Institutional Law and Economics: The Legal-Economic Nexus

Today I was talking to my landlord about the work of Friedman, Sowell, and John Stossel (all individuals whose work he greatly admires). He was talking about "I, Pencil" (or his notion of it) and the way everyone in the world acting in their own self-interest gets a product (a pencil) from point A to point B, without any deliberate notion of all the potential steps that may occur from the time the wood is harvested until it becomes a pencil.  There is no Prime Directive or government action forcing this collection of interactions. The lumberman sells his timber, the processor makes it into various lengths and intermediate products for their customers, those customers may use each individual product for their own purposes.  One of the buyers is the manufacturer of pencils, and he simple sells them to the highest bidder, and off they go to whoever that may be at the time. His point with this story was that there needn't be any unnecessary "government intervention"...

 Lately, we have been reading John R. Commons' Institutional Economics (Part I).  In it, Commons lays the foundations for a lot of what he sees as the basis of economic transactions, heavily rooted in human psychology, action, and interaction (or, as we like to say-- human interdependence). It is a dense book as explained briefly in Rodrigo's blog contribution last week . One notable component of the Commonsonian approach to economics is the fundamental importance of collective action, or the role collective action plays in shaping the legal rules and informal institutions of the world around us. It's interesting to think about how collective action in relation to housing rights has or may continue to impact existing property law. In Dr. Lisa Alexander's 2015 contribution to the Nebraska Law Review titled, Occupying the Constitutional Right toHousing , she walks through the various Occupy and other housing-strike movements of the recent past, detailing how each is a for...

 The New York Times The Daily podcast for October 11th covered climate change mitigation and adaptation efforts in two North Carolina towns subject to significant flood events over the past several years: Avon and Fair Bluff. It's been 8 year since Hurricane Matthew put the towns under water; 4 since Florence. Both towns are struggling from the realities of the physical collapse caused by flooding and now economic collapse for numerous reasons, notably the loss of residents following each major flood event. In the case of Fair Bluff (pop. 545), they rely on grants and what amounts to many volunteer hours to keep things going and rebuild after every set back. Current economic development goals include rebuilding downtown on higher ground-- but that requires significant funds and a tax base. They discuss federal aid (notably FEMA) who offer to buy out residents in at-risk areas, essentially encouraging residents to leave rather than invest in a rebuild time after time.  This de...

Last week, we discussed the issue of hospital beds and hospital bed capacity.  This has been at the heart of the debate over the Covid-19 restrictions and the need to flatten the infection curve to avoid overwhelming the capacity of hospitals.  Based on 2015 data from the Centers for Disease Control, the US and approximately 900,000 hospital beds across 5,500 hospitals.  Two-thirds of these hospitals are under 200 beds on average. Hospital beds are a rather strange economic good because of the separation of user and payer in most cases in the United States and in many countries.  The user of a hospital bed, the patient, is the consumer of the good.  The payer and the buyer of the good is typically a public or private insurance company expect in the cause of an uninsured individual.  This group includes private insurance companies such as Aetna, Kaiser or Blue Cross.  It also includes public insurance such as Medicare and Medicaid and some local gove...

Hospital Beds as an Economic Good The building and maintenance of hospital beds is a difficult economic proposition.  Each hospital must decide within the market rules are designed by each state in the United States, how many beds make sense for that facility. Hospital beds are expensive to maintain and represent a high fixed cost.  Much of the costs of a hospital bed must be incurred regardless of actual capacity (Green, 2002) [1] .  An empty bed loses money and is not available to help cover fixed costs. Planet Money Show and Hospital Beds National Public Radio’s (NPR) show “Planet Money” recently had story about the issue of hospital bed economics.   https://www.npr.org/sections/money/ They cite during the show Prof. Zack Cooper from the Yale School of Public Health who talks about the efficiency and inefficiency of hospital beds.  Cooper states in the piece that, “If there are beds, those beds would have gotten used...

This week, given the extreme circumstances surrounding the recent COVID-19 pandemic, we are once again deviating from our usual ILE content and leaning on the expertise of our in-house law fellow, Samantha Zinnes , to talk about the challenges local government has in dealing with the crisis. This brief interview was conducted via zoom on March 30 th , 2020. Relating to the law and this COVID-19 crisis, what can you say about the federal and local response? SZ: The problem right now is not necessarily that the law is flawed, but that we have a distribution of leaders who are unevenly using the law and the tools it gives them to their fullest potential.   We have a federal government with tools that only the federal government can use, but they are not being implemented the way states and local governments want or need them to be.   So the fact that we have multiple levels of government is a double-edged sword.   The states check the federal government by only al...

This week, given the extreme circumstances surrounding the recent COVID-19 pandemic, we're deviating from our usual ILE content and leaning on the expertise of our in-house law fellow, Samantha Zinnes , to talk about the power local government has in dealing with this type of situation.   The Power of Michigan Local Health Officials to Combat a Pandemic Disease By Samantha Zinnes, Esq. Early last week, Governor Gretchen Whitmer declared a state of emergency as the first confirmed cases of COVID-19, an illness caused by coronavirus, were reported in Michigan. At the same time, the World Health Organization (WHO) officially declared this coronavirus a pandemic. A disease that is a pandemic or epidemic does not necessarily refer to the severity of the actual disease or the complications it causes. Rather, it more has to do with where, when, and how the disease has spread. An epidemic is defined as a clear increase in the normal amount of cases occurring in a commun...