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,

(1) The Adaptive Markets Hypothesis: Market Efficiency from an Evolutionary Perspective 

(2) Reconciling Efficient Markets with Behavioral Finance: The Adaptive Markets Hypothesis

(3) The Three P’s of Total Risk Management

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. 

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For me, one of the most heart wrenching victims of the country’s financial crisis has been public libraries. Even Ray Bradbury could not save the Ventura, California library. This story may be nothing compared to the misery in Haiti, but I wonder what the closing of public libraries due to budget cuts says about where our country is.

My connection to public libraries is likely not unique, but it cuts across generations. My grandfather took me to the public libraries in South Jersey at least once a week in the summer. Those trips were one of those luminous memories from childhood that one hopes are among the last to go.

I remember him taking me one day to a large public library in Philadelphia. He told me that day how he would visit the public library every week after he immigrated to the United States. For him, the public library was a wonder that Europe did not have. In the midst of the Great Depression, he would marvel at students working hard at the library at all hours on Saturday and Sunday. He did not finish high school himself and was forced to work at an early age as a salesman, despite being introverted and having a talent for engineering but no talent for sales. That day he said something like, “There is no excuse here.” I could tell he wondered what he could have done had he grown up in this country.

My wife also grew up in another country, and she too marvels at the public libraries here. Our six year old son now enjoys going at least once a week to the public libraries in Albuquerque, often with his Tia Ruth (actually the wife of my retired colleague). Will his children and grandchildren be able to enjoy what we have?

If you believe in equality of opportunity, public libraries are one of the greatest assets the country has. It is a quiet institution that helps define us. With each library that closes, America is diminished.

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• Lawyers often dream about becoming hedge funders; surely they ought to be able to identify winning cases and invest in them (if you can get around the PR/ethics issues, that is).  Burford Capital started a fund to back claims in US courts for a cut of the proceeds.  But the IPO did not go well - the fund raised less than half of its target. Via DealBook
• I presented a piece on thrift charter switching (a la Countrywide) and the financial crisis at Larry Ribstein's Illinois corporate law colloquium earlier this week - it was a terrific experience.  Here's his write-up.
• Tyler Cowen is wrong.
• Economists colonize, physicists defend their discipline.  Whereas, I suppose, law neither colonizes nor defends, but always wins in the end.  We're like Russia before 1989.  Via Tyler Cowen.

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Thanks for the opportunity to be a guest.  On to finals.

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Keep them in a single, clearly marked file.

I consider myself an eminently organized person, but I just got flattered with a request to put two of my older articles into an anthology, and didn't know (a) whether I had the right to give permission, and (b) where the agreements were.  I put law review author agreements right up there with the HIPAA disclosures that I have to sign when I go to the doctor (or maybe the raft of documents during a house closing telling me my mortgage is going to be sold and securitized, then backed by an AIG credit default swap) in terms of "life is too short to bother reading this."  After scrambling around on my hands and knees for about fifteen minutes, I found the first agreement, which clearly provides that I retained the copyright and the right to reproduce.   I can't find the second one, so I have a call into the law review. 

You heard it here first.

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The good people behind Scotusblog have said that they have a hard time posting daily between July and October, when the Supreme Court spends much of its time lecturing in Europe.  At least Supreme Court buffs have Jeffrey Toobin to kick around.  Consider the plight of the DC Circuit afficianado.  No exposes about that court in the offing (though there was a marriage), and no opinions since August 24.  New clerks are coming in, summers are taken off, but I think the lesson for agencies is clear: time your interim final rule for July, and revel in at least three months of pre-opinion effectiveness.

Rumor has it that it is possible that EPA has already learned this lesson.

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We’re not afraid to be servicey here at the Glom. Perhaps you’ll indulge me in the occasional round up of international and regulatory news of note?

Canada thinks the EU’s ban on seal products violates national treatment obligations, and has filed suit at the WTO. The idea is that this might help to focus the rules set forth in the famous Shrimp-Turtle dispute in defining when countries can implement environmental protections that also disadvantage foreign trading partners.

Congress is still working on a bill to punish China for keeping its currency cheap. The economists are angry, and so is the Club for Growth. We await news of how Wal Mart – or the consumers it targets – feel[s]. Here is more on the strange economist lineup.

On Friday, the SEC passed a rule defining when managers have to report problems in with their SOX internal controls to auditors and the board. They must do so, inter alia, when they discovery a significant deficiency, which is “A deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.”

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Today marks the end of my two-week guest-blogging stint. Thanks again to my Glom hosts for the opportunity. It was a lot of fun, and I now have even more admiration than I did before for those who blog on a regular basis!

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I’m a daily reader of Conglomerate, and it’s been really fun to guest blog here for a short while. I very much thank Gordon, Christine, Vic, Fred, and Lisa for the opportunity. I’m also thankful for the many helpful comments on my posts.

In closing, I had the pleasure of spending the last few days in Austin for the much-touted conference on empirical legal studies. It did not disappoint. There were numerous corporate/finance sessions with presentations by leading scholars including Roberta Romano, John Coates, and Steve Choi. I learned a lot, and also got to spend some time with former guest blogger Bobby Bartlett (Georgia), who is an extremely nice person and full of good ideas.

Events like this remind me that this job is the best thing going. Thanks again to all.

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Thanks so much to the Glom for inviting me to guestblog for the past couple of weeks. Blogging has been a heady experience, a little daunting and a whole lot fun. Daunting because the posts on Conglomerate are of such consistently high caliber, and because I’d never so much as braved a comment to a blog before. Fun for pretty much the same reasons. Thanks especially to the folks I’ve met or reconnected with over email and through comments. I must confess that now I’m ready to sink back into obscurity (and drafting), leaving the blogging once more in the capable hands of the pros. Thanks again!

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ProfB has an interesting post on the wisdom of crowds versus the wisdom of experts.  One of the intriguing aspects of the Internet has been the democratization of authority.  Thirty years ago, if you were writing a paper for school, you found facts and support for your paper in written materials.  They seemed authoritative because well, it was printed professionally.  Surely hacks couldn't get things published.  Now, research is done online, and any hack can publish something online (look at us!).  We also used to go to the encyclopedia, which carried an authoritative weight second to none.

Today, the WSJ reports that Encyclopedia Britannica is defending itself from a short piece in Nature that compares Wikipedia quite favorably to the venerable encyclopedia.  EB is disputing not only the "errors" that the Nature authors claimed were found in EB (some did seem to be judgment calls) but also the very idea that the lay people that contribute to Wikipedia could compete with its expert researchers.  The Wikipedia people are being very classy about the whole thing and concede that EB has the advantage over certain areas:

He says he was glad Nature chose to compare science-related themes "because on history and the social sciences, we're much weaker." In other areas -- including computer science and the history of "Star Trek," he says, Wikipedia is "way better."

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I missed the Thanksgiving blogging yesterday while at the Magic Kingdom, so I have to impart in a time-lapse way my Thanksgiving story.  My 4 year-old asked me a few months ago "what is Thanksgiving again?"  So, I told him the "Father Guido Sarducci" version of a people who lived in a place where they weren't free so they went across the ocean to a place where they could be free.  Life was hard, but after a year they had a great harvest and celebrated with a big feast to give thanks to God to bringing them to this place.  Luke's response:  "Is this the story with the Pharoah?"

Of course, this put my mind into a cynical spiral where I wondered if all these stories were just recurring mythologies of persecution and destiny.  A friend stopped my spiral by telling me that the similarities in the stories were not evidence of mythological underpinnings but merely evidence of the recurrence of bad Pharoahs.

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I would like to thank Gordon, Christine, and Vic for letting me float some ideas on the Conglomerate.   The regular bloggers are excellent on this site.  But during the last ten days, I came to appreciate how much readers add to the mix.  This is a remarkably civil and intellectually engaging corner of the blogosphere.  And it is obvious that forums like Conglomerate are altering (and, in my opinion, enriching) the academic dialogue, especially when practicing lawyers, students, and non-legal readers chime in with good ideas and reality checks.

That said, I look forward to continuing my regular role as a reader and commenter.  Have a good weekend, everybody!

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A friend of mine sent me Confessions of a Slacker Mom for Mother's Day, but I'm more "really bad mom" than "slacker mom" today.  I took my two kids to the dentist this morning, and my 3 year-old has a cavity.  I would have thought that you would need to have your tooth in your head a year or two before it could get a cavity.  The dentist says that juice is the culprit -- children under five should have no more than 4 ounces of juice a day.  Yikes.  So, I'm pretty sure this goes on my permanent record.

And I don't even want to know how you give a 3 year-old a filling.  I'll find out a week from tomorrow.

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I am ill today.  I was a little sick yesterday, but I taught my classes, so today I am home.  I am always reminded of the practice of law, where we worked whether we were sick or not.  Of course, this meant that we were all sick quite often because everyone came to the office with all their germs.  A female partner explained to me one day, "It's not how well you work.  It's how well you work sick."  That was not in the brochure.

I'm glad to be in academia today.

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