Skip to content
  • Favorite

    Type:
    Categories:
    Sub-Categories:

  • Type:
    Categories:
    Sub-Categories:

    This chapter introduces the history, uses, methods, strengths, and limits of law and economics and game theory as applied to law. Through a game-theoretic analysis of a famous judicial opinion, United States v. Carroll Towing, the chapter describes the efficiency consequences of different potential legal rules and illustrates some of the considerations and challenges inherent in selecting the efficient legal rule. The chapter also highlights some of the trade-offs inherent in the law and economics approach and in employing game theory as a tool for modeling legal problems.

  • Favorite

    Type:
    Categories:
    Sub-Categories:

    Formally, the law purports to be based solely in reasoned analysis, devoid of ideological bias or unconscious influences. Judges claim to act as umpires applying the rules, not making them. They frame their decisions as straightforward applications of an established set of legal doctrines, principles, and mandates to a given set of facts. As scholars who carefully study the law understand, that frame is a façade, and the impression that the legal system projects is an illusion. Oliver Wendell Holmes, Jr. made a similar claim more than a century ago when he wrote that “the felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, even the prejudices which judges share with their fellow-men, have a good deal more to do than the syllogism in determining the rules by which men should be governed.” A century later, though, we are much closer to understanding the mechanisms responsible for the gap between the formal face of the law and the actual forces shaping it. Over the last decade or so, political scientists and legal academics have begun studying the linkages between ideologies, on one hand, and legal principles and policy outcomes on the other. During that same period, mind scientists have turned to understanding the psychological sources of ideology. This book is the first to bring many of the world’s experts on those topics together to examine the sometimes unsettling interactions between psychology, ideology and law.

  • Type:
    Categories:
    Sub-Categories:

    This chapter describes a major rift extending across many important debates over our legal structures, policies, and theories of law. It argues that the divide is based, to a significant extent, on contrasting attributional tendencies: the less accurate dispositionist approach, which explains outcomes and behavior with reference to people’s dispositions (that is, stable personalities, preferences, and the like), and the more accurate situationist approach, which bases attributions of causation and responsibility on unseen influences within us and around us (that is, cognitive proclivities and structures and external environmental forces). As this chapter summarizes, research on the underlying motives and conceptual metaphors behind conservatism and liberalism help explain the vital connections between those attributional styles and political ideologies.

  • Type:
    Categories:
    Sub-Categories:

    This chapter demonstrates that naive cynicism is a pervasive dynamic that shapes policy debates big and small. It argues that naïve cynicism can operate at a particular moment or over long periods of time, and that naïve cynicism is embraced and encouraged by both elite knowledge-producers and the average person on the street. Examining the reactions of prominent academics to situationist scholarship, the chapter offers evidence that naive cynicism has played a significant role in retarding the growth and influence of insights drawn from social psychology and related fields within the dominant legal theoretical frameworks of the last half-century. Despite providing a more accurate depiction of the behavior of legal actors, this research from the mind sciences has been dismissed for decades in favor of commonsense dispositionist notions of causation, responsibility, and blame.

  • Type:
    Categories:
    Sub-Categories:

    Links:

    This chapter begins by loosely defining the concepts of ideology, psychology, and law and providing a brief history of their relationship with each other. As the 1990s turned to the 2000s, the links between ideology, psychology and law were growing stronger as legal theorists began looking to the mind sciences, mind scientists started studying ideology, and as ideological distinctions became more salient in the lawmaking process. After explaining why this volume came together when it did, this chapter offers an overview of the general sections and the individual chapters and comments in the book.

  • Type:
    Categories:
    Sub-Categories:

    This chapter explores the way in which dispositionism maintains its dominance as an attributional framework despite failing to capture accurately the causes of human behavior. The answer lies in a subordinate dynamic and discourse, naïve cynicism: the basic subconscious mechanism by which dispositionists discredit and dismiss generally more accurate situationist insights and their proponents. Without the operation of naïve cynicism, dispositionism would be far more vulnerable to challenge and change. Naïve cynicism is, thus, critically important to explaining how and why certain legal policies manage to carry the day. As a case study, the chapter considers the naïve cynical backlash against situationist accounts of the causes of prisoner abuses at Abu Ghraib, Guantanamo Bay, and other detentions centers.

  • Type:
    Categories:
    Sub-Categories:

    Since its initial publication, the Implicit Association Test (IAT) has been applied in a diverse array of disciplines. Application to the legal and policy arenas, however, has been uncommon. This is true even though the dominant schemas that shape law and policy are like the attitudes, stereotypes, and other forms of implicit cognition that the IAT is so often harnessed to measure. Based upon research designed to identify the dominant knowledge structures, schemas and categories that shape law and policy, the most significant and salient policy scripts boil down to "markets are good, regulation is bad." This chapter will discuss the initial results of an ongoing Policy IAT intended to investigate the strength of those policy scripts across the ideological spectrum. The results shed light on the variability of policy scripts across political categories and attributional styles along a situationist-dispositionist spectrum as well as the malleability of implicit associations.

  • Type:
    Categories:
    Sub-Categories:

    This chapter provides an introduction to the history, uses, methods, strengths, and limits of law and economics. It begins by examining the role of positive and normative approaches to law and economics. To examine the positivist thesis - that the law does in fact tend toward efficiency - the chapter discussed and analyzes the famous Hand Formula developed by Judge Learned Hand in United States v. Carroll Towing. As one of the only traditional cases in which a judge arguably made efficiency his explicit goal, the case presents an excellent opportunity to assess whether, even an efficiency-oriented judge will or can identify the efficient result. The chapter reviews the possible liability rules that might have been applied in Carroll Towing, and uses that review to introduce many of the core concepts and methods of law and economics, including game theory. Ultimately, the chapter concludes that, although the Hand Formula may have led to one of the possible efficient results, there is little reason to be confident, and some reason to doubt, that Judge Hand reached the most efficient outcome. The difficulties inherent in selecting the efficient rule through litigation present a significant challenge to the positivist case for legal economics. The second part of the chapter considers both the normative support for efficiency and the range of challenges to, and refinements of, the normative position that have developed in recent years. The chapter highlights some of the trade-offs inherent in the law and economics approach and concludes that law and economics has, like any legal theory, both costs and benefits.

  • Type:
    Categories:
    Sub-Categories:

    This article is the third of a multipart series. The first part, "The Great Attributional Divide," argues that a major rift runs across many of our major policy debates based on our attributional tendencies: the less accurate dispositionist approach, which explains outcomes and behavior with reference to people's dispositions (i.e., personalities, preferences, and the like), and the more accurate situationist approach, which bases attributions of causation and responsibility on unseen influences within us and around us. The second part, "Naive Cynicism," explores how dispositionism maintains its dominance despite the fact that it misses so much of what actually moves us. It argues that the answer lies in a subordinate dynamic and discourse, naive cynicism: the basic subconscious mechanism by which dispositionists discredit and dismiss situationist insights and their proponents. Without it, the dominant person schema - dispositionism - would be far more vulnerable to challenge and change, and the more accurate person schema - situationism - less easily and effectively attacked. Naive cynicism is thus critically important to explaining how and why certain legal policies manage to carry the day. Naive cynicism often takes the form of a backlash against situationism that involves an affirmation of existing dispositionist notions and an assault on (1) the situationist attributions themselves; (2) the individuals, institutions, and groups from which the situationist attributions appear to emanate; and (3) the individuals whose conduct has been situationalized. If one were to boil down those factors to one simple naive-cynicism-promoting frame for minimizing situationist ideas, it would be something like this: Unreasonable outgroup members are attacking us, our beliefs, and the things we value. We predict that naive cynicism is a pervasive dynamic that shapes policy debates big and small. We argue that it can operate at a particular moment or over long periods of time, and that it is embraced and encouraged by both elite knowledge-producers and the average person on the street. This Article examines the reactions of prominent academics to situationist scholarship. As we argue in this Article, naive cynicism, operating as we predict above, has played a significant role in retarding the growth and influence of more accurate situationist insights of social psychology and related fields within the dominant legal theoretical frameworks of the last half-century.

  • Type:
    Categories:
    Sub-Categories:

    This is the second article in a multi-part series. In the first part, The Great Attributional Divide, the authors suggested that a major rift runs across many of our major policy debates based on contrasting attributional tendencies (dispositionist and situationist). This article explores how dispositionism maintains its dominance despite the fact that it misses so much of what actually moves us. It argues that the answer lies in a subordinate dynamic and discourse, naïve cynicism: the basic subconscious mechanism by which dispositionists discredit and dismiss situationist insights and their proponents. Without it, the dominant person schema - dispositionism - would be far more vulnerable to challenge and change, and the more accurate person schema - situationism - less easily and effectively attacked. Naïve cynicism is thus critically important to explaining how and why certain legal policies manage to carry the day.

  • Type:
    Categories:
    Sub-Categories:

    This new approach would begin by rejecting the dominant, common-sense account of human behavior (sometimes called dispositionism) and replacing it with the more accurate account being revealed by the social sciences, such as social psychology, social cognition, cognitive neuroscience, and other mind sciences. At its core, situationism is occupied with identifying and bridging the gap between what actually moves us, on one hand, and what we imagine moves us, on the other. Recognizing that gap is critical for understanding what roles tort law (among other areas of law) serves. Beyond that, a situationist approach helps to make clear the subconscious tendencies and otherwise unappreciated external forces that have shaped tort law and tort reforms. A situationist perspective on tort law, this Article argues, also has significant implications for how tort law is taught. The Langdellian model of teaching, which has monopolized the law school classroom since the late 19th century, has been the brunt of increasing criticism over the past several decades. Most critics emphasize that the casebook method forces the round complexities of law, lawmaking, and human behavior into the square holes of antiquated legal categories and idiosyncratic appellate decisions. A number of leading law schools are now dramatically reshaping their curricula to address such concerns. Simultaneously, legal theory is in the midst of its own revolution as legal scholars are beginning to reject the hard-core dispositionism at the foundation of law and to incorporate, or at least acknowledge, emerging insights from the mind sciences. The curricular and theoretical renovations underway represent what we would call a turn toward the situationist. Those trends have created a hospitable climate for the emergence of a more robust situationist approach to law and law teaching. This Article describes not only those trends and their implications, but also some specifics regarding how situationist torts would be taught and what a situationist torts casebook would look like.

  • Type:
    Categories:
    Sub-Categories:

    This article, the first of a multipart series, argues that a major rift runs across many of our major policy debates based on our attributional tendencies: the less accurate dispositionist approach, which explains outcomes and behavior with reference to people's dispositions (i.e., personalities, preferences, and the like), and the more accurate situationist approach, which bases attributions of causation and responsibility on unseen influences within us and around us. Given that situationism offers a truer picture of our world than the alternative, and given that attributional tendencies are largely the result of elements in our situations, identifying the relevant elements should be a major priority of legal scholars. With such information, legal academics could predict which individuals, institutions, and societies are most likely to produce situationist ideas - in other words, which have the greatest potential for developing the accurate attributions of human behavior that are so important to law.

  • Favorite

    Type:
    Categories:
    Sub-Categories:

    This Article attempts to elucidate how our forebears, who were presumably as devoted to justice and liberty in their times as we are in ours, failed to condemn behaviors that are today widely viewed as patently oppressive, unfair, and even evil. Our argument unfolds in several Parts. Part II summarizes evidence from social psychology and related fields that helps explain how people who imagine themselves fair and just routinely blame the victims of inequities and excuse the perpetrators or passive observers through blame frames. Because humans crave justice, salient suffering or inequalities activate an injustice dissonance within us. Too often, we alleviate that dissonance, not by addressing the injustice, but by creating an illusion of justice through assumptions, arguments, or stereotypes about the blameworthiness of the victim. Part II then describes three powerful blame frames that have coexisted, while alternating in dominance, throughout American history: the God frame, the nature frame, and the choice frame. Part III elucidates through a few prominent examples how blame frames have operated throughout history to relieve our forebears' injustice dissonances and to perpetuate systems of oppression. The motivated attributions underlying those blame frames acted to legitimate laws, customs, and practices that today - with the benefit of hindsight and the lens of a new frame - are recognized as clearly unjust. Part IV argues that we suffer an equally great confusion today, but the injustices that haunt our generation are soothed less by the God and nature frames and more by conceptions of choice. Choicism attributes disparities to the preferences and character of individuals and their groups. Although choicism purports to be colorblind and non-discriminatory, it is, unfortunately, just the latest cloak veiling racism and other groupisms while allowing us to blame victims and excuse non-victims. Part IV, by examining public reactions to Hurricane Katrina and her aftermath, then shows how Americans experienced an unusually powerful and intractable injustice dissonance when the winds, water, and desperation exposed inequalities that choicism could not readily justify. For at least a moment, Americans faced what seemed to be strong evidence of racial injustice. Part IV reveals some of the ways that a set of overlapping and largely camouflaged blame frames obscured and confused the public discourse regarding Katrina and the injustice dissonance she wrought. Finally, this Article argues that only by understanding the sources and effects of blame frames can we ever hope to end oppression and thereby live according to the fundamental values we espouse.

  • Type:
    Categories:
    Sub-Categories:

    When Justices William Rehnquist and Sandra Day O’Connor left the bench last year, conservatives were in an anxious mood: though pleased at the prospect of shifting the Supreme Court to the right, they were worried by the record of past Republican appointments. The refrain in conservative commentary, repeated with special intensity during the Harriet Miers affair, was: Not another Souter. Not another Kennedy. Not another O’Connor. And they might have added: Not another Blackmun. Not another Stevens. Not another Warren. They were right to be concerned. While there have been a number of relatively reliable conservative justices over the years—Antonin Scalia, Clarence Thomas, and Rehnquist being prime examples—and some important right-shifting exceptions—notably Felix Frankfurter, appointed by Franklin D. Roosevelt, and Byron White, appointed by John F. Kennedy—the tendency in recent decades to drift leftward has been strong enough to gain both popular and scholarly attention. Indeed, Larry J. Sabato, the director of the University of Virginia Center for Politics, has suggested that about one quarter of confirmed nominees over the last half century have wound up “evolving from conservative to moderate or liberal.”

  • Type:
    Categories:
    Sub-Categories:

    This article was written for the 2005 Symposium: "Calabresi's Costs of Accidents: A Generation of Impact on Law and Scholarship" held at the University of Maryland Law School. Donald Gifford provided the following summary in his introduction to the symposium issue: Adam Benforado and Professor Jon Hanson analyze Calabresi's and Posner's very different views of law and economics using concepts borrowed from social psychology. They view Posner as representative of the "relative" dispositionist whose analysis proceeds from the belief that "[t]he individual is presumed to be an independent, choice-making agent whose acts both satisfy and reveal a set of underlying preferences." In contrast, according to Benforado and Hanson, "Calabresi stands as a relative situationist in a particularly dispositionist school of thought";] he "has the instincts of a social psychologist," and differs from those who would "ignore the more significant role played by situational forces - unseen or underappreciated features in our environment and in our interiors." Benforado and Hanson suggest that both Calabresi's and Posner's intellectual development were influenced greatly by their differing reactions to changing intellectual trends emerging during the 1960s: Calabresi seems to have embraced "the general push toward situationism," while Posner was one of a number of scholars that "lashed back in an attempt to legitimate the systems that were being upended by situationist thinking."

  • Type:
    Categories:
    Sub-Categories:

    This Article provides a broad assessment of the American obesity epidemic from the perspective of "critical realism," an innovative approach to legal analysis developed by the authors in previous articles. The article is focused on exploring the vast divergence between common sense views of the sources of obesity - which typically attribute the phenomena to the individual, private choices of consumers - and the very different conception of the sources of obesity that emerges from the social sciences, which are typically much more focused on environmental influences on consumption behavior. The article endeavors to develop an approach to the legal analysis of obesity that is responsive to the social scientific findings, rather than merely patronizing to the common sense view. Further, the Article examines the ways in which the food industry has exercised powerful influence, often in unseen ways, over consumer behavior in the food market, even as the industry has evaded responsibility for the ensuing obesity epidemic by promoting to regulators, as well as to consumers themselves, the view that consumer behavior in the food market reflects the preference driven choices of individual consumers, which the industry claims merely to satisfy.

  • Type:
    Categories:
    Sub-Categories:

    This Article focuses primarily on one slice of social psychology and social cognition research, namely the vast and vibrant field examining the integral role that knowledge structures play in the way we attend to, remember, and draw inferences about information we encounter and, more generally, the way we make sense of our world. The human system of processing information is, in many cases, an efficient means of understanding our worlds and ourselves. Classification of people, objects, and other stimuli is often both indispensable and ineluctable. Still, as social psychologists have demonstrated, "virtually any of the properties of schematic functioning that are useful under some circumstances will be liabilities under others." The categories and schemas that operate, usually automatically, influence all aspects of information processing - from what information we focus on, to how we encode that information, to which features of that information we later retrieve and remember, and to how we draw inferences and solve problems based on that information. Given the unconscious and biasing influence of our schemas, combined with the fact that our schemas themselves will often reflect our unconscious motives, we should be mindful, even distrustful, of our schemas and the conclusions that they generate. These effects, the processes that drive them, and the biases they engender are the primary subject of this Article. A central goal is to offer a broad understanding of how individuals utilize categories, schemas, and scripts to help make sense of their worlds. In doing so, we serve another main objective: to provide a comprehensive (yet manageable) synthesis of a vast body of social psychology literature. This overview should transform how we make sense of our laws and legal-theoretic world. Part II of this Article is devoted to describing the significance of knowledge structures. Part III briefly summarizes how legal scholars have thus far applied insights about knowledge structures and argues that their most profound implications have yet to be appreciated. Part III then provides a set of predictions regarding the influence of knowledge structures and the biases they likely engender for legal theories and laws.

  • Type:
    Categories:
    Sub-Categories:

    This Article is about some of the schemas and scripts that form and define our lives. It is about the knowledge structures that shape how we view the world and how we understand the limitless information with which we are always confronted. This Article is also about the "evolution of ideas" underlying corporate law and all of modern policymaking. It is about the ways in which schemas and scripts have influenced how policy theorists, policymakers, lawyers, and many others (particularly in the West) understand and approach policymaking generally and corporate law specifically. It is about both the invisibility and blinding effect of those schemas. It is about the battle over those schemas and the prizes of victory. And, finally, it is about how the now-dominant schemas render us the "unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades." We begin our discussion in Part II with the dominant knowledge structures underlying modern policymaking, describing the emergence of what we term the "meta script" of policymaking - or the schemas that frame our approach to policy analysis today. Part III turns to the law regulating large commercial interests - specifically, corporate law - and examines the emergence and dominance of the new "macro script" of corporate law. It examines the schemas that identify and legitimate the purpose of the law. Parts IV and V highlight the signs of illusion in those schemas and then begin to unveil the situational magician behind those illusions. Corporate law works, as all illusions work, by relying on a set of schemas that guide our attention and inferences and play into our intuitions and motives. Yet the outcome and response that this Article suggests is neither so benign nor light-hearted as that of a magic show. While its analysis is concentrated on corporate law, the Article's implications reach each of us, from law student to legal scholar, citizen to policymaker, and reveal something unsettling: all of us are susceptible to schematic sleight-of-hand, tricks that render us vulnerable to dangerous illusion. Where many have heretofore tended to see magic, this Article reveals the illusion of law and some of the unseen mechanisms that make it possible. This project's larger ambition, it should be noted, is not to encourage disillusionment with the purported goals of the law, but to provide insights that help tailor our means and to narrow the gap between our ends and our outcomes.

  • Type:
    Categories:
    Sub-Categories:

    This Article is dedicated to retiring the now-dominant "rational actor" model of human agency, together with its numerous "dispositionist" cohorts, and replacing them with a new conception of human agency that the authors call the "situational character." This is a key installment of a larger project recently introduced in an article titled The Situation: An Introduction to the Situational Character, Critical Realism, Power Economics, and Deep Capture, 152 U. Pa. L. Rev. 129 (2003). That introductory article adumbrated, often in broad stroke, the central premises and some basic conclusions of a new approach to legal theory and policy analysis. This Article provides a more complete version of one of those central premises by elucidating a more realistic conception of the human animal than is currently embraced in legal theory. The Article begins with a short introduction to the larger project, and describes the central place that a realist conception of the human actor plays in that project. It then explores several bodies of literature within the fields of social, cognitive, behavioral, and neural psychology in pursuit of a vision of the human actor that is grounded in social science. Having explicated that conception, the Article then outlines some of the basic implications of it for law, legal theory, and social policy. It then analyzes conventional legal scholars', particularly legal economists', arguments for ignoring the lessons of social science in their treatment of human agency. As part of that analysis, this Article describes why recent efforts to incorporate some psychological findings - the sort of work that is often labeled "behavioralist" - have been inadequate. Finally, the authors briefly look beyond the human actor itself to consider some of the fairly obvious - but generally ignored - realities of our present social situation, and some of their implications for common policy presumptions. As subsequent work will make clear, this new, situationist conception of the human animal is as important to a realist account of law and legal theory as the dispositionist conception has been to now-dominant accounts.

  • Type:
    Categories:
    Sub-Categories:

    This article introduces an innovative approach to legal theory which the authors call "critical realism." The approach endeavors to integrate insights of social psychology, and affiliated social sciences, together with the methods of conventional economic analysis, as well as traditional methods of legal inquiry. Canvassing robust findings from across the behavioral sciences, the authors articulate a framework for thinking about human agency in legal analysis that the authors call "the situational character," a conception which is meant to provide a more scientifically grounded understanding of the sources of human behavior and decision-making then is provided by the "rational actor" model that has become so prominent in legal scholarship through the influence of the law and economics movement. The authors further explore the extend to which market-actors, such as corporations, have a stake in promoting to consumers and to policymakers the rational-actor model of human agency, even as market pressures are likely to lead such market-actors to understand and exploit the reality of the "situational character." The authors refer to such efforts on the part of market-actors as "deep capture," an extension of the conception of administrative "capture" long understood by public choice theorists. The authors review several historical episodes and scholarly debates through the innovative framework that their article provides, and suggest many avenues of future research and development of the framework.

  • Type:
    Categories:
    Sub-Categories:

    This book presents a counter-view, based on a survey of several thousand young persons and adults, probing attitudes, beliefs, feelings, and perceptions of risk associated with smoking.

  • Type:
    Categories:
    Sub-Categories:

  • Type:
    Categories:
    Sub-Categories:

    In two previous articles, we hypothesize that, because consumers are subject to predictable cognitive processes that depart from rational utility maximization, manufacturers have the opportunity and incentive to manipulate consumer perceptions of product risks. We suggest in those earlier articles that enterprise liability might offer the most efficient products liability regime in response to the problem of market manipulation. This work extends the analysis by focusing more particularly on the extent to which enterprise liability can combat manufacturer exploitation of consumer cognitive processes. It does so by responding to critiques recently offered by Professors Jeffrey Rachlinski and James Henderson in their article, "Product-Related Risk and Cognitive Biases: The Shortcomings of Enterprise Liability." Those authors argue that we overstate the extent of market manipulation and underestimate the ability of existing laws to identify and redress manipulative conduct. In addition, they argue that, even if enterprise liability does offer the best theoretical response to market manipulation, it offers little hope of practical results due to certain insurmountable difficulties in implementation. Finally, they contend that enterprise liability might actually backfire if adopted, ultimately exacerbating the problem of market manipulation by enabling product manufacturers who oversell safety through fear-based marketing appeals. We respond to each of these critiques and conclude that the case for enterprise liability remains remarkably strong.

  • Type:
    Categories:
    Sub-Categories:

    Links:

  • Type:
    Categories:
    Sub-Categories:

    Links:

    An important lesson of behavioralist research is that individuals' perceptions and preferences are highly manipulable. This article presents empirical evidence of market manipulation, a previously unrecognized source of market failure. It surveys extensive qualitative and quantitative marketing research and consumer behavioral studies, reviews common practices in settings such as gas stations and supermarkets, and examines environmentally oriented and fear-based advertising. The article then focuses on the industry that has most depended upon market manipulation: the cigarette industry. Through decades of sophisticated marketing and public relations efforts, cigarette manufacturers have heightened consumer demand and lowered consumer risk perceptions. Such market manipulation may justify moving to enterprise liability, the regime advocated by the first generation of product liability scholars.

  • Type:
    Categories:
    Sub-Categories:

    Links:

    Critics of the tobacco industry and public health advocates have long argued that the market for cigarettes should be more strictly regulated. Many market-oriented policy analysts, on the other hand, have concluded that further regulation of the cigarette market is unjustified, for 2 general reasons: First, smokers already understand the risks of smoking; and second, any negative spillover effects of smoking are matched, if not exceeded, by positive spillover effects. A paper uses a market-oriented approach to challenge the conclusion that the cigarette market functions well. It is argued that consumers are not adequately informed of the risks of smoking, that the "benefits" of smokers' early deaths have been miscalculated, and that those benefits should not in any case figure in the question of whether deterrence-based regulation is appropriate. One particular form of regulation - ex post incentive-based regulation - is likely to be especially effective in addressing the relevant sources of market failure. Such a regulatory regime might include a smokers' compensation system modeled loosely on state workers compensation programs.

  • Type:
    Categories:
    Sub-Categories:

  • Type:
    Categories:
    Sub-Categories:

    Although nothing is certain in Washington, sweeping federal legislation in the cigarette area is more likely now than has ever been the case. Congress is currently considering several proposals for comprehensive federal regulation of the cigarette market, a market that has until now gone largely untouched by government intervention. Among those proposals, the one that has received the most attention, and the one that in fact motivated policy makers to look anew at the problems posed by cigarettes, is the proposed national tobacco resolution (the "Proposed Resolution"). The Proposed Resolution, which has been advanced by a coalition of state attorneys general and tobacco companies, would grant cigarette manufacturers immunity from all class action and attorney general lawsuits and punitive damages for past harms in exchange for changes in FDA regulatory authority, limitations on advertising by tobacco companies, and $368.5 billion in payouts over 25 years.

  • Type:
    Categories:
    Sub-Categories:

  • Jon D. Hanson & Melissa Hart, Law and Economics, in A Companion to Philosophy of Law and Legal Theory (Dennis Patterson ed., 1996).

    Type:
    Categories:
    Sub-Categories:

  • Type:
    Categories:
    Sub-Categories:

    Links:

    Conventional wisdom holds that tort awards for nonpecuniary losses are undesirable from an insurance standpoint. Professors Croley and Hanson challenge this wisdom. After providing a critique of several reform proposals predicated on that wisdom and explaining why rational consumers might well demand insurance against nonpecuniary losses, they argue that the empirical evidence upon which the conventional wisdom is largely based is more complicated than previously recognized. In particular, several market impediments seriously limit the extent to which inferences about consumer demand can be drawn from looking solely to first-party insurance markets. With those impediments in mind, however, one can see more clearly the modest market evidence of such demand. Moreover, certain nonmarket evidence further suggests that consumers may demand insurance against nonpecuniary losses, though the market's ability to answer that demand is limited. The tort system, in contrast, has several advantages that may render it a superior institution for providing nonpecuniary-loss insurance.

  • Type:
    Categories:
    Sub-Categories:

    Links:

    According to conventional wisdom, target boards face a powerful and unavoidable conflict of interest when deciding how to respond to a hostile bid. Because takeovers threaten the jobs of target directors and officers, target boards are thought to have an incentive either to defeat all bidders or to conspire with a particular bidder. If the target board pursues either of those strategies, target shareholders stand to lose all or some portion of a substantial takeover premium for their shares. As Professor Gilson explains, "it is impossible to identify ... any path management might take which would eliminate the inherent conflict of interest, and action, whether criticism or approval, reflects the potential for diversion of benefit to management and away from shareholders." Delaware courts have responded asymmetrically to this inherent conflict of interest. On one hand, they have shown near limitless deference to target boards (and thus little concern for the conflict of interest), provided the boards reject all bidders. As corporate commentators sometimes quip, target boards are permitted to "just say no.' On the other hand, once a board decides to sell its firm, courts often intervene to prevent the board from giving any one bidder undue advantage over other actual or potential bidders. The goal is to simply to sell to the highest valuing bidder on the best possible terms." For those reasons, Delaware courts do not permit a corporate board that has decided to sell the corporation to favor one potential buyer over another. Put differently, corporate boards cannot "just say yes." Pertinent Delaware takeover laws can thus be summarized with two simple rules: (1) a target board can just say no to any bidder so long as it says no to all potential bidders; (2) if, however, the target board does not reject all bidders, it cannot say yes to just one bidder. Efficiency-minded corporate law scholars have responded more symmetrically to the inherent conflict of interest. Most agree that target boards should be prohibited from seriously obstructing any tender offer, either by rejecting all potential bidders-through, say, a poison pill--or by rejecting all but one potential bidder through a lockup. According to this widely held view, target managements will, if permitted, use those defensive tactics to protect their jobs, and thus will obstruct the transfer of corporate assets to their highest valued use (that is, obstruct the goal of allocative efficiency). Consistent with that viewpoint, most corporate law scholars call for the abolition of virtually all takeover defenses (lockups included), criticizing Delaware's first rule regarding takeovers, but endorsing its second. It seems fair to say, therefore, that most corporate law scholars and courts agree that some lockups should be invalidated as contrary to the interests of target shareholders and/or the goal of allocational efficiency. In contrast, this Article defends the extreme position that all lockups should be enforced, subject only to the business judgment rule. The body of this Article is broken into two broad sections. Part II accepts as true the heretofore uncontested premise that some lockups should be invalidated, and argues that no sound practical method exists for distinguishing undesirable from desirable lockups. Part Ill rejects that premise and makes a case for enforcing virtually all lockups. More specifically, Part II describes and criticizes both the approach that courts have generally taken and an alternative approach that scholars have advanced for evaluating the net effect of lockups. Part II.B explains that Delaware courts purport to examine lockups from the perspective of target shareholders, asking whether the shareholders were better off immediately before or immediately after the lockup was granted. We argue that the openended "proportionality standard" that courts apply to make that assessment is without content and that courts have-perhaps because of the insuperable obstacles confronting them-adopted a clear-cut de facto rule which is equivalent in its effect to a rule that would invalidate all lockups.Part ll.C examines two recent proposals for replacing judicial substantive analysis with a kind of market-based test of lockups. Instead of weighing the benefits and costs of a lockup from the shareholders' perspective, courts should, according to these proposals, take an "ex post" or "bidder" perspective and enforce only those lockups that do not unduly deter or "foreclose" potential bidders from competing. The courts' only task would be to distinguish foreclosing from nonforeclosing lockups. Stephen Bainbridge proposes a "bright-line" version of this approach, recommending that courts enjoin any lockup that guarantees the recipient more than ten percent of the value of its bid. Ian Ayres endorses a more sophisticated version of the ex post approach, explaining that even some sizeable lockups can be nonforeclosing if they do not change the relative valuations of bidders. Both proposals are subject to numerous related criticisms, not least of which is that neither can deliver on its promise to provide courts a new means of identifying undesirable lockups. In short, Part II argues that courts are simply not capable of identifying and validating only those lockups that should be validated. In Part III, we critically examine the animating assumption of courts and scholars-that lockups can have undesirable consequences-and make a case for enforcing all lockups. Part III.A argues that lockups are unlikely to foreclose the highest valuing bidder from acquiring the target corporation because target boards are neither eager nor able to foreclose higher valuing bidders. Our analysis replicates the basic lesson of the Coase theorem, pointing out that if transactions costs are not prohibitively high, corporate assets will wind up in their highest valued use, lockups notwithstanding. Part III.A.2 then argues that this is one context in which the Coase theorem's zero-transaction-cost assumption is not intolerably heroic. While Part llI.A suggests that lockups pose little or no threat to the goal of allocative efficiency, Part llI.B argues that lockups do not imperil the judicial aim of maximizing target shareholder returns. Thus, Parts llI.A and llI.B are intended to rebut the conventional view that lockups pose a powerful threat to the (potentially conflicting) goals of efficiency and revenue maximization. Part HlI.C then shifts the emphasis of analysis and makes an affirmative case for lockups. Although the conventional justifications for lockups are more or less underdeveloped and unpersuasive, there are a variety of ways in which lockups can increase target shareholder revenues, either by enlarging the overall size of the gains to trade between the target and the lockup recipient or by increasing the target's share of those gains. The Article concludes by arguing that because lockups, like chicken soup,'5 can't hurt but may well help, courts should move toward unlocking lockups.

  • Type:
    Categories:
    Sub-Categories:

    Links:

    By locating classic products liability cases and influential products liability scholars in a matrix defined by these two dimensions, this article illustrates how products liability scholarship and the eventful history of products liability law are best understood - indeed, can be properly understood only - in terms of those two dimensions. In so doing, this article attempts to shed light on products liability at several levels. Close to the surface, this article provides an accessible framework, the Products Liability Matrix, for understanding the rich products liability literature and jurisprudence - a primer both to the current, heated debates in the products liability literature and to products liability law generally. But that largely pedagogic benefit is merely the happy-byproduct of this article's other goals, which include challenging the contemporary wisdom regarding the reasons that, and ways in which, products liability should be reformed. Broadly speaking, the trend in products liability law over recent decades has been to treat products liability cases more and more as tort rather than as contract cases. 22 Yet the bulk of current scholarly wisdom now sees this increased reliance on tort law as harmfully misguided. Indeed, a common theme uniting one of the two main camps of products liability scholars - the contractarians - is that manufacturers should be permitted to contract around standards imposed by products liability law through product disclaimers, warnings, and warranties. This camp of scholars would entrust allocation of consumer product risks largely to contract law. Scholars comprising the other main camp - the regulators - do not share the contractarians' faith that contractual allocations of consumer product risks will yield efficient results, but most nevertheless join the contractarians in advocating a curtailed role for tort law. Those regulators urge that consumer product risks be largely relegated to administrative regulation. Both the contractarians and the regulators have voiced their prescriptions with increasing urgency of late. Judges and legislators, now persuaded that modem products liability law is to blame for the liability insurance crisis and in part for the nation's apparent inability to compete successfully with foreign manufacturers, are taking action. This article reveals fundamental tensions within the arguments and reform proposals of scholars in both camps. Those tensions emerge, in large part, from the fact that products liability scholars have failed to appreciate fully either the significance of, or the relationship between, the mutability dimension and the liability-standard dimension of products liability. In a more constructive vein, this article also makes an affirmative case for a particular products liability regime, a regime that both camps in the current debate strongly oppose: enterprise liability.

  • Type:
    Categories:

  • Type:
    Categories:
    Sub-Categories:

  • Type:
    Categories:
    Sub-Categories:

    This Article explores the insurance and deterrence implications of important and long overlooked facts. Consumers are insured through first-party mechanisms against most of the risks of product accidents. However, first-party insurers rarely and imperfectly adjust premiums according to an individual consumer's decisions concerning exactly what products she will purchase, how many of those products she will purchase, and how carefully she will consume them. Such consumer decisions we refer to as "consumption choices. " This failure by first-party insurers to adjust premiums according to consumption choices gives rise to a first-party insurance externality. Based on this insight, this Article offers an economic justification for an "enterprise liability" regime that does not recognize the defense of contributory negligence.