Economics in one lesson

Geoffrey Manne —  31 May 2009

Several people, including Josh, have drawn my attention to John Hasnas’ excellent op-ed on the Sotomayor nomination in the WSJ last week.  Just in case you don’t read the same blogs I do, I thought I’d highlight it here.  It is brilliant.  Here’s a taste:

One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen.

One can empathize with innocent children born with birth defects. Such children and the adversity they face can be seen. One cannot empathize with as-yet-unborn children in rural communities who may not have access to pediatricians if a judicial decision based on compassion raises the cost of medical malpractice insurance. These children are unseen.

One can feel for unfortunate homeowners about to lose their homes through foreclosure. One cannot feel for unknown individuals who may not be able to afford a home in the future if the compassionate and empathetic protection of current homeowners increases the cost of a mortgage.

In general, one can feel compassion for and empathize with individual plaintiffs in a lawsuit who are facing hardship. They are visible. One cannot feel compassion for or empathize with impersonal corporate defendants, who, should they incur liability, will pass the costs on to consumers, reduce their output, or cut employment. Those who must pay more for products, or are unable to obtain needed goods or services, or cannot find a job are invisible.

The point, derived from Bastiat, is extraordinarily powerful, and, as Hasnas notes, the lesson is as important for economists as it is for judges (and for everyone else).  Making decisions on the basis of only the most visible effects of behavior under scrutiny is always a recipe for bad decision-making.  I’d also add that taking advantage of the relative obscurity of broader effects is the essential root cause of the depredations of politics and politicians, who never miss an opportunity to demagogue about a favored interest or idea to the exclusion of the (usually far greater) broader and longer-term effects.

Someone should write a book about the importance of this one idea.

Geoffrey Manne

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President & Founder, International Center for Law & Economics

6 responses to Economics in one lesson

  1. 

    Hasnas has a great point; I’d add a couple of things.

    1. My suspicion of “empathy” follows from a similar suspicion of having courts generally engaging in trade-offs, cost-benefit analysis, and other excursions into making policy. Both invite judges to become the Legislators of Last Resort, and not the interpreter of constitutional, statutory, or common law principles.

    2. The only excuse for “empathy” I can think of is that one may need it to understand what is meant by terms like “cruel and unusual punishment,” “unreasonable search,” “due process,” or “equal protection.” I can imagine that a sense of what it’s like to be in someone else’s shoes could be useful in judging when rights embodied by those principles were violated.

    That said, Hasnas’s warning of a visibility bias is well worth heeding.

  2. 

    In the latest edition of _Law and Literature_, Posner points out the wildly different rates at which U.S. courts of appeals grant asylum on the grounds of political persecution. He suggests that there would be more consistency if judges had better “background knowledge” of the condition of refugees. (He may even use the word empathy–I don’t have the book here.) Cases like these are not as polycentric in their consequences as the ones Hasnas mentions. I don’t think empathy (in this sense) necessarily involves ignoring secondary and tertiary consequences of decisions (and rules).

  3. 

    a.g.: Thanks. I’ll correct that. And I agree with your comments–empathy is an empty concept as a judicial decision tool and/or an excuse for favoritism masquerading as compassion. It’s actually pretty far removed from justice which, as you say, would seem to require clarity, efficiency, predictability and a balancing of trade-offs. Not the pretense that there are no trade-offs.

  4. 
    antitrust guy 1 June 2009 at 6:58 am

    The problem is deeper than the op-ed describes, which is not much different than the problem of any of the tort cases one reads first year of law school. Of course, it’s terrible that Paltzgraff got pounded, or that Phineas Gage ended up with a rod through his head. But that alone doesn’t set useful, efficient, clear rules that balance the relative costs to society.

    The deeper problem is that empathy is totally unprincipled. Why should a judge have more empathy for one plaintiff over another? How does one distinguish the case of the person fired because a plant closed without adequate warning from a person fired because they were Latina? Is one more deserving of empathy than the other? How much? Enough to change the balance?

    BTW, I assume it’s a typo, but you have the nominee’s name spelled wrong.

  5. 

    The opportunity cost of empathy?

Trackbacks and Pingbacks:

  1. ProfessorBainbridge.com - June 1, 2009

    The Trouble with Empathy…

    Some senator needs to read John Hasnas’ brilliant op-ed (HT Manne) to SCOTUS nominee Sonia Sotomayor and ask for her reaction: As important as compassion and empathy are, one can have these feelings only for people that exist and that one knows about …