Law and Economics

Code V.2

Lawrence Lessig has a terrific weblog, well worth visiting regularly (available here), and on today's post he announces something really interesting: he is going to update his five-year old Code and Other Laws of Cyberspace, but he is going to do so in a novel manner.  There will be a Wiki -- all right, I'm not really hip enough to have known what a "wiki" is; you can find out the same way I did at this site -- at which (or is it "on which"?) anyone can write comments or whole new sections of the book.  Professor Lessig will then take all those contributions during the Summer and work them up into the second edition of Code, which Basic Books will then publish in the Fall.  "The Wiki will stay live forever (under a Creative Commons license)."  Professor Lessig has also donated his advance from Basic and any royalties that he might realize from sales of Code V.2 to Creative Commons. 

I had a fascinating discussion this morning with my friend and former student Charlie Petit about Creative Commons and what it means.  (You can find the Creative Commons website here, and Charlie's website here, with lots of nice material on copyright and IP generally.  Charlie specializes in legal representation for authors.)  My admittedly limited understanding of Creative Commons was that it was a means of placing all or parts of one's copyright interests into the public domain.  Alternatively, perhaps, it is a means of renouncing one's copyright interests or of declaring one's intention not to enforce one's copyright interests.  (I notice that the Becker-Posner Blog, which I have recommended before, has a Creative Commons license in the sidebar.)  Charlie tells me that it is not quite as easy to renounce one's copyright interest as the Creative Commons license would seem to indicate.  I want to learn more about this; my instinct is to renounce, if I can and as if anyone might care, any copyright interest in these musings, but I would, nonetheless, be mildly upset -- and I stress "mildly" -- if I were to discover that someone had copied something here and posted it without attribution.  I'll continue to investigate this and will report back on what I've discovered. 

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Interesting Op-Ed

Eric Posner, co-author with Jack Goldsmith of the forthcoming book, The Limits of International Law, has an interesting op-ed piece in today's New York Times.  The title is "All Justice Is Local, Too," and is available here. 

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Good Reading

David Brooks, the columnist for The New York Times, has published two wonderful lists of articles in what he calls the Hookie Awards.  These are essays or articles written on issues of public interest in the spirit of the great public intellectual Sidney Hook.  Brooks published two lists of winning articles -- one on December 25 (available here) and a second today (available here).  Both lists have links to the websites from which you can download the articles.  Enjoy! 

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Indian Patent Law

One of the little known but important aspects of the TRIPs (Trade-Related Aspects of Intellectual Property) Agreement that was part of the World Trade Organization treaty that went into effect on January 1, 1995, was that many developing countries would create and enforce modern intellectual property laws by January 1, 2005.  So, an important milestone in IP is coming up within the week. 

For the past 10 years some developing countries have been living in an interesting limbo before their duty to impose IP regimes arrived.  For instance, India, which has been a vibrant economy for at least the last 13 or so years -- and possibly for the past 20, has seen the growth of a very profitable pharmaceutical industry over the last 10 years that has been routinely copying pharmaceuticals patented in other countries but not India (which has no product patent laws).  These pharmaceuticals have then been sold to other developing countries in competition with the patented pharmaceuticals of companies in the developed countries and (not having incurred the average $800 million development costs of those pharmaceuticals) at far lower prices.  A prominent example is that of antiretrovirals produced in India and sold at low price in sub-Saharan Africa to the many there who are HIV-positive but cannot possibly afford the same products at Northern hemisphere prices. 

Today's New York Times reports that "[t]he Indian government issued a decree [on December 26] to bring its patent laws into compliance with the requirements of the World Trade Organization.  ...  Although details of the decree were not available, the change signaled a breakthrough in patent reform, which had been stalled by political concerns that an overhaul would result in higher drug prices."

The report says that India has process patents but not product patents.  The article concludes, "The change in India's patent laws is aimed at spurring innovative drug companies to switch from making copycat generic drugs.  New options include making generic drugs for booming export markets, contract research and manufacturing, and new drug research." 

India's old patent law (1970) is available here.  The 2003 emendations are here.   An overview of Indian patent law is available here.  And a story in the India Daily about the new decree is available here.  When the details are published, they will probably be available on the website of the India Daily. 

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Organ Transplants

There is an excellent article on the history and prospects of organ transplantation in today's New York Times, available here.  The article indicates that physicians in Louisville and Utrecht will soon try to transplant a face.  I will have much more to write about organ transplantation soon, but let me note that the article indicates that this year there have been more than 87,000 people who have needed a transplanted organ and only 10,600 people who have donated an organ this year.  The article suggests that the principal means by which this excess demand is being addressed are by trying to dampen the demand by improving medical care so that a transplant is unnecessary and by looking to other species, such as pigs, and to manufactured organs as a source of transplants. 

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Firearms and Violence

There is a fascinating post by Stuart Benjamin on The Volokh Conspiracy, a blog I highly recommend and that is available here, on the Lott-Mustard study of the inverse relationship between concealed-carry laws and crime.  Stuart links to many commentaries on the study, including those forthcoming in the Stanford Law Review, and notes that the National Research Council has just published a very critical study of the Lott study entitled Firearms and Violence: A Critical Review, available from the National Academies Press here. 

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One way to get into a full course

The New York Sun reports in yesterday's edition about a nascent market among students at the NYU School of Law for getting into classes that are already full.  Jay Wilson, an enterprising second year student, posted an offer on a student bulletin board to pay $300 to any student currently registered in Daryl Levinson's Spring Semester constitutional law course who would drop the course so that he, Wilson, could take it.  Here's the story.  Note (as my colleague Lee Fennell pointed out to me) the wrong interpretation of the Coase Theorem. 

The NYU law school administration, in the person of Vice Dean Barry Adler, who is an accomplished law-and-economics scholar -- as is the Dean, Richard Revesz -- made some administration-speak criticisms of Mr. Wilson's proposal and vowed to stamp it out.  I am certain that this administration made these criticisms with their fingers crossed. 

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P.S.  Oh!  I see that Marginal Revolution posted on exactly the same thing with more extensive comments.  Give them a read here. 

Organ Transplants

I have been meaning to link to another blog that I read every day, Marginal Revolution.  Tyler Cown and Alex Tabbarok do a marvelous job of bringing economics to bear on interesting public policy issues.  Tyler's entry today contains the fascinating fact or conjecture that 95 percent of all music sales in the People's Republic of China are pirated copies. 

But today also has a wonderful entry on organ transplantation, including a link to a fascinating new paper by Gary Becker and Julio Elias on easing the shortage of kidneys for transplantation.  I'll have much more to say on organ transplantation in a future entry here.  In the meantime, one can't do better than to read Alex's entry today and the trackbacks to his previous work on that topic. 

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Texas Shootout

I have just been reading a marvelous article by my colleague Lee Fennell entitled “Revealing Options.”  The article will appear in the March, 2005, Harvard Law Review.  It is about the legal use of mechanisms of self-valuation to deal with some vexing matters regarding the protection of subjective value.

Here is a marvelous example of the use of options to deal with a legal issue.  It deals with a particular method, called the “Texas Shootout,” for dissolving partnerships: 

The Texas Shootout leverages uncertainty about whether one will emerge as a buyer or seller of partnership shares into a truthful valuation statement.  In a simple two-partner setting, the device would work as follows: One partner (P1) must name a price for her share of the partnership venture.  The other partner (P2) can then choose to pay P1 that price to acquire P1’s share of the venture or can instead require P1 to buy out his share (that is, P2’s share) at that same price.  When P1 sets a price, she is effectively making two representations.  First, she is representing that she is indifferent between keeping her own half of the venture and receiving the stated amount of money.  Second, she is representing that she is indifferent between obtaining the other half of the venture at the stated price and keeping the stated amount of money.  Because the two halves of the enterprise are by definition equivalent and fungible, these two representations are made simultaneously when P1 provides a valuation for her half of the venture.

That’s a neat example of the use of self-valuation techniques and the insights of game theory to discuss a real legal issue. 

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Punitive Damages

A notice this morning from SSRN reports on a recent article in the Journal of Legal Studies by Joni Hersch and Kip Viscusi, "Punitive Damages: How Judges and Juries Respond."  Here's the abstract:

This paper presents the first empirical analysis that demonstrates that juries differ from judges in awarding punitive damages. Our review of punitive damages awards of $100 million or more identified 63 such awards, of which juries made 95 percent. These jury awards are highly unpredictable and are not significantly correlated with compensatory damages. Using data on jury and bench verdicts from the Civil Justice Survey of State Courts, 1996, we find that juries are significantly more likely to award punitive damages than are judges and award higher levels of punitive damages. Jury awards are also less strongly related to compensatory damages. The differential effect of juries is most pronounced among the largest awards.

Juries also tend to award higher compensatory damages, which in turn boost the punitive damages award. The findings are robust with respect to controlling for self-selection of jury or bench trial."

You can download a version of the article from SSRN here. 

You might also look at Professor Viscusi's fascinating article posted on SSRN about "The Blockbuster Punitive Damages Awards."  That article is available here.  Among much other fascinating material, Professor Viscusi reports that just two states -- California and Texas -- account for more than half of the $100 million or greater punitive damages awards in recent years and that 90 percent of all those awards, from whatever state, would be reduced under the formula articulated in State Farm v. Campbell. 

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