The Future of Law and Economics Part 5: A Reply From Henry Manne

Josh Wright —  12 May 2008

I’ve had a wonderful time writing this series on the future of law and economics. When I started the series (Part I, Part II, Part III, and Part IV), I thought it would be a fun thought experiment for me to think through aloud and hopefully start a valuable conversation. By that measure, it has been a success. I’ve received many valuable comments, critiques and responses in blog posts, emails, and in person. But I couldn’t possibly dream up a better way to end the series than with a response from Henry Manne, a founder of the L&E movement, who is perhaps more responsible than any other single figure for its dissemination throughout the legal academy. I think this response is a treat for our readers who are interested in this topic and want to personally thank him for taking the time to offer his thoughts on my series.

As you’ll see, Henry agrees with some of my points and disagrees with others. It appears that our major disagreement centers around my optimism for the empirical L&E agenda in law schools. I will reserve one last modest response on this particular point for a later post, as I believe it presents the opportunity for further valuable discussion, but will also be happy to give Henry the last word should he desire a sur-reply. Without further ado, here is Henry’s response to the series on the future of law and economics:

I found some very thoughtful, even profound, points in your series, but I also found some glaring weaknesses. In the same spirit in which you wrote your ideas, I offer you some passing thoughts on the subject. I have by no means sought to make an orderly response to your discussions, nor to be exhaustive of the many interesting topics you raise. You will just have to sort out for yourself the parts that are relevant for your purposes and those that may do no more than reflect the musings of a never-satisfied old warrior. I might add that this was written in haste (will repentance follow?), and I reserve the right to change my mind tomorrow.

First I want to examine your right-on delineation of the problem as resulting from too much mathematics and over-formalization, the accessibility problem. I was somewhat surprised to find you never mentioning one salient fact in this issue, that the task of a law school is to prepare students for the practice of law and to do the kind of scholarship (research) that serves an instrumental social benefit within the area of law professors’ expertise. I am afraid that your approach to this has been somewhat distorted by your own training and expertise, a problem that afflicts most academics. You show an unmistakable tendency to want to protect the value of the skills that you have. Thus you make what to me seems a somewhat surprising defense of econometricians in law schools (I’ll discuss this point later). Now please understand that I do not criticize you personally for this, for that is exactly what I tried to do starting in the 1950’s, i.e. utilize the skills that I had and to increase the demand for those particular skills. I was fortunate that there happened to be a convergence between my approach and what worked for the law schools of that time. As you and I agree, Law and Economics has been of extraordinary value to legal education. It took it out of the doldrums of anti-intellectualism and mechanical thinking about law, and made law schools respectable partners in the greater role of universities. That was no small development, and I do not think that it is in any immediate danger of being reversed., though sometimes, when I see the quality of what some law professors pass off as Law and Economics scholarship, I wince and think that perhaps the old style law schools were better since at least they could at least pass the Hypocritical test of doing no harm.

But to get back to my main point, I really do not think that we should be bothering in law schools with either teaching or research that in some ways does no make for better lawyers or for better legal scholars (not necessarily the same thing, but again there is convergence in the long run). I do not see any reason for the law reviews to be full of arcane economic jargon that will never be used by any practicing lawyer or comprehended by any sitting judge (with some very rare exceptions). And here I get to my main point. I think that most of that is the result of the very peculiar “market” forces that operate in universities and not from any thought-out rationale of making better laws or lawyers. (See my “The Political Economy of Modern Universities”). In other words, it is part of the general pattern of professors writing for each other and not for the outside world. That was not the thrust of the original L&E approach. Rather the original approach was simply a marginal (jurisprudential) movement from what most legal-realist-oriented law professors were already doing but, alas, doing very badly. They were trying to explain why one rule of law was better than another (and that did implicate eventually some need for econometrics to be able to do a careful cost-benefit calculus; thus I do not reject your emphasis on the importance of empirics, but I may disagree with you on who is best positioned to do it), but the focus was always on improving the law and not on showing the methodological skills of the authors. This was the intellectual victory which revolutionized the law school world, and it was all because of one thing that you rightly note; that is the power of economics, vastly greater than that of any other discipline, to resolve what had appeared to be purely normative issues in a positive way. It was the introduction to this kind of power that opened the eyes of many law professors back in the 1970s, and which I think still has the power to amaze people who are not familiar with economics’ great analytical powers. Of course, her I mean the kind of economics that you were first taught and which I internalized into my very soul at the feet of Aaron Director, Armen Alchian and Harold Demsetz.

And that gets me to my central point, one which I am afraid that you have missed. I think that the major issues are now, as they were fifty years ago, mainly ideological, and I believe that the causes forcing L&E out of the law schools today are the very same ones that operated to prevent my getting better jobs in the 1960s and for most senior law professors to think that what I was advocating was sheer nonsense, “to the right of Genghis Kahn,” as they used to be so stupidly amused at repeating ad nauseum. They were protecting their intellectual investment in skills and ideology against the threat of a new paradigm in which they could not share the rents, and I do believe that that is exactly what is still happening. While you and I see enormous social benefits from a legal system based on the idea of property rights and their protection, all they see is less role for the government and themselves. Perhaps this acts at an unconscious level, but it unmistakably is at work whatever the source of the peculiar leftist ideology of most academics.

What I am saying is that it is impossible to separate completely a discussion of the role of L&E in legal education from the ideological aspects of the subject. I honestly believe that at some level the turn of L&E to econometrics and empirical work is a flight from the implications of a thoroughgoing Alchianesque kind of economics. Perhaps that is even more clear with the current popularity of Behavioral Economics, and of late I even notice in the literature a somewhat open attack on the very idea of freedom of contract. I do not think these developments are accidental or random; I believe that they are inherent in the very structure of modern universities and law schools, and I, therefore, suggest that perhaps you are looking in the wrong direction for a solution to the problem you describe.

Certainly economics faculties, though they have much less motivation to enter the public arena than do law professors, are better situated to do the economics of law than are law professors, who mainly have a very different kind of educational mission. Even if that is not popular with them at the moment (other than perhaps in IO), that is not part of the concern of law schools (we don’t see Biology and Economics in Biology departments just because the economists happen not to be doing that kind of work), nor do I think it is the job of law professors to make significant advances in economic theory. They should utilize the insights of economics at the level at which it works for lawyers and judges, and that is all (it is a lot) that economics should be in law schools. As for empirical work, I like your idea of emphasizing collaboration and translation; that is probably the most meaningful kind of interdisciplinary work; but I see a fairly limited role for law professors in that (largely explaining to the empiricists what factual issues need measuring and what legal implications they might otherwise misunderstand).

I always thought that my idea of economics for law professors was vastly more important than the idea of economics for judges. I still think that, and I also still think that University Economics is the approach that makes sense in this task. But if that is not to be, and L&E is to go the way I see it at the moment (and we agree on most of that), then I would just as soon see it totally disappear from the law schools, though I do not really think there is much chance of that happening.

One response to The Future of Law and Economics Part 5: A Reply From Henry Manne

  1. 
    Bernard Sharfman 19 May 2008 at 11:12 am

    I believe the following story lends support for Professor Manne’s skepticism regarding the value of utilizing econometrics and empirical analysis in legal research.

    Back in the early 80s, I was participating in a Ph.D. program in Economics at the University of Michigan, a school with a strong reputation for econometrics. One afternoon, I decided to attend a well publicized seminar where Harold Demsetz was presenting a paper. Unfortunately, the presentation quickly turned into an attack on Professor Demsetz’s statistical methodology by those brilliant but misguided Ph.D. candidates specializing in econometrics. The result wasn’t pretty and it really turned the focus away from the ideas he was trying to convey. What a waste.