Forum-Shopping and Institutional Economics

The New York Times ran a story yesterday about how Marshall, TX, is becoming a haven for patent litigation. Plaintiffs like Marshall for 2 reasons: (1) the court in Marshall hears patent cases faster than other districts do, and (2) the court in Marshall finds for the plaintiff in a higher rate of cases than other courts do.

I think this is a good illustration of why institutional economists are onto something important. Competition puts pressure on people, and people try to find the easiest way to alleviate that pressure. For competition to be a socially useful motivator, it is important that institutions establish incentives for people to channel their competitive urges in socially beneficial ways. Thus, for example, we want firms to compete by holding the quality of their product constant while pushing prices lower. We don't want firms to compete by erecting high barriers to entry into the market.

Competition is like squeezing a tube of toothpaste from the center. If all of the institutional constraints are set up advantageously, then when you squeeze, the toothpaste will come out of the end of the tube and land on your toothbrush. Bad institutions are like holes in the tube. When you apply the pressure of competition, you get undesirable results.

Is this forum-shopping in Marshall a good thing? I think it's probably a bad thing for courts to compete for business by ruling for plaintiffs in a higher rate of cases. But it may be good for courts to compete over how fast they hear cases on their dockets. Even this kind of competition can be problematic, however, if courts achieve faster disposition of cases by cutting important procedural corners. It's complicated.

Thoughts?

Not a Suicide Pact

Michiko Kakutani, a controversial New York Times columnist, reviewed a new book by Richard Posner in Tuesday's paper. The review is unfair, naive, and confused.

Kakutani writes that Posner "once co-wrote an article recommending the private sales of babies". (I presume the article to which she refers is Elisabeth M. Landes & Richard A. Posner, "The Economics of the Baby Shortage," 7 Journal of Legal Studies 323 (1978).) This charge has become boilerplate language with which to begin a review of a Posner book that the reviewer dislikes. Posner has responded to this charge before, claiming that in that article he

point[s] out the adverse economic consequences of the present system of regulated adoption, under which a pregnant woman is forbidden to accept a fee for giving up her parental rights to adoptive parents. I do not argue that the economic consequences of this prohibition, though they are indeed serious and adverse (just as with other forms of price control), outweigh whatever ethical or other objections might be raised to changing it. Such a judgment would be out of place in a book on the economic analysis of law. The furthest I have gone in the direction [of recommending the private sale of babies] is to suggest, as an experiment, that an adoption agency be permitted to pay a pregnant woman contemplating abortion to carry the child to term and give it up for adoption rather than aborting it.

Introductions aside, Kakutani quickly gets into the substance of Posner's book. Posner's argument in short is that there is a very real tradeoff between national security and civil liberties, and that if we don't strike the correct balance between the two, we will have neither security nor liberty. The Constitution is, as Posner's title suggests, not a suicide pact. As a result, in times of serious national security crises, judges ought to be more willing to curb the civil liberties mentioned in the Constitution to protect national security. Kakutani writes in response:

This willingness to bend the Constitution reflects Judge Posner's archly pragmatic approach to the law and his penchant for eschewing larger principles in favor of utilitarian, cost-benefit analysis. Efficiency, market dynamics and short-term consequences are what concern Judge Posner, not enduring values or legal precedents.

One result is a depressing relativism in which there are no higher ideals and no absolute rights worth protecting.

Accusing Posner of "eschewing larger principles" in favor of short-term consequences either assumes that the larger principles (I assume Kakutani means liberty) are more important than short-term consequences like security or denies the existence of a tradeoff between the two values. If the former, I do not doubt that she is right in some circumstances and wrong in others. The point of Posner's book (and his pragmatism more generally) is to say that judges should engage in a hard-headed examination of which values should trump in certain situations. If Kakutani means the latter, I think she is engaging in wishful thinking of the worst kind.

Kakutani continues:

In fact, Judge Posner appears to see the Constitution as a fantastically elastic proposition that can be bent for convenience's sake.

Posner wouldn't bend it for convenience, but he would bend it for continued existence. Then Kakutani writes:

Many of Judge Posner's arguments in this book are riddled with self-serving contradictions. While he declares that "the Bill of Rights should not be interpreted so broadly that any measure that does not strike the judiciary as a sound response to terrorism is deemed unconstitutional," he also argues that "a constitutional right should be modified when changed circumstances indicate that the right no longer strikes a sensible balance between competing constitutional values, such as personal liberty and public safety."

Constitutional text has a lot of play in it. As a result, judges can always find an argument for a reading that aligns with their political preferences. Almost every reading of constitutional text has counterarguments, so every reading is in some sense a "bending" of the Constitution. The first principle Kakutani cites stands for the idea that judges shouldn't bend the Constitution so as to declare unconstitutional the political branches' reasonable responses to terrorism. The second stands for the idea that judges shouldn't continue a line of constitutional jurisprudence when it obstructs the sensible balances struck by the elected branches. Both quotations express a preference for deference to elected officials. So where's the contradiction?

Kakutani concludes her review with the following:

Judge Posner believes that "additional counterterrorist measures, in particular in the related areas of electronic surveillance and computerized data mining, could be taken without violating the Constitution (even if there were a clear constitutional right to informational privacy), especially if the effect on privacy is minimized by a strict rule against using information obtained through such means for any purpose other than to protect national security." And he writes that "coercive interrogation up to and including torture might survive constitutional challenge as long as the fruits of such interrogation were not used in a criminal prosecution."

So is there anything Judge Posner thinks the Constitution forbids? He writes: "But there is no handle in the constitutional text for the unilateral assumption of dictatorial powers by the president, no matter how desperate the circumstances. We don't want the Constitution to be just an old piece of parchment."

That snarkily delivered "just," along with the use of the adjective "unilateral" to modify "assumption of dictatorial powers," says it all: this book suggests that Judge Posner does regard the Constitution as an old piece of parchment-- a piece of parchment with certain rules, but rules that "are made to be broken" by a president during an emergency, no matter how long that emergency may last.

Where in Kakutani's copy of the Constitution is there a prohibition against "electronic surveillance and computerized data mining"? The Fourth Amendment prohibits "unreasonable searches", but Kakutani doesn't discuss where the line of reasonableness lies (though she hints where she thinks it should be). The Constitution doesn't explicitly prohibit torture, either. Maybe she's basing her implicit argument on the Eighth Amendment's prohibition of "cruel and unusual punishments" or the Fifth Amendment's language that prohibits the U.S. from depriving persons of "liberty . . . without due process of law." But those arguments need to be fleshed out if she expects to convince anyone who applies critical thinking skills to them.

Kakutani's reading of Posner's statement on the unilateral assumption of dictatorial powers is unfair. Nowhere does Posner claim that the president can constitutionally assume dictatorial powers in a multilateral manner.

Her parchment argument is unfair, too: the Constitution is an old peice of parchment. It was signed 217 years ago. It is parchment. Posner is saying it must also be something more; it must stand for the outermost limits of governmental power. Posner's view is that judges should be hesitant to use a document passed 217 years ago to overrule the actions of officials elected by current majorities. Kakutani's view seems to be that the Constitution should mean what her political preferences mean. But other people have different political preferences. The Constitution and the judges who interpret it enjoy democratic legitimacy when they're not perceived to be up-for-grabs to whichever political party can control the bench. Posner may be wrong about where we should strike the balance between security and liberty (so might Kakutani), but that doesn't mean he's wrong about what the Constitution allows.

One expects more from a book review in the New York Times than a collection of quotations taken out of context and meant to turn left-wing readers against Posner's views before they hear his full argument.

The Funniest Thing I Heard Today

Richard Epstein is spending a few weeks at NYU before his classes begin at Chicago (a school on the quarter system). Today he talked about his newest book, How Progressives Rewrote the Constitution.

He told a story about how, during Justice Clarence Thomas's Senate confirmation hearing, Senator Joe Biden held up Epstein's book on government takings and proclaimed that anyone who shared the philosophy of the book was unfit to serve on the Court. Epstein said he loved the press he was getting, but it stopped abruptly after about an hour, when the Anita Hill accusations surfaced.

"Sex beats law every time," Epstein said. "But I still prefer to talk about law because that's where my relative expertise lies."

Why I Love Dick Epstein

Dick Epstein taught the second half of my Property class today. Now, I'm not a big Epstein fan. I saw him speak a few times last year, and I disagree with him on a pretty fundamental level. He's arrogant, too; last year, a student-edited journal at NYU invited him to give the inaugural Hayek Lecture (Friedrich Hayek was a famous Austrian economist). Epstein's introduction to the lecture was: "I had to stop by your Dean's office earlier this afternoon because I forgot what I was supposed to talk to you about."

Epstein is somewhat of an intellectual bully in the classroom; his "Socratic" questions are ridiculously close-ended--more like a lecture than a dialogue--leaving students little room to question his arguments. Yet there are a few things I really admire about him.

Dick Epstein is one of only two people I know who can speak at full speed while maintaining the logical density and continuity of a scholarly book or article. His mind runs in a gear that very few people have. It's no wonder he's such a prolific writer; his ideas come out fully formed and polished.

Epstein always keeps one eye on the big picture when he analyzes legal rules. He follows consequences through several waves, asking whether the result is sustainable and efficient. In a related vein, he's got a sharp eye for nuance. He's got well thought-out arguments for why rules for hunting whales should be different from rules for hunting foxes.