An important and interesting post by Josh Wright on the Future of Law and Economics (the first of a planned series). Josh is a rising star in law and economics. I especially recommend his superb critique of some areas of behavioral law and economics which you can get here.
Here's an excerpt:
Assuming that the modern economics literature is indeed trending towards mathematical sophistication, the most obvious and likely consequence is that L&E will become less relevant to legal and policy audiences. There are at least three possible avenues through which the increase in formalization could be costly for L&E:
(1) Economists will do work that is detached from legal institutions and law and therefore less relevant (the "detachment" problem);
(2) L&E scholars will do work that is very relevant, and maybe even very good, but legal scholars wont know about it or care about it because of the "translation" issues associated with the formal mathematics will prevent it from being retailed to broader audiences, (the "retail" problem);
(3) Informal L&E will be "crowded out" of the law school landscape as it declines in value, (the "crowding out" problem) and as formal scholarship moves away from law schools toward economics departments, traditional subjects of L&E scholarship will be left to less qualified scholars (the "I know STATA and can get any regression through law review editors with a catchy enough title" problem).
My own sense is that right now, #1-3 are all important potential issues for L&E. And I'm certainly not forgetting that increased formalization and specialization might bring some important benefits to economics and to L&E specifically. I'll address the benefit side of the equation in a later post. For now, I want to focus on some of the potential costs. (For interested readers, Larry Ribstein also highlights these problems in his posts.)
From my perspective, the most pressing of these problems is #2, what I've described here as the "the retail problem." The problem of economists ignoring the law and legal institutions is no doubt real and significant, as is the problem of legal scholars without sufficient training publishing empirical work (there is more "bad" empirical scholarship than modeling as statistical software packages lower the cost of entry for empirics but less so for modeling). Bad work will always be a problem and I suspect always has been and always will be. Perhaps the increase in formalization has made bad work of both types more or less likely. I suspect it has allowed room for more bad empirical work than would exist otherwise, but I'm not sure how large this effect is.