Wednesday, July 30, 2014

More on Halbig

Eric Rasmussen makes interesting points below.  In all honesty, I’m impressed and somewhat persuaded by some of the arguments that commentators are now raising.  Although I ultimately don’t find the majority’s reasoning in Halbig to be persuasive, I think the majority makes a far better argument than anything that was written until very recently.  With apologies for being frank to the point of rudeness, I thought the arguments originally made in support of the majority’s position to be so poorly reasoned as to be jokes.  If the arguments being made today had been made years ago, I would have taken these arguments far more seriously.

This brings us back to why I don’t think the inquiry here should be based on some narrow notion of legislative intent.  There are numerous reasons why courts should defer to agency rulemaking.  Agencies are much better positioned than courts to evaluate a regulatory framework as a whole and to interpret the language of a statute so as to make that language workable in light of implementation and administrative concerns.

Again, the State government officials who decided to go with the federal Exchange infrastructure rather than creating Exchanges on their own had no reason to expect that this decision would have implications for whether State citizens would be eligible for the premium tax credits.  If allowed to stand, the majority’s decision in Halbig would create chaos and very real hardship.  It’s not clear who would benefit politically from this chaos and hardship, or whether the ultimate effect would be to undermine or strengthen Obamacare.  But it seems undeniable that adopting the majority’s position today—after both States and individual taxpayers have made important decisions based on an expectation that premium tax credits would be available on the federal Exchanges—would create hardship and disaster that no one intended.

Adler and Cannon deserve credit for raising an innovative argument.  In a draft of one of their writings on the topic, they write: “We were both surprised to discover this flaw in the law, and characterized it as a ‘glitch’”.  (Jonathan H. Adler & Michael F. Cannon, Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits under the PPACA, Case Research Paper Series in Legal Studies, Working Paper 2012-27, July 2012, at 4.)  They then say in a footnote (id.) that they “were first made aware of this aspect of the PPACA by a presentation by attorney Thomas Christina at the American Enterprise Institute in December 2010. See Thomas Christina, What to Look for Beyond the Individual Mandate (And How to Look for It) (Dec. 6, 2010), available at:” 

Note that this presentation is dated December 6th, 2010, over eight months after the legislation was signed into law.  The draft Regulations interpreting the statutory language in question were already well developed by December 2010, and many States had already decided whether to establish their own Exchanges or whether to instead rely on the federal infrastructure.  Moreover, this date is when Adler and Cannon first heard the argument.  Again, I don’t remember when Adler and Cannon first took to radio and print media to start popularizing the argument, but it was clearly after December 6th, 2010. 

The situation today might have been different if the arguments that are now being raised had been articulated years ago, when the Regulations in question were being written and when the States were deciding whether to establish Exchanges on their own.  But, it is just plain ridiculous to argue that the unambiguous plain reading of a statute requires interpreting the statute in a way that almost no one thought was even a possible interpretation only a few years ago. 

I continue to believe that the best reading of the plain language of the statute is that premium tax credits are to be available on the federal-run Exchanges.  Yet, even if I am wrong, this is clearly an instance where the courts should defer to agency rulemaking.


July 30, 2014 | Permalink | Comments (2)

The back-and-Forth Treatment of Subsidies in Federal Exchanges in Legislative History

 We've got a discussion going. Excellent!  In “The Problematic Halbig Decision: Why “Intent” is Too Narrow an Inquiry”, David Gamage tells us that he and  others who were making regulations based on the new statute didn’t even hear mention of the possibility that non-participating states wouldn’t get subsidies for many months.  That’s what the House oversight report   says about Treasury at the time too.   So the Executive branch didn’t see any problem till it was pointed out to them from outsiders.

     This evidence cuts both ways, though. Notice that nobody says that Treasury officials read the subsidy clause and said, “Hey, there might be a problem because that language seems to exclude subsidies for federal exchanges.”  Why, when so many people now see a problem? My guess is that they were working frantically to implement the bill (remember  the federal exchange rollout fiasco  and all the deadline changes) and not looking for new problems.

     Let’s go back to   intent  , though.  As a bill progresses, clauses are inserted to please this and that group, and often  to get just one legislator’s vote. The people who draft the final bill may know very well what they’re doing, and hate the result compared to the draft-before-final, but insert the obnoxious clause knowingly because they need it to pass the bill.   They may then employ a useful bureaucratic trick: put the clause in the document to get agreement, but ignore it in implementation and hope the people who pushed for it don’t notice. (I’ve had that used  successfully against me myself more than once!)

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July 30, 2014 | Permalink | Comments (0)

Tuesday, July 29, 2014

The Rational Minority?

I have recently read an interesting paper, which was just published in Psych Science called In Search of Homo Economicus. The paper takes an individual difference approach to the concept of rationality and demonstrates consistent behavioral differences among people across various behavioral and personality measures. While the classical approach to the study of rationality is aimed at finding the situations in which people deviate from what rational choice approach would predict, the described paper attempts to identify who are the people who deviate from rationality and who are the people who follow the prediction of rational choice.

The researchers have used a combination of dictator and prisoner dilemma games, as well as various personality, intelligence and demographic measures on a sample of Tokyo residents (which is not argued to be representative). They found that 7% of their sampled participants are Homo Economicus (HE) who have kept all of their endowment in the dictator game, and that 8.7% of the participants are quasi–Homo economicus (qHE) who gave away only 15% of their endowment. Moreover, the HE participants were found to be smarter, more individualistic and more likely to engage in long-term investments.


As suggested in some of my previous posts, this approach holds a very promising direction for the law and behavioral science movement. One example, is the idea of differential regulation regarding the usage of monetary measures vs. non-monetary measures [see for example my paper on Intrinsic and Extrinsic Compliance Motivations]. One can speculate that in some legal contexts we might expect a higher ratio of HE and qHE (e.g. corporate taxation) who might then receive a different treatment relative to regulatory contexts with lower ratio of HE and qHE (e.g. Transportation law, Labor law). Naturally, these last examples require further empirical investigation and are not part of the described paper, however, they definitely show potential advantages of an individual difference approach to bounded rationality, an approach which is definitely not common within the legal scholarship.

At the same time, a word of caution is required when moving from theory to policy in the context of individual difference. In contrast to what is sometimes being understood, even very stable differences between people do not mean that these types of people care only about money while others don’t care about it at all. We need to recognize that the differences are of magnitude and hence the policy requirements that followed are important but still relatively limited.  

July 29, 2014 in Science | Permalink | Comments (0)

The Problematic Halbig Decision: Why “Intent” is Too Narrow an Inquiry

I was about to write a comment in response to Eric Rasmusen’s post below, but then I thought I’d make use of my privilege as a blog editor to reply through a post of my own. 

I think framing the issue in Halbig as a question of intent is to view the dispute far too narrowly.  As I noted in my prior post on these cases, I accepted a position at the Treasury Department after the passage of the Obamacare legislation, and I worked on the Regulations interpreting the tax provisions of Obamacare as a primary focus of my position. 

Importantly, I did not hear anyone even mention the possibility that the Obamacare legislation could be read to deny tax credits through the federal Exchanges until months after I arrived at Treasury.  I surrendered my Treasury computer and e-mails when my position ended, so I cannot look up the exact date.  But I remember vividly when I first heard this argument.  A senior political appointee I worked with had heard Michael Cannon present his argument on a radio show and asked me and others working on these issues what we thought of the argument.

Prior to that time, I had been reading the detailed language of the Obamacare statute on a daily basis while working on the early draft of Regulations for the premium tax credits (IRC Sec. 36B), the individual mandate (IRC Sec. 5000A), the employer mandate (IRC Sec. 4980H), and other related provisions.  I had been discussing these provisions with literally hundreds of other lawyers and government officials, many of whom were also poring over the statutory text of these provisions of Obamacare.  After first hearing Cannon’s argument , I asked the other lawyers and officials I had been working with whether they had heard anything like this argument before.  None had.  Everyone I spoke with was completely surprised upon first hearing Cannon’s argument.

How is this possible?  If you read the language of Sec. 36B out of context, Cannon’s argument seems obvious.  Many commentators agree with Cannon that his reading of the text is plainly correct.  And yet this reading never occurred to me or to numerous other lawyers or government officials before Cannon began arguing for his reading on radio and (later) in print.

I’ve explained elsewhere how the plain language of Sec. 1311 defines “Exchanges established by a State” as a defined term-of-art.  I thus consider Cannon’s argument to be based on a sloppy reading of the statutory language, because he ignores that the statute defines the terms he wants to read in a manner inconsistent with the statutory definitions.

But let’s imagine that I’m wrong.  What if I’m misreading the statutory text?  Numerous commentators have noted that we lack decisive contemporary legislative history.  Should we thus despair of determining the “intent” of Congress?

Perhaps so.  However, whatever the intent of Congress, no one claims that the States who chose to go with the federal Exchange infrastructure thought that they would be denying their citizens the premium tax credits by doing so.  This argument simply did not factor into the state-level debates about whether to establish Exchanges on their own or to instead rely on the federal government Exchanges.

We thus return to the fact that Cannon’s argument (which formed the basis of the challenges in Halbig and related cases) was developed after the fact.  Not only was this argument developed after the passage of the Obamacare legislation.  But, more problematically, this argument was developed after important real-world actors made major decisions with far-reaching implications based on reading the language of the statute in a manner contrary to Cannon’s arguments.  When the first states were deciding whether to establish their own Exchanges or instead to rely on the federal government, no one was arguing that this decision might have implications for whether the states’ citizens would be eligible for premium tax credits.

This “course of performance” evidence should easily trump any half-hearted attempts to directly divine legislative intent.

July 29, 2014 | Permalink | Comments (0)

Monday, July 28, 2014

What Does "Intent" Mean for a Legislature?

     A lot of the discussion of the Halbig Obamacare case about federal vs. state insurance exchanges is about the intent of Congress. The  problem is that people   are thinking of different things when they think “intent”.  Many people think it’s ridiculous to say that Congress intended to use subsidies to induce states to establish insurance exchanges, because if you had asked a random member of the Democratic majority whether he’d thought of that,  he’d say it never entered his mind.  I completely agree with that.  But it’s not relevant, because it’s also true that if you asked  the member about  virtually *any* detail of the bill, he’d say it never entered his mind.  We know what he voted for, but even that we know better than he did! He didn’t read it, after all.

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July 28, 2014 | Permalink | Comments (0)

Friday, July 25, 2014

Reforming Law Reviews II: A Proposal

Following up on my previous post on law reviews, and inspired by some posts at the Business Law Prof Blog here and here, I thought I’d share a modest proposal for how we might move toward what I would consider to be a better world.

I agree that there are significant advantages to the law review submissions process, as compared to full peer review, in terms of the speediness of reviewing submissions, preventing the dominance of the field by entrenched senior scholars, and otherwise allowing a wider variety of voices to be heard.  In particular, for legal scholarship aimed at influencing appellate courts (read: law clerks), student editors are probably better at selecting the most potentially influential pieces than would be faculty.

That said, I think it ridiculous that student law reviews as they are currently structured dominate the legal publishing world.  This is probably more of a problem for some subfields than others.  I think the dominance and current structure of student law reviews is seriously holding back the development of legal scholarship in my field of taxation.

Unfortunately, most of the existing peer-reviewed legal journals have significant restrictions in terms of length and style.  I think there is value to the law review style and I’d love to see more peer-reviewed journals accept traditional law review style publications.  My ideal would be for there to be a bunch of journals like the Tax Law Review, except made fully peer reviewed.

How might we evolve toward a system with more peer-review publishing opportunities for traditional-style legal scholarship? 

I strongly urge student editors at law reviews to start by creating one peer-reviewed issue a year.  The remaining issues of the journals could continue with their existing submission processes, thereby maintaining the advantages of the current system.  But journals could accept submissions for their peer-reviewed issue off cycle.  I imagine that many scholars would then try to submit to one or more peer-reviewed journals prior to the start of the submission cycles, with the intent of submitting through the general non-peer-reviewed process come February or August, for pieces rejected through the peer-reviewed process.

Note that student editors could retain control and primary decision making authority over what pieces are accepted for the peer-reviewed issues.  As I understand it, all that peer-review requires is that the editors solicit formal reviews of scholarship before making a decision and that the decision be based partially on these formal reviews. 

A number of top law reviews already solicit faculty reviews of scholarship.  I have been asked to review pieces on many occasions.  But this is generally done informally and inconsistently.  I understand peer-review as requiring a consistent and formal process for soliciting review letters and incorporating these letters into the process of deciding what pieces to accept. 

Particularly for secondary journals, I expect that making one issue a year peer-reviewed would greatly improve the quality of the submissions received and published.  Currently, I send most of my best work to the Tax Law Review for exclusive submission.  I would happily submit to peer-reviewed issues of secondary journals focusing on tax or business law if such existed. 

If any student editors read this, I would be very happy to work with you to help in establishing a peer-reviewed issue of your journal.  Please don’t hesitate to contact me if you might be interested. 

July 25, 2014 | Permalink | Comments (3)

Reforming Law Reviews I: On Blind Review

I see that there are some good posts on reforming law reviews up at the Business Law Prof Blog here and here.

Myself, I don’t think blind submission would have much effect on changing outcomes.  But I do think that all journals should adopt blind submission in order to increase the appearance of fairness.  I’ve served as a referee for a number of peer-reviewed journals that rely on blind submission.  I think in essentially every case that I either knew who the author(s) of the papers I was reviewing were or that I quickly found out who the author(s) were as an unavoidable result of the few minutes of background research I typically do to assess the uniqueness of the contributions of the pieces I review.  Tax is a small enough field, and we generally post papers in publically available fora and/or present papers at conferences well before submitting for publication.

I favor blind review not because I think it will significantly change outcomes, but rather because I think the small costs of blind review are greatly exceeded by increasing the appearance of fairness.  That law reviews ask for authors’ CVs is just plain distasteful, in my consideration.  It is undoubtedly difficult to evaluate scholarship on its quality, factoring out the biases generated by knowledge about the author.  But journal editors should at least try.  I’ve heard many stories that suggest that law review editors sometimes make decisions based on letterhead, CVs, and author reputation.  Yuck!

July 25, 2014 | Permalink | Comments (3)

Wednesday, July 23, 2014

The statutory text of Obamacare and the Halbig and King cases

Having had a busy day yesterday, I’m a little late to the party of discussing yesterday’s very important health care decisions: Halbig and King.

Much of the media and blog discussion has framed the legal debate as being between (a) focusing on the literal wording of the statute, and (b) looking to broader contextual or purpovist forms of statutory interpretation.  There is some truth to this.  But I think the view that the literal wording of the statute supports the majority’s decision in Halbig is wrong.

Central to Obamacare are new Exchanges designed to offer insurance plans to individuals and small businesses, and premium tax credits offered to make these insurance plans affordable for low and moderate income Americans.  Section 36B of the Affordable Care Act (“Obamacare” or the “ACA”) states that to be eligible for the premium tax credits, a taxpayer must enroll in a qualified health plan offered “through an Exchange established by the State under 1311.”  The majority decision in Halbig thus holds that premium tax credits are only to be available through Exchanges established by a state, not Exchanges established by the federal government.

Based solely on the language above, it is easy to see why so many have thought that the narrow language of the statute supports the position reached by the majority in Halbig.  However, it is crucial to understand that the term “Exchange” is a defined term in the statute.  Section 1311(d)(1) requires that “[a]n Exchange shall be a governmental agency or nonprofit agency that is established by a State.”

The majority in Halbig discuss the language of Section 1311(d)(1) at length and provide numerous arguments for why they decide that this language should not be determinative.  I think the majority makes a reasonable case, but I ultimately find their reasoning unconvincing.  I discussed some of the reasons why in an Essay co-authored with Darien Shanske, available here.

I lack the time today to comprehensively review the majority’s arguments in the Halbig decision.  But a few words of context might be helpful.

From 2010 through 2012, I took a leave from Berkeley Law to accept a position at the Treasury Department’s Office of Tax Policy.  As part of that position, I worked on the regulations challenged in the Halbig and King cases.  I started at Treasury after the ACA legislation had passed Congress and had been signed by the President, but I worked closely with many people who were involved in drafting the legislation.

When I arrived in Washington, most everyone was referring to the Exchanges as “state-run” Exchanges, or “state Exchanges”, or “state-established” Exchanges.  Even when discussing the possibility that the federal government might need to step in to establish Exchanges on behalf of some of the states, most everyone still referred to the Exchanges as “state run or established” Exchanges.  To this day, my files related to the Exchanges have the header “state-run Exchanges.”  In other words, it was simply understood by everyone I met who was involved in drafting the legislation, that the phrases “state-run Exchanges” or “state-established Exchanges” were terms of art meant to refer to all Exchanges.  Importantly, the structure and language of the statute is consistent with these forms of expression. 

Far more can be (and has been) said on these issues.  Again, I refer interested readers to my prior essay on this topic.  I may write more as I have time.  For now, I’ll end by emphasizing again the language of Section 1311(d)(1) setting forth the requirement that “[a]n Exchange shall be a governmental agency or nonprofit agency that is established by a State.”  The provision instructing the federal government to establish an “Exchange” when states fail to do so reads: “the Secretary shall (directly or through agreement with a no-tfor-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.”

Ultimately, the textual question in these cases comes down to whether the language of Section 1311(d)(1) should govern or only the language of 36B.  Arguments have been made for prioritizing the implications of each of these.  But, in my view, any discussion that mentions only the language of 36B and not the language of 1311 is missing the heart of the issue. 

July 23, 2014 | Permalink | Comments (1)

Tuesday, July 22, 2014

A Game Tree for Harry Reid vs. Indiana and the Halbig Obamacare Case


I just posted on the DC Circuit’s 2-1 decision against the Government in Halbig, the Obamacare case about whether “an Exchange established by the State under section 1311” means an exchange established by the state, so that in locations where there is no state exchange, the individual mandate and subsidy and employer mandate won’t apply.

Nobody really could believe that the language of the statute is ambiguous, so though the Administration does help lighten our day with some humorous arguments to that effect, their main arguments are about intent. Congress could not possibly have meant to incorporate provisions in a statute that would thwart the intent of those who voted for it! Well, that’s humorous too, since it’s not uncommon for politicians to shoot themselves in the foot. Indeed, given Obama’s current ratings in the polls, one might argue that the Courts should reverse the result of the 2012 election; voters couldn’t possibly have meant to re-elect Obama, and no doubt a majority of them would now admit they were mistaken. But let’s move to where law-and-economics can be helpful to the DC Circuit when it takes up Halbig en banc, as everyone thinks it will unless the case goes straight to the Supreme Court.

In his dissent, Judge Edwards says:

[N]o legitimate method of statutory interpretation ascribes to Congress the aim of tearing down the very thing it attempted to construct…

Appellants in this litigation have invented a narrative to explain why Congress would want health insurance markets to fail in States that did not elect to create their own Exchanges. Congress, they assert, made the subsidies conditional in order to incentivize the States to create their own exchanges…

The simple truth is that Appellants’ incentive story is a fiction, a post hoc narrative concocted to provide a colorable explanation for the otherwise risible notion that Congress would have wanted insurance markets to collapse in States that elected not to create their own Exchanges….

The majority thinks it unremarkable that Congress would condemn insurance markets in States with federally-created Exchanges to an adverse-selection death spiral.

      A little bit of game theory goes a long way. Here’s why Congress would indeed condemn insurance markets in States with federally-created Exchanges to an adverse-selection death spiral. It has to do with payoffs on and off the equilibrium path of a game. Or, since I’m not trying to be pedantic, with why people make threats.



     Let’s use a story. Suppose Harry Reid has a choice between passing a bill saying “No state exchange, no subsidy” or a bill saying “Fed exchange OK for subsidy.” He would prefer the states pay for the exchanges, since even a small saving like that will help reduce the cost to the federal government. He’s got a majority in the Senate, so he can pass whichever bill he wants. His payoff is 10, let us say, if the federal government has to raise taxes to pay for the exchanges, and 12 if the states pay. For the states, let’s call the player “Indiana”, since it’s one of the conservative states from which Reid expects trouble. Indiana will get a payoff of 0 if the federal government pays for the exchanges, and -1 if it has to pay for the exchanges itself, Reid thinks. Reid calculates, though, that under the “No state exchange, no subsidy” bill, Indiana’s payoff will be -3, because it will lose the subsidies and that’s more important than the expense of the exchanges. To be sure, Reid’s payoff would be -20 under that bill if Indiana didn’t establish an exchange, but that would be for Indiana to shoot itself in the foot, which politicians never do. Thus, Harry Reid passes the No State Exchange No Subsidy bill, Indiana establishes an exchange, and Harry gets his maximum possible payoff of 12. Harry has refuted Judge Edwards: he has purposely passed a bill that would cause chaos in Indiana and wreck Reid’s own policy--- but only if Indiana makes a mistake.

    Unfortunately, it was Harry who made the mistake. Indiana’s payoff from establishing the state exchange is -4, not -1. Harry has forgotten about the issue of principle: the Indiana conservative statehouse hates government health care even more than they love subsidies. And so Harry ends up with a payoff of -20.

     The game could be expanded realistically. At the cost of some complexity, we could formally model Harry’s uncertainty over whether Indiana’s payoff was -1 or -4, making this into “a game of incomplete information.” That would just be a technical cleanup, though--- the game would behave much the same. Or, we could also add another player: the Supreme Court. Suppose Harry thinks there is some chance Indiana’s payoff is actually -4, so his No Subsidy bill would backfire. He also knows, however, that some judges, like Judge Edwards, would like to come to his rescue. Thus, we might add a move by the Supreme Court at the end of Refuse to Establish State Exchange. The Supreme Court could keep the law as is, or change it to “Fed Exchange OK for Subsidy”--- in which case Reid is back to his +10 payoff. Or, even better, the Supreme Court might choose the move, “Force Indiana to set up an exchange no matter what the statute says,” and Harry could get his +12 payoff no matter how Indiana moved. I’ll leave that game as an exercise, or maybe for an amicus brief (anybody interested in writing one on this point?)

     This idea is familiar in law and economics in the form of the idea of “penalty defaults” in contract law. Professors Ayres and Gertner pointed out in 1989 that one way a judge could respond to sloppy contracts in which the parties made some clause ambiguous to try to get the courts to go to the trouble to sort it out would be for the court to pick a purposely harmful default clause to use if the parties tried that tactic. For example, if it was unclear which party would receive interest on an escrow account in a merger deal, the courts might want to say in advance that all the interest goes to the Taliban, so everybody loses. That would make them take more care with their drafting. A very recent example in another context is the case of the conservative professor who sued the U. of Iowa law school for political bias in hiring. The jury deadlocked and was dismissed, but somehow (I forget details) the judge called them back two minutes later and they were in agreement. The appellate court reluctantly said there’d have to be another trial, because though in this case it was satisfied that the jurors hadn’t had time to confer with outsiders and a new trial would be something of a waste, it was better to have a bright line rule.

Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 YALE L.J. 87 (1989).

Ian Ayres, Ya-Huh: There Are and Should Be Penalty Defaults, 33 FLA. ST. U. L. REV. 589, 597 (2006).


July 22, 2014 | Permalink | Comments (0)

DC Circuit Strikes Makes Obamacare Optional for States in Halbig

   The DC Circuit just decided 2-1 against the Government in Halbig, the Obamacare case about whether “an Exchange established by the State under section 1311” means an exchange established by the state or means any exchange operating in that state, even if it was established by the Federal government because the State refuses to establish one. This matters because the statute says that the government can only impose the individual mandate and give subsidies after such an exchange is established. Otherwise, it can set up a Federal exchange, but can’t herd people into it by either force or subsidies.

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July 22, 2014 | Permalink | Comments (0)

Monday, July 21, 2014

Acknowledgment, and We Hope More

We want to take a moment here to recognize a man who was our classmate, our colleague, our blogfather, and of course our good friend, Dan Markel.   He taught us not just how to be scholars, but how to be a community of scholars.  

Look, words are not enough.  Let's all think about building some more lasting tribute.  His family, his students, his institution all I'm sure will want to recognize the things he contributed to them.  Speaking just for myself, I'd like to see us, as scholars, make something that reflects and continues what he did for us.  Too soon now to say exactly what.  But I'm sure many others must feel the same.  Let's all give it some thought.     

July 21, 2014 | Permalink | Comments (0)

Friday, July 18, 2014

Thomas Piketty's Democratic Dystopia

Thomas Piketty's Capital in the Twenty-First Century has me reviewing some old law and economics articles. Piketty is concerned with wealth inequality, and believes that it will lead to dysfunctional democracies, and perhaps a return to the near-medieval inequalities of say, France's Belle Epoque period. He drops some dark hints of the violent dystopias that lie ahead if wealth gaps continue to increase. 

Piketty is right to be concerned. In societies with vastly inequalities, those with very little will have very little opportunity costs of violence, with the result that they will have a comparative advantage in violence. The rich can of course purchase security with their vast wealth, conferring upon them an absolute advantage in violence, but that will not be enough to prevent those with little left to lose from engaging in violence. Even though the poor could lose more in a violent clash, in a sense the violence will be more costly to the rich than the poor, which is exactly what the rich fear.

Professor Bruce Johnsen explains why someone with an absolute advantage in violence may be at a comparative disadvantage in violence. His 1986 piece The Formation and Protection of Property Rights Among the Southern Kwakiutl Indians, 15 J. Legal Stud. 41 (1986), illustrates how property rights among aboriginal groups of the Pacific Northwest emerged which provided a substantial amount of customary sharing, in part to avoid the wealth imbalances that would give rise to a comparative advantage in violence. 

July 18, 2014 | Permalink | Comments (0)

Tuesday, July 15, 2014

Should Suspicious Taxpayers Be Warned So They Will Amend Their Ways?

   Should the IRS warn taxpayers that they are in danger of audit, in the hope of getting them to file accurate amended returns?  Here’s how I’d model the situation:

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July 15, 2014 | Permalink | Comments (0)

Monday, July 14, 2014

Is law an Applied Field?

Is law An Applied Field?

Two weeks ago I have participated in a conference on individual differences in law beautifully organized by Avishalom Tor. The conference brought together many leading psychologists, economists and legal scholars to discuss the ability of the law to recognize individual differences. Whether the law is able to treat people differently is indeed a highly complex issue and during the two days of the conference, many related questions were raised and discussed. The focus of this post is related to an observation I had on the discourse between legal scholars and non-legal scholars at the conference. For the most part, the ability of the law to adopt individual differences was analyzed based on issues such as enforcement costs or the effect of differential regulation on behavior. This approach is not without a basis. Many of the academic papers in law reviews have a “mandatory” legal implications section. This is even truer, when it comes to empirical legal studies papers.

The discussion of whether law is a practical or a theoretical field, is of course quite old within the legal scholarship. However, the new point I wish to draw attention to here, is regarding the contribution of empirical legal studies to the perception of it as a policy oriented field. If this observation is accurate, it is quite paradoxical given the fact that empirical legal studies, could have been perceived as a way to merge legal scholarship better into other social sciences such as psychology or sociology, due to its shared methodology. However, instead when law is trying to have its own empirical perspective, it is being pushed to focus on improving legal policy rather than to contribute to the richness of the theoretical discourse in law, even if this could not translate to legal policy making.

This dilemma carries some relevancy for some interesting questions. For example, to what extent, should the research conducted in ELS, be externally valid (see my last post). In that regard, is there a justification for lab experimentation, which could not be translated immediately to policy making? Is there a point in doing empirical legal research, when variation in context is highly predictive?

Going back to the individual difference approach that triggered this discussion, we need to understand whether the law should adapt itself to the research on individual differences, only based on how complicated, it will be to change its enforcement practices or whether it should also consider theoretical justifications when accounting the fact that people are indeed different.







July 14, 2014 | Permalink | Comments (0)

Friday, July 11, 2014

Top 10 Recent L&E Downloads, Private and Public 7/11/14


RECENT TOP PAPERS for all papers first announced in the last 60 days  
12 May 2014 through 11 Jul 2014


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July 11, 2014 | Permalink | Comments (0)

Thursday, July 3, 2014

Impeachment: The Constitution's Remedy for Judicial Activism

    Libertyhead coin

 How would you construct a political regime to avoid the problem of judges issuing rulings to promote their personal political agendas, while at the same time insulating them somewhat from pressure by the other branches of government?  James Madison thought he had the answer, as he explains in Federalist 81:

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July 3, 2014 | Permalink | Comments (0)