prior probability

Note: This is the sixth of seven blog posts reviewing Tyler Cowen’s book “Big Business: A Love Letter to an American Anti-Hero.”

Let’s proceed into Chapters 7 & 8 of Tyler Cowen’s “Love Letter to Big Business.” Like the previous two chapters (Chs. 5 & 6, which I reviewed in my previous post), these two chapters do not appear to be related. Chapter 6 (“What is Wall Street good for, anyway?”) is devoted to the financial services industry, e.g. banks, brokers, credit card companies, insurance firms, payday lenders, etc., while Chapter 7 (“How much does big business control the American government?”) is about rent-seeking behavior or “crony capitalism.” Nevertheless, I am lumping these two chapters together because among the usual crony-capitalist suspects are big banks, especially the ones that are supposedly “too big too fail”!

First off, what is rent-seeking or “crony capitalism”? Professor Cowen provides the best definition of these terms that I have seen to date (p. 171): rent seekers and crony capitalists are business firms who “suck[] up to power and cultivat[e] the coercive power of the state to be on one’s side.” Whether it be bribing bureaucrats for government contracts, lobbying elected officials for favorable legislative treatment, or spending millions of dollars on TV ads to shape public opinion in one’s favor–all these things and more fall under the rubric of rent-seeking. Alas, as Cowen admits, all business firms engage in rent-seeking to a lesser or greater extent, if only to ensure their own survival; the real question, however, is how destructive are these pervasive rent-seeking activities to the overall economy?

Cowen makes a persuasive case that rent-seeking is not that big of a problem. Although corporations spend about $3 billion per year lobbying the federal government, they spend over $200 billion per year to advertise their products and services. (See note 3 on p. 224 of Cowen’s book.) Furthermore, if you were to scrutinize the yearly budgets of both State and federal governments, as Cowen does (pp. 173-175), the only real evidence of rent-seeking you will find are farm subsidies, but even this egregious example of rent seeking represents only $20 billion per year out of a total federal budget of $4.4 trillion. If anything, then, if Cowen is to be believed, non-agricultural business firms are not rent-seeking enough?

What about rent-seeking by big banks? Cowen employs a different strategy to defend big banks and the financial services industry writ large. He admits that the financial services industry in the U.S. is “relatively large” in terms of GDP or Gross Domestic Product, the standard method used by economists to measure the size of the economy, but Cowen argues that this growth in the financial sector is actually a good thing! To the point, Cowen’s argument is that a large financial sector reflects a healthy economy, or in Cowen’s own words (p. 153): “There may be specific parts of the financial sector that are too large …, but a large financial sector relative to GDP is frequently a sign of previous economic success and stability.”

For my part, although I am inclined to give Professor Cowen the benefit of the doubt (that rent-seeking is exaggerated), his complete loss of credibility in Chapters 3 & 4 of his big business book (where he simultaneously defends high CEO compensation and stagnant worker pay) gives me pause. At the same time, perhaps Cowen is right. That is, perhaps there is an “optimal level” of rent-seeking, and perhaps we are below or right at that optimal level. But rent-seeking, by definition, does not generate any new economic value (unlike trade), so why is the optimal level of rent-seeking not zero? Easy. Because efforts spent trying to eradicate or reduce rent-seeking behavior might be more costly than the inefficiencies generated by such rent-seeking in the first place! I will conclude my review of Professor Cowen’s “Love Letter to Big Business” in my next post.

Note: This is the fifth of seven blog posts reviewing Tyler Cowen’s book “Big Business: A Love Letter to an American Anti-Hero.”

Thus far, I have reviewed the first four chapters, as well as the appendix, of Tyler Cowen’s “Love Letter to Big Business.” (Check out my blog posts of June 6 and June 7.) Next, let’s turn to Chapters 5 and 6 of Professor Cowen’s beautiful love letter.

At first glance, these two chapters do not appear to be related. Chapter 5 (“How monopolistic is American big business?”) is devoted to a wide variety of industries, everything from clothing to health care, commercial aviation to cable TV, etc., etc., while Chapter 6 (“Are the big tech companies evil?”) drills down on the tech industry, big data, and Silicon Valley. So, why am I lumping these two chapters together? Because Cowen himself applies the same antitrust framework to all these different industries, and here, Cowen gets it right: the claim that big business firms are dangerous monopolies is greatly exaggerated.

So, why is Cowen right to downplay these monopoly concerns? For two reasons. First off, as Cowen correctly notes (p. 84), consumers have significantly greater choice than in the past in most sectors of the economy, but secondly (and, I would argue, more importantly), in those few areas where we do see monopoly firms (like cable TV) or anti-competitive prices (like health care and aviation), those monopolistic practices are, ironically, the result of government licenses or excessive government regulations, which make it more costly or impossible for new firms to enter those particular markets. (To his credit, Cowen provides many examples of how government is to blame for most of our economic woes.)

What about Big Tech, especially companies like Amazon, Apple, Facebook, Google, and Microsoft? Once again, Professor Cowen is spot on: with the possible exception of Microsoft, which has historically overcharged for its lame products and tried to stifle innovation in the Internet browser market, almost all the products and services that the Big Tech firms have unleashed upon the world have improved our lives at many different margins. Even Facebook and Twitter, with their loathsome and tone-deaf CEOs, selective censorship policies, and weak privacy protections, are worthy of our praise, or in the words of Professor Cowen (p. 100):

“I would like to speak up for the tech companies, especially the big ones. They have brought human beings into closer contact with each other than ever before … mostly through social media. They also have placed so much of the world’s information at our fingertips, and more often than not it is accessible within minutes or even seconds. Whatever problems these developments may have brought in their wake, they are unparalleled achievements and arguably the greatest advances of the contemporary world.”

What about privacy, you might ask? Even Professor Cowen is worried about “the enduring loss of privacy” (p. 121), especially the development of sophisticated facial recognition technologies, detailed genetic profiles, and the ever-present risk of black hat hackers, calling out these particular privacy issues as the elephant in the room. The irony, however, is that the best way to fix or address these legitimate privacy concerns is with more technology, not less. Think of spam filters, encryption, and anti-facial-recognition strategies, just to name a few examples.

In any case, I have always wondered whether privacy is overrated. As Cowen himself notes, no one is immune from negative gossip, and privacy (like liberty) must always give way to public safety. Also, how can we have a meaningful discussion about privacy if no one has even bothered to define this amorphous concept? Alas, a comprehensive analysis of privacy is beyond the scope of this blog post, but a good place to start is Richard A. Posner’s classic essay on the economics of privacy, available here.

We will proceed to Chapters 7 & 8 of Cowen’s Love Letter to Big Business in my next blog post …

Did you know that since 9/11 more people (of all races) have been killed by the police in the USA than the number of U.S. soldiers killed in action in Iraq and Afghanistan? (Check out this police shooting database via Jeff Bezos’s Washington Post.) Also, check out the reimagined front page headline pictured below via the Incalculable Loss Project: “We took the iconic New York Times cover from Memorial Day and featured just some of the names of Black lives lost to police violence alongside the status of their case.” Alas, the status of most of these cases is “pending investigation.” Note of clarification: not all of the dead listed below were unarmed at the time of their deaths. You can see a better-quality version of the entire reimagined front page here. (This post was revised and corrected on 6/12.)

According to u/matias90 (via Reddit), there is a straight line path (over 13,000 kilometers in length) between Liberia and China without crossing any ocean or major body of water. This exotic route sounds like a backpacking adventure of a lifetime! Any takers?

Note: This is the last of four blog posts devoted to Week 5/Module 5 of my business law summer course.

This week, we are exploring civil and criminal cases, and I devoted my previous post to the ideal of “due process of law”, the single-most important procedural ideal of our legal system. Personally, for example, I think Joe Exotic’s criminal conviction should be commuted by President Trump, but due process is not about outcomes; it is about the way people are treated by the legal system, and Joe Exotic was tried by a jury of his peers and given the opportunity to defend himself against the charges against him. (As for Carole Baskin, the docuseries Tiger King raises many legitimate questions about her role in the disappearance of Don Lewis, but legally speaking Mrs. Baskin is not required to prove her innocence. Instead, it is up to the accusing party to bring formal charges or file a civil complaint and to prove his or her case in a court of law.)

But, in reality, Joe Exotic’s jury trial was an extremely rare event. How rare? As we saw in a previous post, most criminal cases result in plea bargains, not jury trials, and likewise, most civil cases settle out of court. (And when I say most, I mean over 98% of all civil and criminal cases, State or federal.) I thus devote the last part of my module on civil and criminal cases to a strategic question that all litigants–civil or criminal–must eventually contend with: when should you cop a plea or settle out of court, and when should you go to trial?

First off, recall from a previous post that going to trial, especially in civil cases, is costly and time-consuming because of the discovery process. But cost is just one part of the settle-or-go-to-trial equation. The other key variable is uncertainty. That is, even if you have all the time and money in the world to fight your case in court, do you really want to take your chances with a jury?

This is not a rhetorical question. Whenever a case goes to a jury, it is next to impossible to predict with any degree of certainty what the outcome of that case will be. Why? Because of another aspect of due process: the burden of proof. In a criminal case, for example, the prosecution must prove its allegations beyond a reasonable doubt, a demanding standard of proof. Even in civil cases, where the plaintiff’s burden of proof is much lower (preponderance of the evidence or “more likely than not”), the defendant is still able to prevail in the case of tie, i.e. if the jury believes the defendant as much as it believes the plaintiff.

If you want to go deeper into these strategic questions, you may have to pay Google Scholar a visit or read my textbook chapter on “Strategic Aspects of Litigation & Settlement.” For now, it suffices to say that the interplay between these two variables–cost and uncertainty–are the main reason why so many civil cases settle out of court and why so many criminal cases end up in plea bargains. FYI: Next week, we will conclude our summer survey course by taking a closer look at ethics, including natural law, animal rights, and business ethics. In the meantime, I will resume my review of Tyler Cowen’s “Love Letter to Big Business” in my next few blog posts.

Source: Brandon Carpenter

Yes, unbundle the police! I am interrupting Week 5 of my business law survey course to share this thought-provoking blog post titled “Why are the police in charge of road safety?” by my colleague, friend, and fellow libertarian scholar Alex Tabarrok. I, too, have always wondered why the police often act as roadside tax collectors (or worse) instead of devoting their valuable time and efforts to fighting crime. Here are some excerpts from Professor Tabarrok’s excellent post (link in the original):

It’s an unacknowledged peculiarity that police are in charge of road safety. Why should the arm of the state that investigates murder, rape, and robbery also give out traffic tickets? Traffic stops are the most common reason for contact with the police…. But why do we need armed men (mostly) to issue a traffic citation?

Don’t use a hammer if you don’t need to pound a nail. Road safety does not require a hammer. The responsibility for handing out speeding tickets and citations should be handled by a unarmed agency. Put the safety patrol in bright yellow cars and have them carry a bit of extra gasoline and jumper cables to help stranded motorists as part of their job–make road safety nice….

Defunding the police, whatever that means, is a political non-starter. But we can unbundle the police.

Note: This is the third of four blog posts devoted to Week 5/Module 5 of my business law summer course.

In my previous post, we saw why getting your “day in court” (i.e. a jury trial) in a civil case can take forever and be so damn expensive: “discovery.” By way of example, during the discovery phase of a civil case, the parties can send each other burdensome requests for the production of documents (including the production of electronic records like emails, texts, and social media posts) and take as many depositions (including depos of non-parties to the case) as they need or are able to afford! The next parts of Module 5 are devoted to criminal cases. (See the top image below.)

Tiger King is a veritable gold mine here. Among other things, my module contains the original criminal indictment against Joe Exotic as well as newspaper clippings about the Don Lewis cold case. In addition, I recorded a video in which I pose the following question, “What do Joe Exotic and Carole Basking have in common?” To the point, whether we are talking about Joe Exotic’s criminal conviction for murder-for-hire (check out his mugshot, bottom left) or the lingering allegations against Carole Baskin that she played a role in Mr Lewis’s mysterious disappearance (check out the cold case notice pictured below, bottom right), everyone is entitled to “due process of law.”

Ok, but what is due process of law, and why is this legal ideal worth studying in a business law survey course? Simply put, the concept of “due process of law” is the single-most important ideal of the Anglo-American legal tradition, so I spend a lot of time (four additional videos in all) exploring the historical origins (going back to the Magna Carta of 1215 A.D.) and the operational meaning of due process. In summary, due process means at the very least two things: (1) whenever someone is accused of misconduct (civil or criminal), he must be given a chance to defend himself, and (2) it is the party who is making the accusation (the plaintiff in a civil case or the prosecutor in a criminal one) who has the burden of proving the truth of those allegations.

Nevertheless, despite the ideal of due process, the fact remains that most criminal cases (like most civil cases) never go to trial; most criminal charges result in plea bargains. Accordingly, the last part of my Week 5 Module is devoted to the following question: Settle or Go to Trial? This is really a strategic question, not a legal one, and rest assured, we will explore this strategic choice in my next blog post.

Note: This is the second of four short blog posts devoted to Week 5/Module 5 of my business law summer course.

My Week 5 module on “Civil and Criminal Cases” begins with the civil actions for trademark and copyright infringement against Joe Exotic (see image below), but before I discuss this area of law, I need to provide some background. When I took Civil Procedure during my first year of law school (the late Geoffrey C. Hazard, Jr. was my “Civ Pro” professor), and later when I became a full-fledged law professor and taught Civ Pro myself, this subject was a two-semester course, so how could I possibly do Joe Exotic’s civil cases any justice in just a minuscule one-week module? By enlisting my secret weapon: my super-smart Jamaican wife Sydjia Robinson, who was my civil procedure student when we first met on my birthday in 2009 (#TeachersPet!) and who today is a successful trial attorney and expert litigator.

Specifically, I asked Sydjia to record three videos explaining the pre-trial process: the pleadings stage, the discovery stage, and summary judgment. In addition, because a court last week granted Big Cat Rescue full control of Joe Exotic’s roadside zoo (an extraordinary remedy to say the least!), I hastily recorded a fourth video explaining the difference between equitable remedies and legal remedies. I also included a copy of the complaint in the Tiger King trademark case (Big Cat Rescue, Inc. v. Big Cat Rescue Entertainment, LLC.), a link to the court’s docket in the trademark case, and a short video clip of one of the deposition scenes from the movie “The Social Network” (my second-favorite scene of the entire movie).

Notice, however, there are absolutely zero videos about juries or civil trials per se in this part of my Week 5 module on “Civil and Criminal Cases.” This omission was diabolically intentional on my part. Why? Because the three main lessons I want to get across here are as follows: (a) how time-consuming and costly the process of suing someone is, (b) the sad fact that very few civil cases ever go to trial anymore (most civil actions are either dismissed or settle out of court); and (c) the legal reality that the previous two items (a) and (b) are directly related. Next up, we will take a look at the criminal side of legal procedure beginning with Joe Exotic’s conviction on murder-for-hire charges as well as the Don Lewis Cold Case …

Before we delve into the details of Module 5 of my business law survey course, I would like to share a screenshot of the bottom half of my course homepage for Week 5, which I forgot to include in my previous post. The bottom of my course homepage contains legally-relevant links about real-time events relating to the recent police killing of George Floyd. Most of the BLM protests have been led by young people, and a lot of my students happen to be persons of color, so the idea here is to signal to my students that their voices are being heard (at least by yours truly). Personally, however, I don’t think we should “defund the police”; why not defund electronic license plate readers and the drug war instead?

Note: This is the first of several blog posts devoted to Week 5/Module 5 of my business law summer course.

We are now moving into Week 5 of my “Summer A” survey course in business law. My university went to remote instruction until further notice, so this course is entirely online. As a result, to make the best of a bad situation (online ed is no substitute for face-to-face classes, in my view), I have been using the surprise hit Netflix show Tiger King to explore the legal and ethical environments of business and to make the course as entertaining and engaging as possible. In this post, I will provide a general overview of Week 5 of the course and describe the contents of Module 5.

To the point, when most people think of “law” they probably conjure up images of criminal or civil trials, so Week 5 of the course is devoted to “Civil and Criminal Cases.” Tiger King is especially on point this week, since two of the main protagonists of the docuseries, Joe Exotic and Carole Baskin, were involved in protracted civil litigation and since Joe Exotic himself was convicted of murder-for-hire. Accordingly, my module on Civil and Criminal Cases is divided into seven parts as follows:

• A. Intro Video, Textbook Chapters, & Theme Song
• B. Civil Actions Against Joe Exotic
• C. Criminal Charges Against Joe Exotic
• D. Don Lewis Cold Case
• E. Due Process & the Burdens of Proof
• F. Settle or Go to Trial?
• G. Quiz & Discussion Post

Again, because of my Tiger King theme, all of the sections in this module features artifacts, reading materials, and video clips that are specific to the Tiger King docuseries. Also, because this summer course is a short one (it ends next week!), my coverage of civil and criminal cases will focus mostly on the ideal of due process and on the burdens of proof. But once again, let’s not get too far ahead of ourselves. We will delve into the details of Module 5 during the rest of this week; in the meantime, below are some screenshots of the homepage of my course for Week 5 (the Canvas App version is below the fold):

Desktop version:

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