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Blog, Law and economics, Privatization

Part 3 – Law and Economics Programs: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule

The last post introduced The Calculus of Consent and explained its pivotal role for Henry Manne and for the development of Law and Economics programs at US law schools. (Read more about Law and Economics programs here). What was this book that was so critical for Manne, “the true founder of law and economics,” and under what circumstances was it written?

In his 1963 review, Manne admits that the reading of the book “frequently is very difficult, and few compromises have been made…to make the going easier.”[1] In his 1987 article “The Calculus of Consent and the Constitution of Capitalism,”[2] Dwight R. Lee explains that the essential argumentation of the book included the following:

  • There is no “general interest” or “public interest” as such; there is only the self-interest of each individual;[3]
  • The self-interest of each individual is advanced only through market exchanges of private property under a capitalistic order: “No other economic order comes close to capitalism in fostering social harmony and widespread prosperity, that is, in promoting the general interest;”[4]
  • In a market (or capitalistic) economy, the principal if not only purpose of government is to protect private property rights;[5]
  • The power of the government should be limited, preferably through constitutional amendment, in such a manner that it would be impossible for the government to infringe upon the market process through “predatory behavior,” predatory behavior being defined as the violation of private property rights.[6]

In sum, The Calculus of Consent argues that the democratic notion of majority voting should be rejected in favor of requiring unanimous consent. The problem with majority rule, according to Buchanan and Tullock, is that it results in “overinvestment in the public sector.”[7] This violates the interests of the minority and limits private capital accumulation and investment, and thus limits economic growth. Only measures that are adopted with unanimity can be understood to be in the public interest. Or, as Charles K. Rowley puts it in his Introduction to a 2004 reprint, the book identifies “the principle of unanimity as the ultimate normative benchmark,”[8] in rejection of “politics as a mechanism for conflict resolution and of the principle of majority rule as an absolute doctrine of popular sovereignty.”[9]

Lee describes The Calculus of Consent as offering a means of “protecting capitalism from government.”[10] In her book Democracy in Chains,[11] Nancy MacLean states “it might more aptly be depicted as protecting capitalism from democracy.”[12] MacLean further explains:

[Buchanan and Tullock] made it clear that they preferred the constitutional rules of 1900 rather than 1960 – a kind of dog whistle to those who would catch the reference. It was that of the unique period referred to by legal scholars as the era of Lochner and Plessy, two pivotal Supreme Court decisions that ensured extreme economic liberty for corporations and extreme disempowerment for citizens on matters from limits on working hours to civil rights…[Buchanan argued] that representative government had shown that it would destroy capitalism by fleecing the propertied class—unless constitutional reform ensured economic liberty, no matter what most voters wanted.[13]

In their preface to The Calculus of Consent, Buchanan and Tullock explain that the seeds for the book were planted in 1958-59 at the University of Virginia, where Buchanan was head of the Thomas Jefferson Center for Studies in Political Economy and where Tullock had been awarded a research fellowship.[14]

In Democracy in Chains, MacLean draws a direct line from opposition to the Supreme Court’s 1954 decision in Brown v Board of Education to the creation of the Thomas Jefferson Center.[15] She recounts how in 1956, two years after the Brown decision, Buchanan submitted to Colgate Darden, the President of the University of Virginia, a proposal for the creation of an economics program within the university’s economics department that would be guided by  the traditions of “old fashioned libertarians” and “’Western conservatives’ who feared the ‘revolt of the masses.’”[16] Buchanan argued that the creation of such a center was urgent because of the Brown decision, which accentuated the “problems of equalitarianism,” including “the tax structure,” “income redistribution” and “the welfare state.”[17] Buchanan explained to Darden that the center needed to have an innocuous name so as to “not draw attention to its members’ ‘extreme views…no matter how relevant they might be to the real purpose of the program.’[18]

MacLean’s book recounts in detail how the Thomas Jefferson Center, once created at the University of Virginia, not only fostered the collaboration of Buchanan and Tullock on The Calculus of Consent,[19] but also served as the prototype for the Center for Study of Public Choice that Buchanan and Tullock later created at George Mason University—the same university whose law school Henry Manne came to head in 1986, as a result of Buchanan and Tullock’s orchestrations.[20]

Many warmly welcomed and praised MacLean’s book upon its publication. For example, George Monbiot wrote that the book is “the missing chapter: a key to understanding the politics of the last half century.” And Genevieve Valentine wrote the “sixty year campaign to make libertarianism mainstream and eventually take the government itself” is at the heart of the book.

On the other hand, some also heavily criticized it. Two vocal critics have been Henry Farrell and Steve Teles. Writing in the Boston Review, they refute MacLean’s contention that the school of public choice emerged as a response to the Supreme Court’s decision in Brown. They reject what they describe as MacLean’s argument that “Buchanan discovered a political ‘technology’ or ‘operational strategy’ for undermining liberalism, and this technology, as applied by Charles Koch, explains why the US right has been so successful in the last two decades.” In doing so, they acknowledge the potential importance of the story MacLean tells:

If this were all true, it would be a historical (and political) discovery of the greatest importance. It would radically alter our understanding of the history of the American right, placing a semi-peripheral individual and intellectual movement at the heart of the story. It would also mean that an intellectual movement that has usually been seen as motivated by its general opposition to regulation and the welfare state would instead have its origins in the white backlash against court-enforced desegregation.

Yes, Farrell and Teles concede, if MacLean’s story was an accurate one, it would force us to take a much more careful look at the libertarian movement in the United States—it would force us to recognize that its origins lie in large part not in an ideology of smaller government for its own sake, but in an ideology of smaller government for the sake of racism. That is, smaller government for the sake of continuing—entrenching—the economic and social subjugation of people of color generally and of African Americans in particular.

Yes, Farrell and Teles concede, this would be highly remarkable, if only it were true. The problem is, they assert, it is not true. Why is it not true? Because, they argue, “strong claims require strong evidence,” but “MacLean has scanty support:”

The problem with MacLean’s claims about Buchanan’s underlying motivations…is that they are her own interpolation rather than directly grounded in the source material she provides. MacLean does not back up her contention that the foundation of Buchanan’s entire school of public choice was motivated in his white Southern resentment of Yankee intervention with textual evidence. Instead, the reader has to rely on her belief that “individual liberty” had a coded meaning for Buchanan and the president whom he was writing to. This is a decidedly slender reed to support such a massive claim.

In sum, Farrell and Teles say that given MacLean does not have sufficient proof of her claims regarding Buchanan’s racist motivations, nor of his historical importance in the conservative “intellectual movement,” she should stop making such claims.

Let’s say that Farrell and Teles are right. That is, let’s say that Buchanan’s role in the development of the conservative intellectual movement was too small to be significant (an assertion with which Henry Manne would certainly disagree[21]) and that, even if Buchanan’s role had been significant, there is no proof that he was motivated by racism. In that case, where can we turn to know who did play a significant role and to better understand what were their motivations?

The next post will propose a response to that question.

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, and Part 4

[1] Henry Manne, “Book Reviews: The Calculus of Consent: Logical Foundations of Constitutional Democracy by James M. Buchanan and Gordon Tullock,” George Washington Law Review 31 (1963): 1071, 1065-1072.

[2] Dwight R. Lee, “The Calculus of Consent and the Constitution of Capitalism,” Cato Journal 7 (1987): 331-36, http://heinonline.org/HOL/LandingPage?handle=hein.journals/catoj7&div=32&id=&page=.

[3] Ibid., 333.

[4] Ibid.

[5] Ibid., 332.

[6] Ibid.

[7] Buchanan and Tulluck, The Calculus of Consent, 125, 148. See also Charles K. Rowley, Introduction to The Calculus of Consent: Logical Foundations of Constitutional Democracy, The Selected Works of Gordon Tullock, Vol. 2 (Indianapolis: Liberty Fund, 2004), xiv.

[8] Rowley, Introduction to The Calculus of Consent, xv-xvi.

[9] Ibid., xvi.

[10] Lee, “The Calculus of Consent and the Constitution of Capitalism,” 332.

[11] Nancy MacLean, Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America (London: Scribe, 2017).

[12] MacLean, Democracy in Chains, 81.

[13] Ibid.

[14] Buchanan and Tulluck, The Calculus of Consent, 15.

[15] MacLean, Democracy in Chains, 45-60.

[16] Ibid., 45.

[17] Ibid., 46.

[18] Ibid., 48.

[19] Ibid., 76-81.

[20] Ibid., 108-111, 115-126, 169-89.

[21] Manne described Buchanan as “one of the great towering figures of intellect in the world in the 20th and early 21st century.” “Dr James Buchanan’s Contributions to Social Philosophy and Political Economy,” Mercatus Center, published November 14, 2014, 2:05, https://www.youtube.com/watch?v=NeDf7Xhk9WY&t=3494s.

Blog, Law and economics, Privatization

Part 2 – Law and Economics Programs: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule

The last post began the story of law and economics programs in US law schools, described the importance of John Olin and the Olin Foundation in their development and introduced Henry Manne as playing an indispensable role. (Read more about Law and Economics programs here).

As John J. Miller explains in his book A Gift of Freedom: How the John M. Olin Foundation Changed America,[1] during Frank O’Connell’s visit with Manne at the University of Rochester in the early 1970s, Manne gave O’Connell a prospectus for a center dedicated to law and economics. After examining the prospectus, O’Connell became enthusiastic about the “law and economics movement”[2] and recommended to Olin that the Foundation invest in it. At first Olin was skeptical, asking “What the hell is a lawyer doing teaching economics?”[3] Clearly, however, he overcame his skepticism because, as noted above, the Foundation ended up investing upwards of $68 million in law and economics programs at a number of US law schools before the Foundation closed its doors in 2005. Miller explains that “of all the foundation’s activities, this was perhaps its most significant,”[4] and Olin remain convinced of its importance until his death in 1982.[5]

Manne’s role did not end with the delivery of that prospectus to O’Connell. To the contrary, his role was pivotal for decades to come. While the Olin Foundation contributed the funds, Manne contributed the organizational know-how and the enthusiasm. Miller explains that “although his scholarship had great impact, Manne made his most lasting contribution as an organizer.”[6] With Olin’s funding, Manne was able to realize his dream of exposing as many as possible to “law and economics thinking.”[7] He did this through the development of law and economics programs at several law schools and through providing the blueprint for the development of programs at many other law schools, through the creation of fellowships for graduate students studying economics, and through programs to educate judges and law professors.[8] Throughout it all he enjoyed the financial support of the Olin Foundation. Eventually Manne would write to Olin:

Your support was an entrepreneurial act comparable to funding a large and risky new enterprise…Without your financial and moral support…my own aspirations and ambitions would have come to nothing.[9]

Indeed, Miller explains that by the late 1980s, Manne had come to be recognized not only as a leading scholar in the field of law and economics, but also as one of the movement’s “greatest organizers.”[10]

Henry Manne graduated from Vanderbilt University in 1950 with a BA in economics and then went on to study law, first at the University of Chicago, receiving a JD in 1952 and then at Yale, receiving an LLM in 1953. At that time, Aaron Director, an economist, was head of the law school. Manne later described Director as a “steel-minded devotee of free markets”[11] and Manne said that he was “certainly influenced”[12] by him. At Yale, because he was a law and not an economics student, Manne was not allowed to take the economics classes that he wanted to. Later he said that he “hated ”[13] Yale, and he returned to Chicago as soon as he could, obtaining a position as a research associate for an “Antitrust Study” funded by the Ford Foundation. However, just one week after he assumed the role the Air Force called him to active duty, requiring him to report within 24 hours.[14] After leaving the military, Manne taught law at Saint Louis University and the University of Wisconsin.[15]

When Manne was at Yale and forbidden from taking the economics classes he wanted to take, he read independently the works of Ludwig von Mises and Friedrich Hayek.[16] Later, in 1957, he had the opportunity to hear Armen Alchian lecture on what was later published as “Some Economics of Property Rights.” Manne later described this encounter with Alchian as the “seminal intellectual event”[17] of his life: “everything I had done intellectually for 13 years came together, with this one idea of Alchian’s about the real nature of property rights and the Misesian notion of people making choices, with every choice being a tradeoff.”[18]

In sum, Manne’s exposure to Aaron Director at the University of Chicago, Manne’s independent reading of von Mises and Hayek while at Yale, and Manne’s encounter with Alchian primed him for another pivotal moment in his career. This occurred in 1962, the year when he accepted an appointment at George Washington University and the year when James Buchanan and Gordon Tullock’s book The Calculus of Consent[19] was published.

During the year before his death, Manne spoke publicly on at least two occasions of the importance of this book for him. Speaking on one of these occasions, Manne said:

I got the book and I was blown away. I said this really rounds out what became “law and economics.” This is very important. And I said the lawyers certainly ought to know about this. I had to twist arms as only a very junior professor can in the law review at [George Washington University] to get them to allow me to review that book. They didn’t think anyone else would be interested. And that review…is literally the only book review of “Calculus of Consent” to appear in any law review in the United States. That tells you something about the level of intellectual curiosity and scholarship in law circa 1962. When [the review] came out, I sent a copy to both Buchanan and Tullock…Within a matter of days I had a telephone call from [Tullock] inviting me to Charlottesville to give a paper and the rest was more of my personal history of a long and very close association mainly with Gordon but also very much with Jim. That came back some years later. I had started the law and economics center first at Miami and then at Emory. I got a call from [Buchanan] …They had moved the Public Choice Center down to George Mason [University] at that point…and they wanted to know if I would be interested in being dean of the law school.[20]

In sum, for Manne, The Calculus of Consent served as the fuel he was looking for: to spread the word of Alchian on property rights and of von Mises on public choice to lawyers.  Manne used this fuel to start a pilot law and economics program at the University of Rochester, before moving on to the University of Miami and then to Emory, creating law and economics centers at both with funding from the Olin Foundation. Further, Manne’s review of The Calculus of Consent lead to his long friendships with the book’s authors, and, ultimately, to Manne’s 1986 appointment to head the law school at George Mason University, alongside Buchanan’s and Tullock’s Center for Study of Public Choice. Manne remained at George Mason for the rest of his career, all the while with funding from the Olin Foundation (up until the Foundation closed its doors in 2005). At the time of his death in early 2015, Manne was hailed as “the true founder of law and economics.”

The next post will examine The Calculus of Consent, the book that was so pivotal for Manne, in greater detail.

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 3 and Part 4

[1] John J. Miller, A Gift of Freedom: How the John M. Olin Foundation Changed America (San Francisco: Encounter Books, 2006).

[2] Ibid., 62

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid., 65.

[7] Ibid., 65-66.

[8] Ibid., 66-69.

[9] Ibid., 66.

[10] Ibid., 79.

[11] “Securities and Exchange Commission Historical Society – Interview with Henry Manne – Conducted on August 6, 2012 by James Stocker,” 10,  http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/oral-histories/20120806_Manne_Henry_T.pdf.

[12] Ibid.

[13] Ibid., 12.

[14] Ibid., 14-15.

[15] Ibid., 16-17.

[16] Ibid., 13-14.

[17] Ibid., 20.

[18] Ibid., 20-21.

[19] James M. Buchanan and Gordon Tullock, The Calculus of Consent (Indianapolis: Liberty Fund 1999), http://files.libertyfund.org/files/1063/Buchanan_0102-03_EBk_v6.0.pdf.

[20] “JLEP Tenth Anniversary Symposium: Opening Remarks and Panel 1 – Armen Alchian,” Journal of Law, Economics & Policy, November 8, 2013 (video published January 3, 2014), 15:08-17:21, https://www.youtube.com/watch?v=7Rye088-avQ&t=1342s. Speaking on a separate occasion, Manne said:

My connection with Public Choice Theory and therefore with Jim [Buchanan] began in 1962 when I read, to my utter amazement, a book called “The Calculus of Consent.” I was totally enamored of it and I said this is something that the lawyers and the legal scholars have been looking for and have needed for a long time. And so I wrote a review of the book, which I’m guessing – it wasn’t easy in those days – five or six different major journals turned down. I was able to lean on my own local review at George Washington University to publish the review, and I can tell you, it is the only review ever written of that book in a law review…[Buchanan and Tullock] introduced great analytical power of economics to the field of political science, of political activity. I was very active in doing the same thing with law. Thereby, both those fields that had been extremely moribund intellectually came alive. They are very different fields today, each worthy of being in the university, than they were back in the days before Public Choice Theory.

“Dr James Buchanan’s Contributions to Social Philosophy and Political Economy,” Mercatus Center, published November 14, 2014, 3:14-5:44, https://www.youtube.com/watch?v=NeDf7Xhk9WY&t=3494s.

Blog, Law and economics, Privatization

Part 1 – Law and Economics Programs: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule

Have you had the chance to read Jane Mayer’s book Dark Money,[1] or Nancy MacLean’s book Democracy in Chains?[2] If you’ve not read either of them, there’s a good chance that you have at least heard of them. Reviews of Mayer’s book, published last year, have appeared, for example, in the New York Times (here and here), New York Review of Books, Financial Times, and Guardian. And reviews of MacLean’s book, published this year, have appeared also in the New York Times as well as The Atlantic, Boston Review, Slate and Forbes.

Mayer devotes a few pages of her book to the development of Law and Economics programs at prestigious US law schools such as Harvard, Yale, Columbia, Cornell and Georgetown.[3]  Mayer explains that law and economics was initially seen as a “fringe theory embraced largely by libertarian mavericks.”[4] That was until the Olin Foundation took an interest in the discipline and spent $68 million to support its growth. In doing so, Mayer recounts, the Foundation acted like an “academic Johnny Appleseed,” underwriting 83% of the costs for all law and economics programs at US law schools between 1985 and 1989.[5] (Read more about Law and Economics programs here).

To tell the story of law and economics programs and the crucial role of the Olin Foundation in their development at law schools around the country, Mayer relies heavily upon a 2006 book by John J. Miller entitled A Gift of Freedom: How the John M. Olin Foundation Changed America.[6] If you have any interest at all in law and economics programs in US law schools and especially in how they came into being, this book is well worth reading.

Here is something that stands out from the book:

The 1969 takeover of Willard Straight Hall at John Olin’s alma mater, Cornell University, galvanized Olin to “take his philanthropy in a bold, new direction.”[7] In case you’re not familiar with this event, it began with the nighttime discovery of a burning cross outside housing for black women students. The next morning, members of the Afro-American Society occupied the student union building, Willard Straight Hall, to protest perceived racism, the university’s judicial system and slow progress in establishing a black studies program. After tense negations with university administrators and a standoff with police, the armed protestors were allowed to exit the building carrying their weapons, and they received no punishment. Within a short period of time after the takeover, the governing bodies of the university had been restructured, a new campus judicial system had been instituted and the Africana Studies and Research Center had been established. In sum, the protestors got what they asked for.

Miller refers to the takeover and its aftermath as a “catastrophe,”[8] and a “disaster,”[9] and explains that it affected Olin deeply and “accelerated his disillusionment with higher education.”[10] Miller explains that in Olin’s opinion, the “real sources of our difficulties” with “radical students” is the fact that education was offered at too low a price.[11] Further, minority students should be admitted to elite institutions such as Cornell only if they are qualified in the same manner as other students and able to finance their education themselves, whether directly or indirectly.[12]

It was on this basis that Olin decided that rather than giving the bulk of his money to hospitals and museums, instead he would “channel his resources” primarily towards “scholars and activists who understood the principals of market capitalism and were capable of influencing opinion and debate.”[13] Miller quotes Olin:

My greatest ambition now is to see free enterprise re-established in this country. Business and the public must be awakened into the creeping stranglehold that socialism has gained here since World War II.[14]

At first, Olin wasn’t sure just how to go about achieving this objective. He knew that he didn’t want to send large checks to alumni funds or endowment drives, because it would be used to “subsidize” many of the “harmful trends” taking place on campus. Instead, “the foundation would target its giving in ways that circumvented and confounded campus radicalism.”[15]

After making a number of small donations of about $10,000 each to organizations such as the Heritage Foundation, the Center for the Study of Public Choice, and the National Right to Work Legal Defense Foundation,[16] the Olin Foundation seemed to finally find its calling when Frank O’Connell, then serving as executive director of the Foundation, drove to the University of Rochester to meet with Henry Manne.[17]

The next post will talk more about Manne and his indispensable role in the law and economics movement.

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 2, Part 3 and Part 4

[1] Jane Mayer, Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (New York: Doubleday, 2016).

[2] Nancy MacLean, Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America (London: Scribe, 2017).

[3] Mayer, Dark Money, 107-09.

[4] Ibid., 107.

[5] Ibid.

[6] John J. Miller, A Gift of Freedom: How the John M. Olin Foundation Changed America (San Francisco: Encounter Books, 2006).

[7] Ibid., 32.

[8] Ibid.

[9] Ibid., 40.

[10] Ibid., 31.

[11] Ibid.

[12] Ibid., 31-32.

[13] Ibid., 32.

[14] Ibid.

[15] Ibid., 40.

[16] Ibid., 40-41.

[17] Ibid., 61-62.

Blog, Lawyer Monopoly, Legal Aid

Who Deserves Legal Help and Who Doesn’t? The Answer Is Not In Words, But Actions

Section 81.102(a) of the Texas Government Code states that “a person may not practice law in this state unless the person is a member of the state bar.” Section 81.102(b) then allows for the Supreme Court of Texas to “promulgate rules prescribing the procedure for limited practice of law” by lawyers admitted out-of-state and by law students.

On August 29, 2017, the Supreme Court of Texas took advantage of this power, by adopting “Emergency Order After Hurricane Harvey Permitting Out-of-State Lawyers to Practice in Texas Temporarily.”

The Order provides that a lawyer who is admitted to the bar of another state and is in good standing in that state may, for a period of six months from August 29, 2017, “practice law in Texas” if that lawyer “is retained by a legal-aid or pro bono program or a bar association that provides services to victims of Hurricane Harvey.”[1]

It is important to note that no one, at least not in any online forum, has criticized the Order. Most notably, no one has said that out-of-state lawyers will provide inferior legal services to victims of Hurricane Harvey, by virtue of not being admitted to the Texas bar. No one has complained that the out-of-state lawyers will steal legal aid or pro bono work from Texas lawyers. No one has even complained that the out-of-state lawyers, working for free, will deprive Texas lawyers of paid work.

No, rather than criticizing the Order, it was welcomed. On the very day the Order was issued, the blog of the Texas Bar (of which all lawyers admitted to the bar in Texas are obligatorily members) posted an entry announcing the Order and providing a link to a form for out-of-state lawyers to fill out in order to volunteer. On the next day (August 30), the ABA Journal published an online article to publicize the Order and provide information about how out-of-state lawyers can assist. And the bars of other states, like Florida, Tennessee and Maryland publicized the Order, encouraging its lawyers to volunteer and providing links for additional information. Indeed, the only negative comment I was able to find about Texas opening itself to out-of-state lawyers was one by Margaret Becker of Legal Services NYC, who was involved with recovery efforts after Hurricane Sandy. As reported by Bloomberg BNA: “A lot of outside firms came to help with flood insurance and ‘they’re a mixed bag,’ Becker said. Some were conscientious but others were not, she said.”

While the Order itself was not criticized, that does not mean that its issuance did not prompt criticism. That criticism was directed at the circumstances that required the Order, and namely the restrictions that Texas and other states (either on the basis of ABA Model Rule 5.5 or otherwise) place upon multijurisdictional practice. One commentator to the ABA Journal article, Josh Effron, wrote that the Order:

helps to show the silliness of preventing lawyers from practicing across State lines in the first place: if an out-of-State lawyer is good enough to practice law in one case (i.e., pro hac vice) and is good enough to practice on a temporary basis (such as in this case), then clearly that lawyer is good enough to practice in general.

The only reason why we make it hard for lawyers to practice across State lines is not to protect the public but, rather, as a form of protectionism, for in-State lawyers to insulate themselves from competition. This runs completely counter to the alleged goal of State bars as protectors of the public interest (rather than the economic interests of the lawyers in that State).

Another commentator was equally harsh: On the website Above the Law, Elie Mystal wrote an article entitled “Texas Allows Out-Of-State Lawyers To Help, Kind Of Highlighting The Stupidity Of State Bar Restrictions.” He continued:

While we’re casting about for silver linings, might this kind of assistance lead us down a path where state bars more generally loosen out-of-state prohibitions on lawyers willing to work pro bono? I mean, I get the economics of out-of-state restrictions. This State’s bar can’t have That State’s lawyers flying in and scooping up all the legal work. It’s stupid and leads to economic inefficiencies, but I get the reasons for it.

But surely, when it comes to pro bono work, why should it still matter what state you are barred in? Why should we make people willing to help for free endure the friction of finding “local counsel” and all that? I don’t mean to sound like Jim Harbaugh, but Legal Aid should be a backbone of our social safety net, and limiting that service based on state bar requirements doesn’t seem to be helping anybody.

The point that Effron and Mystal are making is, essentially, that if a state can allow multijurisdictional practice in order to help victims of Hurricane Harvey, then why can’t other states —all states —allow multijurisdictional practice in other contexts? Mystal limits his question to the context of pro bono (free) legal work, while Effron asks it with respect to all legal work, without differentiation. Both complain that restrictions on multijurisdictional practice do not serve the public interest. To the contrary, they are nothing but a form of economic protectionism for in-state lawyers that operate to limit the public’s access to legal services.

These are entirely accurate observations about the Order, and they raise entirely legitimate objections to restrictions on multijurisdictional practice. However, they do not go far enough. Here is how they could, and should, go further:

1)         While there is no count—official or otherwise —of the number of victims of Hurricane Harvey who will need legal assistance, it will likely be a high number. And many of those persons won’t need legal help for just one matter or requiring just one type of legal expertise. To the contrary, they are likely to require help with respect to multiple matters and a wide range of subject areas: insurance, real property and mortgage, landlord/tenant, family law, bankruptcy, litigation, wills and estates, probate, consumer protection, employment. In this context, it is quite possible if not likely that the demand for free legal services by victims of Hurricane Harvey will be greater than the supply that lawyers, be they from Texas or out of state, will be willing or able to provide. That is, just as legal aid organizations across the country are not able to serve the needs of everyone who is eligible for legal aid, so many victims of Hurricane Harvey will not be able to access free legal services because the demand will be greater than the supply. Some of those persons will be able to pay at least something for legal services. Who will they turn to? If they are paying for the services, they will be limited to lawyers admitted in Texas. Where is the logic in that? According to the laws of supply and demand, the fees charged by the Texas lawyers should be higher than they would be if Texas were open to competition from out-of-state lawyers on a fee-paying basis also. If the victims of Hurricane Harvey can access out-of-state lawyers for free legal services and no one claims that the quality of those services will be harmful to those victims, or even simply inadequate, then on what basis can it be legitimate to deny the victims access to out-of-state lawyers on a fee-paying basis in a more competitive marketplace than one that is limited to Texas lawyers only?

Keep in mind that the Order is valid for six months—unless the Supreme Court issues an extension, all of the out-of-state lawyers (again, working for free) will need to wrap up their work by late February/early March 2018. It is unlikely that all outstanding legal issues connected to Hurricane Harvey will be fully resolved by then. Regardless of whether the Supreme Court issues an extension or not, the Order will at some point expire and when it does, victims of Hurricane Harvey will no longer have access to free legal services by out-of-state lawyers (not legally, anyway). And if they can’t find a Texas lawyer willing to work for free then they’ll have to get in line and pay for a Texas lawyer, just like everyone else.

It is in considering the situation from this urgent context that the pure protectionist purpose of Model Rule 5.5 (the protection of in-state lawyers) is laid bare—indeed, stark naked—and the need to end such protectionism becomes even clearer.

2)         The Order itself is an acknowledgement on the part of the Supreme Court that how lawyers are regulated generally, and the unauthorized practice of law rules specifically, have a direct and demonstrable effect upon the extent to which citizens of a state are able to access legal services. (This is a topic that I explore in my book Modernizing Legal Services in Common Law Countries: Will the US Be Left Behind?). Going further, the Order is an acknowledgement that the exclusion of out-of-state lawyers (Model Rule 5.5 and its counterparts) has the effect of denying needed legal services to a population. Hurricane Harvey did not invent this situation, it simply made it more acute and more blatant for a very particular population: one that is large but still contained and easily identifiable, as well as highly mediatized and easy to sympathize with.

3)         The Order exposes the belief on the part of Supreme Court of Texas (if not all legal regulators) that some legal needs are more worthy than others. As regards the victims of Hurricane Harvey, the Supreme Court considers their legal needs so worthy, the court acted very quickly (just four days after Hurricane Harvey hit the Texas coast on August 25) in order to take very rare (unprecedented?) steps to expand the supply of free legal services, even if some (many?) of the beneficiaries of those services could pay at least something for them. (Unlike the rules of most legal aid organizations, there is nothing in the Order that restricts the beneficiaries of free legal services by out-of-state lawyers only to victims of Hurricane Harvey who are unable to pay for them.)

Contrast what the Supreme Court of Texas presumably learned back in June, 2017 from a report by the Legal Services Corporation (LSC), “The Justice Gap: Measuring the Unmet Civil Legal Needs of Low-Income Americans.” This 68-page Report offers these startling statistics: 71% of low-income households in the United States have experienced at least one civil legal problem in the past year, and 25% have experienced six or more civil legal problems. Of those civil legal problems, the Report states that 86% of them received inadequate or no legal help.” 86%.

The Report lists the most common civil legal problem areas as health, consumer & finance, rental housing, children & custody, education, disability and income maintenance. These problems (together with a host of others, such as domestic violence) afflict the more than 60 million Americans across the country that have family incomes at or below 125% of the Federal Poverty Line (FPL), including senior citizens, persons with disabilities, veterans and residents of rural communities. The Report calls out Texas as having 5.7 million people with incomes under the FPL, a large number as compared to other states. More specifically, of Texas’s total population of 26.8 million, 21.1% have incomes under the FPL. Based upon an average household size of 2.84 persons, this means that there are approximately 2 million low-income households in Texas. Extrapolating from the national figures of 71% and 86%, this means that last year in Texas approximately 1.4 million low income households experienced at least one civil legal problem, and of those, no fewer than 1.2 million of those problems received inadequate or no legal help. Contrast that number to these currently available numbers for Hurricane Harvey: as of Friday September 1, it was estimated that 185,149 homes were damaged or destroyed and 364,000 people had registered with FEMA (Federal Emergency Management Agency) for assistance. Those numbers are considerable, but they do not surpass the 1.2+ million unmet legal needs of low-income households in Texas in the past year.

Underscoring these issues, and going further back, in December, 2016, the Texas Commission to Expand Legal Services issued a report containing eight recommendations to the Supreme Court with the purpose of expanding the availability of civil legal services to low- and middle-income Texans. Those recommendations include “The Court should form a standing committee to maintain accountability for closing the justice gap and to monitor the effectiveness of reform initiatives,” “The Court should encourage the State Bar of Texas, the Texas Access to Justice Commission, and local bar associations to create pipelines of services for modest-means clients,” and “A primary objective of future rulemaking projects should be to make the civil justice system more accessible to modest-means clients.”

There is no evidence in the public record that, since December, 2016, the Supreme Court of Texas has acted upon these or any of the other recommendations in the Texas Report. Nor is there any evidence that since June, 2017, the Supreme Court of Texas has taken any steps to address the situation of the 1.4 million low-income Texas households described in the LSC Report. Why would the Court would be utterly inactive with respect to the dire needs described in those Reports and at the same time be so quickly reactive with respect to the needs of the victims of Hurricane Harvey, if the Court did not believe that some legal needs are more worthy—more deserving of resources and attention—than others?

Do we agree? We can all agree that the victims of Hurricane Harvey deserve legal assistance. Lawyers can demonstrate that agreement by volunteering to help them on a pro bono basis. By all accounts, many lawyers have volunteered, all within a matter of days. But do we also agree with the Supreme Court of Texas that the 1.4 million low income households in Texas (and by extension the 60 million low-income persons throughout the United States) are less deserving of assistance with their legal issues that are unrelated to Hurricane Harvey? We can declare over and over that they are equally deserving of assistance, but, like the Supreme Court of Texas, our inaction says otherwise: We do believe that some legal needs are simply more worthy than others.

[1] The Order also allows a lawyer to “practice law in Texas” if that lawyer was displaced form his/her home state due to Hurricane Harvey and works remotely from a Texas location to provide legal services in his/her home state.

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Related posts on this site:

Chapter 9: Alternative Structures Cannot Help Those Who Cannot Pay

Chapter 12: Opportunities for Legal Aid

Chapter 20: Unmet Need as Human Rights Crisis

Chapter 23: Endless Objections and The Lawyer Monopoly

Blog, Privatization

You Asked For Research? You Got It! Now What Are You Going to Do With It?

The last post described recent (and still evolving) research by NYU PhD candidate Hannah Simpson. Her empirical research focuses on how the fees that a state (that is, a country’s national and/or local government) charges to access its legal systems (courts as well as other agencies such as those for property registration and licensure – which collectively Simpson refers to as a state’s “property rights institutions”) interact with other institutional and economic conditions, and what the effect of that interaction is upon access to justice in that state. In a nutshell, her models demonstrate that the effect upon access to justice is as follows: in wealthy countries economic growth increases demand for access to the state’s legal system but decreases supply. This is because wealth and economic development in a wealthy country are liable to motivate the state to increase fees, on the grounds that the wealthy can and will pay them. However, those same fee increases are usually substantial enough to dissuade the poor from using the state’s system and thus there is an overall decrease in access to justice. In contrast, in poor countries, economic growth increases not only demand for access to the state’s legal system but also supply. This is particularly the case when the state’s system is institutionally biased in favor of the wealthy, even though, Simpson observes, such a conclusion appears counterintuitive. This is because economic growth motivates elites to buy into an otherwise fragile and unappealing institutional framework. This participation increases the system’s effectiveness and thus its appeal, and also leads to reduced administrative costs, enabling the state to reduce its fees, thus increasing accessibility.

Simpson’s research goes further, to also seek to understand: when a state uses its “property rights institutions” to generate revenue, what effect does it have upon competition from private legal services providers? Her conclusion in this regard is in two parts:

On the one hand, when a poor group exits a state system in favor of a private system, the remaining population is unequivocally worse off because the state system becomes both less effective and more expensive. It’s not clear that the exiting group becomes better off either, given that, Simpson observes, when a poor group exits a state system in favor of a private one, the poor group is generally moving from a system based upon procedural safeguards to one based upon “cheaper” methods of enforcement, notably peer pressure and violence. On the other hand, if the poor group’s access to the state system was more theoretical than real because of the system’s bias against the poor, then the poor group can understandably perceive itself to be better off with real peer pressure and violence as opposed to nothing more than theoretical procedural safeguards.

When a wealthy group exits a state system, the state system also becomes less effective, because of the reduction in the number of participants. On the other hand, the additional consequences for the remaining population are equivocal—indeed, they are paradoxal. In theory, the remaining population should benefit from lower fees, but only under certain conditions, namely that the country is experiencing low economic growth and income inequality is increasing, because under these conditions the state will likely lower its fees in response to the exit of the wealthy group. However, Simpson explains, those are not the conditions under which wealthy groups are motivated to exit a state system. Instead, they are motivated to leave when economic growth is high and income inequality is decreasing, because those are the conditions under which a wealthy group is more likely to benefit from participation in a private system rather than a public one. Further, under those conditions, wealthy groups are willing to pay a higher premium to access a private system. In sum, it appears that if a wealthy group does choose to opt out of a state system in favor of a private one, it is more likely than not to do so under conditions that will result in negative effects for the remaining population.

Simpson’s research is complex. It requires significant intellectual investment. But those facts do not make her research less compelling, or less deserving of attention. Again, you can read about her research in more detail here.

What are the implications of Simpson’s research? I suspect there are many—in this post I’d like to consider two of them.

Implication N° 1: We Can Predict the Consequences of Privatization

Let’s start with Gillian Hadfield’s 2016 book Rules for a Flat World: Why Humans Invented Law and How to Reinvent It for a Complex Global Economy. In this book, Hadfield deplores the “abysmal” state of “our knowledge about legal infrastructure.” She continues: “there is next to no research on the fundamental questions of how most effectively to provide legal infrastructure in different environments.” She deplores that “legal infrastructure is simply not on the research agenda in our universities.” She bemoans that “research on how to build legal infrastructure in the face of mounting costs, with the dramatic upheavals of the complex global economy, or in places where legal order is absent or broken” is barely on the radar. Hadfield further laments the lack of research in this post.

Of course Simpson’s research does not respond in full to Hadfield’s lamentations, but it is a beginning of a response, and a highly significant one. It exposes the consequences for access to justice of an important element of legal infrastructure—the use of legal institutions to generate revenue—an element that Simpson persuasively argues has not received sufficient attention to date.

More than that, Simpson’s research speaks directly to the principal argumentation of Rules for a Flat World: that regulation should be privatized. More specifically, the book argues that “markets” (private enterprise) should be allowed to compete with state (public) agencies as well as with each other for the provision of regulatory services. An important element of Hadfield’s proposal is that private regulators would be allowed to charge fees to generate not just revenue, but profit (“dangling the prospect of profit”).

Simpson’s research indicates that if the proposal of Rules for a Flat World were to be implemented, certain groups would likely benefit, while certain others would likely suffer. The beneficiaries would be what Simpson terms “wealthy groups,” that is, it would be the “companies” and “businesses” (that is who Hadfield depicts as the customers of private regulators) who can afford the fees of a private regulator. Those who would not benefit would essentially be everyone else (individuals, businesses and other organizations unable to afford the private fees). They would, Simpson’s research demonstrates, be left with a state legal system that is necessarily less effective (because of reduced usage) but no less expensive (because it would be unlikely that the state would be motivated to lower its fees in response to the exit of the wealthy groups). The remaining users would have the right, like the wealthy groups, to also exit the state system for a private one, but Simpson’s research suggests that such a right would be little more than theoretical. If they were to exit the state system, the remaining users would end up in private systems inferior to the state’s, because they would not be able to pay the fees required to establish and maintain a system approaching the state’s. So, instead of having recourse to (expensive) procedural safeguards to protect their rights, they’d have little more than (cheap) peer pressure, if not violence.

Implication N° 2: A Stark Reality and a Stark Choice

Recall Simpson’s finding that in wealthy countries economic growth increases demand for access to the state’s legal system but decreases supply. Again, this is because wealth and economic development in a wealthy country are liable to motivate the state to increase fees, on the grounds that the wealthy can and will pay them. However, those same fee increases are usually substantial enough to dissuade the poor from using the state’s system and thus there is an overall decrease in access to justice.

This finding places us before a stark reality. In a wealthy country like the United States, we can use our courts and other “property rights institutions” (without forgetting that our courts are intended to protect not just property but also civil—human—rights) as a means of generating revenue for the state, or we can use them as a means to disseminate access to justice on as wide a basis as possible. They cannot be used for both because, based upon Simpson’s research, in wealthy countries one of these objectives is mutually exclusive of the other. If we choose to use our courts and other state legal institutions as a source of revenue, then at the same time, we are choosing—deliberately and with full knowledge—to limit if not entirely block access to justice for a certain portion of the American population, and the more we rely upon those institutions for revenue (that is, the greater the fees we charge), the larger will grow that portion of the American population with limited to no access to justice.

This stark reality leaves us with an equally stark, three-option choice:

  • Do we continue to accept that our courts and other legal institutions may be used as a means for generating revenue for the state, with the consequence of denying to a significant portion of the population access to state (public) legal institutions, and thus continue to deny them access to justice?
  • Do we move in the direction proposed by Hadfield? That is, do we open a regulatory “market” and allow private regulators to compete for regulatory “customers,” including competition with state (public) courts and other property rights institutions, with the consequences described above? Or,
  • Do we recognize that courts and other state legal institutions provide a public service—that they provide something that we as a society need and value because it brings economic as well as social value to everyone? And at the same time do we recognize that in order to disseminate this public service—access to justice—on as wide a basis as possible, that our courts and other state legal institutions must be financed publicly not with user fees but through equitable, progressive revenue sources?

As I’ve already noted, Simpson’s research is new and, as yet, exists only in the form of an evolving working paper. Nevertheless, her work is highly intriguing, it has multiple implications, and it already merits attention.

It’s a beginning of a response to Hadfield’s call for more research. The question is: now that we have it, what will we do with it?

If you’d like to subscribe in order to receive notices of new posts, you can do so by scrolling to the bottom of this page — you’ll see the place in the bottom left corner. Thanks for subscribing!

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, Part 3 and Part 4

Democracy? It’s Messy. Who Needs It?

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections