As a law and econ guy who has attended a fair number of law and economics seminars, I’ve almost never encountered problem #2. I have, however, often seen problem #3. Anecdotally, I might even go so far as to say that problem #4 dominates modern corporate law scholarship, with many leading legal scholars playing with data without offering or testing concrete hypotheses.

But as for the future of law and economics (as opposed to the future of legal scholarship), I’m inclined to bet with David. Most of the economists I know believe that the low hanging fruit in the legal world is empirical, and that techy, structural models will win few adherents (and hence have few career benefits) in the legal academy. The problem, in short, may just be that for most economists, constructing good theoretical models is extremely difficult and requires substantial creativity, but analyzing clean, unexplored data is relatively mechanical. The upshot is that if an economist sees unexplored data, he can probably write a good paper. But if she sees an “unmodeled” phenomenon, her task is very difficult.

L&E developed to fill that vacuum. Divorce L&E from policy application, and it’s value evaporates.

I think it also makes sense to think of the formal/informal distinction in terms of basic and applied research.

Modeling and empirical papers are essential but by themselves are unlikely to settle any issue. The nature of the research means their findings tend to be quite narrow–there is often another variable not tested, or an shaky assumption a model depends upon. Less formal work that synthesizes and integrates formal work with the contours of the law, institutions, and economic theory generally can actually be much more persuasive.

Of course, the bar for informal work is substantially higher than it used to be, and legal scholars doing certain types of work must take it upon themselves to learn how to read econometric papers, and specifically to know their limitations in general and of the models, findings, and measurement methods of any particular paper.

Less formal papers are also valuable to formal researchers in that it may give them hypotheses to test or model. While informal work is certainly taken less seriously by economists, if done correctly it shouldn’t be taken less seriously by legal scholars and policymakers.

Josh Wright has a very interesting post (Part I with more to come) on the future of law and ecomomics. Here is a taste:One consequence of the increase in formal theory and empirical work is increased specialization in economics, and

Over at TOTM, Josh Wright is beginning a series of what looks to be a very interesting discussion of the future of law and economics. Josh addresses the potential costs of the increasing sophistication and formalization of law and economics.