Law School News

Updated: 2 hours 45 min ago

Jennifer Nou on Trump's Coming Crackdown on the Bureaucracy

Tue, 02/28/2017 - 09:46
Taming the Shallow State Jennifer Nou Yale Journal on Regulation: Notice & Comment February 28, 2017

"The question now is not whether the hammer will fall, but how hard."

The gloves have now come off in the battle between President Trump and an increasingly alarmed federal bureaucracy. EPA employees are in the streets. The National Park Service is sending out insubordinate tweets. Intelligence agencies are not just leaking, they’re gushing. Bureaucratic resistance is, of course, not new. But what does seem unprecedented is the degree of open defiance, no doubt prompted by Trump’s own naked hostility. Much has been made of this presidency’s corrosive effect on political norms. Count as another casualty the civil service’s professional ethos and respect for democratically-elected superiors.

Public resistance of this sort has its merits, among them transparency and the opportunity for dialogue. But it also has consequences, some unintended. One is the inevitable crackdown from above. As David Hume observed, “where a disposition to rebellion appears among any people, it is one chief cause of tyranny in the rulers, and forces them into many violent measures which they never would have embraced.” In other words, overt uprisings can stoke even stronger authoritarian impulses — irresistible to a man already predisposed to them. So while some are warning of the dangers of a “deep state,” a shadowy bureaucratic underground, equally worrisome are the perils of a shallow one: a resistance marching boldly in the light.

The question now is not whether the hammer will fall, but how hard.

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Faculty:  Jennifer Nou

Martha C. Nussbaum on Controlling Anger

Mon, 02/27/2017 - 12:24
A better way to be angry: advice from philosopher Martha Nussbaum Tapestry February 26, 2017

Think of the last time you were angry. Not just annoyed, but foot-stomping, wall-punching mad.

Did it feel productive? Probably not.

And that's the trouble, says philosopher Martha Nussbaum — when we get angry, we don't accomplish very much. In fact, she says, it usually only makes things worse. 

In an interview with Tapestry host Mary Hynes, Nussbaum attempted to offer an answer to one of society's oldest problems: "What do we do about the social poison of anger?"

In her book Anger and Forgiveness: Resentment, Generosity, Justice, Nussbaum says that while anger has its place within the range of emotions we need to express, it's often given too much value. Instead, she says, it should be something we seek to control.

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Faculty:  Martha C. Nussbaum

Omri Ben-Shahar: "The Republicans Who Will Stop Trump"

Mon, 02/27/2017 - 10:04
The Republicans Who Will Stop Trump Omri Ben-Shahar Forbes February 24, 2017

The more interesting axis of internal opposition forming within the Republican party has not yet been noticed.

A month into the embryonic Presidency, the Trump locomotive is struggling to gain speed. Dealt the great fortune of a unified government—a Republican controlled Congress and a soon to be restored conservative majority in the high court—the president appeared destined to lead a historical conservative transformation of government. Tax reform, Obamacare repeal, environmental deregulation, corporate-friendly overhaul—all seemed imminent. Trump may have stolen the party from the Republican aristocracy, but the establishment was eager to work with him to advance the common ideology.

Instead of forging ahead, the Trump convoy is stumbling. Within one month, strong voices of dissent are emerging from within the Republican ranks, triggered primarily by two of the President’s early blunders: the Russian connection, and the mismanaged travel ban. Losing a top aid and an early court battle signaled presidential ineptitude, but more importantly they sparked early tones of disapproval among Republican lawmakers.

There are some prominent Republican actors in this emerging anti-Trump coalition, like Senators John McCain and Lindsay Graham, whose antipathy towards the President and disagreement with some of his core views are hardly a secret. But the more interesting axis of internal opposition forming within the Republican party has not yet been noticed.

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Faculty:  Omri Ben-Shahar

Stone, LaCroix, Baude, and Hutchinson on the Future of SCOTUS After Gorsuch's Nominaton

Fri, 02/24/2017 - 09:38
Law School Experts Consider Future of SCOTUS After Gorsuch's Nominaton Vivian He The Chicago Maroon February 23, 2017

On Monday, February 20, professors Geoffrey Stone, Alison LaCroix, and William Baude from the Law School sat down with professor Dennis Hutchinson from the College to discuss the future balance of the Supreme Court under the Trump administration. The event took place at the Law School and was co-hosted by the Institute of Politics.

In light of Neil Gorsuch’s pending nomination to the highest bench of the land, speakers weighed in on a range of issues including Gorsuch’s judicial style, the future ideological leaning of the Court, and the political implications of this nomination for the country.

Stone began his remarks by stating that Gorsuch should not be confirmed to the bench. He explained that had Justice Scalia passed away this February and President Trump nominated Gorsuch to fill that vacancy now, he would have supported the confirmation. Stone said that while he personally disagrees with Gorsuch’s judicial record, the latter is “clearly qualified and clearly ethical,” and would have been an appropriate choice for “a very conservative president to replace a very conservative justice.”

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Faculty:  Geoffrey R. Stone Faculty:  Alison L. LaCroix Faculty:  William Baude Faculty:  Dennis J. Hutchinson

Tom Ginsburg on the on Syrian Constitution Draft

Thu, 02/23/2017 - 16:06
Inside Syria MC exclusive: experts on Syrian constitution draft’s pros&cons Inside Syria Media Center February 23, 2017

The intra-Syrian talks in Geneva are about to start. The meeting, organized by the UN, is aimed at finding a consensus between all the parties of the Syrian conflict. One of the cornerstones of a possible peace agreement is a new constitution which would both benefit the Syrian people and be agreed upon by the parties.
At the talks in Astana, Russia presented a draft constitution which envisages quite a number of significant changes compared to the constitution adopted in 2012. Inside Syria Media Center has contacted experts who shared their opinion on the draft and expressed their views on what kind of laws the today’s Syria requires.
The previous week, we published the comments of writer and political commentator John Wight. Today, we would like to share with our readers the opinions of Professor Tom Ginsburg and writer and columnist Brandon Turbeville who kindly agreed to answer our questions.

What are the benefits and implications of the new constitution proposed by Russia? Will it get the support of the Syrians?

Prof. Tom Ginsburg: I am unable to comment on whether Syrians will support the draft; sometimes the key question for constitutions is not the content, but who is proposing them and what the process is. I suspect that the process by which this constitution is put forward, debated and adopted will be more important for its legitimacy than its actual content.

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Faculty:  Tom Ginsburg

Interview with Martha Nussbaum on Anger, Disgust, and Love

Thu, 02/23/2017 - 16:03
On Anger, Disgust, and Love Emotion Researcher February 23, 2017

You are one of the world’s best known and most celebrated living philosophers, as testified by your 57 honorary degrees and by your reception of the most prestigious honors in philosophy (just in the last two years: Philip Quinn Prize 2015, for outstanding service to the profession of philosophy; Inamori Ethics Prize for Outstanding Ethical Leadership, 2015; Nonino Prize for a “Master of Our Time,” 2015; Kyoto Prize in Philosophy, 2016; NEH Jefferson Lecture, 2017). And yet, your graduate education was not in philosophy but in classical philology. Your PhD dissertation, defended in 1975 at Harvard University, was entitled Aristotle’s De Motu Animalium, and it was more or less the same as the book of that title, published in 1978. What attracted you to classical philology in the first place, and why did you eventually make the transition to philosophy? Is your graduate training in philology to be credited in part for your success as a philosopher, and if so how?

I was attracted to Classics by my love of Greek tragedies and comedies, which I read first in English and then, as soon as I could, in Greek.  When I went to graduate school I wanted to write about tragedy – and lo and behold, I did! – but later. Because when I got to Harvard I found that nobody was addressing the deep ideas in the tragedies. Some were editing texts, and others were doing literary criticism of a somewhat superficial and vapid sort.  The people who really commanded my respect were G. E. L. Owen, the great scholar of Plato and Aristotle, and Glen Bowersock, the historian. I don’t have a gift for history, but in order to work with Glen I made Tacitus my “special author” in Latin, and I’ve always delighted in Glen’s prodigious learning, his grace, his wit.

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Faculty:  Martha C. Nussbaum

Eric Posner on 'The Takeaway' on America’s Presidential Power Struggle

Wed, 02/22/2017 - 16:04
Executive Angst: Understanding America’s Presidential Power Struggle The Takeaway February 18, 2017

Today, we're dedicating our entire show to thinking deeply about the role of the president and executive power.  Here’s what you’ll find in this special Presidents’ Day episode:

  • From George Washington and Andrew Jackson, to Theodore Roosevelt and Woodrow Wilson, the function of the highest office in the land has expanded and contracted over time — sometimes beyond what the nation’s founders ever intended. Where did the concept of executive power originate, and what does the Constitution actually say about it? For answers, we turn to Eric Posner, a professor of law at the University of Chicago.
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Faculty:  Eric A. Posner

Eric Posner on the New Immigration Order

Wed, 02/22/2017 - 15:59
Will the New Immigration Order Make a Difference? Eric Posner February 22, 2017

The major effect of the new immigration order is not to increase the number of deportations. It is to give border agents more discretion. Previously protected people (for example, those who committed minor crimes) may now be deported. But the financial and human resources available for deportation remain the same—unless Congress is willing to appropriate tens of billions of dollars in additional money for enforcement, which it hasn’t, not yet, and—in my view—probably won’t. This means that the number of deportations will not increase, or not significantly.

The effect is the reverse of what conservatives normally seek from agencies. In the case of environmental protection, health and safety, financial regulation, and the like, conservatives typically complain that regulators enjoy too much discretion. “Just tell us the rules,” they say. They argue that discretionary regulation creates excessive uncertainty, which interferes with planning, and subjects them to blackmail from regulators with political agendas.

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Faculty:  Eric A. Posner

Richard Sandor’s Newest Book Released in U.S.

Wed, 02/22/2017 - 13:42
How I Saw It: Dr. Richard Sandor’s Newest Book Released in U.S. PR Newswire February 22, 2017

The latest book by Dr. Richard Sandor, renowned financial innovator, environmental finance expert and University of Chicago Lecturer, is now available in the United States.  How I Saw It: Analysis and Commentary on Environmental Finance” takes the reader on a journey from 1999 to 2005 – a critical time period in the formation of market structures to address global environmental challenges.

The book compiles monthly columns Sandor wrote in those years for Environmental Finance magazine, including the lead-up to his creation of the Chicago Climate Exchange and its early years of trading, along with the launch of the European Climate Exchange. Sandor’s innovations prompted TIME Magazine to name him a “Hero of the Planet” in 2002, and five years later one of the “Heroes of the Environment” for his work as the “Father of Carbon Trading.” Taken together, Sandor’s “How I See It” columns form a comprehensive historical analysis and commentary on environmental finance in the years following the Kyoto Protocol of 1997.

In his columns, Sandor made a variety of predictions that came true, including his belief that it would be up to the states, regions and free markets – rather than the federal government or a global initiative – to lead the efforts in reducing carbon emissions.

Sandor said: “I have always had a passion for financial innovation, but I also recognize as an academic that you have to educate continuously if innovation is to succeed. I set out 18 years ago to do just that with these columns, and I hope that the book will bring a new perspective on the era. I continue to believe wholeheartedly that markets, if properly designed and regulated, can play a critical role in solving environmental issues.”

“How I Saw It” is available in hard cover or as an ebook from the publisher, World Scientific Publishing Co., at

This is Sandor’s fourth book. Previous works include “Sustainable Investing and Environmental Markets: Opportunities in a New Asset Class” and “Good Derivatives: A Story of Financial and Environmental Innovation” – both of which have been translated and published in Chinese by People’s Oriental Press. Sandor is also the lead author of “Environmental Markets: A New Asset Class,” published by the CFA Institute.

About Dr. Richard Sandor

Richard L. Sandor, Ph.D., is Chairman and CEO of the American Financial Exchange, a new electronic marketplace for small and mid-sized banks to lend and borrow short-term funds. He is also Chairman and CEO of Environmental Financial Products LLC, which specializes in inventing, designing and developing new financial markets. Established in 1998, EFP was the predecessor company and incubator to the Chicago Climate Exchange (CCX), the European Climate Exchange (ECX), the Chicago Climate Futures Exchange (CCFE) and the Tianjin Climate Exchange (TCX). Sandor is the Aaron Director Lecturer in Law and Economics at the University of Chicago Law School and a Visiting Fellow with the Smith School of Enterprise and the Environment at Oxford University. He was honored by the City of Chicago for his universal recognition as the “father of financial futures.”

Ellen G. Resnick
Crystal Clear Communications
(773) 929-9292; (312) 399-9295 (mobile)

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Faculty:  Richard L. Sandor

James Cole Jr., ’95, Reflects on the Value of Government Service—and the Impact of Law School Connections

Wed, 02/22/2017 - 07:48
Becky Beaupre Gillespie Law School Communications February 22, 2017

It was 2013, and James Cole Jr., ’95, had just spent over a year as the deputy general counsel of the US Department of Transportation. He felt good about his service: the DOT had played a role in the nation’s economic recovery through job creation and stimulus spending on transportation projects, and Cole relished being part of the effort. But by 2013, the economy was rebounding, and it seemed like a good time to rejoin the corporate practice group at Wachtell, Lipton, Rosen & Katz, where he’d worked between 1996 and 2011.

“I figured, well, the president’s been reelected, unemployment is going down—I’m going to go back to New York,” Cole told Law School students during a lunch talk in January.

That’s when a chat with Law School classmate Jesse Ruiz, ’95, changed his mind.

Ruiz, who had served as chairman of the Illinois State Board of Education, vice president of the Chicago Board of Education, interim CEO of the Chicago Public Schools, and on the US Department of Education Equity and Excellence Commission, asked Cole if he knew US Education Secretary Arne Duncan, a former CEO of the Chicago Public Schools.

“I said, ‘I’ve heard of him and he’s a great guy.’ And Jesse said, ‘You ought to go talk to Arne because Arne needs a general counsel,’” Cole told students. “And that is literally how I met Arne Duncan and became his general counsel in the Department of Education.”

For the next two and a half years, Cole played a key role in the Obama administration’s efforts to ensure the civil rights of transgender students, as well as in many others, including enforcement actions aimed at regulating for-profit institutions and work on a program called My Brother’s Keeper, which was created to address persistent opportunity gaps faced by boys and young men of color. In January 2016, Cole was also delegated the duties of deputy secretary of education by then-Acting U.S. Secretary of Education John B. King, Jr.

Cole’s talk was part of the Law School’s Diversity Month programming, which included sessions focused on LGBTQ victims of domestic violence and sexual assault, civil rights and the Jewish and Muslim communities, race discrimination in the sharing economy, deaf/hard of hearing victims on domestic violence and sexual assault, the Black Lives Matter movement, women in the judiciary, and more.

As Cole described his efforts—among other things, the Department of Education was involved in multiple court battles over transgender bathroom rights and the White House’s release of guidelines instructing schools to allow students to use bathrooms corresponding with their gender identity—he emphasized the impact of serving in government, particularly on a high-profile, “lightning rod” issue. There were weighty questions to consider and often many views within the administration, as well as potential conflicts between the federal government and the states that he and others in the administration had to consider.

“I’ve learned so much in my five years in government service about putting aside differences when we can work together,” he said. “I think we’ve done a fairly decent job of that, but it can be tough.”

Cole, who grew up on the South Side of Chicago and was the first in his family to go to college, also talked about the impact the Law School had on his life. He encouraged students to make the most of Law School relationships, experiences, and opportunities, noting that, as a student, he never would have imagined that the “tall, lanky guy whose seminar I wasn’t smart enough to take” would go on to become the president of the United States or that his Constitutional Law professor, Elena Kagan, would become a US Supreme Court justice.

“Please take advantage of being students at what I consider to be the best law school in the United States,” he said. “I remember sitting in your chairs, and I can assure you that but for the University of Chicago Law School I would not have been able to do the things I have done.”


Daniel Hemel on Repealing ACA's Economic Substance Codification

Tue, 02/21/2017 - 13:05
Repealing Economic Substance Codification and Replacing It With What? Daniel Hemel Whatever Source Derived February 20, 2017

The Republican effort to repeal the Affordable Care Act appears to be stalling. If and when it picks up again, the fate of section 7701(o) of the Internal Revenue Code will be far from the most consequential issue at stake. But section 7701(o), the provision added by the ACA that codifies the tax law economic substance doctrine, matters still — to the tune of $5.8 billion in federal revenue that will be lost over the next decade if the provision is repealed. Or so the Congressional Budget Office estimates; what repeal of section 7701(o) would actually accomplish is something of a mystery. [See Leandra Lederman’s cross-linked post at Surly Subgroup for more on what repeal of section 7701(o) might mean for common law tax anti-abuse doctrines, and for Leandra’s characteristically thoughtful take on the policy implications of repeal.]

By most accounts, the common law economic substance doctrine dates back to the 1935 Supreme Court case Gregory v. Helvering. (For a comprehensive account of the doctrine’s evolution through 2010, see Leandra Lederman, W(h)ither Economic Substance, 95 Iowa L. Rev. 389 (2010).) By 2010, the doctrine was widely understood to incorporate an objective prong and a subjective prong: (1) objectively, did the transaction have economic substance?; and (2) subjectively, did the taxpayer have a business purpose for entering into the transaction? Yet courts applied the two prongs inconsistently: some courts would recognize a transaction only if it satisfied both prongs; others said that satisfying either prong was enough; and still others focused exclusively on one of the prongs or applied something like a balancing test.

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Faculty:  Daniel Hemel

Huq and Ginsburg in Vox: "How to Lose a Constitutional Democracy"

Tue, 02/21/2017 - 11:09
How to Lose a Constitutional Democracy Aziz Huq and Tom Ginsburg Vox February 21, 2017

Scholars used to argue that democracy, once attained in a fairly wealthy state, would become a permanent fixture. As the late Juan Linz put it, democracy would become “the only game in town.” That belief turned out to be merely hopeful, not a reality.

In the past decade, an increasing number of seemingly stable, reasonably wealthy democracies have retreated from previously robust democratic regimes toward autocracy. These states are literally all over the map: They range from Eastern Europe (Hungary and Poland) to the Mediterranean (Turkey) to Latin America (Bolivia and Venezuela). Once-anticipated democratic gains in Russia and China haven’t materialized. Meanwhile, a hoped-for “fourth wave” of democracy in the Arab Spring’s wake has dissipated into bitter civil war or authoritarianism.

Democratic backsliding is far less rare than political scientists used to believe. In a recent academic paper, we identified 37 instances in 25 different countries in the postwar period in which democratic quality declined significantly (though a fully authoritarian regime didn’t emerge). That is, roughly one out of eight countries experienced measurable decay in the quality of their democratic institutions.

Scholars used to argue that democracy, once attained in a fairly wealthy state, would become a permanent fixture. As the late Juan Linz put it, democracy would become “the only game in town.” That belief turned out to be merely hopeful, not a reality.

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Faculty:  Aziz Huq Faculty:  Tom Ginsburg

Geoffrey R. Stone: "Trump And The 75th Anniversary Of The Japanese Internment"

Mon, 02/20/2017 - 12:19
Trump And The 75th Anniversary Of The Japanese Internment Geoffrey R. Stone Huffington Post February 19, 2017

As we move forward in the face of a president’s call for a “Muslim ban” and who knows what else in the future, it is imperative that we remember, reflect upon, and remain eternally vigilant against our capacity to do evil in the name of national security.

Today marks the 75th anniversary of President Franklin D. Roosevelt’s signing of the executive order that authorized the internment of 120,000 men, women, and children of Japanese descent during World War II. As we contemplate the actions of the Trump administration in matters pertaining to national security, it is imperative that we remember and reflect upon this lesson from the past.

In the immediate aftermath of the Japanese attack on Pearl Harbor on December 7, 1941, there was no clamor for the mass internment of persons of Japanese descent. To the contrary, shortly after Pearl Harbor, Attorney General Francis Biddle assured the nation that there would be “no indiscriminate, large-scale raids” on such individuals, and Congressman John M. Coffee expressed his “fervent hope” that “residents of the United States of Japanese extraction will not be made the victim of pogroms directed by self-proclaimed patriots.”

In the weeks that followed, however, a demand for the removal of all persons of Japanese ancestry—citizens and non-citizens alike — exploded along the West Coast. The motivations for this sudden outburst of anxiety were many and complex. In part, this demand was fed by panic-driven fears of a possible Japanese invasion of the mainland. Conspiracy theories abounded, and neither government nor military officials did anything to allay these anxieties.

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Faculty:  Geoffrey R. Stone

Eric Posner on Trump and Fake News

Mon, 02/20/2017 - 12:13
Trump and Fake News Eric Posner February 18, 2017

The underlying truth is that liberals trust liberal news organizations and conservatives trust conservative news organizations: the press has never had more influence or enjoyed more trust, in the disaggregated sense–or so I believe.

In the era of social media, everyone can very easily read news from across the ideological spectrum. With conservatives easily being able to read the stuff that liberal news organizations sell to their customers, and liberals being able to see the stuff that conservative news organizations purvey, trust in the press has fallen to a new low. People can circulate to their ideological pals the latest outrage from a news organization that doesn’t see them as its audience–“can you believe that!” Fake news is born.

But I suspect these poll numbers conceal a fallacy of aggregation. Just as voters distrust Congress but trust their own congressional representatives, people distrust the press as a whole while trusting the specific news organizations that they rely on. That is the Bayesian logic of Gentzkow and Shapiro. In fact, in common usage the “press” probably means the New York Times and CNN, not Fox and the Wall Street Journal. That is why the poll numbers indicate that Republicans have lost more faith in the “press” than Democrats have.

The underlying truth is that liberals trust liberal news organizations and conservatives trust conservative news organizations: the press has never had more influence or enjoyed more trust, in the disaggregated sense–or so I believe.

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Faculty:  Eric A. Posner

Omri Ben-Shahar on Trump's "2 Out, 1 in" Regulation Order

Mon, 02/20/2017 - 12:06
Trump's 2-For-1 Folly Omri Ben-Shahar Forbes February 17, 2017

There are two major problems with this executive order, one economic and the other legal. Together they make the 2-for-1 approach a terribly inefficient, and possibly illegal, way to address over-regulation.

The president thinks this 2-for-1 order is necessary because there is too much regulation. The evidence? The Federal Register (the volumes in which the regulations are published) has ballooned from 23,000 pages in 1960 to almost 175,000 pages now. These new regulations require compliance with standards of highway safety, reduced pollution, workplace health and safety, and many more. Compliance is costly—the conservative Heritage Foundation estimates it at $100 billion per year—which suggests that economic activity is choked and jobs are not created.

There are two major problems with this executive order, one economic and the other legal. Together they make the 2-for-1 approach a terribly inefficient, and possibly illegal, way to address over-regulation.

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Faculty:  Omri Ben-Shahar

Eric Posner on "Judges v. Trump"

Fri, 02/17/2017 - 09:40
Judges v. Trump: Be Careful What You Wish For Eric Posner The New York Times February 15, 2017

The courts now must confront a question: Can they face down President Trump without undermining their own standing?

The opinion of the United States Court of Appeals for the Ninth Circuit upholding the temporary restraining order against President Trump’s travel ban has received a fair amount of criticism from legal experts. They point out that the president enjoys considerable legal authority to take immigration­related actions.

But the experts miss the larger significance of the opinion. It is less a conventional statement of legal reasoning than an indication that the courts have woken up to the dangers of the Trump presidency. The courts now must confront aquestion: Can they face down President Trump without undermining their own standing?

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Faculty:  Eric A. Posner

Part IV of Stone's "Trump, The Supreme Court, And The Rights Of Gays And Lesbians"

Thu, 02/16/2017 - 10:00
Trump, The Supreme Court, And The Rights Of Gays And Lesbians, Part 4 Geoffrey R. Stone Huffington Post February 15, 2017

The role of the Supreme Court in addressing the issue of same-sex marriage.

With the nomination of Judge Neil Gorsuch to serve on the Supreme Court of the United States instead of Chief Judge Merrick Garland, and with the possibility of another Trump Supreme Court nomination at some point down the road, it is useful to reflect on the history of homosexuality in Western culture and on the pivotal role the Supreme Court has played in helping to shape our nation’s laws in this regard.

The plain and simple fact is that, with two Trump appointments to the Supreme Court, should that come to pass, we can expect significant changes in the way the Court approaches the rights of gays and lesbians in the future. Before we get to that point, it is important to understand how we got to where we are today. It is only with that understanding that we can truly comprehend the magnitude of the challenge ahead.

In my first three pieces in this series, I discussed the history of homosexuality from the ancient world through the Supreme Court’s 2003 decision in Lawrence v. Texas. See part 1part 2; and part 3.

In this, the fourth and final piece in the series, I will discuss the role of the Supreme Court in addressing the issue of same-sex marriage. Each of these posts, I should note, is drawn in part from my forthcoming book, Sex and the Constitution. I hope you will find this history instructive.

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Faculty:  Geoffrey R. Stone

Daniel Hemel: Is a Destination-Based Cash Flow Tax “Highly Progressive”?

Thu, 02/16/2017 - 09:54
Is a Destination-Based Cash Flow Tax “Highly Progressive”? Daniel Hemel Whatever Source Derived February 15, 2017

Lots of smart people have been saying that the House GOP’s proposed “destination-based cash flow tax” (DBCFT) would make our system of business taxation more progressive. Alan Auerbach, the intellectual architect of the proposal, says the system would be “highly progressive” because unlike other consumption taxes, the DBCFT exempts wages and salaries from the tax base. Stuart Leblang and Amy Elliott write in a BloombergView column that the DBCFT “should actually be more progressive than our current corporate income tax.” The UK-based Independent posted an op-ed earlier this month with the amusing (though moderately misleading) title: “Deluded Republicans are accidentally pushing for progressive corporation tax reform.”

Well, it all depends on what we mean by “progressive.” Kyle Rozema and I point out in an article forthcoming in the Tax Law Review that even the mortgage interest deduction can be characterized as “progressive” depending on which counterfactual you choose. Our analysis of the mortgage interest deduction applies similarly to the DBCFT. The House GOP plan reduces revenue: the Tax Policy Center pegs the revenue loss from the DBCFT and related corporate income tax reforms at $891 billion over the next decade, while the Tax Foundation estimates an even larger loss of $1.2 trillion (actually rising with dynamic scoring). Whether a DBCFT is “progressive” or “regressive” — i.e., whether it redistributes wealth from the rich to the poor or the other way around — depends entirely on how that gap is filled.

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Faculty:  Daniel Hemel

Adam Chilton at the Midway Dinner: Take Advantage of All this Great University Offers

Tue, 02/14/2017 - 11:15
Law School Communications February 14, 2017

The Midway Dinner is held across the Midway each February to celebrate the midway point of the law school careers of the 2L class. These are the words Assistant Professor Adam Chilton shared last week with the Class of 2018.

We’re gathered here for one of the traditions that make the University of Chicago Law School such a special place: the Midway Dinner.

I could say more about the tradition and how happy I am to be asked to speak on this occasion, but if there is one defining norm here at the University of Chicago, it’s this: no small talk. That’s why, after working here for four years, I know the titles of hundreds of my colleagues’ articles, but none of their children’s’ names. Actually, I don’t remember the titles of their articles, but acknowledging that would be what’s considered hurtful. So let’s get right to it.

Last Friday, I crossed the Midway for the reason every member of our community does regularly without first needing to hear a speech: to find food. On that particular day though, I was meeting James Robinson for lunch. James teaches at the Harris School, is the director of the new Pearson Center for Global Conflict, holds a University professorship, and is a mortal lock to share a Nobel Prize one day with his longtime collaborate Daron Acemoglu for their research on development economics.

Now, James has a background in economics and teaches at a public policy school, and I have a background in political science and teach at the Law School, but we’ve been talking regularly this year because we are both currently working on research on related topics. In both cases, our projects are in part motivated by natural experiments, so let me just explain.  

James’ natural experiment is the fate of two cities along the US/Mexico border. More specifically, Nogales, Arizona, and Nogales, Sonora.  Now, this is the corner of the world that I’m from, and anyone that has visited will tell you, the thing that is distinctive about these cities is that they were once one city, and they’re now divided by a 30-foot-high wall.

On the north side of the wall, the average income is about $30,000 per year. The majority of adults are high school graduates and the majority of teenagers are in school. By global standards, the residents live healthy and long lives that are relatively free of crime and corruption.

On the south side of the wall, the story is different. The average income is closer to $10,000 per year. The majority of adults are not high school graduates, and the majority of teenagers are not in school. And compared to their northern neighbors, the residents live shorter lives, and have to face worse in structure, higher crime, and greater corruption. In short, the side of this wall you are born on has a dramatic impact on your expected outcomes in life.

The obvious question is: what explains the dramatic difference? Now, what’s interesting about this particular case is that many of the explanations put forth to explain development aren’t available. For example, development economists often argue that geography and climate are major sources of disparities in economic growth, but in this case, both cities have the same geography and the same climate. Or as another example, economists also often argue that disparities in growth are related to culture, but here too, the culture and ancestry of the people are the same.

So if the conventional explanations don’t explain this difference, what does? James Robinson and Daron Acemoglou have gotten famous—or at least, famous for academic economists—by arguing that the difference is the quality of the institutions. More specifically, they argue that the United States has inclusive institutions that allow the residents to take part in the democratic process, for individuals to be secure in their own property rights, and for everyone (or, almost everyone) to unlock their human capital through education, employment, and entrepreneurship.

Now, I know that after the last few weeks it sounds weird to argue that America has inclusive institutions, but these things are relative. Compared to Mexico specifically, and Latin America more generally, the United States has had less corrupt and captured institutions. In other words, the thing that that explains the dramatic differences in the life chances for a child born in Nogales Arizona, and a child born in Nogales, Mexico, is the strength of our laws.

Let me give you another natural experiment that’s motivating what I’m currently working on. At the end of World War II, there were just 64 independent countries in the world. By 1970, just 25 years later, that number had more than doubled to 134. This change was largely driven by decolonization. In fact, just more than half of the new countries during that time period were formerly British colonies.

At the time of independence, England largely gave its former colonies a standard constitution known as the Lancaster House constitutions. The interesting part is that the colonies that gained independence from 1945 to 1960 did not include a bill of rights, but then in 1960 there was a decision in the British Foreign Office to start including a bill of rights in constitutions going forward.

The best historical account I know of suggests that the change was a pretty random development. Some officials thought it might make more sense to use as their template, so they did. Why I’m interested is that change presents an amazing opportunity to study whether individual rights actually improve outcomes.

Now, here’s the kicker. At least my initial analysis of the data seems to suggest that having a bill of rights doesn’t make much of a difference. Countries with the bill of rights don’t appear to have had much better rights outcomes than countries without the bill of rights. This trend doesn’t just hold with the Lancaster House constitutions. Instead, my research on the topic with my collaborator Mila Versteeg on the effectiveness of constitutional rights suggests that individual rights and socio-economic rights have no discernable impact on outcomes.

So, where does that leave us? The experience of Nogales tells us that legal regimes that protect individuals and allow them to flourish are perhaps the most important driver of development, but the experience of the Lancaster House experiment tells us that what we put in constitutions might not always make a difference.

How can we square these two claims? It could be the case that the explanation is that individual rights aren’t what matter, but that the distribution of power structures within a country are what does the important work. Or it could be the case that strong legal institutions take time to develop, and for many new countries their institutions simply have had the time to mature. There are many possible explanations, and I’m always open to hearing new theories, but I can tell you that we currently don’t know the answer.

So what does all this have to do with why we are gathered here today? The point is that we know that strong legal institutions matter, but we know a lot less about how to make them. I’m not sure what the answer is, but I’m positive it will be impossible for us to figure out if we don’t have an understanding of history, economics, and a variety of other fields. These are exactly the kind of things that you still have the time to study when you cross the midway.

I’m sure many of you are thinking that these questions might seem interesting to an academic, but have little to do with what you’ll work on when you leave law school. To you, I’d say this: much of what education is about is becoming increasingly specialized. What’s scary about that is that specialization is often the process of closing doors. But being an interdisciplinary person is about opening them back up. Statistics can make you valuable in public interest law, and a knowledge of Latin American history can make you more valuable to firms working on transnational M&As.

So whether you care about helping to improve the lives of people born on the wrong side of walls, or are concerned with insuring that our own institutions continue to become more inclusive and not less, or just want to ensure that you have as many options as possible when you become a lawyer, I urge you to spend part of your time over the next year and a half crossing the Midway and take advantage of all the fascinating courses in other fields that this great university offers. 

Faculty:  Adam Chilton

 "Much of what education is about is becoming increasingly specialized. What’s scary about that is that specialization is often the process of closing doors. But being an interdisciplinary person is about opening them back up." 


Eric Posner on Whether the Court Thinks Trump is a Bigot

Tue, 02/14/2017 - 10:15
The Presidency Shrinks, Part 2 Eric Posner February 13, 2017

In a post on the Ninth Circuit travel ban case, Washington v. Trump, I observed that when the case goes back to the district court, the court will determine whether Trump acted from anti-Muslim animus. If it so finds, then any future national-security action will be subject to an extra layer of judicial review, potentially interfering with the president’s ability to protect the public. “We may have a new regime of heightened judicial review in national security cases because courts believe the president is a bigot.”

Now we get to find out. A district court in Virginia made just this determination in a case called Aziz v. Trump. She declared the national-security justification for the travel ban a sham, and found sufficient evidence of anti-Muslim animus on Trump’s part to issue a preliminary injunction.

Read more at:

Faculty:  Eric A. Posner