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Not-for-Profits, ESGs, and The Economic Structure of Corporate Law
Get PDFA compelling point in The Economic Structure of Corporate Law is that the single goal of maximizing shareholder value is efficient and generally desirable because it gives the managers one aim—while leaving room for law and private contracts to impose constraints on the firm in order to control negative externalities and other social concerns. Easterbrook and Fischel say that: “A manager told to serve two masters (a little for the equity holder, a little for the community) has been freed of both and is answerable to neither.” The point is an especially good one when the manager has more of an interest in one master’s success than another’s, and this is the point that Easterbrook-Fischel emphasize. But it is also the case that the single goal of value maximization, encapsulated in share price in an efficient market, allows investors to monitor managers, not so much to look for misbehavior and the prospect of a lawsuit, but to decide whether to invest in one enterprise or another. In this Article, I ask what this brilliant insight tells us about not-for-profit (NFP) entities which do not offer “investors” (donors) or the law a single metric in order to evaluate their performance. Should investors, and the “market,” prefer an NFP with a single goal or cause, like the environment, however hard it is to measure progress towards this goal, or should we expect the market—as we might think of the competition for donor dollars—to evaluate performance through some alternative mechanism, spread perhaps across a diversified portfolio inside the “firm,” including a university or foundation? Falling in between these two types of opportunities for investment are self-proclaimed ESG (Environment, Social, and Governance) sensitive corporations. These firms attract investors not only by earning profits and increasing shareholder wealth but also by adding to shareholder welfare with a promise to undertake causes, like environmental sensitivity, that appeal to shareholders who invest in these ESG-sensitive enterprises. Easterbrook-Fischel might be expected to disparage the development of ESGs, because they intentionally depart from the single-goal advantage of conventional corporations. On the other hand, if some shareholders want not only to profit but also to pursue various social goals, a corporation can appeal to these shareholders, even if their actual behavior is difficult to assess. Not-for-profits are at the other end of the spectrum. They suffer from many of the same problems. Investors have difficulty knowing whether an NFP is doing a good job. One strategy, developed in this Article, is to follow the advice of donors who have some incentive to evaluate the NFP and compare it with other organizations that would be happy to take their gifts. This explains the ability of an NFP like Harvard (the best endowed university) to receive support from private donors, foundations, and the government. It might seem like a successful NFP does not “need” the money as much as other, less well-endowed NFPs but, on the other hand, its ability to attract large gifts might inform new donors that it is a good investment, just as the share price of a conventional corporate firm, or a takeover offer from a sophisticated company, offers useful information. It also explains the tendency of NFPs to attract large gifts directed at specific goals. If donor Y sees that donor X gave $100 million to an NFP to investigate a particular disease, donor Y might give that NFP a gift because Y shares an interest in that cause, and now wants the recipient to do yet more. Another potential donor, with a different goal in mind, might also learn from X’s gift, and reason that the favored NFP is well-managed and reliable. Just as Easterbrook-Fischel explained the advantage of a corporation’s obligation to follow a single goal, an NFP can be understood as aiming to show that it follows the single goal of reliability, and especially its ability to keep a promise about a single goal as expressed by the investor, or donor. ESGs are unlikely to offer a comparable message because it will not be clear to Y, or another investor, what to learn from a large investment in an ESG corporation
Kids Are Not So Different: The Path from Juvenile Exceptionalism to Prison Abolition
Get PDFInspired by the Supreme Court’s embrace of developmental science in a series of Eighth Amendment cases, “kids are different” has become the rallying cry, leading to dramatic reforms in our response to juvenile crime designed to eliminate the incarceration of children and support their successful transition to adulthood. The success of these reforms represents a promising start, but the “kids are different” approach is built upon two flaws in the Court’s developmental analysis that constrain the reach of its decisions and hide the true implications of a developmental approach. Both the text of the Court’s opinions and the developmental and neuroscientific research on which the opinions rely reveal that the developmental approach is not coherently defined by the legal line between childhood and adulthood. This lack of alignment has led to calls to extend the age of juvenile exceptionalism to young adulthood. But extending the exceptionalist frame obscures the central role that immaturity plays in most offenders’ full criminal careers and preserves a destructive fiction that youthful offenders are a distinctive, more sympathetic, and less corrupt subset of the millions of people charged with committing crimes. This Article argues that the developmental approach, followed to its logical conclusion, calls not for an age extension for juvenile exceptionalism but rather for a wholesale remaking of the entire criminal justice system in line with an abolitionist vision
Symposium Introduction: This Violent City? Urban Violence in Chicago and Beyond
Get PDFTo many, the city of Chicago conjures up a specter of unremitting urban violence. In 2014, the city was labeled the “murder capital” of the United States.1 The following year, a video of the police shooting Laquan McDonald became a cynosure of public concern.2 Commentators as disparate as Spike Lee and President Donald Trump agree: Chicago is uniquely bloody.3 Predictably, the empirical data about Chicago’s crime and policing trends belie the most dramatic of these claims.4 Yet if Chicago is not as violent as either Lee or Trump makes it out to be, the city’s experience nonetheless provides a fruitful lens through which to consider the causes, dynamics, and optics of urban violence and the array of potential legal and policy responses. Our home city’s centrality to traditions of urban sociology, its rich tapestries of racial and ethnic diversity, the durability of its residential segregation and economic stratification, and its role in both police reform and retrenchment—all these provide fertile ground for seeding discussion about the legal and policy problematics of urban violence.
This Symposium gathers a diverse range of empirical, theoretical, and legal perspectives on these problematics as illuminated by the case of Chicago. Scholars from the legal academy and the social sciences take up divergent questions through this lens in the pages that follow. Their contributions touch on both the causes of violence and potential responses. The Symposium thus confronts the following sorts of questions: Why does urban violence, of various forms, arise and persist? How does the frequency and distribution of such violence relate to larger socioeconomic dynamics of urban violence in contexts of concentrated and intractable poverty? What have we learned from decades of massive investments in policing and incarceration, as opposed to noncarceral policy instruments? What are the costs, particularly to historically marginalized groups, of the decision to use coercive rather than supportive interventions? How do various forms of violence— informal and state—interact with each other? And how have initiatives from within communities changed the patterns or stakes of violence?
In two respects, we (as conveners of the Symposium) aim to initiate a debate that is broader than the discussions of urban violence commonly found in the popular press and the academy. To begin with, we frame the problem of urban violence to include both (typically criminal) private violence and (typically lawful) state coercion used by the police and others—phenomena that may be linked.5 As a historical matter, deaths from police violence once comprised nearly 6% of homicides in Chicago.6 Police violence obviously remains a flash point for public controversy today.7 It is hard to see how an analysis of urban violence can account for both the costs and benefits of policy choices—and, in particular, the election between carceral and noncarceral tools—while losing sight of police violence. Second, as just suggested, we resist the assumption that coercive interventions exhaust the plausible domain of responses to urban violence. There is ample evidence, including important work by some of the participants in this Symposium, that violence rates respond to noncoercive policy levers.8 An examination of urban violence that assumes away the relevance of noncoercive interventions is necessarily incomplete.
Our modest goal in this Introduction is to assemble some baseline empirics concerning both private violence and state coercion to provide a context for the pieces that follow. In so doing, we aim to mitigate the need for “scene setting” by each paper in the Symposium.
Readers of the Symposium will find here a synoptic guide to some basic facts about the distribution and extent of criminal violence, as well as socioeconomic conditions and police activity, in Chicago. We include, too, several intercity comparisons to facilitate exploration of whether Chicago presents uniquely dystopic dynamics. To the extent feasible, we rely on graphical representations of the data that are easily and quickly grasped. Our aim here is not to tender any single substantive claim but rather to provide some common ground for the analytic pieces that follow. We conclude by canvassing briefly the contributions made by specific pieces in the Symposium
Manufacturing Outliers
No full textLast term, the Supreme Court issued its first major Second Amendment decision in more than a decade,New York State Rifle and Pistol Association, Inc. v. Bruen.1 The case concerned a challenge to New York’s century-old “may-issue” regulation, which required applicants to show“proper cause” to receive a license to carry a concealed hand-gun in public. Petitioners described New York’s may-issue law as an outlier compared to forty-three other states with more relaxed“shall-issue”or permitless carry laws. At oral argument, Paul Clement, representing the petitioners, framed the case as a simple request:“[W]e’d like what they’re having.2”
In a 6-3 majority opinion striking down New York’s law, Justice Clarence Thomas embraced petitioners’ characterization of the regulation as a contemporary outlier—and went further, casting it as a historical outlier as well. New York and supporting amici had amassed a substantial record of Anglo-American regulations from the medieval period to the early twentieth century to show New York’s law was part of a deep and long tradition of public carry regulation. One by one, the majority characterized each of these historical regulations as outliers. Some were too new; some were too old. Some were outliers because they were passed by territorial governments; some were outliers because they were passed by Reconstruction governments.Some were outliers because they weren’t adequately enforced; some because they weren’t enforced criminally; some were outliers because they governed a population too small, or too regional. None of these regulations, according to the majority, were probative of a long-standing historical tradition of regulating public carry into which the New York law fit.
Bruen’s description of New York’s law as a contemporary and historical outlier raises fundamental questions about how the Justices define that term and the jurisprudential significance of that characterization. After all, there was nothing atypical about New York’s licensing law even thirty years ago, when most states had may-issue permitting, or prohibited concealed carry altogether. Instead, the law became a minority position because of an aggressive and successful campaign to change state law and public norms regarding public carry,and to change the perception of American history pertaining to that practice.3 Further, to suggest that New York’s permitting law is an outlier compared to a longstanding tradition of public carry regulation depends entirely on what counts as constitutive of that tradition.
Of course, enforcing constitutional rights against outlier jurisdictions is not unusual. In contexts as varied as school segregation, contraception, the death penalty, and LGBTQ+ equality, the Justices have effectively nationalized a single standard as constitutional law when state laws and norms come to reflect a putative consensus, curbing jurisdictions that appear to break out in an atypical or retrogressive fashion.4 Scholars across the ideological spectrum, including Justin Driver,5 Keith Whittington,6 Michael Klarman,7 Cass Sunstein,8 Brannon Denning, and Glenn Reynolds,9 have all written on the tendency of the Court to use constitutional rights to prune outlier regulations.
The Court’s invocation of outliers in Bruen warrants renewed attention to the topic for several reasons. First, Bruen highlights the current Court’s inclination to cast its work in exclusively investigative, empirical terms—as a matter of finding something, rather than fashioning it. This maneuver masks assumptions that are essential to the decision and allows the Court to characterize its holding as the dispassionate evaluation of objective facts, uncontaminated by normative choice. Second, given the present majority’s methodological tendencies, overt or covert conceptions of“outliers”are likely to appear in other constitutional domains. Many forms of originalism treat history as a matter of fact which judges can discover.10 This historical-empiricism is frequently touted to distinguish originalist jurisprudence from other approaches that are purportedly more judge-empowering. As Justice Antonin Scalia put it,“[t]exts and traditions are facts to study, not convictions to demonstrate about.”11 “Outlier”arguments are exemplary of this framing, and of its weaknesses.Bruen reveals that such arguments are replete with discretion, whether in selecting the relevant jurisdictions, grouping social phenomena (including law), setting a temporal duration, or elevating or minimizing a set of historical data points.Bruen demonstrates the Court’s tendency to curate a historical record and then to treat it as an objective basis for decision.
Part I of this Article analyzes Bruen with particular focus on how the majority describes contemporary or historical regulations as“outliers.”The majority asserts that its test, which supposedly considers only text, history and tradition, is more “administrable” than the tiers-of-scrutiny test it replaced.12 But Bruen both engages in and encourages forms of judicial intuitionism and discretion that, if left unguided, are likely to disrupt Second Amendment law significantly.
Sections II.A and B then identify and elaborate two principles—neither of them evident in Bruen—that might help bring more discipline to outlier arguments. Thefirst is transparency: Unlike the Bruen majority, courts should be clear about their assumptions andhow they shape the baselines against which purported outliers willbe measured. The second is rigor: Although law is not statistics andmay not lend itself to the same kinds of coding and robustness checksone sees in other disciplines,13 characterizing something as an out-lier, as Bruen does, makes an empirical claim that must be subject tosome kind of verification.14 We do not advance a trans-substantivelegal rule by which one can identify outliers, but we are confident that Bruen’s approach is plainly inadequate, and that, at the very least, some general guiding principles are warranted if outlier anal-ysis is to be anything beyond a rhetorical device. Section II.C briefly explains why an outlier analysis modeled on Bruen poses a threat tohistory and tradition as a modality of constitutional argument. In Part III we conclude by recognizing that our critique of Bruen’s outlier argument is not confined to Second Amendment adjudication but is applicable to other areas of constitutional doctrin
Optional Price Discrimination
Get PDFPrice discrimination gets a bad rap. It is associated with the exploitation of monopoly power and with opportunistically extracting surplus from consumers. As merchants develop ever-more-powerful mechanisms for gathering and compiling information about consumers, the specter of fully personalized pricing seems to loom as an ominous threat. Despite past economic defenses of price discrimination as an efficient and even consumer friendly move in some contexts, 1 recent writing highlights the perceived unfairness of tailoring prices to willingness to pay, especially when this is accomplished through “big data.”2
Yet a parallel phenomenon quietly coexists with all this distress over personalized prices: models that encourage people to voluntarily contribute, typically in varying amounts, the sums necessary to cover the fixed costs of producing new goods or services. That nonprofits rely on forms of “voluntary price discrimination” to cover their costs has been understood for decades. 3 “Provision point mechanisms” that make production of a good or service contingent on reaching a threshold of voluntary contributions have a long history, as well as a modern presence in models like Kickstarter’s.4 Firms, artists, and organizations have also experimented with “pay what you want” models in a variety of contexts.5
This paper explores the possibility of enabling customers to opt into price discrimination6 in settings where it might serve socially valuable purposes— from extending access to lower-income consumers, to facilitating the provision of products that serve small or niche markets, to accomplishing social goals in tandem with consumption. It builds on the rationale for Ramsey pricing, a form of surplus-maximizing price discrimination that covers fixed costs through prices that inversely correlate with buyers’ elasticity, subject to a profit constraint.7 An opt-in model, similarly constrained, could add structure to existing voluntary provision models and enable them to be expanded into new domains.
Such an approach might be accepted by many consumers. Despite the overheated rhetoric around price tailoring, consumers do not always object to the personalization of price. Haggling is an age-old8 form of price discrimination that many customers willingly tolerate or even enjoy. The difference is that consumers perceive themselves to be voluntary participants in the negotiation process, not unwitting marks being fleeced by a corporate algorithm.9 Presumably, they also overwhelmingly believe (even though, statistically, they must often be wrong) that they are getting a better-than average price. Optional price discrimination similarly extends control to consumers, but, unlike haggling, can be structured in ways that ensure those consumers are made better off as a result.
The analysis here proceeds in three parts. Part I explains how price discrimination works, surveys the reasons for hostility to it, and outlines its potential advantages for consumers as well as sellers. 10 By offering alternative ways to cover fixed costs, price discrimination can generate benefits like broader access to products and a wider variety of products. Part II reviews some existing forms of voluntary price discrimination that pursue these goals. Part III examines how an optional approach to price discrimination might be extended into additional contexts. It considers how such an approach could be structured to mutually benefit consumers and firms, and considers the role of government in facilitating it.
Although there are a variety of different forms that optional price discrimination might take, the approaches I have in mind here would give the consumer a genuine choice whether or not to participate in personalized pricing, and would involve specific, clear representations about the terms on which that pricing will be applied. Such clarity serves two purposes, beyond the obvious one of letting consumers know what is on offer. First, it facilitates actions based on fraudulent misrepresentations if merchants provide misleading or false information about their pricing practices. Second, the existence of transparently presented and fully voluntary forms of personalized pricing may help to crowd out forms of price discrimination that do not share these attributes.
The approach to price discrimination developed here is optional in the sense of being voluntary on the part of consumer-participants. It is also optional in a second sense: it contemplates enabling consumers to effectively write or exercise options to buy goods and services based on their valuations.11 Such options could leave consumers—both collectively and individually—better off than under uniform pricing. 1
Review of Daniel Farber, Inequality and Regulation: Designing Rules to Address Race, Poverty, and Environmental Law
Get PDFDan Farber’s wide-ranging article, Inequality and Regulation, makes two core arguments. First, Farber argues that using a uniform value of statistical life (VSL) in cost-benefit analysis is justified not only as a pragmatic compromise but also as a matter of first principles. In particular, he argues that a uniform VSL can be based on a theory of equality that he calls harm egalitarianism, which holds that individuals have equal entitlements to protection against harm. Second, Farber, looking for ways to address environmental justice concerns through regulations, argues that “a heightened focus on differences in exposure and vulnerability [in the cost-benefit analysis of regulations] offers the most promising path forward for environmental justice to expand protection for the goals of environmental justice.” I will address these claims in reverse order.
The Development of the Takeover Auction Process: The Evolution of Property Rights in the Modern Wild West
Get PDFUsing a unique, hand-collected sample of US acquisitions, we study the interaction between the legal system and the takeover auction process from 1981 to 2020. We associate the strengthening of the property rights of targets’ boards after the 1989 Time Inc. decision with fundamental changes in the takeover auction process. This strengthening of the boards’ property rights has moved the auction process from a public one to a behind-the-scenes one in which targets’ boards control both the number of bidders and the flow of information. Targets’ boards are more likely to initiate the auction themselves, and the length of the private negotiation process has significantly lengthened. This fundamental change has benefited target shareholders
In the Beginning: The Creation of the Economic Expert in Antitrust
Get PDFToday one cannot imagine antitrust litigation without the use of economic experts. Defendants and plaintiffs alike pay handsomely for their reports and testimony. However, the use of economists as expert witnesses did not begin until the iconic case of United States v. United States Steel, when two prominent economists, Francis Walker and Jeremiah Jenks, testified on behalf of the Department of Justice and United States Steel. Drawing on the original trial transcript, this paper assesses their role in the litigation. While their level of theoretical sophistication and empirical analysis falls short of today’s standards, the testimony of Walker and Jenks featured some of the same elements of expert testimony that continue today and analysis that was a precursor to the Chicago School’s perspective on competition
A Study of Umbrella Damages from Bid Rigging
No full textIf noncartel firms adjust their pricing to the supracompetitive level sustained by a cartel, purchasers from noncartel firms may suffer umbrella damages. This paper examines the bidding behavior of noncartel firms against the Texas school milk cartel between 1980 and 1992. The largest noncartel firm bid less aggressively when facing the cartel. Structural estimation reveals that, per contract, damages due to noncartel firms bidding higher are at least 35 percent of damages caused by the cartel. Inefficiencies raise the winner’s cost by 5.9 percent. These results shed light on the importance of umbrella damages from a civil liability perspective
Post–September 11 War Deployments and Crime among Veterans
No full textThis study examines the impact of post–September 11 (post-9/11) combat deployments on crime among veterans. We exploit the administrative procedures by which US armed forces senior commanders conditionally randomly assign active-duty servicemen to overseas deployments to estimate the causal impact of modern warfare on crime. Using data from two national surveys and a unified framework, we find that post-9/11 combat deployments substantially increase the probability of crime commission among veterans. Combat exposure increases the likelihood of gang membership, trouble with the police, punishment under the Uniform Code of Military Justice, property crime, and violent crime.
[P]eople in war had so inured themselves to corrupt and wicked manners, that they had taken a delight and pleasure in robbing and stealing; that through manslaughter they had gathered boldness to mischief; that their laws were had in contempt, and nothing set by or regarded. (More [1516] , p. 45)The [unit’s] soldiers who survived all exhibited signs of posttraumatic stress disorder and other psychological conditions. Twelve of them have been arrested for murder or attempted murder. (Woodward v. Alabama, 134 S. Ct. 405, 412n7 [2013] [Sotomayor, J., dissenting]