Judge Ginsburg Reflects on Law and Economics

BY ORAMEL III

The Federalist Society brought Judge Douglas H. Ginsburg of the United States Court of Appeals for the D.C. Circuit back to his professorial stomping ground of Pound Hall on April 2 to address a packed room of over seventy students on law and economics from a judge’s perspective.

Judge Ginsburg, seemingly in his element addressing Harvard Law students, took the opportunity to combine a history lesson with the views of a respected federal jurist as he described how the field law and economics has progressed from its earliest days at the University of Chicago Law School, his alma mater, in the 1940s through to the present day and how he thinks law and economics should affect the actions of counselors and judges.

Judge Ginsburg spent a significant portion of his time speaking about the earliest effects of law and economics. He emphasized that in its beginning phases law and economics, the “old” law and economics, approached the obvious fields of tax law, administrative law, anti-trust law and the like and “taught the lawyers to look at the incentive effects of taxation.” He noted that in this same period the law and economics crowd tackled the products of the New Deal and the industry specific regulation structures that came after Roosevelt’s showdown with the court and the “switch in time that saved nine.”

Ginsburg spoke of how it was these economists’ law schools who started asking simple but “embarrassing” questions such as “where did this regulation come from?”

Going industry by industry, the judge broke down how “old” law and economics tackled pricing and sales regulations in agriculture, finance, transportation and communication. He emphasized that the previous structure of regulation had simply allowed industry to create a safe cartel structure for itself with the aid of government. Through his detailed descriptions, Ginsburg was able to describe how the previous system has been revamped as a result of academic-initiated reform plans stemming from the growth of law and economics in law schools beginning in the 1970s.

Shifting to the present day, Ginsburg brought his talk to bear upon the “new” law and economics, where the economists at law schools began to look around and see that common law areas such as Torts had progressed not with thought given to the “invisible hand” of markets and economics, but rather through following the common law’s own “invisible hand” of precedent and custom. This influence, according to Ginsburg, can be seen in scholars such as Judge Richard Posner uncovering lost tools such as the famous “Hand Formula” in analyzing cases outside the scope of “old” law and economics. Judge Ginsburg used this discussion of the “new” law and economics to look at the tension between viewing the common law as an efficient representation of societal goals and law and economics as creating efficient outcomes. Using an analysis of this tension, Ginsburg then segued into a more personal discussion of the effect of law and economics.

Careful to not oversell the effect and future use of law and Economics Ginsburg ended with these personal views of the usefulness and best practices for law and economics in the courtroom. While mentioning the string of famous judges, from Posner to Bork and Easterbrook to Williams, who fall into the strong law and economics camp, Judge Ginsburg cautioned on how much law and economics should factor into the final decision making process of a judge. He stated very simply that “economic insight can be very helpful, less so in deciding cases, but to help the judge spot economically dubious arguments along the way.” He laid out his concept that it is the “tools of law and economics” that are important and offered that “a few simple receipts would carry the judge, the counselor, and the statesman a long way.” Coming back cyclically to the usefulness of the tools and methods of law and economics, and noting its major successes, Judge Ginsburg ended his talk to the Federalist Society by stating that “the bottom line” is that law and economics has its utility, but that “we would lose our legitimacy as judges if we though we could decide merely because we understand some economics.”

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