ProfessorBainbridge.com

Democrats: The do as I say not as I do party

It figures:

The new chairwoman of the Democratic National Committee was criticizing Republicans who opposed President Obama's bailout of the American automakers union, oh, no, make that American automakers.

"If it were up to the candidates for president on the Republican side," said Rep. Debbie Wasserman Schultz of Florida, "we would be driving foreign cars. They would have let the auto industry in America go down the tubes."

So Michael O'Brien of The Hill newspaper went and checked what kind of automobile loyal-American-car-supporter Debbie Wasserman Schultz owns.

Yup, you guessed it -- Japanese.

Drive as she says, not as she does.

The Bishops and the budget

There's been a bit of kerfuffle lately between the House GOP and the US Catholic Bishops over the budget and Catholic social teaching. I'll borrow a Rick Garnett post to summarize the context:

Here is Rep. Paul Ryan's April 29 letter to Archbishop Dolan; here is Archbishop Dolan's reply.  The exchange is well worth reading, I think, especially as a follow-up to the much remarked public letter to Speaker Boehner, which was signed by a number of Catholic academics.  (As I indicated, in an earlier post, I thought the letter to Boehner overstated the alleged conflict between his voting record and "the Church's most ancient moral teachings", but that's water under the bridge.) 

Speaker Boehner reponded, in a statement, to the Ryan-Dolan exchange:

“I welcome Archbishop Dolan’s letter and am encouraged by the dialogue taking place between House Republicans and the Catholic bishops regarding our budget, the ‘Path to Prosperity.’ Our nation’s current fiscal path is a threat to human dignity in America, offering empty promises to the most vulnerable among us and condemning our children to a future limited by debt. We have a moral obligation as a nation to change course and adopt policies that reflect the truth about our nation’s fiscal condition and our obligation to future generations, and to offer hope for a better future. Our duty to serve others compels us to strive for nothing less. As Chairman Ryan notes in his letter to the archbishop, Americans are blessed to have the teachings of the Church available to us as guidance as we confront our challenges together as a nation.”

Michael Sean Winters, at NCR, and others are underwhelmed by Ryan's letter and -- in Winters's case -- skeptical about the possibility for consonance between the vision proclaimed in the Church's social-teaching tradition and that on display in the work of Ayn Rand.  I don't share (what seems to be) Winters's view that Ryan's reported interest in the (banal and turgid) writings of Ayn Rand has, in his budget, simply been translated into proposed policy.  (By the way, for Rand-haters, David Hart's essay on the occasion of the "Atlas Shrugged" movie is a must-see.) 

One does not have to like Ayn Rand (and I don't), or to be a "Catholic neo-con", to think that (a) it is both profoundly immoral and stupid to continue accumulating debt burdens at our current rates, (b) deep cuts in spending are required, and (c) these cuts require more than the usual promises of increased attention to "waste, fraud, and abuse" and "corporate loopholes" and will have to touch popular social-welfare programs (and defense spending).  Winters is right, of course, to say that Rand's vision is less attractive (because it is unsound) than is Pope Benedict's; but this fact does not eliminate the need to attend more seriously than, say, Sen. Reid has been willing to do to the need to cut spending and to design carefully any tax increases so as to avoid stunting growth.

Catholic neo-con, of course, is more or less where I situate my politics on economic issues, so I have no trouble embracing Rick's points a to c. I'd go on, however, to express a certain amount of skepticism about the Bishop's policy prescriptions. As Michael Novak observes, Catholic prelates and theologians tend to be poorly trained in economics and inexperienced with the business world. They “are likely to inherit either a pre-capitalist or a frankly socialist set of ideals about political economy.”[1] Consequently, theologians “are more likely to err in this territory [i.e., economic justice] than in most others.”[2]

So I take the Bishop's attack on the House GOP budget with more than a grain of salt.

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[1] Michael Novak, Toward a Theology of the Corporation 59 (rev. ed.1990).

[2] Id. at 12.

Law reviews and specialty topics

From Prawfsblawg:

“We would have accepted this article in February,” one editor-in-chief kindly wrote me not long ago, “but we’ve already accepted a tax article this year.”  At the time, I took this as likely an editor’s version of “I have to wash my hair” and tried not to take it too seriously.  A couple of  weeks ago, though, at the OJ (as previously highlighted by your humble correspondent), a recent Chicago Law Review editor said much the same thing: once his journal takes an article from a “specialty” field, the bar is much higher for other pieces in the same field.  Because I enjoy pointless sword fights and extremely bad Scottish accents, I’ll call this the “Highlander effect”: there can be only one specialty article per volume. 

It’s easy to understand the institutional dynamic that produces the Highlander effect.  ...  Articles editors typically have diverse interests--often by design, in order to maximize the board’s capacity to evaluate a range of topics.  Given a limited number of publication slots,  some combination of log rolling and feelings of fairness to others’ preferences means that boards will rarely be able to accept multiple pieces that would satisfy some “outlier” preference.

This scarcity has a number of undesirable effects.  For one, it produces a race to the “submit” button -- exactly the race lamented by our OJ commentator.  It adds significantly to the randomness of placement results, reducing their signaling value.  Or, alternatively, it produces repeated submissions of essentially the same piece to multiple boards, another practice rightly decried at the OJ as wasting journal resources (and, y’know, recidivism is pretty annoying for us authors, too).  Conceivably it raises significant conflict issues for peer reviewers submitting in the same cycle (or narrows the pool of unconflicted reviewers).

I've reached a point of general frustration with law reviews. Getting jerked around on publication by third or, worse yet, second year law students. Being obliged to request expedited consideration as though I were a supplicant asking royalty for a favor. Having some wet behind the ears editor practically rewrite my article. Not getting paid. Frak the law reviews and the horse they came in on. Books or self-publish on Kindle.

Did the Queen snub Obama wine-wise?

Barack Obama has done more than a few things to offend our friends in the United Kingdom. Giving  Prime Minister Brown a gift of 25 DVDs -- that don't even work in the UK. Sending back the bust of Winston Churchill the British Embassy had lent to the Oval office. Referring to BP as British Petroleum. And then there's the whole Kenyan grandfather beat up by British colonial troops or whatever the story was.

On the surface, it seems like they're all making nice on the current State visit. But then I saw a bit about the wine the Queen served Obama at the state dinner at Buckingham Palace:

Finally, after two straight presidents who didn't appreciate the taste of a fine French burgundy, Buckingham Palace tonight had a chance to put on the Ritz for a first family who enjoy a long dinner and luscious wine.

Most notable from the wine cellars of the famous palace: A Echezeaux Grand Cru 1990, Domaine de la Romanee-Conti, that goes for $1,000 - $1,700 per bottle in the United States.

And that got me to thinking. Pricey? Yes. Famous name? To be sure. DRC surely ranks in the pantheon of the top 10 wine estates in the world. But consider:

• Yes, Robert Parker scored the 1990 Grands Echezeaux 93 points
  • But that's a relatively low score for a DRC wine. The Romanee-Conti, for example, routinely scores in the high 90s.
• According to Parker, the 1990 Grands Echezeaux is now an "old wine," as it is past its prime drinking age of 1995-2010. Not by much, granted, but still ...
  •  The choice of a 1990 Grands Echezeaux is especially interesting, since Parker gave the 1991 the same 93 point score and says that it will still be in its prime drinking window through 2012.

Even a Queen presumably needs to clean out the cellar occasionally. But was the Queen also sending a subtle smack down that only a wine geek would recognize? 

More evidence of Congressional insider trading

The same economists who discovered what looks like evidence of insider trading by members of the Senate in the 1990s have repeated their study for members of the House of Representatives. Dan Froomkin reports:

Four university researchers examined 16,000 common stock transactions made by approximately 300 House representatives from 1985 to 2001, and found what they call "significant positive abnormal returns," with portfolios based on congressional trades beating the market by about 6 percent annually.

What's their secret? The report speculates, but does not conclude, it could have something to do with the ability members of Congress have to trade on non-public information or to vote their own pocketbooks -- or both.

I've written about the legal aspects of Congressional insider trading, most recently and most comprehensively in Insider Trading Inside the Beltway, whose abstract follows:

A 2004 study of the results of stock trading by United States Senators during the 1990s found that that Senators on average beat the market by 12% a year. In sharp contrast, U.S. households on average underperformed the market by 1.4% a year and even corporate insiders on average beat the market by only about 6% a year during that period. A reasonable inference is that some Senators had access to – and were using – material nonpublic information about the companies in whose stock they trade.

Under current law, it is unlikely that Members of Congress can be held liable for insider trading. The proposed Stop Trading on Congressional Knowledge Act addresses that problem by instructing the Securities and Exchange Commission to adopt rules intended to prohibit such trading.

This article analyzes present law to determine whether Members of Congress, Congressional employees, and other federal government employees can be held liable for trading on the basis of material nonpublic information. It argues that there is no public policy rationale for permitting such trading and that doing so creates perverse legislative incentives and opens the door to corruption. The article explains that the Speech or Debate Clause of the U.S. Constitution is no barrier to legislative and regulatory restrictions on Congressional insider trading. Finally, the article critiques the current version of the STOCK Act, proposing several improvements.

BTW, as a self-identified Republican (albeit of what some folks call the RINO variety), it would ill behoove me to comment on this aspect of the findings:

The study found some significant difference based on party membership and seniority, with the Democratic sample beating the market by nearly 9% annually, versus only about 2% annually for the Republican sample.

Instead, I'll just let it speak for itself.

I should note that there is at least one study finding that the Congressional trading advantage disappeared post-2004. But even so, there remains no justification for the loophole that allows Congressmen to inside trade with impunity.

Ribstein on Jackson on Corporate Speech

Larry Ribstein weighs in on Lucian Bebchuk acolyte Robert Jackson's proposal "to, among other things, majority shareholder voting on corporate speech decisions." Larry opines that:

The main point to emphasize here is that there is no special free speech reason to protect shareholders from managerial control of corporate speech.  If anything, the arguments cut the other way.  Government control of corporate speech surely raises some voices, and therefore some ideas, above others.  And legislators and regulators seek to promote their own interests, which is the First Amendment’s main concern.

The bottom line is that First Amendment should constrain government regulation not only directly of corporate political speech, but also of the governance processes that produce it. The SEC’s 14a-8 ruling and Bebchuk and Jackson’s proposals would move securities regulation toward a confrontation with the First Amendment that has been brewing since 1933.  See my article with Butler, Corporate Governance Speech and the First Amendment, 43 U. Kans. L. Rev. 163 (1994).

It's a good read, so go check it out.

Shareholders and corporate political speech

Lucian Bebchuk's acolytes continue to spread the claim that shareholders ought to be actively involved in an ever-expanding array of corporate decisions. The latest case in point is Robert Jackson's post at the Harvard Forum, which asserts that the SEC should "give shareholders a greater role in corporate political speech decisions."

Jackson praises the SEC's recent shift in position on Rule 14a-8, which allows shareholders to include proposals on the company’s proxy ballot for a vote by shareholders. Formerly, the SEC took the position that proposals affected corporate political speech could be excluded from the company's proxy statement under rule 14a-8(i)(7) as ordinary business matters. Recently, however, the SEC has changed its position and has begun requiring companies to include such proposals. As Jackson explains:

This proxy season, a Home Depot shareholder, NorthStar Asset Management, asked the company to include on its ballot a proposal recommending, among other things, that the board disclose its policies on electioneering contributions—and give shareholders an advisory vote on those policies. Home Depot sought permission from the SEC to exclude the proposal from its ballot, arguing that the proposal related to Home Depot’s ordinary business operations. In a letter opposing Home Depot’s request, and citing our article, NorthStar argued that Rule 14a-8 required the proposal to be included.

In March, the staff agreed with NorthStar, concluding that the proposal could not be excluded on the ground that it related to Home Depot’s ordinary business operations. Home Depot’s proxy statement, filed two weeks later, now includes the proposal on the ballot—along with management’s statement opposing the proposal.

One wonders why the SEC's shift in position on this issue doesn't raise the same sort of issues raised in the ADSCME v. AIG case. AFSCME's pension fund owned a substantial block of AIG stock, and advanced a shareholder proposal that would have amended the firm’s by-laws effectively to turn the firm’s proxy solicitation material into a ballot: the firm would be required to include in its proxy material not just the incumbent board’s slate, but also rival slates proposed by insurgents. AIG management asked the SEC whether it could exclude the proposal on the grounds that “relate[d] to an election” (Rule 14a-8(i)(8)). The SEC replied that it could (i.e., it issued a no-action letter), AIG excluded the proposal, and AFSCME sued.

The court held that AIG may not exclude the proposal.

Because the interpretation of Rule 14a-8(i)(8) that the SEC advances in its amicus brief-that the election exclusion applies to proxy access bylaw proposals-conflicts with the 1976 Statement, it does not merit the usual deference we would reserve for an agency’s interpretation of its own regulations. … The SEC has not provided, nor to our knowledge has it or the Division ever provided, reasons for its changed position regarding the excludability of proxy access bylaw proposals. Although the SEC has substantial discretion to adopt new interpretations of its own regulations in light of, for example, changes in the capital markets or even simply because of a shift in the Commission’s regulatory approach, it nevertheless has a “duty to explain its departure from prior norms.” Atchison, T. & S.F. Ry. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 808, 93 S.Ct. 2367, 37 L.Ed.2d 350 (1973) (citing Sec. of Agric. v. United States, 347 U.S. 645, 652-53, 74 S.Ct. 826, 98 L.Ed. 1015 (1954))....

Why doesn't the same logic require an explanation here? Preferably by way of a formal rule making subject to APA checks and balances, with opportunity for comment by affected parties?

In any case, as is typical with Bebchuk and his acolytes, Jackson is not satisfied with this victory:

... under current corporate-law rules shareholders’ role in this area remains far too limited. For example, NorthStar’s proposal, consistent with Delaware law, merely recommends that the board disclose its policies on political spending and give shareholders a say on those policies. Even if shareholders overwhelmingly vote for NorthStar’s proposal, Home Depot will not be bound to follow it.

To the extent that the interests of directors and executives in corporate spending on politics diverge from those of shareholders, corporate-law rules should give shareholders meaningful authority with respect to those decisions.

One increasingly wonders if there is any issue Bebchuk and his acolytes think ought to be outside the scope of shareholder decision making.

State corporate law provides clearly that the corporation’s business and affairs are “managed by or under the direction of a board of directors.” The vast majority of corporate decisions accordingly are made by the board of directors acting alone, or by persons to whom the board has properly delegated authority. Shareholders have virtually no right to initiate corporate action and, moreover, are entitled to approve or disapprove only a very few board actions. The statutory decision-making model thus is one in which the board acts and shareholders, at most, react.

Shareholder voting thus is simply one of many corporate accountability mechanisms—and not a very important one at that. In theory, of course, shareholders could vote incompetent directors out of office. In the real world, however, so-called proxy contests are subject to numerous legal and practical impediments that render them largely untenable as a tool for disciplining managers. Accordingly, the product, capital, and employment markets are all far more important than voting as a constraint on agency costs. To the extent voting matters, it does so solely because it facilitates the market for corporate control. If agency costs get high enough, it will become profitable for some outsider to acquire a controlling block of shares and exercise their associated voting rights to oust the incumbent board.

Jackson's complaint that Home Depot is not bound by the proposal thus ought to fall on deaf ears. As Delaware’s Chancellor William Allen observed, our “corporation law does not operate on the theory that directors, in exercising their powers to manage the firm, are obligated to follow the wishes of a majority of shares. In fact, directors, not shareholders, are charged with the duty to manage the firm.” Paramount Communications Inc. v. Time Inc., 1989 WL 79880 at *30 (Del. Ch. 1989), aff’d, 571 A.2d 1140 (Del. 1990).

Allen further recognized that the fact that many, “presumably most, shareholders” would have preferred the board to make a different decision “done does not . . . afford a basis to interfere with the effectuation of the board’s business judgment.” In short, corporations are not New England town meetings.

It's also worth remembering that the beneficiaries of Bebchuk's incessant pressing of ever expanding shareholder power and that of acolytes like Jackson is not going to benefit ordinary investors. Instead as Roberta Romano observed with respect to union and public pension fund sponsorship of shareholder proposals:

It is quite probable that private benefits accrue to some investors from sponsoring at least some shareholder proposals. The disparity in identity of sponsors—the predominance of public and union funds, which, in contrast to private sector funds, are not in competition for investor dollars—is strongly suggestive of their presence. Examples of potential benefits which would be disproportionately of interest to proposal sponsors are progress on labor rights desired by union fund managers and enhanced political reputations for public pension fund managers, as well as advancements in personal employment. … Because such career concerns—enhancement of political reputations or subsequent employment opportunities—do not provide a commensurate benefit to private fund managers, we do not find them engaging in investor activism.[1]

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[1] Roberta Romano, Less Is More: Making Shareholder Activism A Valued Mechanism Of Corporate Governance, 18 Yale J. Reg. 174, 231-32 (2001).

I've dealt with these issues in greater length elsewhere, most notably The Case for Limited Shareholder Voting Rights, 53 UCLA Law Review 601-636 (2006), which explained that:

Recent years have seen a number of efforts to extend the shareholder franchise. These efforts implicate two fundamental issues for corporation law. First, why do shareholders - and only shareholders - have voting rights? Second, why are the voting rights of shareholders so limited? This essay proposes answers for those questions.

As for efforts to expand the limited shareholder voting rights currently provided by corporation law, the essay argues that the director primacy-based system of U.S. corporate governance has served investors and society well. This record of success occurred not in spite of the separation of ownership and control, but because of that separation. Before changing making further changes to the system of corporate law that has worked well for generations, it would be appropriate to give those changes already made time to work their way through the system. To the extent additional change or reform is thought desirable at this point, surely it should be in the nature of minor modifications to the newly adopted rules designed to enhance their performance, or rather than radical and unprecedented shifts in the system of corporate governance that has existed for decades.

And Director Primacy and Shareholder Disempowerment, 119 Harvard Law Review (2006), which was a response to Lucian Bebchuk's 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 made 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.

Corporate Practice Commentator's "Top 10" Corporate & Securities Articles for 2010

Brian Leiter reports that the list consists of:

Ayotte, Kenneth and David A. Skeel, Jr. Bankruptcy or bailouts? 35 J. Corp. L. 469-498 (2010).

Bebchuk, Lucian A. and Ehud Kamar. Bundling and entrenchment. 123 Harv. L. Rev. 1549-1595 (2010).

Bebchuk, Lucian A. and Holger Spamann.  Regulating bankers’ pay.  98 Geo. L.J. 247-287 (2010).

Bratton, William W. and Michael L. Wachter.  The case against shareholder empowerment.  158 U. Pa. L. Rev. 653-728 (2010).

Choi, Albert and George Triantis.  Strategic vagueness in contract design:  The case of corporate acquisitions.  119 Yale L.J. 848-924 (2010).

Choi, Stephen, Jill Fisch and Marcel Kahan. The power of proxy advisors: Myth or reality? 59 Emory L.J. 869-918 (2010).

Kahan, Marcel and Edward Rock. Embattled CEOs. 88 Tex. L. Rev. 987-1051 (2010).

Roe, Mark J.  Delaware’s shrinking half-life.  62 Stan. L. Rev. 125-154 (2009).

Squire, Richard.  Shareholder opportunism in a world of risky debt.  123 Harv. L. Rev. 1151-1213 (2010).

Strine, Leo E., Lawrence A. Hamermesh, R. Franklin Balotti, and Jeffrey M. Gorris. Loyalty's core demand: The defining role of good faith in corporation law. 98 Geo. L.J. 629-696 (2010).

Is the USA inevitably becoming Greece?

Andrew Sullivan:

That was one Republican congressman's lament as the House majority stormed ahead with its endorsement of the abolition of the entitlement and its replacement by a voucher for private insurance. Scott Brown's opposition is rooted in, so far as one can tell, a belief that the vouchers would not keep up with the cost of healthcare (but that was a feature, not a bug, remember) and that "seniors should not have to bear a disproportionate burden." Well, seniors have it pretty great right now compared with many younger than them. Brown's proposal to cut the cost: fraud and abuse. Yep: we're back to those. ...

The demagoguing by the Democrats is predictable, sad, but also so powerful it's hard to see how any party could practically resist it. Alas, Mediscares may work for short term political advantage (we'll see how strongly in tomorrow's special election) but they have delayed real reform for far too long. I wish the GOP were able to work with Obama on this. But that was ruled out well before his election.

The basic problem is that too many people want to ride in the government wagon and too few are willing to help pull it:

Getting our fiscal house in order will require shared sacrifice, which is something our people seem unwilling to endure and our dysfunctional political system is unwilling to demand.

Après moi, le déluge

Goodwin Liu meet Miguel Estrada

The GOP successfully filibustered (with help from one Democrat, Ben Nelson) law prof Goodwin Liu's nomination to the Ninth Circuit. It's been widely reported that the Obama administration was trying to get Liu some judicial experience so as to continue grooming him to be the first Asian-American nominated to the Supreme Court. It is occasioning a good deal of angst and some hypocrisy among liberal legal circles.

Liu may or may not be qualified to be a judge. My guess is that he probably is. But I'm reminded of the case of Miguel Estrada, who the Democrats blocked from taking a seat on DC Circuit. As Wikipedia notes: "Estrada's was the first filibuster ever to be successfully used against a judicial nominee who had clear support of the majority in the Senate (Fortas only had the support of 45 Senators and ended up resigning his position a year later in disgrace), and the first filibuster of any court of appeals nominee." Why were the Democrats so determined to stop Estrada? Because they thought Bush 43 was grooming him to be the first Hispanic nominee to the SCOTUS.

It's no way to run a railroad, but payback nevertheless is a bitch.

So if Liu's looking for somebody to blame, he ought to start with the list of Democrats who filibustered Estrada.

Jack McCord

Paul Caron passes on some sad news:

Tax Prof John (“Jack”) H. McCord (Illinois) died of lung cancer on Wednesday at the age of 76. Please see this moving obituary by his son, Paul, and A Tribute to John H. McCord upon His Retirement, 2000 U. Ill. L. Rev. 741-62:

• Tribute (with a complete bibliography), 2000 U. Ill. L. Rev. 741
• Thomas M. Mengler (Dean, Illinois), A Salute to Professor John H. McCord, 2000 U. Ill. L. Rev. 749
• Charles C. Bingaman (Chapman), Professor John H. McCord: Bridging the Gap Between Law School and Law Practice in Illinois, 2000 U. Ill. L. Rev. 751
• Ora Fred Harris, Jr. (Illinois), Professor John H. McCord: A Marvelous Human Being, 2000 U. Ill. L. Rev. 755
• David Laro (Judge, U.S. Tax Court), Tribute to Professor John McCord, 2000 U. Ill. L. Rev. 757
• Jeffrey G. Sherman (Chicago-Kent), My First-Grade Teacher, 2000 U. Ill. L. Rev. 761

Visitation will be on Sunday (May 22) at Renner-Wikoff Chapel and the funeral on Monday (May 23) at St. Patrick's Catholic Church.  See here to sign the guest book or send a sympathy card, private condolences, or flowers. Memorial contributions may be made to St. Patrick's Catholic Church,  University of Illinois College of Law or Carle Cancer Clinic.

I remember Jack with great affection from our days as colleagues at Illinois. He was the epitome of scholar and gentleman. Plus, he loved dogs, which formed a bond, as he helped Helen and I get through Sam's trying puppy days.

Smith reviews Schools for Misrule

Law prof/blogger Tom Smith reviews Walter Olson's book Schools for Misrule: Legal Academia and an Overlawyered America:

Walter Olson thinks that American law schools are the origin of some very bad ideas, in something like the way bats are said to be the reservoir of certain nasty viruses in Africa: the germs of pernicious concepts incubate there in relative obscurity between epidemics, erupting occasionally to spread destruction and misery. Sadly, Olson is not entirely wrong.

Schools for Misrule is a broad complaint against American law schools, especially perhaps the Yale Law School, alleging that they promulgate terrible jurisprudence. ...

It is not clear, however, whether law schools are responsible for the abuses Olson identifies or merely reflect their professional and political environment. Law schools also should get credit for incubating intellectual movements that have proven powerful tonics for the very problems Olson complains about. The law and economics movement, for example, which evolved at the University of Chicago law school, has deeply undercut theories that everybody should be liable for everything and has increased respect for common-law rules and adjudication. Public choice theory, sprouting in part from the law school at George Mason University, and now widely influential, has made the idea of benevolent judge-reformers seem hopelessly naïve. Harvard Law School hired Jack Goldsmith ’89JD, outspoken critic of the grander claims of international human rights law. Even Berkeley has not seen fit to extradite torture memo author and law professor John Yoo ’92JD to the mercies of his many adamant critics. ...

In other words, the problem is liberal law professors not law schools. Smith concldues, however, that:

Olson’s book, if one-sided, is nevertheless well worth reading. His histories of liability expansion, the role of wealthy private foundations, and international human rights law activism, as well as the ever potentially corrupting influence of money, amount to a sobering crash course in how bad things can happen to good schools and countries. Olson writes with a humorous touch and wears his considerable erudition about the history of legal education lightly. Anyone interested in how law schools influence our broader political debates should read this book, even if it is not the only book on this topic one should read.

More on scientific consensuses: Species extinction rates overestimated

Apropos of the discussion we had the other day about the scientific consensus on climate change comes news that:

The most widely used methods for calculating species extinction rates are "fundamentally flawed" and overestimate extinction rates by as much as 160 percent, life scientists report May 19 in the journal Nature.

However, while the problem of species extinction caused by habitat loss is not as dire as many conservationists and scientists had believed, the global extinction crisis is real, says Stephen Hubbell, a distinguished professor of ecology and evolutionary biology at UCLA and co-author of the Nature paper. ...

"The overestimates can be very substantial. The way people have defined 'extinction debt' (species that face certain extinction) by running the species-area curve backwards is incorrect, but we are not saying an extinction debt does not exist."

The point is not that we should ignore environmental concerns. The point is that we should be wary about claims that massive social and economic changes are necessary simply because the scientific consensus of the moment claims they're desirable. Like the medical claims about salt I mentioned in my earlier post, and like this latest news, the consensus of the moment can turn out to be seriously flawed.

Corporate Governance after the Financial Crisis

Oxford University Press has announced my (newly renamed) book: Corporate Governance after the Financial Crisis:

The years from 2000 to 2010 were bookended by two major economic crises. The bursting of the dotcom bubble and the extended bear market of 2000 to 2002 prompted Congress to pass the Sarbanes-Oxley Act, which was directed at core aspects of corporate governance. At the end of the decade came the bursting of the housing bubble, followed by a severe credit crunch, and the worst economic downturn in decades. In response, Congress passed the Dodd-Frank Act, which changed vast swathes of financial regulation. Among these changes were a number of significant corporate governance reforms.

Corporate Governance after the Financial Crisis asks two questions about these changes. First, are they a good idea that will improve corporate governance? Second, what do they tell us about the relative merits of the federal government and the states as sources of corporate governance regulation? Traditionally, corporate law was the province of the states. Today, however, the federal government is increasingly engaged in corporate governance regulation. The changes examined in this work provide a series of case studies in which to explore the question of whether federalization will lead to better outcomes. The author analyzes these changes in the context of corporate governance, executive compensation, corporate fraud and disclosure, shareholder activism, corporate democracy, and declining US capital market competitiveness.

Features

• Clearly explains complex technical legal and economic issues in ways that the educated generalist will understand
• Identifies and clearly explains which regulations and laws make good policy sense, and which do not
• Sophisticated in its economic analysis of the law to be persuasive to the professional, yet sufficiently clear for the educated lay person
• Thoroughly researched in its coverage of important contributions to the legal and economic literature on corporate governance

While you wait for it to be published in November, of course, you can always buy one of my other books:

What's important in life?

Jason Whitlock:

Nineteen of the 20 top-rated TV shows in the fall of 2010 were NFL games.

People watch, therefore the NFL is really, really important.

You can make the same argument about porn.

He's got a point. Mass popularity doesn't necessarily have anything to do with significance. Witness the Kardashians.