Three Ways of Explaining the Rise of “Law and Economics,” and Also, One Way (Guest Post by Sara Mayeux)

[The following is a guest post by Sara Mayeux, a Sharswood Fellow at the University of Pennsylvania Law School and a PhD candidate in history at Stanford. Her research focuses on the history of American criminal law and institutions. She can be found on Twitter at @saramayeux.]

We Are All Law and Economics Now

The “law and economics” branch of legal scholarship has generated some very complicated debates. At root, though, law and economics stems from a simple seed: the idea that concepts from economics can be usefully applied to legal questions, whether to explain why the law is the way it is or to develop normative arguments for how the law should be. Today it can be hard to understand why applying economics to law could be controversial, both because of the cultural prominence of economics generally and because it has become so commonplace to talk about law in economic terms: to question how regulations affect the efficiency of a particular market, for instance, or to accuse some statutory regime of enacting perverse incentives, or to suggest that some policy has been pushed past the point of diminishing returns. Though law and economics is often taxonomized as conservative, variants of law and economics can be found across the political spectrum: consider, e.g., Cass Sunstein’s use of behavioral economics to advocate for policies that give citizens a paternalistic “nudge.”[1]

And yet, this particular economic mode of thinking and talking about the law only dates to about 1960, and only became widely influential in the 1970s and ’80s. That is not, of course, to suggest that no one had ever thought about law in terms of efficiency or incentives before 1960. But as Daniel Rodgers puts it in Age of Fracture, traditionally, “lawyers had not always known much about economics”; they more readily invoked “narratives of justice, property, rights, and blame”—that is, the language of morality, ethics, philosophy (56). Few legal scholars considered economics relevant to their work outside of a few niche specialties like antitrust law. Today, in contrast, it is not uncommon to encounter demand curves and mathematical models in law review articles. Every JD program includes some exposure to the major insights of law and economics scholarship, and not just in specialized seminars, but in the core required classes. Elite law schools are replete with economics-oriented faculty, programs, and centers. Lawyers and judges are comfortable sprinkling talk of markets (if only superficially, and whatever an actual economist might make of this talk) alongside, around, and on top of the older legal language of justice and rights.

Between the 1960s and 2014, then, what changed? At the basic level of events and chronology, it is not hard to trace the rise of law and economics. Scholars typically identify the University of Chicago as the relevant holy land, Ronald Coase’s 1960 article, “The Problem of Social Cost,” as the gospel of modern law and economics, and Richard Posner’s 1973 book Economic Analysis of Law, which synthesized and riffed on the burgeoning literature for a wide audience, as its letters from Paul.[2] But to name the key texts and figures in a school of thought is one thing; it’s another to explain how and why those texts and figures gained influence—why anyone read them, much less took them seriously.

The conquest of legal academia by law and economics thus offers a case study in the spread of ideas more generally. Most historians would agree that ideas don’t become widely accepted purely on the basis of their merit or “truth value” in some platonic sense. But how, then, do ideas gain power? Why does an idea take flight at the precise historical moment that it does, not a moment earlier or later? And why do some ideas fail to gain traction, no matter how convincing they seem to their adherents? Of course, such inquiries are familiar within intellectual history, the history of science, and related fields. But in this post, my aim is to provide a few examples of how scholars have asked and answered such questions as a route to understanding legal change, and to invite discussion about ways in which this legal scholarship might inform and/or be informed by debates within intellectual history more generally.

Three Ways of Looking at Law and Economics 

So, how did law and economics go from an oddball preoccupation of a few Chicago professors to one of the dominant intellectual frameworks for thinking and talking about law? Here are three recent accounts, each emphasizing a different causal mechanism: the two chapters on law and economics in Steven Teles’s book The Rise of the Conservative Legal Movement; the discussion of law and economics in Rodgers’s Age of Fracture; and Brad Snyder’s recent article “The Former Clerks Who Nearly Killed Judicial Restraint.”

In The Rise of the Conservative Legal Movement, Steven Teles reconstructs two decades of committee meetings and grant applications into a sort of Bildungsroman in which law and economics comes into its own through chance encounters with generous patrons and gains the wisdom over time to work around obstacles. As Teles notes, law and economics is not inherently conservative and indeed, “many of the field’s most prestigious practitioners are quite liberal” (90). However, the crucial early funding for law and economics programs came from conservative foundations, who “saw in law and economics a powerful critique of state intervention in the economy, and a device for gaining a foothold in the world of elite law schools” (90).

Like most accounts of law and economics, Teles’s narrative begins with the University of Chicago Law School’s strong core of economics-oriented faculty going back to the 1930s and then proceeds to Richard Posner’s tenure at Chicago beginning in 1969. Teles quotes the legal scholar Douglas Baird, who explains how Posner’s prolific and eclectic output diffused law and economics to just about every doctrinal subfield: “In the early seventies, people like Posner would come in and spend six weeks studying family law, and they’d write a couple of articles explaining why everything everyone was saying in family law was 100 percent wrong. And then the replies would be, ‘No, we were only 80 percent wrong.’ And Posner never got things exactly right, but he always turned everything upside down, and people talked about law differently” (Douglas Baird quoted in Teles, 99-100).

But the real star of Teles’s account is Henry Manne, “the movement’s first organization entrepreneur” (101). Across stints at George Washington University, the University of Rochester, the University of Miami, and Emory, and ultimately as dean of the George Mason University Law School, Manne proved a tireless organizer who, through trial and error, became adept at securing funding from conservative and libertarian patrons such as the Olin Foundation and the Liberty Fund. At Rochester, Manne hosted summer economics seminars for law professors, designed to equip them with microeconomics tools that they could incorporate in their scholarship. In 1973, he turned down an offer at Yale and instead moved to Miami, where he could have free rein to start a Law and Economics Center and do whatever he wanted with it. There, Manne continued to host gatherings of law professors and also started an annual institute for federal judges, giving them a free trip to a luxury South Florida resort in exchange for sitting through two weeks of economics seminars. “At its height, in 1990,” Teles notes, “the Economics Institute for Federal Judges hosted 40 percent of the federal judiciary, including [then-appellate judges] Ruth Bader Ginsburg and Clarence Thomas” (113).

Manne’s programs, Teles concludes, were important not just or even primarily because they equipped lawyers and judges with economics concepts, but because they symbolically “helped erase law and economics’ stigma, since if judges … took the ideas seriously, they could not be crazy and irresponsible” (217). Although Manne’s organizing efforts hit upon several roadblocks due to personality conflicts and, ultimately, a falling out with the Olin Foundation, over the long run, he proved remarkably successful at promoting and institutionalizing law and economics within the legal academy. Indeed, Teles suggests that, without Manne’s unique entrepreneurial talents, “it is far from certain that anyone else would have built the movement’s organizational infrastructure” (133).

In contrast to Teles’s emphasis on particular personalities and institutions, Daniel Rodgers paints law and economics as one detail in a larger panorama. Law, in his account, is one of many ships on the sea of the 1980s, all buffeted in the same direction by the same storm: “the chaotic economic turmoil of the 1970s” (44). In the chapter of Age of Fracture entitled “The Rediscovery of the Market,” Rodgers describes the 1980s as a moment of widespread cultural “enchantment” with the word “market” and all that it represented (41), borne of a collective longing to understand and, perhaps, control the turbulent economic forces that were remaking America in so many confusing ways. He subsumes law and economics into this larger cultural turn, offering it as just one more discipline-specific example among many: “In the universities, the analytical tools of microeconomics were employed to extend models of utility-maximizing behavior into virtually every quirk and cranny of human life. Lawyers talked knowingly of Pareto optimality and the Coase theorem; philosophers and political theorists debated analytical models of rational choice. In more and more contexts and in answer to a broader and broader range of questions, one heard now that ‘the market decides’” (42).

Finally, Brad Snyder composes a rock-and-roll ballad of generational rebellion, in which law and economics was one of many shiny ’60s alternatives to the stodgy proceduralism of legal scholars past. In “The Former Clerks Who Nearly Killed Judicial Restraint,” Snyder situates law and economics as one of several influential frameworks developed by the generation of Supreme Court law clerks, including Richard Posner, who embarked upon careers as law professors in the 1960s and early ‘70s. This generation had attended law school in the 1950s and early ’60s, when the dominant judicial philosophy being theorized and taught by elite legal scholars was legal process theory. Invoking “neutral principles” and “passive virtues,” the process theorists argued that courts should not presume to be supreme over the other branches of government; that judges should should recognize the limitations on their legitimacy and institutional capacity as compared to more democratically accountable officials; and that, when they did act, courts should offer reasoned explanations for their actions framed in terms of widely applicable principles, not particular contexts or outcomes.

By the early 1970s the ground had shifted underneath legal process theory. Supreme Court justice Felix Frankfurter, a major influence on the process school, retired in 1962; Alexander Bickel died in 1974 at just 49, cutting short the career of one of the most important process theorists; and in between, “Yale and Harvard law students”—and, in various ways, their young professors—“rejected the emphasis on fair process, reasoned elaboration, neutral principles, and institutional competence” in favor of more openly results-oriented approaches to judging, whether the desired result was promoting efficient markets, protecting individual rights, dismantling racist structures, or whatever else (2134). Snyder describes this generational revolt as “an academic popularity contest in which legal process theory was no longer trendy and hip. The young cool kids in the academy … adopted new ideas and transformed legal theory” (2132). These new “hip” ideas spanned the political spectrum; Snyder identifies five categories of anti-process-theory rebels, including law and economics (you’ll have to read the article to learn about the other four, whom he labels rights protectors, post-realists, originalists, and holdouts).

Not surprisingly, Snyder’s account of law and economics emphasizes Richard Posner. But Snyder begins Posner’s intellectual biography not with his arrival in 1969 as a professor at Chicago, but earlier, in 1961, when the law student Posner was named editor of the Harvard Law Review. Described by Snyder as “the most cited legal scholar of all time” (2145 n.115), Posner is known today for his dizzying output of scholarly works, trade books, popular press op-eds, blog posts, and, since 1981, judicial opinions for the Seventh Circuit Court of Appeals. In the legal firmament Posner is usually astronomized as a particularly idiosyncratic star. Snyder, interestingly, refigures Posner as simply one more man of his time. In this account, in adopting law and economics, Posner was just doing what all of the top legal thinkers about his age were doing: rejecting the staid framework of process theory that they had learned in law school, with its frustrating insistence on judicial restraint and its naive faith in “neutral principles,” and instead “gravitat[ing] to new and exciting theories” (2154)—theories that envisioned a more muscular, pragmatic, results-oriented role for judges, whether because such a judicial approach was normatively desirable or, on the more realist (or cynical) accounts of judging, because it was simply inevitable.

Or, One Way of Looking at Law and Economics

We might generalize these three accounts of law and economics into three modes of explaining how an idea, or set of ideas, gains influence: in terms of evangelists and resources, in terms of cultural zeitgeists, and in terms of generational turnover. (It so happens that my three examples come from, respectively, a political scientist, a historian, and a law professor, although I will leave it to others to discern any deep disciplinary meaning to this fact, which may not amount to much, as I have certainly seen historians make variants of all three types of arguments.) I don’t mean to suggest that these three explanations represent the universe of possible explanations either of law and economics or of any other intellectual phenomenon. Nor do I mean to suggest that they’re mutually exclusive. The task of historical synthesis, it seems to me, is rarely the task of explaining which explanations are wrong, and more often the task of figuring out how different explanations, each right in their own way, can all be right together. Citing Teles, Rodgers gestures at the role of “new conservative money” in the movement’s success but argues that “the 1970s boom in law and economics cannot be explained only by its external funders” (59, my emphasis). Teles, of course, would surely agree.

So, can these three explanations, to invoke a ’60s lyric, come together? There are some obvious similarities; both Snyder and Rodgers view law and economics not as a narrow partisan project but as part of some larger intellectual development transcending any particular politics. There are also some obvious tensions. Given the emphasis that Teles places upon charismatic and well-connected individuals, one might read him as suggesting that, without these particular entrepreneurs, law and economics would never have gotten as far as it did. Conversely, Rodgers might be read to suggest that the tradewinds of market-oriented thinking were so strong that they would have somehow buffeted legal academia to law and economics eventually, regardless of whether or not any particular institution got funding or any particular seminar did or did not occur.

Optimist that I am, if only when it comes to wrapping up blog posts, I don’t think the tensions are insurmountable. The cleanest way I can see to synthesize these three accounts would go something like this: Snyder’s tale of generational rebellion explains the motivation that drove leading figures like Posner to want to chart a new path in legal thought away from legal process theory. Rodgers’s big-picture intellectual context explains why this particular new path was among the routes visible to them at the moment they began looking (and perhaps why it was among the more attractive such paths). And finally, Teles’s nuts-and-bolts account explains why so many others followed down the path, once it had been marked—it reconstructs the vectors of institutional support and funding that brought these ideas into contact with judges, lawyers, legal scholars, and other interested observers of law who might not have had any particular generational motivation to worry about process theory, and who might not have had any particularly systematic exposure to the welter of market concepts that Rodgers discusses, but who, once they encountered law and economics in its various vernacular iterations, decided it sounded plausible enough to them (and/or that it served other interests they had) that they became converts.

Now maybe that’s not right because there’s some deep flaw with one or more of these accounts that I’m overlooking, or because it’s not the best calibration among the three accounts; and of course it’s too schematic, insofar as it implies that phenomena such as motivation, mindsets, and institutional support operate independently and on entirely different levels from one another. But it strikes me as one plausible enough way to explain the rise of law and economics.

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[1] To be sure, there remain particular realms of law and policy where some commentators find the application of economics inappropriate or offensive, such as the sale of human body parts. And some commentators are more or less open to, or inclined to make, economic arguments than others. But few mainstream legal thinkers today would deny that economics can sometimes be a useful lens for analyzing law and policy.

[2] Although in fairness, Coase himself didn’t see it quite this way; he once said that he was the “Saint Paul to Aaron Director’s Christ” (quoted in Teles, 96). Aaron Director was the celebrated Chicago professor who founded the Journal of Law and Economics in 1958 (and incidentally, Milton Friedman’s brother-in-law).