Hyman’s Inferno

Gustave_Dore_Inferno32.jpgDevilish rhetoric is hot nowadays–ranging from the Chavez diatribe at the U.N. to “apocalypse chic” to the Left Behind series. Now the Cato Institute is getting in on the act, publishing an expanded version of David Hyman’s law review article Medicare Meets Mephistopheles as a book.

The book does a great job clarifying some complex Medicare law–the glossary and primer on Fraud and Abuse Laws alone are worth the purchase price. However, consistency is not a virtue of the book’s Screwtape-inspired narrator. He first suggests that Medicare is problematic because “‘single working mothers in Nebraska (often themselves lacking health insurance) [are] footing the bill for gold-plated health care provided to high-income Medicare enrollees in Miami'” (41). But soon enough, the grand design becomes apparent:

If Medicare were wholly means-tested, it would be instantly transformed into a program for poor seniors, instead of one for the poor, the wealthy, and everyone in between. Once the Medicare program does not include all the elderly, it becomes much easier for legislators to impose significant funding and benefit cuts . . . . (89)

This is a pretty scary vision; as Ezra Klein notes, in Hyman’s ideal world, “those who make poor decisions, or simply get really ill, face financial ruin.”

While Hyman thinks moral hazard drives “gluttonous” overuse of health services, recent scholarship (reported here) is undermining that shibboleth of consumer-directed health reformers. Certainly there are some ways in which cost-controlling measures could save health care dollars. But Hyman and other free marketeers seem to ignore the fact that expenditures on the chronically ill (which are largely nondiscretionary) are driving cost pressures.*

There’s a bonus excerpt from Richard Epstein’s forward to the book after the jump….

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5

A ruler has twelve inches . . . Queen Elizabeth was a ruler . . . Queen Elizabeth was also a ship.

A recent Gmail ad shows the perils of assiciation. Here’s a genuine (slightly redacted) screenshot of the e-mail and the ad. Take a look at the topic and the resulting advertisement.

gmail

My colleagues and I were talking about a murder case (actually, about a blog post about a murder case). The term “electric chair” appeared nowhere in the conversation, though. However, I was shown an ad — one of Gmail’s famous, targeted ads — for cheap “electric chairs.” In this case, following the advertising link, motorized recliners and wheelchairs.

Murder does not associate directly with wheelchairs; this seems to be a case of two-step association. The obvious explanation is that I was shown this ad because Gmail’s AI ran two association checks, one right after the other. First, “They’re talking about murder. What terms go well with murder? Electric chair!” And second, “So, what do you do for someone who might be interested in electric chairs? I know — let’s offer him a motorized recliner!”

It’s comical, really — a little like a live version of the nonsense sequence I learned in grade school: A ruler has twelve inches . . . Queen Elizabeth was a ruler . . . Queen Elizabeth was also a ship . . . Ships sail in the sea . . . and so on. (The little sequence goes on to talk about fins and Finns, Russian and rushin, etc.) It’s an easy illustration of the principle: Just because A-associates-with-B and B-associates-with-C does not mean that A-associates-with-C.

A measuring-stick is not a ship, even if Queen Elizabeth is a ruler. Ships do have fins and Finns do fight Russians but that doesn’t mean that ships fight Russians; Finns fight Russians and fire engines are rushin’, but that doesn’t mean that Finns fight fire engines. (Does anyone else remember the little couplets?) And a discussion of murder does not mean that I’m interested in motorized recliners, thank you very much.

I sure hope that Homeland Security is doing a better job than Gmail at this whole “making associations” business.

The Fog of Admin: Beliefs about Beliefs

fog.jpgI’ve just started teaching “standards of review” in my administrative law course, and as admin maven Richard Murphy has noted, pinning down the doctrine can feel like “lassoing smoke.” Even the top scholars in the field appear to disagree on basic premises. I think the nub of the difficulty has to do with the “meta-” ness of the enterprise. When a court tries to determine if agency action is “arbitrary and capricious,” it’s often assessing the head of the agency’s beliefs about an ALJ’s beliefs about the parties’ beliefs about the matter at issue.

Obviously this problem occurs elsewhere in law, and there are many deference standards that try to address it. Perhaps in line with Lawrence Rosen’s work on the cultural influence of law, I’m beginning to think some of these standards are filtering into academic and public discourse. One can “map” some controversies as boiling down to points about the deference certain beliefs are owed. For example,

1. Belief: A majority of Americans believe in God.

2. Belief about belief: Some academics criticize this belief. (Dawkins’s The God Delusion; Dennett’s Brights.)

3. Belief about belief about belief: Commentators criticize the critics. (Eagleton on Dawkins; Wieseltier on Dennett)

4. Belief about belief about belief about belief: Others intervene. (Leiter on Wieseltier on Dennett).

The debate can be a little dizzying, but as Eagleton notes, it’s often necessary to “repudiate the brand of mealy-mouthed liberalism which believes that one has to respect other people’s silly or obnoxious ideas just because they are other people’s.” Nevertheless, Eagleton cautions how projects like Dawkins’ risk making a category mistake about the phenomenon they attempt to discredit:

[T]o claim that science and religion pose different questions to the world is . . . to claim that while faith, rather like love, must involve factual knowledge, it is not reducible to it. For my claim to love you to be coherent, I must be able to explain what it is about you that justifies it; but my bank manager might agree with my dewy-eyed description of you without being in love with you himself.

In other words, in a pluralistic society, we’re all obliged to develop the capacity to respect varieties of personal knowledge. . . . without, of course, falling into radical skepticism. I think the difficulty of that balance mirrors the difficulty of developing any coherent account of deference doctrine in admin (which, as Murphy notes, is “a complex brew of improbable fictions and proceduralism”).

Photo Credit: Flickr/B. Jones.

4

CEOs, Just Cause, and $$$$

With the Disney case and now Grasso grabbing headlines, disputes over large payouts to former corporate executives have garnered great attention of late. Last week, another such dispute boiled to the surface, this time in the form of an appeal from an arbitration award in favor of Robert J. O’Connell, the terminated former CEO of MassMutual Financial Group. Sample media accounts can be found here, here, and here.

According to these stories, MassMutual’s allegations of O’Connell’s wrongdoing included, among other things, having affairs with several female employees, making $23 million on questionable “shadow” stock trades, intervening to prevent disciplinary actions against family members who held senior positions, and buying a fancy company-owned condo at a below-market price. The arbitration panel found that MassMutual failed to prove some of these allegations, failed to adhere to procedures for termination set forth in O’Connell’s contract, and otherwise failed to demonstrate just cause as defined in that contract. The panel did find that the firm was entitled to a return of the $23 million. Nevertheless, it awarded O’Connell compensation under the agreement worth between $40 and $50 million. MassMutual is now seeking to overturn the award in a Massachusetts court.

Without more information, we can’t tell whether the arbitrators got it right or wrong, but let’s focus instead on the contract itself. Here is how one report described the substantive portion of the just cause provision:

According to O’Connell’s contract he signed in 1998 when he joined MassMutual, he could be fired for a criminal conviction, theft or embezzlement, as well as for “conduct that constitutes willful gross neglect or willful gross misconduct … resulting in material harm to the company.”

Assuming this description is accurate, the term smacks of board of director abandonment of core principles of corporate governance. While there are many just cause provisions in employment contracts that are not the least bit problematic, this is the CEO we are talking about, this is quite a just cause provision, and the compensation at stake is, well, large.

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9

Trial by Lots

paper_rock.jpgAfter one particularly frustrating and confusing day in law school, I remember vehemently defending trial by ordeal to one of my classmates. (Unfortunately, I was that kind of law student.) For example, in ancient Israel they seem to have resolved litigation from time to time by resort to a kind of holy set of dice, known as the Urim and Thummim, which would be cast to decide who would win a case. There is much to commend such a system. It is quick, efficient, eliminates any advantage that one party might have because of wealth or power, and in an actuarial sense it is completely predictable. One can’t say the same thing, for example, about American tort law. It would seem that the Honorable Gregory Prensell of the U.S. District Court for the Middle District of Florida shares some of these sentiments. In Avista Management, Inc. v. Wausau Underwriters Ins. Co., No. 6:05-CV1430ORL31JGG, 2006 WL 1562246 (M.D. Fla. June 6, 2006), he issued the following order:

This matter comes before the Court on Plaintiff’s Motion to designate location of a Rule 30(b)(6) deposition (Doc. 105). Upon consideration of the Motion–the latest in a series of Gordian knots that the parties have been unable to untangle without enlisting the assistance of the federal courts–it is

ORDERED that said Motion is DENIED. Instead, the Court will fashion a new form of alternative dispute resolution, to wit: at 4:00 P.M. on Friday, June 30, 2006, counsel shall convene at a neutral site agreeable to both parties. If counsel cannot agree on a neutral site, they shall meet on the front steps of the Sam M. Gibbons U.S. Courthouse, 801 North Florida Ave., Tampa, Florida 33602. Each lawyer shall be entitled to be accompanied by one paralegal who shall act as an attendant and witness. At that time and location, counsel shall engage in one (1) game of “rock, paper, scissors.” The winner of this engagement shall be entitled to select the location for the 30(b)(6) deposition to be held somewhere in Hillsborough County during the period July 11-12, 2006. If either party disputes the outcome of this engagement, an appeal may be filed and a hearing will be held at 8:30 A.M. on Friday, July 7, 2006 before the undersigned in Courtroom 3, George C. Young United States Courthouse and Federal Building, 80 North Hughey Avenue, Orlando, Florida 32801.

DONE and ORDERED.

I still think it would have been cooler if Judge Prensell had ordered the parties to throw a set of sacred dice.

EULA Hoops

End User Licens Agreements (EULAs) govern virtually all software programs, and their restrictive terms have tended to multiply and intensify over time. Wendy Seltzer has expertly deconstructed the new Windows Vista license, and a number of commenters have added their own complaints. The terms of use appear to eviscerate rights traditionally enjoyed by users under copyright law. Seltzer concludes:

Users never asked for these impossible limitations. Microsoft decided unilaterally to add them, claiming it could abrogate personal ownership, fair use, and first sale rights because “The software is licensed, not sold.” If Microsoft faced real market competition on the home desktop, users could vote with their wallets, but anticompetitive practices and network effects [discussed here] make Microsoft a like-it-or-not proposition for most users.

Eric Goldman has also been covering the EULA wars, here and here.

Following up on these posts and some of Dave’s interesting contractual hypotheticals, I’m wondering how far the EULA can go. Can someone agree to a term like “The meaning of any contested terms of this license shall be exclusively determined by an agent of the licensor, and licensee hereby waives any right to appeal that determination”? Could this just be viewed as just another form of (lawless) arbitration? Or is this type of term a bit too extreme to be recognized by a court? If anyone can point to a good discussion of the topic, I’d be grateful.

7

A Romantic Contract?

This story has been floating around for a while, but is still great. The basic plot: after a blind date, the man demands that his date (who didn’t call him back) pay him for half the cost of their meal, on an implied contract theory of recovery. Various emails and voicemails follow.

In some ways, it is a nice hypo for a contracts exam. Under what underlying legal theory would a court refuse to get involved in this dispute? Is consideration lacking? Is the subject matter of the contract too personal?

Food for thought.

27

Sentenced to 24 Years

The news of the day is Jeff Skilling’s 24-year sentence. The outrage level in the blawgosphere is at DEFCON 1.

Ellen Podgor:

But I don’t think we will see sentences like this in the future because people will eventually realize the worthlessness of issuing such draconian sentences in non-violent white collar cases. The bottom line is that these sentences are not likely to deter future criminality, as many who engaged in the conduct just did not see themselves as committing crimes.

Peter Henning:

While Jeffrey Skilling receives 24 years for presiding over the collapse of Enron, former Congressman Randy (Duke) Cunningham sells his office to a string of defense contractors for a bit over $1 million and receives a sentence of 8 years. Soon-to-be former Congressman Bob Ney will likely be sentenced to less than 3 years in prison for selling out his office to lobbyists led by Jack Abramoff. How can there be such a disparity between the sentences for public corruption and the corporate frauds perpetrated by Ebbers and Skilling? The harm from public officials, especially those elected to office, who abuse their positions for personal gain is, in my opinion, nearly as great as that caused by corporate chieftains who preside over collapsing companies.

Larry Ribstein:

Judge Lake may well have correctly applied the law by supposing that Skilling was tied to $80 million in investor losses. But to quote Mr. Bumble, who was told that the law supposed that his wife acted under his direction, “if the law supposes that, the law is a ass—a idiot.”

Christine Hurt:

Judge Lake explained that the sentence was proportionate to the crime because Skilling effectively sentenced “hundreds, if not thousands,” to a “life sentence of poverty.” I think I would quibble with that statement, but I guess that’s for another post.

Note that Skilling gets the pain of a long sentence without even the solace of “one for the record books.” To be known as the holder of the longest white-collar crime sentence, Skilling would have had to receive a sentence of 25 years and a day.

I disagree with much of these laments against the Enron prosecution, for reasons I have already discussed. Twice. To put the sentence itself in perspective, I thought it would be fun to google “sentenced to 24 years” and see what I came up. And the results were, predictably, random. A cop who stole drugs, a Dynergy executive (for accounting fraud, later reduced to six years), a retail level drug dealer, a woman busted (allegedly) for holding merely 2.72 g of cocaine, and the significant other of another large drug dealer, convicted for conspiracy.

The message: federal time is hard time for lots of folks, convicted of many nonviolent offenses, in circumstances where deterrence isn’t (necessarily) a strong argument for punishment. Indeed, I’d bet that most of the time spent in federal prison is for “nonviolent” crime, in that sentence enhancements for possessions of firearms and drugs dominate over bankrobbery.

If we think that violence and responsiveness to punishment are the only way to justify long sentences, why not be outraged about such punishments every day? Moreover, it seems to me that Skilling isn’t being punished for going to a jury (while others took the plea discount). He’s being punished because the jury disbelieved his testimony.

2

The Economics of Things that Flow

water.jpgThis week’s New Yorker has an article about water, and, specifically, a claim that it isn’t well suited to traditional economic analysis. For a taste, check out the interview with author Michael Specter here.

Specter provides many examples (from different cultures) of the difficulty societies have in creating residential water markets. Folks resist thinking of water as a commodity. In other countries (particularly, those without a strong riparian law tradition) misuse is rampant. Urban dwellers demand water for free (or force industry to subsidize home use). The result: waste, extreme shortages of potable water, and disease. Specter is particularly strong when he discusses how the competition for water in India and China (in particular) has resulted in a classic tragedy of the commons: farmers competing to dig wells deeper than their neighbors, leading to a falling water table, and, ultimately contamination by salt and poisons. He also provides the somewhat astonishing factoid that water use in the United States has fallen in absolute and per capita terms in the last thirty years, largely due to demand-side reductions caused by technological development. The article claims that the technological change was in turn spurred by the Clean Water Act’s pressure on industry.

The article reminded me of Frank’s nice post of last week on Net Neutrality: Law, Money, and Culture. As you may recall, Frank argued against treating network access as a normal economic good, largely to avoid “another avenue for the large corporations that dominate the culture industry to fast-track their wares to consumers? In the end, network bias-toward-wealthy-entities portends ever more pervasive commercialization of cultural life.” While Frank doesn’t exactly come out and say so, you get the sense (reading other net neutrality folks) that the nondiscrimination principle arises from an intuition that access to a certain quantum of information is a new part of Americans’ birthright endowment.

Perhaps the analogy is facile, but is there a meaningful connection between the economics of water and information? The reason that the analogy occurs to me is that both goods the real cost is access, not consumption. Obviously, there are some important differences too (information isn’t life, whatever Neal Stephenson thinks, etc.) But it might be that the lessons from the partial commodification of water in the last thirty years, and the positive consequences of regulation, could inform our experiences with informational regulation as well. Or, as the title says, is it time for an economics of things that flow?

[Will Baude points out that the idea of fugitive resources isn’t new. Can anyone recommend a good primer comparing water and information economics? I obviously need to catch up!]

0

Law School Innovation Blog

Doug Berman and Paul Caron have started a new blog called Law School Innovation Blog. From the introductury post:

Welcome to the launch of a new blogging adventure: Law School Innovation (LSI). My goal starting this blog is to create a forum for discussing … law school innovations.

As a regular law blog reader, I often notice much blogging about law school dynamics and new law school endeavors at blogs such as Concurring Opinions and Empirical Legal Studies and MoneyLaw and PrawfsBlawg and The Volokh Conspiracy. (I sometime go “off-topic” at my home blog to discuss on-line companions to law journals and related bloggy topics (see, e.g., posts here and here).)

I thought it might be useful to have a dedicated blog home for these sorts of discussions, and Paul Caron and Joe Hodnicki were kind enough to embrace this new project into their Law Professor Blog Network. Topics ranging from Harvard Law School’s new 1L curriculum to the recent emergence of Supreme Court clinics to blogging as scholarship to PowerPoint and internet access in the classroom are just some of the issues I hope will get discussed here.

Though my ambitions for this blog are huge, my time is limited. Thus, I hope other law professors, law students, practicing lawyers and anyone else interested in law school design and evolution will become regular contributors. I would be happy — indeed, eager — to bring on as co-blogger anyone prepared to do a post or two a week on law school innovation topics. Also, I have created a Board of Advisors for this blog. I have no idea exactly what Advisors will do, but at least such a Board is an innovation in the blogosphere.

I encourage early visitors to use the comments to tell me whether this new blog adventure seems like a good idea. If I get encouraging feedback, I’ll probably invest (too much) energy in this new project; if the feedback is less encouraging, this blog may wither away once college basketball season gets going.