One economist’s perspective on the law and economics movement

by Tyler Cowen on April 28, 2009

Law and economics has done well for some straightforward reasons. Most of all, law schools have become more research-oriented over the last twenty years. Publication is more important and word-of-mouth about the quality of publication is more important. Law and economics, which draws so much of its method from economics, has been ideally positioned to benefit from this trend, albeit by a kind of historical accident.

The eighty-page “blah blah blah” law review article is harder to sell in an age of competitive professionalization of the law professor market itself. Law and economics arguments usually can be stated succinctly and the quality of argumentation and evidence is relatively easy to evaluate. It is possible, for instance, that an argument or piece of evidence is wrong and can be demonstrated as such. If law and economics requires some technical knowledge, so much the better for its ability to “signal” the quality of law school professors. I expect these trends to continue.

The conservative branch of the law and economics movement has in particular grown for some reasons rooted in politics. Starting with Reagan, we have had Republican Presidents willing or eager to appoint conservative judges to the bench or other positions of influence (e.g., Ed Meese under Reagan). The conservative side of the legal profession has risen rapidly in relative status and influence. The organization and growth of The Federalist Society has accelerated this process and given it grass roots.

I view the relatively conservative nature of the law and economics movement as a historical accident which is already more or less obsolete. For better or worse, the wave of the future is scholars such as Cass Sunstein, not Henry Manne. The simple lesson is simply that in the long run “mainstream” usually wins out, even if the efforts of Henry Manne shifted or accelerated what later became mainstream trends.

One topic which interests me is how the “conservative” law and economics movement, as it is found in legal academia, differs from “market-oriented” economics, as it is found in the economics profession. The “right wing” economist and legal scholar will agree on many issues but you also will find fundamental variations in their temperament and political stances.

Market-oriented economists tend to be libertarian and it is rare that they have much respect for the U.S. Constitution beyond the pragmatic level. The common view is that while a constitution may be better than the alternatives, it is political incentives which really matter. James M. Buchanan’s program for a “constitutional economics” never quite took off and insofar as it did it has led to the analytic deconstruction of constitutions rather than their glorification. It isn’t hard to find libertarian economists who take “reductionist” views of constitutions and trumpet them loudly.

The conservative wing of the law and economics movement, in contrast, often canonizes constitutions. Many law and economics scholars build their reputations from studying, interpreting, or defending the U.S. Constitution. You don’t get to higher political or judicial office by treating a constitution in purely economic terms.

A second set of differences stems from issues of foreign policy, executive power, and due process, as manifested for instance in the recent debates on torture and detainment of terrorists. Many legal scholars on the right have been forced to either ally themselves with the Bush administration or break with it. The market-oriented economists haven’t faced such a stark dilemma. When it comes to economic issues, there is a readily available default position that keeps you friends with (almost) everyone. You can believe that the Bush administration spent too much but that the Democrats might have been much worse in this regard. Furthermore economists as a whole are less interested in political office than are legal scholars; we have no equivalent of the Supreme Court (chairing the CEA isn’t worth nearly as much in terms of influence or prestige) and thus we are freer agents.

For these reasons, there has been less of a crisis of conscience or polarization among the market-oriented economists. Maybe that will change with the fallout from the financial crisis or global warming but so far the economists have been less politicized than the legal scholars.

I am an economist and when I meet my peers from the legal side of the law and economics movement I often feel as if I am stepping on culturally foreign territory. Overall I feel more at home, culturally and intellectually speaking that is, talking to conservative Democratic economists.

As for the subject directly at hand, I enjoyed reading Steve Teles’s book and I thought it was very carefully researched. It is the best single-volume introduction to its chosen topic. I recommend it to all those who think they might be interested.

For obvious reasons, the part of the book which interested me most was the section about my home institution, George Mason University, and in particular the School of Law. I liked this part of the book too, but I felt it didn’t give a complete picture. In particular there wasn’t enough coverage of the students, a key part of any law school.

I’ve taught a Law and Literature at the GMU School of Law for seven years now. At the same time, I’ve had no real contact with law school governance, as my tenure is in the economics department. (Oddly, although I am an economist, the course contains close to zero economics. Just about every year, I eventually hear something like “You mean you’re not an English professor?”) From my contact with the students, which by now is extensive, I have never noticed signs that I am in anything other than a standard law school.

Never. If I mention “moral hazard” or the “Coase theorem” in regard to the legal discussion in the Book of Exodus, I get a few giggles. Maybe you could count that. I also believe the student body is more ethnically and intellectually diverse than at many top-tier law schools and yes that does mean it is probably more politically conservative than is the student body at Harvard Law. But I believe that is due to our northern Virginia location, and other demographic factors, rather than due to the influence of the faculty in any significant way.

They’ve been a great group of students, deeply interested in new and different ways of thinking about law, whether it be through the lens of economics or through film and fiction. They’re very curious and very willing to challenge whatever I throw at them. I could not get them to agree that the last section of Smilla’s Sense of Snow consists of imagined rather than real events. They think critically about virtually everything they are taught.

So the primary narrative of GMU Law, as I experience it, is that of an educational institution. Teles’s discussion provides a more novel perspective, but it is important not to forget the weight and importance of daily routine and I mean that term in a positive sense. Students come and learn about law, and in turn become lawyers, and that is indeed the main story of what goes on.

{ 15 comments }

1

Matt 04.28.09 at 1:54 pm

Part of the difference between “law and economics”, as it’s existed in law schools for most of its life, and “mainstream” economics, I think, is that many of the founders of the school, or at least those who made it popular and important in the legal world, had little or no formal training in economics. (Posner’s background, for example, is in English.) That this could lead to the desired outcomes guiding the research even more than often happens with all research, especially given the result-oriented nature of legal work (start with a conclusion and find an argument for it is the nature of a lawyers work to a large degree), isn’t surprising. Many of the newer generation of people working in law and economics, though, have PhDs in economics (some don’t even have law degrees). This makes the work more sophisticated and less nakedly ideologically driven than much of the early work, and it’s now certainly not possible to know what someone’s political position will be by knowing that he or she does law and economics work. (I don’t think this significantly contradicts anything Tyler says above, but is meant to add a bit more detail.)

2

Stephen Downes 04.28.09 at 2:52 pm

> so far the economists have been less politicized than the legal scholars.

That’s actually pretty funny, especially coming from someone who writes a very politicized hard-right economics blog.

A more relevant topic for this article would have been something like “the failure of politicized economics, or, why economists should learn from the crash and get their theories right before prescribing them to national governments.”

3

Barry 04.28.09 at 4:08 pm

I would second Stephen’s comment, and add something. In a post on Marginal Revolution (http://www.marginalrevolution.com/marginalrevolution/2009/04/torture-prosecution.html), Mr. Cowen states: ” I believe that a full investigation would lead the U.S. public to, ultimately, side with torture, side with the torturers, and side against the prosecutors. ” He doesn’t give any reason for this opinion, and (not being insulting here), being an economics professor isn’t a good way to get in touch with the hearts of the Great American People (neither is my profession and background). He also gives this principle: “In some of the books, and almost all of the movies we have seen that the law goes as far as people are willing to support it.”. Now, libertarian economics has had at its heart a radical restructuring of the US economy, in a way which has been bad for at least half of the US work force, but that’s not something I’ve ever seen a libertarian economist publicly state as a reason for not pushing very hard for legal changes. The whole L&E movement was basically a largely successful elite movement to enact wholesale changes in the US economic and legal system.

“For these reasons, there has been less of a crisis of conscience or polarization among the market-oriented economists. “

First, we’ve seen a thirty-odd year stagnation in median wages in the USA, after a period of incredible wage growth; this stagnation coincides nicely with the effects of the L&E movement. The fact that even ‘liberals’ such as Brad DeLong could spend up until the last few years not really giving a care about this is IMHO an indication that the lack of a crisis of conscience among most conomists is a mark against most economists. As for polarization, it’s been pointed out (by Krugman and DeLong) that if one wishes bad economic arguments against the stimulus, one didn’t need to go to CATO or Heritage or AEI; one could go to Chicago and Harvard. The lack of polarization among economists is perhaps another mark against their profession; Mankiw working for Bush is like a cancer researcher putting in a few years with the Tobacco Institute, with far less trouble among his peers.

Even now, as the Great Moderation collapses, and the government is frantically trying to prevent a second Great Depression (and the Friedman-Schwartz hypothesis looks increasingly bad), the elite economists haven’t given a sign that they perhaps should re-evaluate the past thirty years of Chicago.

Finally: “One topic which interests me is how the “conservative” law and economics movement, as it is found in legal academia, differs from “market-oriented” economics, as it is found in the economics profession. The “right wing” economist and legal scholar will agree on many issues but you also will find fundamental variations in their temperament and political stances.”

Jim Henley had a great saying about this – ‘they have people for that’. In any movement, there is an allocation of goals and resources: faction A gets policy this, but not policy that, faction B gets policy that, but not policy this. One word for this is ‘trade-off’.
The classical example is people claiming to be libertarian while supporting a Republican administration, even while it does a large amount of very anti-libertarian things. One frequent excuse is ‘the Democrats would be worse’, but that could also translate into “We’re getting what we want most, and the bad stuff we don’t care about” (e.g., that more crony capitalism, more no-bid contracts, lower tax rates on the rich, fewer restraints on those with economic power are well worth a few wars, government spying, ripping up the Bill of Rights, torture of prisoners, politically-motivated prosecutions, etc.).

Trade-offs are sometimes call ‘revealed preferences’; I’ve heard that economists frequently think that insights can be had into a person’s motivations :)

4

Thomas 04.28.09 at 4:16 pm

This is a lawyer’s take on an economist’s perspective:

Law and economics has done well, it seems to me, because economics has a lot to say to about the law. Law is public policy, and it’s hard to talk about public policy without economics–it’s an important part of the toolkit, even if not the only tool.

Cowen says law and economics arguments can be easily evaluated. That’s true for him, but he should remember that these arguments are often evaluated–including for publication, unfortunately–by law students and other lawyers.

Cowen says the “conservative” nature of the law and economics movement is already obsolete, and gives Cass Sunstein as an example. Sunstein is a conventional modern liberal when he does lawyering, but his work touching on economics (for example, his work on regulation) is much more moderate. (There was some quiet discomfort in liberal quarters caused by his nomination for precisely that reason.)

I was a bit surprised by Cowen’s take on different sensibilities. The paradigmatic law and economics scholar is Richard Posner. He tends to be libertarian, and it’s hard to think of him as someone who treats the constitution (or any law, for that matter) as something to be glorified. Posner’s reductionism differs quite starkly from the mainstream approach to the constitution taken by most other lawyers. Perhaps the relatively conservative nature of the faculty doing law and econ at George Mason has affected Cowen’s views on the profession more generally–it seems he misdescribes the larger law and econ movement and also misses the fact that most lawyers not doing law and econ or doing it from a liberal starting position treat the constitution as something to be studied, interpreted and defended.

Matt, recall that Ronald Coase was an economist, as was Aaron Director. Director founded and they both edited the Journal of Law and Economics, and both taught at Chicago for many years.

5

Henry 04.28.09 at 4:21 pm

Marginal Revolution is ‘politicized’ and ‘hard right’ in exactly the same sense as Crooked Timber is ‘politicized’ and ‘hard left’ – that is, it has a recognizable political orientation, and opinions which sometimes, but not always, seem consonant with those political orientations. I have no idea who Tyler voted for in the last election (although I would have my guesses), but if you really think that Tyler should be crucified for all the perceived and actual sins of libertarians (and I believe that he doesn’t describe himself as a libertarian fwiw), then you should also be pillorying us for Joe Stalin, Pol Pot, the Weathermen and the rest of the whole business.

6

Matt 04.28.09 at 4:32 pm

Thomas- you’re right about Coase, of course. I had in mind Posner, Bork, Easterbrook, Scalia (when he was a professor), and so on.

7

John Pertz 04.28.09 at 5:58 pm

If marginal revolution is hard right then this site is Bolshevist. LOL

You endorse exchange,free trade and a moderate form of governance and suddenly you are crafting Mein Kampf. SO RICH!!!

Thanks for dropping the bombs fellahs, this thread is toast!

8

Righteous Bubba 04.28.09 at 6:11 pm

I also believe the student body is more ethnically and intellectually diverse than at many top-tier law schools and yes that does mean it is probably more politically conservative than is the student body at Harvard Law.

Why does it mean that?

9

Barry 04.28.09 at 7:26 pm

Henry, one major and one minor point – the minor point is that just because somebody claims to be libertarian, that doesn’t mean that they are, or don’t support some-to-many right-wing causes. It *is* 2008 after all; the ‘I’m a libertarian orthogonal to your Earth political axis’ argument is no longer to be taken wihout proof.

The major point is that even if many economists were truly not right-wingers, the profession, as well as the L&E subset, got along quite well with the right-wing movement over the past thirty years. Even my personal favorites (DeLong and Krugman) had an attitude during the 1990’s that the limits of respectible liberalism were no further to their left than their left elbows). As was pointed out in Teles’ book, the L&E movement was a right-wing movement. Not centrist, not liberal, not spanning the spectrum.

10

Henry 04.28.09 at 9:34 pm

Barry – but these are quite different claims from the ‘Marginal Revolution is a hard right website’ one, nicht wahr?

11

RaviT 04.28.09 at 10:33 pm

Many law and economics scholars build their reputations from studying, interpreting, or defending the U.S. Constitution.
_______________________________________

Huh, who?

12

Chris Knight 04.28.09 at 10:40 pm

“…the weight and importance of daily routine…” sometimes Cowen is a poet!

13

Henry 04.29.09 at 6:28 pm

RaviT – I suspect that Tyler is talking about Tullock and Buchanan here, but could be wrong.

14

Barry 04.29.09 at 7:09 pm

Henry 04.28.09 at 9:34 pm

“Barry – but these are quite different claims from the ‘Marginal Revolution is a hard right website’ one, nicht wahr?”

My comment yesterday that I shouldn’t have agree with that part of Stephen’s comment was eaten by intertubes worms, it appears.

15

B 05.01.09 at 1:38 am

“I also believe the student body is more ethnically and intellectually diverse than at many top-tier law schools and yes that does mean it is probably more politically conservative than is the student body at Harvard Law. But I believe that is due to our northern Virginia location, and other demographic factors, rather than due to the influence of the faculty in any significant way.”

You’re kidding, right? You must be. Otherwise, you need a lesson in self awareness there buddy. Just peruse the JOE adds from the GMU law school, for example, for all the proof you need. I hasten to add that I don’t think that this is a bad thing….

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