The University of Chicago Law School Faculty Blog

Martha Nussbaum: The 2008 Nora and Edward Ryerson Lecture

On May 14, Martha Nussbaum presented the 2008 Nora and Edward Ryerson Lecture. The Ryerson Lectures grew out of a 1972 bequest to the University by Nora and Edward L. Ryerson, a former Chairman of the Board. The University's faculty selects each Ryerson Lecturer based on a consensus that a particular scholar has made research contributions of lasting significance. Video of Professor Nussbaum's lecture, which was  entitled "Equal Respect for Conscience: The Roots of a Moral and Legal Tradition," is embedded below, and an .mp3 is also available.

New Features on the Faculty Blog

Our observant readers might notice that we've added a couple of nifty new features to the blog. First, you'll see a little green chiclet after each post, and the words "ShareThis." Clicking on "ShareThis" will allow you to quickly share your selected post on dozens of social networking and bookmarking sites, from Facebook and del.icio.us to ones that even our resident webgeek has never heard of.

Also, just below the "Comments" header of each post, you will see an orange feed chiclet and a link to the post's comments feed. This means that you can track the comments on each post without having to continually visit our the blog itself. Instead, you can get up-to-the-moment updates by subscribing to one of these feeds in your favorite feedreader. Of course, you'll still have to come back to the blog to add your own witty riposte to the conversational fray.

Scienter disclosure

Ever since Louis Brandeis wrote that "sunlight is the best disinfectant," disclosure has been the fetish of American law. Our securities laws and much of corporate law are premised on the assumption that disclosure is a virtual legal panacea -- if individuals are aware of the relevant information, then the opportunities for strategic opportunism will be reduced or eliminated. For this reason, the knee-jerk response to perceived problems in nearly every area of law is increased disclosure.

But there may be a dark side to disclosure. In a paper posted to SSRN today (and discussed here), this issue is explored in the context of Rule 10b5-1 insider trading plans, which provide a litigation prophylactic for insiders who pre-commit to trades. Because disclosure of these plans is not mandatory, firms' voluntary disclosure offers a nice test of the social benefits and costs of disclosure.

My co-authors (Alan Jagolinzer and Karl Muller) and I find, among other things, that insiders who disclose the existence of plans earn significant abnormal returns (about 12% in 6 months) compared with insiders who do not disclose. The intuition here is that disclosure increases the opportunities for strategic trading due to the litigation risk reduction benefits. Our data also show that any attempt to "solve" this problem by requiring disclosure of plan participation is unlikely to succeed because the firms currently not disclosing are the ones least likely to be acting strategically. The full abstract is posted after the jump.

Debating Polygamy

What is wrong with polygamy?

Nineteenth-century Americans coupled it with slavery, calling both "the twin relics of barbarism." Today, it is used as a scare image to deter people from approving same-sex marriage, lest it lead down a slippery slope to that horror of horrors.

But what, exactly, is bad about it? Looking at the Texas sect at the Yearning for Zion ranch, so much in the news, will not tell us, because that sect allegedly forced underage girls into marriage. The case then becomes one of child sexual abuse, a crime hardly unknown in the monogamous family, although it gets less splashy publicity when it occurs there. Disturbing things are fun to contemplate when they can be pinned on distant "deviants," but threatening when they occur in families like one's own.

Mormon polygamy of the 19th century was not child abuse. Adult women married by consent, and typically lived in separate dwellings, each visited by the husband in turn. In addition to their theological rationale, Mormons defended the practice with social arguments - in particular that polygamous men would abandon wives or visit prostitutes less frequently. Instead of answering these arguments, however, Americans hastened to vilify Mormon society, publishing semi-pornographic novels that depicted polygamy as a hotbed of incest and child abuse.

Audio/Video: Conference on "Contested Commodities"

Last month, the Law School's Law and Economics Program hosted a conference  entitled "Contested Commodities: Reframing the Debate on Financial Incentives in the Supply of Genetic Materials." The conference, which was organized by Visiting Professor of Law Michele Goodwin, looked at the law, economics, and ethics of the burgeoning market for human genetic materials ranging from blood, sperm, and ova to harvested organs and even newborn babies. The keynote address (video of which is embedded below) was by Richard Epstein, and audio files of all of the panels are available from the conference webpage.

 

Video: Mary Anne Case on "Feminist Fundamentalism"

On April 9, Mary Anne Case, Arnold I. Shure Professor of Law at the University of Chicago Law School, gave a Chicago's Best Ideas talk entitled "Feminist Fundamentalism."

At a time when so many different religious fundamentalisms are coming to the fore and demanding legal recognition, in this talk Prof. Case seeks to vindicate feminist fundamentalism, defined as an uncompromising commitment to the equality of the sexes as intense and at least as worthy of respect as, for example, a religiously or culturally based commitment to female subordination or fixed sex roles.

Video of the talk is embedded below, or you may download a .mov file. Just want to listen to the talk? An .mp3 file is also available.

Audio: Abner Mikva and Jason Huber on the Appellate Advocacy Clinic

It's been an exciting year for clinical education at the Law School, with two new programs being added (the Exoneration Project and the recently announced Federal Criminal Justice Project) and the Mandel Clinic celebrating its 50th anniversary. We plan to bring you much more clinic-related content in the near future, including audio and video of the Mandel Clinic's 50th Anniversary Symposium; in the meantime, we hope you'll enjoy a brief podcast of Judge Abner Mikva and Clinical Instructor Jason Huber discussing the work and  history of the Appellate Advocacy Project. This talk was recorded on April 14, 2008 as part of the Goodwin and Procter Clinics in Action Lunch Series, and also featured current students discussing their experiences working in appellate advocacy (though these are not included in the recording).

Homeownership 2.0 Debate -- Wrapping Up

This week, Rich Schragger and I have been debating my forthcoming piece, Homeownership 2.0. Rich has made a number of excellent points.  In this last post, I want to respond to Rich's most recent post and say a little more about the broader case for H2.0. 

Rich argues that a large fraction of whites prefer racially homogeneous neighborhoods, and that H2.0 investors will respond to consumer demand by resisting integration and engaging in discriminatory practices.  I agree that H2.0 investors (like anyone else) will take measures to avoid bearing financial losses.  I also grant that if enough people hold bigoted housing preferences, whoever holds the offsite investment component for housing will have an incentive to discriminate.  It is interesting, though, that Rich's preferred approach would be to expand leaseholding, which just as surely as H2.0 pushes the investment component to someone other than the home's occupant.  One might think he would similarly worry that landlords will become (in  his words) "a large and powerful class of absentee owners who will have every incentive to intervene in local government to secure their fungible property interests."  Animus-based discrimination requires government intervention regardless of who holds the investment interest, and I see no reason to think that investors will be harder to regulate than homeowners or landlords. 

It is worth asking, however, whether outright prejudice is really the full story.  Suppose that many white homeowners resist integration not because they dislike living near people of another race, but because they fear the reactions of prospective buyers to an integrated community (or because they fear the reactions that prospective buyers will fear that their prospective buyers will have).  These layers of speculation, when coupled with the extreme risk aversion of the undiversified individual homeowner, may result in resistance to changes that actually have a positive expected value for most homeowners.  If homeowners were able to offload risk to investors, they might well stop acting so fearfully.  This, in turn, would alter the signal that investors get about what will or will not subtract value.  In other words, homeowner preferences may end up looking a lot different when we take away the element of investment risk, and investors should be expected to respond accordingly.

I want to emphasize that these potentially salutary effects on homeowner behavior are only one of several reasons why a move to H2.0 might make sense. Affordability is another:  Allowing people to alienate upside potential in their homes can allow  low-income, credit-constrained families greater access to homeownership.  With homeownership comes a stable option to remain in the neighborhood, which encourages site-specific investments in social capital.  Downside protection can also serve important values by ensuring that moves are made for the right reasons.  No longer will people feel that they must sell quickly to avoid a coming drop in home values, or delay transferring to a new job in order to avoid realizing a loss on a home. 

As with any new innovation, H2.0 would carry some risk of unwanted consequences.  I am very grateful to have had this exchange with Rich, because it has usefully fleshed out some of those worries and some possible responses to them. A number of other potential concerns are raised and addressed in the paper.  Certainly, H2.0 would not be ideal for everyone.  Consumers and regulators would confront a learning curve in adapting to it..  But, on balance, adding a new alternative to the slate of tenure choices seems worth a shot. 

Google: As Open and Neutral as It Wants to Be

I hope to return to blogging more regularly now that the college-hunting process is over for my high-school senior son—our family’s first time through what is an amazingly-daunting (and time-consuming) process—and I still have a backlog of other work to clear out, but I can’t resist jumping in to discuss one aspect of the new WiMAX deal announced yesterday between Sprint and Clearwire. As you may know, for awhile, WiMAX has been the next great wireless broadband technology. I say for awhile as it isn’t clear that it is going to ever succeed, but yesterday’s deal is another attempt to take a serious run at it.

That technology isn’t my focus. As part of the deal, Google is reported to be investing $500 million. Google has emerged as serious player in broadband, playing an important role in the last spectrum auction. Google clearly wants to see more broadband capacity and in a post yesterday on the deal, Google emphasized its desire to see an open Internet.

But only so open it seems. As reported in the WSJ yesterday and as is clear from the 9-page press release on the deal, Google’s investment buys it a preferred status on the network. To quote the press release: “Google will partner with the new Clearwire in the development of Internet services, advertising services and applications for mobile WiMAX devices. In addition, Google will be the search provider and a preferred provider of other applications for the new Clearwire’s retail product.” Four bullet points later, we are told that: “Sprint and Google have also entered into an agreement related to Sprint’s mobile services, whereby Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint. Sprint will also preload several Google services - including Google Maps for mobile, Gmail and YouTube - on select mobile phones and provide easier access to other Google services.”

I am not sure what all of that means exactly. “The” search provider sounds like their will only be one search provider and a “preferred” provider makes it sounds as if other providers will be relegated to inferior positions. We also know, see Thaler & Sunstein in Nudge, that default settings are very powerful in determining behavior even if the setting can be changed at low cost.

Google has a public position on net neutrality that contemplates prioritizing based on the general type of application but not based on the ownership of the application. I shouldn’t over-read two paragraphs in a press release, but it isn’t clear to me that the positions that Google have bought with Clearwire and Sprint are consistent with its prior position on openness and net neutrality.

H2.0 and the NIMBY Problem

Lee makes some great points in response to my first post.  Here, in my second, I’d like to focus on the NIMBY problem.  I take it from Lee’s paper that one of her goals is to adjust the homeowner’s risk portfolio in order to reduce socially undesirable behaviors.

I agree with Lee that homeowners are risk adverse, but I’m not convinced that outside investors will behave differently.  The theory of H2.0 is that a more diversified investor will act more rationally than a local (less diversified) homeowner.  But it was large lending (and government) institutions that created the standardized mortgages that fueled suburbanization; those institutions refused to lend in “transitioning” or mixed communities, or refused to lend in African-American neighborhoods altogether. Take block-busting, for example.  Lee is betting that investors (unlike homeowners) will not cut and run when the first African-American family moves in next door, but that depends on believing that the homeowner’s reaction isn’t “rational.”  I think it probably is: to the extent that even modest integration is an undesirable feature of neighborhoods for the majority of house buying whites, a rational investor will avoid mixed communities and find the entry of African-Americans a threat to neighborhood stability.  Even an investor insulated from irrational prejudice will have to act consistently with the preferences of a large share of the house buying public.

Lee responds that we can regulate those investors, but I’m not sure it is going to be any easier to regulate the investors than the homeowners themselves.  Indeed, I’d guess that the investors in H2.0 are going to be even more politically powerful than Fischel’s homevoters.  What H2.0 could create is a large and powerful class of absentee owners who will have every incentive to intervene in local government to secure their fungible property interests.  For Lee, fungibility and distance is a plus; I see both as a minus. 

Of course, I also agree with Lee that homeowners often respond to off-site risks in an unproductive way.  Zoning, for example, may be a positive development when used to control for negative externalities, but has serious regional consequences when it is used to restrict the housing supply.  The trick is distinguishing good from bad NIMBYism.  Lee is betting that a new form of land tenure will get us more good than bad.  But I think the link between property forms and local government policies is more tenuous.  The homeowner’s association—a relatively recent invention that now dominates the new housing market—was supposed to solve lots of problems (including controlling for off-site factors), but, as Lee herself has written, it has often come up short.  Instead of tinkering with forms, we may want to rethink the American obsession with homeownership itself or simply regulate the bad forms of NIMBYism directly.