Author: Arden Rowell

2

Law and Economics for the Read-Write Generation: A Review of Guido Calabresi’s “The Future of Law and Economics”

One of the great pleasures of this little book is that it does not attempt to be exhaustive. Reading it feels like being whisked through a behind-the-scenes tour of a chocolate boutique, with the chocolatier himself merely gesturing modestly at the lines of perfected squares behind the counters, and then enthusiastically pressing new creations upon you: would you try this one, where I have treated basil as if it were raspberry? How about a bite of altruism, which I treat just like any other taste or preference? Many flavors are familiar, others exotic; and some of the oddest combinations seem obvious when combined by the hand of a master.

It’s best, of course, to go on the chocolate tour yourself by reading the book. For myself, I want mostly to point to just two of my favorite pieces. The first is what Calabresi doesn’t want for the future of law and economics: he doesn’t want economic analysts of law to keep on talking at lawyers. That kind of unidirectional application of insights from one field to another—what he terms “Economic Analysis of Law”—just can’t capture or explain either “legal reality” or “human experience.” “In this sense,” he explains, in a move that grounds his vision of the interactive future, “while in Economic Analysis of Law economics dominates and law is its subject of analysis and criticism, in Law and Economics the relationship is bilateral.”

law and econ talking

In Calabresi’s view, the relationship between the disciplines should be based on a give and take, where each sometimes talks and the other listens. Calabresi’s view of the future of law and economics, then, is a distinctively friendly one: a social, creative, interactive future where economists and everyday lawyers meet over drinks to share their insights with one another, and to gradually illuminate the realities of human behavior. Is this the best possible future for law and economics? Whether it is or not, it may be the kind of future that the modern digital generation is best poised to make reality.

To expand on this thought, let me start by pointing to the second piece of the book I wanted to review: the book’s remarkable culmination, a wacky and/or brilliant exhortation to economists to help lawyers—and everyone, really—enjoy the simple, creative things in life: ordinary wine, child-rearing, macramé. Yes really: even the “now often devalued arts like knitting, quilt making, and lacework” have a central role to play in the future of law and economics. If this sounds crazy, well—it is. But what’s even crazier is that, if you read this book, you may—like me—end up with an uneasy inkling that it could also be true.

The fact that I am skipping from the beginning to the end should not dissuade the reader, and indeed, the ending is best savored in light of the craftsmanship of the preceding courses. These are delicious: the first the spicy critique of “economic analysis of law” sketched above, followed by a crunchy/soft confection of commodification and commandification, a peppery treatment of inequality, the unexpectedly smoothness of the insights on altruism, a carefully self-referential redux of the liability rule, a biting treatment “of tastes and values ignored.” Each builds on the previous until: at the zenith of this extraordinary collection of expertise, the book concludes with his sudden and even uncomfortable paean to ordinariness.

The impact of this conclusion is difficult to overstate. It is as if, after touring the boutique and having our minds blown by the chocolatier’s sheer mastery of his art, and the layered beauty created by this gift for pulling disparate ingredients together into an intuitive whole, the master ushered us out of the door by encouraging us to go home and make our own hot chocolate with Swiss Miss and tap water. Really? Really?

The author knows himself to be pushing the envelope here, and he is. Given the title, we are all on notice that this is supposed to be a book about the future of law and economics, but this is radical. Can law or economics really be ready for this kind of Warholization—for this deliberate exultation in the everyday and the mundane?

Well…perhaps. At the least, I think that this approach will find fertile ground with the so-called “read-write” generation: the generation of scholars developing now, who have always engaged with the world through digital networks, and who carry with them a presumption that scholarship—like the rest of their lives—involves listening and talking: reading and writing.

But before I develop that further, let me explain a bit more about how exactly Calabresi ends up where he does.

First, it’s worth noting that Calabresi is does not reject the extraordinary: but while fine wines, sexual acrobatics, and Yankees pitching may all be very well, he suggests they are rare and scarce and costly, and probably best left to professionals. Wouldn’t the world be better—wouldn’t there be more value, more happiness, more delight in the world—if people appreciated things that were common? Law can help shape people’s values, he points out, with a hat tip to critical legal studies. So why not shape values so that preferences can be commonly satisfied, so that achieving that which we hold dear is made easier instead of harder? Economists, he says, can help us—lawyers, society—with this: not by hiding behind a false objectivity, but by deriving principles based on articulated normative priorities. The key is to take principles constitutive of a desirable society, and to derive sub-principles, which can then be used to construct legal interventions. (An even more inclusive view might point out that philosophers might be helpful here as well in identifying the right goals, and that non-economics social scientists might be useful in observing human behavior and testing the impact of selected interventions.)

Calabresi even takes a quick first cut at what key values might be. He adds the two principles “more is better than less” (i.e. bigger pies are better than smaller ones) + “a more equal distribution is better than a less equal one” (i.e. that equal divisions of pie are better than unequal ones) to come up with the conclusion that = “any tastes or values that increase the desire for things which are in common supply in that society—for things that are not scarce—will yield a larger joint maximization.”

This is already a lot to consume—perhaps particularly for economists, whom as Calabresi recognizes, have historically experienced a pervasive queasiness at the thought of recommending some tastes or values over others. But Calabresi doesn’t stop there: he brings a third and even more provocative principle to bear, suggesting that people have a “desire to create.” In combination with the prior principles, this leads him to two questions—the kinds of questions, he argues, that an interactive law and economics can help answer, for the purpose of determining the desirability of specific law and legal structures. These are “[f]irst: What creative activities are broadly available to people who do not have unusual skills? Second: What can law do to further the desirability of such activities?”

And this is where the book steps into the ordinary. Calabresi lists a set of goods—fiber arts, common food, ordinary sex—that he suggests may be widely available. Economists have a critical role to play in identifying these sorts of goods, Calabresi says, and the relationship between law and economics should be one where lawyers can listen, learn, and respond to insights like these from economists. On this conversational model, the give-and-take between disciplines allows law to encourage things that economists point out would make society better off (and presumably?—although this is not the essay’s focus—to discourage things that would make it worse off).

While Calabresi mentions a number of goods that might fit into his categories, he doesn’t mention two that form the basis for much of the modern human experience: social goods, and technology. These are arguably also the building blocks for the creative recipes of the read-write generation. The idea here is that digital natives—people who have never known a world that was not connected through digital means—have a different set of expectations about how to engage with and understand the world around them. Conditioned by social media updates, blogs, and Youtube comments, they expect to participate in creating the world around them—in “writing”—instead of (merely?) passively reading the words of others. They curate Reddit threads; attach biting Twitter hashtags; label and re-label the same picture to create memes. The same generation embraces—often with self-conscious hipsterism—“DIY culture;” an emphasis on “doing it yourself,” whether the “it” is brewing their own alcoholic beverages, constructing homemade marshmallow guns, or using what Calabresi worries are the lost fiber arts to crochet pillows of the Star Wars Death Star. They even share tips with the world on how to make the perfect Swiss Miss hot cocoa. Some of these attempts are more impressive than others, but they all share a commitment to engagement, interaction and creativity. These goods are by no means scarce, in part because of the access allowed by technology, and in part because many are produced in part by the social processes that are also their product. Perhaps even most importantly, they already evidence a shift towards the kinds of values that Calabresi suggests society would do better to affirmatively embrace.

By the end of the book, I had a simultaneous feeling of optimism and foreboding. If Calabresi’s account of common goods is right, then the DIY nature of modern read-write culture is on exactly the right trajectory: in fact, economists and lawyers should all be working to find ways to use law to make more hipsters. At the same time, while networked engagement and creativity may generate significant social value, I worry that the ordinary may sometimes be substituted for the extraordinary. If posting hourly to Facebook means that our best writers never write novels, and our best readers spend their time on social media updates instead of Calabresi’s book, then something truly valuable is lost.

I’m honestly not sure, yet, what I think about the tradeoffs inherent in Calabresi’s final proposal. Regardless, however—and this may be the best test of the book’s success—I am left with an almost overwhelming urge to talk this book over with some economist friends. Possibly over a glass of ordinary wine. And if that’s the future of law and economics, please count me in.

the future of law and econ

0

The Most Interesting Part of Driesen’s Economic Dynamics of Law is the Focus on Change Over Time

In his new book The Economic Dynamics of Law, David Driesen works hard to focus the reader on how policies shape and are shaped by change over time. This is what I find most helpful and distinctive about Driesen’s approach: that he really rolls up his sleeves and tries to think out the intertemporal implications of legal policy. This is a difficult and complex task, and Driesen makes some real inroads, particularly in his treatment of the challenges of systemic risk. He also makes a valuable start at interrogating the distributional questions of how policies impact power dispersal—a start that could be refined still further by adopting Outka’s suggestion of extending this analysis backwards in time, and by addressing the possibility of intergenerational power dynamics (which Driesen ignores even in his recent clarifying comment).

Beyond these observations, I have a few suggestions to make in further refining his temporal approach, and then a few additional reflections on the structure of his argument.

The first suggestion is also a shameless plug for a work-in-progress of mine called Reregulation and the Regulatory Timeline, where I too am struggling with how to operationalize policy choice over time. My approach is to contextualize policy decisions along a timeline, which can then be used to illustrate not only the path-dependence that arises from past decisions’ impact on current decisions, but what I call “intertemporal dependence,” or the fact that current policy decisions can also strategically account for future path dependence. The world isn’t the only thing that changes over time; legal policy also changes, and policymakers should be encouraged to recognize that their decisions today will impact the costs, benefits, and implications of policy decisions far into the future.

Driesen recognizes that costs and benefits shift over time, but he makes this point merely to trivialize the usefulness of equilibria (56). But another—more dynamic?—view of the fact that a policy’s distribution of benefits and costs often change over time would be to note that equilibria shift with costs and benefits, and to prescribe that a dynamic policy would do well to allow behaviors to shift with the landscape of costs and benefits. In this sense—and I return to this point later—Driesen’s fixation on problematizing the underpinnings of neoclassical economics leads him to overlook a valuable application of his approach to cost-benefit analysis.

What is Driesen’s approach—or at least, what kind of decision procedure is dynamic economic analysis? As Driesen himself recognizes, it is essentially a narrow and future-oriented form of the precautionary principle (59). I would add that his focus on avoiding systemic risk strikes me as very similar to the narrow precautionary principle that Cass Sunstein calls the “Catastrophic Harm Precautionary Principal” in Worst Case Scenarios. Sunstein describes his principle this way: “When risks have catastrophic worst-case scenarios, it makes sense to take special measures to eliminate those risks, even when existing information does not enable regulators to make a reliable judgment about the probability that the worse-case scenario will occur.” As Sunstein points out, whether this principle is helpful is a case-specific question that depends on three things: when information will trigger the principle, the role of costs, and the role of any probabilistic information that does exist (WCS 119-120). I worry that Driesen’s anti-systemic-risk precautionary principle is subject to the exact same concerns.

That said, Driesen’s approach is more complex than a single narrow precautionary principle, because he would also have policymakers adopt a second precautionary principle, one that seeks to minimize the risk of shutting down future important opportunities for economic development. As Frischmann has noted, Driesen unfortunately spends less time developing this theme than on systemic risk. But its addition adds significant nuance to Driesen’s approach, even as it adds the potential for difficult value tradeoffs. Driesen’s recognizes these challenges (70-73 + some later discussion in examples), and tries to deal with them by subordinating the economic-development principle to the systemic-risk principle (72). But for me this was insufficient: I was still left wondering particularly about the role of costs. Driesen urges policymakers to consider the shape of change over time, and (building on Douglass North’s work on adaptive efficiency) to leave options open in the face of uncertainty (e.g. 148). But how much should policymakers invest in purchasing those options?

Flexibility is rarely free: at the least, it increases current and future decision complexity, both for policymakers and for industries and people affected by the flexible policies. And often the option itself requires some investment to be established. How much investment is justified in options to reduce systemic risk, given that the cost of these options may well cut into economic opportunities? Again, I think that considering both sides of this ledger—the systemic risks of a policy as well as what Frischmann calls the systemic benefits—makes Driesen’s approach far more nuanced than a unilateral normative commitment that would not necessarily invoke these conflicts. But without some idea at least of how to manage costs (e.g. through an application of option pricing theory?), it is difficult to know how to mediate the tensions here.

All of this makes me agree with Livermore that DEA as a standalone procedure, and as it is currently operationalized, is a bit squishy. But I don’t think this means that the larger theory underlying DEA, understood as the combination of two narrow future-oriented precautionary principles, fails to give any useful guidance to policymakers. I just think that the primary benefit of its guidance is that it encourages systematic reflection about impacts of policies through time. In this sense, Driesen’s preoccupation with cost-benefit analysis and neoclassical economics is largely a distraction from what is most novel and interesting in his approach. I would have far preferred to see an account for dynamic analysis—for analysis sensitive to the change over time that occurs in both legal structures and in world conditions—that was severed from a treatment of cost-benefit analysis.

What’s the real connection between DEA and CBA, if there is one? I think it’s actually this: the more critical a person is of how CBA works as a decision procedure, the more likely she is to welcome alternative decision procedures of any kind. And conversely, the more satisfied a person is with how CBA works as a decision procedure, the less need he is likely to see for additional procedures. But this doesn’t tell us much of anything about DEA: it just tells us about how people felt about CBA before DEA showed up on the scene. That suggests DEA just isn’t giving us much traction on the CBA question. Which is fine. But is also a reason that we may all get further if we recognize, as Livermore points out in in his first post, that DEA can be used either in concert with CBA or not. And that either way, DEA is valuable for promoting further systematic thinking about policymaking in the face of change over time.