Supreme Court Amicus Brief Regarding Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, Washington

Baumol, William J.; Blaydon, Colin; Cicchetti, Charles J.; Stulz, René M.; Dubin, Jeffrey A; Fisher, Franklin M.; Hahn, Robert W.; Hausman, Jerry A.; Hogan, William W.; Kalt, Joseph P.; Kleindorfer, Paul R.; Michaels, Robert J.; Owen, Bruce M.; Pirrong, Craig; Salinger, Michael A.; Shavell, Steven; Smith, Vernon L.; Sweeney, James L.; Willig, Robert; Wolfram, Catherine

doi:10.2139/ssrn.1034200

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Supreme Court Amicus Brief Regarding Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, Washington

AEI-Brookings Joint Center Brief No. 07-02

49 Pages Posted: 2 Dec 2007

See all articles by William J. Baumol

William J. Baumol

New York University - Stern School of Business, Berkley Center for Entrepreneurial Studies; Leonard N. Stern School of Business - Department of Economics

Colin Blaydon

Tuck School of Business, Dartmouth College

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Jeffrey A Dubin

University of Southern California, Department of Economics

Robert W. Hahn

Technology Policy Institute; University of Oxford, Smith School

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

William W. Hogan

Harvard University - Harvard Kennedy School (HKS)

Joseph P. Kalt

Harvard University - Harvard Kennedy School (HKS)

Paul R. Kleindorfer

University of Pennsylvania - Operations & Information Management Department; Paul Dubrule Professor of Sustainable Development & Distinguished Research Professor at INSEAD

Robert J. Michaels

California State University, Fullerton - Department of Economics

Craig Pirrong

University of Houston - Department of Finance

Michael A. Salinger

Boston University - Questrom School of Business

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

Vernon L. Smith

Chapman University - Economic Science Institute; Chapman University School of Law

Robert Willig

Princeton University - Princeton School of Public and International Affairs

Catherine Wolfram

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: November 1, 2007

Abstract

Economists have long recognized that certainty of contract is essential to a healthy economy. Long-term forward contracts, in particular, help reduce financial risk. Those contracts can only accomplish that goal, however, if parties know the contracts will be enforced.

From an economic and policy standpoint, long-term energy contracts should be abrogated only in truly exceptional circumstances. The mere fact that a price seems too high in retrospect does not justify abrogating contracts voluntarily agreed to by sophisticated buyers and sellers. Nor do generalized claims of - market dysfunction - at the time the contract was formed.

Suggested Citation: Suggested Citation

Baumol, William J. and Blaydon, Colin and Cicchetti, Charles J. and Stulz, Rene M. and Dubin, Jeffrey A and Fisher, Franklin M. and Hahn, Robert W. and Hausman, Jerry A. and Hogan, William W. and Kalt, Joseph P. and Kleindorfer, Paul R. and Michaels, Robert J. and Owen, Bruce M. and Pirrong, Craig and Salinger, Michael A. and Shavell, Steven and Smith, Vernon L. and Sweeney, James L. and Willig, Robert D. and Wolfram, Catherine, Supreme Court Amicus Brief Regarding Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, Washington (November 1, 2007). AEI-Brookings Joint Center Brief No. 07-02, Available at SSRN: https://ssrn.com/abstract=1034200 or http://dx.doi.org/10.2139/ssrn.1034200