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July 20, 2010


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Jeff Lipshaw

Kim, are you using "complete" and "incomplete" in the same way the law & econ people refer to complete and incomplete contracts?

Kim Krawiec

Hi Jeff -- I am. There are many parallels in terms of the possible reasons for incompleteness in the two settings (and some differences as well). The usefulness of the analogy, we think, lies in the contract law insight that the interpretive rule should depend on the reasons for incompleteness. Thus, it would be a mistake to simply criticize statutes with gaps and ambiguities -- even intentional ones, as the benefits to incompleteness may outweigh the costs under some conditions. But the political conditions surrounding Dodd-Frank lead me to predict that harnessing agency expertise or reducing transaction costs or enhancing flexibility had little to do with the gaps and ambiguities in this legislation, which I suspect were largely driven by political accountability considerations.

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