The University of Chicago Law School Faculty Blog

Targeted Minimum Wages: Big Box Veto and Local Minima

Mayor Daley has vetoed Chicago's Big Box Ordinance, though this chapter of local history remains open until is known whether the City Council will override the veto - and whether a new, somewhat different ordinance will be proposed. Proponents might draft a yet more refined minimum, or "living," wage bill.  The federal minimum is $5.15; the Illinois minimum is $6.50 (another example of asymmetrical preemption by federal law); the proposed Chicago minimum would have been $9.25 (plus some benefits and then increases over several years) but only for firms that are $1 billion in size and then in business properties occupying 90,000 square feet or more. My subject here is what to make of such targeted minimum wages.

Katrina's Anniversary

There seem to be two very different reactions to the year of post-Katrina recovery. Each is pessimistic.  One is to decry the failure of government, or at least of our government, to bring New Orleans back to normalcy.  Under this view, there are collective action problems in the way of private sector activity, and perhaps some moral sense that we ought to move people from tent cities to brand new housing as quickly as possible. Instead we have shaky politics, a great deal of remaining rubble, crime rates that are returning to horrible pre-Katrina levels, racial differences, and no reason to think that the rebuilding will protect against a category 4 or 5 hurricane in the future. President Bush's impending visit to the area is thus analogized to visits to Baghdad; in both places only half the country believes the sweet-talking against the backdrop of despair. The New Orleans situation is conventionally described as reflecting a lack of will on the administration's part.  Despite the talk and the promise of aid, the actual expenditures are said to be lagging. A government that cared would be spending much more.

Gambling Laws

Cass Sunstein and I have begun thinking about how prediction markets might be regulated.  (Here is a pitch for his new book "Infotopia: How Many Minds Produce Knowledge" (Oxford Press 2006) which can help you get enthusiastic about prediction markets and other uses of aggregated knowledge and wisdom.  Additionally, or if you like the occasional podcast, try my "The Wisdom of Groups and the Use of Experts" from November 2005 and available here.)   On the way there is the interesting question of whether we can distinguish between gambling (and its illegality in most places) and prediction markets, or at least some useful prediction markets. I don't think so, but then I don't think we can really distinguish gambling from many securities markets, but that is not the point of this post. Instead, I'd like to focus on the pervasiveness of "illegal" gambling.

Chicago's Big Box Minimum Wage Plan

Chicago has made news by passing an ordinance requiring large stores that are part of billion dollar companies to pay a higher minimum wage than is applicable to other employers.  Even the structure of the wage is compulsory; of the $13 required to be paid per hour by 2010, $3 must be in benefits. One conventional way to understand the legislation is that it serves the interests of a number of fairly well organized groups. These include groups that would prefer for Walmart and Home Depot to stay away.  Meanwhile, it imposes costs on consumers who might be more difficult to organize and who find it difficult to assess the impact of such legislation on prices, on the level of service that will be provided when these stores do open within the city limits, and on the cost of traveling to stores outside the jurisdiction.

The Case Against (GM's) Bankruptcy

Barry Adler's post suggests that changes in conventional wisdom or laws might be needed to encourage efficient, earlier Chapter 11 bankruptcy petitions. With a few twists and turns the arguments for and against this idea might cause us to reassess or review the fundamentals of bankruptcy.  It is plausible that we would be better off moving in the opposite direction, welcoming the death of bankruptcy, at least for large organizations.  Perhaps GM (which is to say its creditors, executives, or shareholders) and other enterprises would be better off if forced to work out problems by contract (by which I mean arrangements that leave as little room as possible for surprise in court).

Fear and Loathing of Milberg Weiss

Bloggers and journalists are having a field day with the recent indictment of Milberg Weiss and reports of (alleged) illicit hidden payments of cash to cooperating lead plaintiffs. There are a couple of puzzles associated with the news thus far.  One is why the payments (assuming for the sake of the puzzle that the reports are correct, though I think that is most unlikely) would need to be so large (allegedly in the millions). There are many possible representative plaintiffs in most of the securities and other cases that Milberg Weiss becomes involved in; why would any need to be paid, or be paid so much?  Hundreds of lawyers hate the firm and they are quick to say that plaintiffs are paid to lie, to agree to settlements that are not in the interest of other class members, to lie about having been consulted about conflict of interest questions, and so forth.  Some of these possibilities seem implausible, or at least somewhat puzzling, in a world in which named plaintiffs are rarely consulted at all, and in which judges must approve settlements (for better or worse) but are hardly accused of paying too much attention to the wishes of the named, nominal plaintiffs.  And so even if the plaintiffs' firm gains by having a cooperative "client" who expects to be a repeat, long term player with the firm, it is hard to see why this teamwork comes at such a high price.

Predicting Country Size, Number, and Confederation

There is a literature on the size of nations, and therefore on their number, with some of the best work arguing for an emphasis on the tradeoff between heterogeneity and economies of scale. If we think of modern history as consisting of a long period of consolidation, or merger of nations, followed by a period of dismemberment, independence movements, or increased numerosity, then the story is one of technological changes that made increased size more valuable and then less valuable.  (The facts can be disputed, if only because there is room to argue about the definition of a country.  But this is not the place.) Alternatively, preferences might have become more homogeneous and then less so.  If we think of preferences as including a taste for peace, or something else that might be cheaper to achieve with greater country size, then the analysis can get a bit circular even as it gains plausibility.

Barry Bonds II

In yesterday's post, I tried to take up the question of the degree to which Baseball's actions would be influenced by the threat of litigation, or the sort of thinking lawyers engage in. The Comments were provocative and much appreciated. Today's post addresses the likelihood of settlement and, in passing, addresses the Comments and inclination of many readers to take the high moral, or deterrence, ground.

Barry Bonds

I doubt that law should have much to do with how major league baseball runs its show, how basketball games are refereed, how universities are run, and so forth, though of course law intervenes frequently and in strange places, especially where legislators are eager to tread, where governments can influence through expenditures, or where some interest groups care to encourage governmental or judicial involvement. Still, I don’t think it terribly likely that Congress or any judge will much influence the question of whether Barry Bonds is denied the records he has set thus far, or the lifetime homerun record he is likely to reach soon enough. If he were found to have used illegal substances (whether illegal under law or under his sport’s rules) he might be denied a formal record, put into the history books with an asterisk (though that seems silly in this case), or kept out of the Hall of Fame (like the gambler, Pete Rose), but these steps are more likely to be generated by the politics and economics of baseball than to be the product of a statute or judicial decision. It is a bit like asking whether a court or Congress is likely to determine the winner of an Academy Award.

The Politics of Testing

The latest humiliation in the world of standardized testing involves significant scoring errors on the October SAT.  Most of the errors appear to have been small but some may have been as large as 300 or 400 points (out of 2400 on what is now a three-part exam, with each part still bearing a maximum score of 800). It is the outrage that interests me, and the potential involvement of courts and legislatures.  Why is it that people hate these tests so much?  Standardized tests play an important and perhaps increasing role in our society.  Ideally they provise a common denominator in a world where different schools have very different curricula and grading patterns.  And there is something of a free market (but only something, because in some industries rankings make it difficult for schools to ignore the standardized test scores of their applicants) in that employers, graduate schools, and others need not use or put much weight on these exams.