The Erosion of Public Control Over Public Utilities

Sandeep Vaheesan –

Cable Electricity Electrical Energy DistributionSince the 1970s, Congress and federal agencies have replaced regulator-established rates with market-derived pricing in many sectors of the U.S. economy. Electricity and natural gas are two such industries. Congress and the Federal Energy Regulatory Commission (FERC) have abolished regulated rates and instituted market-based pricing in a part of the electricity and gas supply chains. (At a simplified level, both industries have three segments: production, transmission, and distribution. Policymakers generally still treat the transmission and distribution functions as monopolistic.)

These legislative and regulatory decisions are premised on the belief that markets are superior to direct public control of rates and other terms of service. While this process is often described as “deregulation,” the term is a misnomer. This industrial restructuring is a transfer of discretionary authority from public bodies to private actors. Instead of structuring competitive markets in this new environment, the federal courts have defended private market power and helped scale back all public control of sellers and traders of electricity and gas. A case before the First Circuit (in which my Open Markets Institute colleagues and I filed an amicus brief in support of the plaintiffs) illustrates this theme.

In Breiding v. Eversource Energy, New England residents have accused two large utilities of violating antitrust and consumer protection laws by creating an artificial shortage of gas and engineering a chain of events that dramatically drove up the cost of electricity. The district court dismissed the plaintiffs’ complaint and expanded a judicial doctrine intended to protect the integrity of regulator-set rates to also insulate market-based prices from private lawsuits. This decision, which is consistent with rulings by other courts, grants gas producers, power generators, and traders the freedom to engage in exclusionary and other unfair practices. In electricity and gas, the net effect of legislative, regulatory, and judicial choices over the past 40 years has been a dramatic erosion of public control over public utilities.

Continue reading

Central Banking and Finance—The Franchise View

Robert Hockett & Saule Omarova—

It is common to claim that finance is about ‘credit-intermediation,’ a matter of channeling funds from virtuous savers to needful end-users. The picture behind this assertion is that of a gargantuan broker—the financial system as ‘go-between.’ But modern financial systems are much more about credit-generation than intermediation. We need a new metaphor.

In our view, a modern financial system is best modeled as a public-private franchise arrangement. The franchisor is the sovereign public, acting through its central bank or monetary authority. The franchised good is the monetized full faith and credit of the sovereign—its ‘money.’ And the franchisees are those private sector institutions that are licensed by the public to dispense, in the form of spendable credit, the franchised good.

Like any good franchisor, a public acting through its central bank works to maintain the ‘quality’ of the good that its franchisees distribute. In the contemporary ‘developed’ world, the quality in question has been understood primarily in terms of over-issuance.

The central bank’s task has been understood, that is to say, in modulatory terms, the primary objective being to prevent consumer and, in some enlightened jurisdictions, asset price inflations and hyperinflations. Allocative decisions, for their part, are thought best left to the market, on the putative ground that the public’s ‘picking winners and losers’ is apt to be ‘politically arbitrary’ rather than ‘financially sound.’

Two conceptual errors, one of them partly corrected since 2008, seem to have hampered the ‘quality control’ efficacy of many central banks and monetary authorities in the pre-2008 period.

Continue reading

1LPE Round-up

Earlier this fall, the LPE blog launched 1LPE, which aimed to provide a critical countervailing perspective on the doctrinal areas traditionally constituting the 1L curriculum. Take a look at what we’ve published – and get ready for more posts after the break!

Criminal Law




Constitutional Law

Teaching Civil Procedure with Political Economy in Mind

Helen Hershkoff–

Over a decade ago I wrote a short piece called “Poverty Law and Civil Procedure: Rethinking the First-Year Course [Poverty],” published as part of a symposium issue of the Fordham Urban Law Journal on the place of poverty in the law school curriculum. Reginald Heber Smith’s statement from 1919 was the epigraph: “The administration of American justice is not impartial, the rich and the poor do not stand on an equality before the law, the traditional method of providing justice has operated to close the doors of the courts to the poor, and has caused a gross denial of justice in all parts of the country to millions of persons.”

Poverty was practical and concrete, conceived almost in the style of Teacher’s Manual (indeed, it was geared to the casebook I know best, Friedenthal, Miller, Sexton & Hershkoff, Civil Procedure: Cases and Materials). I took inspiration from Kevin Johnson’s earlier article on introducing race into the 1L curriculum. Re-reading Poverty, it’s clear that the pedagogic suggestions are allied with the theoretical premises identified in this blog’s (near-)manifesto—(1) that politics and the economy “cannot be separated,” i.e. politics affects the distribution of economic resources and wealth affects the distribution of political power; and (2) that law constitutes, creates, promotes, and reshapes politics and the economy and is, in turn, affected by both. Here I sketch out some of Political Economy’s more important themes that relate to 1L Civil Procedure and begin to update the teaching approach in light of a few doctrinal developments. The goal is not a mechanical add-on of ideas associated with Political Economy, but rather to encourage a space in the 1L curriculum where suppressed issues about law and  power, both political and economic, can be raised and explored at an early stage in the students’ legal education. Continue reading

LPE of Civil Procedure: Equality Inside and Outside the Courts

Daniel Wilf-Townsend

What does civil procedure have to do with LPE? On the one hand, you might think of procedural rules as only instrumentally important. They don’t dictate our obligations, like tort law or criminal law, or define the terms of economic organization, like property law. But anyone wondering why procedure gets a prime place in the first-year law curriculum should consider the famous warning of Congressman John Dingell, who was heavily involved in landmark accomplishments of substantive policymaking like Medicare, the Endangered Species Act, and the Clean Air Act. In Dingell’s words, “If I let you write the substance and you let me write the procedure, I’ll screw you every time.”

In other words, procedure is power. Procedural rules are at the root of how legal institutions make decisions: who gets into court, what burden they must meet to prove their claims, what information they can find out, who decides which party is right, what remedies may be on the table, and more. This means that the set of procedures the law employs heavily influences the ultimate outcomes of any policy choice. Because legal procedures play such an important mediating role between political choices and actual outcomes, understanding those procedures is a key component of the study of law and political economy.

This post focuses on just one aspect of legal procedure—the idea of formal equality in legal proceedings. I’ll explain how the notion of “procedural equality” stands in tension with inequalities that exist outside of legal institutions and provide a few quick examples of this tension in contemporary doctrinal debates. Finally, I suggest two approaches that students of LPE can take to these kind of debates: one with an eye toward understanding what the law does in the world, and the other with an eye toward considering how the law can be used and improved.

Continue reading

Who are “the People” in Criminal Procedure?

Jocelyn Simonson-

The customary case caption in criminal court, “The People v. Defendant,” pits the community against one lone person in an act of collective condemnation. When I was a public defender in New York City, it was common for judges, clerks, and other courtroom players to refer to individual Assistant District Attorneys as “the People,” as in, “Do the people have an offer?,” “Would the people like to request a lunch break?,” or, if an ADA was not visible in the courtroom, “Are the People in the bathroom?” Calling an individual prosecutor “the People” sends a powerful message to courtrooms full of defendants and their supporters waiting for their cases to be called: a message that they are not part of “the People,” are not part of the public that matters. Even in jurisdictions in which the prosecution calls itself the “State,” “Government,” or “Commonwealth,” this idea—that the prosecutor is the People’s representative in the courtroom—pervades how we think and talk about prosecution and criminal procedure.

Continue reading

Student Debt Cancellation: It’s Actually Good

Luke Herrine-

Whenever talk of student debt cancellation, or even of a “student debt crisis,” gets too loud, there is a bevy of pundits ready to tut-tut. Don’t you so-called progressives know that most student debt is held by young professionals? That the young professionals with the biggest debt loads are unlikely to default on their debt because they have leveraged their education into high-paying jobs (or at least have well-off family who can pitch in)? And so don’t you see that cancelling student debt would mostly just be a subsidy to already comfortable people? And you call yourself progressive? Shame! Go think about what you’ve done. Let the professionals take care of the policymaking.

Now that the Levy Institute has published a report on the likely macroeconomic effects of student debt cancellation and some left politicians have taken up the idea, David Leonhardt at the New York Times saw fit to rehearse the arguments he and others have made multiple times before (apparently not having read the arguments against his position in that selfsame report). Here’s why he’s wrong again.

Continue reading

Lawyering and Political Economy: The Clinical Wing of LPE

Charles Du-

What does an LPE perspective imply for the practice of law? In other words, what is the “clinical wing” of LPE? My recently published essay, “Securing Public Interest Law’s Commitment to Left Politics,” seeks to denaturalize and politicize “public interest law,” arguing for a public interest law focused chiefly on building left political power by supporting movements and organizing. In its current popular usage, public interest law mostly refers to the wide variety of legal practices that are motivated by “progressive” political commitments on the part of the lawyer. (It also increasingly includes conservative causes, especially in the official, institutional definitions of some law schools, which serve as a sort of concession to right-wing students in the name of “intellectual diversity.”) Yet despite its vagueness, public interest law is highly institutionalized, with curricular offerings, scholarships, and fellowships devoted to it. The set of opportunities for each new cohort of progressive lawyers is essentially identical to the contemporary institutional forms of public interest law. This, at bottom, is why it matters to contest the meaning of the term.

Continue reading