Occupational Hazards: Lawyers and Economists

My thanks to Dan Solove for inviting me to be a guest blogger on Concurring Opinions this month, providing an additional outlet for my blogging interests beyond my usual gig on Dorf on Law. As a way of introducing myself, I thought I would answer the question that virtually every law professor has asked me since I migrated from being an economics professor to a law professor: What is different about economists and lawyers?

The question, of course, invites generalities and over-simplifications — an invitation that I do not decline when asked the question and will certainly not decline here. Admitting that there are a million exceptions to every rule, I do believe that there is one predictable type of error toward which legal training seems to push people, and there is a different error toward which economics training tends to push other people. To put the point slightly differently, lawyers and economists have very different tendencies when approaching a problem or a question. These tendencies, or occupational hazards, can of course be overcome. Still, I have found them to be surprisingly reliable traits of the two professional minds. To put my answer simply: Lawyers look for black-and-white answers, while economists too often forget the limitations of their models.

First, the lawyers. Time and again, I find that lawyers, law professors, and (especially) law students will look at a possible answer to a problem and say: “Well, that won’t solve the problem.” For example, if I were to suggest that it would be a good idea to decrease class sizes in public schools, my stereotypical lawyer will say: “Well, that won’t solve the problem. Even with smaller classes, kids in poor schools will still do worse than kids in rich schools.” The lawyer might be right about that, but the economist in me immediately says: “So what? Even if I can’t fix the problem entirely, can I make a decent dent in the problem at an acceptable cost?”

Economics trains people to think in terms of marginal impacts, with the default mental exercise (conscious or not) being a multivariate equation with a set of explanatory variables. If one right-hand-side variable changes, what happens to the left-hand-side variable? This habit of mind strongly resists the temptation to expect too much of any particular solution. Legal scholars know this problem as “allowing the perfect to be the enemy of the good,” demonstrating that the basic idea does cross disciplinary boundaries. Again, however, we are talking about tendencies here, not absolutes.

A few years ago, in a session at AALS, I offered a variation on this observation about the absolutism of lawyers. Afterward, Professor Tamar Frankel of BU Law School suggested to me that the reason for the legal tilt toward all-or-nothing answers is that the basic concepts in law are guilt or innocence, liability or no liability. Lawyers are trained to argue that their client is right, not partially right. I suspect that Professor Frankel is correct that this explains a great deal of what I’ve observed over the years. In any case, I would be very interested to know whether or not the experiences of Concurring Opinions readers support my observations about this occupational hazard and, if so, if other explanations come to mind.

Now, the economists. The central tool of economic thinking is the simplified model. Boil the myriad complications of the world down to a limited set of variables that seem to capture the essence of what we want to understand, try to understand how the variables interact, and see if we can make predictions or give reasonable policy advice. The very power of that approach, however, sometimes (often?) leads to the tendency to treat a model as if it is the reality. Two very different examples will, I hope, make clear what I have in mind.

(1) At a tax workshop several years ago, in the context of a discussion of progressivity and regressivity, a participant noted a then-recent news story in which a Nokia executive in Finland had received a speeding ticket that carried a fine of more than $100,000. The amount of the fine, if I recall correctly, was set by law as a percentage of the violator’s income rather than a set number of euros. An economist in the room objected that this was an inefficient way to set the fines, because the harm of speeding was not correlated with the driver’s income. A law student replied that the harm of speeding might not be the only harm that policymakers cared about. They might put a positive value on the idea that people — no matter how wealthy — should not be able to easily buy their way out of socially acceptable behavior. Expanding the social welfare function, in other words, to reflect positive utility arising from greater social equality could support such a penalty regime.

This student’s suggestion, of course, is not the end of the story; but it is at least a good way to make the well-understood point that the standard economic approach to efficiency is very adaptable. Even so, the economist in question (who is, by the way, a justifiably well-respected member of the fraternity) simply rejected the suggestion out of hand, saying that social equality was not an appropriate argument in the social welfare function. Apparently, he was so accustomed to thinking about social welfare functions that included only certain familiar variables and excluded others that the very idea of changing the variables (even within the same analytical framework) struck him as illegitimate.

(2) I’ve recently written a series of posts on Dorf on Law (the most recent being here) about the housing crisis. As part of my analysis, I’ve been talking about the surprising fact that home ownership is generally not the wise financial move that we often believe it to be. As I described the factors that one takes into account in determining the wisdom or foolishness of buying versus renting, I focused on the standard financial variables that one typically takes into account in analyzing financial decisions: interest rates, expected time in the residence, etc.

On the comment board, Michael Dorf of Cornell Law pointed out that one reason people buy rather than rent is the relative paucity of pet-friendly rentals, which drives pet-owning potential renters into purchases that might end up being relatively very costly. As I read his comment, I realized that I had not merely ignored a fairly important non-financial matter that might be at play in the minds of many potential home owners. I had, in fact, ignored the most important reason that I have owned homes for most of my adult life. Each time I moved between 1993 and 2005, I bought a house — even when I knew that I was likely to stay in the house for only a short time — because I had multiple dogs and cats. Even so, when thinking in the abstract about home ownership, I ignored this experience and simply focused on “the standard model.”

The point of these two examples is obviously not that every economist makes this kind of mistake all the time but to demonstrate the kind of error to which economists are generally prone. Lawyers say, in essence, “My client is innocent,” while economists say, “My model is right.” Luckily, there are plenty of good lawyers and good economists who regularly avoid these professional pitfalls. Still, the pitfalls are there.

In any event, you now know my answer when people ask me the difference between economists and lawyers. But I could be wrong, at least marginally, if my model is incorrectly specified . . .

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6 Responses

  1. Jeff Lipshaw says:

    Neil, one of the most vivid memories of my undergraduate career was talking to one of my economics professors (a macroeconomist working in economics of population) about my decision to go to law school. I think I said something to the effect that I wanted to deal in reality, not models, to which his response was, “yes, but law is also a model.”

    Your comment about mistaking models for reality is insightful, but I think you unduly dismiss the extent to which lawyers also think in models. My fuller treatment on this, which deals with the theory and consequence of precisely that issue – treating models as reality – or games as models – see my “Models and Games: The Difference Between Explanation and Understanding for Lawyers and Ethicists.

    I don’t think the “models” versus “black and white” distinction holds – instead, I think what we have are different modes of explanation, particularly around causation. Again, I apologize for the self-promotion (not really), but this is a subject I’ve been thinking about extensively. I’m particularly interested in the way non-lawyers explain why things happen, the way lawyers do, and the way social scientists (like economists) do, all compared to the way physical scientists explain (see Hart and Honore, Causation and the Law, for a discussion how causation differs, in their view, between scientists, on one hand, and “historians, lawyers, and plain men,” on the other.

    My thesis is that all modeling (including legal and economic) is reductive, and the real distinction lies in the extent and level of reduction. Both are to be distinguished from the process of judgment, which I contend is ultimately irreducible. For more on this, see “Law’s Illusion: Scientific Jurisprudence and the Struggle with Judgment”.

  2. Orin Kerr says:

    Great post, Neil.

  3. Neil H. Buchanan says:

    Thanks, Orin.

    Jeff’s comment makes perfect sense to me. I don’t think that I have any reason to reject the idea that this is a matter of degree and is not truly binary. My answer then becomes: Lawyers are more likely to look for complete answers while economists are more likely to think in marginal impacts; and economists are more likely to adopt models with a limited number and type of variables while lawyers are willing to think in terms of models with a wider variety of variables. Still a gross generalization, but it comports with what I’ve observed.

  4. A.J. Sutter says:

    I was hoping Jeff would more roundly reject the “black and white” characterization of the lawyer’s point of view, and thereby allow me to run out to an appointment this morning on time instead of dallying to type a hasty comment. But this idea that lawyers think of their client as guilty/innocent, or liable/not liable, applies at most to the litigating segment of the profession.

    Transactional lawyers (especially ones doing deals relating to business operations, as distinct from public company M&A, for example) have a much more flexible, open-ended and, to mix metaphors, multi-hued view of the world. That’s because they have to deal more directly with the their clients’ and counterparties’ personalities, the vicissitudes of the business world and industry, and the parties’ desire/need to have a relationship continue into an uncertain future.

    As for economists, a feature that Neil doesn’t mention is their models’ tendency to reduce the output of their multivariate functions and functionals to a scalar. Maybe that’s of the same dimensionality as the “black and white” lawyer model, but it’s different from the point of view of business lawyers — and, I hope, of lawyers who still care about things like justice and equity, rather than only economics.

  5. Jeff Lipshaw says:

    At the risk of getting too theoretical, A.J., I didn’t comment on the “black and white” because I was not (and still am not) quite sure what to think of it.

    I think of litigators and economists both as dealing in historical data and attempting to using inductive reasoning to state a rule (fit to a model) for the situation. In that effort, both run the risk of overdetermination – that is, looking back, any number of rules (or models) will fit the data. In litigation, however, the application of different rules have significantly distinct consequences for the parties, setting up the incentive to “black/white” argument – if we are over-determined in the sense of rule-following, I need to show why my interpretation and not yours is correct. Example from class today: was the failure to disclose a particular fact material for securities law purposes? Plaintiffs say the facts fit the TSC Northway rule; defendant says they fit the “mere puffing” rule. Economists, social scientists, and physical scientists have those kinds of arguments all the time, but not necessarily with the short-term monetary payoff as a legal dispute!

    In transactional work, the problem is under-determination. Should we disclose? We know the rule in TSC Northway, but it doesn’t tell us what to do! And what would this discussion be without playing the W card here: “no course of action could be determined by a rule, because any course of action can be made out to accord with the rule. The answer was: if any action can be made out to accord with the rule, then it can also be made out to conflict with it. And so there would be neither accord nor conflict.” This is the leap I talk about in the Law’s Illusion essay – there is no rule for the application of a rule, so how do we explain judgment?

    So I think I’m agreeing with you.

  6. A.J. Sutter says:

    Hi Jeff

    Actually, your point about “should we disclose” illustrates a point I think we’ve discussed before in this or another blog — “transactional” work includes not only compliance but also negotiation, where the rules are there in the background, but the most salient decisions are business decisions. As we’ve discussed, getting involved in that mess of law-and-business is very much part of a lawyer’s job.

    Your paper on contract and promise touches on this a little bit — you question whether the tension between contract and promise becomes important at the contract stage or at the dispute stage; if I read you correctly, you incline to say at the latter. I tend to agree, in that context.

    In the context of this thread, though, the question isn’t about the domain of application of law, it’s about the thought processes of lawyers. All I’m saying is that even lawyers can unwittingly caricature those thought processes because of ignorance about what a lot of us actually do for a living.