Fall 2021 Workshops

Center for Law & Economic Studies
Fall 2021 Workshops

Sept. 27, 2021 (Mon)
4:20 – 6:10 PM

Presentation via Zoom in Case Lounge (JG 701).
Contact [email protected] for meeting link.

Abbye Atkinson

Class of 1965 Assistant Professor of Law
UC Berkeley Law School

Commodifying Marginalization

Once pillars of American social provision, public pension funds now rely significantly on private investment to meet their chronically underfunded promises to America’s workers. Moreover, desperate for returns, pension funds are increasingly investing in marginalized debt, namely the array of high-interest rate, subprime, risky debt—including small-dollar installment loans and other forms of subprime debt—that tends to concentrate in and among historically marginalized communities. Notwithstanding its often-catastrophic effects on communities, marginalized debt is a valuable investment because its characteristically high interest rates and myriad fees engender higher returns. In turn, higher returns ostensibly mean greater retirement security for ordinary workers who are themselves economically vulnerable in the current atmosphere of public welfare retrenchment. They must increasingly fend for themselves if they hope to retire at a decent age and with dignity, if at all.

This Article surfaces this debt-centered connection between two economically vulnerable groups: workers on the one hand and marginalized borrowers on the other. It argues that the current public-private welfare regime has thoroughly shifted retirement security into the hands of private financial markets, whose fiduciary duties and profit-sensitive incentives eschew broader moral considerations of the source of profits or the subsequent consequences of wealth extraction. Consequently, the rise of marginalized debt as a source of retiree wealth maximization shows how the tenuous socio-economic condition of one community is now openly a source of wealth accumulation for another vulnerable community. Moreover, this incursion of private entities into the arena of public welfare is pernicious because it commodifies and reinforces the subordinate socioeconomic conditions that make the persistence of marginalized debt predictable.


Oct. 11, 2021 (Mon)
4:20 – 6:10 PM

Heather Sarsons

Neubauer Assistant Professor of Economics
Diane Swonk Faculty Fellow
University of Chicago Booth School of Business

Flexible Wages, Bargaining, and the Gender Gap

Coauthor: Barbara Biasi
                  Assistant Professor of Economics
                  Yale School of Management

Does flexible pay increase the gender wage gap? To answer this question we analyze the wages of public school teachers in Wisconsin, where a 2011 reform allowed school districts to set teachers’ pay more flexibly and engage in individual negotiations. Using quasi-exogenous variation in the timing of the introduction of flexible pay, driven by the expiration of pre-existing collective-bargaining agreements, we show that flexible pay lowered the salaries of women compared with men with the same credentials. This gap is larger for younger teachers and smaller for teachers working under a female principal or superintendent.  Survey evidence suggests that the gap is partly driven by women engaging less frequently in negotiations over pay, especially when the counterpart is a man. This gap is not driven by gender differences in job mobility, ability, or a higher demand for male teachers. We conclude that environmental factors are an important determinant of the gender wage gap in contexts where workers are required to negotiate and that institutions, such as unions, might help to narrow the gender wage gap.


Oct. 25, 2021 (Mon)
4:20 – 6:10 PM

Michael Barr

Joan and Sanford Weill Dean of Public Policy
Frank Murphy Professor of Public Policy
University of Michigan Gerald R. Ford School of Public Policy

Roy F. and Jean Humphrey Proffitt Professor of Law
Director, Center on Finance, Law, & Policy
University of Michigan Law School

The Coming Failure of Manipulation Law?
An Experimental Approach with Deep Reinforcement Learning

Coauthors:

Gabriel Rauterberg
Professor of Law, U. of Michigan Law School
                     

Megan Shearer
PhD Candidate, Computer Science & Engineering, U. of Michigan
                     

Michael Wellman
Professor, Electrical Engineering & Computer Science, U. of Michigan

Algorithms trading in financial markets increasingly deploy new and complex forms of artificial intelligence and machine learning. To study the potential trading strategies these algorithms may develop, we use an agent-based simulation to explore the behavior of algorithmic trading agents trained with deep reinforcement learning techniques. In our experimental setting, an agent trades directly in a market and also holds a portfolio of assets benchmarked to prices in that market. Although its reward function is simply to make profits, the algorithm trained through deep reinforcement learning autonomously develops trading strategies that are plausibly manipulative. In particular, the algorithm trades heavily and unprofitably in the market, but affects the benchmark’s price, producing a net profit from its benchmark positions. If done intentionally, an individual engaging in such trading would have committed unlawful securities manipulation, but the algorithm was not designed to artificially affect prices, only to maximize profits. We use our experimental results to further underscore the need for reform of manipulation law, whose two core requirements are currently scienter (intent) and a “manipulative act.” Demonstrating either of these elements for a reinforcement learning-trained algorithm will prove difficult both in concept and practice. Building on recent literature, we suggest ways in which the regulation of manipulation can become more robust against algorithmic challenges and in which the experimental study of algorithms can guide that agenda.


Nov. 8, 2021 (Mon)
4:20 – 6:10 PM

Presentation via Zoom in Case Lounge (JG 701).
Contact [email protected] for meeting link.

Daniel Schwarcz

Fredrikson & Byron Professor of Law
University of Minnesota Law School

Rules of Medical Necessity

Coauthor: Amy Monahan
Distinguished McKnight University Professor
The Melvin Steen & Corporate Donors Professor
University of Minnesota Law School

Health insurance contracts have long excluded coverage for care that is “experimental” or not “medically necessary.” Historically, insurance policies defined these key terms of coverage using broad standards. For example, “medically necessary” care might be defined as care that is “generally accepted in the medical community.” This contractual structure provided insurers with significant flexibility when making coverage determinations, even though denying coverage could pad their bottom line. For this reason, lawmakers developed various tools to prevent insurers from exploiting their discretion to determine when care was “medically necessary” or “experimental.” These safeguards allowed insureds to challenge coverage denials internally within the insurance company, externally to an independent medical expert, and before courts via a contract law or ERISA cause of action. Additionally, state and federal mandates required insurers to cover specific medically necessary treatments and services. This Article documents a dramatic shift in health insurers’ contracts and practices from a standard-based approach to determining the medical and scientific appropriateness of health care towards a rule-based approach for making these determinations. It shows how health insurers have increasingly made incredibly detailed and specific rules of medical necessity part of their formal contractual obligations to policyholders. The Article then argues that health insurers’ shift from standards to rules for defining medically and scientifically appropriate health care undermines the effectiveness of traditional legal tools designed to constrain the risk of health insurer overreaching. The Article concludes by exploring reforms that might effectively address the increasing rulification of medical necessity.


Nov. 22, 2021 (Mon)
4:20 – 6:10 PM

Kristin Johnson

Asa Griggs Candler Professor of Law
Emory University School of La
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CFTC Commissioner Nominee

Presentation will be in person only in Case Lounge (JG 701).

Regulating Decentralized Finance: Cryptocurrency Exchanges

Global financial markets are in the midst of a transformative era. The creation of Bitcoin and Facebook’s proposed distribution of Libra mark a watershed moment in the evolution of the financial markets ecosystem. Purportedly, peer-to-peer distributed digital ledger technology eliminates legacy financial market intermediaries such as investment banks, depository banks, exchanges, clearinghouses, and broker-dealers.

Yet careful examination reveals that cryptocurrency issuers and the firms that offer secondary market cryptocurrency trading services have not quite lived up to their promise. Notwithstanding crypto-enthusiasts’ calls for disintermediation, evidence reveals that platforms that facilitate cryptocurrency trading frequently employ the long-adopted intermediation practices of their traditional counterparts. In fact, when emerging technologies fail, cryptocoin and token trading platforms partner with and rely on traditional financial services firms. As a result, these platforms face many of the risk-management threats that have plagued conventional financial institutions as well as a host of underexplored threats. Automated or algorithmic trading strategies, accelerated high frequency trading tactics, and sophisticated Ocean’s Eleven-style cyberheists leave crypto-investors vulnerable to predatory practices.

Early responses to fraud, misconduct, and manipulation emphasize intervention when originators first distribute cryptocurrencies—the initial coin offerings. This Article rejects the dominant regulatory narrative that prioritizes oversight of primary market transactions. Instead, this Article proposes that regulators introduce formal registration obligations for cryptocurrency intermediaries. This approach recognizes the dynamic nature of cryptocurrency secondary market actors seeking to achieve disintermediation yet balances these potential benefits with normative regulatory goals—protecting investors from fraud, theft, misconduct, and malfeasance; enforcing accountability; preserving market integrity; and addressing enterprise and systemic risk-management concerns.


Dec 6, 2021 (Mon)
4:20 – 6:10 PM

Emiliano Catan

Professor of Law
NYU Law School

The workshop will be in Case Lounge (JG 701).

Zoom link available to Columbia faculty upon request.
To obtain link, please email:
[email protected].

Corporate Governance and Firm Value

Coauthor: Marcel Kahan
George T. Lowy Professor of Law
NYU Law School

Paper available to Columbia faculty upon request.
To obtain a copy, please email: 
[email protected].


The most recent available draft is from an early stage of the project.  At the speaker's request, this version has not been posted publicly.  The event listing is similarly being distributed to Columbia faculty only (not the full Law & Economics email list).