Journal of Scholarly Perspectives

California has led the country on environmental policy since at least the 1960s, when it first tackled the state’s notorious air pollution. But in the last decade, its role as an environmental leader has eclipsed its own impressive history. California has enacted the world’s most ambitious policy to tackle greenhouse gas emissions. Its program to do so—and some musings on the reasons for its leadership—are the focus of this essay.

This Article considers what can be learned about humanizing the modern American prison from studying a small and unorthodox unit inside L.A. County’s Men’s Central Jail. As a formal matter, this unit—known as K6G—is the same as every other in Men’s Central, but for one key difference: its residents are exclusively gay men and transgender women. In reality, however, life in the unit contrasts dramatically with life in the rest of the Jail. Most notably, whereas the Jail’s general population (GP) is almost entirely governed by rules created and violently enforced by racially stratified gangs, K6G is wholly free of so-called “gang politics” and the threat of collective violence (a.k.a. riots) that gang rule creates. K6G is also relatively free of sexual assault—no small feat given that the people housed in this unit would otherwise be among the Jail’s most vulnerable residents. Although very far from ideal, in these and other ways, life in K6Gis markedly safer and more humane than elsewhere in the Jail.

The primary market-based approach to reining in health care costs is generally referred to in policy discussions as “consumer directed health care” (“CDHC”). The simple idea underlying CDHC is that patients will demand less care if they are burdened with a greater responsibility for paying the actual cost of that care than is common in our current system, in which costs are largely borne by public or private health insurance with little patient cost sharing. CDHC implicitly relies on the “rational choice” assumption of neoclassical economics that, given the proper incentive structure, individual consumers will allocate resources between medical care and other goods and services (and, within the category of medical care, between competing treatment options) in a manner that maximizes their “subjective expected utility” (“SEU”). As I explain below, there are compelling reasons to believe, however, that most consumers, as boundedly rational decisionmakers, would be particularly bad at making efficient trade-offs when asked to make point-of-service medical care decisions.

This Article describes a novel, “choice architecture” approach that can help individuals to more optimally allocate their resources between medical care and other goods and services. Under this approach, the government would produce and dispense information concerning the costs and benefits of medical treatments sufficient to enable consumers and health insurers to contract for what I call “relative value health insurance” (“RVHI”), a product that covers medical interventions that meet or exceed a given level of cost-effectiveness.

These ought to be heady times for government service contracting. Once a controversial hobbyhorse of libertarian policy wonks and conservative ideologues, service contracting is now mainstream, championed by leading officials across the political spectrum. Once the target of serious legal challenges, contracting emerged from those early courtroom battles  not only unscathed, but also emboldened by the judiciary’s tacit endorsement. And, once believed too dangerous to be introduced in contexts calling for the exercise of sovereign power, service contracting is now ubiquitous in military combat, municipal policing, rule promulgation, environmental policymaking, prison administration, and public-benefits determinations.

But times are changing. Privatization’s proponents have always relied on government service contracting to promote its four-fold agenda: boosting efficiency, maximizing budgetary savings, enhancing unitary control over the administrative state, and reaping political dividends. Now, however, these proponents are also branching out. They are experimenting with newer, more compelling instruments that provide surer, quicker routes to promote privatization’s fiscal, political, and programmatic aims. In short, they are empowering a new generation poised to advance the privatization agenda in ways traditional service contracting never has. They are empowering privatization’s progeny.

Though the Enron and WorldCom cases were the focus of much attention, very little is known about the subset of securities class actions involving bankrupt companies. The context of bankruptcy should be interesting to scholars of securities litigation because it includes the cases where shareholders suffer the greatest harm. The resolution of securities class actions where a bankrupt company is the issuer may shed light on the way in which context affects how parties and courts assess the merit of lawsuits.

There are two competing views as to the relationship between bankruptcy and securities fraud. Companies approaching bankruptcy have greater incentives to commit fraud in order to save the company or the jobs of managers. There thus might be a causal relationship between bankruptcy and securities fraud. On the other hand, the context of bankruptcy could lead parties and judges to more readily assume that fraud was present in bankrupt companies. This perception could reflect hindsight bias, the tendency to overestimate the predictability of events, leading to the conclusion that management knew of the danger of bankruptcy but failed to disclose it.

This study assesses the relationship between bankruptcy and securities fraud by analyzing a data set of 1,466 consolidated class actions filed from 1996 to 2004, of which 234 (approximately 16%) cases involved a company that was in bankruptcy during the pendency of the class action (“bankruptcy cases”). The study tests two hypotheses: (1) bankruptcy cases are more likely to have actual merit than cases where the issuer is not bankrupt (“non-bankruptcy cases”); and (2) bankruptcy cases are more likely to be perceived as having merit than non-bankruptcy cases, even if they do not necessarily have more merit.