Michaelman: Cost/Benefit Analysis of Decision Whether to Compensate

Once state has decided to regulate, there’ll be winners & losers. Do you compensate the losers? YES if

Costs of Compensating (Settlement Costs)

less than

Costs of Not Compensating (Demoralization Costs)

Costs of Compensating = “Settlement Costs”

INCLUDES:

• Cost of paying claimant

• Cost of paying everyone like claimant

• Costs of administering payment scheme

Focus on costs of processing; valuing

Costs of Not Compensating = “Demoralization Costs”

INCLUDES:

• Upset to losing party & similarly situated

• Upset to sympathizers

Focus on likely public reaction

Compare Settlement Costs to Demoralization Costs

• If SC>DC, no compensation (often widely dispersed small losses)

• If DC>SC, pay compensation (often small group of losers viewed as unfairly burdened)

Role of Efficiency Gains

• Efficiency Gains are net benefits of implementing regulation in question.

Role of Efficiency Gains

Efficiency Gains are net benefits of implementing regulation in question.

E.g., in Hadacheck: • Harm prevented b/c no brickyards (health;

property values)LESS

. Costs of regulation (Harm to brick industry from having to shut down and relocate; harm from increase in cost of bricks; costs of implementation and enforcement)

Role of Efficiency Gains

Efficiency Gains are net benefits of implementing regulations in question. E.g., in Miller:

• Benefits of Regulation (to apple industry & to state economy)

LESS

. Costs of regulation (Harm to cedar owners & neighbors; costs of implementation and enforcement)

Role of Efficiency Gains

If Efficiency Gains are negative, regulation shouldn’t be passed in first place.

Role of Efficiency Gains

If Efficiency Gains negative, regulation shouldn’t be passed in first place.

• Important: Not part of analysis in Takings case.

• Under Euclid & Miller, assessing efficiency gains is job for state legislature, not fed’l court.

Role of Efficiency Gains

If Efficiency Gains positive, but less than both Settlement Costs and Demoralization Costs, in theory, shouldn’t proceed with regulation (net loss to society).

Michaelman: Application

If Efficiency Gains less than both Settlement Costs and Demoralization Costs, in theory, shouldn’t proceed with regulation.

• Might suggest this in a particular case, but very hard to know with precision.

• Maybe if both SC & DC seem very high, suggest shouldn’t go forward.

Role of Efficiency Gains

If Efficiency Gains less than both Settlement Costs and Demoralization Costs, in theory, shouldn’t proceed with regulation.

• Might suggest this in a particular case, but very hard to know with precision.

• Maybe if both SC & DC seem very high, suggest shouldn’t go forward.

• Shouldn’t be central to a Takings analysis.

Role of Efficiency Gains

If Efficiency Gains less than both Settlement Costs and Demoralization Costs, in theory, shouldn’t proceed with regulation.

• Might suggest this in a particular case, but very hard to know with precision.

• Maybe if both SC & DC seem very high, suggest shouldn’t go forward.

• Shouldn’t be central to a Takings analysis.

• QUESTIONS?

Michaelman Sample Application: Miller

• Settlement Costs? – Identifying “losers”– Valuing loss– Total Cost?

• Demoralization Costs?– Upset of “losers”?– Upset of sympathizers?

• Balance?

Michaelman Fairness Principle

Fairness principle: OK not to compensate, if affected parties ought to understand how not compensating in similar cases probably is more beneficial in long run.

• Application to Miller?

Michaelman Fairness Principle

Fairness principle: OK not to compensate, if affected parties ought to understand how not compensating in similar cases probably is more beneficial in long run.

• Miller? Maybe people would see saving important industry as more beneficial in the long run than protecting minor property interest (in landscaping).

Michaelman Sample Application: Hadacheck

• Settlement Costs? – Identifying “losers”– Valuing loss– Total Cost?

• Demoralization Costs?– Upset of “losers”?– Upset of sympathizers?

• Balance?• Fairness Principle?

Michaelman Sample Application: Mahon

• Settlement Costs? – Identifying “losers”– Valuing loss– Total Cost?

• Demoralization Costs?– Upset of “losers”?– Upset of sympathizers?

• Balance?• Fairness Principle?

Michaelman Sample Application: Airspace Solution

For you on your own.

The Blizzard of ‘78

1978: International

• Camp David Accords: Peace treaty between Israel & Egypt

• Unrest in Iran & Nicaragua presages revolutions of ’79

• US agrees to formally recognize People’s Republic of China

• Panama Canal Treaties ratified by Senate to end US Control of canal as of end of ’99

1978: California

• I arrive at Stanford mid-September

• Calif. Prop 13

• Jonestown mass suicide

• Killing of Harvey Milk/George Moscone by Dan White

1978: Other Memorable

• 1st US casinos outside Nevada open in Atlantic City

• Affirmed wins Triple Crown (last time)

• Red Sox & Yankees: Bucky Dent

• Pope Paul VI Pope John Paul I (53 Days) Pope John Paul II

1978: Births & Deaths

BORN:Louise Brown: 1st test tube

baby

Clay Aiken * Kobe Bryant

Nelly Furtado * Josh Hartnett

Dirk Nowitzki * Russ O’Brien

Chase Utley * Reggie Wayne

DIEDHubert Humphrey

Margaret Mead

Golda Meir

Keith Moon

Norman Rockwell

1978: Entertainment

• John Travolta– Saturday Night Fever (Grammy for album)– Grease (movie)

• Vietnam movies (5 yrs after fall of Saigon)– Deer Hunter (best picture)– Coming Home (best actor & actress)

• Premieres: Dallas; Evita; Garfield

1978: Songs

• Just the Way You Are (Billy Joel)

• Copacabana (Barry Manilow)

• Three Times a Lady (Commodores)

• Sailing (Christopher Cross)

• Paradise by the Dashboard Light (Meatloaf)

1978: U.S. Supreme Court

• Regents of the Univ. of California v. Bakke (affirmative action)

• Tennessee Valley Authority v. Hill (snail darter)

• Penn Central Transportation Co. v. City of New York (Grand Central Station)

Grand Central Station (c.1920)

One of the Proposed

Towers with Pan Am Building

(Met Life)

Jacqueline Kennedy Onassis:

"Is it not cruel to let our city die by degrees, stripped of all her proud monuments, until there will be nothing left of all her history and beauty to inspire our children? If they are not inspired by the past of our city, where will they find the strength to fight for her future? …

Jacqueline Kennedy Onassis:

"Americans care about their past, but for short term gain they ignore it and tear down everything that matters. Maybe… this is the time to take a stand, to reverse the tide, so that we won't all end up in a uniform world of steel and glass boxes."

Penn Central• Last & Most Complex Case of Semester

– Culmination of Skills: Read & Reread – Figure out range of arguments it creates

• Order of Proceeding– Last time: Laid out dispute– Today: NEON & CHLORINE: Arguments From

Prior Authority– FRI/MON: Go Through Analysis of Case (Mix of

CHLORINE, OXYGEN & HELIUM DQs)

CHLORINE: DQ118

Theorists & Penn Central Facts

• Sax: –Arbiter or Enterpriser?

–Stopping Spillover Effects?

Mid-September Crisis

Mid-October Crisis

Mid-November Crisis

YOU HAVE MORE TIME THAN YOU THINK YOU DO

• End of LRW

• 3 Days Clear Before Each Test

• Thanksgiving

• Wed Nov 26 + Fri Nov 28-Tue Dec 2

• Schedule Your Time (Roughly)

USE OLD EXAMS• Do Under Exam Conditions• You’ll Never “Feel Ready”; Build in

Time to Do Anyway• Look at Old Model Answers if Available

– Imperfect– Evidence of Kind of Exam Professor Likes

• This Class: Can Do One Old Exam Question Under Exam Conditions & Submit to Me for Comments: Rules Posted Soon on Course Page

OTHER EXAM PREP TIPS

• Checklists for Open Book Exams

• Make Time for Group Work– Consult on Qs from Cases/Classnotes– Discuss Hypos & Old Exam Qs– Identify Likely Issues for Exam

• Go to Office Hours/Review Sessions– My times posted soon on course page

Peace of Mind Tips• Now to Dec. 18: You Need to Sleep

• Ignore Rumor Mill

• The First Year “Grade Curve”

• September 2011

YOU CAN DO THIS !