Thursday, November 24, 2011

Peter Orszag on the Relationship Between Increased Inequality and Polarization

Over at Bloomberg, Peter Orszag has written a fascinating article on the possible relationship between increasing economic inequality and political polarization. As economic inequality increases, will further political polarization be inevitable?

I think so. And the more the longer economic crisis extends itself, the more severe political polarization will become.

Saturday, November 12, 2011

Commentary on Jon Corzine

Great video, over at the Daily Show:

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Wednesday, August 10, 2011

Pyrrhic Victory Indeed: A Response to Dr. Thomas Sowell

Over at National Review, Dr. Sowell has a recent article on his disappointment with the "victory" of conservatives in the latest battle over spending, taxation, and the national debt. He is right to be disappointed, but I think he should also be disappointed with his own approach. What follows is the comment I left on Dr. Sowells article:

Dr. Sowell is undoubtedly brilliant, a gifted writer, and someone who is capable of cutting through confusion and distraction in order to illuminate core issues. For that reason, it is disappointing for him to choose partisan obfuscation rather than simple truth when discussing the causes of our debt problems.

The current fiscal situation is caused by at least three things:
(1) Levels of spending.
(2) Levels of taxation.
(3) Economic conditions.

For Dr. Sowell to say that our debt is "caused" by "excessive" spending alone is simply misleading. Our debt is also a function of, at the very least, spending, taxation, and economic conditions.

FACT: We had a surplus. During the administration of George W. Bush Republicans and some Democrats decided to trade a surplus for tax cuts. It was well known, among honest Democrats and Republicans alike, that when George W. Bush took office that we had a long-term entitlement spending problem. Instead of paying down our debt to deal with those long-term problems, we decided to cut taxes. Without those tax cuts, we would have a significantly lower level of national debt now. To top it off, we also decided to engage in two wars without raising revenue to pay for them. And we decided to provide a new prescription drug benefit to seniors without paying for it.

For Dr. Sowell to imply that Republicans were powerless and had nothing to do with the current situation is simply partisanship overcoming the better judgment that I know exists under the partisan veneer. I believe Dr. Sowell knows better. He is too intelligent and too informed about public affairs not to.

I happen to believe that before you are in a position to try to dictate terms to the other party, it is important to get your own house in order. For conservatives, that starts by having the intellectual honesty to acknowledge the role both spending increases AND tax cuts have played in causing the current debt situation. You may not believe that those tax cuts should be rolled back in anyway as a matter of policy, but to pretend like they have not had an effect on the deficit is simply propaganda overcoming honesty. One can say that deficits are caused only by spending and not tax cuts until they are blue in the face. That doesn't make it true.

FACT: Much of the increase in spending we have experienced now is due to extended unemployment benefits and other so-called automatic stabilizers (i.e. Medicaid, food stamps, etc. etc.) that tend to increase when the economy goes bad. That is, these increases in spending are linked to the performance of the economy, rather than the proliferation of new programs. Clearly, conservatives and liberals (mostly) disagree on how to get the economy going again, but we should still be able to agree on the simple fact that much of the increases in spending at the federal level are tied to the performance of economy. Furthermore, we should keep in mind when talking about "government" spending that a good portion of the increase in the federal government's spending flowed to the states to make up for large cuts at that level of government. There is a sort of dishonesty in complaining about increases in "government spending" without acknowledging the cuts at the state and local level and noting that a portion of the "increases" at the federal level are simply funds flowing to the states that function to somewhat lessen overall what are in fact decreases in government spending caused by the recession.

FACT: A good portion of our fiscal imbalance is caused by a huge decrease in revenues caused by economic problems that benefit no one, whether they are liberal or conservative. The output gap and the fact that our economy is performing way below potential is our common enemy. We may disagree on precise levels of taxation and spending, but we should be able to agree that our current level of economic performance is a major problem. We could better afford the George W. Bush tax cuts that conservatives are so deeply attached to if we had a better economy. We could better afford spending on education, research and development, infrastructure, and the social safety net that liberals especially value if we had a better economy. Neither Democrats nor Republicans and neither liberals nor conservatives benefit from current economic conditions.

Yes, I understand that given that we don't come close to agreeing to how to address this problem, that pointing out that the performance of the economy is a common problem does not necessarily help to bridge the huge differences in opinion among liberals and conservatives on how to best proceed to deal with those problems. But, I think even as both parties resort to blaming each other (which is entirely appropriate by the way -- we also need accountability, not merely compromise) we should keep in mind that there is in fact a shared problem to be solved.

I agree with Dr. Sowell that Republicans have negotiated poorly. However, I happen to feel the same way about President Obama's "negotiation." The only cuts that are binding are those that occur relatively soon, in 2012 and perhaps (maybe) in 2013 before a new Congress gets a chance to have its say. These cuts are $21 billion and $42 billion respectively. With a $14.5 trillion dollar debt and large yearly deficits, such cuts aren't anything to write home about.

Any cuts that go beyond that simply are not going to be respected by Democrats if they win in 2012. This is especially true due to the offensive manner by which such cuts in the "deal" were negotiated under threat of default. I am extremely disappointed that President Obama offered any spending cuts at all, given the unprincipled threats that were used to extract them. And I am sure that Republicans, if they win in 2012, will go beyond the cuts that were negotiated in the so-called "deal" as well.

At the end of the day, I think both sides are ultimately going to have to just accept the system. If you really want major change without ideological compromise, it takes winning multiple elections in a row. That is just the reality of the situation. I understand frustration on both sides with this state of affairs, but our system was actually designed by Madison and the other framers to frustrate those who want to make major changes quickly.

Mostly, major changes to our system of government occur due to crisis. The New Deal and expansion of government afterwards can be attributed to the Great Depression and World War II. But, it wasn't merely a crisis that enabled change, but rather a crisis combined with a political realignment. I know certain conservatives are salivating because there is a "crisis" and they think it is the perfect "opportunity" to roll back the social safety net and the related expansion of government to something much closer to what we had before the New Deal. What such conservatives need to remember however, is that it takes more than a crisis to obtain such an ambitious goal. What it takes is a crisis plus a political realignment. As recent political opinion polls show, there has not been a realignment, so conservatives are going to have very limited political capital to spend on rolling back government, which, by the way, is perfectly capable of returning to "normal" once the crisis has passed.

A final point. Conservatives need to stop blaming the media so much. First of all, it isn't actually possible for the media to be completely objective. Second of all, like it or not, a lot of people simply do not agree with conservative ideas, so-called liberal media or not. Finally, conservatives have a very loud voice in our public affairs. Fox News is now part of the mainstream media and so is National Review for that matter. To engage in so much whining about the media makes you sound like bitter losers. Get over it.

If you aren't persuading people, it isn't because they are not sufficiently familiar with your ideas. Most people know what conservatives believe and many people have rejected those beliefs. The same can be said of liberals. We are a divided country with a lot of moderates and non-political people who may not know exactly what they believe, but they know they don't really buy what EITHER liberals or conservatives are trying to sell them. In that situation, political realignment is very difficult. It is better to acknowledge reality and keep your expectations in check.

If conservatives continue to play their cards as incompetently as they have by consistently overreaching rhetorically (even while consistently failing to deliver in reality), there may well be a political realignment alright. But as recent public opinion polls show, liberals and not conservatives, are likely to be the beneficiaries. That is something for conservatives to think about when they gleefully talk about causing the country to plunge into default in order to achieve their ideological fantasies.

As a liberal, obviously I am not saying that I have anything against a political realignment that benefits liberals. I just would rather it be caused by our side persuading the American people rather than your side causing a crisis that does permanent damage to the country.

And by the way, please try to have some perspective. As a liberal, I would rather live in a successful country where political conservatives held sway than in an unsuccessful country in which political liberals held sway. I hope that patriotic conservatives could join me in that sentiment. Politics, while fascinating and incredibly important, is not everything.

Tuesday, August 2, 2011

The Role of Philosophy in Everday Decisions

Stanley Fish has an interesting to read article in the NY Times on the question of what difference our answers to philosophical questions makes to everyday moral decisions. As he points out, a person who takes a position of moral relativism in asserting that moral values cannot be determined in a purely abstract realm of thought nonetheless can and will come to everyday "common sense" moral judgments about what is right or wrong in everyday life.

I think Fish's proposition is interesting. To some degree philosophy, while highly interesting, is in fact impractical when it comes to resolving concrete questions of morality. Although under certain comprehensive theories, moral deductions regarding concrete issues is certainly possible, we may question on what basis we choose a comprehensive theory to begin with if highly contested religious motivations for choosing a particular comprehensive theory are conceded to not be universally accepted.

Going along with the same point about the implications (or lack there of) of philosophical debates as a guide to living, let us assume that a person believes in determinism rather than free will. That person still has to make what we call "decisions" and will have to live life with the consequences of those decisions.

None of this is to suggest that thinking about philosophical questions is not worthwhile. If anything, a philosophical inquiry is useful in giving us a sense of what can and cannot be resolved and a firmer understanding of the basis of our beliefs. However, the limits of philosophy itself, I think, is evident.

Monday, July 18, 2011

The Power of Economic Models

I have spent some time on this blog talking about how economic models are not "all that" and how obsession with models can stultify analysis. The basic problem is this: what about factors that are not reflected in models? What do you do about those? There is always a risk that models, by being too influential and offering false clarity, can cause an excessive mental focus on particular factors when other factors not in the model are equally or more important.

But I want to be clear. Economic models are still very powerful and still useful in helping clarify thinking. A good example is this post by Paul Krugman today (who emphasizes that models do not necessarily have to be mathematical, although there isn't anything wrong with mathematical models as long as one does not become obsessed with the math as opposed to the real world that are the inspiration for the model). As one can see after reading Krugman's post, models can be helpful in clarifying thinking.

However, this very clarifying function is part of the dangers of models. Because models occasionally have the power to seemingly cut through the confusion, often in an eloquent way, there is a temptation to overuse them and rely on them excessively.

Basically, economic models can be extremely useful. But they are only one tool in one's intellectual toolbox and it should always be remembered that they are but one part in a larger argument. The problem is not economic models per se, the problem is obsession with economic models while losing sight of the bigger picture and everything that matters that is not within the models. That said, models can sometimes help you make an argument about what does and does not matter.

Thursday, May 26, 2011

Texas Senate Passes Loser Pays Bill That Is Actually Plaintiff Pays

The Texas Senate has passed a lawsuit reform bill that is falsely labeled as moving Texas to a loser pays bill when it really moves to a plaintiff pays bill. In some ways it is a slight improvement over the previously passed Texas House bill, but not by much. Now, at least, a winning plaintiff will not be exposed to more costs and attorney fees than the amount they win at trial. This at least ensures that a winning plaintiff does not end up paying the other side more money than they won when they bring a meritorious lawsuit, just because they made the mistake of rejecting a settlement offer that was better than what they end up receiving after trial. While this is much better, because now plaintiffs with meritorious claims do not have to have nightmares about being forced to file bankruptcy from attorney fees and costs for daring to, heaven forbid, actually try to resolve their case in court before a jury of their peers, this still is a bad bill. The result is still way too harsh and definitely pushes nervous plaintiffs with meritorious claims to accept low ball settlement offers because of the "what if" factor. It would make much more sense to apply this sort of thing to plaintiffs who are somehow repeat players, but it does not really make sense to apply this harsh rule to an ordinary individual who has never filed a lawsuit before.

What Texas should do is move to a straight loser pays system period. If you lose, you pay attorney fees and costs. Period. Texas loser pays is more along the lines that if the defendant wins, plaintiff always pays. But if the plaintiff wins, then they not only have to win, but they have to win more than 120% the defendants last settlement offer before the defendant has to pay.

Overall, this is still an awful bill. And it is also mislabeled. It isn't a "loser pays" bill. It is a plaintiff pays bill. This seems awfully strange to favor the rights of defendants so much over plaintiffs. After all, if a plaintiff brings a meritorious lawsuit, then the defendant has done something wrong that violates the plaintiff's legal rights. So, in Texas, it apparently is much worse to actually bring a lawsuit to defend your legal rights than it is to violate those legal rights in the first place.

Why should a plaintiff who loses a lawsuit always have to pay but a defendant who loses a lawsuit often or even usually does not?

That isn't loser pays, that is plaintiff pays!

Wednesday, May 25, 2011

Appellate Jurisdiction in California: State versus Federal

The appellate system in California is different from the Federal system in a very important and surprising way. There are quite a few similarities, of course. In California, the decisions of the Supreme Court of California are binding on all lower state courts just as the decisions of the Supreme Court of the United States are binding on all lower federal courts. Below the Supreme Court level, California has six geographic districts, in a manner analogous to 12 geographic circuits. But there is a really important difference! In California, unless there is a conflict, a California Court of Appeal decision is binding on all Superior Courts in the state, regardless of whether they are in the same district or not! See Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450 (1962). This is very different than the Federal system, where U.S. Court of Appeals decisions are only binding on U.S. District Courts in the same circuit.

This is definitely an important basic fact that any lawyer or citizen doing legal research on California should know and keep in mind.

Tuesday, May 24, 2011

OECD Better Life Index Versus GDP

So, the Organization for Economic Cooperation and Development ("OECD") has come up with a new "Better Life" index upon which to compare countries. Certainly, it is an improvement over GDP. However, I think we must judge this effort as a partial failure to the extent that what is trying to be produced is an alternative to GDP that will actually be reported by the media.

First, it simply is too complicated. When I go to the OECD Better Life Initiative web page, it asks me to rank 11 areas in terms of relative importance to me. I am simply not sure I am fully up to the task. As in, if I were to do a ranking, I am not fully confident in my own answers in terms of my own preferences. What sort of concrete tradeoffs are entailed by a given set of answers? How comfortable would I be with a given ranking if it actually had some sort of impact on my life?

Second, and worst of all, at the end of the day, this measure has no chance of replacing or supplementing GDP as an item that is reported by the media. You can see what the OECD has done here. They have bought into the idea that it is improper to make any sort of value judgments, and therefore have decided that it is up to each and every individual to make his or her own ratings so as to produce individualized country rankings. But this idea fails on two levels. For one, OECD already has made value judgments by deciding that there are 11 categories that matter and that these are the categories that must be weighted and implicitly traded off against each other. For another, GDP is at least a shared social measure, so it is likely to be reported in the media. So, the people behind this OECD category have decided to sacrifice the idea of a shared social measure of well-being to the god of false objectivity. Worse, they haven't really gotten anything in return. They have failed to really eliminate important value judgements, their total focus on individual rankings notwithstanding. The people behind this simply have failed to bite the bullet here and recognize that it is necessary to exercise some institutional judgment and actually produce a single number that rises and falls in a manner analogous to GDP.

It didn't have to be this way. The OECD could have come up with a single number that could be reported by the media and still provided the capability of people to make their own indexes. What they have produced instead is a complicated tool that is practically guaranteed to have minimum impact.

The problem with GDP is that it is at core a subjective measurement that is masquerading as an objective measurement. What is subjective about GDP? What is subjective is that someone decided that the component things that make up GDP were worth measuring and aggregating together into a single measure in the first place. What is subjective is the judgment that the resulting number itself has some sort of meaning. So, it is not as though GDP is objective. One might say that the data that goes into GDP is objective. But the idea that aggregating this objective data and reporting on results is something that is meaningful and important is subjective.

The OECD did not have to sacrifice this project at the altar of objectivity. The main competitor, GDP, is not itself objective.

You simply cannot avoid subjective measurement here. What is important is to acknowledge it and deal with it explicitly, not try to avoid it. So, what the OECD should have done is use their best judgment to come up with a single number that can expand and contract, just like GDP does. They should then allow individuals to alter the various weights of individual criteria to produce their own numbers if they like, but there should have been one number for each country that is released periodically and that can easily be reported by the media.

I appreciate this effort as a first stab at this very challenging problem. But it must ultimately be judged as a failure in terms of producing a viable alternative to GDP that will be reported by the media and thus have much of an impact in improving how we think. I do not imagine that any but the most curious individuals will come to use the Better Life Initiative tool to calculate their own individualized rankings.

Sunday, May 22, 2011

Diagrams in Economics: They Actually Aren't All That

Via Mark Thoma, Daniel Little has an interesting post on the history of diagrams in economics.

One thing that I find interesting is the extent to which mathematical diagrams have been such a dominant part of the toolbox of many economists, especially in modern times. That classical economists did not have access to these modern tools; in many ways, the classical economists had an advantage as a result.

It hardly needs to be said that mathematically precise diagrams are not scientific. They are not empirical, but merely describe a situation assuming very rigid premises are always true. They are most useful for engaging in thought experiments and, perhaps, helping to clarify thinking. (Although there is the risk of the opposite, since not everything that is important is necessarily represented in the model!)

It shouldn't need to be said that doing nuanced mathematical proofs about nuanced details contained in such diagrams are going to tend to be useless to the extent that the truth of such nuanced details depends on false assumptions. But economists waste a lot of time trying to prove such little details about diagrams... This time would probably be better spent contemplating and understanding the real world. In this way, modern economics can be somewhat inefficient; but you would think that a field that claims to obsess over optimality and efficiency, the way economics does, would be more efficient.

Milton Friedman defended models with untrue premises by suggesting that it does not matter how unrealistic the assumptions of a model are, as long as those models predict accurately. An analogy might be Newton's laws of motion which depend on false assumptions about how the world works compared to quantum mechanics. Nonetheless Newton's laws of motion are practically useful for some applications, especially since it is much easier to intuitively understand and use than quantum mechanics. What matters, or so argues Milton Friedman, is the truth of the predictions produced by the model more than whether the premises built into the model are true.

Well, there is some merit here in Milton Friedman's argument. But it is also excessively apologetic and sweeps far too many problems under the rug. First, this is no different than any other area of life. We ultimately have no choice but to reason from premises that are not perfectly true, because absolute truth is not available to us. For example, in law, we infer intent from actions, because we do not have direct access to someone's intent, which resides in their minds. That does not mean that false premises do not matter, however. When our inferences in law are wrong, we end up giving someone the death penalty when perhaps the appropriate punishment would have been merely some prison time or even probation. In economics, you have economists who risk giving policymakers policy advice that is wrong and therefore harmful.

Indeed, the absence of perfection regarding the truth of premises is not an excuse for ignoring false premises. Economists still should do the best they can to get their premises right. They should obsess at least as much over arriving at empirically correct premises as they obsess over rigid mathematical features of their models that do not really matter much in the real world anyway, to the extent that that house of cards is built on a foundation of false assumptions in any case. What is the point of being greatly detailed about a model when many of those details are based on premises that are not only false, but known to be false? If your goal is to make empirical predictions, the more nuanced mathematical details often are not going to matter anyway. A more efficient use of time would be to try to do better in terms of the truth of the premises that are used in the models in the first place.

Also, regarding Milton Friedman's argument, some economists can be awfully sloppy empiricists, as demonstrated by Noah Smith and Dean Baker here and here. While, it is really not true that one can fully make up for untrue premises by using empirical research to verify predictions, to the extent that economists are going to try to do just that, they must ensure that they enforce much higher standards of empirical rigor.

Finally, the entire Milton Friedman defense assumes that the same approach that is applicable to the much more narrow subject of physics is applicable to the much more complex subject of economics. The law of diminishing marginal returns should have convinced any rational knowledge maximizing economist to diversify their methodological approach long ago. The fact that they haven't just proves that economists, like everyone else, are far from rational. One need not go so far as to say that models are completely useless to make the obvious point that they are not all that or the be all and end all.

It is a large missed opportunity that economics has gone so long without working more on getting basic premises right. Economists ignore so many factors that are obviously important in economic transactions (like culture or social meaning) that they can be said to be rather ignorant of the actual functioning of the economy. Many economists don't study the actual economy; they study a fantasy world which consists of economic models built on demonstrably false premises.

Now, this is not true of all economists. You have the rise of behavioral economics which, finally, tries to work on getting premises about how humans actually behave right instead of proceeding based on known falsehoods concerning rationality. It is, however, still true of too many economists. While I am happy about the rise of behavioral economics, rather than be excessively gushy about this development, a more appropriate response is: "It is about time! How long were you economists going to waste playing in your sandbox before emerging to deal with the complexities of the real world anyway???"

What is most remarkable about economics is how little economists actually know, not how much they know. This is not said to bash on economists. The thing economists are trying to study is incredibly complex. But it is a reason to bash on arrogant economists who proclaim to know more than they actually do. So, I think that Greg Mankiw's advice to those listening to economists, both on the left and the right, is well taken: "If you find an economist who says he knows the answers, listen carefully, but be skeptical of everything you hear."

Buying Healthcare is Not Like Buying Milk

You would think this is obvious.

Buying healthcare is not like buying milk.

There is a lot of what is called "asymmetrical information" in the market for healthcare that makes it extremely unlikely that consumers armed with vouchers will be able to "discipline inefficient providers" of healthcare, despite the fanciful claims of certain politicians to the contrary. For one, it is very difficult and often impossible for a consumer to know, without the expertise of the very healthcare provider they are supposed to discipline, whether an outcome is the best one possible. It is very difficult and often impossible for a consumer to know whether the extra steps taken by one provider over another are necessary or useful, given the tendency of the appropriate steps to be taken to vary based on nuanced differences in diagnoses.

Or to put it another way, there is a reason that medical school takes four years in addition to college and many years after that in order to specialize. Add to all that education knowledge gained through experience, and it is quite clear that there is a major asymmetrical information issue regarding basic issues of what the "service" that is delivered should be.

It really is amazing that some politicians are proposing to end Medicare and replace the system with vouchers based on simplistic theories that do not address the plainly obvious point that buying healthcare is not exactly analogous to buying milk.

Jared Bernstein has more at his blog.

Saturday, May 21, 2011

Partisan Thinking, Tribalism, and Freedom

When people watch politics, it is very easy and very human to become attached to one side or the other. When this happens, there is a temptation and tendency to hold arguments and people on the "other side" to higher standards and conversely, a temptation and a tendency to hold arguments and people on "your side" to lower standards. This is a very tribal outlook, but it is also a fundamental human tendency. Indeed, the tribalism itself is evident in the tendency to look for "defectors" in one's tribe that need to be punished. Defectors are those who claim tribal affiliation, but hold one or more unorthodox beliefs. Unfortunately, this is not a very good way at arriving at the truth. Indeed, with tribal partisanship, it is not unusual for positions on what the "right policy" is to evolve for no other reason than tribal self-interest as opposed to more legitimate reasons such as the discovery of additional data or deeper thinking.

I am not saying that in modern politics that both sides are equally right. The solution to the very real problem of partisan tribalism isn't a superficial equivalency that all parties in all situations are equally right. Indeed, that sort of superficial thinking would be every bit as flawed intellectually and nearly as problematic practically as the problem of partisan tribalism itself.

There are no easy answers here. Tribal thinking, to some degree, is simply effective. Under both democracy and other forms of government, a group that can hold itself together will have a tendency to have some advantages over groups that cannot. But therein lies the problem. If tribalism is effective in this sense, the more important question and issue is, effective to what end? The problem with tribalism is that it so distorts the underlying thought process that the goals that one's tribe becomes "effective" at accomplishing are not necessarily good. Also, and most perniciously, tribalism limits an individual's ability to think independently and in a truly free manner.

We say we live in a free country. But the truth is, many of our minds are not free due to partisan tribalism. In our country, many of the people who talk about individual freedom are not truly free themselves.

Friday, May 20, 2011

A Deal to End Judicial Filibusters

Over at the Volokh Conspiracy, Jonathan Adler advocates for a deal to end judicial filibusters far enough into the future so that it would be difficult for either political party to determine which side would initially benefit when the rule was first put into place.

I think this is a good idea, but I share Adler's view that we are unlikely to get any deal of this sort in the immediate future. Our politics has degenerated into a partisan mess and it is rather natural that judicial nominations, like the rest of our political system, would tend towards being dysfunctional and with no end to the problem in sight.

I will say this. In the absence of such a deal, I believe that both sides should continue to use the filibuster vigorously rather than either side engaging in unilateral surrender.

Thursday, May 19, 2011

Do Senators Take Their Oath to Uphold the Constitution Seriously?

So, you have these politicians who claim that filibustering judicial nominees is not only bad idea, but that it is unconstitutional. That is right, not merely a bad idea or bad policy, but unconstitutional.

Well, Senators take an oath to uphold the Constitution, so if they say something like that, they can't later decided filibuster judicial nominations, right? After all, the Constitution, which they took an oath to uphold, takes precedence for any red-blooded American Senator over any political advantage from the unconstitutional filibuster of a judicial nominee, right?


Matt Yglesias has the dirt. Politicians who previously declared that filibustering judicial nominees was unconstitutional now engaged in the filibuster of judicial nominees.

Do these Senators take the Constitution seriously? Do they take their oath to uphold the Constitution seriously? Sadly, we are forced to conclude that the answer is no.

Should Non-Lawyers Own Law Firms?

Over at Above the Law, Elie Mystal argues that it makes sense for non-lawyers to be able to own law firms. I think he is absolutely right. Law firms would be much more efficient if they were run by actual business people. Therefore, the idea that they should only be run by lawyers is not quite right.

As far as the professional responsibility idea that lawyers could not possibly remain ethical if they worked in a firm run by non-lawyers, that just does not make sense. In-house counsel work for non-lawyers, and they usually remain ethical. Government lawyers might find that they can be fired by a non-lawyer, depending on the credentials of their boss, and they still usually remain ethical.

A junior associate working for a law firm, in contrast, might not be ethical despite working for a lawyer or set of lawyers who own the firm. Indeed, such a lawyer might even find that they are encouraged by their superiors to do unethical things, despite the fact that their superiors are also lawyers. It is ultimately the junior lawyer's responsibility to resist in such situations.

Ultimately, it is the responsibility of every lawyer, regardless of their position in the food chain, to maintain their own ethics. The idea that if a law firm were owned by a non-lawyer that this would be inherently corrupting is simply insulting. It is no different than when a very important client, another lawyer, or a company you work for and that you depend on economically demands that you do something unethical. As an individual, every lawyer must exercise his or her own professional judgment and refuse to do anything that is unethical. The idea that lawyers are so ethically weak that they would somehow succumb to unprofessional pressure if they, heaven forbid, worked in a law firm run by non-lawyers is actually an insult to the entire profession and the individual lawyers in it.

Ultimately, the people most hurt by the backwards restrictions on the ownership of law firms are consumers who end up being priced out of the market for legal services altogether due to the high prices that result due to inefficiencies that arise because lawyers are running law firms. It actually is a major injustice.

So I agree with Elie here. It is time for the profession to change its ways, move into the 21st century, and embrace maximally efficient business practices. That means that law firms owned by lawyers who chose to get a J.D. rather than an M.B.A. should have to face competition from law firms owned fully or in part by non-lawyers. And you know what, I really wouldn't be surprised if such law firms delivered the same or better quality for less.

Not So Fast: The Case for Slower Deficit Reduction

Over at Economist's View, Mark Thoma explains how, even if we assume a rather low multiplier of 1.0 for cuts to government spending, that cuts in the range of even $600 billion over two years are likely to have a severe negative effect on unemployment. For example, to do a rough "back of the envelope" calculation, a cut of $300 billion would result in an increase in unemployment of 1% or about 1.5 million workers per year for a total increase in unemployment of 2% or 3 million unemployed over two years.

While it is wise to address deficits over the long term, doing so now when the private sector is not in a position to make up for decreased government spending will seriously hurt the economy and cost a lot of innocent people their jobs.

When it comes to deficit reduction, timing is everything.

Tuesday, May 17, 2011

Are Supreme Court Justices Unelected?

A common criticism of judicial review is that it is undemocratic because federal judges in general and Supreme Court justices in particular are unelected. For example, in a 2006 law review article in the Yale Law Journal, Jeremy Waldron argues that judicial review disenfranchises ordinary citizens:
By privileging majority voting among a small number of unelected and unaccountable judges, it disenfranchises ordinary citizens and brushes aside cherished principles of representation and political equality in the final resolution of issues about rights.
But that isn't quite right. Supreme Court justices are elected! No, not directly of course. They are appointed by the President. But the President who appoints them is elected and the Senators who confirm them are elected. So, ultimately, what sort of judges we have on the Supreme Court and other federal courts is up to the people.

Saturday, May 14, 2011

Paul Krugman on Inflation in Perspective

Over at his blog, Paul Krugman has a brilliant post on inflation. It is interesting how there is this huge disconnect between some people's stated concerns and actual reality.

Of course, you have to empathize with people who are feeling pain at the gas pump right now. But maybe it is time to trade in your SUV (unless you really need it) for a more fuel efficient car. When gas prices fall again, people have a tendency to revert to their old behaviors as if the price of gas were not really volatile and subject to unpredictable increases. What people need to do is think longer term, like Mayor Wamaru did when he built a high seawall to protect the town of Fudai. Just because the waves are not very high today, doesn't mean that you should assume they won't be high tomorrow.

An Example of Visionary Leadership

The Scotsman has a great story about a 51-foot high seawall built in the 1970s by a visionary Mayor Kotaku Wamura which saved the coastal town of Fudai in Japan from the recent tsunami. At the time the project was commenced, the project and the mayor were criticized as being wasteful. But while the March 11th earthquake and tsunami which caused 25,000 deaths, did billions of dollars in damage, and even triggered a meltdown at a nuclear power plant in Fukushima province was devastating elsewhere, the town of Fudai was spared due to the visionary leadership of the late Mayor Wamaru, who unfortunately died in 1997.

While a culture of disdain for government along with a subsequent elevation of the private sector has arisen in the United States, this story clearly illustrates the great value that visionary leadership in the government sector can have. Good government and visionary leadership in the public sector are very important to our future prosperity.

Tuesday, May 10, 2011

Bill Gates is "Stunned" by How Hard it is to Get Funding for Energy Research and Development

Over at GigaOM, Ucilia Wang reports that Bill Gates is stunned at how difficult it is to get our dysfunctional political system to increase funding for energy research and development, which we absolutely must do if we are to thrive as a country. Indeed, although Bill Gates has had success in convincing the Obama administration of the need for increased funding, it is difficult for the administration to even maintain current levels of spending in the face of the Republican desire to cut back on investments in the future, much less increase the level of investment in a way that is likely to accelerate progress.

As I mentioned earlier, given our dysfunctional political system, it is increasingly difficult to make the kinds of critical innovation investments that we need to progress. I suspect that if we do not get our act together soon, we will eventually face national decline.

Monday, May 9, 2011

Loser Pays Isn't a Bad Idea, But Texas is Doing it Badly

So, over in Texas they have passed a new law for breach of contract cases which moves the system to loser pays.

I don't think that the concept of loser pays is a bad idea in general. Too often, in the system used by a majority of states in which each side bares the burden of its own legal costs regardless of outcome, plaintiffs are not made whole after they are wronged by a defendant because they have to pay the cost to bring suit to their lawyers, experts, and others. Under a loser pays system, in contrast, such a plaintiff has the opportunity to actually be made whole.

Still, it should be kept in mind that the legal system is inherently biased against wronged plaintiffs. It is not enough that a wrong in violation of law has been done. It is necessary to prove that violation in a court of law after getting one's evidence properly admitted through the technical and complicated mess that is evidence law. This is not always an easy thing to do by any means and there are many instances where a legal wrong occurs without any sort of remedy as a result. If you can't prove it formally in a court of law in compliance with intricate rules of procedure, it is as though it never happened.

While loser pays is not in general a bad idea, the Texas law, not surprisingly given who is currently in power, is a somewhat imbalanced implementation of the loser pays system. It tips the scales in favor of defendants by requiring even winning plaintiffs to pay the defendant's attorney fees if they fail to properly estimate the value of a settlement offer. So, if the result after trial is less than 80% of a settlement offer, the plaintiff may end up owing the defendant more in attorney fees than they are awarded by prevailing in the lawsuit. Of course, given the inherent uncertainty of legal proceedings, knowing when to accept or reject a settlement offer is often very difficult. Here, the legislature is trying to coerce plaintiffs to accept unfair low-ball settlement offers by harshly punishing them if they guess wrongly. So, what you have is an unbalanced system which systematically favors those who violate the rights of others under the civil law.

To Progress, We Must Risk: But Do We Dare?

Over at Economix, David Leonhardt interviews Tim Harford the author of an upcoming book called Adapt: Why Success Begins With Failure on the subject of risk-taking in both the public and private sector. It seems quite clear that both innovation and scientific breakthrough require risk-taking.

While I certainly agree with Harford that we need to take risks in order to progress, I wonder if our current political system is really able to deliver very well on that. It seems to me that it can sometimes be politically dangerous to experiment. After all, if you have to fight tooth-and-nail just to have the government fund things like high speed rail that are not as experimental, how much more difficult will it be to secure funding for projects that are much more experimental, where any particular project may not amount to anything, but nonetheless are the type of projects that will eventually be the source of great innovation, progress, and human flourishing?

China's Changing Investment Portfolio

Over at the Economix blog, David Barboza has a great post on shifting patterns of Chinese overseas investment. The takeaway: China is moving from a country that mainly attracts inward investment to one that is increasingly investing abroad.
On Friday, the English language newspaper, China Daily, quoted a senior Ministry of Commerce official saying that within three years China’s overseas direct investment would surpass its inbound foreign direct investment. The official said much of that investment would be directed toward the United States, Europe and Latin America.
That would be a major milestone, since China’s economic boom has been powered by decade by overseas companies investing in manufacturing and export-related industries here. Last year, China’s inbound foreign direct investment was about $100 billion, while outbound investments in the non-financial sector were about $59 billion.

Paul Krugman on David Hume

Over at his blog, Conscience of a Liberal, Paul Krugman talks about the liberating effects of reading David Hume. I must concur entirely. Then he applies the principles of one of Hume's quotes to the field of economics.

David Hume:
I have long entertained a suspicion, with regard to the decisions of philosophers upon all subjects, and found in myself a greater inclination to dispute, than assent to their conclusions. There is one mistake, to which they seem liable, almost without exception; they confine too much their principles, and make no account of that vast variety, which nature has so much affected in all her operations. When a philosopher has once laid hold of a favourite principle, which perhaps accounts for many natural effects, he extends the same principle over the whole creation, and reduces to it every phænomenon, though by the most violent and absurd reasoning.
Paul Krugman:
That applies to lots of things; to stay with my home field, the idea of maximizing behavior, which is a useful gadget for thinking about many economic issues, all too often becomes a sacred principle in the minds of economists, who refuse even to consider any story that doesn’t involve perfect rationality on the part of all players.
Definitely something to think about.

Sunday, May 8, 2011

The Solution to the Unemployment Problem: Cut Benefits

The New York Times reports that Florida has just passed a bill, which the governor is expected to sign, to cut the maximum number of weeks people can receive state unemployment benefits.

I guess this is sort of thing that some people go into "public service" to do. But my idea of public service at least does not include kicking people while they are already down, out of a job, and looking for work.

Apparently, in Florida, lawmakers are unaware of this concept called a "tough job market" in which this other thing called "unemployment" goes up and people have a hard time finding a job. This shows that even the most basic concepts are difficult to grasp for some "public servants."

Oh well.

The citizens of Florida have to live with the lawmakers they voted for and the concepts of "public service" that those lawmakers apparently have a passion for. While I think this is the exact opposite of good public policy, we do live in a democracy, so sometimes we have to live with bad public policy instead.

Saturday, May 7, 2011

The Case for Humility Among Economists

Greg Mankiw makes the case in a really great New York Times article. His takeaway:
If you find an economist who says he knows the answers, listen carefully, but be skeptical of everything you hear.
Sounds right to me!

Economists like Stephen Williamson who thinks he has nothing to learn from history and yet is shown to make important mistakes based on this ignorance should take notice.

Tuesday, May 3, 2011

The Incoherence of Friedrich Hayek

From Brad DeLong's blog:
 "Is it your view that if I went out tomorrow and bought a new overcoat, that would increase unemployment?"

"Yes," said Hayek, "but," pointing to his triangles on the board, "it would take a very long mathematical argument to explain why."
I suppose this just goes to show the dangers of relying on excessive mathematical models that defy common sense. Mathematics is not a substitute for other types thinking, but instead a very powerful and important supplement to them.

Friday, April 29, 2011

Is Academic Economics Adapting?

Brad DeLong has a great post that is really worth thinking about for economists and non-economists alike. Although the financial crisis and the subsequent recession should have been a gigantic signal to economics departments that they have to adapt, DeLong sees little evidence that they are actually doing so. As a result, academic economists may deservedly lose influence, or as Brad DeLong puts it:
Perhaps academic economics departments will lose mindshare and influence to others – from business schools and public-policy programs to political science, psychology, and sociology departments. As university chancellors and students demand relevance and utility, perhaps these colleagues will take over teaching how the economy works and leave academic economists in a rump discipline that merely teaches the theory of logical choice.
For economists, this is worth thinking about. Is the stunted view of the economic world that one gets as one looks at the economy more and more exclusively from the perspective of economic models and theory good enough? Or do economic models and theory need to be supplemented by more robust thinking "outside the box" in order to enable better insight into the economic world and how it actually works? Do academic economists have a strong enough understanding of the history of their own discipline?

For non-economists, this is very much worth thinking about as well. It seems that economics has gone astray. That much of the work that economists have done recently has turned out to be irrelevant, or worse, actually harmful. If academic economists are handcuffed by narrow methodologies that render them less and less relevant, it suggests that other academics from business schools, sociology, anthropology, and psychology will need to step into the vacuum so that policy makers are able to understand how the real world economy actually works. Economics may have the term "economy" in the very name of the discipline. That does not mean that the real world economy is what economists are actually studying in all instances.

On the other hand, maybe Brad DeLong is incorrect in his thinking that economics needs to adapt. As Avanish Dixit has suggested, maybe the problem is that academic economists have not been listened to enough by "practical men who believed they had conquered risk."

I am inclined to think that the problem is not so much economic theory, which can be useful when used with appropriate caution, as much as not doing enough to combine and temper economic theory with facts on the ground as well as with markets themselves which are prone to being dominated by "practical men" who, motivated by fear or greed, overreact to the transitory trends of the moment. To criticize academic economics is not to criticize theorists exclusively, but merely to point out that academic theorists need to grapple with the problem of why "practical men" don't listen to them. That is why are "practical men" so irrational, unlike the homo economicus that is assumed in standard economic models. (Though it should be pointed out that this important question is starting to be addressed with the rise of behavioral economics.)

Whatever one ultimately thinks, Brad DeLong's post is worth thinking about.

Wednesday, April 13, 2011

The President's Budget Speech

You have to give President Obama credit. He did give a very good speech on the budget. It was very good to see President Obama unequivocally say that he would not allow the Bush tax cuts to be renewed for those making over $250,000 again. I don't see how we can say we are going to make massive spending cuts harming the poor and the middle class, but at the same time we can afford to continue to pay for financially reckless tax cuts for those at the top of the income ladder. It is good that Obama finally drew a line in the sand. One of this White House's weaknesses in terms of communication is sometimes playing its cards way too close. By drawing a few lines in the sand, the White House reassures his base that not everything is up for negotiation.

I am also glad to see Obama come out and say that Representative Paul Ryan's plan is simply not serious.

I also think the idea of looking carefully at tax expenditures and further simplifying the tax code along the way is a great one.

Now, I do not agree with everything in the President's speech. In particular, I disagree with this part:
Others will say that we shouldn’t even talk about cutting spending until the economy is fully recovered.  These are mostly folks in my party.  I’m sympathetic to this view -- which is one of the reasons I supported the payroll tax cuts we passed in December.  It’s also why we have to use a scalpel and not a machete to reduce the deficit, so that we can keep making the investments that create jobs.  But doing nothing on the deficit is just not an option.  Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order.
I will admit to being one of those who thinks that deficit reduction should wait until the economy has fully recovered. It really is difficult to see what exactly has to be done before we even know what revenues are likely to look like. For example, if unemployment settles down at a long-term trend of 6% instead of 5%, this would imply a much different sort of budget situation. If economic growth after the economy has recovered is higher or lower than expected, this would imply a much different sort of budget situation. Finally, I think there is a real risk that budget cuts now could really slow down the economy and delay recovery. I think the longer term impacts on growth of a an unnecessarily delayed recovery could be significant, given the impacts on people's skill sets of long term unemployment. So, I still don't think this is the time to address budget deficits. However, if I did think this was the time, there is much to like in Obama's approach.

A final point. If Obama wants greater support from his base and independents going into the next election, he will need to learn how to be a more aggressive negotiator going forward. No one wants a President who does not seem like he knows what he wants and who doesn't know how to lead. Unfortunately, that is the impression that President Obama has sometimes given. So, it is important for the President to get out there and be more publicly involved in these sorts of negotiations going forward and emphasize that although he is flexible, there are some lines in the sand that he will not allow to be crossed. I understand that President Obama wants to appeal to independents as well as to his base. One thing he should keep in mind is that independents appreciate strong leadership too; what they do not like is extremism. There is no reason that President Obama cannot cultivate an image as a stronger leader which would be pleasing to both his base and independents while also cultivating an image of reasonableness. These are not mutually exclusive.

Overall, the President gave a really good speech. We will see how he follows through.

Monday, April 11, 2011

How Markets Fail: Snooki Versus the Nobel Laureate

One of the most major flaws markets sometimes exhibit is their failure to value things properly. Market incentives sometimes make it more lucrative to invest in trivial goods such as expensive "designer" bags that can sometimes cost tens of thousands or hundreds of thousands of dollars rather than make investments that are truly worthwhile, for example, reducing worldwide malaria deaths or dealing with the problem of homelessness. Basically, markets can sometimes cause society to misallocate huge amounts of resources to trivial things while real human needs are not met.

An example is Rutgers University paying more for the trivial reality star Snooki to appear on campus than they are paying for a Nobel Laureate. As Catherine Rampell explains, paying Snooki vast amounts of money to talk about her hair at Rutgers University may make some sort of economic sense. But doesn't this just go to show that the way that markets allocate resources is often anything but sensible?

Remember, the next time an economist tells you markets allocate resources more efficiently, that using their incomplete definition of efficiency. Under that definition, it makes more sense to pay tens of thousands of dollars to bring Snooki onto the campus of a public university or into a night club than to use those scarce resources for, I don't know, a scholarship or actual education or for something that actually matters! This should tell you that there is something deeply incomplete with the definition of efficiency used by most economists.

Wednesday, March 23, 2011

Do Words Hurt?

Over at Above the Law, Elie Mystal argues that "words don't hurt anybody" and that people in Canada should just "chill" when it comes to uncivil behavior by certain members of the bar. 

I am going to have to take issue with the statement that words don't hurt anybody.

This simply is not true. Hostile words can inflict stress and cause a stress hormone known as adrenaline to rise, causing people to go into fight or flight mode. Unfortunately, neither fight or flight is usually an appropriate response in our modern society, so there is often no useful outlet to return our bodies to homeostasis.

Excessive stress in turn can actually increase your physical age by causing your chromosomes to degenerate. For evidence, go here.

Excessive stress is also associated with high blood pressure, the development of varicose veins, and an increased risk of heart disease.

Excessive stress may also result in increased levels of visceral fat (aka "belly fat") which in turn is linked to increased risk of cardiovascular disease, insulin resistance, and diabetes.

Excessive stress may increase the likelihood of developing cancer. See this Scientific American article on that point.

Excessive stress may also impair working memory which is needed to reason, comprehend, and learn. It may also impair spatial memory.

The bottom-line is that the old adage that "stick and stones may break my bones but words will never hurt me" is simply false. It is understandable that people would want to think that this is true, because the negative physical health effects of the stress we inflict on others or that is inflicted upon us is not immediately obvious. But over time, the effects of incivility can and will add up and even possibly result in negative health outcomes.

Tuesday, March 22, 2011

Why Economics 101 Incentives for Controlling Healthcare Costs Don't Work

Over at Baseline Scenario, James Kwak insightfully discusses Atul Guwande's findings in a recently published New Yorker article and explains why health care incentives don't work. Basically, the insight is that since only a few patients consume a hugely disproportionate amount of healthcare dollars for severe conditions, that providing incentives to cut down visit the doctor visits (to stop the so-called "over-consumption" of medical care) actually increased medical costs in a plan that implemented this strategy. As James Kwak explains:
One refrain you heard incessantly during the health care reform debate was that we have high health care costs because of overconsumption and we have overconsumption because people don’t bear a high enough share of their marginal health care costs, so the solution is to increase copays and deductibles. This is what Economics 101 would tell you: people respond to incentives. But Gawande discussed one large company that tried this year after year, but only saw their costs going up. The problem was that while most members responded to the higher copays and kept their costs more or less steady, the 5 percent of members who generated 60 percent of the costs behaved differently. Or, rather, they also reduced consumption (of doctor’s visits and prescription medications), but as a result they often had catastrophic outcomes. These were people with heart disease on cholesterol-lowering medications, and when they went off their medications they ended up in the hospital with heart attacks and then with congestive heart failure.
Read the whole thing.

A Proposal for Cooperation Among Bleeding-Heart Libertarians and Liberals.

Today, over at the Bleeding-Heart Libertarian blog, an extremely interesting and provocative post by Gary Chartier got me thinking about how libertarians of the bleeding-heart variety and liberals might successfully work together.

As Chartier argues, it is undoubtedly true that much of the power of the state is used to benefit those in privileged positions of power. As an example, think about the Copyright Term Extension Act which extended copyright protection on all existing works for 20 years to benefit Disney (protection for Mickey Mouse was about to expire) and other holders of very old copyrights that were about to expire... There is no way that one can argue with a straight face that increasing the length of copyright protection for existing works provides much incentive for the creation of new works, especially given that copyright before the extension already extended significantly beyond the life the creator before the act. (And it should be remembered that the purpose of giving the Congress power to grant copyright was "to promote the progress of science and useful arts" by providing adequate incentives to creators. In contrast, the purpose was not to enrich copyright holders at the expense of everyone else, although that seems to be the effect and purpose of the act.) So, this is just one example of a law, among many, meant to benefit a narrow, powerful, and privileged interest at the expense of freedom for everyone else.

Here is the problem I have though. While not denying that danger of "capture" or the concerns brought up most prominently in the public choice literature, I believe it is possible for the state to have an extremely positive role in advancing everyone's shared interests (i.e. basic science research, the funding of universities, the provision of universal education) and also in advancing the interests of the disadvantaged. Or to put it another way, just because we should try to stop the state from doing bad things, that does not mean we should try to use the state to do good things. I think that one area where liberals and bleeding-heart libertarians are likely to partially part ways is that bleeding-heart libertarians are much more likely to be extremely skeptical of even the "good" functions of the state. Nonetheless, I do think that caution and concern about the possibility of state power being corrupted or having unintended (as well intended) consequences should, in theory, be something that liberals and bleeding-heart libertarians can agree on.

Or to put it another way, maybe bleeding-heart libertarians might productively think about how to counteract "capture" in a perhaps second-best world where the state is taking on more of a role that they think is perfectly optimal. And maybe liberals could think about how market mechanisms might be taken advantage of in areas that have traditionally been used by the state, even if this is not their first-best scenario. For example, maybe liberals should think about whether school vouchers that could be used at private schools might be a better alternative to more centralized control, whether by local school boards or state and federal governments, given the difficulties that schools that face too many mandates may have innovating. And maybe bleeding-heart libertarians could compromise and consider whether the amount of vouchers and total education spending could be increased to address concerns that liberals may have about access to high quality schools for poorer students, and also whether regulations that prevent schools that accept vouchers from denying access to "undesirable" students might be necessary. Basically, if a bleeding-heart libertarians prefers less education spending, and a liberal is worried that inadequate resources devoted to education will perpetuate socioeconomic disadvantage, perhaps there is room for compromise that will make everyone better off.

While it is true that state power is often twisted to give advantages to those (like Disney in my example) who do not need any such special solicitation, the perhaps much more difficult question is how to reform state power so that it can play a more productive role, given the reality that no one is likely to get their way all of the time. In my school voucher example, bleeding-heart libertarians would be expected to allow overall education spending to go up, even though they may be very skeptical about the size of government. Liberals would be expected to trust parents to choose good schools for their children, even if they are skeptical that all parents would exercise this power responsibly and would no doubt continue to worry about students who fell through the cracks as a result. Also, if vouchers are in the hands of parents, wouldn't this partially address public choice and capture concerns? Sure, private schools would have an incentive to lobby for greater funding for their own benefit. But, since that money would ultimately go through the hands of parents who would be empowered to change schools, it would be hard for private schools to direct increased funding to their own pockets without providing increased services (which would mean increased expenses, thus making lobbying somewhat less desirable).

Just a thought. Maybe there is more room for an alliance between liberals and certain libertarians than I have previously considered.

Thursday, March 17, 2011

David Frum on Means Testing Medicare

David Frum has a really excellent article on the issue of reforming Medicare. It is worth thinking about.

The Return of Debtors Prison

For those wondering how things have gone wrong in this country, this article in the Wall Street Journal should be some food for thought.

What happens to the financial industry when they lose countless billions of dollars and we are worried that they cannot pay their debts? They get bailed out. What happens to ordinary people who do not pay their debts to the financial industry? Well, they just might end up in jail.

We live in interesting times.

Wednesday, March 16, 2011

Forget Watson, What About Poker Bots

Computers just keep getting more and more intelligent with advances in artificial intelligence. First, there was Deep Blue, which beat world champions at chess. Now there is Watson, which can take a complex game requiring natural language processing (Jeopardy) and beat most humans.

But what about poker? Poker is more complicated, because a good part of it involves reading people and determining how aggressively they are playing and also reading when the same person shifts from a more aggressive to less aggressive mode of play. So far, poker playing computers have not done so well, but it turns out that apparently some are starting to learn, as illustrated by this New York Times article.

Tuesday, February 22, 2011

The Ph.D. versus J.D. Credential For Law Professors

Stephen Bainbridge apparently thinks that law schools would do a better job of teaching people to "think like a lawyer" if more of the faculty only had J.D. degrees and did not have Ph.D. credentials.

First, in response to Bainbridge's argument that a few years of "top law firm" experience is to be highly valued, I don't think the theory that a "top law firm" is the best place to get experience doing "real law" is correct. At least not for a longer period of time than the typical person who aspires to be a legal academic will probably work there for, since one does not usually get really great experience at a big law firm until they work their way up the ranks. One would probably get better experience at a smaller law firm where one would deal with cases more holistically, rather than specializing so narrowly in a small slice of a case, typically with no or minimal client contact, as starting associates at large law firms tend to do.

I would further argue, and here I agree with Richard Posner, that the concept of "thinking like a lawyer" isn't really much different than "thinking logically about law" with the recognition that judges are not always logical and sometimes there is quite a bit of logical existent ambiguity that results in uncertain answers to legal questions. (And also, that sometimes ideology and culture play a much more powerful role than mere logic in judicial decisions.) That is, the whole idea that "thinking like a lawyer" is somehow radically different than other ways of thinking is simply fallacious.

Basically, "thinking like a lawyer" is not rocket science. Far from it. That academics from other disciplines would be incapable of providing as good insight or even superior insight into how to "think like a lawyer" is simply incorrect. Because the key to learning to "think like a lawyer" is to learn to think. Period. And also, the goal should not merely be to learn to think like "a lawyer" since many lawyers are average thinkers, but instead to improve one's thinking significantly above the mean. To do that, it is appropriate to consider the ways of thinking that arise from a variety of academic disciplines.

I think the last thing that law students need is more faculty teaching them to "think like lawyers." What law students need more are two things:

(1) Lots of feedback. As countless studies have shown, feedback is the key to learning. Indeed, often students learn as much from taking a test as they do from studying for a test. Yet in the typical law school class, students are evaluated solely on their performance in a single written final exam rather than being given homework and tests other than the final exam which would give them continual and necessary feedback as they proceed through the semester. A system with such limited feedback is simply an awful system for learning, but it seems to persist as a tradition at law schools nonetheless.

(2) Law schools should strive to provide as many clinical opportunities as possible, and make participation mandatory. If one wants to really learn to think like a real lawyer, then one must do, and not merely read. Basically, one learns what sorts of arguments work well and which ones do not work well from real world experience. One learns that knowing the judge and their peculiarities is actually very important, myths which suggest that there is a universal way to "think like a lawyer" to the contrary notwithstanding. Basically, once again, this comes down to experience, which provides feedback.

So, I would suggest that Bainbridge's thinking about what would make for a better law school is actually quite flawed. A Ph.D. will and should continue to be a very welcome credential, one that adds a lot. Basically, law has a lot to learn from those who get a Ph.D. degrees in anthropology, sociology, statistics, philosophy, economics, or history. Especially since law school itself is not especially consistent and rigorous when compared to the typical Ph.D. program, where graduate students are (or at least should be) closely mentored. For example, a statistician with a Ph.D. has a lot more to offer that the typical generic J.D. with "all the right credentials" on understanding the empirical consequences of legal decisions. A sociologist (who is also likely to have a strong statistical background) has more or at least different insight into potential social consequences of legal decisions than the typical generic J.D.. A real historian has a lot to teach the typical generic J.D. about how to do "real history" instead of "law office history." I could go on.

Having a law faculty with a bunch of Ph.D.s in diverse fields will in fact do much more to enrich both the educational experience of students and the field of law itself than having a faculty dominated by a bunch of Yale Law, Harvard Law, and Stanford Law graduates with nothing more than a vanilla J.D. degree. I say this as an individual who only has a vanilla J.D. from one of the above schools myself.