Law is full of vague standards, legally relevant facts are frequently unclear, sanctions and damages are often uncertain, and the likelihood of detection is rarely known precisely. In our forthcoming paper, we ask how these sources of uncertainty, common in any legal system, affect the utility of risk-neutral actors such as business firms. We conclude that the answer depends on the source of uncertainty and the specifics of the enforcement environment.
Our most consequential finding is that an increase in legal or factual uncertainty harms firms when enforcement is targeted, meaning that greater deviations from what the law demands lead … Read more
My forthcoming article, Irredeemably Inefficient Acts: A Threat to Markets, Firms, and the Fisc, identifies a category of acts that clearly and inevitably reduce social welfare. These acts—which I call irredeemably inefficient—have not been expressly recognized in previous work. Yet the distinction I draw reflects a fundamental feature of the U.S. antitrust law, justifies several recent Delaware Chancery Court decisions, and suggests substantial rethinking of some important aspects of securities and commodities regulation.
Irredeemably inefficient acts have remained outside of the standard theory of public enforcement of law. That theory holds that inefficient conduct may be converted into … Read more