Archives For marriage

Weekend reads: Big is bad edition

Eric Fruits —  22 June 2018

Big is bad, part 1: Kafka, Coase, and Brandeis walk into a bar … There’s a quip in a well-known textbook that Nobel laureate Ronald Coase said he’d grown weary of antitrust because when prices went up, the judges said it was monopoly; when the prices went down, they said it was predatory pricing; and when they stayed the same, they said it was tacit collusion. ICLE’s Geoffrey Manne and Gus Hurwitz worry that with the rise of the neo-Brandeisians, not much has changed since Coase’s time:

[C]ompetition, on its face, is virtually indistinguishable from anticompetitive behavior. Every firm strives to undercut its rivals, to put its rivals out of business, to increase its rivals’ costs, or to steal its rivals’ customers. The consumer welfare standard provides courts with a concrete mechanism for distinguishing between good and bad conduct, based not on the effect on rival firms but on the effect on consumers. Absent such a standard, any firm could potentially be deemed to violate the antitrust laws for any act it undertakes that could impede its competitors.

Big is bad, part 2. A working paper published by researchers from Denmark and the University of California at Berkeley suggest that companies such as Google, Apple, Facebook, and Nike are taking advantage of so-called “tax havens” to cause billions of dollars of income go “missing.” There’s a lot of mumbo jumbo in this one, but it’s getting lots of attention.

We show theoretically and empirically that in the current international tax system, tax authorities of high-tax countries do not have incentives to combat profit shifting to tax havens. They instead focus their enforcement effort on relocating profits booked in other high-tax places—in effect stealing revenue from each other.

Big is bad, part 3: Can any country survive with debt-to-GDP of more than 100 percent? Apparently, the answer is “yes.” The U.K. went 80 years, from 1779 to 1858. Then, it went 47 years from 1916 to 1962. Tim Harford has a fascinating story about an effort to clear the country’s debt in that second run.

In 1928, an anonymous donor resolved to clear the UK’s national debt and gave £500,000 with that end in mind. It was a tidy sum — almost £30m at today’s prices — but not nearly enough to pay off the debt. So it sat in trust, accumulating interest, for nearly a century.

How do you make a small fortune? Begin with a big one. A lesson from Johnny Depp.

Will we ever stop debating the Trolley Problem? Apparently the answer is “no.” Also, TIL there’s a field of research that relies on “notions.”

For so long, moral psychology has relied on the notion that you can extrapolate from people’s decisions in hypothetical thought experiments to infer something meaningful about how they would behave morally in the real world. These new findings challenge that core assumption of the field.

 

The week that was on Truth on the Market

LabMD.

[T]argets of complaints settle for myriad reasons, and no outside authority need review the sufficiency of a complaint as part of a settlement. And the consent orders themselves are largely devoid of legal and even factual specificity. As a result, the FTC’s authority to initiate an enforcement action  is effectively based on an ill-defined series of hunches — hardly a sufficient basis for defining a clear legal standard.

Google Android.

Thus, had Google opted instead to create a separate walled garden of its own on the Apple model, everything it had done would have otherwise been fine. This means that Google is now subject to an antitrust investigation for attempting to develop a more open platform.

AT&T-Time Warner. First this:

The government’s contention that, after the merger, AT&T and rival Comcast could coordinate to restrict access to popular Time Warner and NBC content to harm emerging competitors was always a weak argument.

Then this:

Doing no favors to its case, the government turned to a seemingly contradictory argument that AT&T and Comcast would coordinate to demand virtual providers take too much content.

 

 

In Apple, Facebook, Google, International, Platforms, Truth on the Market, United Kingdom , ,
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My Office Door

Thom Lambert —  12 November 2015

University professors often post things on their office doors—photos, news clippings, conference posters, political cartoons.   I’ve never been much for that.  The objective, I assume, is to express something about yourself: who you are, what interests you, what values you hold.  I’ve never participated in this custom because I haven’t wanted to alienate students who might not share my views.  That’s not to suggest that I’m shy about those views.  I will—and regularly do—share them with students, even those who I know disagree with me.  But if posting my views on the door were to dissuade students from coming to me to discuss those views (and contrary ones), I would be losing the opportunity to have a meaningful dialogue.  Plus, my tastes veer toward minimalism, and doors covered with postings are ugly. Thus, no postings.

Until today.  My institution, the University of Missouri, is at a crossroads.  We can be a place where ideas—even unpopular ones—are  freely expressed, exchanged, and scrutinized.  Or we can be a place where everyone’s feelings are protected at all times.   It’s one or the other.

Tuesday morning, I opened an email and thought, “What a great prank. It looks so official!”  The email, which was from the MU Police, read as follows:

To continue to ensure that the University of Missouri campus remains safe, the MU Police Department (MUPD) is asking individuals who witness incidents of hateful and/or hurtful speech or actions to:

  • Call the police immediately at 573-882-7201. (If you are in an emergency situation, dial 911.)
  • Give the communications operator a summary of the incident, including location.
  • Provide a detailed description of the individual(s) involved.
  • Provide a license plate and vehicle descriptions (if appropriate).
  • If possible and if it can be done safely, take a photo of the individual(s) with your cell phone.

Delays, including posting information to social media, can often reduce the chances of identifying the responsible parties. While cases of hateful and hurtful speech are not crimes, if the individual(s) identified are students, MU’s Office of Student Conduct can take disciplinary action.

As it turns out, it was no joke.  Anyone on my campus who witnesses “hurtful speech” is directed to call campus police—individuals who carry guns, drive squad cars, and regularly arrest people. Now rest assured, “cases of hateful and hurtful speech are not crimes.”  They can give rise to, at most, “disciplinary action” by the MU Office of Student Conduct.  But still, isn’t it a bit unsettling—chilling, even—to think that if you say something “hurtful” at Mizzou (e.g., gay marriage is an abomination, affirmative action is unfair and hurts those it is ostensibly designed to help, Christians who oppose gay marriage are bigots, Islam is not a religion of peace, white men are privileged in a way that leads to undeserved rewards, culture matters in cultivating success, Republicans are dumb), the police may track you down and you may be required to defend yourself before the student conduct committee?  Perhaps the MU Police, or whoever crafted that email (let’s get real…it wasn’t the police), didn’t really mean that all hurtful speech is potentially problematic.  But if that’s the case, then why did they word the email as they did?  Pandering to an unreasonable element, maybe?

Contrast Mizzou’s approach to that taken by Purdue University.  The day after the Mizzou email, Purdue president Mitch Daniels reminded members of the Purdue community that their school actually stands for both tolerance AND free speech.  Here’s his letter:

Purdue Letter

 

The contrast between Mizzou and Purdue couldn’t be starker.  And it really, really matters.  I hope that posting these two documents on my door (along with this spot-on Wall Street Journal editorial) will not dissuade students from engaging in dialogue with me.  But I can’t be demure on this one.  So I now have—much to my aesthetic chagrin—a decorated office door.  Please come in and talk, even if you think I’m wrong.

 

In Truth on the Market
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Meese, Mellor & Rowes on Economic Liberty and the Fourteenth Amendment

Thom Lambert —  25 March 2013

“[N]or shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

These words from the U.S. Constitution’s Fourteenth Amendment lurk behind a great many news stories these days.  For the next two days, the U.S. Supreme Court will consider whether they guarantee a right to same-sex marriage (or, more narrowly, whether they preclude a state from banning gay marriage after it’s been permitted).  The Court will also consider whether similar words in the Fifth Amendment, which applies to the federal government, preclude Congress from denying same-sex married couples the rights that are available to other married couples under federal programs.  Just today, the Court announced that it will consider whether the words preclude a state, by referendum, from eliminating the use of affirmative action in higher education.

But do the words place any meaningful restrictions on regulations of purely economic activity?  For the last two-thirds of a century, most people have assumed they don’t.  Sure, economic regulations are officially subject to Fourteenth Amendment constraints.  But the “rational basis review” courts have applied in scrutinizing economic regulations has generally amounted to  a rule of per se validity.

As Alan Meese explains, a recent Fifth Circuit decision suggests that might be changing, if ever so slightly.  Conservatives may balk (e.g., “you can’t have Lochner without Roe!”), but, as Alan discusses, the Fifth Circuit’s scrutiny was far less stringent than that engaged in by the courts that struck down economic regulations in the so-called Lochner era.  As Chip Mellor and Jeff Rowes explain, it seems the Fifth Circuit was just doing its constitutionally assigned job here.

In Constitutional Law ,
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Leonhardt on the Age Gap

Paul H. Rubin —  24 June 2012

In today’s New York Times David Leonhardt has a pretty amazing article.  He tells us that “polls suggest that Mitt Romney will win a landslide among the over-65 crowd and that President Obama will do likewise among those under 40.” He links to the Gallup Poll for this evidence. ( I generally don’t follow polls; I get my political forecasts from Intrade).

Without drawing any conclusions, the articled itself explains why this is amazing.  First, under this administration, as Leonhardt indicates  “the young are generally losing out to the old.”  With respect to Federal spending (where President Obama clearly favors more and Governor Romney less)  “more than 50 percent of federal benefits flow to the 13 percent of the population over 65”, largely through Social Security and Medicare.  Thus, the polling results are not driven by economics; they seem entirely driven by social issues such as gay marriage and immigration (which is of course actually an economic issue.)  Mankiw cites Niall Ferguson on the way in which the current generation is living at the expense of the young.

Many years ago James Kau and I wrote s series of articles showing that ideology was a major determinant of voting. (We actually measured ideology of Congress, rather than of individual voters.)  If one believes as I do that Romney’s policies will lead to more robust long term growth than Obama’s policies,then the Gallup results are a strong demonstration of the power of ideology over self interest.  But social policies can be changed; lost output cannot be recovered, and a lower growth rate will haunt current younger voters through their entire lives.

In Truth on the Market , , ,
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Book Review of Cohen & Wright on Family Law & Economics

Josh Wright —  25 April 2012

From Lucy Heckman:

The Research Handbook on the Economics of Family Law consists of a series of essays about perspectives on the commercial relations of human activities outside of the commercial world, specifically marriage and child-bearing.  The work addresses such topics as factors that influence marriage, trends in marital stability, divorce and divorce law and the role of economics, the economics of infant feeding, and the relation between early access to birth control and its influence on a woman’s education, career, and fertility, many people tend to look for Chicago divorce lawyer when they have trouble with their marriage. All of the essay topics are varied and each contributor takes a different approach to his or her topic. Some of the essays rely heavily on surveys and literature on the topic, others use empirical economics, while others take a purely legal approach to the topic. Along with addressing marriage, divorce, and childrearing there are some unexpected topics such as abortion access, prostitution, and incentives for partnering. This is an enlightening text on the subject of law, economics, and social institutions that will be useful for students in law and economics, specifically those studying family law.

The book is available here.

 

In Amazon, Platforms, Truth on the Market
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Sex and the business association

Larry Ribstein —  11 December 2011

Should domestic relationships be modeled on corporations, partnerships or other business associations?  This idea may seem attractive.  As I have argued, both business and family relationships can be viewed as standard forms, which are useful for filling gaps in long-term contractual relationships.  Borrowing contract-type thinking from business associations also could help break through the norm-driven rigidity of family law.  Thus, I have argued (here, and in Chapter 8 of The Law Market) for using business associations as a model for a choice-of-law approach to same sex marriage.

My writing got me an invitation to the very interesting “Love or Money” conference at Washington University, which explored “the false dichotomy in life and law between activities initiated for affective reasons, such as love or altruistic impulses, and those undertaken for profit.” 

But I probably disappointed the organizers by insisting on some “dichotomy” — that is, a separation between the statutory standard forms used for “love” (intimate relationships) and for “money” (business associations).  My point is that merging the two, while it may have political advantages, could muddy both legal areas.  This is based on my theory of the functions of these standard forms articulated in several papers, and most completely in my book, Rise of the Uncorporation. 

My paper from that long-ago conference, Incorporating the Hendricksons, has finally been published.  (Of course the title refers to much missed Big Love). Here’s the abstract:

The family is evolving rapidly, but not fast enough for some people. Several commentators suggest freeing family law of its traditional constraints by applying the contractual business association model. Business models, though superficially similar to domestic relationships, ultimately are unhelpful or counter-productive to defining the family. This Article discusses the essential differences between business and domestic partnerships and the potential havoc from trying to merge the two.

One nice result of the conference and paper is that I finally got to use this title for a blog post.

In Amazon, Corporate & Securities Law, Google, Platforms , ,
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Nuno Garoupa on Reforming Legal Professions in Europe

totmauthor —  20 September 2011

The European Commission, in particular the Directorate-General for Competition, has shown interest in promoting competition in the market for legal services since the early 2000s.

Some countries such as the United Kingdom have taken this matter seriously. After a long review process, the British government has recently implemented a new regulatory set-up for legal services in order to foster competition, innovation, consumer protection as well as a so-called accountable regulatory enforcement (under the Legal Services Act 2007).  These reforms were prepared by the Clementi report (published by December 2004) which argued for alternative business structures (allowing nonlawyers to go into business with lawyers as well as nonlawyer’s ownership of law firms including the possibility of public trading of shares in law firms), an independent agency to deal with disciplinary complaints (rather than leaving it to self-regulation; currently the Legal Ombudsman and the Office for Legal Complaints), and greater freedom for legal service providers to compete (under the supervision of the Legal Services Board operational since 2010). The reform failed to suppress the distinction between solicitors and barristers, but the new alternative business structures could in the future further contribute to blur this distinction. It is probably too early for a full-fledged assessment of the impact of these legal reforms on the market for legal services in the United Kingdom, but the general sense seems to be that they have modernized the institutional framework in the right direction while making the market more competitive just in time for the 2008 recession. I do not know of any empirical study on the effect of these reforms on legal fees but it would be important to know whether or not more competition and plausibly a better regulatory setup have reduced average fees.

Not all countries have moved in the direction of deregulation. Until recently Spain had no bar exam. Law graduates simply needed to register with the local bar at the end of their degree (of five years in the past, now four years). The consequence is that Spain has currently one of the highest numbers of lawyers in per capita terms (slightly behind the United States). However, a large proportion of these “lawyers” are actually not practicing law, but merely registered with the local bar. With the excuse that Spain was different from the other EU Member States, the Spanish government has introduced a bar exam in 2007, effective from 2011. At this stage, we do not know what the passing rates will be, but we can easily see the new bar exam being used to reduce entry to the profession under the pretense of improving quality.

Another example is Portugal. Law graduates are accepted for a training period at the end of which there is a (national) bar exam with a significantly high passing rate. Due to an expansion of legal education in the mid 1990s, the number of lawyers has increased considerably in the last decade or so. As a consequence there has been a pressure for more competition in a market traditionally characterized by strong cartelization and considerable rent-seeking. The response from the national bar was simple: introduce a new (national) bar exam to enter the training period with a passing rate of less than 10%. There is no doubt that such change has satisfied the “incumbents.”!

In European Union, International, Legal Profession, Regulation, United Kingdom, Unlocking the Law Symposium , , ,
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Research Handbook on the Economics of Family Law

Josh Wright —  13 August 2011

Edward Elgar has published the Research Handbook on the Economics of Family Law — available here and here or here — co-edited by myself and Lloyd Cohen.  While a bit outside my normal intellectual strike zone, its an area with such a diverse and important set of topics, a lot of cool data, and application of cutting edge methods.  I think we’ve put together a really nice group of new essays that covers quite a bit of ground in the vast family law space with topics including but not limited to: marriage, divorce, prostitution, breastfeeding, abortion, and child support.  The contributors include:

  • Joseph Price
  • Amy Wax
  • Michael Hanlon
  • Scott Cunningham and Todd Kendall
  • Betsey Stevenson and Justin Wolfers
  • Robert Lerman
  • Antony Dnes
  • Douglas Allen
  • Tiffany Green and Katherine Dickinson
  • Jonathan Klick and Thomas Stratmann
  • Melanie Guldi

You can peruse the contents here.

And for what it is worth, my earlier venture with Lloyd Cohen — Pioneers of Law and Economics, which includes a great collection of new essays by leading scholars such as Demsetz, Garoupa, Grady, Hazlett, Hylton, Litvak, Morriss, Pfaff, Ribstein, Tollison, and  Ulen — is now pretty widely available in paperback for less than $50.

In Amazon, Google, Platforms, Truth on the Market
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China

Paul H. Rubin —  27 June 2011

There are many stories about unrest in China.  Many factors are blamed for this unrest, including low wages, poor working conditions, and political factors.  But there is one thing that is not generally mentioned:  demographics.  The one child policy coupled with a preference for males (due to both economic and cultural factors) means that there ar significant numbers of unmarried and probably unmarriageable males.  This leads to severe male-male competition.  However, it also means that there are large numbers of socially discontent men with little to lose.  Similar factors probably operated in the Arabic world.  In both cases, it may be difficult to maintain an open democratic society.  I discussed this in Darwinian Politics, beginning at page 118.  It is also the theme of the book Bare Branches by Valerie M. Hudson and Andrea M. den Boer.  Because of demographic factors relating both to a very peculiar age structure and the gender imbalance mentioned here, China is going to face serious difficulties in the future.  Those projecting increasing power for China do not always take these factors into account.

In Amazon, China, International, Platforms , , ,
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New York and the market for marriage law

Larry Ribstein —  25 June 2011

NY’s decision to fully legalize same sex marriage (here’s a useful news roundup) can be seen among many other things as a demonstration of legal evolution in our federal system.

For some background on marriage and the market for law see Buckley and Ribstein (published 2001 Illinois Law Review 561), Ribstein 2005, and O’Hara & Ribstein, Chapter 8.  The 2001 and 2005 articles anticipated the state law competition that unfolded at a time when the once-promising same sex marriage movement was floundering.

Three years ago I summarized the state of play, noting the ups and downs in the marriage law market.  Fifteen years ago Hawaii looked like it was going to lead the nation.  This spurred federal DOMA and the state DOMAs.  But these developments left the “market” intact in any state that had not rejected same sex marriage, and therefore an opening for the same sort of evolution of choice of law as happened with corporate law.

Indeed, the market did develop.  First Massachusetts, then California.  This put pressure on NY, which actually adopted same sex marriage by gubernatorial decree in 2008 recognizing the validity of out of state same sex marriages.  Then Massachusetts, with an eye on the lucrative market for marriage ceremonies, decided to let out of state couples marry in Massachusetts. At that point I asked “Any bets on how long it will take for NY to allow same sex marriages to be performed in NY? When that happens, the marriages will be fully legal in NY, California and Massachusetts.”

Then Connecticut went for same sex marriage via court decision. I said at the time, “this move by the state located between NY (which recently recognized out-of-state same sex marriages) and Massachusetts, and next to Vermont (which has quasi-same-sex-marriage), was predictable.”

As I said just before the 2008 election, when things seemed to be looking pretty good for same sex marriage:

Those favoring a particular legal regime can further their interests not just by lobbying a particular legislature, but also by “shopping” for law in other jurisdictions, including by getting married in the relevant state. These other jurisdictions have an incentive to supply law to attract residents, ceremonies, legal work. Even non-supplier jurisdictions have an incentive to enforce the foreign law because the “shoppers” (including affluent and productive same sex couples) can avoid non-recognizing states. We’ve seen this competition play out, among other areas, in corporations and commercial contracts, and it is happening in Europe as well as the US.

But then, as we know, Prop 8 happened, and the legal aftermath.  The 2008 election was generally bad for same sex marriage, as significant Obama constituencies voted against it. (There’s no mystery why he’s still dithering on the issue.)

Although the NY decision may end up being a watershed, all indications for the future aren’t necessarily favorable for same sex marriage.  Even NY couples aren’t so much better off than they were the day before yesterday.  Basically what’s changed is they can get married at home rather than in Greenwich, benefiting NY caterers and hotels (which as just indicated may have figured in the political decision).  But their marriages still may not be enforceable in 45 jurisdictions.  Priests, ministers and rabbis don’t have to marry the couples (and this religious exemption might end up triggering invalidation of the NY law). 

There is an increasingly strong temptation to clear up the legal chaos confronting same sex couples, added to the moral and philosophical reasons for legalizing same sex marriage.  Moreover, NY’s recognition of same sex marriage is likely to register in public opinion which will directly affect Congress and perhaps even the Court.

On the other hand, as I said in my 2005 article (footnotes omitted):

[T]he relevant question is whether the process is likely in the long run to disregard rights that deserve recognition. A decision invalidating laws against same sex marriage would leave many questions unanswered concerning potential differences between same sex and heterosexual relationships. Agnosticism is particularly important for family law, given the clash of normative views and the difficulty of getting reliable data. * * * Courts and legislators can observe the results, particularly as children grow up under different regimes. Evolution also permits the law to adapt incrementally to unpredictable future events and changing mores, provides feedback as to alternatives, and minimizes the cost of mistake compared to a Supreme Court decree.

So what should happen now?  About half of the country is still opposed even after having been exposed to it in the media and their daily lives.  Many (particularly African-Americans) believe that recognition of same sex marriage would weaken marriage, which is still a valuable institution.  On the other hand, same sex couples have increasing state law options, including but not limited to marriage, for supporting their relationships.  On the third hand, their situations are far from ideal. 

I personally favor same sex marriage and would vote for it whenever I have the opportunity.  The plight of same sex couples registers more heavily with me than the more abstract objections that many have to same sex marriage.  But, believe it or not, I don’t have a bottom line.  I just have the observation that the market for law should have something to do with it.

In Amazon, Jurisdictional Competition, Platforms
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China land and bachelors

Paul H. Rubin —  16 April 2011

The New York Times has an interesting story about land markets in China.  In order to get married a man needs to own property and land prices are very high in China.  As it its habit, the Times blames “overeager developers who force residents out of old neighborhoods.”

In fact, the Times gets it backwards.  The information needed to understand the issue is in the story: “The marriage competition is fierce, and statistically, women hold the cards. Given the nation’s gender imbalance, an outgrowth of a cultural preference for boys and China’s stringent family-planning policies, as many as 24 million men could be perpetual bachelors by 2020, according to the report.”  So what is happening is that there is a shortage of marriageable women and it is competition for the land needed to attract these women that is driving up land prices.

This competition is one unfortunate side effect of the one child policy and the Chinese preference for boys.  These 24 million unmarriageable men are going to be a long term problem for China.  In my book Darwinian Politics I argue that a large core of perpetual bachelors makes a free and open society difficult because this core will lead to social instability; the argument is also forcefully made in Bare Branches: The Security Implications of Asia’s Surplus Male Population by  Valerie M. Hudson and Andrea M. Den Boer. 

Much has been written about the problem of China’s aging population but I don’t think we have paid enough attention to the issues of gender imbalance.  More generally, I think much of the course of world politics over the next century is going to be driven by major demographic trends, and I think these worthy of increased study.  Nicholas Eberstadt of AEI is doing this sort of work, but I think there is much more to be done.

In Amazon, China, International, Platforms , , , , ,
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Modes of mixing law and economics

Larry Ribstein —  12 April 2011

Geoff Miller has a new must-read paper on the relationship between law and economics:  Law and Economics versus Economic Analysis of Law.  Here’s the abstract:

This paper distinguishes law and economics – conceived as an equal partnership between two disciplines – and economic analysis of law, conceived as the application of economic reasoning to legal rules and institutions. I explore the difference by contrasting Robert Aumann’s economic analysis of a text from the Talmud with an analysis of the same text conducted from within the framework of law and economics. The paper demonstrates that law and economics and economic analysis of law offer complementary means for obtaining information about the social world.

Here’s Miller’s brief overview of the distinction between the two concepts:

The economic analysis of law is the use of economic principles and reasoning to understand legal materials. It is a branch of economics. Law comes into the picture as an object of study. Just as macroeconomics looks at matters such as employment, growth and productivity, economic analysis of law looks at legal rules and institutions and seeks to analyze them from an economic point of view. Law and economics, on the other hand, is a genuine partnership of two disciplines, each with something to contribute. Economics adds the insights of economic science; law adds the understanding of complex institutions, politics, and social policies.

Miller’s analysis is based on a problem analyzed by Robert Aumann in Risk Aversion in the Talmud, 21 Economic Theory 21, 233–239 (2003).  Here’s Miller’s description of the problem:

Prior to their marriage a husband‐to‐be signs a marriage contract promising to pay his wife‐to‐be 500 zuz in the event of divorce. Later, the wife sues her husband, claiming that he has obtained a divorce but refuses to pay the money called for in the contract. As required under the applicable law of evidence, she introduces two witnesses, W1 and W2, who testify that the divorce occurred. Based on this testimony the judge orders the husband to pay 500 zuz to the wife. The husband pays up.

In the next stage, the husband sues W1 and W2, claiming that they perjured themselves when they testified that the couple had divorced. The judge agrees with the husband, finding that the witnesses had perjured themselves. The judge now has to determine the amount of damages.

* * *

[T]he perjurers must pay the husband an amount equal to the harm that was imposed by their perjury. But how is this standard to be implemented? * * *The measure of damages they adopted was, in effect, the amount the husband paid as a result of the perjured testimony discounted by the probability that the couple would have divorced in any event. * * *

But this raises an additional issue Aumann analyzed:  The damages should also reflect risk aversion.  The presumably risk averse husband avoided the risk of divorce when the witnesses made it happen, while the presumably equally risk averse wife gained that much more as a result of realizing her previously contingent asset.  Two rabbis differed as to whether the court should adopt the wife’s or the husband’ perspective.

So far, according to Professor Miller, we are in the land of the economics of law — that is, using a legal question as an opportunity for applying economic principles, in this case risk discounting and risk aversion. But law and economics accomplishes the further task of combining economics with social policy to resolve the legal issue. 

Miller notes that the witnesses’ testimony was part of a legal fiction.  Everybody in the small community must have known no divorce occurred, and the wife and husband each could buy equally perjured witnesses to achieve his or her desired result. Yet the rabbis accepted the fact of the divorce because they must have thought this was a just result.  They then could do more precise justice between the husband and wife by adjusting the damages, reasonably assuming that the wife or her family will indemnify the witnesses for their damages.

Miller surveys three potential results. First, the wife may be opportunistically creating a split because she would be happier with somebody else, then seeking damages under her agreement.  Discounting the damages for probability at least deprives the wife of any reward for this misbehavior. ‘

Second, the marriage may have broken down but the husband is misbehaving to get the wife to waive her rights.  The court can adjust the probability of divorce to 100% and increase the wife’s damages. 

Third, the marriage may be unhappy but the parties are simply deadlocked.  Now the probability of divorce is 50%.  The rabbis get to split the baby in half, so to speak, and give the wife some relief but no excessive reward.

Miller says:

In each of these cases, the court can use the measure of damages as a means for advancing important social policies: giving wives relief from loveless marriages, reducing disparities in power, protecting the family against instability, and policing against opportunism by either party. Accordingly, law and economics provides a supplemental explanation for the Talmudic measure of damages – one not inconsistent with the economic interpretation advanced by Professor Aumann, but arguably more informative (if also less precise) because it is based on the institutional details that a lawyer can bring to the table.

And now back to the distinction between economic analysis of law and law and economics.  Miller concludes:

Each approach has advantages and disadvantages. Economic analysis of law brings to the table the well‐understood methodology and a precision of analysis that is emblematic of economics as a whole. On the other hand economic analysis of law also carries with it the limits of its method, which include the fact that, to achieve analytical precision, the approach must abstract away from many features that make a difference in the real world.

Law and economics is inherently more complex and less analytically rigorous than economic analysis of law. These might be considered weaknesses. On the other hand, law and economics, because it does not abstract from the real world, also offers a potentially richer menu of explanations for the phenomena under investigation. At its worst, law and economics can be muddied, as when we mix many colors into an ugly brown. But at its best, law and economics can be a rainbow that adds vibrancy and depth to an analysis drawn from the purely economic approach.

We see these debates being played out in many different contexts in legal academia, from academic conferences to hiring to curriculum.  And they are being replicated with other disciplines such as philosophy and psychology.  Legal academia needs more of the sort of self-conscious analysis displayed in Miller’s article to decide how to achieve the best mix of law and other disciplines.

In Economic Theory, Law & Economics ,
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