Sunday, June 22, 2014

Farms vs. Developers or Farms vs. Farms?

The New York Times ran an article a couple of weeks ago on a new kind of retirement community: not just a sprawling collection of tract houses solely for retirees, but mixed-use and mixed-age communities with special resources for older people. The visionary developer credited with leading the way of this new, more enlightened model of retirement living was Del E. Webb, whose first retirement community was Sun City, near Phoenix. First-year law students should remember that name. Del Webb developed Sun City, which grew and grew and grew, towards a feedlot owned by Spur Industries, a cattle feedlot. The feedlot had been there since 1956, farming in the area since 1911, and Sun City since 1960. Sun City literally grew toward the feedlot, and when Webb started having trouble selling houses, he sued Spur on the grounds that the feedlot was a nuisance. Most students think it wrong that the late-comer Webb should be able to sue the feedlot, which was already there. The chutzpah!

But as we learn in Property class, why should there be a first-in-time, first-in-right rule? Why should a feedlot essentially foreclose residential development by virtue of being there first? Back when Phoenix was a growing city and residential development was a valuable activity (let's not talk about the water usage for now), why should a feedlot stay there just because it was there? The Arizona court held in Spur Industries v. Del E. Webb that it shouldn't, and sided with Del Webb -- to an extent. Spur had to move its feedlot, but Webb had to pay for the move. My students generally like that result, as land moves to its most valuable use (let's not talk about the water usage for now), and the feedlot is made whole. The "coming to the nuisance" defense is not an absolute defense, but merely a factor.

But that case did not sit well with farmers. In every single state plus Puerto Rico, some form of a "Right-to-Farm" law was passed. RTF statutes provide farms with a defense to nuisance claims by plaintiffs that migrate toward (or "come to") any allegedly nuisance-creating farm. RTF statutes commonly set out some definition of the agricultural operations that can raise the defense, a list of permitted operational changes that can be undertaken without losing the defense, and some time limit that serves as an effective statute of limitations on any claims of nuisance against a farm.

So now the coming to the nuisance defense *is* (to varying degrees and subject to lots of qualifications) an absolute defense. Are we happy?

Well, it depends on who you are. The usual justification of Right-to-farm laws of protecting farms from encroaching residential development rings hollow in light of modern developments in agricultural operations. For example, in Parker v. Obert's Legacy Dairy, an Indiana court upheld a fairly long-standing interpretation of Indiana's Right-to-Farm law as protecting a farm that expanded operations from about 100 cows to almost 1000, holding that such a change was not a "significant change" in the type of agricultural operation, and thus enjoyed the protection of Indiana's RTF statute, despite its fairly significant scaling-up. The dairy could therefore not be the subject of a nuisance lawsuit brought by neighbors.

But maybe this is not really just about the right to farm anymore. The plaintiff's property in Parker was also a farm, albeit a small-scale farm. As between the plaintiff's farm and the defendant's farm, the Right-to-Farm law acts as a subsidy for the defendant's large-scale farm. While economies of scale accrue to larger, more intensive agricultural operations, a variety of environmental and land use laws provide a check on the uncontrolled growth of such farms, ensuring that the negative externalities of such farms are at least commensurate with the economic benefits of efficient large-scale farming. Right-to-Farm laws upset this balance, providing incentives to intensify agricultural operations and enlarge capital investments. The result is a skewing of the distribution of farms toward the larger, the more intensive, and the greater polluting operations.

June 22, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, June 16, 2014

The Latest News in Adultery Law

Volokh Conspiracy has a post, “The First Amendment protects a right to engage in adultery?: on Rothrock v. Cooke (N.C. Super. Ct. June 11, 2014). Judge John Craig is being an activist and a sloppy lawyer here. He has eliminated two torts, alienation of affections and criminal conversation, on the grounds of violation of the 1st amendment rights of freedom of speech and freedom of association as incorporated by the 14th amendment. It’s commonplace, if wrong, to incorporate the 1st amendment via the 14th, but it’s going a bit far to say that private sexual acts count as free speech, no matter what judges may say about them if they're done publicly in exchange for admission fees. (Or perhaps I'm wrong on that--- if the couple charges admission, does that make it commercial speech and hence subject to almost no 1st amendment protection?)

Here’s what the 2nd Restatement of Torts says about the two torts:

@ 683 ALIENATION OF SPOUSE'S AFFECTIONS. One who purposely alienates one spouse's affections from the other spouse is subject to liability for the harm thus caused to any of the other spouse's legally protected marital interests.

@ 685 CRIMINAL CONVERSATION WITH A SPOUSE. One who has sexual intercourse with one spouse is subject to liability to the other spouse for the harm thus caused to any of the other spouse's legally protected marital interests.

      Note that these are distinct torts. Mothers in law have been sued for alienation of affections, and a rapist would be liable under the action of criminal conversation.

     Alienation of affections is akin to tortious interference with contract; the tort is to act so as to cause someone to violate legal rights established by previous agreement. In tortious interference, the tortfeasor causes the third party to break a contract, which is illegal in the sense that it gives him a cause of action. In alienation of affections, the tortfeasor causes the third party (say, the husband) to deny the plaintiff the affection to which marriage entitles her---- though of course it is not unlawful for a husband to be emotionally cruel to his wife. Freedom of speech could be involved in alienation of affections since, as in tortious interference and many conspiracy cases, the unlawful action takes the form of words and the communication of ideas. It’s hard to see how criminal conversation is freedom of speech, though, since it can be carried out in complete silence and without communicating anything except, perhaps, an unpleasant disease.

     At any rate, this attracted my attention because I am the chief (because the only) scholar of the law and economics of adultery that I know, as a result of my article on the subject, "An Economic Approach to Adultery Law," Chapter 5, pp. 70-91 of Marriage and Divorce: An Economic Perspective, edited by Antony Dnes and Robert Rowthorn, Cambridge: Cambridge University Press, 2002, It has a lot of law and history in it, with a focus on Indiana as an example (did you know Indiana was the divorce mill state of the 19th century, to which New York couples would travel for easy divorces?)

June 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 15, 2014

Student Loans III: The Redistribution Question

We’ve been talking about student loans, and the fact that the federal government is turning a multi-billion dollar profit on them (especially law-school and other graduate loans).  These profits may be the equivalent of a progressive tax on borrowers.  Is that a reason to support the current design of the program?  Assuming that the program actually is progressive (admittedly, an unanswered question, as we saw last time), I would say yes.  I’ll argue co-blogger David Gamage should say yes, too, but that many other folks would disagree.

              Standard public finance economics analysis would suggest that government shouldn’t use its own market participation as a way of redistributing wealth.  The reasoning is what I’ll call the “heavy buckets” theory, but most people follow Kaplow & Shavell in terming it a “double distortion” argument.  Let’s say you have to schlep some water from the river to your house.  Would you rather use a heavy steel bucket or a nice light plastic one, assuming both hold the same amount of water?  That’s a no-brainer.

            The double-distortion argument is roughly the same.  The claim is that any time we redistribute income, we will change people’s incentives to work, as the expected after-tax returns for earning more are diminishing.  So whether government imposes a pure transfer, or just charges more for the brownies at its bake sale, either way the after-transfer value of my salary is lower.  That’s the water in the bucket.  The bake sale, though, is the heavy bucket, because it has a second drag on the economy: it also discourages me from eating brownies. 

            Anyway, that’s the standard story, but Gamage has a different one

Continue reading

June 15, 2014 | Permalink | Comments (1) | TrackBack (0)

Tuesday, June 10, 2014

Why Has Thomas Piketty Hit Such a Nerve?

Thomas Piketty has attained a public figure status in the United States dwarfing his celebrity in his native France, and it isn't just because of the now-tired debate about the "one percent" and the "ninety-nine percent." Yes, there is wealth concentration in the United States. It is unprecedented in the United States, but not Old Europe. Piketty makes much of the Belle Epoque, the Gilded Age, a bright period of optimism and joie de vivre, but also extreme French aristocracy and wealth concentration. But in modern America, optimism is still slumping, and the wealth gap is increasing. Piketty proposes a progressive wealth tax; ideally, a global one. That proposal itself could be the focal point of the controversy surrounding his book. I don't think it's the only one.

It isn't just wealth concentration that haunts Americans. Wealth concentration just focuses a unease about the extent to which we control our futures and that of our children. We have handed over much of our lives to singular entities, private or not, consciously or not, voluntarily or not, and it is never clear if we are better off for it. Whether it be due to economies of scale, or some other reason that things are concentrating in the hands of a few, our diminishing lack of choice is disquieting. So much of our day-to-day experiences as Americans are impacted by extremely concentrated industries. The Hachette Book Group has gotten into a dispute with Amazon, through which about 44% of all books sales are made, in which Amazon is reportedly delaying shipments of Hachette books as retaliation for its refusal to agree to ebook rates. This is putatively for our own benefit as bookbuyers, but as a publisher or a writer, are we better off with one widespread, brutally efficient distributor? What are our choices of cable providers? And how do you feel when you get off of a flight on the one of now-three major airlines that you are forced to patronize? [nb: you can always file air travel complaints with the FAA consumer complaint site, which I did after an American Airlines gate agent in Miami slammed a boarding door in my panting, sweating face, sneering "sorry, flight's closed."] [nb2: airlines, it has to be said, are not making money hand-over-fist like the other concentrated industries]. Yesterday, the President announced an executive order that will cap student loan repayments at ten percent of income. That, too, seems aimed at an American malaise about access to success. It gets couched by the President as making sure everyone gets a "fair shot" at success, but what he really means is that success and material wealth should not be concentrated. Piketty himself focuses much of his reform proposals around access to higher education.

This brings me to my earlier post about climate change being a national security threat. Piketty is finds it "terrifying" that the wealth gap could increase back up to Belle Epoque levels. Why? Well, what happens when there are vast wealth inequalities, and a decreasingly small fraction of people that own an increasingly large part of the pie? Can you imagine what it feels like to be one of the 0.1%? Vast inequalities of wealth, concentrated in a vanishingly small few, creates a comparative advantage for violence on the part of the dispossessed. It could be that even expensive, sophisticated security systems, while offering an absolute advantage in violence, suffer a comparative disadvantage when faced with swarms of angry crowds with little opportunity cost of violence. That is the kind of calculus confronting oppressive governments when facing frustrated and hungry mobs with little to lose from violence. This may sound fantastic in modern America, but it is not solely a dystopian, futuristic Hollywood sci-fi risk, as evidenced from the many modern-day political upheavals. Moreover, the problem with this risk is that it is a potential spiral. Once a police state -- private or public -- is erected, it becomes difficult to reverse. Marx warned that class struggles would come; Durkheim warned that they may result in violent upheaval.

 Maybe this backdrop of potential violence is why Piketty has hit such a nerve.

June 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, June 9, 2014

Should Death End Criminal Penalties?

  In the tax blog Procedurally Taxing I recently came across U.S. v. Molen, E.D. Cal. No. 2:10-cv-2591 MCE KJN (May 21, 2014); 113 AFTR 2d ¶ 2014-842 , only available on PACER at the moment:

“Generally, to determine whether a federal cause of action survives the death of a defendant, the court must first determine whether the claim asserted against that defendant is civil or penal in nature. Reiserer v. United States, 479 F.3d 1160, 1162 (9th Cir. 2007) (citing United States v. $84,740.00 Currency, 981 F.2d 1110, 1113 (9th Cir. 1992)). “It is ‘a well-settled rule that actions upon penal statutes do not survive the death’ of a party.” Id. (quoting United States v. Oberlin, 718 F.2d 894, 896 (9th Cir. 1983)).””

  This seems like a very bad rule, and someone should write a law-and-economics paper on it. It reduces or eliminates penalties, effectively freeing someone near death or willing to commit suicide from criminal liability. Of course, such a person won’t worry about prison, but he will worry about financial penalties and whether the effects of his crime can be reversed.  This matters not only for deterrence, but for restitution and retribution.  Suppose  Mr. Smith defrauds Mr. Jones of a million dollars, leaves it to his daughter, Mrs.  Brown, and commits suicide. Brown is safe from criminal  money penalties (and from punitive damages, presumably--- she didn’t commit an intentional tort), so the worst Smith need fear about his daughter’s financial future is that she will have to give back the million dollars. She will have to bring her own civil lawsuit for that, however, without the benefit of having a government-financed criminal prosecution first, and without the investigatory powers of the government.   Would she have to worry about being an accessory after the fact? I don’t know.  Consider, too, the informational value of punishment, which is lost.  It would be good for the truth to be established about Smith’s criminality. Knowing that his reputation would be ruined after his death would affect Smith in advance, and if his criminality in this were established, it might prompt people to investigate his other, earlier, dealings and discover more crimes.

    This bad rule is not new, though. Here is an excerpt from U.S. v. Oberlin. 718 F.2d 894, 896 (9th Cir. 1983):

“Death pending appeal of a criminal conviction abates not only the appeal but all proceedings in the prosecution from its inception. Durham v. United States, 401 U.S. 481, 483, 91 S.Ct. 858, 860, 28 L.Ed.2d 200 (1971) (per curiam); United States v. Bechtel, 547 F.2d 1379 (9th Cir.1977). In such a case, the appeal is dismissed and the cause remanded to the district court with instructions to vacate the judgment and to dismiss the indictment. Id. See also United States v. Pauline, 625 F.2d 684, 685 (5th Cir.1980); United States v. Moehlenkamp,557 F.2d 126, 128 (7th Cir.1977); United States v. Crooker, 325 F.2d 318, 320 (8th Cir.1963). If the sentence included a fine, this rule of abatement ab initio prevents recovery against the estate. See Pauline, 625 F.2d at 684; United States v. Morton, 635 F.2d 723, 726 (8th Cir.1980). Similarly, an abated conviction cannot be used in any related civil litigation against the estate. See Pauline, 625 F.2d at 684.

In early cases, the reasoning behind this rule is stated simply as "all private criminal injuries or wrongs, as well as all public crimes, are buried with the offender." United States v. Dunne, 173 F. 254, 258 (9th Cir.1909),quoting United States v. Daniels, 47 U.S. (6 How.) 11, 13, 14 L.Ed. 323 (1848). More recently, the rationale has been expressed as follows:

[W]hen an appeal has been taken from a criminal conviction to the court of appeals and death has deprived the accused of his right to our decision, the interests of justice ordinarily require that he not stand convicted without resolution of the merits of his appeal, which is an "integral part of [our] system for finally adjudicating [his] guilt or innocence." “





June 9, 2014 | Permalink | Comments (2) | TrackBack (0)

Should Government Profit From Student Loans, Part II: Are Student Loans Regressive?

Readers might remember that a while back I was sorta-defending the idea that the government might be turning a profit on student loans.  Loan repayment reform is also in the news.  In my opening post I left open a few big questions.  One of the biggest: does relying on interest revenue shift the burden of government from richer to poorer households?  I suspect a lot of people are fine with funding high school programs with a bake sale, and not so thrilled about paying for education by selling lottery tickets.  Lotteries are a pretty regressive way to fund government, and so I’m mostly on the side of their critics.  Are student loans like lotteries?

            The difficulty is that to answer the question, we have to be more specific about what we mean by “regressive.”  Are we talking about how much money borrowers have right now?  Almost by definition, folks who are borrowing money don’t have a lot of it at the moment.  But is that the right way to think about whether loans are regressive? 

            Looked at from a longer-term perspective, the loan system is arguably on net progressive.  Graduate students, after all, earn more than any less-educated group as a whole, and historically law students have done more than ok.  Those results, though, pool together borrowers and debt-free degree holders.  Borrowers are likely to have considerably less family wealth, on average (or, at many graduate programs, are likely to have had less-desirable admissions profiles).  So the question, which is empirically unresolved as best I can tell, is whether graduate borrowers on average are better off than the marginal taxpayer -- that is, the taxpayer who would have to bear the cost of replacing the loan-program revenues.

            Many economists support this life-time view of progressivity, but co-blogger Manuel Utset and I have a bit of different view.  We suggest that the decision to prioritize lifetime over, say, annual welfare depends in part on empirical evidence about people’s preferences.  If one reason we re-distribute wealth is to satisfy popular preferences for redistribution, our measure of redistribution should be influenced by how the public actually formulates that preference.  My own intuition is that “don’t give that homeless man a quarter, he used to be rich” would not strike most voters as the right way to think about redistribution. 

            In other words, I think that the fact that loans might cause some short-term hardship for borrowers should count against the appeal of profiting from those loans.  But suppose that, even accounting for that, student loans are on net progressive.  Maybe surprisingly, a lot of smart folks don’t think that would be a reason for relying on them.  Let’s kick that discussion to a third post.       

June 9, 2014 | Permalink | Comments (3) | TrackBack (0)

Friday, June 6, 2014

"Does Economics Need an Infusion of Religious or Quasi-Religious Formulations?"

Econ Journal Watch came out recently with an issue on: "Does Economics Need an Infusion of Religious or Quasi-Religious Formulations?" Editor Dan Klein has a prologue suggesting that conventional economic theory is "flat" and that religion might inform an approach better than maximization subject to constraints. Various economists, including me, respond with short articles.  I recommend  A. M. C. Waterman's "Can ‘Religion’ Enrich ‘Economics’?", in particular. 

   One surprise is that though there have been 458 downloads of the complete issue, one article has had 26,433! It's Rupert Read and Nassim Nicholas Taleb's "Religion, Heuristics, and Intergenerational Risk Management". Taleb wrote the book The Black Swan and has his own website. The article's worth reading, though I completely disagree with his view of the state of economics. Econ Journal Watch allows comments on articles, a very good thing, though you have to work a bit to read or write them, which eliminates much of the feature's usefulness.

June 6, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 3, 2014

Is Climate Change a National Security Threat?

In his commencement address to the United States Military Academy last week, President Obama called climate change a "creeping national security crisis." He means that there will be refugee flows, natural disasters, and conflicts over water and food. But really, in my narrow mind, nothing is a security crisis unless it involves violence or the threat of it. Does climate change pose that threat? Then-Defense Secretary Robert Gates made that point over six years ago.

Bruce Johnsen at George Mason once offered this example. "I'm a big guy [he is]. But if I am threatened by violence on a dark street by someone smaller than me who wants my wallet, I will give it to him even if he is unarmed. Even though I may have an absolute advantage in violence, that person is likely to have a comparative advantage in violence." I am paraphrasing, but you get the point. Also, surely Professor Johnsen is not the only person to have made this point, but he is the only big guy I know to have made this point.


The point is that people have different opportunity costs of violence. A poor mugger on the streets may have a less than 50-50 chance of winning a fight against Bruce Johnsen (that was a few years ago), but because of his extraordinarily low opportunity costs of injury, it is a chance he might take. Professor Johnsen, on the other hand, might have to cancel classes, miss conferences, and *gasp* -- even miss faculty meetings! His costs of injury would be very high. Wealth inequalities are dangerous precisely because they create vast disparities in the opportunity costs of violence.

So goes it with climate change. As the rich get richer and the poor get relatively poorer (indulge me for a moment, as Professor Johnsen noted that these claims are inferential, and may underestimate the adaptive capacity of poor nations) in a climate-changed world, the poor are likely to respond by fighting. Poorer nations are likely to respond with violence, because, after all, when your country is threatened by flooding and tropical storms, what really do you have to lose?

June 3, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, June 2, 2014

EPA Rule on Greenhouse Gas Emissions: when they said it was a long time in the making ....

they meant it. 

Some attentive Canadian will point out that the Canadian federal government -- the Conservative Party-led Canadian federal government, headed up by the almost comically unloved Prime Minister Stephen Harper, introduced roughly the same rule as early as 2011, and finalized it in 2012. The rule, like EPA's announced rule yesterday, sets a rate standard for power plants that is easy for natural gas-fired power plants to meet, impossible for coal-fired power plants to meet, unless a heretofore non-existent carbon capture and storage technology is deployed. The Canadian rule was quite realistic (and unambitious) in requiring that the CCS technology achieve a 30% emissions reduction rate.

No one who has had any experience with Environment Canada, the Canadian version of something like the EPA, believes that Environmental Canada, much less one under the government of Stephen Harper, was capable of forming such a rule (the Canadian rule was also not 645 pages like the EPA rule was). There is a 100% chance that the Canadian rule was developed with considerable EPA input. The Canadian rule also grandfathers up to the end of the "useful life" of a power plant -- 45 years. Sensible to some, but I've argued against grandfathering, as have many.

I can appreciate timing considerations, but remain puzzled. I can see the Obama Administration wishing to avoid rolling it out right before the 2012 re-election bid, but why wait until now? There is no margin for error if the President truly wants this in place by the time he leaves office. If that was his wish, he squandered 18 months getting this rolled out. And all the time, Bob and Doug Mackenzie had already set a useful precedent.

June 2, 2014 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 1, 2014

Empirical legal studies – The new law and economics of non-American legal scholars?

Next week, I will be participating in a conference in London organized by Cornell law school (Dawn Chutkow, Valerie Haies and Michael Haise, who have stepped up to replace the late Ted Eisenberg). The conference attempts to establish the global society of Empirical Legal Studies. I will further elaborate my description about the conference itself, however one item of the report I prepared about Israel, is the trigger for this blog. A while ago, few papers have been written about the dominance of Israelis in law and economics (e.g., Oren Gazal-Ayal 2007). An argument raised in these papers claims that Israelis who want to participate in the global market of ideas, with special emphasis on the U.S academic market, has focused on law and economics, which tends to be a more universal area, relative to more doctrinal areas of research. Indeed, intuitively everyone who sees the amount of Hebrew speaking participants in ALEA, could relate to this argument, and I am guessing it is also true for other countries. This is not yet the situation in the annual conference of empirical legal studies. However, when making the report for the above mentioned conference, I could not have helped noticing that something like 10-15 percent of the legal academics in Israel, have empirical legal studies as their main methodological community, number that seems to outnumber that of the law and economics community (there is an obvious overlap between the two communities).

              There are some preliminary questions that one should ask, if interested in evaluating whether empirical legal studies could have similar “universal” effect to that of the law and economics method. In principle, one can identify many similarities; in both approaches the necessary knowledge of the doctrine is minimal, the knowledge of math and or statistics, respectively, could replace knowledge of U.S law, and both partly rely on disciplinary fields which argue to be universal (e.g. economic or psychology). However, there are also some notable differences between these two communities of knowledge. First, in many strands of empirical legal studies, much of an argument's development process is related to collecting data about legally relevant institutions. In much of these institutions, the variation among countries is such that when brought as evidence, it could never influence American legal policy, without further “local” findings. Another strand of empirical legal studies, is based upon experimental methods. Admittedly, in most aspects of experimental psychology, the country where the experiment was conducted in, is secondary to the question of interval validity. However, in the experimental legal analysis, question of external validity seems to play a much larger role, as in any other applied science. Nonetheless, scholarship wise, it seems that being non-American will be less of an advantage.

Next week I hope to come back with some answers to the potential contribution of empirical legal studies to the emergence of a truly global legal academic. 

June 1, 2014 in Science | Permalink | Comments (0) | TrackBack (0)

Thursday, May 29, 2014

End the Crude Oil Ban and Fix Bridges and Highways

The United States can end the export ban and simultaneously stabilize the insolvent Highway Trust Fund. Bridges are collapsing and 18-wheelers are falling into potholes the size of Rhode Island, and we complain that Congress has not raised the gasoline tax since 1993. That tree-hugging pit of Marxism, the US Chamber of Commerce, has called for a gas tax increase.

IHS Energy, a consulting group headed by energy writer and wonk Daniel Yergin, today released a report advocating for an end to the domestic crude oil export ban. The IHS report, downloadable from this IHS page, reports that lifting a crude oil ban would create an average of almost 400,000 jobs between 2016 and 2030. Surprisingly, ending the ban would lower gasoline prices by an average of 8 cents per gallon. This is because US gasoline prices are set by global crude oil prices not domestic production costs, and lifting a US export ban would add to the world supply by a significant amount. The only losers would be domestic refiners such as Valero, which enjoy discounted crude prices, and have opposed lifting the ban. Wah.

So here is an idea: lift the ban, and at the same time impose a gas tax of 8 cents per gallon. The gasoline consumer is no worse off, because the gas tax only counteracts the lower gas prices resulting from ending the export ban, and generate about $9.7 billion annually for the Highway Trust Fund (135 billion gallons of gasoline were consumed in the United States last year, 13 billion of which were ethanol). Ideally, the crude oil export ban should be accompanied by an $9 per ton of CO2 carbon tax, but that's another story.

Enacted as part of the Energy Policy and Conservation Act of 1975, the crude oil export ban was meant to secure energy supplies in the wake of the 1973 oil embargo that shocked an energy-complacent United States. The actual legislation just provides that "[t]he President may, by rule, under such terms and Export conditions as he determines to be appropriate and necessary to carry out the purposes of this Act, restrict exports of -- ... coal, petroleum products, natural gas, or petrochemical feedstocks. .." Section 103 goes on to provide that the "President shall exercise the authority provided for in Exemption, subsection (a) to promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States, except that the President may, ... exempt from such prohibition such crude oil or natural gas exports which he determines to be consistent with the national interest..." So it is pretty clear that the ban is a matter of executive discretion. It is just that Presidents Ford, Carter, Reagan, Bush, Clinton, Bush, and Obama have all decided that exporting oil was not in the national interest.

But that was 1975, and the United States is now one of the major oil producers of the world today. Much of the EPCA's provisions, aimed at insulating the United States from volatile global energy prices, still seem useful today, like the Strategic Oil Reserve and fuel efficiency standards for motor vehicles. But lifting the crude oil ban now has bipartisan interest, with Senators Wyden and Cantwell joining Murkowski in calling for at least consideration to ending the ban.

May 29, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 27, 2014

New IRS Ruling about Employers Dumping Employees onto the Health Exchanges

The IRS says 

What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?,

 and answers: You are big trouble, because that counts as an improper insurance plan, so you    pay a fine of  $100/day per employee. That may or may not  be a reasonable interpretation of the statute, but it seems to me unimportant.   What the IRS has said is that an employer can't cancel its insurance plan and give each employee $5,000 they must use for an exchange plan. It does not say that the employer can't cancel its insurance plan and give each employee a $5000 raise to compensate. That's what an employer should do anyway, since it has no incentive to make the employee spend the money on health insurance. The only thing that could matter (and maybe it does) would be if employer contributions to employee-bought health insurance are exempt from income tax for the employee. Then, this ruling does cut out  the tax benefit. 

(hat tip: TaxProf)

May 27, 2014 | Permalink | Comments (0) | TrackBack (0)

Journal of Law, Finance, and Accounting CFP

From our inbox:

[The Journal of Law, Finance, and Accounting, a newly-launched publication from some great folks] invite[s] you to submit your manuscript for presentation at the JLFA 2014 Conference.  The extended deadline for submissions is 11:59 pm, on Monday June 9, 2014 (Eastern time).  Please submit papers through SSRN at  All submissions will be reviewed by the JLFA editors.  Accepted papers will be eligible for expedited publication in JLFA, if desired by the authors (subject to the authors’ compliance with referee and editor requests).

The conference will be held at NYU on Friday, September 19, 2014.  We will pay (reasonable) travel expenses for presenters and discussants.  We look forward to receiving your submissions.

The Journal of Law, Finance, and Accounting (JLFA) is a new publication sponsored by the NYU Stern School of Business and NYU School of Law.  JLFA will offer an outlet for high quality empirical or theoretical scholarly work at the intersection of law, finance, and accounting.  It will be published by Now Publishers and hosted by the Social Science Research Network (SSRN).  This intersection includes research having implications for the ways law and regulation affect the structure, governance, performance, and function of the firms, markets, and institutions that comprise the financial system, as well as research that addresses the different ways capital is raised and the links between financial markets and the real economy.  This interdisciplinary research area is sometimes called “law and finance,” although much relevant work comes from scholars whose principal home may be in accounting, economics, or political science.  For more information, see the journal website at

JLFA executive editors:

Viral Acharya (NYU Stern School of Business, Department of Finance)

John Armour (Oxford, Law Faculty and Said School of Business, Department of Finance)

Barry Adler (NYU Law School)

Lucian Bebchuk (Harvard Law School)

Bernard Black (Northwestern:  School of Law and Kellogg School of Management, Department of Finance)

Ronald Dye (Northwestern Kellogg School of Management, Department of Accounting)

Julian Franks (London Business School, Finance)

Joshua Ronen (NYU Stern School of Business, Department of Accounting)

May 27, 2014 | Permalink | Comments (0) | TrackBack (0)

Sunday, May 25, 2014

Lack of Vision in Law School Strategizing

Erwin Chemerinsky (UC-Irvine), Creating a Law School That Emphasizes Public Interest Law, 7 DePaul J. for Soc. Just. 1 (2013) talks about his deanship in the project of founding the law school in Irvine. 

It really is a shame Irvine, with all that money, just aimed to be a generic top 20 law school instead of experimenting.   And more important than money: it began with no vested interests in the form of stodgy  and divided faculty to overcome. It's only chance to truly make top 20, as opposed to a safe number 50 or whatever it is, was to take a risk by doing something new that might turn out to be a total fiasco. But the risk, and lack of imagination, was probably why it didn't try. It could have been a banking-and-real-estate law school, or pure tax (including public-interest tax stuff), or even a pure criminal-law school, offering other stuff only as necessary to get accreditation, or even going unaccredited since in California that's not such a problem.

(hat tip: TaxProf)

May 25, 2014 | Permalink | Comments (0) | TrackBack (0)

The Neglected role of Behavioral Ethics in Behavioral Law and Economics

There seem to be three main potential pillars for the criticism on rationality and consequently to Behavioral Law and Economics Literature; The biases and heuristics literature which focuses on limited cognition, the limitations of self-interest motivation which focuses on fairness and morality, and finally behavioral ethics which focuses on the motivational forces that limit people’s ability to recognize the wrong-doing of their own behavior. Yet, while the first two are considered as classical areas criticizing rationality with thousands of papers and dozens of books, the third- behavioral ethics- still lacks a stand, in my view, for no good reason.

Behavioral ethics focuses on people’s inability to recognize their wrongdoing. This process is explained as either the higher involvement of automatic reasoning through an unaware self-deception, or as post hoc rationalization justifying oneself unethical behavior. The emerging focus on “good people” in the psychology and management literature represents the growing recognition that many unethical decisions are not done by deliberate intention to act wrong, and are rather consequential to the situation.

Behavioral ethics is a huge and growing aspect of the management literature. It study topics such as implicit discrimination and is far less researched than the two mentioned above, especially from a legal perspective, leaving highly important questions completely unanswered, while its potential impact on legal theory is much more important. If, for example, the biases and heuristics literature challenges people’s ability to commit to long term decisions, research of behavioral ethics literature challenges people recognition that something is wrong with their behavior –the core question of the law. This is highly important because it challenges the ability of the law to change people's behavior. Supposedly, few people will change their behavior if they fail to see the wrongdoing of their own behavior.

The main intellectual history rationale behind this omission might be the fact that behavioral ethics emerged from management rather than economics. If this is the case, it is yet another reason to focus the behavioral analysis of law, to law rather than to economics.(See previous blog)


Banaji, M. R., & A. G. Greenwald. (2013). Blindspot: Hidden Biases of Good People.

Bersoff, D. M. (1999). Why Good People Sometimes Do Bad Things: Motivated Reasoning and Unethical Behavior. Personality and Social Psychology Bulletin, 25(1), 28–39.

Mazar, N., O. Amir, & D. Ariely. (2008). The Dishonesty of Honest People: A Theory of Self-Concept Maintenance. Journal of marketing research, 45(6), 633-644.

Feldman, Yuval, Behavioral Ethics Meets Behavioral Law and Economics Handbook of Behavioral Law and Economics, Forthcoming. Available at SSRN:

May 25, 2014 in Science | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 21, 2014

Top States for Education: Massachusetts--- and Texas

In "U.S. Students from Educated Families Lag in International Tests," Hanushek, Peterson, and Woessman report on a study they did that looked at how well 15-year-olds did on math tests in different states and countries. We hear about that kind of thing all the time. What's different here is that they stratify by parental education. Regardless of education of parents, Korea does best. For well-educated parents, Massachusetts is number 6, between the Netherlands and Germany. For poorly-educated parents, Texas is number 7, between Estonia and Finland. (Oddly enough, they are symmetric in their rankings: for highly-educated, Texas is number 18, between Slovakia and Washington State, and Massachusetts is number 19, between Minnesota/Denmark and Kansas/UK.) Texas's performance is particularly important because the numbers are not adjusted for race, a key variable in explaining performance.

Somebody might make use of the difference in relative performance of high- vs. low-education families to think about who controls the governments in different places. It seems rich people run things in Massachusetts, poor people in Texas. One might think that the results imply Massachusetts people care less about equality than Texans, too. That seems odd in view of the political alignments, but less so if you think of Massachusetts as technocratic and Texas as populist.

Regardless of the deep implications, given the amount I'll be paying for rent in Belmont, Mass. next year while on sabbatical ($4,100/month--- which is actually a good deal in two senses), I'm happy to hear these results.


 (Hat tip: MM)

May 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 20, 2014

Legal Innovation: Notary Public Videos

  I was at the bank yesterday getting something notarized.  I explained to my daughter Lily that a notary verifies that somebody with the person's ID has signed their name to a document. She asked a very sensible question: "Why don't they take a video of you signing it?" 

Why not indeed? The cost would be trivial. In fact, holding up the document and the ID to a cheap camera would reduce the cost, already trivial, of the notary recording that the signature had taken place. 

  Now that Lily has thought of this idea, how could she profit from it? Or, since it isn't patentable and she isn't of an age to go round doing consulting work for state governments, how could she get the idea to someone who could get it implemented?  (in which case, she can get some credit for it  too and use that on her college applications seven years from now...) 

May 20, 2014 | Permalink | Comments (0) | TrackBack (0)

The Obama Administration, Cybersecurity, and International Environmental Law

The Obama Administration indicted several Chinese military officials for corporate espionage -- not, we suppose, military espionage, which is fair game. Even administration officials admit it will probably not result in anything other than retaliation, but it is worth stopping to think about the implications for international law, and for me, international environmental law.

I am preparing for a webinar in series hosted by the Canadian Bar Association, with the administrative leadership of Marc McAree, partner at the Toronto law firm of Willms and Shier, on Cross-Border environmental disputes. My old friend and co-authorAusten Parrish (now Dean at IU-Maurer), will be on hand, and he will lament the breakdown of reliance on international institutions in favor of unilaterial measures, such as domestic litigation. In Austen's previous work, he has outlined his view of the problem, which is that this leads to a breakdown of the implicit norms of international comity, and will lead to an unproductive tit-for-tat world of international diplomacy. In Austen's view, courts are even creatively redefining extra-territoriality out of existence, essentially making almost everything into a "domestic matter." Austen politely (he is Canadian after all) presses a disagreement with "sovereigntists" such as Eric PosnerJack Goldsmith, and Curtis Bradley for advocating for a world less dependent on international institutions than say, domestic litigation or economic sanctions.

But I think Dean Parrish's cautionary notes ring hollow in several contexts, and the cyber-security threat is a good example of why. Austen's worry is about a breakdown in international legal institutions, and an over-reliance on litigation as a means of settling cross-border disputes. But really, how have they been working lately? China announced their withdrawal from a joint body of cybersecurity cooperation with the US, but it has not done very much anyway. The United Nations and climate change? And let's stop and wonder here: what is the endgame? Is it true that this tit-for-tat world will give rise to a breakdown in international cooperation altogether? Surely trade between China and the United States will not suffer too much as a result of this spat over cyber-security. What exactly will bring Russia to heel over its regional ambitions to re-create some subset of the former Soviet Union? I think the U.N. is not up to it, especially with Russia and China on the Security Council. Being unable to use VISA or MasterCard -- now that sounds scary! International institutions, while not dead, are not going to be the sole bulwark against international lawlessness in the future. The deep economic interdependencies among nations will be important, and markets will play a role in disciplining both international lawlessness, and the running amok of domestic litigation. The difficulty of enforcement in areas such as cyber-security also limits the capacity of international institutions to police.

Fundamentally, the effects test as a basis for jurisdiction over foreign entities has fallen on hard times, and perhaps that is the problem. But if there is going to be some resurgence in the role of international institutions, some grappling with extra-territorial effects is going to have to take place. Without a more complex discussion of extra-territorial effects, both the "sovereigntist" and the "internationalist" positions in the abstract sound unrealistic and overbroad. In environmental as in cybersecurity issues, it becomes harder to think of the world in the traditional Westphalian way.

May 20, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 14, 2014

Society for Environmental Law and Economics

Professor Cole tells me that the  Society for Environmental Law and Economics is meeting May 23-24 in Chicago. The program is at:

May 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Political Corruption at Texas Law School

Looking for a good research topic?  Here's a good methodology for finding political influence in state-funded laws schools from 

Normally, almost nobody who gets into UT Law fails the bar. found 90 students who had failed it twice or more. That should be reason enough for university officials to double-check their grades and Law School Admission Test — or LSAT —  scores to see which students actually earned admission, and who benefited from a political favor.

We found additional reasons to scrutinize 24 names on that list:

  • At least 15 of the students are politically connected, either through office, personal relationships, or campaign donations to officeholders who have figured in the fight over UT’s leadership.
  • At least 12 of the students have roots in Laredo, home of state Sen. Judith Zaffirini, who is known to have pulled strings on behalf of other applicants. As Laredo has just 2 percent of the state’s population, it’s highly over represented in this sample.
  • A half-dozen of the students have connections to state Rep. Joe Straus, his close allies, or a lobby shop that rose to prominence with Straus’s ascendance to speaker in 2009.

May 14, 2014 | Permalink | Comments (0) | TrackBack (0)