Faculty Bibliography

Developments in capital markets have fueled a concentration of horizontal ownership across competing firms, and this has been linked to anticompetitive effects and economic underperformance. The debate about such ownership concentration has proven contentious and controversial. This symposium titled “Common Ownership: Illuminating a Great 21st Century Antitrust Debate” brings together key new works on the topic that confirm, extend, and illuminate the prior empirical findings and policy implications. Among other things, these contributions survey the recent empirical literature, provide new important empirical results about the extent and effect of horizontal ownership, offer a methodological critique, highlight concepts that address core capital market and labor market linkages, and articulate ideas for policy development to tackle emerging contingencies.

The protracted political dispute between South Korea and Japan over the wartime brothels called "comfort stations" obscures the contractual dynamics involved. These dynamics reflected the straightforward logic of the "credible commitments" so basic to elementary game theory. The brothel owners and potential prostitutes faced a problem: the brothel needed credibly to commit to a contractual structure (i) generous enough to offset the dangers and reputational damage to the prostitute that the job entailed, while (ii) giving the prostitute an incentive to exert effort while working at a harsh job in an unobservable environment. Realizing that the brothel owners had an incentive to exaggerate their future earnings, the women demanded a large portion of their pay upfront. Realizing that they were headed to the war zone, they demanded a relatively short maximum term. And realizing that the women had an incentive to shirk, the brothel owners demanded a contractual structure that gave women incentives to work hard. To satisfy these superficially contradictory demands, the women and brothels concluded indenture contracts that coupled (i) a large advance with one- or two-year maximum terms, with (ii) an ability for the women to leave early if they generated sufficient revenue.

DOI:10.1590/2179-8966/2020/59769. Ensino Jurídico e Reprodução da HierarquiaDuncan Kennedy Versão original: KENNEDY, Duncan. Legal Education and the Reproduction of Hierarchy. Journal of Legal Education, v. 32, n. 4, 591-615, dez. 1982.  TraduçãoSophia Vigário, bacharel em Direito e mestranda em Direito pela Universidade Federal do Pará. ORCID: https://orcid.org/0000-0001-8038-366X. E-mail: sophiavigario@gmail.com Vitória Sinimbu, bacharel em Direito pelo Centro Universitário do Pará e mestranda em Filosofia pela Universidade Federal de Santa Catarina. ORCID: https://orcid.org/0000-0001-7822-8433. E-mail: vitoriasinimbu@gmail.com

With the merger of law and equity almost complete, the idea of equity as a special part of our legal system or a mode of decision making has fallen out of view. This Article argues that much of equity is best understood as performing a vital function. Equity and related parts of the law solve complex and uncertain problems—including interdependent behavior and misuses of legal rules by opportunists—and do so in a characteristic fashion: as meta-law. From unconscionability to injunctions, equity makes reference to, supplements, and sometimes overrides the result that law would otherwise produce, while primary law operates without reference to equity. Equity operates on a domain of fraud, accident, and mistake, and employs triggers such as bad faith and disproportionate hardship to toggle into a “meta”-mode of more open-ended scrutiny. This Article provides a theoretical account of how a hybrid law, consisting of relatively simple and general primary-level law and relatively intense and directed second order equity can regulate behavior better through these specialized modes than would homogeneous law alone. The Article tests this theory on the ostensibly most unpromising aspects of equity, the traditional equitable maxims, as well as equitable fraud, defenses, and remedies. Equity as meta-law sheds light on how the fusion of law and equity spawned multifactor balancing tests, polarized interpretation, and led to the confusion of equity with standards, discretion, purely public law, and “mere” remedies. Viewing equity as meta-law also improves on the tradeoff between formalism and contextualism and ultimately promotes the rule of law.

Many people believe that the Chevron framework, calling for judicial deference to reasonable agency interpretations of ambiguous statutory provisions, is fatally inconsistent with section 706 of the Administrative Procedure Act. An investigation of the historical context shows that this belief is incorrect. There is no indication that the provision was generally understood, in the 1940s and 1950s, to require independent judicial judgments about questions of law.

Lying has been with us from time immemorial. Yet today is different-and in many respects worse. All over the world, people are circulating damaging lies, and these falsehoods are amplified as never before through powerful social media platforms that reach billions. Liars are saying that COVID-19 is a hoax. They are claiming that vaccines cause autism. They are lying about public officials and about people who aspire to high office. They are lying about their friends and neighbors. They are trying to sell products on the basis of untruths. Unfriendly governments, including Russia, are circulating lies in order to destabilize other nations, including the United Kingdom and the United States. In the face of those problems, the renowned legal scholar Cass Sunstein probes the fundamental question of how we can deter lies while also protecting freedom of speech. To be sure, we cannot eliminate lying, nor should we try to do so. Sunstein shows why free societies must generally allow falsehoods and lies, which cannot and should not be excised from democratic debate. A main reason is that we cannot trust governments to make unbiased judgments about what counts as "fake news." However, governments should have the power to regulate specific kinds of falsehoods: those that genuinely endanger health, safety, and the capacity of the public to govern itself. Sunstein also suggests that private institutions, such as Facebook and Twitter, have a great deal of room to stop the spread of falsehoods, and they should be exercising their authority far more than they are now doing. As Sunstein contends, we are allowing far too many lies, including those that both threaten public health and undermine the foundations of democracy itself.

In this report, the Committee on Capital Markets Regulation (the “Committee”) describes the turmoil in the U.S. Treasury market during March 2020, with a focus on the unexpected rise in Treasury yields, the illiquidity in the Treasury market and the subsequent intervention by the Federal Reserve to stabilize the market. We then describe the market structure for trading U.S. Treasuries as well as trade reporting requirements and public information regarding the owners of Treasuries. We find that policymakers and the public lack the transaction data to comprehensively determine the source of selling in March 2020 that drove the volatility in the U.S. Treasury market. Policymakers have sought to identify the source of the selling pressure in the Treasury market in March 2020 because holders of U.S. Treasuries, including large financial institutions and foreign investors, rely on the assumption that Treasuries are cash-like instruments.1 For U.S. Treasuries to continue to function as a global safe haven asset, Treasuries must retain their value and trade efficiently during market crises. Identifying the source of the selling pressure in March 2020 would enable policymakers to determine whether changes to regulation or market structure are necessary to allow the Treasury market to better accommodate such selling in the future. In-deed, understanding the potential sources of fragility in the Treasury market remains important, as periodic bouts of volatility persist—most recently in February 2021.2 In Part I of our report, we summarize the volatility in the U.S. Treasury market in March 2020 and the Federal Reserve’s role in stabilizing the market. In Part II, we provide a comprehensive overview of the market structure for trading U.S. Treasuries (so-called “cash Treasury” markets), including the respective role of broker-dealers, proprietary trading firms, institutional inves-tors and trading venues. Part II then describes the trade information for U.S. Treasuries available to regulators from the Financial Industry Regulatory Authority’s Trade Reporting and Compliance Engine (“FINRA’s TRACE database”). Finally, in Part III we evaluate public disclosures of ownership information and trade data for U.S. Treasuries, including data provided by the Federal Reserve and U.S. Treasury Department regarding institutional investors, foreign investors and foreign official investors (such as central banks and sovereign wealth funds). We also review public disclosures regarding the U.S. Treasury holdings of hedge funds and mutual funds. We conclude that policymakers and the public lack the trade and ownership information necessary to comprehensively determine the source of selling in the Treasury market in March 2020. We therefore recommend that policymakers exercise caution before reaching conclusions or enacting regulations related to the March 2020 spike in Treasury yields. An appropriate first step for policymakers would be to consider whether expanded reporting obligations for participants in the U.S. Treasury market are warranted. In addition, policymakers should continue to study activity in the U.S. Treasury market to determine whether other reforms could enhance its efficiency, resiliency and transparency.

We experimentally study the decision-making process of judges in China, where judges are specifically prohibited to cite prior decisions as the basis for their judgments, and where, in past surveys, most judges explicitly stated that precedent played at most a marginal role in their decisions. In an experiment resembling real-world judicial decision making, we find, however, that precedent seems to have a significant influence on the decisions of the participating Chinese judges. Indeed, judges spend more time reading prior cases than statutes, and they typically read precedents before they access the statutes. On the other hand, judges rarely mention the precedent in their reasons. Our findings suggest that the Chinese judiciary operates much more similarly to its homologues in the U.S. and elsewhere than their written opinions and much folklore would suggest.

Power and productivity mediate economic outcomes across markets–both product markets and labor markets. We develop a neoclassical economic framework that combines productivity and power, and presents the balance between them as an equilibrium outcome determined by strategic investments–by firms, consumers and workers–in law, technology, (mis)perceptions and ideology. An actor’s choice of investment–most important, the choice between a productivity-increasing investment and a power-increasing investment–can be explained by the relative marginal return from the different investments. Whereas the incentives of firms and consumers and those of firms and workers are roughly aligned with respect to productivity-increasing investments, they are diametrically opposed with respect to power-increasing investments. Since investments affect surplus and thus the resources available for future investment, the model features multiple equilibria and path dependence. Policy intervention may be needed to shift the market from a bad equilibrium, with low productivity and adverse distributive consequences, to a more efficient and more equitable equilibrium. Policy intervention may also be needed to control welfare-reducing, power-seeking investments. While some degree of market power may be needed to support long-term efficiency, innovation and economic growth, firms will often seek excessive market power that will reduce overall welfare. Policymakers should strive to optimize power structures across different markets, e.g., by influencing the relative return from different power-increasing and productivity-increasing investments. The explanatory power of our theoretical framework is demonstrated through a series of detailed case studies–from the home broadband and net neutrality wars and the antitrust battles of Microsoft and now Google to the struggles between firms and unions during 19th century industrialization and the evolving story of Uber and the gig economy. Our framework informs ongoing debates in antitrust law, labor and employment law, intellectual property law, and consumer protection law, and in any other area of law that regulates, directly or indirectly, product or labor markets.

Hyperlinks are a powerful tool for journalists and their readers. Diving deep into the context of an article is just a click away. But hyperlinks are a double-edged sword; for all of the internet’s boundlessness, what’s found on the web can also be modified, moved, or entirely disappeared. This often-irreversible decay of web content is commonly known as linkrot. It comes with a similar problem of content drift, or the often-unannounced changes––retractions, additions, replacement––to the content at a particular URL. Our team of researchers at Harvard Law School has undertaken a project to gain insight into the extent and characteristics of journalistic linkrot and content drift. We examined hyperlinks in New York Times articles starting with the launch of the Times website in 1996 up through mid-2019, developed on the basis of a dataset provided to us by the Times. We focus on the Times not because it is an influential publication whose archives are often used to help form a historical record. Rather, the substantial linkrot and content drift we find here across the New York Times corpus accurately reflects the inherent difficulties of long-term linking to pieces of a volatile web. Results show a near linear increase of linkrot over time, with interesting patterns emerging within certain sections of the paper or across top level domains. Over half of articles containing at least one URL also contained a dead link. Additionally, of the ostensibly “healthy” links existing in articles, a hand review revealed additional erosion to citations via content drift.

Congress is on the cusp of transforming American elections. The House recently passed a bill that would thwart voter suppression, end gerrymandering, and curb the undue influence of the rich. Something like this bill could soon become law. In this Article, I provide a multilayered foundation for such sweeping electoral legislation. From a theoretical perspective, first, I argue that Congress poses less of a threat to democratic values than do the states or the courts. It’s more difficult for a self-interested faction to seize control of federal lawmaking than to capture a state government or a judicial body. Second, surveying the history of congressional electoral regulation, I contend that it’s remarkably benign. Most federal interventions have advanced democratic values—in marked contrast to many of the states’ and the courts’ efforts. Third, I show that current law grants Congress the expansive electoral authority that, normatively, it ought to possess. In particular, the Elections Clause, the Guarantee Clause, and the Fourteenth Amendment’s Enforcement Clause combine to empower Congress over most electoral levels and topics. And fourth, returning to the House’s recently passed bill, I maintain that its most controversial elements are constitutional under the applicable doctrine. In fact, Congress could venture considerably further than, to date, it has tried to go. Together, these points should hearten legislators when they next turn to the project of electoral reform. Not only is aggressive federal action permissible in the American political system—it may be the only way to save it.

Collected here are nineteen responses to the question, “What 21st-century works will merit a close reading in 2050?” Clarifications of that question are provided in a foreword. This tranche represents responses from authors with last names beginning L through Z. The nineteen responses presented here are from Mitchell Langbert, Andrés Marroquín, Steven G. Medema, Alberto Mingardi, Paul D. Mueller, Stephen R. Munzer, Evan W. Osborne, Justin T. Pickett, Rupert Read and Frank M. Scavelli, Hugh Rockoff, Kurt Schuler, Daniel J. Schwekendiek, Per Skedinger, E. Frank Stephenson, Scott Sumner, Cass R. Sunstein, Slaviša Tasić, Clifford F. Thies, and Richard E. Wagner. Responses from authors A through K were provided in the previous issue of this journal

From a welfarist perspective, willingness to pay (WTP) is relevant only as a proxy for individual preferences or utilities. Much of the criticism levied against the WTP criterion can be understood as saying that WTP is a bad proxy for utility, or that WTP contains limited information about preferences. Specifically, critics of WTP claim wealth effects prevent it from serving as a good proxy for utility. I formalize and extend this critique by developing a methodology for quantifying the informational content of WTP. The informational content of WTP depends on how WTP is measured and applied. First, I distinguish between two types of policies: (i) policies that are not paid for by the individuals they affect and (ii) policies that are paid for by the individuals they affect. Second, I distinguish between two types of WTP measures: (i) individualized WTP and (ii) uniform, average WTP (like the value of a statistical life). When the cost of the policy is not borne by the affected individuals, individualized WTP has low informational content and increases wealth disparity. Uniform, average WTP has higher informational content and reduces wealth disparity, at least in the case of universal benefits. Therefore, when possible, a uniform, average WTP should be preferred in this scenario. When the cost of the policy is borne by the affected individuals, individualized WTP has high informational content but increases wealth disparity. Uniform, average WTP has lower informational content and indeterminate distributional implications. Here, the choice between individualized WTP and uniform, average WTP is more difficult. I briefly consider two extensions. The first involves time. I present a dynamic extension of the relationship between the informational content of WTP and the wealth distribution. The second extension emphasizes the effect of forward-looking rationality on the WTP measure. The question of rationality raises additional concerns about WTP-based policymaking.

We take two professions — police officers and doctors — and place their experiences with big data in dialogue. Policing and medicine, while naturally different in some obvious respects, actually both need to grapple with a lot of the same moral, social, and legal questions that come with adopting big data programs. This because, as we discuss below, both professions generally possess a monopoly over an acute societal vulnerability, be it safety or health, and have accordingly developed a set of settled internal norms to shape individual discretion in service of each respective function. We place the professions side-by-side and try to distill certain insights from the perspective of three key stakeholders — practitioners, policymakers, and the polity.

This article appropriates Ricardo and Marx as progenitors of one of the contemporary CLS approaches to law and political economy. In the first part I look at Ricardo and Marx through a presentist lens. I ignore their allegiance to the labor theory of value and restate what I think is important for “us” in neo-classical terms. What is left is a model in which a legal regime distributes a surplus helping some at the expense of others, setting in motion a chain of further distributional changes in a particular direction (e.g. stagnation or growth). Then I describe Ricardo’s legal presuppositions and Marx’s explicit understanding of law as seriously mistaken and restate their ideas in the “postrealist” mainstream language of contemporary American legal thought. The great question they help answer, restated, is how to decide when redistributive interventions will or will not, have or have not “hurt the people they are trying to help.” The last part introduces this approach, contrasting it with familiar liberal approaches. The normative orientation is to distribution in favor of subordinated groups rather than to efficiency and to work on transformable background rules of public and private law rather than to politically unattainable reform by tax and spend, large scale re-regulation or decommodification. A companion article applies the “neo-Ricardian” analytic to the dynamics of housing and credit markets in poor black neighborhoods.

There is concern that present-biased agents incur too much debt because of its deferred costs – concern that has influenced regulation of consumer credit. While this concern is valid when debt is used to finance current consumption, credit may increase efficiency when it is used to fund durable good purchases, which is the most common use of debt. Without debt, present-biased agents underconsume durable goods because of their deferred benefits. The deferred cost of debt can offset the deferred benefit from the durable good. We study the effects of purchase-financing on the demand for durable goods by present-biased agents.

If whatever counts as merit for some purpose is unevenly distributed, a decision procedure that accurately sorts people on that basis will “pick up” and reproduce the pre-existing pattern in ways that more random, less merit-tracking procedures would not. This dynamic is an important cause for concern about the use of predictive models to allocate goods and opportunities. In this article, I distinguish two different objections that give voice to that concern in different ways. First, decision procedures may contribute to future social injustice and other social ills by sustaining or aggravating patterns that undermine equality of status and opportunity. Second, the same decision procedures may wrong particular individuals by compounding prior injustices that explain those persons’ predicted or actual characteristics. I argue for the importance of the first idea and raise doubts about the second. In normative assessments and legal regulation of algorithmic decisionmaking, as in our thinking about anti-discrimination norms more broadly, a central concern ought to be the prospect of entrenching harmful and unjust patterns—quite apart from any personal wrong done to the individuals about whom predictions are made.

Expand the Court now.

Through webs of cross-cutting ties, groups can build "social capital" -- the ability to use the resulting access to information and collective punishment to enforce on each other their norms of appropriate behavior. Yet not all minorities maintain such networks. And groups without them sometimes find themselves manipulated by opportunistic entrepreneurs who capture private benefits for themselves while generating massive hostility and (statistical) discrimination against the group as a whole. As one adage puts it, sometimes the worst enemy of a minority group is its own leadership. Consider the Korean residents of Japan. Koreans had begun to migrate to Japan in the 1910s. They were poor, single, male, young, uneducated, and did not intend to stay long. As one might expect given those characteristics, they maintained only very low levels of social capital, and generated substantial (statistical) discrimination against themselves. After the Second World War, most Koreans returned to their homeland. Among those who stayed, however, a self-appointed core of fringe-left opportunists took control and manipulated the group toward their private political ends. Lacking the dense networks that would let them constrain the opportunists, the resident Koreans could not stop them. Those with the most talent, sophistication, and education simply left the group and migrated into Japanese society. The opportunistic leaders exploited the vulnerable Koreans who remained, captured private benefits for themselves, and generated enormous hostility and (statistical) discrimination against the rest.

Following the 2020 presidential election, health care reform discussions have centered on two competing proposals: Medicare for All and an individual public option (“Medicare for all who want it”). Interestingly, these two proposals take starkly different approaches to employer-provided health coverage, long the bedrock of the U.S. health care system and the stumbling block to many prior reform efforts. Medicare for All abolishes employer-provided coverage, while an individual public option leaves it untouched. This Article proposes a novel solution that finds a middle ground between these two extremes: an employer public option. In contrast to the more familiar public option proposal, which would offer government sponsored health insurance directly to individuals, our plan creates a public option for employers, who can select a public plan—based on Medicare and altered to meet the needs of working populations—instead of a private health plan for their employees. Employer-based private health coverage is in decline and increasingly leaves workers vulnerable. Our proposal offers a gradual way to loosen reliance on this system. We review the policy, regulatory, fiscal, and business arguments in favor of this form of public option, which we argue is less disruptive than Medicare for All but more impactful than an individual public option. Because employer take up would be gradual and voluntary, our plan has lower fiscal costs and should face less resistance from employees and vested interests than Medicare for All. Over time, if the plan meets employers’ and employees’ needs, more people would be covered by a public option, moving away from over-reliance on private employer plans and toward something akin to Medicare-for-Many in a less politically, legally, and fiscally fraught way.

For too long, giant tech companies have thrown around their weight to crush competition, exploit user data and spread disinformation. They may think they're too big to be held accountable, but Lina Khan is proving them wrong. Since Khan published her blockbuster Yale Law Journal article "Amazon's Antitrust Paradox" in 2017--written while she was still a law student, she has been the leading intellectual force in the modern antitrust movement. Her writings and advocacy have pushed scholars, lawyers, activists and public officials to think differently about Big Tech. Khan has also been a critical figure in government, providing advice to countless elected officials, working at the Federal Trade Commission and staffing the House Judiciary Committee's Subcommittee on Antitrust.

As health care becomes increasingly personalized to the needs and values of individual patients, informational interventions that aim to inform and debias consumer decision-making are likely to become important tools. In a randomized controlled experiment, we explore the effects of providing participants with published fact boxes on the benefits and harms of common cancer screening procedures. Female participants were surveyed about breast cancer screening by mammography, while male participants were surveyed about prostate cancer screening by prostate-specific antigen (PSA) testing. For these screening procedures, we expect consumers to have overly optimistic prior beliefs about the benefits and harms. We find that participants update their beliefs only modestly and change their stated preferences to seek screening even more modestly. Participants who scored higher on a numeracy test updated their beliefs and preferences about screening more in response to the fact boxes than did patients who scored lower on the numeracy test. More-numerate subjects also seem to become more anxious in response to the risk information.

In conjunction with the 50th anniversary of the creation of the Environmental Protection Agency, this book brings together leading scholars and EPA veterans to provide a comprehensive assessment of the agency’s key decisions and actions ...

Rosa Brooks gets a firsthand look at the complicated world of urban policing.

Do people from benefit from food labels? When? By how much? Public officials face persistent challenges in answering these questions. In various nations, they use four different approaches: they refuse to do so on the ground that quantification is not feasible; they engage in breakeven analysis; they project end-states, such as economic savings or health outcomes; and they estimate willingness-to-pay for the relevant information. Each of these approaches runs into strong objections. In principle, the willingness-to-pay question has important advantages. But for those who has that question, there is a serious problem. In practice, people often lack enough information to give a sensible answer to the question how much they would be willing to pay for (more) information. People might also suffer from behavioral biases (including present bias and optimistic bias). And when preferences are labile or endogenous, even an informed and unbiased answer to the willingness to pay question may fail to capture the welfare consequences, because people may develop new tastes and values as a result of information.

This short paper, building on previous discussions in the workshop series, begins in Part A with some general considerations on indirect discrimination law. Part B then discusses Hypothetical No. 7 on the differential effect of restaurant closings in light of some of these general considerations.

Many presidents have been interested in asserting authority over independent regulatory agencies, such as the Federal Trade Commission, the Federal Communications Commission, the Nuclear Regulatory Commission, the Securities and Exchange Commission, and the Federal Reserve Board. The underlying debates raise large constitutional questions, above all about the meaning and justification of the idea of a “unitary executive.” In the first instance, however, the president’s authority over independent agencies depends not on the Constitution, but on a common statutory phrase, which allows the president to discharge the heads of such agencies for “inefficiency, neglect of duty, or malfeasance in office.” This phrase – the INM standard – is best understood to create a relationship of presidential review — and a particular remedy for legal delinquency flowing from that review. It allows the president to discharge members of independent agencies not only for laziness and torpor (“inefficiency”) or for corruption (“malfeasance”), but also for neglect of their legal duty, which includes egregiously erroneous decisions of policy, law, or fact, either repeatedly or on unusually important matters. Connecting this understanding to the Take Care Clause, we reject both a minimalist approach, which deprives the president of any kind of decisionmaking authority over policy made by independent agencies, and also a maximalist approach, which would treat the independent agencies as essentially identical to executive agencies, in terms of presidential oversight authority. This approach has strong implications for how to understand the President’s directive authority over the independent agencies.

Investor‐driven ’short‐termism’ is said to harm EU public firms’ ability to invest for the long term, prompting calls for the EU to better insulate managers from shareholder pressure. But the evidence offered—rising levels of repurchases and dividends—is incomplete and misleading: it ignores large offsetting equity issuances that move capital from investors to EU firms. We show that, over the last 30 years and the last decade, net shareholder payouts have been moderate and investment and cash balances have increased. In sum, the data provide little basis for the view that short‐termism in the EU warrants corporate governance reforms.

The Eleventh Amendment might be the most misunderstood amendment to the Constitution. Both its friends and enemies have treated the Amendment’s written text, and the unwritten doctrines of state sovereign immunity, as one and the same— reading broad principles into its precise words, or treating the written Amendment as merely illustrative of unwritten doctrines. The result is a bewildering forest of case law, which takes neither the words nor the doctrines seriously.

The power balance in the stock market changed when Robinhood and other brokerages realized could make money by selling access to their users’ lack of information.

Over the last century, Japanese consumers have steadily lost their taste for sake. Several large producers dominate the mass market through economies of scale, but the regional brewers have gradually gone out of business. In this environment, a small group of enterprising regional brewers began to create a market for premium sake with the environmental variations so important to French terroir. To produce this terroir sake, brewers must convince local farmers to grow high-risk and high-cost varieties of rice optimized for premium sake. The challenge involves unusually complex incentive and informational requirements. Yet the parties almost never draft elaborate contracts with verifiable terms, and rarely vertically integrate. Instead, they build dense and refined networks of social capital among themselves and combine short-term renewable (and hence terminable) contracts, extremely high (efficiency-wage level) prices, and close monitoring by the brewer. In the process, they give the farmers strong incentives to let the brewers intervene as needed in the farming. The brewers and farmers neither draft elaborate contracts nor vertically integrate for a simple reason: they do not need to do so. The combination of dense networks of social capital, terminable short-term contracts, and high prices gives them all the flexibility they need.

This essay explores the contradictory coexistence between two approaches to law that have been dominant in all major legal traditions: law as the normative order chosen by the legitimate and effective holders of power in the state and law ...