These experts represent a mix of academics and practitioners, have some experience blogging themselves (although they will not be encouraged to nominate their own writing), and – most importantly – are voracious, appreciative, and intelligent consumers of legal blogs.  They are donating their good judgment and eagle eyes in helping to curate our selections. Throughout the year, they will be nominating posts to be voted on by the panel; as editor-in-chief of The Post, I will determine how many votes are required for a post to be featured here, and I will aim to stay within a yearly range of 5-20 featured posts with a
minimum of arbitrariness or capriciousness.

I’m extremely pleased that the inaugural issue of The Post has recognized a series of my recent blog posts focusing upon Google and antitrust.  Its always nice to know somebody is reading; and it is also really flattering to be included in a list of some of the legal bloggers I read on a regular basis.  Here’s the set of bloggers and blogging recognized in the first issue of The Post:

So Much For the Commerce Clause Challenge to Individual Mandate Being “Frivolous,” The Volokh Conspiracy, July 18, 2010, by Randy Barnett

“Let ’em Play,” Volokh Conspiracy, July 18-22, 2011, by Mitch Berman

Healthcare and Federalism: Should courts strictly scrutinize federal regulation of medical services?, PrawfsBlawg, Aug. 14, 2011, by Rick Hills

Why John Edwards Probably Did Not Commit A Crime, Regardless of His Motives or Those of The Donors, Election Law Blog, June 4, 2011, by Richard Pildes

Legal Theory Lexicon: Legal Theory, Jurisprudence, and the Philosophy of Law, Legal Theory Blog, Apr. 24, 2011, by Lawrence B. Solum

Antitrust Remedies, Truth on the Market, May 10, July 11 & 13, 2011, by Josh Wright

The “Antitrust Remedies” series of posts include the following:

Barnett v. Barnett on Antitrust

Searching for Antitrust Remedies, Part I

Searching for Antitrust Remedies, Part II

If you didn’t read them the first time around — this seems like as good a time as any!  And check out the other legal blogging in The Post.

Hal is Managing Director and Principal at Navigant Economics. He has written, thought and advised extensively on antitrust, finance and general regulatory issues.  His SSRN page is here, and it includes co-authors like David Teece, Dan Rubinfeld, Jerry Hausman, Greg Sidak, Bob Crandall, and Bob Litan, among many others. He is the co-author of the book Broadband in Europe: How Brussels Can Wire the Information Society (Kluwer/Springer Press 2005). and his article have appeared in, among there, American Economics Association Papers and Proceedings, Harvard Journal of Law and Technology, Journal of Industrial Economics, Journal of Network Industries, Journal of Regulatory Economics, Review of Network Economics, Topics in Economic Analysis and Policy, and Yale Journal on Regulation. He has also served as Adjunct Professor at Georgetown University’s McDonough School of Business.

On the policy front, his essays have appeared in several leading newspapers and magazines, including Antitrust, Forbes, The Economist’s Voice, Harvard Business Review, Health Affairs, The Milken Institute Review, Regulation, The Wall Street Journal, and The Washington Post. His M.A. and Ph.D. degrees in economics are from the Johns Hopkins University and his B.S. magna cum laude in economics is from Tulane University.

Perhaps of particular interest to our readers, one of Hal’s most recent articles (with Gerald Faulhaber) is on wireless broadband competition and the FCC’s most recent wireless competition report, a not-uncommon subject around here (see, e.g., here).  It’s an excellent paper, and you can find a link to the article and a podcast of Hal discussing the paper with Jerry Brito here.

We look forward to a stimulating set of posts from Hal — and he isn’t shy, so don’t hesitate to weigh in in the comments!

This blog was established by Professors Erik Brynjolfsson, Joshua Gans and Shane Greenstein. They noticed that there were many blogs devoted to digital developments and consumer products but the selection focussing on economic and business aspects of the digital world was very limited. Digitopoly’s mission is to provide an economic and strategic management perspective on digital opportunities, trends, limits, trade-offs and platforms; expanding commentary in this important space.

The blog’s name — Digitopoly — reflects our broad interests in the impact of digital technology on competition. While, in some cases, our concern is the preservation of competition in the face of pressures toward monopoly, in others we see opportunities for greater competition and welfare benefits.

Our logo is deliberately iconic. The heavy set line in the graph could represent Moore’s Law (for processing power as time progresses) or Metcalfe’s Law (for the value of networks as more join).  It overtakes the simple linear trend represented by thin, broken line. This reflects the idea that linear ways of thinking rarely serve us well in the digital economy.

Check it out.

TOTM readers may or may not know that the blog — being without site counter for some time — was not in these rankings until quite recently.  We come in at #17 overall (as measured by visitors; #18 by page views).   It is also worth noting that we are now the leading business-focused law blog in visitors, and second (but closing) only to the Harvard Corporate Governance Blog in page views.   We’re also, to my knowledge, the leading blog with a significant focus on antitrust issues.  Scanning the data, we are also posting some astronomical growth numbers — 365% and 506% over last year’s figures for page views and visitors, respectively.  OK, OK, if you were paying attention to the beginning of the post, you know this is largely because we didn’t have a site meter for much of last year.  Nonetheless, our readership is expanding and, as top-ranked law professor / blogger Ann Althouse advises her readers: “Check out some of those other blogs, especially ones that are acquiring new readers. They might be kind of good.”   We hope you’ll think so.

Thanks to all of our readers and commenters.  Also on the blog front, we are looking to make an announcement on our next TOTM symposium.  See the menu on the right hand side for links to prior TOTM symposia or the tab at the top for links to our last “free to choose” symposium on behavioral law and economics.

I did enjoy the thought of this mandarin of the tax-exemptocracy being pulled from the comfort of his first-class Air France seat and dispatched to Riker’s Island without regard to status or dignity. And I admired the humble immigrant who would risk so much for the sake of justice. And I smiled at the spectacle of France’s Socialists finding their would-be savior exposed by American prosecutors when they had been hypocritically observing a code of silence about his habits. And I liked seeing the IMF red-faced for whitewashing DSK’s previous escapades.

* * *

He adds that

this is as good an opportunity as any to ask where else we might be committing similar blunders. The climate change obsession, with its Manichean concept of polluting corporations versus noble eco-warriors? The Wall Street obsession, with its belief the boardroom boys were criminally guilty of the financial crisis? The China obsession, with its view that the Middle Kingdom is destined to overtake the U.S. in global economic and political clout? The Israel obsession, with its notion that if only Jewish settlements were removed from the West Bank peace would break out throughout the Middle East?

In each of these cases, the media (broadly speaking) has too often been guilty of looking only for the evidence that fits a pre-existing story line. * * *

But anecdotes are not data—which happens to be the world’s most easily neglected truism. Also true is that sloppy moral categories like the powerful and the powerless, or the selfish and the altruistic, are often misleading and susceptible to manipulation. And the journalists who most deserve to earn their keep are those who understand that the line of any story is likely to be crooked.

I discussed these issues five years ago in my Public Face of Scholarship. I found a rich economics literature analyzing media bias:

• Michael Jensen observed that people “want sensationalist stories that present choices between good and evil and simple solutions rather than complex explanations.”
• Core, Guay and Larcker studied the journalist coverage of executive compensation, noting that the press emphasizes sensationalism rather than realistic analysis of the extent of excessive compensation.
• Gregory S. Miller, The Press as a Watchdog for Accounting Fraud, 44 J. ACCT. RES. 1001 (2006) found that the press emphasized sensationalist elements in stories about accounting fraud.
• Gentzkow & Shapiro, Media Bias and Reputation, 114 J. POL. ECON. 280 (2006) argue that the news media seek to confirm what the audience thinks it already knows rather than risk being rejected. 
• Mullainathan & Shleifer conclude that journalists feed audience biases.
• David Baron reverses causation, arguing that media bias originates with left-leaning anti-market journalists rather than with an effort to serve the audience.

I discussed these theories by way of arguing that bloggers can help correct these tendencies.  That may have happened in this case, but being biased in favor of the accepted wisdom here I didn’t follow any bloggers who might have caught on. 

All of this shows that media and audience bias can be very sticky, and we need a lot of different information sources to combat it.  In other words, free speech is important.  This includes not only bloggers, but for-profit corporate speech, which can cut against some of the biases Stephens referred to.

I really appreciate comments, particularly including when they disagree with the posts.  These comments are what distinguishes an interactive blog from a passive website.  I’m glad people are willing to take the time and effort to engage in the discussion.  The vast majority of our readers have worthwhile contributions.

But every once in awhile we get the other kind.  Like yesterday:  a completely baseless (and untrue) accusation that I had a financial conflict regarding one of my posts.  The comment was not only insulting, but even worse contributed nothing to the discussion.  The comment now sits in trash.

So for the small fraction of our readers who need to be reminded: be civil and be substantive.  This is our blog.  If you want the other kind, get yer own.

For the vast majority:  keep the comments coming.

Paul has written seminal articles on, among other subjects, the forces shaping the common law, franchising, and covenants not to compete.  Paul’s current areas of interest include tort reform, regulation of pharmaceuticals, the economics of privacy and the economics of the Bill of Rights.  He’s a frequent contributor to prominent publications, and now will grace our pages.

Paul will significantly expand our coverage and reinforce our position as one of the leading sources of commentary on the law and economics of regulation.   No folk economics here — just Truth on the Market.

Q:  Business law scholars think a great deal about how the corporate form can facilitate good business decisions.  But financial institutions tend to use corporate governance best practices (no poisons pills, dual class stock structures, plenty of outside, if not always qualified, directors), and yet have extremely high levels of insider compensation, regularly exercise poor risk management, and so on.  You’ve looked at the way the banks were run during the crisis; how did you think their corporate organization affected their performance, if at all? 

A.  It is important to remember that most Wall Street firms were partnerships before they became corporations.  When they took investment risk, they did it with the partners’ money; when they reaped rewards, it was the partners who put those rewards in their pockets.  Once the partnerships became publicly traded corporations, they were suddenly freed from the fear that losses would come out of their own pockets–it was now shareholders’ money they were putting at risk.  Yet their view of compensation never changed: the vast majority of the gains they made went not to the shareholders, but to themselves.  Most Wall Street firms put aside more than 50 of revenues–not profits, but revenues–for compensation, an astounding figure.  That is why there was so little brake on the riskiness, and even the foolishness, of the risk-taking:  all the incentives went in the opposite direction.  Having a corporate structure, in no small measure, created those warped incentives.

Obviously I agree that corporations were a cause, and the uncorporation is a possible solution.  I noted this more than two years ago discussing a post by Charles Calomiris making points identical to those of Nocera.  Since then, the point has been made by so many others that it is now commonplace: 

• Michael Lewis (“No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.”)
• James K. Glassman & William T. Nolan, Wall St. J., Feb. 25, 2009, at A15
• Steve Davidoff  (the firm that best avoided the problems with subprime, Goldman, “retained the most partnership-like attributes” of all the investment banking firms, but that “all partnerships were not created equal”)
• Caroline Salas & Pierre Paulden
• Richard Posner, A Failure of Capitalism, 99-100 (2009) (hedge funds didn’t do as badly as large publicly held financial firms partly because they were “less plagued by conflicts between owners and managers” and that “the incentive to take risks that is created by executive overcompensation in publicly held companies has been a factor in the financial crisis”).
• Alan Blinder (hedge funds have less leverage than investment and commercial banks because their senior partners “almost always have significant shares of their own personal wealth tied up in the funds”)

I noted in my 2008 post that

[t]his story directly supports what I have been saying about the advantages of what I call partnership, or “uncorporate,” governance structures that involve not only high-powered owner-like compensation, as Calomires stresses, but also distributions to owners and limited term of the fund, both of which tend to expose managers to capital market discipline.

* * * [T]hese devices can be superior to the sort of monitoring structures that publicly held corporations and other firms governed on the corporate model typically rely on. So we see that all of the so-called independent directors in the world and the other trappings that are considered so essential to the modern corporation did not stop a huge segment of the investment industry from deliberately ignoring reality, and causing vast dislocations as a result. Yet despite this, as I show in my article, there is still a bias against uncorporate structures in large firms.

I later wrote in my Rise of the Uncorporation (footnotes omitted):

[I]t is not clear that investment firms need to turn back the clock to the partnership era. Managers’ personal liability may deter beneficial risk-taking because there is a lot of uncertainty that even the most intense monitoring cannot eliminate. Modern uncorporate business forms may be a better approach because they combine limited liability with partnership-like mechanisms for addressing agency costs.

In my article, Uncorporation’s Domain, I noted that the uncorporate/hedge fund structure is appropriate for investment banking:

The modern uncorporation could offer a useful compromise for investment banks.  These firms might become more like hedge funds, which survived the meltdown relatively well. * * *

The biggest problem posed by uncorporate investment banking is that it could exacerbate concerns about market risk.  Owner demands for cash might force distressed firms to sell assets in illiquid markets at “fire sale” prices.  In the recent financial crisis, rapidly deteriorating asset values led to fears of investor runs on financial firms.  Toppling financial firms reduce overall market liquidity and thereby can threaten the whole economy.  Thus, rather than permitting the spread of the uncorporation into investment banking, regulators seem poised to apply increased regulation of the financial sector to uncorporations.  Indeed, the U.S. House of Representatives passed a major financial reform bill that would, among other things, impose registration and systemic risk regulation on hedge funds, while European regulators appear to be moving toward even tighter controls. 

It is important to keep in mind, however, that these market risks materialized in a financial industry dominated by corporations.  Uncorporate governance could weed out the weakest firms before disaster strikes, thereby reducing the risk of a market-wide crisis of confidence.  Uncorporations also can avoid some of the problems posed by bankruptcy of financial institutions. An uncorporation that cannot continue making distributions to its owners is in a different position from a firm that cannot continue paying its creditors in that it can deal with the potential shortfall by ex ante contract, possibly avoiding the need for a hasty ex post restructuring in bankruptcy.  This Article’s analysis suggests that regulators should consider the basic governance differences between uncorporations and corporations when deciding which financial institutions are appropriate for systemic risk regulation.

Of course we now know that didn’t happen — Dodd-Frank Section 403 responded to the financial crisis in part by shackling hedge funds with new registration and information requirements despite the now commonplace wisdom that hedge funds were a solution to rather than a cause of the financial crisis.

Final note:  I like the idea of academic bloggers interviewing journalists.  Great illustration of what I saw a few years ago as the potential relationship between blogging intellectuals and the mainstream press — and a way to get a better press corps.  But hey, Dave, how about some follow-up questions?