The University of Chicago Law School Faculty Blog

Student Blogger - Adaptive Preferences and the Deliciousness of Equal Rights

A Thirsty fox once saw some fine
Ripe grapes that hung on a tall vine
“Just what I’m longing for!” cried he,
And sprang to get them eagerly.
Alas! the clusters hung so high,
He could not reach them. By and by,
Finding his efforts all in vain,
His longing turned into disdain;
“They’re only fit,” snarled he, “for Apes.
What do I want with sour grapes!”

- The Hereford Aesop

A prominent argument against a moral framework oriented around preference satisfaction is that preferences are prone to distortion due to one’s situation.  The fox, asked about his preference for grapes at the end of his efforts-all-in-vain, reports an affirmative distaste for them.  A welfarist, it is argued, who sought the best allocation of fruits among the attendees at the forest animal cocktail party, would find nothing wrong in allocating no grapes to the fox, based on this revealed distaste.  So the fox is deprived of grapes he doesn’t want, so what? 

A non-Aesop example of this phenomenon—commonly termed “adaptive preferences”—might be the case of women who have become accustomed to life in a culture that subjects them to systematic oppression.  What response is appropriate if these women report that they have no preference for greater autonomy or more equal rights? 

Professor David Weisbach, speaking with the Law & Philosophy Workshop, argued that phenomena that look like adaptive preferences can readily be explained within the welfarist framework as stable preferences under changed circumstances.  In general, this looks a lot like learning, a phenomenon for which the welfarist has developed analytical tools.

Student Blogger - Law and Morality in War

It is several hours into the stand-off. Two gun-toting bank robbers have barricaded themselves in a downtown bank, along with a single hostage. Visibly desperate, one robber shouts out to the police that he intends to kill his hostage, holding a gun to her head. Two police snipers report to the police commander that they have clear shots just as the second robber raises his weapon toward the hostage. The commander authorizes the shots, and both robbers are killed.

Traditionally, under the criminal law, this situation raises few issues. The police exercised a justified use of force. However, had the criminals opened fire and killed a hostage or a police officer, they would be criminally liable. For Professor Jeff McMahan, this asymmetry in treatment of police and criminals represents an important correspondence between the criminal law and morality.

McMahan finds it troubling that the modern law of war fails to reflect this correspondence with morality, particularly in the fact that combatants in war are treated symmetrically, that is without reference to the moral justification of a combatant’s cause. McMahan discussed this divergence between the law of war and the morality of war with the Law & Philosophy Workshop.

Student Blogger - Law and Economics Workshop: What Accounts for Trial by Ordeal’s Popularity?

Trial by ordeal—it evokes images of a darker time, where social outcasts drowned amidst accusations of “Witch!” or carried hot coals to clear their names. But this week’s Law and Economics brings a novel twist to an old subject with Professor Peter Leeson’s paper, Ordeals, available to read at http://www.law.uchicago.edu/files/files/Leeson.pdf.

What It’s About

To a modern secularized society, trial by ordeal may seem particularly insensible as a method of adjudication. It forces the innocent and the guilty alike to undergo the cost of an ordeal and, short of actual divine intervention, the outcomes won’t have much correlation with actual guilt or innocence. However, Professor Leeson takes the unique position that, for a highly religious or superstitious society, an ordeal system may produce more accurate results in adjudication by leveraging people’s strongly held beliefs to elicit confessions and improve factfinding. In other words, ordeals may have simply been the best option for a society where more sophisticated methods of evidence-gathering do not exist.

Here’s how it works. Suppose priests could manipulate the results of trials by ordeal. Professor Leeson notes that priests had discretion to lower the temperature of the hot iron as they prepared the ordeal, to pray a longer invocation to allow boiling water to cool, to douse an innocent suspect with cold holy water, or to decide arbitrarily when the accused had sunk far enough in the water to prove his innocence in a water-dunking ordeal. Suppose, also, that priests recognized themselves as “agents” of God and exercised this discretion to sort out people they believed were innocent from those they believed were guilty.

Student Blogger - Winter WIP: Eric Posner and Omri Ben-Shahar Discuss the "Right to Withdraw"

Most Americans, after buying a product from a store, expect that they will be able to return it -- at least within a reasonable amount of time and assuming the item is undamaged. This instinct is borne out by the policies of most retailers, who generally allow returns of most items within a set time period, for a refund, exchange, or store credit. In Europe, this is a right explicitly protected by contract law. In the US, by contrast, the rules vary from state to state, but in general there is no legally protected right to return an item. In his latest WIP talk, Professor Eric Posner presented a paper he and Professor Omri Ben-Shahar are working on regarding what they call the "right to withdraw" from these contracts (alas, there are sound prudential reasons for not titling the proposal the "right of return").

The core insight Posner and Ben-Shahar develop is the function allowing the return of an item serves in terms of letting consumers assess an item's value. For some purchases, such as home or office furniture, it is very difficult to determine whether the purchase is worth the money without some time experiencing it in your home. You need to know if the chair is comfortable, or if the futon matches your living room color scheme. Allowing consumers to return a product makes them more willing to buy, because they know they'll have the opportunity to determine with greater certainty the actual value the product holds to them.

There is, of course, a story from the seller's side as well. Sellers want buyers to feel comfortable purchasing their products, but they also have to worry about depreciation if the goods are returning after weeks of use. The speed at which depreciation occurs varies from product to product -- perishable items depreciate quickly, permanent furnishings more slowly. Some goods, due to cultural taboos, lose essentially their entire resale value upon being used once, which is why even stores which have generally lenient return policies won't let you return a casket. Other goods, such as music or electronic media, are vulnerable to copying, and thus returns are usually prohibited after the consumer opens the box.

The fact that most stores allow returns, and most consumers expect some reasonable ability to return products they buy, counsels turning some right of withdrawal into at least a default rule, to insure that outlier stores don't exploit consumer expectations. But the content of such a rule is more complicated. Ideally, it should maximize the ability of the consumer to gain information about the value of the product, while minimizing the risk posed to sellers via depreciation. In theory, consumers could just have an unlimited right of return subject to paying the value of any depreciation. But depreciation is extremely difficult to measure objectively. So, as an alternative, Posner and Ben-Shahar propose using time as a proxy -- as more time passes (with a rate that varies depending on the type of good), the item will be presumed to have depreciated in value more. This prevents consumers from externalizing the costs of excessive inspection and deliberation, while still allowing them some ability to back out of the contract if the goods don't turn out to be as valuable to them as they initially estimated.

The second part of the paper looks for traces of this sort of doctrine in American law. And they find one potential source in the famous ProCD v. Zeidenberg case, reviled by the bulk Contracts professors and students alike (albeit for different reasons). ProCD held enforceable additional contract terms contained "inside the box" of a computer that was purchased remotely (and were a black box to the buyer at the time he purchased the good). The 7th Circuit concluded that giving all the terms over the phone would have been impracticable, hence, the "acceptance" of the contract only came after the consumer opened the box and read and assented to the terms. This, Posner and Ben-Shahar argue, is essentially a form of the right to withdraw -- once the consumer receives the goods and finds out more information about them (here, certain contractual terms he may find overly onerous), he has, according to the court, the legal right to return the item as a matter of contract law.

Another parallel comes from the right to reject non-conforming goods, codified in the UCC. Though there are differences, two key assumptions overlap with the idea behind a right to withdraw. The first is the assumption that the buyer might not have important information regarding the quality or kind of the goods until they actually arrive at her doorstep. The notion that there is some information about the product that the buyer is unlikely to be able to obtain until after they are in her presence is similar to a right of withdrawal. Second, the UCC conditions rejection on it occurring within a reasonable amount of time after the buyer discovers (or should have discovered) the defect, and before the goods have had a change in condition (that isn't caused by the defect). This rule is designed to protect the rejection rule from being used to exploit sellers and put them at too much of a disadvantage vis-a-vis their customers. The rule effectively creates a trade-off similar to the one Posner and Ben-Shahar recommend for returns: the longer the good is in the possession of the buyer, the greater the defect necessary to justify returning it.

Student Blogger - Winter WIP: Dixon Presents on Partial Constitutional Amendments

The American constitution is notoriously difficult to amend. If you want the cold, hard, figures, the sobering statistic for a prospective constitutional amendment is less than a .25% success rate: 27 successes in over 10,000 attempts. This figure is far beneath the amendment rates for other countries around the world. And the result is that many amendments that command majority, or even super-majority, support, do not end up clearing all the hurdles of Article V (think of the ERA, flag burning, or school prayer amendments).

The result is a constitution that runs a perpetual risk of being out of sync with majority perspectives. To resolve this, while still maintaining the countermajoritarian ethos that motivated the difficult amendment process to begin with, Professor Rosalind Dixon proposed the idea of "partial constitutional amendments", which would be given persuasive but not controlling authority by the courts. This proposal, though novel, has some parallels in the constitutional jurisprudence of other countries (such as Canada and India), whose courts tend to see themselves in more of dialogic relationship with their respective legislatures.

A partial constitutional amendment is simply an amendment that achieves majority support, but for one reason or another does not clear all of the requirements of Article V. It might not achieve a supermajority, or it might not achieve ratification in a supermajority of states. These amendments should be seen as akin to persuasive authority -- the further along they are in the process, the more persuasive they would be. The idea is to provide a mechanism for constitutional updating that is respectful of the Article V process, has a clear democratic hook beyond personal judicial preference, and allows for more rapid synchronization between democratic preferences and constitutional doctrine.

Professor Dixon is operating within a tradition of thought holding that courts generally are relatively responsive to sustained democratic preferences, at least eventually. However, they also labor under a desire to not be seen as making a decision "under fire", that is, solely writing a decision to placate democratic outrage at a prior (presumably now-overturned) precedent. The result is that constitutional updating occurs fitfully and perpetually under a shroud of potential illegitimacy.

Consider the reaction to and eventual reversal of Hammer v. Dagenhart, which struck down a law forbidding the transport through interstate commerce of goods made with child labor. Decided in 1918, the decision met with immediate outrage and an attempt at an Article V override. The effort eventually failed, but it did get through Congress, and was ratified by 20 states within a decade of its proposal. Meanwhile, Congress issued several new laws targeting child labor, which were successively struck down by a recalcitrant court in 1919 and 1923. The court managed to maintain its resistance for 20 years beyond Hammer's decision date. The first chink in the armor came with West Coast Parrish in 1937, but Hammer wasn't formally overruled until 1941.

Adopting a policy of partial constitutional amendments could potentially shave valuable time off this process. By providing a formal avenue by which congressional responses to unpopular judicial decisions could be given weight and authority by the court, the partial constitutional amendment would help dissipate some of the perceived legitimacy concerns where courts seem like they might be too beholden to the democratic branches. In a sense, it formalizes a modernizing process in the judiciary that many scholars believe exists, but few judges are comfortable admitting to.

Student Blogger - Law and Economics Workshop: How IP Rights Affect Supply Chain Management

This week’s Law and Economics Workshop featured Professor Jonathan Barnett and his paper, entitled, “Intellectual Property as a Law of Organization,” available at http://www.law.uchicago.edu/files/files/barnettdraftfeb1.pdf.

What It’s About

If innovation happens even in industries with weak IP rights, what is the point of having IP rights? In the prior literature, some academics had raised concerns that having a costly system of patent rights could be redundant and unnecessary when private measures, such as contracts, barriers to reverse-engineering, and limiting the amount of outsourcing, could protect a firm’s intellectual capital just as well. Professor Barnett’s paper counters this viewpoint by arguing that patent rights can incentivize innovation indirectly in other ways, by changing the way firms bring innovations to market (e.g., patent rights can give businesses more flexibility in deciding how to roll out their products, from testing to structuring the supply chain).

No matter how innovative an idea is, there’s got to be some way to bring the idea to market in order for the public to capture some benefit. According to Professor Barnett, the problem with a world without patent rights is not so much the lack of innovation, but rather the way that firms will react to the possibility of expropriation. In this world, firms will still come up with new ideas, but they will be more reluctant to partner too closely with other firms because it will be harder to prevent their partners from stealing their ideas without IP rights. For example, if an idea-generating firm wanted to make a contract with an idea-buying firm, it would have to disclose the idea before the firms can come to an agreement. Once the seller discloses the idea, though, the buyer already has the idea; the buyer has no reason to agree to give something back to the seller, if the seller didn’t hold something back (Arrow’s Paradox).

Student Blogger - Law and Econ Workshop: Racial/Political Biases in Bankruptcy?

Last week, Professor Paige Marta Skiba of Vanderbilt Law School presented her paper, titled, “Race, Gender, and Political Ideology in Personal Bankruptcy Outcomes,” to the Law and Economics Workshop here at Chicago (the most recent draft is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1548473).

What It's About

The study collected 9,526 bankruptcy petitions across the United States, comparing dismissal rates based on gender, race, and the probable political allegiances of the judge and county. Although the dismissal rate differences between male and female petitioners were negligible, the study indicated that African American petitioners had their petitions dismissed more than White petitioners (24% compared with 7%), with this general trend holding true across all judge demographic types. Yet, African American petitioners’ repayment plans, once approved, did not require Black petitioners to pay significantly more than their White counterparts. Results also suggested that gender and political affiliation of judges may affect petitioners’ Chapter 13 approval rates (White male Democrats in a Republican county and White female Republicans in a Republican county tend to dismiss at a higher rate). The study also investigated the effects of race and gender on decisions to file under Chapter 7 versus Chapter 13, the amount of attorney fees charged, but most of the discussion in the workshop centered on the issue of dismissal.

What Was Discussed

From the outset, the workshop participants seemed most interested in discussing methodology, with critiques being about evenly divided between 1. concerns about the accuracy of the measurements and 2. the problem of omitted variables:

 On the accuracy issue, several participants raised concerns about the way the study determined the race of petitioners. Since petitions do not contain information about race, the study had extrapolated probabilities of race based on zip codes and surnames (matching surnames to census data, and only using those names where probability of race membership passed a certain threshold). One concern was that this method of determining race, by using zip codes, could inadvertently introduce confounding variables based on neighborhood locations (which may relate to real estate values). The study also collected data on race and gender of bankruptcy judges by looking at pictures available to the public.

Student Blogger - Winter WIP: Malani Asks if We Can Select Beliefs Without Evidence

Most (not all) models of human preferences are rather agnostic about the process by which we form beliefs about the world. And on the occasion that scholars do think about the subject, they general posit that people change their beliefs based on the acquirement of new information.

But this can't be right -- or at least, not always. First, people have to at some point form a set of priors, which necessarily occurs mostly devoid of factually inquiry. Second, people do seem to form beliefs about certain subjects that are not typically amenable to factual support (such as a belief in God). Third, people often seem to resist updating prior beliefs even in the face of contradictory data, indicating that belief construction can be affected by considerations other than hard data. There are situations where there might be utility considerations in "selecting" between different beliefs -- for example, someone who suffers from anxiety might prefer to believe that good things will happen in the future, because they experience a utility loss from worrying about future losses. Eliminating this loss might outweigh any utility gains from forming a more accurate belief structure about the future.

In this week's WIP, Professor Anup Malani presented the findings of an experiment designed to test the possibility of forming beliefs without evidence. The trick was to use the placebo effect, which fundamentally is the statistically measurable boost one gets from taking an action that one believes will improve performance, divorced from any "objective" reasons that performance should actually be enhanced. The (rather ingenuous) model of the study, in a simplified form, is as follows:

Student Blogger - Information Acquisition and Panel Diversity

The notion that political ideology may influence judicial decisionmaking is today neither new nor particularly noteworthy. Political scientists and legal academics have long suspected as much, and even a cursory glance at Supreme Court decisions over the years should suffice to convince even the most ardent of skeptics. But while the idea may not be new, empirical evidence of such partisanship has only emerged in recent years. Professors Tom Miles and Cass Sunstein, for instance, have studied a phenomenon that has come to be known as panel effects—briefly, that the political ideology of the judges who compose an appellate panel influences the outcome of the decision. In a new paper, presented at last week's Public Law & Legal Theory Workshop, Professors Matthew Spitzer and Eric Talley expand upon this literature. In particular, they propose a general model that seeks to understand the panel effects phenom as a result of strategic information acquisition by individual panel members.

Those who enjoy sifting through mathematical models—and who doesn't?—might want to take a look at the paper (which is here). But for the lazy or insouciant, a description of the model will have to suffice. Put briefly, the argument advanced by Professors Spitzer and Talley is as follows: in mixed panels (that is, those composed of both Republicans and Democrats), the member in the minority will have incentives to invest in acquisition of additional information about the case in hopes of swaying the middle voter whereas she would not have had such incentives were the panel composed of members of only one political persuasion. In other words, when the panel is split 2–1 in favor of Republicans, for example, the Democratic member will be more inclined to dig into the case law in hopes of convincing the more centrist Republican on the panel to switch sides. These incentives, argue the professors, might explain the panel effects observed by Miles and Sunstein, among others.

The faculty, though generally receptive to the argument, nevertheless had many questions. What if search costs are really low? asked one faculty member; then, everyone on the panel would have incentives to search. That is true, replied Professor Talley, but search costs also reflect the opportunity costs associated with working on other cases, hearing more cases, foregoing other productive activities, bypassing leisure, and the like. While there is no easy way to measure such costs directly, they are likely greater than zero. Could this theory explain why we only observe panel effects in some bodies of law? wondered another faculty member. The idea in this case would be that panel effects would only occur in situations where ideology was likely to influence the decision and there was some set of discoverable information that could change judges' minds. What about amici? inquired a third professor. The answer: When they are filed, amicus briefs would provide yet another source of information for the minority member on a mixed panel. The minority member, of course, would still have to read and digest them, which is a process that is similar to the one studied in the paper.

Questions aside, a model based on information acquisition has some intuitive appeal. And if true, it would almost certainly have implications for judicial decisionmaking. This account, however, joins a number of competing theories that seek to explain panel effects. More data and empirical analysis will tell which theory works best.

Student Blogger - Winter WIP: Tom Ginsburg on Executive Term Limits (and their Evasion)

For most of its history, the United States had an unwritten term limit on Presidents of two four-year terms. This sufficed until World War II, where President Franklin Delino Roosevelt ignored the rule and served four terms, prompting a constitutional amendment. Other countries, such as Honduras and Venezuela, have seen efforts (failed and successful) to amend the constitution to allow incumbent president's to serve beyond previously established term limitations.

It is these evasions of term limitations -- presidential "over-stayers" -- that interest Tom Ginsburg in his latest work in progress (with Zachary Elkins and James Melton), "On the Evasion of Executive Term Limits". In systems with fixed term limits, we can divide executives into three categories: (1) understayers (those who serve for less than the constitutional maximum, for example, those who lose a re-election campaign, retire due to illness, or are removed in a coup), (2) those who serve the maximum term and then exit punctually (George W. Bush or Bill Clinton), and (3) overstayers, those who take action to stay in power beyond the constitutionally-governed rules in place when they entered office.

A plurality of executives are actually understayers, and most of those leave for "normal" reasons (election defeat or retirement). Professor Ginsburg, however, is most interested in the interplay between categories two and three. Amongst executives with an opportunity to overstay, a not-inconsequential number (nearly 20%) stay longer then they would otherwise be allowed. They do this via constitutional amendment, declaration of emergency, or by simply rewriting the constitution wholesale. And these figures might understate the problem: they don't include, for example, an executive who installs a crony or relative to take his or her place upon retirement, or one who simply diverts power to a new office and assumes that upon retirement (in both cases, think Vladimir Putin).

Measuring all reported instances of executive overstay, the authors found (among other things) that older leaders were more likely to overstay than younger ones, leaders with military backgrounds were more likely to overstay compared to executives with other backgrounds (generally lawyers), and that a history of overstays actually decreased the likelihood of repetition (each time an executive overstayed, it decreased the probability that next executive would do the same). Moreover, they found that overstay via "extra-constitutional" means was becoming increasingly rare, and that overstay rarely seems to provoke a constitutional crisis.

The paper also examines way that countries can guard against executive overstay. It's worth noting here that this presumes that overstay is a problem and, as a corollary, that term limits are a good thing -- something that is not necessarily clear. Most obviously, term limits prevent the polity from re-electing a leader that they otherwise would support -- it is an interference with pure majoritarianism, possibly deprives a country of experienced leaders, raises the problem of what to do with retired, former presidents, and forces voters to select a devil they don't know over one that they do. There are, of course, solid arguments for term limits -- overcoming voter apathy, guarding against tyrannical instincts, preventing executives from entrenching themselves indefinitely via corruption and fraud -- the point is that the debate over how to check against overstay necessarily presumes certain conclusions about the usefulness of term limits.

Professor Ginsburg forwards several institutional models for reducing overstay. Countries could offer rewards to executives who step down on time. These rewards could be monetary (such as Mo Ibrahim's $5 million award, plus $200,000 a year for life, to African leaders who step down from power) or governmental -- France makes all ex-presidents ex officio members of the country's constitutional court. For many leaders, international opportunities with the United Nations or other international organizations might help cushion the blow of being out of power. Alternatively, countries could modify the electoral system to account for incumbency advantages -- the authors consider a version of Bruce Ackerman's "supermajoritarian escalator" in suggesting that incumbents should have to gain ever-higher shares of the voters each time they run for re-election (plurality in the first run, majority in the second, 55% in the third, and so on).

The broader point is that, regardless of whether one generally thinks fixed executive term limits are advisable or not, the debate would benefit from an infusion of empirical data. How often overstay threatens the political fabric of a country, which policies are effective in checking overstay and which policies are not, and what factors make overstay more or less likely are all of use to policymakers seeking to construct governmental systems with an eye towards writing the rules of the executive branch.