Fall 2010 Workshops
Law and Economic Studies
September 20, 2010
Professor Chris J. Brummer
Georgetown University Law Center
How International Financial Law Works (And How It Doesn't)
The “Great Recession” has given way to a dizzying array of international agreements and reports aimed at strengthening the prudential oversight and supervision of market participants. How these international financial rules operate is, however, deeply misunderstood. Theorists of international law view international financial rules as merely coordinating mechanisms in light of their informal “soft law” quality. Yet these scholars ignore the often steep distributional implications of financial rules that may favor some countries over others and thus fail to explain why soft law would be employed where losers to agreements can strategically defect from their commitments. Meanwhile, political scientists, though aware of the distributional dynamics of financial rule-making, rarely, if ever, examine international law as a category distinct from international politics. Law is instead cast as an inert, dependent variable of power, as opposed to an independent factor that can inform the behavior of regulators and market participants.
This Article presents an alternative theory for understanding the purpose, operation and limitations of international financial law. It posits that international financial regulation, though formally “soft,” is a unique species of cross-border cooperation bolstered by reputational, market and institutional mechanisms that often render it coercive than classical theories of international law predict. The Article notes, however, that these disciplinary mechanisms are hampered by a range of structural flaws that erode the “compliance pull” of global financial standards. In response to these shortcomings, the Article proposes a modest blueprint for regulatory reform that eschews more drastic (and impractical) calls for a global financial regulator and instead aims to leverage transparency in ways that more effectively force national authorities to internalize the costs of their regulatory decision-making.
Brummer, C - Fall 10 WS
October 4, 2010
Professor Mark A. Lemley
Stanford Law School
Patent Quality and Settlement Among Repeat Patent Litigants
Repeat patent plaintiffs – those who sue eight or more times on the same patents – have a disproportionate effect on the patent system. They are responsible for a sizeable fraction of all patent lawsuits. Their patents should be among the strongest, according to all economic measures of patent quality. And logic suggests that repeat patent plaintiffs should be risk averse, settling more of their cases and taking only the very best to trial to avoid having their patents invalidated. In this paper, we test those hypotheses. We find that repeat patent plaintiffs are somewhat more likely to settle their cases. But, to our surprise, we find that when they do go to trial or judgment, overwhelmingly they lose. This result seems to be driven by two parallel findings: both software patents and patents owned by non-practicing entities (so-called “patent trolls”) fare extremely poorly in court. We offer some possible explanations for why a group of apparently weak patents nonetheless have so much influence over the patent system, and some preliminary thoughts about how these findings should shape the patent reform debate.
Lemley, M - Fall 10 WS
October 18, 2010
Professor Reinier H. Kraakman
Harvard Law School
CEO Tenure, Performance and Turnover in S & P 500 Companies
with John C. Coates, IV
Two empirical literatures tie the displacement of incumbent CEOs of widely-held companies to the poor performance of their firms—the turnover and mergers and acquisitions (M&A) literatures. In this paper we demonstrate a strong link between CEO turnover and friendly acquisitions of target firms in the S&P 500 between 1992 and 2004. We find that acquisitions and internal CEO turnover are most likely to occur at the same point in a CEO’s tenure, roughly five years after her initial appointment. We conjecture that deals are potential alternatives to CEO dismissal by the board or imminent CEO retirement. In support of this conjecture, we explore interactions among CEO dismissals, retirements and resignations, and acquisitions on the one hand, and firm performance and CEO tenure on the other. We also investigate specific hypotheses relating tenure to a CEO’s age, her status as an inside or outside appointee, and the level of deal activity in the M&A market. Among our key findings is that the probability of a deal remains constant over the last half of the age distribution of our sample CEOs, even though their probability of retiring increases sharply. This suggests that -- contrary to our conjecture -- impending retirement is not among the stronger incentives driving the management of target firms to seek friendly buyers. Finally, this paper contributes to the turnover literature on the methodological level by comparing multinomial logistic regression—the traditional methodology of turnover research—to competing risk regression, a methodology adapted from epidemiological and medical research and recently introduced into the empirical finance literature.
Kraakman - 2010 WS
November 1, 2010
The Honorable Richard Allen Posner
Judge on the United States Court of Appeals
for the Seventh Circuit in Chicago
Judge Posner unfortunately was forced to cancel his trip to New York, so our Monday law and economics workshop is CANCELLED
A Realistic Theory of Judicial Behavior
The presentation at the workshop will be based on one chapter, and an excerpt from another, of a forthcoming book on judicial behavior that I’ve coauthored with Lee Epstein and William Landes. The chapter is the description of the informal economic model that the empirical chapters of the book seek to test. We model judicial behavior as a problem in labor economics; the unusual tenure conditions of federal judges complicate but, we argue, do not negate a model of self-interested agent and principal behavior. The chapter considers objections to the model, and more broadly to the “realist” conception of judges, raised in a recent article by Edwards and Livermore.
The excerpt is from the chapter on dissents in the Supreme Court and in the federal courts of appeals. Although Professor Epstein gave a version of the chapter at the Columbia workshop last spring, the excerpt, which compares dissent behavior in the Supreme Court and the courts of appeals, was (with the exception of a couple of paragraphs) not a part of that paper. The excerpt seeks to explain, both theoretically and empirically, the dramatically higher rate of dissent in the Supreme Court than in the courts of appeals.
Posner Paper Fall 2010
November 15, 2010
Professor Nancy Staudt
Northwestern University School of Law
The Judicial Power of the Purse:
How Courts Fund National Defense in Times of Crisis
The paper that will be presented is the empirical chapter of a forthcoming book investigating judges' hidden purse powers and the use of these powers in times of foreign policy crises. The presentation will incorporate both qualitative and quantitative data and will provide support for the idea that judges use their financial powers differently in times of peace and in times of crisis.
Staudt - Fall 10 WS
November 29, 2010
Professor Suzanne Scotchmer
University of California, at Berkeley
Goldman School of Public Policy
Cap-and-Trade, Emissions Taxes, and Innovation
Emissions taxes and carbon caps can both lead to efficient production of energy, in the sense of controlling carbon emissions to the extent that is efficient with existing technologies. However, the regulatory policy has a second objective, which is to create incentives to develop lower-carbon technologies. With both objectives in mind, does one policy dominate the other? The answer depends partly on whether the regulated price of energy is in the elastic or inelastic part of the demand curve. It also depends on the size of the intended improvement. Under tax regulation, an innovator can always profit from diffusing the clean technology to all producers. This is not true under a carbon cap, because diffusion expands energy supply, reducing the price of energy and of allowances, and eroding the producers' willingness to pay for licenses. Under cap-and-trade regulation, the regulator has less ability to control the price of energy while ensuring productive efficiency (full diffusion). Because there is little incentive to invest in a larger improvement than will be fully diffused, cap-and-trade regulation limits innovation in a way that is avoided by a tax. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1527247