This paper uses data from the 2008 Survey of Consumer Payment Choice to discuss the adoption, use, and discarding of various common payment instruments. Using a nationally representative sample of individual-level data, it presents evidence in unparalleled detail about how consumers use different payment instruments. Most interestingly, it displays robust evidence of significant age- and race-related differences in payments choices. Among other things, it suggests that the range of payment instruments adopted and regularly used by blacks is narrower than that chosen by whites, presumably because of relatively limited access to financial institutions. With regard to age, it documents pervasive (and complex) age-related patterns at every step of the decisions to adopt, use, and discard payment instruments.

The paper uses two hand-collected datasets to implement a novel research design for analyzing the precursors to patent quality. Operationalizing patent "quality" as legal validity, the paper analyzes the relation between Federal Circuit decisions on patent validity and three sets of data about the patents: quantitative features of the patents themselves, textual analysis of the patent documents, and data collected from the prosecution histories of the patents. The paper finds large and statistically significant relations between ex post validity and both textual features of the patents and ex ante aspects of the prosecution history (especially prior art submissions and the existence of internal patent office appeals before issuance). The results demonstrate the importance of refocusing analysis of patent quality on replicable indicators like validity, and the value that more comprehensive collection of prosecution history data can have for improving the output of the patent prosecution process.

This paper probes the puzzle of why only a few of those for whom bankruptcy would be economically valuable ever choose to file. We use empirical evidence about the patterns of bankruptcy filings to understand what drives the point in time at which the filings occur, and to generate policy recommendations about how the bankruptcy and debt-collection system sorts those that need relief from those that do not.

The paper combines three kinds of data. First, quantitative data collected from judicial filing records that show the weekly, monthly, and annual patterns of bankruptcy filings. Second, 40 interviews with industry professionals (consumer and creditor attorneys, trustees, and judges) from five states (Georgia, Iowa, Massachusetts, Nevada, and Texas). The interviews probe why people file when they do and what distinguishes those that choose to file from those that hold off. Third, survey data from the 2007 Consumer Bankruptcy Project, the first nationally representative sample of bankrupt households. The survey data explores the struggles families endure before they choose to file.

The data support two empirical findings. The first is about the role of aggressive collection in motivating bankruptcy filings. Generally, apart from foreclosure-related filings, the emergency bankruptcy filing is largely a myth. Creditor collection activity does not force people into an immediate bankruptcy. On the contrary, it wears them down slowly but ineluctably, like water dripping on a stone. Second, the primary factor that affects the date on which people actually file is their ability to save up the money to pay their attorneys and filing fees. Thus, among other things, we see an annual peak shortly after families receive their tax refunds, and a semi-monthly peak related to the receipt of paychecks.

Finally, we build two important policy recommendations on those findings. First, we argue that the existing collection process is flawed by a prisoner’s dilemma that leads to excessive and wasteful “dunning” by creditors. Because each creditor has an incentive to be first in line to collect, and because the creditors can dun their debtors at little or no cost to themselves, creditors as a group naturally engage in dunning activities that debtors find intolerable – a level of activities from which a rational single creditor would refrain. We recommend a variety of solutions to strengthen the FDCPA. Some are at the level of detail (extending it to in-house collection, increasing the statutory damages, and the like). But the most important is a “do-not-call” rule modeled on the do-not-call list for telemarketers. Specifically, we recommend a low-transaction-cost mechanism (activated by telephone call or Internet site) that would automatically and immediately stop all creditor collection activity.

Second, corollary to our argument that excessive collection causes inappropriate filings, we also believe that the excessive filing costs deter socially valuable filings. To respond to that problem, building on earlier work, we argue that low-income low-asset filers should have access to a simplified administrative process that provides prompt relief without the costs and delay of judicial process.

This paper examines how the risks of debt, financial distress, and bankruptcy shift over the life course. Comparing parallel data from the 2007 Survey of Consumer Finances and the 2007 Consumer Bankruptcy Project, we analyze use of the bankruptcy process as a product of the distribution of unplanned events, the ability of households to use credit markets to limit the adverse effects of such events, and barriers in access to the bankruptcy system. Our findings suggest two things. One, bankrupt households generally come from the bottom quartiles of the population in assets and income and the top quartile in debt, but the filing patterns vary substantially by age and race. Two, households neither explain their bankruptcies in the same ways nor use the same strategies to avert bankruptcy. The comparative explanations reveal age- and race-based variations that are consistent with disparate access to markets and institutions. The paper relates the findings to the increase in recent decades in the incidence of finan- cial distress and bankruptcy among the elderly.

This chapter uses data from the Federal Reserve Board’s Survey of Consumer Finances for 2004 (the “SCF”) to examine the penetration of credit cards into LMI markets. The chapter has two purposes. First, I discuss the rise of the modern credit market, emphasizing the segmentation of product lines based on behavioral and financial characteristics of customer groups. Among other things, that trend involves the use of products aimed at LMI households that differ significantly from those aimed at middle-class households. Second, I describe the extent to which LMI households borrow on credit cards, the types of LMI households that borrow, and how they differ from the more affluent households that borrow. Despite lower incomes, credit card use is almost as common among LMI households as it is among more affluent households. Indeed, measured as a share of income, the credit card balances that LMI cardholders carry are substantially higher than those of more affluent households. To check the robustness of those results, the chapter closes with the results of a multivariate regression analysis of the characteristics of LMI households with credit card debt. Generally, those results suggest that the demographic characteristics of LMI households that have credit card debt are different in material ways from the characteristics of those with credit card debt in the overall population. The models that I summarize here suggest that age, race, and education are important predictors of credit card use in the population at large. At least in these models, however, age and race become insignificant and education is only marginally important in predicting credit card use in LMI households. In LMI households, by contrast, the most significant predictors of credit card use are employment status, the use of other financial products (checking accounts, mortgage loans, and car loans), and marital status.

This chapter uses data from the Federal Reserve Board’s Survey of Consumer Finances for 2004 (the “SCF”) to examine the penetration of credit cards into LMI markets. The chapter has two purposes. First, I discuss the rise of the modern credit market, emphasizing the segmentation of product lines based on behavioral and financial characteristics of customer groups. Among other things, that trend involves the use of products aimed at LMI households that differ significantly from those aimed at middle-class households. Second, I describe the extent to which LMI households borrow on credit cards, the types of LMI households that borrow, and how they differ from the more affluent households that borrow. Despite lower incomes, credit card use is almost as common among LMI households as it is among more affluent households. Indeed, measured as a share of income, the credit card balances that LMI cardholders carry are substantially higher than those of more affluent households. To check the robustness of those results, the chapter closes with the results of a multivariate regression analysis of the characteristics of LMI households with credit card debt. Generally, those results suggest that the demographic characteristics of LMI households that have credit card debt are different in material ways from the characteristics of those with credit card debt in the overall population. The models that I summarize here suggest that age, race, and education are important predictors of credit card use in the population at large. At least in these models, however, age and race become insignificant and education is only marginally important in predicting credit card use in LMI households. In LMI households, by contrast, the most significant predictors of credit card use are employment status, the use of other financial products (checking accounts, mortgage loans, and car loans), and marital status.

Software patents have been controversial since the days when “software” referred to the crude programs that came free with an IBM mainframe. Different perspectives have been presented in judicial, legislative, and administrative fora over the years, and the press has paid as much attention to this issue as it has to any other intellectual property topic during this time. Meanwhile, a software industry developed and has grown to a remarkable size, whether measured by revenues or profitability, number of firms or employees, or research expenditures. The scope of software innovation has become even broader, as an increasing number of devices incorporate information technology, requiring modern manufacturing firms outside the software industry to employ developers and programmers to ensure that increasingly diverse functions are performed more efficiently.

Although inventors have consistently asserted their need for patents in order to compete with industry incumbents, patent protection has not been easily or consistently available for much of this period. Rather, the legal system has responded gradually to the burgeoning software industry by broadening the scope and strength of protection for software-related inventions in fits and starts. The explosive growth of the industry is largely attributable to demand generated by the efficiency of software solutions; the expansion of the venture capital industry over the same period largely explains the lack of industry concentration. The “garage” mentality can be explained by the fact that even some of the largest industry incumbents began with one or two (largely unfunded) inventors. Also, there is every reason to believe that increased patent protection has contributed to the ability of independent inventors and smaller firms to compete.

Moreover, the ability to obtain patents on software always has been important to some of the industry incumbents, while others have exhibited little need for patents and, displayed in some cases, strenuous opposition to the patentability of software. The incumbents are a diverse group. Some produce only software; others have substantial hardware product lines. Some sell to other technology firms and others sell applications to end users in a broad range of markets. And some sell prepackaged software products, while others focus on services—custom programming, installation, or maintenance. Regardless of the sector in which they participate, the incumbents spend massive amounts on research and development (R&D)—about 14% of their annual revenues, more than $60,000 per employee. However, there are important patterns in patenting practices that raw data on R&D investments cannot explain.

Argues that incentives to monitor default in construction loans would be improved by elevating mechanics lien claimants over construction lenders.

Analyzes the propriety of using intermediaries to regulate misconduct on the Internet.

The second part of the verification institutions project, extending the 87 Geo. L.J. (1999) article to accommodate the role of information technology.

Uses a dataset of letter of credit transactions to document the high rate of discrepancies in letter of credit transactions and explores explanations for why businesses would use letters of credit and yet not submit drafts that comply.

Extends my work on secured credit to analyze the use of secured credit in transactions involving software, where there is no likelihood of foreclosure or repossession. Documents the regular use of debt by venture-backed software firms.

Analyzing secured credit and similar institutions as "verification institutions" to resolve problems of information asymmetry in financing transactions

Using information from Justice Blackmun's files and the case, and a dataset matching Supreme Court bankruptcy decisions with information about participation by the Solicitor General, the paper argues that the SG's participation in secured creditor disputes in the mid-1990's is a big part of the explanation of this counter-textual case. The paper introduces a broader theory of bankruptcy interpretation that I call "bankruptcy skepticism," rejecting claims that bankruptcy interpretation by the Supreme Court has been literalist.

This is a shortened version of Chapter 12 of Charging Ahead, using decisionmaking theory to analyze contracting problems in credit card contracts. The paper proposes a standardized regime of credit card contracts to focus competition on a few attributes that are important to consumers.

This is a reply to Omri Ben Shahar's piece on contracts without consent, appearing in the same issue.

This is the first in a series of pieces on bankruptcy interpretation, this one arguing that the preemptive effect of bankruptcy law on state commercial law should focus on state legislation that is "directed" at bankruptcy proceedings.