Black Metropolis Research Consortium
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Taming Wildcat Stablecoins
Get PDFCryptocurrencies, including stablecoins, are all the rage. Investors are exploring ways to profit off of them. Governments are considering ways to regulate them. While the technology underlying cryptocurrencies is new, the economics is centuries old. Oftentimes, lawmakers are so focused on understanding a new technological innovation that they fail to ask what exactly is being created.
In this case, the new technology has recreated circulating private money in the form of stablecoins, which are similar to the banknotes that circulated in many countries during the nineteenth century. The implication is that stablecoin issuers are unregulated banks. Based on lessons learned from economic theory and financial history, we argue that circulating private money is not an effective medium of exchange because it is not always accepted at par and its issuers are vulnerable to destabilizing bank runs.
We also explore the treatment of stablecoins under the existing legal framework and examine the upsides and downsides of interpretive, regulatory, and legislative options that attempt to mitigate the financial-stability risks associated with stablecoins. These options include requiring the issuance of stablecoins through banks, backing stablecoins one-for-one with safe assets, and establishing sovereign digital money to compete against private digital mone
Toward Principled Background Principles in Takings Law
Get PDFBlunders made by lawyers, judges, and scholars have caused the Supreme Court’s recent opinion in Cedar Point Nursery v. Hassid to be deeply misunderstood. In Cedar Point, the Court re-wrote takings law by treating temporary and part-time entries onto private property as per se takings. Prior to Cedar Point these sorts of government-authorized physical entries would have been evaluated under a balancing framework that almost invariably enabled the government to prevail. As it happens, there were two well-established rules of black letter law that California’s lawyers and amici mistakenly failed to invoke in defending the Cedar Point union organizer access regulation. First, a physical takings claim accrues when a regulation authorizing third parties to enter private property is promulgated, not when the third party actually enters the land. Second, only the party that owned the land at the time the physical taking cause of action accrued can prevail. Under these doctrines, Cedar Point Nursery’s lawsuit was filed decades too late. By the wrong plaintiff. California’s oversights were probably outcome determinative.
Moving beyond Monday-morning quarterbacking, we argue that the statute of limitations arguments available to governments in future cases help provide the essential limiting principles that went unmentioned in Cedar Point. In the aftermath of Cedar Point prominent scholars denounced the opinion as a vehicle for gutting antidiscrimination law, labor law, environmental law, rent control, and other parts of the regulatory state. Our analysis reveals that these concerns are likely exaggerated because defenders of those long-standing limits on the right to exclude can invoke the statute of limitations arguments that California’s lawyers failed to raise. On the other hand, new restrictions on owners’ rights to exclude are vulnerable to legal challenge. Properly understood, contemporary takings law grandfathers in many longstanding limits on the right to exclude while constraining governments that wish to tackle collective action problems by restricting property rights in new ways. Moreover, statutes of limitations and related doctrines can provide courts with something that has been elusive since the Supreme Court’s 1992 takings decision in Lucas v. South Carolina Coastal Council: a principled and coherent account of what restrictions on owners’ rights are impervious to takings claims because they qualify as background principles of state property law
The Rise of Nonbinding International Agreements: An Empirical, Comparative, and Normative Analysis
Get PDFThe treaty process specified in Article II of the Constitution has been dying a slow death for decades, replaced by various forms of “executive agreements.” What is only beginning to be appreciated is the extent to which both treaties and executive agreements are increasingly being overshadowed by another form of international cooperation: nonbinding international agreements. Not only have nonbinding agreements become more prevalent, but many of the most consequential (and often controversial) U.S. international agreements in recent years have been concluded in whole or in significant part as nonbinding agreements. Despite their prevalence and importance, nonbinding agreements have not traditionally been subject to any of the domestic statutory or regulatory requirements that apply to binding agreements. As a result, they have not been centrally monitored or collected within the executive branch, and they have not been systematically reported to Congress or disclosed to the public. Recent legislation addresses this transparency gap to a degree, but substantial gaps remain
A Critique of The American Law Institute’s Draft Restatement of the Corporate Objectiv
Get PDFThe American Law Institute (ALI) is currently working on a Restatement of the Law of Corporate Governance (Restatement). At the ALI’s May 2022 annual meeting, the membership approved, inter alia, § 2.01, which purports to restate the objective of the corporation. Section 2.01 differentiates between what the drafters refer to as common law jurisdictions and stakeholder jurisdictions. The latter are those states that have adopted a constituency statute (a.k.a. a non-shareholder constituency statute).
The drafters assert that, in common law jurisdictions, the corporate objective is to “enhance the economic value of the corporation, within the boundaries of the law . . . for the benefit of the corporation’s shareholders . . . .” In doing so, the corporation is allowed to consider the impact of its actions on various stakeholders, provided doing so redounds to the benefit of shareholders. In stakeholder jurisdictions, the corporation’s objective is to “enhance the economic value of the corporation, within the boundaries of the law . . . for the benefit of the corporation’s shareholders and/or, to the extent permitted by state law, for the benefit of employees, suppliers, customers, communities, or any other constituencies.”
In both sets of jurisdictions, the drafters assert that the corporation “may devote a reasonable amount of resources to public-welfare, humanitarian, educational, and philanthropic purposes, whether or not doing so enhances the economic value of the corporation.”
This article is intentionally agnostic on the underlying normative issue of whether corporations should focus exclusively on shareholder interests or should also consider stakeholder interests. Instead, it offers a critique of § 2.01 and offers suggestions so as to clarify important open questions and better align § 2.01 with current law.
Aspects of § 2.01 addressed herein include: Do corporations have objectives? What is the corporate objective? Are tradeoffs allowed? Is opting out allowed? Should § 2.01 mandate obedience to the law? Does § 2.01 embrace Caremark? How does § 2.01 apply in takeovers? What rules govern corporate charitable activities? Why did the drafters ignore the special problems of multinationals
Does the Severity of Sanctions Influence Learning about Enforcement Policy? Experimental Evidence
No full textThe literature on law enforcement often assumes that the updating of beliefs regarding the probability of detection is a process that is independent from the severity of the sanction. We test this presumption experimentally, using a taking game in which the probability of detection may be either high or low with commonly known probabilities. Individuals gain information about their probability of detection from their experience in the taking game. Some offenders are punished by a severe sanction, while others are sanctioned only mildly, which causes the experience to differ across subjects. Our analysis reveals that the severity of the sanction influences how individuals update their beliefs about the probability of detection, casting doubt on the widely held presumption that the perceived probability of detection and the magnitude of the sanction are separable
The Future of International Law Freedom of Journalism: A Transitional Justice Framework
Get PDFThe overwhelming majority of digital and physical attacks on journalists are done with impunity. This results in lower-quality journalism, less scrutiny of government, and less healthy societies and democracies. The international human rights law concept of transitional justice could bolster collective will and inform legal mechanisms to combat such impunity. Judges and investigators in several recent cases of attacks on journalists have invoked transitional justice concepts, including truth-telling, criminal investigations and prosecutions, reparations, and institutional reforms to guarantee non-recurrence. These mechanisms should be fully implemented to protect journalism at local, national, and international levels
Deterrence and Compellence in Parliament
Get PDFIn most countries, parliamentary immunity protects lawmakers from civil or criminal charges while in office, and it shields them from prosecution for their political speech and actions. We present the first empirical analysis of the impact of parliamentary immunity on the behavior and performance of politicians. Leveraging a constitutional amendment that lifted the immunity of 24 percent of the members of the Turkish Parliament (MPs), we find that losing immunity from prosecution pacifies opposition MPs, who become less diligent (drafting and initiating fewer pieces of legislation or inquiries, delivering fewer and shorter speeches) and less aggressive (interrupting other MPs less frequently). Their tendency to cast dissenting votes against the government is also reduced. These MPs are less likely to be renominated by their parties for the next election, and they are less likely to be reelected. The loss of immunity has no impact on government-aligned MPs
How Progressive is the U.S. Tax System?
Get PDFWe examine changes in tax progressivity over time. Because there are many possible definitions of progressivity and because methods of defining and allocating income vary, we look for results that are robust across studies and definitions of progressivity. To do this, we compare the results from three different publicly available datasets, those from Piketty, Saez, and Zucman (2018), Auten and Splinter (2023) and Congressional Budget Office (2023). Notwithstanding some headline results to the contrary, all three datasets show that the tax system has become more progressive and more redistributive over the last several decades, with much of that change occurring in recent years. This increase in redistribution is driven primarily by an increase in transfers to households in the bottom half of the income distribution which is missed by a focus on the top 1%. A literature search for other studies confirms this result
Cross-Border Influencers: Democracy and Externalities
Get PDFThe United States does not allow foreigners to influence U.S. elections by giving money to political parties or candidates, but many other countries do allow cross-border influencing. Indeed, the variety of policies among countries is remarkable. Some countries, like the United States, that forbid financial contributions from outside the country, do permit cross-border contributions across domestic borders, such as those of states and cities. Meanwhile, Canadians cannot contribute to the campaigns of U.S. political candidates, and cannot even (lawfully) influence the American political process by purchasing campaign t-shirts or bumper stickers. This prohibition is in place even though, like constituents of neighboring jurisdictions within the U.S., Canadians are greatly affected by U.S. policies
Labor Market Concentration and Competition Policy Across the Atlantic
Get PDFDrawing upon data from the largest cross-country study of labor market concentration to date, this Essay analyzes the level of concentration of labor-input markets in Europe and North America and provides a comparative perspective on employers’ monopsony power. It explores the characteristics of monopsony in labor markets and documents its impact by looking at the magnitude of employer concentration in selected jurisdictions. Using a harmonized dataset of online vacancies, this Essay shows that European labor markets are no more competitive than North American ones. It also supports the view that the effects of concentration on labor markets are broadly similar in both Europe and North America, despite the much stronger labor market institutions in Europe. The Essay shows that there is no apparent economic or legal justification for a lack of enforcement activity by European competition authorities in labor markets relative to the United States. While enforcement action has picked up in the last two years in Europe, there is likely still scope for a significant increase in the role of competition enforcement in labor markets. The Essay identifies sectors and practices that may be scrutinized with priority by European competition authorities and proposes a mix of enforcement, merger control, and well-targeted policy and regulatory solutions to address employers’ monopsony power