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CORNELL ECON 4040 - Exam 1 Study Guide

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Econ 4040 1st EditionExam # 1 Study Guide LecturesMatthews v. Massell, 356 F.Supp. 291 (N.D. Ga. 1973)Facts: mayor of Atlanta plans to use federal Revenue Sharing Act funds to pay firemen’s salaries, and use resulting savings in the general fund for politically motivated tax refundClaim of Plaintiffs: proposed use of federal funds violates requirement that funds be used only for “priority purposes”; misuse will render city liable for repayment of funds and penaltyDefense: restrictions on use of funds are illusory and unenforceable, as recognized by CongressMatthews v. Massell, 356 F.Supp. 291 (N.D. Ga. 1973)Holding: proposed use of funds a violation; enjoinedReasoning: no restrictions on the use of freed-up funds on the fact of the Act, but shifting funds from one account to another constitutes a misuse of funds as it would violate the spirit of the restrictionsEconomic theory: budget curve of the city and ‘new year spending’ problem; result is illogical from a single-budget perspective, allocation of budget contingent on the new funding is indistinguishable from next year’s budget presupposing the funding; intent is only relevant here because the budget was pre-announcedTilton v. Richardson, 403 U.S.672 (1971)Facts: Higher Education Facilities Act of 1963 allocates funding for new buildings to universitiesClaim of Plaintiffs: taxpayers grant funds to religiously affiliated colleges as a violation of the First AmendmentHolding: no violation; problem of “entanglement” between the federal government and religious institutions is mitigated because (1) collegiate institutions prioritize education and college students arecynical; (2) non-ideological character of the aid provided; (3) no continuing financial relationship;Douglas Dissent: one budget; money saved for the construction of secular buildings can be spent for religious purposes; restricting use of budget would require surveillance which will create further entanglementTilton v. Richardson, 403 U.S.672 (1971)Economic Theory: designing funding conditions toincentivize a particular use?Matching grant: effectively reduces the price of building by ½; assume two budget items, religious buildings and non-religious buildingsEquilibrium: depends on elasticity of demand;Without knowing elasticity of demand, we cannot know the effect of a matching grantEdwards v. Sims, 24 S.W.2d 619(K.Y. 1929)Facts: entrance to a cave located on Edwards’s land, where he operated an exhibition of the cave. Lee (neighbor) sues to compel a survey to determine if any part of the cave falls under his property. Chancellor Sims ordered the survey. Edwards sues for a writ of prohibition to prevent the survey.Rule of Law: Cuius est solum, eius est usque ad coelom et ad inferos (Whoever owns the soil, owns all the way to heaven and down to hell) [old rule]Holding: writ of prohibition denied; right to exclude others from your property sometimes yields to public policy or the property rights of others;Edwards v. Sims, 24 S.W.2d 619(K.Y. 1929)Dissent: cave has no use to Lee; would adopt instead a rule that limits dominion over space below realproperty to resources that can be utilized; cave-mouth owner should own whole cave because he has the means to enjoy and profit from it. “The true principle should be announced to the effect that a man who owns the surface, without reservation, owns not only the land itself, but everything upon, above, or under it which he may use for his profit or pleasure, and which he may subject to hisdominion and control. . . . It should not be held that he owns that which he cannot use and which is of no benefit to him, and which may be of benefit to others.”Economic Theory: who derives the most benefit from use of the resource? Or should we focus on conservation? Externalities from subterranean use? Alternative approach: clarity of a bright-line rule like the old rule allows the market to allocate resource to user who can derive greatest value; but depends on transaction costs.U.S. v. Causby, 328 U.S. 256(1946)Facts: army and nave planes fly 60 ft. above plaintiff’s house and chicken farm; chickens are scared to deathClaim of Plaintiff: taking by the government (tort claims not available)Defense: Air Commerce Act of 1926 declares “navigable airways” a public right of way under the sovereignty of the US; determined by Civil Aeronautics AuthorityHolding: damages are more than incidental; “an intrusion so immediate and direct as to subtract from the owner’s full enjoyment of the property and to limit his exploitation of it.” “Flights over private land are not a taking, unless they are so low and so frequent as to be a direct and immediateU.S. v. Causby, 328 U.S. 256(1946)Policy: protecting full enjoyment of real property promotes investmentBlack’s dissent: majority’s rule erects a barrier to regulatory adjustments to new technology. Courtscan contribute by awarding damages or granting injunctions, but to establish rigid property rules inairspace is obstructive.Economic Theory: commercial easement, property becomes common when commonly used (acontroversial balancing of private and public rights)Moore v. Regents, 249 Cal. Rep.494 (1988)Facts: Moore’s unique cells were patented by doctors at the hospital at which he was treatedClaim of Plaintiff: conversion (1) π owned or had a right to possession; (2) wrongful act or disposition of π’s property rights by ∂; (3) damages;Defense: property interest for Moore would obstruct research and diminish social utility;Issue before the Court: were Moore’s cells and cell line derived from those cells his property?Holding: Moore has a property interest in the cells (note: not the law . . . this aspect of the holding wasreversed on appeal)Dissent: this is an issue for the legislature; not appropriate for the court to create a property right in this area.Economic Theory: Coase theorem and market for body parts; assign clear property rights and alienability, and the market will allocate to the most valuable useFlynn v. Holder, 684 F. 3d 852(9th Cir. 2012)Claim of Plaintiffs: challenge constitutionality of National Organ Transplant Act’s ban on compensationfor bone marrow donations; especially as applied to new minimally invasive procedure, as a violation of Equal Protection because identical to blood donation;Defense: rational basis for distinguishing between organs [defined for purposes of the Act as body parts sale of which is prohibited], and, e.g.,


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