Wednesday, August 12, 2015

Benforado on cameras and perspective

Adam Benforado (Drexel) has this Slate essay (excerpted from his new book). He discusses the role of perspective in evaluating video evidence and the need to "underst[and] how footage can influence perception," so "we can change how we use cameras to address that distortion." I have been making similar arguments, here and elsewhere. And I like some of Adam's suggestions about finding ways to obtain and use video with different or wider perspectives.

Posted by Howard Wasserman on August 12, 2015 at 03:15 PM in Books, Civil Procedure, Howard Wasserman | Permalink | Comments (0)

Friday, July 24, 2015

Liability for Lifesaving Inventions?

I saw that Evenflo has produced a new car seat (which will be sold by Walmart), which is designed to "jingle" when a child is left in the car seat after the ignition turns off.  In light of the seemingly increasing number of horrific deaths of children accidentally left in carseats, this new car seat could be an important, lifesaving device.  And, yet, the lawyer in me found myself immediately wondering about the liability issues, and accompanying normative questions.  Walmart's director of corporate communications has apparently advertised that "this car seat will eliminate the chance of a baby being forgotten in a car."  Of course, that is only true if the car seat is used properly, in a compatible car, with compatible technology, and if the device doesn't malfunction (among other things).  The actual car seat and instructions will no doubt contain such warnings in bold print all over the place.  And yet, despite such warnings, will a product that is designed precisely to ameliorate inattention (which, thereby, may reasonably encourage more of it), and which is advertised publicly as "eliminating the possibility of a baby being forgotten in a car" really be able to escape liability if some slight inattention in the use of the product causes it to malfunction?  In this regard, if this particular product does not work as a result of misuse, it seems that the legal issues may be different than a run-of-the-mill product that fails to function properly because of misuse.  Since the very purpose of the product is to protect against inattention, does it somehow bear a heavier burden to work despite inattention in use?  In assessing such a claim, would a court take into the positive externalities (for the poor, helpless children otherwise trapped in car seats) from the product (in the cases in which it works)? Although I have not thought about torts in a rigorous way in quite some time,  I do not believe there is a formal, doctrinal way to consider such positive externalities in assessing a liability claim regarding the carseat.  And yet, it seems that normatively it should matter that an overly sensitive liability regime may discourage the production of this lifesaving product, and the positive externalities for the otherwise trapped children.  What do others think? 

Posted by Leigh Osofsky on July 24, 2015 at 01:38 PM in Books | Permalink | Comments (2)

Wednesday, July 15, 2015

"We Begin with the Assumption that Contracts Matter...."

GULATI 0375292One of my reads this summer, because it's relevant to my piece on "lexical opportunism," has been a fascinating little book by Mitu Gulati (Duke, left) and Robert Scott (Columbia, right), The 3 1/2 Minute Transaction: Boilerplate and the Limits of Contract Design (Chicago, 2012). The subject matter is a puzzler: why did sophisticated law firms keep including a particular contract provision (the "pari passu" clause) in sovereign debt agreements when (a) almost nobody could present a credible explanation of its purpose, and (b) a highly publicized case affirmed an interpretation of the clause that threatened to undermine all attempts to restructure sovereign debt? Scott new 9-09

Let me start with words of praise. This is a good read and good work. Anybody seriously looking at issues in contract theory ought to be reading it. But it's refreshing to read the results of an academic, empirical piece where the authors are so frank about their bemusement and their inability to come up with a satisfying explanatory theory. Professors Gulati and Scott come at the problem with a neoclassical economic perspective, and find that "these hard-nosed Wall Street lawyers told us stores about rituals, talismans, alchemy, the search for the Holy Grail, and Zeus." (5)  It's pretty clear 173 pages later they'd agree that the conclusion - sticky boilerplate and herd behavior - is a whimper rather than a bang.

I confess that Ayn Rand's The Fountainhead and Atlas Shrugged were staples of my intellectual youth. I've since come to terms with some of the hokum and inherent contradictions in the philosophy (she hated Kant, and I kind of know why - her response to the limits of reason was to opt for an orthodoxy of logic, including the foundational posits that logic requires), but many of her bon mots come back to me at opportune times.  The apropos quote here is from Francisco d'Anconia to Dagny Taggart: "Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong."

So.... One of the fundamental puzzles for Gulati and Scott is why sovereigns incur any costs toward lowering the cost of capital by way of contract design, and yet economists seem to think that contract design is irrelevant. The bridge from that to their assessment begins as follows: "In any case, as contracts scholars, we begin with the assumption that contracts matter." (23)

That bothers me.  Let's try these variants.  "As philosophers, we begin with the assumption that metaphysics matter." "As human anatomy scholars, we begin with the assumption that appendixes matter." "As physicists, we begin with the assumption that phlogiston matters." What's going on is a demonstration of the subtle ways in which descriptive theory has a normative component, even if the normative element is as basic as something like "this activity should be amenable to explanation by way of theory." If you start with neo-classical welfare-maximizing as the default in human decision-making - i.e., ceteris paribus, that's how the world ought to operate - no wonder it's a puzzle when it doesn't turn out to work that way. (I'm not sure if old Ayn ever got to the part of the Critique of Pure Reason that works through this - it's buried in an Appendix to the Transcendental Dialectic, beginning at pages A643/B671.)

If we check our premises, maybe contracts don't matter.

Posted by Jeff Lipshaw on July 15, 2015 at 07:44 AM in Article Spotlight, Books, Lipshaw, Science | Permalink | Comments (1)

Thursday, June 04, 2015


Hello -- my name is Megan La Belle, and I'd like to thank Howard and PrawfsBlawg for the opportunity to guest blog here this month.  I am an associate professor at Catholic University of America, Columbus School of Law, where I teach and research in the areas of intellectual property, civil procedure, and administrative law.  I am looking forward to sharing some ideas about patent litigation and other topics with the PrawfsBlawg community. 

Posted by Megan La Belle on June 4, 2015 at 08:41 AM in Books | Permalink | Comments (1)

Sunday, March 01, 2015

Recommending Highly The Black Box Society by Professor Frank Pasquale

This is my last post for this stint (my third) on Prawfsblawg and I want to thank again for inviting me Howard Wasserman and the others who are doing the work of keeping going what Dan Markel, ZT”L started.

I also wanted to share a very interesting, well-written and important book that I’ve been reading this month by PrawfsBlawg alumni @frankpasquale called The Black Box Society: The Secret Algorithms that Control Money and Information.  (Amazon).   Professor Pasquale is a professor at the University of Maryland Francis King Carey School of Law School of Law.  In this book, Frank explains in clear, non-technical English what exactly is going on behind the internet technology we use every day.   He explains how the sites we access on the internet are not just collecting information from us, but are selling it to others who are using that information in shaping the information we get back.    So, and this among the more benign points, what you get when you run a Google (or other) search is probably very different than what I would.  Google is not an automated index nor is a database like Lexis or Westlaw.  Moreover, the information collected isn’t just shaping the advertisements we see on the screen, it’s controlling our access to jobs, credit, insurance, security clearances, and housing.   As he explains, “you can’t form a trusting relationship with a black box.”

What makes the book of special interest to law professors is that it doesn’t just present the issue, it addresses the lack of legal restraints in the United States to regulate (or even monitor) the information private companies collect and the ways they use it.  Frank makes a strong case, as he has in his scholarship, for the role of regulation not just in promoting transparency, but in regulating behavior.  As he explains, “If credit scores can be regulated, why not the scoring systems used by digital advertisers and employers?” 

Whether we directly use the internet to apply for credit, insurance or jobs, those offering these things to us have full access to extensive data about what we like, what we do, and how we are likely to behave.  For example, they know  whether we are willing to pay above market price for convenience.   We are, he tells us, voluntarily opening our entire lives to commercial organizations who not only lack any obligation to keep our confidences, whose business model is to package and sell them.   

While we were worrying about the government listening to our phone calls, we didn’t notice that “the state’s immense powers of compulsion and enforcement can now be enlisted in support of the black box technologies of the search, reputation, and finance sectors.”


I commend the book to you highly, as well as his NY Times Op-Ed overview but in the event you need more convincing, please see what others have said in Science, The New Republic, Slate,  and The New York Times.

Posted by Jennifer Bard on March 1, 2015 at 03:33 PM in Books, Current Affairs, Dan Markel, Howard Wasserman, Information and Technology, Web/Tech | Permalink | Comments (0)

Monday, February 02, 2015

The Legacy of Ruth Bader Ginsburg

Congratulations to occasional-guest Prawf Scott Dodson (Hastings) on publication of his edited volume, The Legacy of Ruth Bader Ginsburg (Cambridge), featuring a great line-up of contributors. Al Brophy has a full write-up on the book.

Posted by Howard Wasserman on February 2, 2015 at 09:31 AM in Article Spotlight, Books, Howard Wasserman | Permalink | Comments (0)

Monday, January 19, 2015

Bedside Collections Visits in the Emergency Room

Should acute care hospitals be prohibited from attempting to collect health insurance co-pays and other forms of co-insurance bedside in the emergency room?  

There isn't actually that much to garner a laugh in Steven Brill's new book America's Bitter Pill, but his description of how medical debt collector Accretive Health sells its services to its acute care hospital customers brought a smile to my lips. First, this was because the "Accretive Secret Sauce" is bedside Emergency Room collection and second, because Steven Brill had apparently never heard of this practice until researching this book.

Just where has he been making visits to the ER with his children? It is reported that at least half of acute care hospitals nationwide have been charging upfront ER fees.  We are on the cusp of an era of changing constraints on hospital debt collection practices, including a change to the rules about bedside debt collection in the Emergency Room.  Most of the new rules focus on those who likely would ultimately be eligible for free or reduced care and how they are to treated pending that determination. But what about the Bruce Folkens of the world-- the ones who most likely will not be eligible for free or reduced fee care? Will upfront fees in the ER remain the rule for them? 

After all, could it be that New York Presbyterian, whose expertise in resolving aortic  aneurisms such as the one Steven Brill suffered and describes as the  narrative framework for much of his book, does not engage in this practice? If not, is it because their post-Emergency Room discharge collection numbers are stronger than those of Fairview Ridges Hospital in Burnsville, Minnesota?

We'll never know because, like a great many important topics in Steven Brill's book, we only know the anecdotal, the one off event. So, let's pause and do justice to Steven Brill's account of Bruce Folken's several hour visit to Fairview Ridges Hospital in Burnsville, Minnesota for chest pain where, yes, a hospital employee asked him about his plans to pay the remaining $493 left on his annual deductible.

Bruce Folken's experience at Fairview Ridges Hospital was not unusual in several ways. First, chest pain is one of the most common reported symptoms that drives Emergency Room visits in the U.S. and Bruce Folken's outcome (a diagnosis of indigestion) is also not atypical. Second,  it is further not unusual that ruling out a significant cardiac event does not come cheap for reasons that the rest of Steven Brill's book struggles to explain.

So, once Brucke Folken (described as half way through  his visit and resting in bed with an IV) was ruled-out as an emergency cardiac patient, why the rush to obtain payment? Could it have been that the hospital has been monitoring its collection rate and noted that Emergency Room bad debt is a disproportionate share of acute care hospital bad debt? Of course, the fine line here is between bedside debt collection from those using the ER for genuinely emergent care and those using it for urgent or even routine care and Accretive has, more than once, found itself on the wrong side of that line.  Bruce Folken's situation is right on the line -- perhaps genuinely emergent at the beginning but morphing into urgent by the time bedside debt collection was undertaken.  

If this offends, perhaps it is because of the retrospective determination of  the validity of use of emergent care under the prudent layperson standard or some other standard found in Bruce Folken's policy, but surely not in having a substantial co-pay outstanding at the time of an ER visit.

You see, this is a scenario that will only increase in frequency.  More and more of us are enrolled in high deductible plans and the trendline points upward. So, of course there are now and will be many more Bruce Folkens among those of us with unmet high deductibles and Emergency Room needs. 

Don't forget your wallet.












Posted by Ann Marie Marciarille on January 19, 2015 at 12:09 AM in Blogging, Books, Current Affairs | Permalink | Comments (0)

Saturday, January 17, 2015

The Little Legal Academy and the Big Idea Book

Why does law insist on remaining an article field? In law schools, many professors never aspire to write books. Perhaps worse, many don’t have a book idea in them. In my view, our lack of emphasis on books—and especially on "big idea" books—is detrimental. When legal scholars get together, their conversations seldom concern big idea books. There are too many articles, opinions, and statutes to discern. Law review articles are the coin of the realm, and, as a result, we face a dearth of big idea books—by which I mean books that try to capture or espouse a grand theory or strategy of life. Without big idea books, we are left with far fewer big ideas.

In other fields, big idea books proliferate. Take foreign affairs, where such books are a fixture. Indeed, they are the only game in town.  From Samuel Huntington’s The Clash of Civilizations, to Francis Fukuyama’s The End of History, to Joseph Nye’s Soft Power, to Henry Kissinger's many home runs, ideas are backed by books. And big ideas by big idea books. Every foreign policy thinker whose ideas have withstood the test of time has written a big idea book. In the think tank world, such books are also ubiquitous. Think of Robert Kagan’s Of Paradise and Power, In many other fields, they similarly abound. Consider Stephen Hawkings’s A Brief History of Time in physics, James Waston’s The Double Helix in biology and genetics, and the many such books in economics. Thomas Piketty’s Capital is a recent example.

I’m not claiming that we don’t have best-selling authors in the legal academy. We do. And I’m not claiming that we don’t have books. That would be silly. Obviously, we have plenty of both. I’m not even claiming that we don’t have big idea books. Rather, what I’m arguing is that we don’t have enough of them. And that we don’t place enough emphasis on them, either. A law professor friend told me recently that he had no time for such books. They took too long to write, did not fit his research needs, and were not available (wait for it ... wait for it) on Hein-on-Line.

Alas, that’s a problem. To me, this kind of thinking makes the legal academy seem small-minded. Its ideas, confined to the four corners of a single document, become inconsequential to the big idea men (and women) of the world. I believe that articles play an important role, don't get me wrong. But they do not provide the proper forum for big ideas—which are better sold through books. These are the most important ideas we want our fellow citizens to understand, ideas that by their very nature draw a simple, common, and shared thread from the legal academy to the greater, outside world. For such ideas to proliferate, it is time for legal scholars to change their view of books. A new generation must stand up for big ideas.

Even our big idea thnkers realize that not all of their ideas are as big as they could be. In Lincoln Caplan's recent profile of Cass Sunstein, Sunstein said of the Chicago economist Richard Thaler, a frequent coauthor with whom Sunstein wrote Nudge, “If you look at his academic articles and his very few books, he tends not to hit singles and doubles, he likes to hit home runs, and that’s just not my style. I have itchier fingers than you can have if you’re only looking for home runs.”

I'll submit that more home runs come from books. I'll also admit that in Paul Horwitz’s excellent schema of the kinds of readers you meet, I’m the Publisher's Agent, though I prefer to call it "the Bookie.” Come see me with an article idea, and I'll likely talk you into turning it into a book. Either that or I will tell you that you should not be wasting your time on the idea in the first place. But who has ever workshopped a book? Well, it's time we start. 

Posted by Eugene Mazo on January 17, 2015 at 06:03 PM in Books | Permalink | Comments (11)

Tuesday, January 06, 2015

Harvard Gets a Taste of Its Own Medicine

The transformation of the employer sponsored health care plans offered by Harvard University has hit the press. Heck, it was even discussed at AALS. Harvard has insulated its employees longer and more fully from the transformation -- begun before the passage of the ACA but accelerated by its implementation -- of its employer sponsored health insurance from a risk shifting to a risk sharing model. By this I mean that Harvard's employees are being introduced to a world of higher cost-share (deductibles, co-pays, etc.).  Some Harvard employees are not happy at all.

I am agnostic on the question of whether Harvard ought single-handedly bear the cost of expanded health insurance. Conversations about Harvard's endowment are inherently fraught.

Regrettably, what has gotten less attention is the idea that Harvard might -- as some employers have -- embrace narrow networks in at least some of  its offerings in order to offer a variety of plans that trade off choice and cost.  The New York Times did note: "But Harvard’s ability to create such networks is complicated by the fact that some of Boston’s best-known, most expensive hospitals are affiliated with Harvard Medical School. To create a network of high-value providers, Harvard would probably need to exclude some of its own teaching hospitals, or discourage their use."  

Oh, so much more could have been said.  Harvard's teaching hospitals are, in fact, a leading contributor to health care inflation in Massachusetts, as the Massachusetts Attorney General's 2013 report on the matter amply demonstrates.  The increased concentration of hospitals in Massachusetts, particularly those under the Harvard affiliated banner, has also played a significant role in high health care inflation in Massachusetts. And the proposed Partners Health merger, combining Harvard teaching hospitals with community hospitals has some people concerned that the post-merger entity will bring community hospitals under the Harvard teaching hospital reimbursement rate system.

If Drew Gilpin Faust were really serious about controlling health care costs for her employees, she might have to consider steering her own employees past Harvard affiliated facilities. But that may not pass the political laugh test.

Harvard may be learning what academic medical centers have been learning for a long time: it can be difficult to operate a medical center that serves your own employees at a cost effective price point, a bitter pill indeed.



Posted by Ann Marie Marciarille on January 6, 2015 at 11:26 PM in Books, Current Affairs | Permalink | Comments (1)

Thursday, January 01, 2015

Maybe The Knick Needs a Few Midwives

I am, I concede, an odd television fan.  I probably spend more time reading about television than actually viewing it.  I actually enjoy reading reviews of television programs that I have no intention of ever viewing. Occasionally, however, a review or series of reviews makes me want to see something for myself.

And so it was with "The Knick", a bravura Steven Soderbergh creation (now with its second season in production) -- a medical procedural set in a turn of the century New York City hospital. With almost its first scene a heartbreaking and gut wrenching failed cesarean section, whatever else The Knick represents, it is vivid. It is also somewhat clinically detached. Eventually we learn that the failed cesarian had been attempted unsuccessfully twelve times before by the same team. As one reviewer wrote, "The Knick uses historical distance to make sickness into something strange and unfamiliar, giving its doctors the aura of scientific adventurers." Adventurers they were. Later footage depicting brave experiments with unknown forms of anesthesia tip us off that the character of Dr. Thackery may, in fact, be based on extraordinary real-life surgeon Dr. William Halstead.  

It would be an understatement to describe Dr. Halstead as an adventurer. I do have to wonder if the series does him justice in one important regard. Noone comforts the crying (very soon to be dying) young cesarian candidate as she is wheeled into the operating theatre in "The Knick." It is apparent she senses she is near death but it is unacknowledged, although it is clear the risk is grave.

Dr. William Halstead, in fact, stood for a new gentler surgical approach, recognizing roughly handled tissues were often lost. No less than H.L. Mencken noted "[h]e showed that manhandled tissues, though they could not yell, could yet suffer and die."

The critics' reviews on "The Knick" are mixed. For each "Steven Soderbergh Made a Gilded-Age 'ER' and It's Riveting" review there is an equal and opposite "Surgical Strikeout."  "The Knick," it seems, suffers by comparison with  PBS's "Call the Midwife" (soon to be showing its fourth season with a fifth in production). "The Knick" is being criticized  for lack of character development when compared with the well-developed characters of both health care providers and patients in "Call the Midwife."

In all fairness, "Call the Midwife" has had far longer to develop the characters involved but these critics may have a point.  Patients in "The Knick" are often unnamed, breathtakingly mute or near-mute. Patients in "Call the Midwife" may even serve as recurring characters, as they did in Jennifer Worth's memoir on which the series, through season three, has been based.

Some of this is a difference in perspective. Jennifer Worth has left us her personal, professional, and spiritual autobiography in her three volume memoir of her time in East London.  Hers is a meditation on her personal transformation through service in a low income, low health literacy community. Over time, Jennifer Worth did not flinch to discuss the desperation of women with too many children and too little money. "Call the Midwife" is not for the faint of heart despite all those wonderful sepia colored images you may have seen of midwife Jenny Lee pedaling to a house call through the clotheslines of the East End tenements. The series itself is far grittier and Jennifer Worth's  memoir grittier still.

We will see where "The Knick" takes us.  Given that Dr. Halsted performed the first successful radical mastectomy for breast cancer in the United States, never mind transfused himself on the spot to save his sister's life post-partum, I can only imagine that more compelling drama is ahead. Oh, and did I mention he was a stickler for complete sterility in the surgical suite? I hope we get to see a more well-rounded presentation of this compelling, complex, and astonishing man.

And the mute young mother-to-be who never lived to grow into her role? She teaches us something as well about how the human touch, whether felt in carefully restrained surgery or attentive midwifery, can comfort and strengthen, even unto the last moments of life. 


Thank you to my friends at Prawfsblawg for the opportunity to visit with you this month and  for the opportunity to ponder things health law related.




Posted by Ann Marie Marciarille on January 1, 2015 at 10:43 PM in Blogging, Books, Culture, Current Affairs, Television | Permalink | Comments (0)

Friday, December 26, 2014

Robert Howse, Leo Strauss: Man of Peace

Happy holidays to all. If you have an Amazon or Barnes & Noble or what-have-you book certificate lying around from the holidays, I'm happy to recommend a new-ish book by our friend and occasional Prawfsblawgger (and one of my former teachers) Robert Howse, Leo Strauss: Man of Peace. We have been behind the times here recently at Prawfsblawg. On the whole, given the times, I think that's a good place to be. But there are exceptions, and this is one of them: the official publication date of the book was mid-September, and we should have been shouting it from the rooftops long before now. My attention was called to the book by this review of it at The National Interest. And here is a review in the LA Review of Books. The book is also available on Kindle, so there's no reason you shouldn't own it seconds after looking at this post. Congrulations on the book, Rob! Here's a book description from Amazon:

Leo Strauss is known to many people as a thinker of the right, who inspired hawkish views on national security and perhaps even advocated war without limits. Moving beyond gossip and innuendo about Strauss's followers and the Bush administration, this book provides the first comprehensive analysis of Strauss's writings on political violence, considering also what he taught in the classroom on this subject. In stark contrast to popular perception, Strauss emerges as a man of peace, favorably disposed to international law and skeptical of imperialism - a critic of radical ideologies (right and left) who warns of the dangers to free thought and civil society when philosophers and intellectuals ally themselves with movements that advocate violence. Robert Howse provides new readings of Strauss's confrontation with fascist/Nazi jurist Carl Schmitt, his debate with Alexandre Kojève about philosophy and tyranny, and his works on Machiavelli and Thucydides and examines Strauss's lectures on Kant's Perpetual Peace and Grotius's Rights of War and Peace.

Posted by Paul Horwitz on December 26, 2014 at 09:08 PM in Books | Permalink | Comments (0)

Wednesday, September 03, 2014

Switching Books

First, by way of introduction, I am an associate professor at Barry University Dwayne O. Andreas School of Law in Orlando, and I teach Torts, Business Organizations, Health Care Law, and several Health Care Law Related Seminars.  I write about topics at the intersection of science and the law, most recently in areas related to contraception in the Affordable Care Act, egg freezing, surrogacy, and prenatal testing  ( SSRN author link here).  I hope to write about some of the new issues cropping up in these areas over the next few weeks.

As most you can empathize, the beginning of the semester is extremely busy.  I am chairing our Appointments Committee again this year--but the other reason for the hecticness is because I decided to switch my Torts and Business Organizations books this fall.  This is my sixth year of teaching Torts and this is the third Torts book I have used (I switched to Farnsworth and Grady).  This is my fifth year of teaching Business Organizations and this is the first time I have switched books (I am now using Smith and Williams).  Of course, my grand plan was to prep the entire semester for both courses over the summer--and big shocker, that did not happen.

Many colleagues warned me about the time suck of switching books and how much work it would be, and they were right.  BUT I am loving the new books I am using--and it has made the material fresher and more interesting to me (and hopefully--as a result to my students). (By the way, I have no affiliation with either book or authors but I am enjoying teaching from them very much--and I know there are a lot of other excellent Torts and Business Organizations books out there as well)    As someone who had gotten used to my old material, switching books has also allowed me to try out new teaching methods--especially incorporating many more problems into each class--to which the students seem to be responding really well.  The new books are forcing me to be  a student again-- I am rediscovering the material and it has been great.  Don't get me wrong--if you find me up at midnight preparing for class, I am not always this positive. Some of my colleagues -(like Dan O' Gorman--perennial Professor of the Year at Barry and Fred Jonassen -who have similarly been unhappy with the books they were using) have written their own self published Contracts books that they, of course, love (and they are shopping it to publishers by the way)  --but for those Prawfs who lack the time and/or motivation to do that--and don't completely adore their textbooks, I think the effort to review some examination copies of new textbooks - to see if something really fits one's teaching style and law school's student body better-is totally worth it.     Now back to prepping for class...

Posted by Seema Mohapatra on September 3, 2014 at 07:55 PM in Books, Teaching Law | Permalink | Comments (0)

Monday, June 23, 2014

Halliburton and the State of the Efficient Capital Markets Hypothesis

Very interesting set of opinions in Halliburton v. Erica P. John Fund, Inc.  The continuing vitality of the efficient capital markets hypothesis is one of the big issues in the case, and there are numerous cites to law profs, including the law professors' amicus brief and articles by Lynn Stout, Don Langevoort, and James Cox, among others.  Both big opinions cite to Lev and de Villiers.  A very interesting example of when theory has a big role to play in doctrine. 

From Chief Justice Roberts's majority opinion:

Even though the efficient capital markets hypothesis may have“garnered substantial criticism since Basic,” post, at 6 (THOMAS, J., concurring in judgment), Halliburton has not identified the kind of fundamental shift in economic theory that could justify overruling a precedent on the ground that it misunderstood, or has since been overtaken by, economic realities.

From Justice Thomas's concurrence in judgment:

The Court’s first assumption was that “most publicly available information”—including public misstatements—“is reflected in [the] market price” of a security.  [Basic, 485 U.S.] at 247. The Court grounded that assumption in “empirical studies” testing a then-nascent economic theory known as the efficient capital markets hypothesis. Id., at 246–247. Specifically, the Court relied upon the “semi-strong” version of that theory, which posits that the average investor cannot earn above-market returns (i.e., “beat the market”) in an efficient market by trading on the basis of publicly available information. See, e.g., Stout, The Mechanisms of Market Inefficiency: An Introduction to the New Finance, 28 J. Corp. L. 635, 640, and n. 24 (2003) (citing Fama, Efficient Capital Markets: A Review of Theory and Empirical Work, 25 J. Finance 383, 388 (1970)). The upshot of the hypothesis is that “the market price of shares traded on well-developed markets [will] reflec[t] all publicly available information, and, hence, any material misrepresentations.” Basic, supra, at 246. At the time of Basic, this version of the efficient capital markets hypothesis was “widely accepted.” See Dunbar & Heller, [Fraud on the Market Meets Behavioral Finance, 31 Del. J. Corporate L. 455, 463–464 (2006)].

This view of market efficiency has since lost its luster. See, e.g., Langevoort, Basic at Twenty: Rethinking Fraud on the Market, 2009 Wis. L. Rev. 151, 175 (“Doubts about the strength and pervasiveness of market efficiency are much greater today than they were in the mid-1980s”). . . .  

For further reading: interested folks might want to check out our book club for Justin Fox's The Myth of the Rational Market, which included the author, Lynn Stout, David Zaring, & Benjamin Means. 

Posted by Matt Bodie on June 23, 2014 at 12:22 PM in Books, Corporate, Scholarship in the Courts | Permalink | Comments (0)

Monday, June 16, 2014

Wrap-Up for "Making the Modern American Fiscal State"

Many thanks for all our participants, especially Ajay Mehrotra, for our club on "Making the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877-1929."  Here is a list of the posts:

Many thanks to all our participants for a great club.  And if you enjoyed this club, check out the online symposium at Balkinization for Nick Parrillo's book, Against the Profit Motive: The Salary Revolution in American Government, 1780-1940.

Posted by Matt Bodie on June 16, 2014 at 11:42 AM in Books, Tax | Permalink | Comments (0)

Friday, June 13, 2014

Taxation, Civic Identity, and the Future of Consumption Taxes

Thanks again to Matt Bodie and Prawfsblawg for hosting this discussion of my book, and for the commentators for their thoughtful questions and critiques.  As I mentioned in my previous post, I thought I’d try to address some of the more specific questions raised by the readers and comments in their earlier posts. But before I do that I also want to reply to Matt Lindsay’s fascinating comment about the historical relationship between the rise of progressive taxation and consumer citizenship.

Matt makes the brilliant observation that the progressive critique of the tariff as a regressive consumption tax became more salient at the turn of the twentieth century, and not earlier, because by then one’s capacity to consume became more central to new notions of civic identity.  I think Matt is absolutely correct, and this is a parallel that is, admittedly, rather under-developed in my book.

I do make reference, as Matt notes, to the neo-Jacksonian critique of the tariff as the “mother of all trusts,” and thus as a form of “state capitalism” that many nineteenth-century reformers adamantly opposed.  But I don’t do enough with the literature on shifting notions of civic identity between production and consumption.  Part of the reason was because I had a hard time squaring my periodization with the historiography which frequently contends that the rise of consumer citizenship came later, generally in the mid-twentieth century.  Matt is quite right that the movement for a living wage, which many of the progressive economists I study supported, is the early version of this shift in civic identity.  I just didn’t see many of my historical actors making this connection.

What I tried to do, instead, was frame this change in civic identity as part and parcel of a broader shift in visions of state power.  Unlike the neo-Jacksonians who were critical of government from a “classical liberal” perspective, the reformers in my book were more open to the exercise of public power.  The University of Wisconsin political economist famously noted that he and his cohort of “new school” economists believed that the state was “an ethical agency whose positive aid was an indispensable condition of human progress.” In this sense, these reformers were an essential part of what historian Mary Furner has referred to as the rise of a “new liberalism” in American law and political economy. Progressive taxation based on the principle of “ability to pay” was, I argue, a key element of that new liberalism.

Matt’s observation also reminds me that part of what I’m trying to do in the book is stress the importance of pre-WWI foundations.  Nick Parrillo also draws attention to this pre-crisis institution-building.  I try to show in the book that these pre-war tasks – from laying the intellectual and emotional spadework, to creating the constitutional and legal foundations, to implementing administrative innovations (like a crude form of withholding) – were all absolutely crucial to the accelerating development of the modern fiscal state during the war, and also responsible for its resiliency after the war.  Thus, what might appear as comparatively small-scale changes (though amending the constitution was hardly small scale), were in the long duree quite significant.

Reuven Avi-Yonah raises another important, historically-specific question about Edwin Seligman and how he seemed to take an inconsistent position on the different theories underlying early twentieth-century tax policy.  Reuven rightly notes that Seligman played a major role in the 1920s and later in shaping the international tax regime based on the benefits principle of taxation, not ability to pay.

This is a critical observation.  Although I do not deal directly in the book with the development of 1920s international tax policy, I can say that Seligman and his cohort of “new school” economists did not believe that any one theory could be used transhistorically to support all tax policies everywhere.  As German-trained historicists, they firmly believed that policy was a function of changing contexts and conditions, and they were quite clear in arguing that while the ability to pay rational was appropriate in supporting progressive income and wealth-transfer taxes at the national level, benefits theory still had an important part to play at other levels of government, particular the local level.

From this, I think we can extrapolate that the new school economists led by Seligman would have been more than comfortable in using benefits theory for international tax policy, without seeing their move as somehow intellectually inconsistent.  International tax policy was fundamentally different from national tax policy, especially during the height of industrial capitalism, and thus they would have been open to alternative theoretical justifications.

Let me conclude by addressing a couple of questions raised by Susie Morse, Reuven, and Matt Lindsay about what my tale may tell us about today’s tax debates.  In the conclusion, I gesture to how the “fiscal myopia” I trace in the book may be partially responsible for why American tax theorists and policy analysts continue to fixate on the progressivity of our tax system, while neglecting how a more holistic view of the tax-and-transfer system could address issues of inequality and regressive taxation.  Susie, Matt, and Reuven each wonder whether the bias I identify has locked us into a resistance to consumption taxes and a neglect of how progressive spending can outweigh regressive revenue extraction.  The book has a rather pessimistic view, listing several reasons why we might be locked-into this bias – not the least of which is the kind of American exceptionalism that Matt identifies.

Recently, though, I’ve become slightly more optimistic about this issue.  If we’ve learned anything from American political or policy history, it’s that moments of crisis can lead to transformative changes.  And if the policy analysts are correct that the U.S. is about to face a major fiscal imbalance when entitlement spending far outstrips revenue projections, perhaps we will be able to overcome this fiscal myopia – perhaps we will see something like a VAT that can generate the revenue necessary to underwrite our commitment to a modern regulatory, administrative, social-welfare state.

We’ll have to see.  My book is just a humble story about the past – it’s not a bold prediction about the future.

Thanks again to Matt and PrawfsBlawg for hosting this discussion.

Posted by Ajay Mehrotra on June 13, 2014 at 02:02 PM in Books, Tax | Permalink | Comments (0)

Thursday, June 12, 2014

The Citizen-Consumer and the Origins of Progressive Income Taxation

    By way of underscoring Ajay’s emphasis on the importance of the pre-crisis conceptual transformation (and adding, perhaps unnecessarily, to the already-complex question of historical causation) I wanted to build on Ajay’s notion of fiscal citizenship to propose a further way of thinking about the relationship between the evolving political economy of citizenship and the rise of progressive income taxation.  There is now a sizeable literature analyzing the shift in civic identity in the late-19th and early 20th century, from production to consumption—more specifically, from understanding work itself as a source of independence, dignity and virtue; to understanding a worker’s ability to maintain a respectable standard of living as a measure those citizenly qualities.  This capacity to consume was at the center of union movements for a living wage, and for harnessing purchasing power (though boycotts and union label campaigns) to create a more just labor system.  (I’ve argued in my own work that the standard of consumption likewise became an important measure of fitness for citizenship in debates over federal immigration policy.) 

     This left me wondering whether this shift in the political economy of civic identity helped to shape the transformation of the fiscal state by giving new resonance to the long-standing critique of the tariff and fueling support for a non-consumption-based revenue system.  Ajay demonstrates that the tariff was widely viewed as inherently regressive, extracting more from those with less by surreptitiously folding the tax into the price of consumer goods.  And even if it had, at an earlier time, plausibly served to protect infant industries, with the maturation of American capitalism in the final decades of the 19th century it was increasingly viewed as an illegitimate special privilege bestowed on political favorites.  That’s basically a neo-Jacksonian critique of class legislation that, by the 1890s, had been around for decades.  (And as Ajay notes, it had been forcefully advanced against the tariff by figures like Thomas Cooley and David Wells.) 

     I wonder, though, whether that critique gained such traction when it did because it stressed the impact of the tariff on the cost of life’s necessities at precisely the moment when a worker’s capacity to consume—to maintain a respectable standard of living—was becoming a measure of not only personal independence but also, and more broadly, of the basic compatibility between the industrial labor system and equal citizenship.  This isn’t to doubt the vitality of neo-Jacksonian critique or the important role of the progressive economists in popularizing it; but rather to propose a further, perhaps complementary, way of understanding why political receptivity to a non-consumption-based alternative to the tariff system (i.e. the income tax) gained traction after the turn of the century.  In short, was painting the tariff as a regressive consumption tax more salient at the turn of the century than it had been just a couple decades earlier, precisely because one’s capacity to consume had become so much more central to American civic identity?  And while I’m at it, does the relative prominence of “consumer citizenship” in modern American political culture continue to serve as an impediment to serious consideration of broad-based consumption taxes?



Posted by Matthew Lindsay on June 12, 2014 at 11:16 AM in Books | Permalink | Comments (0)

Wednesday, June 11, 2014

Making the Modern American Fiscal State, Central Themes and Claims

First, let me begin by thanking Matt Bodie and the other folks at PrawfsBlawg for hosting this online book symposium, and the readers for their insightful commentaries.  Many of the readers/commentators have seen this book project evolve over time and I’ve learned immensely from their earlier feedback and their own scholarship.  I’ve also enjoyed reading the other book club posts at this blog, and I’m honored and delighted to have the opportunity to discuss my new book with PrawfsBlawg readers.

With this initial post, I thought I’d try to address some of the book’s more general themes and central claims – many of which have already been eloquently summarized by several of the commentators.  I’ll follow up soon with a second post addressing some of the more, historically-specific questions posed by the readers and comments.

So, let me begin by addressing two key issues drawn from the commentators’ posts: (1) the political consequences of the rise of the modern fiscal state – intended and unintended; and (2) the importance of crisis and contingency – as they relate to theories of historical change.

Political consequences – intended and unintended.  Steve Bank accurately notes that the reformers and state-builders who are the key protagonists of my story were seeking to create a moderate fiscal state.  Although there were calls from the far left for more radically redistributive taxes, it was the middle-ground progressive activists, thinkers, lawmakers and administrators who ultimately prevailed.  One reason they did so, as Matt Lindsay notes in his commentary, is because they had to work within the confines of an American political culture that was suspicious of centralized state power.  The existing historiography tends to overemphasize, in my view, the strength of this anti-statist strand of American politics.  And thus one of the main objectives of my book is to show that turn-of-the-century progressive reformers were able to take advantage of economic crises and national emergencies to overcome conservative resistance and create a more social-democratic fiscal state.  Indeed, Thomas Piketty seems to agree that the United States in the early twentieth century was pioneer in adopting direct and graduated taxation.

In this sense, I do not believe that many of the historical actors in my account intended the new tax regime to be a temporary or fleeting part of the revenue system.  To be sure, they advocated graduated income and wealth-transfer taxes as a counter-balance to the regressive incidence of the existing regime of national tariffs and excise taxes – at a time (the first Gilded Age) when American society was riddled with massive economic inequalities.  But many of my historical characters contended that this new tax system would be essential for much more than just raising revenue or recalibrating the distribution of tax burdens.  They sincerely believed that taxes, as part of the social contract, could also reconfigure notions of civic identity – or what I refer to as “fiscal citizenship.”  Many of them also came to see direct and progressive taxes as a way to shape political institutions by building a vital administrative infrastructure, as Nick Parrillo has observed in his comments, and as he has argued in parts of his recent book.  These were the intended consequences of the progressive fiscal state-building agenda.

But there were also several unintended consequences.  Indeed, one of the great ironies that frame the book is how the so-called “success” of the “ability-to-pay” logic supporting the progressive income tax may have forestalled a more holistic American understanding of the tax-and-transfer process. In the book, I argue that by rejecting the “benefits theory” of taxation and exalting the “ability to pay” rationale, reformers severed the link between state spending and revenue generation. By stigmatizing nearly all consumption taxes as regressive and outdated expressions of the benefits principle, they limited the imagination of future American tax theorists and reformers.  By defining fiscal justice exclusively by the progressivity of a tax system based on ability to pay, reformers created what I refer to as a kind of “fiscal myopia” that foreclosed the consideration of broad-based, European-style consumption taxes as a means to finance modern social-welfare spending.  Thus, one of the “presentist” upshots of my book, as Susie Morse and Reuven Avi-Yonah note, is to explain how the origins of our current tax system may partially explain why the U.S. tax system, which lacks a value-added tax (VAT), is such an outlier compared to its OECD counterparts.  Incidentally, in the book’s introduction, I gesture toward how intellectual currents may have contributed to other causes explaining why the U.S. has not adopted a VAT.

Matt Lindsay acutely notes another irony or unintended consequence in my story.  By referencing the recent “you didn’t build that” controversy, Matt makes a great case for how “the defeat of the benefits theory a century ago has made it possible to deny any element of reciprocity, and thus to assert a kind of fiscal atomism that’s more strident than ever.”  I think he is absolutely correct.  But I’m not sure if this is a legacy of the progressive period, or whether it is a representation of a more recent fiscal transformation.  As I try to explain in the book’s conclusion, I believe that since the 1960s, we have entered a new fiscal epoch – one in which there is a diminished sense of social responsibility and democratic obligation.  Whether we refer to this period as an era of Bowling Alone or as Age of Fracture, there’s no denying that we’ve witnessed the growing disintegration of the social.  In this sense, my book is really about a lost moment in American history – a moment when progressive reformers, thinkers, lawmakers, administrators and ordinary citizens believed in social solidarity and collective obligations.

Crisis and contingency – theories of historical change.  In his thought-provoking commentary, Nick Parrillo has pushed me to elaborate on my theory of American political development, or more broadly on my understanding of historical change.  Nick and Susie both correctly observe that WWI is in some ways the climax or linchpin of my story, but that I’m also resistant to the conventional account of war as the handmaiden of state-formation (a la Charles Tilly, et al.).  Indeed, just as I am skeptical of the existing literature’s overemphasis on American anti-statism, I have been equally uncomfortable with the claims of historical social scientists that “war makes states” (Tilly 1985).  Thus, the book tries to show that war is not simply an exogenous variable that ineluctably determines the size and shape of nation-states.  In contrast to this Darwin logic of natural selection, I try to show how social movements, political activists, public intellectuals, power lawmakers, and key government administrators all engaged in a highly contested, contingent, and uncertain battle over the ideas, laws, and institutions that would come to define the new fiscal polity.

Still, one may wonder, as Nick does, whether my account would have been dramatically different if the United States had not adopted the intellectual and legal foundations for direct and progressive taxation before the national crisis of the Great War.  Nick poses just such a counterfactual.  This is an intriguing question.  And as Nick no doubt knows historical counterfactuals can be both illuminating and dangerous.  If I had to guess, I would think that the U.S. would have adopted a more moderate and perhaps temporary income tax, based on the Civil War precedents, to raise the revenue to wage a global war.  The other options seem less likely. 

All this, of course, raises the central question whether my historical narrative is in tension with my theory of historical change.  Susie and Nick have both pushed me to re-examine whether war is or is not the explanatory variable.  To answer this critical question, I think one needs to draw a distinction between fundamental causes of historical change versus triggering or catalytic events.  As I see it, the fundamental causes of the fiscal transformation I have set out to explain were afoot well before the war emergency: the pre-crisis conceptual shift, which itself was rooted in the rise of industrialization and a more interdependent society; a constitutional amendment (16th); a new legislative basis; and the beginnings of an administrative apparatus – all these were the drivers of the fiscal revolution.  The war was mainly a triggering event that accelerated a process that had begun much earlier.  I’m not sure if I make this distinction between causes and triggers clear in the book, but this might be one way to reconcile my historical account with my theory of American political development.

In my next post, I hope to take on the more specific questions raised (or yet to be raised) by my thoughtful interlocutors and any other commentators.


Posted by Ajay Mehrotra on June 11, 2014 at 04:40 PM in Books, Tax | Permalink | Comments (0)

Tuesday, June 10, 2014

“You didn’t build that” and the “Benefits” Theory of Taxation

       There’s a great deal to admire about Ajay Mehrotra’s terrific new book, Making the Modern American Fiscal State:  Law, Politics, and the Rise of Progressive taxation, 1877-1929.  In this initial post, I’ll describe the book’s central themes and a few of its many virtues, and then raise a question about the long-run consequences of the legal-intellectual transformation that Ajay describes.

       At the center of Ajay’s account is a wonderfully engaging intellectual history of a group of progressive American economists, including Richard Ely, Henry Carter Adams, and Edwin Seligman.  It was these scholar-activists, among others, who did the foundational intellectual work of displacing the then-prevailing “benefits” or “compensatory” theory of taxation, which imagined tax-paying as one side of a reciprocal exchange between the taxpayer and the state; and replacing it with the “ability to pay,” or “faculty” theory, premised on new model of fiscal citizenship grounded in the social democratic values of solidarity and ethical duty. 

     Having absorbed the historicism and empiricism of the German Historical School of Economics in which they were trained, the progressive economists eschewed the purported timelessness and universality of classical British political economy.  Instead, they emphasized the historical contingency of fiscal policy; its embedded-ness in the social and ideological context in which it operated.  In practice, this meant drawing on the lived experience of modern industrial life to critique the classical liberal divisions between public and private, and between the laissez-faire state and the self-possessed individual; and forging a much larger role for the state in mitigating the economic inequality and conflict inherent in modern industrial capitalism.  The progressive economists strove to accomplish all this, moreover, while steering clear of the more “communal” and redistributive views of their German mentors.  To do so, Ajay writes, they needed to “graft continental ideas onto the stock of Anglo-American thought; they needed to make German economic theories palatable for modern American institutions and culture.”  

    The ability to pay theory of taxation, with its new vocabulary of duty and solidarity, proved essential to this project because it allowed the progressive economists to explain how an income tax regime that featured a high exemption and steeply graduated rates could shift a greater share of the tax burden to the wealthy, without undermining the principal tenets of market capitalism. As an intellectual history of this process of grafting, or translation, Making the Modern American Fiscal State is an engaging and instructive read.  But it is also much more than that. 

     It is fundamentally a study of ideas in action—as Ajay writes, of how “[s]ocial movements, political activists, public intellectuals, powerful lawmakers, and key government administrators engaged in a highly contested, contingent, and uncertain battle over the ideas, laws and institutions that would come to define the fiscal polity.” (p. 25)   To tell this story, Ajay expertly interweaves several parallel histories.  Public intellectuals responding to broad structural economic forces like industrialization, corporate consolidation, and cyclical economic depression occupy a central role in Ajay’s analysis.  But Making the Modern American Fiscal State is also a political history of the long-running battle between Republican defenders of the “regressive” federal tariff, and Democratic and Populist advocates of progressive income taxation; a constitutional history of the Pollock case (striking down the first federal income tax), the adoption of the 16th Amendment, and the Supreme Court’s post-Amendment decisions mostly ratifying emerging federal tax policy; and an administrative history of how tax reformers, lawmakers and Treasury officials created a more centralized and professionally administered fiscal bureaucracy.  

     Finally, and most surprisingly for me, it is also a history of American citizenship—specifically, of how the act of paying taxes became imbued with the citizenly virtues of ethical and patriotic duty, and of equal sacrifice for the benefit of the public.  I have to confess that when this theme was first introduced, I wondered whether it might be somewhat overdrawn, and I was skeptical that citizenship had been more than a rhetorical trope used by advocates of a progressive income tax.   But that skepticism dissolved once I encountered abundant evidence drawn from a rich and varied array of sources, and I came away highly persuaded that Ajay describes what was, in fact, a fundamental change in the very meaning of paying taxes, not only for tax reformers and policymakers, but also for many of the wealthy taxpayers who bore the brunt of the graduated income tax. 

            Now I’d like to turn to the long-run consequences of abandoning the benefits theory of taxation, and think about Making the Modern American Fiscal State specifically as a history of the present.  Ajay argues that, by rejecting the benefits rationale so emphatically and completely; by stigmatizing all consumption taxes as hopelessly regressive; and by defining fiscal fairness exclusively as a matter of reallocating tax burdens according to the ability to pay, the progressive economists and their political allies created a kind of “fiscal myopia,” foreclosing consideration of broad-based, European-style consumptions taxes as a way to finance modern social welfare spending.   

     As I’ve been thinking about this and other various historical legacies of the transformation that Ajay describes, I keep returning to the famous “You didn’t build that” controversy of the 2012 Presidential campaign, which was prompted when President Obama mangled a passage of a speech intended to make the basic point that people don’t acquire wealth in a vacuum, independent of various public, tax-payer funded resources.  Senate candidate Elizabeth Warren made a similar argument much more effectively it in a 2011 youtube video that's been viewed more a million times.  As she told a group of supporters: 

There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for.  You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did. Now look, you built a factory and it turned into something terrific…. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay it forward for the next kid who comes along.

    Now, neither the President nor Senator Warren adheres to the 19th-century benefits theory, in the sense of wanting to limit tax contributions to the measurable benefits that each individual and business receives in return.  But perhaps it’s nevertheless telling that leading contemporary advocates of progressive fiscal policy feel the need to invoke the social contract, and to make the argument that business owners do, indeed, benefit from public expenditures; and further, that reminding people of that fact inevitably elicits charges of “socialism.” 

     At the very least, it suggests that the vision of fiscal citizenship that Ajay describes is less robust today than many of us might like.  But it also made me consider whether, for all of the limitations of the benefits theory (it’s regressive, transactional, atomistic, etc.), at least it had the virtue of reminding us as taxpayers that we do, in fact, receive reciprocal benefits for the payment of taxes—a fact that today is no longer a truism.  In other words, I wondered whether the defeat of the benefits theory a century ago has made it possible to deny any element of reciprocity, and thus to assert a kind of fiscal atomism that’s more strident than ever.  So the question is, should we add to the list of unintended consequences a second variety of fiscal myopia—specifically, an inability or unwillingness to see the embedded-ness of economic success in the broader matrix of publically financed amenities in which that success is achieved?


Posted by Matthew Lindsay on June 10, 2014 at 02:18 PM in Books | Permalink | Comments (1)

Avi-Yonah on "Making the Modern American Fiscal State"


The following is a post from Reuven Avi-Yonah:

This is an important and exciting book. Two questions:

1. To what extent did the lack of emphasis on the expenditure side of the budget in assessing progressivity, which Ajay characterizes as a mistake, lead to the current imbalance in U.S. tax policy (no VAT)?

2. Ajay emphasizes the role of Seligman in moving from benefits to ability to pay taxation. But Seligman was also a major figure shaping the international tax regime on a benefits basis. How can the two be reconciled, and what are the implications for the current attempts to revive benefits theories of taxation?

Posted by Matt Bodie on June 10, 2014 at 11:52 AM in Books | Permalink | Comments (0)

Mehrotra tackles two mysteries in Making the Modern American Fiscal State


Here are two mysteries of United States public finance.  First, how was the 1913 ratification of a Constitutional amendment permitting the imposition of a powerful new federal income tax even possible?  Second, why doesn’t the United States have a value-added tax or other broad-based national consumption tax?  Ajay Mehrohtra grapples with both in his recent book, Making the Modern American Fiscal State.

Ajay calls his approach “neo-progressive,” but “contingent,” and he builds a careful history of American tax law and policy from the 1890s to the 1920s.  The story covers the adoption of the corporate and individual income tax at both federal and state levels and the relative decline of excise taxes and custom duties, as well as efforts to improve the breadth and administration of the property taxes relied on by many municipalities.  It ends before the explosive tax moment of the New Deal and World War II, which saw the institution of Social Security and other payroll taxes and the expansion of the income tax to a “mass tax.” 

The income tax developments form the focal point of this political class warfare story.  

Economists may not have satisfied themselves about the consumer incidence of excise taxes and custom duties, but less-well-off consumers apparently felt it, and demanded a tax based on the sonorous and malleable metric of “ability to pay” – a practical relative of endowment or “faculty” taxation -- rather than the exchange-based concept of “benefits taxation.”  That the 1893 Panic drove a Populist-and-rogue-Democrat passage of the first peacetime income tax in U.S. history is believable.  It is what comes after that generates the mystery.

In class, I used to tell it like this:  In a 5-4 1895 decision in Pollack v. Farmer’s Loan & Trust Co., SCOTUS held the federal income tax unconstitutional because it violated the requirement that “direct” taxes must be “apportioned.”  It reasoned that since property taxes are direct taxes, taxes on income from property must also be treated as direct taxes.  This ridiculously broad interpretation of  “direct tax” was sensibly reversed by the 1913 ratification of the Sixteenth Amendment to the Constitution.

What?  Because of sensible state legislatures, we got a federal income tax?  Plaintiffs who had the resources to persuade a Supreme Court majority just decided to sit down and shut up?   Wasn’t the Republican party dominant nationally?  Were we at war?  Was there some financial crisis?

The story Ajay tells does not have a simple motivating cause.  There are at least three strands.  First, there was a perception of increasingly unequal distribution of wealth and income, highlighted by the growing power of corporations and some rich families and a financial panic in 1906-07.  Second, the states, especially Wisconsin with its individual income tax, successfully experimented, including with the administration of the tax.  Third, academics strongly advocated the view that a federal income tax should not violate the constitution and indeed would make sensible policy.   This view was voiced by Edwin Seligman of Columbia, apparently partly to atone for spinning out hypotheticals to the contrary at the request of the Pollock taxpayer plaintiffs.   Ajay suggests that Seligman’s efforts helped tip the balance in favor of ratification in New York.

The story of this first mystery, the birth of the U.S. national income tax, perhaps partly explains the second mystery – why the United States does not have a value-added or other broad-based consumption tax.  Of course, VAT technology developed later, after World War II.   Nevertheless, Ajay argues that if the framework set up by the Pollock debate continued to dominate in later decades, it helps explain why the U.S. differs from every other OECD nation on the VAT question.

Like other flat-rate consumption taxes, VATs are regressive.  This is often justified outside the U.S. by their capacity to fund broad social welfare programs.   But the U.S. income tax debate at the turn of the century only focused on half the issue:  only on whether certain types of taxpayers should pay more, rather than on how the money was spent.  A focus on how the money was spent could have put income tax advocates back into the excise-tax-dominated benefits-tax box from which they wished to escape. 

So perhaps turn-of-the-century policymakers developed the mental habit of sharply segregating  taxation and public spending in their thinking to permit them to make a coherent argument to reverse Pollock.  But it is striking that we maintain that habit today.  It is a standard underlying feature of much analysis in a standard law school tax class and an explicit assumption of optimal tax theory.  We measure the distribution of tax changes with predictable political skews, but more rarely attempt to say who benefits from changes in public spending.  With Ajay’s book, we understand better why we have this bias.  Whether we have the capacity to expand our view in a disciplined fashion remains an unanswered question.

Posted by Susie Morse on June 10, 2014 at 11:28 AM in Books | Permalink | Comments (2)

American Fiscal State-Building, Crisis, and Contingency



In his sweeping and sophisticated new book, Making the Modern American Fiscal State, Ajay Mehrotra takes on a transformation of profound and enduring importance: America’s shift from a tax regime that was relatively regressive and indirect (centered on the federal tariff) to one that is relatively progressive and direct (centered on the federal income tax).  Chapter 1 of the book sets the stage by introducing us to the old tax regime that prevailed as of the 1880s, especially the tariff.  Chapters 2 through 5 explain how the new regime first gained a foothold in American government -- in the spheres of intellectual discourse, law, and government institutional capacity.  At the end of Chapter 5, the year is 1915: the Sixteenth Amendment has been ratified, Congress has enacted an income tax targeted at the highest earners and corporations, and the Treasury Department has begun its collections, using the crucial administrative technology known as “stoppage-at-source” -- a crude early form of withholding.  We can, at this point in the story, recognize the essential features of our present regime.  Yet they exist only in embryo: the income tax itself is still tiny, with a top rate of 7%, accounting for only 8% of federal revenue (p. 352).  It takes the crisis of the First World War -- with its tremendous revenue demands -- to cause the federal income tax to grow from a mere embryo into the workhorse of the American state.  The Great War takes up Chapter 6, and it is the climax of Mehrotra’s story.  The income tax's top rate skyrockets to 77%, and it ends up providing most federal revenue (p. 300, 352).  The revolution is locked in: even in the putatively reactionary 1920s, as Mehrotra argues in his concluding Chapter 7, the top rate doesn’t go below 25% (more than triple the prewar figure), and the tax accounts for about 50% of federal revenue (p. 352). 

Yet despite the centrality of the WWI crisis to the transformation Mehrotra chronicles, he is keen to resist a simple functionalist account in which (to paraphrase Charles Tilly) the war makes the state.  As Mehrotra insists: “the wartime fiscal revolution was not merely a functionalist response to the need for revenue ....  The wartime tax regime embodied, instead, a complex continuation of the conceptual shift in public finance advanced by prewar progressive intellectuals and political leaders ....” (p. 295; see also pp. 22-25).  Mehrotra assigns great importance to this pre-crisis conceptual shift -- he devotes more than half the book to it (Chapter 2-5), in which he explains how reformers provided the income tax with a well-articulated economic and moral justification, a constitutional space, a legislative basis, and the beginnings of a bureaucratic apparatus. 

I think that Mehrotra’s rendering of this story reflects (or, at least, can be invoked to support) a certain theory of political development, one that I would like to discuss in this post. To do so, let me pose a counter-factual.  Say that WWI had occurred just ten years earlier.  Had the United States gone to war against Germany in 1907, rather than 1917, the prospect of ramping up the income tax to pay for the war would’ve looked very different.  It would’ve been constitutionally doubtful, would’ve demanded a much bigger leap in terms of new legislation, and would’ve required building a collection apparatus (e.g., stoppage at source) from scratch, rather than scaling-up a prototype.  Further, the intellectual justifications would’ve been less developed.  One can imagine that, in such circumstances, the U.S. government might’ve tried to finance the war by intensifying the old regressive regime, paying for the conflict with heightened tariffs, expanded excises, and borrowing.  This might’ve entrenched the old regime further and/or made the U.S. war effort less successful.  Alternatively (or in addition), the U.S. government might’ve tried an income tax, but it would’ve had to be “on the fly,” without the foundation-laying that Mehrotra emphasizes in Chapters 2-5.  That is, it would’ve been similar to what did in fact happen in 1917-18 with the War Industries Board, whose management of production and procurement was far less successful than the Treasury’s financing operations (and note the WIB didn’t survive once the crisis ended). 

That the income tax performed so well in WWI suggests that a comparatively small amount of pre-crisis institution-building -- consisting mostly of pre-organizational tasks like justifying the policy, carving out the constitutional space, and enacting the statute, plus a few initial organizational tasks like implementing stoppage-at-source on a small scale -- can go a long way in terms of intra-crisis (and post-crisis) operations.  

On this point, it’s illuminating to compare Mehrotra’s book with a classic study of crisis-driven American state-building, Theda Skocpol and Kenneth Finegold, “State Capacity and Economic Intervention in the Early New Deal,” Political Science Quarterly 97 (1982): 255-278, elaborated in their book, State and Party in America’s New Deal (Madison: Univ. of Wisconsin Press, 1995).  Focusing on the economic crisis of 1933, Skocpol and Finegold argue that the Agricultural Adjustment Act succeeded while the National Industrial Recovery Act failed because the AAA drew upon the mature, long-developed policy thinking and implementational knowhow of the U.S. Department of Agriculture, whereas the NRA had no mature state apparatus to rely upon.  Personally, I find Skocpol and Finegold’s account of these two programs compelling.  But their study is limited in what it can tell us, because their two cases are both so extreme.  NRA had zero pre-crisis institutional capacity, whereas the USDA was extraordinary in that regard, having built routinized and attractive career paths for its personnel over the preceding decades. 

The Treasury Department’s income-tax apparatus in WWI, as reconstructed by Mehrotra, presents an intermediate case: it had not enjoyed nearly as deep a process of maturation as USDA had by 1933, but neither was it forced to start from zero like NRA.  When it comes to institution-building, crisis is opportunity (to paraphrase Rahm Emanuel).  But laying the foundations for institutions -- even if these are largely intellectual or legal (i.e., merely “on paper”) -- may determine what kinds of opportunities the crisis presents. 

Seen in this light, the exact timing of WWI (determined by events exogenous to America and thus arbitrary from the American perspective) seems fortuitous and highly consequential for American political development.  Consistent with path-dependence theory (to which Mehrotra is sensitive, e.g., p. 354), major consequences arise from relatively small initial events and are to some degree random.  I’d like to hear what Mehrotra thinks of this reading.  How much is our present-day fiscal regime an accident of timing?  Had the Treasury Department’s progress not happened to be a few years ahead of the German U-boats, would we all be paying different taxes today?  

Posted by Nicholas Parrillo on June 10, 2014 at 11:23 AM in Books, Tax | Permalink | Comments (2)

The Rise of Progressive Taxation: What Does it Mean to be Progressive?


                Ajay Mehrotra is a leader of a new generation of tax historians and a pioneer in the field of fiscal sociology.  Befitting his richly interdisciplinary training and acculturation, Ajay’s work is not merely a history of the tax laws, but offers an almost anthropological peek at the development of the fiscal architecture in this country.  Indeed, Ajay is one of those writers where I’m tempted to read the footnotes before I read the main text.  His citations to authority often provide an unparalleled literature review of the field.  As an added bonus, many of his footnotes actually have pinpoint cites, unlike some historical books where the reader is left to wonder whether the author has actually read the books he is citing.  With Ajay, there is no such worry.  He reminds me of fellow tax historian Assaf Likhovski of Tel Aviv University in his polyglot-like fluency in the literature of multiple disciplines.

In Making the Modern American Fiscal State:  Law, Politics, and the Rise of Progressive Taxation, 1877-1929, all of the best qualities of Ajay’s work are on display.  The book is careful, nuanced, informative, and comprehensive.  Although Ajay is not the first to observe this, the book beautifully describes how the revenue system was radically re-made over this period and beyond, shifting from a system focused on regressive customs duties and excise taxes (based upon the “necessity to consume”) to a system primarily based on taxing incomes and intergenerational wealth transfers (based upon the “ability to pay”).  As befitting someone steeped in the Elliot Brownlee tradition of economic history, Ajay devotes ample time to profiling the pioneering public finance economists who Ajay gives credit for this progressive transformation, including Henry Carter Adams, Richard T. Ely, and Edwin R.A. Seligman.  Perhaps his greatest contribution is in the book’s detailed description of the centralization of fiscal authority and the concomitant development of the administrative apparatus to operate the new system.


What I fear what may be lost amidst the subtitle and the momentous nature of the transformation is the extent to which the progressivism involved in the shift was more contextual, political, and contingent than the rhetoric might suggest.  Although there were certainly those who envisioned a radically redistributive type of progressive taxation, they weren’t exactly the winners in this debate.  Arguably, the prevailing theory of income taxation was one that is hardly ever discussed today and I did not see mentioned in Making the Modern American Fiscal State – one Edwin Seligman called the “special compensatory theory.”  This was distinguished from the general compensatory theory, which posited that the income tax was necessary to offset “the inequalities consecrated by custom and by law” whereby “the legal conditions of society naturally favor the rich.”  Under the special compensatory theory, the revenue system is viewed as a whole and one form of taxation is made progressive to make up for the regressive effects of another specific form of taxation.  As Seligman wrote in the 1908 edition of his treatise on Progressive Taxation in Theory and Practice, the income tax and other similar direct taxes are “designed to act as an engine of reparation” against the regressivity of the customs duties and excise taxes.  “In order to obtain equal treatment the regressive indirect taxes must be counterbalanced by the progressive direct tax.” (Seligman, pp. 144-146)

It’s not that Ajay ignores this part of the story.  For example, Ajay explains that in 1894 “[income tax advocates . . . reminded their opponents that the proposed income tax was merely a supplement to a larger tariff regime, and that national taxation was just one part of a broader fiscal order that included many forms of regressive taxation.” (p. 128).  It’s just that Ajay characterizes this as a political compromise that served as a weigh station on the road to the true progressivity of an income-centric tax system, rather than being a part of the design itself.  Under this latter perspective, the transformation in the revenue system that began during this period envisioned an income tax in which the base and the rates ratcheted up or down based on the makeup of the remainder of the system.  Indeed, during the debates over the first post-Sixteenth Amendment income tax bill in 1913, Senator John Sharp Williams, the leader of the Democratic caucus, argued that “when the good day comes – the golden day – when there will be no taxes upon consumption at all . . . and no import duties at all except countervailing duties to offset them [then] everybody will pay in proportion to his income,” meaning a flat rate.  In effect, the transformation Ajay describes was important and it was progressive (in no small part due to the advance of fiscal citizenship that is one of Ajay’s themes), but it was not necessarily designed to lead to progressive income taxation as a permanent feature of the revenue system.

Perhaps this is why the “retrenchment” Ajay describes in the 1920s was not really a retreat from the principles of progressivity that helped motivate the original income tax.  Instead, it was more a reflection of the post-World War I return to the mean for income taxation in its service as a mild counterbalance to the continued presence of regressive features, including, in more modern times, the regressivity arising from the unequal distribution of tax evasion opportunities.  In many respects, the fundamentally moderate or even conservative underpinnings of the original income tax continues to describe the tax system and frustrate reformers, such as those who see Thomas Piketty’s recent tome as a clarion call for new forms of wealth taxation.  

Posted by Steven Bank on June 10, 2014 at 09:00 AM in Books, Tax | Permalink | Comments (0)

Book club on "Making the Modern American Fiscal State"


Our book club for "Making the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877-1929" begins today.  Our club-goers will be:

Looking forward to a great club!

Posted by Matt Bodie on June 10, 2014 at 01:25 AM in Books | Permalink | Comments (0)

Wednesday, June 04, 2014

Stress and Dissent: Reading Geithner and Warren

If you’ve read the books and academic articles or even watched the movies about the financial crisis, you’ve mostly heard a unified and compelling narrative. On the cynical end, Geithner, Paulson, and Bernanke were Wall Street cronies in bed with the largest banks, the vampire squids like Goldman Sachs, and they used taxpayer money to bail them out. The more generous and nuanced view is that they made unprecedented moves to bail out TBTF banks because the big banks had too much power and sway over them. 

Geithner’s cleverly-named “Stress Test” is the Treasury Secretary’s attempt to convince us that everything we believed was wrong. (You can feel the struggle of Geithner trying to pull at the dominant narrative by watching the painful and uncharacteristically not-funny 45-minute interview with Jon Stewart .) Geithner sat at the very center of the storm from beginning to end. First as head of the New York Federal Reserve, the regulator most entwined with the Wall Street firms, he oversaw the early rumblings of crisis as well as the rescue of Bear Stearns and the failure of Lehman Brothers. Then, as Treasury Secretary, he oversaw TARP, the auto bailout, Dodd-Frank and every other aspect of the financial rescue.  Geithner knows what we think happened and he addresses each of our facts with other facts, each opinion with an insider’s take and each objection with a “reality check.” He did not want to bail out banks for the bank’s sake. He expresses disdain for their excess, stupidity, and herd behavior. He wants us to know that his team bailed them out to save the economy and the public from their collapse. The fear that drove him was not Wall Street failure, but America’s demise. He and his team were convinced that “there would have been shantytowns again” if they mishandled the crisis. And once the war was started, it was necessary to use "overwhelming force."

Geithner is not an arrogant hot-head as all the public accounts seem to indicate (See books by Neil Barofsky, Sheila Bair, and even Warren).  He comes off as humble and down-to-earth. His greatest flaw, and it’s a big one given his position, is that he lacks the gravitas and clarity to speak to the public and instill confidence. His signature is on all of our paper money and he sits at the center of a monetary system that is based purely on public trust. He readily admits that that is the one thing he “sucked” at. (He says the night before he started as Chairman of the New York Fed, he was carded when he tried to buy a beer). He is so aware of his failures in this arena that he runs through a list of media criticisms of some of his biggest public speaking flops, like the speech he gave about TARP that set off a stock market sell-off-- a speech that the Wall Street Journal commentator described as “Shock and uh.” He repeats these quips and more to “marinate” us in his shortcomings, which he also did with the President before he appointed him as Treasury Secretary. Geithner describes himself as an ordinary guy with average grades and average ambitions--or none, really. He goes to work for the government  because he didn’t have a clear sense of what he was good at, didn’t want to go to Wall Street, and because that’s what his dad did. Unlike almost every other memoir or autobiography, Geithner doesn’t offer any past narratives colored by the present—he didn’t for example, realize he was “good with money” by running a lemonade stand and he didn’t learn how to deal with crisis because of his childhood spent living abroad. His narrative is an honest, just-the-facts story without much self-reflection or moralizing.

Geitner’s basic message is that he and his team were first responders in a financial collapse and their goal and major achievement was to prevent the U.S. financial system to go over a cliff. His book demands that we measure their success by that metric. They saved us from collapse and earned a profit to boot! What’s everyone whining about? He calls some of his critics “populists,” “moral hazard fundamentalists,” and those who wanted “Old Testament Justice.” Geithner had no time for such grandstanding and rhetoric. He keeps repeating: “plan beats no plan.” He had a fire to put out and he was singularly focused on putting it out. His mantra was “no more Lehmans.”  According to Geithner, his failure to bail out Lehman, due in part to the Brits dropping the ball and not having enough authority, was the avoidable problem that set off an irrational panic.  In this account, it’s hard to argue that Geithner was nothing short of heroic--or as Michael Lewis says, “unusually brave.” He steered a sinking ship to safety by putting his head down and working tirelessly despite relentless criticism (and mockery) from all sides.

But if Geithner is the hero in this story and the bailouts were the only thing between us and another Great Depression, then why is it still so hard to feel grateful? Part of it is that many people are still suffering. But the other part is that any story in which the protagonist saves us all from disaster by giving cash to big banks is not a story that can easily put us at ease.

Geithner is invested in writing the history of the crisis from his perspective and he is honest and thorough as he does it, but maybe what he views as noisy naysayers and “fundamentalists” weren’t just obstructionists who didn’t appreciate the gravity of the situation. Maybe they just wanted to play a different game.

Elizabeth Warren’s “A Fighting Chance” is an account from one of those populists demanding “Old Testament Justice." “No perp walks. No mass indictments ... Where were the armies of auditors, seizing hard drives and poring over the financial statements?” (Although Warren’s book reads much more like a campaign book—it’s basically “Dreams of My Father” and “Audacity of Hope” rolled into one—short on details and heavy on grandkids, dogs and peach cobbler.) If Geithner’s repeated mantra is “No more Lehman’s” and “haircuts are always a bad idea,” Warren’s is: “the game is rigged.”

Geithner played by the rules of the game to achieve the goals of that game and he did a great, even heroic job. And Warren wants to change the rules of the game so that “winning” has nothing to do with bank profits. She refers to Geithner in her book as someone who always had her back, but whose main interest was to “foam the runway” for banks--make the crash landing as painless as possible and return them to profitability as quickly as possible. And this is where Geithner’s background does prove something. Geithner was not a Goldman executive as everyone thought. He makes this clear over and over again. He was not a Wall Street guy. But he was an umpire in that game. It’s possible he spent so long marinating in the rules of that game, that he couldn’t see anything past the stadium. 

Warren talks about a Time magazine cover in which she, Sheila Bair (FDIC), and Mary Schapiro (SEC) are labeled “The New Sheriffs of Wall Street.” Why were the Sheriff’s of Wall Street all women, she muses, when the majority of Wall Street all men? Because they weren’t invited into the stadium--they were outsiders: “I had never inhabited the world of high finance, never played golf with a foursome of CEOs, never smoked cigars at the club. Some people argue that if you are never in the club, you can’t understand it.” The financial system and the crisis are so complex that few people inside or out understand it and Geithner defends himself against the attacks by saying that people just didn’t understand the complexity or the stakes.  He is critical of both Sheila Bair and Brooksley Born (former CFTC chairman who proposed that derivatives should be regulated when no one else saw them as a threat). Geithner’s condescending analysis is that Sheila just didn’t understand the problem they were dealing with and Born’s proposal for regulating OTC derivatives was “noble,” but she lacked a “concrete and plausible plan.” Warren, he says, didn’t have a workable plan that was better than his--and “plan beats no plan.”

In a democracy, dissent can’t just be dismissed because it comes from outsiders "without a plan." And complexity isn’t a shield from criticism. It’s clear that Geithner did everything he could do. Everything except ditch the play book. Or ask foundational questions: were the Wall Street banks actually providing a benefit to the economy? Why funnel the rescue through the banks in the first place? Is our current banking system the right intermediary for credit? Warren, on the other hand, does just that because as she says “not being in the club means never drinking the club’s Kool-Aid. I had studied the banking system from the outside so none of it was sacred to me.”

In the end, I was surprised by how much I actually liked Geithner. And I’ve never believed that the game was “rigged.” Or at least no one is doing the rigging—no “bad guys” or vampire squids. Just a dogma so pervasive that everyone on the inside seems oblivious to life outside the sacred walls of Wall Street finance. And like religious fundamentalists, all challengers to their faith are seen as wrong or misguided. But we don’t live in a Wall Street theocracy and we need to have a public discourse about what kind of banking system works for all of us.

Posted by MehrsaBaradaran on June 4, 2014 at 12:53 PM in Books | Permalink | Comments (3)

Tuesday, May 27, 2014

Book club on "Making the Modern American Fiscal State"


Just wanted to provide a heads-up that on Tuesday, June 10, we'll be hosting a book club on Ajay Mehrotra's new book, "Making the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877-1929."  Joining us for the club will be:

Hope you can join us.

Posted by Matt Bodie on May 27, 2014 at 05:32 PM in Books, Corporate, Tax | Permalink | Comments (0)

Thursday, May 15, 2014

Wrap-Up for Book Club on "Corporate Governance in the Common-Law World"

Many thanks to all our clubbers, particularly Christopher Bruner, for a terrific discussion on "Corporate Governance in the Common-Law World: The Political Foundations of Shareholder Power."  Here are the posts from the club:

Many thanks to everyone for a great club.

Posted by Matt Bodie on May 15, 2014 at 01:05 PM in Books, Corporate | Permalink | Comments (0)

Tuesday, May 13, 2014

Bruner Book Club: The Relationship between the Corporation, Employees, and Social Welfare

Many thanks to the participants in the club for a great set of responses.  I'm coming in late, and given my location here on the employment side of the corporate governance/social welfare axis, I'm going to focus on the social welfare variable in Christopher's equation.

Corporate Governance in a Common-Law World does a great service in expanding and deepening the debate over the nature of corporate governance.  Employees have been pretty much left out of the corporate-governance models in legal academia, going back at least to Easterbrook and Fischel, and perhaps as far as Berle and Means.  That has changed somewhat, recently: for example, Bruner aptly provides some nice attention to the Gourevitch and Shinn book, which (among others, including John Cioffi) brings employees into the traditional manager/shareholder corporate-governance duality.  But Bruner himself has gone a step further: he argues that corporate goverance policies are inextricably intertwined with employee-related social policies -- characterized in his book as "social welfare."  By drawing a connection between corporate law and labor and employment law, Bruner has expanded the scope of "the law of the firm," for lack of a better term, to include not just shareholders, boards, and top-level executives, but rather all the participants in the firm, especially employees.

However, there are three issues I would like to raise in this post for further consideration.  First, I want to question the definition of "social welfare" within Bruner's model.  There has been a lot of focus on the scope of the "corporate governance" variable in his analysis, and I think Brett rightly brings up the roles of shareholder suits and executive compensation.  But how about the social welfare side of the equation? I would have appreciated a greater effort by Bruner to develop his social welfare variable more rigorously, by explaining exactly what factors into it.  The book does this for corporate governance, using a series of charts to compare differences between the common-law countries as to specific policies.  However, his approach to social welfare is more anecdotal, and lumps in a rather large and somewhat amorphous set of policies.

To some extent, Bruner arguably simplifies "corporate governance" into takeover policy, and "social welfare" into unemployment protections.  The easy correlation is that the risk of job loss from mergers and acquisitions would be balanced by national health insurance, unemployment insurance, and job retraining programs. But while his work is clearly not limited to that dynamic, it is unclear how far out it expands, particularly with respect to social welfare.  He also relies on the work of the late, great David Charny, who set out a list of policies related to what he termed "the employee welfare state."  But Bruner does not extensively develop Charny's list.  He also focuses on the health care programs in the various countries, comparing the NHS in Britain (and similar systems in Australia and Canada) with the U.S.'s patchwork system of insurance and care.  But social welfare policy cannot be limited to health insurance, can it?  It would be interesting to see Bruner develop a sharper definition of this category in future work, with a more nuanced approach to subcategories.  Is all of "social welfare" correlated with corporate governance, or can we narrow it down to specific subcategories of employee protections?

I bring up the underdeveloped concept of social welfare especially since Bruner makes some very nice observations about the lack of nuance in existing comparative corporate governance models.  His criticisms of LLSV, for example, for failing to account for differences between common-law countries make a nice point about the importance of going beyond rather chunky categorizations.  But his social welfare category risks making the same mistake.  Just as a very particularized example, Sam Estreicher and Jeff Hirsch have recently challenged the notion that U.S. unjust dismissal law is much less employee-friendly than that of other developed countries.  And this challenge is on a particular aspect of social welfare policy that most commentators would have thought to be well-settled.  So I think we need a sharper definition of the social welfare category, and more nuanced comparisons within that definition, if social welfare is to be a meaningful variable in Bruner's equation.

Second, and perhaps a more interesting question from my perspective, is: what forces drove the societal balancing act into these two sets of policy spheres?  Why, in particular, did employees not demand more ownership of the enterprise, rather than simply pushing for beefed-up social welfare programs?  Social welfare policy seems like a second-best set of ameliorative efforts to address the lack of power that employees have within their own firms.  Labor law is the most direct "social welfare" effort to address that internal power imbalance.  However, that set of laws has been very careful calibrated to avoid any infringement upon the so-called "core of entrepreneurial control."  Labor law carves out a space for employee power, but that power falls outside the decision-making center of the firm.  It's not inevitable that employees must look to generate power outside of the firm, is it?  And if not, then why did employees and other members of society choose the social welfare policies at issue as their means of balancing out pro-shareholder corporate governance policies?  Bruner mentions two minor aspects of British company law that protect employees: statutory authority to consider shareholder interests and a statutory mechanism for providing payments to employees in the face of bankruptcy or closure.  But such protections are, in Bruner's words, still "fundamentally quite shareholder-centric" in their orientation (p. 158).  Why didn't or haven't employees pressed for more within corporate law?

Third, Bruner's model implicitly assumes that a pro-shareholder approach is necessarily an anti-stakeholder, particularly anti-employee, approach, at least to the extent that it needs to be balanced out by pro-employee social welfare policies.  However, some of the recent battles between shareholders and managers do not seem to fit this rubric.  Lucian Bebchuk, for example, is perhaps the scholar most associated with shareholder primacy, but he has been excoriated by business groups for being a tool of not only activist shareholders but also public-employee pension funds.  The late Larry Ribstein was deeply suspicious of pro-shareholder reforms such as proxy access and say-on-pay, as he believed they allowed unions to have an undue influence over corporate policy.  Bruner is careful in places to acknowledge that pro-shareholder is not necessarily conservative or liberal, but I think his model implicitly assumes that pro-shareholder is anti-employee.  To some extent, the efforts of union pension funds to increase shareholder rights seems to belie this notion.  Australia's superannuation program, discussed by Bruner, is another interesting example of how this contrast is breaking down in some places and spaces.

I have all these questions because Christopher has written such a provocative, original, and thoughtful study of the relationship between corporations, shareholders, employees, and society.  His contribution has significantly added to the extensive literature on these issues, and I'm sure that this book is just the beginning.

Posted by Matt Bodie on May 13, 2014 at 11:56 PM in Books, Corporate | Permalink | Comments (1)

Uncommon Law: Social Welfare and Corporate Governance in the Common-Law World


Reports of the uniformity of corporate governance among common law jurisdictions are greatly exaggerated (at least when it comes to shareholder rights and security, anyway).  This is an essential descriptive thesis of Chris Bruner's Corporate Governance in the Common-Law World: The Political Foundations of Shareholder Power.  It also is undoubtedly an engaging topic for a book--one that demanded my attention and resonated with me almost immediately.  In research I did a few years ago for what ultimately became a draft paper and book chapter, I had explored the validity of claims of international convergence in insider trading regulation and found much the same thing that Bruner finds in this book: facial similarities in legal structures and doctrine may mask more interesting and telling differences.

The descriptive account is important, but it is not the heart and soul of the book.  Rather, the core value of the book is that it strikes out beyond culture, history, and economics to politics--specifically, social welfare politics--to explain the differences among the corporate governance systems in the four jurisdictions studied--the United States, the United Kingdom, Australia, and Canada.  By demonstrating that changes in shareholder power and protections vary with social welfare dynamics, the book begs a far more significant conclusion: that corporate governance oppresses and empowers the populace in much the same way that state government does and that the corporation therefore may be an arm of or a substitute for state government in promoting or effectuating policy.  This take-away is unsurprising to me; it is intuitive and sometimes obvious in other contexts.  Nevertheless, the weight of proof is hard to come by, and I am grateful for Bruner's work in providing it.

Many elements of the story are compelling.

 In light of debates here in the United States about the role of shareholders in the corporate form, it was of particular interest to me that the U.K. Companies Act (which I have not independently studied to an significant degree) casts shareholders in the role of principals that can dictate the activities of corporate directors.  I had seen evidence of shareholder centrism in takeover regulation in the U.K. (which I teach in Comparative Mergers & Acquisitions, when I get the chance to teach that course), but the revelation that this shareholder-friendliness extends to the broader management function of the firm helped to explain and normalize the pro-shareholder mergers and acquisitions doctrine.  

This observation about the doctrine also demonstrates a fundamental difference between the doctrine in the United States and the United Kingdom:  in the United Kingdom, the board is an agent of the shareholders.  While folks try to make that argument under U.S. law, the agency is not complete given, among other things, the inability of shareholders to direct the board (in most cases).  In this aspect, the book's account of U.S. corporate governance offers support, at least from a comparative perspective, for the descriptive accuracy of Steve Bainbridge's evolving director primacy theory.  At the very least, as Bruner notes, it is "explicable as a rejection of strict shareholder primacy."  See p. 44.  On that note, for those who haven't watched the videos of the recent UCLA Lowell Milken Institute event, A Conference and Micro-Symposium on Competing Theories of Corporate Governance, I highly recommend them.

I wonder (and I do not mean for this to be a mere rhetorical question) what, in light of Bruner's observations on U.S. corporate law, he might have to say about the introduction of social enterprise entities into state corporate law in the United States.  In the past few years, we have seen in the United States the rise of benefit corporations, flexible purpose corporations, and the like (following on the introduction of  B Corp certification and low-profit limited liability companies--L3Cs).  This social enterprise entity movement (if you will) is in part a response to the lack of shareholder power under U.S. law to manage the business and affairs of the corporation--specifically, to ensure that the directors take into account social and environmental concerns in addition to traditional, financial shareholder wealth maximization.  Yet, that account differs from Bruner's assessment in the book on other-constituency statutes like those in Indiana and Connecticut, see p. 44, which he characterizes as a "marginalization of shareholders."  See also pp. 171-73.  (I see Andrew also picks up on this thread.)  The cultural, historical, economic, and political aspects of the emergence of social enterprise entities raise interesting questions that I would find to be a fruitful subject for further commentary.  To the extent they may affect public companies (who may become and are acquiring social enterprise entities), the matter deserves thoughtful consideration.  I can see how a treatment of this issue could both substantiate and challenge Bruner's observations about shareholder power under U.S. corporate law.

On a lighter note, as a securities law teacher and researcher, I also enjoyed the brief part of the book that explained the allocation of securities regulation authority in the various federal systems represented by the United States, Australia, and Canada.  See p. 78.  The issue of where authority in securities regulation resides in state governments outside the United States is always troublesome for those of us who desire to teach foreign law but have spent our time in the thickets of U.S. securities law.  In other words, it's always difficult to find securities law in a new jurisdiction when searching for it from an ethnocentric perspective . . . .  Here, I was admittedly a bit chagrined that U.S. securities law was classified as national law both as a default and in practice.  Although the book only purports to address public companies (which admittedly are largely regulated under federal securities law in the United States), I would argue that a lawyer for a public company who forgets to check on the applicability of state securities law for a particular transaction is committing malpractice.  This is true notwithstanding the breadth of constitutional power under the Commerce Clause and the resulting strong preemption provisions in the National Securities Markets Improvement Act of 1996.  But I may be misunderstanding Bruner's analysis here.

No matter.  The book is a good read (well written and provocative) and promises to generate much conversation here at Prawfs and elsewhere.  It conveys a lot of information in a relatable and accessible way.  I recommend it for your summer reading list.

Posted by joanheminway on May 13, 2014 at 03:09 PM in Books, Corporate, Law and Politics | Permalink | Comments (0)

Monday, May 12, 2014

Law Profs' Role in Bar Passage--and Bar Reform

ABA Standard 301   commands that “A law school shall maintain rigorous educational program that prepares its students for (1) admission to the bar and (2) effective, ethical and responsible participation in the legal profession.” Yet we in legal education have an odd relationship with the bar exam. 

We know, of course, that it is the hurdle almost all of our students will have to clear before they are eligible to practice law.  Most of us have passed it ourselves.  We also know that bar passage has become a highly publicized metric of success.   But for reasons that I have never fully understood, law schools have turned their back on the exam by leaving “bar review” to commercial companies.   And by doing so have allowed the exam to become a test of cramming, not learning.  Here are some ideas about how to better prepare our students not just for one “make or break” exam but also for the many years of law practice ahead of them.

  1. Lets get over the idea that it’s inappropriate for law schools to help students prepare for the bar exam.   We all need to make ourselves aware of what areas of our subjects the students will be tested on.
  2. Support a movement to divide the bar exam into sections (or steps as in medical school) given over the course of law school, not all at once.  This is not the same as taking the bar exam early.  It is an organized system of objective exams that cover the first year topics the first year and then move on to more complex, scenario based questions that ask the students to actually use the information they have learned.
Essays on “bar exam reform” are as numerous as raindrops during a hurricane.  Here’s a proposal by Prof. Daniel Solave to abolish it.  This is a blog post, not a bibliography--although here are two.

The written state essay exams are mostly very consumer oriented—they look at legal problems potential clients might bring to a new lawyer.  Wills, divorce, arrest, property division, partnership, consumer fraud.   But there is tremendous variety with each state being able to make its own decision.  This may change if more states adopt the multistate essay exam.

The MBE, on the other hand, is a complex game of “gotcha.”  (go look at some problems) And it may well have gotten that way because the bar review process supports it.   Everyone’s research (public and private) finds that the most reliable indicia of bar failure is poor performance in law school. Professor Robert Anderson has put out comes at the same idea, how good are you taking tests, using LSAT scores as a factor.  But it’s not clear to me if we understand what that really means.  Could it be that students who perform poorly in law school perform poorly in bar review?   

As Jane Yankowitz points out, we know very little about what happens to the students who fail. If what the bar exam is really testing is the ability to learn a lot of things very quickly (and that’s important for a lawyer) then aside for the hazing aspect of bar study what is it really adding to the cause of protecting clients?

So what to do?  

First, we could help the students more with the existing bar exam by being more aware of what is going to be tested and how.  The MBE is quite clear about the scope of what they test.  Professor Steve Friedland has put out a book, One Hundred Rules You Need to Know to Pass the Bar Exam.   I’m using it to audit my Torts Syllabus.  Here’s a website with a lot of information about bar passage.

Second, we could get more involved in developing a series of standardized exams given throughout law school.   The timing and content of the bar exam are strange.  Neuroscience/Common Sense 101 tells us that everyone remembers best what they learned most recently.  Yet the multistate bar exam tests, in enormous detail, many first year topics

I’ve written before that medical education struggles with many of the same problems we do, and is by no means satisfied with their testing system.  But have a look at how they structure standardized testing.  Step 1 comes at the end of the first two “classroom” years, step 2  after two more years of closely supervised clinical training and step 3 after residency.   (Yes, they too have "commercial review courses" but medical students still do much of this exam prep themselves with practice question books and actual review--here and here) Note that step 2 also has a skills component including, among other things, observing a student interview and counsel a patient (who has been trained to present the symptoms of a specific disease).

Sure, you’ve heard criticisms of the bar before.   And a common response is to shrug, say it’s not perfect but it’s the best we have given limited ability to actually watch students practice law.  But I think we can give a better test that would hold students to a standard higher than cramming ability.

My goal in this blog post is not to convince or debate, but rather to start a conversation about imaging law school without commercial bar "review."









Posted by Jennifer Bard on May 12, 2014 at 10:01 PM in Books, Life of Law Schools | Permalink | Comments (0)

Saturday, May 03, 2014

Sen Elizabeth Warren's New Memoir of Special Interest to Law Profs

There are a lot of reasons why law professors should read Senator Elizabeth Warren’s recently published memoir--“A Fighting Chance."  The top two are that it's well-written and frequently very funny.   (for full effect--I suggest the audio version that the Senator narrates herself).

Beyond that, not only is it a lucid explanation of the banking industry’s efforts to limit the ability of creditors to make a fresh start through declaring bankruptcy, it is an account of her extraordinary academic career--one that she achieved without any of the traditional criteria such as academic pedigree, powerful mentors, family connections, prestigious fellowships or judicial clerkships.  For those unfamiliar with her as Bankruptcy Professor-here are some posts she has made on the Credit Slips blog.

She also closely documents her struggles to balance family, both her children and elderly parents (and pets).   There is a lot for law professors to unpack here--including how her interest in the people behind the laws has shaped her career. 

But more generally, I look forward to discussing how critical it is for the future of legal education that Senator Warren succeed in convincing her colleagues of the need to reform the way higher education is financed.   Whether she herself has the best plan for fixing student loans—well different people have different views-including just eliminating them.   But unless we can stop the ever increasing cycle of debt that is making our students’ lives so difficult, any of the important changes that need to be made in legal education risk being about as effective as bailing out a sinking boat with a bucket that itself has a hole in it.

 As I will elaborate later, I’m very optimistic that we can all create a program about which students can say 5, 10, 15 years later that they are better off for having gone to our law school.  But we’re probably not there now.  Rather, we are in a situation similar to being attacked by a hive of bees.  Every individual bee, lack of job opportunities, bimodal salary distributions,  drop in state support for public institutions, lack of transparency about student outcomes, out dated curriculums, disconnect between the classroom and the practice of law, imposition of a value system that drives law students into disproportionate levels of depression that may well follow them  throughout their careers, is capable of inflicting painful or even lethal stings.   But the breach in the hive comes from a level of student loan debt that cannot be supported by any reasonably obtainable career path.  It’s not a perfect metaphor—student loan reform is necessary but not sufficient to developing a legal education that better prepares our students for the important role they will play in society. 

Posted by Jennifer Bard on May 3, 2014 at 01:33 PM in Books, Culture, Current Affairs, Law and Politics, Life of Law Schools, Teaching Law | Permalink | Comments (1)

Monday, April 28, 2014

CEO Privacy

Over at his blog, Stephen Bainbridge posted today about a Stanford Business School short case study arguing that a CEO divorce might impact a corporation and its shareholders, and therefore shareholders should take into account the personal lives of CEOs when making investment decisions.  He concludes in his post that the corporation's directors likely do not have any legal obligation to affirmatively monitor the CEO's personal life, including his/her marriage.    

While I agree with that conclusion regarding duty to monitor, as I have written about previously, it is a more ambiguous question under the current law whether a corporation that is actively aware of a situation in the personal life of the executive has any obligation to disclose that information to the shareholders.  

In my scholarship, I have focused on a closely related question: not whether corporations do have to disclose personal information about its executives to its shareholders, but rather should corporations have to disclose such information to their shareholders?

 On the one hand, the Stanford case study is probably correct that a CEO divorce (or other difficult situation including family death, or health situations) might impact a corporation and its shareholders.  This general conclusion is not new, as finance scholars at NYU empirical studies studied data from Denmark and found statistically significant drops in company profitability following the death of a CEO's child or parent (although not after the death of a mother-in-law).  

That is not the complete story, however, in deciding the  normative question.  In addition to the shareholders' interest in obtaining potentially relevant (one might arguably say material) information about the CEO, there is also a competing interest by the executive in being able to keep personal information about such deeply personal matters as health information, family deaths, and marital troubles to themselves and their circle of loved ones.

How do we balance these two competing interests? In my 2013 Florida State Law Review article "Disclosing Corporate Disclosure Obligations"  I argue that the best way to balance and value these competing interests is to amend the existing corporate disclosure requirements to allow corporations and executives to negotiate and contract up front what the corporation's disclosure policy will be with regard to the personal information of that executive.  The corporation will then disclose that disclosure policy to the shareholders.  More details about the proposal are of course available in the full version of the paper available at

In my next post later this week, I will talk about the next portion of the project, where I consider if there might be reasons that we want executives to be able to hold on to some level of privacy because executive privacy might tell us something about how corporations then treat the privacy of their employees and consumes.  


Posted by Victoria Schwartz on April 28, 2014 at 02:40 PM in Books | Permalink | Comments (0)

Saturday, March 01, 2014

Waldron v. Seidman, and the obligations of officials and the rest of us

"Never Mind the Constitution." That's the awesome title of this characteristically sharp and learned essay by Jeremy Waldron, reviewing in the HLR Mike Seidman's new book, On Constitutional Disobedience.  Seidman's got a cheeky and funny short reply to Waldron, entitled, appropriately enough, "Why Jeremy Waldron Really Agrees With Me."  I wonder if Seidman's Response will continue the apparent trend of the personal title for scholarship, e.g., Why Jack Balkin is Disgusting. If Susan Crawford's Response in the Harv. L. Rev. Forum to the review of her book by Chris Yoo is any indication, I suspect at most we can use these few data points only to identify a trend in favor of the  "meta" title and not make broader generalizations just yet.

Moving past the title to something like the merits, I'll confess I'm pretty skeptical toward the general thrust of Seidman's argument (as characterized by Waldron and as evidenced in his NYT oped from last year). He is, as Waldron notes, basically a philosophical anarchist and that's a position I find largely untenable under particular conditions of a reasonable well-working liberal democracy. (Importantly, some of Waldron's work on political obligation was what led me down that path but little of Waldron's work on that subject figures into his review of Seidman.) One last mildly interesting thing to note is that Seidman's embrace of philosophical anarchism and his export of it to constitutional theory basically coincides with the thrust of Abner Greene's recent book, Against Obligation.  There are differences between them, some of which are discussed here (review of Seidman by Greene) and here (review of Greene by Seidman). For those interested in these overlapping and important projects, the BU Law Review published a symposium on these two books last year, and you can find the contributions here, which I'm looking forward to exploring further, since, full disclosure, I am writing dreaming up something inspired by these various works on the moral and political obligations of prison or other corrections officials as a distinct class of officials).


Posted by Administrators on March 1, 2014 at 04:19 PM in Article Spotlight, Blogging, Books, Constitutional thoughts, Dan Markel, Legal Theory | Permalink | Comments (13) | TrackBack

Monday, February 17, 2014

Law Schools Competing on Course Material Prices

Christine Hurt's post about the sales model of legal scholarship included a new approach for providing students with course materials:

The direct-to-student model for casebooks.  I've been thinking about this since I discovered how much a new edition of the Torts book I use cost (gasp).  So, currently, I can use my work time to write a casebook that is then sold to law students, including mine, who pay $200/ea, and I get $20/ea.  For doing my job.  (I know, others deviate from this model, including paying their own students back their royalties .)  But why not just self-publish?  I spend my summer coming up with my own materials (as many do for their own courses anyway) and make them free for my students online?  All the cases are available on the internet, and so are all the statutes/Restatement sections/etc.  The only thing missing is the commentary and the questions (which I usually skip).  This could save students $1000/semester.  I'm teaching a course for the first time this semester, BA II, and I put together my own materials -- cases, law review articles, public disclosure documents.  It takes a lot of time, but it's not crazy.  What about first-time professors?  Well, I would be happy to share my materials.  In fact, all the Torts professors here could combine forces.  Just a thought.

I have written (here and here!) about moving to an open-source model for casebooks.  But it hasn't happened yet.  I think there are pretty clear reasons why: (1) casebooks provide value to professors by organizing and synthesizing complex material, and (2) professors and law schools do not have to pay the costs of those materials directly or personally.  

Ian Ayers, in the op-ed cited by Christine, argued that schools should have a "textbook maintenance organization" that provides students with books as part of tuition.  So I was thinking about revisiting this idea now, and adding a twist:  schools could compete against each other on course material prices.  Here's what one enterprising law school could do:

  • Instead of having students buy their own books, have students pay the school a yearly "course materials fee," and then the school would provide them with all the books or other materials assigned for their courses.
  • The school would then buy books for its students (and, in theory, negotiate a cheaper bulk rate) or pay its professors to produce their own materials for their classes.

This system would incentivize not only cheaper casebook prices, but it would also incentivize the production of course materials more specifically tailored to that set of students.  So schools with a local employment base could, for example, teach the criminal law of that particular state using state-oriented materials.  I think (almost) everyone wins here:

  • Students would pay less overall, as the school would have an incentive to keeps its fee lower given the salience and openness of the fee.  And they also might get course materials more directly targeted to their educational needs.
  • Schools would get the money for course materials directly and then either pay the publishers lower prices (by negotiating) or pay their own profs to produce teaching materials.
  • Profs who produce their own materials locally could get some compensation for the value they add.
  • And even though it might not be "good" for them, it would incentivize casebook publishers to add more value for what they are selling, so profs continue to use them.  (Ayres argues that publishers would sell more books, which is possible but seems unlikely to me.)  Plus, the school would not cover supplemental materials and/or study aids, so publishers would still be able to get full value there.

Ayres argues for textbook maintenance organizations as an efficient and fair reform.  But couldn't it also be grounds for competition?  Schools would have to make clear that they were working hard to save their students money overall, rather than just hitting them with another fee.  So one school could advertise: "Students at most schools can pay over $2000 in course materials per year.  At X School of Law, we'll cover all your course materials for only $500."

The response to educational market change seems to be slow and sticky.  But given the ever-increasing cost of casebooks, paired with the new incentives for schools to compete on price, some schools might find some success here if they are willing to be first-movers.

BTW: if you need more evidence about the crazy inflation of casebook prices, check out this line from Ayres's 2005 op-ed: "We're used to paying $25 for a hardcover novel, but my casebook on contracts now sells to students for $103 . . . ."  The 2014 price is here.

Posted by Matt Bodie on February 17, 2014 at 11:24 AM in Books, Life of Law Schools, Teaching Law | Permalink | Comments (10) | TrackBack

Tuesday, July 09, 2013

The Checklist Manifesto: A Book that Altered How I View the World

Perhaps I am late to the party, as it came out in 2009, but I recently finished reading The Checklist Manifesto, by Atul Gawande, and it changed how I view the world.  Gawande is a surgeon, but he wrote this book for a general audience to probe how checklists can help to eradicate simple errors in the increasingly complicated things that we do.

As Gawande recounts, we live in a world of tremendously complex knowledge, yet we still make many harmful mistakes.  Surgeries cause infections.  Planes (unfortunately, as this past weekend's news reminded us) crash.  Investors make poor decisions.  How can we fix these problems?

The idea is quite simple:  use a checklist.  Well-constructed checklists, when employed at pause points in a complex process, help to ensure that we do not allow our huge array of knowledge to cloud the routine but essential steps we must perform in a given procedure.  Buildings do not generally collapse because engineers use checklists at each step in the building process.  Implementing a simple checklist in the operating room significantly reduces infections. Charles "Sully" Sullenberger used a checklist to successfully land his damaged plane in the Hudson River.  (It is not clear whether the Asiana Airlines pilots in this past weekend's crash used a checklist once they realized they were in danger.)

Yet we still do not use checklists on a routine basis in lots of things that we do.  

Indeed, at a instinctual level checklists are often anathema to many people.  Surgeons generally reject checklists because they believe they are the "experts" and know how to run their operating rooms.  I experienced a knee-jerk anti-checklist mentality myself without even realizing it:  The day after finishing the book I was on the telephone with an after-hours nurse hotline to ask a simple question about an allergy medicine, and I became very frustrated when the nurse kept asking me seemingly-unrelated questions about my symptoms.  She continued to probe me on an array of irrelevant matters that, I thought, had nothing to do with my issue.  Only after I hung up did I realize -- she was using a checklist!  Sure, I might actually have a simple question regarding a medicine, but someone else calling with that same issue could be experiencing a more serious health issue that required immediate attention.  Using a checklist could allow the nurse to catch the emergency situations.

Almost every endeavor we undertake could benefit from a checklist.  Law is no exception. Litigators could use checklists in a deposition or when questioning a witness on the stand.  Commercial lawyers can employ checklists at different stages of the dealmaking process.  Brief writers might look to a checklist to ensure they include all of the necessary elements in their written submissions.  We often tell law students to create checklists for their exams to make sure they are hitting all of the issues.  But although there are obvious benefits, checklists are generally underused.

This is certainly true in my own field of election law.  This all leads to one of my current research projects, an article tentatively titled "A Checklist Manifesto for Election Day."  My initial research shows that states and counties provide poll workers with long, detailed training materials but no easy-to-use checklist to which they can refer on Election Day.  Yet, as the continued flurry of post-election litigation demonstrates, we make election mistakes in every election.  Perhaps a checklist can help.

It is rare that a book I read for pleasure turns not only into a research agenda but also changes the way I view so many aspects of what we do as a society.  Faithful readers (hi Mom!), are there other books that have had same affect on you?  Do you use checklists?

Posted by Josh Douglas on July 9, 2013 at 01:09 AM in Books | Permalink | Comments (5) | TrackBack

Saturday, June 08, 2013

"I Ought To Like, But Don't"

The weekend seems like the appropriate time for a frivolous and non-law post.  I recently had the pleasure of seeing the Studio Theatre's excellent production of Tom Stoppard's The Real ThingThe Real Thing was already my favorite play, but seeing this production made me appreciate parts of it even more.  My theater companion was not so impressed, and remarked that given his theater tastes, Stoppard was "one of those things I ought to like, but don't."

I was intrigued by the concept.  Amazon and Netflix now regularly make confident assertions about things I'll like, given the other things I like, and given what people who like those things like.  And while those assertions are often right, they occasionally misfire.  Similarly, even without the algorithms, I suspect that each of us have books or movies or other tastes that we "ought to like," given the tastes of those similar to us, but don't.

Mine's The Lord of the Rings.  I read a lot of fantasy novels and given what others like, I ought to like these.  But while I finally managed to finally slog through the first two books by pretending that they'd been written by George R.R. Martin, I still got stuck early on in The Return of the King.  I ought to like them much more than I do. 

How about you?

Posted by Will Baude on June 8, 2013 at 07:36 AM in Books | Permalink | Comments (8) | TrackBack

Wednesday, May 29, 2013

On "Moving On"

I really enjoyed, and was challenged by, Stanley Fish's recent "Opinionator" column, "Moving On."  I have a lot of books, at home and in the office, and (I confess!) I like having a lot of books . . . in piles, on shelves, across the desk, in one of those wheel-cart things.  I write in them (imagining ludicrously that I or someone else will someday be curious about my in-the-margins reactions) and just cannot buy the idea that Kindles and are substitutes.  Yes, I know, this "like" of mine reveals both an insecurity and a less-than-commendable showoffyness.  Still, like the Facebook group that "judges you when you use bad grammar", I cannot pretend that I don't judge when I'm in a house with no books.  And, giving them away -- even ones I didn't like -- has always been kind of hard. 

Fish reports, though, that, after getting rid of a whole bunch of his own (heavily annotated, I assume!) books, he "felt nothing":

In the hours and days following the exodus of the books I monitored myself for a post-mortem (please excuse the hyperbole) reaction. Would I feel regret? Nostalgia? Panic? Relief? I felt nothing. What should have been a momentous event barely registered as I moved on to what seemed the more important task of choosing a new carpet. I was reminded of what a colleague who had left a university after 23 years replied when I asked him if it was difficult to do. He said, “It was like checking out of a motel.”

Really?  "Nothing"?  That's striking.  And, I think, impressive.   To be able to look at piles of notes, and annotated books and articles, and "to do" files, and shelves with banker-boxes labelled with various laughably-over-ambitious project-names, and "say," as Fish reports having said:

What I saw on the shelves was work to which I would never return, the writings of fellow critics whom I will no longer engage, interpretive dilemmas someone else will have to address. The conversations I had participated in for decades have now gone in another direction (indeed, in several other directions), and I have neither the time nor, if truth be told, the intellectual energy required to catch up. Farewell to all that. So long, it’s been good to know you. I’m sure you’ll do fine without me.

This strikes me as very . . . "healthy", and not just because Fish is, he says, moving toward retirement.  The fact that the "conversations" in which we are (or imagine we are, or aspire to be) participating were happening before us, and will go on after us, and are probably indifferent to (most of) us is a tough one for academics to confront, I think.  After all, we are required to assert confidently and often the novelty and importance of our interventions in these conversations.  And, it seems fair to say, Fish's actually have been pretty important.  He can still say, so long, it’s been good to know you. I’m sure you’ll do fine without me.  Again, impressive.

Posted by Rick Garnett on May 29, 2013 at 11:40 AM in Books, Rick Garnett | Permalink | Comments (0) | TrackBack

Monday, March 18, 2013

Prawfs Guest Tim Lytton Has a New Book: Check It Out!

Professor Tim Lytton, who has previously guested in this space, has a new book that I'm happy to share with our readers. It's called KosherPrivate Regulation in the Age of Industrial Food.  

Timothy D. Lytton is the Albert & Angela Farone Distinguished Professor of Law at Albany Law School. To read an interview with the author, click here.

Generating over $12 billion in annual sales, kosher food is big business. It is also an unheralded story of private-sector regulation in an era of growing public concern over the government’s ability to regulate the food industry. Kosheruncovers how independent certification agencies rescued American kosher supervision from corruption and turned it into a model of nongovernmental administration.

 “Kosher is one terrific book. It’s a wonderfully entertaining account of the squabbles, finger-pointing, and cutthroat competition that turned kosher certification from scandalous corruption to a respectable—and highly profitable—business. Today, if a food is labeled kosher, it is kosher, which is more than can be said of most claims on food labels. You don’t have to be Jewish to appreciate the fun in Timothy Lytton’s presentation of an unusually successful case study.”

— Marion Nestle, New York University, and author of Food Politics

In overcoming many of the problems of insufficient resources and weak enforcement that hamper the government, private kosher certification holds important lessons for improving food regulation. The growing popularity of kosher food is a response to a more general cultural anxiety about industrialization of the food supply. Like the organic and locavore movements, a growing number of consumers see rabbinic supervision as a way to personalize today’s complex, globalized system of food production.


Posted by Administrators on March 18, 2013 at 12:19 PM in Books | Permalink | Comments (4) | TrackBack

Thursday, January 31, 2013

Wrap-Up for Book Club on "Justifying Intellectual Property"

Many thanks for a really engaging book club to our terrific set of participants: Oren Bracha, John Duffy, Wendy Gordon, Justin Hughes, Jonathan Masur, and of course our author, Robert Merges.  Rob had a pretty busy day providing responses to the other participants, and the result is a club that dives deep down into the book.  In case you missed some of the posts, or just want a handy guide for future reference, here's a chronological list:

I have a feeling some of these discussions could continue on into the future.  If you haven't gotten the book, you can find it at AmazonBarnes & Noble, and HUP, or get Chapter 1 at SSRN. .

Posted by Matt Bodie on January 31, 2013 at 11:56 AM in Books, Intellectual Property | Permalink | Comments (0) | TrackBack

Wednesday, January 30, 2013

ost Book Club: Justifying IP -- Putting the Horse Before Descartes (Response to Duffy)

In this, my final response to the many interesting posts in my book, I want to traverse some comments that John Duffy made. To the other authors of posts, especially those who wrote reactions to my responses -- we will have to continue offline. I have taken too much space already. And the many readers of Prawfsblawg who care nothing for IP are I am sure tired of all this.

I am going to skip over the blush-inducing praise in John's post, and get right to his main point. He says:

" [I]f we are frustrated with the complexities of economic theories and are searching for a more solid foundation for justifying the rules of intellectual property, is Kant (or Locke or Rawls or Nozick) really going to help lead us out of the wilderness?"

John says no. He says further that just as Descartes' doubts drove him to embrace foundations that were thoroughly unhelpful when it came to elucidating actual physical reality, such as planetary motion, so my doubt-induced search for solid foundations will lead nowhere (at best), and maybe to some very bad places (at worst).

This argument may be seen to resolve to a simple point, one often made in legal theory circles: "It takes a theory to beat a theory." (Lawrence Solum has an excellent entry on this topic in his Legal Theory Lexicon, posted on his Legal Theory Blog some time back.) The idea here is that utilitarian theory is a true theory, because it is capable of proof or refutation and because it guides inquiry in ways that could lead to better predictions about the real world. By this criterion, deontic theories are not real theories because they cannot be either proven or refuted. Einstein's famous quip comes to mind; after a presentation by another scientist, Einstein supposedly said "Well, he wasn't right. But what's worse is, he wasn't even wrong."

My response starts with some stark facts. We do not know whether IP law is net social welfare positive. Yet many of us feel strongly that this body of law, this social and legal institution, has a place in a well-functioning society. Now ,we can say the data are not all in yet, but we nevertheless should maintain our IP system on the hope that someday we will have adequate data to justify it. The problem with this approach is, where does that leave us in the interim? We could say that we will adhere to utilitarian theory because it stands the best chance of justifying our field at some future date -- when adequate data are in hand. But meanwhile, what is our status? We are adhering, we say, to a theory that may someday prove true. By its own criteria it is not true today, not to the level of certainty we require of it (and that it in some sense requires of itself.) But because it will be "more true" than other theories on that magic day when convincing data finally arrive, we should stick to it.

My approach was to turn this all upside-down, I started with the fact that the data are not adequate at this time. And I admitted that I nevertheless felt strongly that IP makes sense as a field; that it seems warranted and even necessary as a social institition. So it was on account of these facts that I began my search for a better theoretical foundation for IP law.

If you have followed me so far, you will not be surprised when I say that for me, Locke, Kant and Rawls better account for the facts as I find them than other theries -- including utilitarianism. Deontic considerations explain, to me at least, why we have an IP system in the absence of convincing empirical evidence regarding net social welfare. Put simply: We have IP, regardless of its (proven) effect on social welfare -- so maybe (I said to myself) *it's not ultimately about social welfare*.

This is the sense in which, to me, deontic theory provides a "better" theory of IP law. It fits the facts in hand today, including the inconvenient fact of the absence of facts. Of course, we may learn in years to come that the utilitarian case can be made convincingly. I explicitly provide for this in JIP, when I say that there is "room at the bottom," at the foundational level, for different ultimate foundations and even new ultimate foundations. It's just that for me, given the current data, I cannot today make that case convincingly. And it would be a strange empirically-based theory that asks me to ignore this key piece of factual information in adopting foundations for the field. To those who say deontic theories cannot be either proven or disproven, I offer the aforementioned facts, and say in effect that an amalgam of deontic theory does a better job explaining why we have IP law than other theories. And therefore that it is in this sense "more true" than utilitarian theory. Again, it fits the facts that (1) we do not have adequate data about net social welfare; and (2) we nevertheless feel IP is an important social institution in our society and perhaps any society that claims to believe in individual autonomy, rewards for deserving effort, and basic fairness.

One final point: to connect Kant with Hegel with Marx, as John does, is a legitimate move philosophically. But I have to add that for many interpreters of Marx, he is the ultimate utilitarian. What is materialism, as in Marxist historical materialism, but a system that makes radically egalitarian economic outcomes the paramount concern of the state? The famous suppression of individual differences and individual rights under much of applied Marxist theory represents the full working out of the utilitarian program under which all individuals can be reduced to their economic needs, and all government can be reduced to a mechanistic system for meeting those needs (as equally as possible)? If we are going to worry about where our preferred theories might lead if they get into the wrong hands, I'll take Locke and Kant and Rawls any day. In at least one form, radical utilitarian-materialism has already caused enough trouble.

This is hardly all there is to say, but it is all I have time to say. So I will keep plodding along, like a steady plow horse, trying not only to sort out the foundational issues, but also to engage in policy discussion and doctrinal analysis. And with this image I close, having once again put the (plow) horse before Descartes in the world of IP theory.



Posted by Rob Merges on January 30, 2013 at 08:50 PM in Books, Intellectual Property, Legal Theory | Permalink | Comments (2) | TrackBack

Masur on Merges on Masur on Mergers

I greatly appreciate Rob Merges' generosity in taking the time to respond to my original post.  His response is, characteristically for Rob, incisive and thoughtful.  I am not sure, in the end, how much we really disagree.  But I will take a shot at briefly disentangling and clarifying a few points with the goal of identifying whether or not disagreement actually exists.

Rob is absolutely correct that there are two separate questions: 1) whether an IP system can be justified at all; and 2) how well a particular system is performing.  Rob argues that, with respect to question #1, the IP system cannot be justified on economic (by which we mean utilitarian or welfarist) grounds.  Why would this be?  One possibility is that utilitarianism or welfarism or consequentialism (which is what we mean when we talk about an "economic" foundation) cannot provide a morally satisfactory basis for intellectual property rights.  There is a short section in the book (pages 151-153) that coulud be read as developing this argument, but that section is better understood as a critique of a completely unfettered free market, a point with which few economists would disagree.  As a general matter, the book does not appear to be making this point, and indeed it would be a mammoth undertaking to do so (even for Rob Merges and this book) given the extensive arguments that scholars have been making for centuries about welfarism as a moral foundation.  Rob will correct me if I am wrong, but I do not understand this to be his main argument.

A second possibility is that economics (read: utilitarianism or welfarism) cannot generate the midlevel principles that operate in intellectual property.  But as I pointed out in my previous post, it can generate them -- or at least the ones that are really central to the American IP system.

The third possibility, and the one I understand Rob to be advancing, is that the IP system, as it is currently constituted, does not actually promote the utilitarian ends that an economic approach would demand.  That is: as an empirical matter, IP doctrines as they operate today do not actually increase social welfare.  As Rob wrote in his post:

"The data required by a comprehensive utilitarian perspective are simply not in evidence in this field -- at least not yet. Put simply, I do not think we can say with the requisite degree of certainty that IP systems create net positive social welfare."

That seems exactly right to me, and this is why I believe that Rob and I are actually in violent agreement as to most of the important issues.  But this means that economics fails in response to Rob's question #2 -- how well is the system actually performing? -- rather than question #1, which is how the IP system can be justified on a theoretical basis.  That is why I wrote that economics has failed an empirical test, while Rob's deontic theory has passed a theoretical test.  This touches upon an excellent point made by a commenter to my first post.  This is not a reason to abandon deontic theory; rather, the point is simply that when we evaluate different types of theories, we should do on comparable grounds.

Nor do I mean at all to say that Rob's deontic theory is not correct, or compelling, or even superior to economics.  It is certainly the first two and maybe the third as well.  It is just that I do not believe a utilitarian economic theory can be ruled out on the theoretical grounds used to evaluate Lockean and Kantian deontic theories.  Economics is part of the overlapping consensus as well. 

Posted by Jonathan Masur on January 30, 2013 at 05:53 PM in Books, Intellectual Property | Permalink | Comments (0) | TrackBack

Tuesday, January 29, 2013

The New Institutional Philosophy of Rob Merges

In Justifying Intellectual Property, Rob Merges has written one of the most sweeping, significant, and brilliant books about intellectual property to be published in years.  The importance of the book is only accentuated by the identity of the author.  Merges is, of course, one of the godfathers of the institutional economics approach to intellectual property law, so this book conjures up the image of Richard Posner arguing that contract and tort law are fundamentally grounded in theories of fairness and distributive justice.  Merges’ book is an ideal candidate for a book club such as this one because it covers so much ground and does so with a great deal of nuance and careful detail.  This post will only scratch at one corner of Merges’ masterpiece, and I look forward to reading the perspectives of others as well.  Many thanks to Matt Bodie for organizing this club and to Prawfsblawg for hosting it.

Justifying Intellectual Property is a tremendous achievement in large part because it succeeds in adducing a fully compelling non-economic justification for intellectual property rights.  When Merges argues that he can arrive at the midlevel principles that animate central IP doctrines using Locke, Kant, and Rawls, he is highly persuasive.  The antecedent question, which I hope to explore, is what has catalyzed this approach.  Merges notes throughout the book that for an economic justification for intellectual property, the evidence is not there:  based on existing empirical findings, there is at least as much reason to believe that intellectual property has hampered innovation as that it has advanced it.  That is a fair characterization.  But note the type of argument being made.  It is not the case, and Merges correctly does not assert, that IP’s midlevel principles cannot be justified with economic theory.  Such a justification would not be difficult: nonremoval, proportionality, and efficiency are core ideas of an economic theory of intellectual property—efficiency, as Merges notes, might be the foundational principle, with nonremoval and proportionality two of the crucial midlevel principles.  The only principle that is missing from standard economic accounts is dignity, unless it is thought of in human welfare terms (which perhaps it should be).  But dignity plays a much smaller role in IP doctrine than the other three midlevel principles.  This is particularly true in the United States, where artists and creators have fewer moral rights than they do in European jurisdictions.  And it is true as well for patent law, where one will struggle to locate an important doctrine that appears to be grounded primarily in a concern for human dignity.  When it comes to dignity considerations in IP, it is not clear how great the need for justification really is.

Nor is it the case that IP doctrine is inconsistent with economic theory.  To be sure, there are some (perhaps many) doctrines that seem misguided from the position of economic theory.  But this will be true for all legal fields, including those, like antitrust, that are indisputably guided by economic thinking and economic thinking alone.  If there were not such holes and inconsistencies in the doctrine, there would be little for legal scholars to write about!  More importantly, if IP’s midlevel principles could be understood equally well as stemming from economic theory, then any doctrinal failings are attributable to errors in translating midlevel principles into doctrine, not a problem with economics as a fundamental IP precept.  So the issue is not doctrine, either.

The problem, as Merges correctly describes it, is that IP doctrine, as implemented by courts and other parties, has failed to advance the economic aims that it set out.  This is an empirical judgment, and quite possibly a correct one.  But what is the comparable standard by which a deontic conception of IP is to be judged?  What would it mean for IP doctrine in practice not to have properly advanced Lockean or Kantian ethics?  How could anyone tell?  The problem—or, more accurately, the advantage for Kant and Locke—is that those approaches are purely theoretical and do not generate testable predictions.  Economic theory has foundered on a set of tests that cannot be applied to the alternatives Merges proposes.

Rob Merges is absolutely right that an economic approach to intellectual property law has failed to deliver on its promise and should be rethought.  To take its place, he has accomplished something monumental, elevating deontic theory to a sustainable position as the foundation for intellectual property law.  But the terms on which he has lifted Kant and Locke do not entomb economic theory.  In the end this may be just as well.  It would be a shame if future scholars were to cease reading the terrific institutional economics articles that Merges wrote earlier in his career.

Posted by Jonathan Masur on January 29, 2013 at 12:53 PM in Books | Permalink | Comments (2) | TrackBack

Thoughts on "Justifying Intellectual Property" from Wendy Gordon

Here is an initial post for the book club from Wendy Gordon, William Fairfield Warren Distinguished Professor, Boston University, and Professor of Law, BU School of Law:

Rob Merges’s new book book is an immense achievement.  Intellectually it is stunning, plus Rob is an amazing and appealing writer.

Not since Peter Drahos’s 1996 book, A Philosophy of IntellectualProperty, has someone attempted to bring together a plethora of philosophic perspectives on IP.  Rob adds to this panoptic philosophic view a sharp knowledge of economics, and he puts at the center an acute recognition of how much we need – and lack—crucial empirical evidence about the effects of IP.

Ironically, it’s Rob’s valuable focus on the need for better facts that fails him in the chapter on Rawls.  Rob argues that broad IP rights are consistent with giving Rawlsian priority to the worst off in society.  But the Rawls chapter is riddled with factual assumptions which, if empirically investigated, might well prove the opposite.

One could quibble on philosophic grounds with Rob’s interpretation of Rawls (details of quibble available on request), but even on Rob’s own terms it’s far from clear that the worst-off  benefit from the restraints that patent and copyright  impose on the use of inventions and works of authorship.

Posted by Matt Bodie on January 29, 2013 at 10:24 AM in Books, Intellectual Property | Permalink | Comments (0) | TrackBack

Book Club on "Justifying Intellectual Property"

Welcome to the Book Club on Robert Merges' Justifying Intellectual Property.  Joining us for the club will be:

You can find the book at the usual places (AmazonBarnes & Noble, Powell's Books), or get Chapter 1 instantly at SSRN. Thanks to our participants!

Posted by Matt Bodie on January 29, 2013 at 10:12 AM in Books, Intellectual Property | Permalink | Comments (1) | TrackBack

Wednesday, January 09, 2013

In praise of "American Girl"

My daughter turned seven last month and is in the deepest throes of an American Girl phase. This is not unexpected, since my niece went through the same thing five years ago, as have daughters of friends. What  admittedly has been unexpected is that this has not been a bad thing. The whole product line presents some very positive, intellectually engaging messages for young girls.

I have been especially surprised by the books, which we have been plowing through for the past several months (several of them lent to use by a friend who saved her now-grown daughter's collection). These essentially are works of historical fiction, focusing on a particular character living in a particular time and providing seven-year-old-level historical context and information. They are fairly well written by accomplished children's book authors (as opposed to the assembly line of underpaid people trapped in a basement who we are convinced write the Disney princess books). The young girls are smart, curious, engaged, and strong, without being too perfect. And the books take pains to be historically accurate (albeit at a seven-year-old level); for example, the books about a Nez Perce girl in the mid-19th century were written in consultation with an advisory board of academics and tribe leaders. Each book also includes a short "Looking Back" chapter at the end that discusses real life in that time; and some of these were unflinching about things like slavery, the treatment of Indians, and the Great Depression (again, at a seven-year-old level). They are pretty clearly liberal in orientation, although I obviously have less of a problem with that.

Most importantly, the whole thing has fed my daughter's historical and political curiosity, which is fun for me to watch and to talk about. Last night was Title IX and Watergate; two nights ago was Reconstruction. I may be enjoying it as much as she is.

Posted by Howard Wasserman on January 9, 2013 at 06:26 PM in Books, Howard Wasserman | Permalink | Comments (6) | TrackBack

Continuing the discussion: Koppelman's "Defending American Religious Neutrality"

A few weeks ago, Paul kicked off a discussion about Andy Koppelman's new book, Defending American Religious Neutrality, and posted Andy's introduction.  (Readers might also be interested in this short essay, The Many Paths to Neutrality, which Andy and I wrote, and which serves as the Introduction to our First Amendment Stories.)

I had a chance to "workshop" Andy's book when it was in draft, and have re-read it after its publication.  I admire it, and Andy, a lot.   

For starters, I appreciate his reminder that, maybe, things are not so bad.  Yes, it is true that the Court often makes a mess of things, certain Justices are prone to cringe-inducing displays of unwarranted self-confidence, and the threats to religious freedom, at home and abroad, are real.  Still, we have, as Koppelman notes, “been unusually successful in dealing with religious diversity” and, despite the fair and ample criticism directed at our First Amendment caselaw, it strikes me that our courts are “muddling through” reasonably well.

In addition, there are many points, claims, and observations in Andy’s book that strike me as sound and welcome.  He correctly criticizes and refutes those “radical secularists” who regard religion as “toxic and valueless” and who seem bent on its “eradication . . . from public life.”  He is right that the Constitution does permit – indeed, it invites – the accommodation of religion.  He helpfully amends John Rawls’s call for “civic friendship” with the reminder that the “path to actual civic friendship”
is not, in the real world, aided by rules-of-engagement that require the bracketing or translating of “comprehensive views”; the better way, instead, is to “tell each other what we [really] think and talk about it.”  He is wise to urge readers not to overstate
or obsess the difficulties involved in “defining” religion, because there is no single definition.  And, I think he is right that First Amendment doctrine, to the extent it contains a judicially enforceable “secular purpose” requirement, should focus on legislative outputs – that is, on what officials actually do and say – rather than on inputs, or on the supposed motives of legislators or religious commitments of voters.

Koppelman’s primary thesis is that “American religious neutrality is coherent and attractive.”  One question we might ask is whether the regime he describes is actually “neutral,” or is actually either the American regime or the “American ideal.”  My own impression is that the coherence and attractiveness of the regime Koppelman proposes and defends depends substantially on its not being – at least, not entirely – “neutral.”  This regime is one of neutrality “properly understood” or, it turns out, of non-neutrality.  The government is not required, by Koppelman’s “proper[]” understanding of neutrality to be religion-blind or indifferent to religion, and it is certainly not required to be leery of or hostile to it.  Instead, “American religious neutrality” permits governments and officials to regard religion – at a high level of generality – as a good thing, and to act accordingly.  The state is to be “silent about religious truth” but this silence may be accompanied or complemented by policies – like religion-based accommodations from generally applicable laws – that both reflect and communicate the view that “religion as such . . . [is] valuable”.

Maybe one way to put the matter is to say that the American religious-liberty regime aims to be “neutral” with respect to the truth of (most) religious claims precisely because it is not “neutral” – it does not aim to be neutral, it should not be neutral – regarding the good of religious freedom.  Religious freedom, in the American tradition, is not what results from the operationalization in law of hostility toward religion.  It is not (only) what results from a program of conflict-avoidance or division-dampening.  It is not merely the product of those compromises that were necessary to secure the ratification of the original Constitution.  It is, instead, a valuable and necessary feature of any attractive legal regime, because it reflects, promotes, and helps to constitute human flourishing. 

So, and again, the state should remain “neutral” with respect to most religious questions – primarily because the resolution of such questions is outside the jurisdiction, and not just the competence, of civil authorities – but it may and should affirm enthusiastically that religious freedom is a good thing that should be protected and nurtured in law and policy.

Posted by Rick Garnett on January 9, 2013 at 09:59 AM in Books, Rick Garnett | Permalink | Comments (11) | TrackBack

Friday, December 21, 2012

Introduction to a Discussion: Koppelman on "Defending American Religious Neutrality"

Here's another piece of weekend reading. As Rick noted on this page a while back, our friend and colleague Andrew Koppelman has just published an excellent book on law and religion, Defending American Religious Neutrality. (Note that the Amazon page offers an excellent deal when you buy it with another particular book.) Here's what Steve Smith of San Diego has to say about it: "Neutrality has been the central but embattled ideal in the modern jurisprudence of religious freedom. Andrew Koppelman offers the most serious and sophisticated defense of that ideal now available. For anyone interested in these important debates, this book is not recommended reading: it is required." That seems right to me. It offers a wide-ranging and sophisticated explanation and defense of the role of neutrality in the American law of religious liberty, and even those of us who do not share all his views (and I think Andy has convinced me that he and I actually have a good deal of common ground) will find it a book to be reckoned with.

Andy has kindly offered an introduction to his book below and, God (or not God) willing and the creek don't rise, Rick and I should be posting some responses to the book in the next week or two, hopefully with some replies by Andy. We're grateful to have him. His post begins below and continues after the fold.

* * * 

The American law of freedom of religion is in trouble, because growing numbers of critics, including a near-majority of the Supreme Court, are ready to cast aside the ideal of religious neutrality.  My new book, Defending American Religious Neutrality (Harvard, 2013), defends the claim, which unfortunately has become an audacious one, that American religious neutrality is coherent and attractive.

Two factions dominate contemporary discussion of these issues in American law.  One, whom I’ll call the radical secularists, tend to regard the law of the religion clauses as a flawed attempt to achieve neutrality across all controversial conceptions of the good – flawed because it is satisfied with something less than the complete eradication of religion from public life.  The other, whom I’ll call the religious traditionalists, think that any claim of neutrality is a fraud, and that law necessarily involves some substantive commitments.  They claim that there is thus nothing wrong with frank state endorsement of religious propositions: if the state is inevitably going to take sides, why not this one?  One side regards religion as toxic and valueless; the other is untroubled by the state’s embrace of an official religion.  Neither sees much value in the way American law actually functions.

Yet America has been unusually successful in dealing with religious diversity.  The civil peace that the United States has almost effortlessly achieved has been beyond the capacities of many other generally well-functioning democracies, such as France and Germany.  Even if the American law of religious liberty were entirely incoherent, it might still be an attractive approach to this perennial human problem.  There is, however, a deep logic to the law that its critics have not understood.

Prominent scholars of religion have ridiculed President-elect Dwight Eisenhower’s 1952 declaration:  “Our form of government has no sense unless it is founded in a deeply felt religious faith, and I don’t care what it is.”  Eisenhower nonetheless revealed a deep insight into the character of American neutrality.  This book aims to recover that insight.


Contrary to the radical secularists, First Amendment doctrine treats religion as a good thing.  It insists, however – and here it parts company with the religious traditionalists - that religion’s goodness be understood at a high enough level of abstraction that the state takes no position on any live religious dispute.  It holds that religion’s value is best honored by prohibiting the state from trying to answer religious questions.

American religious neutrality has over time become more vague as America has become more religiously diverse, so that today (with the exception of a few grandfathered practices) the state may not even affirm the existence of God.  This kind of neutrality is not the kind of neutrality toward all conceptions of the good that many liberal political theorists have advocated, but it is the best response to the enormous variety of religious views in modern America.  It is faithful to the belief, held by the leading framers of the First Amendment, that religion can be corrupted by state support.

Defending American Religious Neutrality offers new answers to three questions:  What conception of neutrality is relied on in the interpretation of the Establishment Clause of the First Amendment?  Is it coherent?  Is it defensible?

     The First Amendment of the United States Constitution says “Congress shall make no law respecting an establishment of religion, or abridging the free exercise thereof.”  The interpretation of this provision has been controversial for a long time, and indeed may be ripe for revolution.  A growing number of writers, including several Supreme Court Justices, have argued that religion clause doctrine is both incoherent and substantively unattractive.  They propose to replace it with a new set of rules that are far friendlier to official endorsement of religion.

     If these proposals are adopted, the result would be heightened civil strife, corruption of religion, and oppression of religious minorities.  One proposal, for example, is to permit states to endorse general principles of Abrahamic monotheism.  Official religious pronouncements not only brand as outsiders anyone whose beliefs do not conform to the official line; they tend to produce religion of a peculiarly degraded sort.  If the state gets to discern God’s will, we will be told that God wants the reelection of the incumbent administration.  Another proposal is that religious activities should be eligible for direct funding so long as there is a plausible secular reason for doing so.  Such funding for religious entities, particularly when those entities are relied on to provide public services such as education, aid to the homeless, prison rehabilitation, or drug treatment, can easily lead to a situation where the only option is a religious one, and people are bullied into religious activities.  The most radical proposal would discard the requirement that every law have a secular purpose.  Some religious justification is available for nearly anything that the state wants to do to anyone.  Permitting such justifications would devastate many constitutional protections that have nothing to do with religion.

And this exorbitant price will have been paid for nothing. Present doctrine already allows for what the doctrine’s critics most value: state recognition of the distinctive value of religion. The law treats religion as something special in a broad range of legislative and judicial actions. What the state may not do—what the doctrine properly forbids it to do—is declare any particular religious doctrine to be the true one, or enact laws that clearly imply such a declaration of religious truth.

     There is, indisputably, a deep coherence problem in First Amendment law.  The Court has interpreted the First Amendment to mean that “[n]either a state nor the Federal Government can set up a church. Neither can pass laws which aid one religion, aid all religions, or prefer one religion over another.”  But the Court has also acknowledged that “the Free Exercise Clause, . . . by its terms, gives special protection to the exercise of religion.”

          Accommodation of religion as such is permissible.  Quakers’ and Mennonites’ objections to participation in war have been accommodated since Colonial times.  Other such claims are legion.  Persons whose religions place special value on the ritual consumption of peyote or marijuana (or wine, during Prohibition) seek exemption from drug laws.  Landlords who have religious objections to renting to unmarried or homosexual couples want to be excused from antidiscrimination laws.  Churches seeking to expand sometimes want exemption from zoning or landmark laws.  The Catholic church wants to discriminate against women when ordaining priests.  Jewish and Muslim prisoners ask for Kosher or halal food.  These scruples have often been deferred to, and religious objectors have frequently been exempted from obligations that the law imposes on all others.

          There is considerable dispute about whether the decision when to accommodate ought to be one for legislatures or courts, but that debate rests on the assumption, common to both sides, that someone should make such accommodations.The sentiment in favor of such accommodations is nearly unanimous in the United States.  When Congress enacted the Religious Freedom Restoration Act (RFRA), which attempted to require states to grant such exemptions, the bill passed unanimously in the House and drew only three opposing votes in the Senate.  After the Supreme Court struck down the Act as exceeding Congress’s powers, many states passed their own laws to the same effect.  Many of those opposed to judicially administered accommodations, such as Supreme Court Justice Antonin Scalia, think that it is appropriate for such accommodations to be crafted by legislatures. 

   Each of these measures raises the same dilemma.  If government must be neutral toward religion, then how can this kind of special treatment be permissible? 

It is not logically possible for the government both to be neutral between religion and nonreligion and to give religion special protection. Some justices and many commentators have therefore regarded the First Amendment as in tension with itself.  Call this the free exercise/establishment dilemma.

This apparent tension can be resolved in the following way.  Begin with an axiom: The Establishment Clause forbids the state from declaring religious truth.  A number of considerations support this requirement that the government keep its hands off religious doctrine.  One reason why it is so forbidden is because the state is incompetent to determine the nature of this truth.  Another, a bitter lesson of the history that produced the Establishment Clause, is that the use of state power to resolve religious controversies is terribly divisive and does not really resolve anything.  State involvement in religious matters has tended to oppress religious minorities.  Finally, there is a consideration that is now frequently overlooked, but which powerfully influenced both the framers and the Justices who shaped modern Establishment Clause doctrine:  the idea that establishment tends to corrupt religion.

These considerations mandate a kind of neutrality.  The state may not favor one religion over another.  It also may not take a position on contested theological propositions.

     It is, however, possible, without declaring religious truth, for the state to favor religion at a very abstract level.  The key to understanding the coherence of First Amendment religion doctrine is to grasp the specific, vaguely delimited level of abstraction at which “religion” is understood.

     What in fact unites such disparate worldviews as Christianity, Buddhism, and Hinduism is a well-established and well-understood semantic practice of using the term “religion” to signify them and relevantly analogous beliefs and practices.  Efforts to distill this practice into a definition have been unavailing.  But the common understanding of how to use the word has turned out to be all that is needed.  Courts almost never have any difficulty in determining whether something is a religion or not. 

The list of reported cases that have had to determine a definition of “religion” is a remarkably short one.  The reference I rely on here, Words and Phrases, is one of the standard works of American legal research, a 132 volume set collecting brief annotations of cases from 1658 to the present.  Each case discusses the contested definition of a word whose meaning determines rights, duties, obligations, and liabilities of the parties.  Some words have received an enormous amount of attention from the courts.  Two examples, Abandonment and Abuse of Discretion, drawn at random from the first volume of this immense compilation, each exceed 100 pages.  Religion, on the other hand, takes up less than five pages.  The question of what “religion” means is theoretically intractable but, as a practical matter, barely relevant.  We know it when we see it.  And when we see it, we treat it as something good.

     American religious neutrality is studiedly vague about the good that it is promoting, and this may be a source of frustration to its admirers.  But there is wisdom in this vagueness.  Citizens do need to share an understanding of what is valuable. But when the details of this particular Valuable Something are so hotly disputed, the most effective way for the government to pay it reverence is just to shut up about it.


Posted by Paul Horwitz on December 21, 2012 at 09:14 AM in Books, Paul Horwitz | Permalink | Comments (4) | TrackBack

Saturday, November 10, 2012

That's it, I'm done!?

Sad news: Philip Roth has announced his abandonment of writing and reading. I feel like this is like giving up breathing. I often think I'll have to be pulled out of the prawf job feet first, but I wonder if there's a point at which, like Roth, you just announce: Basta! 

Maybe Bill Miller's book, Losing It, will provide some solace.

Posted by Administrators on November 10, 2012 at 02:27 PM in Books | Permalink | Comments (0) | TrackBack

Tuesday, October 23, 2012

The Lost Posner Book Reviews...

I'm a big fan, in the main, of both Richard and Eric Posner's book reviews in the New Republic, among other places.  Thanks to a pointer from Dave Lat on FB, I stumbled upon this selection of excerpts from the Elder's book reviews over at Kyle Graham's blog. Check it out :-)  Here's a funny send-up of what RAP would say about Moby Dick:

Fairly early in the text, it becomes clear that Ahab could maximize his returns by pursuing other whales, instead of Moby-Dick.  True, Ahab lost his leg to the creature, but that is a classic sunk cost. (Can you see why?) That Ahab foregoes other, better opportunities for oil and ambergris in his hunt for the white whale represents a mystery that the author never satisfactorily explains...

Posted by Administrators on October 23, 2012 at 02:28 PM in Blogging, Books | Permalink | Comments (1) | TrackBack

Thursday, October 18, 2012

F-Words: Fairness and Freedom in Contract Law

I am participating in a online symposium on Concurring Opinions, where we are discussing Larry Cunningham's fantastic new book, Contracts in the Real World, and where you should check out the rest of the commentary.

As I read "Facing Limits," Larry's chapter on unenforceable bargains, I had to pause and smile at the following line:

People often think that fairness is a court's chief concern, but that is not always true in contract cases (p. 57).

I still remember the first time someone used the word "fair" in Douglas Baird's Contracts class. "Wait, wait," he cried, with an impish grin. "This is Contracts! We can't use 'the f-word' in here!"Of course, Larry also correctly recognizes the flip side of the coin. If courts are not adjudicating contracts disputes based on what is "fair," we might think that "all contracts are enforced as made," but as Larry points out, "that is not quite right, either" (p. 57).

Pedagogically, Contracts in the Real World is effective due to its pairings of contrasting casebook classics, juxtaposed against relevant modern disputes. In nearly every instance, Larry does an excellent job of matching pairs of cases that present both sides of the argument. I don't mean to damn with faint praise, because I love the project overall, but I feel like Larry may have missed the boat with one pairing of cases.

As I mentioned, the chapter on Facing Limits is in part about the difficulty of balancing fairness, or equitable intuitions, against freedom of parties to be bound by their agreements. Larry pairs In re Baby M, a case where the New Jersey's highest court invalidated a surrogacy agreement with Johnson v. Calvert, a case where the California Supreme Court upholds such an agreement. As I discuss after the break, I'm troubled that the Court in Baby M could be on the wrong side of both fairness and freedom. 

Facing Limits on Surrogacy Agreements

In re Baby M was arguably the first case on surrogacy agreements to reach national prominence. The court found unenforceable a surrogacy agreement between William and Elizabeth Stern, who hoped to raise a child that Elizabeth could not bear, and Mary Beth Whitehead, who wanted to give another couple "the gift of life" and agreed to bring William's child, Baby M, to term. Mrs. Whitehead and her then-husband Richard were in tight financial straits, and the surrogacy deal promised $10,000, "on surrender of custody of the child" to the Sterns.

Once she gave birth, Mrs. Whitehead found it difficult to part with the baby girl she called Sara Elizabeth, but the Sterns planned to name Melissa. To avoid relinquishing the child, the Whiteheads fled to Florida with the baby. When Baby M was returned to the Sterns and everyone made it to court, the trial judge determined that the interests of the baby were best served by granting custody to the Sterns. The Supreme Court of New Jersey agreed with that assessment, but on its way to that conclusion, rejected the validity of the surrogacy contract itself, in which all parties stipulated, prior to the birth of Baby M, that it was in the child's best interest to live with the Sterns.


The Supreme Court's decision ostensibly turned on the unenforceability of the contract because, even in America, "there are, in a civilized society, some things that money cannot buy" (p. 55). But the decision is full of language suggesting that, in the Court's opinion, Mrs. Whitehead didn't know what she was doing. In the very paragraph that the Court assumed that she could consent to the contract, the Court marginalized her capacity to consent. 

The Court bought into two tropes often trotted out by those who aspire to protect the poor from themselves: the coercive effects of money, and the inability of the poor to fully understand the consequences of their decisions. The Court was troubled that Mrs. Whitehead, "[t]he natural mother," did not "receive the benefit of counseling and guidance to assist her in making a decision that may affect her for a lifetime." The Court was perhaps suspicious she could not. After noting the distressing state of her financial circumstances, the Court posited that "the monetary incentive to sell her child may, depending on her financial circumstances, make her decision less voluntary."

Fairness and Freedom

It strikes me as unfair to conclude that a mother of two is incapable of considering what it might mean to give birth to a third. Holding the surrogate to the bargain can seem unfair at the difficult moment where she hands over the baby, but I struggle to see how it is any less unfair to allow the parents to invest their hearts and energy into planning for a baby that will come, but will not become theirs. 

Turning to the question of the coercive effect of money, the problem with paternalistic protections is they often protect the neediest from the thing they ostensibly need the most. Many interested parties find ways to make money on adoption and surrogacy. It's puzzling, if we are truly serious about protecting the needy, that we would protect them from also acquiring some of the money that we seem to assume they so desparately need.

Here's another way to make the same point: in the wake of Baby M, some states allow surrogacy contracts, and some don't. Hopeful parents who can afford to enter into surrogacy contracts will go to states, like California, where those contracts are enforced. Surrogacy providers who hope to make their money as an intermediary will focus on markets where their contracts will survive judicial scrutiny. Our potential surrogates, however, are more likely to be tied to the jurisdictions in which they reside, at least if the assumptions about poverty in the Baby M opinion are generalizable. So altruistic surrogates will be able to carry a child to term in every state, but those who desire to make a bargain can do so only in those states willing to recognize them. To me, that sounds neither free nor fair. 

Larry takes some comfort in the common law inquiry into the best interests of the child, and with that I take no issue. In a case where the contract and the child's interests are at loggerheads, it seems appropriate in the abstract for the best interests to be a heavy thumb on the scale, or even to trump the prior agreement. I'm just not sure that In re Baby M -- a case where the Court knocked out the contract even though the contract terms and best interests were essentially in line -- is a case where the value of the best interest test are best brought to light.

Cross-posted at Concurring Opinions and ContractsProf Blog.

1 I may have slightly dramatized this exchange, although my classmates assure me I did not invent it from whole cloth.


Posted by Jake Linford on October 18, 2012 at 12:50 PM in Books, Current Affairs, Science, Things You Oughta Know if You Teach X | Permalink | Comments (8) | TrackBack

Thursday, October 11, 2012

10 Works that Mattered Most (to you!)

Via SSRN, I just stumbled across Rick Pildes' little essay for the Int'l Journal of Constitutional Law, which is celebrating its 10th Anniversary by asking a gaggle of distinguished prawfs what 10 works have most influenced them and their academic work. Check it out and keep a watch for the contributions from the others: Justice Stephen Breyer, Catherine MacKinnon, Philip Bobbitt, Jeremy Waldron, Seyla Benhabib, Sam Issacharoff, Martin Shapiro, and Michel Rosenfeld.

Feel free to add your own voices in the comments.

Posted by Administrators on October 11, 2012 at 07:36 PM in Article Spotlight, Books | Permalink | Comments (0) | TrackBack