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.

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.

(more…)

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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Sunstein and Thaler have a series of posts over at Volokh Consipiracy on their new book Nudge, which expands on their notion of libertarian paternalism (see here, here , here and here).  Something in the most recent post caught my eye.  In preparing to respond to various objections to libertarian paternalism, Sunstein argues that this sort of paternalism offers the “best of both worlds”:

In short, we hope that libertarian paternalism might provide a real third way, one that recognizes the best in Hayek and Friedman while also noticing the work of Simon, Kahneman, and Tversky (and Thaler), which shows that human beings often choose poorly. Thus, for example, libertarian paternalism offers fresh ways of thinking about the mortgage crisis, credit card reform, savings for retirement, prescription drugs, health care, environmental law, and even marriage. In all these contexts, a few nudges could help a lot.

One of the problems that I have with libertarian paternalism marketed in this manner is that it sells traditional economic theory short by describing it as missing the point that individuals make errors.  Perfection is costly, and so the optimal rate of errors is not zero.  The argument against paternalism, libertarian or otherwise, is not that individuals  have perfect foresight and do not make errors (even systematic ones).  It is that individuals will tend to make better self-interested decisions than the government would do on their behalf. 

A second problem, and one I’ve noted before, is that:

In accounting for the long run costs of paternalism, we must also be mindful of dynamic effects that are likely to follow from paternalistic decision-making before intervening (on this last point, see Klick and Mitchell in the Minnesota L. Rev., or more recently Ed Glaeser’s essay on Paternalism and Psychology).

These long term dynamic costs of paternalistic intervention surely must be part of the cost-benefit analysis with respect to any such regulatory proposal.   In other words, there is a danger that my mitigating the costs of errors through regulation, we increase the rate of errors.  This point goes directly to the appropriateness of the “libertarian” modifier for this type of paternalism.  Sunstein & Thaler argue that liberty is maintained because these proposals encourage choice rather than coercive mandates.  But the libertarian case also rests on the presumption that allowing individuals to bear the costs of their errors leads to better and more competent choices in the future.  Many, but not all, of the proposed “nudges” do not appear to take this concern to seriously.

CELS 2008 will be held at Cornell Law School this year September 12 and 13.  Submissions are due by April 15th.  CELS has quickly become one of the best conferences of the year and I’m very much looking forward to attending.  Here’s the conference announcement:

The conference’s objectives are: (1) to encourage and develop empirical and experimental scholarship on legal issues by providing scholars with an opportunity to present and discuss their work with an interdisciplinary group of people interested in the empirical study of law; and (2) to stimulate ongoing conversations among scholars in law, economics, political science, demographics, finance, psychology, sociology, and other disciplines. The conference’s audience will include paper presenters, commentators, and other attendees, and will include many of the nation’s leading empirical legal scholars. The goal is productive discourse on both particular papers and appropriate methodologies. We especially encourage submissions from junior scholars.

See you there.

My colleague Lloyd Cohen and I are editing a volume for Edward Elgar on Pioneers in Law and Economics.  We’ve collected a dozen or so top notch essays from leading law and economics scholars covering the pioneers in the discipline and their contributions.  I’ll have more details to post about this project in a month or so — including a full list of contributing authors, subjects, and of course, details on how to buy the book!!!  If you’re interested in a preview, Larry Ribstein’s entry, Henry Manne: Intellectual Entreprenuer, and Kate Litvak’s, Frank Easterbrook and Daniel Fischel, are both available on SSRN right now.  As Larry notes in his post, the two essays combined are an excellent guide to the last 40 years of corporate law and economics.

GW Lawprof Michael Abramowicz is guest blogging over at the Volokh Conspiracy on the virtues of prediction markets and his new book: Predictocracy.

Thom was recently invited to draft a critical response to a symposium at the Institute for Consumer Antitrust Studies on the future of single firm conduct.  The transcript from the Roundtable Discussion is available on SSRN.  Thom graciously asked me to join him in drafting a short critical piece to the symposium. It is difficult to respond to an entire symposium in under 20 pages, and we are quite sure we were not able to get to it all of it. We did our best to hit the highlights and central themes of the conversation and contrast the generally pro-interventionist views expressed by the conference panelists with our more skeptical views about the proper scope of the antitrust enterprise in our modern economy. With that said, Antitrust (Over-?)Confidence is now available on SSRN. It will be published in the Loyola Consumer Law Review. Here is the abstract:

On October 5, 2007, a group of antitrust scholars convened on Chicago’s Near North Side to discuss monopolization law. In the course of their freewheeling but fascinating conversation, a number of broad themes emerged. Those themes can best be understood in contrast to a body of antitrust scholarship that was born six miles to the south, at the University of Chicago. Most notably, the North Side discussants demonstrate a hearty confidence in the antitrust enterprise-a confidence that is not shared by Chicago School scholars, who generally advocate a more modest antitrust. As scholars who are more sympathetic to Chicago School views, we are somewhat skeptical. While we applaud many the of the insights and inquiries raised during the conversation, and certainly this sort of discussion in general, our task in this article is to draft a critical analysis of the October 5 conversation. In particular, we critique the North Side discussants’ vision of a big antitrust that would place equal emphasis on Sections 1 and 2 of the Sherman Act and would expand private enforcement of Section 2.

Download it.

Courtesy of Larry Solum’s Legal Theory Blog, the following two papers have been posted on SSRN and may be of interest to our readers. First is Keith Hylton’s analysis of the Weyerhaueser decision, Weyerhaeuser, Predatory Bidding, and Error Costs.  Here is the abstract:

In Weyerhaeuser v. Ross-Simmons the Supreme Court held that the predatory pricing standard adopted in Brooke Group also applies to predatory bidding claims, because the two types of predation are “analytically similar”. I argue that predatory bidding is likely to be more harmful to consumer welfare than is predatory pricing. Successful input market predation may lead to a “dual market power” outcome in which the firm has market power in both the input and the output market. In spite of the analytical distinction, consideration of error costs leads me to conclude that Brooke Group remains the best standard to apply to predatory bidding claims.

Also, my GMU colleague Bruce Kobayashi has posted Spilled Ink or Economic Progress? The Supreme Court’s Decision in Illinois Tool Works vs. Independent Ink.  Kobayashi argues that while the rejection of the presumption market power is a positive step:

“the Court’s decision may be limited by the flawed and outdated modified per se rule used to evaluate tying arrangements generally. Moreover, while the Court undermined the underlying rationale for the modified per se rule against tying, it chose not to revisit this issue. In addition, while the Court’s opinion implicitly adopts a robust standard for market power, it failed to address its contradictory holding in Kodak v. ITS, its most recent decision evaluating a tying arrangement.”

Professor Kobayashi’s analysis is spot on and he joins a number of commentators, including myself in this Cato Supreme Court Review article, who have characterized Independent Ink as a decision that moves antitrust doctrine in the right direction but also as plagued by missed opportunities.  In my analysis, I focus on the missed opportunity to clarify the status of competitive price discrimination in antitrust analysis.  I argue that the failure to reject the view that price discrimination implies antitrust relevant market power

“is costly because it deters competitive price discrimination, which despite widely perpetuated economic myths, is not generally associated with consumer welfare losses and may benefit all consumers. While antitrust law has come a long way in terms of economic sophistication, the persistent association of anticompetitive inferences with an inherently competitive practice is evidence that it has not yet fully incorporated fundamental lessons from the economic literature.”

Professor Kobayashi explores different “missed opportunities” in the Court’s Independent Ink decision.  Specifically, he rightfully criticizes the failure of the Court to revisit its last, and highly controversial, tying decision in Kodak.

Both of these papers look very interesting and apply an error-cost framework to understand appropriate rules for predatory bidding and tying.  Both are worth reading.

Danny Sokol has collected picks from antitrust specialists around the globe. There were plenty of excellent articles and books to pick from but I ultimately selected this article from Keith Hylton and Fei Deng and this book on the Microsoft Case from Bill Page and John Lopatka. You can see the rest of the picks here.

While I limited myself to selecting a single article and a single book for the purposes of the Professor Sokol’s list, I thought I’d post the contents of the rough “Top Ten” list I sketched out. As a disclaimer, I’m probably am missing a few really good ones I read earlier in the year and didn’t put any effort into making an exhaustive list of antitrust scholarship for the year. Plus, I might have also misclassified the timing on some of these. Feel free to add your own in the comments, but here are some “articles” (broadly construed to include government reports, etc.) which would appear somewhere in my Top Ten (or Twenty?) List:

• William E. Kovacic, The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/Harvard Double Helix, 2007 Columbia Bus. L. Rev. 1
• Jonathan B. Baker & Carl Shapiro, Reinvigorating Horizontal Merger Enforcement (forthcoming Oxford University Press).
• The AMC Report & Recommendations
• Louis Kaplow & Carl Shapiro, Antitrust (Chapter 15 in Handbook of Law and Economics)
• Dennis Carlton & Randy Picker, Antitrust & Regulation (NBER working paper)
• Benjamin Klein and Andres V. Lerner, The Expanded Economics of Free-Riding: How Exclusive Dealing Prevents Free-Riding and Creates Undivided Loyalty, 74 (2) Antitrust L. J. 473 (2007).
• David S. Evans & Richard Schmalansee, The Industrial Organization of Markets with Two-Sided Platforms, 3(2) Competition Policy International 151 (Autumn 2007).
• Thomas A. Lambert, Weyerhaueser and the Search for Antitrust’s Holy Grail, 2006-2007 Cato Supreme Court Review 277 (2007).
• Bruce Owen, Su Sun, & Wentong Zheng, China’s Competition Policy Reforms: The Antimonopoly Law and Beyond (working paper).

The December 2007 of the Antitrust Source is now available online and features a symposium on the recent Supreme Court activity along with several interesting articles, interviews, book reviews, and my favorite regular feature — the Working Papers and Recent Scholarship review by Bill Page and John Woodbury (which this month features scholarship by George Priest and FTC economist Malcolm Coate).

Dave Hoffman aptly describes the contours of a lot of the blog debate over Brian Leiter’s citation rankings of law professors by specialty:

Objection: “But you didn’t measure X…”
Leiter: “True. Let a hundred flowers bloom, and do your own data collection!”

I’ve got to say, I’m not sure that I really understand any of the objections to Leiter’s provision of this service. I suspect my initial reaction to the rankings was not unlike many law profs — I perused the rankings to look for scholars in my primary field: antitrust.

Apparently, antitrust scholarship is not as heavily cited as other areas in the business law classification with which antitrust is grouped (corporations, securities, commercial law, and bankruptcy). Interestingly, but perhaps not surprisingly given the breadth of the category, there are not many antitrust types that make the list. But there are a few. A quick look at the rankings in business law and law and economics yields the following folks that I recognize as antitrust scholars (even if it is not their primary field):

1. Richard Epstein (University of Chicago), 3390 citations
2. Mark Lemley (Stanford University): 2110 citations, age 41.
3. William Landes (University of Chicago): 1550 citations, age 68
4. Herbert Hovenkamp (University of Iowa), 1450 citations
5. Louis Kaplow (Harvard University): 1370 citations, age 51.
6. George Priest (Yale University): 870 citations, age 60.

I’m probably missing a few.

Categorizing these folks is obviously a very difficult task. Each of these six has published extensively in a number of other areas (IP, tax, law and economics, etc.) as well as made significant contributions to the antitrust literature. Still, my own sense (based mostly on casual empiricism) is that Professor Hovenkamp should be categorized as an antitrust person as I suspect an overwhelming majority of his citations are in antitrust. This change would make Hovenkamp #3 in Business Law. George Priest (#10 on the L&E list) is another candidate for an “antitrust” representative in the Business Law category. But this is a much closer call than Hovenkamp given Priest’s wide ranging publications across L&E generally and its pretty difficult to quarrel with the L&E category classification.

Besides — if I did have a serious quarrel — I guess I could just make my own antitrust ranking! I don’t. But I’ve decided that I’ll work on an antitrust-specific ranking since I’m curious as to what the top 10-20 in antitrust would look like. I’ve assigned an RA to work on tracking down some citation data and will post them along when we’ve got results. Feel free to email me (or comment) if you have thoughts on what a useful set of antitrust scholarship rankings would look like.

Over at Antitrustworldwiki.com, Keith Hylton has a very cool wiki project compiling antitrust laws around the world.  Here’s the description:

AntitrustWorldWiki.com is a collaborative database covering antitrust laws around the world. Its purpose is to provide information on the key provisions of antitrust laws in a manner that enables users of this wiki to compare antitrust enforcement regimes around the world. We will expand the site to include new information and to enable users to post comments and observations.

The project looks very promising for future empirical research and already includes a number of special reports with details on predatory pricing laws, competition enforcement budgets, and penalties.