Historically, corporate governance arrangements arose out of the interactions of the various constituencies that form around corporations. American corporate law evolved to facilitate the bargaining and innovation that made up this governance market. Pursuant to the modern theory that corporate law is supposed to promote efficiency, rather than market activities, changes to the governance regime imposed a one-size-fits-all set of practices from outside the traditional governance market. The result has been a decline in the number of companies interested in joining America’s public markets, and the adoption, by those companies that do go public, of extreme governance structures designed to resist the influence of the governance industry.

Chapter 11 turns to a discussion of the competing arguments concerning the new public nuisance law advanced by practicing attorneys, interest group allies, judges, scholars, and law-and-economics professors. Almost all criticisms of the new public nuisance law have been negative, characterizing expansion of public nuisance law as illegitimate and dysfunctional. These critiques are examined through the lens of various categories of criticism: (1) traditional, (2) formal, (3) institutional, (4) rule of law, (5) democratic theory, and (5) law and economics. The critics all draw on negative examples from the mass tort public nuisance cases in the 21st century (lead paint, firearms, opioids, vaping, climate change). At least one commentator, however, has offered tempered praise for the new public nuisance law as the second best solution to community-wide harms. She believes that the development of the new public nuisance law is in the finest traditon of a flexible, developing common law to meet changed circumsatnces. This commentator would permit continued development of the new public nuisance law, enhanced with several guardrails and transparency in proceedings.

This chapter shows how thin the legal-economic analysis of property law has been and responds to a few particular arguments in that field, including arguments about the general structure of property law, adverse possession, and dead-hand control.

This chapter describes the motivations for an analytical, “internal” critique of the law-and-economics movement. In particular, it discusses earlier types of critiques and shows that, while they are probably successful on their own terms, they have done little to dislodge economic-style thinking as a dominant force in American private law. Instead, a critique on the law-and-economics movement’s own terms is needed. The chapter also identifies several recurring problems, or “antipatterns,” in legal-economic reasoning.

This chapter summarizes the problems of the law-and-economics movement and tries to outline new ways for economic thinking to make a more lasting contribution to law.

This chapter develops and critiques the major economic arguments in tort law, focusing mostly on the model of bilateral precaution, which attempts to analyze the foundational choice between negligence and strict liability. It also responds to “least-cost avoider” arguments and shows how little progress economic thinking has made in understanding most of tort law. The commonplace conclusion that tort law has easily succumbed to the law-and-economics movement is incorrect.

This chapter responds to leading arguments about contract remedies, including the theory of efficient breach, contract interpretation, rules of disclosure (or permitting nondisclosure), consideration, and other topics in contract law. It shows how little progress the law-and-economics movement has made in understanding most areas of contract law, despite the obvious connections between contracts and economics.

This chapter chronicles an unnoticed aspect of the intellectual history of the “contractarian” paradigm, the descriptive claim that firms are best characterized as nexus of contracts. Although the paradigm’s rise in the 1980s in the corporate world is well known, little has been said about its success in rewriting both theory and doctrine in charitable and not-for-profit law. The contract paradigm has reshaped the questions that not-for-profit scholarship attempts to answers, and it is tightly linked to developments in not-for-profit doctrine and practice. Key examples include the growth of donor standing—the notion that not-for-profits have a fiduciary duty to their donors, and that donors may bring suit for breaches—and the growing obsession with “donor intent” throughout the not-for-profit sphere. I contrast contractarianism with an institutionalist “public trust” conception of charities, which was the prevailing intellectual paradigm for most of the 20th century.

This introduction traces aspects of the history of fiduciary duties in business law and scholarship. Despite fiduciary law’s centrality to business law, the chapter describes how the contractarian revolution of the 1980s contributed to the marginalization of fiduciary duties, both in theory and doctrine. However, subsequent developments, both in case law and in scholarship, have questioned some of the core assumptions of the early wave of contractarian theory. The introduction outlines three critiques that scholars have levied against the early contractarians’ view of fiduciary duties, and connects these critiques to the eighteen chapters in the volume. The introduction also provides a roadmap of our contributors’ arguments.

This chapter details how competition laws have, to date, addressed matters associated with interoperability standards and SEIP. Particular focus is given the essential facilities doctrine. In the United States, the essential facilities doctrine has been abandoned; in the EU, refusal to licence can constitute an abuse of a dominant market position in the relatively narrow circumstances outlined in the ‘exceptional circumstances’ test applied in the Magill and IMS Health cases. Consideration is also given to the law and economics analysis of the relevant laws and practices. It is concluded that the essential facilities doctrine, as applied to interoperability standards and SEIP, would not provide a helpful basis for binding disciplines at the international level because of entrenched differences between leading jurisdictions, as well as its questionable standing in the context of law and economics scholarship. The work also includes discussion and analysis of other applicable principles of competition law in the context of interoperability standards, including concerted practices, fraud or misconduct in the creation of standards, tying, and the somewhat controversial doctrine of excessive pricing.

Decentralization of the energy sector means the breaking-up of the sector and its vertically integrated enterprises and/or global cartels by separating its distinct functions (extraction, transmission and sale), thereby allowing for increased competition in the market. This chapter uses two case studies to illustrate the challenges the decentralization of largely vertically integrated energy markets poses for international trade law, including international trade law’s inability to deal comprehensively with the production quota practices of global energy cartels such as the Organization of Petroleum Exporting Countries (OPEC). The chapter then studies regional energy market decentralization policies (in this case the European internal market), focusing on the panel report in EU – Energy Package, and considers which WTO rules facilitate such policies and which constrain them.

Over the past few decades, scholars in a variety of fields – economics, psychology, sociology, anthropology, and international relations, among others – have made enormous strides studying the behavioral roots of international law by exploring individual motivations, describing organizational cultures, and mapping communities of practice. Taken together, the work of these scholars presents a complex, nuanced understanding of how international law works. However, these projects are rarely considered together and are generally separated by academic enclosures and focused on different subfields within international law, thereby unfortunately restricting communication among scholars who are using different methodologies. The goal of this book is to break down some of these barriers and provide a glimpse of what an international law more focused on behavior and more engaged with these other fields might look like; this chapter aims to provide a roadmap in this effort by describing international law’s long interest in behavior and the past attempts to explore that relationship, exploring the book’s approach and laying out the contributions in each chapter, and beginning the process of bringing these insights together and outlining a series of takeaways for future study of international law as behavior.

This chapter provides an introduction to the basic structure and themes of the book. We begin with a description of the basic features of a corporation. We then discuss the intellectual foundations of corporate governance, including an overview of the doctrine of shareholder primacy and the view that a corporation is merely a nexus of contracts. We begin to catalog some of the cracks in these foundations, focusing on the shortcomings of the long-standing arguments for the exclusive shareholder franchise. Next, we make clear that our the criticisms of shareholder primacy and the exclusive shareholder franchise do not question, but indeed make extensive use of, the basic principles of standard economics and social choice theory. In other words, both our critique and our positive theory come from within the very tradition that gave rise to the original arguments for shareholder control. We conclude the chapter with a detailed plan for the rest of the book.

Judge Richard Posner’s opinion in McCarty v. Pheasant Run, Inc. exemplifies his use of a law and economics approach in tort cases. Applying the famous risk–utility test found in the “Hand formula,” Posner refused to impose negligence liability on a hotel in a case in which a woman was assaulted by an unknown assailant who gained access to her room through an unlocked door that opened into a courtyard. The rewritten feminist dissent objects to the use of the risk–utility test in sexual violence cases where the “loss” being quantified (i.e., a deprivation of personal autonomy) is often undervalued and misunderstood. To eliminate the risk of victim-blaming, the feminist opinion would change the law to disallow a contributory negligence defense to limit a plaintiff’s recovery in cases of rape and sexual assault. The accompanying commentary discusses how Judge Posner’s rhetoric and his law and economic philosophy leads him to weigh the economic interests of businesses over women’s physical and emotional well-being.