Alex Tabarrok

Publications

Research

Most of my research is in the field of empirical law and economics and political economy. For example, I have written on the effect of police on crime, bounty hunters, judicial elections and tort awards, regulation and declining dynamism, patent law and other topics.

My paper on Dominant Assurance Contracts presents a solution to the public good problem! A follow-up stress tests the mechanism in the lab.

I have also written several papers on the theory of voting such as Would the Borda Count Have Avoided the Civil War?

I have written extensively on the FDA including Assessing the FDA via the Anomaly of Off-Label Drug Prescribing.

During COVID I was an advisor to the US government on using incentives to accelerate vaccine development and production. Along with Michael Kremer and other members of the Accelerating Health Technologies group, I developed a model for the US government on allocating funds to a vaccine portfolio. The model is discussed in Preparing for a Pandemic: Accelerating Vaccine Availability, especially the appendix. We also published Market design to accelerate COVID-19 vaccine supply and Testing Fractional Doses of COVID-19 Vaccines. Later with my students I published Is it Possible to Prepare for a Pandemic? and Covid in the nursing homes: the US experience among other papers. During COVID I was a prominent public proponent of first doses first, fractional dosing, rapid tests and human challenge trials, among other policies meant to accelerate our response to the crisis.

Here is my Google Scholar page and my CV. A list of publications follows. Email me if you have difficulty finding a copy.

Where possible I have provided a link to a PDF file, preferably to the final journal version. In some cases direct linking was not possible and it may take a click or two. If there is no link or you have any problems reading the PDF email me and I can either email you an electronic copy or snail mail a hardcopy. Other publications are below.

Working papers

2026

How Much Redistribution Will AI Require?

Abstract
Artificial intelligence may raise output while reducing labor’s share of income. This paper derives an accounting rule for the transfer required to keep aggregate real labor income per capita on its no-AI path. The required share of AI-path GDP depends on relative GDP and labor’s share. Faster growth permits a lower labor share without reducing aggregate labor income. Suppose GDP would otherwise grow by 2 percent annually, with labor receiving 60 percent. No transfer is needed if AI raises annual growth to 5 percent and labor’s share remains at least 45 percent. At 10 percent growth, labor’s share can fall to 28 percent and labor as a whole would remain as well off as under the no-AI path. A three-parameter translator connects beliefs about displacement, productivity, and labor’s share of new output to this forecast space. Across three stylized views, including one in which labor’s share falls to 23 percent, the required transfer remains below 6 percent of GDP. At that scale, making labor recipients whole while preserving gains for capital recipients appears politically feasible.

Tabarrok, Alex. 2026. “How Much Redistribution Will AI Require?” Working paper, August. PDF.

2026

Chaos and Misallocation under Price Controls

PDF

(with Brian C. Albrecht and Mark Whitmeyer)

Abstract
Price controls kill the incentive for arbitrage. We prove a Chaos Theorem: under a binding price ceiling, suppliers are indifferent across destinations, so arbitrarily small cost differences can determine the entire allocation. The economy tips to corner outcomes in which some markets are fully served while others are starved; small parameter changes flip the identity of the corners, generating discontinuous welfare jumps. These corner allocations create a distinct source of cross-market misallocation, separate from the aggregate quantity loss (the Harberger triangle) and from within-market misallocation emphasized in prior work. They also create an identification problem: welfare depends on demand far from the observed equilibrium. We derive sharp bounds on misallocation that require no parametric assumptions. In an efficient allocation, shadow prices are equalized across markets; combined with the adding-up constraint, this collapses the infinite-dimensional welfare problem to a one-dimensional search over a common shadow price, with extremal losses achieved by piecewise-linear demand schedules. Calibrating the bounds to station-level AAA survey data from the 1973–74 U.S. gasoline crisis, misallocation losses range from roughly 1 to 9 times the Harberger triangle.

Albrecht, Brian C., Alex Tabarrok, and Mark Whitmeyer. 2026. “Chaos and Misallocation under Price Controls.” arXiv:2602.12066 [econ.GN]. arxiv.org/abs/2602.12066.

2026

Private School Competition and Student Achievement in Chile

Abstract
Using Chile's 2005–2024 SIMCE commune panel, this paper studies whether growth in subsidized private-school enrollment raises achievement or mainly reflects cream skimming. Cross-sectional diagnostics reject pure cream skimming but show stronger sorting at high private-share levels. In commune fixed-effects regressions, a 10 percentage point increase in subsidized private share is associated with a 0.85–1.06 point increase in commune mean scores; cohort value-added estimates are slightly larger at 1.32–1.43 points. Controlling for private-public socioeconomic separation barely changes the aggregate slope, but larger SES gaps predict larger sector score gaps and weaker within-sector outcomes in more segregated communes.

Tabarrok, Alex. 2026. “Private School Competition and Student Achievement in Chile.” SSRN Working Paper 6842996. doi.org/10.2139/ssrn.6842996.

2026

Norms in Conflict: Why AI Advisors Fail to Improve Human Coordination

(with Zhongheng Qiao, Robertas Zubrickas and Timothy N. Cason)

Abstract
Cooperation failures in social dilemmas persist because individually rational behavior yields inefficient collective outcomes. Advances in AI raise two possibilities: AI may improve outcomes by advising humans or by acting autonomously. We test both in a repeated threshold public-goods experiment with heterogeneous valuations of the public good. Such threshold games model a broad class of burden-sharing problems (crowdfunding, shared infrastructure, multilateral agreements) in which efficiency requires not only coordination but agreement on a cost-sharing norm. We compare a human-only benchmark to treatments with an AI advisor (OpenAI's GPT-5) and to treatments in which AI agents make allocations directly. AI Only groups outperform human groups, reaching the threshold more often. The mechanism is illuminating: AI agents contribute near-equal amounts largely independent of valuations, whereas humans scale contributions with valuations. In contrast, AI advisors do not improve human-only outcomes. We distinguish two bottlenecks to coordination—an information bottleneck, in which parties lack the calculations needed to condition on others' behavior, and a legitimacy bottleneck, in which parties reject cost-sharing rules that conflict with their fairness norms. AI overcomes the first but not the second.

Qiao, Zhongheng, Alex Tabarrok, Robertas Zubrickas, and Timothy N. Cason. 2026. “Norms in Conflict: Why AI Advisors Fail to Improve Human Coordination.” SSRN Working Paper 6350778. doi.org/10.2139/ssrn.6350778.

Forthcoming and published papers

2020s

2026

JUE Insight: Breaking Ground: Can Refund Bonuses Solve the Holdout Problem?

Explainer working paper version

(with Timothy N. Cason and Robertas Zubrickas)

Abstract
The holdout problem presents a pervasive challenge in situations that require the assembly of independently controlled assets, where due to complementarity the combined whole is worth more than the sum of its parts. One avenue for addressing holdout problems involves contingent contracts, where agreements are conditional upon reaching a predetermined threshold. This paper reports an experiment to investigate a new refund bonus contingent mechanism, in which asset owners who agree to participate (e.g., sell their asset) receive a bonus payment if the required threshold for project success is not met. The refund bonus eliminates failure equilibria and improves the frequency of successfully reaching the threshold in the symmetric mixed strategy equilibrium. In the experiment, individual asset holders choose each round whether to accept an offer to sell. Multiple owners must accept for the (contingent) sale to materialize, and holdout owners who do not sell can earn more, so the game has the strategic incentives of a volunteer's dilemma. The data show that the bonus mechanism increases agreements to sell, the frequency of successful projects, and efficiency. By the second half of the experimental sessions, the total number of sales is 35 percent higher and the threshold is met nearly twice as often with the bonus than without.

Cason, Timothy N., Alex Tabarrok, and Robertas Zubrickas. 2026. “JUE Insight: Breaking Ground: Can Refund Bonuses Solve the Holdout Problem?” Journal of Urban Economics 156: 103901. doi.org/10.1016/j.jue.2026.103901.

2026

A Test of the Coase Conjecture Using Prices of Electronic Books

(with Tim Groseclose)

Abstract
The Coase Conjecture predicts that a durable-goods monopolist without commitment will rapidly cut price toward marginal cost. We test this prediction in the electronic-book market using release-day prices. To proxy for marginal cost, we use competitive prices of public-domain electronic books on the same platforms. Release-day prices for copyrighted electronic books are far above this cost benchmark—typically more than 30 times higher—and prices remain largely flat over the first month. Sales also persist well beyond release, contradicting immediate market clearing. These patterns are hard to reconcile with standard no-commitment models but are consistent with models featuring commitment to future prices and with outside-option models.

Groseclose, Tim, and Alex Tabarrok. 2026. “A Test of the Coase Conjecture Using Prices of Electronic Books.” Southern Economic Journal, May 23. doi.org/10.1002/soej.70052.

2025

Two Peas in a Pod: Democracy and Capitalism

working paper version

Abstract
Many people argue that democracy is incompatible with capitalism, but they differ on whether democracy will subvert capitalism or whether capitalism will subvert democracy. The first argues that the logic of democracy leads to socialism with James Madison and Joseph Schumpeter decrying the road to serfdom, with others like Karl Marx delighting in this historical inevitability. The second argues, based in part on fears of rising inequality, that capitalist oligarchs will come to control the democratic process, cementing their dominance. Democratic forms may remain, but true democracy will be ended. A third argument consistent with the views of Hayek, Mises, Friedman, and others is that capitalism and democracy are compatible and even mutually reinforcing. We provide evidence for the third view by showing that most democracies are capitalist, and most capitalist countries are democracies. Empirically there is no obvious and inevitable trend either toward or away from capitalism or democracy, although both rise and fall with events. We argue that there are significant complementarities in theory and practice between capitalism and democracy and, as a result, capitalist democracies are relatively stable.

Geloso, Vincent, and Alex Tabarrok. 2025. “Two Peas in a Pod: Democracy and Capitalism.” In Can Democracy and Capitalism Be Reconciled?, edited by Sidney M Milkis and Scott C Miller. Oxford University Press. doi.org/10.1093/9780197774731.003.0003.

2025

Pandemic Preparation without Romance: Insights from Public Choice

Abstract
The COVID-19 pandemic, despite its unprecedented scale, mirrored previous disasters in its predictable missteps in preparedness and response. Rather than blaming individual actors or assuming better leadership would have prevented disaster, I examine how standard political incentives—myopic voters, bureaucratic gridlock, and fear of blame—predictably produced an inadequate pandemic response. The analysis rejects romantic calls for institutional reform and instead proposes pragmatic solutions that work within existing political constraints: wastewater surveillance, prediction markets, pre-developed vaccine libraries, human challenge trials, a dedicated Pandemic Trust Fund, and temporary public–private partnerships. These mechanisms respect political realities while creating systems that can ameliorate future pandemics, potentially saving millions of lives and trillions in economic damage.

Tabarrok, Alex. 2025. “Pandemic Preparation without Romance: Insights from Public Choice.” Public Choice 204 (April): 262–85. doi.org/10.1007/s11127-025-01277-2.

2025

Operation Warp Speed: Negative and Positive Lessons for New Industrial Policy

Abstract
Operation Warp Speed (OWS) was a U.S. government initiative to accelerate the development, manufacturing, and distribution of COVID-19 vaccines. Novel vaccines typically take decades to develop. Prior to COVID, the shortest development of a novel vaccine was for the mumps vaccine, a record four years (Roos 2023). Public health officials in China identified a novel coronavirus as the causative agent of the COVID-19 disease on January 7, 2020 (CDC 2023). On December 11, 2020 the FDA granted the first Emergency Use Authorization for a COVID-19 vaccine in the United States (FDA 2020). A total development time of under one year. Perhaps even more remarkably, by the end of that year over 5 million US residents had already been vaccinated.1 It’s difficult to say how long it would have taken a COVID vaccine to be produced absent OWS but there is little doubt that OWS accelerated the process, saving millions of lives and trillions of dollars worldwide.2 How did Operation Warp Speed accelerate COVID-19 vaccines? If we think of OWS as a type of industrial policy what are the lessons for other industrial policies? These are the questions this paper attempts to answer.

Tabarrok, Alex. 2025. "Operation Warp Speed: Negative and Positive Lessons for New Industrial Policy." Innovations: Technology, Governance, Globalization 14 (1-2): 2-22. doi.org/10.1162/inov.a.268.

2025

The Economic Way of Thinking in a Pandemic

Abstract
During the pandemic, the economic way of thinking was extraordinarily useful, leading to a quick consensus among economists of widely differing political persuasions on many issues of pandemic policy. Yet speaking to politicians, bureaucrats, and the public revealed many ways in which the economic way of thinking was foreign and sometimes uncomfortable to non-economists, albeit often useful. Instructors can use pandemic policy to engage students on topics like incentives, trade-offs, utilitarianism, Bayesian reasoning, and overcoming cognitive biases.

Tabarrok, Alex. 2025. “The Economic Way of Thinking in a Pandemic.” The Journal of Economic Education 56 (1): 51–57. doi.org/10.1080/00220485.2024.2403448.

2024

Signaling Quality: How Refund Bonuses Can Overcome Information Asymmetries in Crowdfunding

Explainer

Abstract
Crowdfunding can suffer from information asymmetry, leaving some investors disappointed with low-quality projects, whereas other high-quality projects remain unfunded. We show that refund bonuses, which provide investors a payment if a fundraising campaign is unsuccessful, can signal project quality and help overcome the market failure in crowdfunding. Because strong projects have a lower risk of bonus payout, entrepreneurs with strong projects are more likely to offer bonuses. This signals high quality to investors, and due to their updated beliefs, this drives investment toward such projects. An experiment provides supporting empirical evidence for the benefits of this signaling solution to the problems of information asymmetry in crowdfunding,

Cason, Timothy N., Alex Tabarrok, and Robertas Zubrickas. 2024. “Signaling Quality: How Refund Bonuses Can Overcome Information Asymmetries in Crowdfunding.” Management Science, ahead of print, October 18. doi.org/10.1287/mnsc.2023.03923.

2024

Freedom of the Test

Abstract
Advancements in diagnostic tests and technologies hold the potential to usher in an era of personalized medicine, which could significantly extend and improve our health span. However, realizing this potential requires dismantling regulatory barriers, including certain FDA restrictions on speech, which currently impede the progress and accessibility of these innovations.

Tabarrok, Alex. 2024. “Freedom of the Test.” Journal of Free Speech Law 5 (1): 95–102.

2023

Targeted Randomization Dose Optimization Trials Enable Fractional Dosing of Scarce Drugs

Abstract
Administering drug at a dose lower than that used in pivotal clinical trials, known as fractional dosing, can stretch scarce resources. Implementing fractional dosing with confidence requires understanding a drug’s dose-response relationship. Clinical trials aimed at describing dose-response in scarce, efficacious drugs risk underdosing, leading dose-finding trials to not be pursued despite their obvious potential benefit. We developed a new set of response-adaptive randomized dose-finding trials and demonstrate, in a series of simulated trials across diverse dose-response curves, these designs’ efficiency in identifying the minimum dose that achieves satisfactory efficacy. Compared to conventional designs, these trials have higher probabilities of identifying lower doses while reducing the risks of both population- and subject-level underdosing. We strongly recommend that, upon demonstration of a drug’s efficacy, pandemic drug development swiftly proceeds with response-adaptive dose-finding trials. This unified strategy ensures that scarce effective drugs produce maximum social benefits.

Boonstra, Philip S., Alex Tabarrok, and Garth W. Strohbehn. 2023. “Targeted Randomization Dose Optimization Trials Enable Fractional Dosing of Scarce Drugs.” PLOS ONE 18 (10): e0287511. doi.org/10.1371/journal.pone.0287511.

2023

Building Networks: Investigating the Quid pro Quo between Local Politicians & Developers

Abstract
Mutually beneficial arrangements between politicians and real estate developers are common in many developing countries. We document what happens when the politician-developer nexus is disrupted by an election. We construct a novel dataset of real estate projects and electoral constituencies in Mumbai’s municipal government. We find that an incumbent party losing the election increases real estate project completion times by 5%. We find no effect of quasi-random redistricting or changes in voter preferences on project delays. We investigate two mechanisms for the slowdown associated with party turnover — delays in construction approvals around the time of the election and increase in litigation against projects after the election. While we see no rise in litigation, we find that delayed approvals near an election explain 23% of the increased total delays due to party change.

Tandel, Vaidehi, Sahil Gandhi, and Alex Tabarrok. 2023. “Building Networks: Investigating the Quid pro Quo between Local Politicians & Developers.” Journal of Development Economics 164 (September): 103-138. doi.org/10.1016/j.jdeveco.2023.103138

2023

How to Learn and Teach Economics with Large Language Models, Including GPT

Abstract
GPTs, such as ChatGPT and Bing Chat, are capable of answering economics questions, solving specific economic models, creating exams, assisting with research, generating ideas, and enhancing writing, among other tasks. This paper highlights how these innovative tools differ from prior software and necessitate novel methods of interaction. By providing examples, tips, and guidance, we aim to optimize the use of GPTs and LLMs for learning and teaching economics effectively.

Cowen, Tyler, and Alexander T. Tabarrok. 2023. “How to Learn and Teach Economics with Large Language Models, Including GPT.” SSRN Scholarly Paper. Rochester, NY. doi.org/10.2139/ssrn.4391863.

2022

Covid in the Nursing Homes: The US Experience

Abstract
The death toll in nursing homes accounted for almost 30 per cent of total Covid-19 deaths in the US during 2020. We examine the course of the pandemic in nursing homes focusing especially on whether nursing homes could have been better shielded. Across all nursing homes the key predictor of infections and deaths was community spread, i.e. a factor outside of the control of nursing homes. We find that higher-quality nursing homes, as measured by the CMS Five-Star Rating system, were not better able to protect their residents. Policy failures from the CDC and FDA, especially in the early stages of the pandemic, created extended waiting times for Covid-19 tests and slowed attempts to isolate infectious residents. But once infections were widespread, testing would have had to have been much greater to have had an appreciable effect on nursing home deaths. We find, however, that starting vaccinations just 5 weeks earlier could have saved in the order of 14,000 lives and starting them ten weeks earlier could have saved 40,000 lives. Or here.

Bjoerkheim, Markus B, and Alex Tabarrok. 2022. “Covid in the Nursing Homes: The US Experience.” Oxford Review of Economic Policy 38 (4): 887–911. doi.org/10.1093/oxrep/grac033.

2022

Vaccines and the Covid-19 Pandemic: Lessons from Failure and Success

Abstract
The losses from the global Covid-19 pandemic have been staggering—trillions in economic costs, on top of significant losses of life, health, and well-being. The world made significant and successful investments in vaccines to mitigate the pandemic, yet there were missed opportunities, as well. We review what has been learnt about the value of vaccines, the speed at which vaccines can be developed, and the optimal and ethical approaches to vaccine distribution, as well as other issues related to pandemic and emergency preparedness. Surprisingly, spending on vaccines remains far below that which would be justified by the social return. We remain poorly prepared for future pandemics and other emergencies.

Kominers, Scott Duke, and Alex Tabarrok. 2022. “Vaccines and the Covid-19 Pandemic: Lessons from Failure and Success.” Oxford Review of Economic Policy 38 (4): 719–41. doi.org/10.1093/oxrep/grac036.

2022

Is It Possible to Prepare for a Pandemic?

Abstract
How effective were investments in pandemic preparation? We use a comprehensive and detailed measure of pandemic preparedness, the Global Health Security (GHS) Index produced by the Johns Hopkins Center for Health Security (JHU), to measure which investments in pandemic preparedness reduced infections, deaths, excess deaths, or otherwise ameliorated or shortened the pandemic. We also look at whether values or attitudinal factors such as individualism, willingness to sacrifice, or trust in government—which might be considered a form of cultural pandemic preparedness—influenced the course of the pandemic. Our primary finding is that almost no form of pandemic preparedness helped to ameliorate or shorten the pandemic. Compared to other countries, the United States did not perform poorly because of cultural values such as individualism, collectivism, selfishness, or lack of trust. General state capacity, as opposed to specific pandemic investments, is one of the few factors which appears to improve pandemic performance. Understanding the most effective forms of pandemic preparedness can help guide future investments. Our results may also suggest that either we aren’t measuring what is important or that pandemic preparedness is a global public good. or here.

Omberg, Robert Tucker, and Alex Tabarrok. 2022. “Is It Possible to Prepare for a Pandemic?” Oxford Review of Economic Policy 38 (4): 851–75. doi.org/10.1093/oxrep/grac035.

2022

William Baumol and the Cost Disease

Abstract
The Baumol effect follows from simple but deep microeconomic reasoning. All prices are relative prices, so if some goods are getting cheaper, others must be getting more expensive. Simple. But in transferring our attention about the cause of rising prices from stagnating sectors to progressive sectors, the Baumol effect radically changes our understanding of the causes, consequences, and evaluation of rising prices. Even today, the power of the Baumol effect to explain price changes through different time periods and places is underestimated. Throughout his career, Baumol returned to this simple idea many times, making it a key to his thought and his evolving views on long-term economic development.

Tabarrok, Alex. 2022. “William Baumol and the Cost Disease.” In Research in the History of Economic Thought and Methodology: Including a Symposium on the Work of William J. Baumol: Heterodox Inspirations and Neoclassical Models, edited by Luca Fiorito, Scott Scheall, and Carlos Eduardo Suprinyak, 40B:11–26. Research in the History of Economic Thought and Methodology. Emerald Publishing Limited. doi.org/10.1108/S0743-41542022000040B003.

2022

Testing Fractional Doses of COVID-19 Vaccines

Abstract
Due to the enormous economic, health, and social costs of the COVID-19 pandemic, there are high expected social returns to investing in parallel in multiple approaches to accelerating vaccination. We argue there are high expected social returns to investigating the scope for lowering the dosage of some COVID-19 vaccines. While existing evidence is not dispositive, available clinical data on the immunogenicity of lower doses combined with evidence of a high correlation between neutralizing antibody response and vaccine efficacy suggests that half or even quarter doses of some vaccines could generate high levels of protection, particularly against severe disease and death, while potentially expanding supply by 450 million to 1.55 billion doses per month, based on supply projections for 2021. An epidemiological model suggests that, even if fractional doses are less effective than standard doses, vaccinating more people faster could substantially reduce total infections and deaths. The costs of further testing alternative doses are much lower than the expected public health and economic benefits. However, commercial incentives to generate evidence on fractional dosing are weak, suggesting that testing may not occur without public investment. Governments could support either experimental or observational evaluations of fractional dosing, for either primary or booster shots. Discussions with researchers and government officials in multiple countries where vaccines are scarce suggests strong interest in these approaches.

Więcek, Witold, Amrita Ahuja, Esha Chaudhuri, Michael Kremer, Alexandre Simoes Gomes, Christopher M. Snyder, Alex Tabarrok, and Brandon Joel Tan. 2022. “Testing Fractional Doses of COVID-19 Vaccines.” Proceedings of the National Academy of Sciences 119 (8). doi.org/10.1073/pnas.2116932119.

2021

Preparing for a Pandemic: Accelerating Vaccine Availability

Abstract
Vaccinating the world's population quickly in a pandemic has enormous health and economic benefits. We analyze the problem faced by governments in determining the scale and structure of procurement for vaccines. We analyze alternative approaches to procurement, arguing that buyers should directly fund manufacturing capacity and shoulder most of the risk of failure while maintaining some direct incentives for speed. We analyzed the optimal portfolio of vaccine investments for countries with different characteristics as well as the implications for international cooperation. Our analysis, considered in light of the experience of 2020, suggests lessons for future pandemics.

Ahuja, Amrita, Susan Athey, Arthur Baker, Eric Budish, Juan Camilo Castillo, Rachel Glennerster, Scott Duke Kominers, et al. 2021. “Preparing for a Pandemic: Accelerating Vaccine Availability.” AEA Papers and Proceedings 111: 331–35. doi.org/10.1257/pandp.20211103.

2021

Early refund bonuses increase successful crowdfunding

Explainer ungated

Abstract
The assurance contract mechanism is often used to crowdfund public goods. This mechanism has weak implementation properties that can lead to miscoordination and failure to produce socially valuable projects. To encourage early contributions, we extend the assurance contract mechanism with refund bonuses rewarded only to early contributors in the event of fundraising failure. The experimental results show that our proposed solution is very effective in inducing early cooperation and increasing fundraising success. Limiting refund bonuses to early contributors works as well as offering refund bonuses to all potential contributors, while also reducing the amount of bonuses paid. We find that refund bonuses can increase the rate of campaign success by 50% or more. Moreover, we find that even taking into account campaign failures, refund bonuses can be financially self-sustainable suggesting the real world value of extending assurance contracts with refund bonuses.

Cason, Timothy N., Alex Tabarrok, and Robertas Zubrickas. 2021. “Early Refund Bonuses Increase Successful Crowdfunding.” Games and Economic Behavior, doi.org/10.1016/j.geb.2021.05.006.

2021

Too slow for the urban march: Litigations and the real estate market in Mumbai, India

Abstract
We use data from the universe of approximately 3000 ongoing formal real estate projects in Mumbai to show that 27.3% of the projects and 42.9% of the built-up space is under litigation. Average construction time is 8.5 years. Using OLS and matching techniques, and controlling for other factors determining time to completion including location, developer experience and project size, we estimate that litigated projects take approximately 20% longer to complete than non-litigated projects. A variety of robustness tests are consistent with this finding. We address potential endogeneity concerns using an instrument - the neighborhood’s propensity to sue. The increase in time to completion increases the total cost of building by at least 30%. We identify a small number of litigated projects in the Bombay High Court dockets and find that so-called Public Interest Litigation, litigation begun by people outside the contractual process (i.e. not apartment purchasers, residents, or contractors), appears to be responsible for a significant share of project litigation.

Gandhi, Sahil, Vaidehi Tandel, Alexander Tabarrok, and Shamika Ravi. 2021. “Too Slow for the Urban March: Litigations and the Real Estate Market in Mumbai, India.” Journal of Urban Economics, February, 103330. doi.org/10.1016/j.jue.2021.103330.

2021

Simple Rules for the Developing World

Abstract
Much of the discussion in favor of simplicity of legal rules and against complex regulation is rooted in economically developed countries with strong state capacity. With economic development and state capacity comes the presumption that complex rules will be enforced. Therefore, analysis focuses on the administrative and error costs, and the unintended consequences of complex rules that are enforced. This paper argues that the Epsteinian insight is even more relevant to the developing world where countries often lack enough state capacity to even take on simple governance tasks. Developing countries often have less than 20 percent of the state capacity of developed countries. However, this does not mean they limit the regulatory structure to a fifth of the tasks. Under-enforcement or non-enforcement of complex rules imposes different costs and unintended consequences on society. Using examples from India, this paper highlights problems of enforcement swamping, deadweight loss, and corruption arising from the under-enforcement of complex rules. To avoid these problems, the paper concludes that a fortiori less developed countries should favor simple rules.

Rajagopalan, Shruti, and Alex Tabarrok. 2021. “Simple Rules for the Developing World.” European Journal of Law and Economics, December. doi.org/10.1007/s10657-021-09716-3.

2010s

2019

To Serve and Collect: The Fiscal and Racial Determinants of Law Enforcement

Abstract
We exploit local deficits and state-level differences in police revenue retention from civil asset forfeitures to estimate how incentives to raise revenue influence policing. In a national sample, we find that local fine and forfeiture revenue increases faster with drug arrests than arrests for violent crimes. Revenues also increase faster with arrests of blacks and Hispanics than with whites’ drug arrests. Concomitant with higher rates of revenue generation, we find that arrests of blacks and Hispanics for drugs, driving under the influence, and prostitution, and associated property seizures, increase with local deficits when institutions allow officials to more easily retain revenues from forfeited property. Whites’ drug and driving under the influence arrests are insensitive to these institutions. We do, however, observe comparable increases in whites’ prostitution arrests. Our results show that revenue-driven law enforcement can distort police behavior and decision-making, altering the quantity, type, and racial composition of arrests.

Makowsky, Michael D., Thomas Stratmann, and Alex Tabarrok. 2019. “To Serve and Collect: The Fiscal and Racial Determinants of Law Enforcement.” The Journal of Legal Studies 48 (1): 189–216. doi.org/10.1086/700589.

2019

Premature Imitation and India’s Flailing State

Abstract
A flailing state is one where the government is unable to implement its own plans due to misaligned incentives between the policymakers and implementing bureaucracy. The Indian government attempts to legislate every aspect of citizens' lives, yet lacks the resources and personnel to administer these ambitions, leading to failure in execution. One factor behind inappropriate laws and regulations is the Indian elite's close connection with Western, especially Anglo-American, elites. This elite minority, comprising the top bureaucracy, academia and policy circles, initiates policies that appear progressive by Western standards but are disconnected from ground realities for most Indians. As examples, the paper discusses the 26 week maternity leave mandate, applicable to only 1% of Indian women; housing regulations on parking and open spaces raising costs beyond affordability; failed efforts on open defecation that overlook cultural factors; and the Right to Education law that ignores learning outcomes while penalizing functional private schools. These imported policy ideas burden the already weak state and worsen implementation issues. The alternative proposed is presumptive laissez-faire, relying more on markets even if imperfect, as befits limited state capacity. State capability must be built before taking on ambitious governance. Laissez-faire allows wealth, education and trust to grow, gradually enabling a mixed economy. The Indian elite's premature mimicry of Western welfare and regulatory states, without context and capability, leads to the flailing state's failure.

Rajagopolan, S. and A. Tabarrok. 2019. “Premature Imitation and India’s Flailing State,” The Independent Review, 24: 2, pp. 165-186.

2018

Is Regulation to Blame for the Decline in American Entrepreneurship?

Abstract
Mounting evidence suggests that economic dynamism and entrepreneurial activity are declining in the United States. Over the past thirty years, the annual number of new business startups and the pace of job reallocation have declined significantly. A variety of causes for these trends have been suggested, including an increasing ability of firms to respond to idiosyncratic shocks, technology induced changes in the costs of hiring and training, and increasing regulation. This research combines data from the Statistics of U.S. Businesses, which contains measures of the decline in economic dynamism, with RegData, a novel dataset leveraging the textual content of the Code of Federal Regulations. RegData contains annual industry level measures of the stringency of regulation. By combining these data, we are able to estimate the extent to which changes in the level of federal regulation can explain decreasing entrepreneurial activity and dynamism. We find that Federal regulation has had little to no effect on declining dynamism.

Goldschlag, N. and Tabarrok A. 2018-forthcoming. Is Regulation to Blame for the Decline in American Entrepreneurship? Economic Policy 93

2016

A Skeptical View of the National Science Foundation's Role in Economic Research

Abstract
We can imagine a plausible case for government support of science based on traditional economic reasons of externalities and public goods. Yet when it comes to government support of grants from the National Science Foundation (NSF) for economic research, our sense is that many economists avoid critical questions, skimp on analysis, and move straight to advocacy. In this essay, we take a more skeptical attitude toward the efforts of the NSF to subsidize economic research. We offer two main sets of arguments. First, a key question is not whether NSF funding is justified relative to laissez-faire, but rather, what is the marginal value of NSF funding given already existing government and nongovernment support for economic research? Second, we consider whether NSF funding might more productively be shifted in various directions that remain within the legal and traditional purview of the NSF. Such alternative focuses might include data availability, prizes rather than grants, broader dissemination of economic insights, and more. Given these critiques, we suggest some possible ways in which the pattern of NSF funding, and the arguments for such funding, might be improved.

Cowen, T., & Tabarrok, A. 2016. A Skeptical View of the National Science Foundation’s Role in Economic Research. Journal of Economic Perspectives, 30(3): 235–248.

2015

Is Entrepreneurship in Decline?

Written for Cato Conference on Growth, video presentation.

Abstract
The US economy has been one of the most dynamic economies in the world but recent research suggests that US entrepreneurship and dynamism are in decline (Decker, Haltiwanger, Jarmin and Miranda 2014). We offer a brief survey of the decline in dynamism literature and some of the potential causes. We find that Federal regulation, is probably not a causes of declining dynamism. Taking a closer look at some of the ways that dynamism and entrepreneurship have been measured suggests that we may be mismeasuring. If entrepreneurship is measured as new firm creation, for example, we miss the entrepreneurship inherent in rebuilding and revitalizing larger and older firms. Since most workers work for larger and older firms, revitalizing these firms may be a more important use of entrepreneurship than starting new firms. In an increasing global economy we may also miss some of the outsourcing of dynamism that has occurred in recent decades. Dynamism as measured by, for example, job reallocation has a negative side, churn. Information technology may allow us to reduce churn while still allowing adaption and innovation. Creative destruction is necessary for a growing economy but if we can boost the ratio of creative to destruction that counts as an improvement in welfare. The relationship between dynamism and entrepreneurship, flexibility and growth is uncertain and welfare conclusions are not yet clear.

Tabarrok, A. & N. Goldschlag. 2015. Is Entrepreneurship in Decline? In Understanding the Growth Slowdown (Brink Lindsey (ed). Cato Institute.

2014

Lessons from Gurgaon, India's Private City

Abstract
In just thirty years, Gurgaon has grown from a tiny hamlet to a city of nearly two million people and it has done so based almost entirely on the private provision of public goods, including transportation, utilities, and security. In some rankings, Gurgaon is the best city in India in which to live and work (Behl 2009). Gurgaon, however, lacks important infrastructure, especially in areas such as sewage and electricity where the optimal scale exceeds that of most builders. Thus, for large-scale infrastructure, important externalities are not internalized. We examine where Gurgaon has succeeded, where it has failed, and how people are adapting to both the successes and the failures. We compare Gurgaon with other private cities built on a different model, including Jamshedpur in India and Walt Disney World in the United States. The developing world, including India, is urbanizing rapidly. We draw lessons from Gurgaon to suggest how new private cities could be built on an even-greater scale, thus internalizing externalities while still keeping the advantages of private provision.

Rajagopalan, S., & Tabarrok, A. 2014. Lessons from Gurgaon, India’s private city. Cities and Private Planning (pp. 199–231). Edward Elgar Publishing. doi.org/10.4337/9781783475063.00018.

2014

Public Choice Perspectives on Intellectual Property

Abstract
Abstract: We mine two public choice traditions for insights into intellectual property rights: the Virginia school, centered on James Buchanan and Gordon Tullock, and the Bloomington or Institutional Analysis and Development school, centered on Elinor Ostrom and Vincent Ostrom. We apply the perspectives of each school to issues of intellectual property and develop new insights, questions, and focuses of attention. We also explore tensions and synergies between the two schools on issues of intellectual property.

Dourado, E., Tabarrok, A., 2014. Public choice perspectives on intellectual property. Public Choice 1–23. doi:10.1007/s11127-014-0195-x

2014

The Industrial Organization of Online Education

Abstract
Abstract: Online education has flexibility and cost advantages over in-class teaching and these advantages will grow with improvements in information technology. We consider likely market structures given that the quality aspects of online education exhibit endogenous fixed costs. Concentration in the market for courses could be high, as it is currently in the market for textbooks. The not-for-profit sector will exhibit lower costs, lower concentration, and possibly zero price.

Cowen, T., Tabarrok, A., 2014. The Industrial Organization of Online Education. American Economic Review 104, 519–522. doi:10.1257/aer.104.5.519

2014

AN FDA REPORT CARD: Wide Variance in Performance Found Among Agency’s Drug Review Divisions

With DiMasi and Milne and a foreword by Dr. Andrew C. von Eschenbach, former commissioner, U.S. Food and Drug Administration; director, National Cancer Institute

Abstract
Abstract: The United States Food and Drug Administration (FDA) reviews and must ultimately approve any new drug as "safe and effective" before it can be marketed for sale in the United States. The question of whether the agency is too cautious in its reviews (delaying access to critically needed treatments), or too fast in issuing approvals (potentially exposing patients to undetected risks from new products), has long been a subject of public debate. This study attempts to provide a more objective examination of the FDA's performance by examining disparities in review and approval times across 12 review divisions within the FDA's Center for Drug Evaluation and Research (CDER). After reviewing nearly 200 products accounting for 80 percent of new drug and biologic launches from 2004 to 2012, the authors find wide variation in division performance. In fact, the most productive divisions (Oncology and Antivirals) approve new drugs roughly twice as fast as the CDER average and three times faster than the least efficient divisions—without the benefit of greater resources, reduced complexity of task, or reduction in safety. The authors estimate that a modest narrowing of the CDER divisional productivity gap would reduce drug costs by nearly $900 million annually. The worth to patients, however, would be far greater if the agency could accelerate access to an additional generation of (about 25) drugs. Greater agency efficiency in approving a single generation of drugs would be worth about $4 trillion in value to patients, from enhanced U.S. life expectancy. To reap such gains, this study encourages Congress and the FDA to more closely evaluate the agency's most efficient drug review divisions, and apply the lessons learned across CDER. We also propose a number of reforms that the FDA and Congress should consider to improve efficiency, transparency, and consistency at the divisional level.

DiMasi, J.A., Milne, C.-P., Tabarrok, A., 2014. AN FDA REPORT CARD: Wide Variance in Performance Found Among Agency’s Drug Review Divisions. Manhattan Institute.

2014

Firearms and Suicides in US States

working paper version

(with Justin Thomas Briggs)

Abstract
ABSTRACT: This study investigates the relationship between firearm prevalence and suicide in a sample of all US states over the years 2000–2009. We find strong, positive effects of gun prevalence on suicide using OLS estimation, across a variety of measures for gun possession, and with several sets of controls. When using instrumental variable estimation, the effect remains significant, despite also finding significant evidence that gun ownership causes substitution towards gun-suicide rather than other methods of suicide. There is also evidence for non-linearities in the effects of guns on suicide.

Briggs Justin T. and A. Tabarrok. 2014. Firearms and suicides in US states. International Review of Law and Economics 37: 180-188. dx.doi.org/10.1016/j.irle.2013.10.004. (www.sciencedirect.com/science/article/pii/S014481881300077X)

2014

Ill-Conceived, Even If Competently Administered: Software Patents, Litigation and Innovation

-A Comment on Graham and Vishnubhakat in the JEP.

Abstract
Abstract: The number of patents has increased dramatically in the past three decades, as has the number of patent-related lawsuits, particularly in the field of software. Industry and academic experts have expressed concern that many of the patents being issued are of low quality. Writing in the Journal of Economic Perspectives, Stuart Graham and Saurabh Vishnubhakat have defended the United States Patent and Trademark Office, arguing that the PTO has acted responsibly in issuing patents that are legally valid and that it is handling problems constructively. We accept some of Graham and Vishnubhakat’s defense of the PTO, but argue that the most important issue is not whether the law is being competently administered but whether patent law, particularly as applied to software, is creating patents that are overly broad and ambiguous. We maintain that it is, and that the results are less innovation and more costly and unproductive litigation.

Miller, Shawn, and Alexander Tabarrok. 2014. Ill-Conceived, Even If Competently Administered: Software Patents, Litigation and Innovation-A Comment on Graham and Vishnubhakat. Econ Journal Watch 11 (1).

2013

Private Education in India: A Novel Test of Cream Skimming

Abstract
Abstract: Students in private schools routinely outperform those in public schools both in the United States and around the world. But do private schools make students better or do they simply cream skim better students? In this article I take advantage of the remarkable fact that in many districts in India a majority of students attend private schools. As the private share of school enrollment increases, cream skimming becomes less plausible as the explanation for a higher rate of achievement in private schools. Evidence for cream skimming is found when the private share of schooling is low, in the range of 0–15%, and thus private schools have a large public pool from which to skim. But the private effect on achievement does not appear to diminish greatly even in districts where more than 70% of students are in private schools. Most importantly, mean scores taken over the entire population of students, private and public, increase with the share of private schooling. These findings support a significant productivity effect of private schools. (JEL I25, I2, L33)

Tabarrok, A., 2013. Private Education in India: A Novel Test of Cream Skimming. Contemporary Economic Policy 31, 1–12. doi:10.1111/j.1465-7287.2011.00286.x

2012

Product Liability and Moral Hazard: Evidence from General Aviation

Abstract
Abstract: Product liability law reduces the costs of accidents to consumers, thus reducing their incentives to invest in safety. We estimate the impact of tort liability on a subset of consumers who have significant control over the probability of an accident: the consumers of general aviation aircraft. The General Aviation Revitalization Act of 1994 exempted manufacturers of small aircraft from product liability claims when their aircraft reached 18 years of age. We use the exemption at age 18 to estimate the impact of tort liability on accidents as well as on a wide variety of behaviors and safety investments by pilots and owners. The results are consistent with moral hazard. When an aircraft is exempted from tort liability, the probability that the aircraft will be involved in an accident declines. Direct evidence of pilots’ and owners’ behavior is also consistent with moral hazard.

Helland, E.A., Tabarrok, A., 2012. Product Liability and Moral Hazard: Evidence from General Aviation. Journal of Law and Economics 55, 593–630. doi:10.1086/666363

Do Off-Label Drug Practices Argue Against FDA Efficacy Requirements? Testing an Argument by Stuctured Conversations with Experts

(with Dan Klein). The heart of this paper is an analysis of the written comments that physicians made to the "consistency argument" (see the paper). We provide all the comments here as Word documents. The responses are split into three categories; the comments of challengers who disputed the consistency argument, the comments of liberalizers who agreed with the consistency argument, and final comments on the survey made by both challengers and liberalizers. In the text these are denoted as the "g", "c" and "f" comments respectively.

Abstract
ABSTRACT: The amended Food, Drug and Cosmetics Act requires efficacy certification for a drug’s initial uses (“on-label”), but does not require certification before physicians may prescribe the drug for subsequent uses (“off-label”). Does it make sense to require FDA efficacy certification for new drugs but not for new uses of old drugs? Using a sequential online survey we carried on a “virtual conversation” with some 500 physicians. The survey asked whether efficacy requirements should be imposed on off-label uses; almost all physicians said no. It asked whether the efficacy requirements for initial uses should be dropped, and most physicians said no. We then asked respondents whether opposing efficacy requirements in one case but not the other involved an inconsistency. In response, we received hundreds of written commentaries. We organize and discuss these commentaries with an eye to understanding how the medical market certifies off-label drug uses and how this compares to FDA certification. Does off-label medicine suggest that efficacy requirements should be placed on new uses of old drugs? Does it suggest that efficacy requirements on new drugs should be lifted?

2000s

2007

Does Three Strikes Deter? A Non-Parametric Investigation

(with Eric Helland)

Abstract
ABSTRACT: We take advantage of the fortuitous randomization of trial outcome to provide a novel strategy to identify the deterrent effect exclusive of incapacitation. We compare the post-sentencing criminal activity of criminals who were convicted of a strikeable offense with those who were tried for a strikeable offense but convicted of a non-strikeable offense. As a robustness check, we also make this comparison in states without three strikes laws. The identification strategy lets us estimate the deterrent effect non-parametrically using data solely from the three-strikes era. We find that California’s three strike legislation significantly reduces felony arrest rates among the class of criminals with two strikes by 17-20 percent.

Helland, E. and A. Tabarrok. 2007. Does Three Strikes Deter: A Non-Parametric Investigation. Journal of Human Resources XLII (2): 309-330.

2006

Missing the Mark

Abstract
In their paper “Members First: The Ethics of Donating Organs and Tissues to Groups,” Timothy Murphy and Robert Veatch question the ethical underpinnings of LifeSharers, a grass-roots effort to increase the supply of organs by giving organ donors preferred access to organs Tabarrok and Undis respond.

Tabarrok, A. and David Undis. 2006. Missing the Mark. Cambridge Quarterly Journal of HealthCare Ethics. 15(4):450-456.

2005

The Problem of Contingent Fees for Waiters

Abstract
ABSTRACT: In a series of influential papers, Lester Brickman (2003a, 2003b, 2004) has argued that the income and effective hourly rate of tort lawyers using contingent fees has increased by 1400% since 1960 and that the market for contingent fee lawyers is uncompetitive as evidenced by lack of price advertising and uniform pricing across practitioners, cases and time. He also argues that contingent fee lawyers use “contingent-fee math” to build up additional costs and fees. I critically examine Brickman’s calculations and compare contingent fees in the market for lawyers with contingent fees, usually called tips, in the market for waiters.

Tabarrok, A. 2005. The Problem of Contingent Fees for Waiters. The Green Bag. Summer 2005: 377-381.

2005

What are Private Governments Worth?

Abstract
Comment (with Amanda Agan) ABSTRACT: “Private governments” such as homeowners associations and condominium cooperatives provide all manner of collective consumption goods, from road maintenance, trash collection, and snow removal to transportation, policing, and medical care. These organizations were practically unheard of in 1960, but today some 54.6 million people in the United States live in various neighborhood associations. Using data from Northern Virginia we show houses in HOAs are worth, on average, more than 5 percent more than similar houses in the same neighborhood but outside of HOAs. Given those large advantages, it is not surprising that HOAs are growing rapidly. Implications for the future are discussed.

Agan, A. and A. Tabarrok. 2005. What are Private Governments Worth? Regulation. 28 (3: Fall): 14-17.

2005

Using Terror Alert Levels To Estimate the Effect of Police on Crime

(with Jon Klick)

Abstract
ABSTRACT: We argue that changes in the terror alert level set by the Department of Homeland Security provide a shock to police presence in the Mall area of Washington, D.C. Using daily crime data during the period the terror alert system has been in place, we show that crime drops significantly, both statistically and economically, in the Mall area relative to the other areas of Washington DC. This provides strong evidence of the causal effect of police on crime and suggests a research strategy that can be used in other cities.

Klick, J. and A. Tabarrok. 2005. Using Terror Alert Levels to Estimate the Effect of Police on Crime. Journal of Law and Economics. 48(1): 267-280.

2004

The Fugitive: Evidence on Public versus Private Law Enforcement from Bail Jumping

(with Eric Helland)

Abstract
ABSTRACT: After being arrested and booked, most felony defendants are released to await trial. On the day of the trial, a substantial percentage fail to appear. If the failure to appear is not quickly explained, warrants are issued and two quite different systems of pursuit and rearrest are put into action. Public police have the primary responsibility for pursuing and rearresting defendants who were released on their own recognizance or on cash or government bail. Defendants who made bail by borrowing from a bond dealer, however, must worry about an entirely different pursuer. When a defendant who has borrowed money skips trial, the bond dealer forfeits the bond unless the fugitive is soon returned. As a result, bond dealers have an incentive to monitor their charges and ensure that they do not skip. When a defendant does skip, bond dealers hire bail enforcement agents, more colloquially known as bounty hunters, to pursue and return the defendants to custody. We compare the effectiveness of these two different systems by examining failure to appear rates, fugitive rates and capture rates of felony defendants who fall under the respective systems. We apply propensity score and matching techniques.

Helland, E. and A. Tabarrok. 2004. The Fugitive: Evidence on Public versus Private Law Enforcement from Bail Jumping. Journal of Law and Economics XLVII (1): 83-122.

2004

Using Placebo Laws to Test “More Guns, Less Crime”

(with Eric Helland).

Abstract
ABSTRACT: We reexamine Mustard and Lott’s controversial study on the affect of “shall-issue” gun laws on crime using an empirical standard error function randomly generated from “placebo” laws. We find that the effect of shall-issue laws on crime is much less well-estimated than the Mustard and Lott (1997) and Lott (2000) results suggest. We also find, however, that the cross equation restrictions implied by the Lott-Mustard theory are supported. A boomlet has occurred in recent years in the use of quasi-natural experiments to answer important questions of public policy. The intuitive power of this approach, however, has sometimes diverted attention from the statistical assumptions that must be made, particularly regarding standard errors. Failing to take into account serial correlation and grouped data can dramatically reduce standard errors suggesting greater certainty in effects than is actually the case. We find that the placebo law technique (Bertrand, Duflo and Mullainathan 2002) is a useful addition to the econometrician’s toolkit.

Helland, E. and A. Tabarrok. 2004. Using Placebo Laws to Test “More Guns, Less Crime”. Advances in Economic Analysis & Policy 4 (1): Article 1. www.bepress.com/bejeap/advances/vol4/iss1/art

2003

Contingency Fees, Settlement Delay and Low-Quality Litigation: Empirical Evidence from Two Datasets

(with Eric Helland)

Abstract
ABSTRACT: Although flat fees are common for divorces, wills and trusts and probate, lawyers in personal injury cases generally are paid by contingency fee or at an hourly rate. Arguments have been made that contingency fees increase low-quality, "frivolous" litigation but counter-arguments suggest that contingency fees actually limit such litigation and instead it is hourly-fees that increase low-quality litigation. Using a difference in differences test and data on a cross section of states in 1992 we test whether legal quality is lower under contingency or hourly fees. We also examine medical malpractice claims in Florida using a time series centered around a law change that limited contigency fees. We also examine the impact of fee arrangements on the expected time to settlement. We find that hourly fees encourage the filing of low-quality suits and increase the time to settlement (i.e. contingency fees increase legal-quality and decrease the time to settlement).

Helland, E. and A. Tabarrok. 2003. Contingency Fees, Settlement Delay and Low-Quality Litigation: Empirical Evidence from Two Datasets. Journal of Law, Economics and Organization 19 (2): 517-542.

2002

Patent Theory versus Patent Law

Abstract
ABSTRACT: According to the economic theory of patents, patents are needed so that pioneer firm have time to recoup their sunk costs of research and development. The key element in the economic theory is that pioneer firms have large, hard to recoup, sunk costs. Yet patents are not awarded on the basis of a firm's sunk costs. Patent law, in fact, ignores costs. The disconnect between patent law and patent theory suggests either that modifying patent law so that it better fits with patent theory would reduce the costs and inefficiencies associated with current patent practice or that the standard economic theory of patents is wrong.

Tabarrok, Alexander. 2002. Patent Theory versus Patent Law. Contributions to Economic Analysis & Policy 1 (1), Article 9. www.bepress.com/bejeap/contributions/vol1/iss1/art9

2003

Race, Poverty, and American Tort Awards: Evidence from Three Datasets

Working paper version here. (The above link requires subscription or university access to the JLS).

Abstract
ABSTRACT: We investigate the impact of the race and income of the jury pool on trial awards. We find that the average tort award increases as black and Hispanic county population rates increase and especially as black and Hispanic county poverty rates increase. An increase in the black county-poverty rate of 1 percentage point tends to raise the average personal injury tort award by 3 to 10 percent. An increase in the Hispanic county-poverty rate of 1 percentage point tends to raise awards by as much as 7 percent although this effect is less well estimated. These effects imply that forum shopping for high-poverty minority counties could raise awards by hundreds of thousands of dollars. Average awards fall with increases in white (non-black, non-Hispanic) poverty rates in two of our datasets, thus making these findings even more surprising. Awards increase with black and Hispanic county-poverty rates even after controlling for a wide variety of other potential causes.

Helland, Eric. and Alexander Tabarrok. 2003. Race, Poverty, and American Tort Awards: Evidence from Three Datasets. The Journal of Legal Studies 32 (2): 27-58.

2002

Expected Dividend Growth, Valuation Ratios and Rational Optimism

Abstract
ABSTRACT: Large changes in valuation ratios can be explained by relatively small changes in the expected dividend growth rate. We use the Gordon growth model to back out an "expected" dividend growth rate and we compare this rate with the actual rate of dividend growth. We cannot reject the hypothesis that our estimated rate is a rational expectation of the actual. As a result, a model of valuation ratios based solely on a handful of fundamentals can easily explain the variation in the data. In particular, the historically high ratios of the late 1990s and today are consistent with rational expectations about dividend growth. Such expectations, moreover, appear reasonable in the context of slowly accumlating, long-term changes in the economy that are reducing output volatility, increasing the duration of expansions and reducing the duration of recessions. Contrary to a number of recent analyses, optimism about the future is not ruled out by the data.

Santoni, G. and A. Tabarrok. 2002. Expected Dividend Growth, Valuation Ratios and Rational Optimism. Journal of Financial and Economic Practice 1 (1): 110-119.

2002

The Effect of Electoral Institutions on Tort Awards

PDF

Abstract
ABSTRACT: We argue that partisan elected judges, have an incentive to redistribute wealth from out-of-state defendants (non-voters) to in-state plaintiffs (voters). We first test the hypothesis using cross-state data. We find a significant partisan effect after controlling for differences in injuries, state incomes, poverty levels, selection effects and other factors. One difference which appears difficult to control for is that each state has its own tort law. In cases involving citizens of different states, Federal judges decide disputes using state law. Using these diversity of citizenship cases we conclude that differences in awards are caused by differences in electoral systems not by differences in state law.

Helland, E. and A. Tabarrok. 2002. The Effect of Electoral Institutions on Tort Awards. American Law and Economics Review 4 (2): 341-370.

A Geometric Proof of the Neutrality Theorem

Abstract
ABSTRACT: The neutrality theorem for public goods is proved using a Dolbear triangle diagram.

Tabarrok, A. forthcoming. A Geometric Proof of the Neutrality Theorem. Public Finance/Finances Publiques.

2001

President Perot, or Fundamentals of Voting Theory Illustrated with the 1992 Election

Mathematica code for most of the calculations in this paper can be found here. This paper uses the same techniques (but in one less dimension) as Would the Borda Count have Avoided the Civil War? - thus the theory sections overlap.

Abstract
ABSTRACT: Different voting systems can lead to different election outcomes even when voter preferences are held constant. Using the 1992 election as an example, it is shown how the outcome of every positional vote system can be found. Similarly, every possible cumulative and approval vote outcome is shown. Multiple vote systems, like approval and cumulative voting, have disturbing properties. Using the 1992 election as illustration, it is shown how a candidate who wins under every positional vote system, who wins every pairwise vote (i.e. is the Condorcet winner), and who has the most first place and least last place votes may nevertheless lose under approval or cumulative voting. Similarly, it is shown how a candidate who loses under every positional system, who loses every pairwise vote (i.e. is the Condorcet loser), and who has the least first place and most last place votes may nevertheless win under approval or cumulative voting.

Tabarrok, Alexander. 2001. President Perot, or Fundamentals of Voting Theory Illustrated with the 1992 Election. Public Choice 106 (3-4): 275-297.

2000

Assessing the FDA via the Anomaly of Off-Label Drug Prescriptions

Abstract
ABSTRACT: Most American hospital patients are given drugs not approved by the U.S. Food and Drug Administration for the prescribed use. If off-label prescribing is so widespread and successful, is the FDA's pre-approval process really necessary?

Tabarrok, A. 2000. Assessing the FDA via the Anomaly of Off-Label Drug Prescriptions. The Independent Review V, #1: pp. 25-53.

2000

Runaway Judges? Selection effects and the jury?

Abstract
ABSTRACT: Reports about runaway jury awards have become so common that it is widely accepted that the US jury system needs to be ‘fixed.’ Proposals to limit the right to a jury trial and increase judicial discretion over awards implicitly assume that judges decide cases differently than juries. We show that there are large differences in mean awards and win rates across juries and judges. But if the types of cases coming before juries are different from those coming before judges, mean award and win rates may differ even if judges and juries would make the same decisions when faced with the same cases. We find that most of the difference in judge and jury mean awards can be explained by differences in the sample of cases coming before judges and juries. On some dimensions, however, there remain robust and suggestive differences between judges and juries.

Helland, Eric and Alexander Tabarrok. 2000. Runaway Judges? Selection effects and the jury? Journal of Law, Economics, and Organization 16 (2): 306-333.

2000

Believe in Pascal's Wager? Have I got a deal for you!

Abstract
ABSTRACT: Pascal’s wager is initially compelling because “believing” in God appears to be costless. Believing in the possibility of infinite utility, however, implies that the believer is willing to accept any finite cost to achieve any positive probability, no matter how small, of attaining infinite utility. "Tabarrok's offer," although costly, should be compelling to those who accept Pascal's wager.

Tabarrok, A. 2000. Believe in Pascal's Wager? Have I got a deal for you! Theory and Decision 48: 123-128.

2000

The Ramsey Model of Economic Growth

The link is to a Mathematica NB file.

Abstract
ABSTRACT: The Ramsey model of economic growth is a workhorse of contemporary macro-economics. It's the starting point not only for growth theory but also for modern business cycle theory. Ask an economist how the economy will react to an increase in government purchases or to a change in the tax rate on capital and the first model he will reach for in a search for answers is the Ramsey model. In this paper I briefly explain a simple version of the Ramsey model and put the model through its paces using Mathematica's extensive numerical and graphical abilities.

Tabarrok, Alexander. 2000. The Ramsey Model of Economic Growth. Mathematica in Education and Research 8: 3-4: 43-51.

1990s

1999

The Opportunity Costs of Rent Seeking

May be minor differences from published version.

Abstract
ABSTRACT: The costs of rent seeking exceed traditional measures when opportunity cost is considered. When the quantity of resources consumed by rent seeking is large, rent seeking draws consumer surplus out of alternative resource employments. The costs of rent seeking differ in partial and general equilibrium frameworks; Tullock (1989) recognizes this but incorrectly argues that rent seeking costs are twice as large in general than in partial equilibrium. Other authors suggest that rent seeking costs are lower once the opportunity costs of resources used in rent seeking are considered. We clear up the confusion in the current literature.

Cowen, T., and A. Tabarrok. 1999. The Opportunity Costs of Rent Seeking. Journal of Public Finance and Public Choice XVII (2-3):121-27.

1999

Court Politics: The Political Economy of Tort Awards

In most respects superseded by The Effect of Electoral Institutions on Tort Awards which reviews the pertinent findings from this paper.

Abstract
ABSTRACT: We investigate the forces, which explain why trial awards differ across the U.S. states. In 23 states judges are elected and in 10 they are elected via partisan elections. Elections have two important effects. First, defendants are often out-of-state non-voters while plaintiffs are typically in-state voters. We predict, therefore, that elected judges will redistribute wealth from out-of-state businesses to in-state plaintiffs. Second, the realities of campaign financing require judges to seek and accept campaign funding from trial lawyers who uniformly are interested in larger awards. We hypothesize that these two forces cause awards to be larger in states where the judiciary is elected rather than appointed. We also hypothesize that the demand for redistribution will increase as poverty increases and thus that awards will be larger in states with greater poverty. Using a sample of over 7000 cases across 48 of the 50 states we find significant evidence in support of these hypotheses.

Tabarrok, A., and E. Helland. 1999. Court Politics: The Political Economy of Tort Awards. Journal of Law and Economics XLII,1(April): 157-188.

1999

Would the Borda Count have Avoided the Civil War?

Mathematica code for most of the calculations in this paper can be found here. This paper uses the same techniques (but in one more dimension) as President Perot - thus the theory sections overlap.

Abstract
ABSTRACT: The election of 1860 was one of the most important and contentious elections in US history. It was also one of the most interesting. Four candidates from three different parties battled for the presidency and all four received a significant number of votes. We ask whether Lincoln's victory was sound, or was it due to a fluke in the electoral system? Did a Lincoln win plausibly represent the will of the voters or would a different voting system have represented their preferences more accurately? Would the outcome have been the same had one or more of the candidates dropped out of the race? These and other questions are answered using new graphical techniques which let us assess voter preferences more accurately. Using these techniques, we are able to show, in a single figure, the outcome of every positional voting system, as well as all possible approval voting outcomes. By comparing the outcome under plurality rule to the outcomes which would have occurred under other voting systems, we conclude that Stephen Douglas, not Lincoln, was plausibly the candidate who best represented the preferences of the voters.

Tabarrok, Alexander. and Lee Spector. 1999. Would the Borda Count have Avoided the Civil War? Journal of Theoretical Politics 11(2): 261-288.

1998

Voting Theory with Representation Triangles and Cubes

The link is to a Mathematica NB file. See the material on voting and mathematica for more complete coverage of the voting package.

Abstract
Abstract: Voting seems straightforward but on closer inspection even simple voting rules have mysterious and odd properties which often challenge our conception of democracy. Some of these paradoxes have bothered social scientists for hundreds of years but until recently little theory existed which explained why and when paradoxes might be expected to occur. In his book, "The Geometry of Voting," the mathematician Donald Saari has shed considerable light on why voting 'paradoxes' occur and how they can be predicted. The package voting.m uses Mathematica's capabilities to implement many of the functions described in Saari's book "The Geometry of Voting," Springer-Verlag, 1994. The package allows us to experiment with positional voting systems, pairwise voting, approval voting and cumulative voting. In this article I will focus on positional and pairwise voting, other package capabilities are explained at length in the electronic supplement.

Tabarrok, A. 1998. Voting Theory with Representation Triangles and Cubes. Mathematica in Education and Research 7 (3):20-28.

1998

Who Benefits from Progress?

Abstract
Abstract: Progress is better for some consumers than for others. We analyze the factors which govern how much a consumer gains from progress, defined as price declines and the introduction of new and improved products, and we show how these factors vary systematically across different consumer groups. Economic developments of the 1980s and 1990s have brought increasing disagreement about the performance of the American and European economies. Economists typically try to account for these dual and contrasting perspectives by citing the increasing gap between the wages of skilled and unskilled labor. We examine differential consumer gains as another factor which may account for the contrasting perspectives. Differential consumer gains can also help to explain contrasting perspectives on the de-socialization of the East European and Soviet economies.

Tabarrok, Alexander and Tyler Cowen. 1998. Who Benefits from Progress?, Kyklos 51 (3):379-397.

1998

The Separation of Commercial and Investment Banking: Morgans Vs Rockefellers

Too much public choice takes a correlation as proof of (special interest) causation. This paper is my attempt at an historical public choice. My most Rothbardian paper.

Abstract
ABSTRACT: The public interest arguments for the separation of commercial and investment banking are weak and appear unable to explain the passage of the Banking Act. The separation can best be understood in the context of a bank war between the Morgan and Rockefeller banking groups. The House of Morgan blended commercial and investment banking to a much greater extent than did the Rockefeller group. Although separation raised the costs of banking to the Rockefeller group, it hurt the House of Morgan disproportionately and gave the Rockefeller group a decisive advantage in their battle with the Morgans. The micro-history approach of this paper pinpoints the specific individuals who were responsible for the Act's provisions separating commercial and investment banking.

Tabarrok, A. 1998. The Separation of Commercial and Investment Banking: Morgans Vs Rockefellers. The Quarterly Journal of Austrian Economics 1 (1):1-18.

1998

The Private Provision of Public Goods Via Dominant Assurance Contracts

Explainer

My most un(der)appreciated paper!

Abstract
ABSTRACT: Many types of public goods can be produced privately by profit seeking entrepreneurs using a modified form of assurance contract, called a dominant assurance contract. I model the dominant assurance contract as a game and show that the pure strategy equilibrium has agents contributing to the public good as a dominant strategy. The game is also modelled under incomplete information as a Bayesian-Nash game.

Tabarrok, A. 1998. The Private Provision of Public Goods Via Dominant Assurance Contracts. Public Choice 96:345-362.

1995

Irrelevance Propositions Are Irrelevant

Pascal's Wager applied to new-classical economics.

Abstract
Abstract: Ricardian equivalence theory and other New-Classical neutrality results have generated an enormous debate because they appear to have strong implications for policy. I argue that irrelevance propositions are policy irrelevant. If these propositions are true then behaving as if they are false has zero costs, but, if they are false, behaving as if they are true may be very costly. Thus, even if we beleive these propositions to be true, we should behave as if they were false. In consequence, we should not be overly concerned with whether these propositions are in fact true. An interesting corrolary of the above arguments is that if irrelevance propositions are believed to be true much evidence will exist which suggests that they are false.

Tabarrok, A. 1995. Irrelevance Propositions Are Irrelevant. Kyklos 48:409-417.

1995

Good Grapes and Bad Lobsters: Applying the Alchian and Allen Theorem

Abstract
Abstract: We consider the well-known theorem of Alchian and Allen that adding a per unit charge to the price of two substitute goods increases the relative consumption of the higher price good. The current literature misspecifies the conditions under which the theorem holds. When applying the theorem the fixed cost should be applied on a per unit basis, rather than in terms of an entry fee for consumption. We state the necessary conditions for the theorem to hold when the the consumers are shipped to the goods.

Cowen, T., and A. Tabarrok. 1995. Good Grapes and Bad Lobsters: Applying the Alchian and Allen Theorem. Economic Inquiry XXXIII (April):253-56.

1994

Genetic Testing: An Economic and Contractarian Analysis

Abstract
ABSTRACT: Medical researchers are rapidly identifying the genetic causes of many diseases. Genes that increase the risk of contracting Alzheimer's, colon and breast cancer, Huntington's, cystic fibrosis and numerous other diseases have been identified. Genetic tests can reveal an individual's probable health status many years in advance of sickness. Many fear that this will lead to `genetic discrimination' in the employment and health insurance markets. Solutions such as consent laws are impractical and create adverse selection problems. A new form of insurance, genetic insurance, can eliminate these problems and allow everyone to be insured.

Tabarrok, A. 1994. Genetic Testing: An Economic and Contractarian Analysis. Journal of Health Economics 13:75-91.

1992

The Public Choice Theory of John C. Calhoun

One of the best pieces on Calhoun in my humble opinion.

Abstract
Abstract: Like the title says.

Tabarrok, A., and T. Cowen. 1992. The Public Choice Theory of John C. Calhoun. Journal of Institutional and Theoretical Economics 148 (4):655-74.

1991

The Preferred Tax Type: Comment On Herbener

Abstract
Abstract: "Austrian" economists sometimes object that indifference curves are a poor tool because indifference doesn't exist in the real world. The premise is questionable but the real issue is, Does the use of i. curves results in mistaken economics? Herbener was the first to try to proof that it does but his argument is faulty.

Tabarrok, A. 1991. The Preferred Tax Type: Comment On Herbener. Review of Austrian Economics 5 (2):107-10

Chapters in books, other nonrefereed articles