Adminization: Gatekeeping Consumer Litigation

Yonathan Arbel (Alabama Law School)

Abstract : Large companies and debt collectors frequently file unmeritorious claims against consumers. Recent high-profile actions brought by the Consumer Financial Protection Bureau (CFPB) against JP Morgan, Citibank, and large debt collectors illustrate the breadth and importance of this phenomenon. Due to the limited financial power of individuals, consumers often do not defend against such baseless claims, which results in the entry of millions of default judgments every year. To combat this problem, policymakers and scholars have explored a variety of solutions that would make it easier for consumers to defend in court, but these prove ineffectual. To solve the problem of unmeritorious claiming, this Article proposes a budget-neutral solution called “Adminization.” This novel approach uses an administrative agency, the CFPB, as a gatekeeper to civil litigation which screens out baseless claims. The main task of the agency is to select a sample of cases, audit them, and—where needed—issue fines. The sampling of cases for audit could rely on machine-learning algorithms—the same ones used by credit card companies to monitor fraud today—to effectively focus the agency’s attention. The audit will use agency investigators to gather and corroborate information relevant to the debt claim, and where wrongdoing is found, the agency will use its powers to fine abusive plaintiffs. Under this system, every plaintiff is subject to the risk of thorough investigation and large fines, thus undercutting the financial incentive to engage in wrongful behavior. The importance of this contribution lies in its cost-effectiveness, practicality, and political feasibility relative to “participation-based” approaches that dominate the discussion today.

Do Private Prisons Raise Incarceration Rates?

Christian Dippel (UCLA)
Michael Poyker (UCLA)

Abstract : The emergence of the private prison system in the U.S. in the mid-1980s was followed by an unprecedented increase in incarceration rates. In this paper, we investigate to what extent the latter was caused by the former. Combining a novel geo-located panel-set of private prisons with circuit-court panel data on sentencing behavior, we ask whether the construction of a new private prison (or the privatization of a public one) changes the sentencing behavior of neighboring courts. We use rich auxiliary cross-sectional variation in how judges are appointed or elected and time-series variation in judges’ electoral and appointment cycles to pin down likely mechanisms by which the private prison industry influences sentencing behavior.

Tort Reform and Innovation

Alberto Galasso (University of Toronto)
Hong Luo (Harvard Business School)

Abstract : Current academic and policy debates focus on the impact of tort reforms on physicians’ behavior and medical costs. This paper examines whether these reforms also affect incentives to develop new technologies. We find that, on average, laws that limit the liability exposure of healthcare providers are associated with a significant reduction in medical device patenting and that the effect is predominantly driven by innovators located in the states passing the reforms. Tort reforms have the strongest impact in medical fields in which the probability of facing a malpractice claim is the largest, and they do not seem to affect the amount of new technologies of the highest and lowest quality. Our results underscore the importance of considering dynamic effects in the economic analysis of tort laws.