Monday, May 8, 2023

Guido Calabresi and the “Economic Style,” Part 1: The Law & Economics Education of Guido Calabresi

This post, by Karen Tani (University of Pennsylvania), is the second in a series of posts in which legal historians reflect on Outside In: The Oral History of Guido Calabresi (Oxford University Press), by Norman I. Silber.
When I first met Guido Calabresi, it was in an interview for a clerkship. As an outsider to the world of Yale Law School, I knew him only by reputation and had little sense of how he had achieved his stature. Prior to the interview, I tried to familiarize myself with his legal scholarship, but I lacked the intellectual grounding to really understand the importance of his interventions. The interview went just as I feared, at least from my perspective. We had a moment of connection when we talked about the infamous Korematsu case and my Japanese American grandparents’ experience at that time (the early chapters of Outside In nicely capture why this would resonate with him), but besides that, I remember feeling unsophisticated and uninteresting. I was genuinely surprised when he offered me a job.
One of the delights in reading Outside In has been to realize, belatedly, how deeply my research interests intersect with Calabresi’s life. In part, this is because his adulthood covers the period that most interests me as a historian, and because his personal and professional journeys brought him into contact with so many influential people in law and politics. To take one example, my first article was about the revocation of government benefits and privileges as a tool of anti-communist persecution and how this influenced Charles Reich as Reich formulated what became “The New Property.” Calabresi not only knew Reich well, but, like Reich, had clerked for Justice Black during a period when the Supreme Court grappled with loyalty/security cases. All this comes up in Outside In.

I also now see another intersection. This post (one of several) discusses Calabresi as a complex vector of what sociologist Elizabeth Popp Berman has called “the economic style of reasoning”—an approach to governance that rose to prominence in the later decades of the twentieth century and that is central to my current work on disability and law in this period. [All the Berman quotes in what follows are from Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy (Princeton University Press, 2022). I use the abbreviation “TLE” for citations.]*
“The economic style of reasoning” is Berman’s term for “a distinctive way of thinking about policy” that became visible in Washington “as early as the 1950s, but really spread in policymaking between about 1965 and 1985” (TLE 3, 5). Less a coherent theory than a “loose approach to policy problems,” the “economic style” emphasizes the use of “basic microeconomics concepts, like incentives, various forms of efficiency, and externalities” (TLE 3, 5). Translated into policymaking (by liberals as well as conservatives), this has often meant quantification, the use of models to simplify, cost-benefit analysis, and “thinking at the margin” (TLE 5). And, compellingly, it has led to results that appear politically neutral. “[N]evertheless,” Berman cautions, the “economic style” “contains values of its own,” such as “choice, competition, and, especially, efficiency” (TLE 4).

Berman’s Thinking Like an Economist carefully documents “where the economic style of reasoning came from” and “how it spread and was institutionalized in Washington” (TLE 4). (She also explores and critiques the political consequences, to which I’ll return in later posts.) One facet of the “spread,” she argues, was through the field of Law & Economics. Here, Berman places most emphasis on Harvard and University of Chicago industrial organization economists (those interested in "the relationship between firms, industries, and markets”) and their influential converts in law (e.g., Chicago’s Richard Posner) (TLE 72). But Calabresi’s work receives mention, too, as “a separate, fruitful line of intellectual exploration” (TLE 84). In other words, Calabresi was there at the beginning and he mattered, but Berman appears to attribute the rise of economics in law schools (and beyond) largely to other figures.
Outside In brings additional nuance to this important account, by (1) describing Calabresi’s Chicago-skeptical training in economics, (2) documenting Calabresi’s somewhat different “economic style” (apparent in both his academic writings and his judicial opinions), and (3) suggesting that he may, in fact, have played a crucial (if complex) role in the “spread” phenomenon that Berman has rightly brought to scholars' attention. 

This post discusses the first: the Law & Economics education—or rather the economics, then law, education—of Guido Calabresi.**

Calabresi’s education in economics is the focus of Chapter 8 of Volume I of Outside In ("OI, v.1"). There, Calabresi credits G. Warren Nutter with introducing him to the subject. In Calabresi’s words, Nutter “had trained at the University of Chicago” and “went on to become a founder of the ‘Virginia School,’ which was more conservative, even, than the University of Chicago School of Economics” (OI, v.1, 167-68). (Berman also mentions Nutter, using him to illustrate the divergence between the Harvard and Chicago approaches to market governance (TLE 80).)  Calabresi clearly learned a lot from Nutter, but also recalls resisting Nutter’s “hardcore Chicago viewpoint” and learning important lessons about how to “deal with” that viewpoint’s power (OI, v.1, 168).
The other professors Calabresi credits with shaping him are the economists William Fellner and James Tobin, the political scientist Bob Dahl, and the “political economist” Charles Edward Lindblom

Fellner, who Calabresi says “influenced [him] the most,” is perhaps best remembered as a “conservative monetary theorist,” according to Norman Silber’s helpful commentary (OI, v.1, 170, 197). But to Calabresi, Fellner was important for teaching him “that so much of classical economics is really veiled political economy” (a conviction that, interestingly, is also central to Berman’s critique of the “economic style”) (OI, v.1, 170). In Calabresi’s words, “Fellner put Chicago economics into more of a political context; he understood that many of the things the Chicago economists were saying about efficient social ordering by weakly regulated markets were actually judgments about political economy and were not required by economic theory” (OI, v.1, 170).  Calabresi credits Fellner with helping him “develop[] a sense of . . . the advantages of markets in reaching neutral—today we would say ‘Pareto efficient’—results,” while also understanding reasons to be “skeptical of Chicago” (OI, v.1, 170).
As for the others, Tobin receives credit for offering Calabresi “liberal insights,” as well as for teaching him that what “might be true in theory . . . doesn’t work in practice” (a lesson that Calabresi brought from Tobin’s macroeconomic terrain into the realm of microeconomics) (OI, v.1, 170-71). Dahl, who was still quite junior at the time he taught Calabresi, sparked Calabresi’s interest in political theory. And Lindblom inspired Calabresi to bring modeling into law, as he famously did in his co-authored article “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral” (more on that later).
Calabresi’s education continued via a Rhodes Scholarship at Oxford, where leading figures in “left economics” (i.e., proponents of a “command” approach to economic regulation) supplemented what Calabresi concedes was a “primarily . . . Viennese School-Chicago background” (OI, v.1, 183). At Oxford, he also studied under John Hicks (famous for his contribution to welfare economics, including the formulation of what is now called “Kaldor-Hicks efficiency”). But already Calabresi was searching for something beyond economics, leading him ultimately back to Yale and to the law school.
Calabresi’s legal education is the subject of Chapter 10 of Volume I. Here, the reader will find fewer “lessons learned” from great mentors (although plenty of colorful and affectionate anecdotes). One gets the sense that although Calabresi picked up a lot of knowledge in law school, his professors did not shape his thinking to the degree that his economics professors did. (For a somewhat different perspective on Calabresi's time at Yale Law, see Laura Kalman’s wonderful Law & Contemporary Problems essay “Some Thoughts on Yale an Guido.”) As Calabresi’s constitutional law professor Lou Pollak told Silber, “it was clear that there was nothing that the faculty could do to teach Guido” (OI, v.1, 246).
What the legal education chapter instead brings into view is how Calabresi began mining the intersection of economics and law. His first attempt was, in his words, a “not particularly interesting” student Note on an antitrust topic (i.e., he did not stray from the comfort zone of Law & Economics, as it then existed) (OI, v.1, 227). But his second attempt, which eventually became the article “Some Thoughts on Risk Distribution and the Law of Torts,” was more significant. In Calabresi’s words, it was an exploration of “when and why many of the existing tort rules can be understood through and are consistent with economic theory” (OI, v.1, 227-228). And so began an illustrious career.
“But what I wrote was not just an economic analysis of law,” he emphasizes in his oral history. “It was a law and economics piece. It went on and said ‘here, economics doesn’t really explain the law; could it be something wrong with economics?” (OI, v.1, 228). There was a “back-and-forth” between law and economics “that is characteristic of Coase, that is characteristic of me, and that is not characteristic of the economic analysis of law, and much of what [Richard] Posner and others do” (OI, v.1, 228).
In my next posts, I’ll explore how Calabresi’s scholarship fits, and doesn’t fit, the “economic style” of reasoning at the core of Berman’s account. I’ll also reflect on the influence of Calabresi’s writing and teaching. And I’ll ask some questions about how we ought to assess this influence, using as a touchstone Berman’s diagnosis of the consequences of the “economic style.”

-- Karen Tani

* For more on Berman's Thinking Like an Economist, check out this LPE blog symposium

** In this post, I include some quotes from Calabresi himself. These come from Outside In. One note of caution: as Silber explains in a helpful Author's Note, the "fluid monologue" one finds in the book is not a verbatim transcript. The language attributed to Calabresi was no doubt his own (as I think people who know him would attest), but its presentation on the page was "craft[ed] out of [interview] transcripts." (OI, v.1, xiv)