Gary Becker has an important post on the political economy and economic consequences of Chicago’s Big Box ordinance which would raise the costs of using low skilled labor for the affected retailers. The punchline is not surprising. It is a bad ordinance that “will hurt the very groups, African-Americans and other poor or lower middle class individuals, that supporters claim would be helped.” Here’s a taste of Becker’s analysis:

Even if retailers with mega stores were trying to cater at least in part to the Chicago market, this ordinance makes them more likely to open up in suburbs that could be reached by some Chicagoans as well as by those living in the suburbs. Large retailers that continue to operate in Chicago will reduce their use of low skilled workers by replacing some of them by more skilled employees, and by machinery and other capital. Retailers will also try to avoid being covered by the ordinance by reducing their space to just below 90,000 square feet.

In a city like Chicago the burden from these responses to the ordinance will fall disproportionately on African Americans and Latinos since fewer jobs will be available to workers in the city with less education and lower skills. In addition, prices in Chicago of items sold relatively cheaply by stores like Wal-Mart and Target will rise because fewer of these stores will open in the city. The mega stores that remain will raise their prices because their costs will go up. Since city customers of these stores are mainly families with modest incomes who seek low prices rather than elaborate service, they more than the affluent classes will be hurt by the rise in prices and reduced availability of big box outlets.

Read the whole thing. I can’t help but think with the passing of this misguided and ill-conceived ordinance, and as my co-blogger Thom once noted in this space, “What’s the Matter with Chicago?”

Richard Posner reviews Steven Shavell’s Foundations of Economic Analysis of Law in the most recent issue of Journal of Economic Literature (June 2006). Not to take anything away from Posner’s review of the merits of Shavell’s treatise, and his detailed analysis of Shavell’s treatment of particular areas of law (e.g. intellectual property), but to me the most interesting components of the review were Posner’s attempts to place Shavell’s book in the history of economic scholarship about law and to speculate on the future direction of that scholarship. Posner articulates an “overlapping generations” historical account of law and economics, with one generation standing on the shoulders of the next, and some scholars spanning the gap between several generations.

Posner describes the founding generation of law and economics as consisting of Coase, Becker, Calabresi, and “a few others.” The major contributions of the first generation, which Posner described as complete by around 1970, was the transformation of economics from its status as a “subject” to a “method” to be applied to new areas of the law and all sorts of non-market interactions, e.g. Becker’s economic theory of criminal punishment, Coase’s article on transactions cost and tort law, and of course, Calabresi’s The Cost of Accidents. The defining achievement of the founding generation was to supply a set of tools (economics as the theory of rational choice) which could be applied to all forms of social activity.

The second generation’s task was to expand the domain of law and economics. Younger law and economics scholars took the tools of the first generation and applied them to virtually all fields of law. Posner includes himself in this group, along with Becker’s students William Landes and Isaac Ehrlich. Posner describes the work of the second generation as:

“characterized by close attention to legal doctrines, procedures, and institutions. Formal modeling was not emphasized and theoretical rigor was often absent in the work of the law professors. But as a result of the close attention to the law itself, the work of the second generation had and continues to exert an immense influence on leegal education and a growing influence on legal doctrine and on the practice and administration of law.”

Posner views Shavell as the leading figure in the “third generation” of mathematical law and economics scholars, which includes the likes of: Polinsky, Hart, Bebchuk, Kaplow, and Sykes. It is the generation of the JD/PhD. Their work has “tended to cultivate the intensive margin, bringing new insights into fields such as torts and contracts that had already received considerable attention from the second generation.”

Posner recognizes that these generations “overlap both in time and in methods and subject matter.” Becker, for example, has done important work in each of the first three generations. As a young law and economics researcher, I was most interested in what Posner had to say about the next generation. Posner points to five areas of focus for fourth generation research agendas, the first three of which involve some form of empiricism:

1. Comparative study of legal instutions across countries and states.

2. “Situating law in the total system of social control, which includes custom (much earlier emphasized by Friedrich Hayek and, earlier, by theorists of the common law), morality, reputation, and emotion.”
3. Explaining the behavior of judges.

4. The use of economic analysis of law in developing countries to generate legal reform.

5. Deeper study of the insights from the literature in organizational economics for legal reform.

All in all, well worth a read. Some reactions and questions about Posner’s intriguing account of where law and economics scholarship has been and where it is going below the fold.

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PCAOB recently issued an audit practice alert entitled Matters Related to Timing and Accounting for Option Grants. The alert mostly addresses option backdating and potential resulting improper accounting. Spring-loading is only mentioned in a footnote on page 2:

In addition, academic research has suggested the possibility that some issuers may have purposely granted options immediately before the release of information that the issuer believed would be favorable to its share price. While these practices may not result in the granting of discounted options, they may create legal or reputational risks and raise concerns about the issuer’s control environment.

This is a rather equivocal statement, especially compared to what the alert says about backdating. It seems to say that if the lawyers sign-off on spring-loading and the company has appropriate controls in place, there is no accounting issue. As I said before, to get the securities lawyers comfortable, I wouldn’t be surprised by companies adding disclosure along the lines of “we may from time to time purposely grant options immediately before the release of information that we believe will be favorable to our share price.”  The tax lawyers, however, could be a different story.

Here’s a taste:

If the Internet Gambling Prohibition Act is approved, it will become a precedent for congressional control over other aspects of the Internet and an important loss in our liberty. Let’s follow the money and ask who benefits should the law be passed. What about legal gambling establishments in Las Vegas, Atlantic City and elsewhere? From their revenue point of view, they’d be happy to see less online gambling competition.

What about federal, state and local governments? Online gambling, most of which is offshore, doesn’t create any tax revenue for them. The bill focuses on online games such as poker, blackjack and sports betting but exempts taxable state-regulated gambling such as lotteries and horse racing.

If people want to gamble online, they are going to gamble online. The only thing the act will accomplish is, like Prohibition, make criminals out of otherwise law-abiding people. It will turn banks and other financial institutions into government snoops. Rep. Barney Frank, D-Mass., said, “If an adult in this country, with his own money, wants to engage in an activity that harms no one, how dare we bar it.” I second that and add, since protection of “the children” often serves as an excuse to restrict our liberties, that if children get involved, let their parents, not Congress, deal with it.

Check it out. Christine Hurt also offers some thoughts here and here.

I was in the car for 10 hours this weekend, driving from Richmond, VA, to upstate New York.  Though Judge Robert Bork was not technically in the car with me, I spent most of my driving hours listening to his book, Slouching Towards Gomorrah, on tape.  (I borrowed the book on tape two or three years ago.  Many thanks to its patient lender, who wishes to remain anonymous.)

I am finding the book to be a fascinating listen (I have not yet finished the tapes), and, for that reason, I wanted to mention the book here.  I imagine there are still a few folks out there who have not yet taken a summer vacation and might want something interesting to listen to or read while vacationing.  I recommend this book.

A few thoughts regarding the book, for what they are worth (note that the book is about a decade old, so I am sure the internet is rife with reviews of the book –of course, this does not deter me from sharing my thoughts):

1.  Bork on Bork:  In my experience, information about Judge Bork and his views is usually proffered by someone with a slant (either in support of Judge Bork or against him).  It is incredibly interesting, then, to hear about Judge Bork’s views in his own words, to get a sense of what he really believes.  Whether the reader agree with his views and his politics or not, the reader will at least be clear on what Judge Bork does and does not believe after reading or listening to his book.

2.  Why:  In his book, Judge Bork is generally very specific in explaining why he believes what he believes.  Again, regardless of where you come out on the substance of his beliefs, his articulation of his reasons for holding the views he holds is fascinating.

3.  The 1960s:  I was not a faculty member at Yale Law School during the period of unrest on college campuses in the 1960s.  Judge Bork was.  I found his description of his experiences during the 1960s (both at home and on campus) riveting.  The details he provides about his perspective as a “conservative� (my word) in a fairly “liberal� environment during that tumultuous period are much more interesting than anything I read about in a textbook in high school.  Whether or not a reader likes what Judge Bork recalls, the Judge’s recitation of his recollections at least allows the reader to create a vivid mental picture of how Judge Bork viewed the situation.

4.  Writing Style:  As one could imagine, Judge Bork takes strong positions on certain issues in his book, and he tends to use unequivocal language to support his positions.  Yet, based on what I have listened to so far, he is able to take aggressive positions on difficult issues without regularly lapsing into what I view as irrelevant, mean-spirited attacks on his naysayers.  (To be sure, he does not mince words, but he also does not say things such as “liberals are a bunch of crazy people�).  In almost all cases, Judge Bork’s articulation of his views and why he holds them, while unapologetic, are at least directed toward the goal of explaining why he believes what he believes, as opposed to simply slamming those who hold the opposite views. 

On a related point, based on the recent outrage at Ann Coulter’s book, I wondered more than once while listening to Slouching Towards Gomorrah how the language Coulter uses in her book would compare to Judge Bork’s language in his book.  Was Ms. Coulter attacking and belittling to no good end, as the media has led me to believe, or was she explaining (albeit directly and . . . perhaps abrasively) the reasons underpinning her views?  I have no idea – I have not read her book.

5.  Bork Then, Bork Now:  The passion with which Bork expresses his views in the book made me wonder what the pre-tenure Judge Bork at Yale was like.  Did he express his views back then in the way he expresses them in his book?  Was he that “convincedâ€? back then?  Moreover, was he openly taking the positions then that he takes in his book?  I muse on this issue in part because an anecdote was recently relayed to me regarding the faculty of one fairly highly ranked school law school taking *huge* issue with a faculty appointments candidate who had listed the Federalist Society on a resume.  The Fed. Soc., not “Child Pornography Fans United” or something equally reprehensible.

6.  Labels:  One might maintain that some groups of scholars, members of the judiciary, political associations, etc. can be reduced to labels – liberal lefties, the radical right, whatever the moniker might be.  Listening to the book is raising my awareness of the nuances on the issues agitating the left/right divide, such that I now think that no label duopoly will ever capture the divisions across some issues.

7.  Results or Principles:  As noted above, Judge Bork takes no prisoners with the language he uses in his book.  He lays things out exactly as he sees them, it seems, with no apologies.  I admire the fact that he does not try to sugar-coat his beliefs, as I am a huge fan of being direct.  At the same time, however, I found myself thinking as I listened “would Judge Bork have achieved more toward the things that he believed in, had he taken (even with his nose plugged) a slightly more moderate view?  Would that have been the right thing to do, as a means to an end, to broaden his audience and the scope of his influence?�  Mind you, I mention this rhetorical question with all due respect.  Judge Bork has a level of influence and power than few ever achieve.  Therefore, I am not trying to criticize how he conveys his views in his book.  I am merely musing.

(Apologies for dropping this book discussion into the midst of a super affirmative action discussion, by the way, Josh.)

A few days ago I asked about where we stand on the empirics of affirmative action, and more specifically, Richard Sander’s well known result that affirmative action at law schools harms blacks. I even called out folks who had been following the debate more closely:

I am really looking for empirical answers from folks that have read the literature and are familiar with the evidence rather than more general views on affirmative action. ELS guys? Bill [Henderson]?

Well, Bill Henderson at ELS Blog answered my request with an extremely thoughtful post. Bill is well versed in the debate and has been involved in recent efforts to impanel independent scholars to review the work of Sanders and his critics.

This is an absolutely must read post for anybody interested in this debate. Bill addresses the empirics, law school testing, lawyer competency, and a number of other important issues in his post. Here’s a taste, but you should really go read the whole thing:

During the last two years, critics have made in-roads on various parts of Sander’s analysis (particularly his prospective model that suggests that ending racial preferences could actually increase the number of black lawyers, since the estimate required assumption that could be easily contested). Many of the critiques, unfortunately, look at the data narrowly, concluding that if they can find any result with a subset of the data that varies from Sander’s they have done their job. I think the task is broader — to look at all of the data Sander has advanced (including the compelling second-choice data) and assess whether the mismatch theory does a better job than the alternative explanations in accounting for dismal black outcomes. But to date, no one has offered an alternative theory that fits the bulk of the observational data. And that’s a problem … .

I am tired of academics trying to score points at Sander’s expense without offering an alternative hypothesis that directly confronts the data. Faced with the bleak statistics on minorities and the legal profession, our time would be better spent embarking on a Manhattan Project for legal education that examines each nexus of the lawyer creation process, including law school pedagogy. A panel of respected, independent scholars to review the questions raised by Sander and his critics would be a step in the right direction.

Thanks for the answer, Bill.

I took a quick look at the HCA merger agreement to see whether any provisions would catch my eye. One did. The agreement contains a “go shop” provision (see earlier discussion of “go shops” here). Until 11:59 p.m. (EST) on September 12, 2006, HCA is free to solicit competing bids (see Section 7.4), although if it takes a better deal the other side is entitled to a $300 million breakup fee (the breakup fee is $500 million outside of the “go shop” context).

Incidentally, as widely reported, the HCA deal will be the biggest LBO ever topping the 1988 $31 billion RJR Nabisco deal by $2 billion. But in today’s dollars, the RJR deal is still number 1. coming in at roughly $45 billion.

Has the empirical question of whether affirmative action harms blacks been answered with a resounding no? Paul Butler thinks so. In a post about UCLA Professor Richard Sander’s next installment of research, Butler writes:

UCLA law professor Richard Sanders has done it again. He wrote an article a few years ago making the claim that affirmative action was responsible for lowering the number of black lawyers. This thesis was persuasively debunked by Blackprof’s Devon Carbado among others. Not to be deterred, Sanders has now advanced the same theory with regard to black partners in law firms.

Perhaps Butler is alluding to Carbado’s excellent post, which attempts to sharpen the empirical debate by asking what data would be sufficient to establish that affirmative action harms blacks and suggesting that such data must include information regarding “where blacks are in society as a result of affirmative [action].” Perhaps not. Carbado’s post doesn’t appear to even attempt such a “debunking.” So where does Sander’s empirical result stand? Carbado’s post warns: “Of course, there is no way to give proper treatment to this issue in this forum; it’s hard to have an empirical discussion on a blog.” But a discussion of the empirical issues here seems worthwhile, and I am not convinced this medium renders such a discussion impossible. I am willing to bet the ELS Bloggers agree with me that the blog medium does not prevent such a discussion of the empirical evidence.

Like much of the legal academy, I have read Sander’s work, the criticisms (57:6 Stan. L. Rev.), Sander’s replies (e.g., here and here), and even a sur-reply. I also found this useful Legal Affairs Debate Club exchange between Sander and ELS Blog’s Bill Henderson. While I have read most of the literature at some point or another, I admit that I have only casually followed the empirical exchange between Sanders and his various critics. That caveat aside, Butler’s claim that Sander’s results have been “persuasively debunked” struck me as either: (1) premature, (2) wrong, or (3) a sign that I have really not been following this debate.

I’m not making any normative statements here. For that matter, I’m not taking a position on the empirics without doing some more homework. This is, however, one of the most followed empirical debates the legal academy has seen recently (perhaps only second to this) and so I thought it worthwhile to dig a little bit deeper here.

My relatively uninformed impression of the debate was that Sander’s fundamental result, that affirmative action reduced the number of black lawyers, had not been “debunked.” I had assumed that either no consensus had been reached and the question was still “live,” or the literature had moved on to more precisely identifying the causal mechanisms at work (is it mismatch or something else?) but had at least on some scale accepted the result. Such a state of play, of course, would not be abnormal for a relatively young empirical debate. As such, my hunch was that Butler’s description was probably inaccurate on the merits. Does anybody following the empirical exchange more closely than I have a sense of whether a consensus has in fact been reached in either direction? If so, what is it? Is the perception that Sander’s results have been debunked? If so, what is it that he has identified? If there is no consensus, what are the open questions?

I am really looking for empirical answers from folks that have read the literature and are familiar with the evidence rather than more general views on affirmative action. ELS guys? Bill?

NOTE: For those interested in a shorter version of at least Sander’s views and his responses to critics, his posts at the Volokh Conspiracy are a nice place to start.

Today’s W$J has an article describing some of the option granting practices at Brocade (see here). Among them was the creation of a one member compensation committee consisting of Brocade’s CEO, Greg Reyes. The article gives the following as the reasoning:

The process of granting stock options was cumbersome because the compensation committee met only every three months. Mr. Reyes said he wanted to speed it up so he could recruit better in those hectic days in Silicon Valley. The board gave him authority to approve options by himself, including their exercise prices.

He said the idea was supported by Larry W. Sonsini, one of the most prominent attorneys in Silicon Valley, who was then a Brocade director. A spokeswoman for his law firm, Wilson, Sonsini,Goodrich & Rosati in Palo Alto, said that one-person stock-option committees are legal under the laws of Delaware. That’s where Brocade is incorporated. “One-person stock-option committees were adopted during a time of intense competition for hiring and retaining employees and the ability to act quickly was critical,” said the spokeswoman for the law firm.

Wilson, Sonsini is of course correct. DGCL Sec. 141(c)(1) provides: “The board of directors may, by resolution passed by a majority of the whole board, designate 1 or more committees, each committee to consist of 1 or more of the directors of the corporation.” (emphasis added). The MBCA has a similar provision. While it may not represent best corporate practice to have single member committees, given the statutory language it is certainly within the board’s business judgment as to whether it is appropriate in a particular case.

With respect to compensation committees, however, NYSE and Nasdaq listing standards adopted in 2003 make it clear that the CEO cannot be on the committee–it has to be composed entirely of independent directors. Note that the standards do not specify whether a compensation committee can consist of a single independent director, but they use the plural “directors” in a way that implies the answer is no.

Although listing standards may make the question moot for most public companies, if you were a director, would you sign-off on a single member compensation committee? My inclination is “no.” Even during “a time of intense competition for hiring and retaining employees,” it seems to me that at least three directors could make themselves readily available to approve option grants through written consent. Executive compensation is just too riddled with temptation for abuse to leave to one person.

Frank Pasquale at Madisonian is concerned that organ markets do not show enough concern for the poor. He writes:

I’d be more sympathetic to the economic approach to the topic if it showed a bit more concern for the plight of those unable to pay for organs (and for the very poor in LDC’s whose organs are most likely to be utilized). There are many ways to do so: Steven Calandrillo’s approach to the topic is one of the best current treatments that injects concerns of social justice into the organ shortage crisis. In short, I think I’d be ready for an organ market if one were to tax all the transactions to assure wider access to the less advantaged.

Frank goes on to submit for our consideration some empirical data “to back up his egalitarian concerns,” citing the following statistic:

Over the years 1950 to 1970, for each additional dollar made by those in the bottom 90 percent of income earners, those in the top 0.01 percent received an additional $162. In contrast, from 1990 to 2002, for every added dollar made by those in the bottom 90 percent, those in the uppermost 0.01 percent (today around 14,000 households) made an additional $18,000.

Let me say from the start that I am not quite sure what these numbers are supposed to prove in the way of support for “egalitarian” concerns. As far as I can tell, the point of these numbers is that there exists income disparity in the United States. So what does that have to do with depriving low-income earners of the choice to earn some extra cash? Is the point that it rich folks will be running around stocking up on organs with their extra cash? Perhaps the point is that the poor are so poor that they will be lining up to sell kidneys and other organs. But I’m not sure what this has to do with the relative incomes of the rich and poor.
But all of that is a bit of an aside. Hoisting the exploitation and social justice banner in the name of prohibiting market transactions that will almost certainly increase welfare and save lives is not a new strategy. But I am not convinced that in this instance, nor in many others, social justice and markets are somehow assumed incompatible. What criteria are we using for to order outcomes on the basis of their propensity to mete out “social justice?” As best I can tell, there is no criteria being used other than individual policy preferences for these outcomes and some hand waving about how markets are … “market-based” and “financial” and “commoditize” things — which, by the way, is bad. Quod erat demonstrandum.

Let me start with the proposition that I do not know whether a market solution will maximize social justice. But it will certainly help to clear the market for kidneys, which will save lives, which must have something to do with social justice, no? Frank’s post suggests that concern for the poor is at least an element of this social justice criterion. But, I fail to understand how depriving those with low incomes of a choice they currently do not have shows a greater concern for the poor than giving them an option not previously in their choice set. This objection masks, and not very effectively, an assumption that the poor either cannot or will not economize on the potential costs and benefits in the language about justice.
Economists more involved in the organ market debate than I have frequently responded to the notion that organ markets will decrease the welfare of the poor. For example, here is Gary Becker from a recent blog post:

Another set of critics agree with me that the effect on the total supply of organs from allowing them to be purchased and sold would be large and positive, but they object to markets because of a belief that the commercially-motivated part of the organ supply would mainly come from the poor. In effect, they believe the poor would be induced to sell their organs to the middle classes and the rich. It is hard to see any reasons to complain if organs of poor persons were sold with their permission after they died, and the proceeds went as bequests to their parents or children. The complaints would be louder if, for example, mainly poor persons sold one of their kidneys for live kidney transplants, but why would poor donors be better off if this option were taken away from them? If so desired, a quota could be placed on the fraction of organs that could be supplied by persons with incomes below a certain level, but would that improve the welfare of poor persons?

Moreover, it is far from certain that a dominant fraction of the organs would come from the poor in a free market. Many of the organs used for live liver or kidney transplants are still likely to be supplied by relatives. In addition, many middle class persons would be willing to have their organs sold after they died if the proceeds went to children, parents, and other relatives. Although this is not an exact analogy, predictions that a voluntary army would be filled mainly with poor persons have turned out to be wrong. Many of the poor do not have the education and other qualifications to be acceptable to the armed forces. In the same way, many poor persons in the US would have organs that would not be acceptable in a market system because of organ damage due to drug use or various diseases.

More from Becker in a second post:

A common concern among the critics is that the poor will both give too many of their organs, and not have access to transplants. I have more confidence than these critics do in the ability of the vast majority of poor people to make decisions in their self-interest. Moreover, market forces rather than rich persons would determine the price of organs, in the same way that rich people do not presently set the price of maid services.

Most organ transplants are paid by private insurance, Medicaid, or Medicare. Since that would continue, and since I indicated that market-determined organ prices are unlikely to add much to the total cost of transplants, the poor should not be at more of a disadvantage in getting transplants if organs were sold than they are under the present system. Indeed, they are likely to be at less of a disadvantage when the supply of organs clears the demand for organs. For the rich and famous sometimes can now use influence to get priority, and they can travel to countries where they are assured of getting a transplant.

And finally, from Don Boudreaux’s column in the Pittsburgh Tribune-Review:

[T]hese fears are baseless and an insult to poor people. People such as my law-school classmate presume that someone with only a modest income is so short-sighted that he’d prefer to sell his kidney in exchange for a few car or rental payments rather than to economize elsewhere or to drive a less-expensive car or live in a less-expensive apartment.

Perhaps some Americans are so poor that they have no ways to economize further. Maybe this (very small) group of people are the ones my classmate worries about. If so, her concerns remain insulting and dangerous. If someone is so poor that he judges selling his kidney to be worth the money it will bring to meet current expenses, we must still presume that he is the best judge of his welfare.

The problem in this case — and it is a genuinely serious problem — is this person’s desperate poverty. Selling his kidney is a way to help him relieve the consequences of that poverty. How does denying him this opportunity for some extra income help him?

Nevertheless, I do not deny that most kidney sellers would be people whose incomes fall on the lower part of the American scale. Would this fact be evidence of exploitation? No — not any more than is the fact that most supermarket cashiers, house painters, and used-car salesmen are people whose incomes fall on the lower part of the American scale.

Would we make these workers better off if we announced that they are free to give away their labor at such jobs but cannot receive payment for it?

Seems to me that the real exploitation is to demand that kidney donors not receive payment for donating their valuable bodily organs.

A related argument against legalized kidney sales is that people should not profit from other people’s serious illnesses. But physicians, nurses and pharmaceutical companies, along with many other folks and firms, routinely profit from other people’s illnesses. Would we improve our world by prohibiting doctors, nurses and pharmaceutical companies from ever being paid? Of course not.

It’s time that practical concern for the very real lives of very real people replaces a lethal commitment to wooly aesthetic and philosophical notions.

There is a serious cost to taking seriously the notions of bioethicists, law professors, medical professionals, and others that a market in organs is immoral or dismisses the poor. Thousands of people are dying every year while waiting for transplants. Increasing the supply of organs is a problem that deserves the most serious consideration and there is no serious theoretical reason to believe that, in the case of organ donation, supply curves do not indeed slope upwards.

Story here. The SEC will hold a Webcast press conference at 5pm E.D.T. (click here).

I’m sure you noticed that Bill’s recent draft is, deservedly, the most downloaded corporate law paper in the last 3 months over at SSRN. 

It also turns out that Josh has been pretty busy himself.  In fact, according to Brian Leiter, Josh is 19th in the list of authors with at least three papers with the most downloads per paper in the last 12 months.  He has 5 new papers with 162 downloads per paper.  And he has some pretty good company:  Bainbridge is number 17 and Ribstein number 18.

Congratulations to both.

Lisa Fairfax kicked off an interesting discussion over at the Glom regarding some reasons why untenured folks should not engage in empirical scholarship. The basic message: it takes too long, is too hard (to get data, mostly), may not be received well by tenure committees. There are some great comments to the post defending the enterprise of empirical legal scholarship by the untenured and the theme is picked up at ELS Blog. Many thanks to Lisa for kicking off this very interesting and important discussion. It is a valuable discussion of some of the tradeoffs facing those who would like to include empirical work in their research agenda pre-tenure. Understanding the risks associated with undertaking your research agenda, whatever it is, is certainly a better option than going in blind.

I think Bill Henderson’s comment has it about right:

“In the fall of 2001, as I job-talked my first empirical article, I remember hearing the caveat on pre-tenure empirical work from the chair an appointments committee. But two years later, an IU colleague told me, “In this business, we spend a lot of time doing scholarship. You’ve got to follow your star.”

So which advice is better? In my case, I could not follow both. So I picked empiricism because I loved the work.

… .

Sure, two years from now I may not get tenure (I remain optimistic!), but intellectually, this has been the best five years of my life. Why give in to fear? Follow that damn star.”

Bill’s comment, to me, gets to the heart of the matter. While law school tenure standards are light relative to social science departments, tenure is not guaranteed. Young empirical scholars, like juniors in many other fields, must make some tough choices about their research agendas and make some fairly subjective judgments about the potential costs and benefits of those decisions over time. We law professors have the opportunity to follow whatever research agenda we desire, not to mention a pretty wonderful job in the meantime. Not to minimize the obvious utility of the other suggestions in the comments for those seeking tenure (find an institution that values empirical work, find publicly available data, etc.), but I think the best advice an untenured faculty member can get is to find a research agenda they are passionate about and then put your head down and get to work.

Speaking of empirical scholarship, and on a bit of a tangent, yesterday I spoke at SEALS panel dedicated to the topic of “Empirical Law and Economics.” I presented my empirical paper on the consumer welfare consequences of slotting allowances, uncreatively but hopefully appropriately titled, “Slotting Contracts and Consumer Welfare” (forthcoming in the Antitrust Law Journal).

The panel featured presentations by the Glom’s Fred Tung and Joanna Shepherd (both of Emory Law School). Both papers were took on very interesting and important research questions and were very carefully done. At other conferences, like ALEA, I typically sit on panels that are topic specific, i.e. antitrust. While I very much enjoy that model, which allows me to talk to specialists in my field, this panel was particularly enjoyable for me because it tied together empirical papers from very different fields: corporate governance, torts, and antitrust. Fred presented work co-authored by Joanna Shepherd and Albert Yoon (Northwesetern) entitled “Cross Monitoring and Corporate Governance” examining the role of banks in reducing agency costs. Joanna presented “Tort Reform and Accidental Deaths,” a thought provoking and excellent study co-authored by Paul Rubin of the impact of a number of tort reform measures on accidental deaths. Here is the abstract:

Theory suggests that tort reform could have either of two impacts on accidents. First, reforms could increase accidents as tortfeasors internalize less of the costs of externalities, and thus, have less incentive to reduce the risk of accidents. Second, tort reforms could decrease accidents as lower expected liability costs result in lower prices, enabling consumers to buy more risk-reducing products such as medicines, safety equipment, and medical services, and as consumers take additional precautions to avoid accidents. We test which effect dominates by examining the effect of tort reforms on non-motor vehicle accidental death rates, using panel-data techniques. We find that caps on noneconomic damages, a higher evidence standard for punitive damages, product liability reform, and prejudgment interest reform lead to fewer accidental deaths, while reforms to the collateral source rule lead to increased deaths. Overall, the tort reforms in the states between 1981-2000 have led to an estimated 22,000 fewer accidental deaths.

UPDATE: Paul Horwitz and Larry Solum offer some additional thoughts.

The current SSRN top tens for corporate, corporate governance, and securities law are after the jump. (more…)