The tragedy of the carrots: Economics and politics in the choice of price instruments

Stanford Law Review

Volumn 64, Issue 4, 2012, Pages 797-850

  Galle, Brian ^a  

^a BOSTON COLLEGE   (United States)

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EID: 84861462930     PISSN: 00389765     EISSN: None     Source Type: Journal    
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References (464)

1. Malachi 3:8-9.
2. Malachi 3:10-12.
3. 26 U.S.C. § 170 (2006).
4. This proposal passed the U.S. House of Representatives. American Clean Energy and Security Act of 2009, H.R. 2454, 111th Cong. (2009).
5. See, e.g., Gilbert E. Metcalf & David Weisbach, The Design of a Carbon Tax, 33 HARV. ENVTL. L. REV. 499 (2009).
6. For an overview of the many provisions.
7. see STAFF OF J. COMM. ON TAXATION, 111TH CONG., TAX EXPENDITURES FOR ENERGY PRODUCTION AND CONSERVATION 21-107 (Comm. Print 2009), available at http://finance.senate.gov/imo/media/doc/042309jctdoc1.pdf.
8. There is an environmental economics literature on the use of subsidies, sometimes known as "PES," or "payment for environmental services."
9. See Thomas Sterner, POLICY INSTRUMENTS FOR ENVIRONMENTAL AND NATURAL RESOURCE MANAGEMENT 167-80 (2003);
10. Stefanie Engel et al., Designing Payments for Environmental Services in Theory and Practice: An Overview of the Issues, 65 ECOLOGICAL ECON. 663, 663-74 (2008).
11. see also Howard F. Chang, An Economic Analysis of Trade Measures to Protect the Global Environment, 83 GEO. L.J. 2131, 2149-64 (1995) (comparing subsidies and penalties as tools for encouraging international climate agreements).
12. Jonathan Baert Wiener, Global Environmental Regulation: Instrument Choice in Legal Context, 108 YALE L.J. 677, 701-96 (1999) (examining subsidies together with other policy options for containing global warming). For the most part that literature is descriptive.
13. see Engel et al., supra, at 664, although Chang, Sterner, and Weiner ask explicitly whether subsidies are ever normatively preferable to penalties.
14. Other writers have also investigated the relative cost-effectiveness of taxes and subsidies. An early economics literature examined the so-called "output" effect, which is one of the several factors I examine here.
15. E.g., WILLIAM J. BAUMOL & WALLACE E. OATES, THE THEORY OF ENVIRONMENTAL POLICY 211-34 (Cambridge Univ. Press 2d ed. 1988).
16. Robert E. Kohn, When Subsidies for Pollution 1975 Abatement Increase Total Emissions, 59 S. ECON. J. 77 (1992).
17. Stuart Mestelman, Production Externalities and Corrective Subsidies: A General Equilibrium Analysis, 9 J. ENVTL. ECON. & MGMT. 186 (1982).
18. Mitchell Polinsky, Notes on the Symmetry of Taxes and Subsidies in Pollution Control, 12 CAN. J. ECON. 75 (1979). Others consider the transaction costs of the two systems.
19. See, e.g., Donald Wittman, Liability for Harm or Restitution for Benefit?, 13 J. LEGAL STUD. 57, 62-65 (1984).
20. Gerrit De Geest & Giuseppe Dari-Mattiacci, Carrots Versus Sticks 8-31 (Wash. Univ. in St. Louis Sch. of Law Legal Studies Research Paper Series, Paper No. 09-09-03, Aug. 2009) [hereinafter De Geest & Dari-Mattiacci, Carrots Versus Sticks], available at http://ssrn.com/abstract=1470129.
21. The most recent evolution of that project is Giuseppe Dari-Mattiacci & Gerrit De Geest, Carrots, Sticks, and the Multiplication Effect, 26 J.L. ECON. & ORG. 365 (2009) [hereinafter Dari-Mattiacci & De Geest, Multiplication Effect], which argues that the relative price-efficacy of sticks is a reason to prefer them to carrots, and that theirs is the first sustained attempt to distinguish normatively between the two instruments.
22. The most recent evolution of that project is Giuseppe Dari-Mattiacci & Gerrit De Geest, Carrots, Sticks, and the Multiplication Effect, 26 J.L. ECON. & ORG. 365 (2009) [hereinafter Dari-Mattiacci & De Geest, Multiplication Effect], which argues that the relative price-efficacy of sticks is a reason to prefer them to carrots, and that theirs is the first sustained attempt to distinguish normatively between the two instruments. at 367-68.
23. I agree on both fronts, but there are a number of other relevant factors in the debate, some of which may point in the opposite direction.
24. Compare Robert N. Stavins, A Meaningful U.S. Cap-and-Trade System to Address Climate Change, 32 HARV. ENVTL. L. REV. 293, 348-53 (2008) (quantity).
25. William D. Nordhaus, To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming, 1 REV. ENVTL. ECON. & POL'Y 26 (2007) (price).
26. Marc J. Roberts & Michael Spence, Effluent Charges and Licenses Under Uncertainty, 5 J. PUB. ECON. 193 (1976) (price).
27. Martin L. Weitzman, Prices vs. Quantities, 41 REV. ECON. STUD. 477 (1974) (price).
28. Compare Daniel N. Shaviro, Rethinking Tax Expenditures and Fiscal Language, 57 TAX L. REV. 187, 192-99, 206-21 (2004). (suggesting some merits to use of the tax system for policy implementation)
29. Edward A. Zelinsky, James Madison and Public Choice at Gucci Gulch: A Procedural Defense of Tax Expenditures and Tax Institutions, 102 YALE L.J. 1165, 1175-84 (1993) (same).
30. J. Clifton Fleming, Jr. & Robert D. Peroni, Can Tax Expenditure Analysis Be Divorced from a Normative Tax Base?: A Critique of the "New Paradigm" and Its Denouement, 30 VA. TAX REV. 135, 172-79 (2010) (criticizing use of tax system for non-tax policy goals).
31. Edward D. Kleinbard, The Congress Within the Congress: How Tax Expenditures Distort Our Budget and Our Political Process, 36 OHIO N. UNIV. L. REV. 1, 4-30 (2010) (same).
32. See A.C. PIGOU, THE ECONOMICS OF WELFARE 172-203 (4th ed. 1932).
33. JONATHAN GRUBER, PUBLIC FINANCE AND PUBLIC POLICY 134 (2d ed. 2007).
34. JONATHAN GRUBER, PUBLIC FINANCE AND PUBLIC POLICY. at 134-35.
35. JONATHAN GRUBER, PUBLIC FINANCE AND PUBLIC POLICY. at 122.
36. JONATHAN GRUBER, PUBLIC FINANCE AND PUBLIC POLICY. at 422.
37. Patient Protection and Affordable Care Act, Pub. L. No. 111-148 §§ 1401(a), 1402(a)-(c), 1421(a), 2001(a), 124 Stat. 119, 213, 220, 237, 271 (codified as amended in scattered sections of the U.S. Code).
38. 26 U.S.C. § 5000(a) (Supp. IV 2010).
39. For more detail on the points in this paragraph, see Part III below.
40. To be sure, there are literally dozens of other sources that discuss "carrots and sticks." But in nearly all cases these other works merely discuss the role of incentives in human behavior, rather than attempting to distinguish between the two mechanisms. Ian Ayres's recent book, intended for popular audiences, does suggest differences between carrots and sticks as policy tools, but heavily emphasizes the difference in framing between the two and does not discuss the considerations addressed here.
41. IAN AYRES, CARROTS AND STICKS: UNLOCKING THE POWER OF INCENTIVES TO GET THINGS DONE 45-72 (2010). Another cousin is Howard F. Chang, Carrots, Sticks, and International Externalities, 17 INT'L REV. L. & ECON. 309 (1997), which considers the strategic incentives of nations bargaining over international environmental law. Both Chang and Ayres have insights to contribute to my project, but their main focus is elsewhere.
42. See, e.g., Chang, supra note 7, at 2150-64.
43. Wiener, supra note 7, at 726-27, 755.
44. As far as I am aware, Wittman's brief discussion is the only prior example of any analysis of the carrot/stick decision for positive externalities, and he limits his discussion to transaction costs.
45. See Wittman, supra note 7, at 71, 79.
46. E.g., BAUMOL & OATES, supra note 7, at 213.
47. Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089, 1115-24 (1972).
48. Wiener, supra note 7.
49. A possible exception is Cass R. Sunstein, Television and the Public Interest, 88 CALIF. L. REV. 499, 543-48 (2000), which, although framed as a choice among different kinds of property rules, does briefly discuss a few factors influencing the choice among price mechanisms and other options for encouraging the production of public interest programming. Some authors have considered why the tort system punishes wrongdoing but does not require restitution for gratuitous good deeds.
50. see, e.g., Giuseppe Dari-Mattiacci, Negative Liability, 38 J. LEGAL STUD. 21, 26-30 (2009) (discussing prior literature), but these studies do not consider whether the best incentives for good deeds would instead be sticks for failure to provide the good.
51. For discussion of the points in this paragraph, see Part V below. Prior literature does include some discussion of the political economy of the choice between carrots and sticks, most notably STERNER, supra note 7, at 180-202.
52. For definitive reviews, see Wallace E. Oates, An Essay on Fiscal Federalism, 37 J. ECON. LITERATURE 1120 (1999).
53. Wallace E. Oates, Toward a Second-Generation Theory of Fiscal Federalism, 12 INT'L TAX & PUB. FIN. 349 (2005).
54. See Brian Galle & Joseph Leahy, Laboratories of Democracy? Policy Innovation in Decentralized Governments, 58 EMORY L.J. 1333, 1335-37 (2009) (describing the backand-forth claims).
55. Typically, in the United States, our employers are obliged to do this for us, a procedure known as income tax withholding. IRS, PUBLICATION 15, (CIRCULAR E), EMPLOYER'S TAX GUIDE (2011).
56. Actually, when the author purchased his Prius, the tax credit was $3150.
57. See Summary of the Credit for Qualified Hybrid Vehicles, IRS, http://www.irs.gov/newsroom/article/0,id=157557,00.html (last updated Nov. 8, 2007).
58. see also 26 U.S.C. § 30B (2006 & Supp. IV 2010) (establishing the credit).
59. Assuming, of course, that the dealer doesn't increase its price by $1000 in anticipation of my windfall. Sometimes the economic benefits of a carrot go to a party other than the one the law assigns them to. But that doesn't reduce the efficacy of the carrot, as I'll explain shortly.
60. Stanley S. Surrey & Paul R. McDaniel, The Tax Expenditure Concept: Current Developments and Emerging Issues, 20 B.C. L. REV. 225, 228 (1979).
61. 29.483 U.S. 203 (1987).
62. On the withholding of an expected carrot as equivalent to a stick.
63. see Lior Jacob Strahilevitz, Reputation Nation: Law in an Era of Ubiquitous Personal Information, 102 NW. U. L. REV. 1667, 1712 (2008).
64. E.g., Robert Carroll et al., Income Versus Consumption Tax Baselines for Tax Expenditures, 64 NAT'L TAX J. 491, 492-93 (2011).
65. Julie Roin, Truth in Government: Beyond the Tax Expenditure Budget, 54 HASTINGS L.J. 603, 610-22 (2003).
66. Peter Westen, The Empty Idea of Equality, 95 HARV. L. REV. 537, 547 (1982).
67. 26 U.S.C. § 5000A(a)-(b) (Supp. IV 2010).
68. 26 U.S.C. § 5000A(a)-(b). § 5000A(c).
69. Edward D. Kleinbard, Constitutional Kreplach, 128 TAX NOTES 755 (2010) (pointing out that these two structures are economically identical).
70. A "marginal" price is just the cost for the purchase of one incremental unit of some good.
71. GRUBER, supra note 11, at 122.
72. For more nuance, see BAUMOL & OATES, supra note 7, at 15-18.
73. The author denies that this ever happened while he lived in Florida, Bob.
74. See Ronald H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960), reprinted in R.H. COASE, THE FIRM, THE MARKET, AND THE LAW 95 (1988). And really, Bob, that was uncalled for.
75. GRUBER, supra note 11, at 135.
76. GRUBER, supra note 11. at 134.
77. Another tool, which I omit here for simplicity, is a so-called "quantity" regulation. In that case, society would simply determine how many trees I should grow, and force or incentivize me to grow that many. The mechanisms can be similar in many respects, but do differ in some important ways, as others have ably explained.
78. See, e.g., STERNER, supra note 7, at 136-47.
79. Louis Kaplow & Steven Shavell, On the Superiority of Corrective Taxes to Quantity Regulation, 4 AM. L. & ECON. REV. 1, 2-15 (2002).
80. Wiener, supra note 7, at 727-34.
81. GRUBER, supra note 11, at 134.
82. Kaplow &Shavell, supra note 42, at 4.
83. Wiener, supra note 7, 714-15 (describing this point as the general consensus of economists).
84. Unjustified pruning threats notwithstanding. Actually, even bargaining between two parties can fail for a variety of reasons, including strategic behavior and the possibility that the parties assign different utility to an identical amount of dollars. Herbert Hovenkamp,
85. Marginal Utility and the Coase Theorem, 75 CORNELL L. REV. 783, 789-806 (1990).
86. Louis Kaplow & Steven Shavell, Property Rules Versus Liability Rules: An Economic Analysis, 109 HARV. L. REV. 713, 724, 734 (1996).
87. See Calabresi & Melamed, supra note 21, at 1107-10.
88. Kaplow & Shavell, supra note 45, at 749.
89. This insight is usually credited to ALLEN V. KNEESE, THE ECONOMICS OF REGIONAL WATER QUALITY MANAGEMENT 90-93 (1964).
90. Interchangeability also requires that the tax system treat sticks and carrots identically, which it does not always do.
91. See Gregg D. Polsky & Dan Markel, Taxing Punitive Damages, 96 VA. L. REV. 1295, 1302-27 (2010) (explaining how the federal tax system may distort intended incentive effects of state tort law).
92. Ethan Yale, Taxing Cap-and-Trade Environmental Regulation, 37 J. LEGAL STUD. 535, 548 (2008) (examining interactions between corporate income tax and environmental controls).
93. RICHARD A. Posner, Economic Analysis Of Law 10 (8th ed. 2011).
94. RICHARD A. Posner, Economic Analysis Of Law 10 (8th ed. 2011). at 7-12.
95. See Dari-Mattiacci & De Geest, Multiplication Effect, supra note 7, at 367 (pointing out that framing effects may undermine traditional equivalence between taxes and subsidies).
96. JONATHAN BARON, THINKING AND DECIDING 269-70 (4th ed. 2007) (summarizing studies).
97. JONATHAN BARON, THINKING AND DECIDING 269-70 (4th ed. 2007) (summarizing studies). at 267-68.
98. JONATHAN BARON, THINKING AND DECIDING 269-70 (4th ed. 2007) (summarizing studies).
99. JONATHAN BARON, THINKING AND DECIDING 269-70 (4th ed. 2007) (summarizing studies). at 267 & n.8.
100. GRUBER, supra note 11, at 36.
101. GRUBER, supra note 11. at 36 n.1.
102. see THE NOTORIOUS B.I.G., Mo Money Mo Problems, on LIFE AFTER DEATH (Bad Boy Records 1997).
103. GRUBER, supra note 11, at 36 n.1.
104. See POSNER, supra note 48, at 7 & n.8 (noting that no one has successfully identified an inferior good for which the income effect would exceed the substitution effect).
105. Cf. Calabresi & Melamed, supra note 21, at 1095-96 (observing that assigning a legal entitlement enriches the entitled party and so may change its preferences).
106. "Inelastic" means simply that demand doesn't change much when price changes. GRUBER, supra note 11, at 45-46.
107. See Jon D. Hanson & Kyle D. Logue, The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation, 107 YALE L.J. 1163, 1218-20 n.254 (1998) (analyzing studies of price elasticity of tobacco products).
108. Cf. Brian Galle & Manuel Utset, Is Cap-and-Trade Fair to the Poor? Shortsighted Households and the Timing of Consumption Taxes, 79 GEO. WASH. L. REV. 33, 68-71 (2010) (surveying studies of the relationship between timing of income and household consumption). Another way to put this point is that, if saving and borrowing are costless, a household will base purchasing decisions on expected lifetime income. Borrowing, however, may be limited by transaction costs and psychological barriers, see id., so that perceived income shrinks to the amount available to satisfy budget demands within a relatively short period.
109. STERNER, supra note 7, at 167-70.
110. I assume here a competitive market. In an oligopolistic market, producers with market power can constrain supply to a level below the unrestricted equilibrium, allowing them to capture more of the subsidy in profit rather than passing along the cost savings to consumers. In the long run, though, even that scenario often will result in greater output, since eventually entrepreneurs will recognize the superior profits to be had in the industry and, assuming the oligopolists cannot easily keep them out, they will compete away the higher profits. For a detailed discussion of the effect of subsidies in oligopolistic markets.
111. see Klaus Conrad & Jianmin Wang, The Effect of Emission Taxes and Abatement Subsidies on Market Structure, 11 INT'L J. INDUS. ORG. 499, 500-18 (1993).
112. In some situations, such as when components of the taxed good can be divided up and thereby escape a portion of the tax, taxes may actually decrease the price of the original (now unbundled) good.
113. See Henry E. Smith, Ambiguous Quality Changes from Taxes and Legal Rules, 67 U. CHI. L. REV. 647, 649-50 (2000).
114. See STERNER, supra note 7, at 167-68.
115. See BAUMOL & OATES, supra note 7, at 217-30.
116. See Wiener, supra note 7, at 727.
117. See, e.g., William G. Gale & Janet Holtzblatt, The Role of Administrative Issues in Tax Reform: Simplicity, Compliance, and Administration, in UNITED STATES TAX REFORM IN THE 21ST CENTURY 179, 179-80 (George R. Zodrow & Peter Mieszkowski eds., 2002).
118. Joel Slemrod & Nikki Sorum, The Compliance Cost of the U.S. Individual Income Tax System, 37 NAT'L TAX J. 461, 462-74 (1985).
119. On Amsterdam's skinny homes.
120. see HARVEY S. ROSEN & TED GAYER, PUBLIC FINANCE 371 (8th ed. 2008). To watch Axel Foley wreck most of downtown Detroit in his pursuit of untaxed cigarettes.
121. see BEVERLY HILLS COP (Paramount Pictures 1984).
122. GRUBER, supra note 11, at 578-79.
123. The classic analysis of the differing transaction costs between the two is Wittman, supra note 7, at 62-65.
124. Wittman asserts that it is more efficient to choose the rule affecting fewer actors-for example, punishing theft instead of paying for non-theft, if most people comply with the law.
125. Wittman asserts that it is more efficient to choose the rule affecting fewer actors-for example, punishing theft instead of paying for non-theft, if most people comply with the law. at 64-65.
126. It should already be clear that this analysis is seriously incomplete. For one, in the case where Wittman would prescribe paying, his analysis fails to account for the deadweight loss involved in raising revenues for payoffs. This loss might exceed any administrative savings achieved by reducing the number of affected actors.
127. See Calabresi & Melamed, supra note 21, at 1121.
128. See GRUBER, supra note 11, at 53.
129. See Calabresi & Melamed, supra note 21, at 1102-03.
130. See, e.g., David A. Koplow & Philip G. Schrag, Carrying a Big Carrot: Linking Multilateral Disarmament and Development Assistance, 91 COLUM. L. REV. 993, 1026-42 (1991).
131. Smith, supra note 65, at 698.
132. Wiener, supra note 7, at 726.
133. See William A. Fischel & Perry Shapiro, Takings, Insurance, and Michelman: Comments on Economic Interpretations of "Just Compensation" Law, 17 J. LEGAL STUD. 269, 290-91 & n.48 (1988) (suggesting that failure to compensate for takings may discourage investment).
134. See Kaplow & Shavell, supra note 42, at 4, 9.
135. See Kaplow & Shavell, supra note 42. at 7.
136. See Louis Kaplow, A Note on Subsidizing Gifts, 58 J. PUB. ECON. 469, 472 (1995) (noting that if subsidy amounts vary inversely with donors' observed willingness to give, some donors may give less in order to extract greater subsidies).
137. See Kaplow & Shavell, supra note 42, at 5-6 (claiming this is only the case when the government is constrained to use a linear tax schedule).
138. Smith, supra note 65, at 683-96 (suggesting this is also the case when producers can effectively conceal a portion of the harm they produce).
139. In some instances, the added difficulty of measuring producer costs may end up being an argument for abandoning Pigouvian pricing altogether and using some other instrument, such as a quantity rule.
140. See In some instances, the added difficulty of measuring producer costs may end up being an argument for abandoning Pigouvian pricing altogether and using some other instrument, such as a quantity rule. at 685.
141. See Paul J. Ferraro, Asymmetric Information and Contract Design for Payments for Environmental Services, 65 ECOLOGICAL ECON. 810, 811 (2008).
142. Roldan Muradian et al., Reconciling Theory and Practice: An Alternative Conceptual Framework for Understanding Payments for Environmental Services, 69 ECOLOGICAL ECON. 1202, 1204 (2010).
143. Ferraro, supra note 82, at 811.
144. Ferraro, supra note 82.
145. See STERNER, supra note 7, at 153.
146. Sunstein, supra note 21, at 546-47. Hanson and Logue argue that the government can reduce opportunities for producers to conceal information by imposing sticks ex post, rather than setting a price ex ante.
147. Hanson & Logue, supra note 61, at 1273-74. While they may be right that measuring is easier than predicting, it is unclear why an ex post system would reduce producer incentives to conceal harms as they are happening.
148. For empirical evidence of this theory.
149. see Charles L. Ballard & Steven G. Medema, The Marginal Efficiency Effects of Taxes and Subsidies in the Presence of Externalities: A Computational General Equilibrium Approach, 52 J. PUB. ECON. 199 (1993).
150. E.g., Wiener, supra note 7, at 730.
151. E.g., Metcalf & Weisbach, supra note 5, at 513-14 & n.66.
152. Gilbert E. Metcalf, A Distributional Analysis of Green Tax Reforms, 52 NAT'L TAX J. 655, 663 (1999). The climate change bill that passed the U.S. House of Representatives also had this feature. American Clean Energy and Security Act of 2009, H.R. 2454, 111th Cong. § 431 (2009).
153. STERNER, supra note 7, at 175. Additionally, most economists would claim that a consumption tax cannot be more efficient than an income tax, because both ultimately reduce the amount of after-tax goods that workers can consume, and therefore both equally distort the decision of how hard to work. Thus, if carbon-tax revenues simply replace income tax revenues, there is no net gain in efficiency. My own view is that there is some reason to doubt that consumption taxes are as distortive of labor/leisure decisions as income taxes, because workers may not be as aware of the cumulative burden of consumption taxes.
154. See Brian Galle, Hidden Taxes, 87 WASH. U. L. REV. 59, 77-81 (2009) (describing possible welfare effects of unnoticed taxation). Because they do not tax savings, consumption taxes also might avoid the income tax's impact on personal savings decisions, which may be efficient in some situations.
155. See Daniel Shaviro, Beyond the Pro-Consumption Tax Consensus, 60 STAN. L. REV. 745, 783-88 (2007). In any event, switching to a consumption-tax stick can be efficient if it replaces taxes other than the individual income tax, such as by reducing the corporate income tax.
156. One form of stick that might require revenue expenditures is criminal fines. To make the stick credible, the government must have enforcement officers, judges, finecollectors, and so on.
157. Dari-Mattiacci & De Geest, Multiplication Effect, supra note 7, at 369-76.
158. see also AYRES, supra note 18, at 50 (calling this a "pretty obvious point").
159. Dari-Mattiacci & De Geest, Multiplication Effect, supra note 7, at 366.
160. See Dari-Mattiacci & De Geest, Multiplication Effect, supra note 7. at 368.
161. Cf. See Dari-Mattiacci & De Geest, Multiplication Effect, supra note 7. at 376 (noting that the advantage of sticks is smaller when agents act cooperatively to resist).
162. See Engel et al., supra note 7, at 669.
163. See TREASURY INSPECTOR GEN. FOR TAX ADMIN., ADDITIONAL STEPS ARE NEEDED TO PREVENT AND RECOVER ERRONEOUS CLAIMS FOR THE FIRST-TIME HOMEBUYER CREDIT 4-11 (2010), available at http://www.treasury.gov/tigta/auditreports/2010reports/201041069fr.pdf. On the opportunistic behavior of carrot recipients, see Ferraro, supra note 82, at 811.
164. Cf. Thomas W. Merrill, Explaining Market Mechanisms, 2000 U. ILL. L. REV. 275, 287 ("[T]here is little basis for thinking that the management costs associated with one type of market mechanism. are materially lower than those associated with other types").
165. Of course, actors may not expend the same effort to pursue gain as to avoid loss if they are more averse to losses than they are attracted to gains. But firms, at least, are typically held by a diversified group of shareholders and so are risk-neutral.
166. See John C. Coffee, Jr., Shareholders Versus Managers: The Strain in the Corporate Web, 85 MICH. L. REV. 1, 19 (1986).
167. See De Geest & Dari-Mattiacci, Carrots Versus Sticks, supra note 7, at 17, 22.
168. Cf. POSNER, supra note 48, at 282 (arguing that efficient criminal law adds punishment for efforts to conceal crime).
169. De Geest & Dari-Mattiacci, Carrots Versus Sticks, supra note 7, at 23-24. Some of the potential costs include not only pure administrative losses, but also unwanted redistribution from those who cannot easily comply with a penalty regime to those who can.
170. De Geest & Dari-Mattiacci, Carrots Versus Sticks, supra note 7, at 23-24. Some of the potential costs include not only pure administrative losses, but also unwanted redistribution from those who cannot easily comply with a penalty regime to those who can.
171. On the other hand, as Henry Smith explains, multi-attribute goods are especially expensive to monitor when we use subsidies, because of the added possibility that producers will manipulate quantity or quality to extract more subsidies per unit of the subsidized good.
172. See Smith, supra note 65, at 698-700.
173. See supra text accompanying notes 50-54.
174. See Hersh Shefrin & Meir Statman, The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence, 40 J. FIN. 777, 782 (1985). 103.
175. See STERNER, supra note 7, at 167.
176. See supra text accompanying notes 66-67.
177. See Trisha L. Bezmen & Craig A. Depken II, Influences on Software Piracy: Evidence from the Various United States, 90 ECON. LETTERS 356, 359 (2006). 106.
178. See R. Glenn Hubbard et al., Banks Need Fewer Carrots and More Sticks, WALL ST. J., May 6, 2009, at A15. For the history of the development of a similar norm in the envi-ronmental context.
179. see Jonathan Remy Nash, Too Much Market? Conflict Between Tradable Pollution Allowances and the "Polluter Pays" Principle, 24 HARV. ENVTL. L. REV. 465, 467-78 (2000).
180. See, e.g., John C.P. Goldberg, The Constitutional Status of Tort Law: Due Process and the Right to a Law for the Redress of Wrongs, 115 YALE L.J. 524, 532-58 (2005).
181. Jason M. Solomon, Equal Accountability Through Tort Law, 103 NW. U. L. REV. 1765, 1784-1811 (2009).
182. see also Benjamin C. Zipursky, Rights, Wrongs, and Recourse in the Law of Torts, 51 VAND. L. REV. 1, 6 (1998).
183. See Goldberg, supra note 107, at 602-03.
184. Or, more generally, when a stick program combined with dedicated spending from the stick-generated revenues is on net regressive. Imperfect enforcement can also lead to redistribution, when carrots or sticks are applied to only a subset of the producer population. But under realistic assumptions, this effect appears no more likely under carrots than under sticks.
185. See De Geest & Dari-Mattiacci, Carrots Versus Sticks, supra note 7, at 18, 22-23.
186. The efficiency case for redistribution in favor of the poor is based on the diminishing marginal utility of wealth. That is, the richer people already are, the less each additional dollar gained or lost is worth in utility terms. For example, if Josephine has $1000 and loses $500, she is in serious trouble, and may face hunger or eviction. If she has $1 million and loses $500, she is a little bummed.
187. There remains a lively debate over whether designers of legal rules should be concerned about distributional effects, or whether instead all distributive considerations should simply be taken care of in the income tax system.
188. Compare Louis Kaplow & Steven Shavell, Why the Legal System Is Less Efficient than the Income Tax in Redistributing Income, 23 J. LEGAL STUD. 667, 669 (1994).
189. David A. Weisbach, Should Legal Rules Be Used to Redistribute Income?, 70 U. CHI. L. REV. 439, 446-53 (2003).
190. Richard S. Markovits, Why Kaplow and Shavell's "Double-Distortion Argument" Articles Are Wrong, 13 GEO. MASON L. REV. 511, 550-55 (2005).
191. Brett H. McDonnell, The Economists' New Arguments, 88 MINN. L. REV. 86, 111 (2003).
192. Chris William Sanchirico, Deconstructing the New Efficiency Rationale, 86 CORNELL L. REV. 1003, 1006-11 (2001).
193. I tend to agree with those who argue that legal rules should account for distributive considerations, for reasons including those I have explained elsewhere.
194. Brian Galle, Is Local Consumer Protection Law a Better Redistributive Mechanism than the Tax System?, 65 N.Y.U. ANN. SURV. AM. L. 525, 530-40 (2010).
195. For a survey of the evidence on these points.
196. see Galle & Utset, supra note 62, at 48-60, 78-82.
197. See Andrew J. Haile, Sin Taxes: When the State Becomes the Sinner, 82 TEMP. L. REV. 1041, 1050 (2009) (summarizing these arguments). It is not entirely clear that the criticism is cogent. The consumer, or at least her future self, suffers a large portion of the harm from tobacco and alcohol, but may simply lack the willpower to stop. These harms can be thought of as "internalities." If the diminishing marginal utility of wealth makes the sin tax's bite sharper, it is the consumer herself who benefits more.
198. Kaplow & Shavell, supra note 45, at 739-40.
199. See Muradian et al., supra note 82, at 1204.
200. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 HARV. L. REV. 869, 913 (1998). Presumably, carrots also are disproportionately tempting for poorer households. But this can be an advantage for policymakers, since it allows the government to achieve the desired marginal effects with a smaller outlay.
201. See Engel et al., supra note 7, at 672 (suggesting that subsidies can help to alleviate poverty).
202. See American Clean Energy and Security Act of 2009, H.R. 2454, 111th Cong. § 431 (2009).
203. Metcalf & Weisbach, supra note 5, at 513-14 & n.66.
204. Metcalf, supra note 88, at 664.
205. See Md Rumi Shammin & Clark W. Bullard, Impact of Cap-and-Trade Policies for Reducing Greenhouse Gas Emissions on U.S. Households, 68 ECOLOGICAL ECON. 2432, 2437 (2009).
206. Cf. Terry Dinan & Diane Lim Rogers, Distributional Effects of Carbon Allowance Trading: How Government Decisions Determine Winners and Losers, 55 NAT'L TAX J. 199, 206 (2002) (modeling revenue effects of rebate proposals). Basically, the rebate would cost more than the tax if the tax were very effective at getting producers to reduce carbon in ways that resulted in no tax paid but were still expensive for the producers, and the producers passed these costs on to customers.
207. E.g., STANLEY S. SURREY, PATHWAYS TO TAX REFORM 136 (1973).
208. E.g., STANLEY S. SURREY, PATHWAYS TO TAX REFORM 136 (1973).
209. See supra text accompanying note 76.
210. E.g., Dari-Mattiacci, supra note 21, at 25.
211. Engel et al., supra note 7, at 670.
212. See Engel et al., supra note 7, at 670. There are a number of reasons producers might mitigate negative externalities in the absence of a subsidy. Some changes in business processes can both benefit the firm and also reduce externalities (think of switching from an outmoded coal power plant to a modernized hydrothermal one). Absent government action, private actors subject to the externality might bargain directly with the producer. Finally, the producer might altruistically avoid harming its neighbors. Although few firms likely act out of feelings of altruism held by their principals, being perceived as "eco-friendly" or "dolphin-safe" also has branding benefits.
213. De Geest and Dari-Mattiacci. Appear to argue that inframarginality, or what they call "overpayment," can be reduced by tailoring the amount of the carrot to an individual producer's cost of production.
214. De Geest & Dari-Mattiacci, Carrots Versus Sticks, supra note 7, at 20. But, as they acknowledge, this works only when the government has perfect information.
215. De Geest & Dari-Mattiacci, Carrots Versus Sticks, supra note 7, at 21-24. Considering that producers can manipulate the information available to the government, and that if carrots vary with their effort cost then producers would have a strong incentive to engage in manipulation, that is a large assumption. But it may not be implausible. For a discussion of how the government can elicit information producers would prefer to keep concealed.
216. see the text accompanying notes 142-43 below.
217. See BAUMOL & OATES, supra note 7, at 212.
218. Wiener, supra note 7, at 726.
219. See Louis Kaplow, An Economic Analysis of Legal Transitions, 99 HARV. L. REV. 509, 529-31 (1986).
220. see also Lawrence Blume & Daniel L. Rubinfeld, Compensation for Takings: An Economic Analysis, 72 CALIF. L. REV. 569, 590-92 (1984) (pointing out that guaranteed compensation for government takings induces overinvestment in property likely to be subject to regulation).
221. Cf. Steven L. Schwarcz, Systemic Risk, 97 GEO. L.J. 193, 206 (2008) (describing how externalities contributed to the financial crisis).
222. Foreclosures produce downward spirals because homeowners are more likely to default when the value of their home is less than their outstanding mortgage. Since foreclosures in a neighborhood drive down prices of neighboring homes (the negative externality that motivates government intervention), a few foreclosures can trigger a cascade.
223. See Anna Gelpern & Adam J. Levitin, Rewriting Frankenstein Contracts: Workout Prohibitions in Residential Mortgage-Backed Securities, 82 S. CAL. L. REV. 1075, 1125-26 (2009).
224. See Anna Gelpern & Adam J. Levitin, Rewriting Frankenstein Contracts: Workout Prohibitions in Residential Mortgage-Backed Securities, 82 S. CAL. L. REV. (2009). at 1102-03, 1127 (noting deliberate use of inflexible mortgage securitization contracts by lenders).
225. Posner, supra note 48, at 68-69.
226. See Saul Levmore, Changes, Anticipations, and Reparations, 99 COLUM. L. REV. 1657, 1663 (1999).
227. See Edward L. Deci et al., A Meta-Analytic Review of Experiments Examining the Effects of Extrinsic Rewards on Intrinsic Motivation, 125 PSYCHOL. BULL. 627, 658-59 (1999) (summarizing their meta-analysis of other studies).
228. Ernst Fehr & Simon Gächter, Do Incentive Contracts Undermine Voluntary Cooperation?, 30-31 (Inst. for Empirical Research in Econ., Univ. of Zurich, Working Paper No. 34, 2002) (finding larger crowding-out effect for penalties than for bonuses), available at http://www.iew.uzh.ch/wp/iewwp034.pdf.
229. See Kaplow, supra note 127, at 551-52.
230. See, e.g., Fischel & Shapiro, supra note 77, at 269.
231. In effect, the carrot substitutes for unavailable private insurance. Promising to use a carrot takes the cost of the risk of newly discovered dangers off of producers, and distributes it to society as a whole. This risk-spreading is efficient because of the diminishing marginal utility of wealth: when everyone in society suffers a small loss, the total social utility lost is less than if one person suffered a loss of the same total size. GUIDO CALABRESI, THE COSTS OF ACCIDENTS 39 (1970). Typically, moral hazard is a serious concern with these forms of implied government bailouts.
232. Daryl J. Levinson, Making Government Pay: Markets, Politics, and the Allocation of Constitutional Costs, 67 U. CHI. L. REV. 345, 390 (2000). But by assumption, we have no moral hazard in the unforeseeable-risk scenario.
233. The analysis is similar if we shift from wholly unforeseeable to nearly unforeseeable events. Low-probability outcomes remain difficult to privately insure against because the transaction costs of insurance will eat up any risk-spreading gains.
234. Kaplow, supra note 127, at 594. While moral hazard will not be zero, it will still be very small. Thus, we do not need to distinguish much between different degrees of near unforeseeability.
235. Even if hazards were unforeseeable, it might be argued that the expected change in behavior from outcomes that cannot be predicted would be small, since the cost of far-future events would be heavily discounted. POSNER, supra note 48, at 69.
236. See Levmore, supra note 132, at 1663.
237. Cf. Levmore, supra note 132. at 1665 (noting that parties who anticipate regulation that disadvantages them may work to delay its implementation). Probably the more complete way of stating this point is that producers will choose among strategies involving mixes of concealment, lobbying, and real change. If change is cheaper than concealment and lobbying, the producer may simply change. But given the government's difficulty in gathering private information, it seems plausible that concealment will often be a low-cost strategy-unless the government penalizes it. More on that in a moment.
238. See Ferraro, supra note 82, at 811.
239. Cf. Chang, supra note 18, at 310-24 (arguing that nations offered carrots by other nations will overestimate the costs of environmental mitigation, while sticks will not have this effect).
240. Hanson & Logue, supra note 61, at 1274 n.458 (arguing that the government should probably not ignore information from producers, even if it is suspected to be false, because producers have more information).
241. See STERNER, supra note 7, at 159 (offering bottle deposits as an example of an information-revealing carrot).
242. Ferraro, supra note 82, at 812 (suggesting separating equilibrium contracts or auctions to screen out exaggerators).
243. Even if carrots are available to all incumbents, at some point new information is only marginally useful, and so latecomers should get sticks. To eliminate competitive advantages for incumbents, policy can shift so that every producer faces sticks over time. Incumbents may rationally predict that eventually the government will transition to sticks. Assuming any degree of time discounting on their part, though, the fact that sticks arrive rather later than carrots should make them more amenable to revealing their private information.
244. Kaplow & Shavell, supra note 45, at 738.
245. See POSNER, supra note 48, at 63-67 (discussing the train example).
246. Cf. Blume & Rubinfeld, supra note 127, at 590-91 (observing that tax payments to fund compensated takings are the equivalent of insurance premiums). 147. For instance, suppose five farmers live near a railroad track. The railroad does $100 in damage to each farmer's crops by using a cheap, spark-prone engine. To discourage the railroad from operating in that risky manner, the farmers each pay a tax of $100 to the government, which then pays the railroad to cease. Now, suppose that each farmer can move his crops far enough from the tracks to avoid any damage. If any one farmer mitigates, total damage drops to $400, making the per-farmer tax only $80.
247. This point is similar to the argument sometimes made in favor of requiring the government to pay when its regulations reduce the value of a regulated party's property: if the government must internalize the budget costs of both sides of the externality ledger, it will only regulate when regulation increases total welfare.
248. Blume & Rubinfeld, supra note 127, at 620-22.
249. Kaplow and Shavell hint at a similar idea, stating in passing that "property rule protection of injurers' right to cause harm" would give victims "strong incentives to avoid exposure."
250. Kaplow & Shavell, supra note 45, at
251. For a discussion of the role of group cohesion and social institutions in coordinating for the production of public goods.
252. see ELINOR OSTROM, GOVERNING THE COMMONS: THE EVOLUTION OF INSTITUTIONS FOR COLLECTIVE ACTION 26-54, 185-214 (1990).
253. Robert C. Ellickson, New Institutions for Old Neighborhoods, 48 DUKE L.J. 75, 78-90 (1998)
254. Wolfgang Stroebe & Bruno S. Frey, Self-Interest and Collective Action: The Economics and Psychology of Public Goods, 21 BRIT. J. SOC. PSYCHOL. 121, 131-35 (1982).
255. More precisely, and putting aside any game-theory-inspired interactions with the incentives of other victims, an individual victim mitigates where mitigation costs are less than the damage per victim divided by the number of taxpayer-victims. That situation is probably unusual, since if mitigation is cheaper than voters' proportional share of the tax, they presumably would mitigate rather than vote for the tax. But there might be some heterogeneity in mitigation expenses or tax burden. Returning to our farmer example, suppose it costs only $15 for one of the farmers to move crops away from the fiery tracks. Since that farmer can now pay $15 to achieve a $20 tax savings, she will do so (unless she believes that by not mitigating she can induce other farmers to mitigate). Note, though, that if there were ten farmers, the total tax would be $1000, and mitigation by one farmer would still save $100. Each farmer's individual mitigation efforts therefore reduce each tax bill by only $10, meaning that mitigation would no longer be cost-effective, even for the low-cost farmer. Again, then, mitigation incentives depend on the size of the group of taxpayer-victims.
256. E.g., BAUMOL & OATES, supra note 7, at 230-31.
257. see Wittman, supra note 7, at 67-68 (examining this point in the tort context).
258. E.g., Wittman, supra note 7, at 67-68. To see this, consider a house husband who is hanging his laundry outside to dry. Suppose that it costs him $1 in quarters and wasted time to dry them at the laundromat instead. Suppose also that factory smoke causes $2 in damage to shirts left outside. What if the husband is not compensated for his damaged shirts, but instead the factory pays a fine? Then he will dry them at the laundromat, because each damaged shirt leaves him out $2, which is more than the cost of quarters. But what if he is compensated by the factory? Then he leaves the shirts outside and collects the money. In that scenario, the husband loses $2 and gains $2, for a net of zero per shirt, while laundering represents a loss of $1 per shirt. This could be a socially inefficient result-for example, if it would cost the factory more than $1 per shirt to avoid the damage, and $1 has the same utility value for factory investors and shirt washers.
259. Consider the Federal Deposit Insurance Corporation (FDIC), an insurance pool for banks funded by banks. Suppose we have ten banks contributing to the pool and that total operating costs are $100 million annually. Say also that if any one bank defaults it jeopardizes the operations of other banks, for instance by worrying depositors and causing withdrawals and even runs, costing each other bank $5 million. So let us now say that the FDIC imposes a fine of $45 million (9 × $5 million) on a bank that defaults, payable to the funding pool. In effect, then, a default by one bank fully compensates each other bank by reducing their individual shares of the annual operating costs of the pool from $10 million to $5 million. If banks can, at some cost, reduce their exposure to damage from a competitor's default, this is an inefficient result, because banks will have no incentive to invest in mitigation.
260. To illustrate, imagine a $100 million fine on a water polluter, shared equally among 100 million taxpayers nationwide. Presumably the fine is set at this level because the marginal damage is also $100 million. If each taxpayer experiences an equal amount of that harm, their net cost or benefit from the pollution and fine is zero ($1 in tax saved less $1 in damage). If the mitigation is at all costly-say, the price of a Brita filter-then no taxpayer has any incentive to mitigate. A more likely scenario is that some households, such as those with children, are more vulnerable. Households bearing a disproportionate share of the marginal damage may suffer a net loss as a result of the combined pollution and fine, and therefore conceivably have some incentives to mitigate. But other portions of the population still would not. Transaction costs somewhat weaken the equivalence, because they presumably would reduce the amount of net revenue benefits from imposing a fine. But on the other hand if fines permit lower tax rates then society experiences less deadweight tax loss.
261. Cf. Giuseppe Dari-Mattiacci & Nuno Garoupa, Least-Cost Avoidance: The Tragedy of Common Safety, 25 J.L. ECON. & ORG. 235, 258 (2007) (noting that victims' failure to mitigate is itself a negative fiscal externality imposed on producers).
262. I should acknowledge that carrots can also encourage victims to conceal their ability to mitigate. However, once we recognize that victims help to fund carrots, it is evident that the problem is more significant for sticks. Since victims bear a portion of the cost of the carrot, they internalize at least some of society's total cost of mitigating the externality, making them more likely to prefer the most efficient result. For example, if victims fully internalize the cost, they will always prefer to assign mitigation to the least-cost avoider. They therefore would have no economic interest in concealing their costs of mitigation.
263. See Gary Bornstein & Meyrav Ben-Yossef, Cooperation in Intergroup and SingleGroup Social Dilemmas, 30 J. EXPERIMENTAL SOC. PSYCHOL. 52, 63 (1994). In part this is because in that setting groups use greater intragroup incentives to force cooperation.
264. See Gary Bornstein & Meyrav Ben-Yossef, Cooperation in Intergroup and SingleGroup Social Dilemmas, 30 J. EXPERIMENTAL SOC. PSYCHOL. 52, 63 (1994), and in part it may result from psychological pressure to conform.
265. See Gary Bornstein & Meyrav Ben-Yossef, Cooperation in Intergroup and SingleGroup Social Dilemmas, 30 J. EXPERIMENTAL SOC. PSYCHOL. 52, 63 (1994). at 64.
266. For consideration of whether subsidies might be defensible because they are more politically achievable.
267. see text accompanying notes 260-66 below. 158. On the question of whether price regulation would be better in this context than command-and-control regulation, such as caps on spending.
268. see David S. Gamage, Note, Taxing Political Donations: The Case for Corrective Taxes in Campaign Finance, 113 YALE L.J. 1283, 1296-321 (2004). Whether such a policy would be constitutional is a different question, which I leave for others.
269. For a description of the National Flood Insurance Program and its struggles with moral hazard.
270. see JUSTIN R. PIDOT, COASTAL DISASTER INSURANCE IN THE ERA OF GLOBAL WARMING 12-17 (2007).
271. staff of j. Comm. On taxation, 111TH CONG., ESTIMATES OF FEDERAL TAX EXPENDITURES FOR FISCAL YEARS 2010-2014, at 49 (Comm. Print 2010). Some commentators would argue that the benefits for retirement savings are not subsidies, but instead should be viewed as a step towards a normatively correct tax system in which all savings are untaxed.
272. Compare Bruce Wolk, Discrimination Rules for Qualified Retirement Plans: Good Intentions Confront Economic Reality, 70 VA. L. REV. 419, 421-22 (1984) (concluding the current tax treatment of qualified pension plans is a subsidy)
273. Edward A. Zelinsky, The Tax Treatment of Qualified Plans: A Classic Defense of the Status Quo, 66 N.C. L. REV. 315, 315-16 (1988) (concluding the current tax treatment of qualified pension plans is not a tax expenditure). This illustrates again the normative instability of any given baseline. My point here is only that retirement preferences depart from the current baseline in which most saving is taxed.
274. See POSNER, supra note 48, at 638-39 (noting burdens of poverty on altruists).
275. GRUBER, supra note 11, at 650.
276. E.g., Joseph Bankman & David Weisbach, The Superiority of an Ideal Consumption Tax over an Ideal Income Tax, 58 STAN. L. REV. 1413, 1455 (2006).
277. Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (codified as amended in scattered sections of the U.S. Code).
278. amended by Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029.
279. For an accessible summary.
280. see HENRY J. KAISER FAMILY FOUND., SUMMARY OF NEW HEALTH REFORM LAW (2011), available at http://www.kff.org/healthreform/upload/8061.pdf.
281. See SENATE DEMOCRATIC POLICY COMM., THE PATIENT PROTECTION AND AFFORDABLE CARE ACT DETAILED SUMMARY 1 (2009), available at http://dpc.senate.gov/healthreformbill/healthbill04.pdf.
282. The legislation expands Medicaid eligibility to all non-Medicare qualified adults earning less than 133% of the federal poverty limit, and offers subsidies toward private insurance for households between 133% and 400% of the federal poverty limit.
283. HENRY J. KAISER FAMILY FOUND., supra note 165, at 1-2.
284. Another aspect of underinsurance, of course, is that being even partially uninsured is harmful for one's health and peace of mind.
285. Amy Finkelstein et al., The Oregon Health Insurance Experiment: Evidence from the First Year 4 (Nat'l Bureau of Econ. Research, Working Paper No. 17,190, 2011), available at http://www.nber.org/papers/w17190.pdf. Arguably, it should be possible to alleviate those concerns without encouraging overconsumption of health care.
286. See supra text accompanying note 88.
287. Gideon Yaniv et al., Junk-Food, Home Cooking, Physical Activity and Obesity: The Effect of the Fat Tax and the Thin Subsidy, 93 J. PUB. ECON. 823, 824 (2009).
288. For an explanation of why traffic is the result of negative externalities.
289. see Jona-Than Remy Nash, Economic Efficiency Versus Public Choice: The Case of Property Rights in Road Traffic Management, 49 B.C. L. REV. 673, 687-94 (2008).
290. Of course, Axel used bananas.
291. See BEVERLY HILLS COP, supra note.
292. See e.g., U.S. DEP'T OF TRANSP., CONGESTION PRICING: A PRIMER 2-3 (2006), available at http://www.ops.fhwa.dot.gov/publications/congestionpricing/congestionpricing.pdf (describing San Diego's policy of granting free access to express lanes for vehicles with multiple passengers).
293. Nash, supra note 171, at 704 n.200 (describing subsidy programs in Maryland and Washington, D.C.).
294. E.g., Richard Arnott, Pricing Urban Transportation, in PUBLIC ECONOMICS: SELECTED PAPERS BY WILLIAM VICKREY 271, 271-75 (Richard Arnott et al. eds., 1994) (describing Vickrey's efforts in support of congestion pricing).
295. Nash, supra note 171, at 676.
296. Nash, supra note 171, at 713 n.256, 727.
297. For other suggestions.
298. see Lior Jacob Strahilevitz, How Changes in Property Regimes Influence Social Norms: Commodifying California's Carpool Lanes, 75 IND. L.J. 1231, 1246-47 (2000).
299. For reviews.
300. see Jonathan Gruber, Medicaid, in MEANS-TESTED TRANSFER PROGRAMS IN THE UNITED STATES 15, 68-72 (Robert A. Moffitt ed., 2003).
301. Robert A. Moffitt, The Temporary Assistance for Needy Families Program, in MEANS-TESTED TRANSFER PROGRAMS IN THE UNITED STATES.
302. Supra note, at 291, 317-20.
303. For more on business improvement districts.
304. see Richard Briffault, A Government for Our Time? Business Improvement Districts and Urban Governance, 99 COLUM. L. REV. 365, 377-414 (1999).
305. E.g., John D. Colombo, The Marketing of Philanthropy and the Charitable Contributions Deduction: Integrating Theories for the Deduction and Tax Exemption, 36 WAKE FOREST L. REV. 657, 698 (2001).
306. Mark P. Gergen, The Case for a Charitable Contributions Deduction, 74 VA. L. REV. 1393, 1397-98 (1988).
307. 26 U.S.C. § 4942 (2006 & Supp. I 2007). The text above considerably simplifies the workings of the tax, but the details are not of interest here.
308. For a review of the available evidence on foundation giving patterns.
309. see Richard Sansing, Distribution Policies of Private Foundations, in HANDBOOK OF RESEARCH ON NONPROFIT ECONOMICS AND MANAGEMENT 42, 44-51 (Bruce A. Seaman & Dennis R. Young eds., 2010).
310. See BURTON A. WEISBROD, THE VOLUNTARY NONPROFIT SECTOR: AN ECONOMIC ANALYSIS 69 (1977).
311. See See BURTON A. WEISBROD, THE VOLUNTARY NONPROFIT SECTOR: AN ECONOMIC ANALYSIS. at 69-70.
312. 26 U.S.C. § 164 (2006 & Supp. IV 2010).
313. See Brian Galle & Jonathan Klick, Recessions and the Social Safety Net: The Alternative Minimum Tax as a Countercyclical Fiscal Stabilizer, 63 STAN. L. REV. 187, 226-35 (2010).
314. Daniel Hewitt, Demand for National Public Goods: Estimates from Surveys, 23 ECON. INQUIRY 487, 503 (1985).
315. Wittman, supra note 7, at 71, 79.
316. See supra text accompanying notes 90-100.
317. Engel et al., supra note 7, at 670.
318. see also William M. Landes & Richard A. Posner, Salvors, Finders, Good Samaritans, and Other Rescuers: An Economic Study of Law and Altruism, 7 J. LEGAL STUD. 83, 99 (1978) (showing that paid rescue crowds out altruistic rescue).
319. E.g., Amihai Glazer & Kai A. Konrad, A Signaling Explanation for Charity, 86 AM. ECON. REV. 1019, 1019-21 (1996).
320. Susan Rose-Ackerman, Altruism, Nonprofits, and Economic Theory, 34 J. ECON. LIT. 701, 717 (1996).
321. Obviously, this is a generalization. For example, there is a market in carbon offsets. KATHERINE HAMILTON ET AL., ECOSYSTEM MARKETPLACE & NEW CARBON FIN., FORGING A FRONTIER: STATE OF THE VOLUNTARY CARBON MARKETS 2008, at 33 (2008), available at http://www.ecosystemmarketplace.com/documents/cms_documents/2008_StateofVoluntaryCarbonMarket2.pdf
322. See, e.g., Bruce R. Kingma & Robert McClelland, Public Radio Stations Are Really, Really Not Public Goods: Charitable Contributions and Impure Altruism, 66 ANNALS PUB. & COOPERATIVE ECON. 65, 66-67, 73-74 (1995) (identifying several reasons donors may contribute to charity, and reporting evidence that these motives are indeed important to observed giving).
323. See Landes & Posner, supra note 188, at 99.
324. see also Brian Galle, Keep Charity Charitable, 88 TEX. L. REV. 1213, 1224-25, 1233 (2010) (making this point about the charitable contribution deduction).
325. Cf. Scott Hershovitz, Two Models of Tort (and Takings), 92 VA. L. REV. 1147, 1175-78 (2006) (arguing that tort law does not require compensation for gratuitous benefits because there is no moral duty to do so).
326. Rob Atkinson, Altruism in Nonprofit Organizations, 31 B.C. L. REV. 501, 629 (1990).
327. Compare Bruno S. Frey & Reto Jegen, Motivation Crowding Theory, 15 J. ECON. SURVS. 589, 599-600 (2001) (reporting a handful of studies that find penalties crowd out altruistic behavior).
328. with Yuval Feldman & Orly Lobel, The Incentives Matrix: The Comparative Effectiveness of Rewards, Liabilities, Duties, and Protections for Reporting Illegality, 88 TEX. L. REV. 1151, 1205-06 (2010) (finding no crowd-out from penalties).
329. Sunstein, supra note 21, at 546.
330. see also Nash, supra note 106, at 479 (arguing that assigning the obligation to pay to those who are responsible for producing negative externalities encourages personal responsibility and trust in government).
331. E.g., Frey & Jegen, supra note 195, at 598-607.
332. Mark R. Lepper et al., Undermining Children's Intrinsic Interest with Extrinsic Reward: A Test of the "Overjustification" Hypothesis, 28 J. PERSONALITY & SOC. PSYCHOL. 129 (1973). There is a small but developing literature aimed at studying how to provide Pigouvian pricing without also crowding out intrinsic motivations.
333. See Muradian et al., supra note 82, at 1205-07 (describing some recent suggestions and case studies).
334. See Sunstein, supra note 21, at 546-47 (describing incentive effects of paying broadcasters to produce public interest programming).
335. Kevin G. Hall, Treasury Shifts Target of Wall Street Rescue Plan, KNIGHT RIDDER, Nov. 13, 2008, available at 2008 WLNR 21699361.
336. See John H. Cochrane & Luigi Zingales, Lehman and the Financial Crisis, WALL ST. J., Sept. 15, 2009, at A21.
337. For example, imminent expiration of temporary tax subsidies accelerates the subsidized activity.
338. Alan J. Auerbach & Kevin A. Hassett, Fiscal Policy and Uncertainty, 5 INT'L FIN. 229, 231-36 (2002).
339. Christopher L. House & Matthew D. Shapiro, Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation, 98 AM. ECON. REV. 737, 762-63 (2008).
340. See supra text accompanying notes 134-37.
341. In more technical terms, what is happening in the positive externality context is the intrusion of a zero lower bound on the degree of crowd-out. Anticipated sticks might crowd out productive activities when those activities are already under way. But if there are no regulable activities in progress, there is nothing to crowd out.
342. Cf. Levmore, supra note 132, at 1678 (noting that the government should want to compensate manufacturers of goods useful during crises, in order to avoid discouraging investments in producing those goods).
343. Wittman, supra note 7, at 70 n.37 (suggesting that a duty to rescue might discourage people from entering areas where others may be likely to need rescuing).
344. Dari-Mattiacci, supra note 21, at 33-40, 54. 206.
345. Dari-Mattiacci, supra note 21, at. 38.54. 206
346. EDWARD P. LAZEAR, PERSONNEL ECONOMICS 65-69 (1995).
347. See POSNER, supra note 48, at 52-53.
348. See POSNER, supra note 48. at 202.
349. Cf. Wittman, supra note 7, at 71 (arguing that it may be difficult to employ sticks to produce positive externalities because of difficulty in identifying whom to punish). 211.
350. Cf. BAUMOL & OATES, supra note 7, at 214 (noting that subsidies require the gov-ernment to specify the benchmark amount of goods to be produced).
351. Sunstein, supra note 21, at 545 (noting the difficulty of designing a price instrument that captures the uncertain mar-ginal value of another unit of public interest television).
352. Wittman, supra note 7, at 68-69 (pointing out that it may be difficult to find and pay all potential producers). 212.
353. See LOUIS KAPLOW, THE THEORY OF TAXATION AND PUBLIC ECONOMICS 253-54, 271-72 (2008) (noting that even subsidies for charity should be optimized, not maximized). 213.
354. But see Robert Cooter, Prices and Sanctions, 84 COLUM. L. REV. 1523, 1533-34 (1984) (arguing that policymakers can determine the correct level of production of a good by observing social consensus, even if marginal costs are not observable). A problem with Cooter's argument is that community behavior may be distorted by biases and fixed in place by path dependence, such as the happenstance of prior law and institutional arrangements. Also, as he acknowledges, long-held standards simply do not exist for new policy choices, such as the extension of copyright in my example. Admittedly, even if society does not know the precise marginal social benefit of a good, if society knows the general slopes of the supply and demand curves for the good, then the regulator could make reasonable predictions about whether overproduction or underproduction is the greater danger. If we expect that the social benefit curve is relatively steep, then the risk of underproduction is worse, assuming equal chances of underand overproduction. Reciprocally, the risk of overproduction is worse if the curve is relatively flat.
355. Pub. L. No. 105-298, § 102, 112 Stat. 287 (1998) (codified as amended at 17 U.S.C. §§ 301-304 (2006 & Supp. IV 2010)).
356. See Joseph P. Liu, Copyright and Time: A Proposal, 101 MICH. L. REV. 409, 413-22 (2002). One thing that does seem clear is that granting the extension retroactively did not spur any new creations by dead artists.
357. See Rob Atkinson, Reforming Cy Pres Reform, 44 HASTINGS L.J. 1111, 1123 & n.38 (1993).
358. See, e.g., POSNER, supra note 48, at 697.
359. Alex M. Johnson, Jr., Limiting Dead Hand Control of Charitable Trusts: Expanding the Use of the Cy Pres Doctrine, 21 U. HAW. L. REV. 353, 379-91 (1999).
360. See CALABRESI, supra note 136, at 150-52.
361. see also Saul Levmore, Explaining Restitution, 71 VA. L. REV. 65, 73 (1985) (extending least-cost avoider analysis to those who provide benefits to others).
362. See Wittman, supra note 7, at 71.
363. 26 U.S.C. §§ 167-199 (2006 & Supp. IV 2010).
364. Office of Aviation Analysis, Essential Air Service Program, U.S. DEP'T TRANSP., http://ostpxweb.dot.gov/aviation/x-50%20role_files/essentialairservice.htm (last visited Apr. 13, 2012).
365. HOME and Low Income Housing Tax Credits (LIHTC), U.S. DEP'T HOUSING & URB. DEV., http://www.hud.gov/offices/cpd/affordablehousing/training/web/lihtc (last visited Apr. 13, 2012).
366. See David M. Schizer, Subsidizing the Press, 3 J. LEGAL ANALYSIS 1 (2011).
367. See Harold M. Hochman & James D. Rodgers, The Optimal Tax Treatment of Charitable Contributions, in THE ECONOMICS OF NONPROFIT INSTITUTIONS: STUDIES IN STRUCTURE AND POLICY 224, 228-32 (Susan Rose-Ackerman ed., 1986).
368. Schizer, supra note 222, at 5-16.
369. Sunstein, supra note 21, at 539-42.
370. See Sunstein, supra note. at 544.
371. Cf. STERNER, supra note 7, at 171 (noting that subsidies affect output by attracting new investment in the regulated field).
372. See, e.g., Frans L. Leeuw, The Carrot: Subsidies as a Tool of GovernmentTheory and Practice, in CARROTS, STICKS, AND SERMONS: POLICY INSTRUMENTS AND THEIR EVALUATION 77, 77 (Marie-Louise Bemelmans-Videc et al. eds., 2007) (reporting that major European countries spend between twenty and thirty-five percent of their GDP on grants and subsidies)
373. cf. Calabresi &Melamed, supra note 21, at 1117 (noting that a rule under which victims compensate polluters for limiting their right to pollute "may well be the most frequent device employed").
374. For overviews.
375. see JAMES M. BUCHANAN & GORDON TULLOCK, THE CALCULUS OF CONSENT (1962).
376. DANIEL A. FARBER & PHILIP P. FRICKEY LAW AND PUBLIC CHOICE: A CRITICAL INTRODUCTION (1991).
377. See Chulho Jung et al., The Coase Theorem in a Rent-Seeking Society, 15 INT'L REV. L. & ECON. 259, 261 (1995) (noting that dispersed interests are less likely to be able to defend an efficient choice of policy instrument that favors them).
378. Merrill, supra note 97, at 287-89 (arguing that public choice theory explains successful political opposition to a carbon tax).
379. See Daniel A. Farber, Public Choice and Just Compensation, 9 CONST. COMMENT. 279, 292-93 (1992) (arguing that requiring compensation for takings increases takings because the costs of compensation are not paid for by direct beneficiaries but instead come from the federal treasury).
380. Nathaniel O. Keohane et al., The Choice of Regulatory Instruments in Environmental Policy, 22 HARV. ENVTL. L. REV. 313, 347-48 (1998) (explaining that firms may oppose efficient regulations when redistribution from the firm exceeds the firm's share of social welfare gains).
381. But see DANIEL SHAVIRO, WHEN RULES CHANGE: AN ECONOMIC AND POLITICAL ANALYSIS OF TRANSITION RELIEF AND RETROACTIVITY 77-78 (2000) (suggesting that narrow interest groups may be disadvantaged in some regulatory settings). For a description of the commons problem.
382. see Lee Anne Fennell, Common Interest Tragedies, 98 NW. U. L. REV. 907, 913-25 (2004).
383. See JACOB S. HACKER & PAUL PIERSON, WINNER-TAKE-ALL POLITICS 41-73 (2010).
384. See supra text accompanying notes 145-56.
385. See Stephen Loffredo, Poverty, Democracy, and Constitutional Law, 141 U. PA. L. REV. 1277, 1327-28 (1993). If the group of beneficiaries is relatively easy to organize, however, an initial lack of resources may be unimportant. Entrepreneurs might be willing to organize and advocate for the beneficiaries in exchange for their political support, or for a portion of the other expected proceeds of their victory.
386. See Elizabeth Garrett, Harnessing Politics: The Dynamics of Offset Requirements in the Tax Legislative Process, 65 U. CHI. L. REV. 501, 518-19 (1998).
387. See Christopher H. Schroeder, Rational Choice Versus Republican MomentExplanations for Environmental Laws, 1969-73, 9 DUKE ENVTL. L. & POL'Y F. 29, 49-56 (1998).
388. The basic problem is that if the state persists in redistribution efforts, those who are burdened in excess of their local benefits will leave, threatening local prosperity and local officials' electoral prospects.
389. See WILLIAM A. FISCHEL, THE HOMEVOTER HYPOTHESIS 39-71 (2001).
390. See Charles C. Brown & Wallace E. Oates, Assistance to the Poor in a Federal System, 32 J. PUB. ECON. 307, 328 (1987).
391. William F. Fox & John A. Swain, The Federal Role in State Taxation: A Normative Approach, 60 NAT'L TAX J. 611, 614-15 (2007).
392. This tactic is not unheard of. For example, the Charlotte Bobcats reportedly signed a contract with the City of Charlotte agreeing to pay a $200 million termination fee if they break the lease on their arena and move to another city. A Look at Potential NBA Relocation Candidates, SEATTLE TIMES (July 13, 2008, 12:00 AM), http://seattletimes.nwsource.com/html/nba/2008048569_sonichart13.html.
393. See, e.g., Am. Trucking Ass'ns v. Scheiner, 483 U.S. 266, 284 (1987) (holding that states cannot "plac[e] a financial barrier" at their borders). On the Court's willingness to abide incentives for entry.
394. see New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 278 (1988) (dictum).
395. and Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 532-33 (1959) (Brennan, J., concurring) (suggesting that the Court's equal protection decisions could be reconciled on the grounds that states can reward newcomers but not punish them).
396. But see Cuno v. DaimlerChrysler, Inc., 386 F.3d 738, 742-48 (6th Cir. 2004) (holding that selective state tax benefit for in-state manufacturer violated the dormant Commerce Clause), rev'd on other grounds, 547 U.S. 332 (2006).
397. See Peter D. Enrich, Saving the States from Themselves: Commerce Clause Constraints on State Tax Incentives for Business, 110 HARV. L. REV. 377, 382-405, 440-48 (1996) (arguing against state-level relocation incentives).
398. For overviews of the doctrines.
399. see RICHARD H. FALLON, Jr. et al., THE FEDERAL COURTS AND THE FEDERAL SYSTEM 101-39 (6th ed. 2009).
400. See ROBERT D. COOTER, THE STRATEGIC CONSTITUTION 62-63 (2000).
401. See ROBERT D. COOTER, THE STRATEGIC CONSTITUTION 62-63 (2000).
402. see also Saul Levmore, Precommitment Politics, 82 VA. L. REV. 567, 571-72, 581 (1996).
403. See Richard L. Doernberg & Fred S. McChesney, On the Accelerating Rate and Decreasing Durability of Tax Reform, 71 MINN. L. REV. 913, 946 (1987).
404. I say "in their archetypical forms" here because my framework also defines a stick as any painful departure from the status quo. So a stick may simply be a reduction in a preexisting carrot program, in which case the sharp ease-of-monitoring distinction between the two instruments fades.
405. For a cogent summary of the law on suits to force government action.
406. see Lisa Schultz Bressman, Judicial Review of Agency Inaction: An Arbitrariness Approach, 79 N.Y.U. L. REV. 1657, 1664-74 (2004). On the questionable status of private suits by thirdparty beneficiaries.
407. see Samuel R. Bagenstos, Spending Clause Litigation in the Roberts Court, 58 DUKE L.J. 345, 385-93 (2008).
408. and Daniel P. Tokaji, Public Rights and Private Rights of Action: The Enforcement of Federal Election Laws, 44 IND. L. REV. 113, 125-37 (2010).
409. See Rebecca E. Zietlow, Two Wrongs Don't Add Up to Rights: The Importance of Preserving Due Process in Light of Recent Welfare Reform Measures, 45 AM. U. L. REV. 1111, 1121-26, 1137-39 (1996) (explaining the right to challenge an individualized denial and summarizing case law distinguishing that right from the opportunity to challenge general government policy shifts).
410. E.g., Regan V. Taxation with Representation of Wash., 461 U.S. 540, 544 (1983). 250. United States v. Am. Library Ass'n, 539 U.S. 194, 212 (2003) (Rehnquist, C.J.) (plurality opinion).
411. Regan, 461 U.S. at 544.
412. Rust V. Sullivan, 500 U.S. 173, 193 (1991).
413. Citizens United v. FEC, 130 S. Ct. 876, 896-97 (2010).
414. See Miriam Galston, Lobbying and the Public Interest: Rethinking the Internal Revenue Code's Treatment of Legislative Activities, 71 TEX. L. REV. 1269, 1282-1314 (1993).
415. E.g., Mary L. Heen, Congress, Public Values, and the Financing of Public Choice, 65 OHIO ST. L.J. 853, 898-910 (2004).
416. Kleinbard, supra note 9, at 18-20. 256.
417. See Galle & Klick, supra note 185, at 237-38.
418. See Galle & Klick, supra note 185, at 237-38.
419. Of course, in many cases sophisticates may be at odds with the interests of the general public.
420. See, e.g., Keohane et al., supra note 231, at 359 (claiming that hidden costs facilitate enactment of environmental regulations that disfavor the general public). In that situation, transparency would presumably increase lobbying by both the public and also the sophisticates who must attempt to outweigh them.
421. For additional skepticism that tax-expenditure opacity can be cured simply by disclosure, and the comment that many other forms of government transfers are just as hidden.
422. see Roin, supra note 31, at 624.
423. E.g., STERNER, supra note 7, at 196.
424. Engel et al., supra note 7, at 669.
425. Mestelman, supra note 7, at 187.
426. see also Levmore, supra note 132, at 1665-66 (suggesting that a commitment against occasional payoffs to "losers" of new regulatory policy would reduce the amount of good new policy overall).
427. See supra text accompanying notes 122-30, 141.
428. See supra text accompanying notes 198-201. 262.
429. Cf. Robert W. Hahn, Jobs and Environmental Quality: Some Implications for Instrument Choice, 20 POL'Y SCI. 289, 299 (1987) (reporting that voters respond to the perceived, rather than actual, impact of costs and benefits).
430. Mathew D. McCubbins & Terry Sullivan, Constituency Influences on Legislative Policy Choice, 18 QUALITY & QUANTITY 299, 301-02 (1984) (same).
431. See Lisa Heinzerling, Selling Pollution, Forcing Democracy, 14 STAN. ENVTL. L.J. 300, 330 (1995) (describing grandfathering of permits as a tool for winning political support from polluters).
432. Stavins, supra note 8, at 351 (describing the political advantage of cap and trade as avoiding a "focus" on higher costs).
433. See, e.g., George F. Will, Editorial, Carbon's Power Brokers, WASH. POST, June 1, 2008, at B7. For evidence on the importance of framing on public perception of energy taxes.
434. see Shi-Ling Hsu et al., Pollution Tax Heuristics: An Empirical Study of Willingness to Pay Higher Gasoline Taxes, 36 ENERGY POL'Y 3612, 3617-18 (2008).
435. I am grateful to Darien Shanske for this point.
436. See, e.g., Cheryl D. Block, Overt and Covert Bailouts: Developing a Public Bailout Policy, 67 IND. L.J. 951, 968-72 (1992).
437. Daryl J. Levinson, Parchment and Politics: The Positive Puzzle of Constitutional Commitment, 124 HARV. L. REV. 657, 672-97 (2011).
438. Adam Levitin, Bankrupt Politics and the Politics of Bankruptcy, 97 CORNELL L. REV. (forthcoming 2012) (manuscript at 19-23).
439. Jonathan R. Macey & James P. Holdcroft, Jr., Failure Is an Option: An Ersatz-Antitrust Approach to Financial Regulation, 120 YALE L.J. 1368, 1375-90 (2011).
440. Martin S. Feldstein, The Welfare Loss of Excess Health Insurance, 81 J. POL. ECON. 251 (1973).
441. E.g., Macey & Holdcroft, supra note 267, at 1370.
442. See Galle & Klick, supra note 185, at 200-02 (explaining causes of present bias among state and local policymakers).
443. See, e.g., Levinson, supra note 267, at 661-62, 672-81.
444. Terry M. Moe, The Politics of Structural Choice: Toward a Theory of Public Bureaucracy, in ORGANIZATION THEORY: FROM CHESTER BARNARD TO THE PRESENT AND BEYOND 116, 137 (Oliver E. Williamson ed., 1990).
445. Kenneth A. Shepsle, Bureaucratic Drift, Coalitional Drift, and Time Consistency: A Comment on Macey, 8 J.L. ECON. & ORG. 111, 114 (1992).
446. See William M. Landes & Richard A. Posner, The Independent Judiciary in an Interest-Group Perspective, 18 J.L. & ECON. 875 (1975).
447. Rachel E. Barkow, Insulating Agencies: Avoiding Capture Through Institutional Design, 89 TEX. L. REV. 15, 21 (2010).
448. Lisa Schultz Bressman & Robert B. Thompson, The Future of Agency Independence, 63 VAND. L. REV. 599, 613-14 (2010).
449. E.g., POSNER, supra note 48, at 868-69, 871.
450. Cf. Brian Galle, Designing Interstate Institutions: The Example of the Streamlined Sales and Use Tax Agreement ("SSUTA"), 40 U.C. DAVIS L. REV. 1381, 1414 (2007) (explaining entrenchment of appointed personnel as deriving from the value that the appointer assigns to the delegate's connections within and knowledge of their institution).
451. Levinson, supra note 267, at 694-97 (suggesting that political institutions achieve insulation from politics in part because they are structured to favor certain outcomes).
452. Brian Galle & Kirk J. Stark, Beyond Bailouts: Federal Tools for Preventing State Budget Crises, 87 IND. L.J. 599, 619-41 (2012).
453. Michael Abramowicz & Ian Ayres, Commitment Bonds, 100 GEO. L.J. 605, 622-44 (2012).
454. Michael Abramowicz & Ian Ayres, Commitment Bonds, 100 GEO. L.J. 605, 622-44 (2012). at 33.
455. For an example of a skilled combined analysis of several of these factors together.
456. see Victor Fleischer, A Theory of Taxing Sovereign Wealth, 84 N.Y.U. L. REV. 440, 494-503 (2009). On the use of information as a regulatory tool.
457. see Bradley C. Karkkainen, Information as Environmental Regulation: TRI and Performance Benchmarking, Precursor to a New Paradigm?, 89 GEO. L.J. 257, 286-345 (2001).
458. Evert Vedung & Frans C.J. van der Doelen, The Sermon: Information Programs in the Public Policy Process-Choice, Effects, and Evaluation, in CARROTS, STICKS, AND SERMONS: POLICY INSTRUMENTS AND THEIR EVALUATION.
459. supra note 228, at 103.
460. For some prior discussions of carrot/stick combinations.
461. see Engel et al., supra note 7, at 669.
462. Smith, supra note 65, at 695-96.
463. See Eugene F. Fama & Michael C. Jensen, Separation of Ownership and Control, 26 J.L. & ECON. 301, 302-11 (1983).
464. Levinson, supra note 136, at 356-57.