Red Tape
Justices and Legal Clarity: Analyzing the Complexity of U.S. Supreme Court Opinions
Ryan Owens & Justin Wedeking
Law & Society Review, December 2011, Pages 1027-1061
Abstract:
Legal clarity is important to understand and measure because of its connection to the rule of law. We provide the first systematic examination of the clarity of Supreme Court opinions and discover five important results. First, certain justices systematically craft clearer opinions than others. Justices Scalia and Breyer write the clearest opinions, while Justice Ginsburg consistently writes the most complex opinions. Second, ideology does not predict clarity in majority or concurring opinions. Third, all justices write clearer dissents than majority opinions, while minimum winning coalitions produce the clearest majority opinions. Fourth, justices across the board write clearer opinions in criminal procedure cases than in any other issue area. Finally, opinions that formally alter Court precedent render less clear law, potentially leading to a cycle of legal ambiguity.
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Do We Need Speed Limits on Freeways?
Arthur van Benthemy
Stanford Working Paper, December 2011
Abstract:
When choosing his speed, a driver faces a trade-off between private benefits (time savings) and private costs (fuel cost and own damage and injury). Driving faster also has external costs (pollution, adverse health impacts and injury to other drivers). This paper uses large-scale speed limit increases in the western United States in 1987 and 1996 to address three related questions. First, do the social benefits of raising speed limits exceed the social (private plus external) costs? Second, do the private benefits of driving faster as a result of higher speed limits exceed the private costs? Third, could completely eliminating speed limits improve efficiency? I find that a 10 mph speed limit increase on highways leads to a 3-4 mph increase in travel speed, 9-15% more accidents, 34-60% more fatal accidents, and elevated pollutant concentrations of 14-25% (carbon monoxide), 9-16% (nitrogen oxides), 1-11% (ozone) and 9% higher fetal death rates around the affected freeways. I use these estimates to calculate private and external benefits and costs, and find that the social costs of speed limit increases are three to ten times larger than the social benefits. In contrast, many individual drivers would enjoy a net private benefit from driving faster. Privately, a value of a statistical life (VSL) of $6.0 million or less justifies driving faster, but the social planner's VSL would have to be below $0.9 million to justify higher speed limits. The substantial difference between private and social optimal speed choices provides a strong rationale for having speed limits. Although speed limits are blunt instruments that differ from an ideal Pigovian tax on speed, it is highly unlikely that any hidden administrative costs or unforeseen behavioral adjustments could make eliminating speed limits an efficiency-improving proposition.
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Sean Farhang
Law & Social Inquiry, forthcoming
Abstract:
Examining qualitative historical evidence from cases of federal regulation in the areas of labor, civil rights, and environmental policy, this article provides support for the hypothesis that divergence between legislative and executive preferences - a core and distinctive feature of the American constitutional order - creates an incentive for Congress to rely upon private lawsuits, as an alternative to administrative power, to achieve its regulatory goals. It also shows that this mechanism encouraging statutory mobilization of private litigants had been operative long before its powerful growth started in the late 1960s, that it operated in similar fashion with Republican legislators facing Democratic presidents and Democratic legislators facing Republican presidents, and that it remained a source of controversy and an active influence on congressional decision making throughout the half century covering the 1940s through the 1980s.
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Inconsistent Regulators: Evidence From Banking
Sumit Agarwal et al.
NBER Working Paper, January 2012
Abstract:
US state chartered commercial banks are supervised alternately by state and federal regulators. Each regulator supervises a given bank for a fixed time period according to a predetermined rotation schedule. We examine differences between federal and state regulators for these banks. Federal regulators are significantly less lenient, downgrading supervisory ratings about twice as frequently as state supervisors. Under federal regulators, banks report higher nonperforming loans, more delinquent loans, higher regulatory capital ratios, and lower ROA. There is a higher frequency of bank failures and problem-bank rates in states with more lenient supervision relative to the federal benchmark. Some states are more lenient than others. Regulatory capture by industry constituents and supervisory staff characteristics can explain some of these differences. These findings suggest that inconsistent oversight can hamper the effectiveness of regulation by delaying corrective actions and by inducing costly variability in operations of regulated entities.
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The Anti-Federalist Strand in Progressive Politics and Political Thought
Elvin Lim
Political Research Quarterly, forthcoming
Abstract:
In this article, the author argues that the Progressives can be as much characterized as the antistatists of the nineteenth century as the statists of the twentieth century because their overriding goal was the destruction of the party state and not, directly, the creation of the bureaucratic state. They found in Anti-Federalist political thought a general antistatist template that they used to articulate their specific objection to the nineteenth-century party state. This template comprised a mutual commitment to simple government, the common good as a preinstitutional reality, democracy, direct and responsive government, fear of elite rule, civic education, and cultural homogeneity.
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Todd McFall & Julianne Treme
Applied Economics Letters, Spring 2012, Pages 763-768
Abstract:
This study examines how PGA Tour golfers' playing strategies offset a ban on technologically superior golf club grooves and how the strategy changes translated into performance changes. The ban, which was implemented at the beginning of the 2010 season, effectively decreased golfers' abilities to spin the golf ball from all on-course environments and offers a unique opportunity to examine offsetting behaviour in the light of a ban on the type of technology. We compare 2009 and 2010 PGA Tour results in a manner consistent with previous studies of offsetting behaviour and golf club groove construction. Our results suggest that offsetting behaviour mitigated the effects of the technological regulations on golf clubs in an economically and statistically significant way, as golfers' performances improved following the technological ban.
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Eric Zitzewitz
NBER Working Paper, January 2012
Abstract:
Transparency is usually thought to reduce favoritism and corruption by facilitating monitoring by outsiders, but there is concern it can have the perverse effect of facilitating collusion by insiders. In response to vote trading scandals in the 1998 and 2002 Olympics, the International Skating Union (ISU) introduced a number of changes to its judging system, including obscuring which judge issued which mark. The stated intent was to disrupt collusion by groups of judges, but this change also frustrates most attempts by outsiders to monitor judge behavior. I find that the "compatriot-judge effect", which aggregates favoritism (nationalistic bias from own-country judges) and corruption (vote trading), actually increased slightly after the reforms.
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Major League Baseball's First Year Player Draft: A Natural Laboratory for the Study of Bargaining
Christopher Garmon
Journal of Sports Economics, forthcoming
Abstract:
Major League Baseball's (MLB) Draft is a natural laboratory for the study of bargaining: There are no bonus restrictions, draft picks cannot be traded, and there are no commitment issues (i.e., players "declaring" for the draft). This article tests the implications of bargaining theory using data from the 2003-2010 MLB drafts. In 2007, new draft rules were introduced, but not uniformly across the draft, making it possible to estimate the effect of each change. Although the rule changes were designed to lower bonuses, they had the opposite effect. The rule changes led to $178 million in extra compensation to drafted players.
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Revolving door laws and state public utility commissioners
Marc Law & Cheryl Long
Regulation & Governance, December 2011, Pages 405-424
Abstract:
This paper investigates the effects of revolving door regulations - laws that restrict the post-government employment opportunities of public sector workers - on the characteristics of state public utility commissioners. We find that commissioners from states with revolving door regulations have less expertise, serve shorter terms, and are less likely to be subsequently employed by the private sector, compared with their counterparts from states without revolving door laws. These findings suggest that revolving door regulations may have costly unintended consequences.
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Legal Origin or Colonial History?
Daniel Klerman et al.
Journal of Legal Analysis, forthcoming
Abstract:
Economists have documented pervasive correlations between legal origins, modern regulation, and economic outcomes around the world. Where legal origin is exogenous, however, it is almost perfectly correlated with another set of potentially relevant background variables: the colonial policies of the European powers that spread the "origin" legal systems through the world. We attempt to disentangle these factors by exploiting the imperfect overlap of colonizer and legal origin, and looking at possible channels, such as the structure of the legal system, through which these factors might influence contemporary economic outcomes. We find strong evidence in favor of non-legal colonial explanations for economic growth. For other dependent variables, the results are mixed.
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Legal institutions, social norms, and entrepreneurship in Britain (c.1890-c.1939)
Paolo Di Martino
Economic History Review, February 2012, Pages 120-143
Abstract:
This article analyses the functioning of debt-discharge procedures in England and Wales in the light of the debate on entrepreneurial failure in the years between the late Victorian age and the interwar period. Using an original dataset and an empirical approach, it is argued that social norms, cultural elements, and class considerations influenced the outcome of decisions in a way that could have reduced the incentives for economic agents to engage with productive activity. Results show that over the entire period judges paid disproportionate attention to moral issues, and often gave lighter sentences to members of the elite who went into bankruptcy for personal reasons, and tougher ones to entrepreneurs who failed because of engagement with economic activity.
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James Hollyer, Peter Rosendorff & James Raymond Vreeland
Journal of Politics, October 2011, Pages 1191-1205
Abstract:
Are democracies more transparent than other types of political regimes? Many people believe that the presence of elections alone is not sufficient for a country to be considered democratic and that transparency must be included as part of the definition of political regime. We agree that contestability of elections and transparency of policymaking are analytically distinct concepts. Adopting minimalist approaches to democracy and transparency, we ask a basic question: do electoral politics provide incentives for governments to disseminate data? We thus investigate theoretically the relationship between regime type and the willingness of policy makers to provide credible announcements on policy-relevant variables. And we demonstrate empirically that the availability (or absence) of policy-relevant data is correlated with regime type, even after controlling for GDP per capita, IMF participation, country fixed-effects, and time trends. Democracies are indeed more transparent.
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On the Optimal Number of Courts
Stefan Voigt
International Review of Law and Economics, forthcoming
Abstract:
This is the first paper to investigate whether the number of high courts in a country has systematic effects both on the quality of its legal system and on its level of economic development more generally. It is theorized that due to the division of labor and a higher degree of specialization, high courts might be advantageous in terms of court productivity. Yet, they might also be disadvantageous in terms of a less coherent legal system. It is empirically tested whether the positive or the negative effects prevail. Results show that a larger number of high courts never has any positive effects on very broad outcome variables; indeed, with regard to some of these, a greater number of high courts is correlated with worse outcomes.
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Nudges and norms: On the political economy of soft paternalism
Jan Schnellenbach
European Journal of Political Economy, forthcoming
Abstract:
This paper discusses soft (or libertarian) paternalism, as proposed among others by Thaler and Sunstein (2008). It is argued that soft paternalism should not be understood as an efficiency-enhancing, but as a redistributive concept. The relationship between soft paternalism and social norms is discussed in detail. In particular, it is argued that soft paternalism increases the stability of given social norms, which in turn need not be efficient, nor in the material self-interest of a majority of individuals. Soft paternalism is argued to be an essentially conservative concept of policy-making in the sense that it tends to increase the longevity of status quo social norms.
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Does Planning Regulation Protect Independent Retailers?
Raffaella Sadun
Harvard Working Paper, December 2011
Abstract:
Entry regulations against big-boxes have been introduced in many countries to protect independent retailers. Analyzing a planning reform launched in the U.K. in the 1990s, I show that entry regulations may in fact accelerate the decline of independents by increasing the attractiveness of smaller in-town store formats for retail chains. The causal impact of planning regulation is estimated using variation in local political control across the U.K., which exogenously affects the ease of entry for big-boxes in this specific institutional framework. The analysis shows that up to 17% of the independents' employment decline between 1998 and 2004 can be attributed to the regulatory reform.
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Historic Preservation and Residential Property Values: Evidence from Quantile Regression
Velma Zahirovic-Herbert & Swarn Chatterjee
Urban Studies, February 2012, Pages 369-382
Abstract:
Historic designation is increasingly used as a means to achieve both preservation and community economic development. This study considered the effects of historic designation on residential property values in Baton Rouge, Louisiana, USA. The results support the well-established notion in urban economics literature that historic preservation has a positive impact on property values. However, appreciation of property values may displace less-affluent residents of historic districts after designation takes place. The results also show that the lower-end properties gain the most value from historic preservation. Thus, it must indeed be recognised that with increasing values comes the very real possibility that displacement of neighbourhood residents can occur.
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Robert Bird & Donald Smythe
Law & Social Inquiry, forthcoming
Abstract:
This article reports the results of a study that uses social network analysis to compare the persuasiveness of legal precedents in the diffusion of the strict liability rule for manufacturing defects. This new study tests which legal precedents were most influential and also whether certain state judicial variables influenced the diffusion process. The results are striking. The federal circuit regions appear to define an important reference group in the diffusion process, and social network effects dominate economic and political variables. In addition, the de facto separation of powers in the enactment of new state legislation appears to influence courts' propensities to adopt the strict liability rule. When the executive and legislative branches were controlled by the same political party, regardless of whether it was Republican or Democratic, state courts were more inclined to adopt the strict liability rule.
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The Determinants of State-Level Caps on Punitive Damages: Theory and Evidence
Thomas Miceli & Michael Stone
Contemporary Economic Policy, forthcoming
Abstract:
Under the standard economic model of torts, punitive damages correct for imperfect detection. Incorporating litigation costs into the model provides a justification for punitive damage caps. At the optimum, caps balance deterrence against the cost of litigation. Empirical testing of the model is performed via Cox proportional and parametric hazard analyses, using a panel dataset from 1981 to 2007. The results reveal a positive relationship between legal services employment (a proxy for legal costs) and cap enactment, and a negative relationship between state gross state product (a proxy for damages) and cap enactment. Cap enactment is also influenced by political ideology.
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Mitchel Herian et al.
Journal of Public Administration Research and Theory, forthcoming
Abstract:
The purpose of this article is to test whether the use of public participation by a local government increases perceptions of procedural fairness among the public and to propose an explanation for why fairness is a strong predictor of satisfaction with governmental decisions. To do this, we draw on the uncertainty management model to hypothesize that indications of procedural fairness can increase public support for government and its decisions and that fairness effects are greater for individuals who are more uncertain (less knowledgeable) about the governmental body in question. To test the hypothesis, we embedded an experiment in a survey of the public that was used by a local government to inform its budgetary decisions. The results provide support for the notion that governmental use of public input does increase perceptions of governmental fairness and that, in turn, perceptions of fairness have stronger relationships with overall governmental assessments for those who are relatively uncertain about a governmental institution.
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Do smoke-free laws affect revenues in pubs and restaurants?
Hans Olav Melberg & Karl Lund
European Journal of Health Economics, February 2012, Pages 93-99
Abstract:
In the debate about laws regulating smoking in restaurants and pubs, there has been some controversy as to whether smoke-free laws would reduce revenues in the hospitality industry. Norway presents an interesting case for three reasons. First, it was among the first countries to implement smoke-free laws, so it is possible to assess the long-term effects. Second, it has a cold climate so if there is a negative effect on revenue one would expect to find it in Norway. Third, the data from Norway are detailed enough to distinguish between revenue from pubs and restaurants. Autoregressive integrated moving average (ARIMA) intervention analysis of bi-monthly observations of revenues in restaurants and pubs show that the law did not have a statistically significant long-term effect on revenue in restaurants or on restaurant revenue as a share of personal consumption. Similar analysis for pubs shows that there was no significant long-run effect on pub revenue.
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Michael Sosin
Journal of Public Administration Research and Theory, forthcoming
Abstract:
Although decentralization and devolution in some ways increase state governments' discretion, they in other ways may limit that discretion. The current study tests the thesis that, at least in the early 2000s, discretion declined in some states' substance abuse service systems; states experiencing a financial shortfall came to adopt the federal government's service priorities. These states largely acted because of the institutional dominance of the federal government. The thesis is supported by analyses of two waves of data from a nationally representative sample of providers of outpatient substance abuse services. The study considers several uses of the findings: supplementing the perspective that argues that states lose discretion due to decentralization and devolution-induced economic disincentives, understanding the diffusion of federal policies relating to the Temporary Assistance to Needy Family program, generally suggesting some limits to state discretion, and thus helping to reconceptualize the benefits and costs of decentralization and devolution.
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Incentives and Adaptation: Evidence from Highway Procurement in Minnesota
Gregory Lewis & Patrick Bajari
NBER Working Paper, December 2011
Abstract:
Procurement projects often encounter unanticipated problems. Deadlines and penalties are one important instrument used to incentivize contractors to adapt their plans. We develop a theory of highway procurement in which contractors must modify their construction rate following a productivity shock. We model how time incentives affect the work rate and time taken, characterizing the efficient contract design. Using new micro-level data from Minnesota that includes day-by-day information on work plans, actual outcomes and delays, we find strong evidence supporting the theory. As an application, we build an econometric model that endogenizes adaptation, and simulate how different incentive structures affect outcomes and the variance of contractor payments. Accounting for the traffic delays caused by construction, switching to a more efficient design would substantially increase welfare without substantially increasing risk.