My previous post (or stream of consciousness rant) on the classic Ronald Gilson value creation article generated a number of interesting comments here and from Mike Madison and Mike Risch.  These are all interesting and fair comments, and most are not inconsistent with my thesis. Rather than bury this in the comments, I thought I would do a follow-up.

Let me be clear.  I am not suggesting lawyers do not create value for their clients.  That would be foolish.  My project is instead to propose a counter-explanation that deals in value and meaning, and one that plays off what Bob Ellickson referred to (in a wonderful coinage - it's in the Yale Journal of Law and Humanities somewhere) as the creative tension between the yin of social-science universalizers and the yang of humanistic particularizers.  I spent 26 years out in the world of transactions, and my intuition is that the latter has as much explanatory power as the former, even in the world of financial returns and Kaldor-Hicks equilibria and executive compensation.  Corporations are made of people who are subjective agents, and not black boxes, but the worldview of economic analysis is to treat business and people as black boxes - hence, Richard Posner's priceless epigram that in doing economic analysis, it would not be a solecism to speak of a rational frog.

Gilson's attempt to justify the lawyers' existence is based wholly on the assumption going in that lawyers must necessarily increase value of the transaction (i.e. expand the surplus).  It's that jumping-off point I think is questionable.  To take the example of one commenter, I certainly agree that keeping up to date on forms, like the MAC clause, is something lawyers do, but I'm not as convinced that's the value clients see in hiring a lawyer.  Moreover, the casuistic nature of common law-making is that the adaptation of the law into agreements usually has the feel of generals fighting the last war.  How the social-science universalizing of economics deals with this is to start with perfect rationality, which doesn't take account of language as a social construction, and then to back off into bounded rationality. The equivalent lingo in contracts is "complete" and "incomplete" contracts.  I've written previously in some detail about why I think that concept is wrong, or perhaps more appropriately, incomplete.

Without for a minute making a judgment about the exercise (although I confess that when I was a general counsel and hired Wall Street firms to help do acquisitions, I couldn't bear to stay in the room when they were negotiating the reps and warranties), I think most things lawyers negotiate in acquisitions end up in the long run being trivial either because (a) there's no real dispute about what the deal is or what the language means, or (b) there's no real likelihood that the language will ever come into play to resolve a dispute.  Did I think negotiating the caps, baskets, and survival period of the indemnification was important?  Yes.  But the documentation of that tended to be trivial. Did I think the set of representations about the corporate bona fides to do the deal were important?  Of course.  Was there ever a dispute about the corporate bona fides?  No.  Is the negotiation of a "force-the-vote" provision in a public company takeover important? Yes.  But what it really has to do with is providing assurance or certainty, and that's equally as valid an explanation as the suggestion that somehow the lawyers created more utils along the way. 

Most disputes are opportunistic, I've argued before, in the sense that circumstances will present themselves, and parties will assess whether either under a formal approach or a contextual approach they can argue the agreement language to support their opportunism. That, despite the way I've said it, is not a judgment about the value of the lawyer to the client.  The language the lawyer drafts, and the counsel the lawyer gives, may be the only tree in the storm of uncertainty and contingency the client has. 

Shaking hands upon meeting is a ritual.  It says "I have no weapon and you are safe with me."  It's a simple one because it doesn't have to predict very far out into the future.  Shaking hands to seal a deal is a ritual.  It says "your transaction is safe with me."  But it's not a very precise ritual.  Signing a contract to seal a deal is also a ritual, and it is far more sophisticated than shaking hands, but it's still a way of saying, "subject to these terms and conditions, your transaction is safe with me."

The fundamental difference, and one that I've decided I need to put together in an essay, is whether you approach explanation from a purportedly scientific, objective perspective, or whether you approach it from an interpretative, subjective perspective.   In the former, you explain down from perfect rationality to what people do to account for uncertainty, and in the latter you explain up from individuals' reconciliation of the way the world is and the way it ought to be. What the former seems to claim is a privileged status as knowledge, and that's what strikes me as wrong.  Maybe I'm beating a dead horse to take on a 1984 law-and-economics view of the world, but it is a great and creative piece of theory.  And if indeed it's "the reigning academic account of what business lawyers actually do," then it seems to me it's fair game.

Permalink | Legal Theory | Comments (1) | TrackBack (0) | Bookmark

Usha's post below, with its reference to Ronald Gilson's 1984 article on value creation by lawyers, prompts me to a short rant, not about Usha's post, but about the article, which Usha rightly calls a "classic" and  "the reigning academic account of what business lawyers actually do."  Honestly, with all due respect to Professor Gilson (who joined the Stanford faculty the year I left as a student), the article has bugged me since I read it a couple years ago; indeed, I have a comprehensive list from a Lexis search I did a while back of every article that had cited it, because I was trying to do a literature search to see if anybody else had said what I'm about to say here.  Since I haven't followed up on my list, I don't know, and I therefore apologize if I'm repeating a critique somebody has already written.  I also apologize for the stream of consciousness approach that follows.

What about the article bugs me?  Let me count the ways:

1.  If I were taken with law and economics in 1984, but had no way of showing empirically that the reams and reams of hours that lawyers spent doing deals actually produced anything with intrinsic value (which Professor Gilson forthrightly admitted, at pp. 247-48 of the article), but was inclined to hope that they did, with an interest in justifying their existence (as again Professor Gilson forthrightly admitted at footnote 149), this is, I suppose, exactly the article I would write.  What we have here is an attempt to make sense of the world, by way of scientific (or quasi-scientific) theory, but it is "over-determined" in the sense that the theory selected happens to be rational actor economics, rather than, say, the theoretical view Clifford Geertz applied to Balinese cock-fighting.

2.  The theory is capsuled as follows.  All transactions occur because buyers value an asset more than sellers.  The difference between the two values is surplus.  Haggling over the split of the surplus is of no interest generally to economists; that is mere strategic bargaining.  Each party, being rational, would know that hiring a lawyer to grab a bigger portion of the surplus won't work, because the other side will respond in kind, and the lawyers, not the parties, would get the benefit of the surplus.  So, in the long run, rational actors being what they are, it must be the case that "[t]he increase must be in the overall value of the transaction, not merely in the distributive share of one of the parties. That is, a business lawyer must show the potential to enlarge the entire pie, not just to increase the size of one piece at the expense."  That's a rational actor trope, and one that I have criticized in another context here.

3.  As I said in a comment to Usha's post, if I were to apply an economic model to lawyers in deals it would be the Prisoner's Dilemma. Both clients would be better off cooperating by throwing all the lawyers out of the room for most of the issues in the deal, hence eliminating the transaction cost of arguing over myriad reps and warranties and other contract niceties that don't make any difference anyway. So imagine a Prisoner's Dilemma matrix with Party A and Party B, and the choice for each is "Lawyer" or "No Lawyer." The payoff for each side choosing "No Lawyer" is a huge reduction in costs (say, 5, 5) compared to both sides choosing "Lawyer" (say, 10, 10)" But both sides keep their lawyers, for fear of the (1, 20) or (20, 1) outcomes in the Lawyer/No Lawyer boxes that are akin to one prisoner confessing but the other one not.

4.  There are places where lawyers reduce transaction costs, say, by mediating between two positions to reach a solution, but there's nothing particularly lawyerly about that. That's a negotiating skill.  Moreover, lawyers may well be necessary to getting the deal through the regulatory thicket, whether it is Hart-Scott-Rodino pre-merger notification or CFIUS review.  But that hardly seems fair, because lawyers created the regulatory thicket.

5.  We have a neighborhood association in northern Michigan.  A lot of people in the association are rich.  When something happens that they don't like, they say things like, "if you do that, I'll have 10 lawyers from the Humungous Law Firm, who I have on retainer, up here the next day."  Since I'm a lawyer, and I used to be a partner at the Humungous Law Firm, I laugh at that, but it's an effective club when wielded against non-lawyers.  I rarely hear non-rich people say this, which goes to my next point.

6.  Professor Gilson's "empirical" testing of this theory is to walk through the most heavily lawyered of all documents, the typical business acquisition agreement.  If lawyers really created value accordingly to the theory, we ought to be able to test it not in mega-million or mega-billion dollar deals, but in little deals that happen all the time.  But the reality there is that most transactions occur without lawyers.  Sometimes there is boilerplate that lawyers had a hand in.  But if a lawyer being involved in a transaction necessarily made the pie bigger, why don't lawyers appear in almost all transactions?

7.  Professor Gilson spends many pages on the information-exchanging value of representations and warranties, and puzzles over the lack of any indemnification mechanism in public company deals (the representations and warranties expire at closing largely because once the proceeds in stock or cash are distributed to widely dispersed shareholders, there's no putting Humpty-Dumpty back together again). He acknowledges that indemnification may be partial or limited in time (there's also the "basket" or deductible, but I don't think that gets mentioned), but the real question, it seems to me, is whether the actual instances of acting on the indemnification clauses warrant the investment in the reps and warranties.  My guess is they have some amount of in terrorem effect, but neither of us have a whole lot of data to go on.  (The one empirical study of which I'm aware on this subject is by Steve Schwarcz, and it is based on surveys of clients who hire transactional lawyers.  To quote Steve's abstract:  "Contrary to existing scholarship, which is based mostly on theory, this article shows that transactional lawyers add value primarily by reducing regulatory costs, thereby challenging the reigning models of transactional lawyers as 'transaction cost engineers' and 'reputational intermediaries.'")

8.  My equally non-testable theory is that lawyers sometimes add value to deals, sometimes subtract value, and appear most of the time during the deal for the same reason neckties do:  it's part of the ritual.  There is no intrinsic reason they have to be there.  Lawyers, like neckties, have value, not because they necessarily make the pie bigger, any more than neckties make the pies bigger, but because somebody values the lawyer enough to pay more for her to be there than it cost for her to get there (marginally speaking, of course).  That's the reason we buy $75 neckties and Rolex watches as well.  But we don't feel a need to justify the presence of the necktie or the watch as a "transaction cost mechanism."

9.  I am persuaded by years of observation that great lawyers (like Jim Freund, who Professor Gilson cites repeatedly) help make deals, but that there is nothing particularly lawyerly about it.  It is, as Vic Fleischer suggests, quarterbacking, or as David Zaring suggests, closing.  That strikes me as an aspect of leadership, something business schools teach, but with which law schools and law (qua law) struggle immensely. 

10.  Mostly, though, I step back and see the process as something akin to a Balinese cockfight, a ritual or ceremony that gives us some limited assurance of certainty in a highly uncertain and contingent world.  I find it equally plausible that the presence of all those lawyers doesn't do a damned thing to make the pie bigger - but they are necessary, and they do have value, just as the accoutrements to the cock-fight have value to the participants.  Their value is in what they do to give us the courage to overcome fear, panic, seller's remorse, buyer's remorse, and risk averseness. Again, as I said over in the comments, lawyers provide an alternative model for resolving disputes about the deal that is better than pistols at twenty paces, but the idea that the contract language provides certainty in anything other than trivial cases is a self-justifying illusion for lawyers.  I suppose what really bugs me comes from my intuition that the Gilson thesis is theory-laden in the sense that Ian Shapiro criticized in The Flight from Reality in the Human Sciences.  What comes first is the economic model and its assumptions about value and rationality, which is then imposed on a linguistic exercise, which is itself an imperfect model of a complex world.

Permalink | Law & Economics| Legal Theory| M&A| Rants | Comments (6) | TrackBack (1) | Bookmark

From The HLS Corporate Governance Blog:

Let us rule then, you and I,
When there’s theft of corp’rate opportunity
Like a patient over-billed by doctors able;
Let us read through certain less well-researched briefs,
The nimbly wrought conceits
Of high-paid lawyers in nearby hotels
Who work so hard all day for corporate shells;
Days that follow, full of insipid argument
Of questionable intent
That lead some to such aggravating questions . . .
Oh, do not ask, “Why is it?”
Let us rule, and don’t inquisit!

In the court attorneys come and go
Talking of prices high and low.

By David Kessler.  Via Ribstein, with his own well-written literary take.

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark

A group of faculty at BYU has been working through The Canon of American Legal Thought one article at a time. The project started because John Fee and I were interested in the possibility of teaching a class from the book, but it has thrived because all of the participants are having great fun being students again. Our sessions have produced some memorable moments, like when John said, "Wesley Hohfeld seems like the kind of person who would take pleasure in reminding you that a tomato is a fruit, not a vegetable."

One of the recurring themes in the early works in this volume is predictability. In "The Path of the Law," for example, Holmes asserts that "pretty nearly the whole meaning of every new effort of legal thought is to make [our] prophesies [of what courts will do] more precise, and to generalize then into a thoroughly connected system."

In Llewellyn's contribution -- "Some Realism About Realism" -- we again encounter the assertion that appellate litigation is indeterminate and the aspiration that legal theory can enhance predictability:

[The Realist "movement" is] a first attack upon the realm of the unpredictable in the actions of courts. That attack suggests strongly that one large element in the now incalculable consists in the traditional pretense or belief ... that there is no such area of uncertainty, or that it is much smaller that it is. To recognize that there are limits of the certainty sought by verbalism and deduction, to seek to define those limits, is to open the door to that other and far more useful judicial procedure: conscious seeking, within the limits laid down by precedent and statute, for the wise decision. Decisions thus reached, within those limits, may fairly be hoped to be more certainly predictable than decisions are now--for now no man can tell when the court will, and when it will not, thus seek the wise decision, but hide the seeking under words. And not only more certain, but what is no whit less important: more just and wise (or more frequently just and wise). [Italics in original; bold added.]

One thing I find interesting about this passage is Llewellyn's focus on judicial decision making. While it stands to reason that more insightful judges would make more predictable and just decisions,  this claim is quite a bit different from the usual claim about the contribution of Realism. For example, Brian Leiter, Rethinking Legal Realism: Toward a Naturalized Jurisprudence, 76 Tex. L. Rev. 267 (1997), argues that the Core Claim of Legal Realism is that "judges respond primarily to the stimulus of facts. Put less formally--but also somewhat less accurately--the Core Claim of Realism is that judges reach decisions based on what they think would be fair on the facts of the case, rather than on the basis of the applicable rules of law."

Proceeding from this Core Claim, the main contribution of Realism to predictability would not be that the nature of judicial decision making had changed, but rather that our understanding of those decisions had improved. Again, from Brian Leiter:

[I]f the Sociological Wing of Realism--Llewellyn, Moore, Oliphant, Cohen, Radin, among others--is correct, then judicial decisions are causally determined by the relevant psycho-social facts about judges, and at the same time judicial decisions fall into predictable patterns because these psycho-social facts about judges--their professionalization experiences, their backgrounds, etc.--are not idiosyncratic, but characteristic of significant portions of the judiciary. Rather than rendering judicial decision a mystery, the Realists' Core Claim, to the extent it is true, shows how and why lawyers can predict what courts do.

In the end, I am left wondering whether predictability of appellate decisions has improved at all since the 1930s. Most legal questions, even those raised in appellate courts, seem quite a bit simpler than those portrayed by Llewellyn in this passage:

[T]he line of inquiry via rationalization has come close to demonstrating that in any case doubtful enough to make litigation respectable the available authoritative premises--i.e., premises legitimate and impeccable under the traditional legal techniques--are at least two, and that the two are mutually contradictory as applied to the case at hand.

Even most appellate cases are not "doubtful enough to make litigation respectable" if this sort of indeterminacy is required for respectability. And those cases that must be resolved from "mutually contradictory" premises are likely no easier now than they were then.

Permalink | Legal Theory | Comments (1) | TrackBack (0) | Bookmark

Not necessarily.

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark

All of the posts and comments on this blog about the Wisconsin Supreme Court yesterday danced around the general question of the propriety of having courts give some review to economic legislation. Call this Lochnering. (Consider Ted Frank's and Plainsman's skepticism or Christine Hurt's applause.] In response to Christine's question about what degree of generalized cost-benefit legislative review courts ought to engage in, I offer the following thoughts:

I will be the first to acknowledge that it's quite likely that there is no authorization in the U.S. Constitution for the U.S. Supreme Court to engage in such a practice. And further, there are plenty of reasons that it might be undesirable for the U.S. Supreme Court to do it. Federal judges are unelected, likely to be out of touch with the electorate, often unfamiliar with economics, unable to review more than a handful of cases, and therefore likely to have trouble creating a coherent Lochner doctrine. Their decisions would be seriously entrenched against popular review (because the U.S. Constitution is quite difficult to amend). Such U.S. Supreme Court review would be injurious to decentralized economic policy, especially since judges tend to be skeptical of the unfamiliar, and thus their decisions would tend to rein in outlying states, just as its criminal procedure jurisprudence has done. The Court also is unlikely to be familiar with the procedural and political process in every state, and therefore not particularly likely to engage in a useful Ely-style analysis of whether the law had been created by democracy as usual. All right.

But what's the practical case against a low, but nontrivial level of review by the courts of a U.S. state? Obviously, the state constitution might or might not authorize such review, but let us suppose that the voters or framers of a constitution were thinking about authorizing such review, or having gotten stuck with it, were debating whether to amend the constitution and rebuke the court. What's so bad about having states who wish to engage in Little Lochnerism?

Many state supreme courts are elected, at least in retention elections, and state constitutions are all easier to amend than the federal one is. These choices may arise from a skepticism of judicial power, but they also mean that judicial review in a given area has lower stakes, because the judiciary is less likely to have undefeatably final say. State courts tend to be more familiar with local politics and concerns, and may be better able to engage in political-process review a la John Ely. State judges, for better or worse, tend to be marginally less elite than many of their equivalents on the federal bench, and therefore presumably less out of touch with the electorate. Their efforts to bring constitutional doctrine to bear on economic legislation also will not be as injurious to federalism, since their decisions reach only a single state, and very few people believe that counties or municipalities ought to enjoy the same degree of sovereignty that states do. State courts also tend to have larger dockets, and (obviously) many more cases from a single state, so it would be more conceivable for them to craft a coherent economic-review doctrine. So, what would be so bad about a state deciding to turn its court into a low-level legislative-rationality-review-board?

There is some noise that this would be violative of separation of powers principles. This is not necessarily bad, of course-- states aren't required to separate powers in the same way the national government does, and may not particularly want to. Many states don't have a powerful near-unitary executive, vast administrative state, or jealous judiciary. But at any rate, it should be obvious that engaging in economic review if it is authorized by law is not violative of separation of powers, but rather the essence of it. Laws require courts to make substantive doctrinal judgments all the time, whether through zoning enabling statutes, civil-rights statutes like RLUIPA and RFRA, constitutional provisions like the "reasonable"ness prong of the 4th Amendment, or substantively economic statutes like the Antitrust Act or the code on trademarks.

Similarly, there is some suggestion that courts lack the institutional expertise to do economics. Somehow it seems generally accepted that they can review campaign finance legislation or school district boundaries or a school prayer policy to see whether it is constitutional, but the minute they have to do something like contemplate gas prices in Hawaii, everybody gets nervous. It is hard to imagine why. It is not as if most legislators engage in substantive economic analysis of every bill on their own. They deputize overworked staffers and take a great deal of information from competing lobbyists and then do their best. Maybe a Little Lochner state court would need a few extra clerks, but is there any reason to think that the adversarial process in court would work a whole lot worse than the adversarial lobbying process that already happens in statehouses?

It's also true that such judicial review would place limits on the ability of legislatures to log-roll, combining some provisions that each person thinks is dubious until the resultant combination is okay with everybody. How possible this would be in a Little Lochner world depends in part on the state's severability laws. But while some log-rolling may be a good thing, it is not obvious that the optimal constraints on log-rolling are zero; that is why many states have germane-amendment rules or single-subject rules. Log-rolling may make elements of the legislative process harder for the people to supervise, and also may make it easier for the legislature to weave unconstitutional provisions together with popular constitutional ones. The people might reasonably decide to authorize the judiciary to strike down the most egregious pieces of legislation.

Legislators and legislatures are highly imperfect agents for the people who elect them. This is why some states retain popular-democracy provisions and why we have authorized some types of judicial review. Surely many allegations of racial discrimination or religious oppression or unconstitutional disuniformity in state taxes involve tough and imperfect judgment calls, even when proceeding by neutral rules (which are themselves imperfest). But is there any theoretical reason why people ought to force their courts to get out of the tough and imperfect judgment calls business altogether?

Permalink | Legal Theory | Comments (4) | TrackBack (0) | Bookmark

Over the weekend, I began reading H. Patrick Glenn's excellent book Legal Traditions of the World, which is extremely well written and informative. In the chapter on the civil law tradition, I found this tidbit about legal method:

Aristotle said that what you really can’t do, what nobody will let you get away with in argument, is affirming at the same time two things which contradict themselves. Put the other way, between two contradictory things, there is no middle (it’s excluded). You heard this as a child -- you can’t have your cake and eat it too. And everybody now knows this. There is no middle ground between contradictory things…. So once you know that two things are contradictory, once they have been defined and boundaried so that you know they are contradictory, that’s it. You have irreconcilable difference, or separation, or possibly incommensurability, or quite possibly conflict…. But what you now have is precision, since you have a notion of consistency, and consistency is what allows you to build, as opposed to simply wandering around amongst the differences.

As regular readers of this blog may remember, I posted some thoughts about legal method back in February and focused on analogical reasoning. The principle of consistency is an implicit requirement of analogical reasoning. Lawyers spend a great deal of time and energy probing facts and doctrine to discover consistencies and inconsistencies.

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark

Wow! HeinOnline has a great new website containing 100 "legal classics." Which would you read first? I opened Langdell's famous casebook, Selection of Cases on the Law of Contracts, and read the preface, which included this:

I entered upon the duties of my present position, a year and a half ago, with a settled conviction that law could only be taught or learned effectively by means of cases in some form.... Law, considered [as] a science, consists of certain principles or doctrines. To have such a mastery of these as to be able to apply them with constant facility and certainty to the ever-tangled skein of human affairs, is what constitutes a true lawyer; and hence to acquire that mastery should be the business of every earnest student of law. Each of these doctrines has arrived at its present state by slow degrees; in other words, it is a growth, extending in many cases through centuries. This growth is to be traced in the main through a series of cases; and much the shortest and best, if not the only way of mastering the doctrine effectually is by studying the cases in which it is embodied. But the cases which are useful and necessary for this purpose at the present day bear an exceedingly small proportion to all that have been reported. The vast majority are useless and worse than useless for any purpose of systematic study.

Thus commenced the modern teaching of law. But take a look through the body of that work and note how short the cases are, how many Langdell included, and the absence of explanatory text. Modern casebooks bear only passing similarity to this seminal text.

Thanks to Bonnie Shucha for the tip.

Permalink | Legal Theory | Comments (1) | TrackBack (0) | Bookmark

Richard Thaler and Cass Sunstein coined this term in their 2003 paper, published in the American Economic Review and in later form in the University of Chicago Law Review. They begin with the observation that "The idea of libertarian paternalism seems to be a contradiction in terms." Yes, that was my very first thought. Thaler and Sunstein want me to reconsider.

A few aspects of this paper interest me. First, Thaler and Sunstein base the notion of libertarian paternalism on the falsification of strong-form purposive human action. That is, they contend that people do not always -- perhaps even "usually" -- make choices in accord with their own "best interest." This is not a trivial assertion, but it is one that I am more than happy to accept. That said, it is also not true that people never make choices in their best interest. Law is interesting precisely because we are working in the large middle region, in which people sometimes choose wisely and sometimes do not.

Second, Thaler and Sunstein employ the concept to encourage "welfare-enhancing" interventions by institutions:

We urge that such rules should be chosen with the explicit goal of improving the welfare of the people affected by them. The libertarian aspect of our strategies lies in the straightforward insistence that in general, people should be free to opt out of specified arrangements if they choose to do so. Hence we do not aim to defend any approach that blocks individual choices. The paternalistic aspect consists in the claim that it is legitimate for private and public institutions to attempt to influence people’s behavior even when third party effects are absent. In other words, we argue for self-conscious efforts, by private and public institutions, to steer people’s choices in directions that will improve their own welfare.

As you might expect, this idea has already generated strong reactions. For example, Daniel Klein accuses Thaler and Sunstein of acting disingenuously: "I believe they seek to dispose of libertarianism by speaking in a way that upsets libertarianism’s key semantics, but without making clear that that is what they are doing, much less challenging those semantics directly." The heart of Klein's criticism relates to the distinction between voluntary and coercive action. According to Klein, Thaler and Sunstein muddy the waters "because they reject the key distinctions between governmental and nongovernmental affairs." In a reply to Sunstein, Klein clarifies his target: "Social Security taxes and consumer protection laws (with concomitant enforcement) tread on property and freedom of contract, and hence on freedom; they are coercive." By contrast, company policies and other "private" arrangements are non-coercive. By conflating governmental and non-governmental action, Klein argues, Thaler and Sunstein attempt to undermine the force of libertarian claims about the illegitimacy of government action.

Fair enough. Thaler and Sunstein are playing loose to score rhetorical points. But I think Sunstein can be forgiven for concluding that "Klein seems to me to have nothing to say against" the proposal. That is, assuming that fundamental changes in the size and functions of government are not on the table, Klein has nothing to say about the proposal that policy makers should embrace "the explicit goal of improving the welfare of the people affected by them." For a more fundamental challege to the proposal, we might consult Don Boudreaux who wonders:

What are the "desired social objectives"? How are they chosen? The range of options – from among which the "desired" ones are to be chosen – is vast. Do our "desired social objectives" include absolute income equality among families? Zero rates of divorce? Reducing the number of abortions? Curing cancer within ten years? Putting a man on Mars? No more petroleum imports? Reducing air pollution nationwide by 10% annually? 25% annually? 50% annually? Eliminating the trade deficit? Completely eliminating tobacco consumption? Reducing alcoholism by 5%? By 30%? TiVo in every family room?

The implicit assumption underlying Boudreaux's critique is that individual choice is always a viable alternative to collective choice. Thaler and Sunstein reject that assumption:

The first misconception is that there are viable alternatives to paternalism. In many situations, some organization or agent must make a choice that will affect the behavior of some other people. There is, in those situations, no alternative to a kind of paternalism -- at least in the form of an intervention that affects what people choose. We are emphasizing, then, the possibility that people’s preferences, in certain domains and across a certain range, do not predate the choices made by planners.

Thus, Thaler and Sunstein view themselves as making a rather modest and obvious point. They are not attempting to justify the New Deal, but trying to direct policy makers who operate within our current system. With respect to those policy makers, Sunstein rightly observes:

Libertarian paternalists insist on freedom of choice; they do not want to foreclose options (Sunstein and Thaler 2003). At the same time, they believe that, in many contexts, planners cannot help influencing choosers, even if they aspire to neutrality. If influences are inevitable, shouldn't planning be undertaken with some awareness of its effects? Libertarian paternalists believe that the answer is clearly yes—and that planners in the private and public sectors should explore approaches that lead people toward welfare-increasing outcomes while also leaving them free to choose. (emphasis added)

The difficulty with this debate is that the participants are playing on various levels. Thaler and Sunstein have offered a thoughtful and provocative proposal that is not easily dismissed with simple appeals to individual v. collective choice.

Permalink | Legal Theory | Comments (1) | TrackBack (0) | Bookmark

I don't know whether Ronald Dworkin is a violent man, but Brian Leiter probably does not want to meet Dworkin in a dark alley. Leiter's paper The End of Empire: Dworkin and Jurisprudence in the 21st Century is as complete a fisking of another scholar as I have ever read. And Brian uses only 21 pages to do the job.

Here is a nice summary of the argument, though you really need to read the whole paper:

The New York University School of Law web page describes Ronald Dworkin as "probably the most influential figure in contemporary Anglo-American legal theory� and says �Dworkin is probably one of the two or three contemporary authors whom legal scholars will be reading 200 years from now.� Both statements are, I shall suggest, rather hyperbolic, at least with respect to Dworkin the legal philosopher.... Notwithstanding the majestic sweep and ambition of his jurisprudential corpus, my conclusion�which I�ve come to only gradually over the last decade of reading, writing, talking and teaching about problems in legal philosophy�is that in legal philosophy, Dworkin now deserves to go the way of Skinner in psychology or Derrida in literary theory, that is, the way of figures whose work, at one time, was a stimulus to new research, but who, in the end, led�or, in Dworkin�s case, tried to lead�their field down a deeply wrong-headed path. The only good news in the story about Dworkin�s impact on law and philosophy is that most of the field declined to follow the Dworkinian path�something, interestingly, that those not working in legal philosophy generally do not know.

Those of you who read Brian's blog know that he is capable of more impassioned language than that, and he does not disappoint in this paper. For example, he argues that Dworkin's recent rhetoric "borders ... on the 'unhinged,'" suggests that a recent Dworkin law review article is a "hatchet job," and summarizes Dworkin's positive legacy thus: "seven distinctive Dworkinian theses, none very plausible, many spectacularly wrong-headed, all extensively criticized, and some abandoned already by Dworkin himself."

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark

Posner on Free Will

Unless you've been under a rock this week (or enjoying the holiday cyber-free), you've no doubt heard that Richard Posner is guest-blogging on Brian Leiter's blog. Yesterday, Judge Posner explained his thoughts on free will and criminal mens rea:

I think of free will as being epiphenomenal. When we engage in deliberation, we are examining the pros and cons of alternative courses of action. When we complete our deliberation, either the pros or the cons will be weightier, and we go with the weightier side of the balance. . . . The question for the law is not whether a defendant's crime was the product of an exercise of free will, but whether attaching a penalty to the kind of conduct in which he engaged is likely to reduce the incidence of that conduct by making it more costly. If so, we say that his decision to engage in the conduct was culpable, was "his fault." We say he "could have chosen" not to engage in the conduct. But probably, if we knew everything about his psychology, we would realize that his choice was foreordained. What we mean when we say that he "had a choice" is that the penalty would have deterred most people from engaging in such behavior.

This argument reminded me of a law school friend, Michael Weiss, who suddenly and sadly died a few years ago. While a third year law student, Michael had an editorial published in the Wall Street Journal.

Because Prof. Hamilton required us to bring the WSJ to Business Associations every day, we read it together as a class. Michael's editorial, dated February 11, 1992, argued, using Immanuel Kant, that Jeffrey Dahmer had acted out of free will in the same sense that Judge Posner writes of free will. (However, Judge Posner seems to create an exception for insanity, which Michael would not have.) The editorial is available on Westlaw, but the relevant portion is reprinted below. I still don't agree with Michael, but I wish he were here so that we could argue about it again. I know for a fact that he would be a blogger!

In his "Critique of Pure Reason" (1781), Kant holds that before we perceive something the mind has already shaped and colored it into something of its own creation. We therefore can never understand the way things "really" are. In this context Kant addresses one of the most confusing problems of criminal law, "caused" mental states. Kant maintains that the argument over whether a given mental state was caused or free confuses the way things seem to us and the way things are. . . . Kant proves that in order to make sense of our inner experiences we must assume that our mental states are freely chosen. Although all physical objects have a cause, as mental beings we are always free; our mind makes it that way. Kant makes clear that the fact that we can think implies freedom. That we can think proves as a practical matter that we are free. . . . This solution neatly answers the problem of Jeffrey Dahmer. The defense's proof that Mr. Dahmer's intention to do ghoulish acts was somehow caused by his childhood or biology is irrelevant. These things are not unique in their ability to cause mental states. All mental states, as physical events, have a cause. However, we also must consider Mr. Dahmer's drive a mental act and we must assume it is free. To try to prove it was caused or free is a mistake. It all depends on how we look at it. According to Kant, practically, logically, it was free.

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark

This question occupied me for several hours in New Orleans, as I anticipated possible lines of inquiry for my session on Law & Management. While pondering the issue, I stumbled across an article by then-Dean Kathleen Sullivan called Interdisciplinarity, 100 Michigan Law Review 1217 (2002). On the issue of law as discipline, Sullivan wrote:

Organizational charts of the disciplines often focus on content, or the taxonomy of subject matters studied. Of course, law is a discipline in this sense. Legal rules, documents and judgments comprise a rich and complicated body of texts distinct from novels, equations, or musical scores. And law involves a rich and complicated body of institutional arrangements that structure and regulate social order, distinct from the institutional structures of markets, cultures, and religions.

But a discipline, as the term itself suggests, also represents a technique, a method of analysis, a way of working. Here too, law is distinctive. It is a branch of rhetoric that gives normative force to interpretation and analysis. It is a set of interpretive techniques of problem-solving that disaggregate and order the messy jumble of facts through which conflict presents itself. And it is an amalgam of argumentative and decisional conventions, engrained through repetition, teachable only through reiterated practice and critique, as with etiquette, musical performance, or sport.

If you have any doubt that legal method is distinctive, try reading a non-lawyer's attempt to state the holding of a judicial opinion. With rare and brilliant exception (Linda Greenhouse, Nancy Rosenblum, Austin Sarat come to mind), even the cleverest non-lawyers routinely garble such summaries, seeing holdings in cert. denials, constitutional rules in statutory constructions, substantive shifts in remedial rulings, big swings in molecular motions. Legal journalism routinely commits political mapping fallacies, announcing that the Supreme Court is "turning right" only to recant a term later to say that "the center holds." The equivalent in etiquette is the faux pas; in music, singing off pitch; in sport, the duff, the dink, the mulligan. Lawyers know better because of our immersion and internalization of our discipline, a social practice that turns out to be a lot harder than it looks.

This appeals to me, and for the time being, I am proceeding on the assumption that Sullivan is right. Law as an academic disclipline must be something more than the subject matter that we study. There must be a legal method, and she locates this in the ancient field of rhetoric. As I read this description of law, I wonder why we do not teach principles of rhetoric more systematically in law schools. Many law schools teach a course in legal process, but the content of these courses varies widely from institution to institution.

Most law students learn legal method, if at all, only contextually. That is, they learn to interpret judicial opinions by studying contracts cases, torts cases, property cases, etc. They learn to interpret statutes in a course on corporate law or environmental law. The result of this contextual learning is that most law students are not very self-conscious about employing the legal method. They are, in a word, sloppy.

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark

Reading Mark de Rond's book on Strategic Alliances as Social Facts, I ran across this from Michael Crichton's Travels:

It's hard to observe without imposing a theory to explain what we're seeing, but the trouble with theories, as Einstein said, is that they explain not what is observed, but what can be observed. We start to build expectations based on our theories. And often those expectations get in the way.

Lot of wisdom in that.

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark

Nate Oman has a post on legal theory that is worth reading over at Tutissima Cassis. He tries to explain the success of law and economics in late 20th century legal thought and the relative lack of success of other law & ______ possibilities, specifically law & anthropology. Nate asserts that legal academics want a form of "Newtonian social physics" -- where they can "hold the world constant, change one law, and see what would happen" -- and they get something like that in economics.

But, as Nate observes, what legal academics get in economics is not really Newtonian, in the sense that one can reason deductively from a set of certain principles. Instead, it is Popperian in the sense that the focus is on falsifiability. Law & anthropology, by contrast, is not motivated by a desire to create falsifiable propositions, but rather meaningful interpretations of society.

One missing piece to all of this: why have law & _______ at all? Traditional legal reasoning and scholarship provided answers that were more-or-less determinate. The process was heavily inductive. Like a scientist observing the movements of the stars, legal scholars read judicial opinions and drew from those observations a set of general principles. These principles were tweaked and refined by treatise writes and code drafters to produce much of modern law.

This traditional scholarship has much the same flavor as law & anthropology, but the problem was not so much the absence of predictive power (after all, we could assert that future judges should follow the principles established by the past judges). Rather, the problem was the lack of normative bite. So, while law and economics provided useful tools for describing and evaluating the consistency of past decisions, its magnetic appeal derives from the sense that it offers normative hope.

By the way, as you undoubtedly know, over the past few decades, economics has become increasingly the domain of mathematicians. The following landed in my emailbox tonight at the hands of Stuart Macaulay: "In my youth it was said that what was too silly to be said may be sung. In modern economics it may be put into mathematics." R. H. Coase, The Firm, the Market, and the Law 185 (Univ. Chi. Press 1988).

Permalink | Legal Theory | Comments (0) | TrackBack (0) | Bookmark