Fabians and Gramscians in law and economics

One important part of Steve Teles’ story is the rise of law and economics as a major approach to understanding how the law and regulation does (and should) work. Steve has a nice discussion of how law and economics became institutionalized, despite the opposition of various law professors, in two key ways. First, rich donors (and especially John M. Olin) helped support law and economics programs in a variety of law schools around the country (including non-conservative schools such as the Boalt school in Berkeley). Second, Henry Manne built up George Mason University’s Law School as an explicitly libertarian institution.

These are two quite different approaches to institution building. The first involves working with existing power structures – identifying elite institutions, and using money as leverage to persuade them in directions that you (the conservative or libertarian multi-millionaire) find more congenial. The potential benefits are that if you do succeed in changing them, you likely reshape the entire field. The potential problem is that your efforts will be diluted – that people will take your money and apply it in ways that you would prefer not to, and that your ideology will be watered down as it is diffused among people who don’t share your political priors. The second involves trying to re-order power relations by building an entirely new institution (or taking over a not very successful existing one), and using it as a spearhead for your movement. The benefit is that you can do this without having to make the same compromises – you can work more or less from a blank slate, re-ordering the institution better to your liking, without having to compromise or dilute your principles as much. The disadvantage is that unless you are very skilled and very lucky, it will be much harder to reshape the field as a whole (since you are both trying to persuade others in the field that your approach merits attention and that your (previously non-existent or not very-well regarded) institution should be taken seriously.

The dilemma of whether to adopt what Steve describes as a ‘Fabian’ (burrowing into existing insittutions) or a ‘Gramscian’ approach (building a new one) is a general one for institution builders (Dan Drezner identifies very similar problems in his discussion of institution building in foreign policy making here. And Steve indeed concludes that the Olin approach has succeeded in influencing the field at the cost of ideological coherence, while the Manne approach has succeeded in building up an ideologically coherent program at the cost of influence in the field.

I think that this analysis is largely right, although it perhaps under-estimates the extent to which law and economics has realigned the field of law and regulation – more on this later. But what it does do in my view is to make it clear that the rise of law and economics cannot be understood very well within the terms of law and economics itself. In other words, the factors that explain the relative success of law and economics as an approach suggest a quite different set of causal accounts than those that law and economics accounts usually focus on. When we look at both the ways in which GMU law school has succeeded in relative terms (and it has), and how law and economics has become a pervasive way of understanding the world both on the left and the right, we don’t see a neutral Walrasian auctionplace with tatonnement, and competition between anonymous market participants, each seeking to respond to forces of supply and demand that are the result of exogenous preferences. Instead, we see intensely personal efforts not only to play in the marketplace as it is, but to reshape it, by persuading participants to value things that they didn’t value before.

Moneybollocks and Money Problems

Steve’s account discusses at length the standard explanation that GMU professors themselves like to use when they want to explain the relative success of George Mason University Law School – market failure and Moneyball. George Mason’s genuinely impressive reinvention of itself as a well regarded second tier law school (its previous reputation had been dismal, even in the regional market) is owed, according to this account, to the failure of other law schools to hire impressive research talents whose politics were uncongenial to them. GMU faculty members depict this as a kind of market failure. Other schools, which might prefer to hire left-liberal mediocrities over sharp, well-published libertarians pay a price for their discrimination. More to the point, they leave easy pickings on the table for others to sweep up. Institutions that don’t discriminate on the basis of ideology should have a clear competitive advantage over institutions that do.

There is a specific comparison that George Mason University law school figures like to draw upon; that with Michael Lewis’s Moneyball. GMU law school types see themselves as like the Oakland team in Lewis’s book – they are playing the numbers, and hiring smart people that other academic teams are irrationally passing over. Steve’s book quotes Daniel Polsby, Dean of GMU’s law school as saying

we are proponents of moneyball here, and we have a pretty simple predictive model of productivity here, and it very rarely fails us, and anybody can use it … We’re not burdened by intolerance for people who have libertarian and conservative leanings, and we’re not going to discriminate against them. It may be the case that we would discriminate against people on the left, with socialist inclination, but that becomes very theoretical because our dear friends in the food chain snap those people up.

But it is not only Polsby. David Bernstein and Todd Zywicki use the same metaphor to describe GMU too.

Now, to be clear, there is probably something to this. I imagine that there are some scholars whose brilliance is underestimated because of their political affiliations (which is not, of course, to say that all scholars with unpopular political affiliations are brilliant). But there is also a fair amount of what might fairly be described as self-congratulatory Moneybollocks in this point of view. The problem that GMU faced was quite different from the problem faced by Michael Lewis’s Oakland A’s. In baseball, as best as I understand it (which is not that well, but I’m pretty sure I am right on this) there is a clear, explicit, and for the most part exogenous scoring system – with a few judgment calls around the margins, people can agree on what action should score _x_.

The Moneyball strategy, in its original variant, was a recognition that some players who weren’t necessarily very flashy, nonetheless scored better than their market prices would suggest, suggesting that they were a bargain. But in academia (and perhaps especially in legal academia), you don’t have any really satisfactory system of scoring that neutral bystanders could (mostly) agree on. Nor does GMU even pretend to adopt a real ‘Moneyball’ strategy, as Posner effectively admits with his crack about socialism (and if, as his claim suggests, there are more overtly socialist professors being hired by top law schools than overtly libertarian professors, I’ll fry up my one and only hat, and eat it). The market shaping tactic that it has adopted requires hiring on ideology, not on some abstract notion of merit – and while the two may have similar short term consequences, they are really quite different in logic and ultimate effect.

The difference stems from the fact (and I am slightly adapting what I said in my earlier post here) that a closer attention to candidates’ underlying form isn’t necessarily going to allow underranked departments to claw their way up the ratings. “Winning”as a department or school doesn’t depend on performing better in some absolute sense, so much as persuading your peers in other institutions that you are winning. The closest one gets to a neutral metric for success (I am not even going to _get into_ the purported neutrality of US News and World Report’s ranking system) is publication in highly ranked journals, but this is far from independent, especially in the legal academy, where anonymous peer reviewed journals are mostly crowded out by law student edited journals, where the reviewers know the identity of a paper’s author. Student law journal editors have a lot of papers to review in a short space of time (the joys of a multiple submission system) and are likely to pay a lot of attention to the reputation of an author’s school when they’re deciding whether to publish his or her article. I don’t think it is unreasonable to suspect that if you are an unknown from a highly ranked school, you have a much better chance of getting published than an unknown from a less prestigious school.

Thus, top schools have very smart people (in all probability, more talented on average than those in less well ranked schools) – but they probably do better in relative terms than any differences would merit. Furthermore, the ability to hire perceived stars is an important part of the reputational capital of these schools (even if these stars are over-valued). Ceteris paribus, departments that hire equally (or nearly as) talented people, who aren’t perceived as stars, are going to find it more difficult to improve their rankings than they should. To some extent, the “success” of top law schools is a self perpetuating phenomenon which is difficult, perhaps impossible, to overturn using a pure Moneyball strategy.

What this suggests is that GMU law school’s success in the rankings is only partly thanks to the ability of its Dean to exploit others’ irrationality by spotting underexploited talent elsewhere, and hiring it. It is also the product of trying to redefine the rules of the legal marketplace, by establishing a different kind of intellectual capital (that of conservative and libertarian thought in the legal academy), and persuading others that this capital had value. I can understand why GMU law professors might like to represent their success as the triumph of rationality in the marketplace; it reinforces their own express understanding of how the world works. But canny recruitment of legal talent is only part of the story (and perhaps not the most important part). As Steve argues:

Manne’s programs for law professors overcame unfamiliarity by equipping academics with the basic concepts of economics, eliminating the mystery associated with unfamiliar concepts. Those programs eroded the field’s ideological stigma by creating personal bonds between the legal academy’s mainstream and law-and economics, and by convincing participants that economics was an ideologically neutral set of tools. Manne’s programs for federal judges also helped erase law and economics’ stigma, since if judges – the symbol of legal professional respectability – took the ideas seriously, they could not be crazy and irresponsible. This account suggests the limitations of thinking about intellectual change through the metaphor of the ‘marketplace of ideas.’ In any market, there are some things that participants simply will not buy and sell because they are considered immoral or inappropriate for exchange. Through most of the 1960s, for example, it could barely be said that law and economics was in the marketplace at all, because the market’s normsetters refused to take it seriously.

In other words, the quite real (if limited) success of Henry Manne’s efforts to promote law and economics at GMU rested in large part on his efforts (through GMU and perhaps more importantly elsewhere) to _change the underlying basis of the market for legal scholarship._ He sought to change the profession’s perceptions regarding what was worthwhile legal research and what was not, with some considerable success. To understand what happened, you need economic sociology, not economics. Changes in actors’ self-perceptions, in their disciplinary norms, in the kinds of work that they value and disparage, and in the ways that they conceive of the market are crucial components of the story of law and economics. Libertarian law professors became more valuable in the legal academic marketplace because law professors (as a collective body) became more likely to accept and believe that libertarian-inflected law and economics was a valuable commodity. And changes in taste of this sort are exactly the kind of thing that economic theory itself is terrible at explaining. Moneyball is a cute metaphor, and does capture a limited part of what went on. But if GMU law school had adopted a pure Moneyball strategy, it wouldn’t be where it is today, under any reasonable set of expectations. It not only had to hire smart people with unorthodox views – it had to persuade others that their specific kind of smartness and heterodoxy had value.

This should obviously give some pause to law and economics triumphalists at GMU and elsewhere. If the success of law and economics can’t be explained (and I really don’t think it can be) within the internal intellectual categories of law and economics itself, then those categories are of limited explanatory scope . NB that this does _not_ mean that they are useless – it does mean that (to adopt another market metaphor) a diversified intellectual (and, I would argue, ideological) portfolio is valuable to intellectual inquiry (even if its value in the academic marketplace is less certain). It also, possibly, leads to some problems that Steve talks about around the edges of his story. The two components of the GMU strategy – Moneyball (scoop up undervalued scholars) and econ soc. (persuade others that libertarian and law and economics approaches are useful) cut against each other over the longer term. In particular, if you really succeed in persuading other schools that they should value libertarian scholarship, then those other schools won’t behave ‘irrationally’ any more (not that they were necessarily behaving ‘irrationally’ to begin with, if the market didn’t value libertarian scholarship, libertarians had difficulties in publishing in top journals etc), and will grab interesting scholars at the entry stage as well as later on. And this presents real problems for a school like GMU that even in the best of all worlds is financially under-resourced compared to top tier law schools with fat endowments (albeit less fat than they used to be).

The book discusses the difficulties that GMU has had in becoming a feeder for top ranked programs elsewhere – while a couple of scholars (including Zywicki and Bernstein) have visited at top programs elsewhere, they usually haven’t moved (whether because of personal choice or because they weren’t asked to is unclear – the recruitment process for lateral moves in the legal academy is rather opaque to me at least). I suspect that at least part of this may be because the bright right-of-center law professors _aren’t_ being ignored anymore, but are being recruited by top programs with more money right at the beginning – Moneyball may only get you so far.

II – Law and Economics and Market Politics

I think that Steve arguably underestimates the significance that law and economics has had for both law and politics. In fact, I think it is hard to overestimate this impact. Steve is right to say that the Fabian strategy (in this instance of encouraging major law schools to take up law and economics through giving ’em money) carries the risk of diluting the ideology. But ideological dilution isn’t all bad – if the resulting brew is weaker, there is very likely a lot more of it.

A recent article on the revival of the Kaufmann foundation’s Law and Economics program provides a nice illustration of this. I quote from a “Fortune article”:http://features.blogs.fortune.cnn.com/category/law-and-economics/ describing it.

Though the field of law and economics has often been seen as a politically conservative movement, the leader of the Kauffman initiative will be Robert Litan, Kauffman’s vice president of research and policy. Litan has held prominent governmental positions during Democratic administrations and has been affiliated with the centrist-to-liberal Brookings Institution for nearly 20 years. Among other things, Litan was deputy assistant attorney general in the antitrust division of the Clinton Justice Department when Justice first went after Microsoft in the 1990s. (Litan has both a Ph.D. in economics and a law degree from Yale.) “I’d characterize the law-and-economics school as a mode of economic thinking,” says Litan in an interview, contending that it is politically neutral. “There are many people in the field who are Democrats as well as Republicans, liberals rather than conservatives.”

…How does the current economic collapse — and its implicit lesson that over-reliance on market mechanisms have led us to disaster — affect his and Kauffman’s plans?“Ironically,” he responds, “it may be an even bigger deal now that economy is collapsing. We are now about to have a huge national debate on the role of markets and regulation … and how much are we going to roll back from the market-oriented philosophy in which a lot of law-and-economics participated. … From our viewpoint we’re hopeful that whatever repairs we make in the economic system, we don’t kill off risk-taking and entrepreneurial drive, because that’s what we need for growth.”

Now on the one hand, Bob Litan is a genuine slightly-left-of-center moderate Democrat. The new initiative furthermore seems to be devoting specific attention and energy to a set of issues that libertarians and liberals mostly agree on – the horrid mess that is intellectual property law in general, and patent law in particular (the convergence on these issues between strong libertarians like David Levine and lefties like the Public Knowledge crowd is real and impressive). But there is another hand. Litan (if he is not being misquoted here, and the quotes certainly seem consonant with what I think he believes) seems to espouse two positions that would likely not have been espoused by left-of-center types thirty years ago – (1) That the market needs to be protected against regulation, and (2) that this is a politically neutral position that should be obviously true to both left and right. The preponderance of these two mutually reinforcing beliefs among ‘moderate’ left of center in this country – represent, in my view, an emphatic and important victory of the law and economics movement. If you win the technocrats (and law and economics arguably has won the technocrats), then you very nearly have won the entire game.

To be quite clear, I am not arguing that the view that we need to protect markets from regulation is useless, let alone universally malign. Markets can surely produce good things, and should, under many circumstances, be allowed to do so with a minimum of interference. My point is a little subtler. I think I detect in Litan’s viewpoint (and I surely detect it in many other emanations of sort-of left of center moderation) an implicit set of normative assumptions about what politics (and in particular political economy) involve. These assumptions stem from the belief that the market, when it works properly, is the best possible way of achieving essential human freedoms. It may be that under some circumstances markets have problems, whether because they cannot themselves always produce their own rules, resolve issues of externalities etc. Under these circumstances, government can play a role in regulating markets, but they should minimize that regulatory interventions to that which is absolutely necessary.

This is one plausible account of how the political economy should work. It is certainly the account that we see in much of the law and economics literature, which certainly has a clear anti-regulatory bias. But it is not, contra Litan, a politically neutral account. It prioritizes some values over others. It makes some kinds of distributional arrangements more likely, and other kinds of distributional arrangements less likely. Nor is it by any means the only plausible account of how the political economy should work. For example, one might reasonably prefer collective choice made through democratic processes (as many actual lefties do). And there are other positions too. But discussing the strengths and weaknesses of these different accounts involves political debate over what kinds of values our economic arrangements should seek to achieve. If we conceive of political economy as a set of technical discussions over how to best allow markets to achieve what they can achieve while adopting the bare minimum of regulation necessary to prevent the market from eating itself, then we effectively foreclose these debates.

And here, I suspect (though I certainly can’t prove) that law and economics has played a very significant role indeed in taking these debates off the table. It offers an apparently neutral technical apparatus for analyzing the relationship between laws, regulations and market outcomes. However, it is skewed in practice by a pronounced pro-market bias, starting, as it usually does, from the assumption that the market is the most efficient way of achieving individuals’ desires and needs. This bias doesn’t necessarily flow from the technical apparatus of its parent discipline, economics (cf the work of Jack Knight and Jim Johnson). But in practice, the two are closely associated.

Law and economics, as it is theorized in the legal academy and applied to regulatory politics is a diluted form of the pure libertarian variant of public choice (which was far more pronouncedly hostile to the very idea of the federal government than law and economics as a whole). But precisely because it is so diluted, and because it appears technical and uncontroversial, it has a much wider influence than an overtly libertarian political program would have. Smart liberals (Cass Sunstein is the most obvious example) think in ways that are profoundly structured by their exposure to law and economics. Sometimes this may be salutary (there are real insights in law and economics and in libertarian thought). Sometimes (in my view), not so much. But whichever which way, it isn’t politically neutral or anodyne at all. Instead, it is a real political position, which has significant normative consequences, and should be debated as such, not merely accepted as a commonplace.