Zywicki, Todd J.; Rajagopalan, Shruti --- "Bankruptcy judge as a central planner" [2017] ELECD 1583; in Zywicki, J. Todd; Boettke, J. Peter (eds), "Research Handbook on Austrian Law and Economics" (Edward Elgar Publishing, 2017) 371

Book Title: Research Handbook on Austrian Law and Economics

Editor(s): Zywicki, J. Todd; Boettke, J. Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849801133

Section: Chapter 17

Section Title: Bankruptcy judge as a central planner

Author(s): Zywicki, Todd J.; Rajagopalan, Shruti

Number of pages: 27

Abstract/Description:

In this chapter we provide an explanation for why the Chapter 11 reorganization process cannot accurately value and reorganize an insolvent firm. Due to the information and incentive vacuum of the reorganization process, Chapter 11 places the bankruptcy judge in the same institutional setting as a central planner. Therefore, the bankruptcy judge is given the impossible task of economic calculation without the relevant market data to calculate the same. Given the inability to make market allocations, Chapter 11 allocations are prone to rent-seeking and interest group capture.