In recent years, economists working in public finance and related fields have applied a new set of models and methodologies to the problems of ine-quality and economic insecurity. This innovative approach-often known as "the new dynamic public finance"-emphasizes the challenges posed by productivity changes across the life cycle and policy changes over time. The new dynamic public finance has generated important insights that often cut against the conventional wisdom in classical optimal tax theory, suggest-ing-for example-that capital income should be taxed and that higher cap-ital income taxes can incentivize investment under certain circumstances. Mainstream economics has assimilated many of these insights, but with fleet-ingly few exceptions, legal scholars have yet to engage with the new dynamic public finance literature. This article explores the potential for cross-pollination between law and the new dynamic public finance. It explains the central intuitions underlying dynamic tax models and draws out implications for tax and other areas of law. The new dynamic public finance offers compelling reasons to adopt age-dependent tax schedules, generates novel justifications for the taxation of capital, and provides an original argument for applying different tax rates to single individuals and married couples. It also reveals flaws in the federal taxation of retirement savings and-in particular-raises serious doubts about the wisdom of the traditional IRA and 401(k) structures. Beyond the Internal Revenue Code, the new dynamic public finance literature offers fresh perspectives on the design of disability and unemployment insurance programs, the rationale for tort law, the regulation of cryptocurrency, and the application of the Constitution's procedural due process requirements, among other subjects. Ultimately, incorporating a new dynamic public fi-nance perspective into tax and non-tax law can inform the crafting of a more comprehensive system of social insurance while enriching our understand-ing of the system we now have.
Nonprofit control of operating businesses has long been a feature of European corporations such as Novo Nordisk, Ikea, Carlsberg, and Rolex, which are governed by enterprise foundations-nonprofits with charitable missions explicitly permitted to hold controlling stakes in businesses. In the United States, nonprofit control is becoming more prominent due to recent legal developments, with companies like Patagonia and OpenAI under nonprofit ownership. Despite this growing interest, the economic rationale behind nonprofit control remains poorly understood: why would nonprofits with social missions choose to control businesses that sell products and services? We identify two primary models of nonprofit control. The income-generating for-profit is controlled by a nonprofit to generate funding for the nonprofit's charitable mission, ensuring steady long-term cash flows and mitigating systematic risk. The socially oriented for-profit is controlled to ensure the operating business adheres to the nonprofit's mission. Unlike simplistic accounts that treat all nonprofit-controlled businesses as uniformly purpose-driven, our analysis clarifies the benefits and risks of these models and provides a framework for evaluating legal regimes governing them. Our comparative analysis of legal systems in Europe, the United Kingdom, and the United States highlights significant differences in how nonprofit control is regulated. European and U.K. laws support income-generating for-profits through enterprise foundations and trading companies while incorporating oversight to ensure socially oriented for-profits remain mission-driven. U.S. law, by contrast, imposes strict limits on private foundations while allowing other nonprofits to control businesses with few safeguards against outside-investor influence. We propose an optimal legal framework to facilitate income-generating for-profits where mission drift risks are relatively low while also imposing stronger safeguards on socially oriented for-profits to prevent outside investors from undermining those for-profits' social missions, as seen in the recent OpenAI controversy. Rather than focusing on independence from donors or founders, legal reforms should prioritize independence from investors with economic interests in the for-profit subsidiary. Our proposal ensures that nonprofit-owned businesses remain both financially sustainable and committed to their stated social purposes.
This Article reveals how a core principle of U.S. banking law unintentionally increases concentration, instability, and inequality in the financial system. Since the 1990s, Congress has instructed regulators to resolve a failed bank using the strategy-be it a merger or liquidation-that incurs the "least cost" to the federal Deposit Insurance Fund (DIF). The ensuing three decades have demonstrated that, although well intentioned, this least-cost requirement is flawed in two ways. First, the least-cost requirement overemphasizes costs to the DIF, which contrary to popular belief are not taxpayer money and cannot be predicted accurately. Second, it ignores other critical factors that regulators ought to consider when resolving a failed bank, including competition, financial stability, and financial inclusion. This Article traces the origins of the least-cost requirement and draws on case studies, including JPMorgan's acquisition of First Republic Bank in 2023, to show how it has distorted bank resolution in undesirable ways. The Article contends that Congress should repeal the least-cost mandate to allow bank regulators to consider all relevant societal costs when deciding how to resolve a failed bank. Absent this reform, the least-cost requirement will inevitably lead to even more concentration, less inclusion, and increasing fragility in the financial system.
The relationship between state and local governments stands at a crossroads. In recent years, state legislatures across the country have intervened aggressively in local affairs, part of a broader wave of preemption that has upended traditional norms of local autonomy. At the same time, legislatures have disregarded other areas of local regulation-including areas where state intervention might be welcomed by local residents-and are frequently inattentive to existential challenges affecting local governments. Cities and counties face intersecting resource, capacity, and turnover crises. They struggle to raise revenue, retain employees, and provide bare services. And they operate in an environment of heightened institutional mistrust. Against this backdrop, local communities veer between seeking support and fearing retribution from their state governments. Yet this narrative tells only part of a larger story. State governments are diffuse institutions, and other state-level actors have quietly come to play increasingly influential roles in the subfederal system. One such actor is the state auditor, an independent executive official who has assumed a position of relative trust at a time of widespread institutional suspicion. State auditors are granted vast powers to interrogate local-government affairs. Through a particular type of audit-performance audits, which examine the effectiveness of local practice-the state auditor can pull back the veil of local administration by reviewing local policies, scrutinizing local decisions, and suggesting governance reforms to cities, counties, and local agencies. In this manner, performance audits are conduits of state-local policy-making that differ in important ways from traditional modes of state oversight. In contrast with legislative preemption, performance audits enable individualized state interventions into the weeds of local governance. They are, perhaps, just another threat to local autonomy. Or perhaps they represent something entirely different: a more nuanced, targeted method for state and local officials to communicate, a mechanism by which state auditors-who promise the transparency, vision, and expertise that local bodies often lack-assist those struggling local governments so often ignored by other state actors. This Article is the first to explore the local-audit regime that operates across the United States today. Drawing upon an original dataset of hundreds of audit documents, it argues that performance audits may offer a profitable balance between the virtues and vices of localism, thus forging a system by which states can meaningfully shape local policy without infringing upon local democracy. Yet audits are more impactful in some communities than they are in others, a reminder that governance problems do not afflict local institutions equally and that one-size-fits-all solutions might neglect realities on the ground. The Article concludes with concrete suggestions for reform, each drawn from an approach already tested elsewhere in the audit ecosystem. In doing so, it calls for deeper engagement with public auditing regimes-an opportunity, more broadly, to explore diverse local entities and the heterogeneous world of state oversight they inhabit.
This Article examines the political and economic implications of the U.S. Supreme Court's landmark decision in Kelo v. City of New London (2005) through an empirical study of eminent-domain practices in New York City. Using a unique dataset of all expropriations in New York City over twenty-nine years, we challenge two core assumptions underlying the Kelo discourse: (1) that local governments require formal legislative or judicial constraints to refrain from aggressive economic-development takings and (2) that such takings generate substantial economic benefits. Contrary to widespread expectations, our analysis reveals a ninety percent decrease in takings for economic development in New York City following Kelo, despite the absence of restrictive post-Kelo legislation in New York State. This finding demonstrates that public opposition was sufficient to drive significant policy shifts, even without formal legal constraints. Simultaneously, our economic analysis finds no measurable benefits from economic-development takings-no significant increases in employment or business-establishment growth-thus challenging the "spillover benefits" rationale cited in Kelo. Building on these findings, we argue that courts should serve dual roles: as agoras fostering public debate and as enforcers ofprocedural safeguards ensuring that projections made by politicians are evidence based. Specifically, we propose implementing review mechanisms modeled after environmental-impact assessments to verify economic claims before pursuing eminent domain. We thus suggest that overturning Kelo, as some seek, would unnecessarily constrain local democratic processes when procedural reforms could more effectively address the underlying concerns.
Antitrust law, particularly the Supreme Court's decisions in National Collegiate Athletic Ass'n v. Board of Regents, 468 U.S. 85 (1984), and National Collegiate AthleticAss'n v. Alston, 594 U.S. 69 (2021), has fundamentally changed college sports. Intercollegiate athletics, at least at the major conference level and particularly (but not exclusively) with respect to football and men's basketball, has become a multibillion-dollar business and completely shed any pretense of amateurism on the part of the players. This raises a serious question whether major-conference athletics of the kind the antitrust laws have engendered is consistent with the other, primary output of great research universities: their academic programs. I suggest there are significant tensions, ranging from revenue drains through distortion of admissions and educational programs to hidden and potentially exploitative cross-subsidies among students.
The twentieth anniversary of Kelo v. City of New London is a good opportunity to consider the broader significance ofpublic use for constitutional theory, and to explore parallels between the "public use" issue at stake in Kelo and another major issue in constitutional property rights under the Takings Clause: exclusionary zoning. This Article takes up that challenge. Part I highlights the strikingly similar history of the two issues. In both cases, there is a strong originalist argument that the policy in question-private-to-private condemnations in one case, exclusionary zoning in the other-violates the property-rights provisions of the Fifth Amendment. But, on both issues, the Supreme Court and federal courts generally have taken a highly deferential approach since the rise of Progressive and New Deal Era skepticism of property rights. Part II outlines reasons why that conventional wisdom is wrong. Judicial deference on both public use and exclusionary zoning has greatly harmed the poor and disadvantaged, particularly racial minorities. Moreover, stronger judicial review can actually further "representation-reinforcement" in two ways: by giving voice to groups excluded from the political process, and by empowering them to "vote with their feet."Finally, Part III highlights synergies between judicial enforcement of public-use limitations on eminent domain and enforcement of restrictions on exclusionary zoning.
The power of eminent domain is an inherent attribute of sovereignty, not a power granted by the federal or any state constitution. There are significant constitutional constraints on exercises of the eminent-domain powers, however, most notably the requirement contained in the Takings Clause that private property shall not "be taken for public use, without just compensation." Delineating the boundaries of the eminent-domain power has proven a formidable challenge for courts, scholars, and others, due in part to the sparseness and indeterminacy of the relevant constitutional text and history. In this Article, I examine how an understanding of the founding generation's vision of a new nation free of old-world "corruption" sheds light on the limits of the power of eminent domain. In the late eighteenth century, Americans employed the term "corruption" broadly to denote the use of government power to promote private interests at the expense of the general welfare. "Corruption," in short, denoted not just "quid pro quo" exchanges, such as outright bribery ofpublic officials, but also the systemic societal rot that results from abuses of the public trust. This history offers a clear lesson for the contours of the power of eminent domain. It makes sense to be wary notjust ofproperty condemnations that benefit specific, identifiable private parties, but also of eminent-domain initiatives that create opportunities for those in power to entrench themselves by selecting future winners.
George Priest drew an analogy between public utility regulation and relational contracts, combining legal, economic, and historical analysis to explain an evolution from municipal franchise agreements to public utility commissions. The contract analogy has the benefit of drawing attention to both the supply and demand sides of regulation. I argue that this perspective can shed light on an episode that the economic theory of regulation has otherwise struggled to explain-the dramatic changes in the regulatory landscape beginning in the late 1970s, commonly known as deregulation. Changes to the organization of Congress had unanticipated consequences for its ability to supply the type of cartel-enforcing regulations then common in many large industries. The result was the end of cartel enforcement and an expansion of conduct of business rules. Simultaneously, post-government employment became a more important form of payment for favorable regulatory treatment.
Early in his career, Professor George Priest floated the idea of the law-school-as-university, in which scholars and teachers would employ the social sciences to understand how the law affects human behavior. He contended that the traditional study of doctrine was both uninteresting and of little consequence. In this essay I contend that Professor Priest's advocacy, particularly of law and economics, has contributed greatly to understanding of the law's impact on human behavior. I also contend that his prediction of an altered and expanded curriculum proved accurate, but not in the way he contemplated. Rather, law school curricula have burgeoned with clinics and courses promoting a wide array of activist causes at the expense of traditional offerings on doctrine and legal method. A consequence is a new generation of lawyers and judges dedicated to realizing favored causes rather than respecting and maintaining the rule of law.
This article is a modest response to George Priest's lament that academics should pay more attention to capitalism as an institution. Fundamental to contract and property, which George described as forming the bedrock of capitalism, is the counterintuitive ability of participants to exercise a modicum of self-restraint, in what Tocqueville called "self-interest rightly understood" (SIRU). The article tracks permutations of the SIRU puzzle in various guises, including the famous Marshmallow Test of young children, as well as in other theoretical work on property. The upshot is that SIRU is explicable in close-knit groups, but much less so in the stranger relationships of advanced, large-scale capitalism. Moreover, the SIRU mystery is replicated in the kinds of advanced democratic institutions that arguably enable large-scale capitalism. Hence the development of both advanced capitalism and advanced democracy may owe their origins to accidental historical circumstances.
This essay examines the critical challenge of balancing government intervention and market freedom, drawing insights from the intellectual collaboration and contestation between Owen Fiss and George Priest. Comparing the United States and Europe, the analysis reveals that while America achieves superior economic performance through market-oriented policies, Europe demonstrates better health outcomes, lower inequality, and more effective climate policies. Argentina's century-long decline illustrates the catastrophic consequences of poor institutional choices. The paper argues that America's emphasis on wealth creation over distribution has generated GDP growth and greater innovation substantially outpacing Europe while contributing to rising inequality and democratic instability. Finding the optimal balance between government and market mechanisms will require a clear assessment of costs and benefits that often eludes those on the ideological extremes.
Historians and legal scholars alike have previously noted that the meaning of "public use" began to change in the nineteenth century, continuing into the twentieth. In the hands of some state courts, "public use" expanded from an approach dependent on "use by the public" to one that at least occasionally tolerated "use for the public benefit." This shift in meaning laid the groundwork for Berman v. Parker, the urban-renewal decision from the United States Supreme Court that provided support for the broad reading of "public use" in the 2005 decision Kelo v. City of New London. In this Article, I focus my attention on one of the vectors for the emergence of "public benefit" conceptions of the public-use requirement: state constitutional text itself. In the nineteenth century, several states specifically authorized takings for private use in their state constitutions, usually to benefit local and economically critical industries. In other states, this approach was explicitly rejected. Although these private-use provisions have been noted by other scholars, this Article collects and examines them as a group, including the lessons about "public use" that one might glean from the fruitful and fascinating debates that these provisions engendered among nineteenth-century lawyers at constitutional conventions. The conventions are an important site for understanding the logic underlying "public benefit" conceptions of "public use."And they might shape the future of "public use" doctrine by offering historical grounding for alternative conceptions of the line between permissible and impermissible takings, whether as a matter offederal or state constitutional law.
In Kelo v. City of New London (2005), the U.S. Supreme Court signaled that government-sponsored assemblies hardly ever create problems under the Public Use Clause in the Fifth Amendment to the U.S. Constitution. By a 5-4 majority, the Court held that a government takes property for public use when it condemns private property and transfers that property to another private party to produce local economic benefits. That holding was all but required by Court precedent, the majority argued; the eminent-domain power is the only way government can reassemble property. That argument relies on false dichotomies. In this Article, I argue that government-sponsored assemblies do not need to be takings for public use to be constitutional. In rights-based property theories, the power to sponsor private-to-private transfers and to assemble private property can be authorized instead under the police power, and specifically under the class of police regulations that secure average reciprocities of advantage. This Article teaches two lessons, one normative and one doctrinal. Normatively, reciprocity-of-advantage doctrine asks more reasonable questions than current doctrine does about whether state-sponsored assembly is justifiable. And doctrinally, this Article offers a roadmap for overhauling contemporary public-use doctrine. The U.S. Supreme Court treated assembly problems as reciprocity-of-advantage problems in the first assembly cases it considered after the Fourteenth Amendment was ratified-Head v. Amoskeag Manufacturing Co. and Wurts v. Hoagland (both 1885), and Ohio Oil Co. v. Indiana (1900). If Head, Wurts, and Ohio Oil Co. are convincing, then the Court's later assembly cases- from Clark v. Nash (1906), through Berman v. Parker (1954), to Kelo-should be limited or overruled.
Like many scholars who, over the course of long careers, have focused on various dimensions of international law-in my case, principally international trade law and the institutional dimensions of economic and social development in developing countries1-it is difficult not to be depressed about the current fractious state of geopolitical relations. In the brief comments that follow, I focus on two controversial sets of issues that bridge these two domains: whether economic interdependence yields a peace dividend, and whether we can hope to escape the enduring mythology of the imperial civilizing mission, which I believe are central to current geopolitical fault lines. I close with some speculative thoughts on the relationship between these two questions and potential responses to them. As Paul Romer remarked on receipt of the Nobel Prize in Economics in 2018 for his pathbreaking work on endogenous growth theory, "[o]nce one starts to think about [questions such as these], it is hard to think about anything else."2
Evidence in recent years points to a fraying of criminal antitrust enforcement. Aggregate criminal penalties have fallen dramatically, and a series of recent acquittals has reduced Department of Justice (DOJ) win rates in (Sherman Antitrust Act) Section 1 cases from previously stratospheric levels. An obvious explanation is that the overall strength of the federal enforcement regime, bolstered by increases in statutory penalties, has deterred most offenses and left a paucity of explicit conspiracies. From our review of eleven cases filed from 2020 to 2023, we do observe indirect evidence of deterrence. But we also conclude that other factors are at work, including the DOJ's attempts to apply criminal penalties to conduct that diverges from classic horizontal agreements, stronger efforts by defendants at trial, and the DOJ's unwillingness to adjust its strategies in light of courts' demonstrated willingness to allow economic evidence of anticompetitive effects. If the DOJ continues to pursue enforcement in a broad selection of cases and remains committed to the view that per se violations do not require economic evidence of anticompetitive harm, then its track record will continue to suffer, with potentially adverse consequences for criminal antitrust enforcement to follow.
In the 1980s, George Priest published two seminal articles on the intellectual history of strict liability for injuries caused by defective products. First, he demonstrated that the states' remarkably quick acceptance of such liability starting in the mid-1960s reflected the consensus among prominent legal thinkers of the wisdom of "enterprise liability" theory, which had been developed over the previous three decades primarily by Fleming James, Friedrich Kessler, and William Prosser. This theory proposed that commercial enterprises should be liable to consumers who suffered product-related injuries in order to internalize accident costs to manufacturers and sellers, equitably allocate the risks of such accidents, and protect the public. Second, Professor Priest argued that the "founders" of Section 402A of the Restatement (Second) of Torts (1964), which established strict liability for harms caused by "any product in a defective condition unreasonably dangerous" to a consumer, intended merely to streamline recovery for manufacturing defects. Accordingly, Section 402A's drafters did not foresee that courts would dramatically enlarge its scope to include design and warning defects. Scholars have generally agreed that Professor Priest presented the definitive intellectual history of strict products liability. Nonetheless, various commentators have contended that he (1) overemphasized the impact of James, Kessler, and Prosser; (2) paid insufficient attention to larger political, social, and economic movements that influenced the development of strict liability; (3) did not adequately account for the role of lawyers (as contrasted with scholars and judges) in swiftly implementing such liability; (4) wrongly concluded that Section 402A's founders intended to limit its application to manufacturing defects; and (5) exaggerated the impact of enterprise liability on tort law developments after 1964. I will try to show that these critics have failed to refute Priest's historical analysis of strict products liability.
