March 06, 2008
Scientific American reports on a study attempting to explain the biological basis for why girls seem to have superior language skills compared to boys. As a father of two sons experiencing some of the trials and tribulations of pre-school, I notice these stories. Apparently, girls completing linguistics tasks show more brain activity in areas specialized for language encoding, while boys show activity in areas relating to visual and auditory functions. What does this all mean?
[I]t implies that boys need to be taught language both visually (with a textbook) and orally (through a lecture) to get a full grasp of the subject, whereas a girl may be able to pick up the concepts by either method.
Subjects ranged from 9 to 15 years of age. The next question is whether these differences persist with age.
Permalink | Gender Issues, Science | Comments (0) | TrackBack (0)
Forbes' 2008 list of the world's richest people reveals that, after thirteen years, Bill Gates no longer holds the title of the world's richest man. Instead, that honor now goes to Warren Buffett with a net worth estimated at $62 billion. Gates, at a net worth of $58 billion, fell to the number 3 slot. Apparently, you can blame Microsoft's bid for Yahoo, and Microsoft's subsequent decline in stock price, for Gates' slide on the Forbes list. But Microsoft lent a helping hand to at least one other billionaire. Thus, this year saw the youngest ever billionaire on the list, 23 year-old Facebook founder Mark Zuckerberg, who ranked 785 with a net worth of $1.5 billion. Microsoft's purchase of a stake in Facebook no doubt helped get Zuckerberg on the list. Despite Gates fall from number one, I am sure this is one of those instances where coming in third place is not tantamount to losing.
March 05, 2008
For those interested in non-tax issues, The House Financial Services Committee is currently holding a hearing on Sovereign Wealth Funds.
For the tax nerds out there, I thought I might offer a short overview of how SWFs are currently taxed. In future posts, I will propose some reform alternatives for Congress to consider.
The big picture is that Sovereign Wealth Fund investments in the United States are generally exempt from tax under Section 892 of the Code. The idea is that when a foreign sovereign makes a portfolio investment in the United States, the sovereign is acting as a sovereign and is entitled to sovereign immunity.
There is an exception for commercial activity. So, for example, if the government of Italy were to operate a cycling touring company in the United States, the profits from that active business activity would be taxed as business income. (Similarly, if a customer of that touring company fell off the bicycle and got hurt, Italy would not be immune from tort liability.) The key for Sovereign Wealth Funds is that portfolio investing is *not* treated as a commercial activity under current law. So the returns from their investments -- interest, dividends, capital gains -- are categorically exempt from tax.
The detail start to get a little complex, so I'll continue below the fold.
After Obama advisor and Chicago economist Austan Goolsbee made the news for his off-the-cuff, disputed, but quite plausible comments to a Canadian diplomat, Josh Wright over at Truth on the Market asks:
how important are economic advisers anyway? ... As a general matter, I think it is perfectly appropriate to give credit to the principal for the quality of the agents he or she is able to attract....[but] I’m significantly discounting the possibility that Goolsbee is exhibiting much of a constraining effect on Obama or that his presence should be relevant to the free trade credentials of the candidates.
Matthew Yglesias, btw, thinks that Goolsbeegate is ending up being very important, though he's focused on the politics, not on the advice. I think that economics advisors, like most advisors, make little picture, rather than big picture differences, and mostly only after the election, when they're appointed to a job where they can make some substantive decisions that higher ups are too busy to review. Economics advisors are, in short, mid-level bureaucrats - and it can be nice to be a mid-level bureaucrat, but it's not like you get to steer the country towards anarcho-syndicalism or anything.
At any rate, it's a good time to point you to Goolsbee's recent commencement address, where he genially tries to define the nature of economic inquiry:
We really don’t deal with the loftiest ideals of humanity. We deal with humans at their most mundane. We aren’t about narratives and inspiration or how people would behave in their finest hours. We are about how people behave in the everyday marketplace. I think we are especially hated because of the nagging fear on the part of idealists that we might be right about people. Our world view begins with a few of the following points: First, economists typically ignore what people say and only look at what they do....Economists are perfectly comfortable in a world of choosing between the lesser of evils. In our world, everything is an evil. Nothing is perfect....Next, economists don’t take anecdotes for answers....We spend lots of time thinking about causality and indirect effects...
March 04, 2008
Yahoo would rather merge with AOL than be acquired by Microsoft!
Correction: Yahoo's managers hate Microsoft.
What do Yahoo's shareholders want? Some of them are suing those managers. Others may get a chance to vote soon, as Microsoft looks toward a proxy contest. According to the NYT, Yahoo is thinking about postponing its annual meeting, but it can't put off the vote forever.
Here is the important thing to understand: lots of shares have changed hands since the Microsoft bid was announced, and those new buyers did not buy Yahoo because they have warm and fuzzy feelings about Jerry Yang. These new shareholders paid a premium for their shares, and they are counting on a big transaction. Yahoo's managers are facing tremendous pressure to deliver.
Yesterday a number of the local news stations extensively covered the story of the Sharper Image bankruptcy, with particular emphasis on the fact that Sharper Image is no longer honoring gift cards as a result of its bankruptcy. The story not only appears to reflect a sign of toughening economic times, but also re-affirms some of the problems associated with gift cards.
To be sure, it is nothing new that when a company declares bankruptcy, many are left holding claims that have no hope of being satisfied. Now gift cardholders are a part of that “many.” Interestingly, rival store Brookstone is offering a 25% discount for anyone who makes an in-store purchase and turns in a Sharper Image gift card—regardless of the face value of the card. The discount may be more than some creditors ultimately receive.
Yet the Sharper Image story reflects an additional reason why gifts cards may not be the “perfect gift.” Indeed, we have blogged before about some of the problems associated with gift cards, including the fact that they often go unused or otherwise expire quickly. While legislators have sought to respond to these kinds of problems, it seems difficult for them to respond to the bankruptcy problem, even though it appears to reflect a significant amount of money left on the table. And as some news stories suggested, it is a problem that may be exacerbated during an economic downturn. Thus, one research firm predicts that shoppers could lose some $75 million this year as a result of gift cards that are not honored because of store closings. Indeed, given the booming business that gift cards represent for some companies, many news stories speculated about other companies that could find themselves in the same predicament as Sharper Image. For example, one station speculated about Barnes and Noble, which sells lots of gift cards and yet recently forecasted weaker than expected earnings for 2008. To be sure, Barnes and Nobles does not appear to be in danger of declaring bankruptcy, but it is something to keep in mind with respect to purchasing gift cards.
In the end, perhaps you need to research the financial solvency of a company before purchasing a gift card. At the very least, the Sharper Image story underscores the importance of using gift cards sooner rather than later. And since I have a number of Barnes and Nobles gift cards tucked away in various envelopes, I will be making a trip to the bookstore this weekend.
Permalink | Businesses of Note | Comments (1) | TrackBack (0)
A group of faculty at BYU has been working through The Canon of American Legal Thought one article at a time. The project started because John Fee and I were interested in the possibility of teaching a class from the book, but it has thrived because all of the participants are having great fun being students again. Our sessions have produced some memorable moments, like when John said, "Wesley Hohfeld seems like the kind of person who would take pleasure in reminding you that a tomato is a fruit, not a vegetable."
One of the recurring themes in the early works in this volume is predictability. In "The Path of the Law," for example, Holmes asserts that "pretty nearly the whole meaning of every new effort of legal thought is to make [our] prophesies [of what courts will do] more precise, and to generalize then into a thoroughly connected system."
In Llewellyn's contribution -- "Some Realism About Realism" -- we again encounter the assertion that appellate litigation is indeterminate and the aspiration that legal theory can enhance predictability:
[The Realist "movement" is] a first attack upon the realm of the unpredictable in the actions of courts. That attack suggests strongly that one large element in the now incalculable consists in the traditional pretense or belief ... that there is no such area of uncertainty, or that it is much smaller that it is. To recognize that there are limits of the certainty sought by verbalism and deduction, to seek to define those limits, is to open the door to that other and far more useful judicial procedure: conscious seeking, within the limits laid down by precedent and statute, for the wise decision. Decisions thus reached, within those limits, may fairly be hoped to be more certainly predictable than decisions are now--for now no man can tell when the court will, and when it will not, thus seek the wise decision, but hide the seeking under words. And not only more certain, but what is no whit less important: more just and wise (or more frequently just and wise). [Italics in original; bold added.]
One thing I find interesting about this passage is Llewellyn's focus on judicial decision making. While it stands to reason that more insightful judges would make more predictable and just decisions, this claim is quite a bit different from the usual claim about the contribution of Realism. For example, Brian Leiter, Rethinking Legal Realism: Toward a Naturalized Jurisprudence, 76 Tex. L. Rev. 267 (1997), argues that the Core Claim of Legal Realism is that "judges respond primarily to the stimulus of facts. Put less formally--but also somewhat less accurately--the Core Claim of Realism is that judges reach decisions based on what they think would be fair on the facts of the case, rather than on the basis of the applicable rules of law."
Proceeding from this Core Claim, the main contribution of Realism to predictability would not be that the nature of judicial decision making had changed, but rather that our understanding of those decisions had improved. Again, from Brian Leiter:
[I]f the Sociological Wing of Realism--Llewellyn, Moore, Oliphant, Cohen, Radin, among others--is correct, then judicial decisions are causally determined by the relevant psycho-social facts about judges, and at the same time judicial decisions fall into predictable patterns because these psycho-social facts about judges--their professionalization experiences, their backgrounds, etc.--are not idiosyncratic, but characteristic of significant portions of the judiciary. Rather than rendering judicial decision a mystery, the Realists' Core Claim, to the extent it is true, shows how and why lawyers can predict what courts do.
In the end, I am left wondering whether predictability of appellate decisions has improved at all since the 1930s. Most legal questions, even those raised in appellate courts, seem quite a bit simpler than those portrayed by Llewellyn in this passage:
[T]he line of inquiry via rationalization has come close to demonstrating that in any case doubtful enough to make litigation respectable the available authoritative premises--i.e., premises legitimate and impeccable under the traditional legal techniques--are at least two, and that the two are mutually contradictory as applied to the case at hand.
Even most appellate cases are not "doubtful enough to make litigation respectable" if this sort of indeterminacy is required for respectability. And those cases that must be resolved from "mutually contradictory" premises are likely no easier now than they were then.
My newest research project looks at the taxation of sovereign wealth funds. The paper is still a work-in-progress, but here is where I think I am headed: Under current law, Sovereign Wealth Funds are exempt from U.S. tax. Congress should consider amending Section 892 of the code to tax these state-owned investments under certain conditions, and the Code should not favor state-owned investors over private foreign investors. As with Two and Twenty, I think this is an example where the investment world has changed since Congress wrote the rules, and it is time for an update.
Overview. Under current law, based on the principle of sovereign immunity, investments by foreign state-owned funds and controlled entities are generally exempt from tax. Commercial activities in the US may be taxed, but portfolio investing is not considered a commercial activity.
By contrast, investment returns by private foreign individuals and corporations are taxed at rates as high as 30%, although this rate is often reduced by treaty agreement, or, in the case of most capital gains, treated as foreign source income and therefore exempt from U.S. tax. Encouraging foreign investment in the United States generally increases overall welfare. But there is no sound policy reason to unconditionally exempt state-owned investment funds from U.S. taxation, and it is not at all clear that we should give state-owned funds a competitive advantage that crowds out private investment. At the same time, policymakers should proceed with caution, as raising tax rates on Sovereign Wealth Funds could be perceived as a protectionist signal that could discourage both state-owned and private foreign investment.
Regulatory arbitrage between investment regulation and tax. One policy concern is how the funds want to have it both ways. On the one hand, they present themselves to the SEC and other regulators as if they are just like any other institutional investor, investing for purely commercial purposes. And thus, they argue, they should not be subject to any additional regulatory burden of disclosure, transparency, or anything else. On the other hand, for tax purposes they are treated as sovereign states and thus entitled to sovereign immunity from taxes. The net result of our regulatory scheme, then, is to give state-owned funds a competitive edge over private investment.
Continued below the fold.
Just for fun, three cheese videos ...
Gloucestershire Cheese Rolling
The Cheese Trap
Cheese And Onions
March 03, 2008
In the midst of a laundry list of proposed changes for foreign issuers filing in the US - my rough takeaway on those is: now that you can file under IFRS or GAAP, if you choose GAAP, you really have to choose it, not some watered down GAAP-for-foreigners - the SEC revealed that it's considering bestowing a modest research boon on the corporate governance effects crowd. It may
Amend Form 20-F to require annual disclosure of the significant differences in the corporate governance practices of listed foreign private issuers compared to the corporate governance practices applicable to domestic companies under the relevant exchange’s listing standards
That's a little less exciting than it sounds. The US exchanges already require this "significant difference" disclosure on the corporate website or in the annual report. Now the SEC wants to mandate this disclosure in the annual report:
Foreign private issuers frequently opt to provide this disclosure on their websites, rather than in their annual reports. We are proposing to require disclosure of this information in the Form 20-F annual reports filed by all foreign private issuers whose securities are listed on a U.S. exchange. This would consolidate all of the relevant corporate governance disclosure about a listed company in one central location.
But, I suppose, it does make it easy for researchers to know where to look when they begin their coding projects.
Permalink | Securities Trading & Regulation | Comments (0) | TrackBack (0)
I've reached the end of my visit. I want to thank again everyone here at the Conglomerate. It remains my favorite read in the blogosphere.
For my last post, I return to the topic of changes to the law school curriculum, since that is taking up much of my time and energy at this point. I blogged previously about some of the changes were are making to our first year curriculum here at Minnesota. I actually think that more work needs to be done with the third year rather than the first year. We have started thinking about the third year, and have just begun to develop a series of what we are calling "capstone" courses. These will be focused on trying to give students a better sense of what practice in some particular areas is like. They will be simulation-based and team taught.
An example of a possible course of particular interest to readers here is our start-up company capstone proposal. In this, students would follow a fictional start-up company through critical stages in its development. One faculty member would teach about choice of entity and formation, and the students would draft certificates and bylaws. Another faculty would teach about employment law, and the students would draft employment agreements with the founders. A third professor would teach about IP, and the students would draft IP licensing agreements. And so on through a variety of possible scenarios.
I know that courses along somewhat similar lines have been around for a while, and others are being started now. We are beginning to gather material on what other schools are doing along these lines. Any pointers that anyone would like to provide would be greatly appreciated. Thanks.
Permalink | Law Schools & Lawyering | Comments (3) | TrackBack (0)
For years people have been trying to promote more substance at the AALS Annual Meeting, and I think that some of the sections are succeeding. But the notion of "unconferencing" implies that we shouldn't bother. Consider Kaliya Hamlin's view as expressed at Unconference.net:
Why would you go across the country to listen to people present papers, talk on panels, visit trade show booths or watch ppt presentations when you could do all of that 'online'?
...
Face time with other people IS really valuable, rare and expensive. Having meaningful conversations, getting advice from peers and tackling challenging issues is something that is good use of time. Using methods that are structured but leverage the "wisdom of the crowd" gathered are what unconferences are about.
What happens at an unconference? Kaliya describes it as follows:
So What Happens?
Open Space is a way to bring people who have a shared interest or who want to work together to work on something. The invitation is very important and helps frame the whole thing - Who do you want to be there and why? One way to frame this is we want to have a group representative of many organizations that have a stake in X and will gather to acomplish these deliverables.
How Does It Work?
Open Space opens up the agenda creation process so that all those gathered can put forward ideas for sessions. Because the agenda is made live in real time it is direct relevance to those gathered that day (or at least for the person calling the session).
For technical communities that are collaborating and cooperating via, IRC, Conference Calls, Wiki’s, Blog’s. and other media it is virtually impossible to figure out the topics that will be hot and need face time six months, three months or even one month prior to an event. Live agenda creations helps them make effective use of face-time during the day of conferences instead of around the edges of events programed many months ahead of time.
Even if there is committee of 1 or 3 or 10 they can’t ‘know’ all of what 50-300 people coming to an event around a topic need to talk about ahead of time. One way to address the putting forward of what might be talked about is to post it on a wiki so that people can get a sense of the topics that are of interest.
Space Needed for Open Space
There are several ways you can host space for open space one way is in a large room where you have all sessions going on around the edges. You can also have breakout rooms where different meetings happen. It is good if these can be as close together as possible. You can also do a mixture of a large room and breakouts.
Agenda Creation
You put up a blank schedule of rooms and times. When we do [the Internet Identity Workshop] we typically have 5 or 6 one hour sessions in a day with 15 min breaks and a one hour lunch.Then the facilitator or holder of the space invites those who have something they want talk about related to the overall theme come to the the front write on an 8×11 sheet of paper the title of the topic and their name. They annouce this to the room…folks can ask questions about what the session is about and then they put in a slot on the blank schedule. This goes on for about 15-30 min and voila now you have a full schedule. Those gathered then break up and go to the sessions they want.
Would you attend a law unconference?
For a funny take on this phenomenon, check out Cash Peters.
is exactly the attribute that is most difficult to assess in advance: "the ability to successfully cope with the uncertain and the unknown." Dan Drezner cogently expresses a sentiment that I have felt for years. I tend to use "character" as a rough proxy for this attribute, though I suspect the correlation is rather weak.
Modern pyramid schemes often are quite sophisticated in hiding the ball from the participants, mainly by focusing on the mystical qualities of their exclusive products. Quest Net, on the other hand, barely makes the effort to disguise its lack of substance. Take a look at the "Opportunity Overview" page. Judging by the quality of the disclosure, the generic products distributed by Quest Net are not an important part of the opportunity.
The description of the company emphasizes the business opportunity first, and the products are clearly an afterthought:
Our Story began in 1998, with a dream to touch and change lives around the world by harnessing the power of the Internet.
From the beginning, we were committed to providing customers with an innovative business opportunity through an e-commerce platform, like none other before. Nearly a decade later, we can proudly say - We did it!
We have developed an entire range of unique, exclusive and reliable products that are retailed online around the world using our scientifically designed business plan. Our customers have enjoyed the most advanced business tools for almost a decade - simplified online enrolment, a virtual office containing powerful business tools to manage and regulate your business, secure payment options, all fully integrated on an advanced e-commerce platform.
Even as the late 90s experienced the dot com bust with the demise of various headline grabbing online businesses, we have continued to quietly make our presence felt through a stable and steady growth and an ever increasing global customer base.
We started off with a single product, a collectible numismatic coin, that went on to define an entire product range of collectible coin sets and medallions over the next few years. It was only natural to then expand into watches and jewellery that have today developed into a world class brand representing quality, exclusivity and value. With continued success and a burgeoning loyal customer base, we further expanded our product range to include vacation packages, wellness products and state of the art telecom products and services.
In the last nine years, we have grown to become one of the largest and most profitable network marketing companies in the world.
Get the picture?
Success, success, success!!!
What do you do?
Who cares?! We are great at it!
Quest Net has been banned in Sri Lanka, Iran, and Afghanistan. The story of the company in Afghanistan was recounted on Friday's Marketplace, including a protest by Quest Net investors, who shouted "Quest zindagee!" ("Quest is life!") outside of President Hamid Karzai's palace. We even get a feel good story about the Taliban: "There is one group that seems able to stop Quest. When Zaman's friends came south to recruit in Kandahar, the Taliban left a letter on their door. It said: Get out, or we'll kill you. And the 'businessmen' quickly retreated."
March 02, 2008
SI describes the plight of Daniel Smith (no relation), a young man from Boise who orally accepted an offer of a football scholarship from the University of Hawaii last April. After Hawaii Head Coach June Jones decided in January to accept an offer to coach Southern Methodist University, one of the assistant coaches at Hawaii called Smith to rescind the scholarship offer. According to Smith, he had promised Hawaii that he wouldn't entertain offers from other schools, so he was left without a scholarship for this fall. Smith sued.
Anyone who follows college football knows that the rules governing recruiting are heavily regulated by the NCAA, but the system of extending "offers" and receiving oral "acceptances" is very fluid. A player often "commits" orally to play for one school, then changes his mind and "commits" to another school. Likewise, many coaches make offers, only to rescind the offers when a better prospect comes along. In short, while severing relationships is not pleasant, most everyone involved in the process seems to understand that the commitments made during recruiting are non-binding. The deal is done only when the player, his parents, and an institution's athletics director all sign a "letter of intent" (LOI). That letter commits the school to providing financial aid for one year -- assuming the athlete is admitted -- and it marks the point at which recruitment of the athlete by other schools must cease. (More here.)
Stories about jilted athletes and coaches are legion, but this is the first time I have seen such a case go to court. Smith's attorney is relying on the doctrine of promissory estoppel, and according to Smith, the promise from then-defensive line coach Jeff Reinebold went something like this: "If we offer you a scholarship, we want you to be 100 percent committed to us, and we'll be 100 percent committed to you." While SI quotes one source suggesting that such a promise would be out of character for Reinebold, that sort of talk is consistent with many recruiting stories with which I am familiar. In any event, let's assume for the sake of argument that Reinebold made the statements. Does Smith have a viable claim under promissory estoppel?
Smith seems to have strong case of reliance (he stopped working with other football programs), and his reliance appears to have been detrimental (he missed out on the possibility of other scholarships). But the question remains: was Smith justified in relying on Reinebold's purported promise?
Well, first there is the matter of agency law. Was an assistant coach authorized or apparently authorized to make such a statement? According to the SI story:
Daniel said he never spoke to Jones, Hawaii's head coach. And while most schools require the head coach to sign off on any scholarship offer, Hawaii's assistants under Jones sometimes did offer scholarships on their own. Greg Brown, a Las Vegas personal trainer, said Miano offered his son, Corbin, a scholarship last year. Corbin, a safety from Spring Valley High, called Miano in September to commit to Hawaii.
Good facts for Smith. But what about the fact that everyone knows that pre-LOI commitments are non-binding? Maybe Smith is so new to the system that he doesn't know what everyone knows. Or perhaps Hawaii was signaling its intention to transact on a different basis from other schools, to allow itself to be bound where other schools would not. Nevertheless, I have a hard time imagining a court siding with Smith in this case, largely because Hawaii will bring all sorts of evidence showing that these pre-LOI arrangements are not the basis for reasonable reliance. Even if Reinebold made a statement like the one above, it looks more like salesmanship than contract. Given the emphasis during recruiting on the formal LOI, Smith probably should have understood that the oral "commitment" was nothing more than rah-rah talk.
Permalink | Contracts, Sports | Comments (1) | TrackBack (0)
Steve Bainbridge and Larry Ribstein have differing suggestions on the most influential of all corporate law cases. After Bainbridge first suggested Smith v. Van Gorkom, Ribstein replied by suggesting a federal securities case, Basic v. Levinson. Bainbridge responded that even if one expands the set to include federal cases, Basic is less influential than Case v. Borak, since the latter makes possible private standing to sue to enforce the securities laws. Hence, Levinson could not have occurred without Case.
This raises interesting questions of how one measures the influence of a case. By the standard quantitative measures, Basic seems to win hands down. Westlaw's citation service shows 9898 cases citing Basic, and just 3373 citing Case. Looking to influence among academics, a search of Westlaw's JLR database yields 637 hits for "Basic /2 Levinson" compared to just 158 for "Case /2 Borak". Basic also seems to get much more attention in Securities Law classes (it certainly does in mine).
And yet, Bainbridge's take on what makes a case influential certainly makes some sense. He asks us to imagine the counterfactual of how the world would look if a case had been decided differently, and plausibly argues that more would have changed with a different decision in Case than in Basic. Fair enough. Of course, such counterfactuals are tricky. If Case had been decided in the opposite way, for instance, would Congress have acted to create an explicit cause of action? Perhaps. The question is also complicated by the fact that Case dealt with causes of action under sect. 14 of the '34 Act, whereas the real action is under Rule 10b-5. I doubt the latter point matters too much--had the Court denied a private cause under sect. 14, it would have been very hard to find a private cause under 10b-5.
FWIW, my own suggestion for other highly influential state law cases besides Van Gorkom, in the comments section, was Aronson v. Lewis. Note how many significant Delaware cases that one might give in answer to this question come from the same time: Van Gorkom (1985), Aronson (1984), Weinberger (1983), Zapata (1980), Unocal (1985), and Revlon (1986) are all way, way up there among state law cases. Essentially, the contemporary contours of Delaware fiduciary duty were set in a 6 or so year period. Obviously, the high M & A activity of the time, particularly hostile takeovers, played a big role in the development of the law.
March 01, 2008
John Duggan, the Comptroller of the Currency, just called on the Basel Committee to re-think how much it would count subprime mortgage securities towards establishing the adequacy of the capital reserves of regulated banks. Of course, this used to be the kind of thing that the Comptroller of the Currency could do on his own, without persuading foreign bank supervisors of the merits of the idea on his next trip to Switzerland. Anyway, here's what he said:
regulators need to reconsider the part of the Basel II capital rules that apply to senior tranches of re-securitized structured credit such as [collateralized debt obligations consisting of securities backed by subprime mortgages]. While the Basel II framework recognized the greater systematic risk embedded in securitization exposures when compared to corporate exposures, we need to take another look to see if the differences that were incorporated went far enough. For example, should the securitization provisions of Basel II establish a unique set of higher risk weights for [collateralized debt obligations consisting of securities backed by subprime mortgages] and other re-securitizations, reflecting the higher vulnerability to systematic risk as evidenced by recent events?
February 29, 2008
Corporate law scholars overwhelmingly posit efficiency as the measure of the effectiveness of legal rules when doing normative analysis. They almost never defend this choice; it goes without question. Yet, is efficiency really all that matters in setting the rules of corporate law?
Law and economics scholars have a standard argument, due to Kaplow and Shavell, for focusing only on efficiency in setting all sorts of legal rules. This double distortion argument contends that setting legal rules at their efficient level and then achieving whatever level of redistribution is desired through tax and transfer policies will distort behavior from the efficient level less than if we try to achieve distributive goals in part through legal rules.
Chris Sanchirico and Richard Markovits have already pointed out a number of problems with this argument. The objection that intrigues me most questions the political feasibility of the Kaplow and Shavell approach.
February 28, 2008
Check out the new blog from Jennifer Martin, Kristen David Adams, Robyn Meadows, Marie Reilly, and Keith Rowley called Commercial Law. The tagline: "Commerce, n. A kind of transaction in which A plunders from B the goods of C, and for compensation B picks the pocket of D of money belonging to E."
Hmm. Strange pitch for a gaggle of commercial law professors.
But Marie Reilly's post on "The Morality of Trade" gets things back on the right track. It concludes, "Commerce is not a cuss word."
