Strategic Judging Under the United States Sentencing Guidelines: Positive Political Theory and Evidence

We present a positive political theory of criminal sentencing and test it using data from the United States Sentencing Commission. The theory posits that, faced with appellate review, federal district court judges applying the Sentencing Guidelines strategically use sentencing instruments -- fact-based and law-based determinations made during the sentencing phase -- to maximize the judges\u27 sentencing preferences subject to the Guideline’s constraints. Specifically, district court judges are more likely to use law-based departures when they share the same party ideology with the overseeing circuit court than when there is no party alignment between the two courts. Fact-based adjustments, on the other hand, are routinely used to maximize sentencing preferences regardless of party alignment between the two courts. Our regression analyses suggest that the theory is largely supported. We find that: (1) Democrat appointees generally gave lower prison sentences relative to Republican appointees for crimes of violence, theft and drug-trafficking and (2) sentencing instruments were selectively used to raise or lower the prison sentence based on the political ideology of the judge, the type of crime, and whether there was political alignment between the district and circuit court

Perpetuities or Taxes? Explaining the Rise of the Perpetual Trust

By abolishing the Rule Against Perpetuities, twenty-one states have validated perpetual trusts. The prevailing view among scholars is that enactment of the generation skipping transfer (GST) tax in 1986 prompted the movement to abolish the Rule by conferring a salient tax advantage on long-term trusts. However, an alternate view holds that demand for perpetual trusts stems from donors’ preference for control independent of tax considerations. Proponents of both views have adduced supporting anecdotal evidence. Using state-level panel data on trust assets prior to the adoption of the GST tax, we examine whether a state’s abolition of the Rule gave the state an advantage in the jurisdictional competition for trust funds. We find that, prior to the GST tax, a state’s abolition of the Rule did not increase the state’s trust business. By contrast, in a prior study we found that, between the enactment of the GST tax and 2003, states that abolished the Rule experienced a substantial increase in trust business. Accordingly, we conclude that the enactment of the GST tax prompted the rise of the perpetual trust. These findings bear on the debate over proposals to liberalize the law of trust termination and modification and to amend the GST tax. Our findings also contribute to the literature on the bequest motive

Did Reform of Prudent Trust Investment Laws Change Trust Portfolio Allocation?

This paper investigates the effect of changes in state prudent trust investment laws on asset allocation in noncommercial trusts. The old prudent man rule favored “safe” investments such as government bonds and disfavored “speculation” in stock. The new prudent investor rule, now widely adopted, relies on modern portfolio theory, freeing the trustee to invest based on risk and return objectives reasonably suited to the trust and in light of the composition of the trust portfolio as a whole. Using state- and institution-level panel data from 1986-1997, we find that after a state’s adoption of the new prudent investor rule, trust institutions held about 1.5 to 4.5 percentage points more stock at the expense of “safe” investments. Accordingly, we conclude that trustees are sensitive to changes in trust fiduciary law. Even though trust investment laws are nominally default rules, such rules matter in the presence of agency costs and unreliable judicial enforcement of opt outs

Perpetuities or Tax: Explaining the Rise of the Perpetual Trust

By abolishing the Rule Against Perpetuities, 21 states have validated perpetual trusts. The prevailing view among scholars is that the 1986 generation skipping transfer (GST) tax prompted the movement to abolish the Rule by conferring a salient tax advantage on long-term trusts. However, an alternate view holds that demand for perpetual trusts stems from donors’ preference for control independent of tax considerations. Proponents of both views have adduced supporting anecdotal evidence. Using state-level panel data on trust assets prior to the adoption of the GST tax, we examine whether a state’s abolition of the Rule gave the state an advantage in the jurisdictional competition for trust funds. We find that, prior to the GST tax, a state’s abolition of the Rule did not increase the state’s trust business. By contrast, in a prior empirical study we found that, between the enactment of the GST tax and 2003, states that abolished the Rule experienced a substantial increase in trust business. Accordingly, we conclude that the enactment of the GST tax sparked the modern perpetual trust phenomenon. Understanding the impetus for the rise of the perpetual trust throws light on the debate over recent proposals to liberalize the law of trust termination and modification and to amend the GST tax. Our empirical assessment of competing explanations for the rise of the perpetual trust also contributes to the literature on the bequest motive

The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums

We evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of healthplans representing over 10 million Americans annually between 1998 and 2006, we find that caps on non-economic damages, collateral source reform, and joint and several liability reform reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce “defensive” healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions.