The Holberg is a kind of Nobel for fields not covered by the Nobel—arts, social sciences, law. Even before his contributions to behavioral science, everyone considered Sunstein one of the very top legal scholars by virtue of his contributions to constitutional and administrative law, among much else. His last 20 years of work, much but not all of it devoted to behavioral science and law, and star wars, has extended his influence across the galaxy. It is amazing to think that in his 40s, Sunstein was already a great scholar yet had not even begun the work that would prove his most influential. At this age, most scholars have settled into whatever groove that will take them to their grave.
I tell aspiring legal academics to read Sunstein first. It is hard to replicate his brilliance and imagination, but it is possible, by reading him, to understand that even technical scholarship can be written in a fun, stylish, and engaging way. Everyone should imitate his efforts to reach out to people he disagrees with, and treat them with respect and decency.
Is the Stormy Daniels (alleged) hush agreement legally invalid?
I’m not going to teach the Stormy Daniels / “David Dennison” contract in my contracts class. Time is short. But there is some good stuff for law students to ponder—even an integration clause!
In the end, Daniels’ case is pretty weak.* In seeking a declaratory judgment that the “hush agreement” is invalid, she makes three, or possibly four, arguments.
1. No contract was formed because “Mr. Trump [the putative real identity of David Dennison] never signed the agreements. Nor did Mr. Trump provide any valid consideration. He thus never assented to the duties, obligations, and conditions the agreement purportedly imposed upon him” (para. 38).
2. The agreements “are invalid, unenforceable, and/or void under the doctrine of unconscionability” (para. 39).
3. The agreements are invalid because “they are illegal and/or violate public policy” (para. 40).
4. Elsewhere, in the factual recitation, she argues that because Trump (or actually his lawyer Cohen) breached the agreement by disclosing his payment of $130,000 to Daniels, Daniels is no longer obligated to keep her side of the bargain.
On #1, there is no legal requirement that Trump sign the agreement, as far as I know. He can simply consent to it through his lawyer. And even if there were, there’s no reason why the contract wouldn’t be valid as a deal between Daniels and Essential Consultants, the LLC apparently created for this purpose, with Trump as a third-party beneficiary. In other words, Essential Consultants pays Daniels to keep mum, and she agrees to keep mum. The $130,000 payment, whether from Trump himself or Cohen or EC, is valid consideration. Contract? Sure.
On #2, Daniels does not allege facts that make out a claim of unconscionability. She was represented by a lawyer in the negotiations, and she seemed, if anyone, to be in the superior bargaining position. While she vaguely asserts that Trump and Cohen “aggressively sought to silence” her, she does not describe the aggression. If there was something amounting to unconscionability—significant threats, say—she would presumably have mentioned them. Moreover, the $130,000 payment would not likely be regarded by a court as unconscionably low.
On #3, public policy actually favors settlements. There has been some argument lately about whether non-disclosure agreements may violate public policy by hiding bad behavior, but the law, as far as I know, says otherwise.
On #4, Daniels would normally be entitled to damages if Trump/Cohen breached the agreement in this way. But, while I can’t say I’ve read every word of the agreement, virtually all the non-disclosure obligations are (not surprisingly) on Daniels’ part. Moreover, if, as Daniels argues, Cohen violated the non-disclosure provisions, it would seem that Trump (not Daniels) is the injured party, and that Trump would have a remedy against his attorney, rather than Daniels against Trump. Incidentally, Cohen is not listed as a defendant; and it does seem that Daniels alleges that Cohen’s disclosure was at the behest of Trump, suggesting that the breach was Trump’s rather than Cohen’s. Maybe, but the weakness of the contractual language will be a problem for Daniels; she would have difficulty showing that the disclosure was a material breach given that her major aim in the contract was apparently the monetary payment, which apparently took place; and it’s also not clear that she can prove she was injured by the disclosure.
Of further interest, the contract includes a $1 million liquidated damages clause that benefits Trump alone. Law students: is this clause enforceable or illegal as a penalty? I’m inclined to think the latter because the clause stipulates the same penalty for any violation, no matter how trivial. It is also large relative to the payment to Daniels.
*Under common law principles. Maybe there are idiosyncrasies of California law, especially in relation to the public policy claim, that I don’t know about.
What is “norming” and what does it have to do with regulation?
It’s a style of regulation that has received very little comment. It may be troubling. You can read an article I wrote about it, with Jonathan Masur. Abstract below.
The book, edited by Cass Sunstein, is out. Buy a copy and another one for a friend.
The book exemplifies a paradox of aggregation. Individually, most authors (including me) answer “probably not.” Yet read every essay and close the book, and the impression you’re left with is more like “uh-oh.” Perhaps the reason is that the authors bring so much energy and varied perspective to describing the threats to constitutional democracy, and draw on different historical and comparative sources that reinforce each other. However, when explaining why those threats are likely to be countered, the authors converge on a series of familiar observations about the strength of our institutions and political culture. With each repetition, these observations sound more like hollow reassurances than irrefutable truths. Well, villains are always more interesting than heroes.
What would a useful Twitter look like?
When I opened an account on Twitter several years ago, I naively made the following assumptions.
1. I could follow newspapers and other publications so I would get stories I’m interested in.
2. I could follow worthy charitable institutions, cultural organizations, and entertainment venues, which would keep me up-to-date about events and projects.
3. I could follow colleagues and other academics, journalists, commentators, and experts of various sorts, who would keep me informed about developments in areas of expertise I share or wanted to learn about. Also, specialized academic journals and institutions.
In fact, nothing worked out.
1. New organizations bombarded me with the same headlines over and over. How many times do you want to read “Longtime Trump attorney says he made $130000 payment to Stormy Daniels” on your feed?
2. Worthy charitable institutions showered me with pleas for money. Cultural organizations sent redundant notices of events I did not want to attend. Restaurants I might visit twice a year sent me their menus every day.
3. Most people in category #3 did not actually alert me to developments in their area of expertise. When not ranting and raving, they sent me links to #1 and #2 along with snippets of text expressing their outrage and indignation. Meanwhile, the tweets of people who tweeted responsibly got lost in the deluge. When you think about it, if you tweet once a day, or a couple times a week, how likely is it that people who receive tens of thousands of tweets daily will see yours? They’d have to watch their feed all day long.
As the years passed, I realized I had filtered out nearly everyone and everything, whereupon I deleted my account.
So what would a useful Twitter look like?
(a) News related to my interests that I might have overlooked. No headlines; I see those on my own.
(b) Cultural events and entertainment options I might actually want to attend. Once.
(c) The latest academic scholarship related to my interests—this is likely to be no more than 10-20 articles or books per week.
Twitter is an enormously inefficient method for accomplishing (a), (b), and (c). Currently, it’s much easier to do periodic google searches. Maybe after years more of AI development, Twitter could give me want I want. But I’m not holding my breath. Generating content that people scan once a week is no way to make money. Twitter can’t work unless it can make itself an obsession.
Aspire to inform, not to convince.
Promote the kinds of things you’d like to see more of.
Don’t promote the kinds of things you’d like to see less of.
Here’s the problem with Will’s proposal: it is entirely at variance with Twitter’s goal, which is to make money by generating content that vast numbers of people will read.
Will is one of thousands of Twitter’s unpaid laborers. Because Twitter pays Will nothing, it can’t dock his wages for producing content that few people read. But Twitter can downgrade his content in favor of the things people want to see: sarcasm, derision, humor, and images and videos rather than links to academic papers on SSRN.
Twitter figured this out years ago, when it stopped displaying tweets on your feed in the order that they arrive, and started tinkering with algorithms that promote tweets that are most likely to be read, liked, and retweeted (as well as ads and paid promotions), including tweets from people who you do not even follow. Twitter’s description of the algorithm is cagey, to say the least. But we don’t need much imagination to understand what it is trying to do.
Will’s view is a bit like that of a conscientious casino operator who worries that slot machines addict people unfairly by relying too much on noise and colors. The operator turns off the sound and replaces the colorful images of fruits and dollars with a black-and-white sign that says “win” or “lose.” He should hardly be surprised if customers disappear the next day—even though the (very bad) odds remain unchanged. The whole point of the color and excitement is to lure the customers and open their wallets. The odds are beside the point.
Twitter cannot make profits unless people use it addictively. Not only will it never create a system that a conscientious academic might design. It also cannot tolerate the content that a conscientious academic wants to produce. If you don’t believe me, look at your analytics. You can still tweet, but hardly anyone will see your tweets. What’s the point of that?
Today, Twitter is a planetary-scale hate machine. By which I don’t mean “people post hateful things on Twitter.” I mean literally generates hate, as in, put a bunch of people with diverse perspectives on Twitter and by the end of the day they hate each other more than when they started. Common ground might have existed, but they won’t find it, because Twitter, like any arms dealer, works better when they fight. It even benefits from collateral damage, when they hurt people they didn’t specifically intend to hurt.
Through its core design—short messages, retweets, engagement metrics—Twitter incapacitates the safeguards necessary for civil discussion. It eliminates context, encourages us to present each other out of context, prevents us from explaining ourselves, rewards the most incendiary messages and most impulsive reactions, drives us to take sides and build walls.
If Twitter is going to foster healthy conversation, it will have to change fundamentally. It won’t be a matter of tuning some filters and tweaking some ranking algorithms.
The best concise account of the problems with Twitter I have seen. Who are you going to believe?
In a new paper, written with Suresh Naidu and Glen Weyl, I explore ways that antitrust law can be used to counter labor market power. Is labor market power a serious problem? Increasingly, the answer seems to be yes. The latest research suggest residual labor market elasticities in many markets in the neighborhood of 0.5 to 3. The figure above, taken from our paper, provides a rough estimate of the cost to efficiency (DWL = deadweight loss) and workers (“labor share”). Yes, there are assumptions galore, but you’ll need to read the paper if you want to know what they are. You can find it here.
In another (short) paper, Alan Kreuger and I argue for limits on covenants-not-to-compete and no-poaching agreements, among other things, as a way of curbing monopsony power targeted at low-income workers. Here’s the paper, and here’s an op-ed.
Imagine the editor of a respectable news website approaches you, and says he would like to hire you for a part-time job. You will surf the web in search of interesting news stories, and identify those that you think the news website should link to so as to keep its readers engaged. You might supply some accompanying text as well. You will spend 30 minutes a day, every day.
Sure, you say; you think you can fit that into your schedule. What’s the pay? The editor says: Nothing.
Nothing? Can someone really expect you to spend the equivalent of 22 eight-hour days, about a month of workdays, every year, for no compensation at all? Why yes.
Divide Twitter users into two groups. One group consists of passive consumers who use their Twitter feed as a personalized source of news and entertainment. They never tweet; they are pure customers, who (I suppose) see some advantage to this type of news aggregation. They pay by resting their eyeballs on ads and promotions, the source of Twitter’s revenues.
The other group consists of hybrid worker-consumers. Like the first group, they “consume” the Twitter feed as a source of news and entertainment. But, unlike the first group, they also labor for free, spending hours over the year dutifully tweeting and retweeting Web materials they think of general interest, along with brief snippets of text.
The first group gets something for nothing; the second group gets nothing for something. The members of the latter group are pure suckers. Twitter doesn’t compensate them with anything, not even in kind, for their labor that the first group doesn’t get for free.
How did Twitter pull off this amazing feat—of not only obtaining billions of dollars per year in free labor, but from highly intelligent and educated people—academics and journalists—who are normally hard to fool?
The answer seems to be that once Twitter was able to persuade some famous people to start using Twitter, the lure for ordinary mortals was irresistible. (This, even though the truly famous do not actually send tweets but pay their PR agents to send tweets for them, or buy up followers in the gray market.) The rest is a matter of exploiting well-known foibles of human psychology. Crystalline metrics establish a ranking system that enables you to compare yourself to your peers, lording over those beneath you while chasing after those just above you. A fairly reliable albeit radically decentralized system of obtaining followers ensures that you will progress toward an achievable goal as long as you keep sending those tweets. Positive feedback to your own tweets in the form of likes and retweets, with the occasional jackpot when your tweet goes viral, creates an irresistible variable ratio schedule of rewards that keeps you engaged. If only the work—and that’s what it is—weren’t so damn tedious!
It’s a con, but an impressive con, the sort Tom Sawyer would appreciate.
Are Russian trolls protected by the First Amendment?
Not exactly, but the First Amendment might make life difficult for government officials who want to block, deter, or at least diminish Russian propaganda during the 2018 election. In his prosecutions of Russian agents, Robert Mueller apparently will rely on statutes that prohibit foreigners from meddling with American elections. But the First Amendment protects speech, and while it doesn’t protect fraud (the focus of the indictment), the core activities of the trolls—the use of social media to propagate support for Donald Trump and opposition to Hillary Clinton—fall firmly under the First Amendment umbrella.
This may not save the Russian agents. In addition to engaging in some clearly fraudulent behavior, as non-citizens located outside the United States, they probably cannot claim First Amendment protection. But they can’t be sent to jail in any event because they lie outside the reach of American power. Russians in the United States, and Trump supporters who don’t mind spreading Russian propaganda, are protected by the First Amendment. In sum, the First Amendment protects propagandists whom U.S. authorities could reach, and national borders protect propagandists whom the First Amendment does not protect. The U.S. government is helpless.
There is another twist. Supreme Court doctrine recognizes that the First Amendment protects one’s right as an “addressee” to receive mail and other communications free of government interference. This means any law that sought to blunt the force of Russian propaganda by controlling its distribution by internet companies is unconstitutional. In the wake of the 2016 election, the idea that an unfettered “marketplace of ideas” is always good for the public lies in ruins. If the now twin danger of Russian and terrorist propaganda over social media is at least recognized, it will take a long time to overcome the constitutional legacy.
I have another box-4 op-ed in the Washington Post here, and then something about secrecy and democracy in Foreign Policy, both published in the peaceful Friday evening slot when everyone has time to concentrate.
Imagine that a group of amateur softball players start a game in a public park. An audience distributes itself on picnic blankets and enjoys the game. Question: should the audience pay the baseball players?
The answer, as a matter of culture, is no. And the audience certainly has no legal obligation to pay. We might say that the rule is: “if you play a game in the park, you cannot demand payment.” But is that a good rule?
Suppose the rule were: “if you play a game in the park, you may charge anyone who watches the dollar equivalent of the marginal product of your contribution.” This rule is, of course, impractical; but if it weren’t, it should produce social gains. Better players would migrate to the park, and consumers (that is what they are) would get a better product. A point I want to make is that the reason we have the inefficient rule is not just practicalities (of determining marginal products, regulating park usage, and all the rest). We also have a cultural norm that would frown on any player who tried to charge people who watched him play, with a partial exception for buskers, who (culturally speaking) are understood to be more in the business of entertaining, but still are not entitled to demand payment. The player, by contrast, is just having a good time. But isn’t he also “working”? A professional baseball player “works” when he engages in exactly the same activity. We don’t we say that the professional baseball player shouldn’t be paid because he’s just “playing.” What exactly is the difference between the amateur’s “work” (which we call “play”) and the professional’s “work”?
Now consider another setting: the family. Under the traditional conception of the family in our culture, the woman did not “work” in the sense that the man did. Of course, we have no trouble seeing housecleaning, dinner-making, and child-rearing as work, and even in the old days, people would sometimes resolve the cognitive dissonance by calling the work “women’s work,” thus devaluing it but not denying that it is work at all. You can even find judicial opinions where the work supplied by women in a household setting is treated as “gratuitous.” But the idea that women should not be paid for their work was entrenched. Married men, like the hypothetical baseball audience, enjoyed the benefits of a cultural monopsony.
We see this phenomenon in other settings. As Kim Krawiec points out in an ingenious article, the same cultural logic has been applied to the “gamete market”: women are expected to “donate” eggs for free, with compensation to cover only medical bills, rather than demand a fair payment. (Men, as sperm donors, are not.) We see something similar in the kidney market (for both sexes). The beneficiaries of the monopsony are not the ultimate consumer but intermediary companies, who are, by the way, (in the case of the egg market) being sued for price fixing. But there are countless examples. Sports—my original example, where the difference between “work” and “play” is so obscure—provide a long history of monopsony, mostly wiped out for now, except that universities operating through the NCAA continue to underpay “student” athletes who are essentially workers who are given room and board and a nominal education in return for extraordinary levels of labor. I suspect similar stories can be told in the area of the arts, ideas, and politics, where there have often been traditions of holding that workers should not be paid or should be underpaid. The common theme seems to be that firms have taken advantage of historical traditions and understandings that dissuade people from demanding full pay.
The latest and most interesting manifestation is the market for data labor. Starting with Jaron Lanier, commentators have pointed out that Facebook, Google, and other big tech companies have exploited a cultural understanding that when one uses internet services as a consumer one doesn’t “work” by supplying data despite the great value of the data for the internet companies, which use it to improve their AI services. This is not very different from my other examples, especially the women’s work example—since women were, in a rough sense, paid in kind for their work though not give their marginal product as they would in a market. The big tech companies would get better data if they paid people with money for their specific contributions rather than in kind through the general service provision (and, in fact, sometimes they do, but in a way largely hidden from the public, as when they hire people (as “workers”) to label photos), but very likely do not do so because they do not want to disturb the cultural monopsony from which they benefit. The result is that a huge number of people who make significant contributions to the development of AI and other services are unpaid, except roughly in kind, which not only retards the growth of technology services, but results in a massive transfer of wealth from ordinary people to the tech titans.
Glen Weyl and I explore these ideas in one of the chapters of our new book, Radical Markets, and argue that a free market in data labor would both advance technological progress and redistribute wealth to ordinary people. You can also read a discussion of the idea in The Economist.
Acolytes of Milton Friedman will squirm. The “Friedman doctrine” says that corporations should maximize profits, and no more. Let shareholders (who earn high returns as a result) and consumers (who pay low prices) decide how to use their savings to benefit society, directly or through government.
Friedman makes the good point that if we agree that business leaders should spend corporate funds on public benefits, then we’ll also have to accept them as agents of the public trust, yet there is no reason to believe that CEOs are capable of determining the best social uses for a corporation’s funds. Do you want the CEO of Exxon or Coca-Cola to use dollars that would otherwise go into lowering the prices of their products to fund the latest climate-denial institute or an art museum in a wealthy community? Or would you rather use those dollars for your own charitable interests?
Fink seems to be aware of these objections, and in fact toward the end of the letter, after suggesting that BlackRock’s vassals need to serve a “social purpose,” he defines that the “social purpose” for BlackRock as “investing the time and resources necessary to foster long-term value.” And this just means that BlackRock will continue, as it always has, trying to discourage corporations from maximizing short-term returns, and seems to have very little with the sort of corporate charity that Friedman attacked. Which is to say that BlackRock isn’t doing anything different except, according to the Times, adding staff to monitor the companies that BlackRock owns stakes in (something BlackRock and the other institutional investors have been doing for years, even while sometimes claiming in response to complaints about the antitrust implications of their behavior that they have no influence on corporate governance because they are “passive”).
If BlackRock wants to act in a socially responsible way, here is something it could do. It could demand that CEOs of the underlying firms be compensated based on the difference between the stock returns of their firm and the stock returns of other firms in the industry. This would give CEOs an incentive to cut costs so as to increase market share, passing on savings to consumers. The increase in competition would also reduce the aggregate returns of the firms within the industry since they typically enjoy market power, thanks to the oligopolistic structure of most industries and the firms’ common ownership by a handful of institutional investors like BlackRock itself. That means that BlackRock itself would lose money both for its shareholders and clients, including the relatively small portion of the population that has invested its savings in stocks. But the losses would be offset by gains to consumers. That would be good for society, but bad for BlackRock. Is Fink willing to put his (actually, our) money where his mouth is?
In this book, I examine the lawfulness of the federal government’s bailouts of major financial institutions during the crisis of 2008 and 2009. Probably of most interest to a specialist readership but I also address the broader inescapable issues of our system of government. Does the government have too much power? Are there ways to prevent abuse? You can preorder the book here.