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Abstract:
In the past decade behavioral economics has established itself as a contender to the throne of neoclassical economics in the economic analysis of law. The pros and cons of behavioral as compared to neoclassical economics have been vigorously debated at the general, methodology level. But the success or failure of the behavioral challenge will be judged by its ability to improve upon neoclassical economics - both descriptively and prescriptively - in specific legal applications. Consumer contracts provide an important test case for behavioral economics. In this exchange we offer the first comprehensive debate between the behavioral and neoclassical perspectives as applied to the law and economics of consumer contracts.

Abstract:
This essay takes off on the famous phrase "good fences make good neighbors" from Robert Frost's poem "The Mending Wall" to explore the function of boundaries in setting up property rights. The first section of the paper begins by exploring how boundaries create spaces where individual decisions can be made without the costs of collective action. It then examines how this extreme separation can lead to the duplication of resources, which in turn prompts customary practices that allowed for shared space at the boundary lines which work to the mutual advantage of the two (or more) parties who share common boundaries. It gives illustrations from customary agricultural practices and the law of nuisance to explain why common law boundaries should be understood to be semi-permeable instead of absolute.

Abstract:
This paper defends the current legal regimes for the creation of property rights in the human genome and related forms of intellectual property. The basic trade-off of any system of intellectual property is the desire to spur innovation on the one hand while preventing the creation of blockades once patents are recognized. It argues that the creation of multiple patents not only increases the risk of blockade but creates the offsetting benefit of different ways to reach any business objective. The paper then reviews and rejects various strategies that may be used to both respect patent rights and undo blockades, including condemnation of patents and regimes of compulsory licenses. It also argues that the current rules on genomic patenting meet the general standards for valid patents, and concludes against many critics that the current system offers about the right mix between private rights and public access.

patents, antitrust, genome, condemnation, compulsory licenses

Abstract:
The constitution contains many disparate structural provisions and guarantees of individual rights: federalism questions under the commerce clause start in very different places from the protection of speech, religion or property. Yet the differences are often misleading. In each case the structure of the argument is identical: what is the basic interest that is protected, what justifications can be posed for its limitation, with or without compensation. Where an intermediate or strict standard of review is proposed, the nature of these inquiries all collapse to the single question of whether government intervention overcomes some market imperfection relating to negative externalities (force and fraud) or monopoly and coordination problems. Where the standard of review is reduced to rational basis, then the structure of basic rights and the justifications for their restriction becomes ill-formed and ad hoc. The conceptual defense of the Lochner era is much stronger on structural grounds than its manifold critics commonly suppose.

U.S. constitution, individual rights

Abstract:
Trade secrets are an important form of property that receive constitutional protection against government expropriation under the takings clause. That level of protection is in the first instance determined by the nature of the taking. The common view is that trade secrets as intangible property can only be subject to a regulatory taking, so that the government actions are judged under a lenient rational basis standard. But this analysis is incorrect when the government not only restricts the way in which the holder of a trade secret may use its property, but also requires its disclosure to the world at large, for which a standard of strict scrutiny is appropriate. Once that is done, then the health and safety justifications for the particular disclosure, as well as the compensation, if any, provided have to be looked at more closely. Judged by this standard, the requirements for sharing trade secrets for pesticides governed by federal environmental statutes that was accepted in Ruckelshaus v. Monsanto should pass muster, but the efforts of Massachusetts for force disclosure of trade secrets about flavoring additives in cigarettes was correctly struck down Philip Morris v. Reilly, albeit not by treating it as a government occupation, but by ratcheting up scrutiny for regulatory takings as applied to intangibles.

intellectual property

Abstract:
Many modern intellectual property scholars have argued that the creation of patents and copyrights, for inventions and writings, respectively, should be resisted on the grounds that these forms of property necessarily infringe ordinary forms of liberty, in contrast to property that is found in tangible things. This article rejects that claim by showing how property conflicts with liberty in both settings, but that the different configurations of rights observed in these various areas is defensible on the grounds that the loss of liberty for all persons is, to the extent that human institutions can make it, compensated by the increased utility generated by the various property rights in question. The appropriate approach to intellectual property is not abolition but fine-tuning in an effort to increase the gains from intellectual property generally.

intellectual property, property rights, liberty

Abstract:
Legal systems must deal not only with the cognitive limitations of ordinary individuals, but must also seek to curb the excesses of individual self-interest without conferring excessive powers on state individuals whose motives and cognitive powers are themselves not above question. Much modern law sees administrative expertise as the solution to these problems. But in fact the traditional and simpler rules of thumb that dominated natural law thinking often do a better job in overcoming these cognitive and motivational weaknesses. The optimal strategy involves the fragmentation of government power, and the limitation of public discretion. Three types of rules that help achieve this result are rules of absolute priority, rules that judge conduct by outcomes not inputs, and rules that use simple proration formulas to allocate benefits and burdens.

Abstract:
Mark-to-market accounting helps create asset bubbles and exacerbate their negative collateral consequences when they burst. It does the latter by forcing the hand of counterparties to demand collateral even when it is inefficient to do so. Watchful waiting and inaction is often the more efficient course of action. Yet often this is the road not taken, out of fear of litigation and regulatory sanctions. Nonetheless, as a business matter, forbearance on foreclosure may well make sense if the party is optimistic about future values and a collateral call would generate assets sales that, under present mark-to-market rules, would negatively impact these values. But if the party forbears and is wrong about the future values, shareholders may sue the firm for not exercising its legal rights in order to protect their interests. Because future values are uncertain, litigation costs are high, and courts are likely to make some mistakes, firms will demand excessive levels of collateral.

In this environment, the high transaction costs of coordination and fear of potential antitrust liability can combine to cause a rush to seize or demand collateral, even when collective forbearance would be more efficient. These problems of imperfect litigation and antitrust rules will sometimes cause action to be taken when inaction would be the more efficient course. Deleveraging cascades will result, thereby increasing the risk of financial meltdown.

This article explores these and other issues surrounding the mark-to-market controversy. No system of valuing a firm’s assets and liabilities is perfect, so our critique of mark to market does not clinch the case for the reinstating historical cost accounting. Rather our goal is to simply point out previously unrecognized problems with mark to market, based on their interaction with the legal system. Armed with an understanding of how litigation risk can influence market participants’ behavior under different valuation rules may help standard setters in the industry modify the existing rules to reduce the chance of future market meltdowns.

financial bailout, mark-to-market, historical cost, bubbles, regulation, securities

Abstract:
This monograph offers a comprehensive critique of the Employee Free Choice Act (EFCA) now before Congress. EFCA would fundamentally alter the current labor law in three ways. The first of these is to allow unions to opt for recognition through a card check instead of the secret ballot currently required under the National Labor Relations Act. The second would institute a regime, if the parties do not reach an agreement within 130 days after the union is recognized, of compusory arbitration and arbitrator-imposed requirements and restrictions, binding for a two-year period. The third would increase the current sanctions for unfair labor practices committed by employers during an organizational campaign. My major thesis is that all of these changes are unwise deviations from the status quo that will introduce unwise dislocations in labor markets that are not justified by the current union claim that the decline of unionization in the private sector is largely attributable to improper employer intransigence. The better explanations focus on structural changes in ordinary labor markets in an increasingly globalized economy, which shows similar downturns in union representation in developed nations, often operating under different legal regimes.

Abstract:
The recent Supreme Court decision in Bell Atlantic v. Twombly stands at the crossroads of antitrust and civil procedure. As an antitrust case, Twombly makes sense on structural grounds. The FCC regulation of the telecommunications industry, and the many innocent explanations as to why each telecommunications company would stay out of its rival's territories obviated the need for further discovery. But in many other contexts, including Conley v. Gibson a case involving potential breach of the duty of fair representation on matters of racial discrimination discovery could flesh out the relevant factual issues. The Supreme Court's general disapproval of Conley sweeps far too wide. Discovery should only be denied when the plausible inferences that can be drawn from the complaint and publicly available evidence clearly imply further discovery is of little value. Accordingly, the Federal Rules of Civil procedure should explicitly acknowledge that in a small set of cases motions on the pleadings can properly function as truncated and disguised motions for summary judgment.

antitrust collusion, telecommunications, FCC, summary judgment, judgment on the pleadings, discovery

Abstract:
Much recent work has trumpeted the so-called problem of the anticommons in the patent field, especially in connection with medical tools. That conclusion rests on a mistaken comparison of government bureaucrats who lack strong institutional incentives to issue needed permits, and does not carry over to entrepreneurs who only make money by making deals. The analysis also wrongfully assumes that additional patents create further problems, when in fact many patents help to open up alternative paths through the patent thicket. The elaborate compromises of Hatch-Waxman, which were intended to spur research by strengthening patent protection and then facilitating the turnover to the generic market at patent expiration, represent a sound compromise that should not be dissipated by legislative efforts to undercut the use or duration of existing research patents.

Michael Heller, Rebecca Eisenberg, patent protection, biomedical research

Abstract:
The economic forces governing transitions between different property rights regimes has been the source of extensive study since Demsetz's path breaking 1967 essay, "Toward a Theory of Property Rights." This paper offers first a general critique of that position, chiefly on the ground that it underestimates the practical difficulties of orchestrating efficient transitions in contexts where strong political forces are at play. Thereafter, the paper explores the movement among various systems that are used to allocate a particular public good, namely parking places on public streets. It examines both bottom-up systems that rely on analogues to the rule of first possession (in both clear and snowy weather) and top-down systems that use meters and permits as allocation devices. It offers explanations as to why the optimal rule will tend to vary with the density of traffic and generally opposes the use of special permits that limit occupancy to residences of certain neighborhoods, which effectively reduce the carrying capacity of a system of roads.

Property rights, public lands, first possession, permits, parking

Abstract:
Public dissatisfaction with managed care has produced a number of legal initiatives that would increase the overall level of public regulation of managed care organizations. Among other things, these initiatives would limit the scope of remedial preemption under ERISA, expand the doctrines of vicarious liability and implied agency, adopt a general "patient's bill of rights," and subject managed care organizations to a mix of class actions by disappointed plan participants. This paper argues that most of these initiatives are ill-conceived, in the sense that they do not hold any realistic possibility of improving the performance of the health care system relative to the current set of tort and contract doctrines that are now in place.

Abstract:
The current level of public dissatisfaction has engendered a long list of proposed reforms that seek to increase the overall level of public regulation of Managed Care Organizations (MCOs), by limiting the scope of preemption under ERISA, by expanding doctrines of vicarious liability and implied agency, by adopting a patient's bill of rights, and by exposing them to class actions by disappointed plan participants. In response, this paper argues that most of these reforms are ill-conceived, in the sense that they do not hold any realistic possibility of improving the performance of the health care system relative to the current set of tort and contract doctrines that are now in place. Direct actions against MCOs for example are likely to hamper their mission to contain costs. The usual conditions that make vicarious liability sensible, for example, are not likely to pertain here when physician groups have assets to meet anticipated claims against them. And the use of class actions runs the serious risk of introducing dubious claims for liability based on some broadside allegations of fraud when their proper function is restricted to allowing the amalgamation of individual claims that would otherwise be too costly to pursue on an individual basis. The real problem with MCOs is that in conditions of scarcity, the public is unable to reconcile its inconsistent demands for low premiums ex ante with comprehensive and deep coverage ex post.

Abstract:
The title of this paper plays off the title of Thomas Grey's well known article, The Disintegration of Property, which argued in part that the ceaseless consensual fragmentation and recombination of property rights revealed some inner incoherence of private property institutions. I take the opposite position and treat this supposed disintegration as evidence of the robust nature of private property rights, not only for land but for all forms of intellectual property. I use this framework to critique modern intellectual property rights cases that impose limits on the terms of private licenses, and the efforts, some of which were embodied in the now dormant Patent Reform Act of 2007 to limit the use of injunctions, damages, and attorney's fees, including at least one effort to shield an important class of admitted infringements of patents from all forms of liability. One broad issue that patent reform initiatives raise concerns the question of whether the per se rules for physical takings carry over to the patent area, which in turn raises the larger philosophical question of the transference of legal principles from the physical to the intellectual realm.

property theory, intellectual property, exclusive rights, alienation; licenses, patents, copyright, first sale doctrine, patent exhaustion, takings

Abstract:
In Beyond Learned Helplessness, Professor Gregg Bloche surveys the wreckage of past attempts at health care cost containment, and responds to the evident social ills with a typical inside-the-Beltway solution: an expert independent agency. The agency will “set a national agenda for clinical outcomes research, support this research in dependable fashion, develop cost-benefit trade-off principles for medical coverage, and formulate coverage protocols based on these principles.” The resultant scheme would place “binding limits on covered services for Medicare and other federally-funded insurance programs, including extension of coverage to the uninsured. . . [and] a model for the private sector, state Medicaid programs, and state efforts to reduce the numbers of the uninsured.” There are, moreover, shades of these expert panels in virtually every current proposal of the Obama administration for the regulation of health care, often with greater powers than Bloche himself envisions.

Count us doubtful. The history of expert independent agencies does not inspire optimism. Industrial policy has not succeeded in any other area in which it has been tried; price and wage controls, telecommunications, airlines, ground transportation, and agriculture all count as notable failures. If the history of administrative agencies has taught us anything, it is that expertise offers no shield against the corrosive effects of bias – particularly when government regulation is beset by the same problems with information and coordination that make markets difficult to operate.

Decentralized market actors are often better able to identify and use relevant information than a single sclerotic government agency that is beset with administrative and political problems of its own. There is little to be gained by attacking the intractable problems of modern health care policy with process-oriented solutions, or with other regulatory schemes that seek to convert private providers of health care in to public utilities subject to direct government regulation. A direct attack on the substantive issues is necessary.

In section I, we offer a brief critique of the system of positive rights and merit goods that underlie the case for most forms of universal health care coverage. In section II, we identify three practical problems that no working politician can wish away in the effort to implement universal health care coverage: the fundamental principle of diminishing marginal utility; the destabilizing impact of heavily subsidized government-provided coverage on the private market; and the treatment of the full range of existing regulations affecting the delivery of health care services as an exogenous given. We address each of these deficiencies in turn. In section III, we examine briefly six areas where we think massive deregulation is in order: medical malpractice, HIPAA, federal tax law, fraud and abuse, health insurance regulation, and certificate of need/scope of practice limitations. Part IV provides a brief update of our analysis, as of mid-September, 2009 to take into account some of the health reform proposals now under consideration in Congress. Part V concludes.

We anticipate that our proposals will be met by howls of protest from those who benefit from the status quo or who stand to gain from the expansion of federal regulatory authority. The complaints of these apologists for expanded state power should be seen for what they are – a defense of rent-seeking by new political players, incumbent providers, or both. The whole point of deregulation is to limit the opportunity and rewards of rent-seeking, thereby increasing consumer surplus. No administrative agency or committee of experts, no matter how well intentioned and knowledgeable, will be able to do a better job of meeting consumer demands than the private market. To think otherwise is to repeat the mistakes of the past, instead of learning from them.

Abstract:
Government power is often used to transfer resources between individuals and the state. On some occasions the state takes private property and places it into public solution; in others it alters the policies pertaining to the use of government lands without changing its legal ownership; and in others it disposes of public lands to private parties. Each of these three activities can be evaluated under a standard that asks whether the acquisition, use or distribution of these resources improves overall social value. Tested by that standard, the rules of acquisition are conducted under standards that typically short-change owners by ignoring the subjective value of the property or the consequential losses inflicted by government use. Changes in land use practices for public lands are politically divisive but are typically undertaken without any effective measure of whether the changes improve overall good. Distributions of public assets to private hands often involve giveaways that move resources to lower-valued uses. A sensible rendering of the just compensation component of the takings clause could protect against many of the abuses associated with the acquisition of private property for public use. A competitive bidding system could control much of the abuse on the distribution of public property for private use. But it is very difficult to come up with any administrative or constitutional scheme that affords sensible oversight over the highly important but less visible task of regulating the patterns of use of public lands.

Public lands, constitutional law, property law

Abstract:
The traditional forms of public health law were directed largely toward communicable diseases and other externalities, such as pollution, with negative health impacts. The more modern view treats any health issue as one of public health so long as it affects large numbers of individuals, which would include such matters as obesity and diabetes. Historically, this paper examines the constitutional evolution of the public health principle from the narrower to the broader conception. It then argues that the narrower principle better defines the appropriate scope of coercive government intervention than the broader definition, which could easily authorize those forms of intervention in economic affairs whose indirect effects are likely to reduce overall social wealth and freedom, and with it the overall health levels of the population.

public health law

Abstract:
From the earliest times, animals were understood as objects of human rights. That result did not depend on some limited understanding of their capabilities for cognition and sensation, but rather rested on the strong sense that without domestication human beings could not secure their own advancement. The modern claims for animal rights cannot therefore be justified by an appeal to some newer and deeper understanding of the subject, but must rest on the claim that what they share with human beings is more important than what separates them. Those common elements do justify some level of animal protection but does not justify the radical transformation of social institutions that would flow from the recognition, as Steven Wise has advocated, of the basic libertarian rights of freedom from human domination and exploitation.

animal rights

Abstract:
In this paper, Richard A. Epstein, Professor of Law at the University of Chicago, explains how there are substantial gains to be made from countries getting 'easy' policy decisions correct. Societies collapse and become impoverished when they do not accept the basic principles of freedom to contract and competition. Even in the developed world these principles have not been accepted in key areas such as agricultural and labour markets. Significant welfare gains could be achieved from liberalisation in both areas.

Epstein explains how liberal economists, politicians and civil servants often spend much time discussing 'difficult' cases. While these issues may be important to particular groups in society, the implications of getting 'difficult' cases wrong is not serious. Thus policy-makers and their advisers, Epstein says, would do well to concentrate on the 'easy' cases.

In his study, Professor Epstein uses evidence and analysis derived from the disciplines of both law and economics. Professor Geoffrey E. Wood provides a commentary that elucidates Epstein's argument and shows how it can be further applied to policy issues relevant to the UK.

law and economics, institutional economics

Abstract:
The previous issue of Regulation contains a provocative attempt by University of California, Berkeley law professor Peter Menell to discredit what he calls the property rights movement (PRM) for its supposed "absolutist" stance on intellectual property. As part of the article, he asserts that I participate in (or perhaps even lead) a movement that poses a profound danger to the efficient operation of our complex system of intellectual property law, especially as it relates to patents and copyrights. In this article, I argue that this characterization is inaccurate. I believe that there are rights over intellectual property, but they differ in important ways from rights over real property.

patents, injunction, absolute rights, equitable relief, genomic patents, water law, property rights, intellectual property, tangible property, infringement, policy, property rights movement, law

Abstract:
Congress and the Food and Drug Administration have heard several recent calls for weakening the patent protection supplied under the Hatch-Waxman Amendments to the basic patent and food and drug laws, which govern the relationship between holders of pharmaceutical patents and their eventual generic competitors. According to some of the proponents of such change, the patents lead to a "Tragedy of the Anticommons" wherein innovation is slowed or aborted as various firms refuse to allow others to use their intellectual property. We think that Heller and Eisenberg have overstated the case against patent protection at both the theoretical and empirical levels. The number of patents filed in recent years has continued to move sharply upward across the board. Indeed, threatening to weaken patent rights is likely to have a chilling effect on innovation because without ample patent protection, no combination of first-mover advantages or altruism will generate the capital sums needed.

Anticommons, biomedical, pharmaceutical patents, intellectual property, patents, biomedical research, tragedy of the anticommons, liability, innovation, patents

Abstract:
Class actions are best justified as an aggregation device that allows for lawyers to bring large numbers of claims in a single proceeding, where each party is compensated for his or her loss of control by a receipt of the greater returns that class actions promise. One constraint on aggregation is that it preserve the substantive entitlements between plaintiffs and defendants. Yet all too often it turns out that courts will relax the substantive requirements of proof in favor of plaintiffs in order to increase the number of common issues needed to justify the certification of a class. The net effect is that class actions work to distort the substantive laws in ways that tend to have a systematic bias in favor of plaintiffs that was no part of their original purpose or design. Guarding against this risk should lead judges to exercise greater caution in the certification of classes.

Abstract:
Any symposium on private-equity firms and the going private phenomenon would be incomplete without discussion of Sovereign Wealth Funds (SWFs). These government owned investment vehicles have and will continue to play an important role in the going private phenomenon. SWFs have not only helped fuel that phenomenon through their participation as limited partners in private-equity funds and hedge funds, but their massive capital infusions into ailing financial institutions and private-equity firms in the wake of the subprime mortgage crisis may, in a very real sense, save it. It is not hyperbolic to suggest that the future of private equity - including the going private phenomenon - and the future of SWFs are inescapably intertwined. Misguided regulation of the latter will, quite foreseeably, operate to the detriment of the former. And the scope of potential mischief is broad.

SWFs have existed for decades, but today they face heightened scrutiny due to their recent rapid growth and a concomitant shift in their investment strategy from primarily conservative debt instruments to higher risk/reward equity investments. This shift in strategy has stoked fears in the United States and Europe that these funds - which find home primarily in the Middle East and Asia - will use their economic clout to pursue political goals. This type of rhetoric has led some to call for increased regulation of SWFs.

In this Article we argue against imposing any additional burdens on investments by SWFs in the United States, at least at present. In our view, at this point a policy of watchful waiting is preferable to any immediate effort to impose special restrictions on SWFs. On the one hand, the nightmare scenarios painted by SWF critics often involve activities that would be caught by existing laws, either as they relate to national security or to various forms of business regulation under the securities and antitrust laws. On the other hand, we do not possess perfect foresight and cannot say that every possible permutation of SWF investment should escape a regulatory response in the future. What we do know, however, says that the burden of proof lies on those who think that further prophylactic regulation is in order at this juncture. To date, SWFs have acted as model investors, and the risk that they may act strategically in the future is significantly mitigated by existing safeguards. A far greater danger to America’s economy and security inheres in taking unnecessary action that would encourage SWFs to redirect their investments elsewhere, or to harbor resentment toward the United States that could express itself in a wide range of hostile actions.

Sovereign wealth funds, private equity, going private, regulation, foreign investment, best practices

Abstract:
This essay introduces the papers presented at a conference at the University of Chicago Law School in June 2008, entitled "The Going Private Phenomenon: Causes and Implications." The papers will be published in a forthcoming volume of the University of Chicago Law Review. This introduction puts the papers in the context of the recent private equity boom and ongoing crunch, and it offers some preliminary views on the current and future state of the private equity industry.

Abstract:
The advantages of electronic transactions - swift, reliable, and silent - over clunky checks and bulky cash are apparent to consumers. Yet, the payment industry has been embroiled in a continuous procession of antitrust lawsuits in the United States and increasing threats from overseas. Antitrust law works best when it concentrates on horizontal agreements like bid rigging and price fixing. But, with these attacks on the payment card industry, governments are attacking business arrangements that make platform industries work.

credit cards, debit cards, electronic transactions, payment card, payment industry, antitrust,, cooperatives, integrated firms, richard epstein, thomas brown

Abstract:
Libertarians are inclined to view property as best dealt with through contract. They are hostile to IP rights in general, and copyright and patent rights in particular, because these aren't viewed as natural rights over tangible things stemming from the actions of individuals. Still these rights are defensible because they help advance human happiness in a wide range of circumstances, so that their creation under a set of general prospective rules satisfies the most exacting of social criterion. They tend to leave no one worse off than in a state of nature, and indeed tend to spread their net benefits broadly over the entire population. Differences in how the law treats both tangible and intellectual property do not signal any disintegration in the overall conception of property rights. As in all cases we should be on the lookout for strong social improvements that cannot be achieved by voluntary means. In those cases, purposive innovation on property rights, by either courts or legislatures seems appropriate. The law of intellectual property should be subject to constant analysis and review, but not to any a priori attack on the supposed inferiority of intellectual property rights to those in tangible objects.

Intellectual Property, IP, libertarian, social contract, property rights, liberty, property, happiness, freedom, Hobbes,Locke, Hegel, private property,socialism,ownership,property,competition,markets,capitalism,economics,patent, copyright

Abstract:
This paper analyzes three issues critical to understanding the chronic shortage in organs. Section 2 develops a simple economic model of altruism that helps explain how markets with altruistic participants operate in ways similar to ordinary economic markets, but produce an equilibrium position in which more organs are transferred at lower cash prices. Section 3 examines and rejects the various arguments used to undermine the neoclassical arguments in the first section. Section 4 looks at ways to expand the supply of organs: directed donations within families and among friends, solicited organs via matchingdonors.com, donor-recipient pairs, and LifeSharers.

altruism, crowding out, kidney transplant, paired organ donations

Abstract:
Current legal conceptions of property differ in the private and the public law. The former develops a comprehensive conception that gives full protection for each element in the bundle of rights - possession, use and disposition - which allows parties to enter into complex transactions that increase wealth for the parties without prejudicing outsiders. Constitutional doctrine gives strong protection to exclusion, but weak protection to use and disposition, and thus invites a complex range of government strategies that reduce property value, without creating any offsetting gain in third parties.

first possession, Lockean theory, nuisance, spatial externalities, temporal externalities, trespass, unconstitutional condition, zoning

Abstract:
The constant condemnation of discrimination in the access to health care in the United States suffers from a number of flaws. First, by refusing to offer any explicit definition of discrimination, it fails to distinguish between differential treatment that is attributable to bias or prejudice from that which counts a rational response to differences in patient need. Discrimination based on cost-differences will not be, and should not be expected to be, eliminated by market forces, while those which are not will be, and should be, eliminated. Second, it relies improperly on studies that purport to find discrimination in other markets. Third, the evidence of discrimination in health care often ignores problems in communication, and differences in family and social structure that could lead conscientious physicians properly to use different approaches for patients of different races. With the striking absence of any overt evidence of discrimination, investigators should be cautious about inferring discrimination from statistical studies that are at best able to control for a small fraction of the relevant variables.

Abstract:
Any legal system must make a trade-off between two components of optimal law enforcement. The first requires all persons injured by some wrongful conduct to recover full damages in order to create optimal incentives for primary conduct. The second requires some limit on the number of potential of wrongful suits arising out of wrongful conduct, in order to contain the administrative and error costs of legal enforcement. In most practical settings, the second of these concerns has proved more important than the former, which has led to the creation of a practical standing doctrine recognized in the Supreme Court's decisions in Illinois Brick (1977) and Holmes (1992). One component of standing is the so-called privity limitation, which limits suits to parties who are immediate purchasers from the wrongdoer. The privity limitation has applied to common law actions, and to statutory causes of action under both the general antitrust law and direct schemes of regulation. This paper explores the evolution and justifications for the privity doctrine, and then argues that the recent suits, such as Goldwasser (2000) and Trinko (2002) that have allowed indirect purchasers of telecommunications services to have standing against Local Exchange Carriers under the Sherman Act misread the relevant legal authority, and overlooks the important practical function of both standing and privity limitations.

Sherman Act, monopolies, privity limitation, telecommunications, local exchange carriers, practical standing doctrine

Abstract:
The linkLine price squeeze case pending in the Supreme Court for the Fall 2008 Term is one of the most significant antitrust cases on monopolization law that the Court has taken in years. Amici are professors and scholars in law and economics who have taught, or have conducted research on, antitrust law and the economics of industrial organization. They are William J. Baumol, Robert H. Bork, Robert W. Crandall, George Daly, Harold Demsetz, Jeffrey A. Eisenach, Kenneth G. Elzinga, Richard A. Epstein, Gerald Faulhaber, Franklin M. Fisher, Charles J. Goetz, Robert Hahn, Jerry A. Hausman, Keith N. Hylton, Thomas M. Jorde, Robert E. Litan, Paul W. MacAvoy, Sam Peltzman, J. Gregory Sidak, Pablo T. Spiller, and Daniel F. Spulber.

We agree with the petitioners that the Ninth Circuit has generated an inescapable conflict among circuits, and that its opinion is incompatible with the Supreme Court's decisions in Trinko, Weyerhaeuser, and Brooke Group. We agree with Judge Gould's dissent from the Ninth Circuit's decision in linkLine that Trinko "takes the issues of wholesale pricing out of the case," such that the plaintiffs' only possible remaining theory of harm would be predatory pricing at the retail level - which the plaintiffs did not allege. We also agree with Judge Ginsburg's opinion for the D.C. Circuit in Covad Communications Co. v. Bell Atlantic Corp., which in turn embraces the conclusion of the Areeda-Hovenkamp treatise that "it makes no sense to prohibit a predatory price squeeze in circumstances where the integrated monopolist is free to refuse to deal." The existence of a rule like linkLine has a pervasive impact on business behavior that, at the margin, affects competition and consumers. This deleterious effect extends beyond the telecommunications industry to affect all firms that do business in the Ninth Circuit. These reasons justify reversing the Ninth Circuit's decision.

In our minds, an even larger reason than those described above makes it imperative that the Court reverse this decision. The Ninth Circuit's decision in linkLine implicates the normative foundation of modern Sherman Act jurisprudence: that antitrust law exists to advance consumer welfare. We have three points to make.

First, any rule of price-squeeze liability that threatens liability based on the claim that the difference between a firm's upstream and downstream prices leaves downstream rivals insufficient margin substitutes a rule of competitor welfare for consumer welfare.

Second, properly understood, a price squeeze is a regulatory issue, which makes sense only as a rule of price regulation in an industry already subject to duties to deal and to control by institutionally competent regulators. Attempting to implement regulatory policy through section 2 of the Sherman Act is ill-advised, both because it makes no sense for courts to re-regulate deregulated or lightly regulated industries, and because courts lack the institutional competence to implement regulation.

Third, the Ninth Circuit's rule is of pressing concern precisely because it will deter efficiency-enhancing conduct and competitive pricing. Vertical integration and partial integration are ubiquitous, and firms need to be able to make decisions about such integration without the threat of liability. Vertically integrated firms likewise need to be free to cut retail prices (as long as the prices are not predatory) without concern for rivals - the point of Brooke Group. Moreover, the Ninth Circuit's standard is so vague and open-ended that it creates uncertainty and invites litigation; it also permits imposition of liability based on apparently subjective evaluation of disputed and hard-to-prove facts, which will lead to a substantial risk of false positives.

Abstract:
The aftermath of Kelo gives rise to urgent land use issues, both theoretical and historical. On the former, I argue that the analysts should be aware of the close and positive connection between restrictive land use policies on the one hand and a willingness to condemn parcels for private development on the other. The inability to overcome local opposition with private development forces developers to get in essence, pre-acquisition approval through public condemnation. One way, therefore, to ease the pressure on public use is to retreat from aggressive land use regulation to a scheme that more closely approximates that of the common law rules on nuisance and restrictive covenants, which will be hard to achieve since local systems of voting give little weight to the interest of potential buyers who live outside the governance area. Historically, this opportunity was lost when the United States Supreme Court in Berman v. Parker distanced itself from the thoughtful decision of Judge Prettyman below in Schneider v. District of Columbia, which sought to cabin in the ends for which the eminent domain power could be used, even if it gave too much deference to local governments on any means/ends connections.

Kelo, just compensation, land use planning, nuisance, public use, restrictive covenants, zoning

Abstract:
Modern law often rests on the assumption that a uniform cost/benefit formula is the proper way to determine fault in ordinary contract disputes. This Article disputes that vision by defending the view that different standards of fault are appropriate in different contexts. The central distinction is one that holds parties in gratuitous transactions only to the standard of care that they bring to their own affairs, while insisting on the higher objective standard of ordinary care in commercial transactions. That bifurcation leads to efficient searches. Persons who hold themselves out in particular lines of business in effect warrant their ability to achieve uniform standards, while individuals who seek favors from their friends are incentivized to choose them carefully given the subjective standard of care. These results, moreover, derive from the Roman conceptions of care brought into the Anglo-American law through the 1703 decision in Coggs v. Bernard, and are shown to have surprising durability in dealing with agency, medical malpractice, occupier liability, guest statute and frustration cases. Often the efficient standard of fault is given only to those who do economics without really trying.

bailments, fault, efficiency gratuitous transactions, Hand formula, impossibility, negligence, objective versus subject standard, stranger cases

Abstract:
Most forms of egalitarian theory impose on government (and through it other people) to redress the inequalities of fortune that result from bad luck. This Article takes issue with the various forms of this large claim, and argues that decentralized forms of assistance are likely in the long run to do better by the very standards by which egalitarians justify their own program. The alleviation of poverty depends in the first instance on increases in wealth that can only come through private innovation and technological advances. These have in fact produced major improvements in overall well-being, with disproportionate advances for the poor. But if one starts with Dworkin's unsustainable distinction between option and brute luck, or Nussbaum and Sen's capability theory, then no egalitarian theory can deliver on the promise to level differences in wealth without seriously compromising overall levels of social welfare. By expanding the scope of government regulation, these proposals open the door to selfish political forces whose political clout ensures that ill-conceived programs, such as the Americans with Disabilities Act, frustrate the very goals they hope to achieve. State intervention to redistribute resources should be understood as a last resort for dealing with problems of ill fortune.

charitable behavior, egalitarianism, libertarianism, luck redistribution, welfare rights

Abstract:
In NRA v. City of Chicago, Judge Easterbrook held that the Second Amendment, which protects the right to keep and bear arms, did not bind state governments. This article examines the reasoning that he uses to reach that result, which it contrasts with the style of argumentation that led to the opposite conclusion in Judge O’Scannlain’s decision in Norkdye v. King. Easterbrook’s approach emphasized the imperative need for lower court deference to the Supreme Court’s explicit Reconstruction Era holdings that the Second Amendment does not bind the states, even after the Supreme Court’s game-changing decision in District of Columbia v. Heller and thus gave only scant attention to the various historical authorities that O’Scannlain referred to in Nordyke. On balance it appears that Easterbrook is against incorporation on a variety of historical and federalism grounds, none of which are likely to prevail when the Supreme Court addresses the issue of incorporation when it hears the case later in the 2009 October Term.

Abstract:
This article is a short response to Jennifer Rothman's claim that the customary practice offers a poor foundation for the narrow reading that many courts give to the fair use defense in copyright law. It argues that her position is sound insofar as it protests the threat of litigation as a means to aggrandise property rights, but misunderstands in connection with both artistic and written works the weakness of the fair use doctrine when cheap means are potentially or actually available for the dissemination of works through license. The fair use doctrine avoids a low transaction cost, but suffers the greater inconvenience of eliminating one or more revenue stream for the author, which diminishes the initial incentive to produce.

custom, copyright, fair use

Abstract:
How do we understand human nature? The purpose of this Essay is to examine the relationship between human nature and social institutions. More concretely, the question is: What does an accurate account of human nature tell us about the choice of a desirable set of social institutions? Accounts of this sort typically focus on two key sticking points, one of ends and the other of means. On the former, Is individual self-interest the driving force behind all forms of human behavior? Do people care about themselves first? In the extreme, improbable, answer to this query, ordinary people do not care about any other individuals at all. In more modest versions, they display a degree of empathy and concern for their fellow individuals, best captured by Hume’s memorable phrase of “confin’d generosity.” On the latter, Do these (self-interested) persons select the proper, i.e., lowest cost, means to reach their chosen ends under conditions of uncertainty? Within the standard versions of neoclassical economics, both of these premises - self-interest and rationality - are generally posited as true.

Abstract:
Under last year's Wright Amendment Reform Act, several gates at Love Field Airport in Dallas are slated for demolition because they could be leased to airlines other than American Airlines and Southwest Airlines, the two dominant players in the burgeoning North Texas market. The new law not only distributes market power in the Dallas/Fort Worth area, but also shapes activities everywhere else on the airline grid.

The Wright Stuff, Wright Amendment Reform Act, Love Field, deregulation, civil aeronautics board, reform, flight restrictions, Senator Hutchinson, Mayor Miller, environmental concerns, antitrust, eminent domain, prospective advantage

Abstract:
This article examines Hart`s claim that it is possible to identify a core set of moral principles that constitute the minimum content of natural law. It argues that there is no reason to link natural law solely to self-preservation when its principles could be extended to maximize social welfare. The article then shows how these so-called minimum rules of property, contract, and tort have in fact large generative powers that allow them to explain many of the salient features of any complete legal system. The article also shows how the relevant principles in this regard can be developed by an appeal to Hart`s principles of defeasibility and causation. Both of these concepts organize the orderly and incremental expansion of legal rules from their initial core into a complete legal system.

Abstract:
The proposed Employee Free Choice Act - better known as the 'Card Check' Act - represents a remarkable departure from U.S. labor law. The legislation does not include a number of features contained in previous labor laws that the Supreme Court has ruled were necessary for those laws to be constitutional. Hence, even under the legal philosophy that has governed U.S. labor law since the New Deal, the EFCA is a constitutional pariah.

efca, employee free choice act, nlrb, national labor review board, collective bargaining, wagner act, taft-harley act, landrum-griffin act, railway labor act

Abstract:
This Article critiques Michael Heller’s important contribution in the Gridlock Economy. At no point does it take the position that gridlock, or the associated anticommons, is not a serious issue in the design of a legal system. But it does insist that gridlock is not the major source of social dislocation, or that private ownership is the major source of gridlock. More concretely, the articles examines the other important sources of economic distortion that are unrelated to economic gridlock from private action. These include the use of excessive government subsidies (as with health care), misguided government licenses (as with broadcast licenses); the unwise use of government power to create gridlock situations (as with employment law); the excessive role of government permitting (as with real estate development); and the use of creative private techniques to overcome gridlock (as with patent licensing as a way to combat the patent thicket). Thereafter, the Article explains how traditional common law rules did a better job in controlling for gridlock than many current initiatives, by narrowly defining the class of actionable harms to exclude competitive loss, blocked views, and hurt feelings. It closes with an explanation of how broad definitions of harm slow down decisions in the public sector, thereby impeding the use of the eminent domain power that could otherwise respond to gridlock issues.

Michael Heller, Gridlock Economy,

Abstract:
The Court should reject the Federal Circuit’s new, restrictive approach to patent eligibility because it is in conflict with the statute, the precedents of this Court, and sound public policy. The Federal Circuit’s narrow interpretation of patent eligibility strikes first at excluding patents in the area of business methods and software, in direct conflict with the Court’s decision in Diehr. Worse still, the Federal Circuit’s approach could easily cast a pall over all method claims in other areas of technology. Given the long established links between the eligibility rules for software and biotech, it is likely to spread its tentacles to biotech in particular, thereby undermining the huge boost that the Court’s decision in Chakrabarty gave to bioscience. Furthermore, the Federal Circuit’s approach will have a profound adverse effect on the public’s ability to benefit from Dr. Chakrabarty’s own research.

Business Methods, patents, innovation, software, biotechnology

Abstract:
Although the principle of personal autonomy is commonly accepted as the proper guide for health care decisions, that principle has been conspicuously absent in the area of drug regulation where the FDA has the unquestioned power to keep drugs off the market that it does not deem safe and effective. In many difficult areas, especially with cancer drugs, undue reliance of FDA expertise has serious deleterious defects. The most conspicuous sign that its regulatory role often is counterproductive is the widespread off-label uses of drugs to treat conditions for uses that have not been approved by the FDA. These uses are not undertaken by individual doctors on a whim but are subject to systematic voluntary oversight within the profession which works more swiftly and sensibly than the FDA itself. The clear policy recommendation is that the FDA should work hard to speed new drugs to market given the other superior mechanisms available to collect and evaluate the information on whether, and if so how, these drugs should be used.

FDA, drug regulation

Abstract:
This article examines the level of appropriate level of constitutional protection against outside governments that condemn property located within a given local municipality that use tax increment financing to fund local improvements The standard TIF arrangement does not provide the TIF lenders with liens against any particular asset, because to do so would be to abandon the tax exempt status of the municipal bonds that are issued. Yet these agreements guarantee that the local government that issued the bonds will take no steps to compromise their repayment from (incremental) tax dollars. These protections allow TIF bonds to trade in ordinary financial markets. The bonds may, however, prove vulnerable to loss when the private and public property within the local municipal district are condemned by an outside governments, as happened in Chicago v. Prologis, now before the Illinois Supreme Court. I believe that these TIF bonds should in general be counted as property under the takings clause and not be treated as a mere “expectation” devoid of constitutional protection. This topic opens the way for a larger consideration of how to value divided interests in real property under the takings clause as a matter of modern finance theory in light of the powerful public choice issues at stake.

tax increment financing, takings, reasonable expectations, local government, public finance

Abstract:
Without question, the libertarian vision that envisions the use of state power to control force and fraud as a proper governmental function is one piece of any comprehensive political theory. But the hard-line libertarian goes astray in finding this the sole function of government or in thinking that the maintenance of order is possible without the imposition of taxes. Rather, the case for taxation rests on the familiar view that state coercion is sometimes necessary to overcome coordination problems. The justification for a minimal system of taxation therefore is that it provides more in benefits for the individuals taxed than they lose in revenue. Stressing the benefit shows the mistake in Nozick's famous observation that taxation is "on a par" with forced labor. And the proper understanding of the logic of taxation shows the defects in the series of steps in demoktesis - or "ownership of the people, by the people, and for the people" - that Nozick offers to show how difficult it is to draw any clear line between taxation and slavery.

Taxation, libertarianism, Nozick, democracy

Abstract:
This paper critiques the elaborate system of privacy safeguards that are found in the 1996 Health Insurance Portability and Accountability Act (HIPAA). On the more specific level, it explains how the detailed rules for the protection of privacy interests are likely to impact the ability to organize new medical research projects or to pursue follow-up with long-term studies already in place. On the more general level, it criticizes the requirement for individuated consent for discrete medical or financial transactions as an impediment to freedom of contract by precluding the use of generalized consent at the formation of the health care provider/patient relationship. The extreme set of ex ante regulatory provisions might make some sense if the current systems in place for the protection of medical privacy had shown some demonstrated failure that more limited after-the-fact remedies could not correct in individual cases. As no such showing has been made, the current explosion in regulation is best understood as the aggrandizement of regulatory power under the large grant of delegation contained in the original statute.

regulation, privacy, health, insurance, medical research

Abstract:
This article examines the relationship of contract and trust theory to the governance and operation of corporations. The author examines these theories first on a general level, then applies them to the doctrine of corporate opportunity as developed in Chancellor Allen's opinion in Cellular Information Systems, Inc. v. Broz.

Abstract:
The growth of the law of privacy has taken chaotic forms. Sometimes claims for privacy work in harmony with classical liberal ideals and on other occasions it works against them. This paper seeks to examine the strength of various claims to privacy within a framework that first asks whether, and if so how, privacy interests may be protected under the framework I defended in Simple Rules for a Complex World (Harvard University Press 1995). The first stage asks the extent to which privacy interests are protected by libertarian rules directed toward the protection of autonomy, property, and voluntary exchange from the use of force and fraud. It then examines how privacy interests can be usefully protected by the relaxation of these rules in ways that work to the long-term advantage of all individuals. It then notes that protecting certain forms of privacy (such as that against eavesdropping) fall within this category while other claims for privacy (such as shielding medical records from employers and insurers) do not. Privacy issues can thus be sorted out by the same conceptual devices used to evaluate traditional common law claims in torts and contracts.

Abstract:
Rate regulation has commonly been imposed on natural monopolies in order to prevent excessive profits by the regulated firms. Use of regulation in turn creates the risk of confiscation of firm assets if the rates of return are not sufficient to cover both the variable and fixed costs of the business, leading to constitutional protections against insufficient rates. Rate regulation has often been extended to competitive industries, such as insurance, where it has no similar intrinsic rationale. The reduced returns, and higher costs to the regulated firm necessarily drive the rates below the required competitive return in ways that no hearings or appeals can fix. When firms therefore seek to exit form a competitive industry to forestall the risk of regulation, they should be allowed to so as of right, even if firms in monopolistic industries are not accorded that privilege. Nonetheless many states, such as Florida with its Wind Insurance Program, have been able to force firms to remain in the state, thereby imposing enormous burdens both on shareholders and on policyholders in other jurisdictions. Although the Constitution contains no explicit guarantee of an exit right, such must be recognized in competitive industries to implement the constitutional guarantees against confiscation.

Abstract:
This paper examines and rejects the commonplace view that the doctrines of classical contract law (offer and acceptance, consideration, damages) were logically linked to the political philosophy of laissez-faire. Many writers (Grant Gilmore, Patrick Atiyah, Lawrence Friedman) attribute much of the rigid and mechanical nature of nineteenth century contract law to its affinity with laissez-faire. In this paper I reject that connection. The key distinction is that between security of exchange and freedom of contract.

Laissez-faire is strongly committed to both, but most of contract law only requires the former without the latter. Security of exchange ensures that the enforcement of legal contracts when, as commonly is the case, one party must perform before the other. Freedom of contract guarantees a broad sphere in which voluntary arrangements are permissible. Most contract law is devoted to the former, which can be supported even by those who favor extensive regulation of economic transactions. The strength or weakness of that law is largely determined by instrumental questions of whether they promote stable contracting over time.