The post below from Conspirator Ilya on speed traps rang a bell with me because I managed to get my first speeding ticket in fifteen years two weeks ago, driving in Virginia. Madison County, to be exact, at 6:30 am on a weekday, driving on Highway 29 between DC and Charlottesville. I’ll be a visiting professor in the spring at UVA law school, and I wanted, um, a sense of how fast I could commute once a week.
Let me be the first to admit that I was speeding. Quite a lot. I think I was probably going about 80 in a 60 zone. The officer was very nice and – this is the part that I noted – essentially wrote down the ticket from the 80 that I was doing down to 69. This saved me some surcharges that would have kicked in over 70. But I was struck mostly by the psychology of the write-down – in effect, I felt good that I was getting a “sale” price for my speeding ticket and felt much, much better about it than I otherwise would have. Hard to prove, but I distinctly “felt” like I was getting a bargain apart from the tangible write-down. But this was shortlived, because when I went online to pay, I discovered that the 9 miles over times $6 per mile was augmented by “fees” and “costs” that brought the ticket up to $115. The experience has had the intended (I think it is intended) deterrent effect on my driving on 29.
Second, and entirely unrelated to this, on a serious note in response to the Keynsian post below Conspirator Todd, check out the short academic essay by Harvard’s Jeffrey Miron in the new and very interesting issue of the Harvard Journal of Law and Public Policy, “The Case Against the Fiscal Stimulus.” Good brief case on the arguments against the stimulus – not necessarily all stimulus, but at a minimum against this one. If someone knew of a link to an article that is the same thing on the other side of this issue (i.e., short, academic policy without being overly technical, pitched at roughly this level of sophistication, and making a case without ignoring the other side, I’d be grateful; it would nice to have them side by side).
Third, John Coates, an leading corporate law scholar and old friend on the faculty at Harvard Law School, has a new argument up that is a new twist on the Citizens United case – is it actually good for shareholders? The paper is up at SSRN, “Corporate Governance and Corporate Political Activity: What Effect Will Citizens United Have on Shareholder Wealth?” I work in some of John’s areas of research, but this one is not one I’m competent to comment on, though I thought it a very interesting read. Here is the abstract:
In Citizens United, the Supreme Court relaxed the ability of corporations to spend money on elections, rejecting a shareholder-protection rationale for restrictions on spending. Little research has focused on the relationship between corporate governance – shareholder rights and power – and corporate political activity. This paper explores that relationship in the S&P 500 to predict the effect of Citizens United on shareholder wealth. The paper finds that in the period 1998-2004 shareholder-friendly governance was consistently and strongly negatively related to observable political activity before and after controlling for established correlates of that activity, even in a firm fixed effects model. Political activity, in turn, is strongly negatively correlated with firm value. These findings – together with the likelihood that unobservable political activity is even more harmful to shareholder interests – imply that laws that replace the shareholder protections removed by Citizens United would be valuable to shareholders.
Fourth, Duke University Law School’s Steven L. Schwarcz and UCLA Law School’s Iman Anabtawi have a new article out, Regulating Systemic Risk, that seeks to give an account of how systemic risk propagates itself through the financial system. This is a very interesting and important paper, I believe, one of the most interesting on systemic risk that I’ve read; here is the SSRN abstract:
Systemic risk management is at the forefront of financial regulatory agendas worldwide. The global financial crisis was a powerful demonstration of the inability and unwillingness of financial market participants to carry out the task of safeguarding the stability of the financial system. It also highlighted the enormous direct and indirect costs of addressing systemic crises after they have occurred, as opposed to attempting to prevent them from arising. Governments and international organizations are responding with measures intended to make the financial system more resilient to economic shocks, many of which will be implemented by regulatory bodies over time. These measures suffer, however, from the lack of a theoretical account of how systemic risk propagates within the financial system and why regulatory intervention is needed to disrupt it. In this Article, we address this deficiency by examining how systemic risk is transmitted. We then proceed to explain why, in the absence of regulation, market participants are poorly situated to disrupt the transmission of systemic risk. Finally, we advance a regulatory framework for correcting that market failure.
In preparation for my 1L elective course next term on law and economics, I’ve also been re-reading various things, and after a lot of consideration, decided that the best way to understand the Coase theorem is to … read Coase! So I’m going to require a short little paperback with a couple of the key articles as part of the reading. I came to the conclusion that Coase’s original papers tended to be clearer than the much more sophisticated and elegant but, from the standpoint of the uninitiated, much less accessible later versions of it. Coase wrote to explain a new idea to an audience that had not seen it before, and his prose seems to me clear and straightforward.