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Network Responses to Network Threats: The Evolution into Private Cybersecurity Associations
Abstract
Cybersecurity is a leading national problem for which the market may fail to produce a solution. The ultimate source of the problem is that computer owners lack adequate incentives to invest in security because they bear fully the costs of their security precautions but share the benefits with their network partners. In a world of positive transaction costs, individuals often select less than optimal security levels. The problem is compounded because the insecure networks extend far beyond the regulatory jurisdiction of any one nation or even coalition of nations. Originally published in 2006, this book brings together the views of leading law and economics scholars on the nature of the cybersecurity problem and possible solutions to it. Many of these solutions are market based, but they need some help, either from government or industry groups, or both. Indeed, the cybersecurity problem prefigures a host of twenty-first-century problems created by information technology and the globalization of markets.
Critical Infrastructure Protection seeks to enhance the physical and cyber-security of key public and private assets and mitigate the effects of natural disasters, industrial accidents and terrorist attacks. In 2009, several Canadian governments published the National Strategy and Action Plan for Critical Infrastructure (NS&AP), a framework for governments and the owners and operators of critical infrastructure - largely in the private sector - to collaborate on the security and increased resiliency of Canada's critical assets. Drawing on the social science risk literature, audits, and a three-year research and education project, this article argues that the strategy of relationship building, collaborative risk management and information sharing is under-developed and limited by market competition, incompatible institutional cultures, and legal, logistical and political constraints. The NS&AP should better delineate risks and identify how governments can work with industry, and acknowledge the paradox between trust and transparency, the role of small- and medium-sized enterprise, and how risk management processes can vary. © The Institute of Public Administration of Canada/L'Institut d'administration publique du Canada 2013.
This essay challenges some widely held understandings about rationality and choice, and uses that challenge to develop some conclusions about the appropriate domain of law. In particular, it suggests that many well-known anomalies in individual behavior are best explained by reference to social norms and to the fact that people feel shame when they violate those norms. Hence, there is no simple contrast between "rationality" and social norms. Individual rationality is a function of social norms. It follows that social states are often more fragile than might be supposed, because they depend on social norms to which people may not have much allegiance. Norm entrepreneurs -- people interested in changing social norms -- can exploit this fact; if successful, they produce what norm bandwagons and norm cascades. Collective action might be necessary to solve some unusual collective action problems posed by existing norms. And for many purposes, it would be best to dispense with the idea of "preferences," despite the pervasiveness of that idea in positive social science and in arguments about the appropriate domains of law.
We model and experimentally examine the board structure-performance relationship. We examine single-tiered boards, two-tiered boards, insider-controlled boards, and outsider-controlled boards. We find that even insider-controlled boards frequently adopt institutionally preferred rather than self-interested policies. Two-tiered boards adopt institutionally preferred policies more frequently but tend to destroy value by being too conservative, frequently rejecting good projects. Outsider-controlled single-tiered boards, both when they have multiple insiders and only a single insider, adopt institutionally preferred policies most frequently. In those board designs where the efficient Nash equilibrium produces strictly higher payoffs to all agents than the coalition-proof equilibria, agents tend to select the efficient Nash equilibria. Copyright 2008, Oxford University Press.
This article demonstrates that, at least since the adoption of the Organizational Sentencing Guidelines in 1991, the United States legal regime has been moving away from a system of strict vicarious liability toward a system of duty-based organizational liability. Under this system, organizational liability for agent misconduct is dependant on whether or not the organization has exercised due care to avoid the harm in question, rather than under traditional agency principles of respondeat superior. Courts and agencies typically evaluate the level of care exercised by the organization by inquiring whether the organization had in place internal compliance structures ostensibly designed to detect and discourage such conduct. I argue, however, that any internal compliance-based organizational liability regime is likely to fail because courts and agencies lack sufficient information about the effectiveness of such structures. As a result, an internal compliance-based liability system encourages the implementation of largely cosmetic internal compliance structures that reduce legal liability without reducing the incidence of organizational misconduct. Furthermore, a review of the empirical literature on the effectiveness of internal compliance structures suggests that many organizations have adopted precisely this cosmetic approach to internal compliance. This leads to two potential problems: first, an underdeterrence of organizational misconduct and, second, a proliferation of costly but ineffective internal compliance structures.
The authors interpret historical evidence in light of a repeated-game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants. The merchant guild developed the theoretically required attributes, secured merchants' property rights, and evolved in response to crises to extend the range of its effectiveness, contributing to the expansion of trade during the late medieval period. The authors elaborate on the relations between their theory and the monopoly theory of merchant guilds and contrast it with repeated-game theories that provide no role for formal organization. Copyright 1994 by University of Chicago Press.
Trade prospered in absence of law in California during the 1830s and 1840s. Merchants, through intermerchant trade and the
partnerships they organized to buy goods abroad, played a central role in trade. This article examines the private-order institution
that facilitated intermerchant trade. The hypothesis is that a particular type of private-order institution, a coalition,
governed agency relations among merchants in California. Within the coalition, a reputation mechanism mitigated the commitment
problem inherent in having individuals handle goods that they did not own by linking a merchant's past behavior and his future
payoff. Evidence from the merchants' business correspondence supports the hypothesis. A game-theoretic model of a coalition
is presented. The model provides insight into the punishment merchants imposed on cheaters, the expansion of the coalition
in the 1830s, and its collapse around the time of the gold rush in 1848–1849
This paper presents an economic institution which enabled eleventh-century traders to benefit from employing overseas agents despite the commitment problem inherent in these relations. Agency relations were governed by a coalition--an economic institution in which expectations, implicit contractual relations, and a specific information-transmission mechanism supported the operation of a reputation mechanism. Historical records and a simple game-theoretical model are used to examine this institution. The study highlights the interaction between social and economic institutions, the determinants of business practices, the nature of the merchants' law, and the interrelations between market and nonmarket institutions. Copyright 1993 by American Economic Association.
Group members usually mention and focus more on information members share in common before the discussion than information that only one member knows before the discussion. Shared information is more influential because it influences all members’ initial opinions and because other members can validate it. Research has found that the focus on shared information can be reduced. Higher status members, like leaders, often mention more unshared information, as do members designated as advisors to the group. Groups in which members are aware of each other's specialized knowledge discuss more unshared information, and longer group discussions elicit more unshared information.
Corporate structures differ among the advanced economies of the world. we contribute to an understanding of these differences by developing a theory of the path dependence of corporate structure. The corporate structures that an economy has at any point in time depend in part on those that it had at earlier times. Two sources of path dependence-structure driven and rule driven-are identified and analyzed. First, the corporate structures of an economy depend on the structures with which the economy started Initial ownership structures have such an effect because they affect the identity of the structure that would be efficient for any given company and because they can give some parties both incentives and power to impede changes in them.,Second, corporate rules, which affect ownership structures, will themselves depend on the corporate structures with which the economy started. Initial ownership structures can affect both the identity of the rules that would lie efficient and the interest group politics that can determine which rules would actually be chosen. Our theory of path dependence sheds light on why the advanced economies, despite pressures to converge, vary in their ownership structures. It also provides a basis for why some important differences might persist.
Corporate law serves both to facilitate and to regulate the conduct of the corporate enterprise. Insofar as corporate law is regulatory, it provides incentives and disincentives to the major actors in the corporate enterprise -- directors, officers, and significant shareholders -- through the threat of liability. In significant part, however, these actors are motivated not by the desire to avoid liability, but by the prospect of financial gain, on the one hand, and by social norms, on the other. Much work has been done on the way in which these actors are motivated on the threat of liability and the prospect of financial gain, but relatively little work has been done on the operation of social norms. In this Article, I examine the interrelation of social norms and law in corporate law. The purpose of this examination is to illuminate both corporate law specifically, and the interrelation of social norms and law generally, by studying ways in which that interrelation operates in a specific field. I focus on three kinds of social norms, which I call descriptive norms, conventions, and obligational norms. The organization of the Article is as follows: I begin by describing and defining the kinds of social norms that are relevant to law. I then consider, in a preliminary way, the effects and origins of social norms. Finally, I examine the critical role of social norms in three central areas of corporate law: fiduciary duties (care and loyalty), corporate governance (board composition and the role of institutional investors), and takeovers. In the course of that examination, I apply and elaborate the introductory analysis concerning the kinds, origins, and effects of social norms, and consider some of the kinds of interrelations between social norms and law.
This Article provides an overview of the land regimes that the peoples of Mesopotamia, Egypt, and Israel created by law and custom between 3000 B.C. and 500 B.C. One purpose of the endeavor is narrowly pedagogic. In the United States, students who enroll in courses on property law traditionally have found the history of land law treated in highly stylized fashion. The leading casebooks begin their historical accounts with the Norman Conquest of 1066, sketch the English land regime under high feudalism, and then chronicle the developments over the ensuing centuries, particularly the weakening of the crown and the rise of a landowner's powers of alienation. Because English legal history is more directly relevant to an Anglo-American lawyer than any other remote history, some emphasis on these events is entirely appropriate. The shortcoming of this pedagogic tradition, however, is that the English struggles are presented as if they are without parallel. This is highly misleading. This Article demonstrates that the peoples of the ancient Near East grappled with comparable issues some 3,000 years before the English Normans did.
A look at land regimes in the earliest periods of human history can illuminate debate over the extent to which human institutions can be expected to vary from time to time and place to place. On this crucial question there are four general schools of opinion: rational-actor optimists, rational-actor pessimists, stage theorists, and cultural pluralists.
This article reports the results of an investigation into how rural landowners in Shasta County, California, resolve disputes arising from trespass by livestock. The results provide an empirical perspective on one of the most celebrated hypothetical cases in the law-and-economics literature. In his landmark article, "The Problem of Social Cost," economist Ronald Coase invoked as his fundamental example a conflict between two neighbors- a rancher running cattle and a farmer raising crops. Coase used the Parable of the Farmer and the Rancher to illustrate what has come to be known as the Coase Theorem. This unintuitive proposition asserts, in its strongest form, that when transaction costs are zero, a change in the rule of liability will have no effect on the allocation of resources. For example, the Theorem predicts that as long as its admittedly heroic assumptions are met, the imposition of liability for cattle trespass would not cause ranchers to reduce the size of their herds, erect more fencing, or keep closer watch on their livestock. The Theorem has become the most fruitful, yet most controversial, proposition in law-and-economics.
Coase himself was fully aware that obtaining information, negotiating agreements, and litigating disputes are all potentially costly, and that thus his Parable might not portray accurately how rural landowners would respond to a change in trespass law. Some law-and-economics scholars, however, assume that transaction costs are indeed often trivial when only two parties are in conflict. Therefore, these scholars might assume that Coase's Parable faithfully depicts how rural landowners resolve cattle-trespass disputes.
Preliminary findings indicate that businessmen often fail to plan exchange relationships completely, and seldom use legal sanctions to adjust these relationships or to settle disputes. Planning and legal sanctions are often unnecessary and may have undesirable consequences. Transactions are planned and legal sanctions are used when the gains are thought to outweigh the costs. The power to decide whether the gains from using contract outweigh the costs will be held by individuals having different occupational roles. The occupational role influences the decision that is made.
Scholarship on private legal systems (PLS) explains the evolution of norms created and enforced by PLSs, but rarely addresses the evolution of institutions that form PLSs. Such institutions are assumed to form spontaneously (unless suppressed by law) when law is either unresponsive or incapable of directing behavior in welfare-maximizing manners. But, as this paper demonstrates, PLSs typically cannot form spontaneously. Newly formed PLSs cannot enforce cooperation since the effectiveness of mechanisms used to secure this cooperation (e.g., the threat of exclusion) depends on the PLS's ability to confer benefits to its members, and newly formed PLSs do not yet confer such benefits. Successful PLSs bypass this barrier by building on extant foundations - preexisting institutions that already benefit members, typically through functions requiring less costly enforcement. The threat of losing preexisting benefits disciplines members to abide by the PLSs' rules, which in turn allows the PLSs to regulate behavior. This pattern indicates that rather than developing spontaneously, PLSs develop in phases, initially facilitating activities that are unrelated to regulating behavior and incur lower enforcement costs, the provision of which enables the PLS to regulate behavior in the second stage. The paper suggests normative applications of this observation in the fields of antitrust, critical infrastructure protection and corporate governance.
The private ordering literature examines how nongovernment institutions mitigate opportunistic behavior in transactions. It emphasizes two elements that facilitate cooperation and reduce opportunism: repeated play and reputation. This paper explores the implications of a third element: network effects. Network effects create an incentive for a unique form of opportunism that exists only in network environments - degradation. On the other hand, network effects facilitate mechanisms that may be very effective in mitigating opportunism. Therefore, in certain industries, networks mitigate opportunism, largely displacing in that role the parties to the transaction and the government. This paper identifies mechanisms used by networks to reduce opportunism, and market characteristics that are conducive to the effectiveness of these mechanisms (and therefore to the efficiency of networks as regulators). This helps explain the prevalence of networks in certain markets as compared to others, and gives tools to assess networks' ability to self-regulate and anticipate the type of opportunism that is more likely to plague a given environment.
Congress responded in similar ways to 2001's major national crises: bolstering internal controls in corporate America under the Sarbanes-Oxley Act in response to Enron's debacle and imposing internal controls on its financial services industry under the USA PATRIOT Act in response to 9/11's terrorism. These reflexive legislative responses to national crisis fit a pattern of proliferating controls as a first-order policy option dating to the mid-1970s. Documenting this proliferation and untangling the definition of internal controls, this Article attributes the appeal of internal controls as a policy option to systemic forces including the movements for deregulation and cooperative compliance, resistance to overt federal preemption of state corporate law, the monitoring model of the board of directors in corporate governance and audit committee ascendance, the social responsibility movement and the diversification of auditing services. Manifest appeals include the limited substantive content control directives carry and the increasing harmonization of control types around audit committees, compliance officers, employee training manuals and external audits of controls fitting neatly into the team production theory of corporate practice and law and making even mandatory controls appealing to corporations being implicitly regulated. Illuminating the limits of this policy option is an examination of comparative attitudes towards control risk shown by the auditing and legal professions. Audit approaches control risk with a formal context, definition and measurement apparatus consciously aware of risk's inevitability and that controls may increase or decrease risk. Yet auditors advertise their product as capable of doing more. Legal culture takes the advertisements seriously. The resulting expectations gap can be reinforced when audit's emphasis on systems and controls creates false impressions that these reflect likely achievement of underlying objectives. Proliferation of internal controls in the face of crisis shows social anxieties. Assuaging social anxieties with these tools can create illusions of control and denial of risk. Legal culture is telling managers to take steps to buy absolute control; audit culture is happy to sell it; the truth is, there is no absolute control. No system provides absolute assurance. The gap is significant between (1) what systems can deliver versus (2) what legal culture expects and what auditors advertise they can deliver. When internal controls fail, the policy response is to require audits of controls. This is the story of Sarbanes-Oxley. In the 1970s, the SEC persuaded Congress in response to crisis to pass the Foreign Corrupt Practices Act requiring companies to have internal financial controls. In the early 2000s, in response to crisis perceived to originate in internal control failure, the SEC persuaded Congress to pass Sarbanes-Oxley requiring auditors to audit those internal controls. In this cycle of control mandates followed by audit mandates, pressure builds on audit to create controls that can be audited. But since controls do not automatically reduce audit risk and may increase it, audits of them cannot speak to the effectiveness of underlying substance over which controls offer no reliable assurance. Legislative enthusiasm for controls as crisis-response mechanisms pretends controls can do more than they can and when controls consequently proliferate they can do even less - it becomes hard to assess which controls are effective. Control proliferation and generality complicate foreseeability analysis in tort. If controls applied only in particular settings with defined functions, they could indicate that related risk realization was foreseeable. They might be useful in assessing difficult pragmatic questions of causation when losses arise after controls fail. But when every aspect of corporate affairs is layered with elaborate controls there is no credible basis for drawing such inferences. Control signifies nothing special, so offers no insight concerning foreseeability or causation. This has not, however, prevented using control failures in exactly this mistaken way. When controls fail, the existence of control norms, directives, or practices are relevant to evaluating the standard of care exercised and matters of causation and foreseeability with little or no regard to the particular control at issue or its underlying substantive purpose. But Sarbanes-Oxley and PATRIOT show two polar extremes of control types: internal controls over financial reporting and controls dedicated to fighting terrorism. Two competing models of regulatory theory map onto this range. The deterrence model hypothesizes that target decision-making is conducted by comparing the cost of compliance with the product of enforcement threats and penalty levels. The cooperation model enlarges the framework by recognizing norms of compliance that may be skewed by the simple adjustment of threat and penalty levels. For internal controls the relative purchase of these models varies with the tenor of the control: financial controls link to the deterrence model where penalties for failure should be high and liability likely; externally-oriented controls are congruent with the cooperation model: penalties and liability risk should be zero. This theoretical account of the distinction between control types is consistent with the longer history of corporate law but the current legal environment's ambitions for internal controls threatens to upset this traditional stance. This appears most acute in the case of terrorism and provides an internal-controls-based defense of general compensation schemes such as the 9/11 Victims' Compensation Fund.
This article revisits the debate over the institutional foundations of the efficiency in the common law by examining the supply-side conditions of the production of common law legal rules. Previous models of efficiency in the common law, such as those proposed by Paul Rubin and George Priest, have stressed the "demand" side of the production of common law legal rules. They have argued that the driving force in the evolution of the common law are the actions of private litigants that generate a "demand" for the production of legal rules. It has been argued that these litigation efforts by private parties can explain both the common law's historic tendency to produce efficient rules as well as its more recent evolution away from efficiency in favor of wealth redistribution. This article does not directly challenge the traditional "demand side" model, but it proposes to supplement the model with a "supply side" model of the evolution of the common law that examines the institutional incentives and constraints of common law judges over time. It is argued that the traditional efficiency of the common law arose in the context of a particular historical institutional setting and that changes in that institutional framework have made the common law more susceptible to rent-seeking pressures and thereby undermined its pro-efficiency orientation. The article first describes the traditional demand-side explanation for the rise and fall of efficiency in the common law. The article then distinguishes a supply-side model of efficiency in the common law, examining the historical institutional framework that generated the common law. It will be argued that the common law evolved in a particular institutional framework that differed substantially from the modern set of institutional constraints faced by judges and which render the modern understanding of judicial constraints quite anachronistic. The article argues that there were certain characteristics of the institutional structure that produced the common law that tended to encourage the production of efficient common law rules: (1) the doctrine of "weak precedent" under the common law, (2) the polycentric legal order of the judicial system in the era in which the common law was formed, and (3) the reliance of the common law on private ordering, including freedom of contract and custom. The article then explains how changes in this institutional framework has generated a decline of the efficiency of the common law and a rise in rent-seeking pressures that has caused the common law's evolutionary path to deviate in recent decades.
This Article provides the first detailed empirical analysis of firms' choice of organizational form. It provides important evidence on whether there is an efficient market in organizational forms or firms' choice of form is impeded by network externalities. We focus on formations of limited liability partnerships (LLPs) and limited liability companies (LLCs) in examining the effect of various factors on firms' cho ice of business form. Our data provides important evidence against the network externalities hypothesis. Because the LLP and LLC forms are similar except for the LLP's link to the existing "network" of partnership law, firms would prefer the LLP to the LLC form if network externalities mattered. In fact, we find that firms prefer the LLC form. Moreover, the reduced relative popularity of LLCs in states that impose entity taxes on LLCs but not LLPs, and the increased relative popularity of LLCs in states and years in which LLCs have particular inherent advantages, provide further evidence that the inherent characteristics of the two business forms, rather than network externalities, are driving choice of form.
As Russia and other formerly socialist states construct market economies, the appearance of strong securities markets remains an unfulfilled expectation. Notwithstanding broad privatization of state-owned enterprises and the elimination of industrial subsidies - essential precursors to demand for capital-raising securities markets - stock markets in Central and Eastern Europe remain illiquid, inefficient, and unreliable. Strong securities markets do not, it seems, neatly follow from the welfare-maximizing behavior of individuals and institutions. Nor can the appearance of securities markets be effectively dictated by government decree. Post-communist securities market transition therefore presents a puzzle: Do markets emerge, or must they be created? Joining the debate over whether "law matters" in the creation of securities markets, this Article draws on recent finance and microeconomic analysis of network effects to propose an alternative theory of why law might matter in the creation of securities markets, and to challenge traditionally limited views of how it matters. After articulating the proposed network model of securities markets, this Article outlines the model's implications for securities market transition. Specifically, it highlights two categories of network inefficiencies that may help explain the persistent weaknesses of securities markets in Russia and other transitional states. The model suggests such inefficiencies may also arise in the modernization of established securities markets, however, implying lessons for the United States and other developed economies as well. Where network effects undermine the spontaneous emergence of strong markets, this Article proposes a limited coordination of market expectations - as distinct from law's demarcation of property rights and enforcement of contracts, as conventionally acknowledged, and its protection of minority investors, as recently emphasized by "law matters" corporate and securities law scholars - as a central role for law in the very creation and design of strong securities markets.
In Organizational Misconduct: Beyond the Principal-Agent Model, Professor Krawiec argues that organizations have perverse incentives to implement ineffective compliance programs, and supports this argument with a survey of empirical research. Based on her argument she urges that organizations be held strictly liable to corporate crimes (in terms of both guilt and punishment), regardless of the implementation of a compliance program by the accused organization. Assuming arguendo that criminal law's current treatment of compliance programs gives organizations an incentive to design inefficient programs, this Article posits that corporate crime may be better deterred if criminal law embraces, rather than remains agnostic to, compliance programs. First, Krawiec's policy suggestion overstates the impact of the legal sanction on corporate behavior. The legal sanction is only one of several sanctions imposed for organizational misconduct. The public relations effect of misconduct may harm organizations more than any legal sanction, giving them an incentive to implement compliance programs that assure the public of the organization's compliance with the law. Second, Krawiec does not consider utility that is derived from reducing the public's subjective perception of the likelihood of misconduct. This placebo effect that exists whether a compliance program is objectively effective or not, may increase utility by offsetting behavioral biases that cause the public to overestimate the probability of organizational misconduct.
No one has the right, and few the ability, to lure economists into reading another article on oligopoly theory without some advance indication of its alleged contribution The present paper accepts the hypothesis that oligopolists wish to collude to maximize joint profits It seeks to reconcile this wish with facts, such as that collusion is impossible for many firms and collusion is much more effective in some circumstances than in others The reconciliation is found in the problem of policing a collusive agreement, which proves to be a problem in the theory of information A considerable number of implications of the theory are discussed, and a modest amount of empirical evidence is presented
One may define a concept of an n-person game in which each player has a finite set of pure strategies and in which a definite set of payments to the n players corresponds to each n-tuple of pure strategies, one strategy being taken for each player. For mixed strategies, which are probability distributions over the pure strategies, the pay-off functions are the expectations of the players, thus becoming polylinear forms …
We develop a model in which the benefit of language acquisition is increasing in the number of individuals who speak the language. This gives rise to a network externality, and if language acquisition is costly, the language acquisition decisions by individuals may be inefficient. If the available policy instruments affect all members of a language group homogeneously, then policies that effectively subsidize language acquisition are warranted only for the majority language. /// Bilinguisme et effets externes de réseau. Les auteurs développent un modèle dans lequel l'avantage attaché à l'acquisition d'une langue s'accroît à proportion qu'un nombre plus grand de personnes parlent cette langue. Voilà qui donne lieu á un effet externe de réseau. Si l'acquisition de la langue est coûteuse, il se peut que la décision par les individus soit inefficace. Si les instruments de politique publique affectent tous les membres d'un groupe linguistique de façon homogène, alors les politiques qui subventionnent effectivement l'acquisition d'une langue sont légitimes économiquement seulement pour la langue majoritaire.
Why do some industry cartels survive for decades while others are quickly undermined by price wars and entry? Variation in cartels' longevity can be explained by differences in their costs of self-enforcement and service value to members. Analyzing legal cartel contracts formed under the Webb-Pomerene Export Trade Act, I find that longer-lived cartels tended to export to small buyers, to have wide industry coverage, to operate in periods of stable prices and growing demand and to sell under side agreements with foreign competitors. Contracts in which the cartel centralized its control through a common sales agency tended to be more stable. However, cartels usually grew less stable with age and when there was a recent and long history of cartelization in the industry. Finally, cartels whose primary rationale was to fix price tended to be particularly unstable because these contracts invited fringe competition and entry. Copyright 1996 by the University of Chicago.
Radio technology is the key to rapid broadband development that reaches even geographically remote areas of the world. To get needed, radical changes in radio regulation, much more attention should be directed toward central issues of constitutional law. Historical experience and centuries of conversation about fundamental political choices has created knowledge that can revolutionize radio regulation. Bringing this knowledge to life in the field of radio regulation involves asking three questions. First, what is a good separation and balance of powers in radio regulation? Second, how should radio regulation be geographically configured? Third, how should radio regulation understand and respect personal freedom and equality? Asking these questions does not call forth a pre-determined answer, nor is discussion of them within the competence of only a small group of radio technology experts. Asking these questions points to the truths and the process that offers the best hope for revolutionizing radio regulation and creating a better life for everyone.
This essay analyzes the rules that high-seas whalers used during the heyday of their industry to resolve disputes over the ownership of harvested whales. The evidence presented sheds light on two important theoretical issues of property rights.
The first issue is the source or sources of property rights. According to what Williamson calls the "legal-centralist" view (1983:520), the state is the exclusive creator of property rights. Many scholars, including Thomas Hobbes (1909:97-98), Garrett Hardin, and Guido Calabresi (1972:1090-91), have at times succumbed to legal-centralist thinking. An opposing view holds that property rights may emerge from sources other than the state-in particular, from the workings of nonhierarchical social forces. The whaling evidence refutes legal-centralism and strongly supports the proposition that property rights may arise anarchically out of social custom.
The second theoretical issue is whether one can predict the content of informal property rights (norms) that informal social forces generate. This essay advances the hypothesis that when people are situated in a close-knit group, they will tend to develop for the ordinary run of problems norms that are wealth-maximizing. A group is "close-knit" when its members are entwined in continuing relationships that provide each with power and information sufficient to exercise informal social control. A norm is "wealth-maximizing" when it operates to minimize the members' objective sum of (1) transaction costs, and (2) deadweight losses arising from failures to exploit potential gains from trade. This theory of the content of norms is proffered as the most parsimonious explanation of variations among whaling rules.
This article investigates how individuals forge and maintain cooperative relationships when there is always the possibility
of starting again with a new partner. The analysis shows that an ever-present opportunity to form new relationships need not
destroy cooperation. Simple strategies achieve the (constrained) optimal level of cooperation. These strategies involve a
“bond” in the form of reduced utility at the beginning of a relationship Two newly matched agents may have an incentive to
forgo paying this bond, given that everyone else in the population requires payment of a bond to start a new relationship.
This incentive disappears, however, if there is enough initial uncertainty about a new partner's valuation of future utility.
Accounts from the sociological and anthropological literature indicate that individuals may indeed pay bonds to form cooperative
relationships.
We study the incentives for a "diagonal" merger between two Internet Service Providers, one a wireless retail only ISP in two origination markets, and the second a vertically integrated wired retailer in one market and an upstream provider in the other. The merger's effects depend on differentiation in access modalities; only with high differentiation does the merger have positive welfare effects. We focus on post-merger foreclosure, which, when it happens, only takes place in the market where the merger is horizontal and not where the merger is vertical. The Network architecture used is meant to capture Internet routing.
This paper extends the author's previous results on the same theme. As the economy grows in complexity, the constraints of information and motivation tighten on centralized lawmaking. Specialized business communities develop their own norms, which the paper terms the "new law merchant." Decentralized lawmaking involves enacting into law those community norms that pass a structural test of efficiency and fairness. The structural test is obtained from a theory of games and norms. Norms arise in a community from games in which individuals have incentives to signal support for practices increasing the supply of local public goods. The standards prescribed by these norms are efficient in the absence of spill-overs or nonconvexities, but the level of informal enforcement is inefficient. The evolution of the common law towards efficiency comes from enforcing efficient social norms, not from selective litigation pressure.Please contact the Program in Law and Economics at Boalt Hall School of Law, UC Berkeley, Berkeley, CA 94720 for a copy of this paper.
Online Ticket Market Pressures Scalpers
- Wolverton
Premiums Least of Owners' Worries in Israel
- Thorne