The Situation of Chicago School “Law and Economics”

From Business Week (an article, by Peter Coy, including several quotations from Situationist Editor, Jon Hanson):

Q: How many Chicago School economists does it take to change a light bulb?
A: None. If the light bulb needed changing, the market would have done it by now.

Chicago-style free-market economics is an easy target for satire, but the movement that flourished at the University of Chicago’s economics department in the 1960s, ’70s, and ’80s really did change the world. Giants such as Milton Friedman, Gary Becker, Robert Lucas, and Eugene Fama provided the intellectual foundation for the political philosophy of President Ronald Reagan and British Prime Minister Margaret Thatcher. In his approach to tax cuts and deregulation, Republican presidential candidate Mitt Romney is an heir to that tradition.

It wasn’t just economics that Chicago revolutionized. Across campus at the University of Chicago Law School, scholars such as Ronald Coase, George Stigler, and Richard Posner were inspired to apply economic analysis to laws and regulations, developing a field that came to be called “law and economics.” It was law and economics types who promoted the now-conventional idea that the benefits of a regulation must be weighed against its costs. Placing a dollar figure on society’s valuation of a human life went from appalling to standard.

They rethought antitrust law, junking simplistic big-is-bad formulations to focus on whether a giant like IBM (IBM) or Microsoft (MSFT) could actually raise prices with impunity. In tort law, they questioned punitive damages that seemed to them motivated by righteous indignation rather than a cool calibration of how to discourage future wrongs. At the apogee of the Reagan-Thatcher era, Chicago Law drew enthusiastic support from businesses and foundations that embraced its small-government message. “Chicago can rightly claim to have been extraordinarily influential in the growth of the field,” says Jon Hanson, a Harvard Law School professor and specialist in psychology and law.

Now Chicago’s law and economics program is coping with problems born of its success. Its intellectual dominance has triggered a pushback from other social scientists who say it’s bloodless—treating people as if they are, or ought to be, perfectly rational calculators of their own self-interest. Even some true believers complain that the field has become too technical. Posner, a federal appellate judge in Chicago, wrote last year in the alumni magazine of the risk that “economic analysis of the law may lose influence by becoming too esoteric, too narrow, too hermetic, too out of touch with the practices and institutions that it studies.” Finally, so many other law schools have launched law and economics programs, and so many judges have learned the lingo, that today law and economics “is like the air you breathe. It’s just pervasive,” says David Weisbach, a Chicago Law professor. That ubiquity has made Chicago less distinctive.

Chicago Law doesn’t take such matters lightly. Last October, Dean Michael Schill announced a major initiative to deal with the challenges, to capitalize on the school’s place in history, and to keep law and economics relevant for the 21st century. He called it, predictably, Law and Economics 2.0. “Just as Chicago was at the forefront of the first wave of law and economics, so it shall be in the future,” he wrote to alumni.

Schill’s big idea is to open new frontiers, both intellectual and geographic. This summer the school will play host to 75 Chinese legal scholars, who will get to meet stars like professor emeritus Ronald Coase—still writing in the field at the age of 101. “Coase is a god in China,” says Omri Ben-Shahar, who is directing a newly created University of Chicago Institute for Law and Economics.

Meanwhile, Chicago Law professors are lobbing new bombs into the arena—fresh ideas for injecting economic thinking into law and regulation. Chicago Law professor Todd Henderson proposes paying bank examiners in part with “phantom” securities linked to the banking companies they regulate. The phantom bonds, essentially derivatives, would rise and fall in concert with a bank’s debt. If banks took too much risk, regulators would feel a hit to their own wealth. To keep regulators from getting so cautious that they ban legitimate transactions, Henderson would throw some phantom stock into their pay packages as well. “There is no reason we can think of why bank regulators should not be paid for performance,” he wrote in the spring 2012 issue of Regulation, a magazine published by the libertarian Cato Institute.

Chicago Law isn’t all about law and economics. President Barack Obama, after all, taught there from 1992 to 2004. So did Supreme Court Justice Antonin Scalia, from 1977 to 1982. (If only they’d overlapped!) Scalia’s brand of constitutional “originalism,” which deeply respects the intent of the Founding Fathers, is an alien idea to the law and economics crowd, who view law as something more useful than sacred.

Even within law and economics there’s ideological diversity. “I don’t think it lines up to any political agenda,” says Lee Ann Fennell, a specialist in property law. Fennell, daring to challenge a central tenet of law and economics, has written that sometimes property rights can be too strong—say, allowing irrational homeowners to block worthy projects even when accommodating them somehow would be better for all. Her solution: Create an exchange where property owners could surrender certain veto powers over land use for a price before conflicts ever arose. That would help new projects sail through.

Still, there is something to the critique that economics can blind legal scholars to other perspectives. The first generation of law and economics scholars reduced people to stick-figure profit-maximizers who would make rational choices every time. “They came into law schools saying, ‘We are social scientists and you are not,’” says Harvard Law’s Hanson. Their authority was undermined when a new wave of social scientists, including Daniel Kahneman, Amos Tversky, and Chicago’s Richard Thaler, presented evidence that people can be irrational, lack willpower, and have shifting, inconsistent senses of what’s in their own best interest.

The human actor in some of the newest law and economics writing is truer to life. Henderson, for example, acknowledges that for some people money isn’t the motivation: “Once diligence has been priced, perhaps some regulators will slack,” he wrote in Regulation.

But Hanson wonders whether law and economics scholars on the whole have gone far enough in incorporating humanity. A case in point: Should the question of motivation matter in assessing damages? A dispassionate law and economics analysis still might say no, while an ordinary juror would say unequivocally yes. As the great jurist Oliver Wendell Holmes Jr. once wrote, “Even a dog distinguishes between being stumbled over and being kicked.”

Defenders of Chicago-style law and economics want to be seen not as ideologues, but as realists. Posner again: “We ask not whether the economic approach to law is adequately grounded” in any particular ethical system, “but whether it is the best approach for the contemporary American legal system to follow.” That’s an appeal to an older Chicago intellectual tradition—pragmatism.

Related Situationist posts:

• How Much Choice Would You Choose?
• Science and Situationism Praised on Huffington Post Blog
• Dan Kahneman on Fast and Slow Thinking
• ‘Situation’ Trumps ‘Disposition’- Part II
• Law and Economics Primer
• Jon Hanson on Law and Mind Sciences
• Situationism at University of Chicago Law
• Tushnet on Teles and The Situation of Ideas – Abstract
• Deep Capture – Part X
• Behavioral Economics and Policy
• Emotional Reactions to Law & Economics – Abstract
• Responding to Law and Economics: Critiques and Alternatives
• David Eagleman on the Brain and the Law
• Brain and Blame
• Allegations of Ideological Bias are Anti-Scientific

Ideology, Psychology, and Law – Introduction

On SSRN, you can now download the introductory chapter of Ideology, Psychology, and Law (published in 2012 by Oxford University Press and containing chapters from numerous Situationist Contributors and edited by Situationist Editor Jon Hanson).

Here’s a quick description.

Formally, the law is based solely on reasoned analysis, devoid of ideological biases or unconscious influences. Judges claim to act as umpires applying the rules, not making them. They frame their decisions as straightforward applications of an established set of legal doctrines, principles, and mandates to a given set of facts. As most legal scholars understand, however, the impression that the legal system projects is largely an illusion. As far back as 1881, Oliver Wendell Holmes, Jr. made a similar claim, writing that “the felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, even the prejudices which judges share with their fellow-men, have a good deal more to do than the syllogism in determining the rules by which men should be governed.”

More than a century later, we are now much closer to understanding the mechanisms responsible for the gap between the formal face of the law and the actual forces shaping it. Over the last decade or so, political scientists and legal academics have begun studying the linkages between ideologies, on one hand, and legal principles and policy outcomes on the other. During that same period, mind scientists have turned to understanding the psychological sources of ideology. This book is the first to bring many of the world’s experts on those topics together to examine the sometimes unsettling interactions between psychology, ideology, and law, and to better understand what, beyond and beneath the logic, animates the law.

This introductory chapter describes why this volume came together when it did and provides an overview of the general sections and the individual chapters and comments in the book. It begins with a brief, loose, and highly stylized history of the relationships between ideology, psychology, and law—a history premised on the oversimplifying assertion that something changed around the year 2000.

Download the chapter for free here.

Learn more about the book here.

Thomas Nadelhoffer on Neuroscience, Philosophy, and Law

From The Project on Law & Mind Sciences at Harvard Law School (PLMS):

Below is a fascinating and enlightening 51-minute interview of Thomas Nadelhoffer by Harvard Law Student Brian Wood.  The interview, titled “Developments in Neuroscience and their Implications for Criminal Law,” lasts just over 51 minutes.  It was conducted the Law and Mind Science Seminar at Harvard (taught by Situationist Editor Jon Hanson).

Bio:

Situationist Contributor Dr. Thomas Nadelhoffer was born and raised in Atlanta, Georgia. He has earned degrees in philosophy from The University of Georgia (BA), Georgia State University (MA), and Florida State University (PhD). Since 2006, he has been an assistant professor of philosopy and a member of the law and policy faculty at Dickinson College in Carlisle, Pennsylvania. He is currently at Duke University as a Visiting Scholar in the Kenan Institute for Ethics.

His main areas of research include moral psychology, the philosophy of action, free will, punishment theory, and neurolaw. He is particularly interested in research at the cross roads of philosophy and the sciences of the mind. His articles have appeared in journals such as Analysis, Midwest Studies in Philosophy, Mind & Language, Neuroethics, and Philosophy and Phenomenological Research. He is the coordinator of the blogs Flickers of Freedom and the Law and Neuroscience Blog. He is also a contributing author to blogs such as The Situationist, The Leiter Reports, and Experimental Philosophy.

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Vodpod videos no longer available.

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Table of contents:

• What have you been working on recently?  0:22
• What are some areas of the legal system in which this science is relevant? 1:07
• What are the problems with the traditional approaches to using science in the criminal system, and how are new scientific methods relevant to fixing them? 2:15
• How could these newer scientific methods be employed? 4:09
• What are the rationales society has traditionally cited as justifying criminal punishment? 6:55
• Can you explain what Compatibalism is? 10:17
• Aren’t there problems with notions of moral responsibility under Compatibalism? 12:26
• How do neuroscience, Compatibalism, and determinism relate to our notions of law? 12:55
• What do you see as the problems with the classic approaches to punishment? 15:25
• Is there anything especially strange about Retributivism to you? 20:37
• Can you detail what you believe to be the just reasons for punishment and how society can punish people more justly? 23:41
• In your view, how would you punish psychopaths under the consequentialist rationale? 30:40
• Can you give an example of the distinctions psychopaths cannot draw? 34:50
• What’s the most interesting experiment you have conducted? 37:01
• Do you think these participants just misunderstood what determinism is? 38:15
• What qualities do you believe you and other researchers and philosophers need to be successful? 40:03
• How has what you have learned through your research influenced the way you live you life? 41:35
• How do you see the relationship of law and mind science developing in the future? 44:55

The Need for Situationism in the Law

Dr. William Woody spoke at the University of Northern Colorado about why Psychologists should be involved in the legal system.  Here’s a ten-minute video of that event.

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For a sample of related Situationist posts, see “The Situation of False Confessions,” “Clarence Darrow on the Situation of Crime and Criminals,” “The Lucifer Effect Lecture at Harvard Law School,” and “Law & the Brain.”

Martha Fineman on the Situation of Gender and Equality

Martha Fineman recently posted on  SSRN her fasinating chapter, titled “Evolving Images of Gender and Equality: A Feminist Journey” examining the changing conceptions of gender and equality and the unjustified privileging of autonomy over equality in American culture.

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This chapter, which will be included in Transcending the Boundaries of Law, M.A. Fineman, Ed (Routledge 2010) brings a historical and analytic gaze on the concept of equality in the US legal system. Beginning with the establishment of Portia Law School for women and court decisions like Muller v. Oregon, I discuss the tension between seeking equality as sameness of treatment and seeking positive improvements in the lives of women. While women have officially attained legal equality with men, in terms of being able to vote, practice a profession, and own property among other things, the benefits of citizenship are still distributed in highly unequal ways. In part this is because as a nation Americans value autonomy over equality and thus sacrifice substantive equality in the name of greater independence, ignoring the realities of our shared states of episodic dependency and constant vulnerability.

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You can download the chapter for free here.  For a sample of related Situationist posts, see “Nicole Stephens on ‘Choice, Social Class, and Agency’,” The Blame Frame – Abstract,” “The Motivated Situation of Inequality and Discrimination,” and “The Space & Place (Situation) of Rural Women.”

Behavioral Economics and Policy

Last month, Rick Montgomery wrote an interesting article, “Behavioral Economics Is Moving from Theory to Policy,” for the Kansas City Star.  Here are some excerpts.

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As the economy sinks and investors buckle over, the behavior buffs are rising up.

From the lesser-appointed corners of academia, psychologists, sociologists and a youthful breed of economists scoff at the revered mathematical models that have driven economic thought and snared Nobel Prizes.

These preachers of “behavioral economics,” including some on President-elect Barack Obama’s economic team, argue that humans cannot be relied upon to obey the efficient, orderly tenets espoused by free-market thinkers.

Chief among the old-school rules is the assumption that we act rationally with money.

“That’s absurd, counterfactual . . . and now they’ve created a catastrophe,” said William Black, who teaches economics and law at the University of Missouri-Kansas City.

Until now, policymakers showed slight regard for the growing field of study into how mortal gaffes and greed intersect with financial decision-making in ways that can punish us all.

Now some close to Obama suggest government’s role is to “nudge” Americans into behaving in economically smarter ways.

“We need a bit more ‘Psych 101’ in addition to ‘Econ 101’ in the design of public policies,” blogged Peter Orszag, the next chief of the Office of Management and Budget, who just turned 40.

Some traditional economists might ask, “And how do you intend to calculate the effects of herd mentality, blind faith or self-destructive foolishness when dealing with a mortgage broker?”

They might cite the gospel that free markets, like celestial bodies in orbit, move in rational and self-correcting ways. Knowing that, who would ever fall for the gravity-defying performance reports of fund manager Bernard Madoff, who claimed double-digit returns year after year after year?

Human beings, that’s who — now shorn of $50 billion.

In October, behavioral scholars were triumphant when the very oracle of the slide-rule set, Alan Greenspan, delivered in Congress what some called a requiem for decades’ worth of economic teaching.

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity — myself, especially — are in a state of shocked disbelief,” the former Federal Reserve chairman conceded.

Why so shocked?

As many see it, a star of Economics 101 known as the “rational actor” abandoned the stage and left markets a mess.

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Across America, collegiate quarrels have been building ever since economists began calling themselves scientists.

Channeling Isaac Newton, those 20th-century purveyors of empirical truths felt they needed formulas to forecast outcomes and solve economic riddles.

Oh, please, murmured many psychologists, sociologists and political scientists. To them, economists were trying to elevate themselves above the murkier, “softer” sciences.

The creation in 1969 of the Nobel Prize in Economic Science put monetary thinkers in the league of the great laureates of medicine and physics.

The second recipient of the prize was Paul A. Samuelson. His 1947 book, Foundations of Economic Analysis, was among the first to pitch sophisticated mathematics as the key to understanding and addressing problems.

Samuelson is 93 now. And what irritates him about the debate over behavioral economics is its either-or tone.

Most of the time, free markets do follow rational, predictable rhythms, Samuelson told The Star. But history has shown that bubbles can build and “the slide-rule guys can’t smooth out those bubbles.”

“A hopelessly addicted centrist (favoring) limited, sensible regulation,” Samuelson blamed “eight terrible years of deregulation” that saw some of Wall Street’s brightest financial engineers tiptoe from the rational realm to the reckless one.

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You can read the entire article here.  For a list of related Situationist posts, click here.

To read some longer law review articles detailing the history of the “competition” between economics, economic behavioralism, and situationism, check out “Legal Academic Backlash: The Response of Legal Theorists to Situationist Insights” (Emory Law Journal, Vol. 57, No. 5, 2008) available on SSRN, “The Situational Character: A Critical Realist Perspective on the Human Animal” (Georgetown Law Review, Vol. 93, 2004) available on SSRN,” and “Taking Behavioralism Seriously: The Problem of Market Manipulation” (New York University Law Review, Vol. 74, 1999) available on SSRN.

Behavioral Criminal Law and Economics – Abstract

Richard McAdams and Thomas Ulen recently posted their paper, “Behavioral Criminal Law and Economics,” on SSRN.  Here’s the paper’s abstract.

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A behavioral economics literature identifies how behaviorally-derived assumptions affect the economic analysis of criminal law and public law enforcement. We review and extend that literature. Specifically, we consider the effect of cognitive biases, prospect theory, hedonic adaptation, hyperbolic discounting, fairness preferences, and other deviations from standard economic assumptions on the optimal rules for deterring potential offenders and for regulating (or motivating) potential crime victims, legislators, police, prosecutors, judges, and juries.

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For those interested in a more detailed summary, we have excerpted portions of the paper’s introduction below.

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The standard theoretical law‐and‐economics account of criminal behavior begins from the observation that potential criminals are rational decisionmakers. Becker (1969). The theory assumes that potential criminals compare the expected costs and benefits of criminal activity, where the expected benefits include the anticipated monetary and nonmonetary returns to the crime, discounted by their probabilities of realization, and the expected costs of the crime, which include formal and informal sanctions (the latter including loss of lawful employment opportunities, social stigma, and guilt), discounted by the probabilities of detection. If the expected benefits exceed the expected costs, then the rational potential criminal commits the crime; otherwise, he or she does not. Moreover, the rational potential criminal compares the expected costs and benefits of criminal activity with those of legitimate activity and rationally allocates her time and other resources between those alternatives so that the marginal net benefit is equated.

Similarly, the standard law‐and‐economics account of other participants in the criminal justice system—police, judges, prosecutors, defense attorneys, juries, and legislators—also presumes rational decisionmaking. So, the police—both individually and collectively—may choose to allocate their limited resources according to rational calculations about costs and benefits, choosing, for example, between the investigation of detected crimes and prevention of crimes so that the marginal productivity of additional resources devoted to either activity is equal. Not only has this account received theoretical elaboration and extension, it has also been tested empirically. For a review, see Levitt & Miles (2007). The early empirical literature—that of the 1970s—was often done in alternating turns by those favorably disposed toward the rational‐choice‐theory account and those critical of that theory. In the late 1970s a panel of the National Academy of Sciences surveyed the empirical literature and reached the conclusion that “deterrence works”—that is, that the predictions of the rational‐choice‐theory explain observed patterns of criminal behavior.

These theoretical accounts of decisionmaking by criminals and other participants in the criminal justice system have had a profound influence on legal scholarship over the past 40 years and an equally important impact on criminal justice policy. For example, the United States Sentencing Commission, created by Congress in the early 1980s, was charged to rationalize federal criminal sentencing by, among other things, reducing the variability of sentences on the ground that indeterminate sentencing was not as deterring as determinate sentencing. And in the debates to explain the remarkable decline in crime that began in the early 1990s, some have argued that that decline is partly attributable to the deterrence‐based policies of the 1980s and 1990s, such as the remarkable increase in the frequency with which criminals have been incarcerated. Levitt (2004).

But at the same time as these rational‐choice‐theory‐based arguments have become so important, a significant and broad criticism of rational choice theory and of its application to issues of criminal law has been made. That criticism is called “behavioralism.” Importantly, behavioralism is not a theoretical criticism of rational choice theory. Rather, it is a criticism based almost entirely on experimental and other empirical studies that find the predictions of rational choice theory to be inaccurate. To illustrate with one example, rational choice theory predicts that in making decisions under uncertainty, decisionmakers accurately ascertain the probabilities of the various alternatives open to them, apply those probabilities to payoffs of the alternatives, and choose that alternative that maximizes their expected subjective utility. But psychologists and economists have discovered that most decisionmakers facing an uncertain set of options use far simpler heuristics to make a decision, such as choosing that alternative that is most “salient.”

The findings of behavioralism have become so thorough and well‐established as to make it difficult to begin any analysis of decisionmaking from the position of rational choice theory. This, of course, has profound implications for many areas of law and public policy, including criminal law. Many of the policy changes championed or implemented after the impact of Becker’s revolutionary insight stand or should stand on less firm foundations than had been previously thought to be the case. The central purpose of this chapter is to indicate how some of the central findings of the behavioral literature erode the rational‐choice‐theoretic foundations of criminal law and policy and to show how a recognition of the behavioral literature might lead to a rethinking of the legal and policy conclusions of the past 30 or so years.

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You can download the entire paper for free here.

A Situationist Critique of Legal Theory – Abstract

Situationist contributor David Yosifon has recently posted his excellent article, “Legal Theoretic Inadequacy and Obesity Epidemic Analysis” (forthcoming 15 George Mason Law Review (2008)) on SSRN.  Here’s the abstract.

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This Article explores crucial analytic and normative limitations in presently dominant and ascendant approaches to legal theory. The approaches’ failure to provide a satisfying framework for analyzing the obesity epidemic presently raging undeterred in American society reveals these limitations. Conventional law and economics scholars writing on the subject have deployed familiar frameworks to reach predictable conclusions that are neither intellectually nor morally justifiable. This Article argues that recent theoretical innovations promulgated within the burgeoning law and behavioralism movement have thus far provided no more reliable a framework for legal analysis of the obesity epidemic than has conventional law and economics. This Article critiques in particular the behavioral law and economics concepts of “libertarian paternalism” and “asymmetric paternalism,” as well as the concept of “expressive overdeterminism,” recently developed by proponents of “cultural cognition theory.” This project is undertaken as part of a broader effort to develop an alternative approach to legal theory that previous co-authors and I call “critical realism.” The theoretical arguments herein are broad, but this Article aims to also advance obesity epidemic analysis in particular. Part V briefly discusses specific public policy implications of my assessment, with special reference to a policy innovation based in the reform of corporate law.

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To download a copy of Professor Yosifon’s paper for free, click here.

For those interested, here is a list of related Situationist posts to date: “Big Calories Come in Small Packages,” “The Situation of Eating – Part II,” “The Situation of Eating,” “The Situation of the Dreaded ‘Freshman 15′,” “Our Situation Is What We Eat,” “Social Networks,” “Common Cause: Combating the Epidemics of Obesity and Evil,” “The Situation of Fatness = Our ‘Obesogenic’ Society,” “Innovative Policy: Zoning for Health,” “Situational Obesity, or, Friends Don’t Let Friends Eat and Veg,” “McDonalds tastes better than McDonalds, if it’s packaged right,” “The Science of Addiction, The Myth of Choice,” “The Situation of our Food – Part I,” “The Situation of Our Food – Part II,” “The Situation of Our Food – Part III,” and “The Situation of our Food – Part IV.”

Legal Academic Backlash – Abstract

Situationist contributors Adam Benforado and Jon Hanson have posted their latest article, Legal Academic Backlash: The Response of Legal Theorists to Situationist Insights (Emory Law Journal, Vol. 57, No. 5, 2008) on SSRN. Here is the abstract.

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This article is the third of a multipart series. The first part, “The Great Attributional Divide,” argues that a major rift runs across many of our major policy debates based on our attributional tendencies: the less accurate dispositionist approach, which explains outcomes and behavior with reference to people’s dispositions (i.e., personalities, preferences, and the like), and the more accurate situationist approach, which bases attributions of causation and responsibility on unseen influences within us and around us.

The second part, “Naive Cynicism,” explores how dispositionism maintains its dominance despite the fact that it misses so much of what actually moves us. It argues that the answer lies in a subordinate dynamic and discourse, naive cynicism: the basic subconscious mechanism by which dispositionists discredit and dismiss situationist insights and their proponents. Without it, the dominant person schema – dispositionism – would be far more vulnerable to challenge and change, and the more accurate person schema – situationism – less easily and effectively attacked. Naive cynicism is thus critically important to explaining how and why certain legal policies manage to carry the day.

Naive cynicism often takes the form of a backlash against situationism that involves an affirmation of existing dispositionist notions and an assault on (1) the situationist attributions themselves; (2) the individuals, institutions, and groups from which the situationist attributions appear to emanate; and (3) the individuals whose conduct has been situationalized. If one were to boil down those factors to one simple naive-cynicism-promoting frame for minimizing situationist ideas, it would be something like this: Unreasonable outgroup members are attacking us, our beliefs, and the things we value.

We predict that naive cynicism is a pervasive dynamic that shapes policy debates big and small. We argue that it can operate at a particular moment or over long periods of time, and that it is embraced and encouraged by both elite knowledge-producers and the average person on the street.

This Article examines the reactions of prominent academics to situationist scholarship. As we argue in this Article, na¿ve cynicism, operating as we predict above, has played a significant role in retarding the growth and influence of more accurate situationist insights of social psychology and related fields within the dominant legal theoretical frameworks of the last half-century.

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To download the article for free, click here. To read a collection of related Situationist posts, click here.

Naive Cynicism – Abstract

Situationist Contributors Adam Benforado and Jon Hanson have posted their recent article, “Naive Cynicism: Maintaining False Perceptions in Policy Debates” (57 Emory Law Journal (2008)) on SSRN. The paper was recently listed on SSRN’s Top Ten download list for LSPLDL: Political Process, and is a featured article on the Emory Law Journal Website. The abstract is pasted below.

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This is the second article in a multi-part series. In the first part, The Great Attributional Divide, the authors suggested that a major rift runs across many of our major policy debates based on contrasting attributional tendencies (dispositionist and situationist). This article explores how dispositionism maintains its dominance despite the fact that it misses so much of what actually moves us. It argues that the answer lies in a subordinate dynamic and discourse, naïve cynicism: the basic subconscious mechanism by which dispositionists discredit and dismiss situationist insights and their proponents. Without it, the dominant person schema — dispositionism — would be far more vulnerable to challenge and change, and the more accurate person schema — situationism — would be less easily and effectively attacked. Naïve cynicism is thus critically important to explaining how and why certain legal policies manage to carry the day. (To download a copy, click here.)

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For a recent Situationist post illustrating naive cynicism at work, see “Naïve Cynicism in Election 2008: Dispositionism v. Situationism?.”

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Deep Capture – Part X

This is the tenth part of a series on what Situationist Contributor David Yosifon and I call “deep capture.” The most basic prediction of the “deep capture” hypothesis is that there will be a competition over the situation (including the way we think) to influence the behavior of individuals and institutions and that those individuals, groups, entities, or institutions that are most powerful will win that competition.

Previous posts in this series (which are summarized at the bottom of this entry), reviewed a sample of the evidence indicating that pro-commercial dispositionism has been widely accepted as the presumptive starting place for policy analysis. The previous post in this series described the strategy of relying on credible third-party messengers. This post suggests how that strategy may have influenced legal theory and law.

(Situationist artist Marc Scheff is providing the remarkable illustrations in this series.)

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There is a vast range of interconnected evidence (too vast to do justice to in this subsection) of pro-commercial interests investing to deeply capture the many “credible third parties” that might influence the many “targeted audiences” (including all of us) to accept pro-commercial worldviews. In this subsection we will focus on a small sample of that evidence. Although the sample is small, it will hit close to home for much of our audience and will, we hope, strike a more direct and personal chord than the Galileo discussion may have.

Consider the world of legal scholarship. Large business interests have attempted to locate, create, and sponsor the production and dissemination of pro-commercial legal scholarship by legal scholars who have served as credible, if often unwitting, spokespeople for business ends. More specifically, consider some of the evidence regarding the goals and influence of the John M. Olin Foundation.

According to the Olin Foundation’s Web site,

the general purpose of the John M. Olin Foundation is to provide support for projects that reflect or are intended to strengthen the economic, political and cultural institutions upon which the American heritage of constitutional government and private enterprise is based. The Foundation also seeks to . . . encourag[e] the thoughtful study of the connections between economic and political freedoms, and the cultural heritage that sustains them.

To advance that goal the Olin Foundation has, among other things, awarded tens of millions of dollars to prominent law schools for the promotion of law and economics scholarship. Over the past twenty years, Olin money has established law and economics programs, or “centers,” at several prominent law schools: the University of Chicago, Yale, Stanford, Harvard, Columbia, Georgetown, Duke, the University of Michigan, the University of Pennsylvania, George Mason, and the University of Virginia. In 1999, a year in which the Foundation paid out almost $20 million in grants to organizations around the country, \Harvard Law School’s John M. Olin Center for Law, Economics, and Business was in the middle of a four-year, $6 million grant, Yale Law School’s John M. Olin Program in Law and Economics was in the middle of a three-year, $1.9 million grant, and the University of Chicago Law School’s John M. Olin Program in Law and Economics was in the middle of a six-year, $2.5 million grant. In May 2003, Harvard received another grant from the Olin Foundation, this time for $10 million, “the largest foundation grant in the law school’s 186-year history.”

Olin money, as we will describe in more detail in subsequent work, has a significant influence not only in encouraging certain types of scholarship, but also in increasing the credibility of that scholarship. It establishes “centers” dedicated to law and economics theory, provides funding for journals through which law and economics scholarship can be stamped with the legitimacy of “peer review” by other legal economists, finances a series of workshops to encourage efficiency-oriented scholars to share and test their views at elite law schools, and gives scholarships and fellowships to top law students who participate in law and economics seminars and produce law and economics scholarship. In short, Olin money has helped to create and advance a critical mass of legal scholars, who begin with the strong dispositionist axioms of neoclassical economics, who write largely for one another and policymakers, and who view themselves (and are viewed by many others) as the only genuinely social scientific members of the legal academy.

The success of the Olin Foundation’s funding of law and economics seems fairly dramatic. Professor Steven Shavell, the director of Harvard Law School’s Olin Program, recently provided one measure of that achievement. Professor Shavell surveyed the academic appointments at the “top 10” law schools over the last decade. Of forty-three total placements, he found that, twenty-three were Harvard Law School graduates, and ten of those had been Olin fellows. As Professor Shavell told the Boston Globe, “[i]n the long run, we’re going to have a heck of an impact on who’s teaching at the leading law schools, and what the students are learning.”

We would go further. The Olin Foundation and the law and economics scholarship that it has subsidized have already had “a heck of an impact.” Indeed, the scholarly project that the Olin money has sponsored is the same project that is widely understood today to be the dominant paradigm for policy analysis. Professor Shavell has emphasized that the economic analysis of law “has changed the nature of legal scholarship, influenced legal practice, and already proven its tremendous value in policymaking and business.” Furthermore, the Olin Foundation’s Board of Trustees recently declared that their contributions have “supported a wide range of scholars and writers who significantly changed the content and direction of American academic and political discussion.”

Of course, the fact that the Olin Foundation poured millions of dollars into promoting law and economics does not necessarily imply that those investments played a significant causal role in the stunning success of the now-dominant paradigm. It may be, as most of its proponents presume, that law and economics was destined for greatness solely on the merits, and that Olin money simply facilitated an inevitable process that was already underway.

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There are several reasons to suspect, however, that the Olin Foundation’s support, combined with numerous other situational influences, has played a pivotal causal role in the success of the law and economics movement. First, the success of law and economics appears to map closely with the precise ambitions and strategies of the key individuals behind the Olin Foundation: John Olin, the founder of the organization, and William Simon, its longtime president. After leaving his position as Treasury Secretary in the Nixon and Ford Administrations, Simon wrote two best-selling books that outlined his conservative and pro-commercial beliefs and his agenda for implementing them. Simon was a prominent, early exponent of the dispositionist, neoliberal worldview that seeks to promote private enterprise and to minimize the role of government–a worldview shared by John Olin. They also shared a belief that American universities at the time produced ideas and graduates that were dangerously antithetical to those ends. To Simon, this problem was tantamount to a war of liberty versus totalitarianism–a war with three fronts:

1. Funds generated by business . . . must rush by multimillions to the aid of liberty, in the many places where it is beleaguered.
. . . .
. . . [Foundations established by such funds must] serve explicitly as intellectual refuges for the non-egalitarian scholars and writers in our society who today work largely alone in the face of overwhelming indifference or hostility. They must be given grants, grants, and more grants in exchange for books, books, and more books.
2. Business must cease the mindless subsidizing of colleges and universities whose departments of economics, government, politics and history are hostile to capitalism and whose faculties will not hire scholars whose views are otherwise.
. . . .
. . . America’s major universities are today churning out young collectivists by legions, and it is irrational for businessmen to support them.
. . . .
3. Finally, business money must flow . . . to media which are either pro-freedom or, if not necessarily ‘pro-business,’ at least professionally capable of a fair and accurate treatment of procapitalist ideas, values and arguments. The judgment of this fairness is to be made by businessmen alone–it is their money that they are investing.

These are the three fronts on which to act aggressively if we are to create a sophisticated counter-force to the rising despotism. One of my own first actions on leaving the post of Secretary of the Treasury was to accept the job of president of the John N. [sic] Olin Foundation, whose purpose is to support those individuals and institutions who are working to strengthen the free enterprise system.

Thus, Simon, with the support of the Olin Foundation, was trying to alter the playing field on which academic debate takes place–and trying to do so situationally. Furthermore, he understood that the dispositionism of law and economics is pro-business and that many alternative views, otherwise successful in the marketplace of ideas, are not. Simon presented American individualism, much as ad agencies presented the Marlboro Man, as the American tradition and the source of America’s greatness. However, like the Marlboro Man’s creators, Simon seemed to appreciate that such individualism, to be embraced as deeply as Philip Morris, Simon, and others desired, had to be heavily promoted, and reinforced if it is to be widely accepted. And he further understood that the situation can and should be manipulated by, among other things, choosing particular academics, programs, and scholarly camps to give “grants, grants, and more grants in exchange for books, books, and more books.”

In light of Simon’s (and thus the Olin Foundation’s) pro-business mission, there is good reason to believe that the Olin Foundation’s sizeable law and economics investment was money well spent. The point is strengthened when one considers that the Foundation engaged in a kind of “stage financing” of these programs: grants were intended to last for only a few years, at which point the Foundation would consider whether to renew its contribution to a particular program. The fact that the Foundation continued to renew many grants provides strong evidence that it believed that its investments were generating worthwhile returns in terms of encouraging pro-commercial worldviews (and discouraging alternatives) among students, academics, and policymakers.

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Part I of this series explained that our “deep capture” story is analogous to the (shallow) capture story told by economists (such as Nobel laureate George Stigler) and public choice theorists for decades regarding the competition over prototypical regulatory institutions. Part II looked to history (specifically, Galileo’s recantation) for another analogy to the process that we claim is widespread today — the deep capture of how we understand ourselves. Part III picked up on both of those themes and explains that Stigler’s “capture” story has implications far broader and deeper than he or others realized. Part IV examined the relative power (measured as the ability to influence situation) of large commercial interests today, much like the power of the Catholic Church in Galileo’s day. Part V described other parallels between the Catholic Church and geocentrism, on one hand, and modern corporate interests and dispositionism, on the other. Part VI laid out the “deep capture hypothesis” a bit more and began loosely testing it by examining the role that it may have played in the “deregulatory” movement. Part VII provided some illustrative examples of how atypical “regulators,” from courts to hard-hitting news networks, reflect and contribute to deep capture. Part VIII contrasted different cultures for evidence of commercial interests in promoting dispositionism. Part IX described the strategy of employing third-party messengers.

The Great Attributional Divide – Abstract

Situationist Contributors Adam Benforado and Jon Hanson have posted their recent article, “The Great Attributional Divide: How Divergent Views of Human Behavior are Shaping Legal Policy” (57 Emory Law Journal (2008)) on SSRN. The paper was recently listed on SSRN’s Top Ten download list for LSPLDL: Political Process, and is a featured article on the Emory Law Journal Website. The abstract is pasted below.

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This article, the first of a multipart series, argues that a major rift runs across many of our major policy debates based on our attributional tendencies: the less accurate dispositionist approach, which explains outcomes and behavior with reference to people’s dispositions (i.e., personalities, preferences, and the like), and the more accurate situationist approach, which bases attributions of causation and responsibility on unseen influences within us and around us. Given that situationism offers a truer picture of our world than the alternative, and given that attributional tendencies are largely the result of elements in our situations, identifying the relevant elements should be a major priority of legal scholars. With such information, legal academics could predict which individuals, institutions, and societies are most likely to produce situationist ideas – in other words, which have the greatest potential for developing the accurate attributions of human behavior that are so important to law. (To download a copy, click here.)