Tag Archives: Law

Require Legal Liability Insurance

The point of liability law is mainly to induce good behavior by having courts threaten to make related people pay cash later if a bad thing happens. The law tries to set who would pay how much to whom after what events in order to induce such people to take good care, so as to minimize the sum of the costs of bad things happening, care taken to avoid them, and the legal process itself.

One thing that limits the ability of law to make these choices well is the fact that most people have limited amounts of the kinds of assets that the legal system is willing to grab to settle a lawsuit. Like cash, stocks, and on. Some people are “judgement proof”, meaning they have none of these things. Most others have some assets, but substantially less than the law might want to make them pay in some situations.

Because most people have limited assets in this sense, those who bring lawsuits typically focus their attention on related parties with “deep pockets”, i.e., those who have far more assets. If such parties have any involvement at all in some bad event, lawsuits focus on blaming them and trying to make them pay.

This focus on deep pockets seems a clear failure of the system. Liability should instead be chosen based on the usual legal criteria of who could have most cheaply prevented the bad event, who could have reasonably foreseen the event in order to target their prevention efforts, and who did or did not take sufficient levels of care given such things.

If people had more assets that they could pay in the event they were held liable for a bad event, the law would have more options. It wouldn’t have to make them pay more, but it could do so if the situation seemed to warrant it.

One kind of solution is to allow the legal system to touch more kinds of assets. For example, in many ancient societies you could be sold into slavery to pay legal debts. Or your larger family clan might be held liable for your actions. While many places today have a homestead exemption that prevents some kinds of creditors from taking a primary home to cover debts, the law could have fewer such exceptions. However, many people feel uncomfortable with such approaches.

A different solution, one that should induce less of this discomfort, is to require people to buy general legal liability insurance. In many places today all drivers are required to buy insurance for auto accident liability up to stated amounts. The idea here is to just generalize that to all legal liability. We’d pick some minimum amount everyone should be ready to pay, say one million dollars. Then everyone would have to find an insurance company willing to cover them for that amount. If they were held liable by a court, they’d personally pay what they could out of their personal assets, and then the insurance firm would pay the rest.

Insurance firms would of course charge you different premiums, based on their estimates of how many assets you have and your likelihood of being held liable for bad events. To convince them you are a low risk, you could show them many things about yourself, and even let them continually monitor you in many ways.

Of course there is a cost to the insurance process, and there would remain some hidden info and actions which would produce some transfers between people who look alike to insurance firms, and make most people not quite as careful as they ideally would. But surely this should move care in the right direction, compared to a system where people get sued less because they don’t have enough money to pay.

Well yes, it is possible that the whole legal system is just making everyone pay too much across the board for all bad events. In which case making people able to pay more just makes things worse. But if we think this is the situation we should just cut back on the legal system, starting by making it harder to sue parties with deep pockets. Maybe we should limit all parties to a max liability of a few tens of thousands of dollars.

But if you don’t want to cut back on the liability of those with deep pockets, and if you accept that deep pocket folks aren’t actually as more responsible for bad events, surely not enough to explain how much more often they are sued, then you gotta think it would be good if other people could be held more liable than they are today.

So you should want to require general legal liability insurance. And then we’d all have to pay a bit more, but we’d all have fewer bad events. Which should be worth the trade, if the legal system is close to doing the right thing now with our limited abilities to pay.

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Bowing To Elites

Imagine that that you are a politically savvy forager in a band of size thirty, or a politically savvy farmer near a village of size thousand. You have some big decisions to make, including who to put in various roles, such as son-in-law, co-hunter, employer, renter, cobbler, or healer. Many people may see your choices. How should you decide?

Well first you meet potential candidates in person and see how much you intuitively respect them, get along with them, and can agree on relative status. It isn’t enough for you to have seen their handiwork, you want to make an ally out of these associates, and that won’t work without respect, chemistry, and peace. Second, you see what your closest allies think of candidates. You want to be allies together, so it is best if they also respect and get along with your new allies.

Third, if there is a strong leader in your world, you want to know what that leader thinks. Even if this leader says explicitly that you can do anything you like, they don’t care, if you get any hint whatsoever that they do care, you’ll look closely to infer their preferences. And you’ll avoid doing anything they’d dislike too much, unless your alliance is ready to mount an overt challenge.

Fourth, even if there is no strong leader, there may be a dominant coalition encompassing your band or town. This is a group of people who tend to support each other, get deference from others, and win in conflicts. We call these people “elites.” If your world has elites, you’ll want to treat their shared opinions like those of a strong leader. If elites would gossip disapproval of a choice, maybe you don’t want it.

What if someone sets up objective metrics to rate people in suitability for the roles you are choosing? Say an archery contest for picking hunters, or a cobbler contest to pick cobblers. Or public track records of how often healer patients die, or how long cobbler shoes last. Should you let it be known that such metrics weigh heavily in your choices?

You’ll first want to see what your elites or leader think of these metrics. If they are enthusiastic, then great, use them. And if elites strongly oppose, you’d best only use them when elites can’t see. But what if elites say, “Yeah you could use those metrics, but watch out because they can be misleading and make perverse incentives, and don’t forget that we elites have set up this whole other helpful process for rating people in such roles.”

Well in this case you should worry that elites are jealous of this alternative metric displacing their advice. They like the power and rents that come from advising on who to pick for what. So elites may undermine this metric, and punish those who use it.

When elites advise people on who to pick for what, they will favor candidates who seem loyal to elites, and punish those who seem disloyal, or who aren’t sufficiently deferential. But since most candidates are respectful enough, elites often pick those they think will actually do well in the role. All else equal, that will make them look good, and help their society. While their first priority is loyalty, looking good is often a close second.

Since humans evolved to be unconscious political savants, this is my basic model to explain the many puzzles I listed in my last post. When choosing lawyers, doctors, real estate agents, pundits, teachers, and more, elites put many obstacles in the way of objective metrics like track records, contests, or prediction markets. Elites instead suggest picking via personal impressions, personal recommendations, and school and institution prestige. We ordinary people mostly follow this elite advice. We don’t seek objective metrics, and instead use elite endorsements, such as the prestige of where someone went to school or now works. In general we favor those who elites say have the potential to do X, over those who actually did X.

This all pushes me to more favor two hypotheses:

  1. We choose people for roles mostly via evolved mental modules designed mainly to do well at coalition politics. The resulting system does often pick people roughly well for their roles, but more as a side than a direct effect.
  2. In our society, academia reigns as a high elite, especially on advice for who to put in what roles. When ordinary people see another institution framed as competing directly with academia, that other institution loses. Pretty much all prestigious institutions in our society are seen as allied with academia, not as competing with it. Even religions, often disapproved by academics, rely on academic seminary degrees, and strongly push kids to gain academic prestige.

We like to see ourselves as egalitarian, resisting any overt dominance by our supposed betters. But in fact, unconsciously, we have elites and we bow to them. We give lip service to rebelling against them, and they pretend to be beaten back. But in fact we constantly watch out for any actions of ours that might seem to threaten elites, and we avoid them like the plague. Which explains our instinctive aversion to objective metrics in people choice, when such metrics compete with elite advice.

Added 8am: I’m talking here about how we intuitively react to the possibility of elite disapproval; I’m not talking about how elites actually react. Also, our intuitive reluctance to embrace track records isn’t strong enough to prevent us from telling specific stories about our specific achievements. Stories are way too big in our lives for that. We already norms against bragging, and yet we still manage to make our selves look good in stories.

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Dissing Track Records

Years ago I was being surprised to learn that patients usually can’t pick docs based on track records of previous patient outcomes. Because, people say, that would invade privacy and make bad incentives for docs picking patients. They suggest instead relying on personal impressions, wait times, “bedside” manner, and prestige of doc med school or hospital. (Yeah, those couldn’t possibly make bad incentives.) Few ever study if such cues correlate with patient outcomes, and we actively prevent the collection of patient satisfaction track records.

For lawyers, most trials are in the public record, so privacy shouldn’t be an obstacle to getting track records. So people pick lawyers based on track records, right? Actually no. People who ask are repeatedly told: no practically you can’t get lawyer track records, so just pick lawyers based on personal impressions or the prestige of their law firm or school. (Few study if those correlate with client outcomes.)

A new firm Premonition has been trying to change that:

Despite being public record, court data is surprisingly inaccessible in bulk, nor is there a unified system to access it, outside of the Federal Courts. Clerks of courts refused Premonition requests for case data. Resolved to go about it the hard way, Unwin … wrote a web crawler to mine courthouse web sites for the data, read it, then analyze it in a database. …

Many publications run “Top Lawyer” lists, people who are recognized by their peers as being “the best”. Premonition analyzed the win rates of these attorneys, it turned out most were average. The only way that they stood out was a disproportionate number of appealed and re-opened cases, i.e. they were good at dragging out litigation. They discovered that even the law firms themselves were poor at picking litigators. In a study of the United Kingdom Court of Appeals, it found a slight negative correlation of -0.1 between win rates and re-hiring rates, i.e. a barrister 20% better than their peers was actually 2% less likely to be re-hired! … Premonition was formed in March 2014 and expected to find a fertile market for their services amongst the big law firms. They found little appetite and much opposition. …

The system found an attorney with 22 straight wins before the judge – the next person down was 7. A bit of checking revealed the lawyer was actually a criminal defense specialist who operated out of a strip mall. … The firm claims such outliers are far from rare. Their web site … shows an example of an attorney with 32 straight wins before a judge in Orange County, Florida. (more)

As a society we supposedly coordinate in many ways to make medicine and law more effective, such as via funding med research, licensing professionals, and publishing legal precedents. Yet we don’t bother to coordinate to create track records for docs or lawyers, and in fact our public representatives tend to actively block such things. And strikingly: customers don’t much care. A politician who proposed to dump professional licensing would face outrage, and lose. A politician who proposed to post public track records would instead lose by being too boring.

On reflection, these examples are part of a larger pattern. For example, I’ve mentioned before that a media firm had a project to collect track records of media pundits, but then abandoned the project once it realized that this would reduce reader demand for pundits. Readers are instead told to pick pundits based on their wit, fame, and publication prestige. If readers really wanted pundit track records, some publication would offer them, but readers don’t much care.

Attempts to publish track records of school teachers based on students outcomes have produced mostly opposition. Parents are instead encouraged to rely on personal impressions and the prestige of where the person teaches or went to school. No one even considers doing this for college teachers, we at most just survey student satisfaction just after a class ends (and don’t even do that right).

Regarding student evaluations, we coordinate greatly to make standard widely accessible tests for deciding who to admit to schools. But we have almost no such measures of students when they leave school for work. Instead of showing employers a standard measure of what students have learned, we tell employers to rely on personal impressions and the prestige of the school from which the student came. Some have suggested making standard what-I-learned tests, but few are interested, including employers.

For researchers like myself, publications and job position are measures of endorsements by prestigious authorities. Citations are a better measure of the long term impact of research on intellectual progress, but citations get much less attention in evaluations of researchers. Academics don’t put their citation count on their vita (= resume), and when a reporter decides which researcher to call, or a department decides who to hire, they don’t look much at citations. (Yes, I look better by citations than by publications or jobs, and my prestige is based more on the later.)

Related is the phenomenon of people being more interested in others said to have the potential to achieve X, than in people who have actually achieved X. Related also is the phenomenon of firms being reluctant to use formulaic measures of employee performance that aren’t mediated mostly by subjective boss evaluations.

It seems to me that there are striking common patterns here, and I have in mind a common explanation for them. But I’ll wait to explain that in my next post. Till then, how do you explain these patterns? And what other data do we have on how we treat track records elsewhere?

Added 22Mar: Real estate sales are also technically in the public record, and yet it is hard for customers to collect comparable sales track records for real estate agents, and few seem to care enough to ask for them.

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Why Erase Childhood?

In our society, adults must live with their records. We collect records on sport, contests, web-forums, marriage, school, jobs, crimes, debt, taxes, etc. Such records help others who want to interact with those adults, by helping them guess the consequences of such choices. Such records also help those who have good-looking records.

Of course, such records also hurt those with bad-looking records. Sometimes that hurt is unfair, as when a record looks bad due to a random event outside their control. But overall we judge it good to let people see records; we expect observers to usually take reasonable account of the possibility of noisy record signals.

For many kinds of records, we give the person who is the subject of the records the option to not reveal them. But we also let others draw inferences from such a lack of visible records. If a job applicant doesn’t show you a record of having graduated from college, you are allowed to infer that they probably didn’t go to college.

For children, however, we tend to go out of our way to prevent the collection and sharing of records. We often expunge childhood criminal records, and we make sure public schools don’t save or share records of grades and misconduct. Even though childhood behavior is often quite predictive of adult behavior. For example a larger literature (e.g., here, here) finds childhood misbehavior to be one of our best predictors of adult criminal behavior.

I don’t see an obvious rationale for this. The usual rationale for restricting kid behaviors is that the kids are irrational. But here we have a restriction on adults reacting to this person as an adult. The sorts of irrationalities someone displays as a kid are quite plausibly predictive of the irrationalities they might display as an adult. And I see no reason why adults should be especially irrational in interpreting such signs. We were all kids once, after all.

Yes kids who behave badly as kids will look worse as adults, and have worse life options and outcomes as a result. But we are mostly fine with this happening to adults due to their adult actions. What is so differently problematic about such things resulting from childhood actions?

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Fundamentalists Are Not Traditionalists

In my last two years of college I rebelled against the system. I stopped doing homework and instead studied physics by playing with equations (and acing exams). In this I was a “school fundamentalist.” I wanted to cut out what I saw as irrelevant and insincere ritual, so that school could better serve what I saw as its fundamental purpose, which was to help curious people learn. I contrasted myself with “traditionalists” who just unthinkingly continued with previous habits and customs.

One of the big social trends over the last few centuries has been a move toward reforming previous rituals and institutions to become more “sincere,” i.e., to more closely align with stated purposes, especially purposes related to internal feelings. For example, the protestant revolution tried to reform religious rituals and institutions toward a stated purpose of improving personal relations with God. (Christian and Islamic “fundamentalists” continue in this vein today.) The romantic revolution in marriage was to move marriage toward a stated purpose of promoting loving romantic relations. And various revolutions in government have been justified as moving government toward stated purposes of legitimacy, representation, and accountability.

In all of these cases advocates for reform have complained about insincerity and hypocrisy in prior practices and institutions. Similar sincerity concerns can be raised about birthday presents, or dinner table manners. Kids sometimes ask why, if gifts are to show feelings, people shouldn’t wait to give gifts until they most feel the mood. Or wait for when the receiver would most like the gift. Kids also sometimes ask why they must lie and say “thank you” when that is not how they feel. Here kids are being fundamentalists, while parents are traditionalists who mostly just want the kids to do the usual thing, without too much reflection on exactly why.

We economists are deep into this sincerity trend, in that we often analyze institutions according to stated purposes, and propose institutional reforms that seem to better achieve stated purposes. For example, in law & economics, the class I’m teaching this semester, we analyze which legal rules best achieve the stated purpose of creating incentives to increase economic welfare.

I’ve been made aware of this basic sincerity vs. tradition conflict by the sociology book Ritual and Its Consequences: An Essay on the Limits of Sincerity. While its sociology theory can make for hard reading at times, I was persuaded by its basic claim that modern intellectuals are too quick to favor the sincerity side of this conflict. For example, even if dinner manners and birthday presents rituals don’t most directly express the sincerest feeling of those involved, they can create an “as if” appearance of good feelings, and this appearance can make people nicer and feel better about each other. We’d get a lot fewer presents if people only gave them when in the mood.

Similarly, while for some kids it seems enough to just support their curiosity, most kids are probably better off in a school system that forces them to act as if they are curious, even when they are not. Also, my wife, who works in hospice, tells me that people today often reject traditional bereavement rituals which don’t seem to reflect their momentary sincere feelings. But such people often then feel adrift, not knowing what to do, and their bereavement process goes worse.

Of course I’m not saying we should always unthinkingly follow tradition. But I do think our efforts to reform often go badly because we focus on the most noble and flattering functions and situations, and neglect many other important ones.

From Ritual and Its Consequences I also got some useful distinctions. In addition to sincerity vs. tradition, there is also play vs. ritual. This is the distinction among less-practical “as-if” behaviors between those (play) that spin out into higher variance and those (ritual) that spin in to high predictability. Ritual in this sense can help one to feel safe when threatened, while play can bring joy when one doesn’t feel threatened. One can also distinguish between kinds of play and ritual where people’s usual roles are preserved vs. reversed, and distinguish between kinds where people are in control vs. out of control of events.

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Reparations As Law

There has been a lot of talk lately about race-based reparations, initiated by this Atlantic article. (See also here, here, here.) I’m not a lawyer, but I do teach Graduate Law & Econ, and the discussion I’ve seen on reparations has ignored key legal issues. So let me raise some of those issues here.

The argument for reparations is based on the very solid well-accepted principle that when A harms B, A should compensate B, both to help B and to discourage future A’s from acting similarly. But over the centuries we’ve collected many other legal principles which limit the scope of application of this basic legal principle.

For example, we usually require that a specific person B identify a specific person A, and offer clear evidence of a particular clear harm that B suffered, relative to some other state that B had a right to reasonably expect. We also require a clear causal path between A’s acts and B’s harm, a path that A could have reasonably foreseen. We usually require public notice about legal prohibitions, we forbid double jeopardy and retroactive rules, and we impose statutes of limitations to limit the delay between act and claim.

Each of these limitations no doubt prevents some Bs from getting compensation from some As, and thus fails to discourage related As from causing related harms. But these limitations are usually seen as net gains because they prevent fake-Bs from using the legal system to extract gains from not-actually-As, which would reduce the perceived legitimacy of the whole legal system due to a perception that such fake cases were common.

Now it is actually not obvious to me that all these limitations on law are net gains. I can see the arguments for allowing hearsay evidence, emotional harms, double jeopardy, retroactive rules, no statutes of limitation, and taking compensation from non-A folks that As care about. That is, I can imagine situations where each of these limitation violations might usefully help to discourage As from hurting Bs.

Our limitations on law have so far mostly prevented people from using the legal process to obtain race-based reparations. After all, cash reparations for US slavery would react to a broad varied pattern of centuries-old harm by transferring from folks distantly and varyingly related to As to others distantly and varyingly related to Bs. Such transfers could only very crudely track the actual pattern of cause and harm. So new policies of race-based reparations would in effect embody many new exceptions to our usual limitations on legal suits. And they would create precedents for future exceptions, making it easier to obtain further reparations based on race, gender, and many other factors.

So regarding race-based reparations, what I most want to hear is a general principled discussion about the pluses and minuses of our usual limitations on law. Yes, we may have imposed overly strict limits. And yes, the legitimacy of the legal system can also be reduced when everyone knows of big harms the law didn’t address. But still, we need to identify principles by which we could make exceptions to the usual limitations.

Yes, one simple principle might be to give big compensation whenever the chattering classes nod sagely enough and say loudly enough that yes it is the right thing to do. But it would be nice to hear concrete arguments on why this approach tends to avoid the usual problems that the limitations on law are said to be there to avoid. Might it be better to create a whole new system of reparation courts that operate according to new legal principles?

Of course in signaling terms, one’s willingness to throw out all the usual legal precautions to endorse race-based reparations can signal exceptional devotion to the race cause. But is this really a path we want to go down, competing to outdo each other in our eagerness to toss out our usual legal protections in order to signal our devotion to various causes?

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The Up Side Of Down

In her new book, The Up Side of Down: Why Failing Well Is the Key to Success, Megan McArdle takes some time to discuss forager vs. farmer attitudes toward risk.

Forager food sources tended to be more risky and variable, while farmer food sources are more reliable. So foragers emphasized food sharing more, and a tolerate attitude toward failure to find food. In contrast, farmers shared food less and held individuals responsible more for getting their food. We’ve even seen the same people switch from one attitude to the other as they switched from foraging to farming. Today some people and places tend more toward farmer values of strict personal responsibility, while other people and places tend more toward forager forgiveness.

McArdle’s book is interesting throughout. For example, she talks about how felons on parole are dealt with much better via frequent reliable small punishments, relative to infrequent random big punishments. But when it comes to bankruptcy law, a situation where the law can’t help but wait a long time to respond to an accumulation of small failures, McArdle favors forager forgiveness. She points out that this tends to encourage folks who start new businesses, which encourages more innovation. And this does indeed seem to be a good thing.

Folks who start new businesses are pretty rare, however, and it is less obvious to me that more leniency is good overall. It is not obvious that ordinary people today face more risk than did most farmers during the farming era. The US apparently has the most lenient bankruptcy law in the world, and that is indeed some evidence for its value. However, it seems to me more likely that US forager forgiveness was caused by US wealth than vice versa. McArdle says the US got lenient bankruptcy in the late 1800s via lobbying by senators representing western farmers in debt to eastern banks. And it is even harder to see how farming in the US west then was more risky than has been farming throughout the whole farming era.

Most likely what changed was the wealth of US farmers, and their new uppity attitudes toward rich elites. This fits with debt-forgiveness being a common liberal theme, which fits with liberal attitudes being more forager-like, and becoming more common as rising wealth cut the fear that made farmers. If lenient bankrupts is actually better for growth in our world, this would be another example of Caplan’s idea trap, where rising wealth happens to create better attitudes toward good policy.

Overall I found it very hard to disagree with anything that McArdle said in her book. If you know me, that is quite some praise. :)

Added 2May: The fact that most farmer cultures were clannish may be part of an explanation here. The strict farmer morality is mostly about how to deal with outsiders, distant from your immediate family. The clan is punished severely, but it is usually more forgiving internally. If farmer clans had lower risk than do isolated families today, that could be a reason to have more forgiving bankruptcy law today.

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Let Re-Discovery Evade Patents

In this post I’m going to explain why patents can be a good idea, why they often go wrong today, and a way to fix that problem. And I’ll do that all in the context of a situation you should understand well: finding a shorter route to drive from home to work. (This post is ~1600 words, and so longer than usual.)

Imagine that you usually take a particular route from home to work, and some firm offers to find you a better route. You tell them your current route, and they tell you that they have found a different route that will save you thirty seconds a day, which over a year adds up to eight hours. You can inspect their route to verify their claim, but only if you agree that you can’t use that route (or anything close) unless you pay them a mutually agreeable fee. (Assume they can enforce that, by seeing your car’s driving path records. And assume you can verify their claim somehow.) You agree, inspect and verify, and then agree to pay them one hundred dollars, which is well below your value of saving eight hours of driving, and above their cost of finding the route.

This example contains an info property right: once you agree not to use their route unless you pay for it, then they own a right to your use of that route. Since the route is info, what they own is info. The prospect of owning that info right gives the firm an incentive to work to find that route. And because they must find a mutually agreeable price, their incentive to work is neither too much nor too little. An agreeable price must lie between their cost of finding the route and your added value from using it.

Now imagine that you are one of hundreds of drivers who go from the same initial home area to the same final work destination. Now this route-finding firm wants to sell a better route to all of you. But there is a problem. Once this firm sells the route to a few of of you, the others may learn of that route from these few buyers, either by being told or by following their cars. In this case the total price the firm could get from all the drivers might be much less than the sum of driver values for using the better route. Thus the firm’s incentive to work to find a better route could be too low. That is, this group of drivers could be better off it they joined together to paid the firm more to find a better route. But joining is too hard, so it doesn’t happen. Continue reading "Let Re-Discovery Evade Patents" »

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Why Is Law Fertile For Econ?

I’m about to teach graduate law & econ for the first time, after teaching the undergrad version five times. Going over my new text (Shavell) I’m struck by a difference between law & econ and other areas of applied econ, like labor econ, enviro econ, defense econ, managerial econ, public choice, econ of the family, etc. Relative to these other areas, it seems to me law & econ has more non-obvious insights that can be explained with very little econ machinery, usually in just a paragraph or two of text. Yes most areas have some of these, but in law they just seems to go on and on. Why is law so fertile for economics this way?

You might say that law & econ started recently, but in many other areas we learned most of what we know after law & econ work started. You might say that law & econ has participation by law specialists and it helps to have simple arguments to be able to explain insights to them. But most of these other areas also have specialists who appreciate simple arguments.

You might say that law typically deals with interactions in pairs, which are intrinsically simpler than interactions between many parties. But when supply and demand applies it is also a pretty simple interaction, and many other areas like family econ also deal with pairs a lot.

Another explanation is that for most of us the usual heavy moral coloring of law blocks our simple understanding of consequential arguments in law. In other areas of econ application that lack such mental blocks, most people would already understand the simple consequences of simple actions, and so economics couldn’t get credit for those as insights. But in law economics can get credit for explaining simple consequences that many folks would have already understood in other areas without such mental blocks.

This last explanation is my tentative favorite, though I’m open to other suggestions. It says law is an area where most folks are especially reluctant to let themselves appreciate simple consequences, most likely because they prefer to hold onto standard far ideals about law, and try not to see consequences that might conflict with such ideals. For example, seeing contract breach as immoral promise breaking makes it hard to see how good breaches happen when damages for contract violation equal the value the other party places on non-breach.

Of course this explanation also suggests it will be particularly hard to get the actual law to change much in response to good economic arguments about law. Which is roughly what we see.

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`Best’ Is About `Us’

Why don’t we express and follow clear principles on what sort of inequality is how bad? Last week I suggested that we want the flexibility to use inequality as an excuse to grab resources when grabbing is easy, but don’t want to obligate ourselves to grab when grabbing is hard.

It seems we prefer similar flexibility on who are the “best” students to admit to elite colleges. Not only do inside views of the admission process seem to show careful efforts to avoid clarity on criteria, ordinary people seem to support such flexibility:

Half [of whites surveyed] were simply asked to assign the importance they thought various criteria should have in the admissions system of the University of California. The other half received a different prompt, one that noted that Asian Americans make up more than twice as many undergraduates proportionally in the UC system as they do in the population of the state. When informed of that fact, the white adults favor a reduced role for grade and test scores in admissions—apparently based on high achievement levels by Asian-American applicants. (more)

Matt Yglesias agrees:

This is further evidence that there’s no stable underlying concept of “meritocracy” undergirding the system. But rather than dedicating the most resources to the “best” students and then fighting over who’s the best, we should be allocating resources to the people who are mostly likely to benefit from additional instructional resources.

But this seems an unlikely strategy for an elite coalition to use to entrench itself. If we were willing to admit the students who would benefit most by objective criteria like income or career success, we could use prediction markets. The complete lack of interest in this suggests that isn’t really the agenda.

Much of law is like this, complex and ambiguous enough to let judges usually draw their desired conclusions. People often say the law needs this flexibility to adapt to complex local conditions. I’m skeptical.

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