Person: Kaplow, Louis
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Kaplow, Louis
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Publication Information and the Aim of Adjudication: Truth or Consequences?(2015) Kaplow, LouisAdjudication is fundamentally about information, usually concerning individuals’ previous or proposed behavior. Legal system design is challenging because information ordinarily is costly and imperfect. This Article analyzes a broad array of system features, asking throughout whether design should aim at the truth or at consequences, how these approaches may differ, and what general lessons may be drawn from the comparison. It will emerge that the differences in approach are often large and their character is sometimes counterintuitive. Accordingly, system engineers concerned with social welfare need to aim explicitly at consequences. This message is not one opposed to truth per se but rather a strong admonition: it is dangerous to be attached to the alluring view that adjudication is primarily about generating results most in accord with the truth of the matter at hand.Publication Multistage Adjudication(Harvard University, Harvard Law School, 2013) Kaplow, LouisLegal proceedings often involve multiple stages: U.S. civil litigation allows motions to dismiss and for summary judgment prior to trial; government agencies as well as prosecutors employ investigative and screening processes before initiating formal adjudication; and many Continental tribunals move forward sequentially. Decisionmaking criteria have proved controversial, as indicated by reactions to the Supreme Court’s recent decisions in Twombly and Iqbal and its 1986 summary judgment trilogy, which together implicate the Supreme Court cases most cited by federal courts. Neither jurists nor commentators have articulated coherent, noncircular legal standards, and no attempt has been made to examine systematically how decisions at different procedural stages should ideally be made in light of the legal system’s objectives. This Article presents a foundational analysis of the subject. The investigation illuminates central elements of legal system design, recasts existing debates about decision standards, identifies pathways for reform, and provides new perspectives on the nature of facts and evidence and on the relationship between substantive and procedural law.Publication On the Taxation of Private Transfers(Harvard John M. Olin Center for Law, Economics, and Business, 2010) Kaplow, LouisThis essay considers the appropriate conceptual framework for assessing the taxation of private transfers to individuals. Although it is conventional to emphasize the role of estate and gift taxation or inheritance taxation in redistributing income from the rich to the poor, the revenue effects of transfer taxation, and its distortionary effect on labor supply and savings, it is suggested in line with some recent work that the dominant focus should be on positive and negative externalities attributable to giving. The fundamental reason is that transfer tax reform can be combined with adjustments to other aspects of the fiscal system, notably the income tax, so as to keep constant most effects other than externalities.Publication Market Definition, Market Power(2015) Kaplow, LouisMarket definition and market power are central features of competition law and practice but pose serious challenges. On one hand, market definition suffers decisive logical infirmities that render it infeasible, unnecessary, and counterproductive, and the practice of stating market power requirements as market share threshold tests is incoherent as a matter of empirics and policy. On the other hand, market power is often probative of the desirability of liability, yet the typically assumed functional relationship is unexplored and often implausible. These latter deficiencies are addressed through a ground-up analysis of the channels by which market power can be relevant. It is important to explicitly and simultaneously consider both anticompetitive and procompetitive explanations for challenged practices and to attend to the magnitudes of the social consequences of correct and mistaken imposition of liability in order to identify the various ways and senses in which market power bears on optimal decision-making.Publication Market Share Thresholds: On the Conflation of Empirical Assessments and Legal Policy Judgments(Oxford University Press, 2011) Kaplow, LouisIn competition law, market power requirements are often articulated in terms of market shares. The use of market share thresholds, however, conflates two distinct questions: (1) How much market power exists in a given situation? (2) How much market power should the law require? As a consequence, neither question is answered, or even directly illuminated. Furthermore, because market shares are not themselves measures of market power but instead merely a factor that bears on its magnitude in a given setting, they are inapt answers to both inquiries. Their use involves a category mistake. The identified problems are illustrated by unpacking Learned Hand’s famous pronouncement in Alcoa of the market shares required for the offense of monopolization, but the core defects characterize all market share declarations.Publication Targeted savings and labor supply(Springer Nature, 2011) Kaplow, LouisSubstantial evidence suggests that savings behavior may depart from neoclassical optimization. This article examines the implications of raising the savings rate – whether through social security, retirement plans, or otherwise – for labor supply, where labor supply is determined by behavioral utility functions that reflect the non-neoclassical character of savings behavior. Under one formulation, raising the targeted savings rate has the same effect on labor supply as that of raising the labor income tax rate; under a second, raising the targeted savings rate has no effect on labor supply; and under a third, raising the targeted savings rate increases labor supply regardless of the slope of the labor supply curve. Effects on labor supply are particularly consequential because of the significant preexisting distortion due to labor income taxation.Publication An Optimal Tax System(Wiley-Blackwell, 2011) Kaplow, LouisA notable feature and principal virtue of Tax by Design is its system-wide perspective on different elements of the tax system. This review essay builds on this trait and offers a more explicit foundation for the report's general approach, drawing on a distribution-neutral methodology that is developed in other work. This technique is then employed to illuminate and extend Tax by Design's analysis regarding the VAT, environmental taxation, wealth transfer taxation, and income transfers.Publication On the Choice of Welfare Standards in Competition Law(John M. Olin Center for Law, Economics, and Business. Harvard Law School., 2011) Kaplow, LouisThis article addresses two issues relating to the choice between a consumer welfare and total welfare standard for competition law. First, it considers whether distributive considerations may favor a consumer welfare standard, or at least some underweighting of producer surplus in a total welfare assessment. The argument that focusing on consumer welfare is poorly targeted to general redistributive objectives is correct but not decisive since the distributive incidences of consumer and producer surplus differ significantly. By contrast, the argument that it is more efficient to rely exclusively on the tax and transfer system to achieve general distributive objectives is normatively powerful. Second, the relevance of the preexisting level of price elevation (relative to a competitive, marginal cost benchmark) is found to be quite different under the two standards. For a given additional price increase caused by anticompetitive activity, the marginal sacrifice of consumer welfare is greatest when there is no preexisting elevation and gradually falls as the initial elevation grows. By contrast, the marginal sacrifice of total welfare (deadweight loss) is negligible when there is no preexisting elevation and rises as the initial elevation grows. This difference has implications for competition policy, most directly for that toward horizontal mergers and price-fixing, along with practices that facilitate coordinated price elevation.Publication Who will vote quadratically? Voter turnout and votes cast under quadratic voting(Springer Nature, 2017) Kaplow, Louis; Kominers, ScottWho will vote quadratically in large-N elections under quadratic voting (QV)? First, who will vote? Although the core QV literature assumes that everyone votes, turnout is endogenous. Drawing on other work, we consider the representativeness of endogenously determined turnout under QV. Second, who will vote quadratically? Conditional on turning out, we examine reasons that, in large-N elections, the number of votes that an individual casts may deviate substantially from that under pure, rational QV equilibrium play. Because turnout itself is driven by other factors, the same determinants may influence how voters who do turn out choose the quantity of votes to cast. Independently, the number of votes actually cast may deviate dramatically from pure QV predictions because of the complex and refined nature of equilibrium play. Most plausibly, voting behavior and outcomes would be determined predominately by social and psychological forces, would exhibit few of the features emphasized in the analysis of hyper-rational equilibrium play, and would have consequential properties that require a different research agenda to bring into focus. Some of our analysis also has implications for voting behavior under other procedures, including one person, one vote.Publication Market Definition and the Merger Guidelines(Springer Nature, 2011) Kaplow, LouisThe recently issued revision of the U.S. Horizontal Merger Guidelines, like its predecessors and mirrored by similar guidelines throughout the world, devotes substantial attention to the market definition process and the implications of market shares in the market that is selected. Nevertheless, some controversy concerning the revised Guidelines questions their increased openness toward more direct, economically based methods of predicting the competitive effects of mergers. This article suggests that, as a matter of economic logic, the Guidelines revision can only be criticized for its timidity. Indeed, economic principles unambiguously favor elimination of the market definition process altogether. Accordingly, the 2010 revision is best viewed as a moderate, incremental, pragmatic step toward rationality, its caution being plausible only because of legal systems’ resistance to sharp change.