Source: http://www.thepocketpart.org/volume-112-issue-4-january-2003-681968
Timestamp: 2013-12-09 12:23:15
Document Index: 669246040

Matched Legal Cases: ['§ 4001', '§ 4001', '§ 4001', '§ 4001', '§ 4001', '§ 4001', '§ 4001']

The Yale Law Journal Online - Volume 112, Issue 4, January 2003
Volume 112, Issue 4, January 2003
Why Above-Cost Price Cuts To Drive Out Entrants Are Not Predatory--and the Implications for Defining Costs and Market Power Einer Elhauge, Tuesday, 31 December 2002 112 Yale L.J. 681 (2003)Recently, European and U.S. officials have made surprising moves toward restricting firms from using above-cost price cuts to drive out entrants. This Article argues that these legal developments likely reflect the fact that scholarly critiques of cost-based tests of predatory pricing have never been satisfactorily addressed, and offers a better explanation for why restrictions on reactive above-cost price cuts are undesirable. It begins by concluding that ¿costsî should be defined functionally as whichever cost measure assures that prices above costs cannot deter or drive out equally efficient rivals, and shows how applying that functional benchmark resolves numerous apparent anomalies in current predatory pricing law. It then shows that reactive above-cost price cuts do not necessarily indicate an undesirable protection of market power, but rather can be an efficient response to deviations from the output-maximizing price-discrimination schedule in competitive markets. Even when an incumbent does have market power, restrictions on reactive above-cost price cuts have mainly undesirable effects. They fail to encourage entry and raise post-entry prices in the bulk of cases, where the entrants are (or will predictably become) as efficient as the incumbent or would have entered anyway despite entrant inefficiency. They can only weakly encourage less efficient entry since the restrictions cannot protect less efficient entrants in the long run, and even in such cases they have mixed effects on post-entry prices since they give incumbents perverse incentives to raise post-entry prices to speed the day when the restriction expires. In all cases, they impose wasteful transition costs and losses in productive efficiency, and they lessen incentives to create more efficient incumbents and entrants. These adverse effects are worsened by implementation difficulties that cannot be avoided no matter how the rules are defined, including that possible definitions of the moment of entry or exit either make the restrictions ineffectual or make their adverse effects last far longer than any benefits from entry, that they inefficiently either increase or decrease innovation rates, and that any price floor or output ceiling will cause inefficiencies because of either great uncertainty or inflexibility in the fact of changing market conditions. Read more...	Essay
Economic Analysis of Contract Law After Three Decades: Success or Failure? Eric A. Posner, Tuesday, 31 December 2002 112 Yale L.J. 829 (2003)Modern economic analysis of contract law began about thirty years ago and, many scholars would agree, has become the dominant academic style of contract theory. Traditional doctrinal analysis exerts less influence than it did prior to 1970 and enjoys little prestige. Philosophical work on the nature of promising has captured some attention, but petered out in the 1980s, with little to show for the effort other than arid generalizations about the nature of promising. Academic critiques from the left no longer stir up excitement as they did twenty years ago. Scholarship influenced by cognitive psychology has so far produced few insights. Only economic analysis seems to be on solid footing. One way to validate a field's claims is to look at its history. Economically oriented scholars writing in the early 1970s had foundational insights, and then over time subsequent writers have criticized and refined them; because these refinements were derived from common premises, there has been a sense of forward movement in the subject, of the building of an increasingly sophisticated consensus. Although critics of economic analysis deride its scientific aspirations, the steady accumulation of insights over time resembles scientific progress. Doctrinal, philosophical, and critical scholarship by contrast has been static. The authors agree or disagree, and about the same things, as much today as they did twenty or thirty years ago. Yet there are grounds for concern about the economic analysis of contract law. Careful students of its history know that the sense of convergence ended years ago; in the last ten years, theory has become divergent, and impasses have emerged. The simple models that dominated discussion prior to the 1990s do not predict observed contract doctrine. The more complex models that emerged in the 1980s and dominated discussion in the 1990s failed to predict doctrine or relied on variables that could not, as a practical matter, be measured. As a result, the predictions of these models are indeterminate, and the normative recommendations derived from them are implausible. For these reasons, I will argue that economic analysis has failed to produce an "economic theory" of contract law, and does not seem likely to be able to do so. By this, I mean that the economic approach does not explain the current system of contract law, nor does it provide a solid basis for criticizing and reforming contract law. This is not to say that the economic approach has not produced any wisdom, but that the nature of its accomplishment turns out to be subtle and will become clear only after an extended discussion. This Essay has two purposes: to document the failures of economic models to explain contract law or to justify reform, and to provide an explanation for these failures. The explanation centers on the difficulty of developing a model of contractual behavior that can be tested and that does not make unreasonable assumptions about the cognitive abilities of contractual parties. At the outset, a few comments must be made in order to avoid some possible misunderstandings of the argument. First, I will not argue that some other approach to contract law is superior to the economic approach, nor that economic analysis should be abandoned. If a moral must be extracted from the discussion, it is skepticism about how much additional value economics has to offer to understanding contract law today. Second, I do not make claims about the value of economic analysis for understanding other areas of law. Indeed, my critique rests on empirical and methodological judgments about the contracts literature, judgments that do not necessarily apply to, say, torts or property. Nor do I take a position in this Essay on controversies over the welfarist foundations of economic analysis. Third, I want to avoid making general arguments about what counts as a good theory. One might argue that any methodology that yields surprises or insights about a familiar topic is valuable, and those surprises or insights should be counted as theories. To avoid these philosophical issues, I will focus on the original aspirations of the economic analysis of contract law: to provide an explanation of existing legal rules, and to provide a basis for criticizing or defending those rules. Finally, I want to avoid debates about what counts as "economic analysis of contract law" by stipulating that it did not exist before 1970. This is, of course, artificial. Many earlier scholars, including Holmes, Llewellyn, Hale, and Fuller, used economic analysis in the sense that from time to time they would assume that contracting parties are rational and then speculate about how different legal rules would affect these parties' incentives. From a modern perspective, however, their insights seem banal, and that is because post-1970 economic analysis is more systematic and careful. The interesting question is whether the post-1970 commitment to methodological individualism and the other premises of the rational actor approach provide the basis for a theory that can be used to explain or criticize contract law. My plan is as follows. Part I describes various results from the economic analysis of contract law and compares them with the legal doctrine. In virtually every case, models make either false or indeterminate predictions about the doctrines of contract law. Part II discusses the closely related literature on incomplete contracts, a literature that attempts to predict the content of contracts, as opposed to contract law. The separation of these two bodies of scholarship, now gradually disappearing, is an accident of history, but useful for seeing the general problems with the economic project. Part III speculates about what went wrong with economic analysis and argues that an ambiguity at the heart of the concept of transaction costs is to blame. Part IV looks at trends in contracts scholarship. Part V criticizes alternative approaches to contract theory. Read more...	Responses
Valuing Modern Contract Scholarship Ian Ayres, Tuesday, 31 December 2002 112 Yale L.J. 881 (2003)In sum, Posner has leveled three different criticisms at the modern economic analysis of contracts: a descriptive critique that the scholarship fails to describe or predict the content of current law, a normative critique that the scholarship fails to "provide a solid basis for criticizing and reforming contract law," and an implicit evolutionary critique that the scholarship has run out of things to say. Posner's descriptive critique is misplaced. Modern scholarship has never been about trying to describe or predict current law. His normative critique is overblown. While Posner is correct that much of the modern scholarship is based on stylized models with results that turn on particular parameter values, he underappreciates the normative importance of "possibility" theorems. Modern scholarship has contributed by showing that the accepted determinacy of prior normative analysis is unsustainable. Moreover, the factors identified by modern literature have generated affirmative policy proposals (such as extending the Hadley foreseeability limitation to seller's lost-profit damages). But Posner's evolutionary critique may stand on a stronger footing. All valuable schools of inquiry at some point in time tend to reach diminishing marginal returns. The economic analysis of tort law, for example, is widely conceded to have reached a point of "maturity" where it is difficult to find basic untheorized questions for study. And maybe--despite my arguments about opt-out rules--the same is taking place, or about to take place, with regard to the economics of contracts. I join Posner in welcoming and predicting a shift from the theoretical to the empirical. But instead of debating the future, it's better for us to wait and see. Methodology pieces like this also are subject to the very criticisms that Posner levels at modern scholarship--they don't predict current law, they don't provide a basis for critiquing current law, and they quickly play themselves out. A few years back, Posner and I participated in a Wisconsin Law Review symposium comparing economic and sociological approaches to law. Posner wisely eschewed writing an ungrounded piece on methodology and instead published what to my mind was the most valuable contribution of the symposium--an analysis of gratuitous contracts. In contrast, I dyspeptically complained about the limited value of publishing method pieces, stating that "I generally believe that ungrounded discussions of methodology are not useful. I don't 'do' method--or at least I don't do method well. . . . Better to have scholars from different disciplines attack a particular problem, and then assess which methodology produces the best purchase." Read more...	903
In That Case, What Is the Question? Economics and the Demands of Contract Theory Richard Craswell, Tuesday, 31 December 2002 112 Yale L.J. 903 (2003)In his thoughtful essay, Eric Posner asks whether economic analysis has failed contract law and suggests that it has. Not surprisingly, I hold a different opinion. That is, while I agree with much of what Posner says about particular economic findings, I disagree about what it would mean for economics to "fail" (or, for that matter, what it would mean to succeed). More specifically, Posner argues that economic analysis has failed in two respects, both as a descriptive theory and as a normative one. Descriptively, Posner says, economics fails to predict existing doctrine: Either existing doctrine differs from the rules that economics identifies as efficient, or economics is too indeterminate to identify the most efficient rules. And normatively, Posner says that this same indeterminacy also prevents economics from making any suggestions for the reform of contract law. On my view, though, the descriptive and normative issues (and what constitutes "failure" for each of these purposes) must be treated separately. The descriptive claims that might be made for economics are largely uninteresting, as most scholars have implicitly recognized. I will speak briefly about those claims in Part I of this Response, but the bulk of my comments--Part II--will concern the normative claims. To the extent that normative analysis is at issue, I am much less troubled by indeterminacy of the sort that Posner describes. I then address, in Part III, the very different demands of what might be called an "interpretive" theory of contract law. In short, my differences with Posner are largely over the question of "what counts as a good theory" of contract. Posner wisely declined to address that question--wisely, I say, because a full discussion could easily have tripled the length of his essay. My goal in this Response, though, is to put that issue back on the table, for this is where most of our differences can be found. Read more...	Review
Friedman's Law Michael E. Parrish, Tuesday, 31 December 2002 112 Yale L.J. 925 (2003)In this appraisal of Lawrence M. Friedman's American Law in the Twentieth Century, I begin in Part I with a survey of the several "schools" of American legal history that have risen to prominence in the years since World War II, utilizing a suggestive framework first offered by Professor Stephen Presser two decades ago. In Part II, I discuss Professor Friedman's intellectual debt to Willard Hurst, as well as his previous scholarly efforts to synthesize major developments in American law over the last century. Part III assesses the organizational framework, methodology, and interpretations of evidence offered by Friedman in the present book, while Part IV provides a critical discussion of these strategies. Part V raises the question of the relationship of American legal history to what has been characterized, and criticized, by some historians as "Whig" history, and offers a final assessment of Friedman's newest volume. Read more...	Comment
A Small Problem of Precedent: 18 U.S.C. 4001(a) and the Detention of U.S. Citizen "Enemy Combatants" Stephen I. Vladeck, Tuesday, 31 December 2002 112 Yale L.J. 961 (2003)In 1971, Congress repealed the Emergency Detention Act, part of the Internal Security Act of 1950, by writing into 18 U.S.C. § 4001(a) the provision that "[n]o citizen shall be imprisoned or otherwise detained by the United States except pursuant to an Act of Congress." Enacted amid mounting public pressure during the Vietnam War, § 4001(a) sought to "restrict the . . . detention of citizens of the United States to situations in which statutory authority for their incarceration exists." At the time, it represented a legislative response to the outrage over the executive internment of Japanese Americans during World War II, detentions carried out pursuant only to a presidential order. Today, § 4001(a) represents a bar to the Bush Administration's current policy of detaining U.S. citizens as "enemy combatants," absent congressional authorization, without charges and without access to counsel or the courts. This Comment analyzes that policy in light of the current force of § 4001(a) and Howe v. Smith, the 1981 Supreme Court decision that embraced an expansive reading of the antidetention statute. Since, under Howe, § 4001(a) applies to all U.S. citizens regardless of "enemy combatant" status, the only remaining issue is whether Congress authorized the detentions in question. After tracing the history of § 4001(a), this Comment evaluates, and finds inadequate, the Administration's various justifications for the detention of U.S. citizens as "enemy combatants." The analysis concludes that, in the absence of clear congressional authorization, the detention policy not only violates § 4001(a) but also shows complete disregard for the deeper purpose behind this provision's enactment and the fundamental separation of powers principles manifested therein. Read more...	Yale Law Journal Archive