Archive for November, 2009

Remarks from North
November 30, 2009

HT: Peter Klein

Back to the Future of L&E
November 7, 2009

I have only just read Henry Manne and Josh Wright’s superlative assessment of the future of law and economics. The progressive complexity of research within the discipline has generated a disparity between those who model and theorize and those that prosecute and adjudicate–a gap which the subject first victoriously merged. Manne sagaciously describes the original amalgamation as having removed legal education “out of the doldrums of anti-intellectualism and mechanical thinking about law” by harnessing “the power of economics …to resolve what appeared to be purely normative issues in a positive way.”

Director, Alchian, Coase, Williamson, Posner, Easterbrook, Calabresi, Stigler, and Demsetz corroborated the crossroads of legal and economic research, elevating the convergence to a level of respect and consequence. But now new challenges arise. Wright anticipates three possible results:

(1) Economists will do work that is detached from legal institutions and law and therefore less relevant (the “detachment” problem);

(2) L&E scholars will do work that is very relevant, and maybe even very good, but legal scholars won’t 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);

(3) Informal L&E will be “crowded out” of the law school landscape as it declines in value, (the “crowding out” problem) and as formal scholarship moves away from law schools toward economics departments, traditional subjects of L&E scholarship will be left to less qualified scholars (the “I know STATA and can get any regression through law review editors with a catchy enough title” problem).

From my perspective, the most pressing of these problems is #2, what I’ve described here as the “the retail problem.” The problem of economists ignoring the law and legal institutions is no doubt real and significant, as is the problem of legal scholars without sufficient training publishing empirical work (there is more “bad” empirical scholarship than modeling as statistical software packages lower the cost of entry for empirics but less so for modeling). Bad work will always be a problem and I suspect always has been and always will be. Perhaps the increase in formalization has made bad work of both types more or less likely. I suspect it has allowed room for more bad empirical work than would exist otherwise, but I’m not sure how large this effect is.

Given such qualified predictions, what does this mean for new institutional economics & its sphere of influence? Will the recent acknowledgment of Williamson and Ostrom change the scope of the aforementioned outcomes in any significant way so as to redirect the subject’s course?