In April 2000, the FTC issued a Complaint against women’s shoe distributor Nine West, claiming that Nine West had engaged in minimum resale price maintenance (RPM) (i.e., the setting of minimum prices that retailers could charge for its shoes). Apparently, Nine West was providing retailers with lists of “off limits” or “non-promote” shoes that weren’t to be promoted except during defined periods. Because Nine West sought acquiescence in those policies by threatening to terminate offending dealers, the FTC maintained that it had engaged in a minimum RPM agreement. At that time, such agreements were deemed to be per se unreasonable–and thus automatically illegal–restraints of trade. Nine West ultimately agreed to a broadly worded Consent Order requiring it to refrain from (among other things) fixing prices at which its retailers may sell, advertise, or promote its products; “otherwise pressuring” its dealers to adhere to resale prices; and “[s]ecuring or attempting to secure any commitment or assurance from any dealer concerning the resale price at which the dealer may advertise, promote, offer for sale or sell any Nine West Products.”

In last summer’s Leegin decision, the Supreme Court overruled Dr. Miles, the 1911 decision that had declared RPM agreements per se illegal. The Court reasoned that such agreements are frequently procompetitive and should not be condemned unless they are shown to violate the Rule of Reason (a fairly fact-intensive balancing test that considers the likely competitive effects of a restraint of trade in light of market structure so as to determine whether the restraint is, on balance, pro- or anti-competitive). In light of Leegin, which clearly undermined both the FTC’s Complaint against Nine West and its Consent Order, Nine West petitioned for modification of the Order to eliminate the prohibitions discussed above. Nine West reasoned that the Order unfairly placed it at a competitive disadvantage since its rivals now may engage in RPM and their RPM agreements cannot be successfully challenged absent a showing of actual competitive harm.

This all makes sense. The FTC’s Complaint and Order were based on an old (and much maligned) precedent holding that all minimum RPM agreements are automatically unreasonable and illegal. That precedent has been squarely overruled. Ergo, the Order should be revised to permit Nine West to engage in a business practice the Supreme Court has (correctly) concluded is usually pro-competitive. Seems pretty open and shut, right?

Think again. In an eighteen-page opinion released Tuesday (May 6), the FTC only partially granted Nine West’s request for modification and required Nine West to justify its use of RPM to the Commissioners by filing regular reports showing that its use of the practice is, in fact, pro-competitive.

Now one might wonder how a Supreme Court decision holding that minimum RPM is not presumptively unreasonable could support an order requiring Nine West to continually justify (i.e., to prove the reasonableness of) its use of the practice. Indeed, wasn’t the point of Leegin to put the burden of establishing the unreasonableness of any instance of RPM on the party complaining about the practice? The FTC says no. It maintains that the Rule of Reason applicable to RPM should presume that any instance of the practice is anti-competitive unless the defendant makes some showing otherwise.

To reach this rather odd conclusion, the FTC latches on to the Leegin Court’s observation that:

[a]s courts gain experience considering the effects of these restraints by applying the rule of reason over the course of decisions, they can establish the litigation structure to ensure that the rule operates to eliminate anticompetitive restraints from the market and to provide more guidance to businesses. Courts can, for example, devise rules over time for offering proof, or even presumptions where justified, to make the rule of reason a fair and efficient way to prohibit anticompetitive restraints and to promote competitive ones.

By this remark, the FTC contends, the Supreme Court directed the lower courts and regulatory agencies to adopt “the analytical approach that the D.C. Circuit endorsed in Polygram Holdings” [a.k.a. the “Three Tenors” case]. Under that approach, which builds on the “quick look” or truncated Rule of Reason the Supreme Court began to apply in 1978 in the Professional Engineers case, an antitrust tribunal considering a practice that is “inherently suspect,” though not per se illegal, may presume the practice unreasonable unless the defendant “either identif[ies] some reason the restraint is unlikely to harm consumers, or identif[ies] some competitive benefit that plausibly offsets the apparent or anticipated harm.” Minimum RPM, the FTC argues, is “inherently suspect” because it bears a “close family resemblance” to “‘another practice that already stands convicted in the court of consumer welfare’ – horizontal price-fixing.” Thus, the FTC concludes, Leegin, properly interpreted, presumes the unreasonableness of minimum RPM unless the defendant establishes that anticompetitive harm is unlikely by showing, for example, that the manufacturer engaging in RPM lacks market power, that the impetus for the RPM arrangement is the manufacturer rather than its retailers, and that there is no dominant retailer that might be responsible for the RPM agreement. While Nine West made such a showing (which is why the FTC begrudgingly agreed to modify the order so as to permit RPM), “the circumstances in the market could change” (which is why the Commission required Nine West to continually justify its use of the practice).

This is hogwash.

As an initial matter, the quoted remark from Leegin contemplates a structured Rule of Reason, not the sort of truncated inquiry approved in Professional Engineers and its progeny. The Court was simply saying that as courts accumulate experience evaluating minimum RPM, they will be able to articulate the precise factors that should be considered in determining the legality of any particular instance. Courts have done this sort of thing with other practices that are subject to the Rule of Reason. Horizontal data exchanges, for example, are evaluated by considering specific aspects of the structure of the market in which the participants compete and the nature of the information exchange (see Todd v. Exxon). The Rule of Reason applicable to exclusive dealing practices involves a structured “qualitative foreclosure” inquiry (see Tampa Electric). As courts gain experience with minimum RPM, they will similarly set forth a structured inquiry that is both easier to apply and more predictable than the “kitchen sink” Rule of Reason first set forth by Justice Brandeis in the Chicago Board of Trade decision.

In addition, the FTC erred in concluding that minimum RPM is “inherently suspect” and thus presumptively unreasonable. The Polygram Holdings (Three Tenors) decision itself sets forth the standard for inherently suspect, but not per se illegal, restraints:

If, based upon economic learning and the experience of the market, it is obvious that a restraint of trade likely impairs competition, then the restraint of trade is presumed unlawful and, in order to avoid liability, the defendant must either identify some reason the restraint is unlikely to harm consumers or identify some competitive benefit that plausibly offsets the apparent or anticipated harm.

It is simply not the case that “economic learning” and “the experience of the market” have made it “obvious” that minimum RPM “likely impairs competition.” The Leegin Court was crystal clear on that point.

Presumably realizing as much, the FTC latches onto another statement from Polygram Holdings – the observation that a restraint may be inherently suspicious because of “the close family resemblance between the suspect practice and another practice that already stands convicted in the court of consumer welfare.” The Commission maintains that vertical RPM bears that sort of resemblance to horizontal price-fixing.

But that’s just crazy. While horizontal and vertical price-fixing (minimum RPM) both involve the fixing of prices, there are hugely important differences between the two practices. Most notably, minimum RPM usually cannot benefit the price-fixer (the manufacturer) unless it increases sales at the retail level, generally by motivating point-of-sale services that make the product at issue more desirable to consumers. By contrast, horizontal price-fixing benefits the price-fixers by decreasing output to consumers. Thus, saying that the two practices bear a close family resemblance because they both involve price-fixing is like saying that Gary Coleman and Heidi Klum resemble each other because they both have legs.

As we’ve previously explained (and as the FTC well knows), it’s really hard to use RPM to accomplish anti-competitive ends. Pro-competitive rationales undoubtedly explain most instances of minimum RPM, and for that reason, the burden should be on the party challenging an RPM practice to prove his less plausible story.

The FTC’s May 6 opinion seems to be coated with the fingerprints of Commissioner Pamela Jones Harbour, who has made no secret of her affection for Dr. Miles. At this point, though, it’s getting a little embarrassing. While we all know how hard it can be to say goodbye, it’s time to let the Good Doctor go.

My colleague and fellow UCLA alumnus Thomas Hazlett and I have published an op-ed in the Chicago Tribune proposing a partial solution, partially inspired by the early exit of Kevin Love from our beloved Bruin basketball squad, to the problem of early exit by potential NBA draftees.  We note that the problem is the NCAA cartel, which restricts payments to college players while attempting to maintain the charade of amateurism.  While this restriction on cash payments is not likely to be lifted any time soon, we proposed that universities extend insurance coverage that will allow interested potential draftees to stay in school and insure the risk of draft slippage.   Here’s an excerpt:

So the answer, given that universities cannot pay athletes market wages, is to at least insure them. Were underclassmen to be appraised, via draft rankings, and then offered compensation in the event—post-graduation—they slipped by some increment, they could hedge this very considerable exposure. The NCAA allows players to insure, but the player pays even though it is largely the university (and its fans) that benefits. Moreover, policies can only insure against career-ending injuries, leaving the more common outcomes—less serious injuries and performance-related changes in draft status—terrifying prospects.

The schools should extend broader coverage. The contracts we propose do not fully compensate college athletes for their valuable service, and would thus retain only some of the talent now jumping early to the pros. Yet, the approach would preserve the NCAA’s “amateur” wink, while allowing student-athletes to play college ball until their 21st birthday without risking the family jewels. A slam dunk, really.

Check out the whole thing.

A new Cato Book Forum Wednesday May 14th at Noon:

Featuring the author, Steven Teles, University of Maryland and Yale University Law School, with comments from Roger Pilon, Cato Institute and Hon. David McIntosh, Mayer, Brown, Rowe & Maw, former Member of Congress (R-IN), Federalist Society Co-Founder.

Starting in the 1970s, conservatives learned that electoral victory did not easily convert into a reversal of important liberal accomplishments, especially in the law. As a result, conservatives’ mobilizing efforts increasingly turned to law schools, professional networks, public interest groups, and the judiciary—areas traditionally controlled by liberals. Drawing from previously unavailable internal documents, as well as interviews with key figures, The Rise of the Conservative Legal Movement examines this sometimes fitful, and still only partially successful, conservative (and libertarian) challenge to liberal domination of the law. Steven Teles explores how this mobilization was shaped by the legal profession and the difficulties in matching strategic opportunities with effective organizational responses. He explains how foundations and other groups promoting conservative ideas built a network designed to dislodge legal liberalism from American elite institutions. And he portrays the reality, not of a grand strategy masterfully pursued, but of individuals and political entrepreneurs learning from trial and error. The book provides an unprecedented look at the inner life of one of the most striking developments in American public affairs over the last several decades.

In a series of posts (Part I, Part II and Part III), I’ve sketched out how the trend toward increasing detachment in L&E scholarship might reduce the influence of the L&E movement at the retail level and become its ultimate undoing. I must say, writing this series has been a lot of fun but has also been a bit depressing as somebody with more than a theoretical stake in the future of L&E in law schools, and more importantly, somebody who views the “retail” success of L&E as critical to its growth.

In this post, I decided to get a little bit more optimistic and focus on some potential solutions. As it turns out, the post is pretty long. So let me at least tell you upfront what I’m going to talk about so you can avoid it, skip to the bottom, or read the whole thing depending on your level of interest. Here’s the set of issues I want to address:

1. What efforts can be made to secure the benefits of specialization and formality while minimizing the likelihood of detachment from the traditional “legal” audience?
2. And what role can law schools and other institutions play in ensuring that L&E remains interdisciplinary (not leaning too far toward its “home discipline”) and relevant?
3. Relatedly, what can be done to save “Retail” L&E?

Notice that each of these issues starts with the presumption that retaining retail L&E is a good thing, and because L&E in the law school is conducive to the dissemination of L&E to relevant policy audiences it is also a good thing. I try to justify these presumptions in Part II, but won’t spend much additional time with them here. Instead, I want to focus on some institutional strategies that aim to minimize the detachment problem without throwing away the gains from specialization from having well trained economists do L&E.

There are several institutions than can play a role here, but lets start with the law schools.

1. What Can The Law Schools Do?

I should be clear that I believe the stakes are high here for L&E. There have been many important challenges to L&E in its development, and many critical moments. In his Intellectual History of the George Mason School of Law, Henry Manne cites to the revival of the Journal of Law and Economics at Chicago, publication of Richard Posner’s Economic Analysis of Law, publication of Guido Calabresi’s The Costs of Accidents: A Legal and Economic Analysis, and the first offering of the Economics Institute for Law Professors (which would later become inextricably intertwined with George Mason’s Law and Economics Center). 

I should make a small note about the last of those here that relates to the importance of retail L&E. The caretakers of the intellectual movement of L&E had these detachment concerns in mind from the very start.  Henry Manne notes that preferences for initial invitations to the Economics Institute for Law Professors were given to schools with group applications, “the more the merrier.”  This not only had the obvious effect of producing some L&E scholars by arming them with the tools of price theory, but it also increased the likelihood that economic concepts would be taught to law students.  Less obviously, having L&E friendly groups at law schools (even if not producing L&E scholarship) had the effect of increasing the likelihood that economics-oriented job market candidates would be palatable to the faculty as whole.  Moreover, the selection of Alchian & Allen’s University Economics (which is surely one of the most influential books in L&E), which avoided much mathematical formality, was surely deliberate.

The institutional challenges facing first and second generation L&E pioneers were quite different from those facing L&E now.  L&E was not an accepted intellectual movement then.  It is now. L&E scholars were undervalued on the job market, making it relatively cheap to stockpile L&E talent at a single law school like George Mason.  This is no longer the case.  Top L&E job market candidates regularly score entry level positions at top 20 law schools.  One of the most substantial challenges facing the earlier generation was to demonstrate the intellectual power of economics in solving problems relating to the law and institutions.  The intellectual power over economics, and L&E, had to be marketed to a skeptical legal academy.  Now, even those who disfavor economics now mostly accept that L&E adds value to modern policy discussions (Hillary Clinton aside). The modern challenges are those faced by a more mature discipline, and are in some ways natural consequences of L&E’s success.  While the current challenges might be natural and the byproduct of a successful intellectual program, they are serious challenges.  Indeed, this is a very important stage in the development of L&E. 

So what can the law schools do in light of some of the issues we’ve discussed? To repeat, the primary problem causing the trend toward detachment from the legal academy is the increasing formalization of economics itself.  There is not much law schools can do about that movement per se, and I’m not sure that they would want to if they could. The law school’s mission here should be to encourage good L&E scholarship, whether it is formal, informal, empirical or theoretical.  With respect to both formal economic theory and econometrics, law schools must find a way to encourage work that is likely to be relevant to the world that the legal academy lives in and reflects some careful thought about the law and legal institutions.

There are really two problems here. The first is encouraging L&E scholars to do relevant work. This can be a challenge for freshly minted Ph.D.’s who are preparing for an economics job market where there is a substantial premium on fancier mathematical elegance and real world relevance sometimes takes a back seat. The second is that formal methods might prevent law school colleagues from valuing L&E work that is also highly relevant. We want to take advantage of the benefits of formal methods while retaining relevance. Law schools can also play a proactive role in solving this second problem.

Encouraging Relevant Work. What can law schools do to encourage L&E scholars to do more relevant work? The first thing is to help produce the next generation of L&E scholars and influence the type of work that they do. I’m going to address that supply side issue separately (see below). Other than helping produce JD/PhD candidates that will join the legal academy, there are a number of possible strategies. Here are a few:

• Hire Empiricists/ Econometricians. One obvious way that a law school can do this is to hire more empiricists than theorists. This is not to say that law schools should “give up” on L&E in favor of a more general Empirical Legal Studies movement. Empirical L&E is and should harness the insights from economics. This is its primary source of advantage over other forms of empirical legal studies. But the implication of this series of posts has been that the detachment of the modern economic theorist from the legal academy has already started, and is a trend that will continue. Better for law schools to be ahead of this trend then behind it.
• But Don’t Just Hire Any Econometrician. The key is that law schools want to hire L&E scholars whose work will be valuable and relevant to the legal community. Hiring committees wanting to be ahead of these trends should be looking for empiricists who know the law, are interested in it, and have an interesting and relevant research agenda. By the way, this is hard work by hiring committees and others can pay off. I don’t mind saying that when I came on the academic job market this was the major hang up that most law schools I interviewed with were willing to share with me (at least, it was one of them). At the time, I was a freshly minted PhD with a dissertation full of economics papers on shelf space contracts and vertical contracting problems. George Mason faculty members asked me over and over whether I was interested in the law, where my research agenda was going in 2 years? 5 years? I had to try to convince them that despite not having written ANYTHING yet about the law, I was interested. Plus I had to sell them that the tools I was using in my economics work had more general application. Luckily, George Mason is a receptive audience for that line of argument. While my answers must not have overwhelmed them, they were willing to give me a VAP to “wait and see” how things turned out. The point is that this type of questioning and really understanding your potential hires can help to identify economists that are going to do relevant work. You just have to ask them and then listen!
• Encourage Collaboration. Collaboration is one way to recruit economists to work on problems that are relevant to legal institutions while also ensuring that the work reflect careful thought about those institutions rather than assumptions and modeling decisions that strip the analysis of relevance.  I have in mind here combinations of economists and legal scholars across departments, but it can certainly involve economists in law schools (think Kobayashi and Ribstein; or Klick, Kobayashi and Ribstein).  Of course, many of these collaborations arise naturally without any coaxing from the administration.  There are a lot of incentives to collaborate in this fashion.  I do think this sort of thing arises naturally at George Mason because of the intellectual environment. I can think of two co-authored projects that I’ve worked on that came about because of “hallway” conversations. But greasing the tracks for this kind of thing cant hurt. I’m not saying that the school needs to set up a bounty for co-authored work, but more subtle steps might be appropriate: have an L&E Workshop, bring in interesting speakers to that workshop and encourage faculty wide attendance, have non-economists collaborate with the L&E folks to decide who is invited to give what papers.  Any other ideas out there?
• Hire Economists Who Can Teach Law Students. Of course, law schools want all of their professors to be able to teach. But my point here is that to the extent that law schools are concerned about detachment created by specialization and formality, there is nothing like an economist who can get up in front of a room and explain the intuition of his model, or his identification strategy, to a room full of non-economists. I get nervous when I meet economists who cant do this but can prove every proposition in MGW. Hyperplanes, fixed point theorems, instrumental variables and first-order conditions are all important.  But a good economist in a law school environment ought to understand price theory (along with other things) and ought to be able to explain both economic concepts and his scholarship to general audiences.  Hiring L&E scholars that can wholesale their ideas to non-economist colleagues, collaborate, participate in school’s intellectual community, and retail economics to students, is a good way to avoid or at least minimize the detachment problem.

Encourage faculty to understand the relevance of L&E. The second problem is that L&E scholars doing formal but relevant work might still be detached simply because the work is too mathematically-oriented for attract the interest of colleagues. I’d like to think this would not be a major problem and that law faculties would be interested in important empirical work in their field or what insights economic theory could provide.  Or that it could be solved by paying attention to the problems discussed above, e.g. integrating L&E faculty into the general intellectual activity of the law school, not letting your econometrician sit in his office and run STATA programs all day, encouraging L&E scholars to workshop their projects in-house as well as at economics conferences, informal workshops and lunches, etc.

Here, I think it is the general legal community that is going to have to adjust more than the L&E scholars thanks largely to the success of the empirical legal studies movement of which empirical L&E is a part. Sophisticated estimation methods are simply part and parcel of this project, and they clearly add value to the scholarly discourse in virtually every area of the law. Even if non-economist colleagues want to dismiss this kind of work, or have the type of general aversion to quantification and measurement that is not uncommon amongst law students, good empirical work isn’t going anywhere. Better for the law school to embrace it and work towards setting up an institutional culture that values this work. A good way to start is providing research support for your econometrician(s): funding for RAs, statistical software packages, and data. A second step is to make sure those seeking placements in peer reviewed economics journals know that there work will be valued at the tenure review stage.

2. Training the Next Generation of L&E Scholars

A separate, but obvious, implication of the detachment theme is that there is a profitable opportunity for the production of L&E scholars who will produce, translate, and retail accessible scholarship. This does not necessarily mean informal scholarship. It includes theorists and econometricians who understand and are interested in studying law and legal institutions, and who also have the ability to communicate with both economists and legal academics. Competition among empirical L&E types in law schools will intensify as these methods increase in value and entry level JD/PhDs find homes at top programs. But what about theorists doing relevant and accessible work? What about informal L&E scholars and economic theorists in the model of Coase, Alchian and Demsetz? What about price theory and the law in the spirit of Becker?

Who will train the next generation of L&E scholars? Notice first that this question was a critical one in expanding the original L&E movement beyond its first and second generations. Henry Manne has explained the importance of training economics graduate students, and avoiding precisely the detachment problem we’ve been discussing, to the Law and Economics Center (the bold is mine):

Another important part of the Center prospectus was the proposal for a specially designed law degree for PhDs or near-PhDs in Economics. At the
time there was no organized program for the production of new law and
economics scholars. There were, of course, a few people in law teaching who had advanced degrees in Economics. But some of them were too mathematical in their orientation to be of much practical use in the popular interdisciplinary work, since ultimately the value of this scholarship would be in its use to judges and practicing lawyers.…

So there was not a reliable source of future law and economics scholars, and, unless such a source could be guaranteed at this critical stage, the field could easily fizzle out. This argument for producing future scholars appealed to a new law and economics enthusiast by the name of Frank O’Connell, a lawyer, who, as it happened, was the President of the then newly active John M. Olin Foundation. O’Connell presented the entire prospectus of the Law and Economics Center to Mr Olin, who himself then became an enthusiast for the field and agreed to fund five three-year fellowships for economists to attend law school under the Center’s aegis. The existence of high-quality graduate students gave the Center a panache and an excitement that it did not have before – or after. Ultimately there were 33 of these John M. Olin Fellows at Miami and Emory, at least 16 of whom ended up in academia, a pretty good percentage even for Harvard or Chicago but almost unbelievable for Miami and Emory.

So who will be this generation George Mason? Or Emory? Here are a few possible answers.

• George Mason / Vanderbilt Model. The George Mason model is still alive and kicking. Indeed, the George Mason Law and Economics Program still produces some excellent joint degree JD/PhDs along with the GMU Economics Department, and also offers Levy Fellowships to PhD candidates seeking a law degree at George Mason. Jonathan Klick (heading to U Penn from Florida State), one of the most exciting young empirical L&E scholars in the nation, is the pride of the Levy Program and its biggest success story. Vanderbilt Law’s new PhD in L&E program offers the same type of model with a slightly different emphasis and curriculum than George Mason’s Ph.D. program (Vanderbilt lists its principal fields as including “behavioral law and economics, risk and environmental regulation, and labor and human resources.” But the model here is the interdisciplinary model in a manner which addresses some of the “detachment” problems that we’ve discussed by housing the training of the student in the law school and being mindful of the production of scholarship that is important to the legal academy.
• In-house Training. Another possibility, and one that might deserve further discussion, is that the next generation of L&E scholars are already in the legal academy and just don’t have the economics training. The logic is that if the economics departments don’t care about law or law and economics as a field, we ought to train them ourselves (see above). But what better source for bright scholars that understand the law than law school professors themselves? Some might not have the mathematical chops to make it through an economics PhD program. Some might but might not be interested. Fine. No offense taken. But it strikes me that the subsidization of legal scholars interested in graduate economics education would be a great investment. I know some schools do this some of the time. But it strikes me that this might become a more popular approach in 5 years than it is now. Anybody out there having some PhD economics training subsidized by their institution and want to talk about it?
• Solum’s Multi-Disciplinary Model. Larry Solum raises the related possibility that law schools take over the production of the next generation of scholars interested in L&E (and other things) and other interdisciplinary methods. Here’s Solum on what this model would look like: “If law ere to follow this path, it would require the creation of multidisciplinary PhD programs in law that introduced future legal academics to empirical legal studies, positive legal theory, formal legal models, normative legal theory, advanced doctrinal methods, and so forth.”
• Nobody. Sigh. This is the option where L&E withers off and disappears from the legal academy altogether as formal work migrates to economics departments and even the empiricists are viewed as “detached.” I assign a low probability to the extreme version of this option, but a slightly higher probability to more moderate (but still unattractive) versions of this story where bad informal L&E crowds out the good and the mathematical stuff disappears to economics departments.

3. The Olin Foundation is Gone. What’s Next?

There is no doubt that Olin Foundation money was at the heart of the success of the growth and development of the L&E movement. Steve Teles’ Rise of the Conservative Legal Movement goes to great lengths to explain the role of this funding in spreading the gospel of L&E. With the Olin Foundation money all wrapped up, and L&E standing as a mature discipline in the legal academy, what role can other institutions play in making sure that the L&E movement doesn’t unravel while its influence on policy discourse slowly dies?

I have three ideas I want to raise and that I hope start some discussion.

Academic Law and Economics Centers. There are a number of law and economic (or similarly oriented) centers housed at law schools around the country: UCLA, USC, George Mason, Texas, Stanford, Berkeley, Chicago, Harvard, and Yale all have them. As do others. I can’t think of any that are more active than Northwestern’s Searle Center, where I’ve had the pleasure of participating in a number of programs over the past year or two. But they’ve got what I think is the right model.  One of the themes of Steve Teles’ Rise of the Conservative Legal Movement and that comes up frequently in discussions with first and second generation L&E scholars are just how important the early Liberty Fund meetings and similar workshops and conferences were.  The “research roundtable” format bringing together lawyers and economists to discuss specific topics is one that has been highly productive in L&E in large part, I think, because of the collaboration of people and ideas at these events (many of which result in co-authored papers, research projects, etc.).  But law and economics centers can play a critical role in sponsoring these types of events and reaching out beyond hosting the in-house L&E workshop.  It is also a useful way to attract and recruit young economists and PhD students to the problems that we think are important. 

Embracing the Young Economists. I think one of the biggest potential solutions for L&E moving forward is not simply avoiding detachment of current L&E scholars but bringing in new blood that is interested in doing relevant and important work. We’ve talked about some of the solutions. But those solutions all assume that the trend within economics is a given. But we can relax that assumption and open the door to some new possibilities. For example, we might not be limited to accepting the fate of having to “train our own” next generation.  Maybe we don’t have to give up economics departments doing the training.  L&E needs to find a way to re-market itself to young economists and graduate students and convince them that its problems are important.  Economists want to do relevant work.  At least most do.  I promise.  Right now, L&E is just unpopular in economics departments.  There is a premium in economics right now is for clever and creative solutions that use a lot of math, whether theoretical modeling or estimation.

But there is no reason not to embrace what is good about formal economics.  That is something that I’ve repeated as a theme through these posts.  Specialization is good.  And advances in econometric techniques have allowed more powerful insights into causal inference (I’m thinking about panel data techniques).  Formal math gets a bad rap in L&E sometimes.  It can be misused.  But so can the written word.  Check out a few of the top law reviews.  You think economists are the only ones who use language to camouflage hidden assumptions?  Or show off their skills in the chosen language at the cost of accessibility to a general audience?  Please.   But new formal techniques are not all window dressing.  They have benefits than can be used to create insights relevant to L&E and the world that we live in. 

Geoff made this point in a comment to a post I wrote about some of the critiques that were going around about “cute-o-nomics,” and the perils of this sort of empirical work.  Toward the end of his comment, he hones in on the exactly the tradeoff we’ve been discussing involving elegant mathematical economics and sophisticated empirical strategies and L&E:

The folks like Levitt who do this work, who can perceive problems and think through creative solutions to them, are applying real economic intuition. They may use a lot of math, to be sure, but the underlying logic is generally quite simple (not as in “easy” but as in “not-complicated”) and complex mathematics is not necessary to explain or to understand what’s going on. It is economics in the style of Tullock and Alchian and Coase. These are real lessons learned through application of a powerful system of analysis. In contrast, too much of economics today seems to be little more than mathematic gymnastics. It is largely devoid of real fundamental understanding of human behavior and of the analytic power of a few simple rules to explain it. The debates don’t turn on seemingly fundamental questions like, “how well does this explain observed behavior?” Rather the debates are about the elegance of complex models and the proper use of this variable or that equation. Important endeavors, to be sure, but hardly deserving of more accolades than the work of incisive “natural” economists.

That’s a great explanation of the problem, but also the promise of harnessing some of the really great talent coming out of economics departments if we, being the legal academy and interested institutions, can convince them that we’ve got problems worth solving. And we do. But we are failing to solve a marketing problem. L&E needs to be marketed to the economists. We’ve got interesting problems to solve. Economists want to do work that matters and that is read. Notice how many of these folks write popular books and blog? Don’t tell me they don’t want to influence large audiences and participate in relevant policy debates. And there is an upside to this trend in empirical economics to use clever identification strategies and instruments to get at causal relationships — even if one can sensibly argue that there are some tradeoffs between cleverness and relevance as well. Here’s what I wrote in defense of Levitt a while back when he was getting some heat from economists about his “clever” research agenda:

One might think that at least one important consequence of Levitt’s research agenda, in addition to adding to our economic knowledge (which used to be enough, didn’t it?), will be a contribution to making popular again economics that is more connected to explaining real world phenomena of all types with economic intuition, models, and data. If that happens, Levitt isn’t ruining economics. He’ll be saving it. Or at least making it more relevant. And definitely more fun. If Levitt is going to take the brunt of the attack for “clever” research, at a minimum, we ought to be willing to give credit for sending the pendulum back towards the empirically-oriented side of the spectrum by making it “cool” to worry about the real world again.

L&E institutions ought to be embracing the economists and graduate students and getting them interested in L&E problems. Lets invite promising economists to conferences, workshops, discussions, for coffee. Let’s fund some dissertations. Let’s make it cool to do L&E in economics departments. Maybe it is impossible to get AER to publish the kind of economics that will have a lot of influence in legal circles. Maybe. But AER isn’t all there is to economics. I really think law schools and legal scholarship have a lot to offer young economists. I think a better pitch needs to be made to recruit economists to come pay attention to our problems. And those interested in the future development of L&E ought to try to improve that pitch.

Training Judges.  I only know what I’ve read about the programs at George Mason’s LEC, and Henry Butler’s (now running the Searle Center, which hosts the Brookings Judicial Education Program) program.  Judicial education is one of the unequivocal success stories of the L&E movement.  Large fractions of the judiciary have come to these programs because they are interested in learning basic microeconomics.  Educating the judiciary in basic economics might be one of the most important functions of the L&E movement.  At least, it is a critical part of L&E’s success at the retail level.  These programs seem to be moving full speed ahead and remain very popular.  While I have no reason to believe that these programs will slow in the near future, one might suspect that detachment would eventually take a toll on the demand for judicial education as well to the extent that economics’ influence on the law declines.   It strikes me that maintenance and expansion of these programs, as well as programs to train interested law professors in economics, should be at the heart of the institutional mission to continue the healthy development of L&E.

I think I’ve got one more post left in me to finish off this series.  I’ll finish up with some additional predictions about what areas in L&E are ripe for development in light of these trends, touch on some items I’ve left out of the discussion completely (what about behavioral law and economics?  neuroeconomics?), and some thoughts about what the distribution of L&E talent across schools might look like in 10 years.

Josh’s series-in-progress on the future of law and economics (Part I, Part II, Part III…and more to come) is simply fantastic. It’s also a bit depressing for those of us who are economically inclined but lack the skill set required to do sophisticated modeling and/or rigorous empirical work. Josh’s latest post (Part III) suggests there might be a role for us posers as “translators.” I’d be completely happy with that role. Indeed, I’ve always viewed my own economically-influenced scholarship as “economic analysis of law,” not “law and economics” per se, for it consists of analyzing legal rules in light of the models and empirical findings of other, real-live economists. But I’m still a bit depressed because, as Josh says in Part III, even translators need formal training, and I don’t have much of that.

There is, though, one scholarship trend – unacknowledged by Josh – that gives me hope. That trend is behavioral law and economics (BL&E). As Christine Jolls explained in this paper, BL&E “attempts to improve the predictive power of law and economics by building in more realistic accounts of actors’ behavior.” In particular, BL&E jettisons the traditional rational choice model of human behavior – the assumption that humans are rational self-interest maximizers – and replaces it with a model that purports to take account of individuals’ cognitive quirks.

While challenges to the rational choice model are old news (everyone recalls the art major in Econ 101 who kept insisting, “But people don’t really act that way!”), BL&E has gotten traction lately because of studies suggesting not just that people act irrationally but that they do so in systematic ways. If, in fact, departures from rationality are systematic, then they are predictable. And if they are predictable, then they can inform legal analysis, helping us structure rules to optimize outcomes in light of individuals’ various quirks.

Without doubt, BL&E represents an important trend in legal scholarship. (Stephen Choi and Adam Pritchard go so far as to refer to it as “the growth stock of legal academia”!) Perhaps that’s because it generates policy recommendations that are more attractive to most law professors than those generated by traditional L&E. Because most voluntary transactions leave both parties better off and are thus wealth-enhancing, traditional L&E has typically advocated laissez faire policies that permit free contracting and private ordering. This has riled lots of “liberal” (not in the classical sense) law professors, who haven’t been so fond of L&E’s generally libertarian policy prescriptions. BL&E, on the other hand, is much less confident that free contracting and private ordering lead to optimal outcomes. Accordingly, it tends to generate more interventionist policy recommendations – the sorts of policies to which most law professors are attracted.

For evidence of the influence of behavioral economics and BL&E, take a glance at Amazon.com’s current list of best-sellers in the business and investing category. Number 11 is MIT economist Dan Ariely’s Predictably Irrational: The Hidden Forces that Shape Our Decisions. That book explains for a popular audience some of the cognitive quirks behavioral economists have purportedly discovered. Number 13 is Cass Sunstein and Richard Thaler’s Nudge: Improving Decisions About Health, Wealth, and Happiness. That book prescribes some “libertarian paternalist” public policies that might improve society, given that individuals are beset by the sorts of cognitive quirks discussed in Ariely’s book.

So why am I optimistic that there’s a role for those of us with some basic economic sense and analytical skill but without extensive training? Because a good bit of the normative BL&E work is open to significant, but relatively non-technical, criticism. (I’m not talking about Sunstein and Thaler, whose book I haven’t yet read and whose work is generally quite insightful.) As I explained in this short response article, behavioral theorists are particularly susceptible to at least two mistakes: they may discount the rational account too quickly, and they may hastily advocate an interventionist policy response without accounting for the likelihood of government failure. Those of us with a solid understanding of microeconomic theory and public choice may be able to offer important criticisms of their ideas — without a lot of math formulas and regressions. Of course, the better trained we are, the more rigorous our criticisms will probably be. But I’m holding out hope that we won’t be relegated to the dust bin.

In previous posts (Part I and Part II) I discussed the increasing trend towards formal mathematics in L&E scholarship and some of the potential issues this raises for the L&E movement as it becomes more detached from the legal academy. This post focuses on another question: What will L&E scholarship in law schools look like in the future?

The most natural question to start with, and one I’ve discussed a bit in prior posts, is whether there will be any L&E scholarship in law schools in the future at all? I think the answer is yes. But the L&E scholarship that comes out of law schools is going to look different. One possible change is that there is a plausible concern that formal L&E scholarship will be “crowd out” high quality informal scholarship and render L&E without any presence at the retail level. Under this scenario, the trend towards increased formalism is sustainable, formal theoretical and empirical L&E scholarship must be valued by colleagues despite the fact that most of them aren’t interested in it or can’t read it. A second, and I think more likely, scenario is that as formal L&E becomes increasingly detached from, and presumably less valuable to, its intended audience but also colleagues in the law school, L&E scholars will migrate toward economics departments and leave the legal academy behind. (Larry Solum raises this and other possible scenarios in a very thoughtful response to this post which also addresses how this trend might play out in the legal academy more generally).

I tend to think the second scenario is much more likely. I don’t see the current trends as sustainable in the long run. To be clear, this is not a critique of L&E scholarship per se. Highly formal theoretical and empirical work is highly valuable. The stale debate about whether formality in economics is good or bad on the whole held aside for a moment, there can be no serious claim that formal economic contributions, harnessing the power of mathematical precision, have increased our economic knowledge and been an engine of progress for L&E. The question I’m dealing with here is about the limits of this trend. I’m not sure how close we are to the limit. And that is worth discussing. Entry level placements and lateral moves suggest that L&E in law schools suggest that L&E is still on the rise. But what happens to L&E scholarship in law schools when L&E as a discipline becomes so detached from “the law” that our theories cannot be retailed to a general audience or the results of our research cannot be disseminated to the legal academy? What type of scholarship stays in law schools? Who migrates to economics departments? Does some scholarship simply die off, too formal for law schools and too interested in the law to get tenure at economics departments? Lastly, do these changes suggest any new and profitable opportunities for legal scholars?

Here are a handful of thoughts that propose some tentative answers to these questions.

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This just in:  Microsoft withdrew its most recent bid for Yahoo and announced it will not be making a hostile move for Yahoo.  This comes on the heels of the announcement a mere day ago that Yahoo and Microsoft were sitting down to try to hammer out a friendly deal.  Fickle, that Microsoft is!

Allow me to answer questions folks might ask in the aftermath:

1.  Question:  What does this retreat by Microsoft say about the economy and the M&A market? 

Answer:  Nothing.  Nada.  Microsoft wanted to buy Yahoo for cheap.  Yahoo wanted no part of that.  Over the past 20 months, while Yahoo’s stock has been weak, it has traded on-and-off in the $30-ish range.  Microsoft’s final $33 per share bid was nothing to write home about.  If Microsoft was making a credible bid and they thought Yahoo was a good long-term strategic acquisition, we would have seen bid prices moving up further than they have over the past three months.

2.  Question:  What is going to happen on Monday to Yahoo’s stock price? 

Answer:  Yahoo’s stock price is going to get pummeled by arbs exiting their short-term investment.  The drop in Yahoo’s stock price will mean nothing of substance.  I promise.  So, while the media is going to get all excited on Monday about the drop in price, and the 5 p.m. news on Monday is going to talk about Yahoo being the day’s biggest loser, ignore the chatter.  Or buy Yahoo stock while it is cheap.

3.  Question:  Is the Yahoo board going to get sued?  Wasn’t this a good deal for Yahoo and the Yahoo board just gave it away?

Answer:  No and no.  Well, “yes” and no.  Yahoo’s board has already gotten sued both by shareholders who thought the Yahoo board should have taken the Microsoft offer and, oddly, from shareholders who thought Yahoo was favoring Microsoft.  Either way, I think those suits are non-starters.  Again, Microsoft was not offering a huge premium for Yahoo.  If I were on the Yahoo board, I would have said “no,” too. 

4.  Question:  Is Microsoft just bluffing?  Will they come back with a better bid?

Answer:  I hope not.  I am not convinced that Microsoft yet has a really solid reason for why they need to buy Yahoo, other than thinking they could get Yahoo for cheap.  Now that Microsoft realizes it cannot buy Yahoo for cheap, I doubt they will be circling back around in the short term.  The fact that Microsoft announced tonight that it did not intend to make a hostile bid speaks further to the dim chances they will circle back around in the short term.

To that end, Microsoft should thank the Yahoo board that the Yahoo board stopped Microsoft from making a purchase that does not make a whole lot of sense.  Am I the only person who remembers the AOL-Time-Warner deal from just under a decade ago that is NOW being unwound?  That deal NEVER made sense, and, LOOK, ten years later, it is being unwound. 

Note to Microsoft CEO Steve Ballmer:  Send Yahoo CEO Jerry Yang a nice fruit basket on Monday, to thank him from saving Microsoft from its urge to merge.

I’ve been waiting for my old con law prof to take a political stand I could really get behind, and he finally has. Barack Obama is the only one of the presidential candidates to take a firm stand against this shamefully populist gas tax holiday. Good for you, Prof!

Now, I’m not normally a big tax guy. Taxes generally expand the government’s coffers, enabling the state to do more of the stuff I don’t think it should be doing, and lots of taxes (e.g., capital gains taxes, Sen. Obama) create terrible, wealth-destructive incentives. But not all taxes are created equal. Activities that impose costs that are not borne by the people engaging in the activities – negative externalities, to use economic jargon – may be appropriately taxed. Gasoline consumption, which creates all sorts of negative spillovers, is one of those activities.

A friend of mine whom I hadn’t seen for a while came over the other night. I laughed when I realized he’d traded his ridiculous monster truck (he’s a city boy who definitely doesn’t need that much vehicle) for a sensible Honda Civic. “What’s up with the ride?” I asked. “Gas prices,” he replied.

What good greenie (as Hillary is trying to portray herself) or economically astute policymaker (as McCain is trying to portray himself) could think this is a bad thing?

The DC Madam killed herself today, about a week after being found guilty by a jury on prostitution-related charges of money-laundering (among other things). 

Among her alleged clients are Louisiana Senator David Vitter, former U.S. Deputy Secretary of State Randall Tobias, and Harlan K. Ullman, a senior associate with the Center for Strategic and International Studies, who developed the “shock and awe” doctrine. 

I titled this post with a “Dammit,” something I am not inclined to do normally in this academic setting, because I am just disgusted and disheartened at how this has played out.  Anyone who has paid attention to how women versus men have been treated in the context of prostitution could have seen this train coming down the tracks. Women who are exposed as having been involved in prostitution scandals often kill themselves.  Men tend to waltz away, unscathed in the long term.  I realize these are gross generalizations for which I have no empirical substantiation, but I am thinking about Brandy Somethingorother, from about a year ago.  Without going back and looking the story up, I think Brandy was a professor (or used to be) who was also a prostitute.  When she was publicly revealed as a prostitute, and when it seemed that she was going to be in huge legal trouble, she killed herself.  I do not recall that any of her male clients, nor any of the DC Madam’s male clients, killed themselves.  Just the DC Madam and this Brandy Somethingorother killed themselves.  Why is it that the women are scorned and shamed and kill themselves but the same thing does not happen on the male side? 

I am one of three daughters, raised in an all-girl household (save my long-suffering father).  All three of us Nowicki girls have graduate degrees.  We were raised completely unaware of the notion that being a girl ever mattered in the bigger-picture sense.  (It mattered in terms of whether I needed to lift the toilet seat and whether I was likely to grow to a size to be able to compete on the football field with any chance of success, but it did not matter – or so I thought – in terms of justice and fairness in life.)  We were raised with the belief that everyone - women, men – are judged equally on the basis of their achievements and missteps, and gender is irrelevant.

But, yet, the DC Madam was left dangling by her neck in some shed in Florida, while Vitter, Tobias, and Ullman are out there, happily employed, likely soon to put their affiliation with the blissfully deceased (likely their view) DC Madam far, far behind them.  *That* is what prompts me to title this post “Dammit.”  We all could have seen this coming.  *That* is why this post is titled “Dammit.” 

It strikes me as ironic that I just learned today that corporate and securities law professor Jill Fisch was hired by UPenn, such that there is now one fewer top top law school with basically no women among the corporate/securities law faculty.  Score one for the women.  Congratulations Professor Fisch.  Tough to juxtapose that, however, with “RIP Deborah Jean Palfrey.”  I guess today is a wash in terms of equality for women.  Dammit. 

My condolences to Ms. Palfrey’s mother.  Regardless of the legality or illegality of Palfrey’s actions, it should not have ended this way.

Dammann and Schundeln have a new paper up on SSRN entitled “Where are Limited Liability Companies Formed? An Empirical Analysis” (see here) that examines the state of formation choice of 64,000+ LLCs. Here’s the abstract:

We empirically study the incorporation choices or, more accurately: formation choice, of limited liability companies. Most of the firms in our large sample of more than 64,000 limited liability companies are formed in the state where their principal place of business is located (the PPB state). As their size increases, however, firms become more likely to be formed outside that state, with Delaware emerging as the primary destination for those that are not formed in the PPB state. In particular, of those firms that have 1,000 or more employees, roughly half are formed outside their home state, and of the latter, more than 80% are formed in Delaware.

We show that substantive law matters to the formation choices of closely held limited liability companies. More specifically, limited liability companies appear to be migrating away from those states that offer lower levels of protection for minority investors: We find statistically significant evidence that firms are less likely to be formed in their PPB state if the latter offers relatively lenient rules on managerial liability or if it allows companies to be dissolved via a less than unanimous resolution of the members.

In my previous post, I sketched out some trends in the Law & Economics movement in recent years. Specifically, I’ve focused on the trends towards increasing mathematical formality and specialization within economics as a stand alone discipline. The post triggered some thoughtful responses from Larry Solum and Larry Ribstein for which I am grateful. I also received a number of responses in private which asked, rather bluntly, “So what?” The point was that even if everything I claimed about trends in economics and L&E were true, perhaps the result would be L&E scholars being more detached from the legal academy and migrating to economics departments. Again, so what? L&E work would be getting done by somebody somewhere. More than one of these private responses included the observation that maybe L&E types should be in economics departments anyway where there are tougher tenure standards, peer review, and less pay.

I planned on jumping in to the issue of where I think L&E in law schools is heading (including the issue of theory versus empirical work that David Zaring raised in the comments to the first post) and then what law schools and other institutions could do to solve the “problem.” But it seems like I might have more work to do to establish that the movement of L&E away from the legal academy would, indeed, be a real problem worth solving. So, in this post I’ll try to make the case that the trends highlighted in the first post, despite the benefits of mathematical rigor and precision, should give L&E scholars pause. The next three posts will get into the details of how I think this trend will play out in law schools, economics departments, and in legal scholarship itself.

My sense is that the increase in mathematical rigor poses special problems for L&E for several reasons. The primary reason is that the historical success of law and economics turns at least in part of its unparalleled success at the retail level. First and second generation producers of law and economics scholarship — think Director, Alchian, Coase, Williamson, Posner, Easterbrook, Calabresi, Stigler, Demsetz, and others — were able to “sell” important economic insights to lawyers, judges, policy audiences and the legal academy more broadly. Henry Manne took advantage of the power and accessibility of the economics insights from these L&E scholars by bringing them together at Economics Summer Camps to teach economics to law professors. The newly educated law professors would in turn, retail the power of economic thinking to law students. A similar process would take place with efforts to teach federal judges basic microeconomic theory through the George Mason Law and Economics Center programs which were also a brainchild of Henry Manne (this seems like a good place to plug Larry Ribstein’s essay on Henry Manne: Intellectual Entrepreneur which is forthcoming in a book I am co-editing with my colleague Lloyd Cohen on the Pioneers of Law and Economics).

In any event, the point is that much of the success of L&E owes to its success at the retail level. Antitrust is a wonderful example of the success of L&E. There is perhaps no other area where economic theory is integrated into the law. But even in areas where economics have not completely dominated the intellectual discourse, L&E has been an important voice in academic and policy debates in many areas of the law. Its voice is one that pushes for an understanding of how economic agents will respond to changes in the law, how markets work, and how markets respond to legal change. No matter whether one adopts the L&E worldview, as I do, I don’t think there is much debate the L&E has added a significant and valuable perspective to legal discourse. Indeed, one can make the case that its impact has been mores strongly felt than any other interdisciplinary approach to the law. The recent trend towards detachment from the retail audiences, from this perspective, is a special historical development in L&E. It is also one that is quite troublesome from the perspective of an L&E scholar who would like to see the field retain its influence. L&E scholarship, it seems, is at a crossroads. The concern is not just that L&E scholarship as we know it will move to economics departments. After all, economics departments do not currently value much of the work that is done by L&E scholars. The concern is that L&E scholarship as we know it will disappear altogether.

So far, I’ve unfairly painted a picture of formal methods in economics as ruining L&E without any upside. This may appear odd coming from somebody who does some modeling and econometrics in his own research. So let me make sure I’m being clear. Mathematical rigor and formality is not without its benefits. Modeling can help generate testable implications. Mathematics can force out into the daylight hidden assumptions and make explanations more precise in a unique way. Like any other tool in economic science, mathematical modeling can produce insights for some problems but maybe less so for others. It would neither make sense to claim that L&E left no room for the sort of detailed institutional analysis and exposition supplied by Alchian, Coase, Williamson, Klein, Demsetz, or Tullock than it would to claim that L&E should ignore the insights generated by careful theoretical or econometric work. Though I do quite a bit of econometric work in my own research, I do believe (perhaps to the chagrin of my econometrician friends) that there is still some important empirical work to be done in L&E that doesn’t necessary involve large scale datasets and statistical analysis.

Frequently, discussions of the increased formality of economics also include the observation that it has become pretty easy to run a regression with modern statistical software packages. This is also an important development in L&E scholarship and empirical legal scholarship more generally. I agree with others who have observed that the reduced costs to doing empirical work has become a problem in L&E scholarship in the legal academy. It is certainly true that legal scholars will make improper use of econometric tools from time to time. It is also true that misuse of empirical methods is less likely to be prevented by the peer review mechanism. Though on the positive side of the ledger, conferences like CELS are doing excellent work to raise the bar for empirical scholarship. Similarly, economists may fall prey to the mistake of letting the tools and methods determine which questions they answer, perhaps because the tools and methods determine what is publishable in top journals, or produce models or econometric work that is of little relevance. Neither of these errors are particularly interested to me, though I suspect the incidence of both errors has grown dramatically over time with the increasing demand for empirical legal scholarship and also changes in economic science over the past 30 years.

While I’ve focused on the costs of formalization and specialization throughout this and future posts, I do not want to be misunderstood as leveling the “physics envy” critique at economists, e.g. that economists use modeling as a thinly veiled attempt to make their work look more serious or to adopt a complex language to increase barriers to entry (an accusation most lawyers should be familiar with). For instance, a significant portion of my own research agenda involves some theoretical modeling and econometrics. As an aside, I’ve always thought that particular rhetorical critique (”physics envy”) was not very effective. Formalization clearly has both benefits and costs. The question I am interested in is how this change in economic science will change L&E as a discipline — its already started — and as we know it in law schools.

The increase in mathematical rigor in economics has translated, not surprisingly, into work in L&E that also makes increasing use of formal modeling or econometric methods. One consequence has been something I described as the “retail problem” in my last post:

L&E scholars will do work that is very relevant, and maybe even very good, but legal scholars wont know about it or care about it because of the “translation” issues associated with the formal mathematics will prevent it from being retailed to broader audiences, (the “retail” problem)

In other words, increased formalization has meant that a larger fraction of relevant and high quality L&E work has become less accessible to lawyers, judges, and policy makers. A simple way to describe this trend towards increased formalization might be as a movement toward of L&E towards the prevailing methods and trends in its home discipline. One might question whether this is a problem at all. For the reasons discussed above, I think it is. And at the very minimum, this trend has serious implications for the direction the L&E movement is headed in law schools and in legal scholarship.

The rest of this series, hopefully, will discuss various aspects of this problem. There are at least three immediate questions I think worth discussing concerning the implications of this trend of L&E generally:

(1) What will L&E scholarship in law schools look like in the future? This encompasses questions like whether informal L&E will be “crowded out” as the work becomes increasingly detached from, and presumably less valuable to, not only its intended audience but also colleagues in the law school. It also encompasses questions like whether “serious” L&E scholars will migrate towards economics departments leaving law schools behind. (Larry Solum raises this and other possible scenarios in a very thoughtful response to this post which also addresses how this trend might play out in the legal academy more generally).

(2) What efforts can be made to secure the benefits of specialization and formality while minimizing the likelihood of detachment from the traditional “legal” audience? This line of questioning presumes, I think correctly, that detachment would be a serious blow to the L&E movement and encompasses questions like: What role can law schools and other institutions play in ensuring that L&E remains interdisciplinary (not leaning too far toward its “home discipline”) and relevant?

(3) Does This Trend Have Implications for Law School Specialization? Larry Solum suggests that one possible path is the multidisciplinary model where graduate students would be trained in the basic methodologies of their discipline (the law) and PhD programs that trained in specialties such as empirical legal studies, economics, positive political theory, advanced doctrinal methods, etc. As law school specialization is a topic I’ve written about here previously (here, here and here), and a model that I’m familiar with here at George Mason, one might ask whether this trend toward formal L&E scholarship will impact schools like George Mason who have staked out a position as a school that specializes in L&E?

I plan on writing a separate post addressing each of these three questions over the next week or so.

I’m very interested in the history, the present, and the future of the law and economics methodology and movement. Recently, I’ve been giving some thought to the direction of the movement, especially as it currently exists in the legal academy. Some of my thinking has been inspired by this post from Larry Ribstein, the comments to this post at Prawfs (especially those from Brian Leiter and Kate Litvak), and Steven M. Teles’ book on the Rise of the Conservative Legal Movement, each of which highlights some of the trends and tensions emerging in the field as well as what has made it so successful. Much of the discussion in those blog posts has to do with whether a Ph.D. is necessary or sufficient to do modern L&E scholarship, or at least, whether there is room interdisciplinary scholarship for those without the PhD or equivalent technical skills. That all debate has been hammered out fairly thoroughly. My target in what I hope will be a series of posts is different, though not orthogonal to that debate: where is L&E now and where is it going?

There are a couple of general trends pushing on the law and economics movement from different directions that make speculation about the future of the movement interesting and raise a number of interesting questions. I don’t think I know the answers to these questions, but I thought it would be fun to write a series of blog posts that sketch out my tentative thinking on these general trends, identify some potential strengths and weaknesses of the L&E movement in its current form, share some thoughts about where it is headed, and hopefully stimulate some discussion.

In this first post, I’m going to try to set the stage by identifying some of the trends in the L&E movement in particular and their causes and consequences. In future posts, I’ll try to shed some light on where I think the L&E movement in law schools is going, where it isn’t going, and where I’d like it to go in the next 5-10 years. First, lets start by sketching the landscape with the identification and description of some general trends and patterns in L&E below fold.

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Harvard’s Einer Elhauge answers the titular question in the newest issue of Competition Policy International, in response to a review of his new textbook Global Antitrust Law and Economics (with Damien Geradin) at the newly revamped Global Competition Policy website.   The response essay is less about the particulars of the book than it is about what the fundamental goals of modern competition law courses are and should be.  The debate takes the form of teaching doctrine and procedure vs. economic analysis with Elhauge defending the latter.  Here’s an excerpt from Elhauge driving home the point:

I inserted the bolded portion.  This is a lesson I try to impart to my antitrust students and one that I hope that they take to heart by the time the semester is over.  I think Elhauge has this exactly right.  Check out the essay.

Speaking of Nudge, Cato is holding a  book forum on Cass Sunstein and Richard Thaler’s new book on May 1 which will feature Sunstein, and comments from Will Wilkinson and my colleague Terrence Chorvat.  Registration is free and you can also watch the event live at the link above.