Friday, May 29, 2020

Of Economics, Legal Reasoning, and Religion: Conservatives' Opportunistic Escape Hatches

by Neil H. Buchanan

I have at various times thought that there was hope that the people with whom I disagree on matters of public policy and legal issues were at least making some kind of internal sense.  That is, I thought that perhaps it was possible to follow their logic and apply it to new questions, and even if the answers to which their logic might lead were "not conservative," at least the other side would have to admit that their own approach to answering such questions had led us there.  Fair is fair.

I miss those days of optimistic youth.  As Professor Dorf and I have both announced this week (here and here, respectively), we recently wrote a law review article, "A Tale of Two Formalisms: How Law and Economics Mirrors Originalism and Textualism," in which we note not only that conservatives are playing rigged games in both economic analysis and legal interpretation but that the way in which they have rigged both games is surprisingly similar.  We make further points based on our observations, but that similarity is the key that motivated us to write the paper in the first place.

Professor Dorf's column on Tuesday did a nice job of summarizing our article, whereas my column yesterday explored whether anything remains of the concept of economic efficiency once we understand that its theoretical basis is incoherent.  Here, I will briefly discuss a few examples of times when it almost seems as if taking conservatives' preferred argumentative structures seriously might lead somewhere surprising (and useful), only to find that the story always bends back on itself whenever the preferred right-wing outcome is threatened.

After a quick summary of the two halves of our argument, I will move on to those illustrative examples.

Frequent readers of Dorf on Law, and readers with legal training in general, are likely to be very familiar with the critique of conservatives' preferred approaches to legal interpretation.  On constitutional questions, legal conservatives loudly claim to be rejecting "living constitutionalism" -- which, they claim, is too open ended and simply allows unelected judges to impose their values on the country -- in favor of the purportedly neutral, disciplined approach of originalism.  In interpreting legal texts, they claim to be constrained by the limits of the words themselves.

Although Professor Dorf and frequent DoL contributor Professor Eric Segall disagree on some important details, they both reject the originalist and textualist (O&T) approach on what is essentially legal realist grounds.  The contortions to which right-wing legal scholars and judges have gone to save originalism from absurdity have, among other things, made a mockery of any claim that O&T is anything other than a method by which conservatives impose their preferred conclusions on every legal question, untethered to the supposedly objective limitations that their theories are said to provide.

In economics and in Law & Economics (L&E), as I summarized yesterday, the pretense of objectivity is based on the idea that there is a neutral, scientific way to measure efficiency.  Conservatives then claim that efficiency is reduced by virtually every liberal policy measure, but they insist that this is not merely a matter of their expressing their subjective policy preferences but an objective statement of reality.  "Policy X is inefficient, like it or not."

The problem, as we explain in the article, is that there is no coherent way to specify what is efficient, because the economic interactions that would supposedly lead to objectively efficient outcomes are contingent on a zillion different foundational matters based in law.  Every legal rule in tort, contract, property, and even criminal law will form the baseline on which economic transactions are made.  For example, two otherwise identical countries, one of which provides a patent system whereas the other does not, will reach very different "efficient" outcomes, and neither of them can be said to use the "correct" baseline in an objective sense.

This means, as we argue in our article, that every specification of legal rules (which ultimately determine economic endowments and other relevant matters) can lead to an outcome that can be called efficient.  And under each baseline, outcomes under other baselines are by construction inefficient.  That is what we mean when we say that efficiency is an incoherent concept.

Or, to put it as simply as possible, there is no doubt that one can specify a baseline and then describe the efficient outcome that will result from it, but that outcome is entirely baseline dependent.  One of my colleagues pointed out correctly that "I can call something efficient, once I've specified the baseline," to which I responded, "Yes, but I can specify any other number of baselines with different 'efficient' results."

By analogy, I recall years ago when an African-American public figure called someone a racist, and when the political heat from that (accurate) claim became too much, he walked it back by defining racism so broadly that it meant nothing.  (If I recall correctly, he said that he meant racist in the sense that "race was something that a person thinks about.")  At that point, he could say that he was not wrong to call that other person a racist.  But if everyone is a racist under some definition or another, then what point is there in even using the word?

Because everything can be called efficient under one or another set of assumptions, but none of them are efficient in any broader sense beyond their specific baselines, what does it mean to say that they are efficient?  That is why I have said many times that it is not exactly wrong to call something efficient but rather that everything is both efficient and inefficient at all times.  As we describe in Part V of our article, liberals could walk around saying that "our policy proposals are all efficient, whereas conservatives' are inefficient," and we would not be wrong.  But we would not be right in any meaningful sense, either, so we do not do so.

In any event, a lot of the frustration that liberals feel when trying to engage on conservatives' preferred terrain is that the ground constantly shifts under our feet.  But when that ground shifts, it is not necessarily the case that conservatives have moved to something completely indefensible on their own terms; it is just that the new argument is utterly opportunistic.

Consider the Second Amendment.  Prior to the current century, the courts and legal scholars took the words of that amendment to mean that the right to keep and bear arms was tied to the Revolutionary era's reliance on militias.  Why did people think so?  Because the words of the amendment clearly said so.

When conservatives (joined, surprisingly, by a few leading liberal scholars) suddenly decided that the militia language was actually a non-binding preamble, one could be forgiven for thinking that maybe those conservatives were not as bound to textual fealty or precedent as they had long claimed.  Moreover, as the Justice Stevens wrote in his Heller dissent, even the historical reading using originalist tools would lead to a liberal outcome in the case.

My point is not that "both sides have a point," because Stevens clearly had the better of the argument from every perspective.  Instead, I am saying that this is a leading area in which one might have naively looked at O&T adherents' professed approach and conclude that Heller would be a trivially easy case.  Motivated reasoning, however, allowed those people to, ahem, adapt their approach to look like O&T yet conveniently reach the preferred political outcome.

As I was making my transition from economics into law, I frequently experienced situations in which I thought, "Oh, well here is where even conservative economics-oriented people would reach a liberal outcome."  For example, by using straightforward economic analysis, one would readily conclude that punitive damages are completely appropriate and that class actions are efficient.  But no, conservatives found ways to claim that punitives are inefficient and that class actions are an abomination.  Again, I am not saying that neither side is right and neither side is wrong as a matter of policy.  I am saying that the surprise comes from believing that L&E people were willing to go where the logic would lead them rather than adjusting their logic as needed.

I also once realized that completely standard economic analysis would lead to the conclusion that the case-or-controversy requirement is inefficient.  Although I never wrote the paper, I even came up with a title: "On the Economic Efficiency of 'Legislating from the Bench.'"  The idea was that economic actors would strongly prefer courts to issue advisory opinions, to answer questions that are moot or unripe, not to worry about standing, and so on.  Certainly, businesses would prefer bright-line decisions that are extremely broad rather than the slow accretion of just-enough-to-decide rulings.

Even though I never wrote the paper, the point remains that, as far as I am aware, there is no subset of the L&E movement dedicated to convincing the other members of the Federalist Society to embrace judicial activism of the sort that I am describing here.  They are all, of course, perfectly happy to embrace blatant activism of other sorts, including Justice Scalia's clumsy attempts to put the word "race" into the text of the Equal Protection Clause.  But the economic efficiency of having courts quickly and broadly clarify the law is not, as far as I know, their concern.  Better to give businesses shields against liability, apparently.

I have, in fact, had this same sense of being conned whenever I have tried to engage with conservative religious arguments.  Although the Old Testament certainly describes and even endorses in various ways the vile institution of slavery, my understanding of Christianity as I was growing up made it abundantly clear that all people are God's children and that slavery was not Christian.  Yet American churches, including the Presbyterian Church in which my father was a minister, had split during the Civil War when southern Christians suddenly decided that slavery was completely consistent with -- if not required by -- scripture.

To emphasize, this is yet another example in which I am not saying that both sides have a point.  I am saying, however, that it is yet another situation in which a person who says, "Oh, well surely conservatives will follow their own logic" is in for a rude awakening.  "The logic simply requires the outcome" sounds good until conservatives need to tweak the logic to get to their preferred outcome.

It is almost as if they are guilty of what they accuse liberals of doing.  Psychological projection is a powerful thing.

6 comments:

Steve Davis said...

To claim that you have demonstrated that "nothing remains" of economic efficiency is an extraordinary claim. It would come as a surprise to people like Calabresi and Posner and the hundreds of other legal scholars practicing in the field of law and economics, as well as to almost all economists, and to the millions of business owners -- and I would contend all sane, conscious human beings, including you and Mike (I regard the two of you as among the saner people I know)-- who make efficiency calculations every single day in deciding how to spend their time and money.

To make such an extraordinary claim requires, as they say, extraordinary proof. I think your analysis of the problems of economic efficiency as a value is interesting and illuminating, but that you don't prove what you claim to prove. A few semi-random thoughts why:

1. Incoherence arguments are inherently weak arguments. Why? Because any reasonably educated person can show any political, moral, or legal value to be incoherent -- to be inherently ambiguous, internally contradictory, based on empirically questionable assumptions, fuzzy at the margins, and indeterminate of outcomes. Take your pick: liberty, equality, democracy, justice as fairness, Marxism, feminism, etc. Everything is incoherent. But if everything is incoherent then nothing is incoherent. You do not advance the ball toward better lawmaking merely by showing something is incoherent.

2. A more persuasive approach would be to demonstrate that there are alternative values that do a better job of adjudicating cases, or devising legal rules, or making decisions in other contexts (Room 204, SUVs, intellectual property terms, etc.), than efficiency. You don't do this.

3. I think your "baseline problem" analysis is really interesting and illuminating, but you exaggerate its impact. It's just not true that in the real world baselines are arbitrary and that we have no idea how to make efficiency decisions because baselines can be moved around. Tell that to a business owner who must make these decisions every day. Consider the Room 204 issue. Yes, it's true that we don't have all of the information available to determine what is the perfectly efficient location for the refreshments. But so what? A. We don't need perfect information to make approximate efficiency decisions. People in fact do this every day, and that contradicts your claim that it can't be done. B. Theoretically, we could construct tests to find out which locations are more efficient than others, and those tests might yield real data. Efficiency, unlike some other value systems, can be used to help set up such a test. And C. Your objection is non-unique to efficiency: all solution models will be indeterminate in exactly the same way because we will always lack perfect information. We do the best we can with the tools we have. That's the best we can ever do. You don't demonstrate that efficiency does a worse job than other models. I suspect not only that it does not but that in fact it does a much better job than many alternatives.

So, anyway, I think the article is interesting and valuable -- especially the analysis of case outcomes using both L&E and O&T (I agree that conservatives make silly claims about the neutrality of O&T, and to some extent regarding L&E, although I quarrel with your description of L&E as formalism, which I think it manifestly is not)-- but the claims you make for it are a tad extravagant.

Michael C. Dorf said...

Steve: I think that all three of your comments fundamentally misconceive what our paper does in a way that could be misleading to readers of the blog who haven't read the paper. We'll try to clarify areas of the paper that have given you the misimpressions you have but meanwhile, I'll respond to your points briefly:

A) In your point 2, you say that we would do better "to demonstrate that there are alternative values that do a better job of adjudicating cases." Yet our core point w/r/t efficiency is that it does not purport to be a value at all. Rather, it purports to be a statement of fact. We (try to) say throughout the paper that we would welcome economically informed analysis that identified the normative grounds for its assumptions and justified them.

A similar observation applies to what you say in your point 1. Here is your list: "liberty, equality, democracy, justice as fairness, Marxism, feminism." The first three are plainly values, to which my previous paragraph applies. Justice as fairness, Marxism, and feminism are all ideologies. Marxism as attempted anywhere is objectionable on moral and practical grounds (as we discuss in the paper), so whether it is also incoherent is of not much concern to me. Feminism is a telling example. Although there are obviously many versions of feminism, one major strand does to patriarchy what we aim to do to neoclassical economics: Feminists aim to show that institutions defended as natural and objective have embedded within them a particular male perspective. Feminism is thus quite up front about normatively. Interestingly, justice as fairness as Rawls described it in A Theory of Justice was effectively critiqued on the ground that people behind the veil of ignorance were not, as Rawls claimed, abstracted from their circumstances, but reflective of 20th century Western liberal values. Rawls accordingly modified his views to make clear that his claims were much more contingent in Political Liberalism. Would that the leading figures in Law&Econ do the same.

B) Neil's example of Room 204 was meant to show that even in everyday life there are assumptions embedded in individual decisions about how to act, but the core of our critique aims at efficiency as a regulatory standard. Consider SUVs, which figure prominently in our paper. We say that the number of SUVs that will be produced in an "efficient" society depends crucially on law, in particular on a glitch in the CAFE standards applicable to cars as opposed to trucks. It also depends on all sorts of other legal baselines. Suppose the government raises the gasoline tax by $1/gallon. A used-car dealer who learns of this fact will sensibly stock more small sedans and fewer SUVs, because of supply and demand. Nothing we say in the Article denies that, but the used-car dealer is not making a decision that is "efficient" in the sense in which we are critiquing the use of that term. By contrast, if a legislator were to oppose the gasoline tax increase on the ground that it will "distort" the market in a way that is "inefficient," the legislator is using efficiency in the way we call incoherent. The legislator is assuming that the current tax level or even zero taxes on SUVs is a natural baseline, when there is no such thing as a natural baseline. In a state of nature, there are no SUVs.

Frank Willa said...

Thank you and Professor Dorf for these posts. It seems to me some of the comments 'just can't let go' of the efficiency thing...and, as you noted yesterday,...(to) fall back on the narrower claim...

So, I googled the etymology of efficient and found among the results:

'late 14c., "making, producing immediate effect, active, effective," from Old French efficient and directly from Latin efficientem (nominative efficiens) "effective, efficient, producing, active," present participle of efficere "work out, accomplish," from assimilated form of ex "out" (see ex-) + facere "to do" (from' ...
(from 'etymonline' site)
That is it is from late Middle English...and it is doing, producing, or accomplishing.

When did 'efficient' take on the value judgment/subjective aspect of 'a doing' that somehow makes it better than 'doing another thing'? I would suspect it was when someone wanted an outcome or result that benefited them. Maybe like calling a contract breach 'efficient'...efficient or better for who?(L&E?)...the one that doesn't get the benefit of the bargain, or the one that wants out? So, as you say 'here we are'.

Is it too simplistic to sum up what you have presented in detail- a necessary analysis for a full understanding that meets the objections...which is a baseline judgement of mine- as, to borrow from a well used phrase,...

Efficiency is in the eye of the beholder?

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Nico Banks said...

Adding to Steve Davis's third point:
Often, an L&E theorist's baseline is non-arbitrary because it is descriptive rather than normative. It doesn't attempt to justify its baseline assumptions, but it uses those assumptions because they describe the way the world actually is (as opposed to the way the world should be).