While any observation about the mindsets of lawyers and economists (or anyone else, for that matter) surely oversimplifies, I noted in my earlier post that — based on my experiences both as an economics professor and as a law professor — each profession seems to instill certain tendencies in its practitioners. While lawyers seem to take an all-or-nothing approach to problems (leading them too often to reject useful partial solutions because “that won’t solve the problem”), economists come to believe their models [...]]]> Early last month, in my first guest post on Concurring Opinions, I posted some comments about the differences between the ways economists and lawyers think about problems. Today, in my last guest post, I return to the subject of lawyers and economists.

While any observation about the mindsets of lawyers and economists (or anyone else, for that matter) surely oversimplifies, I noted in my earlier post that — based on my experiences both as an economics professor and as a law professor — each profession seems to instill certain tendencies in its practitioners. While lawyers seem to take an all-or-nothing approach to problems (leading them too often to reject useful partial solutions because “that won’t solve the problem”), economists come to believe their models just a bit too much. On the latter point, Alan Greenspan’s recent testimony before Congress to the effect that he has been in “shocked disbelief” at the failure of his long-held model of how the economy works (unregulated markets will lead to good results) has shown the potentially enormous negative consequences of the economist’s default mindset.

Beyond the tendencies that are drilled into members of the two professions (or which, perhaps, lead to self-selection into the two professions), a more interesting question is what lawyers and economists actually do. More precisely, when we have a public policy problem, how do the skill sets of lawyers and economists determine their respective usefulness in dealing with the problem? Again, I make no claim that

my answer is anything beyond a broad-brush summary and that individual cases will vary. Still, recent events suggest that, on big issues, economists’ contributions are essential but can be either helpful or useless depending on what the lawyers do. Examining the current crisis and the policy responses to it will, I hope, clarify my meaning.

Regarding the ongoing financial crisis, it really does take some training in monetary economics and finance to understand the causes and consequences of the panic in the financial markets. It is especially helpful to understand the nature of financial contagions to understand why the current crisis is not merely a “too big to fail” phenomenon but rather a matter of the unique fragility of the psychology of financial markets. Economists who would never support the nationalization of, say, Wal-Mart (even if it were failing) understand that the failure of even much smaller financial firms threatens to lead to much more profound problems for the entire economy. As far as it goes, the insight from economics is that the bailout/rescue is both important and unique, and that partial and temporary nationalization of the banking system is currently called for in ways that need not set a precedent for bailouts of non-financial markets. (There are, to be sure, respectable economists who disagree about the wisdom of the financial rescue. The vast majority of economists, though, agreed that the rescue was unfortunately necessary.)

What do lawyers do? They make it work (or not). Earlier this month, the economist Alan Blinder wrote an article in the New York Times, “Got $700 Billion? Sweat the Details,” in which he described all of the things that need to be done well in order to make sure that the rescue plan succeeds. Blinder tells us in so many words that the legal work is now what matters. Among the issues he raises is that the rescue plan can be disastrously derailed by conflicts of interest. Without adequate legal rules and procedures that will rein in individual self-interest among the recipients of government assistance, the plan could do more harm than good. Similarly, he describes the difficulty in setting prices for assets for which there is no market. When there is no reliable market indicator for determining the fair market value of assets, it becomes essential to write complicated laws and contracts that allow the government to include contingencies in their dealings with private actors. In principle, this is easy. “If X happens, then the parties’ respective rights and responsibilities change.” Anyone who has studied legislative drafting or contract law knows just how simple this is not.

It is tempting to think of this as a physicists-versus-engineers split. The economists are the theorists, and the lawyers actually implement the theory. That analogy, however, does not quite get at the nature of the problem. Economists still have things to say about, for example, the likely incentive effects of provisions to curb conflicts of interest; but their theories on the smaller-bore issues leave open much more room for uncertainty. That uncertainty must be filled in by the lawyers. The better they do their job, the more likely it is that the economists’ policy prescriptions will actually work. As always, a neutral legal framework cannot be assumed into existence.

P.S. It has been a pleasure visiting at Concurring Opinions for the last two months. Thanks to Dan Solove for inviting me to join in the fun. I now return exclusively to my regular gig at Dorf on Law. Perhaps I’ll run into some of you there.

I have been working with the GW Law Review students to organize this symposium, which is based [...]]]> This afternoon and all day tomorrow, GW Law will be hosting a symposium: “What Does Our Legal System Owe Future Generations? New Analyses of Intergenerational Justice for a New Century.” There will be an opening panel on the philosophy of justice between generations, followed by four panels discussing the implications for intergenerational justice of the following areas of policy: government spending and taxation, environmental law, reproductive rights, and consitutional law. The principal presenters for the five panels are, respectively, Bob Hockett (Cornell) and Ori Herstein (private practice), Neil Buchanan (GW) and Dan Shaviro (NYU), Jamison Colburn (Penn State) and Matt Adler (Penn), Sherry Colb (Cornell), and Mike Dorf (Cornell).

I have been working with the GW Law Review students to organize this symposium, which is based on my forthcoming article: “What Do We Owe Future Generations?” Over the last several years, I have been trying to work through the implications of the oft-heard claims that current generations are short-changing future generations. (Listen to almost any politician speak for more than five minutes and you’ll hear something about our irresponsibility toward the future). Usually, this is couched in terms of anti-deficit rhetoric, and it is often misleadingly tied to efforts to change the Social Security program. As my scholarly interests are solidly in the area of fiscal policy, I decided to see whether there is actually a strong argument that — as a matter of government spending and taxing policy in the long run — current generations are cheating future generations. What I found was surprising. Even given the long-term trends in spending and taxing, future generations’ per capita GDP will be higher than ours even under the most pessimistic scenarios. The issue is distributional (both within and across generations), therefore, because the averages look unexpectedly promising.

When I taught a seminar on the subject of intergenerational justice a few years ago at NYU Law, I found that my students were only mildly interested in the fiscal policy aspects of intergenerational obligations. No surprise there, I guess, as macroeconomics is not everyone’s idea of a fascinating topic. We thus expanded our inquiry and confirmed that, even if we are not cheating future generations in terms of pure economic income, there are enormous issues in the areas of education, the environment, reproductive rights, the rule of law, and many other areas of policy in which current generations are obviously harming the interests of future generations. This symposium is designed to stimulate discussion about those matters. I also am in the planning stages of turning this into a book.

I am very excited to hear what the other scholars at the symposium will say over the next two days. I will report back next week on some of what I hear.

I recently finished a draft of [...]]]> Even among highly educated professionals, there is a persistent difference in the salaries of men and women. Untangling the reasons for that difference is quite difficult, and it involves as a threshold matter trying to figure out whether there are factors other than gender that explain why women earn less than men. Some studies have suggested that the difference in salaries is not in the first instance about the gender of the worker but about the worker’s status as a parent or non-parent. Some empirical research, for example, has found that men with children earn more than everyone else in their fields but that there are no detectable differences among women with children, women without children, and men without children.

I recently finished a draft of a paper (available here) in which I looked at the results of two surveys of graduates of the University of Michigan Law School from the classes of 1970 through 1996. These surveys were developed by Richard Lempert, David Chambers, and Terry Adams, who used the data from the first survey to study the effects of race on lawyers’ careers in their fascinating article: “Michigan’s Minority Graduates in Practice: The River Runs Through Law School,” 25 L. & Soc. Inquiry 395 (2000). Professor Lempert and his co-authors administered a follow-up survey that gathered information about gender and parental status; and they allowed me to use their data for the empirical analysis summarized in my draft paper.

Most of my paper is focused on technical matters of survey techniques and econometric analysis. For those who find such matters tedious or worse, the most direct discussion of the statistical results is in the introduction and conclusion and on pp. 30-32. My tentative results confirm the “daddy bonus” that others’ have found in other studies, with the range of estimates suggesting a 15-20% salary advantage for fathers. Unlike previous studies, however, I also find a strong suggestion that women …

with children endure a “mommy penalty,” earning perhaps 10-15% less than the childless (and thus 25-35% less than fathers). I also find some weaker statistical support for the hypothesis that childless women earn less than childless men, with my estimates suggesting an 8-9% difference disfavoring women.

The wonderful thing about empirical research is that every interesting set of results demands further study. Can my results regarding the salary losses for mothers and childless women be confirmed by further research? Although I also look at differences such as part-time status, the ages of children, and whether the children are living with the lawyer-parent, what other evidence should be taken into account in future studies?

Perhaps a more intriguing question is why the salary disadvantages against women and in favor of men largely show up through parental status. (Parenting itself still tends to be characterized by massive differences in gender roles, of course. Even if all of the difference in salaries between men and women were mostly about differences in child-rearing, therefore, this would simply relocate the question of how sexism continues to affect women and men differently.) Because this draft is mostly a technical discussion of empirical results, I speculate only briefly on the reasons for the daddy bonus, offering three possibilities: fathers feel the need to work harder to bring home more bread for the family, men wait to become fathers until their salaries are high enough to support a growing family, and (my cynical favorite) fathers shirk childcare responsibilities by hiding in the office and incidentally raising their salaries.

Fortunately, the surveys from which I drew my data are now being superseded by an even larger study of Michigan law graduates, with more detailed questions and more respondents from more graduating classes. This will allow researchers to use “panel data” techniques and other sophisticated methods of searching for statistical relationships.

Because I plan to be one of those researchers, I would be especially interested in readers’ suggestions (either on the Comment board or via email: nbuchanan@law.gwu.edu) regarding both how to improve and refine the regressions and how to explain the results. The best way to analyze empirical issues is to analyze data from as many angles as possible, so I will be very appreciative of any constructive suggestions.

In making these assessments, I deliberately set aside the criteria on which the pundits usually proclaim winners and losers in such debates: who had the best zinger or the most memorable line, who performed better than or worse [...]]]> After the first presidential debate late last month, I posted some comments about the event from my perspective as a former academic debater and coach/advisor. Similarly, I later posted some reactions to the vice presidential debate. The short version of my take on those debates is that Obama clearly won his debate, but paradoxically not by as much as he would have if his opponent were not such an insistently inept debater; and Biden won his debate by successfully transcending his opponent’s inability to offer a coherent argument.

In making these assessments, I deliberately set aside the criteria on which the pundits usually proclaim winners and losers in such debates: who had the best zinger or the most memorable line, who performed better than or worse than they were expected to perform (by whom?), and so on. My purpose was to answer a question that I have often heard people ask in this and other election years: Viewed solely as a debate, who won?

When I did not post any comments on the second presidential debate (which was held this past Tuesday evening), several people contacted me and asked that I offer similar commentary on that debate at some point before the final debate this coming Wednesday. I am happy to do so; but I should note that the reason I did not post comments immediately afterward was that there seemed to be very little new to say about that debate (in which so little new was said). Indeed, I am beginning to wonder what the point of such debates could be, given that they can seem so unproductive and vapid. I will return to that question after a quick assessment of the second debate itself.

First, it has to be said that the format of the second debate was unhelpful (and that’s putting it gently). The debate was in a so-called “town hall” style. If anything, this format makes it even less likely that the candidates will engage with each other on the issues, mostly because they seem to be so busy trying to flatter the voter/questioner — which, among other things, prevents the candidate from challenging the premises or importance of a question. Given that I have always given minimal credit for style and maximum credit for clash on the issues, this format was all but guaranteed to make this debate worse in my assessment for both candidates than the first one. (I am not, of course, completely impervious to differences in debaters’ styles. For example, McCain’s occasional tendency to speak in breathy, dramatic tones was new to this debate and more than a bit off-putting.)

On the merits, the second debate went pretty much the way of the first debate. Perhaps the major differences were that Sen. McCain reduced (but certainly did not eliminate) the number of times that he made simple assertions (“I know how to ___”) in place of arguments, and Sen. Obama seemed to have made a strategic decision not to try to untangle McCain’s description of the issues as much as he did in the first debate. Thus, this debate looked much more like alternating stump speeches than the last one did. There were still sharp exchanges in which Obama debated and McCain merely repeated (especially regarding the questions on Pakistan and health care), making Obama clearly the better debater. There was not, however, nearly as much direct exchange of arguments as there had been in the earlier debate.

Sen. McCain had one particularly good moment, which was when he forthrightly refused to answer a yes-or-no question and explained why he would not do so. Question: “This requires only a yes or a no. Ronald Reagan famously said that the Soviet Union was the evil empire. Do you think that Russia under Vladimir Putin is an evil empire?” McCain’s response included this: “If I say yes, then that means that we’re reigniting the old Cold War. If I say no, it ignores their behavior.” This was a very effective way to expose the inanity of the question.

On the other hand, McCain continued to insist that Obama “fails to admit that he was wrong about Iraq.” Sen. Obama, of course, does not believe that he was wrong about Iraq, which means that when Obama tries to explain his position on Iraq, he “fails to admit” what he believes to be false. It’s an old rhetorical trick, and it can be applied to anything. “Sen. McCain has never admitted that his image as a maverick has long since gone stale and has no current basis in fact.” Build an assertion into the premise of the question, and then watch the other guy struggle to disentangle the assertion from the actual question. Obama did not take the bait.

The only other noteworthy aspect of this debate is McCain’s attempts at quasi-heckling. Having asserted that Obama would impose fines on companies and parents who failed to buy health insurance, he then predicted that his opponent would not tell the audience how big the fine would be. After Obama responded by describing his health plan in a way that McCain did not like, McCain interrupted the moderator and said: “I don’t believe that — did we hear the size of the fine?”

Similarly, Obama at one point (mixing “wet behind the ears” and “green” as metaphors for inexperience) said: “Now, Senator McCain suggests that somehow, you know, I’m green behind the ears and, you know, I’m just spouting off, and he’s somber and responsible.” McCain jumped in with: “Thank you very much,” and laughed. The effectiveness of this sort of thing is, of course, largely in the eye of the beholder; but it certainly struck me as odd for McCain to be acting frivolous and irresponsible while claiming to be somber and responsible. It was especially surprising that Sen. McCain thought these one-liners were even worth launching, given his need to come across as less volatile and more grounded in these debates than he has recently.

As I noted above, the lack of news in the second presidential debate left me wondering whether there is even a point in holding these events (whether or not we continue to mislabel them as debates). On The Daily Show with Jon Stewart, the correspondent John Oliver offered a brilliant critique of the debates as being nothing more than people sitting around waiting for a candidate to commit a gaffe. That certainly seems more accurate than viewing the debates as clashes of ideas.

Still, the reason that I was involved in competitive debate for so many years was that even stilted exchanges offer opportunities to see whether debaters can think on their feet, respond directly to questions and challenges, and point out when someone else’s arguments simply miss the point. Those skills are valuable in any position where difficult decisions must be made about complex issues. This is not by any means the only basis upon which to choose a president, but it at least will bring me to my TV set this coming Wednesday evening to watch the final debate.

At this point, viewed as debates, Obama and Biden have a total of three wins under their belts.

I am — even at this late date — as untainted by publicity [...]]]> Last Thursday evening, I watched the vice presidential debate between Sen. Biden and Gov. Palin. Because of an earlier commitment, I had to leave town the next morning, and I have been in virtual seclusion ever since. I have not seen any commentary or spin from the various camps, nor do I know whether there is an emerging consensus of whether one side or the other exceeded or fell short of whatever artificial expectations they had managed to create in advance of the debate. I have seen enough headlines to know that Gov. Palin is still on the Republican ticket (which in itself is rather remarkable at this point). Other than that, however,

I am — even at this late date — as untainted by publicity as any jury pool could be.

In my comments last week about the first presidential debate, I noted that my experience as a debater and debate coach/advisor (totaling 18 years) generally has been a disadvantage in watching political debates in the U.S. Such debates tend to involve little actual clash of arguments, and the assessment of winners and losers is determined by who had the best zinger or one-liner. The pleasant surprise coming out of the McCain/Obama debate, therefore, was that it was possible to assess it as a real debate. Seen in that way, it was obvious that Sen. Obama is an extremely able debater and that Sen. McCain is not; but McCain’s form of non-argument has the tendency to muddy the waters and make it unnecessarily difficult to see just how badly he is losing on the merits. While McCain’s performance would still be a D+ on an academic grading scale (which is not how debates are generally graded, but I’ll use the letter grading system here because of its familiarity to most readers), his refusal or inability actually to debate had the effect of lowering Obama’s grade to a B+. Still a clear-cut win, but hardly reflective of the apparent underlying differences.

While I had immediately recognized Obama’s situation as one where a superior debater was struggling with how to respond to an inferior opponent, Biden/Palin was immediately recognizable as something similar but with a crucial difference: a superior debater who was unaffected by his opponent’s inability to make a coherent argument. Biden thus showed how to beat an outmatched opponent without being dragged down in the process. I would, in fact, say that Biden’s performance in this debate was one of the best debating performances that I’ve ever seen outside of a championship debate round. Only a few small demerits (repeating a claim about Exxon’s taxes too many times, for example) moved him from an A+ to an A, notwithstanding Palin’s solid D. (Failing grades are reserved for people who cannot even speak for their allotted time or who melt down on the spot.)

The general pattern of the debate was set early. Palin would make a broad assertion, Biden would respond on point, and Palin would either repeat what she had originally said or change the subject. (Indeed, on at least one occasion, she changed the subject immediately upon hearing the question from the moderator.) Biden displayed a broad and deep knowledge of public policy, and he was clearly prepared to answer specific assertions that he had anticipated Palin making. Each time she talked about some vote or statement that Biden or Obama had made in the past, Biden had an answer that was directly responsive. I don’t know if others watching the debate found this type of exchange compelling, but I was riveted. Biden seemed to be prepared for every argument, and Palin quickly lapsed into home-spun generalities as she ignored her opponent’s arguments.

It did not help Palin’s case that her prepared comments seemed to have been written without concern for whether they contradicted each other. Thus, she simultaneously managed to decry the lack of “oversight” of the financial markets — asserting quite energetically that the subprime mortgage mess had been caused by predatory lending — while repeatedly asserting that it would be bad to have the government try to solve problems. (She even paraphrased, in garbled form, Ronald Reagan’s famous government-is-not-the-solution-to-the-problem-government-is-the-problem mantra: “Patriotic is saying, government, you know, you’re not always the solution. In fact, too often you’re the problem so, government, lessen the tax burden and on our families and get out of the way and let the private sector and our families grow and thrive and prosper.”)

One particularly interesting exchange occurred when Gov. Palin made a now-familiar assertion about the number of times that Sen. Obama has “voted to increase taxes or not support a tax reduction.” Her claim was that Obama had cast such a vote 94 times. Biden’s response was devastating in two ways. First, he pointed out that Palin’s method of counting votes would show McCain as having “raised taxes” 477 times. Second, and much more importantly, he refused to fight on her turf, stating quite correctly that “it’s a bogus standard.” I have also argued in the past that this whole “didn’t vote to cut taxes” concept is nonsense; so it was especially nice to see Biden refuse to accept the premise of Palin’s too-familiar claim.

Another highly effective argument from Sen. Biden was in response to what was almost surely an unanticipated, bizarre argument from Gov. Palin. Unsurprisingly, one of Biden’s broad strategies in the debate involved tying the McCain/Palin ticket to the leader of their party, George W. Bush. Also unsurprisingly, Palin wanted to distance herself from an extremely unpopular president. Yet I cannot imagine that Biden could have expected Palin to say that Biden and Obama were engaging in “just too much finger-pointing backwards to ever make us believe that that’s where you’re going” (referring to the future). Apparently, Palin’s argument was that the past is irrelevant.

Whether I’m right or wrong that this took Biden by surprise, though, his response was again doubly effective. He started by saying that “past is prologue.” Just as I was thinking to myself, “Hmm, that’s a bit too indirect to score points,” Biden then launched into one of his most effective arguments in the debate, listing quickly all of the ways in which McCain’s policies (in this case, foreign policy positions) were the same as Bush’s. For someone with the reputation of being long-winded, moreover, it was especially surprising to see how quickly Biden was able to deliver such a devastating response.

Palin was, however, unaffected by the failure of her argument. She even tried to return to it with her least effective scripted line: “Say it ain’t so, Joe.” (It was at that moment that it became clear why Palin had been heard on a live microphone at the beginning of the debate asking Sen. Biden if she could call him Joe.) She followed that non-starter with this: “[T]here you go again pointing backwards again. You preferenced your whole comment with the Bush administration. Now doggone it, let’s look ahead . . .” The commentary just writes itself.

Finally, one of the most difficult tasks that Sen. Biden faced was the choice of when to respond as opposed to when to pass up opportunities to respond to Gov. Palin’s assertions. At one point, he used the familiar but always effective “I don’t know where to start.” The most interesting choice that he had to make, though, was whether to respond to Gov. Palin’s repeated claims that she and Sen. McCain are “mavericks.” This is the kind of non-specific claim that made the Obama/McCain debate so difficult for Obama, and Biden shrewdly let those claims slide. At some point, however, even a meaningless claim has to be refuted; and when Biden did finally respond, he had one of his best moments of the debate. He quickly listed five issues — the budget, health care, education, the Iraq war, and (the one small-bore issue) assistance to low-income citizens to pay winter heating bills — on which McCain “has been no maverick.” Biden thus took what had clearly been one of Palin’s safety nets (using the word six times in her remarks), gave it content, and then used it to score a very important point.

Again, at this point I do not know how the expectations game has played out in the vice presidential debate. I do know that, no matter what one’s expectations were, Sarah Palin’s performance as a debater was simply terrible while Joe Biden’s was extremely effective. I wish I could see the Senator debate again, even if he again had to do so without any real opposition.

Sadly, Maureen Dowd’s op-ed in this past Sunday’s New York Times seemed correct when she impatiently described “what debates are about. It’s not a lecture hall; it’s a joust. It’s not how cerebral you are. It’s how visceral you are. You need memorable, sharp, forceful and witty lines.” Yet despite an initial consensus among pundits [...]]]> The first presidential debate seems like it happened a million years ago, with all of the drama about the financial crisis that has transpired since Friday. Still, with the vice presidential debate scheduled for tonight, and two more presidential debates yet to come (pending more dramatic announcements), it seems like a good moment to reflect on the first debate and perhaps its most trenchant lesson for those who watch tonight’s debate.

Sadly, Maureen Dowd’s op-ed in this past Sunday’s New York Times seemed correct when she impatiently described “what debates are about. It’s not a lecture hall; it’s a joust. It’s not how cerebral you are. It’s how visceral you are. You need memorable, sharp, forceful and witty lines.” Yet despite an initial consensus among pundits that Obama and McCain had essentially debated to a tie on style (or whatever it is that one uses to judge a joust), at least some polls showed that Obama won the debate in the minds of more voters. (A TIME poll of independent voters, for example, has Obama winning the debate, 41-27, among likely voters.)

I readily admit that I have an old-fashioned view about debates. Like many academics,

I was actively involved in high school debate for four years. I then participated in parliamentary debating throughout my college career. During my first year of grad school, I helped a friend start the parliamentary debate team at Harvard. (Harvard had long had an excellent team that competed in so-called on-topic debate but did not have a team that engaged in the extemporaneous parliamentary style of debating.) I ended up being an advisor for that team for nine years, through three national championships, and I advised the Wellesley College team for a year when I was a visiting professor in their economics department.

This experience, far from qualifying me to judge American political debates, usually severely handicaps me. I pitifully tune into each debate somehow convinced that the contestants will actually argue with each other, then I sit in disgusted silence as they trade scripted sound-bites. When real debating does happen, though, and when one candidate actually wins the debate on the merits, the pundits generally ignore the obvious and focus on, say, whether one candidate sighed too much.

As I watched the debate last Friday, though, I had an unexpected sense of a different kind of deja vu. I was not watching the usual U.S. political debate. I was back on the debate circuit, watching a clearly superior debater and a clearly out-matched opponent, with the inferior debater so insistently refusing to argue that he was (almost surely inadvertently) dragging down his opponent with him. Political preferences aside, I felt sympathy for Obama as I watched him try to engage his opponent, only to find himself facing a blur of non sequiturs, naked assertions, and unprovable claims from McCain. I had seen this before. When a good debater faces a bad debater, it is difficult for the good debater even to figure out where to begin to respond. What ends up being a clear win on the merits (and has the potential to be a blow-out) ends up getting uglier than necessary, because there’s both so little and so much to argue against.

For example, one of McCain’s most frustrating tendencies is simply to announce things. “I know the veterans. I know them well. And I know that they know that I’ll take care of them. And I’ve been proud of their support and their recognition of my service to the veterans. And I love them. And I’ll take care of them. And they know that I’ll take care of them. And that’s going to be my job.” What does one say to such a thing? “No, John, you don’t love the veterans, and you don’t know how to take care of them”? There is an opportunity to point out that McCain has opposed shortening tours in Iraq as well as the proposed new GI bill, but in the moment it’s not easy to find that opening when faced with an opponent’s blunt assertions that he’ll “take care of” veterans. Similarly, McCain is fond of asserting that he has been places and knows how to do things: “And I know how to work with [David Petraeus].” I asked myself, if I were debating McCain, how could one respond to such a bald assertion? “No, you don’t” isn’t debating. (Insert Monty Python joke here.)

To the extent that there were actual arguments (or “clash,” as the debaters say), it was again quite frustrating to watch. McCain faulted Obama for not holding hearings as chair of a Senate subcommittee. Obama responded by saying that the issues at hand are not in his jurisdiction. McCain’s response? “By the way, when I’m subcommittee chairman, we take up the issues under my subcommittee.” Right. That’s just what Obama said. On a judge’s “flow sheet” (notes of the debaters’ arguments and responses), this is a clear win for Obama; but it at least appears that McCain has responded, and it would surely be unclear to me (if I were in Obama’s shoes) wether I should spend precious time pointing out that my opponent had not responded to my point.

This was even more at play in the exchange over McCain’s attacks on Obama for saying that he would meet with world leaders “without precondition.” McCain would attack, Obama would respond, and McCain would repeat his original claim that it’s bad to agree to talk to an enemy without preconditions. On that issue, though, a different kind of odd argument intruded. McCain claimed that meetings with adversaries would legitimize their views. Obama, quite understandably, replied that sitting down to talk with adversaries has often been useful in the past, and he stated simply that he would talk to anyone “if I think it’s going to keep America safe,” which would surely include considerations of propaganda advantages. Rather than challenging Obama on what would satisfy that premise, however, McCain ended the segment by saying : “So let me get this right. We sit down with Ahmadinejad, and he says, ‘We’re going to wipe Israel off the face of the Earth,’ and we say, ‘No, you’re not’? Oh, please.” Not only is that completely non-responsive, it also displays a complete lack of understanding of how one talks to adversaries (something that McCain “knows how” to do). This part of the debate also devolved into another “no, it isn’t” exchange about what Henry Kissinger had said. At least that can be fact-checked.

In other words, this was one of those debates where the losing side wasn’t, as they say, “dancing around the issues.” This was simply a debater who did not know how to debate. Every time I saw something like this when I was a debater or a judge in a debate, the frustration was palpable. Never, however, did the superior debater lose. It was always uglier than it should have been, but an inability to make real arguments and to respond on point is not a winning combination.

The final point, regarding tonight’s vice presidential debate, is obvious. I’ll be watching to see who argues versus who asserts, who responds to points and who misses or misconstrues them. I will not be watching to see who can joust better.

Different viewers surely had different moments during the debate when their jaws dropped. Sen. McCain’s assertion that Pakistan was “a failed state” caused at least one knowledgeable commentator to drop a stitch. (Sorry for the mixed metaphor.) For me, though, it was [...]]]> In the first presidential debate last Friday, the moderator’s first question was addressed to John McCain: “[A]re there fundamental differences between your approach and Senator Obama’s approach to what you would do as president to lead this country out of the financial crisis?” McCain’s reply began as follows: “Well, the first thing we have to do is get spending under control in Washington. It’s completely out of control.” He soon added: “I’m going to veto every single spending bill that comes across my desk.”

Different viewers surely had different moments during the debate when their jaws dropped. Sen. McCain’s assertion that Pakistan was “a failed state” caused at least one knowledgeable commentator to drop a stitch. (Sorry for the mixed metaphor.) For me, though, it was that first answer about cutting government spending that left me staring in wonder. McCain’s comments indicated a complete disconnect from even the most basic understanding of macroeconomics and a mindless commitment to an orthodoxy that would make matters much worse. Perhaps worse still,

Sen. Obama did not — and arguably could not — say as much. While his comments were true as far as they went, Obama accepted McCain’s premise that we need to cut spending right now.

In two recent blog posts, Michael Dorf has pointed out that, even on its own terms, McCain’s proposed spending freeze would not actually cut spending and that government spending fails to explain either the origins of the housing crisis or how McCain could support the now-defeated rescue bill if he believes his own explanation. All true. The problem, though, is much more fundamental (to use one of Sen. McCain’s favorite words): cutting spending right now would be the worst thing to do.

Let’s put aside for now whether government spending is the culprit in getting us into this mess. (I don’t think that it is, but that’s irrelevant for now.) Let’s also put aside whether there are long-term fiscal imbalances that need to be addressed. (I strongly suspect that those problems are overstated, but I readily acknowledge that reasonable people can disagree.) The question that McCain and Obama addressed was what to do when one of them becomes president in less than four months. They said that we should cut government spending. This is utter foolishness.

One cannot, of course, do justice to the macroeconomics of deficit spending in one short blog post. Perhaps the most direct way to put the point is this: Cutting spending when the economy is already weak and getting weaker is like bleeding a dying patient. Consumers are scared, many are losing their jobs, and access to credit to buy things is drying up. We can thus expect consumption spending to weaken considerably. Businesses have lost access to credit and, more importantly, have lost any plausible reason to invest in expanding their businesses in the face of a potentially disastrous recession or even depression; so we can similarly expect business spending to continue to weaken. The rest of the world has caught our financial contagion, and most of our trading partners have seen their economies weaken significantly in recent months. Notwithstanding the tanking of the U.S. dollar, therefore, exports will not bail us out. State and local governments are already in the process of slashing budgets as their tax receipts shrink. The only pillars remaining to bear all the weight of propping up the economy are thus federal spending and tax cuts. (Tax cuts, as welcome as they would be for strapped consumers, are also less likely to be spent by people who are understandably scared about their immediate futures and who thus need to put as much aside as they can.) Yet the candidates say that the first thing they would do is cut federal spending. Let’s open another vein and see if the patient gets better!

The most generous thing one can say about this lunacy is that one or both senators is really against “wasteful spending,” not all federal spending. If so, neither even came close to saying so. Still, it is counter-intuitive but true that even wasteful spending is better than no spending at all when the economy is down. The scientist who receives a grant for studying the DNA of bears in Montana, after all, buys groceries and pays rent. I would be the first to say that we should always try to spend government money on non-wasteful projects (though I see no reason why the infamous bear DNA study is thought to be presumptively wasteful); but neither candidate is talking about keeping up the same level of spending by shifting funds from dumb stuff to smart stuff.

We will need a stimulus package, and we will need it soon. Yet neither party’s nominee (nor any of the other leaders in Washington) will say as much. Given that Sen. Obama leads the party that has traditionally been more open to the idea that at least temporary government stimulus is necessary, why did he at least not say something about the foolishness of cutting spending right now? Just as some people still like to blame Bill Clinton for the country’s problems, I blame him for this.

The essence of Clinton’s triangulation strategy was to accept his opponents’ critique of “old Democrats” and claim that there is a Third Way that accepts the wisdom of both sides and rejects their excesses. Sounds nice. In the case of government spending and deficits, Clinton’s strategy involved accepting the idea that government is bad and refusing to defend the important roles that government must play. While I suspect that Clinton understood that cutting spending in a situation like the one we currently face would be the height of folly, the reality is that his rhetorical stance undercut the ability of anyone in national politics to stand up for real fiscal sanity. If Sen. Obama had said: “You know what? Cutting government spending right now is the exact opposite of what we should do,” everyone would have been shocked. Republicans would have had a field day, and Democrats would have distanced themselves from his comments. (A congratulatory blog post from me probably could not save his campaign.)

In short, strategic capitulation on matters of principle comes with a price. Right now, the best we can hope for is that the next president will ignore the conventional wisdom (and his own words) and realize that an economy on its deathbed needs all the life blood it can get.

If the players in Washington do not abandon the general contours of the plan that the [...]]]> I had planned to write today about the next steps in dealing with the financial crisis, following the agreement in Washington on the major contours of a bailout plan. Last night, however, the plan fell apart, with House Republicans walking away from the negotiations. The nature of any actions at the Federal level — as I write at 8:30am EDT on Friday — are thus very much in doubt. With the situation in flux, I will take the opportunity here to offer a few thoughts on the crisis and a number of ways that it might yet be handled, either picking up where we left off or starting from scratch.

If the players in Washington do not abandon the general contours of the plan that the Bush Administration proposed (a revolving line of credit falsely called a “$700 billion bailout” when in fact it could be any amount, and when the numbers that are being tossed around are gross, not net, costs to the Treasury), then clearly the movement in the past week has all been in the right direction. Rejecting Treasury Secretary Paulson’s blank check approach was entirely appropriate, in particular the deservedly reviled Section 8: “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

In addition, insisting that government infusions of funds be tied to equity shares in the companies who benefit is precisely what is needed to make sure that the net cost of the bailout to taxpayers is minimized. Efforts to ensure that those who made the wrong decisions do not walk away from the mess with huge payouts is at least politically necessary (and by my lights completely justified). Finally, making sure that distressed homeowners receive assistance — through, among other things, access to bankruptcy proceedings, which are hardly pain-free and which are designed to require at least partial payment of loans — is essential to address the underlying problem of nonperforming debt. “Nonperforming debt,” after all, is simply people not making any payments on their loans. Reducing that problem is the key to all of this.

If, however, the political grandstanding really means that we are starting over, the good news is that there are some very thoughtful alternatives available. Bob Hockett, a law professor at Cornell, offered an extremely interesting plan on Dorf on Law yesterday afternoon, before the talks collapsed. Bob suggests that the Federal Housing Administration (FHA) and the newly-renationalized Fannie and Freddie (and Ginnie) are the perfect institutions to deal with the problem at the level of housing rather than on Wall Street. I cannot do justice to his plan in this post, so I’ll just encourage everyone to link to it here. It’s a fairly long read, as blog posts go, but very much worth the time.

Similarly, the economist Jamie Galbraith, in an op-ed in the Washington Post, offers the disarmingly brilliant idea of using deposit insurance and the FDIC as the levers to fortify the financial system. (More provocatively, he wonders whether a bailout is even necessary, now that the banking system has consolidated so dramatically.) Taking off the $100,000 limit on deposit insurance and allowing the FDIC to perform its duties would potentially defuse the problem:

Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund — a cosmetic gesture — and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary — as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can’t save everyone, and those investors aren’t poor.

What both Hockett and Galbraith have in common is an ability to see the value of using institutions that already exist to do what they already are capable of doing well, if we would only let them. Those institutions already provide oversight, and they in turn are subject to oversight. No need to set up a new bipartisan review board or any such untested system that would surely become a political football.

Interestingly, therefore, even though the efforts over the past 30 years to deregulate the financial system have led to this crisis, the anti-regulation zealots at least left the structures in place to allow a relatively quick and simple regulatory solution. The regulators have been underfunded, ridiculed, and prevented from doing their jobs, but to their great credit (and the credit of the politicians who created those institutions during the last great financial crisis), they are still there. We would do well to put them back to work.

The question, of course, invites generalities and over-simplifications — an invitation that I do not decline when asked the question and will certainly not decline here. Admitting that there are a million exceptions to every rule, I do believe that there is one predictable type of error toward which legal [...]]]> My thanks to Dan Solove for inviting me to be a guest blogger on Concurring Opinions this month, providing an additional outlet for my blogging interests beyond my usual gig on Dorf on Law. As a way of introducing myself, I thought I would answer the question that virtually every law professor has asked me since I migrated from being an economics professor to a law professor: What is different about economists and lawyers?

The question, of course, invites generalities and over-simplifications — an invitation that I do not decline when asked the question and will certainly not decline here. Admitting that there are a million exceptions to every rule, I do believe that there is one predictable type of error toward which legal training seems to push people, and there is a different error toward which economics training tends to push other people. To put the point slightly differently, lawyers and economists have very different tendencies when approaching a problem or a question. These tendencies, or occupational hazards, can of course be overcome. Still, I have found them to be surprisingly reliable traits of the two professional minds. To put my answer simply: Lawyers look for black-and-white answers, while economists too often forget the limitations of their models.

First, the lawyers. Time and again, I find that lawyers, law professors, and (especially) law students will look at a possible answer to a problem and say: “Well, that won’t solve the problem.” For example, if I were to suggest that it would be a good idea to decrease class sizes in public schools, my stereotypical lawyer will say: “Well, that won’t solve the problem. Even with smaller classes, kids in poor schools will still do worse than kids in rich schools.” The lawyer might be right about that, but the economist in me immediately says: “So what? Even if I can’t fix the problem entirely, can I make a decent dent in the problem at an acceptable cost?”

Economics trains people to think in terms of marginal impacts, with the default mental exercise (conscious or not) being a multivariate equation with a set of explanatory variables. If one right-hand-side variable changes, what happens to the left-hand-side variable? This habit of mind strongly resists the temptation to expect too much of any particular solution. Legal scholars know this problem as “allowing the perfect to be the enemy of the good,” demonstrating that the basic idea does cross disciplinary boundaries. Again, however, we are talking about tendencies here, not absolutes.

A few years ago, in a session at AALS, I offered a variation on this observation about the absolutism of lawyers. Afterward, Professor Tamar Frankel of BU Law School suggested to me that the reason for the legal tilt toward all-or-nothing answers is that the basic concepts in law are guilt or innocence, liability or no liability. Lawyers are trained to argue that their client is right, not partially right. I suspect that Professor Frankel is correct that this explains a great deal of what I’ve observed over the years. In any case, I would be very interested to know whether or not the experiences of Concurring Opinions readers support my observations about this occupational hazard and, if so, if other explanations come to mind.

Now, the economists. The central tool of economic thinking is the simplified model. Boil the myriad complications of the world down to a limited set of variables that seem to capture the essence of what we want to understand, try to understand how the variables interact, and see if we can make predictions or give reasonable policy advice. The very power of that approach, however, sometimes (often?) leads to the tendency to treat a model as if it is the reality. Two very different examples will, I hope, make clear what I have in mind.

(1) At a tax workshop several years ago, in the context of a discussion of progressivity and regressivity, a participant noted a then-recent news story in which a Nokia executive in Finland had received a speeding ticket that carried a fine of more than $100,000. The amount of the fine, if I recall correctly, was set by law as a percentage of the violator’s income rather than a set number of euros. An economist in the room objected that this was an inefficient way to set the fines, because the harm of speeding was not correlated with the driver’s income. A law student replied that the harm of speeding might not be the only harm that policymakers cared about. They might put a positive value on the idea that people — no matter how wealthy — should not be able to easily buy their way out of socially acceptable behavior. Expanding the social welfare function, in other words, to reflect positive utility arising from greater social equality could support such a penalty regime.

This student’s suggestion, of course, is not the end of the story; but it is at least a good way to make the well-understood point that the standard economic approach to efficiency is very adaptable. Even so, the economist in question (who is, by the way, a justifiably well-respected member of the fraternity) simply rejected the suggestion out of hand, saying that social equality was not an appropriate argument in the social welfare function. Apparently, he was so accustomed to thinking about social welfare functions that included only certain familiar variables and excluded others that the very idea of changing the variables (even within the same analytical framework) struck him as illegitimate.

(2) I’ve recently written a series of posts on Dorf on Law (the most recent being here) about the housing crisis. As part of my analysis, I’ve been talking about the surprising fact that home ownership is generally not the wise financial move that we often believe it to be. As I described the factors that one takes into account in determining the wisdom or foolishness of buying versus renting, I focused on the standard financial variables that one typically takes into account in analyzing financial decisions: interest rates, expected time in the residence, etc.

On the comment board, Michael Dorf of Cornell Law pointed out that one reason people buy rather than rent is the relative paucity of pet-friendly rentals, which drives pet-owning potential renters into purchases that might end up being relatively very costly. As I read his comment, I realized that I had not merely ignored a fairly important non-financial matter that might be at play in the minds of many potential home owners. I had, in fact, ignored the most important reason that I have owned homes for most of my adult life. Each time I moved between 1993 and 2005, I bought a house — even when I knew that I was likely to stay in the house for only a short time — because I had multiple dogs and cats. Even so, when thinking in the abstract about home ownership, I ignored this experience and simply focused on “the standard model.”

The point of these two examples is obviously not that every economist makes this kind of mistake all the time but to demonstrate the kind of error to which economists are generally prone. Lawyers say, in essence, “My client is innocent,” while economists say, “My model is right.” Luckily, there are plenty of good lawyers and good economists who regularly avoid these professional pitfalls. Still, the pitfalls are there.

In any event, you now know my answer when people ask me the difference between economists and lawyers. But I could be wrong, at least marginally, if my model is incorrectly specified . . .