Greetings, Glommers! (and hello, Janet and Mario*!)
It’s an honor to join this extremely sharp and thoughtful community of corporate and commercial law scholars for the next two weeks. The Conglomerate has long been one of my favorite law blogs and it’s truly a privilege to walk among these folks for a time (if a bit daunting to follow not just them but Urska Velikonja and her excellent guest posts). Thanks to Gordon, David, and their Glom partners for inviting me to contribute.
By way of biographical introduction, I’m currently a Visiting Assistant Professor at the University of Denver Sturm College of Law, where I teach International Business Transactions and International Commercial Arbitration. Last year, I did a VAP at Hofstra Law School (and taught Bus Orgs and Contracts).
In the next few weeks, I’ll be exploring a number of issues related to law and global finance. I have a particular interest in currencies and monetary law, or the law governing monetary policy. Two of my current projects (on which more soon) address legal aspects of critical macroeconomic policy questions that have emerged since 2008: U.S. monetary policy and the Eurozone sovereign debt crisis.
Without further ado, I will take a page from Urska and kick off my residency here with a somewhat meta question: should scholars refrain from writing about legal issues in macroeconomics, specifically monetary policy?
One thinks of monetary policy decisions—whether or not to raise interest rates, purchase billions of dollars of securities on the secondary market ("quantitative easing"), devalue or change a currency—as fundamentally driven by political and economic factors, not law. And of course they are. But the law has a lot to say about them and their consequences, and legal scholarship has been pretty quiet on this.
Some concrete examples of the types of questions I’m talking about would be:
- Pursuant to its dual mandate (to maintain price stability and full employment), what kinds of measures can the Federal Reserve legally undertake for the purpose of promoting full employment? More generally, what are the Fed’s legal constraints?
- What recognition should American courts extend to an attempt by a departing Eurozone member state to redenominate its sovereign debt into a new currency?
When it comes to issues like these, it is probably even more true than usual that law defines the boundaries of policy. Legal constraints in the context of U.S. monetary policy appear fairly robust even in times of crisis. For example, policymakers themselves often cite law as a major constraint when speaking of the tools available to the Federal Reserve in combating unemployment and deflation post-2008. Leading economics commentators do too. Yet commentary on “Fed law” is grossly underdeveloped. With the exception of a handful of impressive works (e.g., by Colleen Baker and Peter Conti-Brown), legal academics have largely left commentary on the Fed and macroeconomics to the econ crowd.
A different sort of abstention characterizes legal scholarship on the euro crisis. Unlike the question of Fed power, there is a burgeoning literature on various “what-if” euro break-up scenarios. But this writing tends to focus on the impact on individual debtors and creditors, not on the cumulative impact on the global financial system. Again, the macro element is missing.
It is curious that so many legal scholars would voluntarily absent themselves from monetary policy debates. The subtext is that monetary policy questions are either normatively or descriptively beyond the realm of law. If that is scholars’ actual view, I think it is misguided. But maybe the silence is not as revealing as all that.
- One issue is sources. You will not find a lot of useful caselaw on the Fed’s mandate or the Federal Reserve Act of 1913, and the relevant statutes and regulations are not very illuminating. Further, it’s a secretive institution and that makes any research (legal or otherwise) on its inner workings challenging.
- Another issue is focus. Arguably the natural home of legal scholarship on domestic monetary issues, for example, should be administrative law. But the admin scholarly gestalt is not generally as econ-centric as, say, securities law. Meanwhile, securities scholars tend to focus on microeconomic issues like management-shareholder dynamics.
- A final possibility, at least in the international realm, is historical. After World War II, Bretton Woods established a legal framework intended to minimize the chance that monetary policy would again be used as a weapon of war. The Bretton Woods system collapsed over forty years ago, the giants of international monetary law (Frederick Mann, Arthur Nussbaum) wrote (and died) during the twentieth century, and now even some of the leading scholars who followed in their footsteps have passed away. At the same time, capital now flows freely across borders and global financial regulation has become less legalized in general. These factors plus the decline of exchange-rate regulations (most countries let their currencies float) may have undermined scholars’ interest in monetary law. But as the ongoing euro saga demonstrates, international monetary law and institutions remain as critical as ever.
These are some possible explanations for why legal scholars have largely neglected questions of monetary law, but I’m sure I’ve overlooked others. What do you think?
*Pictured are Janet Yellen and Mario Draghi, chiefs, respectively, of the Federal Reserve and the European Central Bank.
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1. Posted by Douglas Levene on February 24, 2014 @ 17:43 | Permalink
Your research agenda sounds very interesting and highly appropriate. It's surprising that legal scholars have not to date focused on the Fed and its legal limitations/powers.
2. Posted by Urska Velikonja on February 25, 2014 @ 7:04 | Permalink
Welcome, Greg! I'd probably add the international financial regulation folks (like Dan Tarullo, Anna Gelpern) to the list, but I think you're right that it's a very short list. One of my colleagues recently told me that the secret to a good research agenda is to find a topic that no fewer than 10 people are paying attention to, and no more than 50. I'm looking forward to your posts!
3. Posted by Greg Shill on February 25, 2014 @ 8:00 | Permalink
Thank you, Douglas and Urska, for the kind welcome. Urska, I definitely agree that those two, as well as Mitu Gulati, Hal Scott, and a handful of others whose work I seem to keep bumping into, belong on any list of "scholars working on the legal boundaries of macroeconomic policy." Urska's colleague's advice sounds good to me. I look forward to everyone's feedback going forward.
4. Posted by Peter Conti-Brown on February 25, 2014 @ 9:57 | Permalink
Greg, thanks for the shout-out. I couldn't agree more that lawyers/legal scholars can and should pay a lot more attention to these issues.
I'd plug two others: (1) the Glom's own David Zaring, who has written a lot about the Fed/Treasury approach to what might be called macroeconomic regulation, including institutional design issues in monetary policy; and (2) Rosa Lastra, whose two books (Legal Foundations of International Monetary Stability and Central Banking and Bank Regulation) are essential reading for this space.
Looking forward to your posts and articles!
5. Posted by Greg Shill on February 25, 2014 @ 10:12 | Permalink
Thanks, Peter! The scholars you mention definitely belong on any macro policy list. And, how rude of me not to mention the scholarship of one of my own hosts! David's work is required reading on the crisis. He might forgive me for that omission, but my mother probably wouldn't.
I hoped that declaring an area of scholarship in need of attention would invite some recommendations, so please keep them coming!