Random Selection for Scaling Standards

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2021

Random Selection for Scaling Standards Random Selection for Scaling Standards

Michael Abramowicz

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1345

Article

RandomSelectionforScalingStandards

MichaelAbramowicz†

INTRODUCTIONStandards don’t scale. When adjudication costs are relatively

high, according to the canonical economic advice on rules versusstandards,rulesarepreferable.1Thevirtueofstandardsisthattheyallowthelawtobetailoredtoindividualcircumstances,2butapplyingastandardtomillionsofcitizenswillbeunworkableifmanywillin-vokecostlyprocedurestoexplaintheiruniquesituations.Andso,toachievemassjustice,regulatorsusuallyseektocreatedetailedrules3despitetheinevitabilitythattheywillbeoverinclusiveandunderin-clusive.4But could standards scale? If legislatures could reduce thecostofadjudicationbutstillensurethatlikecasesaretreatedreason-ablyalike,5 thenmassivespendingprogramscouldbeadministered

† Professor of Law, GeorgeWashington University. For helpful comments, IthankSteveCharnovitz,RobGlicksman,ReneeLerner,ChipLupu,JoshuaMitts,NaomiSchoenbaum,SteveSchooner,andJonathanSiegel.Allerrorsaremyown.Copyright©2021byMichaelAbramowicz. 1. See,e.g.,LouisKaplow,RulesVersusStandards:AnEconomicAnalysis,42DUKEL.J.557,572(1992)(“Thedifferenceinpromulgationcostsfavorsstandards,whereasthatinenforcementcostsfavorsrules.”);Hans-BerndSchäfer,RulesVersusStandardsinRichandPoorCountries:PreciseLegalNormsasSubstitutesforHumanCapitalinLow-IncomeCountries,14SUP.CT.ECON.REV.113,116(2006) (“Thecosteffectivenessofrulesversusstandardshastodowiththerelativesizeofvariouscostsassociatedwiththespecification,adjudicationandenforcementoflegalnorms.”). 2. See,e.g.,ErnstFreund,TheUseofIndefiniteTermsinStatutes,30YALEL.J.437,438(1921)(identifying“flexibility”asabenefitofindefinitestandards). 3. See,e.g.,Hecklerv.Campbell,461U.S.458,470(1983)(allowinganagencytocreate rules even where the statute requires consideration of individual circum-stances). 4. See,e.g.,FREDERICKSCHAUER,PLAYINGBYTHERULES:APHILOSOPHICALEXAMINA-TIONOFRULE-BASEDDECISION-MAKINGINLAWANDINLIFE31–34(1991)(explainingthatrulesareoverinclusiveandunderinclusiverelativetotheirpurposes). 5. Onedangerofastandardisthatadecisionmakermayreachresultsforrea-sonsthatthecreatorofthestandardandthatmostotherdecisionmakersapplyingthesame standard would have thought inappropriate. See, e.g., RICHARD A. POSNER,

1346 MINNESOTALAWREVIEW [105:1345

throughsimplestandards,withnoneedtoapproximatethosestand-ardswith rules. ThisArticle explores a novel technique for accom-plishingthisgoal:allowingclaimantstoselltheirclaimstointermedi-aries and then distributing the government subsidy to theintermediaries inproportiontovaluationofasmallnumberofran-domlyselectedclaims.

Consider a hypothetical program for which a broad standardseemsinfeasibleusingconventionalregulatorytechniques:alegisla-ture is considering a statute to mitigate climate change (perhapsthroughacarbon tax6)but itwishes toprovide transitionrelief forthoselikelytobeadverselyaffected.7Anadministrativeagencymightbecreatedtoadministerastandard,suchasaprovisionentitlinganycitizenclaimantto“compensationsufficientsothatthestatutewillnothave a significantly disproportionate effect on the claimant.” But iflower-levelbureaucratsrenderedawardsdirectlyunderthestandard,intolerable inconsistency might result.8 The conventional legal re-sponsewouldbetoapproximatethestandardwithrulesidentifyingdiscrete classes of people entitled to benefits,9 such as coalminerswhowilllosetheirjobsordriversofHummerautomobileswhowillhavetoscraptheircarsorpaymoreforgas.Theregulationswouldalmostsurelyomitmanyaffectedindividuals.10Regulatorswillprob-ablyignorethewaitstaffatadinerfrequentedprimarilybycoalmin-ers,forexample.Anyrulesarelikelytobesoimperfect—overcompen-satingsomeandundercompensatingothers,sometimesforpolitical

ECONOMICANALYSIS OFLAW592 (5th ed. 1998) (noting “a broad standard ... raisesagencycosts,”whichiscontrarytothestandard’sgoal);SCHAUER,supranote4,at98(notingthatruleslimitthepowerofjudges);MichaelD.Gilbert,DoesLawMatter?The-oryandEvidencefromSingle-SubjectAdjudication,40J.LEGALSTUD.333,352(2011)(“Manyobservershypothesizethatlawpredominateswhenrulesaredeterminateandideologypredominateswhenrulesareindeterminate.”(citationomitted)). 6. See,e.g.,GilbertE.Metcalf&DavidWeisbach,TheDesignofaCarbonTax,33HARV.ENV’TL.REV.499,527(2009)(consideringamyriadofdesignissueswithsuchatax);CONG.BUDGETOFF.,EFFECTSOFACARBONTAXONTHEECONOMYANDTHEENVIRONMENT(2013)(assessingacarbontax’seffects). 7. Cf.BruceR.Huber,TransitionPolicyinEnvironmentalLaw,35HARV.ENV’TL.REV.91,101–03(2011)(discussingpasteffortstoprovidetransitionalfinancialrelieftothoseadverselyaffectedbyenvironmentallegislation). 8. Administrativeagenciesoftengivediscretiontoofficials,buttheyseektocon-strain such discretion, for example with detailed substantive rules. See generallyCharlesH.Koch,Jr.,JudicialReviewofAdministrativeDiscretion,54GEO.WASH.L.REV.469(1986)(identifyingvarioustypesofdiscretionandmeansbywhichtheyarecon-trolled). 9. See,e.g.,Youngv.NationwideMut.Ins.Co.,693F.3d532,539(6thCir.2012)(discussingthebasisonwhichclassesaredefinedforclass-actionsuits). 10. SeeSCHAUER,supranote4.

2021] RANDOMSELECTION 1347

reasonsandsometimesasaresultofsheeradministrativenecessity—thatthelegislaturemightwelldecidetogiveuponcompensation,orevenontheclimatechangelegislationaltogether.

Enterrandomselectionmarkets.Thegovernmentwouldcreateafund—say,$1trillion,thoughthesameprincipleswouldapplytoanexperimental program many orders of magnitude smaller—that itwould distribute in proportion to valuations of randomly selectedclaims held by intermediaries who have purchased them from theoriginalclaimants.Thatis,insteadofallowingeverycitizentomakeadirectclaim toanadministrativeagency, claimantswouldsell theirrightsinthefundtotheintermediaries.Onlyaverysmallnumberofrights,maybe1,000,wouldbeselectedatrandomfortheagencytoadjudicate.Eachofthesecaseswouldinvolveacarefuladjudicationbeforeamulti-membertribunal.Continuingtheexampleabove, thetribunal’staskwouldbetoestimatetheclaimant’sdisproportionatelossfromthelegislation,ifany.Adjudicating1,000casesisafarmoremanageabletaskforanadministrativeagencythanadjudicatingmil-lionsofseparateclaims.Lawyerswouldhaveampleincentivetode-velopfactualandlegalargumentsinthesecases,becausemuchmorewouldbeatstake:theentirefundwouldbedistributedtotheinter-mediariesholdingtheserights,withtheamounteachintermediaryre-ceives proportional to the judicial valuation of the correspondingclaim.

Superficially,thismightappeartobealottery,rewardingthein-termediariespurchasingclaimsatrandom.Buttheprospectofthisul-timatepayoutgivesintermediariesincentivestopaymoreforrightsheldbyownerswith stronger claims for compensation.A frivolousclaimforcompensationwouldbeworthvirtuallynothing,becausein-termediarieswouldanticipatethatifafrivolousclaimwererandomlyselectedforadjudication,itwouldreceiveatbestanegligibleportionofthefund.11Ifthereissomecircumstanceuniquetoaclaimantthatone would expect should lead to a high valuation, then that rightwouldbemorevaluabletotheintermediaryaswell.Ifrandomlyse-lectedasoneofthe1,000,thisclaimwouldentitletheintermediarytoarelativelylargeportionofthefund.Anintermediarywouldthusbewillingtopaymoreforit.Inthisclimatechangecompensationhypo-thetical,aclaimsoldbyacoalminerseemslikelytobemuchmorevaluablethanthetypical foodserviceworker’s,butaworker inthedinerfrequentedbytheminersmightreceiveavaluesomewherein

11. Frivolousclaimsalsocanbediscouragedbychargingafeetosubmitaclaim.SeeinfraPartI.B.2.


between. Intermediaries have incentives to consider any facts thatmightaffectvaluationandadjustoffersaccordingly.

Anintermediarywouldliketopayaslittleaspossibletoaclaim-ant for the applicable right, but competition among intermediarieswilldriveuptheprice.Intermediariesperformataskakintothatofinsurancecompanies12butinreverse,payingcitizensforlow-proba-bilitywindfallsinsteadofacceptingpremiumsfromcitizensforlow-probability losses.13Althoughsignificantdebateaddressestheneedforregulatingpriceschargedbyinsurancecompanies,14aprimaryjus-tification for regulation in that context lies in consumers’ informa-tional burden in choosing among insurance plans.15 Here, becausenonpricecontract termswouldnotdifferentiate the intermediaries’offers,aconsumerneedstobeconcernedonlywithreceivingthehigh-estpaymentpossible,sochoosingamongoffersisnotdifficult.Iftheintermediarymarketiscompetitive,claimantsshouldreceiveapprox-imatelytheexpectedvalueoftheirclaimsminusaportionofthein-termediaries’costsinassessingandadjudicatingclaims.Becausein-termediaries can hold diversified portfolios andmitigate their riskexposure in otherways, the randomness inherent in this approachshouldnotsignificantlyreducepayments.16Someconsumerprotec-tionregulationmaystillbeappropriate,17buttheregulatorytaskisthecomparativelyeasieroneofensuringthatthereissufficientcom-petitioninthemarket.

Randomselectiondoesnoteliminatetheneedforindividualizedjudgments to be made. It just shifts the responsibility for making

12. Insurancecompaniesdistributerisktothosebetterabletobearit.See,e.g.,KENNETHS.ABRAHAM,DISTRIBUTINGRISK: INSURANCE,LEGALTHEORY, ANDPUBLICPOLICY(1986)(articulatingthecommonframeworkofAmerican insurance lawthroughaneconomic,ethical,andlegallens).Theintermediariesserveasimilarfunction,takingon therisk thatclaimantswouldbear,both fromtherandomization itselfand frominconsistencyacrossdecisionmakersinevaluatingclaims. 13. Anotheranalogyissecuritization,bywhichaholderofariskassetreceivesacertainsumbysellingittothemarket.See,e.g.,RobertDeanEllis,SecuritizationVehi-cles,FiduciaryDuties,andBondholders’Rights,24J.CORP.L.295,299–303(1999)(dis-cussingthemechanicsandbenefitsofsecuritization). 14. See,e.g.,DanielSchwarcz,EndingPublicUtilityStyleRateRegulationinInsur-ance,35YALEJ.ONREGUL.941(2018)(arguingthatrate-settingisnotneededundercurrentmarketconditions). 15. See,e.g., id.at980–81;seealsoDanielSchwarcz,TransparentlyOpaque:Un-derstanding theLackofTransparency in InsuranceConsumerProtection, 61UCLAL.REV.394(2014)(arguingthatinsurancepoliciesarenotsufficientlytransparent). 16. See infraPart I.B.4 (explaining how intermediaries can reduce the cost ofrisk). 17. SeeinfraPartIII.B.


individualizedjudgmentsinmostcasesfromthegovernmentagencytomarketactors.Aplausibleargumentisthatthisdoesnothelpscalejudgment,butonlytodisguisejudgment.Arelatedcritiqueisthatthisformofscalingisaperniciousoutsourcingofacoregovernmentalre-sponsibility.18 Government procedures are valuable not simply be-causetheyareefficientmechanismsforapplyingthelawtothefacts,butalsobecausetheymayimpartfeelingsofprocedural justice.19Acitizendeniedpaymentbythegovernmentmaystillperceiveproce-dural justice as a result of the government’s provision of reasons,whileacitizenunabletosellaclaimonthemarketmightreactdiffer-ently.20Andfinally,itmaybemorefeasibletopreventthegovernmentfromengagingin invidiousdiscriminationthan itwillbetopreventprivateactorsfromdoingso.21

Theseareimportantcriticisms.Buttheydonotdefeatthepointthatthissystemdrasticallyreducestheeconomiccostofadjudicationand thereforemakes otherwise impossible administrative schemesfeasible. Even relatively informal, non-adversarial forms of

18. Scholarssometimesworrythatprivatizationwillallowlegislatorstoachievepolicygoals that theycouldnotachievedirectly through legislation.See, e.g., JonD.Michaels,Privatization’sPretensions,77U.CHI.L.REV.717(2010)(examininghowpri-vatization“workarounds”allowagenciestoachievepoliciesthatwouldbeotherwisepoliticallyunattainable).Othersarguethatprivatizationcaneitheradvanceorhinderpubliclawvalues.See,e.g.,JodyFreeman,ExtendingPublicLawNormsThroughPrivat-ization,116HARV.L.REV.1285,1291–1314(2003)(examiningtheideologicaldiffer-ences in thepragmaticdebateoverprivatizationbetweeneconomicandpublic lawtheorists).Inthiscontext,however,thegovernmentisunlikelytobeabletoregulatebychoosingaparticularprivateprovider,andultimatepaymentsoffundswillstillbemadebythegovernment. 19. SeeE.ALLANLIND&TOMR.TYLER,THESOCIALPSYCHOLOGYOFPROCEDURALJUS-TICE (1988) (reviewing theoriesandresearchonprocedural justiceand its implica-tionsonlegalframework);JOHNTHIBAUT&LAURENSWALKER,PROCEDURALJUSTICE:APSY-CHOLOGICAL ANALYSIS (1975) (exploring how procedural justice is used to mediateconflictsbetweenindividualsandgroups). 20. An analogous question is whether bargaining can support a psychologicalrecognitionofproceduraljustice.SeeRebeccaHollander-Blumoff&TomR.Tyler,Pro-ceduralJusticeinNegotiation:ProceduralFairness,OutcomeAcceptance,andIntegra-tivePotential,33LAW&SOC.INQUIRY473(2008)(examiningtheroleoffairnessinbi-lateral negotiations, finding that procedural justice encourages the acceptance ofnegotiatedterms);MichaelM.O’Hear,PleaBargainingandProceduralJustice,42GA.L.REV.407(2008)(discussingtheimpactofproceduraljusticeoneffectivepleabargain-ingstrategy). 21. See,e.g.,IanAyres&FredrickE.Vars,WhenDoesPrivateDiscriminationJustifyPublicAffirmativeAction?,98COLUM.L.REV.1577,1583(1998) (noting thatprivatediscriminationmaycontinueinmarketsaftergovernmentdiscriminationhasended).


governmentadjudicationaresubjecttoproceduralnorms,22andgov-ernmentformalityhasitsprice.23Adjudicationhasasignificantmini-mumcost.Thiscostmakesclassactionsparticularlysuitablewhereeach member of the class has suffered relatively small damagesagainstprivateactors,but thatmechanism isunavailablewhen theclaimantsareheterogeneous.24Privateactorsmaybeabletoconsiderrelevantevidenceinmoreinformalways,withoutin-personhearings.Shiftingdecision-makingfromgovernmentalactorstothemarketviarandomselectionwillbemostappropriatewhenthecostofadjudica-tionpercasewillbelargerelativetotheamountofmoneyatstake.Thisismorelikelytobetruewhenanadministrativeprogramwouldinvolveamassivenumberof claimsandwhenadjudicationofeachclaiminvolvesmanyseparatebutinteractingissuesratherthanroteapplicationofbright-linerules.

Thecase forusingrandomselection toscale judgment isat itsapexwhenthequestioniswhetherasubsidyshouldbeadministeredthroughrandomselectionornotatall.Whymightgovernmentalad-judicationsometimesseemoffthetableasapossiblemeansofadmin-isteringastandard,asintheexampleoftransitionalcompensationde-veloped above? At least in principle, it might seem that thegovernmentcouldrelaxtheformalityofgovernmentdecision-makingasanalternative.Theproblemisnotconstitutionallaw,whichallows

22. Evenwhatistechnicallyreferredtoas“informaladministrativeadjudication”isoftenquiteformal.TheAdministrativeProcedureAct(APA)imposesnoexplicitre-quirementsonsuchadjudication.SeeEdwardRubin,It’sTimetoMaketheAdministra-tiveProcedureActAdministrative,89CORNELLL.REV.95,107–09(2003)(discussingthemyriadofactionsthatcompriseinformaladjudicationundertheAPA,juxtaposedwiththelittledirectiontheAPAsuppliesinregardtotheseactions).Still,thejudiciaryim-posesexpostconstraintsonsuchadjudications.See,e.g.,CitizenstoPres.OvertonPark,Inc.v.Volpe,401U.S.402,420(1971)(insistingthattheagencyrecordcontainsuffi-cient justification for thedecision);Ronald J.Krotoszynski, Jr.,TamingtheTailThatWagstheDog:ExPostandExAnteConstraintsonInformalAdjudication,56ADMIN.L.REV.1057,1060–69(2004)(discussingclaimantsseekingafter-the-factreviewofanagencydecisionviamechanismswithintheAPA). 23. See, e.g., Matthew C. Stephenson, The Strategic Substitution Effect: TextualPlausibility,ProceduralFormality,andJudicialReviewofAgencyStatutoryInterpreta-tions,120HARV.L.REV.528,531(2006)(“Proceduralformalityiscostlybecauseofthetime,effort,andresources that it requires,andperhapsalsobecause itmay triggerunwelcomeexternalattention.”). 24. SeeFED.R.CIV.P.23(a)(2)(requiring“questionsoflaworfactcommontotheclass”);id.23(b)(3)(requiringinadamagesclassaction“thatthequestionsoflaworfactcommontoclassmemberspredominateoveranyquestionsaffectingonlyindivid-ualmembers”).


forlessformalitywhenlessisatstake.25Thedangeristhatlessfor-malitymay yieldmore arbitrary governmental decision-making, aswellasarbitrariness’scousins,corruptionanddiscrimination.26Likerulesandespeciallyintheirabsence,proceduralprotectionscanin-creasefairnessandconsistency.27Sodoesthelawoflargenumbers,28butallowingmanydecisionmakerstovoteoneachcasealsoescalatescosts.Intheexampleofclimatechangecompensation,anadministra-tiveregimethatallowsclaimantstoraiseanyindividualcircumstancewouldalmostsurelybetoocumbersomewithoutrandomselection,particularlybecause avoiding idiosyncratic awardswould likely re-quiremultipledecisionmakerstoconsiderthefactsofeachcase.

Creatinganewbureaucracytoprocessmillionsofclaimsforale-galentitlementthatdoesnotalreadyexistwouldbeachallengingfeatoflegalengineeringiflimitedtotraditionaltools.Ourexistingbureau-craciesforprocessingmassclaims,suchastheSocialSecurityAdmin-istration29 and the Veterans Administration,30 have grown andevolvedoverdecades,withcontinuousrefinementstobothsubstan-tivestandardsandproceduresthatarespecific to therelevantcon-text.31Inprinciple,agovernmentcouldhirethousandsofnewadmin-istrative judgesand regulationdrafters,but in theabsenceofpriorexperiencewithasimilaradministrativeprogram,itmaybedifficulttoanticipatetherangeoffactualandlegalissuesthatwillarise.Thus,

25. SeeMathewsv.Eldridge,424U.S.319,341(1976)(holdingthat“thedegreeofpotentialdeprivationthatmaybecreatedbyaparticulardecisionisafactortobeconsideredinassessingthevalidityofanyadministrativedecisionmakingprocess”). 26. See,e.g.,PaulStancil,SubstantiveEqualityandProceduralJustice,102IOWAL.REV.1633(2017)(arguingthattheFederalRulesofCivilProcedureseektoachieveformaljusticebytreatinglikecasesalike,butdifferencesacrosscasesinmodernliti-gationmayjustifyalternativeapproaches). 27. SeeRichardL.Marcus,SlouchingTowardsDiscretion,78NOTREDAMEL.REV.1561,1571–74(2003)(recountingthedevelopmentofrulespreventingjudgesfromusingadhocprocedures). 28. SeeAdrianVermeule,SystemEffectsandtheConstitution,123HARV.L.REV.4,13–15(2009)(discussingtheapplicationofCondorcet’sJuryTheorem,whichstates“asthenumberofmembersin[a]groupincreases,theprobabilitythatamajorityvoteofthegroupiscorrecttendtowardscertainty”(citationomitted)). 29. SeegenerallyFederalOld-Age,Survivors,andDisabilityInsurance(1950–),20C.F.R.pt.404(2019)(providingdetailedregulationsfortheadministrationofSocialSecurity). 30. SeegenerallyScheduleforRatingDisabilities,38C.F.R.pt.4(2019)(providingdetailedregulationsfortheadministrationofveteranbenefits). 31. AsearchoftheFederalRegisteridentifies2,367documentsrelatingtotheSo-cialSecurityAdministration,includingroughlyafeweverynewweek.SeeSocialSecu-rity Administration, FED. REG., https://www.federalregister.gov/agencies/social-security-administration[https://perma.cc/E4UK-F5W3].


developersofanewbureaucracywouldbewell-advisedtobuildonexistinginfrastructure,asforexamplesomeadvocatesofMedicareforAllproposetobuildontheexistingMedicareprogram.32Butthismaybelessfeasiblewhenagovernmentprogramhasagoalnotcloselyre-latedtoanyprogram,asexemplifiedbytheclimatechangecompen-sationhypothetical.

Evenwhenfullydeveloped,anagencydedicatedtodistributinggovernmentfundstolargenumbersofheterogeneousclaimantsmaydo apoor jobof ensuringhorizontal equity among claimants.Withdecadesofimprovementsandexperience,agenciesliketheSocialSe-curityAdministrationstillexhibitlargedisparitiesbasedonwhichad-ministrativelawjudgeaparticularclaimantreceives.33Thecruxofthechallenge is that administrative law judges have significant protec-tionsfrompoliticalinterference34butmayhavedifferentpreferencesabouthowtoresolvecases.Analternativeagencydesignwouldfea-turestrongpoliticalcontrol.Ifastrongadministratorisempoweredtooverruledecisionsbelow35andhasdiscretiontodismissadminis-trative lawjudgeswhodecidecasescontrarytotheadministrator’sgoals,36perhapsgreaterconsistencycanbeachieved.Butthatmightoffenddueprocessnorms37andcreatetheriskthattheprogramwill

32. SeeMedicareforAllActof2017,S.1804,115thCong.(2017)(providingforuniversalhealthcarebygraduallyincreasingeligibilityforMedicare). 33. See,e.g.,RichardJ.Pierce,Jr.,WhatShouldWeDoAboutSocialSecurityDisa-bilityAppeals?,REGULATION,Fall2011,at34,36–37(describing“thegrowingproblemofALJ’sunwarrantedcommitmentofbillionsofdollarstoundeservingclaimants”andtheSocialSecurityAdministration’sinabilitytoaddresstheissue);seealsoHearingsand Appeals: ALJ Disposition Data FY 2020, SOC. SEC.ADMIN., https://www.ssa.gov/appeals/DataSets/03_ALJ_Disposition_Data.html[https://perma.cc/VVW7-RRVN](showingalargedisparityingrantratesamongALJswithatleastfiftydecisions,in-cluding4.9%withgrantratesfrom20%to30%and3.6%withgrantratesfrom80%to90%). 34. SeeKentBarnett,ResolvingtheALJQuandary,66VAND.L.REV.797,806–08(2013)(describingALJprotections). 35. AgencyheadssometimesbutnotalwaysmaypersonallyreviewALJdecisions.SeeRussellL.Weaver,AppellateReviewinExecutiveDepartmentsandAgencies,48AD-MIN.L.REV.251,252(1996)(“Agencyofficialsretainedcompleteauthoritytoreviewexaminers’decisionsandsubstitutetheirowndecisions.”). 36. Today,ALJsareremovable“onlyforgoodcauseestablishedanddeterminedbytheMeritSystemsProtectionBoardontherecordafteropportunityforhearingbe-foretheBoard.”5U.S.C.§7521(a). 37. See,e.g.,Barnett,supranote34,at821–22(consideringwhetherpoliticalabil-itytoremoveALJswouldthreatendueprocessofthoseappearingbeforeagency).TheSupremeCourthasnotresolvedwhetherALJsmustberemovablebythePresident.SeeFreeEnter.Fundv.Pub.Co.Acct.OversightBd.,561U.S.477,507n.10(2010)(“Forsimilarreasons,ourholdingalsodoesnotaddressthatsubsetofindependentagencyemployeeswhoserveasadministrativelawjudges.”).


shiftradicallywithchangesinpoliticaladministration.38Yetanotherapproachtodistributingmassivenumberofclaimswouldbedevolu-tion,forexampleintheformofblockgrants.39Butdevolutionsimplypassesonthechallengeofcreatingasoundadministrativestructuretoamorelocaljurisdiction,40entailingtheriskthatpoliticalcommit-mentwillvarynotonlyovertime,butalsogeographically.Inshort,allofthestandardapproachestoscalingmassjusticeintroducetheriskofinconsistency,whetheracrossadministrativelawjudges,acrossju-risdictions,oracrosstime.Morestringentrulesandproceduresmayreduceinconsistencyonthemargins,butonlyatincreasedcosts.

Anadministrativeprogramresolvingclaimsbyrandomlyselect-ingclaimspurchasedbyintermediarieswouldscalejudgmentwithafundamentally different approach, so initial experiments ideallywouldbeonasmallscale.Yetoneoftheproposal’schiefvirtuesisthattherandomizationisstraightforwardtocalibrate.Simplyallowing(orrequiring)claimsalesandinstitutingrandomselectionensuresthatthe intermediarieswillhaverobust incentives topredicthowcaseswillbevalued ifselectedforrandomadjudication.41Administrationdoesnotrequirethecreationofalargebureaucracy.Somemechanismforfilingclaimsandforregisteringchangesofownership,suchasawebsite,42 is needed. Then, enough judges must be appointed to

38. Administrativeagenciesaresometimespermittedtochangecourseforrea-sonsofpoliticalpreference,buttheymustprovidenonpoliticaljustificationsfordoingso.See,e.g.,KathrynA.Watts,ProposingaPlaceforPoliticsinArbitraryandCapriciousReview,119YALEL.J.2,6(2009)(“[A]gencies,courts,andscholarsalikegenerallyseemtohaveacceptedtheviewthatinfluencescomingfromonepoliticalbranchoranothercannotbeallowedtoexplainadministrativedecisionmaking,evenifsuchfactorsareinfluencingagencydecisionmaking.”). 39. SeegenerallyJerryL.Mashaw&DylanS.Calsyn,BlockGrants,Entitlements,andFederalism:AConceptualMapofContestedTerrain, 14YALEL.&POL’YREV.297(1996)(offeringacriticalassessmentofthesetechniques). 40. Onemightarguefordevolutiononthegroundthatstatesaremorelikelytoexperimentthanthefederalgovernmentandthatstateagenciescanlearnfromotherstates’experiences.SeeNewStateIceCo.v.Liebmann,285U.S.262,311(1932)(“[A]singlecourageousStatemay,ifitscitizenschoose,serveasalaboratory;andtrynovelsocialandeconomicexperimentswithoutrisktotherestofthecountry.”).Someschol-ars,however,arguethatinfactstatesengageinrelativelylittleexperimentation.See,e.g.,SusanRose-Ackerman,RiskTakingandReelection:DoesFederalismPromoteInno-vation?,9J.LEGALSTUD.593(1980)(answeringthetitle’squestionmostlyinthenega-tive);Hannah J.Wiseman&DaveOwen,FederalLaboratoriesofDemocracy,52U.C.DAVISL.REV.1119(2018)(arguingthatthefederalgovernmentcanserveasalocusofexperimentation). 41. Itispossible,however,toincreaseordecreaseintermediaries’incentivestoinvestinclaimscreening.SeeinfraPartI.A.2. 42. AstheexperiencewiththeAffordableCareActdemonstrates,creationofawebsitetobeusedatsuchscaleisnotatrivialtask.SeeAlexanderB.Howard,What


enablecareful,thoughtfuladjudicationoftherelativelysmallnumberofclaimsthatarerandomlyselected;ifjudgesareappointedforrea-sonablylongterms,theprofileoftheaveragejuristmaynotshiftallthatmuchwithpoliticalwinds.Critically,itwillnotmatterifthetotalnumberofunderlyingclaimsgrowsorshrinks.Perhapsthegovern-mentwouldwishtoincreasethenumberofdecisionmakersandadju-dicatedcasessomewhat if theagency’smissionexpands.Butthis isnowherenearthechallengeofscalinganadministrativeagencythatmustgiveindividualizedattentiontoeverycase.Aproblemwithsomesystemsofmassjusticeisthatclaimscantakeyearstoprocess.43Themarketapproachhasnoneedforqueuing,andclaimantscanreceivetheirpayoutsasquicklyastheycannegotiatewithintermediaries.

TheideaofusingrandomselectioninthewaythisArticlepro-posesisnew,buttheprospectofrandomlyselectingcasesforadjudi-cationhasreceivedsomeattention.44First,ShayLaviehasdescribedamechanismcalled“reversesampling”todistributeproceedsinsuc-cessfulsmallclaimsclassactioncases.45TheproblemthatLaviead-dresses is that of the class actionwith a large number of potentialclaimants, each entitled to only a small amountof damages.46 Suchcasespresentthechallengeofhowtodistributethedamagespaidbythedefendant.47 If theadministrativecostsofdistributing thedam-agesarehighrelativetothedamagesthemselves,theneitherthede-fendantmustpaytoomuchortheplaintiffsreceivetoolittlerelativetohypotheticalfullcompensation.48Courtssometimesawardcypresdamages,49 but plaintiffsmight then receive no benefit at all. Lavie

WentWrongatHealthcare.gov?,DIGIPHILE(Dec.1,2013),http://digiphile.wordpress.com/2013/10/17/what-went-wrong-at-healthcare-gov[http://perma.cc/7479-B6JD](describingthefactorsthat ledtotheHealthcare.gov’sfailureatrelaunchonOctober1). 43. See,e.g.,MichaelSerota&MichelleSinger,Veterans’BenefitsandDueProcess,90NEB.L.REV.388,389–92(2011)(documentingmultipleyears’delaysinresolvingveterans’benefitsissues). 44. Randomsamplinghasalsobeenusedtoprovideevidencewithincases.SeeJosephB.Kadane,ProbabilitySamplinginLitigation,18CONN.INS.L.J.297(2011)(dis-cussing the possibility of using statistical methods to handle mass tort cases effi-ciently).Forexample,aprosecutionofadoctorforMedicarefraudreliedonananalysisofarandomsampleofpatientrecords.Id.at303. 45. Shay Lavie,Reverse Sampling: Holding Lotteries to Allocate the Proceeds ofSmall-ClaimsClassActions,79GEO.WASH.L.REV.1065,1069–74(2011). 46. Id. 47. Id.at1067. 48. Id. 49. SeegenerallyRhondaWasserman,CyPres inClassActionSettlements,88S.CAL.L.REV.97(2014)(discussingcypresawardsinclassactionsuits).


suggests distributing thedamages among classmembers chosen atrandom,thusreducingthetotaladministrativecostsofdistribution.50ArecentSupremeCourtoralargumentoncypresawardsconsideredthe feasibilityof thisapproach.51A limitation is thatLavieassumesthat therelativedamagesofeachplaintiff isknown inadvanceandthusignoresthepossibilitythatrelativedrawsonthefundcouldbedeterminedthroughadjudicationsinrandomlyselectedcases.52ThisArticle extends the Lavie approach, arguing that it can work withclaimsrequiringvaluation,solongasclaimantsselltheclaimstoin-termediaries.

Second,somecommentatorshavearguedthat“statisticaladjudi-cation”couldbeusedtoresolveclaimsofheterogeneousclassmem-bers.53 With statistical adjudication, the courts would adjudicate asmall percentage of randomly selected claims,54 and the remainingclaimants, instead of having their days in court, would have theirclaimsresolvedbasedonstatisticalmodels.55Aclassmemberwouldbeassignedahighervalue,thegreaterthedamagesreceivedbysimi-larlysituatedclaimantsamongtheadjudicatedclaims.Iftheclaimsintheclassactionaresufficientlyhomogeneous,theplaintiffforeachre-mainingclaimmayreceivetheaverageoftheadjudicatedclaims.56Ad-vocatesofstatisticaladjudicationdonotviewthemechanismasan

50. Lavie,supranote45,at1068. 51. SeeTranscriptofOralArgument,Frankv.Gaos,139S.Ct.1041(2019)(No.17-961)(“Isn’titalwaysbettertoatleasthavealotterysystem,then,thatoneoftheplaintiffs,oneoftheinjuredpartiesgetsit,ratherthansomeonewho’snotinjured?”).TheCourtdidnotreachthemeritsofthecypresissue.Frank,139S.Ct.1041. 52. Lavie,supranote45. 53. SeeRobert G. Bone, Statistical Adjudication: Rights, Justice, and Utility in aWorldofProcessScarcity,46VAND.L.REV.561,580(1993)(exploringadjudicationbysamplingtohandlelargescaleadjudicationandillustrateshow“atsomepointalongtheheterogeneity-homogeneitycontinuum,aggregationceasestoimprovetheaccu-racy”);AlexandraLahav,TheCasefor“TrialbyFormula,”90TEX.L.REV.571,626(2012)(explaininghow“reasonsforvariationare‘noise’ratherthantheeffectoflegallyrele-vantvariablesthatoughttohavebeentakenintoaccount”whencaseoutcomesareheterogenous);MichaelJ.Saks&PeterD.Blanck,JusticeImproved:TheUnrecognizedBenefitsofAggregationandSamplingintheTrialofMassTorts,44STAN.L.REV.815,837(1992)(“Atsomepointalongtheheterogeneity-homogeneitycontinuum,aggre-gationceasestoimprovetheaccuracyoftraditionaltrialsandbecomesavitiation.”);LaurensWalker&JohnMonahan,SamplingEvidenceattheCrossroads,80S.CAL.L.REV.969,981(2007)(illustratingtheimportanceofsamplesizeinsteadoffocusingonho-mogeneousclassmembers). 54. SeeBone,supranote53,at565(discussingtheprocessdemonstratedbytheCiminocourt). 55. Seeid.(discussinghowtheCiminoprocesswouldimpactremainingasbestoscases). 56. See,e.g.,id.at577–84.


inferiorsubstituteforactualadjudication57Thestatisticalmodel,theysuggest,canproducemoreaccurateandmoreconsistentresults,be-causethestatisticalrecoveriesarebasedonanexpectationofdam-agesthataverageswhatidiosyncraticjudgesorjuriesmightdecideinanyparticularcase.58Aproblem,however,isthatstatisticaladjudica-tionitselfrequiressomeprocedureforresolvingcontestedcodingofdifferent claims. The random selectionmechanism described here,thoughimmediatelyapplicabletoadministrativeproceedingsratherthanclassactions,avoidstheneedforthegovernmenttoconductanystatisticalanalysisordeterminewhichcasesaremostsimilartooneanother.

Third,DavidRosenbergandStevenShavellhavesuggestedwhatthey frameasa simplemethod to reduce litigationcosts ingeneralcivil litigation.59Onlyhalfofunsettledcases60wouldbeselectedforadjudication.Damagesinthesecaseswouldbetwiceashighastheyotherwisewouldbe,anddefendantsinothercaseswouldowenoth-ing.61Thismechanismisclosertothemarketmechanismdescribedhere,inthatrandomselectioniscoupledwithproportionatelyhigherdamages.Thedamagesthataplaintiffexpectstoreceiveonaverageor that a defendant expects to pay on average in the Rosenberg-Shavellmechanismisroughlyequaltothedamagesintheabsenceofthemechanism.62Theaveragecostoftrialis,however,reduced,be-cause fewer trialsoccur.63Withourmechanism, though, claimsaresold,soeveryclaimantstillcanreceivesomerecovery.Becauseofthis,muchhighermultipliersandthusmuchgreatercostsavingsarepos-sible.RosenbergandShavelldonotgeneralizetheirmechanismtoal-low1inNcasestobeselectedforNtimesthedamages.64Perhapsthey

57. Seeid.at566(listingscholarswhoadvocateforstatisticaladjudication). 58. See,e.g.,Saks&Blanck,supranote53,at851(explaininghowstatisticaladju-dicationhelpsto“increaseaccuracy”and“reducebias”);Lahav,supranote53,at612–18(arguingthatstatisticaladjudicationpromotes“outcomeequality”bytreatingsim-ilarcasesmoreconsistently). 59. David Rosenberg & Steven Shavell, A Simple Proposal To Halve LitigationCosts,91VA.L.REV.1721(2005). 60. Therandomizationwouldoccurimmediatelyafterfiling.Seeid.at1727.Thus,settlementwouldneedtooccurbeforefiling. 61. Id.at1731. 62. Id.at1730. 63. RosenbergandShavellanticipatethattheirproposalwouldpromotesettle-ment.Id.at1727–28(notingthatriskaversionshouldincreasesettlement,thoughtheeliminationofalllitigationcostsinhalfofthecasesreducespressuretosettle). 64. Thepossibilityofbasinggovernmentaldecision-makingonrandomselectionwithsomeotherprobabilityclearlywouldhaveoccurredtoRosenberg,whoinanothercoauthored article considers random selection of administrative enforcement. See


believedthathigherNwouldbeinfeasible,forexamplebecausede-fendantsmightbelesslikelytobeabletopaythejudgment.65Whenthegovernmentispayorandclaimantscanselltheirrights,however,virtuallyanylevelofNcanbeachieved.

TheArticleproceedsasfollows.PartIdescribeschoicesassoci-atedwiththedesignofrandomselection:whetherthefundtobedis-tributedshouldbefixedorbasedonjudicialvaluations,whetherclaimsalesshouldberequiredoroptional,howmanyclaimsshouldbese-lected,howtodealwithproblemsassociatedwithverysmallorverylargeclaims,andhowtoreducetheriskassociatedwiththerandomselectionmechanism.Thedesignofthesystemofadjudicationinran-domlyselectedcasesisthefocusofPartII.Especiallyintheabsenceofdetailedregulations, it iscriticalthatdecisionmakershaveampletimetoattendtodetails,becausedetails that intermediariesexpectdecisionmakerstoignorewillhavenoeffectonclaimvalues.PartIIalsodiscussestheincentivesofvariousparticipantsinthevaluationprocess:theclaimants,theadversariesselectedtoargueagainsttheclaimants,andthejudgesthemselves.Then,PartIIIofferssomepre-liminaryanalysisofconsumerprotection.Thecoreprotectionforcon-sumers is the incentive that intermediaries will have to competeagainstoneanother.Traditionaltoolslikeantitrust,consumerprotec-tion,andantidiscriminationlawmightbolstercompetition.

Finally,PartIVappliestherandomselectionapproachtovariousregulatory schemes. Several of these seek to direct governmentspendingtopreventclimatechange.Climatechangeisausefulillus-trationofthepowerofrandomselectionbecauselegalrulesdesignedto address it economy-wide present a challenge of distributing re-sourcesatascalebeyondeventhatofourmostextensiveexistingad-ministrativeprograms.Moreover,someplausiblelegislativegoalsareeasytostateinprincipleyethardtoimplementinrules.66Thesearepreciselythecircumstancesinwhichrandomselectionmarketsmightbeespeciallyuseful.Threedifferentformsofcompensationfunds(for

RobertJ.Jackson,Jr.&DavidRosenberg,ANewModelofAdministrativeEnforcement,93VA.L.REV.1983(2007) (introducingsingle-outcomesampling,whereregulatorsrandomlyselectoneofthesourcesofrisk,determineliability,andapplytheoutcomeasdeterminativeofliabilityatallofthesources). 65. AnavenueforfutureresearchistogeneralizetheRosenberg-Shavellmecha-nismtohigherdamagemultipliersbyrequiring(oratleastallowing)plaintiffstosellclaimsandbyrequiringdefendantstoinsuretheirclaims. 66. Richard J.Lazarus,SuperWickedProblemsandClimateChange:RestrainingthePresenttoLiberatetheFuture,94CORNELLL.REV.1153,1187(2009)(explaininghowthelong-termimplementationofclimatechangewillcontinuetobeimpededde-spiteenactingappropriatelegislation).


costsassociatedwithclimatechangemitigation,forexpensesassoci-atedwithimprovingenergyefficiency,andforclimatechange-relatedresearchanddevelopment)aredescribed.TheArticlealsoconsidershowrandomselectionmightbeusedtodistributedamagesofadisas-ter,usingthecurrentnovelcoronaviruspandemicasanexamplethatanticipates future challenges, whether from climate change, otherpandemics,orentirelyunexpectedemergencies.Itarguesthatagov-ernmentaldamagesfunddistributedinthiswaymightbelesseasilyexploitedby fraudstersandspecial interests than fundsdistributedthroughamoretraditionalstructure.Italsoexplainsthatrandomse-lectionmarketscanbecreatedquitequicklyandcansavethelegisla-turethechallengeofmakingdifficultdecisionsabouthowrelieffundsshouldbedistributed.

I.THERANDOMSELECTIONMECHANISMSupposethatCongressweretocreatea“GoodnessandNiceness

Commission,”toborrowGaryLawson’shypotheticalexampleofage-nericadministrativeagencythatwewouldnotreallywant,67withthemissionofsubsidizingactsofgoodnessandniceness.UsingtheSocialSecurityAdministrationmodeltoaccomplishthisgoalwouldbechal-lenging,tosaytheleast.Extensiveregulationsdefiningactsthatqual-ifyforasubsidypaymentwouldbeneededtoreducedisparityamongdecisionsbythemanythousandsofagencyofficialswhowouldneedtobehiredtoadjudicatecases.Withtherandomselectionmodelde-finedintheIntroduction,thetaskisrelativelysimple.Anyonewithev-idenceofhavingperformedanactofgoodnessornicenesscouldsub-mitdocumentationofthatacttoawebsiteandthensellrightstoanypayment. The Commission would adjudicate some tiny fraction ofcasesanddivide thegovernment’sentiresubsidyamongthem.Thegreaterthesubsidy,themoreintermediarieswouldpayforclaimsandthemoreefforttheywouldputintodistinguishingstrongclaimsfromweakones.

TheCommissionmightstillbeahorrificidea,butitwouldnotbeadministrativelyinfeasible.Therandomizationmechanismsavesthegovernmentfromthetaskofassessingeverydetailofeveryclaim.Thegovernment’sinitialroleisthemuchsimpleroneofservingasrepos-itoryforrecordinginitialclaimsandtransfersofthoseclaimstointer-mediaries.Thismightbeaccomplishedwithawebsite,68servingasa

67. SeeGaryLawson,TheRiseandRiseoftheAdministrativeState,107HARV.L.REV.1231,1239(1994). 68. Seesupranote42andaccompanyingtext.


userinterfaceallowinguserstostoreinformationintheunderlyingdatabase. Perhaps in the future, a decentralized solution such as ablockchainmightbeused.69Mostoftheinformationinclaimscouldbeanonymous,butclaimantsmustatleastregistertheirID,suchasSo-cialSecuritynumber, topreventduplicateclaims,70aswellassomeproof that the filingwas authorized.71 This Articlewill not discusstheseimplementationissuesinanyfurtherdetail.Rather,thisArticlewillfocusonthefoundationalstructureofthemechanism,specificallythe rules governing claimpayouts, addressed in SectionA, and therandomselectionitself,addressedinSectionB.Theprinciplesareap-plicable regardless of the agency’smission, so the Commission canserve as a stand-in for anyagencyprimarilydedicated to spendinggovernmentmoney.

A. DEFININGRULESONCLAIMSALESANDPAYOUTSWehaveassumedsofarthatthegovernmentwoulddistributea

fixedfundtotheownersofrandomlyselectedclaims,butitwouldalsobepossibletoleavethetotalpayoutamountundefined.Subsection1explainswhythefixedfundwillgenerallybepreferable,andSubsec-tion2introducesvariantsofbothmechanismsthatwouldallowthegovernmenttoreduceorincreasetheincentiveofintermediariestoinvestigate claims thoroughly. Then, Subsection 3 explains why itlikelymakessensetorequireclaimsales,ratherthanmerelymakingsuchsalesoptional.

69. Somehavearguedthattheblockchainisparticularlyusefulwheretranspar-encyisneededtopreventcorruption.See,e.g.,JesseMarks,DistributedLedgerTech-nologiesandCorruption:TheKillerApp?,20COLUM.SCI.&TECH.L.REV.42,62(2018)(“SincerecordsinproperlyrunDLTscanneverbedeleted,theDLTcanhelptopreventotherofficialsfromextractingbribestomaketheproblem‘goaway.’”). 70. Ifasingleindividualispermittedtofileduplicateclaims,forexampleformul-tipleactsofgoodnessandniceness,thenwhenaclaimisselected,theadjudicatorswillneedtoconsiderallotherclaimsregisteredunderthesameSocialSecuritynumber.Ifaclaimforthesameunderlyingactisfiledmultipletimes,theadjudicatorscoulddivideanyawardbythenumberoftimestheclaimwasfiled.SeeinfraPartI.B.3.Alternatively,redundantfilingscouldleadtodisqualification. 71. Thegoalofthisrequirementistopreventharassmentstemmingfromfilingundersomeoneelse’sidentity.Cf.PippaBrowde,ManyUnhappyReturns:TheNeedforIncreased Tax Penalties for Identity Theft-Based Refund Fraud, 18 FLA.TAXREV. 53(2015) (discussing problems of identity theft in taxation). For example, a video inwhich theperson is filmedauthorizing theclaimcouldbeused.Thekey is that thegovernmentonlyneedstoverifyauthenticityinthesmallpercentageofcasesselectedforadjudication.Perhapsmoreimportantthantheabilitytoprovethatone’sclaimisvalidistheabilitytopostevidencethatanotherclaimpurportedlyonone’sbehalfisnotauthorized.


1. FixedFundvs.VariablePayoutsInthevariablepayoutalternativetothefixedfund,72thegovern-

mentwouldpaytotheholderofeachrandomlyselectedclaimtheval-uationamountdividedbytheprobabilityofrandomselection.Asare-sult, the government’s total liability would be uncertain. Such anapproachmaybeadvisableifthegovernmentbelievesitimportanttogive full compensation to each claimant, rather than having theamountofcompensationvarydependingonthenumberofclaimants.Thismight be appropriate if it is unclear howmany claimants arelikelytoparticipate.Inaddition,itmightreduceclaimantriskattribut-abletouncertaintyabouthowmanyotherapplicantswillseekfunds.Finally,thisapproachisusefulifalegislaturewouldlikeaprogramtobeabletoscalefromyeartoyearwithoutfurtherneedforthelegisla-turetochangethesizeofthesubsidyfund.

Yetthereisastrongargumentthatthetotalmonetarycommit-menttoaparticularprogramshouldbeuptothelegislature,especiallyifmoneyistobedistributedbasedonavaguestandardratherthandetailedrules.OurGoodnessandNicenessCommissionhypotheticalmightbesilly,butitwouldbeevensillierforagovernmenttodelegatetotheCommissionunlimitedauthoritytodeterminejusthowmuchgoodnessandnicenessoughttobesubsidized.Thelegislaturewouldstillaffectthetotalawardpaymentamount,butthateffectwouldariseintheselectionofjudges,thuspoliticizingthejudgeselectionprocess.IftheagendaoftheCommissionispoliticized,thenrandomselectionmightreducedisparitiesatanyparticulartimebutincreasedisparityovertime,dependingonwhichpartycontrolsthelegislature.Politicsshoulddeterminerelativegovernmentalpriorities.Butifadjudicationisjustabattlebetweenjudgeswhowanttogranthighandlowawards,the systemwillperform lesswell atdistinguishingbetweenclaims.With a fixed fund, the focuswouldbeon selecting judgeswhowillmakeappropriatecomparisonsbetweenclaims.

Intermediatepossibilitiesexist.Thegovernmentcould,forexam-ple,providethatthetotalpayoutwillequalthesumofvaluations,butconstrained to someminimum andmaximum. Or, the governmentcould set total compensation as a function of the total number of

72. Thefixedversusvariablepayoutproblemisaninstanceofthemoregeneralchoicebetweenboundedandunboundedinstitutions.SeeYairListokin,BoundedInsti-tutions,124YALEL.J.248(2014).AnexampleisthattheNationalScienceFoundationisaboundedinstitution,withafixedamountofmoneytodistribute.Seeid.at358–59.Thisisespeciallyattractiveifthefunddistributormayhavedifferentpreferencesfromthe legislature.See id.at358(notingthat theNSFmighthavegreater “‘pro-science’leaningsrelativetoCongress”).


claimants.Or,thegovernmentcouldprovideforafixedfund,butpro-vide some formula determining whether the fixed amount shouldchange over time. The formula might, for example, increase theamount if the population increases. The formula for the fixed fundmightevendependinpartonjudicialvaluations,sothatifthevalua-tionssuggestclaimantsarebeingshortchanged,thefundwillincreaseatleastsomewhatinthenextperiod.

2. WholeFundvs.PartialFundPayoutsWhetherafixedfundorvariablepayoutsareused,wehaveas-

sumedabove that theonlymoney that claimantswould receive fortheir claims would be from the intermediary. A variant approachwouldbeforthegovernmenttogiveclaimantsmoneyproportionaltotheamountreceivedfromintermediaries.Withafixedfund,forexam-ple,thegovernmentmightdistributesomeportionofthefixedfundamongallclaimants,orwithvariablepayouts,theamountdistributedmightbeapresetmultiplier(say,twoorthree)ofintermediarypay-ments.Thepurposeofsuchanapproachwouldbetoreducethetotalstakesforintermediariesandthus,reducetheirinvestments.If,forex-ample,halfofthegovernmentsubsidyisdistributedinthisway,withtheotherhalfdistributedtointermediariesintheusualway,thenin-termediarieswillonlyhavehalfasmuchatstake.Andso,theyshouldbeexpectedtodevotelesstimeoveralltoclaimassessmentandfewerresourcestotheultimateadjudications.

Whether this is appropriatedependson the trade-off betweentwogoals:minimizingadministrativecostsandpricingclaimsaccu-rately.Thehighertheproportionoftotalpaymentstobedistributedbythegovernmenttoclaimantsinproportiontotheamountsreceivedfromintermediaries,thelessintermediarieswillhaveatstake.There-sultwillbereducedadministrativecostsandahigherratioofmoneyreceivedbyclaimstomoneyspentbythegovernment.Acomplicationisthatsuchaschemeintroducesthedangerofsidepayments;aclaim-antmightbribeanintermediarytoincreaseofficialpayment,andthegovernmentwouldneedtopolicesuchbribery.Thelowerthepropor-tion,ontheotherhand, themore intermediarieswillhaveatstake,resultingingreateraccuracy.Inprinciple,thegovernmentcouldevenachievegreateraccuracy (at greaterexpense) than thebaseline,bytaxingintermediariesonpaymentstoclaimantsandaddingthetaxespaidtothefundtobedistributedbacktointermediaries.Therestofthe Article, however, will assume that there are no taxes and nomatchingpayments,thoughofcoursethelegislaturecouldchangethisovertimedependingonitsinitialexperience.


3. Allowingvs.RequiringClaimSalesWeassumedabovethatclaimantswouldberequiredtoselltheir

claims to a genuine intermediary. A simple way of enforcing thiswouldbetolimitrandomselectiontointermediariesowningatleastsomenumberofclaimscorrespondingtodifferentclaimants(perhaps1,000).Onemightreasonablyargue,however,thatclaimsalesoughtnotberequired.Anindividualwhowishestoholdontoalotteryticket,theargumentgoes,shouldbeabletosavetheadministrativecostsoftheclaimsale.Indeed,ifthepublicunderstandsthepointofthemech-anism,thiswoulddolittleharmandcouldperhapssavesomeadmin-istrativecostsifclaimsareforverysmallvalues.73Butarequirementthatclaimantssellclaimsreinforcesthepointthattherandomselec-tionsystemisnotintendedtobeagovernmentlottery,butamarketforclaims.Inaddition,ifsaleisnotrequired,themarketwillbesubjecttoadverseselection,74assomeone’swillingnesstosellaclaimmightbeseenasanindicationthattheclaimisoflowquality.75Arequire-ment thatclaimsbesoldeliminates thisadverseselectionproblem,becauseintermediarieswouldunderstandthataclaimantwassellingbecauseoftherequirementtodoso.

B. SELECTINGCLAIMSFORADJUDICATIONClaimswouldbeselectedforadjudicationatrandom,witheach

claimhavinganequalchanceofbeingselected.Onetaskforthegov-ernmentwouldbetoconductthisrandomselection.Governmentsof-ten conduct lotteries in other contexts,76 such as where a limited

73. Whentheadministrativecostsofsellingaclaimareclosetotheclaimvalue,thenitprobablymakessenseforindividualssimplytoholdontotheirclaims.Inthiscase,theproposalherebecomesclosetoLavie’sreversesamplingproposal.SeeLavie,supranote45,at1073–75.Thedifference is thatdifferentclaimants’ lottery ticketswouldhavedifferentvaluesifrandomlyselectedforadjudication. 74. SeeRonenAvraham,TheEconomicsofInsuranceLaw—APrimer,19CONN.INS.L.J.29,44–61(2012)(discussing theproblemof adverse selection in the insurancemarket). 75. SeeGeorgeA.Akerlof,TheMarketfor“Lemons”:QualityUncertaintyandtheMarketMechanism,84Q.J.ECON.488(1970)(modelingthisphenomenoninthemarketforusedcars). 76. Oneofthemostinfamouswasthegovernment’sdrawofnumbersdetermin-ingdraftorderfortheVietnamWar.Subsequentanalysissuggestedthatthe lotterywasnotrandom,asmenbornlateintheyearhadalowerprobabilityofbeingselected.NortonStarr,NonrandomRisk:The1970DraftLottery,5J.STAT.EDUC.(1997),http://jse.amstat.org/v5n2/datasets.starr.html[https://perma.cc/GQ88-AVFL].


numberofseatsareavailableinadesiredschool,77sothisisrelativelystraightforward.Ifthegovernmentweretouseablockchaintostoreclaims,itcouldmaketherandomselectionparticularlytransparenttoprevent concerns about corruption.78 If there were worries that apseudo-randomnumber generatorwould be insufficiently random,the government could use quantum random number generation.79These techniquesarehardlynecessary—thegovernmentcould justuse Excel80—but their availability highlights that the governmentshouldbeabletochooserandomnumbers.

1. NumberofClaimsButhowmanyclaimsshouldbeadjudicated?Because theonly

purposeoftheadjudicationistoprovideincentivesforintermediar-ies,inprinciplethegovernmentcouldchooseasfewastwoclaims.Itwouldthenadjudicateeachanddividetheentirefundbetweenthosetwoclaims.Forexample,ifClaimAwereadjudicatedtohaveavaluetwiceClaimB’s,thenClaimAwouldreceivetwo-thirdsoftheentiresubsidy.Assumingintermediarieshadcorrectlyanticipatedtheselec-tionandvaluationsoftheseclaimsandthattherewassufficientcom-petitionamong intermediaries, thenClaimAwouldhavebeenpur-chased for about twice the price paid for Claim B. Claims morevaluablethanAwouldearnmoreinthemarketthanA,andclaimslessvaluablethanBwouldearnlessthanB.

Theremay,however,begoodreasonstoadjudicateconsiderablymorethantwoclaims.Onereasonismathematical.Whenafundisdis-tributedtojusttworandomlyselectedclaims,aclaimwillnotquitebeexpectedtoreceiveexactlyitsvalueproportionaltoallotherclaims.Rather,smallclaimswillreceiveconsiderablymore,andlargeclaimswillreceiveconsiderablyless.Thereasonisthatiftwosmallclaimsaretheonlyonesselected,eachwillreceivepreciselyhalfthefund,thesameamountthattwolargeclaimsselectedwouldreceive.Indeed,ifclaims’truevaluesareperfectlyanticipatedandareuniformlydistrib-utedfromzerouptosomemaximum,thelowestvalueclaimsmightreceivealmostsixtimestheirvalue,whilethehighestvalueclaimsare

77. Foracritiqueofthefairnessofthisapproach,seeCarolNecoleBrown,CastingLots:TheIllusionofJusticeandAccountabilityinPropertyAllocation,53BUFF.L.REV.65,414–24(2005). 78. Seesupranote69andaccompanyingtext. 79. See, e.g., Quantum Random Numbers, ANU QRNG, https://qrng.anu.edu.au[https://perma.cc/5PG2-36J8](measuring“thequantumfluctuationsofthevacuum”). 80. See How to Generate Random Numbers in Excel, TRUMPEXCEL.COM, https://trumpexcel.com/generate-random-numbers-excel[https://perma.cc/89BB-Z9H9](providingatutorialonhowtogeneraterandomnumbersinExcel).


worthonlyabout70%oftheirvalue.81Thesituationisevenmoredireiftherearemanysmallclaimsandfewlargeones.82If,however,100claimsaresampled,thesituationismuchbetter.83Thelargerthenum-berofclaimssampled,thecloserapproximationofthesamplingdis-tributiontotheunderlyingdistribution.Iftheunderlyingdistributionwereknown,thenitwouldbepossibletoadjustforthis,butthisseemsunlikely.84Thus,thegoalshouldbetoadjudicateenoughclaimstoen-sureatleastthatmarketvaluationsarenotsystematicallydistortedbymuch.

Asecondreasonislegal.Ifadjudicationresultsinwrittenopin-ions,thenmoreadjudicationswillproduceagreaternumberofprec-edents.But,aswewillseebelow,85itisnotobviousthatprecedentsimprovetheoperationoftherandomselectionscheme.Ifweassumethatthereissomebenefittoproductionofprecedents,thatmustbebalancedagainstthecostofadjudicationtodetermineanappropriatenumberofcasestoadjudicate.Inanyevent,theproportionofcasesthatmust be reviewed is likely to be relatively small, certainly farfewerthaninaregimewithappealasofright.Moreover,thelegisla-turecreatingsucharegimemaychooseafixednumberofadjudica-tionsforeachperiod,ratherthansomesetpercentage.If100adjudi-cations sufficewhen 10million file demands for compensation fortheirgoodnessandniceness,86thenthatnumbershouldalsoworkinanevenbetterandnicersocietyresultingin100millionclaims.Thisadministrativeschemecanscalewithouthiringsubstantialadditionalpersonnel,thoughperhapsbenefitsofprecedentswouldmakesome

81. Thiswascalculated fromasimplemodel inwhich twoclaimsaresampledfrom 1,000 claims.With sampling repeated a billion times, the lowest value claimearnedonaverage6.46timesitsvalue,whilethehighestvalueclaimearned0.693ofits value. For the code that produced this calculation, seembabramo/ClaimSample-Model, GITHUB, https://github.com/mbabramo/ClaimSampleModel [https://perma.cc/2T7J-FSDU]. 82. Wedefinedtheclaimsashavingtruevaluesrangingfrom100,000i/1001for1<=i<=1000.Againsampling10milliontimes,thelowestclaimreceived1,026timesitstruevalue,whilethehighestclaimreceivedonly0.164ofitstruevalue.Seeid. 83. Withauniformdistributionofclaims,thelowestclaimreceived1.01timesitstruevalue;thehighest,0.993ofitstruevalue.Withtheasymmetricdistributionde-finedinthepreviousfootnote,thelowestclaimreceived1.058timesitstruevalue;thehighest,0.947. 84. Thedistributionmightbeestimatedbasedonpaymentsforinsuranceonran-domselection.SeeinfraPartI.B.4.Butevenwithactuariallyfairrates,someinterme-diariesmightnotinsuresomeclaims,andperhapssmallclaimswoulddisproportion-ately not be insured. Therefore, it is difficult to know the distribution of claims inadvance. 85. SeeinfraPartII.A.3. 86. Seesupranote67andaccompanyingtext.


scale desirable. The months—or years—long backlog inherent inotheragencydecisionswouldnotbeanissue.Thelegislature’sonlyrecurringdecisionthenbecomeshowgreatthesubsidyshouldbeineachperiod,assumingthatthesubsidyisfixed.87

2. FilingFeesBecause the system scales so easily, it can handle claims both

largeandsmall.Whenasmallclaimisrandomlyselected,theinterme-diarieswilllikelynotspendasmuchtopersuadethedecisionmakersthatitishighvalue,sincelessoverallisatstake.Theadjudicatorspre-sumablywouldnotspendasmuchtimeoniteither.Buttheadjudica-torslikelywouldtrytoensurethatsmallclaimsreceiveproportionalpayoutsrelativetooneanotherandthattheratiosofpayoutsbetweenlargeandsmallclaimsreflect theirmerits.Still,aconcernmightbethattoomanysmallorevenfrivolousclaimswouldbefiled.Therules,asstatedsofar,meanthatthereislittlereasonnottosellaclaim.Aproblemwiththisisthatintherandomsampleofadjudications,smallclaims might dominate large ones. This exacerbates the problemabove, that absent a large pool of cases to adjudicate, small claimsmightreceivehigherpayoutsthantheydeserve.Moreover,thesocialcostsassociatedwithfilingsmallclaimsmightexceedthesocialbene-fits.

Thereis,however,asimplesolution.Thegovernmentcoulddis-courageclaimantsfromfilingsmallclaimsbyrequiringafilingfee.If,forexample,thegovernmentintendstheGoodnessandNicenessCom-missiontorewardactslikebuildingsoupkitchensratherthanactslikestoppingatapedestriancrosswalk,itmightinsistonafilingfeeof,say,$10,000.Themoneyfromthefilingfeeswouldbeaddedtotheoverallpool,soitwouldnotreducethenetsubsidy.Butitwoulddetersmallclaims.Ifthemarketexpectsavaluationforaclaimsignificantlybelowthat threshold, thenno intermediarywouldwant tobuythatclaim.This isnotwithout itsdownsides,assubsidieswouldeffectivelybedistributedproportional to assessedvalueover $10,000, insteadofdistributedproportional to assessed value. This slightly overvalueslargeclaimsrelativetosmallerones,atendencythatworksintheop-positedirectionofthedistortiondescribedabove.88Avariantonthefiling fee approachwould increaseeach claimvaluedat anamountabovethefilingfeebytheamountofthefilingfee.Thus,ifoneweresurethatonehadaclaimthatwouldbevaluedat$20,000andone

87. SeesupraPartI.A.1. 88. Seesupranotes81–83andaccompanyingtext.


paida$10,000filingfee,onewouldexpecttoreceiveapproximately$30,000backonaverageforanetgainof$20,000,butsomeonewithaclaimvaluedat$5,000wouldexpectonaveragea$5,000loss.

3. SubdividedClaimsTheflip-sideproblemisthedangerthatsmallclaimswillreceive

toohighaproportionofthesubsidyrelativetoaverysmallnumberofverystrongclaims.Suppose,forexample,thatthevastmajorityofafundreallyshouldgotoasinglepersonorentity.89Iftherearemillionsofverysmallclaims,thenthechanceofthisclaimbeingselectedislow,andsoitwillbeundercompensated.Forexample,ifonly100claimsof100,000,000weretobeselected,thenthebestanyclaimcanhopefor is to receive all of the fund if selected, producing an expectedamountofonlyonemillionthofthefund.Thereis,however,aneasysolution.Aclaimantshouldbeabletodivideitsrighttocompensationintoshares,witheachsharehavingthesameprobabilityofbeingse-lectedforrandomadjudicationasanyundividedclaim.Then, ifonesuchclaimwererandomlyselectedforadjudication,theresultingval-uationwouldbedividedbythenumberofshares.Forexample, ifaclaimantwithanundividedclaimwouldhavereceiveda$100millionvaluationbutbreakstheclaiminto100shares,thenasingleshare,ifrandomlyselected,wouldreceiveavaluationof$1,000,000.Thisap-proachcouldbeusedinconjunctionwithfilingfees90 todiscourageexcesssubdividing.

4. InsuranceforNonselectionAnothervirtueofclaimsubdivisionisthatitservesaninsurance

function.The intermediarywhoholdsavaluable claim facesa sub-stantialriskthattheclaimmightnotberandomlyselectedforadjudi-cation.Yetevenwithsubdivision,theintermediarywouldretainsub-stantialrisk.Fortunately,thereisabetterwayofgreatlyreducingtheriskcostoftherandomselectiondevice:Thegovernmentcouldoffer,atactuariallyfairrates,insurancethatwouldpayoffifaclaimisnotrandomly selected.91 Suppose, for example, that an intermediary

89. See,e.g.,EDWARDMONKTON,THEPIGOFHAPPINESS(2007)(describingacommu-nityinwhichasingleindividual’seffortsgreatlyincreasegoodnessandniceness).Thismaybemoreobviouswithsomeofour laterproposals.Forexample, if thegovern-ment’s goal is to reward climate change innovation, then it is possible (thoughun-likely) that a single inventorwill endupdeservingmostof the fund.See infraPartIV.A.3. 90. SeeinfraPartIV.A.2. 91. Forasimilarproposal,seeMichaelAbramowicz,TaxExperimentation,71FLA.L.REV.65,103–04(2019).


holds a claim that, if all claims were adjudicated, would receive$100,000.Butbecauseoftherandomselectionfunction,theclaimhasaone inone thousandchanceofbeingrandomlyselected, inwhichcaseitwillbeworth$100,000,000.Theintermediarycouldthenputupabondfor$99,900,000,whichwouldbeforfeitedtothegovern-mentintheeventthecaseisrandomlyselected;theother99.9%ofthe time, the governmentwould pay $100,000. This entirely elimi-nates the intermediary’s risk. Meanwhile, because the governmentshouldberiskneutral,92 thisshouldbeaservicethat itcancheaplyprovide.93

Admittedly,thatisahighbondtoputup,anditwouldnotbeprac-tical foranintermediarywiththousandsofclaimstoputupabondthathighoneachclaim.Byholdingadiversifiedportfolio,aninterme-diaryhasalreadyhedgedrisk;thisillustratesthecapacityofthecapi-talmarketstoreducerisk.94Theintermediarycouldthenfurtherre-duceriskbybuyinganinsuranceproductthatreflectstheriskthatitwillhavebadluck,inthesensethattherandomselectionwillbeofclaimswithlowerexpectedvaluefortheintermediarythanwouldoc-cur on average. An intermediary might accomplish this by self-as-sessingthevalueofeachofitsclaims.Thismakesitstraightforwardtocalculatetheexpectedvalueofitsportfolio,givenrandomselection.Thecontractcouldthenprovidethatiftherandomselectionimpliesasignificantlygreaterexpectedvalue(that is, the intermediarybene-fitedfromtheluckofthedraw),theintermediarywouldforfeitabondtothegovernment,while ifrandomselection impliesasignificantly

92. SeeChristopherSerkin,BigDifferencesforSmallGovernments:LocalGovern-mentsandtheTakingsClause,81N.Y.U.L.REV.1624,1666&nn.162–64(2016)(citingsourcesassuminggovernmentriskneutrality).Governmentalofficialssometimesacttoavertrisk,leadingtopolicythatfailstotakeadvantageofgovernmentriskneutral-ity.Seeid.at1666–67.Inprinciple,however,thegovernmentshouldbeabletoacceptfairlylarge,actuarially-fairbetswhileimposingvirtuallyzeroriskonindividualtax-payers. 93. Alternatively,theprivatesectorcouldprovidesuchinsurance.Astandardar-gumentforprivateinsuranceinsteadofgovernmentallyprovidedinsuranceisthatthegovernmentmayuseprivateinsurancetoachievesocialobjectivesthatarebetterpur-suedoutsideaninsurancesystem,andthusthatprivateinsuranceismorelikelytobeactuariallysound.See,e.g.,ReginaAustin,TheInsuranceClassificationControversy,131U.PA.L.REV.517,569n.304(1983).Buttheremaybeeconomiesofscopeingovern-mentaladministration,becausethegovernmentisadministeringthefund.Meanwhile,thereisnoactuarialchallengehere,becausewhatisbeingadministeredisarandomnumberfunction. 94. Anintermediaryalsomighttakeadvantageofcapitalmarketstoreduceriskinotherways,forexamplebysellingsharestothepublic.See,e.g.,KelliA.Alces,LegalDiversification,113COLUM.L.REV.1977,1978(2013)(“Diversificationisthebestpro-tectioninvestorshavefromtherisksofcapitalinvestment.”).


lowerexpectedvalue,thegovernmentwouldpaymoneytotheinter-mediary.Thoughthis ismodestlymorecomplex,becausesuchcon-tractswoulddependentirelyonrandomselection(ratherthanontheultimateresultsofadjudications),thegovernmentcanofferperfectlyactuariallyfaircontracts,thusreducingtheriskfromrandomselec-tion.Fromthegovernment’sperspective,itdoesnotmatterwhethertheintermediaryself-assessescorrectly.Inprinciple,eachintermedi-ary’sincentivewouldbetoinsureuptothepointwhereitwouldbeindifferenthowtherandomselectionturnsout.95

Randomselection,however,isnottheonlysourceofriskforin-termediaries.Riskcannotbealtogethereliminatedbecauseoftheun-certaintyinherentinvaluation.96Somedecisionmakersmightvalueaclaimhigher thanothers,creatingrisk,andeventhedistributionofhowdifferentdecisionmakerswouldvalueaclaimmaybeunknown,creating uncertainty.97 In cases randomly selected for adjudication,thestakeswillbeveryhigh,farhigherthanifeverycasewereadjudi-cated.Ontheotherhand,valuationriskiseliminatedinthecasesnotrandomlyselectedforadjudication,andwehaveseenabovethattheriskassociatedwith randomselection itself canbe insuredagainst.Thequestionthusarisesofwhichimposesagreatereconomicburden:valuationriskineverycase,orntimesthevaluationriskinone-of-ncases?Theanswermaybethelatter,butthedifferencemaynotbesogreat.Valuationriskassociatedwithaclaimis largelyunsystematicrisk,meaningthatitisuncorrelatedwithotherrisks.98Financetheorytellsusthatunsystematicriskcanbeeliminatedifheldaspartofadiversifiedportfolio.99Withhighern,anunsystematicriskamountsto

95. See,e.g.,AlanSchwartz,ProposalsforProductsLiabilityReform:ATheoreticalSynthesis,97YALEL.J.353,362–63(1988)(notingthatwhenthepriceofinsuranceisactuariallyfair,consumerswillbuysufficientinsurancesothattheconsumerisindif-ferentbetweenstatesoftheworld). 96. SeeFRANKH.KNIGHT,RISK,UNCERTAINTYANDPROFIT22–48(1921). 97. Id.InDonaldRumsfeld’sfamoustypology,theconcernhereisstillwithknownunknowns,ratherthanunknownunknowns.SeeDonaldH.Rumsfeld,U.S.Sec’yofDef.,&Gen.RichardMyers,Chairman,JointChiefsofStaff,RemarksatDepartmentofDe-fense News Briefing (Feb. 12, 2002), https://archive.defense.gov/Transcripts/Transcript.aspx?TranscriptID=2636[https://perma.cc/D9GV-W6U5] (distinguishingthesefromknownknowns).Knownunknownsatleastcanbeestimated. 98. PerB.Mokkelbost,UnsystematicRiskoverTime,6J.FIN.&QUANTITATIVEANAL-YSIS785,785(1971)(defining“unsystematicriskorvariation”as“variationduetoat-tributesofindividualsecurities”). 99. SeegenerallyEDWINJ.ELTON,MARTINJ.GRUBER,STEPHENJ.BROWN&WILLIAMN.GOETZMANN,MODERNPORTFOLIOTHEORYANDINVESTMENTANALYSIS313(9thed.2014)(“[E]venifanindividualassethadagreatdealofunsystematicrisk,itwouldhavelittleimpactonportfoliorisk,andtherefore,unsystematicriskwouldnotrequireahigherreturn.”).


agreaterportionofamarket-basketportfolio,butthishasonlyatinyeffectonoveralldiversification.Justastheintermediary’spoolingofclaims reduces risk, so too can themarket further diversify risk. Ahedgefundmightinvestinanintermediary,forexample,becauseitsriskisidiosyncratic,muchashedgefundsmayinvestinlitigation.100Oranintermediarycansellsharestothepublic,thusaccomplishingfurtherdiversification.

II.ADJUDICATIONOFRANDOMLYSELECTEDCLAIMSOnceacaseisselectedforadjudication,thestakeswillbehigh.If,

for example, only one in 1,000 claims is adjudicated, the expectedvalueoftheclaimwillbe1,000timeswhatitwasbeforerandomse-lection.Itistheexpectationofthisoccasionalhighpayoffthatgivesintermediariesincentivesexantetobidclaimsup.Litigationexpenseswillbehigherwithsuchaclaimthanwouldbethecaseifnomultiplierwereapplied,butthelitigationexpenseswillbebornefarlessoften.Becauselitigationexpensesriselessthanproportionatelytothevalueof adjudication,101 this mechanism reduces expected litigation ex-penses.Incompetitivemarkets,intermediarieswillbiduptoexpectedclaimvaluelessexpenses,sorandomselection’sreductionofexpectedlitigationexpensesmeansthatclaimantswillreceivemorethantheywouldifeveryclaimwereadjudicated.

This Part addresseswhat the adjudication processwould looklike,consideringhowrandomselectionmightchangethewaythatlit-igation isconducted.SectionAexamineshowexpertandotherevi-dencemightbeconsidered,howtoensurefulldevelopmentofargu-ments against claimants, and whether the outcome binding onclaimantsbeforeamulti-judgetribunalshouldbethatoftheaverageormedianjudge.Italsoexplainsthatbecausethegoalistoprovidepredictability to the public, rather than predictability to litigants,precedentshouldplaylessofarole.SectionBdescribestheincentivesofvariousparticipants.Becauseclaimantshavealreadybeenpaidbyintermediaries,theymayneedsomeincentivetoencouragetheirfullparticipationinlitigation—andtoholdthemaccountableshouldthey

100. SeeBruceH.Kobayashi&LarryE.Ribstein,Law’sInformationRevolution,53ARIZ.L.REV.1169, 1211–12 (2011) (noting similarity of litigation funding tohedgefundinvesting). 101. Thisisimplicitintheoft-notedpointthat“smallrecoveriesdonotprovidetheincentiveforanyindividualtobringasoloactionprosecutinghisorherrights.”Am-chemProds.,Inc.v.Windsor,521U.S.591,617(1997)(quotingMacev.VanRuCreditCorp.,109F.3d338,344(7thCir.1997)).Theratioof litigationcoststodamages ishigherforsmallclaimssuitsthanforsuitswithhighstakes.


haveengagedinfraudwhensellingtheirclaims.Meanwhile,thisPartalso considers the role of adversaries, whose function is to argueagainstclaimants,andofjudges.

A. STRUCTUREOFTHEPROCESSThisSectionconsidersthestructureofadjudicationfromstartto

finishandbeyond.

1. ConsiderationofEvidenceAdjudicationistheoccasionforcarefulconsiderationinthecon-

textofspecificfactshowtomeasurerelativedesert—inthecaseofourgeneric hypothetical example, what counts as “goodness and nice-ness”102—thatis,howmuchcreditanindividualmightreceivefordif-ferentacts,andhowtoaddressevidentiaryuncertaintiesordisagree-mentsamongexperts.Inthissense,theadjudicationsfunctioninthemannerandspiritof thecommonlaw.103Theprocessthus flipsthetypicalregulatoryscript,underwhichmostoftheidentificationofrel-evant distinctions occurswhen regulations are crafted rather thanwhenadjudicationisperformed.Tobesure,theGoodnessandNice-nessCommission couldenact regulations thatwould resolve issueslargeandsmall.104But thechallenge towhichrandomselectionre-spondsisthecreationofanadministrativeprograminwhichweas-sume that full development of regulations is not practical, becausetherearetoomanyfactualscenariosorbecause it is toodifficult toassign weights to various scenarios.105 We thus assume that the

102. Seesupranote67andaccompanyingtext. 103. J.LynEntrikin,TheDeathofCommonLaw,42HARV.J.L.&PUB.POL’Y351,362–63(2019)(definingcommonlawaslegalrightsanddutiesderivedfromjudicialopin-ions). 104. Seesupranote3. 105. In thecriminalcontext, theU.S.SentencingGuidelinesserveasausefulre-minderthatthemostambitiousattemptstocreaterulestoconvertacts(e.g.,crimes)intonumbers (e.g.,prisonsentences) fall short.TheGuidelinesrecognize theirownincompletenessbyallowingupwardanddownwarddepartures.U.S.SENT’GGUIDELINESMANUAL§§5K1.1–5K3.1(U.S.SENT’GCOMM’N2018).CriticslongarguedthattheGuide-linesaretooconstrainingevenwiththedeparturemechanism.SeeKATESTITH&JOSEA.CABRANES,FEAROF JUDGING:SENTENCINGGUIDELINES INTHEFEDERALCOURTS 143–78(1998).Perhapsinpartbecauseofthesecritiques,theGuidelinestodayaremerelyad-visory.SeeUnitedStatesv.Booker,543U.S.220,245(2005).Unsurprisingly,Bookerhasledtoincreasedinter-judgedisparityinsentencing.SeeCrystalS.Yang,HaveInter-judgeSentencingDisparitiesIncreasedinanAdvisoryGuidelinesRegime?EvidencefromBooker,89N.Y.U.L.REV.1268,1272–73(2014).Similarly,indistributingfundsusingaconventionaladministrativeregime,thegovernmentmayreducedisparityormaygrantflexibilitytotakeallfactorsintoaccount,butnotboth.


agencyactsunderabroadstandardoratleastthattheenactedregu-lationsleaveconsiderableroomfordiscretion.

Whattypesofargumentsshouldjudgesconsiderinexpostpro-ceedings?Oneanswerisanykindoffactualevidenceorlegalconsid-erationrelevantinanidealworldofperfectandcostlessadjudication.Indetermininghowmuchtoofferforparticularclaims,intermediar-ieswillconsideranyinformationthattheyanticipatejudgeswillcon-sider,unlessthecosttotheintermediariesofconsideringsuchinfor-mationeveninformallyistoohigh.Ifanintermediarybelievesthatajudgewouldconsiderafactortoberelevanteventangentially,thentheintermediarywillhaveanincentivetoadjustitsofferfortheclaimupordown.Ifjudgeswereexpectednottoconsidercertainfactorsastootangential,theintermediarieswouldnotconsiderthemeither,sopricingwouldbealessnuancedreflectionofunderlyingmerit.Thus,inourhypothetical,judgesshouldconsideranyspecificcircumstancesthatsomeonewouldordinarilyweighinconsideringhow“goodandnice”someone’sactswere,even ifhypotheticalregulatorstryingexantetocreateacatalogueofrelevantconsiderationswouldnevereventhinkofsuchaconsideration.

Ontheotherhand,evenifajudgebelievessomeconsiderationtobemarginallyrelevantintheory,thejudgereasonablymightdecidetoassignitnoweight.Perhapsthejudgeisconfidentthateachinterme-diarywouldviewthecostofconsideringsuchevidencetoexceedthebenefitsindetermininghowmuchtobidforaclaim.Becauseofthemultiplier,anintermediaryrationallymightignoresomeevidenceexante,eventhougheithertheintermediaryoranadversarytothein-termediarywouldwishtoargueaboutitafteraclaimisrandomlyse-lected. Alternatively, the judge might believe that intermediarieswouldconsidersuchevidence,butthatsuchconsiderationwouldin-creasethecostofdetermininghowmuchtobidonclaims.Becauseclaimantsultimatelybearthiscost,106ajudgereasonablymightdecidetoignoresuchevidence.Judges,however,shouldbecarefulnottoex-cludeconsiderationsthatintermediariescouldcheaplyconsiderinin-formalways.Whenaperson“thinkingfast”islikelytohaveanintui-tive reaction to some detail, it probably bears some weight, eventhoughitwouldtakeapersonalongtime“thinkingslow”toarticulatethe detail’s relevance.107 We should not assume that the intuitive

106. See,e.g.,BakerBottsL.L.P.v.ASARCOLLC,576S.Ct.2158,2164(2015)(ref-erencing the “bedrockprincipleknownas theAmericanRule,”whichprovides that“[e]achlitigantpayshisownattorney’sfees”). 107. Cf.DANIELKAHNEMAN,THINKING,FAST AND SLOW19–108 (2013) (comparingtwosystemsformakingjudgments).


moralistorevenintuitiveeconomistineachofusisirrelevant;ifintu-itive reactions shouldbe suppressed, it shouldbebecause theyarefoundirrelevantaftercarefulconsideration.

Theexactnatureoftheevidencethatjudgeswouldconsiderde-pendsontheadministrativeprogram.ThehypotheticalGoodnessandNiceness Commission would naturally lend itself to specific infor-mationaboutjustwhatanindividualorentityapplyingforapartofthesubsidydid.Perhapsthereisvideoorothercontemporaneousev-idence,ormaybewitnessesexist.Expertevidencealsomightbeim-portanttoassesshowmuchtheclaimantactuallyhelpedpeople—forexample,byprovidingeducationorsubstanceabuseservices.Econo-mistsmight testifyaboutwhether these individualshadbetterout-comesthanothers.Butneitherthisnoranyotheragencyneedcommitsolelytoaneconomicmethodology.Maybeethicistsorphilosopherswouldhaverelevantcontributions.Anadvantageofadjudicatingun-derastandardisthatawiderangeofconsiderationscanbebroughttobear,eveniftheyaregenerallyviewedasincommensurable.108Ar-gumentsmightbemadeabout the relativeweight these considera-tionsshouldhave.If,overtime,certaintypesofarguments,withinoracrossmethodologies,cometoberecognizedasmorereliable,inter-mediarieswillchangetheirexpectationsofhowjudgeswillrule.Ran-domsamplingthusmakesitpossibletointegratevariousmethodolo-giesinawaythatwouldbedifficulttoaccomplishwithexanterules,and in a way that allows expectations to evolve organically asknowledgeandinformationimproves.

2. MeasureoftheOutcomeOnce judgesconsiderallof theevidence foraparticular claim,

they must announce a claim valuation. With variable payouts, theclaimownerwouldsimplyreceivethevaluationamount,butwiththefixedfundapproachrecommendedabove,theclaimvaluationwouldbedividedbythesumofallclaimvaluationsintheperiodtodeter-minehowmuchof the fundtheclaimownershouldbepaid.109Butwhathappensifdifferentjudgesdisagree?Shouldweassigntheclaimtoanewpanel,akintotheapproachthatthelegalsystemtakesifa

108. Onemightarguethatwherevaluesareincommensurable,itisimpossibletoweighthemagainstoneanother.SeeRichardWarner,DoesIncommensurabilityMat-ter?IncommensurabilityandPublicPolicy,146U.PA.L.REV.1287,1313(1998)(con-sideringthisclaim).Standardsareusefulifmultiplevaluesshouldbeweighedagainstoneanother,evenintheabsenceofamethodologyfordoingsoobjectively. 109. SeesupraPartI.A.1.


juryisunabletoagreeondamages?110Suchastepisprobablyunnec-essary,eveniftheagencydecidedtousejuriesasdecisionmakersra-therthanjudges.111Instead,oncejudgeshavehadafullopportunitytoconsiderallevidenceandtodeliberateamongstthemselves,ifthereis not full agreement, then either the average or median decisionmightbedeterminedtobetheclaimvaluation.

Butwhichvalueshouldbeused—averageormedian?Thereisastrongcaseforthemedian.Assumethatclaimsaretobedecidedbythree-judgepanels,withthejudgesrandomlydrawnfromabroaderpoolof judges.Andsuppose thatasmallpercentageof judgeshavewildlydifferentviewsfromotherjudges,forexamplebyvaluingsomeclaims at multiple orders of magnitude greater than other judgeswouldbelieveappropriate.Asingleoutlieronapanelmightthenhaveanoutsizedeffectonanaward ifanaveragevaluationmetricwereused—andtotheextentthatintermediariesanticipatethepossibilityof such a judge, such outlier judges have an outsize effect on theamounts receivedby claimants.With amedianmeasure, this effectwillbereduced,becausetwosuchjudgeswiththesamepreferencesmustbeonthesamepaneltoaffectthefinalvaluation.

Theargumentforusingthemedianthusalsosuggeststhatthree-judgepanelsarepreferabletosingle-judgepanelsandmayevenpro-videanargumentforstilllargerpanels.Thedangerofoutsizedinflu-enceisevenmoredisturbingifoneimaginesthatperhapssomejudgeswillexaggeratetheirviewstoincreasetheirinfluence.Othersolutionsarepossible.Techniqueslikeperemptorystrikesmightbeusedtore-duce the influence of outliers.112 Or perhaps, an average should beusedunlessitdeviatesmorethanacertainpercentfromthemedian.

Thereis,however,aseparateargumentforusingthemedianra-ther than the average. Suppose that there is disagreement not justabouttheamountoftheawardbutaboutwhethersomeoneshouldbe

110. Thisisvirtuallyunheardof,becausejurieswillcompromiseondamages.Mor-risB.Hoffman,TheCaseforJurySentencing,52DUKEL.J.951,1007(2003)(“[J]urors[incivilcases]whohavemanagedtoagreeontheyesornoquestionofwhetherade-fendanthasbeenprovedresponsibleareveryunlikelytobeunabletoreachaunani-mousverdictonpunishment.”). 111. Studiessuggestthatwhiledifferentjuriestendtocomparedifferentfactpat-ternssimilarly, theymaybehighly inconsistentwhenaskedtoawarddamages.SeegenerallyCassR.Sunstein,DanielKahneman&DavidSchkade,AssessingPunitiveDam-ages (with Notes on Cognition and Valuation in Law), 107 YALEL.J.2071,2075–81(1998)(reportingresultsofjuryexperiments). 112. SeeMichaelHasday,EndingtheReignofSlotMachineJustice,57N.Y.U.ANN.SURV.AM.L.291,291–92,307(2000)(discussingpossibilityofperemptorychallengesof judges and suggesting instead that appellate panels always include at least onememberofeachmajorparty).


entitledtoanawardatall.Forexample,theremightbeadebateaboutwhether a claimant is eligible to receive awards. If themajority ofjudgesdeterminesthataclaimantisineligible,thereisastrongargu-mentthattheclaimantshouldreceivenothing.Ananalogyistoatortcaseinwhichthedefendantisfoundnotliable;wedonotencourageajurytoawardone-quarterdamagesiftheyexpectthatone-quarterofhypotheticaljurieswouldfindliability.113

3. EffectofPrecedentWhetheramedianoraverageisused,judgeswouldbeencour-

agedtoissuewrittenopinions.Byissuingawrittenopinion,ajudgeshowsthepublicthatthejudgehascarefullyconsideredtherelevantissues. A written opinion thus functions analogously to proof ofwork114andhelpsensurethatjudgesdonotshirktheirresponsibili-ties to consider issues carefully.When reputational considerationslead judges to care about their work product, intermediaries willlikelyhavegreaterconfidencethatrelevantevidencewillbeconsid-ered.Intermediarieswillthusbemorelikelytoconsiderrelevantevi-dencethemselvesinpricingclaims.Equallyimportant,anobligationtoexplainone’sreasoningmaydecreasetheprobabilitythatajudgewillrelyonfactorsthatthejudgewouldnotwishtoadmitrelyingon—forexample,becausesuchconsiderationwouldviolateastatuteortheConstitution.115 Written opinions also contribute to generalknowledge about the issue being adjudicated.116 If a judge has en-gagedincarefulthoughtaboutsomeabstractissue,writingitdown

113. Steinv.NewYork,346U.S.156,178(1953)(“Courtsuniformlydisapprovecompromiseverdictsbutarewithoutothermeansthanadmonitionstoascertainorcontrolthepractice.”).Foranexplanationofhowsuchcompromisemayadverselyaf-fectthelegalsystem’sinterestsbutsuggestingthatitmaybeappropriateinveryclosecases,seeMichaelAbramowicz,ACompromiseApproachtoCompromiseVerdicts,89CALIF.L.REV.231,246–50(2001). 114. Theconceptof“proofofwork”ismostwellknowninthecontextofthecryp-tocurrencyBitcoin.SeeSatoshiNakamoto,Bitcoin:APeer-to-PeerElectronicCashSys-tem,BITCOIN,http://bitcoin.org/bitcoin.pdf[https://perma.cc/8NQ2-HQF4].Butoth-ers have drawn the analogy that many institutions may bestow status based ondemonstratedproofofwork.SeeEugeneWei,StatusasaService(StaaS),REMAINSDAY(Feb. 26, 2019), https://www.eugenewei.com/blog/2019/2/19/status-as-a-service[https://perma.cc/K72Y-N5N3]. 115. SeeChadM.Oldfather,Writing,Cognition,andtheNatureoftheJudicialFunc-tion,96GEO.L.J.1283,1338(2008)(“[T]heactofwritingputsthejudgeintogreatercontactwith the legalmaterials that are togovernherdecision, therebyenhancingtheirconstrainingeffect.”). 116. Seeid.at1327–29.


maysaveajudgetimeinalatercase,inmuchthesamewayajournalarticleseekstodothecognitiveheavyliftingforothers.

Thisjustificationofwrittenopinions,however,isnotthestand-ardjustificationforprecedent.Precedentsareusuallythoughttobevaluable in part because they create at least provisionally bindingrules,constraining judgesandreducingdisparity.117Butwhendeci-sionmakers (here, the intermediaries)havestrong incentives toactlike the average member of some other body (here, the ultimatejudges),disparityislessofaconcern,andsoprecedentislessneces-sary.Evenifdecisionmakersareunpredictableandinconsistent,mar-ketpricingmayberelativelyconsistent.Indeed,competitionprovidesstrongincentivesformarketpricingconsistency,becauseaninterme-diary that pays anunusuallyhigh amount for a claim losesmoney,whileonewhoofferstoolittlewilllikelylosetheclaimtoacompetitor.Intermediarieswilldevelopmodelsofhowtheyexpectdecisionmak-erstorule(perhapsbasedonsurveysorfocusgroupsofpeoplewithbackgroundssimilartothedecisionmakers),updatingthesemodelsbasedon their observationsof other intermediaries’ offers.118Overtime,oneshouldexpecttheirmodelstoconverge,evenwithoutprec-edents,butalsotoevolveasrelevantresearchemergesandattitudesmodernize.119Thepublic,meanwhile,willlearnwhatclaimsareworthbasedonhowmuchintermediariesarewillingtopay.

Precedentsmightevenbeabadideainthiscontext.Afterall,theyunderminethevirtuesofstandardsoverrules.120Likeanyrule,aprec-edentwillnecessarilybeoverinclusiveandunderinclusiverelativetoitspurposes.121Thedecisionmakerswhoissueprecedentsarejustin-dividuals,andtheymayhaveidiosyncraticbeliefsabouttherelevantissue.Ifadecisionmakersettlesanissue,creatingprecedent,thenfu-tureintermediarieswillpriceclaimsaccordingtothatoutcomeratherthantheirexpectationofwhatarepresentativedecisionmakerwoulddecide. On the other hand, the better the process for making

117. See,e.g.,HeidiLiFeldman,ObjectivityinLegalJudgment,92MICH.L.REV.1187,1232–34(1994)(discussingconstrainingpowerofcommonlaw). 118. Therationaleunderlyingthisassertionisthatintermediariesshouldrecog-nizeaphenomenonlikethewinner’scurse,wherethewinnerofanauctionmaybethepartythathasmostoverestimatedthevalueoftheauctionedasset.See,e.g.,E.C.Capen,R.V.Clapp&W.M.Campbell,CompetitiveBiddinginHigh-RiskSituations,23J.PETROL.TECH.641,641–53(1971)(discussingthe“winner’scurse”).Therationalresponsetolosingauctionsistoincreaseone’sbidinsimilarauctions,andtherationalresponsetowinningistolowerone’sbidinthefuture.Seeid. 119. Seeid. 120. Seesupranote4andaccompanyingtext. 121. Seesupranote4andaccompanyingtext.


precedent,thelesslikelyitwillbethataparticularprecedentisjustonedecisionmaker’sidiosyncraticbelief.Multi-judgepanelsmaycre-ateprecedents,andtheordinaryprocessesofcommonlawdecision-makingallowprecedentstoadaptovertime.122Judgesmaybesensi-tivetothereducedneedforprecedentsintherandomselectionre-gime,yetstilldecidethatparticularprecedentshavethepotentialtobemoretransparentthanmarketpricing.Thus,whileprecedentisnotessentialwhenrandomselectionisused,itstillmayperformausefulroleifusedjudiciously.

Attheleast,writtenopinionsmaybevaluablefortheirpersua-sivevalue.Marketpricingisopaque.123Intermediarieshavenoincen-tivestoreleasetheirrationalesforconcludingwhytheyexpectpartic-ularfactorstoaffectclaims’expectedvalues.124 Inwrittenopinions,decisionmakershavetheopportunitytoapplyestablishedtheorytoconcrete facts—for example, developing reasons why some actsshouldorshouldnotberewardedbyourhypotheticalGoodnessandNicenessCommissionandhowmuch credit variousacts should re-ceive.Shouldsimilar factsarise ina latercase, those initial impres-sionsmaybeusefulinidentifyingsomeconsiderationsrelevanttotheproblem.Overtime,thesetofrelevantargumentsandcounterargu-mentswouldbefurtherdeveloped.Themarketwillthenassess—inpartbasedonitsperceptionoftherelativestrengthoftheseconsider-ations, but alsobasedon the views that judges seem to favor—theprobability thata judgewillchooseonepositionoranother. In thissense, market pricing can complement written opinions, assigningweights to different perspectives even if decisions do not produceconventionalholdings.Thisapproachreducestheriskassociatedwithidiosyncraticprecedent,whilestillallowinglegalideastoflourish.

B. PARTICIPANTSThepartiesthatwillstudyprecedentmostcloselyaretheinter-

mediaries,because,whetherbindingornot,opinionswillprovidein-sightintohowdecisionmakersthink.Wewillconsiderwhetherthein-termediaries should be regulated below, but in this Section, we

122. See,e.g.,GeorgeL.Priest,TheCommonLawProcessandtheSelectionofEffi-cientRules,6J.LEGALSTUD.65,65(1977)(arguingthatinefficientrulesarelikelytobelitigatedmore,thusimprovingtheefficiencyofthecommonlaw);seealsoDanielKler-man,JurisdictionalCompetitionandtheEvolutionoftheCommonLaw,74U.CHI.L.REV.1179,1179(2007)(offeringabalancedperspectiveonthedebateconcerningthecom-monlaw’sefficiency). 123. SeeSchwarcz,supranote15,at396–97(arguingthatinsurancepoliciesarenotsufficientlytransparent). 124. Seeid.


consider how the random selection system should treat other in-volvedindividuals:judges,claimants,andperhapsthoseassignedtheroleofarguingagainsttheintermediaries.

1. JudgesBecauseintermediarieswillsetpricingbasedonwhotheyexpect

the judges to be, theymaywell focus on the identity and views ofjudges.Theymightreadajudge’sopinionsandlistentoajudge’scom-mentsatpubliceventsjustasthemarketlistenstotheFedchair,notforenlightenmentabouttheunderlyingmeritsbutforcluesaboutin-dividualpredilections.125Ifthepoolofjudgesislargeenough,thispre-sents lessofan issue,because intermediarieswillnotknowwho islikelytoresolveaparticularclaim.Nonetheless,intermediariesmightstillfocusonthecharacteristicsofthejudicialpoolasawhole.Perhapsofgreatestconcern,theymightfocusonwhethermostjudgesarefromonepoliticalpartyoranother,especiallyifthequestionofhowtodis-tributeafixedfundhasapoliticalvalence.Thisfocusfurtherincreasesinstability,becausepricescouldchangedramaticallyafterapresiden-tialelection.

Onemightview the tendencyofprices tomovewithpollsandelections as beneficial, increasing judicial accountability. But onecouldalsoviewthisaspernicious, the influenceofpoliticsonwhatshouldbeapoliticalvaluations.Ifso,thenideallythecurrentadmin-istrationoughtnothavemucheffectontheselectionofjudges.Thismightnotbepossible,however,intheU.S.federalsystem,whereprin-cipalofficersmustbenominatedbythePresidentandconfirmedbythe Senate.126 If the agency’s judgeswere inferior officers, perhapstheycouldbeappointedby“thecourtsalone,”127thusattenuatingpo-litical influence.Butforthattobethecase, the judgesmightnotbeable tomake finaldecisions,128 andgiving the agency the ability tooverturnthejudgeswouldreintroducepoliticaldecision-making.

125. Academicsalreadyoffersophisticatedanalysisofjudicialtendencies.See,e.g.,R.PolkWagner&LeePetherbridge,IstheFederalCircuitSucceeding?AnEmpiricalAs-sessmentofJudicialPerformance,152U.PA.L.REV.1105(2004)(analyzingFederalCir-cuit). 126. SeeU.S.CONST.art. II,§2, cl.2.Fora recentopinion findingcertainagencydecisionmakersinsulatedfromreviewtobeprincipalofficers,seeArthrex,Inc.v.Smith&Nephew,Inc.,941F.3d1320,1328–29(Fed.Cir.2019). 127. SeeJamesE.Pfander,TheChiefJustice,theAppointmentofInferiorOfficers,andthe“CourtofLaw”Requirement,107NW.U.L.REV.1125,1174–79(2013)(proposingapproachforcourtstouseinappointinginferiorofficers). 128. SeeArthrex,941F.3dat1328–29.


EvenintheU.S.federalsystem,however,therearealternativesfor reducing political influence. One approachwould eliminate theneedforagencyjudges.Instead,valuationsmightbeperformedinfed-eralcourt,byfederal judges.Thepopulationoffederal judgesshiftsonly slowly over time, because the judges have lifetime appoint-ments.129Thiswouldincreasetheworkloadofthefederalcourts,butbecause of random selection, the increased burden on the courtswouldbereasonable. If that isnot feasible,analternativeapproachmightbetoappointjudgesforrelativelyshortperiodsofnomorethana few years, but postpone decision-making, perhaps by five or tenyears.130Theintermediariesthenwillbemakingtheirdecisionsnotbasedonwhatparticularjudgeswilldobutbasedonwhathypothet-ical future judgesmightdo.Uncertaintyaboutwhichpoliticalpartymightwinthepresidencyinthefuturewouldresultinsomeweightbeingassignedtoeachpossibility,becomingjustanotherfactorintheintermediaries’model.

Thepossibilityofresolvingcaseswithfederaljudgeshighlightsthatthejudgescouldbegeneralists.131Theremay,however,bevaluetoappointingjudgeswithspecializedexpertise.Ajudgeinarandomlyselectedcaseideallyshouldbesomeonewhocanunderstandthevar-iousargumentsthatmightbebroughttobearonthequestionofhowmuchmoney,ifany,anapplicanttothefundshouldreceive.Therele-vantexpertise thusdependsonthepurposeof thesubsidythat thegovernment isdistributing. Insomecases,an ideal judgemightnoteven be a lawyer. In existing regulatory regimes, administrativejudgesalmostalwaysarelawyersbecausetheymustbeabletounder-standhowtodealwithdiverselegalmaterials,includingstatutes,caselaw, and regulations, including both substantive and proceduralrules.132 If random selection were used to implement a standard

129. See Jack M. Balkin,Why Liberals and Conservatives Flipped on Judicial Re-straint: Judicial Review in the Cycles of Constitutional Time, 98TEX.L.REV.215, 225(2019). 130. Postponementofdecisionsmaybecounterproductiveinourexistingjudicialsystem,whereitisimportanttoresolveissues.SeeDavidA.Super,AgainstFlexibility,96CORNELLL.REV.1375,1380(2011).Butitshouldbemoreacceptablewithasystem,likethisone,thatmakesprecedentlessimportant.SeesupraPartII.A.3. 131. Anargumentforgeneralistsinthiscontextisthat,withfewcasestodecide,theadvantageofspecialistjudgesinprocessingcasesmattersless.SeeChadM.Oldfa-ther,Judging,Expertise,andtheRuleofLaw,89WASH.U.L.REV.847,854–70(2012)(arguingthatalthoughspecialistcourtsmaybemoreefficient,generalistsmaypro-ducebetterdecisions). 132. Ontheotherhand,thefactthatnonlawyersareallowedtorepresentdisabil-ityapplicantssuggeststhatnonlawyerscanbecompetent,iflesseffectiveonaveragethanlawyers.See,e.g.,SurveyStatistics:CanaNonlawyerAdvocateHelpYouGetSocial


withoutaccompanyingregulations,however,legalknowledgemightbelessessential.Theargumentsforhowmuchsomeoneisentitledtomightsoundmoreineconomicsorscience,dependingonthetopic,thaninlaw.ReturningtoourhypotheticalCommission,doesanyonebelievethatonemustbealawyertotakethemeasureofgoodnessandniceness?

Lawyersdohaveanadvantageinfollowingproceduralandevi-dentiaryrules,butthesemightwellbelooserthanintraditionaladju-dication,bothbecauseadministrativelawoftenusesinformaladjudi-cation133 and because procedural protections might be mostimportantwhenindividualrightsareatstake.134Thepurposeofran-domlyselectingcasesisnottopreservetherightsofintermediaries,buttodisciplinethedecision-makingoftheseintermediariessotheirbidstoclaimantsreflectthestatutoryspecificationofthejudicialval-uationtask.Proceduralinformalitymightintroducemorevarianceindecision-making,butalittlebitofextrarandomnessoughtnotmatterwhenthegoal is forclaimantstoestimateexpectedvalues.Second-orderquestionssuchaswhetherparticularargumentsshouldbead-missiblemaynot improvedecision-makingonaverageeven if theymay make decision-making more consistent. Moreover, judges arelikelytobeinfluencedevenbyevidencethattheyfindinadmissible,135soallowingabroadscopeofadmissibility,as inarbitration,136maymakesense.Someproceduralrulesmightmakesense(suchasrulesrestrictingeachlitiganttoacertainnumberofhoursofpresentationtime),butnonlawyerscanfollowsuchrules.Meanwhile,becausein-termediariesareapplyingformoneyratherthanbeingdraggedinto

Security Disability Benefits?, NOLO, https://www.disabilitysecrets.com/resources/survey-statistics-can-nonlawyer-advocate-help-get-social-security-disability-benefits.html[https://perma.cc/AUY8-3XWX](assessingsuccessofapplicantswithnonlaw-yerrepresentatives). 133. SeeRubin,supranote22,at123–31(discussinginformaladjudication). 134. MelissaM.Berry,BeyondChevron’sDomain:AgencyInterpretationsofStatu-toryProceduralProvisions,30SEATTLEU.L.REV.541,547(2007)(explainingwhydueprocessprotectionsaregreaterforadjudicationthanforrulemaking). 135. SeeAndrewJ.Wistrich,ChrisGuthrie&JeffreyJ.Rachlinski,CanJudgesIgnoreInadmissibleInformation?TheDifficultyofDeliberatelyDisregarding,153U.PA.L.REV.1251, 1286–1324 (2005) (reporting results of an experiment performedon judgesabouttheeffectofinadmissibleevidence). 136. SeePaulRadvany,TheImportanceoftheFederalRulesofEvidenceinArbitra-tion,36REV.LITIG.469,470(2016)(“Manyarbitratorsadmitalmostanythingprof-feredasevidence,andthesedecisionsarelargelybeyondreview.”).


court,standing,mootness,andother justiciabilitydoctrineswillnothavealargerole.137

2. ClaimantsWhen arguing a randomly selected case, an intermediary will

claim that the valuations corresponding to the original claimantshouldbehigh.Theclaimanthasnothingatstake.Andyet,theclaim-ant’sparticipationmightbeuseful.Theclaimantpresumablywillhavealreadyprovidedtheintermediarywithsomesupportingdocumenta-tion,but,withthegreatstakesafteracaseisrandomlyselectedforadjudication,theintermediarywilllikelywanttodomoreinvestiga-tionof the facts, if such investigation ispossible.This investigationmayrequirethecooperationoftheclaimant.Howcansuchcoopera-tionbeachieved?Themoststraightforwardapproachwouldbe forthecontractbetweentheintermediaryandtheclaimanttorequireco-operation.Similarly,insurancecontractsrequireinsuredstocooper-ate with insurance companies.138 The prospect that the insurancecompanymayenforcesuchaclause,byrefusingtopayoutonthein-surancepolicy,isenoughtoinducecooperationfrommostclaimants.

Yetonemightworrythatcooperationclauseswillnotbeenough,becauseclaimantswillhavealreadyreceivedpaymentfromtheinter-mediary.Thisproblemhasatleasttwopossiblesolutions.Eitheronecouldbe accomplishedby voluntary contracting, though, because agoal is toensureequaltreatmentofclaimants, itmightbebettertocreateageneralruleintheenactinglegislation.The“stick”solutionwouldbe for the intermediary tohave theright toclawback fundsshouldaclaimantnotcooperatewiththeintermediary.Adrawbackofthestickisthatitmaynotworkwithjudgment-proofclaimants139whohavealreadyspentthemoneyfromtheintermediary.Underthe“car-rot”solution,anintermediarymightbeallowedtogivetheclaimantsomeofthefundsfromtheadjudication.Forexample, ifoneinonethousandcasesisadjudicated,theintermediarymightgiveone-thou-sandthoftherecovery—anamountthatshouldonaverageberoughly

137. Cf.Vt.AgencyofNat.Res.v.UnitedStatesexrel.Stevens,529U.S.765,771–78(2000)(findingthatstatutoryentitlementtomoneywassufficient forawhistle-blowertoestablishstanding). 138. Seegenerally44AM.JUR.2DInsurance§1427(2020)(detailinginterpretationofcooperationclause). 139. SeeAmyKnapp,WhatDoesJudgmentProofMean?,NOLO,https://www.nolo.com/legal-encyclopedia/what-does-judgment-proof-mean.html[https://perma.cc/C5AQ-2SKY](“[I]fyoudon’thaveanyincomeorpropertythatthecreditorcanlegallygoafter,then...[thecreditor]cannotcollectonthejudgment.”).


equaltowhattheintermediarypaidtheclaimantinthefirstplace—totheclaimant.

3. AdversariesWithcooperation,theinterestsofintermediariesandclaimants

shouldberoughlyaligned.Butwhowillhaveanincentivetopointoutweaknessesintheirarguments?Oneapproachwouldbetoleavethistothejudges.InquisitorialdevelopmentofthefactsisthenorminSo-cialSecurityadjudication,140anditiswidelyusedinEurope.141Agoodjudgewouldlookforweaknessesintheargumentsofthoseseekingfundsandwoulddispassionatelyconsidertheseweaknessesagainstthestrengthsofthearguments.Evenifwesuspectthatthiswill tiltadjudicationslightlyinfavorofclaimants,thatdoesnotmatterwhentheyarecompetingforafixedfund.Unlessthereisanexantereasonthatclaimantswouldexpectthatone-sidedpresentationwouldfavorsomeclaimantsoverothers,judicialevaluationshouldnotchangeex-pectedvaluesandthusthepricesthatintermediariespayforclaims.

Itwouldalso,however,bepossibletodesignate“adversaries”ineachcase,assigningeachthegoalofarguingagainstaclaimant.Thesemightsimplybeemployeesoftheadministrativeagency,chargedwithconductingappropriatefactualinvestigationandarguingagainsttheintermediary in aparticular case in court.Amore complex schememightprovidefinancialincentives.Consider,forexample,thefollow-ingvariationonfinalofferarbitration142:Theintermediaryisrequiredtoannouncethevaluationthat the intermediaryseeks.Theright toopposetheintermediarymightthenbeauctioned.Theauctionwinnerwould be the adversary andwould announce a different valuation,lowerthantheintermediary’s.Thejudgewouldberequiredtochoosebetweenthesevalues,ratherthanfindingacompromise;thisgivestheintermediariesanincentivenottoexaggeratetheirasks.143Theentirefund,plusauctionrevenues,wouldbedistributedinproportiontotheamountrequestedbytheintermediary,butiftheadversarywon,the

140. See,e.g.,Simsv.Apfel,530U.S.103,110–11(2000)(“SocialSecurityproceed-ingsareinquisitorialratherthanadversarial.ItistheALJ’sdutytoinvestigatethefactsanddeveloptheargumentsbothforandagainstgrantingbenefits....”). 141. But seeDavid Alan Sklansky,Anti-Inquisitorialism, 122 HARV.L.REV.1634,1668–88(2009)(identifyingreasonsthatAmericanjurisprudenceshouldnotincor-porateContinentalinquisitorialism). 142. See,e.g.,AmyFarmer&PaulPecorino,BargainingwithInformativeOffers:AnAnalysisofFinal-OfferArbitration,27J.LEGALSTUD.415,416(1998)(“In[final-offerar-bitration],thearbitermustchooseoneofthetwosubmittedoffers.”). 143. See id.at428–29(explaininghowthemechanismencouragesparties tobereasonableinsubmittingvaluations).


intermediarywouldberequiredtopayitaportionofwhatitreceived,specifically the difference between the valuations divided by theamountrequestedbytheintermediary.

Suchanapproach,thougheasilyimplemented,mightbeconcep-tuallytoocomplexforanyearlyexperimentationwithmarket-basedrandomselection,butthevirtuesofbothauctionsandfinalofferarbi-trationseemaptintherandomselectioncontext.Theuseofauctionsborrowsfromanapproachthatwasusedinsomeclassactionsfortheright tobecomeclasscounsel.144Thegoalofsuchaprocedure is toalignincentivesbetweenclassmembersandcounsel,butitisimper-fect.145Auctionsmaybemoreplausiblehere,wherethewinneroftheauctionwouldnotberepresentingaparticularclient.Meanwhile,finalofferarbitrationlimitstherangeofdisagreement,becauseeachpartyhastheincentivetomakeareasonableoffer.Solongasthevaluationsareannouncedbeforejudgesarechosen,thisreducestheriskthatanidiosyncraticjudgemayhaveanoutsizedinfluenceontheprocess.Inaddition,itensuresthatboththeintermediaryandtheadversaryhavetheexactsameamountofmoneyatstake.Theywillthustendtospendsimilaramountsontheadjudication,ensuringgenuinelyadversarialpresentation.

Whetherfinalofferauctionsareusedornot,settlementsmightbeallowed.Inmostadjudicativecontexts,itgoeswithoutsayingthatsettlements should be encouraged.146 The case, however, is closerwithrandomselection.Becauserandomselectionalreadygreatlyre-ducesthenumberofcasestobeadjudicated,theburdenofadjudica-tionwillbemuchlower,andthustheadjudicationcostssavedrelativetothesizeoftheprogramasawholewillbeloweraswell.Ifadjudica-tion is viewed as providing a public good—for example, becausejudges’writtenopinionswillenrichthepublicunderstandingaboutwhat should count as advancing the government’s goals in the

144. See,e.g., InreAminoAcidLysineAntitrustLitig.,918F.Supp.1190,1197–1207(N.D.Ill.1996)(directingtheappointmentofthefirmwiththefeestructuremostfavorabletoclients);AlonHarel&AlexStein,AuctioningforLoyalty:SelectionandMon-itoringofClassCounsel,22YALEL.&POL’YREV.69,72n.1(2004)(citingsimilarcases);KathrynKranhold&RichardB.Schmitt,ToReinInFees,SomeJudgesAskAttorneysToBid for Suits, WALL ST. J. (Dec. 6, 2000, 12:01 AM), https://www.wsj.com/articles/SB976053221217460327[https://perma.cc/8PBZ-MJBB]. 145. SeeHarel&Stein,supranote144,at107–20(explaininghowtomodifythemechanismtoimproveincentivealignment). 146. See, e.g., AndrewW.McThenia& Thomas L. Shaffer,For Reconciliation, 94YALEL.J.1660(1985) (arguingagainst theargument forwardedbyOwenM.Fiss inAgainstSettlement,93YALEL.J.1073(1984)).


administrativeprogram147—thentheremaybeanargumentforfor-biddingsettlement.Thecaseagainstsettlementisespeciallystrongiftheadversariesareexpectedtobeweak,forexamplebecausetheydonothaveasmuchatstakeastheintermediaries.Butifthefinalofferauctionsareused,thisshouldnotbeasignificantconcern,andsettle-mentswouldsavesomecosts,ultimatelyincreasingclaimantpayouts.Moreover,finalofferarbitrationtendstopromotesettlementbyre-vealingtheparties’information.148Settlementcouldthusallowadju-dicationtobecomequiterareinsuchasystem,perhapsfurtherad-vancing the argument for resolvingdisputeswith federal judgesorothergeneralists.149

III.REGULATIONOFTHEMARKETFORCLAIMSWhetherornotsettlementispermitted,thecostsofadjudication

canbequitelowifrelativelyfewcasesareselectedforadjudication.Themarketitselfachievesthefunctionofadjudicationinmostcases,andthemarketwillconsumerealresources.Intermediariesmustin-vestinmodelingdecision-makingandinevaluatingindividualclaims,butwillalsohaveincentivestomaketheirclaimevaluationprocessesefficient, thus providing a foreseeable cost advantage over govern-mental adjudication of individual claims and discouraging idiosyn-cratic judgments. To be sure, these are as yet untested empiricalclaims.Ataminimum,themarketprovidesincentivesforconsistentclaimresolutionthatarechallengingtoprovidewithinanagencythatadjudicateseveryclaim.Themostpowerfulobjectiontothemarketroleisthusnotthatthemarketwillbetooexpensiveorrandom,butthatthemarketwillsystematicallyshortchangeclaimants,oratleastsomegroupsofclaimants.

Theargumentthatthemarketwillnotshortchangeclaimantsissimple:competition.Ifintermediariesaremakinglargeprofits,entre-preneurswillsenseprofitopportunitiesandenterthemarket,atleastassuminganabsenceofbarrierstoentry.Understandardmodelsofindustrial organization, entry will dissipate supplier rents.150 The

147. See, e.g.,WilliamM. Landes&RichardA. Posner,Adjudication as a PrivateGood,8 J.LEGALSTUD.235,238(1979)(explainingthatwrittenopinions(i.e.,prece-dent)maybeapublicgood). 148. SeeFarmer&Pecorino,supranote142(modelingtheeffectoffinal-offerar-bitrationandnotingthatoffers“mayrevealprivateinformation”). 149. SeesupraPartII.B.1. 150. SeeRichardA.Posner,TheSocialCostsofMonopolyandRegulation,83J.POL.ECON.807,809–15(1975)(offeringamodelofthesocialcostsofmonopolywithcom-pleterentdissipation).SeegenerallyPaulKleinsorge,Rent,BRITANNICA,https://www.britannica.com/topic/rent-economics [https://perma.cc/B67L-3V25] (“In modern


hopeisthatrentswillbedissipatedbycompetitiontopayasmuchaspossibletoclaimants.Rents,however,couldalsobedissipatedbyex-pendituresonmarketing,whichislikelytobeoflowvalueinthiscon-textgiven themostprobabledeciding factor formostconsumers iswhowillpaythemthemostmoney.151Thisshouldbelessofaproblemthanintheinsurancecontext;consumersstronglyconsiderpricesinbuyinginsurance,sotheusualconcernisthatconsumerswillpayin-sufficientattentiontocontractualprotections.152Here,allthatmattersisprice,sothereshouldbenoneedforconsumerstoassesscomplexcontractsorguesswhichprovidermightofferthebestservice.Possi-bly a more serious concern is that political rent-seeking could oc-cur,153withclaimantslobbyingfortheinstitutionoflicensingrequire-ments,purportedlyforconsumerprotectionbutinpracticetoreducecompetition.

Couldalawcreatinganagencyrelyingonrandomselectionin-creasethecompetitivenessofintermediaries?ThisPartconsidersthepossibleroleofantitrustlaw,consumerprotectionlaw,andantidis-criminationlawinensuringthatclaimantsreceiveasufficientamountfromthefund.

A. ANTITRUSTLAWIndividual claimants’ risk of unfairly low compensation due to

anti-competitivebehaviorwouldbereducedbecauseordinaryanti-trustlawwouldpresumablybeinforce.Thus,anyattemptstoengageinprice-fixingwouldbeillegalandsubjecttotrebledamages.154Sotoowouldattemptsbyintermediariestodividemarkets,155eitherbasedongeographyorbasedontheidentityoftheclaimants.Antitrustlaw,

economicusage, rent is representedas thedifferencebetween the total return toafactorofproduction(land,labour,orcapital)anditssupplyprice—thatis,themini-mumamountnecessarytoattainitsservices.”). 151. Marketingmayhelppromoteeconomicefficiencyforsomeproductsincoun-trieswithcorruptionorburdensomeregulation.SeeM.JosephSirgy,GraceB.Yu,Dong-JinLee,ShuqinWei&Ming-WeiHuang,DoesMarketingActivityContributetoaSociety’sWell-Being?TheRoleofEconomicEfficiency,107J.BUS.ETHICS91,100(2012)(“empir-icallydemonstrat[ing]thepositivepredictiveinfluenceofmarketingsystemonsocie-talwellbeing”). 152. SeePaulL.Joskow,Cartels,CompetitionandRegulationintheProperty-Liabil-ityInsuranceIndustry,4BELLJ.ECON.&MGMT.SCI.375,404–05(1973)(discussingcon-sumers’difficultyobtaininginformationaboutinsurerquality). 153. SeeGordonTullock,TheWelfareCostsofTariffs,Monopolies,andTheft,5W.ECON.J.224,231–32(1967)(describingpoliticalrent-seeking). 154. See15U.S.C.§15(a)(allowing“threefoldthedamages”). 155. Suchattemptsalsomaybeparticularlyamenabletoclassactions.SeeA.B.A.SECTIONOFANTITRUSTL.,ANTITRUSTCLASSACTIONSHANDBOOK48–49(2ded.2018).


however,hasitslimits.Aconcerninmodernantitrustscholarshipisthatprovidersmighttacitlycollude,156aprospectmademoreseverebyimprovementsinartificialintelligence.157Moreover,antitrustlawdoesnotpenalizeacompanyforbeingamonopoly,onlyforseekingtomonopolize.158Thus,ifitturnsoutthatthefunctionofintermediaryisanaturalmonopoly,159antitrust lawwouldoffer littleprotection.160Emergenceofanaturalmonopolyseemsunlikely,however.Aninter-mediaryneedonlydevelopapricingmodeltoenterthemarket,notspendbillionsonapowerplant.161

If theantitrust lawsare insufficientlyprotective intherandomselection context, one could imagine specific solutions.A crudebutsimple approachwouldbe to limit any intermediary (or any set ofjointlyowned intermediaries)162 fromowningmore thana setper-centageofclaims.If,forexample,marketsharewerelimitedto20%inageographicregion(perhapsdefinedat thecounty level)butanintermediary bought up 30% of the claims, then each of its claimswouldbepenalizedbybeingassignedalowerprobabilityofrandomselection,withoutacorrespondingincreaseintheproportionofthefundtowhichitwouldbeentitled.Thisincreasestheincentiveforan-otherfirmtoenterthemarket.Thisapproachisnotwithoutitslimi-tationsanddownsides.Ideallyitwouldbeappliedtonongeographicalmarkets(suchasclaimsforparticulartypesofclaimants).Meanwhile,

156. See,e.g.,WilliamE.Kovacic,M.J.Moltenbrey&NathanEimer,TheDetectionandPunishmentofTacitCollusion,9LOY.CONSUMERL.REP.151,156(1997)(offeringhypothetical examples and explaining the problem they pose for antitrust enforce-ment). 157. SeeEmilioCalvano,GiacomoCalzolari,VincenzoDenicolò&SergioPastorello,ArtificialIntelligence,AlgorithmicPricingandCollusion(Ctr.forEcon.Pol’yRsch.,Dis-cussionPaperNo.DP13405,2019),https://a.qoid.us/SSRN-id3310310.pdf[https://perma.cc/GU2B-8PH6]. 158. See15U.S.C.§2(outlawing“attempttomonopolize”). 159. JimChappelow,NaturalMonopoly,INVESTOPEDIA,https://www.investopedia.com/terms/n/natural_monopoly.asp[https://perma.cc/B5X9-AHY6](Aug.29,2019)(“Anaturalmonopolyisatypeofmonopolythatexistsduetothehighstart-upcostsorpowerfuleconomiesofscaleofconductingabusinessinaspecificindustry.”). 160. Naturalmonopolystatusisnotadefense,buttheplaintiffmuststilldemon-strateexclusionaryconduct.SeeEinerElhauge,DefiningBetterMonopolizationStand-ards,56STAN.L.REV.253,325–26(2003). 161. SeeChappelow,supranote159. 162. Recent antitrust scholarship has focused increasingly on the danger thatcross-ownership can encourage collusion, even in public companies. See Einer El-hauge,Horizontal Shareholding, 129HARV.L.REV.1267, 1278–1301 (2016); EricA.Posner,FionaM.ScottMorton&E.GlenWeyl,AProposalToLimittheAnticompetitivePowerofInstitutionalInvestors,81ANTITRUSTL.J.669,680–91(2016)(detailingthepo-tentialharmsofcommonownership).


excessively strict market share limits may reduce achievement ofeconomiesofscale.Butbecausetheserviceprovidedbyintermediar-iesishomogenous,marketsharelimitsseemmoreplausibleherethaninmarketsforwhichincentivesareessentialtofosterinnovation.

An alternative approach to ensure thatmost of a fund goes toclaimantswouldbeforastatutetolimittheprofitoftheindustryasawholebasedontheindustry’scosts.Thewebsitetransferringclaimscouldcollectinformationaboutthesalespricefortheseclaims.Inter-mediariesmightberequiredtosubmitinformationindicatingtheirto-talexpensesinresearchingclaimsandinadjudicatingrandomlyse-lectedcases.Bystatute,totalindustryprofitswouldbecappedatsomepercentage above this level. Any excessmight be distributed to allclaimantsinproportiontotheamountstheyinitiallyreceived.Profitswouldnotapplyonaper-firmbasisbecausesomefirmsmightbepar-ticularlyskilledandthusdeservegreaterpaymentsandalsobecauserandom selectionwould complicate the assessment. Ifmarkets aresufficiently competitive, this regulation may be unnecessary and,giventheneedtoauditindustry-reportedexpensesandtoensurethatclaimsalesareinarms-lengthtransactions,cumbersome.Butitdoesprovidearelativelystraightforwardwayofensuringthatthevastbulkofanyfundgoestoclaimants.

B. CONSUMERLAWConsumerprotection lawalsomightbe tailoredto therandom

selection context, but the degree of supervision required is likelymuchlessthaninotherimportantcontexts.TheConsumerFinancialProtectionBureau(CFPB)mightbeseenassavingconsumers frombadtermsburiedinsmallprint163orperhapsfromattractivefinancialproductsthattheycannotactuallyafford.164Becauseconsumersareselling their claims, they should care only about howmuchmoneytheyreceive.Theremight,however,bearoleforgovernmentindefin-ingasinglestandardcontractforsuchtransactions,orformandatingwarnings for nonstandard contracts. For example, intermediariesmightberequiredtogiveconsumersdisclosuresencouragingthecon-sumers to contact other intermediaries to obtain the best possibleprice.

163. TheCFPB’swebsite formerlypromisedthat theagencywouldensure“thatnothing isburied in fineprint.”AboutUs, CONSUMERFIN.PROT.BUREAU, http://www.consumerfinance.gov/the-bureau[https://perma.cc/Y5FG-D627]. 164. Seeid.(emphasizingmissiontoensure“thatpricesareclearupfront[and]thatrisksarevisible”).


Evenbetter,intermediariesmightberequiredtogiveclaimantstimetoshoparoundforoffers.Anintermediarymightadopttheoldusedcar salesman tacticofofferingagreatdealavailableonly thatday.Suchhigh-pressuresalespitchesnotonlyareinherentlyunpleas-antbutalsomayvictimizerelativelylow-informationconsumers.Buttherearesimplesolutions,suchaslawsauthorizingcooling-offperi-ods,permittingconsumerstocanceltransactionswithinsomeperiodoftime,suchasamonth.165TheInternetshouldmakeiteasyforcon-sumerstoshoparoundforbetteroffers.Adrawbackofthisapproachisthatitmightallowsecond-moverstofree-ride166offthevaluationsofother intermediaries. If IntermediaryA hasa reputation forper-formingdetailedresearch,IntermediaryBmightadoptapolicyofpay-inganyconsumerabitmorethanAoffered.ThismaydiscourageAfromperformingcarefulinvestigation.

Potentialcompromisesexist,however.Anintermediary,forex-ample,mightbeallowedtoinsistthataconsumerwalkingawayfromapreviouslyacceptedofferpaytotheintermediarysomepercentage(perhaps2%,orsomeothernumberdesignatedbystatute).Indeed,thestatutemightprovidethatintermediariesmustpublishtentativelyaccepted offers, alongwith some basic, nonidentifying informationabout the claimant and an anonymized email address atwhich theclaimantcouldbereached.Ifanintermediarydevelopedareputationforpayingtoolittle(bymorethanthespecifiedstatutorypercentage),thirdpartieswouldhaveanincentivetosubmithigherbidsontheseclaims.Theymightdososightunseenif theofferingintermediary’sreputation were sufficiently bad, or they might simply encourageclaimantstoconsidersellingtotheminstead.Thus,arelativelyeasy-to-implementconsumerprotectionrulecouldhelptriggeranauctionforclaimants’rights,whilestillensuringsomecompensationforin-termediariesperforminginitialinvestigations.

C. ANTI-FRAUDLAWSolongasclaimantsseekthehighestpricefromintermediaries,

itisunlikelythatintermediarieswillhaveoccasiontoengageinfraud,

165. SeegenerallyJeffSovern,WrittenNoticeofCooling-OffPeriods:AForty-YearNatural Experiment in Illusory ConsumerProtection and theRelativeEffectiveness ofOralandWrittenDisclosures,75U.PITT.L.REV.333,334&nn.1–5(2014)(discussingsuchlaws). 166. SeegenerallyJimChappelow,FreeRiderProblem,INVESTOPEDIA,https://www.investopedia.com/terms/f/free_rider_problem.asp[https://perma.cc/HLH3-5TEE](July25,2019)(“The freeriderproblemis theburdenonasharedresource that iscreatedbyitsuseoroverusebypeoplewhoaren’tpayingtheirfairshareforitoraren’tpayinganythingatall.”).


though any fraud by intermediaries (for example, false statementsthatclaimantsarenotpermittedtotalktootherintermediaries)couldbeprosecuted.Thegreaterfrauddangertoaclaimantisfraudbyotherclaimants.Withafixedfund,honestclaimantsarevictimizedbythedishonestyofotherclaimants.Forexample,ifhalfofthefundgoestoentirelybogusclaims,theneachhonestclaimantreceivesonlyhalftheaward the claimantwould have received in fraud’s absence. Fraudcouldbepolicedasinanyothermarket.Ifanintermediarybelievedthataclaimantwasattemptingtodefrauditorhadsuccessfullydoneso,theintermediarycouldreportthistofederalprosecutorswhothencoulddecidehowtoproceed.Thegovernmentthusmustdecide,aswithanyotheradministrativeregime,theoptimalamounttospendon fraud investigations,prosecutions,and,whereappropriate,pun-ishment.

Yetperhapsthemost importantprotectionagainst fraudis theincentiveofintermediariestobevigilant.Ifanintermediarybelievesthat some evidence submitted is fraudulent, the intermediary willhavean incentive tooffer less,digdeeper,orwalkaway. Ina rule-boundgovernmentagency,suspicionsoffraudcanbeaddressedonlythroughcumbersomeprocedures,soifasinglemedicalexpertgivesmanydubiousdiagnoses,theagencymayneedtotreattheseaslegiti-mateunlessitwishestoundertakeanexpensiveinvestigation.167In-termediaries,bycontrast,willhaveanincentivetomakeinformalas-sessmentsofthecredibilityofwitnesses, includingexperts,gaugingtheoutcomeof a hypothetical detailed adjudication. Sometimes, anhonestclaimantmightbedisbelieved,butthemarketatleastalsopro-videsincentivesforintermediariestobidupthevalueofstrongclaimsfromwhichothershaveshied.

D. ANTIDISCRIMINATIONLAWTheargument that competitionwilldriveupprices isperhaps

reminiscentofGaryBecker’sexplanationofhowdiscriminationcre-atesprofitopportunities that in turncancounterdiscrimination.168

167. Adrawbackofrarehighlypublicizedenforcementisthatthepublicmayer-roneouslyconcludethatfraudiscommon.SeeMarthaT.McCluskey,TheIllusionofEf-ficiency inWorkers’ Compensation “Reform,” 50RUTGERSL.REV.657,882–84(1998)(notingthatconcernsaboutclaimsfrauddisproportionatelyemphasizeclaimant-sidefrauddespitecontrarydataabouttheprevalenceofemployerfraud). 168. SeeGARYS.BECKER,THEECONOMICSOFDISCRIMINATION14(1957)(explaininghowa“tastefordiscrimination”measuresthemonetaryvaluediscriminators“pay”todiscriminate).ButseeCassR.Sunstein,WhyMarketsDon’tStopDiscrimination,8SOC.PHIL.&POL’Y 22,31–34 (1991) (providingadditional,nonstandardargumentsas towhymarketsfailtostopdiscrimination).


Indeed, ifminority orwomen claimantswere paid less thanwhitemaleclaimants forequallyvaluableclaims, thenintermediarieswillhave incentivestobiduptheseclaims.Fullacceptanceof this logic,however,would suggest that some areas of antidiscrimination law,suchasprotectionsagainst“redlining,”areunnecessary.169Suchpro-tectionscontinue toexist,however,170 and theycouldbeapplied totransactionsbetweenintermediariesandconsumers.Thestatutecre-atingtherandomselectionmarketsmightrequireintermediariestoreportaggregateclaimvaluesforracialorothersubgroups,includinggeographicalsubgroups,tofacilitatethefilingofsuchclaims.

Onereasonthatintermediariesmightbemotivatedtodiscrimi-natewouldbe if they expect that theultimate adjudication itself islikelytodiscriminate.Solongaswitnesscredibilityisatissue,judgesmight discriminate,171 and reliance on standards rather than rulesmayincreasethedanger.172Discriminationisespeciallylikely,how-ever,whendecisionmakersmakemanydecisionswithrelativelylittlescrutiny.Thelargestakesofrandomlyselectedclaimswillhighlightissuesofexpertevidence,possiblyreducingthefocusonthecharac-teristicsoftheclaimantandthusthelikelihoodthatconsciousorsub-consciousbiaswillaffectassessments.Butfordiscriminationthatper-sists,thelawcanprovideremedies.Antidiscriminationlawgenerallybansstatisticaldiscrimination,173includingdiscriminationthatiseco-nomically rational based on the aggregate characteristics of somegroup,aswellasdiscriminationthatisrationalbasedonthirdparties’anticipated discrimination.174 The statute regulating intermediariescould explicitly allowsuitsbasedon these theories and clarify that

169. For an analysis highlighting methodological difficulties in determiningwhetherracediscriminationexistsinthemortgagemarket,seeAndrewHolmes&PaulHorvitz,MortgageRedlining:Race,Risk,andDemand,49J.FIN.81(1994). 170. See,e.g.,42U.S.C.§3604(“[I]tshallbeunlawful...[t]orefusetosellorrent...adwellingtoanypersonbecauseofrace....”). 171. SeeSheriLynnJohnson,TheColorofTruth:RaceandtheAssessmentofCredi-bility,1MICH.J.RACE&L.261,266–317(1996)(discussingtheeffectsofdiscriminationoncredibilityassessments). 172. SeeSamuelEstreicher,AchievingAntidiscriminationObjectivesThrough“SafeHarbor”RulesforCasesofChronicHiringAversion,U.PA.J.L.&PUB.AFFS.1,3–5(2017)(examiningthepotentialcostsofrelyingonrulesratherthanstandardstopreventdis-crimination). 173. See,e.g.,PeterP.Swire,ThePersistentProblemofLendingDiscrimination:ALawandEconomicsAnalysis,73TEX.L.REV.787,790–91(1995)(notingthatstatisticaldiscriminationisillegalunderdisparatetreatmenttheory). 174. Theclassicexampleofthis iscustomerdiscrimination.See,e.g., JonathanS.Leonard,DavidI.Levine&LauraGiuliano,CustomerDiscrimination,92REV.ECON.&STAT.670,671–73(2010)(modelingtheeffectsofcustomerdiscrimination).


they encompass situations inwhich themarket anticipates judicialbias.

IV.APPLICATIONSTOCLIMATECHANGE,PANDEMICS,ANDOTHEREMERGENCIES

PartsIthroughIIIhaveusedtheexampleofagenericadministra-tiveagencytodemonstratehowrandomlyselectingasmallnumberof cases for adjudication can providemarket incentives for pricingclaimsbasedonavaguestandard.Thecaseforthemarket-basedap-proachisstrongestwhenanadministrativeproblemissovastthataconventionalagencycouldnoteasilyaddressit.175Toconsidersomespecificapplicationsofthemarket-basedapproach,wefocusononeofthegreatestproblemsofourtime:climatechange.Avastliteratureexistsassessingthedangerofclimatechange176andvariouslegalre-sponsestoit.177ThisArticle’sgoalistoshowhowrandomselectionmarketsmightpreventclimatechangeor,failingthat,performbetterindistributingfundsthanthegovernmenthasinotherdisasters,in-cludingtherecentCOVID-19pandemic.

ThisArticlesimplyassumesthatalegislatureorotherarmofagovernmentwishestospendmoneyeithertocombatclimatechangeortocompensatethevictimsofclimatechangeorsomeotherdisaster.Thepointisnottoarguethattheparticularexpendituresrepresentthebestwayoffightingclimatechange,eitherintheUnitedStatesorinan international treaty.Rather, it is tohighlight thatdistributingfunds connected to climate change on an economy-wide basis is amassiveadministrativechallenge178—anditisachallengethatmaybemuchmoreeasilymetwithrandomselectionandsalestointermedi-ariesthanwithatraditionaladministrativestructure.Someofthepro-posals are novel, even though theywould be obvious policy candi-dates ifweconclude thatanadministrativeagencycouldefficientlyadministerabroadstandardgoverninghowtodistributefunds.That

175. SeesupraIntroduction. 176. TheIntergovernmentalPanelonClimateChangecreatesperiodicreportssyn-thesizingthelatestresearch.See,e.g.,INTERGOVERNMENTALPANELONCLIMATECHANGE,CLIMATECHANGE2014SYNTHESISREPORT(CoreWritingTeam,RajendraK.Pachauri&LeoMeyereds.,2014). 177. See, e.g., J.B. Ruhl, Climate Change Adaptation and the Structural Transfor-mationofEnvironmentalLaw,40ENV’TL.363,372(2010)(“Tobesure,legalscholar-shiponclimatechangepolicyissharplyontherise.”). 178. SeegenerallyJ.B.Ruhl&JamesSalzman,ClimateChange,DeadZones,andMas-siveProblemsintheAdministrativeState:AGuideforWhittlingAway,98CALIF.L.REV.59 (2010) (broadly discussing administrative challenges with handling climatechange).


theseproposalshavenotbeensuggestedbeforehighlightshowmuchgovernmentalambitionisconstrainedbyasharedassumptionthatef-ficientlyscalingstandardsisimpossible.

The diversity of these proposals also establishes that market-basedrandomselectioncanbeusedindiversecontexts,whetherornotthecontextshaveanythingtodowithclimatechange:wheneachclaimantmightbeentitledtolargepaymentsandalsowhentherearemanyclaimantsentitledtosmallpayments,whenrulesmightbefea-sibleandwhentheyarealmostsurelyinfeasible.SectionAdescribesvariousfundsthatthegovernmentmightdistributeaspartofanti-cli-matechangeefforts.Theproposalsincludecompensatingpeoplehurtbylegislationtocombatclimatechange,reimbursingexpendituresforimprovingbuildingefficiency,andpromotingresearchanddevelop-ment.SectionBexplainshowfundstocompensateforclimatechangeorotherdisasters thatoccur.A fundsubsidizedby thegovernmentmightbeusedtosharetheburdenofclimatechangewhilelimitingtheroleofpoliticsinmeasuringloss.

A. PREVENTINGCLIMATECHANGEThisSectionconsidersthepossibilityofthreepossiblecompen-

sationfundsdesignedtopreventclimatechange.Subsection1elabo-ratesonthefunddescribedintheIntroductiontocompensatethoseharmedbyanti-climatechangelegislation,andSubsection2assesseshowa fundmightbeused tocompensatebuildingownerswho im-proveenergyefficiency.Then,Subsection3assesseswhether fundsmightbeusedtorewardresearchanddevelopmentintonewtechnol-ogies.

1. CompensationforLegislativeLosersManyeconomistshavelongarguedthatthebestapproachtoad-

dressingclimatechangeistoimposeacarbontax179ortocreateacap-and-tradesystemforgreenhouseemissions.180Theseproposals,how-ever, have had only modest political successes.181 In France, for

179. See,e.g.,FrederickvanderPloeg&CeesWithagen,Growth,Renewables,andtheOptimalCarbonTax,55INT’LECON.REV.283,283(2014)(“Asubstantialandpossi-blyrisingcarbontaxisneeded....”). 180. See, e.g.,MATTHORN,CAPANDTRADE:REDUCINGPOLLUTION, INSPIRING INNOVA-TION11(2008).Foracomparisonofthesetwoapproaches,seeLawrenceH.Goulder&AndrewR. Schein,CarbonTaxesVersusCapandTrade:ACriticalReview, 4CLIMATECHANGEECON.1,2–25(2013). 181. Ted Nordhaus &Michael Shellenberger, The Flawed Logic of the Cap-and-Trade Debate, YALEENV’T360 (May 19, 2009), https://e360.yale.edu/features/the_flawed_logic_of_the_cap-and-trade_debate [https://perma.cc/82DR-9DHR] (arguing


example,arecentproposaltoinstituteacarbontaxwaswithdrawnaftermass protests.182 Part of the problem, no surprise, is that thepublicdoesnotliketaxincreases.183Thus,somehaveproposedthatcarbontaxesberedistributedtotheU.S.populationasawholeas“car-bondividends,”184followingCanada,whichhasimplementedsuchanapproach.185 The hope is that a broad political constituency willemergeinsupportofpoliciescombattingclimatechangeoncepeoplestart receiving checks.186 Others have argued that commitments toearmarkcarbon tax revenue forenvironmentalprogramsmight in-creasevotersupport.187Eitherapproach,however,maynotbeeasytoenact,becausewhilemanypeoplewouldseesufficientlysmalltaxin-creasesthattheymightjudgeworththebenefits,asmallergroupwillbeespeciallyharmed,188andsmallgroupsmaybeabletolobbyeffi-ciently.189

thatcurrenteffortstotaxorcapcarbonemissionsare“doomedtofailure”). 182. See,e.g.,AlissaJ.Rubin&SominiSengupta,‘YellowVest’ProtestsShakeFrance.Here’stheLessonforClimateChange,N.Y.TIMES(Dec.6,2018),https://www.nytimes.com/2018/12/06/world/europe/france-fuel-carbon-tax.html[https://perma.cc/83TB-L8YF]. 183. ButseeCameronBallard-Rosa,LucyMartin&KennethScheve,TheStructureofAmericanIncomeTaxPolicy,79J.POL.1(2016)(discussinghowdegreeofdislikeofpayingtaxesvariesbasedonincomebracket). 184. See, e.g., JAMES A. BAKER, III,MARTIN FELDSTEIN, TED HALSTEAD, N. GREGORYMANKIW,HENRYM.PAULSON,JR.,GEORGEP.SCHULTZ,THOMASSTEPHENSON&ROBWALTON,CLIMATE LEADERSHIP COUNCIL,THE CONSERVATIVE CASE FOR CARBONDIVIDENDS (2017),https://www.clcouncil.org/media/2017/03/The-Conservative-Case-for-Carbon-Dividends.pdf[https://perma.cc/9V9C-NTCA]. 185. SeeCanadaAdoptsCarbonFeeandDividendToReinInClimateChange,CITI-ZENS’CLIMATELOBBY(Oct.23,2018),https://citizensclimatelobby.org/canada-adopts-carbon-fee-and-dividend-to-rein-in-climate-change[https://perma.cc/8M7M-2WKR]. 186. SeeKateYoder,RepublicansAreBackinga‘CarbonDividend.’WhattheHeckIsThat?, GRIST (June 21, 2018), https://grist.org/article/republicans-are-backing-a-carbon-dividend-what-the-heck-is-that[https://perma.cc/463K-GETY]. 187. SeeDAVIDAMDUR,BARRYG.RABE&CHRISTOPHERBORICK,PUBLICVIEWSONACAR-BONTAXDEPENDONTHEPROPOSEDUSEOFREVENUE4(IssuesinEnergy&Env’tPol’y,No.13, 2014), http://closup.umich.edu/sites/closup.umich.edu/files/ieep-nsee-2014-spring-carbon-tax.pdf[https://perma.cc/QB5W-Q5KS];GaryM.Lucas,Jr.,VoterPsy-chologyandtheCarbonTax,90TEMP.L.REV.1,41–42(2017)(“[E]videncefromfocusgroupsindicatesthatmanypeopleignoretheincentiveeffectsofenvironmentaltaxesandconclude that theywillbe ineffectiveunless thegovernmentuses theresultingrevenuetofundenvironmentalprograms.”). 188. SeeMANCUROLSON,JR.,THELOGICOFCOLLECTIVEACTION53(1965)(“Thegreatertheeffectivenessofrelativelysmallgroups...isevidentfromobservationandexperi-enceaswellasfromtheory.”). 189. Id.at141(describingtheeffectivenessofsmall“specialinterest”groups).


Adifferentstrategywouldbetoredistributecarbontaxrevenuedirectlytothosemostlikelytosufferfromthelegislationcombattingclimatechange.190Whethersuchaplanwouldbemorepoliticallypal-atable is beyondmy scope here. Also beyondmy scope iswhethertherewouldbeadverseconsequencesfrompayingoffthoseharmedbyanti-climate-changelegislationinthismanner.Onemightargue,forexample, thatanticipationofcompensationwillcreate incentivestouselargeamountsofcarboninhopeofcompensation.191Or,alterna-tively,onemightarguethatifthegoalissimplytomaximizethepolit-ical enactability of the legislation, the compensation should be di-rectednot necessarily at thosewho suffer from the legislation, butinsteadatthosemostlikelytobemedianvoters.192PerhapsWestVir-giniashouldnotreceivecompensationatall,becauseitisunlikelytobeconvertedtotheenvironmentalcauseanyway.193

ThisArticle’sproject is toassume that thegoal is todistributemoney(perhapscarbon taxrevenue) to thoseadverselyaffected inproportiontohowtheyareaffected.Theargumentforrandomselec-tionisbasedlargelyontheinfeasibilityofadministrativealternatives.AsarguedintheIntroduction,194bright-linerulesdeterminingeligi-bilitywillbevirtuallyimpossibletodeviseunlesslimitedtothemostobviouscases,suchascoalminers.Eventhen,theactualmeasureofdamagesmaybecrude,failingtotakeintoaccountnuancessuchaswhetherthosewhohavelostjobsareinapositiontotransitioneasilytootheremployment,basedonconsiderationssuchas theireduca-tionalbackgroundandwhether their family tiesmake it feasible tomovetoothercities.Calculationbecomesfarmorecomplexforindi-rectlyaffected individuals. It isoftensaidthatasingle jobsupports

190. Someargueforoffsettingtheoveralldistributionaleffectofacarbontax,forexample by simultaneously making the income tax more progressive. Metcalf &Weisbach,supranote6,at513–16. 191. LouisKaplow,AnEconomicAnalysisofLegalTransitions,99HARV.L.REV.509,527–29(1986)(makingthebroaderpointthatpartiesmaybehavemoreefficientlyiftheyanticipateretroactivetaxlegislationenactinganefficientrule). 192. AnthonyMcGann,VotingChoiceandRationalChoice,OXFORDRSCH.ENCYCLOPE-DIA POL. (Aug. 31, 2016), https://oxfordre.com/politics/view/10.1093/acrefore/9780190228637.001.0001/acrefore-9780190228637-e-79 [https://perma.cc/75MK-AHSX](“[I]tisoptimalforbothpartiestopositionthemselvesatthepreferenceofthemedianvoter[toenactpolicies].”). 193. America’sGreenestStates,FORBES(Oct.17,2007),https://www.forbes.com/2007/10/16/environment-energy-vermont-biz-beltway-cx_bw_mm_1017greenstates.html#787bd366119d [https://perma.cc/PZG5-WDKW] (ranking WestVirginiaasAmerica’sleast“green”state). 194. SeesupraIntroduction.


multipleotherjobs.195Buteverytownisdifferent,asiseveryjobandeveryworkerandfamily.Itwouldbeextraordinarilydifficulttodevisereasonablepaymentformulasexante.Ifformulasleftanyambiguity(and likely even if theydidnot), the administrativeburdenof pro-cessing tensorhundredsofmillionsof claimswouldbeenormous.Achieving reform within a conventional administrative structurewouldthusbedifficult.Suppose,forexample,thatanagencyincludeda single tier of decisionmakers. The resources required to staff theagencywith enoughdecisionmakers initiallywouldbe large, and itwouldbedifficulttocraftincentivesthatwouldpreventidiosyncraticdecision-making.

Adifferentapproach,butonethatwouldalsorequireamassiveinvestmentinpersonnel,mightbetoestablishanagencywithgreatdiscretion,vestedultimatelyintheagencyhead,todistributemoney.The agency’s decisions might not even be conceived as adjudica-tions.196SuchamodelbearsresemblancetotheapproachusedintheSeptember11thVictimCompensationFund,197whosehead,KennethFeinberg,generallyreceivedpraisefordistributingfundsfairly.198ButtheVictimCompensationFundinvolvedarelativelysmallnumberofclaimants,199andthelimiteddurationoftheFund200andrelativelackofpoliticaldisagreementabouttherelevantconsiderationsindistrib-uting money made the identity of the head of the Fund less im-portant.201Dueprocesswasalso lessof a concern,becauseanyonecoulddeclineanofferofcompensationandbringanindividuallaw-suit.202Theclimatechange issue, including thequestionofwhode-serves thegreatestpayments, is sufficientlypolitically charged thatpaymentsinahighlyhierarchicalmodelmightdependgreatlyonthe

195. See,e.g.,GregorySchmid,Manufacturing:TheKeytoFutureJobs,CHALLENGE,Nov./Dec.1988,at54,56. 196. Matthew LeeWiener, General Rules for Agency Adjudications?, REGUL.REV.(Oct.29,2018),https://www.theregreview.org/2018/10/29/wiener-general-rules-agency-adjudications[https://perma.cc/L6BS-QEAC](broadlydiscussingthelackofuniformityforadjudicationsacrossagencies). 197. September11thVictimCompensationFund,28C.F.R.pt.104(c)(2019). 198. ForFeinberg’sownaccount,seeKennethR.Feinberg,TheSeptember11thVic-timCompensationFund,32LITIG.14,14–17(2006). 199. Id.at14(reportingmore than5,000 familiesandphysical injurysurvivorsparticipatinginprogram). 200. Id.(notingthatFeinbergonlyadministeredtheFundforthirty-twomonths). 201. KennethR.Feinberg,Speech:NegotiatingtheSeptember11VictimCompensa-tionFundof2001:MassTortResolutionWithoutLitigation,19WASH.U.J.L.&POL’Y21,29(2005)(“Ihadtremendoussupport...anditwasbipartisan.”). 202. September 11th Victim Compensation Fund of 2001, Pub. L. No. 107–42,§405(a)(1).


identity of the agency head.203 At least that is likely to be so if theagencyheadcontrolsthesalaryandcontinuedemploymentofsubor-dinates.Ifnot,theagencywouldbeabehemothwithgreatdiscretionvestedinlower-levelemployees,resultingindisparity.Uniformsub-stantiveandproceduralrulesmightreducedisparity,butonlysome-whatandonlyathighcost.204

Usingarandomselectionmarketwouldreducethegovernment’sadministrativeburden.Thisapproachreliesonadynamicmarketsec-tortopriceindividualclaims.205Ultimately,theeffectivenessofclaimpricingisanempiricalquestion.Yetitisnotevenclearhowonecoulddesignastudy tomeasurepricingaccuracy,asanadjudication thatreachesaverydifferentresultfromtheclaimpricecouldbearesultofanidiosyncraticdecisionmaker.Ifthegovernmentweretoimple-menttherandomselectionmarket,thepublicwouldassesstheaccu-racyofclaimpricinginformally,likelyplacingexcessweightonhighlysalientcases.206Thispublicassessmentmightdeterminetherandomselectionapproach’sdestiny.Avirtueoftherandomselectionmarketisthatthegovernmentcanscaleiteasilyovertime,simplybychang-ingthesizeofthefund.Forexample,thegovernmentmightpassmod-estclimatechangelegislationwithamodestfund,andifthatprovessufficientlypopular,itcouldthenpassmoreencompassinglegislationwithalargerfund.

2. GreenUpgradesExpenseCompensationCompensationforadverseeffectsoflegislationisespeciallychal-

lenging,becausethecircumstancesofthosewhomightapplyforcom-pensationaresodiverse.Thisstrengthensthecaseforrandomselec-tion, because this diversitymightmake rules difficult to enact. But

203. DavidB.Spence,TheEffectsofPartisanPolarizationontheBureaucracy,inCANAMERICAGOVERNITSELF?272–73(FrancesE.Lee&NolanMcCartyeds.,2019)(discuss-ingthestrainthatpoliticalpolarizationsplacesonagenciesanditsimpactonagencydecision-making). 204. RobertR.Kuehn,BiasinEnvironmentalAgencyDecisionMaking,45ENV’TL.957,1009(2015)(studying theprevalenceofdiscrepancy inenvironmentalagencydecision-makingdespiterulestoeliminatebias). 205. SeesupraPartIII. 206. Individualsoftenmakejudgmentsbasedonexamplesthatcomemosteasilytomind.SeeAmosTversky&DanielKahneman,JudgmentUnderUncertainty:Heuris-ticsandBiases, in JUDGMENTUNDERUNCERTAINTY:HEURISTICSANDBIASES3,11(DanielKahneman,PaulSlovic&AmosTverskyeds.,1982)(discussingtheavailabilityheuris-tic).Withtherandomselectionmarket,judgmentsmightbeaffectedbycasesthatre-ceivehighpublicity.Forexample,thepublicmightwronglyinferthataclaimantre-ceivedtoolittlewhenanidiosyncraticdecisionmakermadeaveryhighevaluationexpost.


random selectionmarkets alsomight be used for less open-endedmeasurementchallenges.Consider, forexample, theproblemofup-grading the energy efficiency of existing buildings.207 A recent pro-posal in the United States known as the “GreenNewDeal” recom-mends,amongotherthings,upgradingtheenergyefficiencyofeverybuilding in the country.208 Yet the government will inevitably facetrade-offs in what upgrades it might reimburse. For example, onemightnotbeallowedafreetrade-inofatelevisiontothenewestLEDtelevisiondisplay,evenifitisthemostenergyefficientmodel.209

Letusassumethatgovernmentsubsidizationofenergyefficiencyupgradesofexistingbuildingsisdesirable,butthatitalsomakessenseforthegovernmenttoallocateitslimitedresourcestotheupgradesthatmake themostdifference.With randomselectionmarkets, theUnitedStatesmightestablishafixedfundtodistributeamongbuildingownerswhoprovideevidenceofimprovingenergyefficiency,suchasreceiptsandproofthatoldinefficientequipmenthasbeendestroyed.Thisapproach, likethe legislationcompensation fund,caneasilybetestedonasmallscaleandthenscaledifsuccessful.Eventhoughthemodeldevelopedhereisintendedtoallowformassivegovernmentalprograms,smallerexperimentscantestitsviability.Forexample,thegovernmentinitiallymightprovideafundofonlyafewbilliondollarsfor energy upgrades paid for in a particular year, and then if thatprovessuccessful,itmightincreasethesizeofthefundtohundredsofbillions of dollars, without necessarily increasing the size of theagencyadjudicatingclaims.Astheprogramscales,eachclaimislesslikely to be randomly selected, and randomly selected claims earnmore,buttheadjudicativetaskstaysessentiallythesame.Thegovern-ment could change the mission of the program if appropriate, for

207. JonCreyts,HannahChoiGranade&KennethJ.Ostrowski,USEnergySavings:OpportunitiesandChallenges,MCKINSEY&CO.(Jan.1,2010),https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/us-energy-savings-op-portunities-and-challenges# [https://perma.cc/89HG-477M] (“Upgrading buildingshellsandheatingandcoolingequipment,mostly inexistinghomes, represents thelargestopportunity”forresidentialsectorenergysavings.”). 208. SeeSalvadorRizzo,What’sActuallyinthe‘GreenNewDeal’fromDemocrats?,WASH. POST (Feb. 11, 2019), https://www.washingtonpost.com/politics/2019/02/11/whats-actually-green-new-deal-democrats [https://perma.cc/S7QF-H73C] (rec-ommending“[u]pgradingallexistingbuildingsintheUnitedStatesandbuildingnewbuildingstoachievemaximalenergyefficiency,waterefficiency,safety,affordability,comfort,anddurability,includingthroughelectrification”). 209. SeeMost Energy Efficient TV 2019 | Types | Reviews, ALT.ENERGY,https://powersolarphoenix.com/most-energy-efficient-tv-types[https://perma.cc/T85U-GBR2](ratingLEDTVsasmostenergyefficient).


examplebygivinggreaterincentivesfortechnologieswiththepoten-tialtoimproveefficiencyevenmoreovertime.210

Abuildingupgradesprogramcoulduseamoretraditionalagencystructure,butnotwithoutdifficulty.Theagencymightapproach itsregulatorytaskbyratingtheenergyefficiencyofmanydifferentprod-ucts, such as cars, appliances, and building materials.211 Then, theagencymightdeviseaformulafordeterminingtotalenergysavingsbasedontheitembeingreplacedandthereplacement.Ideally,suchaschemealsowouldfactor inenergyusagedata,since itmakes littlesensetosubsidizereplacementof,say,agasguzzlerthatwasbarelydrivenevenbeforethestatutewaspassed.Taxpayersmightthenbeabletotaketaxcreditsontheirincometaxreturns.Inadditiontobe-inginformationallydemanding,however,thissystemmighteasilybegamed. A taxpayer might claim nonexistent upgrades. Thus, theagencymightneedtocreateanationwidecorpsofbuildinginspectors,who ideally would come both before and after upgrades.212 Or, itmightgivestatesincentivestoperforminspections,withpenaltiesonstatesthatdoapoorjob.Suchincentives,however,mightbechalleng-ingtoadministerandcalibrate.

Therandomselectionapproach’sprimaryadvantageoveratra-ditionalagencyisnotinsavingtheexpenseofdevisingexanterules,butinprocessinganenormousnumberofrelativelysmallclaims.213Creatinganefficientbureaucracyforassessingthevalidityofbillionsofclaimswouldnotbeeasy,especiallyiftheprocessinvolvesinherentsubjectivity.Therandomselectionprogramgivesincentivesforinter-mediaries to find low-cost ways to verify the accuracy of claimed

210. Advocatesofcleanenergysubsidiesarguethatearly innovationsprovideafoundationforlaterinnovations.SeeZacharyLiscow&QuentinKarpilow,InnovationSnowballingandClimateLaw,95WASH.U.L.REV.387,389(2017).Sometechnologies,however,mighthavegreaterpotentialthanothersforsuchsnowballing.Id.at392(dis-cussingthedynamicsofinnovationthatimpactsnowballingbyhypothesizinganap-plicationtosolartechnology).Forexample,ifafusionreactorwerecreatedatgreatcost,itmightdeservegreatersubsidythanwind,wherefurtherimprovementswillrunup against the Betz limit. See generally Betz Limit, ENERGY EDUC., https://energyeducation.ca/encyclopedia/Betz_limit [https://perma.cc/JDE5-V9DS] (defin-ingBetzlimitasthe“theoreticalmaximumefficiencyforawindturbine”). 211. Such testing is not always trivial, as evidenced by a scandal involvingVolkswagen’smanipulationofenergyefficiencytests.SeeJackEwing,InsideVW’sCam-paignofTrickery,N.Y.TIMES(May6,2017),https://www.nytimes.com/2017/05/06/business/inside-vws-campaign-of-trickery.html[https://perma.cc/FGD2-8WLJ]. 212. SeegenerallyPeter J.May&RobertS.Wood,AttheRegulatoryFrontLines:Inspectors’ Enforcement Styles and Regulatory Compliance, 13 J.PUB.ADMIN.RSCH.&THEORY117(2003)(discussingtherolethatbuildinginspectorscanhaveinregulatorycompliance). 213. SeesupraPartI.B.1.


improvements.Forexample,intermediariesmightdeviseAIsystemstoassessbefore-and-afterphotosandreceipts, if that is technologi-callyfeasible.JustastaxpayershaveincentivestofindwaystocheattheIRS,sotoowouldbuildingownershaveincentivestofindwaystocheatintermediaries.Butintermediariesmaybemoreadaptable,un-constrainedbythenotice-and-commentprocess,214andwillwanttoensurethattheyarenotpayingforclaimsthatwillbejudgedworth-lesswheneventuallyadjudicatedandscrutinized.

3. InnovationRewardsPartofthegoalofspendingafundonenergyefficiencyupgrades

mightbetoencourageresearchonenergyefficiencytechnologiesorother technologies to combat or adapt to climate change.215 Yet itwouldalsobepossibleforafundtobeuseddirectlytorewardsuc-cessful research and development. For example, the governmentmightestablishafundtobedistributedtoresearchersinproportiontotheircontributiontocombattingclimatechange.Becauseitwillbedifficulttoknowtheusefulnessofsuchresearchforyears,216thegov-ernmentmightdelaypayingoutthefund,forexamplebyinvestingthemoneytobedistributedforresearcheachyearinthestockmarketforfifty years.The example illustrates that intermediariesneednotbepaidrightaway;solongastheywilleventuallybepaidwithinterest,theywillhave incentives tobuyupclaims. Intermediariescanseekfurther funding fromcapitalmarkets, eitherby sellingequityorbyseeking out loans. Capital market funders of intermediaries wouldhave their own incentives to assess the intermediaries’ portfolios,whetherbythemselvessamplingpurchasedclaimsorbyscrutinizingtheintermediaries’modelsandmethods.

Ajustificationforthegovernmenttosubsidizeresearchandde-velopmentisthatthepatentsystemisnotaneffectivetoolforcom-batting climate change.217 The limitedduration of patentsmakes it

214. See5U.S.C.§553. 215. Mary Beth Gallagher,The Race to Develop Renewable Energy Technologies,MIT NEWS (Dec. 18, 2019), https://news.mit.edu/2019/race-develop-renewable-energy-technologies-1218 [https://perma.cc/7T5T-SK2E] (identifying the need forenergytechnologiesandspecificgrowingfields). 216. Climate change research has been going on since 1640, and often it takesmanyyearstocompleteandunderstandsuchresearch.SeeHistoryofClimateScienceResearch,UCARCTR.FORSCI.EDUC.,https://scied.ucar.edu/learning-zone/how-climate-works/history-climate-science-research[https://perma.cc/ZZM8-A2ZA]. 217. OfurTur-Sinai,PatentsandClimateChange:ASkeptic’sView,48ENV’TL.211,231 (2018) (explaining challenges of patent appropriability in context of climatechange,stating“thepatentsystemisfarfromanoptimalincentivemechanisminthe


hardforthosewhocontributetoaddressingalong-termproblemtoappropriatevaluefromtheirwork.218Itisunlikelythatasingleinven-tor could solve climate change, but an inventor who did so likelywouldnotmakemuchmoney,asgovernmentscouldsimplywaituntilthepatentexpiredtodeploythesolution.219If,asseemsmorelikely,multiplegenerationsofresearchareneededtoaddresstheproblemcompletely,220theworkofearlyresearchmaybeusefulbutnotcom-merciallyviablewithinthepatentterm.Thisproblemisnotuniquetoclimatechange.Muchearly-stageresearchreceivesinadequateincen-tivesfrompatents.221Buttheproblemislikelyespeciallyacuteinthiscontext,becausethecostsofclimatechangeareexpectedtorisedra-maticallyinthefuture.222

Whenthesocialvalueofinventionsdivergesgreatlyfromappro-priableprivatebenefits,patenttheoristssuggestthatalternativestothepatentsystemmaybeappropriate.223Literaturehasconsideredthepossibilityofprizeorrewardalternativestothepatentsystem,224recognizingthatgovernmentcanreducedeadweightlossbycompen-satinginventorsandplacingtheirinventionsinthepublicdomain.225Some scholars have argued that the government should buy out

environmentalfield,andthuscannotbetrustedtoadequatelypromotethedevelop-mentofclimatechangetechnologies”). 218. Id.(notingthat“[p]atentshavelimitedscopeandduration,andsomedown-streamusesmayfalloutsidethepatent’sscopeorbeperformedlongafteritexpires”). 219. SeeMichaelAbramowicz,OrphanBusinessModels:TowardNewFormofIntel-lectualProperty,124HARV.L.REV.1362,1404(2011)(“Thetimebetweenthepresentandwhenglobalwarmingisexpectedtocausemajorproblemsislikelygreaterthanthelengthofthepatentterm,sopatentincentivestoreverseglobalwarmingmaybeabsent.”). 220. Tur-Sinai,supranote217,at212&n.1(“[Climatechange]willbeapartofthefutureforourgenerationandformanytofollow.”(quotingJ.B.Ruhl&JamesSalzman,ClimateChangeMeetstheLawoftheHorse,62DUKEL.J.975,977–78(2013))). 221. SeegenerallyRebeccaS.Eisenberg,ProprietaryRightsandtheNormsofSci-enceinBiotechnologyResearch,97YALEL.J.177,180(1987)(exploringchallengesofpromotingbasicresearchwithpatents). 222. MARCYLOWE&REBECCAMARX,DATURSCH.,CLIMATECHANGE-FUELEDWEATHERDISASTERS:COSTSTOSTATEANDLOCALECONOMIES4(2020)(documentingtheeconomiclosstrendsduetoclimatechange-fuelednaturaldisasters). 223. SeeAmyKapczynski&Talha Syed,TheContinuumof Excludability and theLimitsofPatents,122YALEL.J.1900,1909–10(2013). 224. Id.at1909. 225. See,e.g.,JamesLove&TimHubbard,TheBigIdea:PrizesToStimulateR&DforNewMedicines,82CHI.-KENTL.REV.1519,1520(2007);BenjaminN.Roin,IntellectualPropertyVersusPrizes:ReframingtheDebate,81U.CHI.L.REV.999,1025(2014);Ste-venShavell&TanguyvanYpersele,RewardsVersusIntellectualPropertyRights,44J.L.&ECON.525,530(2001).


patentsbasedontheirprivatevalue,226butthismethodwillbeineffi-cientwhenthatprivatevalueisapoormeasureofsocialvalue.227Analternativeapproachwitharichhistoricallineage228isforthegovern-menttocreateprizes,withanentireprizegiventothefirstpartythatmeetssomegoal.229Butitisunlikelythatasinglepersonorentitywillsolvetheclimatechangeproblem.

Amoreappropriatesolutionintheliteratureisthepossibilityofrewards,inwhicheachinventorreceivesvalueproportionatetotheircontributions.230Anargumentagainstsuchproposalsisthatgovern-mentvaluationmaybeunpredictable.231Inventionisinherentlyrisky,however,andbecauseallthatmattersisthatinventorsreceivetheex-pectedvalueofthecontributions,itdoesnotmatterifthegovernmentmightpaytoomuchortoolittleinaparticularcase.232Justasinter-mediarieswith randomselectionensure that claimants can receiveappropriatecompensationevenwithuncertainvaluations,sotoocancapitalmarkets ensureadequatepayment to inventors ina rewardsystem.

Yetasignificantadministrativeproblemremainsunaddressedinthe literature: Is it feasible for the government to adjudicate everyclaim for reward?Decisionmaker variancemaybe tolerable in thiscontext,butitremainscriticalthatadjudicationsbecareful, lesttherewardsandthusthemarketprioritizesuperficialachievementsoverrealaccomplishments.Thisconcernmayexplainwhyoneprojectthatadvocatedforinternationalimplementationofarewardprogramfo-cusednarrowlyononetypeofinnovation:pharmaceuticals.233

226. See,e.g.,MichaelKremer,PatentBuyouts:AMechanismforEncouragingInno-vation,113Q.J.ECON.1137,1138(1998). 227. UNTASKTEAMONSOC.DIMENSIONSCLIMATECHANGE,THESOCIALDIMENSIONSOFCLIMATECHANGE6(DiscussionDraft2011)(discussingtheneedtoincludesocialvalueswhenevaluatingclimatechange). 228. See,e.g.,JonathanR.Siegel,LawandLongitude,84TUL.L.REV.1,2–5(2009)(discussingthehistoryofthelongitudeprize). 229. SeeFionaMurray,ScottStern,GeorginaCampbell&AlanMacCormack,GrandInnovationPrizes:ATheoretical,Normative,andEmpiricalEvaluation,41RSCH.POL’Y1779(2012). 230. SeeMichaelAbramowicz,PrizeandRewardAlternativestoIntellectualProp-erty, in1RESEARCHHANDBOOKONTHEECONOMICSOF INTELLECTUALPROPERTYLAW350(BenDepoorter&Peter S.Menell eds., 2019) (distinguishingprize and reward ap-proaches). 231. Id.at360. 232. Id. 233. SeeAIDANHOLLIS&THOMASPOGGE,THEHEALTHIMPACTFUND:MAKINGNEWMED-ICINES ACCESSIBLE FOR ALL 3 (2008), https://www.semanticscholar.org/paper/The


Thenumberofpharmaceuticaldrugsisrelativelysmall,andsoitmaybefeasibleforanagencytoexamineallofthem.234Moreover,acommonmetric,knownasQALY(quality-adjustedlifeyears),canbeused to assess the contribution of eachdrug towell-being.235 EvenQALYswillhavesomemeasurementchallenges.236Butamoreopen-endedprogram,encompassingnotonlycompletedpharmaceuticalsbutalsoadvancesinbasicresearchcontributingindirectlytocures,would result in amuch larger number of claimants, each ofwhomwouldrequireamoredetailedadjudication.237

Withrandomselection,valuationbecomesconsiderablyeasier,becausethetotalnumberofadministrativehearingscanbemadear-bitrarilysmall.238Measuringthesocialcontributionofanyresearch,however,willstillbeextraordinarilydifficult.239Themorebasictheresearch,thegreaterthechallenge.240Theagencyworkingexpostwillneedtoconsiderhowsomeparticularpieceofresearchcontributedto somebroader researchproject.241Thatbroader researchproject

-Health-Impact-Fund%3A-Making-new-medicines-for-Hollis-Pogge/f8cfb5f5d27455498320dc5dc3a599e418e1f538[https://perma.cc/R6ZX-4G7P]. 234. SeegenerallyLjubicaCvetkovska,32AstonishingPharmaceuticalStatistics&Facts for 2020, SUPPLEMENTS 101 (Apr. 1, 2020), https://supplements101.net/pharmaceutical-statistics [https://perma.cc/P3YC-NYNX] (listing important factsaboutthepharmaceuticalindustryincludingthenumberofdrugsthatareindevelop-mentglobally,theamountofdrugstheFDAapproveseveryyear,andtheamountofmoneyitcoststodevelopanewdrug). 235. SeeHollis,supranote233,at9(“Adrugthatextendedaperson’slifebytenhealthyyearswouldberecognizedashavingcreatedtenQALYs.”). 236. Still,QALYsmaybemoreeasilymeasuredthanalternatives.SeeMatthewD.Adler,QALYsandPolicyEvaluation:ANewPerspective,6YALEJ.HEALTHPOL’YL.&ETH-ICS1,35–42(2006) (explaining thatQALYsvaluesmightbeeasier tomeasure thanwillingnesstopay/accept(WTP/WTA)values). 237. SeegenerallyCONG.BUDGETOFF.,RESEARCHANDDEVELOPMENTINTHEPHARMA-CEUTICALINDUSTRY2–3(2006)(“Thefederalgovernmentspentmorethan$25billiononhealth-related...[researchanddevelopment]in2005.Onlysomeofthatspendingisexplicitlyrelatedtothedevelopmentofnewpharmaceuticals.However,muchofitisdevotedtobasicresearch....”). 238. SeesupraPartI.B(discussingmethodsofrandomlyselectingclaimsforadju-dicationandtheimplicationsofrandomselection). 239. See Magnus Gulbrandsen & Richard Woolley,Measuring Impact: Methods,ChallengesandBiases,U.OSLO:OSIRISBLOG(Apr.5,2018),https://www.sv.uio.no/tik/english/research/centre/osiris/osirisblog/measuring-impact.html[https://perma.cc/6B5G-FEU4] (explaining thedifficulties inmeasuring the impact of research in-cluding,attribution,latency,andcausality). 240. Seesupranotes141–42andaccompanyingtext. 241. SeegenerallyGulbrandsen&Woolley,supranote239(explainingthedifficul-tiesinattributingparticularresearch’scontributiontoafinalprojectsuchasamotionpicture).


itselfmightbejustonecomponentofalargercontribution.242Similarproblemsexist inpatent law,whencourtsmustassessdamagesforinfringementofasmallcomponentofaninvention.243Somehavear-guedthat,inpartbecauseofthesalienceoftheinfringedcomponent,valuationsmay tend tobeexaggerated.244Witha fixed fund, all re-searchcontributionswillbesubjecttoexaggeration,andiftheexag-gerationisthesameforeachassessedcontribution,theeffectcancelsitselfout.

Thus, an argument that the random selectionmechanismwillproducedistortionsmustbemoresubtle.Theclaimmustbethatsometypesofcontributionsmightbevaluedtoohighrelativetoothercon-tributions.Forexample,supposeanargumentexiststhatabasicre-searchcontributionwillbevaluedtoohighly.Then,ifintermediariesanticipate this, theywill paymore tobuy claims forbasic researchthantheyshouldrelativetoappliedresearch.But ifoneanticipatesthat intermediaries will incorporate into their calculations a biasagainstappliedresearch,thenperhapsoneshouldalsoanticipatethattheultimatedecisionmakerswill recognize thepossibilityof suchabias.Ifso,thenthosedecisionmakersshouldbeabletoself-correctbydevaluing their initial assessments of basic research or increasingtheirlaterassessmentsofappliedresearch.Forrandomselectiontoproducesystematicdistortions,thosedistortionsmustbeanticipata-bleyetnotcorrectable.Ifeveryoneovervaluesbasicresearchandfailstorecognizethattheyaredoingso,thentherandomselectionmecha-nismisunlikelytocorrectthemisallocation,butitisalsounlikelytoexacerbatetheproblem.

Therandomselectionapproachisnot,ofcourse,theonlypossi-blemechanismbywhichagovernment(orinternationalorganizationdistributingresourcescontributedbymanynations)couldsubsidizeclimatechangeresearch.245Themostobviousalternativeisagrant-generatingbody.246Acoredifferenceisthatgrant-makinginstitutions

242. Seeid.(“Researchusuallydoesnotleadtocertainimpactsonitsownorauto-matically.Itisthecombinationofresearchwitharangeofotherfactors...thatmakesthedifferenceforafirmorforsociety.”). 243. See,e.g.,BrianJ.Love,PatenteeOvercompensationandtheEntireMarketValueRule,60STAN.L.REV.263(2007)(discussingchallengesinapportioningpatentdam-ages). 244. Foranassessmentoftheeffectofanchoringonpatentdamages,seeThomasF.Cotter,PatentDamagesHeuristics,25TEX.INTELL.PROP.L.J.159,199–203(2018). 245. Seeinfranote247andaccompanyingtext. 246. See Climate Change Research Grants, EPA (Oct. 5, 2020), https://www.epa.gov/research-grants/climate-change-research-grants[https://perma.cc/MD8L


provide funding ex ante, while the random selection mechanismmeasuresexpost.247Ifagrant-makinginstitutioniscapableofmakingsoundexanteassessmentsof thewelfarecontributionsofdifferentgrantproposals,thentheremaybelimitedneedforanexpostmech-anism.248However,therandomselectionapproachmaybepreferableinseveralcircumstances.249First,theprospectivenumberofprojectsmay be so large that the administrative challenges of creating thegrant-makingagencymaybeoverwhelming.250Second,especiallyifalarge sum of money is involved, a grant-making agency may facestrongpoliticalpressures,forexample,toallocatefundingtoparticu-larregions.251Bydelayingtheeventualdistributionofafund,politicalpressuremaybevitiated.Third, if grant-making institutionsare,assomecharge,excessivelydefensiveoftheconventionalscientificwis-dom,252thenthedelayindistributionofthesubsidymayfacilitatesup-portingmorelongshotapproaches.

B. COMPENSATINGVICTIMSOFCLIMATECHANGE,PANDEMICS,ANDOTHERDISASTERS

SubsectionIV.A.1highlightsthatonereasonclimatechangeissodifficult a problem is that any governmental responses must ulti-mately affect individualswith heterogeneous circumstances.253 Forthis andmany other reasons, significant climate change can cause

-N4QD](showinghowtheEPAusesfundstosupportresearchonvariousaspectsofclimatechange). 247. ButseeW.NicholsonPriceII,Grants,34BERKELEYTECH.L.J.1(2019)(arguingthatgrant-makinginstitutionsinvolverepeatedinteractionsandthusarenotentirelyexante). 248. Butseeinfranotes250–51andaccompanyingtext(explainingtheadvantagesofusingarandomselectionapproach). 249. Seeinfranotes250–51. 250. SeeAmaraOmeokwe&YukaHayashi,SBAUnderFireforFailingToGetAidtoStrugglingSmallBusinesses,WALLST.J.(Apr.8,2020,7:00AM),https://www.wsj.com/articles/sba-under-fire-for-failing-to-get-aid-to-struggling-small-businesses-11586343600[https://perma.cc/826A-2RFU](discussingtheSmallBusinessAdmin-istration’sdifficultiesinprovidingemergencygrantstoallofthesmallbusinessesthatareinneedacrosstheUnitedStates). 251. SeePrice,supranote247,at13–14(notingthiscritique). 252. See,e.g.,GinaKolata,GrantSystemLeadsCancerResearchersToPlayItSafe,N.Y.TIMES(June27,2009),https://www.nytimes.com/2009/06/28/health/research/28cancer.html[https://perma.cc/SNG6-TC7N](explaininghowgrant-makinginstitu-tionsinhibitinnovationincancerresearch). 253. SeesupraPart IV.A.1(claimingthatdivergent individualcircumstancescanmakeitdifficultforthegovernmenttodevisereasonablepaymentformulasexante,whichwillintensifyadministrativeburdens).


seriousdamagewhen itoccurs.254 Ifpastdisastersand thecorona-viruspandemicareaguide,thegovernmentmightdecidetopaycom-pensationtothoseespeciallyharmedbyclimatechange.255Arandomselection approach can provide an administratively simple mecha-nismforthegovernmenttocompensatethosewhosufferasaresultofclimatechangeorotherdisaster,includinganotherpandemic.256

IntheUnitedStates,thegovernmenttypicallyrespondstoadis-asterbyhelpingclaimantspayfornecessitiessuchasrentandhomerepairsandalsoapprovinglow-interestloansforreconstructingdam-aged homes and businesses.257 Some of this money ends up beingspentonfraudulentclaims.258Itisadministrativelychallengingforanagencytospendagreatdealofmoneybothquicklyandcarefully.259Perhapsbecauseofthisadministrativechallenge,governmentspend-ingfollowingthepandemiclargelyfocusedonprovidingdirectcashpayments to citizens regardless of demonstrated need,260 supple-mentingunemploymentinsurance,261andsubsidizingloanstoassistbusinessesinpayrollexpenses.262Somecommentatorssuggesteddif-ferentallocations,suchasextendingrebatestotheelderlyanddisa-bled,263butthesharedimplicitassumptionwasthatCongresswould

254. SeeLeslieBaehr,22DevastatingEffectsofClimateChange,BUS.INSIDER(June11, 2014, 3:04 PM), https://www.businessinsider.com/effects-of-climate-change-2014-6 [https://perma.cc/8R8Y-VVRM] (detailing the various consequences of cli-matechangeonpublichealth,housing,andtheeconomy). 255. Seesupranotes194,196–98andaccompanyingtext. 256. Seesupranotes66–67,69–70andaccompanyingtext(presentingrandomse-lectionmethods). 257. See,e.g.,FEMAAssistanceTops$1BillionforFloridaHurricaneIrmaSurvivors,FED.EMERGENCYMGMT.AGENCY(Apr.19,2018),https://www.fema.gov/news-r-lease/20200220/fema-assistance-tops-1-billion-florida-hurricane-irma-survivors [https://perma.cc/44PP-Q4M8] (displaying theamountof funds thatFEMAhasgiven to thesurvivorsofHurricaneIrmaforvariouspurposes,includingrentalpaymentsandhomerepairs). 258. See, e.g., 4 Hurricane Irma-Affected U.S. Attorney Offices Form Fraud TaskForces, INS. J.(Sept.19,2017),https://www.insurancejournal.com/news/southeast/2017/09/19/464738.htm[https://perma.cc/U4P2-T758](describinghowsomeU.S.Attorney’sOfficeshavetakenstepstocombatdisasterfraudrelatedactivity). 259. Seesupranote250(describingthedifficultiestheSmallBusinessAdministra-tionhasfacedindistributinggrants). 260. CARESAct,Pub.L.No.116-136,134Stat.281,§2201(2020) (authorizing“recoveryrebates”). 261. Id.§§2101–07. 262. Id.§1102(establishingthePaycheckProtectionProgram). 263. SeeDanielHemel,StiffedbytheSenateStimulus:TheSurprisingGroupLeftOutof Coronavirus Rescue Bill, N.Y. DAILY NEWS (Mar. 26, 2020, 12:47 PM), https://nydailynews.com/opinion/ny-oped-stiffed-by-the-senate-stimulus-20200326-624qm3qnvbhw7py2unylqpd6iy-story.html [https://perma.cc/TR2D-CL3V] (revealing


needtospecifywhoreceivedhowmuch,usinglimitedsourcesofin-formationsuchastaxreturns.264Thisassumptionreflectsaviewthatitwouldbeimpossibletohaveanadministrativeregimethatwouldprovide individualized assessments of loss attributable to the pan-demic.265

Withtherandomselectionalternative,thegovernmentmightstillallocatespecificsumsofmoneyforparticulardisasters,266butthenal-lowmarketstoprovidecompensation.Insuchaprogram,wecancon-ceiveofthevictimsthemselvesastheclaimants,whoselltheirclaimsforcompensationtointermediaries.Theseclaimsmightbebasedonspecificexpenses (suchas repairbillsafterahurricane)orondatashowingeconomicloss(suchasproofthatabusinessatwhichanin-dividualworkedwasforcedbythegovernmenttoclose).Thefundinthisconceptualizationwouldbedistributedinproportiontoadjudi-catedassessmentsofhowmuchbenefittheintermediariesprovidedto the claimants or howmuch loss the claimants suffered.Alterna-tively,wemightconceiveofcharitiesastheclaimants,withaclaimforeverytypeofreliefgranted.Thecharitiesmightthenholdontotheclaims, if large enough, or sell them to intermediaries aggregatingclaimsfrommultiplecharities.Howeverconceptualized,thissystemwouldallowforconsiderationoftherelativemeritsofdifferenttypesof relief. The ultimate question for adjudicationwould not be howmuchmoneywasgiven,buthowmuchvaluewasproduced.Forex-ample,reliefintheformoffoodmightreceivemorecreditthanreliefintheformofentertainment.Moreover,distributionalconcernsmightbe considered. Greater valuations might be given to relief that

thattheCOVID-19reliefpackageenactedinMarchexcludeselderlyanddisabled“de-pendents”andothervulnerablegroups). 264. ButseeChuckMarr,SamanthaJacoby,Chye-ChingHuang,StephanieHingtgen,ArlocSherman&JenniferBeltran,FutureStimulusShouldIncludeImmigrantsandDe-pendentsPreviouslyLeftOut,MandateAutomaticPayments,CTR.ONBUDGET&POL’YPRI-ORITIES (Mar. 6, 2020), https://www.cbpp.org/research/economy/future-stimulus-should-include-immigrants-and-dependents-previously-left-out [https://perma.cc/S3EF-WEX6](presentingotherexplanationsforwhythesegroupswerenotprovidedrebates,includingthefactthatthemembersofthesegroupsaren’tprimarilyrespon-siblefortheirfinancialsupportorthatitwasamerelegislativetradeoff). 265. SeegenerallyEricMorath,HowManyU.S.WorkersHaveLostJobsDuringCoro-navirusPandemic?ThereAreSeveralWaysToCount,WALLST.J.(June3,2020,5:30AM),https://www.wsj.com/articles/how-many-u-s-workers-have-lost-jobs-during-coronavirus-pandemic-there-are-several-ways-to-count-11591176601[https://perma.cc/SS9X-23K2] (proclaiming thatestimates for lost jobsduring thespringof2020rangedfrom20to40million). 266. SeegenerallyBRUCER.LINDSAY, CONG.RSCH.SERV.,R43537,FEMA’SDISASTERRELIEFFUND:OVERVIEWANDSELECTEDISSUES12(2014)(describingdebateoverwhetherFEMAshouldrelyonsupplementalappropriations).


successfullytargetedthepoororthatsuccessfullytargetedthosemostharmedbythedisaster.

Thenovelcoronaviruspandemicillustratednotonlythegovern-ment’sdifficultyindetermininghowmuchindividualslost,267butalsothegovernment’sinabilitytodirectspendingtothemosthelpfulitemsfor the pandemic.268 In comparison to spending on individual cashpayments, the government spent relatively littlemoney on ventila-tors,269whichseemedthattheymightsavemanylives(thoughturnedoutnottohelpasmuchasinitiallythought),270oronrespiratorsandother protective equipment.271 Even though facemasks greatly re-duced transmissionof thevirus,272 and thus constituted the sortofpositiveexternalitythatstandardeconomictheorysuggestsjustifies

267. ThegovernmentpaymentsundertheCARESActwerebasedonasimplefor-mula,providing“upto$1,200peradultforindividualswhoseincomewaslessthan$99,000(or$198,000forjointfilers)and$500perchildunderseventeenyearsold–orupto$3,400forafamilyoffour.”TheCARESActProvidesAssistancetoWorkersandTheir Families, U.S. DEP’TTREASURY, https://home.treasury.gov/policy-issues/cares/assistance-for-american-workers-and-families [https://perma.cc/R2YA-XXFL]. TheamountsarecalculatedbasedonprevioustaxfilingsandSocialSecurityrecords.Seeid.Notethatthereisnoefforttodeterminewhetherparticularworkerswereemployedinindustriesespeciallylikelytobeaffectedoreventodeterminewhetherindividualshadsufferedadeclineinwages. 268. Seesupranotes203,205andaccompanyingtext. 269. See,e.g.,NathanLayne,OutbidandLeftHanging,U.S.StatesScrambleforVen-tilators, REUTERS (Apr. 11, 2020, 1:52 PM), https://www.reuters.com/article/us-health-coronavirus-usa-ventilators/outbid-and-left-hanging-u-s-states-scramble-for-ventilators-idUSKCN21S20D[https://perma.cc/3Y6V-BLEY](revealingthatthefed-eralgovernmentdoesnothaveenoughventilatorstosupportallofthestatesinneed). 270. SeeSharonBegley,WithVentilatorsRunningOut,DoctorsSaytheMachinesAreOverused for COVID-19, STAT (Apr. 8, 2020), https://www.statnews.com/2020/04/08/doctors-say-ventilators-overused-for-covid-19[https://perma.cc/4BMU-Q492](explaining that some physicians believe that COVID-19 ismore effectively treatedwithdevicesthatarelessintensethanventilators). 271. Forapre-solicitationbythegovernmentforN95surgicalmasks,seePersonalProtectiveEquipment(PPE)N95SurgicalMasks/Respirators,FilteringFacepieceRespi-rator, BETA.SAM.GOV, https://beta.sam.gov/opp/d0c04e0df6e2458698a06812519d462f/view[https://perma.cc/JK9Y-52KJ]. 272. SeeThe Simple ScienceBehindWhyMasksWork,HEALTHLINE, https://www.healthline.com/health-news/the-simple-science-behind-why-masks-work [https://perma.cc/K2JX-KRGL] (explaining howmasks can help reduce the transmission ofCOVID-19).


subsidization,273thegovernmenttookrelativelymodestmeasures.274Publichealthofficialspronouncedthatavigoroustest-and-tracepro-gramwould allow the country to reduce transmission of the virusmorequickly,275yetthegovernmentmonopolizedandbotchedtest-ing276andofferednoinducementstoprivatefirms.Thegovernmentreliedmoreon threats tomandateproduction through theDefenseProduction Act277 than on incentives for companies voluntarily tomeettheneedsofthepandemic.Andwhilethegovernmentdidsubsi-dizeanefforttoproduceavaccine,totalspendingwasfarbelowwhatcost-benefitanalysiswouldjustify.278Buttheblamecannotbeplacedentirelyonaparticularadministration,asstatesdidnotpickuptheslack.279Forexample,notasinglestateinvestedinasufficientnumber

273. SeeArgumentsinFavorofMaskRequirementsDuringtheCoronavirus(COVID-19) Pandemic, 2020, BALLOTPEDIA, https://ballotpedia.org/Arguments_in_favor_of_mask_requirements_during_the_coronavirus_(COVID-19)_pandemic,_2020#Mask_requirements_are_good_for_the_economy [https://perma.cc/4MT5-SJWH] (present-ingargumentsforwhymaskmandatesarebeneficialtotheeconomy). 274. Some statesmandatedmasks in some locations but did not subsidize themasksorrequirehigherqualitysurgicalmasks.Forarareexceptionofaprogramtoprovidefreemasks,albeitonlyoneperperson,seeAliciaLee,TheStateofUtahWillProvideaFreeFaceMasktoAnyResidentWhoRequestsOne,CNN,https://www.cnn.com/2020/04/29/us/Utah-free-mask-coronavirus-trnd/index.html [https://perma.cc/J5CM-63PA](Apr.29,2020,5:50PM). 275. Cf.DeniseChow,EscapingtheCoronavirusLockdownwithTestandTrace,NBCNEWS (Apr. 13, 2020), https://www.nbcnews.com/science/science-news/test-trace-how-u-s-could-emerge-coronavirus-lockdowns-n1182626 [https://perma.cc/M9LT-H45P] (explaining how states can use testing and tracing to reduce the spread ofCOVID-19andrelaxlockdownsandotherrestrictions). 276. See Michael D. Shear, Abby Goodnough, Sheila Kaplan, Sheri Fink, KatieThomas&NoahWeiland,TheLostMonth:HowaFailureToTestBlinded theU.S. toCovid-19,N.Y.TIMES,https://www.nytimes.com/2020/03/28/us/testing-coronavirus-pandemic.html [https://perma.cc/F6UH-XLZ8] (Apr. 1, 2020) (describing how theUnitedStatescouldhavemitigatedtheeffectsoftheCOVID-19pandemicthroughear-lierandmoreaggressivescreening). 277. SeeMichaelAbramowicz,TheDefenseProductionActandCentralPandemicPlanning,REASON:THEVOLOKHCONSPIRACY(Mar.19,2020),https://reason.com/2020/03/19/the-defense-production-act-and-central-pandemic-planning[https://perma.cc/S856-5BAG](discussingtheDefenseProductionAct’sprovisionsandthepowersitbestowsupontheexecutivebranch). 278. SeeSusanAthey,MichaelKremer,ChristopherSnyder&AlexTabarrok,IntheRaceforaCoronavirusVaccine,WeMustGoBig.Really,ReallyBig.,N.Y.TIMES(May4,2020),https://www.nytimes.com/2020/05/04/opinion/coronavirus-vaccine.html[https://perma.cc/8ES8-6H5H] (advocating for the U.S. government to contributegreaterfundstovaccineresearch,giventheimpactthatCOVID-19hasalreadyhadonthenation). 279. SeeDylanHayre,HowStateGovernmentsAcrosstheCountryFailedToProtectOurCommunities fromCOVID-19,ACLU(July2,2020),https://www.aclu.org/news/criminal-law-reform/how-state-governments-across-the-country-failed-to-protect


ofnon-respiratorsurgicalmaskstoensurethateveryonecouldwearanewoneeachday,relyinginsteadonhomemadefacecoverings.280Anexplanationforthesecollectivefailuresisthatitisnoteasytoscaleup an administrative program, decidingwhat to purchase, inwhatquantities,andtowhomtodistributeit,especiallyifcorruptionandcronyismare to be avoided.However, amarket approach could bescaled up quickly, without precisely determining what to spendmoney on in advance. Had the government devoted a tenth of themoneythatitspentonincomesupporttorandomselectionmarketsrewardingprivateeffortstostopthevirus,itmighthavesavedbothlivesandmoney.

Whether a market approach is superior to the status quo ap-proachestohurricaneandpandemicreliefdependsonthemarketandgovernment’srelativeskillatscalingupoperationsquickly,prioritiz-ingimportantexpenditures,anddistinguishinglegitimatefromillegit-imateclaims.Oneobjectionmightbethatmostofthevaluethegov-ernmentprovidesispriortothedisaster,forexample,intheformofstockpilingfoodandothernecessitiesforaliteralrainyday.281Butthisarguablymilitatesinfavorofthemarketrandomselectionapproach.Afterall,privateorganizationsmightpreparestockpilesinadvanceinanticipationofthegovernmentdeclaringadisaster.282Then,oncethegovernmentannouncedthevalueofafundforthedisaster,theprivateorganizationswouldmobilizetheirresources.Someoftheseprivateorganizationsmightbefor-profit;othersmightbenon-profitsthatareabletospendmoreasaresultofthisformofgovernmentsubsidy.Ifprivateorganizationsarebetter than thegovernmentat identifyinghow ex ante expenditures might be useful in a disaster, then this

-our-communities-from-covid-19 [https://perma.cc/X25A-8CEM] (detailing howstateleadershaveendangeredincarceratedpopulationsandcommunitiesasawholewiththeirfailuretoadheretowarningsandtakeaction). 280. See generally Mask Types, U. MD. MED. SYS., https://www.umms.org/coronavirus/what-to-know/masks/mask-types[https://perma.cc/QY79-MP8H](presentingdescriptionsofN95,surgical,andclothfacialcoverings). 281. See,e.g.,PublicHealthServiceAct,42U.S.C.§247d–6b(creatingtheStrategicNationalStockpile);ANNANICHOLSON,SCOTTWOLLEK,BENJAMINKAHN&JACKHERRMANN,NAT’LACADS.OFSCIS.,ENG’G,&MED.,THENATION’SMEDICALCOUNTERMEASURESTOCKPILE:OPPORTUNITIESTO IMPROVE THEEFFICIENCY,EFFECTIVENESS, AND SUSTAINABILITY OF THECDC STRATEGIC NATIONAL STOCKPILE (2016), https://www.ncbi.nlm.nih.gov/books/NBK396382/pdf/Bookshelf_NBK396382.pdf[https://perma.cc/9ELF-DMVR]. 282. SeeRocheIntroducesProgramToFacilitateCorporatePandemicStockpilingofTamiflu,FIERCEBIOTECH (June 27, 2008, 8:29 AM), https://www.fiercebiotech.com/biotech/roche-introduces-program-to-facilitate-corporate-pandemi-stockpiling-of-tamiflu[https://perma.cc/FV48-VG48](revealinghowthepharmaceuticalcompanyRochehasstartedaflexiblepurchaseprogramthatwillenableAmericanbusinessesto“maintainaccesstotheirownstockpileofTamiflu”inpandemicsituations).


approachmightbesuperiortothestatusquo.Privatepartiescanalsomobilizeresources inhopesofselling to thegovernmentunder thestatusquo,butthisismademoreburdensomebythedifficultyofcon-tractingquicklyenough.Moreover, chargingenough to compensatefortheriskthatstockpiledresourcesmightneverbeusedwillleadtochargesofpricegouging,283andperhapsevencriminalpenalties.284Butifthegovernmentpromisestorewardentrepreneursinpropor-tiontothevaluethattheyprovide,thisislesslikely,asthegovernmentsubsidyisframedasanexpostrewardratherthanasaresponsetoanextortionateexantedemand.

Climatechangepresentsasimilarchallengetoanaturaldisasterfund,285butinslowmotionandpotentiallyatamuchlargerscale.286Althoughclimatechangemightleadtospecificdisasterssuchashur-ricanes,287italsomightcausegradualdegradationoflivingconditions,anexamplebeingcoastalareas.288Thegoalofaclimatechangecom-pensationfundmightbetospreadthelossesduetoclimatechangeoveranentirepopulation.289Itmightreimbursepeoplenotonlyfordamagesbutalsoformitigationefforts,suchasthecostofconstruct-ing levees,290 and fordamagessufferedasa resultofgovernmental

283. SeeMichaelBrewer,Note,PlanningDisaster:PriceGougingStatutesandtheShortagesTheyCreate,72BROOK.L.REV.1101,1112–16(2007)(describingandcri-tiquinglegalprotectionsagainstpricegouging). 284. See,e.g.,FLA.STAT.§501.160(2019)(criminalizingunconscionablepricesofessentialcommoditiesduringastateofemergency). 285. Seeinfranote287andaccompanyingtext. 286. Seeinfranote287andaccompanyingtext. 287. See, e.g.,Alistair J.Woodward& JonathanM.Samet,ClimateChange,Hurri-canes,andHealth,108AM.J.PUB.HEALTH33(2018). 288. See,e.g.,Coasts,U.S.CLIMATERESILIENCETOOLKIT,https://toolkit.climate.gov/topics/coastal-flood-risk [https://perma.cc/6QR7-GKT9] (Sept. 18, 2019, 4:32 PM)(detailingtherisksthatrisingsealevelsposeforcoastalpropertiesandinfrastructureintheUnitedStates). 289. Cf.MICHAELDWORSKY&LLOYDDIXON,THEIMPACTONWORKERS’COMPENSATIONINSURANCEMARKETSOFALLOWINGTHETERRORISMRISKINSURANCEACTTOEXPIRE5(2014)(“TRIAmitigatestheimpactofterrorismoninsurancemarketsbytransferringcatas-tropherisktothefederalgovernmentandthenspreadinglossesbroadlyacrosstheentireP&Cpolicy-holderbase inordertoreducethesolvency impacta largeattackwouldhaveonanyparticularinsurancecompany.”). 290. Thisassumesthatleveesinfactservetomitigateclimatechange.ButseeErikaBolstad,Irony:LeveesCouldMakeRiverFloodingWorse,SCI.AM.(May9,2017),https://www.scientificamerican.com/article/irony-levees-could-make-river-flooding-worse[https://perma.cc/Z72M-RXT4] (displaying the arguments from some researchersthatleveeshavecausedincreasedrecreationaldevelopmentonfloodplains,whichre-sultsintheover-channelizingofrivers).Expostdecisionmakersoughtnotreimburseexpensesthatsimplymovedtheeffectsofclimatechangefromoneplacetoanother.


mitigationeffortsthathelpsomeattheexpenseofothers.291Thefundmight be implemented at the state,292 national,293 or internationallevel.294 Larger-scale implementationmay be ethically justified be-causesomeregionsmaysufferconsiderablygreaterlossesthanotherregions.295 Yet itmay be politically treacherous to designate in ad-vancehowmuchmoneyshouldgotoeachregionbecausespecialin-terestsmayaffecthowmoneyisspent,potentiallyresultinginmoneybeingspentinefficientlyonthosemildlyaffectedbyclimatechange.296

Therandomselectionmarketapproachavoidstheneedtomakethesedecisionsexante.Randomselectionwilllikelybejustifiediftheexpectationofhowaverageexpostdecisionmakersarelikelytospendmoneyallocatesfundsbetterthanexantedecisionmakers.Evenifweexpectagreatdealofidiosyncraticdecision-makingexpost,theinter-mediaries will price claims by averaging various possible results.Meanwhile,itmaybeeasiertoarriveatanagreementexante,forthegeneral reason that it iseasier for legislatures topass statutes that

291. See,e.g.,JeremyPatashnik,TheTrolleyProblemofClimateChange:ShouldGov-ernments FaceTakings Liability If Adaptive Strategies CausePropertyDamage?, 119COLUM.L.REV.1273,1276(2019)(assessingtheproblemofdamagethat“resultsfromfuturegovernment-sanctionedclimatechangeadaptationsdesignedtosaveotherpar-cels”). 292. Cf. Montana COVID-19 Fund, MONT. CMTY. FOUND., https://www.mtcf.org/Montana-COVID-19-Fund [https://perma.cc/C2XS-H5DT] (describing the MontanaCOVID-19FundwhichwascreatedbytheMontanaCommunityFoundationandtheMontanaNonprofitAssociationtohelpthestate’sruralandtribalcommunitiesthatarestrugglingduringCOVID-19). 293. Cf.supranotes196–98andaccompanyingtext(explainingtheprovisionsoftheCARESActthathelpcitizensandbusinessessurvivetheCOVID-19pandemic). 294. Cf. COVID-19 Financial Assistance and Debt Service Relief, INT’LMONETARYFUND,https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker[https://perma.cc/QL6L-RAMX](Oct.2,2020)(explaininghowtheInternationalMon-etaryFundisprovidingfinancialaidanddebtservicerelieftoitsmembernationssuf-feringfromtheeconomicconsequencesofCOVID-19). 295. TheIPCCestimatesthatifpolicyremainsunchangedandglobaltemperaturesriseby3.66°C,globalGDPintheyear2100willbe2.6%lowerthanitotherwisewouldbe. INT’LPANELONCLIMATECHANGE,IMPACTSOF1.5°COFGLOBALWARMINGONNATURALANDHUMANSYSTEMS 256 (2018), https://www.ipcc.ch/site/assets/uploads/sites/2/2019/02/SR15_Chapter3_Low_Res.pdf [https://perma.cc/6LUE-SG2F]. Though thispurelyeconomiceffectisaseriouslossakintoaglobalrecession,itissufficientlymod-estthatinprinciple,peopleinless-affectedregionscouldhelpthoseinmore-affectedregions. 296. Analogously,WyomingreceivesfarmoreantiterrorismaidfromthefederalgovernmentthaneitherNewYorkorCalifornia.SeeSTEVENMAGUIRE&SHAWNREESE,CONG.RSCH.SERV.,RL33770,DEPARTMENTOFHOMELANDSECURITYGRANTSTOSTATEANDLOCALGOVERNMENTS:FY2003TOFY2006,CRS-23TO-24,-41TO-42,-53(2006),https://fas.org/sgp/crs/homesec/RL33770.pdf[https://perma.cc/UPW2-TWBN].


punt significantdecisions to administrative agencies.297 Because anagencycanoperatebasedonarelativelysimplestandard,specialin-terest provisions will be more obvious. This makes it more likely,thoughnotinevitable,thatgiveawaysmightbeavoided.Oneapproachmightbetoprovidemodestfundingearlyon,ideallyunderastandardsubstantially free of political influence. Establishing this status quowillmakeitmoredifficultforspecialintereststodistortthecriteriaiffurtherfundingisprovidedlater.

Therecould,however,benegativeconsequencesfromthecre-ationofamechanismtoprovidedisasterrelief.298Thegreatertheex-pectationthatthegovernmentwillreimbursedamagesfromclimatechangeorfromapandemic,thelessincentivethereisforindividualstoacttoavoidlosses.299Asimilarproblemalreadyexistsintheareaofflooddamage.300Recognizingthemoralhazardcreatedbyexpecta-tionsthatthegovernmentwillreimbursesuchdamage,thegovern-menthasundertakenvariousinitiativestorequireresidentsoffloodplainstopurchasefloodinsurance.301Thereisgreatresistancetosuchrequirements, though, even when such insurance is heavily subsi-dizedbythegovernment.302Perhapsifanationalgovernmentcouldcommitcrediblynottoprovideclimatechangedisasterrelief,individ-ualswouldhavebetterincentivestoavoidsuchdamage.Butthatmay

297. E.g.,EricBerger,IndividualRights,JudicialDeference,andAdministrativeLawNormsinConstitutionalDecisionMaking,91B.U.L.REV.2029,2094(2011)(“[L]egisla-turespunttoagenciestoavoidaccountability....”). 298. Seeinfranote299andaccompanyingtext. 299. SeeKristinTate,CoronavirusRevealsFinancialIrresponsibilityofAmericans,HILL (Mar. 22, 2020, 6:00 PM), https://thehill.com/opinion/finance/488906-coronavirus-reveals-financial-irresponsibility-of-americans [https://perma.cc/XF7Z-7VEJ](arguingthatmanyAmericansfailedtoproperlysavetoprepareforaneventsuchastheCOVID-19pandemic). 300. Seeinfranotes301–02andaccompanyingtext. 301. See,e.g.,HomeownerFloodInsuranceAffordabilityActof2014,Pub.L.No.113-89,128Stat.1020(makingnumerouschanges to theNationalFloodInsuranceProgram).Forahistoryof theNationalFloodInsuranceProgramandaproposal toprivatize it, see IKEBRANNON&ARIBLASK,REFORMINGTHENATIONALFLOODINSURANCEPROGRAM:TOWARDPRIVATEFLOODINSURANCE(CatoInst.Pol’yAnalysis,No.817,2017),https://www.cato.org/sites/cato.org/files/pubs/pdf/pa817_2.pdf[https://perma.cc/TH57-XLBQ]. 302. SeegenerallySarahStrochak, JunZhu&LaurieGoodman,TooManyHome-ownersLackFloodInsurance,butManyBuyItVoluntarily,URB.INST.:URB.WIRE(Sept.18, 2018), https://www.urban.org/urban-wire/too-many-homeowners-lack-flood-insurance-many-buy-it-voluntarily [https://perma.cc/WW7G-9GLB] (revealing thatpolicies throughtheNationalFlood InsuranceProgramhavedeclinedover thepastdecadeandthatthemajorityofindividualsinsuredpurchasepoliciesvoluntarilyanddidnotneedgovernmentalcompulsion).


beimpossible,anditwouldpenalizeindividualswhomayhavemadeinvestmentsbeforeclimatechangewasevenrecognizedasasignifi-cantdanger.Agentleralternativemightbetopenalizethosewhoun-dertakeunwiseinvestmentsafterthecreationoftheinitialcompen-sation fund. The random selection fund might provide for“appropriate” reductions in damages assessments where damageswereexacerbatedbyclaimants’actionsafterthepassageofthestat-ute.Suchaprovisionwouldnotbeadequateinarule-boundagencybutcouldworkwithanagencyinterpretingastandardinrandomlyselectedcases.

CONCLUSIONRandomselectionhaslongbeenunderstoodasaneconomizing

devicethatallowsforestimatesofapopulationtobemadebasedonasampleof thepopulation’smembers.303Randomselection isevenusedforqualityassuranceinsomelegalinstitutions,suchasintheSo-cial SecurityAdministration.304But institutions thathaveused ran-domselectionhavegenerallyuseditasameansofmeasuringdeci-sionmakerperformance to improvedecisionmaker incentives. Suchincentivesmaybeinadequatetogenerateconsistentdecision-making,especiallyiftheyconflictwithothervalues,suchasthenormofdeci-sionmakerindependence.305Butifafundisdividedamongarandomselectionof claimants inproportion toadjudicatedvaluations, thenthe independenceofgovernmentdecisionmakersneednotbecom-promised. Indeed, those decisionmakers may be given even morefreedomtoaccountforawiderangeofconsiderations,becauseidio-syncraticdecision-makingbygovernmentmattersless.Whatmattersishowmuchmarketparticipantswillpay,andtheywillhavestrong

303. SeeGregDepersio,UsingSimpleRandomSampleToStudyLargerPopulations,INVESTOPEDIA,https://www.investopedia.com/ask/answers/042915/what-are-advantages-using-simple-random-sample-study-larger-population.asp[https://perma.cc/D9CQ-5CGN] (discussing random sampling and its benefits, including itsabilitytocreateaccuraterepresentationsofthelargerpopulation). 304. SeeDavidAmes,CassandraHandan-Nader,DanielE.Ho&DavidMarcus,DueProcessandMassAdjudication:CrisisandReform,72STAN.L.REV.1,31–40(2020)(de-scribingthemethodsusedbytheSocialSecurityAdministrationtoconductqualityas-surance,includingrandomsampling). 305. See,e.g.,PaulR.Verkuil,ReflectionsupontheFederalAdministrativeJudiciary,39UCLAL.REV.1341,1355(1992)(“Managementtechniquesarenomatchforclaimsofindependence....Thedecisionarenareflectsasettingwhereindividualdecision-makingprevailsoverattemptstoregularizeoutcomesonastatisticalbasis.”);seealsoDanielE.Ho,DoesPeerReviewWork?AnExperimentofExperimentalism,69STAN.L.REV.1,88–90(2017)(explaininghowpeerreviewprogramsareoftenforcedtocom-petewithclaimsfordecisionalindependence).


economicincentivestobidupclaimsthatareunderpriced.Antitrustlaw,consumerprotectionlaw,andantidiscriminationlawcanhelpen-surethatclaimantsreceivetheirclaims’expectedvalue.

Theresult is thatanadministrativeagencywith fewresourcesasidefromthefundtobedistributedcanbeusedtoadjudicateaverylargenumberofclaims,evenifthelegislationisphrasedintermsofstandardsratherthanrules.Somepotentialinterventionstoaddressclimate change might require individualized assessments for largenumbersofpotentialclaimants,sothisisafertilegroundforconsid-eringwhethertasksthatonewouldordinarilythinkimpossiblycom-plexforanadministrativeagencymightbefeasible.However,thisAr-ticle has focused on just one type of task: the distribution ofgovernmentfunds.Thisdoesnotaddressthemanyothertasksthatadministrativeagenciesperform,includingtheassessmentoftaxesorfees.306Randomselection isamechanismthatcanbeusedtodisci-plineanytypeofdecision-makinginwhichgovernmentalofficialsex-erciseconsiderablediscretion.Thepossibilitythatrandomselectionmightserveasasubstituteforrulesasamechanismforpreventingdiscretionfromleadingtoarbitrationandconsistentdecision-makinghaspreviouslybeendisregardedinthe legal literature,andgovern-mentspendingisbutoneareainwhichthistoolmightusefullybede-ployed.

306. Onemightwonderwhether,insteadofarules-basedcarbontaxfocusedsolelyonsomeformsofpollution,randomselectioncouldfacilitateataxschemeembodyingallactivitiescontributingtoglobalwarming.Arandomselectionsystemallowingtaxestobecalculatedbasedonastandardwouldreflectsomeofthesamelogicasisconsid-eredherebutalsowouldpresentuniqueissues.IaddressthesechallengesinMichaelAbramowicz,IanAyres&YairListokin,RandomizingLaw,152U.PA.L.REV.929,997–1001(2011),whichdiscussesthedifficultiesthatcancomewithimplementingataxschemethatusesrandomassignment.

Random Selection for Scaling Standards

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