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http://ssrn.com/abstract=257322
 
 

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Givings, Takings, and the Fallacy of Forward-Looking Costs


Gregory Sidak


Tilburg Law & Economics Center (TILEC), Tilburg University; Criterion Economics, L.L.C.

Daniel F. Spulber


Northwestern University - Kellogg School of Management


New York University Law Review, Vol. 72, No. 5, pp. 1068-1164, November 1997

Abstract:     
Mr. Sidak and Professor Spulber extend here the analysis in Deregulatory Takings and Breach of the Regulatory Contract, published last year in this Review. They respond to comments and criticisms raised not only by Professors Baumol and Merrill, but also by Judge Williams and Professor Williamson in their Comments published last year. Sidak and Spulber begin by exploring the constitutional limitations on the government's ability to redefine the public purpose to which a regulated utility has dedicated its private property. Then, the authors examine whether the government has made givings that implicitly compensate the regulated firm for its diminution in value owing to the imposition of policies mandating network unbundling at regulated prices. Sidak and Spulber refine the limiting principles for the recovery of stranded costs that they articulated in their earlier article and show how those principles reconcile with the actual treatment of losses from deregulation in disparate industries. Next, they expose the economic fallacies in the notion of forward-looking costs as that term has been used by the Federal Communications Commission and state public utility commissions to set prices for mandatory network access under the Telecommunications Act of 1996. The authors analyze the Supreme Courts 1996 decision in United States v. Winstar Corp. and argue that the reasoning employed by seven Justices in that case comports not only with earlier decisions of the Court construing the regulatory contract with public utilities, but also with the contemporary economic analysis of why the regulatory contract is essential and efficient. Sidak and Spulber explain how transition bonds may solve the stranded cost conundrum in the telecommunications and electric power industries by permitting the securitization of stranded costs in a manner that restores investors' faith in the state's ability to make credible commitments. Finally, the authors examine the significance of the Eighth Circuit's 1997 decision in Iowa Utilities Board v. FCC for the debate over deregulatory takings and breach of the regulatory contract.

Number of Pages in PDF File: 99

JEL Classification: KO, K2, L4, L5, L9

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Date posted: January 22, 2001  

Suggested Citation

Sidak, Gregory and Spulber, Daniel F., Givings, Takings, and the Fallacy of Forward-Looking Costs. New York University Law Review, Vol. 72, No. 5, pp. 1068-1164, November 1997. Available at SSRN: http://ssrn.com/abstract=257322 or http://dx.doi.org/10.2139/ssrn.257322

Contact Information

J. Gregory Sidak (Contact Author)
Tilburg Law & Economics Center (TILEC), Tilburg University ( email )
Tilburg, 5000 LE
Netherlands
Criterion Economics, L.L.C. ( email )
1614 20th Street, N.W.
Washington, DC 20009
United States
(202) 518-5121 (Phone)
HOME PAGE: http://www.criterioneconomics.com
Daniel F. Spulber
Northwestern University - Kellogg School of Management ( email )
606 Leverone Hall
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8675 (Phone)
847-467-1777 (Fax)
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