New Economics Papers
on Law and Economics
Issue of 2009‒10‒03
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Law after the welfare state: formalism, functionalism and the ironic turn of reflexive law By Zumbansen, Peer
  2. Article 82 EC – The Problems and The Solution By John Temple Lang
  3. Life’s a breach! Ensuring ‘permanence’ in forest carbon sinks under incomplete contract enforcement By Charles Palmer; Markus Ohndorf; Ian A. MacKenzie
  4. CRIME AND PUNISHMENT WITH HABIT FORMATION By Kuhl Teles, Vladimir; Andrade, Joaquim

  1. By: Zumbansen, Peer
    Abstract: This paper analyzes the contemporary emergence of neo-formalist and neo-functionalist approaches to law-making at a time when the state is seeking to reassert, reformulate and reconceptualize its regulatory competence, both domestically and transnationally. While the earlier turn to alternative regulation modes, conceptualized under the heading of ?legal pluralism,? ?responsive law,? or ?reflexive law? in the 1970s and 1980s, had aimed at a more socially responsive, contextualized, and ultimately learning mode of legal intervention, the contemporary revival of functionalist jurisprudence and its reliance on ?social norms? embraces a limitation model of legal regulation. After revisiting the Legal Realist critique of Formalism and the formulation of functionalist regulation as a progressive agenda, this paper reflects on both the American and German justifications of market regulation and the Welfare State in order to trace the different evolution towards ?responsive law? and legal pluralism in the U.S. and ?post-interventionist? and ?reflexive? law in Germany. This comparison allows for an identification of the emerging transnational qualities of legal normativity in the face of a declining welfare state paradigm, which - at the beginning of the 21st century - appears to provide the stage for turning the progressive gains of the former era into a set of market-oriented justifications of private autonomy and de-regulation. - Der Aufsatz rekonstruiert die wechselhafte Geschichte des Rechts nach dem Wohlfahrtsstaat?. Nachdem die Krise des Wohlfahrtsstaats in den 1970er Jahren vornehmlich als eine Frage der Regulierungs- und Steuerungskrise wahrgenommen wurde, traten ?responsive? und ?reflexive? Rechtstheorien gleichzeitig als Erben und Zerstörer des Rechts als Steuerungsmittel auf. Die Suche nach ?Alternativen zum Recht? in den USA wie auch in Deutschland mündete aber schon bald in eine weitreichende Privatisierungs- und Deregulierungsbewegung. Die sich schon lange ankündigende Skepsis nicht nur gegenüber parlamentarischer Gesetzgebung, sondern auch gerichtlicher Rechts(fort)bildung im Namen der Selbstregulierungskräfte der ?Privatrechtsgesellschaft? durch den Markt und ?social norms? verstärkte diese Kritik am Staat diesseits und jenseits des Atlantik. Der Aufsatz geht vor diesem Hintergrund der Frage nach, inwiefern die gegenwärtige Betonung gesellschaftlicher Selbstregulierung die Kritik der Rechtsrealisten und der frühen Rechtssoziologie am Rechtsformalismus aufgreift, nur um sie im Namen von Marktfreiheiten zu verkürzen und ihres kritischen Potentials beraubt.
    Date: 2009
  2. By: John Temple Lang (Cleary Gottlieb Steen & Hamilton LLP, Trinity College and Senior Visiting Research Fellow)
    Abstract: The Commission's Guidance paper on exclusionary abuse under Article 82 EC is open to three fundamental criticisms. First, it leads to less legal certainty, because the rules suggested are vague and imprecise, because dominant companies will not have the information needed to apply them, and because the Commission is trying to change the law, which it has no power to do. Second, it would lead to some anticompetitive effects, because in practice it discourages price competition, by discouraging individualised price negotiations and retroactive rebates, and by suggesting that the Commission will protect not-yet-as-efficient competitors from price competition. Third, it leads to too many "false positives", i.e., findings of exclusionary abuse that are not justified in economics or law. The solution is to return to the test in the Treaty as interpreted by the Court of Justice: an exclusionary abuse must involve limiting the production, marketing or technical development of competitors of the dominant company, if harm is caused to consumers.
    Keywords: Article 82EC, Competition, Abuse
    JEL: K21
    Date: 2009–08
  3. By: Charles Palmer (IED Institute for Environmental Decisions, ETH Zurich); Markus Ohndorf (IED Institute for Environmental Decisions, ETH Zurich); Ian A. MacKenzie (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: As carbon sinks, forests play a critical role in helping to mitigate the growing threat from anthropogenic climate change. Forest carbon offsets transacted between GHG emitters in industrialised countries and sellers in developing countries have emerged as a useful climate policy tool. A model is developed that investigates the role of incentives in forestry carbon sequestration contracts. It considers the optimal design of contracts to ensure landowner participation and hence, permanence in forest carbon sinks in a context of uncertain opportunity costs and incomplete contract enforcement. The optimal contract is driven by the quality of the institutional framework in which the contract is executed, in particular, as it relates to contract enforcement. Stronger institutional frameworks tend to distort the seller’s effort upwards away from the full enforcement outcome. This also leads to greater amounts of carbon sequestered and higher conditional payments made to the seller. Further, where institutions are strong, there is a case for indexing the payment to the carbon market price if permanence is to be ensured. That is, as the carbon price increases, the payment could be raised and vice versa.
    Keywords: forest carbon offsets, permanence, contract design, incomplete enforcement
    JEL: K12 Q15
    Date: 2009–07
  4. By: Kuhl Teles, Vladimir; Andrade, Joaquim
    Abstract: Moral concepts affect crime supply. This idea is modelled assuming that illegal activities is habit forming. We introduce habits in a intertemporal general equilibrium framework to illegal activities and compare its outcomes with a model without habit formation. The findings are that habit and crime presents a non linear relationship that hinges upon the level of capital and habit formation. It is possible to show that while the effect of habit on crime is negative for low levels o habit formation it becomes positive as habits goes up. Secondly habit reduces the marginal effect of illegal activities return on crime. Finally, the effect of habit on crime depends positively on the amount of capital. This could explain the relationship between size of cities and illegal activity.
    Date: 2009–09–03

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