the IP system.
Wednesday, March 11, 2015
JONAH B. GELBACH, University of Pennsylvania Law School
This paper presents empirical evidence concerning the adjudication of defendant-filed summary judgment motions from nearly 2,000 randomly selected employment discrimination and contracts cases to try to assess Twombly and Iqbal’s performance in filtering cases according to merit. I first explain how such data might be helpful in such an assessment, taking into account the possibility that parties’ behavior might have changed following Twombly and Iqbal.
I then report results indicating that even using this large collection of data -- the most comprehensive data assembled to date to address this question -- we cannot tell whether “TwIqbal” supporters or critics are more correct about the efficacy of the new plausibility pleading regime in the pre-discovery filtering of cases according to merit. This null result points to the very real possibility that plausibility pleading’s case-quality effects -- a quintessential empirical question -- simply can't be answered using data.
This paper’s basic message, then, is that empirical evidence is unlikely to settle the debate over the case-quality effects of the new pleading regime ushered in by Twombly and Iqbal.
Tuesday, March 10, 2015
"Addressing the Zeros Problem: Regression Models for Outcomes with a Large Proportion of Zeros, with an Application to Trial Outcomes"
Journal of Empirical Legal Studies, Vol. 12, Issue 1, pp. 161-186, 2015
In law‐related and other social science contexts, researchers need to account for data with an excess number of zeros. In addition, dollar damages in legal cases also often are skewed. This article reviews various strategies for dealing with this data type. Tobit models are often applied to deal with the excess number of zeros, but these are more appropriate in cases of true censoring (e.g., when all negative values are recorded as zeros) and less appropriate when zeros are in fact often observed as the amount awarded. Heckman selection models are another methodology that is applied in this setting, yet they were developed for potential outcomes rather than actual ones. Two‐part models account for actual outcomes and avoid the collinearity problems that often attend selection models. A two‐part hierarchical model is developed here that accounts for both the skewed, zero‐inflated nature of damages data and the fact that punitive damage awards may be correlated within case type, jurisdiction, or time. Inference is conducted using a Markov chain Monte Carlo sampling scheme. Tobit models, selection models, and two‐part models are fit to two punitive damage awards data sets and the results are compared. We illustrate that the nonsignificance of coefficients in a selection model can be a consequence of collinearity, whereas that does not occur with two‐part models.
Friday, March 6, 2015
The Obama Administration Declares Full Agreement with the Ferguson Grand Jury Decision Not To Indict!
President Obama’s Justice Department has just issued "Department of Justice Report Regarding the Criminal Investigation into the Shooting Death of Michael Brown by Ferguson, Missouri Police Officer Darren Wilson" (March 4, 2015). It’s surprising. It unequivocally exonerates Officer Wilson and says that he was acting in self defense. It doesn’t just say, “there isn’t sufficient proof” or “we cannot say beyond a reasonable doubt”. It goes into specifics and says that the conventional story, pushed by the mainstream media, was completely false. The Justice Department has not only failed to indict Wilson, they have decided it’s not even worth bringing the matter before a federal grand jury.
Will there be mass protests? Will Washington, D.C. be burned down? Will there be calls for President Obama to resign? Do black lives matter?
I thought the Ferguson grand jury documents definitely proved Officer Wilson innocent, that the Ferguson grand jury acted correctly in not indicting, and that it was even questionable whether the prosecutor should have brought the matter before a grand jury (but probably justified in light of public concern, for transparency). But that doesn’t seem to be the perception of many people, even educated people, though I don’t know if any of those people actually looked at the evidence. This could be the subject of a fascinating case study, perhaps even a comparative one comparing it to France’s Dreyfus case (though that took years to finish), on how elite opinion is formed by initial news reports and is hard to change even as more credible evidence appears.
Some quotes from the Justice Department report:
Monday, March 2, 2015
I would like to highlight a great book, recently published, by Richard H. McAdams from Chicago Law School on the Expressive powers of Law. (Harvard University press 2015)
The book brings together lots of research, which has been carried out throughout the years by McAdams and his co-authors on this important topic. McAdams, one of the most important scholars in this tradition, was among the first legal scholars to recognize that law can affect behavior not only through sanctions and morality.
I personally feel especially connected to the expressive function of the law since I have written my mostly experimental dissertation on this topic. What’s unique about the subject is that it captures something which many people feel lies somewhere between deterrence and moral/fairness based approaches to compliance but it is actually based on both. This approach is also unique in a sense that it represents research conducted by people from different disciplines, each suggesting a different account for what expressive law really captures. For example, one of my PhD advisors, Bob Cooter, has developed a competing thesis to this topic. This concept has attracted scholars in the field of law and philosophy to write about it and people who focus on law and institutions have worked on it as well.
The specific thesis provided by McAdams focuses on the notion of information provided by the law as a way to help people coordinate their action. Clearly, the focus on information signaling and focal points brings to the table, something which is distinctively different than deterrence or internalization. Interestingly, while McAdams himself is mostly a Law and Economics scholar, he does review many of the relevant literatures from various other disciplines and analyses them.
However, at the same time it is clear that law serves as a much better focal point when it is seen as something that might be obeyed due to either extrinsic or intrinsic rationales. This is why it is important to recognize that this third "in between" type of effect of the law captures parts of the more traditional approach to the effect of law on behavior.
McAdams' book is also very interesting in a world where states now communicate with citizens through nudging them by various situational cues, which are sometimes beyond their awareness. Revisiting some of the more traditional effects of the law, when people are aware of the effects of it and can deliberate on its meaning, is therefore a highly needed task.
Thursday, February 26, 2015
Steve Sailer has a post, Texas's Top 10 Most Wanted Fugitives Include 8 White Males . (though all 8 are hispanic, as well as the one woman on the list). That made me curious about the FBI list. Here it is:
The federal prison population is 34% hispanic, so that ratio matches the Ten Most Wanted pretty well. It's 7% female, which is also pretty close, but 38% black. I wonder whether the most serious criminals are really 40% WASP (we Norwegian-German-Americans feel a bit left out), or whether the choice is political. It might be interesting to look at the ethnic make-up over time. The FBI has a list of everybody who's ever been Most Wanted at http://www.fbi.gov/wanted/topten/ten-most-wanted-fugitives-faq/.
Monday, February 23, 2015
Comments on Goolsbee and Krueger, “A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler,”
Austan D. Goolsbee and Alan B. Krueger have just posted a working paper, “A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler,” that is going to be a Journal of Economic Perspectives article (I saw it via Marginal Revolution). They were involved in the process in the Obama Administration. They think the rescue was a success, but I think there are some things about the process that they don’t notice, much less deal with. I’ll let them know about them, and maybe they’ll address them in the final version.
The biggest problem to sort out is the difference between the accounting/legal and the economic assets. When a company goes bankrupt, the first-order economic effect is zero, despite the drastic accounting/legal effect. The assets are the same as they were--- they’re just owned by different people. It’s not necessarily any different than when existing shareholders sell 60% of the stock to new shareholders. In bankruptcy, the existing shareholders are in effect forced to give up 100% of the stock to the people who lent them money they can’t repay. Often those people will decide the company isn’t worth keeping together, so they sell it off in pieces, at the extreme auctioning off the land, trucks, and furniture. But it’s not like a nuclear bomb hit the company’s property.
"U.S. Consumers’ Holdings and Use of $100 Bills"
Federal Reserve Bank of Boston Research Paper Series Research Data Reports No. 14-3
Conventional wisdom asserts that $100 bills are often associated with crime and foreign cash holdings, leading some commentators to call for their elimination; in light of this view, it is useful to examine the legal, domestic use of cash. This report uses new data from the 2012 Diary of Consumer Payment Choice (DCPC) to evaluate consumer use of $100 bills as a means of payment. On a typical day in the United States, 5.2 percent of consumers have a $100 bill in their pocket, purse, or wallet. But only 22 percent of U.S. consumers have at least $100 in their wallet, pocket, or purse. Of these cash-intensive consumers, the main association with holding a $100 bill is the amount of cash carried. A consumer who carries $400 to $699 has a 64 percent probability of carrying at least one $100 bill.
Sunday, February 22, 2015
Critics seems to agree that equity crowdfunding—the new exemption to the Securities Act that lets ordinary people invest in startup companies—is going to be a major flop. Papers call it a “siren call,” a “promise unfulfilled,” “a market for lemons” and even “fraudfunding.” The problems are many, but proposed solutions are few. Instead of finding new holes to poke in the existing regulation (Title III of the JOBS Act of 2012), can we find a regulatory patch that makes crowdfunding work?
Yes we can find a valuable role for crowdfunding, but that means asking some new questions. What is crowdfunding supposed to do, anyway? First off, let’s be clear on what it won’t do: crowdfunding won’t fund small businesses. Despite what Barack Obama said when signing the JOBS Act into law (“start-ups and small business will now have access to a big, new pool of potential investors”), small business remain terrible equity investments. They just don’t product rewards sufficient to offset their risks. But crowdfunding can “democratize access to capital,” as the MIT Sloan innovation@work blog put it. Can crowdfunding create the possibility of viable startups with new business models (not just iPhone apps) created by new entrepreneurs (not just white male founders) in new geographies (not just Silicon Valley)?
Crowdfunding as it's currently regulated won't democratize investment, but it could be restructured to fulfill this promise, and here’s how. One: raise the crowdfunding limit from $1 million to $5 million. As Number Two said to Dr. Evil in the 1997 movie Austin Powers, “One million dollars isn’t exactly a lot of money these days.” Startups—especially in relatively cost-intensive fields like hardware design and life sciences—need millions of dollars to get started. For example, the Pebble smartwatch (the most successful crowdfunded campaign to date) needed $10 million to bring their product—which is now sold in BestBuy, WalMart, Amazon and Target—to market.
Two: require angels to invest before crowdfunding. Crowds of folks investing $25 each don’t have proper incentives to protect themselves. It’s rational for such small investors to be apathetic. Crowdfunding is fraught with fraud risk because no one may be overseeing the investment. Angels, who invest at least $10,000 (and often more) each—and do this for a living—are in a much better position to diligence, oversee and influence a brand new startup company.
My new paper talks about these and related topics in some depth, but the point is simple: the best way to protect crowdfunding investors is to let them invest enough money (collectively) in startups to protect themselves. While the SEC is still pondering the exemption’s rulemaking, it’s high time to raise the limit so crowdfunding can actually democratize investment. Voting with dollars only works when the money can be well spent.
For more in depth information and analysis, check on my new article on SSRN, Bridgefunding is Crowdfunding for Startups across the Private Equity Gap, at http://ssrn.com/abstract=2544365
By Seth C. Oranburg, Visiting Assistant Professor, Florida State University College of Law