Monthly Archives: August 2017

Bringing Back the State into Regulatory Scholarship

Robert C. Hockett & Saule T. Omarova, The Finance Franchise, 102 Cornell L. Rev. (forthcoming, 2017), available at SSRN.

In The Finance Franchise, Bob Hockett and Saule Omarova take on the dual myths underpinning contemporary financial regulation: that capital is both inherently scarce and privately provided. They painstakingly document (and illustrate in simple graphics for those of us whose banking savvy is confined to remembering their ATM PIN number) the state’s role in the provision of financial products and services ranging from plain-vanilla loans to digital currencies. They reveal how, at base, all of these products and services depend on the full faith and credit of national governments to assume ultimate liability for privately-issued debt and to monetize privately-issued debt by allowing the putative private debt-holder to spend the debt proceeds as if they were currency.

In short, Hockett and Omarova demonstrate that because the state serves these two functions, “modern finance is not primarily scarce, privately provided and intermediated but is, in its most consequential respects, indefinitely extensible, publicly supplied, and publicly disseminated. At its core, the modern financial system is effectively a public-private partnership that is most accurately, if unavoidably metaphorically, interpreted as a franchise arrangement.” (P. 4.) Continue reading "Bringing Back the State into Regulatory Scholarship"

Comprehending Causation and Correlation

James Grimmelmann & Daniel Westreich, Incomprehensible Discrimination, 7 Calif. L. Rev. Online 164 (2017), available at SSRN.

I’m a fan of off-beat approaches to legal scholarship, having attempted a couple of efforts myself. And I try to keep up with developments in the real world that threaten to impact our discipline, like the concern about “Big Data” that has begun to appear in the law journals. So it’s no surprise that I was very taken by a particularly creative piece by Professors James Grimmelmann and Daniel Westreich, which combines an amusing conceit with dead-on analysis of an emerging and important question.

Incomprehensible Discrimination explores one aspect of a much longer article that appeared recently in the California Law Review by Solon Barocas and Andrew Selbst on data-driven algorithmic methods of making employment decisions.1 The aspect Grimmelmann & Westreich explore is the ability of such analyses to find correlations between, say, job performance and any of a variety of data points with no apparent causal connection to better performance. Barocas and Selbst conclude that traditional disparate impact analysis is not likely to invalidate these kind of selection process. Given sufficient data and robust tests of significance, it’s hard to conclude that reliance on such factors is irrational, even in the absence of any articulable explanation for what one has to do with the other. For Grimmelmann and Westreich, that’s exactly the problem. Continue reading "Comprehending Causation and Correlation"

Unfinished Business: Reforming the Elective Share

Angela Vallario, The Elective Share Has No Friends: Creditors Trump Spouse in the Battle Over the Revocable Trust, 45 Capital U. L. Rev. (forthcoming, 2017), available at SSRN.

Some of our inheritance laws still seem closer to those existing in 1217 instead of 2017. For example, the elective share statutes in a number of states still echo the old common law doctrine of dower. In her new article, The Elective Share Has No Friends: Creditors Trump Spouse in the Battle Over the Revocable Trust, Angela Vallario makes a persuasive case for statutory reform, especially in light of recent trust reform in many of those same states effectively putting creditors in a more favorable position than a surviving spouse.

Professor Vallario begins by describing the current state of the elective share in the United States. She notes that twenty-five of the nation’s separate property states have reformed their elective share statutes to more clearly reflect a joint partnership theory of marriage. However, sixteen states have failed to do so and retain what Vallario calls the “traditional” elective share. Vallario reminds readers that the traditional elective share was built on the remnants of dower. Surviving spouses who are disinherited can claim either a one-half or one-third share of the decedent’s estate. But the term “estate” under traditional statutes has included only probate assets, not non-probate assets like life insurance, joint tenancy property with third parties and trust property. Continue reading "Unfinished Business: Reforming the Elective Share"

The Most Significant Proposed Change in the History of U.S. Corporate Taxation

Alan Auerbach, Michael P. Devereux, Michael Keen & John Vella, Destination-Based Cash Flow Taxation (Oxford Ctr. for Bus. Tax’n, Working Paper No. 17/01, 2017).

The House Republican Blueprint for corporate tax reform would replace our century-old corporate income tax, which we all know and love (or hate), with a “destination-based cash flow tax” (DBCFT), which for many of us remains a mystery. The academic foundation upon which the House proposal is built is a working paper by Alan Auerbach (UC Berkeley), Michael Devereux (Oxford), Michael Keen (IMF), and John Vella (Oxford) (collectively “the authors”), entitled “Destination-Based Cash Flow Taxation.” Given the current turmoil in Washington, it seems unlikely that a DBCFT will be enacted any time soon. Problems with our current system for taxing business income with an international dimension, however, are unlikely to go away on their own. If you want to get up to speed on a radical solution with substantial academic and political support, this paper is an absolute must-read.

The DBCFT has two components: a cash flow tax, which alters the timing and sometimes the substance of includibility and deductibility, and the destination-based “border tax adjustments” that have already found their way (sometimes incoherently) into the popular press. Continue reading "The Most Significant Proposed Change in the History of U.S. Corporate Taxation"

Everything Old is New Again: Breathing New Life into the Fee Simple Absolute

Lee Anne Fennell, Fee Simple Obsolete, 91 N.Y.U. L. Rev. 1457 (2016), available at SSRN.

“And don’t throw the past away. You might need it some other rainy day.” These lyrics to Peter Allen’s song, Everything Old is New Again, sum up the fee simple absolute (“fee simple”) perfectly. This antiquated doctrine that is the backbone of our real property system, the most adored and alienable of the estates in land, receives new life, a new purpose even, in Lee Anne Fennell’s compelling article, Fee Simple Obsolete.

Fennell gives the reader just enough history about the development and context of the fee simple to lay the foundation for a discussion with the reader about the ways in which the old fee simple has become an anachronism in a largely urban society. With eighty percent of Americans living in urban centers, the need for flexibility in reconfiguring precious urban land is at a premium. Continue reading "Everything Old is New Again: Breathing New Life into the Fee Simple Absolute"