The Situationist

Posts Tagged ‘David Yosifon’

The Recovery Within Us: The Human and Legal Situation of “Wall Street 2”

Posted by David Yosifon on October 12, 2010

The financial markets may fail, and personal lives may be wrecked, but as Gordon Gekko (Michael Douglas) says in Wall Street 2: Money Never Sleeps: “nobody likes a cry-baby.” Oliver Stone’s new film is a rally for the old American strategy of overcoming calamity through love, capital, and labor productively employed.

As the film opens in 2008 the world is on the edge of economic meltdown, but the kids are alright.  In the first Wall Street we watched a young stockbroker, Bud Fox (Charlie Sheen), back-slide from the straight path of his union-leader father, into a reckless life of corporate raiding and insider trading.  The sequel’s up-and-comer, Jacob Moore (Shia LaBeouf), has a more serious name and a truer purpose.  This twenty-something is smart, energetic, and idealistic.  From his post at a prestigious investment house he seeks out capital for an under-funded alternative-energy firm that maybe can change the world.  In the 1980’s Bud Fox was all too eager to snort cocaine with the first stranger he finds removing her blouse in a limo made available to him under uncertain terms.  Jacob Moore enjoys the nightclub scene, and likes his whiskey, but he loves Winnie Gekko (Carey Mulligan), has marriage on his mind, and faces down the temptations of money and flesh.

This is not to say that Jacob does not falter.  He meets secretly with the infamous Gordon Gekko, the estranged father of his fiancé, because he believes they need to repair their relationship before she can be fully happy.  This well meant scheme puts an unforeseen and potentially catastrophic strain on the lives of all involved.  Stone’s movie thus takes humanity in all its comprehensive frailty.  In life, as well as in economics, even where corruption does not get us, we are still vulnerable to stupidity (limited cognitive capacity) and over-confidence (motivated reasoning).

In the first film the social stakes in the wheeling-and-dealing balance were the jobs of the men and women who worked with Bud Fox’s father (played by Martin Sheen) at Blue Star Airlines.   After Bud helped Gekko acquire Blue Star, Gekko wanted to break it up and sell off its parts at a profit.  The heart-attack that Bud’s father suffers when he hears the news symbolized the devastation that the 1980’s take-over and bust-up market brought to the lives of American workers.  Gekko and Fox both end up in prison at the end of the first movie, convicted of insider trading.  But insider trading had little to do with the corporate dynamics behind the bust-up of companies like Blue Star.  In the real world nothing was done in the 1980’s or since to change state corporate law or federal securities laws to ensure greater protections for workers or consumers in corporate decision-making.  The failure to make such reforms is in part what made the more recent financial devastation chronicled in Wall Street 2 possible.

After eight lonely years in prison, Gekko emerges in the second film with profound insights about both himself and the market.  Having finally understood that it was greed that cost him everything — money, family, and freedom — it becomes easy for Gekko to see from the sidelines the madness going on in the debt markets all around him.  Everyone from the investment banks to Jacob’s real estate agent mom (Susan Sarandon) got swept up in the fantasy that investments in housing – through securitized sub-prime mortgages or just a couple of “spec” houses – could never go wrong.  Diagnosing this madness, Gekko knows that he can make billions by shorting the debt market (if he “only had the first million.”).

While some of Stone’s characters echo popular political sentiment and sneer at the idea of “making money on losses,” most scholars are agreed that short-selling (betting that a stock will go down) can aid the healthy functioning of the market.  After all, if the world knew that someone as savvy as a Gordan Gekko was betting against the housing market, they might begin to doubt their own certainty that housing will only go up.  For that matter, active short-trading might give us a better sense of just how confident we should be in the viability of Jacob Moore’s favored alternative-energy start-up.  As Gekko himself puts it in this film, “Bulls win, Bears win.  Pigs get slaughtered.”  It turns out that there were some savvy investors who were short on housing prior to the recent meltdown, but the short positions were structured in such a way as to avoid the federal securities laws, and were thus hidden from public scrutiny.  The signaling value of such short-positions was thus lost, as investors and consumers kept on marching towards the slaughter.  Some of the most important reforms to come out of the recent crisis are aimed at ensuring that sophisticated shorting is publicly visible so that it can serve this crucial informational function.

The human stakes of the recent economic collapse are said in the film to be dire.  But Stone’s picture is more interested in showing our capacity for renewal than dwelling on our failure. The film is an ode to human resiliency.  At the heart of the meltdown Stone’s camera follows Jacob to the ruins of the World Trade Center, but only for a reflective moment.  Far more screen-time here is given to the Empire State Building, proudly standing in for the Twin Towers, whose grandeur visually anchored the first film.  Confidence and hard honest work will never be enough if our laws and institutions are out of whack.  But Stone’s film seems to argue that if we can stay on this side of corruption, our other frailties will not do us in.

At one point in Wall Street 2 Gekko and Jacob find themselves in the back of a cab careening recklessly through mid-day traffic.  Gekko tells the cabbie that he will pay more if the driver will go slower.  This may be the best lesson we can take from the bursting of the housing bubble and the subsequent economic crisis.  We all might consider ourselves better off, and we might be willing to pay for it in forgone speed, if our rides up and down Wall Street were a bit more cautious.

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David Yosifon is a Situationist Contributor and Assistant Professor at Santa Clara University School of Law.

For a sample of related Situationist posts, see “Our Stake in Corporate Behavior,” “The Problem of Old Fears and New Dangers,”The Illusion of Wall Street Reform,” “The Situation of Mortgage Defaults,” “Posner on Keynes and the Economic Depression,”The Situation of the American Middle Class,” “The Situation of the Mortgage Crisis,” and “The Financial Squeeze: Bad Choices or Bad Situations?.”

Posted in Entertainment, Life, Situationist Contributors | Tagged: , , | 1 Comment »

Taking the Situation of Consumers Seriously

Posted by The Situationist Staff on January 9, 2010

Situationist Contributor David Yosifon recently posted his superb article, “The Consumer Interest in Corporate Law,” (43 UC Davis Law Review 253-313 (2009)) on SSRN.  It’s an important, well written, and very situationist analysis of the influence of corporate law and corporations on consumers. Here’s the abstract.

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This Article provides a comprehensive assessment of the consumer interest in dominant theories of the corporation and in the fundamental doctrines of corporate law. In so doing, the Article fills a void in contemporary corporate law scholarship, which has failed to give sustained attention to consumers in favor of exploring the interests of other corporate stakeholders, especially shareholders, creditors, and workers. Utilizing insights derived from the law and behavioralism movement, this Article examines, in particular, the limitations of the shareholder primacy norm at the heart of prevailing “nexus of contracts” and “team production” theories of the firm. The Article concludes that fundamental reforms in corporate governance may be needed in order to vindicate the consumer interest in corporate enterprise.

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You can download the paper for free here.  For a sample of related Situationist posts, see “Hey Dove! Talk to YOUR parent!,” “The Situation of Our Food – Part II,” The Situation of Our Food – Part III,” “The Changing Face of Marketing?,” “The Illusion of Wall Street Reform,” “Reclaiming Corporate Law in a New Gilded Age – Abstract,” “Deep Capture – Part VI,” and “Deep Capture – Part VII.”

(The illustration above is by Situationist artist Marc Scheff.)

Posted in Abstracts, Behavioral Economics, Deep Capture, Law, Situationist Contributors, Social Psychology | Tagged: , , , | Leave a Comment »

A Situationist Critique of Legal Theory – Abstract

Posted by The Situationist Staff on October 2, 2008

Situationist contributor David Yosifon has recently posted his excellent article, “Legal Theoretic Inadequacy and Obesity Epidemic Analysis” (forthcoming 15 George Mason Law Review (2008)) on SSRN.  Here’s the abstract.

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This Article explores crucial analytic and normative limitations in presently dominant and ascendant approaches to legal theory. The approaches’ failure to provide a satisfying framework for analyzing the obesity epidemic presently raging undeterred in American society reveals these limitations. Conventional law and economics scholars writing on the subject have deployed familiar frameworks to reach predictable conclusions that are neither intellectually nor morally justifiable. This Article argues that recent theoretical innovations promulgated within the burgeoning law and behavioralism movement have thus far provided no more reliable a framework for legal analysis of the obesity epidemic than has conventional law and economics. This Article critiques in particular the behavioral law and economics concepts of “libertarian paternalism” and “asymmetric paternalism,” as well as the concept of “expressive overdeterminism,” recently developed by proponents of “cultural cognition theory.” This project is undertaken as part of a broader effort to develop an alternative approach to legal theory that previous co-authors and I call “critical realism.” The theoretical arguments herein are broad, but this Article aims to also advance obesity epidemic analysis in particular. Part V briefly discusses specific public policy implications of my assessment, with special reference to a policy innovation based in the reform of corporate law.

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To download a copy of Professor Yosifon’s paper for free, click here.

For those interested, here is a list of related Situationist posts to date: “Big Calories Come in Small Packages,” The Situation of Eating – Part II,” The Situation of Eating,” “The Situation of the Dreaded ‘Freshman 15′,” “Our Situation Is What We Eat,” “Social Networks,” Common Cause: Combating the Epidemics of Obesity and Evil,” “The Situation of Fatness = Our ‘Obesogenic’ Society,” Innovative Policy: Zoning for Health,” Situational Obesity, or, Friends Don’t Let Friends Eat and Veg,” “McDonalds tastes better than McDonalds, if it’s packaged right,” “The Science of Addiction, The Myth of Choice,” The Situation of our Food – Part I,” “The Situation of Our Food – Part II,”The Situation of Our Food – Part III,” and “The Situation of our Food – Part IV.”

Posted in Abstracts, Behavioral Economics, Choice Myth, Cultural Cognition, Food and Drug Law, Law, Legal Theory, Uncategorized | Tagged: , , , , , , , , , , , | 1 Comment »

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