Lawyers and Economists: Division of Labor

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4 Responses

  1. Frank says:

    Very insightful post. As you pursue these ideas, I think that your work might be a great successor to legal realists’ insights about the degree to which the “market” and the “state” are interconnected and intertwined. The crisis reveals just how dependent markets are on the rule of law, and on the types of governmental backstops described in Moss’s book “When All Else Fails: Government as the Ultimate Risk Manager.”

    I get some of legal realist Robert Hale’s thought on the table in this post:

    I hope to be running an informal reading group on his work at Yale this Spring.

  2. Mike Zimmer says:

    At the deepest level, the credit default swaps that are not connected to a particular bundle of securitized assets cannot be priced at all. They are simply gambles on what the payout will be on those assets, but with no connection to them. If credit default swaps were called insurance, there would be no insurable interest at stake and the contracts would be unenforcible. As contracts for gambling debts, they are also unenforcible. How can an unenforceable contract be priced? I have heard that there are over $50 trillion of these credit default swap gambles.

    If somehow these gambling debts get priced and bought by the government, I want the government to pay me the bet I lost on the Chicago Cubs winning the World Series. :-)

  3. A.J. Sutter says:

    1. “While lawyers seem to take an all-or-nothing approach to problems (leading them too often to reject useful partial solutions because ‘that won’t solve the problem’)”: to pick up on your trope of returning to the theme of your first post in your last, may I note that this characterization, too, ignores what transactional practitioners do. Partial solutions are our bread and butter, because we know that in most situations, that’s all there can be. A contract is ever only a partial solution, for example.

    2. The physicist-engineer analogy is misplaced for another reason beyond the one you cite. Most physicists aren’t theorists. They run experiments, and observe phenomena. In condensed matter, materials science, and even particles, to name just a few fields, there are plenty of experimentalists. Moreover, there is even an applied physics, and it’s different from engineering. When it comes to dealing with people, and accomodating their needs, preferences and foibles into the deal, a lot of what a practitioner does is more like one of these types physics than engineering. If you want to analogize economists to string theorists, then I don’t have any complaint.

  4. David S. McQueen says:

    In the 18th century, the discipline was called “Political Economics”. In the 19th century, it slowly separated into “Political Science” and “Economics”.

    Human society has gotten an order of magnitude more complex (yes, I know you’ve noticed) and, as A.J. Sutter commented, even physics has slowly spearated into “applied” and “theoretical”.

    Many years ago, in college, I was advised that specialization was not voluntary anymore, it was mandatory because there was simply too much information. No longer can there be a “general practitioner” in law; now a good lawyer must be “board certified” in a specialty (niche, if you will).

    I assume that specialization is a good thing (why would a patent attorney need to know the latest USSC decision about family law?), but then take it to its logical conclusion: would eventually the patent attorney himself have to be so specialized (say, an “auto transmission patent attorney”)? In the USA, we have 535 people whose full-time job it is to crank out 2,000 page bills which are produced in secret and unfathomable to the rank-and-file citizenry.

    Any system that overloads will eventually break down and have to re-designed. I see that coming.