Josh Wright on the Future of Law and Economics:

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.

Regarding the 'detachment' problem: should an automotive engineer take speed limits into account when describing the mechanics of an automobile at speed?

Law certainly affects business but economics, if it portrays real processes, ought to consider law only to the extent of saying "this law will have that economic effect."
4.29.2008 9:30am
Temp Guest (mail):
Is there any material how Frye and Daubert standards have been applied to economic evidence?
4.29.2008 9:44am
common sense (www):
If economics is important in the law, I think there will always be a market for professors who can "dumb down" the more mathematically sophisticated work and apply it to the law. That might mean an extra level of scholarship, as the more sophisticated economic work is more and more detached from law, more and more scholars will be able to work on the translation back to the law. I think since economics and the law are fundamentally sound as an integrated discipline we will see scholars fill this gap.
4.29.2008 10:36am
Economists who want to continue to reap massive expert witness fees from their lawyer brethren will have the incentive to solve problem #2. Simple economics will solve this problem.
4.29.2008 11:40am
As I have pointed out ad nauseam on this blog and elsewhere, it is hopeless to expect any sophistication in math among legal types or politicians. Of SCOTUS, only Breyer has ever distinguished himself in math. In my UT Austin law-school class of 150, only 5 had undergraduate degrees that required anything but baby math or baby science.

Among current candidates for president, you won't find one who can do math or science, and on a worldwide basis, there are few leaders who have shown any math or science ability. Thatcher and Merkel, both women, are notable exceptions, especially since there are almost no women of note in either math or physics, and a woman, for the first time ever, has attained the status of International Chess Grandmaster.
4.29.2008 11:57am
Frog Leg (mail):
Temp Guest, there are many cases dealing with standards for economic evidence. These run the gamut from PI cases where economists forecast lost future earnings to large antitrust and patent cases where both microeconomic and macroeconomic experts testify.
4.29.2008 12:11pm
What makes a blog post "important"?
4.29.2008 12:29pm
freelunch (mail):
If the LSAT results reflect competence in math and science, we will eventually have lawyers who are tolerably sophisticated in mathematics and science. The tendency of law schools to accept so many students who took non-rigorous undergraduate programs does neither the law nor the students any good.
4.29.2008 2:52pm
byomtov (mail):
Forget advanced mathematics.

I have met lawyers who deal with various sorts of financial matters who do not understand balance sheets, interest rates, or other basic accounting and financial concepts.

I think law professors would do better to try to improve legal education on this front rather than delving into the complexities of mathematical economics.
4.29.2008 3:43pm
To alias' question, "What makes a blog post 'important'?"...

An important blog post is a blog post dwelling on the difficulties facing a subject you claim as an "area of expertise," of course.

It would be embarrassing to be an expert in a defunct field, after all.

I'd now like to point you all to an important blog post on the phrenological characteristics of economists...
4.29.2008 5:06pm
I imagine that Byomtov didn't post his comment with the intention of being the poster-lawyer for ignorance of math, but Hey! give him some credit: the Supremes would appear just as dumb.

Besides the fact that "balance sheets, interest rates, or other basic accounting and financial concepts" do not figure into "advanced mathematics," it should be taken as an axiom that, just as a person attends law school in order to learn to "think like a lawyer," a person masters math in order to think, period.
4.29.2008 6:08pm
byomtov (mail):

I don't understand your point. Was it intended as an insult?

I actually do know that balance sheets don't involve advanced mathematics. My comment doesn't imply that they do. I've done balance sheets, and I've done mathematics, and I've done finance and economics. Nor can I be a poster-lawyer for anything since I'm not a lawyer.

My point was simply that learning to "think like a lawyer," too often does not involve understanding some of the basic concepts that many lawyers will deal with in practice, and that law professors, rather than wandering off into the realms of partial differential equations and the like might better address that problem.

Indeed, legal scholars who want to deal with law and economics would do well to make sure they understand these matters as well. Perhaps they do.

Maybe my comment was not wholly relevant to the post, but I thought it was clear enough, and don't understand your disdain.
4.29.2008 10:22pm
Fat Man (mail):
There are two kinds of thinkers among us. There are story people and there are number people. Lawyers are, by and large, story people. I am a lawyer. The case method is after all, a series of pointed stories.

When I went to college, I majored in history. My wife, is a number person, she majored in mathematics. Economics has come to be an activity of number people.

Our, two younger children, taking after their mother, are number people. The baby (who is now almost 21) is majoring in Economics, and minoring in math. I could not have done what he is doing, and I cannot recall ever having hacked my way through a law review article with graphs and equations in it.

I think that it is unreasonable to expect that law and economics will ever be united. They are different ways of looking at the world by people who use different tools. That does not mean they have nothing to say to each other. Clearly they do.
4.29.2008 11:48pm