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Category: Economic Analysis of Law

Addictive by Design

I was honored to see Prof. John Banzhaf weigh in on a recent post on wellness programs. That post suggested parallels between the addictiveness of tobacco, and that of many food products. Little did I know the NYT was about to publish a blockbuster article on exactly that issue:

[In a 1999 meeting of food industry leaders,] [t]he first speaker was a vice president of Kraft named Michael Mudd. . . . As he spoke, Mudd clicked through a deck of slides — 114 in all — projected on a large screen behind him. The figures were staggering. More than half of American adults were now considered overweight, with nearly one-quarter of the adult population — 40 million people — clinically defined as obese. Among children, the rates had more than doubled since 1980.

Mudd then did the unthinkable. He drew a connection to the last thing in the world the C.E.O.’s wanted linked to their products: cigarettes. First came a quote from a Yale University professor of psychology and public health, Kelly Brownell, who was an especially vocal proponent of the view that the processed-food industry should be seen as a public health menace: “As a culture, we’ve become upset by the tobacco companies advertising to children, but we sit idly by while the food companies do the very same thing. And we could make a claim that the toll taken on the public health by a poor diet rivals that taken by tobacco.”

Fast food lawsuits are looking more prescient by the day.

Illustration: Via Engadget article on interactive ad patents.


Bye, Bye Big Brands, Twinkie, Ding Dong: Hostess Brands, Inc. Liquidating

Ghostbusters, Die Hard, my lunch in grade school all had Twinkies (OK my lunch also alternated with Ding Dongs). In Ghostbusters the Twinkie symbolized psychokinetic energy, in Die Hard it substituted for a cop’s doughnuts, in my lunch it was I guess dessert but substituted for real food. The Wall Street Journal reports, however, that the era is over. Hostess Brands, Inc. is seeking permission to liquidate the company. It’s attempt at reorganization has failed. According to WSJ, “A victim of changing consumer tastes, high commodity costs and, most importantly, strained labor relations, Hostess ultimately was brought to its knees by a national strike orchestrated by its second-largest union.”

There are real people, places, and assets behind these brands. 18,000 workers will lose their jobs. 36 plants will close. The facilities and land will be sold. There is product inventory too. “Loaves of bread and plastic packages of icing-filled desserts” need to go. WSJ suggested that big box stores will be where the food stuff ends up. I remember when Coke changed its formula and folks hoarded the original Real Thing. I wonder whether that will happen with Twinkies. (Given the supposed shelf-life of a Twinkie, a strange pastry cellar built for and owned by some fanatic seems plausible to me).

And, Hostess Brands will sell…its brands. That is where the most money may be made. As I point out in From Trademarks to Brands, brands are not the same thing as trademarks. In the early days of trademarks, one could not sell a brand without the facilities. Today the brand as assest is a given. Selling it as thing is sanctioned by the law even though such practices do not do well within the law economics explanations for trademarks. I argue that a way to understand the move from direct competition to anonymous source, the growth of goodwill, and the expansive view of merchandising and licensing can be explained by brand practices much more than Landes and Posner’s law and economics view. (64 Florida L. Rev. 981, 1009-1019).

I wonder how folks will perceive the sale. If a company buys the name Twinkie or Ding Dong and then makes the cakes with different ingredients or sources for the ingredients, will that matter? What if the taste varies? What if in a year people think Hostess still makes Twinkies and buys the brand based on that error? Is that confusion we care about? Maybe we should not care about any of these. Then again if someone buys Twinkie and uses a new recipe, and then someone makes Twinkies with the original recipe, should that be allowed? Probably not but why is unclear. A healthy market that assumes rational consumers should be able to let information about such variances drive the market, right? Of course we don’t do that in trademark law.

Hmm, perhaps some sugar will help fuel thinking through these points. Better get Twinkies and Ding Dongs before this incarnation is gone.


The Correct Word is Desource, Not Outsource.

Everyone thinks jobs are being outsourced; they are, in fact, being desourced. When Mitt Romney claims he will create jobs, when Barak Obama claims the same, when Google, Apple, or Amazon assert they build out the economy, they all overstate. Worse, they ignore the reality that both manufacturing and service jobs are dying. Robots, artificial intelligence, and the new information-at-scale industries all but assure that outcome. The ability to build and sell without humans is already here. I am not saying that these shifts are inherently bad. They may even be inevitable. What we do next is the question. To answer that question, we need to understand the ways humans will be eliminated from manufacturing and service jobs. We need to understand what I call desourcing.

Focus on manufacturing is a distraction, a sideshow; so too is faith in service jobs. A recent New York Times article about Apple, noted that manufacturing accounts for only about eight percent of the U.S. labor force. And, The Atlantic’s Making It in America piece shows how manufacturing is being changed by robots and other automation. According to some, the real engine is service labor “and any recovery with real legs, labor experts say, will be powered and sustained by this segment of the economy.” That is where desourcing comes in. Many talk about the non-career path of service sector jobs. A future of jobs that have low pay and little room to rise is scary and a problem. Amazon explains why that world might be heaven.

The world of low wage, high stress service work is being replaced by automation. Amazon gave up its fight against state taxes, because it is moving to a model of local distribution centers so that it can deliver same-day delivery of goods. According to Slate, Amazon will spend more than $1 billion to build centers all over the U.S. and hire thousands of people for those centers. The real story is that like any company Amazon wants to reduce operation costs; it must automate or perish as Technology Review put it. It will do that, in part, by using robots to handle the goods. Self-driving cars and autonomous stocking clerks are the logical steps after ATMs and self-serve kiosks at movie theaters and grocery stores. I am always amazed at the folks who line up at movie theater ticket windows rather than use the kiosks. A friend said to me that we should walk up to the window to keep those jobs. It is a nice idea, but I think untenable. We all want to move faster and pay less. Welcome to desourcing.

Desourcing means reducing or eliminating humans from the production or service equation. Humans are friction points. More and more we can reduce those points of contact. We no longer need to send work to other humans.

There are many economic questions that are beyond what can be addressed in a short piece. But here are some ideas on which to chew. The returns from this approach are tremendous for the companies that desource. For example, by one account, Apple makes $473,000 per employee; yet “About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year.” So we may satisfy our need for instant gratification as companies reduce their costs, but that money will go to corporate bottom lines. Whether it will really reach the rest of the economy is not so clear precisely because a smart company will invest in desourcing. I suppose at some point companies will have to realize that they need masses who can buy stuff. Yet I think some studies indicate that serving the upper end of the economy works better than serving the masses. In theory, a company may offer goods at lower prices but to do that, it will need lower production costs. And less workers means lower costs.

I am not saying I know what will solve this riddle. I offer desourcing, because I have not seen a satisfying answer to the issue. There may not be one; for we may be stil sorting what to do as the digital age takes full hold. As the computer science folks say in early training, “Hello world.”


On Information Justice

Like the other commenters on From Goods to a Good Life, I also enjoyed the book and applaud Professor Sunder’s initiative in engaging more explicitly in the values conversation than has been conventionally done in IP scholarship. I also agree with most of what the other commenters have said.  I want to offer plaudits, a few challenges, and some suggestions about future directions for this conversation.

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The Penn State Disaster Pool

So this is interesting:

“The mediator who managed the Sept. 11 victims-compensation fund and settlements with those affected by the 2010 BP Gulf oil spill has been hired by Pennsylvania State University in the hope of settling the civil claims of Jerry Sandusky’s victims.

The university announced Thursday that it had hired Kenneth R. Feinberg to facilitate negotiations for the four current lawsuits and more expected to be filed by those sexually abused by the former assistant football coach.”

One way to read this is that PSU is going to make available a large pool of money to a diverse victim class, and has hired Feinberg for his expertise dividing complex pies in ways that leave most folks relatively satisfied.  But there’s another reading that seems at least plausible.  Associating with Feinberg transmutes the human errors which enabled Sandusky’s crimes into a “disaster”, implying less particularized responsibility.  Plaintiffs refusing to partake in the common pool can potentially be framed as selfish, grasping, etc.  That so even though almost by definition, these disaster pools allocate less money to every plaintiff than their individual claims are “worth”.


What Is IP Good For? Madhavi Sunder Has an Answer: The Good Life

Why bother to have intellectual property rights? That question is the question for IP. Madhavi Sunder has answers. Some excellent work on the subject has looked at whether economics has new answers about IP rights and their structure. Others have taken a hard look at whether any economic argument works. Like books by James Boyle, Brett Frischmann, and Julie Cohen, Sunder’s book runs right at intellectual property law and tackles the hard question. Sunder proposes that we have left off asking what is the good; not just the good produced but the good for all of us. In the tradition of critique she asks about power dynamics and whether free culture is also fair culture. She forces us to consider the realities of exchange culture and rules that bind our ability to engage and thus limit our freedom to author ourselves. In my work on trademarks, brands, and culture, I looked at specific ways we have moved from one-way mass market systems to two-way interactive ones as I questioned whether trademark rules make sense and improve society. I love this book because Sunder takes this point and drills into local, national, and global levels. She challenges current narratives about how and why we create with concrete examples of overflowing creation, unfair results, and troubling societal outcomes all of which abound despite claims about incentives and social welfare creation in IP law. Still, she believes the law has the foundations for “plural values at stake in cultural production.” Her prescription is that we should be “ripping, mixing, and burning” law to get to the world where we have not only goods, but a good life. I recommend the book and look forward to our discussion here at Concurring Opinions.


Symposium on Madhavi Sunder’s From Goods to a Good Life, September 11-13

This week Concurring Opinions is hosting a symposium on Madhavi Sunder’s From Goods to a Good Life (Amazon) published by Yale Press which offers a preview. Madhavi’s work has pushed how many colleagues and I think about intellectual property. I am honored to organize this discussion.

I have more to say about the book, but to whet your appetites, I offer this quote:

The full cultural and economic consequences of intellectual property policies are hidden. We focus instead on the fruits of innovation—more iPods, more bestsellers, more blockbuster drugs—without concern for what is being produced, by whom, and for whose benefit. But make no mistake: intellectual property laws have profound effects on human capabilities…

The symposium will include contributions from Mike Carroll, Laura DeNardis, Brett Frischmann, Mike Madison, Mark McKenna, Frank Pasquale, Zahr Said, Lea Bishop Shaver, Jessica Silbey, and Molly Van Houweling.


The Partisan Foundations of Judicial Campaign Finance

The Center for American Progress has just issued a report on judicial campaign finance that documents the increasing costs of campaigning in judicial elections and raises alarm that “[i]nstead of serving as a last resort for Americans seeking justice, judges are bending the law to satisfy the concerns of their corporate donors.”  Jeffrey Toobin followed up in the New Yorker that “the last thing you want to worry about is whether the judge is more accountable to a campaign contributor or an ideological group than to the law. . . . [b]ut it’s clear now that in many states you should worry—a lot.”

My colleague Joanna Shepherd and I study judicial campaign finance and argue that what is regularly missed in this simple narrative is the crucial role of the major parties.  In our empirical work, we find a very real relationship between contributions to judges and judicial decisions favorable to contributors, but the intuitive narrative of direct exchanges of money for decisions between individual contributors and judges is too simplistic to describe the larger realities of modern judicial elections.  The Republican and Democratic Parties broker connections between contributors and their candidates, and we argue that parties, not elections, seem to be the key to money’s influence on judges.

In a new paper still in progress, The Partisan Foundations of Judicial Campaign Finance, we identify broad left- and right-leaning political coalitions, allied with the Democratic and Republican Parties, whose collective contributions exercise systematic influence across the range of decisions by judges who receive their money.  The parties appear to coordinate judicial campaign finance under partisan elections where their investment and involvement is greatest, and what is more, we find that the robust relationship between money and judicial decisions largely disappeared in our data for judges elected in nonpartisan elections where parties are relatively less involved.

In addition, we go on to find a striking partisan asymmetry between Republicans and Democrats in judicial campaign finance.  Money from conservative groups in the Republican coalition, as well as from the party itself, is associated with more conservative judicial decisionmaking by Republican judges, even controlling for individual ideology.  However, decisionmaking by Republican judges is not responsive to money from liberal sources.  Decisionmaking by Democratic judges, by contrast, is influenced by campaign support from both liberal and conservative sources and thus cross pressured in opposite directions.  The result is that judicial campaign finance reinforces party cohesion for Republicans while undermining it for Democrats.  Campaign finance thus predicts judicial decisionmaking by judges from both parties in some sense, but is much more successful in serving partisan ends for Republicans, netting out in a conservative direction between the two parties.


Stanford Law Review, 64.5 (2012)

Stanford Law Review

Volume 64 • Issue 5 • May 2012

The City and the Private Right of Action
Paul A. Diller
64 Stan. L. Rev. 1109

Securities Class Actions Against Foreign Issuers
Merritt B. Fox
64 Stan. L. Rev. 1173

How Much Should Judges Be Paid?
An Empirical Study on the Effect of Judicial Pay on the State Bench

James M. Anderson & Eric Helland
64 Stan. L. Rev. 1277

How Congress Could Reduce Job Discrimination by Promoting Anonymous Hiring
David Hausman
64 Stan. L. Rev. 1343

The Corporate University: Recent Developments

There are many memorable images in Rob Nixon’s book Slow Violence and the Environmentalism of the Poor. Describing the “risk relocation” that is a prime function of the global economy, he offers this vision of Nigeria:

Often, as a community contends with attritional assaults on its ecological networks, it isn’t granted equitable access (or any access at all) to modernity’s basic infrastructural networks . . . . Like those Niger Delta villages where children for decades had no access to electricity for studying at night, while above their communities Shell’s gas flares created toxic nocturnal illumination. Too dark for education, too bright for sleep: modernity’s false dawn. (42)

Exxon is now “a corporation so large and powerful — operating in some 200 nations and territories — that it really has its own foreign policy.” As Steve Coll observes, the US “gives Chad only a few millions dollars a year in aid, while Exxon’s taxes and royalties can be worth as much as $500 million.” Had Exxon directed only 10% of its 2008 profits to political expenditures that year, it would have spent “more than every candidate for President and every candidate for Senate spent at the last election.” In a surprising number of contexts, corporations enjoy far more freedom of action, and secrecy, than states.

Is it any wonder, then, that universities are beginning to shift allegiance, to pursue the agenda of corporate donors instead of public values? Conferences like EduFactory have chronicled the long history of the corporate university; Philip Mirowski has critiqued it in books and edited collections. But it feels like we are on the verge of a phase change, an irreversible acceleration of dynamics once muted and slowed by the ancient cultural identity of the university. Consider these developments:

1) Martha McCluskey has described “economics scholars simultaneously acting as academic experts on the public interest and as sellers of this expertise to the highest private bidder.” She has chronicled a number of troubling aspects of a recent report on fracking issued by the “Shale Resources and Society Institute” (SRSI) of SUNY Buffalo:
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