Archive for the ‘Behavioral Law and Economics’ Category
posted by Orly Lobel
What a rollercoaster week of incredibly thoughtful reviews of Talent Wants to Be Free! I am deeply grateful to all the participants of the symposium. In The Age of Mass Mobility: Freedom and Insecurity, Anupam Chander, continuing Frank Pasquale’s and Matt Bodie’s questions about worker freedom and market power, asks whether Talent Wants to Be Free overly celebrates individualism, perhaps at the expense of a shared commitment to collective production, innovation, and equality. Deven Desai in What Sort of Innovation? asks about the kinds of investments and knowledge that are likely to be encouraged through private markets versus. And in Free Labor, Free Organizations,Competition and a Sports Analogy Shubha Ghosh reminds us that to create true freedom in markets we need to look closely at competition policy and antitrust law. These question about freedom/controls; individualism/collectivity; private/public are coming from left and right. And rightly so. These are fundamental tensions in the greater project of human progress and Talent Wants to Be Free strives to shows how certain dualities are pervasive and unresolvable. As Brett suggested, that’s where we need to be in the real world. From an innovation perspective, I describe in the book how “each of us holds competing ideas about the essence of innovation and conflicting views about the drive behind artistic and inventive work. The classic (no doubt romantic) image of invention is that of exogenous shocks, radical breakthroughs, and sweeping discoveries that revolutionize all that was before. The lone inventor is understood to be driven by a thirst for knowledge and a unique capacity to find what no one has seen before. But the solitude in the romantic image of the lone inventor or artist also leads to an image of the insignificance of place, environment, and ties…”. Chapter 6 ends with the following visual:
Dualities of Innovation:
Individual / Collaborative
Passion / Profit
And yet, the book takes on the contrarian title Talent Wants to Be Free! We are at a moment in history in which the pendulum has shifted too far. We have too much, not too little, controls over information, mobility and knowledge. We uncover this imbalance through the combination of a broad range of methodologies: historical, empirical, experimental, comparitive, theoretical, and normative. These are exciting times for innovation research and as I hope to convince the readers of Talent, insights from all disciplines are contributing to these debates.
November 16, 2013 at 12:56 pm Posted in: Antitrust, Articles and Books, Behavioral Law and Economics, Book Reviews, Bright Ideas, Economic Analysis of Law, Empirical Analysis of Law, Employment Law, Innovation, Intellectual Property, Law and Psychology, Symposium (Talent Wants to be Free), Technology Print This Post No Comments
posted by Orly Lobel
I promised Victor Fleisher to return to his reflections on team production. Vic raised the issue of team production and the challenge of monitoring individual performance. In Talent Wants to Be Free I discuss some of these challenges in the connection to my argument that much of what firms try to achieve through restrictive covenants could be achieved through positive incentives:
“Stock options, bonuses, and profit-sharing programs induce loyalty and identification with the company without the negative effects of over-surveillance or over-restriction. Performance-based rewards increase employees’ stake in the company and increase their commitment to the success of the firm. These rewards (and the employee’s personal investment in the firm that is generated by them) can also motivate workers to monitor their co-workers. We now have evidence that companies that use such bonus structures and pay employees stock options outperform comparable companies .”
But I also warn:
“[W]hile stock options and bonuses reward hard work, these pay structures also present challenges. Measuring employee performance in innovative settings is a difficult task. One of the risks is that compensation schemes may inadvertently emphasize observable over unobservable outputs. Another risk is that when collaborative efforts are crucial, differential pay based on individual contribution will be counterproductive and impede teamwork, as workers will want to shine individually. Individual compensation incentives might lead employees to hoard information, divert their efforts from the team, and reduce team output. In other words, performance-based pay in some settings risks creating perverse incentives, driving individuals to spend too much time on solo inventions and not enough time collaborating. Even more worrisome is the fear that employees competing for bonus awards will have incentives to actively sabotage one another’s efforts.
A related potential pitfall of providing bonuses for performance and innovative activities is the creation of jealousy and a perception of unfairness among employees. Employees, as all of us do in most aspects of our lives, tend to overestimate their own abilities and efforts. When a select few employees are rewarded unevenly in a large workplace setting, employers risk demoralizing others. Such unintended consequences will vary in corporate and industry cultures across time and place, but they may explain why many companies decide to operate under wage compression structures with relatively narrow variance between their employees’ paychecks. For all of these concerns, the highly innovative software company Atlassian recently replaced individual performance bonuses with higher salaries, an organizational bonus, and stock options, believing that too much of a focus on immediate individual rewards depleted team effort.
Still, despite these risks, for many businesses the carrots of performance-based pay and profit sharing schemes have effectively replaced the sticks of controls. But there is a catch! Cleverly, sticks can be disguised as carrots. The infamous “golden handcuffs”- stock options and deferred compensation with punitive early exit trigger – can operate as de facto restrictive contracts….”
All this is in line with what Vic is saying about the advantages of organizational forms that encourage longer term attachment. But the fundamental point is that stickiness (or what Vic refers to as soft control) is already quite strong through the firm form itself, along with status quo biases, risk aversion, and search lags. The stickiness has benefits but it also has heavy costs when it is compounded and infused with legal threats.
November 15, 2013 at 12:05 am Posted in: Behavioral Law and Economics, Bright Ideas, Contract Law & Beyond, Corporate Finance, Corporate Law, Economic Analysis of Law, Empirical Analysis of Law, Employment Law, Innovation, Intellectual Property, Symposium (Talent Wants to be Free), Technology, Uncategorized Print This Post No Comments
posted by Orly Lobel
Each in his own sharp and perceptive way, Brett Frischmann, Frank Pasquale and Matthew Bodie present what are probably the hardest questions that the field of human capital law must contemplate. Brett asks about a fuller alternative vision for line drawing between freedom and control. He further asks how we should strike the balance between regulatory responses and private efforts in encouraging more openness. Finally, he raises the inevitable question about the tradeoffs between nuanced, contextual standards (what, as Brett points out, I discuss as the Goldilocks problem) versus rigid absolute rules (a challenge that runs throughout IP debates and more broadly throughout law). Frank and Matt push me on the hardest problems for any politically charged debate: the distributive, including inadvertent and co-optive, effects of my vision. I am incredibly grateful to receive these hard questions even though I am sure I am yet to uncover fully satisfying responses. Brett writes that he wanted more when the book ended and yes, there will be more. For one, Brett wanted to hear more about the commons and talent pools. I have been invited to present a new paper, The New Cognitive Property in the Spring at a conference called Innovation Beyond IP at Yale and my plan is to write more about the many forms of knowledge that need to be nurtured, nourished, and set free in our markets.
Matt describes his forthcoming paper where he demonstrates that “employment” is reliant on our theory and idea of the firm: we have firms to facilitate joint production but we need to complicate our vision of what that joint production, including from a governance perspective, looks like. “Employers are people too” Matt reminds us, as he asks, “Do some of the restrictions we are talking about look less onerous if we think of employers as groups of people?” And my answer is yes, of course there is a lot of room for policy and contractual arrangements that prevent opportunism and protect investment: my arguments have never been of the anarchic flavor “let’s do away with all IP, duties of loyalty, and contractual restrictions”. Rather, as section 2 (chapters 3-8) of Talent Wants to Be Free is entitled we need to Choose Our Battles. The argument is nicely aligned with the way Peter Lee frames it: we have lots of forms of control, we have many tools, including positive tool, to create the right incentives, let us now understand how we’ve gotten out of balance, how we’ve developed an over-control mentality that uses legitimate concerns over initial investment and risks of opportunism and hold-up to allow almost any form of information and exchange to be restricted. So yes: we need certain forms of IP – we have patents, we have copyright, we have trademark. Each one of these bodies of law too needs to be examined in its scope and there is certainly some excess out there but in general: we know where we stand. But what about human capital beyond IP? And what about ownership over IP between employees and employers?
So yes, we need joint inventorship doctrines for sure when two inventors work together. But what about firm-employee doctrines? Do we need work-for-hire and hired-to-invent doctrines? Here we arrive to core questions about the differences between employment versus joint ventures or partnerships between people. And even here, the argument is that we continue to need during employment certain firm protections over ownership. But the reality is that so many highly inventive and developed countries, diverse as Finland, Sweden, Korea, Japan, Germany, and China, all have drawn more careful lines about what can fall under “service inventions” or inventions produced within a corporation. These countries have some requirement for fair compensation of the employee, some stake in inventions, rather than a carte blanche to everything produced within the contours of the firm. The key is a continuous notion of sharing, fairness and boundaries that we’ve lost sight of. Intense line-drawing as Brett would have it that is based on context and evidence, not on an outdated version of the meaning of free markets.
What about non-competes and trade secrets? Again, my argument is that these protections alternate, they should be discussed in relation to one another, and we need to understand their logic, goals, and the cost/benefit of each given that they exist in a spectrum. Non-competes is the harshest restriction: an absolute prohibition post-employment to continue in one’s professional path outside the corporation. This is unnecessary. The empirics are there to support their absolute ban rather than the fine dance that of balancing that is needed with some of the other protections. Sure it makes life momentarily easier for those who want to use non-competes, but over time, not only can we all live without that harsh tool, we will actually benefit from ceding that chemical weapon in the battle over brains and instead employ more conventional arms. And yet, even in California, this insight doesn’t and shouldn’t extend to partnerships. The California policy against non-competes is limited to the employment context. If two people, as in Matt’s hypo, are together forming a business, their joint property rights in that business suggest to us that allowing some form of a covenant not to compete will be justified. There will still be a cost to positive externalities but the difference between the two forms of relationships allow for absolute ban in one and a standard of reasonableness for the other. And yes, as Brett alludes to, the world is not black and white and we will have to tread carefully in our distinctions between employees and partners.
I completely agree with Matt and Frank that there are fundamental injustices created by our entire regime of work law. Talent Wants to Be Free takes those deep structures into account in developing the more immediate and positive vision for better innovation regimes and richer talent pools. Matt writes that a more radical alternative lies within Talent but “deserves more exegesis: namely, whether we should eliminate the concept of employment entirely.” What if people will always be independent contractors?, he asks. The reforms promoted in Talent Wants to Be Free, allowing more employees more control over their human capital, indeed bring these two categories – employees and independent contractors – closer together in some respects. But far more would be needed to shift our work relations to be more “democratic and egalitarian: a post-industrial Jeffersonian economy.” As both Frank and Matt show, in their own scholarship and in their provocative comments here, this will require us to rethink so much of the world we live in.
Frank Pasquale’s review is so rich that I hope he extends and publishes it as a full article. Frank says that “for every normative term that animates [Orly’s] analysis (labor mobility, freedom of contract, innovation, creative or constructive destruction) there is a shadow term (precarity, exploitation, disruption, waste) that goes unexplored.” I would agree that the background rules that define our labor market, at will employment, inequality, class and power relations, are not themselves the target of the book. They do however deeply inform my analysis. To me, the symmetry I draw between job insecurity and the need for job opportunity is not what Frank describes as a “comforting symmetry”. It is a call for the partial correction of an outrageous asymmetry. And yes, as I mentioned at the very beginning of the symposium, I hoped in writing the book to shift some of the debates about human capital from the stagnating repetition of arguments framed as business-labor which I view not only as paralyzing and strategically unwise but also as simply incorrect and distorting. There is so much more room for win-win than both businesses and labor seem to believe. On that level, I think Frank and I actually disagree about what we would define as abuse. I do in fact believe that many of us can passionately decide to give monetary gains in return for a job that provides intangible benefits of doing something we love to do. Is that always buying into the corporate fantasy? Is that always exploitation? Don’t all of us do that when we become scholars? Still, of course I agree with many of the concrete examples that Frank raises as exploitation and precarious work – he points to domestic workers, which is a subject I have written about in a few articles (which I just realized I should probably put on ssrn - Family Geographies: Global Care Chains, Transnational Parenthood, and New Legal Challenges in an Era of Labor Globalization, 5 CURRENT LEGAL ISSUES 383 (2002) and Class and Care, 24 HARVARD WOMEN’S LAW JOURNAL 89 (2001)]. Frank describes a range of discontent in such celebrated workplaces as Silicon Valley giants, which I too am concerned with and have thought about how new hyped up forms of employment can become highly coercive. Freeing up more of our human capital is huge, but yes, I agree, it doesn’t solve all the problems of our world and by no means should my arguments about the California advantage in the region’s approach to human capital and knowledge flow be read as picturing everything and anything Californian as part of a romantic ideal.
November 14, 2013 at 4:21 pm Posted in: Behavioral Law and Economics, Book Reviews, Bright Ideas, Empirical Analysis of Law, Employment Law, Innovation, Intellectual Property, Law and Inequality, Law and Psychology, Symposium (Talent Wants to be Free), Technology, Uncategorized Print This Post No Comments
posted by Orly Lobel
As Catherine Fisk and Danielle Citron point out in their thoughtful reviews here and here, the wisdom of freeing talent must go beyond private firm level decisions; beyond the message to corporations about what the benefits of talent mobility, beyond what Frank Pasquale’s smartly spun as “reversing Machiavelli’s famous prescription, Lobel advises the Princes of modern business that it is better to be loved than feared.” To get to an optimal equilibrium of knowledge exchanges and mobility, smart policy is needed and policymakers must to pay attention to research. Both Fisk and Citron raise questions about the likelihood that we will see reforms anytime soon. As Fisk points out — and as her important historical work has skillfully shown, and more recently, as we witness developments in several states including Michigan, Texas and Georgia as well as (again as Fisk and Citron point out) in certain aspects of the pending Restatement of Employment — the movement of law and policy has actually been toward more human capital controls rather than less. This is perhaps unsurprising to many of us. Like with the copyright extension act which was the product of heavyweight lobbying, these shifts were supported by strong interest groups. What is perhaps different with the talent wars is the robust evidence that suggests that everyone, corporations large and small, new and old, can gain from loosening controls. Citron points to an irony that I too have been quite troubled by: the current buzz is about the intense need for talent, the talent drought, the shortage in STEM graduates. As Citron describes, the art and science of recruitment is all the rage. But while we debate reforms in schooling and reforms in immigration policies, we largely neglect to consider a reality of much deadweight loss of through talent controls.
The good news is that not only in Massachusetts, where the governor has just expressed his support in reforming state law to narrow the use of non-competes, but also in other state legislatures , courts and agencies, we see a greater willingness to think seriously about positive reforms. At the state level, the jurisdictional variations points to the double gain of regions that void or at least strongly narrow the use of non-competes. California for example gains twice: first by encouraging more human capital flow intra-regionally and second, by its willingness to give refuge to employees who have signed non-competes elsewhere. In other words, the positive effects stem not only from having the right policies of setting talent free but also from its comparative advantage vis-à-vis more controlling states. This brain gain effect has been shown empirically: areas that enforce strong post-employment controls have higher rates of departure of inventors to other regions. States that weakly enforce non-competes are on the receiving side of the cream of the crop. One can only hope that legislature and business leaders will take these findings very seriously.
At the federal level, in a novel approach to antitrust the federal government recently took up the investigation of anti-competitive practices between high-tech giants that had agreed not to poach one another’s employee. This in fact relates to Shubha Gosh’s questions about defining competition and the meaning of free and open labor markets. And it is a good moment to pause about the extent to which we encourage secrecy in both private and public organizations. It is a moment in which the spiraling scandals of economic espionage by governments coupled with leaks and demand for more transparency require us to think hard. In this context, Citron is right to raise the question of government 2.0 – for individuals to be committed and motivated to contribute to innovation, they need some assurances that their contributions will not be entirely appropriated by concentrated interests.
November 14, 2013 at 1:36 am Posted in: Antitrust, Articles and Books, Behavioral Law and Economics, Corporate Law, Economic Analysis of Law, Empirical Analysis of Law, Employment Law, Government Secrecy, Intellectual Property, Law and Psychology, Symposium (Talent Wants to be Free), Technology Print This Post One Comment
posted by Orly Lobel
Peter Lee’s thoughtful review of Talent Wants to Be Free goes straight to the heart of the issues. Peter describes a “central irony about information” – so many aspects of our knowledge cannot lend themselves to traditional monopolization through patents and copyright that their appropriation is done under the radar, through the more dispersed and covert regimes of talent wars rather than the more visible IP wars. We’ve always understood intellectual property law as a bargain: through patents and copyright, we allow monopolization of information for a limited time as a means to the end of encouraging progress in science and art. We understand the costs however and we strive as a society to draw the scope of these exclusive rights very carefully. and deliberately. We have heated public debates about the optimal delineation of patents, and we are witnessing new legislative reforms and significant numbers of recent SCOTUS cases addressing these tradeoffs. But patents are only a sliver of all the information that is needed to sustain innovative industries and creative ventures. Without much debate, the monopolization of knowledge has expanded far beyond the bargain struck in Article I, Section 8 of the Constitution. Through contractual and regulatory law, human capital – people themselves - their skills and tacit knowledge, their social connections and professional ties, and their creative capacities and inventive potential are all the subject to market attempts, aided by public enforcement, of monopolization. Peter refers to these as tacit versus codified knowledge; I think about inputs, human inventive powers versus outputs – the more tangible iterations of intangible assets – the traditional core IP, which qualifies patentability to items reduced to practice (rather than abstraction) and copyrightable art to expressions (rather than ideas). Cognitive property versus intellectual property, if you will.
Lee is absolutely correct that university tech transfer and its challenges and often discontent is highly revealing in this context of drawing fences around ideas and knowledge. Lee writes “in subtle ways, Orly’s work thus offers a cogent exposition of the limits of patent law and formal technology transfer.” Lee’s recent work on tech transfer Transcending the Tacit Dimension: Patents, Relationships, and Organizational Integration in Technology Transfer, California Law Review 2012 is a must read. Lee shows that “effective technology transfer often involves long-term personal relationships rather than discrete market exchanges. In particular, it explores the significant role of tacit, uncodified knowledge in effectively exploiting patented academic inventions. Markets, patents, and licenses are ill-suited to transferring such tacit knowledge, leading licensees to seek direct relationships with academic inventors themselves.” And Lee’s article also uses the lens of the theory of the firm, the subject of the exchanges here, to illuminate the role of organizational integration in transferring university technologies to the private sector. I think that in both of our works, trade secrets are an elephant in the room. And I hope we continue to think more about how can trade secrets, which have been called the step child of intellectual property, be better analyzed and defined.
November 13, 2013 at 12:30 pm Posted in: Behavioral Law and Economics, Bioethics, Contract Law & Beyond, Corporate Law, Intellectual Property, Law and Psychology, Symposium (Talent Wants to be Free), Technology, Uncategorized Print This Post No Comments
posted by Orly Lobel
Both Vic Fleisher and Shubha Ghosh in their thoughtful commentary about Talent Wants to Be Free invoke the theory of the firm to raise question about the extent of desirable freedom in talent and knowledge flows. In its basic iteration, the theory of the firm suggests that arms-length contracting will not be optimal when one party has the ability to renegotiate and hold the other party up, which is the conventional rational for the desirability of talent controls. This is what I describe in the book as the Orthodox Model of employment intellectual property: firms fear making relational investment in employees and then having the employees renegotiate the contract under a threat of exit. Firms respond through mobility restrictions aimed at eliminating the transaction costs of this kind of opportunism. In the book, I accept, at least for some situations, this aspect of the benefits and confidence that are created for firms in internalizing production and ensuring ongoing loyalty by all players. The orthodox model thus explains post-employment controls as necessary to encourage optimal investment within the corporation. More company controls = more internal R&D and human capital investment. The new model developed in the book doesn’t deny these benefits but argues that the orthodox model is incomplete. The Dynamic-Dyadic Model asks about the costs and benefits when controls are employed. It suggests that yes, often, protecting human capital and trade secret investments is often in the immediate interest of a company, but that too much control becomes a double-edged sword. This is because of both the demotivating effects on employee performance when lateral markets are reduced and because over-time, although information leakage and job-hopping by talented workers may provide competitors with undue know-how, expertise, and technologies, constraining mobility reduces knowledge spillovers and information sharing that outweigh the occasional losses. The enriched model is supported by a growing body of empirical evidence that finds that regions with less controls and more talent freedom, such as California, have in fact more R&D investment, quicker economic growth and greater innovation.
Vic is of course right that one solution to this problem is to recreate high-powered (market-like) incentives for performance within the firm. This is an aspect that I am greatly interested in and I analyze it in Talent Wants to Be Free as the question of whether controls and restrictions can effectively alternate with the carrots of performance-based compensation, vesting interests, loyalty inducing work environments, employee stock options and so forth. I too like Shubha am a fan of Hirschman’s Exit, Voice, and Loyalty and have found it useful in analyzing employment relations. I view the behavioral research as shedding light on these questions of what these intra-firm incentives need to look like in order to preserve the incentive to innovate. In a later post I will elaborate on the monitoring and motivational tradeoffs that exist in individual and group performance.
More generally, though, the research suggests that at least in certain industries, most paradigmatically fast-paced, high-tech fields, innovation is most likely when the contracting environments have thick networks of innovators that are mobile (i.e. Silicon valley) and firms themselves are horizontally networked. The flow of talent and ideas is important to innovation and rigid boundaries of the firm can stifle that interaction even with the right intra-firm incentives. The benefits in terms of innovation rise in these structures of denser inter-firm connections, but also, the costs of opportunism that drive the conventional wisdom are in fact lower than the traditional theory of the firm would predict. This is because talent mobility is a repeated game and at any given moment, a firm can be on either side of the raiding and poaching. Policies against talent controls have the effect of reducing the costs of opportunistic renegotiation by ensuring the firm can hire replacement innovators when it loses its people. To push back on Vic’s phrasing, talent wants to be appreciated and free. MIT economist Daron Acemoglu’s analysis of investments and re-investments in workers as a key ingredient of production and growth is helpful in understanding some of this dynamic. People invest in their own human capital without knowing the exact work they will eventually do, just as companies must make investment decisions in technology and capital funds without always knowing who they will end up hiring. Acemoglu describes the positive upward trajectory under these conditions of uncertainty: When workers invest more in their human capital, businesses will invest more because of the prospects of acquiring good talent. In turn, workers will invest more in their human capital as they may end up in one or more of these companies. The likelihood of finding good employers creates incentives for overall investments in human capital.
November 13, 2013 at 1:12 am Posted in: Behavioral Law and Economics, Economic Analysis of Law, Empirical Analysis of Law, Employment Law, Innovation, Intellectual Property, Symposium (Talent Wants to be Free), Technology, Uncategorized Print This Post No Comments
posted by Orly Lobel
This is a thrilling week for Talent Wants to Be Free. I am incredibly honored and grateful to all the participants of the symposium and especially to Deven Desai for putting it all together. It’s only Monday morning, the first official day of the symposium, and there are already a half a dozen fantastic posts up, all of which offer so much food for thought and so much to respond to. Wow! Before posting responses to the various themes and comments raised in the reviews, I wanted to write a more general introductory post to describe the path, motivation, and goals of writing the book.
Talent Wants to Be Free: Why We Should Learn to Love Leaks, Raids and Free Riding comes at a moment in time in which important developments in markets and research have coincided, pushing us to rethink innovation policy and our approaches to human capital. First, the talent wars are fiercer than ever and the mindset of talent control is rising. The stats about the rise of restrictions over human capital across industries and professions are dramatic. Talent poaching is global, acquisition marathons increasingly focus on the people and their skills and potential for innovation as much as they look at the existing intellectual property of the company. And corporate espionage is the subject of heated international debates. Second, as a result of critical mass of new empirical studies coming out of business schools, law, psychology, economics, geography, we know so much more today compared to just a few years ago about what supports and what hinders innovation. The theories and insights I develop in the book attempt to bring together my behavioral research and economic analysis of employment law, including my experimental studies about the effects of non-competes on motivation, my theoretical and collaborative experimental studies about employee loyalty and institutional incentives, and my scholarship about the changing world of work, along with theories about endogenous growth and agglomeration economies by leading economists, such as Paul Romer and Michael Porter, and new empieircal field studies by management scholars such as Mark Garmaise, Olav Sorenson, Sampsa Samila, Matt Marx, and Lee Fleming. Third, as several of the posts point out, these are exciting times because legislatures and courts are actually interested in thinking seriously about innovation policy and have become more receptive to new evidence about the potential for better reforms.
As someone who teaches and writes in the fields of employment law, I wrote the book in the hopes that we can move beyond what I viewed as a stale conversation that framed these issues of non-competes, worker mobility, trade secrets and ownership over ideas as labor versus business; protectionism versus free markets (as is often the case with other key areas of my research such as whistleblowing and discrimination). A primary goal was to shift the debate to include questions about how human capital law affects competitiveness and growth more generally. Writing about work policy, my first and foremost goal is to understand the nature of work in its many evolving iterations. Often in these debates we get sidetracked. While we have an active ongoing debate about the right scope of intellectual property, under the radar human capital controls have been expanding, largely without serious public conversation. My hope has been to encourage broad and sophisticated exchanges between legal scholars, policymakers, business leaders, investors, and innovators.
And still, there is so much more to do! The participants of the symposium are pushing me forward with next steps. The exchanges this week will certainly help crystalize a lot of the questions that were beyond the scope of the single book and several new projects are already underway. I will mention in closing a couple of other colleagues who have written about the book elsewhere and hope they too will join in the conversation. These include a thoughtful review by Raizel Liebler on The Learned FanGirl, a Q&A with CO’s Dan Solove, and other advance reviews here. Once again, let me say how grateful and appreciative I am to all the participants. Nothing is more rewarding.
November 11, 2013 at 5:25 pm Posted in: Behavioral Law and Economics, Book Reviews, Corporate Law, Economic Analysis of Law, Empirical Analysis of Law, Employment Law, Innovation, Intellectual Property, Symposium (Talent Wants to be Free), Technology, Uncategorized Print This Post No Comments
Announcing Symposium on Orly Lobel’s Talent Wants to be Free: Why We Should Learn to Love Leaks, Raids, and Free Riding
posted by Deven Desai
Think you have enough to read? Think again! I am honored to announce that Concurring Opinions will host a symposium on Orly Lobel’s book, Talent Wants to be Free: Why We Should Learn to Love Leaks, Raids, and Free Riding. The event will run from Monday, November 11 to Friday, November 15. I came to know Professor Lobel’s work as I shared some of my thoughts on intellectual property, property theory, and technologically mediated creation in her seminar, Work, Welfare, and Justice, in 2008. I was thinking about who owns your email? What about work place creation? Who owns what you come up with at work? Does it matter whether you used company technology to create and learn? Professor Lobel was digging into related questions, and it has been a blast seeing her run with them. Now we have the pleasure of her book. The accolades have been coming in from academics in law and other fields as well as the business world. Business Week, Fortune, and Harvard Business Review have run articles by Professor Lobel that draw on the insights from the book.
Professor Lobel argues that as we move deeper into a world driven by human capital and talent is in increasing demand, we have to understand that a lock-down approach to innovation is a losing strategy. Nonetheless:
Many companies embrace a control mentality—relying more on patents, copyright, branding, espionage, and aggressive restrictions of their own talent and secrets than on creative energies that are waiting to be unleashed.
Unlocking talent, setting it free as she puts it, sets up a system where everyone wins. Will our discussants or you agree? I think so, but I am sure there will be new ideas and challenges during the event. Our panelists include Professor Lobel as well as:
October 23, 2013 at 4:06 pm Posted in: Behavioral Law and Economics, Intellectual Property, Political Economy, Property Law, Symposium (Talent Wants to be Free), Technology, Trade Print This Post No Comments
posted by Deven Desai
As I work away on 3D printing I am looking at regulation literature. Ayres and Braithwaite’s Responsive Regulation is available on Amazon for 34.99 for Kindle or you can rent it starting at $14.73 (no kidding, it is that precise). There is a calendar and you can select the length of the rental (3 months comes out to $22.30 and to Amazon’s credit hover over a date and the price appears rather than having to click each date). On the one hand this offering seems rather nifty. Yet I wonder what arguments about market availability and fair use will be made with this sort of rental model for books in play. And this option brings us one step closer to perfect price discrimination. Would I see the same rental price as someone else? Would I need some research assistant to rent for me? Would that person’s price model be forever altered based on some brief period of working for a professor? What about librarians who rent books for work (I suppose work accounts would be differentiated but the overlap between interests may shift what that person sees on a personal account too). Perhaps Ayres and Braithwaite’s regulation pyramid is needed yet again.
posted by Stanford Law Review
Although the solutions to many modern economic and societal challenges may be found in better understanding data, the dramatic increase in the amount and variety of data collection poses serious concerns about infringements on privacy. In our 2013 Symposium Issue, experts weigh in on these important questions at the intersection of big data and privacy.
September 3, 2013 at 7:47 am Posted in: Behavioral Law and Economics, Constitutional Law, Criminal Law, Cyber Civil Rights, Cyberlaw, Empirical Analysis of Law, Intellectual Property, Law Rev (Stanford) Print This Post 2 Comments
posted by Dave Hoffman
[A brief note of apology: it's been a terrible blogging summer for me, though great on other fronts. I promise I'll do better in the coming academic year. In particular, I'd like to get back to my dark fantasy/law blogging series. If you've nominations for interviewees, email me.]
One of the major lessons of the cultural cognition project is that empirical arguments are a terrible way to resolve value conflicts. On issues as diverse as the relationship between gun ownership and homicide rates, the child-welfare effects of gay parenting, global warming, and consent in rape cases, participants in empirically-infused politics behave as if they are spectators at sporting events. New information is polarized through identity-protective lenses; we highlight those facts that are congenial to our way of life and discounts those that are not; we are subject to naive realism. It’s sort of dispiriting, really. Data can inflame our culture wars.
One example of this phenomenon is the empirical debate over minimum wage laws. As is well known, there is an evergreen debate in economics journals about the policy consequences which flow from a wage floor. Many (most) economists argue that the minimum wage retards growth and ironically hurts the very low-wage workers it is supposed to hurt. Others argue that the minimum wage has the opposite effect. What’s interesting about this debate -to me, anyway- is that it seems to bear such an orthogonal relationship to how the politics of the minimum wage play out, and the kinds of arguments that persuade partisans on one side or another. Or to put it differently, academic liberals in favor of the minimum wage have relied on regression analyses, but I don’t think they’ve persuaded many folks who weren’t otherwise disposed to agree with them. Academic critics of the minimum wage too have failed to move the needle on public opinion, which (generally) is supportive of a much higher level of minimum wage than is currently the law.
How to explain this puzzle? My colleague Brishen Rogers has a terrific draft article out on ssrn, Justice at Work: Minimum Wage Laws and Social Equality. The paper urges a new kind of defense of minimum wages, which elides the empirical debate about minimum wages’ effect on labor markets altogether. From the abstract:
“Accepting for the sake of argument that minimum wage laws cause inefficiency and unemployment, this article nevertheless defends them. It draws upon philosophical arguments that a just state will not simply redistribute resources, but will also enable citizens to relate to one another as equals. Minimum wage laws advance this ideal of “social equality” in two ways: they symbolize the society’s commitment to low-wage workers, and they help reduce work-based class and status distinctions. Comparable tax-and-transfer programs are less effective on both fronts. Indeed, the fact that minimum wage laws increase unemployment can be a good thing, as the jobs lost will not always be worth saving. The article thus stands to enrich current increasingly urgent debates over whether to increase the minimum wage. It also recasts some longstanding questions of minimum wage doctrine, including exclusions from coverage and ambiguities regarding which parties are liable for violations.”
I’m a huge fan of Brishen’s work, having been provoked and a bit convinced by his earlier work (here) on a productive way forward for the union movement. What seems valuable in this latest paper is that the minimum wage laws are explicitly defended with reference to a widely shared set of values (dignity, equality). Foregrounding such values I think would increase support for the minimum wage among members of the populace. The lack of such dignitary discussions in the academic debate to date has level the minimum wage’s liberal defenders without a satisfying and coherent ground on which to stand. Worth thinking about in the waning hours of Labor’s day.
September 2, 2013 at 9:02 pm Posted in: Behavioral Law and Economics, Civil Rights, Consumer Protection Law, Contract Law & Beyond, Culture, Current Events, Empirical Analysis of Law, Employment Law Print This Post 2 Comments
posted by Claire Hill
A New York Times front page last week prominently featured a story, U.S. Opens Spigot After Farmers Claim Discrimination, that shows many people in a very bad light indeed. A small, focused program intended to compensate a small number of people, true victims of discrimination in farm lending, has mushroomed for various reasons into a huge money pit, “compensating” those who may very well not have suffered discrimination.
Even those who generally think well of government would, I think, be hard pressed not to be distressed by this story. Government responded to political pressures to include more and more people, and require less and less documentation, resulting in a multi-billion dollar giveaway. I want to focus here on views of those taking “advantage” of the compensation scheme to seek compensation when they were not injured.
Different people have different views as to how people respond to incentives in general and monetary incentives in particular. Some think anyone would ‘do anything for a buck’ – including have children, get/not get married, get more healthcare, or file specious discrimination claims. Some people might think some subset of people (‘greedy’? ‘rational’? more on that later) would do anything for a buck. Some people might think that incentives matter ‘at the margin’ but that someone could not be persuaded to do something very much ‘against his nature.’
There’s also a role for self-deception here: a person who is motivated by a monetary incentive may not want to admit this, and therefore might convince herself that she was doing the incentivized act because it was right/what she really wanted to do, not because of the incentive. Which view a person has depends in part on how she sees herself: what does she see herself as being willing to do for money? It may also depend on her broader view as to whether ‘being willing to do many things for money’ is a bad thing or a good (“rational”) thing.
With respect to what motivates somebody else, a person may think ‘this person is like me—one of ‘us.’ ‘If she is doing x, her motivation is probably what mine would be.’ Obviously, people are not monolithic, and equally obviously, there will be enormous differences in the monetary opportunities people have and how they experience and react to them. There are many things nobody would do no matter how much money was being offered. Read the rest of this post »
posted by Claire Hill
My partner Eric and I were traveling in Portugal in a rented car. The car only took diesel fuel, and we had difficulty figuring out whether particular pumps dispensed diesel. Eric tried to use one pump, which didn’t seem to fit. We asked an attendant, who seemed quite surly. He shoved the ill-fitting pump into the car. About 20 minutes later, on the highway, the car stopped working. The repair people who came to help us told us that the car had been filled with regular fuel.
Eric and I decided that the attendant had disliked us, perhaps because we were American, and had done this on purpose. My sister heard this story; her take was that surely the attendant just made a mistake. She asked ‘don’t you prefer to think of it that way’? Eric and I didn’t, but she did.
One suggestion that’s been made about the marathon bombings is that they could have been stopped given what the FBI knew or had reason to know about the elder brother. Is this comforting—or not? Do we prefer to think somebody knew enough, but didn’t act on their knowledge? Or would we prefer to think that it could not have been stopped? Read the rest of this post »
posted by Claire Hill
Continuing the thread from my previous post, available here, on how prior beliefs and ways of viewing the world affect one’s conclusions:
One person who commented on my prior post noted that people have priors as to how much justification is needed for government action. I completely agree with this. I think that in many cases, that prior is importantly related to, and to some extent caused by, another prior, about what sort of people are in government.
I was brought up thinking that people who went into government were generally “good” – that they went into government to do what they thought of as the right thing, and that in many cases, what they thought was the right thing was pretty good. I recall watching the Alan Alda movie The Seduction of Joe Tynan, which I remember as being about a “good” politician completely compromising his principles to retain power, and feeling both sad and startled.
In a sense, my prior has stayed with me, even though I know of many-probably thousands at this point- examples to the contrary. I recall reading fairly recently (over at Marginal Revolution) about a government decision to keep the speeding limit on a stretch of highway too low. The low speed limit causes accidents, but yields lots of revenue from speeding tickets, presumably the motivation for keeping the limit as it is. My reaction was a bit of shock and dismay. Read the rest of this post »
posted by Claire Hill
Thanks to Larry for inviting me to guest-blog. It’s every academic’s dream, I think, to have a built-in audience for her thoughts. And given the caliber of this blog and the readership it attracts, I could scarcely have a better one.
One subject I’ll be blogging on is my general view that people’s prior beliefs and other aspects of how they view and take in the world explain a huge amount, much more than is usually acknowledged. They (people’s priors) help explain why there are so many debates that never get anywhere. Both sides might have terrific arguments, yet nobody is persuaded.
And people keep on making the same sorts of arguments, even knowing this. Sometimes they wonder why more people aren’t persuaded. It’s a bit like the old joke about the person who goes to a foreign country and doesn’t know the language, so he tries to communicate in his own language and, when he’s not understood, he just tries again, repeating what he said . . . but louder.
I recently went to a very interesting colloquium co-sponsored by the Federalist Society and the Liberty Fund on Behavioral Law and Economics. One big issue discussed was the relationship between behavioral law and economics and law, including most importantly paternalistic justifications for law that behavioral l & e might provide. Michael Bloomberg’s attempt to ban sales of large sizes of soda was much on people’s minds.
One thing I very much wanted to get out of the discussion was an understanding of the other participants’ priors as well as my own. Here are some initial thoughts.
posted by Ryan Calo
Thank you to Danielle for the lovely (re)introduction and to Concurring Opinions for inviting me to blog this month.
The Washington Law Review hosted a symposium Thursday entitled “The Disclosure Crisis,” which covered everything from privacy policies to restaurant hygiene grades. The gist of the conference, on my view, was that the only thing piling up faster than examples of mandated disclosure as a regulatory strategy is the evidence it does not work. Time and time again, officials choose to intervene in a given area by requiring companies and others to reveal information so that individuals can protect themselves and police the market. And time and time again, disclosure ends up helping few if any consumers or citizens actually make better decisions.
posted by Frank Pasquale
Cass Sunstein reviews a book by Sarah Conly on coercive paternalism in the NYRB this month:
A natural objection [to paternalism] is that autonomy is an end in itself and not merely a means. On this view, people should be entitled to choose as they like, even if they end up choosing poorly. . . . Conly responds that when government makes (some) decisions for us, we gain not only in personal welfare but also in autonomy, if only because our time is freed up to deal with what most concerns us. . . .
Conly’s most controversial claim is that because the health risks of smoking are so serious, the government should ban it. She is aware that many people like to smoke, that a ban could create black markets, and that both of these points count against a ban. But she concludes that education, warnings, and other nudges are insufficiently effective, and that a flat prohibition is likely to be justified by careful consideration of both benefits and costs, including the costs to the public of treating lung cancer and other consequences of smoking.
For those who’d like government to influence decisions in subtler ways, check out Kate Greenwood’s review of recent health care proposals from Richard Frank and Christopher Robertson. Very interesting ideas there.
posted by Deven Desai
This Bright Ideas post looks at Kevin Werbach and Dan Hunter’s new book, For the Win: How Game Thinking Can Revolutionize Your Business. I have posted about it, but Kevin and Dan were gracious enough to answer some questions. We go into what is gamification, the differences between internal and external uses of the technique, how it relates to super-crunching, and the ethical and legal implications of the technique.
Kevin and Dan, you have drilled into an area, gamification, that seems almost arcane, a technique known to initiates. Why do it?
[KW] We actually think gamification is quite relevant for a broad range of audiences. First of all, video games have a huge impact on our culture. The games industry generates more revenue annually than Hollywood does at the box office. According to a Pew survey, 97% of American teeagers play video games, and it’s not just young people: the Entertainment Software Association reports that the average age of a gamer is 30, with almost half of them women. We can dismiss video games the way we used to dismiss social networking… and e-commerce before that… and the Internet before that… or we can look at why they are so powerful and apply those lessons in other contexts.
Second, the core goal of gamification is motivation. Think about all the situations where motivation matters: at work, at home, as consumers, in legal compliance, in social activism, and in collective action, to name a few. In all these cases, greater engagement drives material results. If there were motivational techniques that were proven in real-world businesses, consistent with decades of psychological research, and synergistic with big data and other leading-edge technology trends, wouldn’t you want to understand them?
And third, gamification is happening. It’s a rapidly growing business trend among startups, Fortune 500 companies, non-profits, and even government agencies. It raises a host of significant legal, operational, and ethical issues, as well as a variety of practical business concerns. We felt that my work on emerging technology and policy trends through the Supernova conference, and Dan’s scholarship on virtual worlds and background in cognitive psychology, gave us a unique ability to tackle these questions in a serious way. That’s why we put together the first gamification course at Wharton, and wrote For the Win as business guide to this emerging field.
OK, so what is gamification?
[KW] Gamification means applying design techniques from video games to business and other problems. In other words, it’s the process of motivating customers, employees, and communities by thinking like a game designer. It doesn’t mean turning everything into a game. Quite the contrary! Gamification involves incorporating elements of games into existing activities, the way Nike weaves levels and awards into its Nike+ system, or Microsoft motivated employees to review half a million Windows 7 dialogue boxes for localization errors with a competition among offices.
When you look at it that way, the basic concept of gamification is pretty simple, but doing it well is hard. Even experienced game designers often create games that aren’t much fun. Executing gamification effectively requires a combination of skills and knowledge, which we describe in For the Win.
Right. I see games are important in that they are big business and a big part of many folks’ lives. Let’s talk a little more about motivation. Is this approach a sort of applied behavioral economic one? Someone identifies levers and then builds systems to nudge or indeed shift the way others engage and behave?
posted by Dave Hoffman
[CELS VII, held November 9-10, 2012 at Stanford, was a smashing success due in no small part to the work of chief organizer Dan Ho, as well as Dawn Chutkow (of SELS and Cornell) and Stanford's organizing committee. For previous installments in the CELS recap series, see CELS III, IV, V, and VI. For those few readers of this post who are data-skeptics and don’t want to read a play-by-play, resistance is obviously futile and you might as well give up. I hear that TV execs were at CELS scouting for a statistic geek reality show, so think of this as a taste of what’s coming.]
Unlike last year, I got to the conference early and even went to a methods panel. Skipping the intimidating “Spatial Statistics and the GIS” and the ominous “Bureau of Justice Statistics” panels, I sat in on “Internet Surveys” with Douglas Rivers, of Stanford/Hoover and YouGuv. To give you a sense of the stakes, half of the people in the room regularly use mTurk to run cheap e-surveys. The other half regularly write nasty comments in JELS reviewer forms about using mTurk. (Oddly, I’m in both categories, which would’ve created a funny weighting problem if I were asked my views.) The panel was devoted to the proposition “Internet surveys are much, much more accurate than you thought, and if you don’t believe me, check out some algebraic proof. And the election.” Two contrasting data points. First, as Rivers pointed out, all survey subjects are volunteers, and thus it’s a bit tough to distinguish internet convenience samples from some oddball scooped up by Gallup’s 9% survey response rate. Second, and less comfortingly, 10-15% of the adult population has a reading disability that makes self-administration of a survey prompt online more than a bit dicey. I say: as long as the disability isn’t biasing with respect to contract psychology or cultural cognition, let’s survey on the cheap!
Lunch next. Good note for presenters: avoid small pieces of spinach/swiss chard if you are about to present. No one will tell you that you’ve spinach on a front tooth. Not even people who are otherwise willing to inform you that your slides are too brightly colored. Speaking of which, the next panel I attended was Civil Justice I. Christy and I presented Clusters are Amazing. We tag-teamed, with me taking 9 minutes to present 5 slides and her taking 9 minutes to present the remaining 16 or so. That was just as well: no one really wanted to know how our work might apply more broadly anyway. We got through it just fine, although I still can’t figure out an intuitive way to describe spectral clustering. What about “magic black box” isn’t working for you?
posted by Dave Hoffman
Credit Slips highlights a very cool new paper, Bankruptcy Spillovers: Distance, Public Disclosure, and Opaque Information. In the paper, Barry Scholnick examines bankruptcy filings in Canada at a micro level. Looking at the postal code of every filer – which code is a much more precise geographic identifier than our zip codes – Scholnick concludes:
“The punch line of my study is that there is indeed a significant impact from the past bankruptcies of neighbors (as defined by the very small Canadian Post Codes) to the probability that an individual in the neighborhood will file . . . I propose, and provide evidence for, the hypothesis that if a defaulter lives in a neighborhood with a large number of previous bankruptcies among the neighbors, then that individual will choose to default via bankruptcy rather than charge-off. This is because more neighborhood bankruptcies will lower stigma or provide more information about the process of bankruptcy.
On the other hand, I show that defaulters who live in low bankruptcy neighborhoods choose to default via charge-off rather than bankruptcy. This is consistent with the argument that low bankruptcy neighborhoods have higher levels of bankruptcy stigma, thus individual defaulters choose to default via charge-off in order to maintain more privacy about their default.”
This paper not only fits within a literature on bankruptcy, but also is a nice match to work by my co-author Tess Wilkinson-Ryan on how mortgage foreclosure and other forms of breach are socially mediated events. Abiding by onerous contracts is unpleasant, but we do it so long as it is socially validated. When it stops being socially normal to stick with terrible deals, we exit them.