Volume 34, Issue 3 (Special Issue 2017)
Jason Furman, Keynote Address, How Lawyers Can Help Macroeconomists in the Wake of Three Major Challenges, 34 Yale J. on Reg. 709 (2017).
Macroeconomics has changed in light of both developments in the world and its internal intellectual evolution. This article explores ways in which legal scholarship can help inform macroeconomic research and macroeconomic policymaking in light of three important developments: (i) limitations on conventional monetary policy in a world with lower equilibrium interest rates; (ii) labor markets not clearing as evidenced by persistent declines in labor force participation; and (iii) the potential for microeconomic competition policies to have major macroeconomic effects.
Andrew Hayashi & Daniel P. MurphySavings Policy and the Paradox of Thrift, 34 Yale J. on Reg. 743 (2017).
The debate among legal scholars about individuals’ failure to save enough for retirement adopts a “micro” perspective. It focuses on the causes and consequences of undersaving from the perspective of individuals and analyzes how legal interventions, such as tax subsidies and nudges, can best address individual saving mistakes. This debate depends on certain assumptions about how the macroeconomy operates. When these assumptions do not hold, neither do the implications of the micro analysis, turning the conventional analysis of undersaving on its head. In fact, in certain circumstances, saving imposes a negative externality. When this is true, what looks like undersaving at the individual level may constitute oversaving in the aggregate, and the private vice of overconsumption may in fact be a public virtue—the “paradox of thrift.” We adopt a macro perspective and argue for reforms of legal interventions designed to increase savings.
Yair Listokin, Law and Macroeconomics: The Law and Economics of Recessions, 34 Yale J. on Reg. 791 (2017).
In this Article, I offer a macroeconomic perspective on law that reshapes the microeconomic perspective that currently dominates law and economics. I argue that, first, the economy works one way in ordinary economic conditions, in which supply capacity determines output, and a different way when interest rates are zero. At the “zero lower bound” on short-term interest rates, spending demand determines output. Second, because the economy functions differently at the zero lower bound, a law causes one set of effects at the zero lower bound and a different set of effects at other times. And third, because the same law has different effects at different times, law should be different at the zero lower bound than in other times. Specifically, law should do more to promote spending when the macro-economy is characterized by zero interest rates than in ordinary economic conditions. Because the stakes of recessions in which interest rates hit the zero lower bound are so high—for instance, tens of trillions of dollars in lost output, countless lives impaired, and a much higher likelihood of political upheavals like Donald Trump’s ascendancy to the U.S. Presidency—I argue that the (significant) costs associated with introducing macroeconomics into law are worth bearing.
Jonathan S. Masur & Eric A. Posner, Should Regulation Be Countercyclical?, 34 Yale J. on Reg. 857 (2017).
Politicians and commentators have from time to time proposed that regulations be suspended or delayed during recessions because of their adverse impact on employment. We evaluate this argument from within a macroeconomic framework. When the business cycle is taken into account, it is possible that regulations should be weakened during downturns and strengthened during upturns, along the lines of stimulus policy, which normally takes the form of countercyclical adjustments to taxes or the money supply. However, countercyclical regulation will normally be a less efficient means of stimulus. For that reason, it should be used in relative narrow conditions, and when the other stimulus instruments are either ineffective on their own terms or politically infeasible.