ProfessorBainbridge.com

Nukes Not Needed. Alito's All but in. But where was Hagel?

Despite threats from Kerry and Kennedy to filibuster SCOTUS nominee Samuel Alito's confirmation vote, the Senate just voted by 72-25 to end debate. Nineteen Democrats voted for cloture. (Roll Call) Republican Senators Ensign and Hagel missed the vote. Ensign's got a good excuse: he was injured in an auto accident while on his way to the airport to go to DC to vote. But where was Hagel? For somebody who wants to run for the GOP Presidential nomination in 2008, but already has a lot of problems with the base, missing this vote was not a good idea. I, for one, plan to remind folks when the primaries run around.

What's the Appropriate Game Theory Model for Shareholder Behavior?

In my class blog (to which we do not allow public access for reasons of student privacy), we have been discussing Iman Anabtawi's paper on shareholder power, which Iman will be presented in the seminar today. One of my students made an interesting observation, which prompted a discussion as to what is the appropriate game theory game for modeling shareholder interactions. Is it the Prisoner's Dilemma, as my student argues, or something else?

Student Post:

Anabtawi notes that shareholders could engage in collective action for disciplining managers, an assumption crucial to shareholder primacists, but such coordination is impractical given the wide fragmentation of ownership. At the individual level, a rational shareholder would internalize the costs of disciplining management only if its proportionate share is more than its expected costs. At the collective level, it would be desirable for a shareholder to discipline managers if the expected collective benefits exceed their expected costs. The result is that there is no collective action, given that the substantial discipline costs outweigh the expected benefits. As Anabtawi notes, increasing shareholder power in this context is unlikely to generate more shareholder action, given the substantial costs and modest expected benefits. This result is similar to the Tragedy of the Commons, a phrase used to describe a situation where the exercise of individual interests leads to the deterioration of the common good, given that individuals do not have strong incentives to collectively invest or work towards a particular common interest. Here, shareholders’ expected benefits, either individual or collective, do not exceed the expected costs of disciplining management, so individual shareholders would rather pursue other interests other than this “common good”. As Anabtawi notes, increasing shareholder power may actually lead shareowners to underdiscipline management when promoting their private interests at the expense of the general shareholder interests.

Anabtawi’s account of shareholders’ divergent interests is parallel to the classic example of the Prisoner’s Dilemma in game theory, where two separate prisoners must decide separately whether to confess to a crime: if a prisoner confesses, she will get a lighter sentence and her accomplice will get a heavier one, but if neither confesses, sentences will be lighter than if both confess. In the absence of shareholder collusion for a common interest i.e. collective action to discipline management, shareholders instead will compete amongst each other in an attempt to further their own private interests e.g. short-term vs. long-term interests. Such competition will lead to a decrease in overall shareholder value, given that some private interests conflict with the interests of shareholders in general. In other words, even though shareowners are better off collectively by cooperating with each other, their self-interest will deal them to compete with each other, disregarding the negative effects that such competition may have on other shareholders.

To which I responded:

The difficulty I have with using the Prisoner's dilemma to model the shareholder situation is the number of players involved. In a classic prisoner's dilemma, the dilemma arises where the game is played a single time. Where the game is played in multiple iterations, however, a tit-for-tat strategy has been shown to induce the players to reach the collective best outcome. Although the shareholder-shareholder interaction is a repeate game with no finite terminus, which should be ideal for tit-for-tat strategies, the number of players involved would seem to preclude that solution.

To which the student responded:

In regards to your comment, professor, at first I hesitated in using the prisoner's dilemma as an example of shareholder vs. shareholder interactions. It's true that this dilemma is typically used for 2 players where the game is only played once. But I think that if we assume that a large shareowner of a major corporation represents player A, and the remaining shareholders are minor and fragmented in a way that altogether can be categorized as player B, and the game is repeated infinitely, then we may end up with Nash equilibrium where player A would pursue its own self-interests given what player B does, and vice versa. Player A’s actions would likely be designed to benefit its own private interests, while Player B’s actions may be designed to benefit shareholders overall. Or Player A may just engage in a dominant strategy where it will pursue its own interests, no matter what Player B does over time. Of course, the collusion of small shareholders as Player B is an assumption that Anabtawi’s article challenges, thereby suggesting that Player A would eventually win if more shareholder power is granted. This may be a stretch of game theory as applied to shareholder primacy, but it doesn’t hurt to try (I hope).

Anabtawi on Shareholder Power

Today's speaker at my seminar is my friend and UCLA colleague Iman Anabtawi. Iman teaches in the Corporate Law Concentration with an emphasis on teaching transactional skills in courses such as Venture Capital Financing Transactions and Mergers and Acquisitions Transaction Planning.

At Oxford University, Professor Anabtawi was a Marshall Scholar, receiving an M.A. (in philosophy, politics, and economics). At Stanford Law School, she was articles editor of the Stanford Law Review, won the Hilmer Oehlmann, Jr. First Year Writing Award, and received the John M. Olin Prize in Law and Economics. She clerked for the Honorable Laurence H. Silberman of the U.S. Court of Appeals for the D.C. Circuit, and then Justice Sandra Day O'Connor of the U.S. Supreme Court. She then practiced for eight years with the firm of O'Melveny & Myers, where she consecutively held the positions of Tax Associate (Transactional Tax); Corporations Associate; and Special Counsel, Corporations Department. During this time, she specialized in mergers and acquisitions, joint ventures and strategic alliances, funds and acquisition vehicles, and financial products, as well as general corporate representation.

Anabtawi will be presenting her paper SOME SKEPTICISM ABOUT INCREASING SHAREHOLDER POWER.

Abstract: This Article examines shareholder primacists' claims that making boards more accountable to shareholders would go a long way toward solving the agency problem between shareholders and managers and enhancing shareholder welfare. I argue that in the shareholder power debate over whether to vest corporate decisionmaking authority primarily in a firm's shareholders or in its board of directors, shareholder primacists underplay deep rifts among the interests of large-block shareholders - those shareholders most likely to make use of increased shareholder power. The argument for reapportioning decisionmaking authority within the firm away from boards toward shareholders assumes that shareholders are a monolith with the single, overriding objective of maximizing share value. Some of the most significant modern shareholders, however, have private interests that conflict with (1) the goal of maximizing shareholder value generally or (2) the interests of other shareholders who would choose to maximize shareholder value differently, given their peculiar characteristics. Such private interests may induce influential shareholders to engage in rent-seeking behavior at the expense of overall shareholder welfare. In light of this possibility, which I argue is substantial, we would do well to pause before implementing corporate governance measures designed to further empower shareholders.

FYI: Anabtawi's paper is, in considerable measure, a critique of Harvard law professor Lucian Bebchuk's article THE CASE FOR INCREASING SHAREHOLDER POWER. My article, Director Primacy and Shareholder Disempowerment, which is forthcoming in the Harvard law Review, is also a response to Bebchuk's argument.

Abstract: This essay is a response to Lucian Bebchuk's recent article The Case for Increasing Shareholder Power, 118 Harvard Law Review 833 (2005). In that article, Bebchuk put forward a set of proposals designed to allow shareholders to initiate and vote to adopt changes in the company's basic corporate governance arrangements. In response, I make three principal claims. First, if shareholder empowerment were as value-enhancing as Bebchuk claims, we should observe entrepreneurs taking a company public offering such rights either through appropriate provisions in the firm's organic documents or by lobbying state legislatures to provide such rights off the rack in the corporation code. Since we observe neither, we may reasonably conclude investors do not value these rights. Second, invoking my director primacy model of corporate governance, I present a first principles alternative to Bebchuk's account of the place of shareholder voting in corporate governance. Specifically, I argue that the present regime of limited shareholder voting rights is the majoritarian default and therefore should be preserved as the statutory off-the-rack rule. Finally, I suggest a number of reasons to be skeptical of Bebchuk's claim that shareholders would make effective use of his proposed regime. In particular, I argue that even institutional investors have strong incentives to remain passive.

For a broad overview of the law and economics of shareholder voting rights, see my article The Case for Limited Shareholder Voting Rights, which is forthcoming in the UCLA Law Review.

Pixar's Firm Culture

Vic Fleischer and Larry Ribstein have both posted comments on the portion of the Disney-Pixar deal that creates a steering committee to preserve Pixar culture post-merger. I'm in substantial agreement with the former's observation that:

I am a believer in the significance of institutional culture and corporate culture.  But I wonder -- can you really maintain culture with a steering committee?  Top-down force feeding of culture won't work.  Leadership by example, though, helps, and if Jobs and the other Pixar bigwigs stay the course, maybe it will all work out.

Back when I was working on employee involvement/participatory management in the 1990s, it became clear that firm cultures exist and that they matter. Indeed, in my article on Privately Ordered Participatory Management, I argued that they mattered a lot with respect to whether an employee involvement:

When Bill Gore founded W. L. Gore & Associates (the maker of, inter alia, Gore-Tex), he adopted a “lattice” system of employee self-management. The lattice system is a radical form of employee involvement, which verges on a true participatory democracy, but which also resembles a very large self-directed work team. Although Gore & Associates has been quite successful, Gore acknowledges that the lattice system would not work in many firm cultures. As he opines, “established companies would find it very difficult to use the lattice. Too many hierarchies would be destroyed.” He further opines that the lattice system works best in start-ups so organized from the outset.

The empirical evidence confirms Gore’s intuition that employee involvement is almost certain to fail if firm culture is not receptive to participation. Irene Goll found, for example, that competitive pressures and other business environment considerations were not positively correlated with adoption of participatory management programs, but that corporate ideology, especially as it relates to corporate social responsibility, was positively correlated to their adoption. Coye and Belohlav found statistically significant relationships between the degree of employee involvement and both the number of participatory management programs offered by the firm and the average participation in those programs. John Cotton reports that most consultants in the quality circle field posit that some firms are not ready for operational participation in terms of corporate culture.

Firm cultures are highly path dependent creatures, which can prove quite resistant to change. As a result, an inhospitable firm culture can prove a potent and long-lasting barrier to successful employee involvement. In particular, I speculate that firms with strongly entrenched hierarchies and/or a long history of adversarial labor relations are poor candidates for successfully involving employees in decisionmaking.

An illustrative anecdote comes from the paper industry: Both International Paper and Otis Specialty Paper asked their respective employees to cooperate in preparing a job handbook. Otis’ culture emphasized labor—management cooperation. International Paper’s culture emphasized adversarial labor relations and included a recent history of prolonged and violent strikes. Otis’ employees cooperated as requested and the handbook became part of the firm’s participatory management program. International Paper’s employees refused to cooperate reportedly because they believed the project was intended not to introduce participatory management but to provide training manuals to be used by replacement workers in the event of a strike.

The paper industry anecdote suggests one way firm culture affects the viability of participatory management: A long history of adversarial relations precludes the “we’re all in this together” attitudes participatory management needs to foster. A tradition of intra-firm competition can have similar effects.

Firm culture will also impact management decisionmaking about employee involvement. Firm culture is likely to affect not only the basic decision to adopt employee involvement, but also to influence the choice of which program to adopt. Firms with a strong ideological commitment to participatory democracy are likely to adopt very different programs than those firms doing so for purely instrumental reasons. Finally, firm culture has indirect effects by affecting worker tastes. Firm culture not only forms employee tastes, but it also is formed by them.

Recall the evidence that employee tastes differ. The management-oriented literature on participatory management confirms that not all employees are well-suited for employee involvement. J. Richard Hackman, for example, opines: “Every organization has some members who make their best contributions as solo performers.” Indeed, Hackman further opines that some employees are “team destroyers,” who can prevent employee involvement from succeeding. The prevalence of such workers in a firm will go a long way towards determining whether its culture will prove receptive to participatory management.

It is worth noting that worker resistance to participatory management is neither irrational nor deserving of condemnation. Behavioral patterns that are learned over many years, and reinforced by past rewards, are exceedingly difficult to change. As such, firm culture becomes a shorthand for a path dependent explanation for resistance to participatory management. Introduction of participatory management within a firm typically entails substantial change, which will threaten vested interests in the workforce. Self-directed work teams threaten the seniority—and even the jobs—of foremen and other supervisory employees. Surviving supervisors are thrust into new positions as “team consultants” rather than bosses, with new and demanding responsibilities. Gain-sharing, pay for skills, and team-based compensation all threaten traditional seniority-based compensation. Training may be resisted by some workers: the old dogs who don’t want to learn new tricks. The job rotation and stress on “continuous improvement” characteristic of self-directed work teams in a TQM environment will threaten those workers who prefer a more mundane set of job responsibilities.

All of which serves to confirm that cultural conditions may undermine participatory management even if conditions are otherwise appropriate for it.

Schramsberg Crémant (California) 2001

Lightly effervescent and slightly sweet. Very fruity, especially for Schramsberg, which runs towards yeast and bread notes. Stone fruit flavors, notably white peaches. Grade: B+

The Politics of Healthcare

Kevin Drum opines:

... while Democrats might very well need a Newt Gingrich of their own, what they really need if they want to win back control of Congress is a tectonic shift they can take advantage of — and so far I just haven't seen any big, pent-up frustration on the part of center-right voters that might turn large numbers of them into center-left voters instead. It'll be healthcare eventually, but in the meantime I'm stumped.

Maybe, but my guess is that the big business/big government/K Street wing of the GOP is already trying to figure out how to do some version of Hillarycare-lite. In April of last year, I blogged about GM CEO Rick Wagoner's desire to shift GM's healthcare legacy costs on to the taxpayer:

Wagoner mentioned health care in answers to 5 questions, including one that asked what GM's problems were other than health care costs!

Remember the old saying, what's good for GM is good for the country? It was never really true, but it hid a deeper truth; namely, that what GM thinks is good for it will soon become national policy.

Public choice theory teaches us that legislation is a commodity sold by politicians to well-organized interest groups (to grossly oversimplify things). In 1994, Hillarycare died because powerful interest groups were lined up on both sides of the issue, with the main business lobbies lined up against it. So there was no sale.

I predict that the next time a universal single payer plan gets to the policy table, however, that business will be first in line to back it. When you read interviews like the one Rick Wagoner gave the Journal, one can but conclude that business is itching to shift health care costs off their books and onto the American taxpayer.

GOP-sponsored federalization of health care is coming as sure as day follows night. And it'll be one more nail - or maybe a whole bunch of nails - in the coffin of small government.

Hewitt Vineyard Estate Grown Cabernet Sauvignon (Rutherford) 2002

Where's the Rutherford dust? Setting that pressing question aside, this is a very fine wine. Huge nose and big flavors. Blackberries, mocha java, and cassis. Very drinkable now, but has enough tannin/acid structure to support a decade of cellaring. Grade: A-

What Clinton and the Democrats Wrought in 1994

Kevin Drum has an epiphany:

The good news is that Congress is set to pass a bill that prevents companies from funding lavish executive pension plans if the pension plan for their regular workers is underfunded and going bankrupt. ... But then there's this:

For decades, executives relied on the same pension plan as other company employees, so they had an incentive to make it generous. The shift toward a dual system started in 1994, when Congress passed a law intended to limit the cost to taxpayers of runaway executive pay. The law barred companies from taking a tax deduction on compensation in excess of $1 million a year for any current employee. The result: Companies began setting up supplemental pension plans that encouraged senior managers to defer compensation.

Well. That's certainly a good example of the law of unintended consequences, isn't it? I mean, I'm sure the $1 million cap seemed like a good idea at the time.

Here's a couple of other observations for Kevin to chew on. First, the 1994 tax change was effected not by some generic "Congress" but by Bill Clinton and the Congressional Democrats over GOP objections. Second, the Democrat tax change also was a major factor in the Enron, WorldCom, and other scandals of the tech bubble period.

In addition to leading to supplemental pension plans, because incentive-based pay didn't count against the $1 million cap, the Clinton/Democrat tax change encouraged companies to shift executive compensation from salaries into stock options. In turn, the shift towards stock options gave executives strong incentives to managethe stock price rather than the business. And, in some cases, to commit fraud so as to ensure that the company hit its forecasts.

Discussing Disney

There's a number of bloggers over at Conglomerate discussing the oral argument before the Delaware Supreme Court in the Disney-Ovitz executive compensation case.

Elizabeth Nowicki observes:

The points made by appellants’ counsel (as I recall) include: 1.  The directors had the obligation to meet together (as a group) and deliberate together on the decision to fire Ovitz.  By failing to do so, the directors breached some duty, per se.

I tend to sympathize with Larry Ribstein's point that:

I would hope that, after its mistake in Van Gorkom, the court now recognizes how wrong it would be to insist on excessive procedures, including requiring a meeting in order to satisfy due care duties.  And clearly that shouldn't matter for good faith purposes under 102(b)(7).

Yet, it is important to recognize that corporate law's insistence that boards of directors act collectively has a sound basis. Indeed, the very existence of the board of directors is predicated on the superiority of group as opposed to individual decision making. Or so I argued in my article Why a Board? Group Decisionmaking in Corporate Governance:

Abstract: The default statutory model of corporate governance contemplates not a single hierarch but rather a multi-member body that acts collegially. Why? This article reviews evidence that group decisionmaking is often preferable to that of individuals, focusing on evidence that groups are particularly likely to be more effective decisionmakers in settings analogous to those in which boards operate. Most of this evidence comes not from neo-classical economics, but from the behavioral sciences. In particular, cognitive psychology has a long-standing tradition of studying individual versus group decisionmaking. This article contends that behavioral research, taken together with various strands of new institutional economics, sheds considerable light on the role of the board of directors. In addition, the analysis has implications for several sub-regimes within corporate law. Are those sub-regimes well-designed to encourage optimal board behavior? Two such sub-regimes are surveyed here: First, the seemingly formalistic rules governing board decisionmaking processes turn out to make considerable sense in light of the experimental data on group decisionmaking. Second, the adverse consequences of judicial review for effective team functioning turns out to be a partial explanation for the business judgment rule.

Indeed, in that article, I even went so far as to venture a defense of the Van Gorkom decision:

… the Van Gorkom court arguably created a set of incentives consistent with the teaching of the literature on group decision making. The decision disfavors agenda control by senior management, penalizes boards that simply go through the motions, and encourages inquiry, deliberation, care, and process. The decision strongly encourages boards to seek outside counsel and financial advice, which is consistent with evidence groupthink can be prevented by outside expert advice and evaluations. Even the court’s criticism of the board’s willingness to take action after a single meeting is consistent with suggestions that a “second-chance meeting” also helps prevent groupthink. As such, the oft-repeated law and economics critique of Van Gorkom appears overblown. Contrary to what most law and economics scholars have asserted, there is a rational basis for the seemingly formalistic procedures mandated by that opinion.

According to Elizabeth, plaintiff's (i.e., appellant's) counsel also argued that:

Chancellor Chandler erred in placing the officers within the protection of the business judgment rule presumption.

In my treatise, Corporation Law and Economics, I argued that officers should get the benefit of the BJR:

It is reasonably well-settled that officers owe a duty of care to the corporation. It is less well-settled that officers get the benefit of the business judgment rule. Under the ALI PRINCIPLES, the rule applies to both directors and officers. [ALI Principles § 4.01.]

Judicial precedents are divided, however. [Compare Galef v. Alexander, 615 F.2d 51, 57 n.13 (2d Cir. 1980) (holding that the business judgment rule “generally applies to decisions of executive officers as well as those of directors”); FDIC v. Stahl, 854 F. Supp. 1565, 1570 n.8 (S.D. Fla. 1994) (holding that the rule “applies equally to both officers and directors”) with Platt v. Richardson, 1989 WL 159584 at *2 (M.D. Pa. 1989) (holding that the rule “applies only to directors of a corporation and not to officers.”). At least one court claims that the former view is the majority position, rejecting an argument that “the business judgment rule applies only to the conduct of corporate directors and not to the conduct of corporate officers” on grounds that it was “clearly contrary to the substantial body of corporate case law which has developed on this issue.” Selcke v. Bove, 629 N.E.2d 747, 750 (Ill. App. 1994).]

Most of the theoretical justifications for the business judgment rule extend from the boardroom to corporate officers. Many corporate decisions are made by officers, for example, who are likely to be even more risk averse than directors. Accordingly, insulation from liability may be necessary to encourage optimal levels of risk-taking by officers. Just as the board of directors is properly regarded as a production team, so is the so-called top management team. Accordingly, internal team governance may be preferable to external review. In sum, the better view is that officers are eligible for the protections of the business judgment rule.

Does the Academy Police Itself?

The brouhaha last week at UCLA over the Bruin Alumni Association prompted the LA Times' to devote most of its editorial section today to the question of whether universities are biased ideologically. Granted, the BAA's UCLAProfs.com site undermined its credibility by mixing apples and oranges, as I pointed out:

If BAA is going to go forward, a question on which I am firmly agnostic, I should think that they want to avoid violating IP law and university policy respecting copyright and so on. I should think they also need to draw a distinction between in-class abuse of position and legitimate political expression outside of class. So far, it would seem, they are falling down on both scores.

Put bluntly, however, the claims by the defenders of the status quo are even more bogus as the BAA's criticisms.

UCLA Professor Saree Makdisi claims that:

A method for assessing how professors treat their students is already built into how universities work. Every course at UCLA gives students the opportunity to anonymously evaluate their professors, and those evaluations are used in hiring, promotion and tenure decisions; abusive professors don't get very far in their careers.

Institute for Advanced Study Professor Joan Scott apparently got the same set of talking points:

... there are abuse-monitoring mechanisms in academia that distinguish between responsible work and polemic, between teaching that aims to unsettle received opinion and teaching that seeks to indoctrinate. Universities have established procedures to adjudicate complaints of indoctrination, charges of unfair grading and other denials of student rights, and, for the most part, they work.

Neither Makdisi nor Scott offers empirical support for their claims, although the latter claims that "study after study," none identified, validates her argument.

In contrast, I offer you some data. First, as explained in the preceding post, university hiring practices have a demonstrable disparate impact on the political and ideological composition of university faculties. Second, as I noted in my TCS column, these disparities clearly have a deleterious effect on the learning environment. A survey of students at 50 top U.S. universities and colleges conducted by the Center for Survey Research & Analysis at the University of Connecticut, for example, found considerable evidence that politics pervaded the classroom:

For instance, nearly half said that their professors frequently comment on politics in class even though it has nothing to do with the course or use the classroom to present their personal political views. In answers to other questions, the majority acknowledged that liberal views predominate. Most troubling, however, were the responses to the survey item On my campus, there are courses in which students feel they have to agree with the professor's political or social views in order to get a good grade -- 29% agreed.

I don't know whether Makdisi and Scott are simply uninformed or are being disingenuous. I do know that the system is broken and that public scrutiny of how universities spend taxpayer dollars is both appropriate and inevitable. The academic left's knee-jerk effort to delegitimize such scrutiny by invoking labels like witch hunt or McCarthyism will be as bootless as they are duplicitous.

Disparate Impact in Academic Hiring

Much of the LA Times' editorial section is devoted today to the question of whether universities discriminate against conservatives. I've argued in the past that there is such discrimination, although much of it is a question of critical mass and network effects rather than intentional discrimination.

Yet, I am reminded of a question Joe Biden put to Samuel Alito during the recent SCOTUS nomination hearings:

... discrimination has become very sophisticated. It's become very, very sophisticated, very much more subtle than it was when I got here 34 years ago or 50 years ago. ... I mean, there's all different ways in which now it's become so much more subtle. And that's why we all, Democrat and Republican, wrote Title VII. ... What we observed in the real world is it's real subtle. And yet it's harder to make a case of discrimination even though there's no doubt that it still exists.

The concept of disparate impact has become one of the chief tools courts use to address such discrimination. The Supreme Court set out the basic principle in Griggs v. Duke Power Co., 401 U.S. 424, 431-32 (1971), holding that Title VII "proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation. . . . [G]ood intent or absence of discriminatory intent does not redeem employment procedures or testing mechanisms that operate as 'built-in headwinds' for minority groups and are unrelated to measuring job capability."

To invoke disparate impact, the plaintiff must prove, generally through statistical comparisons, that the challenged practice or selection device has a substantial adverse impact on a protected group.

With that background in mind, consider these data from the Times:

Academics who identified themselves as left or liberal

in 1984: 39%

in 1999: 72%

Academics who identified themselves as right or conservative

in 1984: 34%

in 1999: 15%

Among faculties in 1999, Democrats outnumbered Republicans 5 to 1

The Democratic advantage by department in 1999 English: 35 to 1 History: 17.5 to 1 Biology: 4 to 1 Engineering: 3 to 1 Computer science: 2 to 1 Chemistry: 1.5 to 1 But in agriculture, Republicans held a 1.3-1 edge.

In 2004, employees of the University of California and Harvard University were John Kerry's largest dollar contributors and among Howard Dean's top five.

I'd say that makes out a prima facie case that university hiring practices are having a disparate impact. The burden of proof is therefore on the university to show why this disparity exists.

Spare me tired arguments like "liberals have a social conscience," "conservatives only care about money," and such nonsense. I've heard it before ... and rebutted it before.

Clarendon Hills Blewitt Springs Vineyard Old Vines Grenache (Clarendon) 1996

Possibly the finest Australian wine I have tasted to date. A huge wine. A John Wayne of wines. Big and brawny. Deep black even at age 10 and despite having thrown an tremendous amount of sediment. Very prominent legs. Immense nose of leather, cigars, and roasted game. Surprisingly fresh red fruit on the palate, with a subtle sweetness that refreshes rather than cloys. Delightful to drink now, but doubtless could have aged another decade or more.

I must confess that Grenache is not a grape variety for which I have had much respect in the past. Indeed, I had no idea Grenache was capable of producing a wine of this excellence. Thank goodness a friend gave me this bottle. Once again, an amazing wine broadens one's horizons. Grade: A

J. Davies Cabernet Sauvignon Diamond Mountain District (Napa Valley) 2001

The first bottle of this wine I tried was badly corked. After I complained, the good folks at Schramsberg (which owns J Davies) sent along a replacement bottle. A class act. We tried it tonight and it was excellent. Big nose. Mint, chocolate, and bright red fruits, with an interesting undertone of earth and minerals. Grade: A-

Ca' del Solo Big House Red (California) 2003

As usual, this wine includes everything but the kitchen sink. In 2003, it includes Syrah, Petite Sirah, Zinfandel, Carignane, Barbera, and Malbec. It's a good value generic red (<$10), but not especially memorable. Raspberry and blackberry flavors/aromas. Bonus points for value and using a screwcap, but it's still pretty pedestrian. Grade: B-

The Purpose of SSRN

SSRN is a repository of scholarly papers from a variety of disciplines, including law. Dan Markel recently complained that SSRN is not being used for its intended purpose:

I had been under the impression that SSRN was developed initially so that scholars could see "tomorrow's research today."  In other words, scholars (and the public) could access drafts of work well before  publication, along with past publications by a particular author.  And indeed, SSRN's homepage indicates that this is the point:

Each of SSRN's networks encourages the early distribution of research results by publishing submitted abstracts and by soliciting abstracts of top quality research papers around the world.

The "problem," as I see it, is that, at least in law, SSRN is being used as a way to generate more information relevant to the evaluation of a potential scholar (should we hire her, well, let's consider how many articles are up on SSRN, or how many downloads the person's scholarship gets, or, how good the article on SSRN is).  If SSRN is being used for evaluative purposes rather than constructive feedback purposes, then it seems likely that people will not post their "shitty first draft" up, but rather their penultimate draft, or potentially, just their final draft that was published. 

Larry Ribstein also seems to think that SSRN can function as a vehicle for attracting feedback on early drafts.

If the purpose of SSRN ever was to elicit feedback on early drafts, a point on which I plead ignorance, that purpose was just silly. Any young scholar who posted a rough draft to a website hoping that some Harvard or Yale big shot would read it and send along comments was, to be blunt, delusional. Put bluntly, nobody whose comments would be worth getting has that much time on their hands.

Apropos of my point, Gordon Smith notes that:

The problem is that SSRN has never been good at producing that sort of feedback, at least for me. As Dan observes in a comment to the original post, "few people I know actually receive comments from strangers on their drafts, which raises questions about whether the vision of SSRN is being realized; I know I haven't. Have you?" No.

The way you get feedback on rough drafts is by giving it to friends in the field, colleagues at your school, presenting it at workshops, and so on. Not by posting it to SSRN.

Instead, I think what the SSRN founders had in mind when they talked about "early distribution of research results" was bypassing the delays inherent in submitting an article to journals and the subsequent editorial process. I've had law review articles spend a year or more at the journal after acceptance. If you plan to submit to peer reviewed journals that do not allow multiple submissions, the process can be even longer. SSRN provided a vehicle for bypassing that process and getting relatively finished and polished work product out to the world much faster than the journal process allows. This is particularly important for time-sensitive work, but is attractive for any work.

SSRN also provides a vehicle for reaching people outside your discipline. To the limited extent I get feedback on articles from SSRN, it usually is a request for additional information from somebody outside the American legal academy. Hence, it seems safe to assume, SSRN is helping my scholarship reach audiences that would not be reached by law journals.

Or, as Smith suggests:

First, it offers direct marketing of scholarship based on subject matter. This is not such an issue in finance or sociology, where the journals provide focus, but in law our most prestigious publication outlets are general law reviews. ... For current work in corporate law, I rely heavily on SSRN to supplement conferences and word-of-mouth.

Second, SSRN introduces new audiences to my work.

All of these functions argue for posting only finished work product to SSRN. Hence, if Markel intended to suggest that SSRN's original, noble purpose has been eroded by the tawdry concerns of hiring and evaluating legal talent, I think that concern is misplaced.