Just before Christmas the Washington Law Review published a symposium issue honoring Larry Cunningham's new book, Contracts in the Real World. The issue is a good read for Contracts teachers. You can read my contribution, "Contracts as Pattern Language" here. The abstract for this essay is below:
Christopher Alexander’s architectural theory of a "pattern language" influenced the development of object-oriented computer programming. This pattern language framework also explains the design of legal contracts. Moreover, the pattern language rubric explains how legal agreements interlock to create complex transactions and how transactions interconnect to create markets. This pattern language framework helps account for evidence, including from the global financial crisis, of failures in modern contract design.
A pattern represents an encapsulated conceptual solution to a recurring design problem. Patterns save architects and designers from having to reinvent the wheel; they can use solutions that evolved over time to address similar problems. Contract patterns represent encapsulated solutions within a legal agreement (or set of agreements) to a specific legal problem. This problem might consist of a need to match the particular objectives of counterparties in a discrete part of a bargain or to address certain legal rules. A contract pattern interlocks, nests, and works together with other contract patterns to solve more complex problems and create more elaborate bargains. Interlocking patterns enable scalability. Just as Alexander’s architectural patterns for rooms create patterns for buildings, which create patterns for neighborhoods and cities, patterns of individual contract provisions form legal agreement patterns, which interlock to create patterns for transactions, which, mesh to create patterns for markets. For example, contract patterns help lawyers draft real estate contracts. These contracts interlock in sophisticated real estate transactions, which mesh with other contract patterns to form securitization transactions. Securitization patterns create markets for asset-backed securities, which, form part of the larger shadow banking system.
This scalability differentiates contract patterns from boilerplate. However, legal scholarship on boilerplate – including Henry Smith’s work on the modularity of contract boilerplate – patterns allow certain debt contracts to become what Gary Gorton calls "informationally insensitive" and to enjoy many of the economic features of money.
The pattern language framework explains not only how sophisticated contracts function, but also how they fail. The pattern language framework provides a lens for examining recent contracts law scholarship on the failures of sophisticated contract design, including "sticky" contract provisions in sovereign bond agreements, "Frankenstein" contracts in mortgage-backed securitizations, and the "flash crash." If modularity and contract design patterns foster the development of new financial instruments and markets, then their features can also contribute to the unraveling of these markets. For example, by restricting the information content of contracts, patterns and modularity not only midwifed the creation of liquid markets for those contracts, they also played a role in "shadow bank runs" and the catastrophic freezing of these markets. The failure of contracts can have systemic effects for entire markets when a particular contract enjoys widespread use or when it is so connected to other critical contracts that cascading failures occur.
This essay was a contribution to a symposium for Larry Cunningham’s book, Contracts in the Real World.
We had 3 first days last Wednesday. Our oldest started kindergarten, a new school and our first time in the public school system. My youngest (7.5 months) started day care for the first time. And our younger daughter started a new class in daycare.
Whew! Getting used to new routines and juggling 3 kids' schedules took a lot out of me! Plus, it was jarring entering the new world of elementary school. 5 years in, we are old hands at our daycare. A new school brings foreign terminology, procedures, and customs. I am a creature of routine, and I think the thing that bugs me the most about first days is that we haven't yet got the routine down, and we're just kind of making it up as we go along. Blech. I can already tell this week will be better!
I've been thinking about first days in general because 1) I'll be speaking to the incoming 1L class later this week, and 2) for the first time I'll be teaching first-semester Contracts students. Any advice you might have to pass along to either group? The topic of my orientation talk is "Preparing for Class." And the topic for the first class is...Contracts, I guess. I'm planning on jumping in without giving much of an overview. But thoughts are welcome!
Let me start out with a criticism of Larry’s book: it is too much fun. I had a hard time breaking off just a chunk of Contracts in the Real World to write about and found myself spending several hours reading one interesting vignette after another on famous and infamous contracts.
The book will make a wonderful companion text to a traditional contracts casebook. Its value is not just in its engaging account of contract stories or in giving context to chestnut cases, but in providing a very intuitive framework for understanding contract law. The traditional contracts course, perhaps by virtue of having the doctrine of consideration at its heart, can be one of the most confusing in the One-L year. Students are often left to divine the inner structure (or lack thereof) of contract law on their own, likely while cramming for finals. Sometimes the epiphany comes. For many students it does not.
Larry has a real genius for laying out the doctrinal building blocks in a very thoughtful and accessible structure. He groups cases around a rough life cycle of contracts, with chapters devoted to “Getting In: Contract Formation,” to “Facing Limits: Unenforceable Bargains,” to “Paying Up: Remedies.” The layout of the book combined with its lucid writing demystifies contracts.
The layout may at first appear to make this book an ill fit as a companion text to many case books, because many of the cases appear in Contracts in the Real World under a different doctrinal heading than in a particular case book. For example, in the case book I currently use Batsakis v. Demotsis appears in the chapter on “consideration.” Larry places this classic next to cases on unconscionability. I also teach Lucy, Lady Duff Gordon in consideration, while Larry situates it in “Performing: Duties, Modification, Good Faith.”
These differences actually demonstrate a strength of the book. Some disconnect between the organization of a primary case book and a companion text forces students to move beyond a facile understanding of contract law in terms of rigid doctrines. Seeing cases in different contexts and fitting into different doctrinal boxes can help students see that lawyering involves more than memorizing black letter rules and putting issues into the right doctrinal box. Indeed, sometimes different doctrinal boxes can apply to the same problem and lead to the same result (witness rules on past consideration and duress). At other times, the choice of the doctrinal box makes a huge difference (see those same two doctrines). Accomplished students can move from memorizing blackletter law to seeing the possibility of creative lawyering. Larry’s organization – both intuitive and surprising – will help students at both stages.
One final strength of the book is Larry’s choice to include not only court cases but many contemporary contract disputes that never reached the courtroom (such as the dispute between NBC and Conan O’Brien). This brings into the classroom a wider panorama of how lawyers encounter and shape contractual problems in practice. After all, few contracts and few lawyers find their way into a courtroom. Most disputes are resolved in the shadow of law.
I also have a wish list for Larry’s next project (from personal experience, I can tell you how invigorating it is for an author who has just finished a book to be asked “what’s next?’). One of the limitations of the traditional contracts curriculum is how rarely students read and interpret – let alone negotiate or draft – actual contracts. It would be incredibly helpful as a professor to have some of the source contracts behind these stories. Although some of these contracts are already contained in a judicial opinion (Carbolic Smoke Ball) and many will not be public (Conan’s deal with NBC), others might be available with some digging. Having real and full contracts would allow professors to meet many of the items on Professor Collins’ wish list, such as transactional perspectives and drafting exercises. Although some lawyers litigate over failed contractual relationships, many more help parties plan prospectively – including by drafting and negotiating deals. For most attorneys, contracts are not an autopsy subject, to be dissected in a court opinion, but a living thing.
Professor Cunningham’s book provides a joyful reminder of the life in contracts.
From our friends in Boston...
SUFFOLK UNIVERSITY LAW SCHOOL in Boston invites applications for several tenure track positions starting in the 2013-2014 academic year. We seek entry-level and lateral candidates with strong academic records and a demonstrated commitment to excellence in teaching and scholarship. We have particular curricular teaching needs in first-year contracts and first-year property, together with upper-level courses with a focus on health law, business or financial services. We also have foreseeable needs in criminal law and international law. Consideration may also be given to relevant practice experience and community involvement. Suffolk University is an equal opportunity employer. We encourage applications from women, persons of color, sexual orientation minorities, and others who will contribute to the diversity of the faculty. Interested candidates should contact Professors Jessica Silbey and Robert Smith, Co-Chairs, Faculty Appointments Committee, at firstname.lastname@example.org and email@example.com, with a copy to firstname.lastname@example.org, or mail their materials to the Co-Chairs of the Appointments Committee, c/o Janine LaFauci, at Suffolk University Law School, 120 Tremont St., Boston, Massachusetts 02108-4977.
There, I said it.
Haskell Murray's sweet and thoughtful post on mentors reminded me of my early teaching days. 7 years might not sound like a lot to you grizzled veterans, but it strikes me at the end of this academic year that I've been around for a while now. Looking back to my first year, I remember one observation from an old hand that sounded ludicrous at the time: "It doesn't really matter if we cover all the material. It's not a big deal."
"What?!" I was horrified. I had only 3 credits to cover Business Associations, not the luxury of 4. As it was whole chapters and doctrines were left to the wayside, and I felt I had to rush through material to make sure we Covered It All.
I think it was around the end of my second year when I realized that 90% of law the students dutifully crammed into their heads for the exam had trickled out within 2 weeks. That realization was equal parts sobering and liberating. Now my goal is for students to walk out of BA understanding 1) there are different ways to run the railroad, each with tradeoffs in terms of control, liquidity and taxation 2) there are fiduciary duties, 3) the business judgment rule, 4) derivative suits (kind of), and most importantly, 5) THERE'S A STATUTE. Start there.
Don't get me wrong, there's plenty more that I teach and test on. But one of my big goals is to introduce students to the idea of transactional law. So I always try to have at least one guest speaker, a real live lawyer who will tell the class what their practice is like. And we've been lucky enough to have Bill Chandler, the former Chancellor of the Chancery Court, teach a short course here at Georgia for the past several years. When he's in town I dragoon him into service. He's talked about the history and role of the Chancery Court, Disney, what it's like to be back in practice. It's an incredible opportunity for our students to hear from him--much more valuable than anything I could impart in lecture #42.
In Contracts we have a negotiation class and a class on NDAs. I find these classes, particularly toward the end of the semester, are a welcome break in the routine for students. What's more, they give students a taste of how transactional attorneys deal with contracts in real life. Providing this context makes the students care more about the doctrine they're learning.
When I mention such classroom excursions to very new professors, they often remark, "Oh, that sounds great, but I just don't have the time! I have so much to cover!"
I nod understandingly and smile.
Here is a highly productive way for business law professors to procrastinate from grading exams:
The National Bureau of Economic Research just circulated a new version of a paper that provides a medieval complement to the law & finance literature and to Gilson's lawyer as transaction cost engineer idea. The paper by Davide Cantoni and Noam Yuchtman presents evidence that the training of commercial lawyers by new universities contributed to the expansion of economic activity in medieval Germany. Here is the abstract:
We present new data documenting medieval Europe's "Commercial Revolution'' using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany's first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities. Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity.
A very interesting read.
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Thanks to Erik Gerding for the opportunity to share some of my ideas on corporate criminal liability, Dodd-Frank, corporate influences on individual behavior and educating today's law students only three months into my new academic career. I appreciate the thoughtful and encouraging emails I received from many of you. I even received a request for an interview from the Wall Street Journal after a reporter read my two blog posts on Dodd-Frank conflicts minerals governance disclosures. We had a lengthy conversation and although I only had one quote, he did link to the Conglomerate posts and for that I am very grateful.
I plan to make this site required reading for my seminar students, and look forward to continuing to learn from you all.
Best wishes for the holiday season and new year.
Law schools are under attack. Depending upon the source, between 20-50% of corporate counsel won’t pay for junior associate work at big firms. Practicing lawyers, academics, law students and members of the general public have weighed in publicly and vehemently about the perceived failure of America’s law schools to prepare students for the real world.
Admittedly, before I joined academia a few months ago, I held some of the same views about lack of preparedness. Having worked with law students and new graduates as outside and in house counsel, I was often unimpressed with the level of skills of these well-meaning, very bright new graduates. I didn’t expect them to know the details of every law, but I did want them to know how to research effectively, write clearly, and be able to influence the clients and me. The first two requirements aren’t too much to expect, and schools have greatly improved here. But many young attorneys still leave school without the ability to balance different points of view, articulate a position in plain English, and influence others.
To be fair, unlike MBAs, most law students don’t have a lot of work experience, and generally, very little experience in a legal environment before they graduate. Assuming they know the substantive area of the law, they don’t have any context as to what may be relevant to their clients.
How can law schools help?
First, regardless of the area in which a student believes s/he wants to specialize, schools should require them to take business associations, tax, and a basic finance or accounting course. No lawyer can be effective without understanding business, whether s/he wants to focus on mom and pop clients, estate planning, family law, nonprofit, government or corporate law. More important, students have no idea where they will end up after graduation or ten years later. Trying to learn finance when they already have a job wastes the graduate’s and the employer’s time.
Of course, many law schools already require tax and business organizations courses, but how many of those schools also show students an actual proxy statement or simulate a shareholder’s meeting to provide some real world flavor? Do students really understand what it means to be a fiducuiary?
Second and on a related point, in the core courses, students may not need to draft interrogatories in a basic civil procedure course, but they should at least read a complaint and a motion for summary judgment, and perhaps spend some time making the arguments to their brethren in the classroom on a current case on a docket. No one can learn effectively by simply reading appellate cases. Why not have students redraft contract clauses? When I co-taught professional responsibility this semester, students simulated client conversations, examined do-it-yourself legal service websites for violations of state law, and wrote client letters so that the work came alive.
When possible, schools should also re-evaluate their core requirements to see if they can add more clinicals (which are admittedly expensive) or labs for negotiation, client consultation or transactional drafting (like my employer UMKC offers). I’m not convinced that law school needs to last for three years, but I am convinced that more of the time needs to be spent marrying the doctrinal and theoretical work to practical skills into the current curriculum.
Third, schools can look to their communities. In addition to using adjuncts to bring practical experience to the classroom, schools, the public and private sector should develop partnerships where students can intern more frequently and easily for school credit in the area of their choice, including nonprofit work, local government, criminal law, in house work and of course, firm work of all sizes. Current Department of Labor rules unnecessarily complicate internship processes and those rules should change.
This broader range of opportunities will provide students with practical experience, a more realistic idea of the market, and will also help address access to justice issues affecting underserved communities, for example by allowing supervised students to draft by-laws for a 501(c)(3). I’ll leave the discussion of high student loans, misleading career statistics from law schools and the oversupply of lawyers to others who have spoken on these hot topics issues recently.
Fourth, law schools should integrate the cataclysmic changes that the legal profession is undergoing into as many classes as they can. Law professors actually need to learn this as well. How are we preparing students for the commoditization of legal services through the rise of technology, the calls for de-regulation, outsourcing, and the emerging competition from global firms who can integrate legal and other professional services in ways that the US won’t currently allow?
Finally and most important, what are we teaching students about managing and appreciating risk? While this may not be relevant in every class, it can certainly be part of the discussions in many. Perhaps students will learn more from using a combination of reading law school cases and using the business school case method.
If students don’t understand how to recognize, measure, monitor and mitigate risk, how will they advise their clients? If they plan to work in house, as I did, they serve an additional gatekeeper role and increasingly face SEC investigations and jail terms. As more general counsels start hiring people directly from law schools, junior lawyers will face these complexities even earlier in their careers. Even if they counsel external clients, understanding risk appetite is essential in an increasingly complex, litigious and regulated world.
When I teach my course on corporate governance, compliance and social responsibility next spring, my students will look at SEC comment letters, critically scrutinize corporate social responsibility reports, read blogs, draft board minutes, dissect legislation, compare international developments and role play as regulators, legislators, board members, labor organizations, NGOs and executives to understand all perspectives and practice influencing each other. Learning what Sarbanes-Oxley or Dodd-Frank says without understanding what it means in practice is useless.
The good news is that more schools are starting to look at those kinds of issues. The Carnegie Model of legal education “supports courses and curricula that integrate three sets of values or ‘apprenticeships’: knowledge, practice and professionalism.” Educating Tomorrow’s Lawyers is a growing consortium of law schools which recommends “an integrated, three-part curriculum: (1) the teaching of legal doctrine and analysis, which provides the basis for professional growth; (2) introduction to the several facets of practice included under the rubric of lawyering, leading to acting with responsibility for clients; and (3) exploration and assumption of the identity, values and dispositions consonant with the fundamental purposes of the legal profession.” The University of Miami’s innovative LawWithoutWalls program brings students, academics, entrepreneurs and practitioners from around the world together to examine the fundamental shifts in legal practice and education and develop viable solutions.
The problems facing the legal profession are huge, but not insurmountable. The question is whether more law schools and professors are able to leave their comfort zones, law students are able to think more globally and long term, and the popular press and public are willing to credit those who are already moving in the right direction. I’m no expert, but as a former consumer of these legal services, I’m ready to do my part.
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A great example can be found in 9-302, where Article 9 graciously defers to federal law by not requiring (or giving legal force to) a UCC-1 Financing Statement with respect to property that is subject to a federal statute which specifies a different place of filing. It helps to ask students to imagine what the outcome would be if this provision did not exist. Some may argue that in the absence of Article 9's express deference to the federal filing requirement, there would not necessarily be a direct conflict. In other words, parties could readily file under both systems. Others may raise a field preemption argument, whereby any Article 9 filing requirement would be rendered moot by a federal statutory scheme on point. Many others will invoke typical Article 9 policy considerations (such as certainty, predictability and uniformity in commercial law) and argue that a duplicative filing requirement would introduce uncertainty to filers and searchers. Indeed, each of these arguments has been raised in cases dealing with conflicts between Article 9 and federal law.
Once identified, the conflicts angle can be revisited in a number of contexts. Article 9 codifies many resolutions of conflicts, including state law conflicts (consider Article 9’s deference to state motor vehicle title statutes). It can be useful to brainstorm these issues throughout the semester, because once students are sensitive to the conflicts issue, they can more readily understand more complex provisions of Article 9. For instance, consider the ever-misunderstood 9-408. This is a statute that, upon a student’s first reading, seems to boldly set aside federal and state laws, as well as the private contractual agreements of persons who may not even be party to a transaction governed by Article 9. Wow! But once the statute is contextualized within the conflicts and federal preemption issue, students can appreciate that the drafters were not actually trying to overturn or nullify conflicting federal or state laws and contractual agreements. Rather, the provision reflects a much more modest goal: it seeks to clarify the operative effect that those conflicting provisions will have under Article 9, purely for Article 9 purposes. It’s a subtle distinction, but an important one.
I believe that grappling with puzzles of this sort can really pay out in practice. Young attorneys are often called upon to interpret and apply statutes quickly. A rich awareness of statutory interpretation can guide the analysis. So, too, can a basic understanding of how a particular law relates to other laws in a multistate, federal system. And, on a more personal note, I think these inquiries introduce students to the richness and rigor of commercial law.
I am grateful for Usha’s latest post about her ambivalence to law and emotions scholarship because it provides an opportunity to engage in extended public discussion about what are some of the legal payoffs to (business) law professors of learning and teaching about emotions in general and happiness in particular.
I concur with Usha that it’s a busy time of the academic year as the semester is coming to a close and many of us will soon be traveling for the holidays (and some of us have traveled to participate in conferences). Of course, most of us feel that we are if not always, then at least constantly busy. In their article titled Idleness Aversion and the Need for Justifiable Busyness, Christopher K. Hsee, Adelle X. Yang, and Liangyan Wang present experimental evdience that busier people self-report being happier. The following is a video short about how the days are long, but the years are short.
I am quite sympathetic to Usha’s opinion that while happiness research is “all fascinating and it shapes my daily choices and reaffirms (or causes me to question) my life choices. Happiness research goes to the core of myself as a person. Still I wonder: what does this have to do with law?” This is partly because her view is one that many people including myself from a couple of years ago share. As Usha pointed out, I’ve already written a number of law review articles and some peer-referred articles about law and emotions including but not limited to happiness. Rather than repeating any of those article’s themes (those interested can find all of them available here), I’ll share five concrete responses to the specific challenge that Usha issued about what are the legal implications of and payoff to emotions and happiness research.
First, much of law concerns and is about human behavior: how to discourage anti-social human behavior and encourage pro-social human behavior. In attempting to change human behavior, law is and must be predicated upon a theory of human behavior. The theory can be Oliver Wendell Holmes’ bad man or neoclassical economics’ much caricatured rational actor. Whatever that underlying theory of human behavior is that law is based upon, that theory must address human JDM (Judgment and Decision Making) because in order for the law to change human behavior the law must change the judgments and/or decisions that humans make. It just so happens there has been a recent flood of research about how emotions in general and happiness in particular influence human JDM. This research is diverse and scattered across many disciplines, including anthropology, economics, finance, neuroscience, marketing, philosophy, political science, psychology, and sociology. Of course, this plethora of non-legal interest and research does not have to mean there are legal implications of new understandings about how emotions and happiness shape human JDM. But at least some law professors can and should read this rapidly growing literature to digest it and see if any of it has legal implications or payoffs. Professor Emeritus and former Dean of Stanford Law School and current President of the William and Flora HEwlett Foundation, Paul Brest teaches a graduate course on JDM at Stanford University. He has co-authored with Professor of Law and Director of the Ulu Lehua Scholars Program at the William S. Richardson School of Law in Honolulu, Hawai'i and Senior Research Fellow at the Center for the Study of Law and Society at the University of California, Berkeley, Linda Hamilton Krieger a book titled Problem Solving, Decision Making, and Professional Judgment: A Guide for Lawyers amd Policymakers. Chapter 13 of their book analyzes complexities about decision-making including predicting future well-being and Chapter 16 is titled The Role ofAffect In Risky Decisions.
Second, much of business law is premised upon the neoclassical economics model of utility maximization or the behavioral economics challenge to that model. In either case, business law can benefit from recent work on happiness economics because happiness economics raises a more fundamental challenge to and radical critique of neoclassical economics than does behavioral economics. Some view happiness economics as being a proper subset of behavioral economics, while others view happiness economics as being an extension of behavioral economics. In any event, behavioral economics points out that people have bounded rationality, willpower, and self-interest. The theoretical core of behavioral economics is an article titled Prospect Theory: An Analysis of Decision under Risk by Daniel Kahneman and Amos Tversky. This is an article which is likely to have been cited more times than it has been read by law professors and certainly more times than it has been understood by law professors as evidenced by overly broad attempted legal applications.
Happiness economics points out how people often systematically make decisions that fail to maximize their experienced happiness ex post as opposed to their anticipated or predicted happiness ex ante. This robust empirical and experimental finding means that at least in principle there is room for some other party, public or private, to help improve (or take advantage of) people’s JDM. In a recent working paper that is a forthcoming article in the American Economic Review, titled What Do You Think Would Make You Happier? What Do You Think You Would Choose?, Daniel Benjamin, Ori Heffetz, Miles S. Kimball, and Alex Rees-Jones present survey evidence that although what people choose hypothetically and what they predict would maximize their SWB (Subjective Well-Being) typically coincide, there are systematic reversals. They identify such factors as autonomy, family happiness, predicted sense of purpose, and social status to help account for hypothetical choices while controlling for predicted SWB. Their methodology has a number of possible legal and policy applications, including the development of aggregate measures of happiness. Another example is the application of their approach to reconcile the tension between an empirical finding in the article The Paradox of Declining Female Happiness by economists Betsey Stevenson and Justin Wolfers of declining average SWB of American women since the 1970s, both in absolute terms and in relative terms compared to men, with a common intuition that expanded political and economic freedoms for American women have made American women better off. Survey respondents who were asked to rank living in a world with or without such increased political and economic freedoms for women. Significantly more respondents choose to live in a world having expanded political and economic freedoms for women despite believing that a world without such expanded political and economic freedoms would make them happier than the opposite. Their National Bureau of Economic Research working paper 16489 titled Do People Seek to Maximize Happiness? Evidence from New Surveys contains additional examples and more details.
Third, research into two specific emotions, namely fear and greed finds that participants in financial markets are sometimes emotional and sometimes unemotional because they engage in both emotional and unemotional types of mental processing in responding to ever-changing market circumstances. In a series of articles titled,
finance professor Andrew W. Lo posits that many tenets of rational expectations and the so-called efficient markets hypothesis fail to hold always, despite serving as useful benchmarks of what might eventually happen under certain idealized conditions. He speculates that an evolutionary theory of punctuated equilibria involving rare but big environmental shocks resulting in mass extinctions and eruption of new species could apply to financial markets. As Lo points out, law and policy that is based upon assuming rationality or more precisely lack of emotionality is going to be inapt during financial crises. Similarly, law and policy that is based upon assuming emotionality is going to be inapt during financially calm times. His Adaptive Markets Hypothesis implies that effective law and policy should adapt in light of changing financial markets and their participants. Examples of such adaptive business law and policy include:
(1) Countercyclical capital requirements.
(2) Collection, communication, dissemination, publication, and transparency of information about accurate systemic risk measures.
(3) Creation of a Capital Markets Safety Board (CMSB), analogous to the National Transportation Safety Board which conducts an independent investigation of all transportation accidents, in order to perform definitive forensic analysis of past financial crises. The CMSB would be made up of “teams of experienced professionals— forensic accountants, financial engineers from industry and academia, and securities and tax attorneys—that work together on a regular basis to investigate the collapse of every major financial institution.”
As Professor Lo cogently observes,
“The fact that the 2,319-page Dodd-Frank financial reform bill was signed into law on July 21, 2010—six months before the Financial Crisis Inquiry Commission submitted its January 27, 2011 report, and well before economists have developed any consensus on the crisis—underscores the relatively minor scientific role that economics has played in responding to the crisis. Imagine the FDA approving a drug before its clinical trials are concluded, or the FAA adopting new regulations in response to an airplane crash before the NTSB has completed its accident investigation.”
Fourth, central to effective JDM is the development and practice of skills related to emotions and emotional intelligence. A number of business trade books and business school courses focus on how managers can improve their emotional intelligence and in so doing become more effective organizational leaders. Law school clinical and negotiation casebooks and courses often discuss the importance of recognizing and responding appropriately to emotions in attorneys, clients, judges, juries, and other legal actors. For example, in their chapter, If I’d Wanted to Teach About Feelings, I Wouldn’t Have Become a Law Professor, Melissa L. Nelken, Andrea Kupfer Schneider, & Jamil Mahuad present concrete tools for teaching law students about the importance of emotions in negotiation. Yet much of current American legal non-clinical education teaches students explicitly and implicitly that lawyering is just about logical analysis and not about feelings. For example, in another article titled The Discourse Beneath: Emotional Epistemology in Legal Deliberation and Negotiation, Erin Ryan writes that "[b]y acknowledging the salience of wise emotionality in individual and collective deliberation, lawyers will not only improve their own personal repertoires, but propel the practice of law, negotiation, and policymaking toward new horizons of efficacy." Similarly, a recent book titled How Leading Lawyers Think: Expert Insights into Judgment and Advocacy by Randall Kiser discusses (at pages 75-85) how important emotional intelligence is to legal practice.
Fifth and finally, law professors can and should incorporate more information about emotions into law school. Many law professors and law students share a common discomfort with and disdain for emotions in part because of what many law students and faculty believe it means to think like a lawyer. For example, see page 422 of the article titled Negotiation and Psychoanalysis: If I’d Wanted to Learn about Feelings, I Wouldn’t Have Gone to Law School by Melissa L. Nelken. In her anthropological study of first–year contracts classes at eight law schools, law professor and senior fellow of the American Bar Foundation Elizabeth Mertz found that being taught to think like a lawyer caused students to lose their sense of self as they develop analytical and emotional detachment, resulting from the discounting of personal moral reasoning and values, as they learn to substitute purely analytical and strategic types of reasoning in place of personal feelings of compassion and empathy.
In fact, empathy is an important skill that lawyers can and should learn. In his article, Thinking Like Nonlawyers: Why Empathy Is a Core Lawyering Skill and Why Legal Education Should Change to Reflect Its Importance, Ian Gallacher analyzes pedagogical implications of lawyers communicating a lot with people who are not lawyers, such as clients, jurors, and witnesses.
In conclusion, a better and more nuanced understanding of what roles emotions generally and happiness particularly can play in human JDM, economic behavior, financial markets, legal practice, and legal education can and should inform how law professors conduct academic research and teach law students.
A couple of weeks ago, at the instigation of some of our students, three of us business-law professors here at Hofstra held a "Teach In" on the Occupy Wall Street movement. In a room that fits approximately 100, we had a standing room only crowd. Although the event was scheduled to last only for the "common hour" of 12 - 1 pm, many (about half) of the students were willing to continue the conversation for a second hour (and we professors happily obliged). In short, the event was very well received.
Now and again we schedule an event like this (a year ago on Citizens United, for example), but each time we wonder whether there will be sufficient student interest to make it worthwhile. Each and every time, we're more than pleasantly surprised - student turnout is invariably strong, and student participation quite impressive.
Which leads me to this post. I fear that all too often, we assume that our students are simply too busy, too practical, or too whatever to engage in events like this. That assumption does a tremendous disservice to them. A program that is interesting, timely, and well put together, will draw them. And the result is a wonderfully enriching experience for all involved, to the betterment of our community and institution. We should do such things more often.
Our second Business Ethics Seminar meeting focused on my favorite business read: Barbarians at the Gate, by Bryan Burrough and John Helyar. It reads like a novel, and it's the best way I've found to introduce students to deals. This class was the first time I'd read it from an ethical perspective, and I was curious as to what I'd find.
Wow. Captive boards. Corporate jets. Leaks to the press. Advisors with their own agendas. Backroom deals. LBOs: good or bad? Greed, greed, greed.
We're only halfway through the book, and we've got quite a surprise planned for the next class...
Last night I co-taught the first session of a year-long Business Ethics Seminar. It was my first time co-teaching, my first time teaching at night (7:30-9:20!), and my first time teaching this topic.
My partner in crime is my colleague Carol Morgan, who is a dynamo. She teaches courses on M&A and Business Negotiations, and heads up our corporate counsel externship, which places students in-house for a semester.
Carol and I wanted to explore the ethical issues of transactional practice. One of the themes of the course is that ethical issues arise all the time, and so we asked the students to anonymously submit a brief description of an ethical question or dilemma they had confronted in their life--but not what they did. The issues were great, ranging from
a) how to describe clothes on eBay that had been worn for a few hours ("new without tags" or "pre-owned"?) to
b) ignoring company policies forbidding tipping when or working as a server-- or at a retirement home to
c) whether a roofer should report his customer's insurance fraud--and thereby hurt his business.
We told the students at the outset that this was a grand experiment, in terms of course design and content. So far, I'm very pleased.
Like of many law profs, I'm scrambling to get ready for the new semester. I'm scrambling a bit more than usual because I'm following the lead of my friend Jayne Barnard and switching casebooks. Jayne does this every 2 years (!). I've taught Corporations from the O'Kelley & Thompson casebook ever since 2005. I love the O'Kelley Thompson casebook, but I've had the feeling, particularly the last year or two, that things were getting kind of stale. Maybe it was time for a change?
So I bit the bullet and this year I'm trying Klein, Ramseyer, & Bainbridge's casebook. I feel a bit like a contortionist, having spent a few days trying to twist my syllabus in order to cover what I want in the order I'd like. But it's been tremendously liberating to start from near scratch. I'm covering some completely different topics because--well, why not?
And let's face it, reading business organizations cases is fun.