29 April 2016

The Never Ending Saga of Contract Law: The Efficient Breach

For scholars and students of contract law, the (in)famous "efficient breach" hypothesis has diverted more neurons than any other topic in the past half-century. Indeed, I discussed it in Principled Pluralism and Contract Remedies (download here). Briefly put, and quoting from (In)efficient Breach of Contract by Daniel Markovits and Alan Schwartz, proponents of the concept of the efficient breach explain it this way,
The expectation interest remedy [for breach of contract] requires the promisor to transfer a sum equal to the promisee’s expected gain from performance [or loss from nonperformance] if the promisor reallocates her resources to another use. The theory of efficient breach justifies the remedy because the promisor will either perform, when the promisee's [foregone] gain would exceed the [promisor's] gain from reallocation, or breach when the promissee’s [foregone] gain is below.
In other words, the law of contracts demonstrates that it doesn't care about the morality of breach of contract because it limits damages for breach to a promisee's loss rather than the breaching promisor's gain. If the promisor comes out ahead, even after covering the promisee's losses, everyone is (or at least should be) indifferent.

While many have decried the morally agnostic status of the efficient breach hypothesis, Markovits/Schwartz make a more intriguing argument: there is no such thing as an efficient breach. Ever.

How can this be?
Consider two contracts. Contract A lays out a single path to performance: The promisor must trade a specified good or service for a price. Contract B, which we call a dual performance contract, provides alternative paths to performance: The promisor must trade the good or service item or transfer a sum to the promisee that equals the gain the promisee would have realized from the trade. Let the promisor not trade the item, but transfer the sum instead. This would be a breach if the parties wrote contract A, but not if the parties wrote contract B. The promisor would breach even Contract B, however, if she failed both to trade and to transfer the sum. Neither the failure to trade nor the failure to transfer could be efficient breaches if the applicable contract terms were efficient. Hence, to ask whether a breach is efficient is to ask the wrong question.
Putting this another way (and with a HT to Oliver Wendell Holmes, Jr.), if parties enter into a dual performance contract they have agreed that the promisor has an option to perform or pay. Thus, non-performance coupled with reimbursement of the promisee's losses is not even a breach much less an efficient one.

Of course, most contracts are not explicitly of the dual performance variety; most specify that the promisor will do something and leave it at that. So what are we to do in such cases? Is it possible that courts should interpret contracts that specify only a single path as nonetheless permitting such dual performances? Markovits/Schwartz think so. In fact, they believe that most of the time most parties have already bargained for the dual performance. Perform or pay, in other words, is the presumptively correct way to interpret almost all contracts: "Contracts that are silent about remedies should be read to make dual performance promises."

Such a position doesn't strike most folks as immediately obvious. How do Markovits/Schwartz argue for it? In summary--and as amplified by me with respect to point (3)--as follows:

(1) The choice not to perform an agreed-upon exchange amounts to an invitation to renegotiate the original contract. (2) Renegotiations are expensive; thus, prudent parties should agree in the initial negotiation for a remedy should one of them choose not to perform. (2a) An agreement to permit one party not to perform in return for payment of the aggrieved's party's losses is a plausible remedy. (3) Nonetheless, commutative justice requires that the party who chooses not to perform pay something for the option of paying the other party's losses rather than giving up its gain. (4) The something paid for the option is a lower initial contract price.

There is nothing fundamentally invalid with this argument. As I argued in my Principled Pluralism piece, justice is served by a large range of remedies for breach of contract and the current expectation remedy fits comfortably within that range. Yet it remains the case, or so I believe, that the Markovits/Schwartz argument for the current state of affairs would leave most contract parties nonplussed. The fact that such an argument wouldn't occur to most contract parties and that judges have never deployed such an argument leads one to wonder if it isn't a "just so story" that seeks to explain a cause (expectation damages) solely in terms of an effect (putative lower prices).

The Markovits/Schwartz argument also fits uneasily in the widely-recognized doctrine of good faith in the performance of contracts. Even in its most narrow articulation. good faith is understood to limit a contract party's discretion otherwise permitted by the express terms of the contract. Yet on the Markovits/Schwartz hypothesis, a contract regime characterized by a rejection of good faith in performance would, like one limiting damages to a promisee's losses, generate lower initial prices. What on their view accounts for such inconsistent results?

Similarly, even if dual performance is presumptively efficient, why are there impediments to parties who wish to contract out of it? Default rules like expectation damages are understood to be efficient because they save parties the time and trouble of reinventing the wheel each time they enter into a bargain. Nonetheless, thoughtful parties to a particular contract (or with  awareness of a particular counter-party) might want to contract in advance for performance or payment of the other party's gain instead of its losses. Yet courts remain resistant to permitting parties to contract for supra-compensatory damages. Liquidated damages are fine but even they remain subject to a plausibly demonstrable relationship to the promisee's losses.

In sum, I am not persuaded by the Markovits/Schwartz dual performance hypothesis. It is more plausible than the efficient breach hypothesis. It may even be proven correct. But not quite yet.

28 April 2016

From Wagner to Dickens: Music and More Music

Wagnerian opera or English music hall comedy? Over the past several weeks we took in both. First came Wagner's early piece, The Flying Dutchman, performed at the Carpenter Theatre in Richmond. (Performances remain for April 23-24 in Fairfax.) It's hard to believe Wagner composed The Flying Dutchman in 1840 when age 26. A serious tragedy of pride, judgment, love, death, and apotheosis, the music for The Flying Dutchman had a modern feel.
While not atonal, there was nothing melodic about most of it. The performances, especially by Wayne Tigges (the Dutchman) and Wayne Volpe (Daland) were superb. The orchestra was excellent and the staging was very modern but without compromising the integrity of the performance. Quite a contrast with the melodic Italian La Traviata we saw at the same venue a year ago.

The Mystery of Edwin Drood
Then a week ago it was to Regent University for its end-of-season musical, The Mystery of Edwin Drood. A slap-stick song-and-dance musical in the style of a 19th century English musical hall performance (lots of asides and audience participation), The Mystery of Edwin Drood was written by Rupert Holmes (yes, the PiƱa Colada Rupert Holmes) based on an unfinished novel by Charles Dickens. The large cast had obviously spent a lot of time in rehearsal and was well trained in song and dance but the performance of William Cartwright as the music hall's impresario and filling in as mayor of the mythical village of Cloisterham stood out. Cartwright was exceptional in all respects--singing, dancing, vamping, and declaiming.

Performances of The Mystery of Edwin Drood remain so get your tickets now!

21 April 2016

Lucy and Ricky

Lucy  by Ellen Feldman

Comments on two books recently read. Second started but first finished was the historical novel Lucy: A President, A Marriage, A Love Affair by Ellen Feldman. Clearly the beneficiary of in-depth familiarity with the historical documents, Feldman tells the story of the intimate relationship between Lucy Mercer and Franklin Roosevelt. Beginning with the hiring of Lucy in 1915 by Eleanor Roosevelt as what today we would call an administrative assistant (when her husband was Assistant Secretary of the Navy in the Woodrow Wilson administration) Feldman creates a plausible first-person account of a deeply emotional and physically intimate affair that continued until its discovery by Eleanor three years later.

Forced to end the affair to maintain the possibility of becoming president, Franklin nonetheless remained in contact with Lucy even after her marriage to a widower some years her senior. The FDR-Lucy (now Rutherfurd) relationship resumed something of its earlier intimacy as World War II dragged on with the disabling stroke and eventual death of Lucy's husband. The connivance of Anna Roosevelt, Franklin and Eleanor's eldest daughter, in enabling the resumption of her father's relationship helps explain why Lucy--and not Eleanor--was at FDR's side when he died of a cerebral hemorrhage.

A superbly told story as much of manners as the heart, Lucy demonstrates, on the one hand, the reality of a social world that is not so different from as our own as we might wish to believe and, on the other, the long-lost days when a discrete hypocrisy helped maintain the veneer of virtue. In that respect, much has been lost.

Media of Richard III
In contrast to the rich texture added by the author to the story of Lucy, Richard III; A Ruler and His Reputation by English historian and litterateur David Horspool hews closely to the discoverable facts of the life, times, and death of England's king best known through Shakespeare's portrayal as a tragi-comic villain. Horspool is clearly at home with all the bits and pieces of the documentary record of this period in English history (as well as that of the interested players of France, Burgundy, Normandy, and Flanders) in addition to the conclusions drawn from the relatively recent discovery of the remains of Richard himself beneath a parking lot in Leicester.

Horspool's care doesn't prevent him from drawing reasonable inferences from the available data and thus he assigns to Richard culpability for the deaths of his two young nephews who had rightful claims to the throne Richard had seized on the sudden death of his brother.

As with most contemporary historians, Horspool is as interested in the "history of the history" of his subject as he is with the man himself. Thus, throughout the book Horspool interweaves the generations of re-tellings of the story of Richard III. To my surprise, the distinctive blackening of Richard's reputation did not begin with Henry Tudor but a full generation later with Thomas More. Of course, even during his reign Richard had to contend with those who thought he was a murderous usurper but portrayals as a physical (and thus moral) cripple began in the times of Henry VIII. Indeed, not long after the accounts of "Richard the Degenerate" there were pro-Ricardian voices and it is their current incarnation as the Richard III Society that led to the discovery of his remains in 2012.

While hardly a romance of manners, Richard III is an excellent and accessible history of an era of political life far different from our "enlightened" world of politics framed by the media. Yet, as Horspool demonstrates with his account of the 2015 interment of Richard's remains, even today something of the romance of a bygone era continues to affect the public political psyche.

11 April 2016

Dr. Jekyll and Mr. Hyde: Dramatic Augustinianism


We saw the North Carolina State student performance of an adaptation of Robert Louis Stevenson's "Strange Case of Dr. Jekyll and Mr. Hyde" Saturday night. NC State does not offer a major in drama so the student actors, from freshman to seniors, had majors in everything from anthropology to zoology. Literally.

Set design and staging were superb, perhaps because there were some engineering students behind the scenes. The  overall acting was good although not of the quality we are accustomed to see at Regent University performances. Of course, most of the performers at Regent are MFA students who have undergraduate degrees in drama so direct comparison would be unfair to the kids from State.

One source of some confusion was the need to have several students perform several roles. In particular, the need to have four different actors portray Edward Hyde proved disorienting. His primary actor, Matthew Tucker, along with Nico Peaks--the only Henry Jekyll--was very good.

It has been a long time since I've read Stevenson's novel so I came in recalling only the vague outline of the story. The dramatic adaptation by Jeffrey Hatcher didn't dwell on the "sci-fi" elements. Instead, he brought out the "Augustinian" perspective of the duality of the human will. Jekyll's "scientific" tincture-based solution to the problem of human evil proved ineffective if not destructive. Even more importantly, Jekyll's philosophical location of the problem of evil in the mind, which meant it could be overcome by the right-thinking human will, was proved fatally wrong. As St. Augustine observed in his Confessions long ago, the problem of depravity goes all all the way down to the depth of our being and cannot be resolved with drugs or even right knowledge, which should stand as a rebuke to big pharma and the educational-industrial complex.

We commend "Dr. Jekyll and Mr. Hyde" and it will continue to show through April 17 so you can go here to buy your tickets.

09 April 2016

"I Saw the Light"

Last week we went to the opening of the Hank Williams, Sr. biopic "I Saw the Light". Based on the biography of the short-lived country music star, "I Saw the Light" did a good job for a film in its genre. In other words, it was similar to "Walk the Line," the film based on the life of Johnny Cash.

There were two principal differences between "I Saw the Light" and "Walk the Line." First, "Walk the Line" starred well-know actor Joaquin Phoenix playing the title role with the support of actress Reese Witherspoon as June Carter Cash. By contrast, "I Saw the Light" starred folks of whom I hand't heard, Tom Hiddleston and Elizabeth Olsen as Hank and Audrey Williams.

Second, Cash lived a lot longer than Williams. Williams rose to stardom when he was 23 and died only six years later from complications of consuming large quantities alcohol and drugs. Williams died before I was born but I recall hearing many of his hits over the course of my childhood. And, while I knew he died at a young age, I didn't know how young he was and how short his professional career had been.

In any event, "I Saw the Light" was an enjoyable film. Hiddleson, an Englishman, did a credible job of sounding like Hank Williams and the story, while not profound, is a contemporary morality tale.

07 April 2016

Straining Toward Natural Law: Margaret Radin and Contract Degradation Part 1.5.2

This represents my third in a series of posts that began here with my initial comments on Margaret Radin's Access to Justice and Abuses of Contract. Yesterday saw my second post here in which I responded to the first of Dean Eric Enlow's critiques, which had to do with whether contract law was a public good. Based on his prodding, I have affirmed that indeed contract law is a public good.

Dean Enlow went on to raise a second point, this one about my use of the expression "commutative justice" in connection the social practice of contracting in place of the more common contemporary reference to corrective justice. Quoting my original contention,
Among the components of justice is "commutative," which entails a rough equality in exchange. In other words, when all is said and done, a contractual exchange of money (or information) for goods or services should be a fair one.
To which Dean Enlow responds:
Second, in your discussion of the type of justice relevant to contract law, you follow the later typology in distinguishing between commutative and distributive justice which emphasizes equality in the exchange, rather than the older tradition distinguishing between rectifying and distributive justice, which emphasizes reestablishing equality of position after a harm.
And in addition asks, 
If we consider contract law to be concerned with rectifying the distinct kinds of harms that arise out of the breaking of contracts, i.e., enforcing the obligations that arise to remedy harms caused by certain and only certain kinds of contracts, would this make the analysis above easier than when we focus on equality in bargains as the essence of contractual justice?
Two points should be made here. First, I believe the idea of equality of exchange--commutative justice--precedes rectifying justice. As I argued in Looking for Bedrock: Accounting for Human Rights in Classical Liberalism, Modern Secularism, and the Christian Tradition (download here), we should distinguish between primary rights, what we owe one another on account of our common humanity, and secondary rights of rectification, what is owed when a primary right has been denied. Restoring the status quo ante is often a vital aspect of what the law does to correct a wrong but only follows what the parties have already done.

In any event, the world of primary rights can be divided between commutative (e.g., equality of exchange) and distributive (those owed on account of account of status or dignity). Drawing on the work of Nicholas Wolterstorff, I state my argument about the nature and foundation of primary rights in three lengthy paragraphs of Looking for Bedrock. I won't tax my readers with reproducing them here but would direct anyone who is interested to pages 627-629 of the linked article for more detail. (Alternatively, look at some of my blog posts on Wolterstorff's book "Justice: Rights and Wrong" here, here, and here which, while they do not exactly make my point, have the advantage of easy accessibility.)

Second, I would appreciate anything that would make the task of identifying examples of Margaret Radin's "contract degradation" any easier. Yet I'm not sure how moving the initial focus from commutative justice to rectifying justice, as Dean Enlow wonders, would do so. If we leave aside the idea of equality in exchange, how do we identify when a particular contract causes harm? Or, how do we identify which "certain kinds of contracts" from which harm arise should not give rise to a legally enforceable claim? Perhaps there are simpler answers to these questions than there are to when a particular term of the underlying contract is so unfair as to have deprived a party of commutative justice but I'm not sure what they are.

06 April 2016

Straining Toward Natural Law: Margaret Radin and Contract Degradation Part 1.5.1

Last week I posted some initial comments about Professor Margaret Radin's article Access to Justice and Abuses of Contract here. I had planned to get to Part 2 this week but an apposite comment by Eric Enlow, dean of Handong International Law School in Pohang, Korea, has forced me to reconsider two points I made my first time around.

Dean Enlow first questions my conclusion that, just as contracts are means by which humans obtain private goods, so too public remedies for breach of contract are private goods. Quoting myself,

[I]s a right to claim damages for breach of contract a public good? It seems not: the remedy of contract damages--like the practice of contracting--is a private good. 
To which Dean Enlow responds, 
I don't understand why the practice of courts' remedying of breaches of contract concerns only private good. To the contrary, if courts create a state of affairs where the public knows that a breach of a private contract may be remedied, then it creates public conditions where people may contract at lower costs and with greater confidence. Courts thereby facilitate more commercial transactions by lowering transaction costs. Courts may also promote the moral development of personal responsibility in taking responsibility for certain commitments with others and making amends for harms caused by failing in those commitments. 
In other words--my words--provision of a civil remedy for a private wrong (damages suffered as a result of breach of a contract) contributes to the public good in two ways. First, contract law works to increase the frequency of the social practice of contracting and, second, contract law functions as a tutor of private virtue, in particular the virtue of promise-keeping or fidelity. The first promotes an increase in the aggregate number of private goods while the second, the goad of potential civil liability for contract breach, works to increase our individual well-doing, our individual flourishing. In turn, individual flourishing contributes to the flourishing of society as a whole.

In response, I agree with the second of Enlow's points but not the first. With respect to his first criticism, increasing the quantity of private goods (what economists call welfare maximization) may be good for an individual but the effects of American consumerism (my thoughts about consumerism here; even better ones here) suggests that welfare maximization may in fact detract from growth in individual and collective virtue. (Some earlier thoughts on that point here.) In any event, and returning to a point I made in my initial post, I remain unconvinced that welfare maximization is a condition sufficient to identify a public good. I suspect that nothing can be a public good that affirmatively reduces our capacity for private goods but I don't believe the converse follows. In other words, increasing welfare is a necessary but not a sufficient condition by which to identify a public good.

I stand corrected by Enlow's second observation. Promotion of the virtue of fidelity is a public good and contract law can promote fidelity. It is particularly vexing to have overlooked this point because I've made it on previous occasions (see my posts here and here). We all must admit that we need socially instantiated practices to grow in virtue, a habitual turn to the good, and contract law is one such practice. Thus, I affirm that contract law is a public good.

In conclusion, I am grateful to know that someone reads what I write and takes the time to respond thoughtfully to it. Dean Enlow raised an additional point about my Aristotelian account of justice to which I hope to respond soon.

31 March 2016

Straining Toward the Natural Law: Margaret Radin and Contract Degradation Part 1

Speaking Aristotelian-ish, the social practice of contracting is an example of a formal means [cause] by which human beings achieve their natural end of flourishing. Flourishing entails growth in the virtues, one of which is justice. And among the components of justice is "commutative," which entails a rough equality in exchange. In other words, when all is said and done, a contractual exchange of money (or information) for goods or services should be a fair one. (Caveat: a fair exchange need not be on arithmetically equal terms; it need only be a fair chance at arithmetical equality.)

Contract law exists in part because sinful human beings sometimes fail to contract in a just manner. It's unlikely that contractual assent produced at the end of a gun represents a fair exchange. Contract law thus concludes that the party under duress need not uphold her end of the bargain. (Indeed, the law of unjust enrichment goes one step further than contract law and permits such a victim to recover what has already been transferred.)

But what about contractual assent to terms that a party had no knowledge and, even if the terms had been known, wouldn't have been understood? I'll Margaret Radin provide an example taken from Access to Justice and Abuses of Contract (download here):
Facebook promulgated new terms of service in January 2015. Many readers of this essay, perhaps a large majority, are users of Facebook. But very few users know that new terms were imposed recently, and fewer have read them.
If someone did read the terms and wished to disconnect and delete her account, she would discover that certain things will nevertheless stay in Facebook’s power: “Information associated with your account will be kept until your account is deleted, unless we no longer need the data to provide products and services.” [italics added] Moreover, “information that others have shared about you is not part of your account and will not be deleted when you delete your account.” In other words, Facebook will continue to feature your stories and photos in advertisements. You are deemed to “agree” to Facebook’s terms by having continuing to use Facebook after January 1, 2015.
Facebook's terms of service are relatively benign, and use of Facebook is without charge to its users. (It's marketers to whom Facebook sells information that make it extremely profitable.) Nonetheless, all of us have clicked "I agree" for goods or services that we have purchased that include sets of terms we have not read, and at least some of which limit our rights (e.g., to complain publicly about shoddy products or to litigate if the other party breaches). Are such terms a legitimate part of the social practice of contracting? In other words, do they represent a rough equality in exchange? And, even if they don't, should the law of contracts do anything about it?

On the one hand, contemporary contract law is agnostic about the legitimacy of such terms. In other words, the law doesn't care about (or perhaps doesn't believe in) commutative justice. And even if a judge believed that a contract was using terms in an unjust manner, he must conclude that contract law as it now exists provides no recourse. Unlike an unfair exchange produced at the end of a gun, an unfair exchange produced by terms is beyond the power of the law to redress.

Radin, on the other hand, says no, such terms are not legitimate; and yes, the law of contracts should do something about them. But, one asks, how does she know any particular term and the resulting exchange is illegitimate? And how does she argue that the law of contracts should do something about it?

With respect to the first question, she suggests that terms in contracts for goods or services for which there is market failure are almost certainly so one-sided as to be wrong. Market failure occurs in the presence of two factors: (i) when a rational consumer cannot acquire sufficient information about the product to evaluate its value and (ii) the term disclaims liability for damages caused by the product's defects. Consider Radin's example:
Fine print embedded in a composite product may be deployed in a non-competitive market or in a market in which too many consumers lack information about the product, a situation that leads to a race to the bottom. If consumers do not have the information needed to evaluate a product (a situation known as information asymmetry, because the firms themselves do have the information about their products), firms can lower quality without lowering the price, or can lower the price but lower quality more. When that happens, firms that do not lower quality will receive lower revenues and perhaps be driven out of the market.
Even if we agree that there's something "wrong" about that, what should contract law do about it? Are civil governments in the business of reversing races to the bottom? Surely, no one wants to pay more and get less but why should courts or even legislatures get involved in fixing this problem? At this point Radin provides no argument relying, it appears, on moral intuition. (For the limits of moral intuition as a basis for human rights, not to mention contract remedies, see my piece Looking for Bedrock.)

Is there an argument that would warrant Radin's desire to modify the rules of contemporary contract law and forbid certain disclaimers? As I suggested in Who Bears the Burden? The Place for Participation of Municipal Residents in Chapter 9, public choice theory may be that argument. Can disallowing disclaimers in conjunction with defective goods be justified by application of public choice theory?

Let's start with the first question: What is public choice theory?  Public choice theory provides a framework of analysis to identify public goods, goods that that should be provided by civil government at taxpayer expense. Other goods are private and need not be provided by civil government. Public choice theorists posit two markers to distinguish public goods from private ones: First, quoting from Who Bears the Burden?: "A public good is one which should be produced, but for which there is no feasible method of  charging the consumers." Second, provision of such goods at public expense prevent the problem of free riders, those who would take advantage of a good, such as residential streets, without paying. If non-payers can't excluded from using a good without paying, free market participants won't provide (much of) it.

On such an understanding, is a right to claim damages for breach of contract a public good? It seems not: the remedy of contract damages--like the practice of contracting--is a private good. Thus, public choice theory does not justify disallowing contract disclaimers. (Indeed, as I argued in Principled Pluralism and Contract Remedies, civil government need not provide a remedy for breach of contract although it certainly may do so.)

Well, if not public choice theory, is there any other foundation on which to base a rule disallowing disclaimers? There might be, and that's where the need for a substantive account of natural law becomes necessary. Radin and other Progressives are onto something--enforcing unbargained-for disclaimers of remedies for breach of contract may be unjust--yet the thinness of the Progressive account of justice fails to provide warrant for their disallowance. By contrast, a natural law account offers a basis for limiting the ability of one party to use the form of contract to deny its substance.

25 March 2016

Good Friday and Respect for the Dead

I've posted here, here, and here that cemeteries nearby to churches give visible testimony to our confession of the fundamental unity of the Church militant and the Church triumphant, the communion of the saints. In other words, the population of the holy, catholic Church is much larger than those currently living on the earth.

With a little more contemporary cultural flair, Wesley J. Smith makes a similar point in his piece, "The Walking Dead" and the Importance of Dead Bodies here. Turns out that as cremation is rapidly replacing Christian burial, "liquefaction" is the next trend in disrespect:
One trending secular approach for discarding bodies—I can’t think of a more apt descriptive—is liquefaction. The BBC described the system thusly:
The system works by submerging the body in a solution of water and potassium hydroxide which is pressurised to 10 atmospheres and heated to 180C for between two-and-a-half and three hours. Body tissue is dissolved and the liquid poured into the municipal water system.
Having one’s remains poured into a sewer sends a powerful symbolic statement that human beings are nothing more than the sum of our chemistry, just as reverential burial says we are something more.

Of course, there's nothing disrespectful about liquefaction if human life itself is nothing more than a momentary concatenation of molecules. On the other hand, if we look forward to the resurrection of the dead then we should be pleased to join our pioneering Savior in the grave as we await the regeneration of all things, including our bodies.

21 March 2016


Again one of my reviews will appear too late to encourage folks to see another excellent Regent University Theatre production. Saturday night we went to see "Rhinoceros." Written by Romanian emigre Eugene Ionesco, "Rhinoceros" was a protest against the totalitarian movements in Romania and France (both fascist and communist) that had dominated the period between Word Wars I and II. In "Rhinoceros" a slightly confused young man named Berenger sees his friends, fellow workers, and even the beautiful object of his affection becomes rhinoceroses, coarse and rough members of a herd following who-knows-what passes for public discourse in a small French village.

The comparison to contemporary political discourse driven by social media into ever-increasing polarization is obvious. One's first identification might be with a current vainglorious political figure characterized by vituperative attacks on ex-prisoners of war, women, and various minority groups, and surrounded by none-too-subtle hints of violence. Of course, when originally scheduled, the Tragedy of Donald Trump was far over the horizon. So to what else could Ioneso's dystopian vision of mass coarsening be applied?

On several occasions I have commented on the decreasing quality of higher education in America (here and here). Those posts focused on the for-profit institutions that take money from poorly prepared students that then go on to deliver neither education nor skills. Moving up the food chain, however, are public and private institutions that teach skills of critical thinking but with no orientation toward truth. Tearing down ungrounded consumer-driven presuppositions is fine but unless realism is employed toward Truth it degenerates into skepticism and truth is turned into identity politics.

Identity politics of the Left are deployed in service to certain groups identified by race or sexual orientation; those of the Right to a few others. Both are equally uncommitted to pursuit of the common good because each has, by and large, given up belief that there is such a thing as the "common" good.

Nearly all that passes for politics in America today has become means to exercise raw power. The continuing aggrandizement of the office of president and the means the elites and their unthinking minions will employ to gain power are symptomatic of the sort of world that Ionesco portrayed.

Regent's production of "Rhinoceros" was excellent. In particular, William Viriato's performance in the lead role of Berenger was outstanding. I would strongly encourage you to see it had the production not ended the day before this piece is posted but I nonetheless want to commend the combination of theme and production of this play.

14 March 2016

No Bankruptcy For You: The Indirect Prohibition of Educational Reorganization

My spring semester Bankruptcy class is about to transition from the messy world of individual debt relief to the multi-variable universe of business bankruptcy. While I'm happy to let Dean (and former bankruptcy judge) Rich Leonard teach an advanced seminar in corporate reorganization, it is appropriate for all bankruptcy students to get at least a taste of the intricacies of Chapter 11 reorganization.

With a very few exceptions, the Bankruptcy Code permits any financially stressed corporation (or individual for that matter) to seek to reorganize its debts. Bankruptcy reorganization exists because the value of the whole is greater than its constituent parts. In other words, auctioning the assets of an insolvent business produces less value for its creditors than the same business with a new and improved capital structure. Not only are creditors made better off by reorganization, employees, customers, trading partners, and even the community as a whole do better if the business remains intact albeit under new ownership (and often new management).

At least that's the theory.

The implementation of corporate reorganization law is expensive and it's not clear if all of reorganization's potential gains are realized. Nonetheless, it  seems clear that the practice of corporate reorganization produces a net social gain. And, if that's the case (and I believe it is), there would be no good reason to prohibit an otherwise-eligible corporation from at least trying to reorganize, right?

No, there wouldn't. Yet as Matthew Bruckner explains in Bankrupting Higher Education (download here), institutions of higher education face an insuperable barrier to reorganizing their debts. Upon seeking any form of bankruptcy law relief, they automatically become ineligible to participate in federal financial aid programs, which means in virtually all cases they must shut their doors. Any residual value that creditors and others could realize through reorganization is lost.

You might think my response to this state of affairs would be a firm "meh" given my posts about the sad state of higher education in American (some examples here, here, and here). Yet consider Bruckner's well-tempered observation:
The effects of the college bankruptcy reorganization ban are more strongly felt among certain types of institutions. In particular, small colleges that have traditionally provided a liberal arts education and those that were founded to counter race- and gender-based discrimination appear especially vulnerable to financial distress, and are therefore more likely to need to take advantage of chapter 11’s toolkit. As a result, many of our nation’s most storied institutions have been forced to close their doors, preventing them from fulfilling their important missions, instead of being allowed to reorganize in bankruptcy. For example, almost twenty percent of all historically black colleges and universities (“HBCUs”) have closed since 1980.
To cut to the chase, it is the Higher Education Act and not the Bankruptcy Code that makes impossible reorganization of colleges and universities.

Bruckner's article is 61 pages long because it addresses not only the nature of the "death penalty" for colleges and universities that need to reorganize their debts but also why this should not be the case. In other words, he explains how the possibility of reorganization under federal bankruptcy law can preserve value for several groups of stakeholders and serve the common good, a two-fer that's generally not the case in the reorganization of most commercial enterprises.

None of this is to say, at least not in my opinion, that all colleges and universities in financial distress should reorganize. Bruckner addresses structural and cultural reasons why higher education in America finds itself in distress and Chapter 11 certainly will not solve those sorts of problems. Many schools should close but those for which there is no hope of financial recovery should not poison the well for those that could if given the chance.

In any event, Bankrupting Higher Education is an excellent piece of scholarship and should be of interest to those institutions that can gain the ear of lawmakers in Washington.

09 March 2016

"The Revenant"

I saw the third of the films nominated for Best Picture last night. (You can read my thoughts about "Spotlight" here and "Room" here.)  "The Revenant" was my least favorite. As many have noted, the cinematography of "The Revenant" is outstanding and the physical trials of actor Leonardo DiCaprio rightly earned him the Best Actor award. Yet the treatment of the film's theme--the unsatisfying nature of revenge--could easily be lost.

Spoiler alert. What follows includes some plot details.

One could have characterized "The Revenant" is an exceptionally well-filmed story of the motivating power of the desire for revenge. After all, it is revenge that drives DiCaprio's character Hugh Glass to figuratively raise himself from the dead and pursue the man who had killed Glass's son. Battling snow, freezing rain, icy rivers, French fur traders, and a band of Ree searching for their chief's daughter (who had been kidnapped by the French traders, and who Glass helped free)--all the while recuperating from an attack by a grizzly--Glass made it back to Fort Kiowa. When his son's murderer, John Fitzgerald, slips out, Glass continued the pursuit to the death.

Yet Fitzgerald's death did not come at Glass's hand. At the last moment Glass recalls an earlier conversation with a lone Pawnee whose family had been killed by the French who remarked, "My heart bleeds. But revenge is in the Creator's hands." Glass repeats the line (substituting "God" for "the Creator") and lets the mortally wounded Fitzgerald slip away only to see him drowned moments later by the band of Ree that had by then found the chief's daughter.

"The Revenant" portrays natural religion at its best. The desire for revenge is real and, indeed, the near-appropriate response to a grievous wrong. Yet even where the appropriate pursuit of the correct remedy--humanly-administered justice--proves unattainable, natural religion "knows" that divine justice remains. Revealed religion knows this as well (here).

Unfortunately, however, this deep moral truth is likely lost on the majority of the watchers of "The Revenant." I fear that the unrelenting hours-long focus on Glass's incredible feats of survival will drown out the nugget of truth ultimately revealed.