Digital Labor & Rethinking Economics

LaborDayIt’s easy to document the degradation of work conditions in the wake of capital’s ascendance. I’ve done so for years, fully expecting that globalization would push the downward convergence of non-college-educated American workers’ living standards to that of the 73% of the global work force now living in the developing world. But I think we are in the midst of a sea change of resistance. Just listen to Belabored, an extraordinary series of podcasts on labor struggles (with plenty of print/web sources accompanying each broadcast). Or, if you’re in, or can visit, New York City, try to attend the following two conferences:

Rethinking Economics: A student-led movement, this group has an all-star line-up for a conference on Sept. 12-14. I’m particularly happy to see Philip Mirowski in the mix, as his Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown was one of my most enjoyable (and illuminating) reads this summer.

Digital Labor: This November conference will “will bring together designers, labor organizers, theorists, social entrepreneurs, historians, legal scholars, independent researchers, cultural producers and perspectives from workers themselves to discuss emerging forms of mutual aid and solidarity.” I attended the first iteration in 2009, and am on the Advisory Board for this one. It should be a fascinating event, particularly as forms of exploitation common in the “gig economy” influence large corporations.

Photo Credit: Karen Horton.

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Chapter 8 of Berkshire Beyond Buffett: An Excerpt and Link

untitledThe following is an excerpt from Chapter 8, Autonomy, from Berkshire Beyond Buffett: The Enduring Value of Values; the full text of the chapter, which considers the case for Berkshire’s distinctive trust-based model of corporate governance, can be downloaded free from SSRN here.

. . . Berkshire corporate policy strikes a balance between autonomy and authority. Buffett issues written instructions every two years that reflect the balance. The missive states the mandates Berkshire places on subsidiary CEOs: (1) guard Berkshire’s reputation; (2) report bad news early; (3) confer about post-retirement benefit changes and large capital expenditures (including acquisitions, which are encouraged); (4) adopt a fifty-year time horizon; (5) refer any opportunities for a Berkshire acquisition to Omaha; and (6) submit written successor recommendations. Otherwise, Berkshire stresses that managers were chosen because of their excellence and are urged to act on that excellence.   

Berkshire defers as much as possible to subsidiary chief executives on operational matters with scarcely any central supervision. All quotidian decisions would qualify: GEICO’s advertising budget and underwriting standards; loan terms at Clayton Homes and environmental quality of Benjamin Moore paints; the product mix and pricing at Johns Manville, the furniture stores and jewelry shops. The same applies to decisions about hiring, merchandising, inventory, and receivables management, whether Acme Brick, Garan, or The Pampered Chef. Berkshire’s deference extends to subsidiary decisions on succession to senior positions, including chief executive officer, as seen in such cases as Dairy Queen and Justin Brands.

Munger has said Berkshire’s oversight is just short of abdication. In a wild example, Lou Vincenti, the chief executive at Berkshire’s Wesco Financial subsidiary since its acquisition in 1973, ran the company for several years while suffering from Alzheimer’s disease—without Buffett or Munger aware of the condition. “We loved him so much,” Munger said, “that even after we found out, we kept him in his job until the week that he went off to the Alzheimer’s home. He liked coming in, and he wasn’t doing us any harm.” The two lightened a grim situation, quipping that they wished to have more subsidiaries so earnest and reputable that they could be managed by people with such debilitating medical conditions.   

There are obvious exceptions to Berkshire’s tenet of autonomy. Large capital expenditures—or the chance of that—lead reinsurance executives to run outsize policies and risks by headquarters. Berkshire intervenes in extraordinary circumstances, for example, the costly deterioration in underwriting standards at Gen Re and threatened repudiation of a Berkshire commitment to distributors at Benjamin Moore. Mandatory or not, Berkshire was involved in R. C. Willey’s expansion outside of Utah and rightly asserts itself in costly capital allocation decisions like those concerning purchasing aviation simulators at FlightSafety or increasing the size of the core fleet at NetJets.

 Ironically, gains from Berkshire’s hands-off management are highlighted by an occasion when Buffett made an exception. Buffett persuaded GEICO managers to launch a credit card business for its policyholders. Buffett hatched the idea after puzzling for years to imagine an additional product to offer its millions of loyal car insurance customers. GEICO’s management warned Buffett against the move, expressing concern that the likely result would be to get a high volume of business from its least creditworthy customers and little from its most reliable ones. By 2009, GEICO had lost more than $6 million in the credit card business and took another $44 million hit when it sold the portfolio of receivables at a discount to face value. The costly venture would not have been pursued had Berkshire stuck to its autonomy principle.

The more important—and more difficult—question is the price of autonomy.  Buffett has explained Berkshire’s preference for autonomy and assessment of the related costs: 

We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. That means we are sometimes late in spotting management problems and that [disagreeable] operating and capital decisions are occasionally made. . . . Most of our managers, however, use the independence we grant them magnificently, rewarding our confidence by maintaining an owner-oriented attitude that is invaluable and too seldom found in huge organizations. We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly—or not at all—because of a stifling bureaucracy.

Berkshire’s approach is so unusual that the occasional crises that result provoke public debate about which is better in corporate culture: Berkshire’s model of autonomy-and-trust or the more common approach of command-and-control. Few episodes have been more wrenching and instructive for Berkshire culture than when David L. Sokol, an esteemed senior executive with his hand in many Berkshire subsidiaries, was suspected of insider trading in an acquisition candidate’s stock. . . .

[To read the full chapter, which can be downloaded for free, click here and hit download]

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Argentina and Sovereign Insolvency

Thanks to Gerard for the nice introduction. Indeed, I am here to rant about bankruptcy, securities, and corporate, mostly. The vineyard lies dormant now (but any offers for it will be considered).

So, how about Argentina and Elliot? We pay our nice subsidy to the IMF out of our taxes and it finances sovereign restructurings by essentially buying the vote of bondholders into accepting restructurings that are good for both the bondholders and the insolvent sovereign (compared to it wallowing in a depression for years). Then, after the sovereign turns around its economy, our own courts let the holdout bondholders collect on the bonds that, if everyone had held out as they did and the sovereign stayed in a depression for decades, would not have had much value.

We could have a sovereign insolvency regime but the banks opposed the IMF charter amendment to that effect and it did not go through. Or our courts could go back to their equity receivership jurisprudence and try to fashion a sovereign insolvency regime.

Instead, our courts give ammunition to the holdouts, making bonds of insolvent sovereigns more attractive gambles, and pushing up the amount that the IMF will have to pay to buy out the bondholders’ vote in the next restructuring.

How would a sovereign insolvency regime work? It would not be pretty but it would be much prettier than this. Think of Detroit. It makes a bankruptcy filing and proposes a plan that keeps taxes rational and the city viable. No lender of last resort needs to get involved. Bondholders cannot extract any favorable bargains. Our tax dollars do not get wasted.

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Introducing Guest Blogger Nicholas Georgakopoulos

ngeorgakI am pleased to welcome Nicholas Georgakopoulos to CoOp this month.  Professor Georgakopoulos is an expert on bankruptcy, securities regulation, and corporations who writes from a law and economics perspective.  He received his law degree at the Athens University School of Law, his LLM from Harvard, and then taught at the University of Connecticut before moving to the Robert H. McKinney School of Law, where he now holds the Harold R. Woodard Professorship.  Nicholas also owns a winery in Greece (probably a CoOp first, though I can’t say for sure) and is a wonderful colleague.  Hope you enjoy his stint here

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Soft launch of historical website — Calendar of civil liberties

There is a new website: Today in Civil Liberties History, which has five or six events for each day. Each event includes learning materials: books, reports, web sites, Youtube videos, and more. It covers the full range of civil liberties issues: First Amendment, racial justice, reproductive rights, lesbian and gay rights, national security, and more.

The official public launch will be on Constitution Day, Wednesday September 17th, but you can view in now.

For more information about Today in Civil Liberties History, click here: http://samuelwalker.net/wp-content/uploads/2014/07/Coming-This-Fall2.p

And congrats to Professor Sam Walker for what promises to be a welcome addition to our daily calendar experiences.

Meanwhile, here is what happened on this day in August:

AUGUST 28

1955

Emmett Till, 14, Murdered in Mississippi

1963

“I Have a Dream”: King Delivers Historic Speech at March on Washington

1963

John Lewis Speech at March on Washington Censored

1968

“Police Riot” at Democratic Party Convention

1987

Reagan Administration Bars Visas to People with HIV

2011

Martin Luther King, Jr., Memorial Dedicated

 

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FAN 29.1 (First Amendment News) — Florida Bar Joins Petitioner in Urging Court Review of Judicial Elections Case

Barry Richard, counsel for Florida Bar

Barry Richard, counsel for Florida Bar

As difficult as it is to obtain review in the Supreme Court, sometimes a case comes along that makes it hard for the clerks and their bosses to ignore. Williams-Yulee v. The Florida Bar may be just such a case as the stars seem to be aligning in favor of the Petitioner, Lanell Williams-Yulee, having her case ruled upon by the Justices.

In a post a few weeks back, I flagged the Williams-Yulee case in which review was pending in the Court. The issue in the case is whether a rule of judicial conduct that prohibits candidates for judicial office from personally soliciting campaign funds violates the First Amendment. In a per curium opinion, a divided Florida Supreme Court denied the First Amendment challenge.

As I mentioned, a petition for certiorari had been filed by Andrew Pincus, Charles Rothfeld, and Michael Kimberly with assistance from Ernest Myers and Lee Marcus along with Eugene Fidell of the Yale Law School Clinic.

So much for the old news; now, here is the latest development in that case. Last week the Florida Bar filed its response — Barry Richard is the Bar’s counsel of record. Here is what is interesting about the Bar’s response:

The Florida Bar submits that the Florida Supreme Court correctly determined that the challenged Canon 7C(1) of the Florida Code of Judicial Conduct complies with the First Amendment. However, The Florida Bar believes that this Court should issue its writ of certiorari to resolve the significant conflicts existing between state high courts and federal circuit courts and among federal circuit courts on this fundamental issue of constitutional rights.

Additionally, the Respondent urges that the Court review the case for three reasons:

  1. “The issues at the heart of the conflicts are not such that they can accommodate different interpretations and applications in different jurisdictions and judicial forums without insulting fundamental principles,”
  2. “Judicial conflicts over the issues raised by the petition are likely to increase in the foreseeable future. Over twenty states that provide for popular election of judges have rules similar to Canon 7C(1)”, and
  3. “The Florida Bar joins the Petitioner in respectfully urging this Court to accept this case for review not only because there is a national need for resolution, but because of the particularly troublesome position in which it places The Florida Bar. Denial of the petition for certiorari would leave the decision of the Florida Supreme Court standing, but would provide The Florida Bar with little comfort. The existing indirect conflict between the decision of the Florida Supreme Court, and the decision of the Eleventh Circuit in Weaver v. Bonner . . . a case involving a Georgia judicial candidate, is likely to become a direct conflict when the Eleventh Circuit is inevitably called upon to adjudicate the constitutionality of Canon 7C(1) in a case involving a Florida judicial candidate.”

Of course, counsel for the Petitioner (Andrew Pincus) endorses the Respondent’s request for review:

Typically, a respondent joins in a petitioner’s request for further review only when “there is a clear conflict of decisions” and “the question is undoubtedly of such importance as to need a Supreme Court determination.” Stephen M. Shapiro, et al., Supreme Court Practice 510 (10th ed. 2013). That is precisely the case here. Because this case offers an opportunity to answer the question presented free of any doubt that the controversy here is both ripe and ongoing (see Pet. 15-16 & n.9; Resp. Br. 3), the petition for a writ of certiorari should be granted. 

(Hat tip to Maureen Johnston over at SCOTUSblog)

Additional information about the case is set out in FAN #25. Stay tuned for future developments.

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Does Salaita Have a Contract Claim?

As I’ve argued in pedantic detail, Prof. Salaita’s hypothetical promissory estoppel claim against the University of Illinois is weak. In the Illinois Court of Claims, even if one can assert  estoppel against a state instrumentality, the claim should fail unless the undiscovered facts are radically different from those publicly known. But what about an ordinary contract claim? On its face, most observers have discounted the possibility because the offer letter explicitly stated there was no contract before board approval. Prof. Nancy Kim argues to the contrary, in a thoughtful post here. The nub of her argument is one of contract interpretation:

“I think both parties intended a contract and a “reasonable person” standing in the shoes of Salaita would have believed there was an offer.  The offer was clearly accepted.  What about the issue regarding final Board approval? Does that make his belief there was an offer – which he accepted –  unreasonable?  I don’t think so given the norms surrounding this which essentially act as gap fillers and the way the parties acted both before and after the offer was accepted . . . There was, however, an implied term in the contract that Salaita would not do anything or that no information would come out that would change the nature of the bargain for the university.”

I read this to be making an argument about conditions – that is, Prof. Kim thinks that we shouldn’t interpret the language “This recommendation or appointment is subject to approval by the Board of Trustees of the University of Illinois” as an express condition, given the anti-forfeiture preference that many courts practice.  Rather, Kim argues that we should see the term a promise which is subject to a brake – the implied duty of good faith and fair dealing: the Board of Trustees could only withhold approval for good cause. Whether the tweets in question constitute good cause then becomes the real issue.  She admits the problem “caused me some angst,” but ends up coming out against a finding of a condition.

I’m not unsympathetic to Prof. Kim’s position.  But to evaluate it, I would prefer to talk about Illinois decisional law, rather than contract doctrine in general terms.  Just for those few readers of this post who don’t already think about contract law all day long, well, I’ll tell you a secret: there is no contract law.  Notwithstanding the Restatement’s certitude, the states diverge sharply on many matters, including those as seemingly trivial as the preference against forfeiture, and as general as the liability of principals for agents’ actions. I’ve done some research into this.  I original wrote a post that catalogued the absence of evidence in Illinois for contract recovery under circumstances anything like these. But rather than subject myself to a tl;dr comment, I’ll just post the following challenges to Prof. Kim and others who care to take them on.

Read More

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FAN 29 (First Amendment News) — Exceptional Freedom: How many exceptions are there to the First Amendment?

[W]e decline to carve out from the First Amendment any novel exception.                     – Chief Justice John Roberts (2010)

When we talk about exceptions to the First Amendment’s guaranty of freedom of expression, Justice Frank Murphy’s famous 1942 dictum in Chaplinsky v. New Hampshire comes to mind:

There are certain well-defined and narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem. These include the lewd and obscene, the profane, the libelous, and the insulting or ―fighting words—those which by their very utterance inflict injury or tend to incite an immediate breach of the peace. 

Note that the list of exceptions he offered was an incomplete one. To much the same effect as Chaplinsky, in his majority opinion in United States v. Stevens (2010) Chief Justice John Roberts declared:

From 1791 to the present, however, the First Amendment has ―permitted restrictions upon the content of speech in a few limited areas, and has never ―include[d] a freedom to disregard these traditional limitations.  . . . These historic and traditional categories [are] long familiar to the bar, . . . [and include] obscenity, . . . defamation, . . . fraud, . . . incitement, . . . and speech integral to criminal conduct . . . . [They] are well-defined and narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem.

Against that backdrop, the Chief Justice emphasized: “we decline to carve out from the First Amendment any novel exception.” He Unknownalso cautioned: “cases cannot be taken as establishing a freewheeling authority to declare new categories of speech outside the scope of the First Amendment.”

The question, of course, is exactly how many “well-defined and narrowly limited classes” of exceptions are there (Chaplinsky), or  precisely how many “historic and traditional categories” of speech fall outside of the First Amendment (Stevens)?

To answer that question it is important to note that not all of the categories listed by the Chief Justice are single-subject exceptions. For example, consider the “speech integral to criminal conduct” category. That exception itself consists of more than a few particularized exceptions. And then there are the other exceptions that were left unmentioned.

So many exceptions

Mindful of the above, and as I have noted elsewhere, here is a list of the additional (or more particularized) types of expression that have been deemed unprotected:

(1)       blackmail

(2)       bribery

(3)       misleading commercial expression

(4)       incitement to lawless action

(5)       expression that violates an intellectual property right

(6)       criminal conspiracy expression

(7)       threatening expressions

(8)       expression that endangers national security

(9)       insider trading expression

(10)     perjurious expression

(11)     harassment in the workplace expression

(12)     expression in contempt of court

(13)     plagiaristic expression

(14)     criminal solicitation (e.g., prostitution or murder for hire)

(15)     child pornography

(16)     speech that amounts to bullying

(17)     intentionally false speech likely to create a dangerous public panic

(18)     intentionally misrepresenting oneself as a government official

(19)  intentionally false material statements made to voters concerning authorship or endorsement of political campaign materials

(20)     certain kinds of intentionally false statements made about a political or public figure

(21)     certain kinds of prisoner expression

(22)     certain kinds of government employee expression

(23)     certain kinds of government funded expression

(24)     certain kinds of student expression

(25)     certain kinds of expression by those in the military

(26)     expression deemed secret owing to a private contract or law

(27)      certain kinds of expression expression that unfairly places another in a false light

(28)     intentional expression that causes emotional distress

(29)     expression in violation of anti-trust laws

(30)      certain kinds of expression that cause prejudicial publicity that interferes with a fair trial

(31)     intentionally disclosing the identity of secret government agents

(32)     certain kinds of expression that invade the privacy of another

(33)     certain kinds of expression limited by time, place, and manner restrictions

(34)     certain kinds of expression that involves intentional lying

(35)     certain kinds of expression by sitting judges

(36)     certain kinds of expression aired on the public airwaves

(37)     certain kinds of panhandling

(38)     certain kinds of telemarketing

(39)     certain kinds of speech harmful to minors

(40)     certain kinds of commercial solicitation (e.g. lawyers soliciting business)

(41)   certain kinds of expression concerning the unauthorized practice of some licensed profession (e.g., medicine or law)

(42)     certain kinds of intentional lying to government officials (e.g., lying to Congress while under oath or false police reports) and

(43)     certain kinds of evidence introduced into court and in courtroom expression governed by the rules of evidence.

And what of revenge porn & cyber harassment?

Are there more? Perhaps. Might some of the above ones now be deemed unconstitutional? Perhaps. That said, my point is that the lists offered in Chaplinsky and Stevens (among other Supreme Court opinions) give the impression that the number of exceptions to the First Amendment is actually far fewer than may well be the case.

In all of this, however, I do not mean to undermine a robust commitment to free speech freedom — a commitment well beyond what is fashionable in many circles of academia today. Still, if originalism is to be a significant and even determinative guide here, we must be duly mindful of its true dimensions. This is not to say the results reached by the Roberts Court in several First Amendment cases could not otherwise be justified, but rather that some of the Court’s originalist language needs to be more fully stated and explained.

Justices asked to review Secondary Effects case  Read More

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Further Thoughts on Halbig and Originalism

Since my post on Halbig and originalism drew several great comments (including a response by Larry Solum here), I thought would add some clarifying thoughts.

My point is that recovering the original public meaning of a legal text is often much harder than people care to admit. Historians are more likely than lawyers to say that the meaning of a past event is indeterminate.  Now does this mean that we can never know the original public meaning of something?  No.  Does it mean that we should not try to know?  No.  Originalists, in my view, just tend to be overconfident in what they think they know or can figure out.  If we are having a hard time with something from four years ago (assuming you believe that is the case), then where are we for texts from two hundred plus years ago?

Now the best rejoinder to the specific claim in my post is that a complex statute like the Affordable Care Act is not comparable to constitutional language.  The latter gets more widely discussed and is easier to understand.  That is true to some extent, but I’m not sure it’s a total winner.  People are always surprised at how little Section One of the Fourteenth Amendment was discussed at the time, for example, and you can find examples of statutes that were discussed in far greater detail (the Civil Rights Act of 1964, for example).