The attractiveness and novelty of Professor Strahilevitz’s idea lies, among other things, in (i) the discovery of his third category of exclusion mechanics – exclusionary amenities – and (ii) the analysis of interaction between these mechanics and the asymmetric information. The idea of exclusionary amenities sheds light on a form of exclusion, to which seemingly the legislature and judiciary have paid little attention. And the relationship between how people try to exclude others and the asymmetric information makes us think of possible side effects of the government’s disclosure as well as the future possibility of affecting exclusion by means of that same disclosure of private information.
At the same time, there is another thing intriguing to me. Professor Strahilevitz regards “governance” and “exclusion” as alternate regimes. Further, he suggests that the governance regime is often more costly or inefficient than the exclusion regime (“the most cost-effective way to prevent a store’s night watchman from robbing the owner blind is not necessarily to watch the watchman’s every move or to provide him with a compensation package that allies his interest with that of the owner’s, but to try to hire an honest watchman”- p.36, or see the case of Taormina in p.106).
However, since we can exclude others only when we know whom to exclude (or whom not to exclude), the exclusion regime is not always available (Professor Strahilevitz does not emphasize this fact, because it is not the subject of the book, and is probably too obvious a fact). For example, shareholders cannot adopt the exclusion regime in appointing directors. The corporate governance is costly; it would be great if we could substitute it with exclusion of inadequate candidates in advance. Because of the asymmetric information about the qualification of candidates, shareholders cannot exercise their bouncer’s rights to appoint only well qualified candidates. Still, if we could find an adequate exclusionary amenity, we could adopt an exclusion strategy, since the candidates will incorporate their private information into their own judgment whether to apply for (or accept) the director positions, and persona non grata will just walk away. However, as there is no such a thing like a single qualification as director in the first place, we are not sure whom to exclude, or what kind of amenity we should prepare. On the contrary, a company may perform better with directors with diversified backgrounds. In such circumstances, all we can do is to prepare some core norms that must be observed by all the directors – fiduciary duties – with elaborated and costly governance structures to enforce them.
Exclusion is available only when the group excluded (or excluding) can be clearly defined. Something like qualifications of a director composes of innumerable attributes and is likely to be vague. A clear definition tends to fall into the categories of protected classes – e.g. race, color, religion, national origin, age or sex. When we can prepare clear definitions concerning whom to exclude (and such exclusion is allowed), the need for governance will diminish.
We should also note that a definition of an excluded group itself could be affected by the availability of the private information corresponding to such a definition. Think of fraternities excluding students with weak handshakes or shabby cloths, instead of directly excluding unsociable or unpopular students (collecting the corresponding private information is difficult, as well as unsociability or unpopularity is a vague definition). In theory, so long as the excluded group is clearly defined, we can exclude that group by means of exclusionary amenities, even if we cannot exercise our bouncer’s rights due to the lack of private information. It seems, however, that in some cases people prefer a bouncer’s right to the other means of exclusion, even though the definition of the excluded group gets rough and the precision of exclusion diminishes.
Given the correlation between the definition of an excluded group and the availability of private information, information technology enables more complicated definitions of an excluded (or excluding) group by providing us with a cheap method to access private information and ability to sort out necessary attributes (albeit not as complex as the director’s qualifications). As exemplified in the book, fraternities or sororities may be able to gather private information of new comers on social networks, which will enables them to exercise their bouncer’s rights to directly exclude unsociable or unpopular students.
On the other hand, tailored exclusion may generate greater liberty externality. The stigmatization of a well-tailored assembly of pests may be far greater than that of a medley of dropouts. Therefore, the government may more carefully scrutinize such tailored bouncer’s exclusion. (At this point, some people may even prefer a rougher definition of the excluded group to avoid such strict scrutiny.)
These are what I thought about "whom to exclude." When we cannot prepare any definition of whom to exclude at all, we have no choice but to adopt the governance regime. I guess such cases may not be so rare. When the development of the information technology extinguishes the asymmety of information, it affects not only how we can exclude others, but also whom we had better exclude - there is a change in the definition of the excluded group itself. Rather random and lacking in unity, but I hope to discuss the subject with you all soon.
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