Ronald Coase is conventionally described at the "Father of Law and Economics," sometimes along with Aaron Director, Gary Becker, and Guido Calabresi. Rightly so. Coase's The Problem of Social Cost is of primary importance to law and economics by highlighting the importance of transactions costs for understanding law as an economic system. Calabresi's contributions follow in this spirit. Others might be considered "founders" of various branches of law and economics, e.g. Douglass North and New Institutional Economics, Gary Becker and Price Theory and the Law.
I understand there is an obvious superficiality involved when one purports to make claims about the "founders" of any "movement," but don't want to get bogged down in questions about what qualifies one as a "founder" (e.g., didn't Adam Smith found empirical law and economics?) nor the definition of a "movement" of scholarly thought. My simple point is that empirical law and economics seems to have developed its own identity in legal scholarship separate from economic analysis of the law dedicated to Coasean transactions cost analysis or Beckerian price theory, though each of the latter certainly include empirical components. To the extent that it is useful to associate a specific methodology with a scholarly movement, and I think it is for reasons I will discuss, I humbly suggest that George Stigler's research agenda is an excellent model for empirical law and economics scholarship, if not empirical legal scholarship more generally. I offer some support for this claim below the fold.
Alfred Marshall once described economic theory as "an engine for the discovery of concrete truth." Stigler's training included considerable exposure to Marshall's Principles of Economics, an exposure that grew the seeds of what came to be recognized by his peers as the signature characteristic of his research: dedication to empirical verification of neoclassical economic theory. Milton Friedman describes this dedication as evidenced in Stigler's microeconomics textbook, The Theory of Price:
The linkage of fact and theory in his textbook foreshadowed his subsequent scientific work. His many contributions to economic theory were all a byproduct of seeking to understand the real world, and nearly all led to an attempt to provide some quantitative evidence to test the theory or to provide empirical counterparts to theoretical concepts.
Harold Demsetz, another contemporary of Stigler's, eloquently elaborates on this theme:
Housed in Stigler's mind, neoclassical theory had more than the usual quality of material with which to work. It was coupled with a joy in verification and with a strong work ethic and sense of duty to his profession. Intelligence, insight, wit, and style were evident in his writings. His articles and essays could not be ignored. They provoked readers to think and often to follow his lead. For some readers, they simply provoked. Stigler's passion for evidence gathering is also evident in his work, and he made no secret of it.
Coase describes Stigler's methods with a similar admiration:
Even more remarkable is the variety of ways in which he handles a problem; he moves from the marshaling of high theory to aphorism to detailed statistical analysis, a mingling of treatments which resembles, in this respect, the subtle and colourful Edgeworth. It is by a magic of his own that Stigler arrives at conclusions which are both unexpected and important.
Stigler is, of course, renowned for other contributions to economics. Milton Friedman describes his gift for writing as "matched among modern economists only by John Maynard Keynes." His seminal work with Claire Friedland, and subsequent work on the Theory of Economic Regulation, are equalled in their influence on "public choice" only by Buchanan and Tullock's Calculus of Consent. His contributions to theory, and industrial organization in particular, (a field he sometimes called "Microeconomics-with-evidence") were substantial in their own right. Stigler himself described The Economics of Information has his most important theoretical contribution. But Stigler's work displayed an unmistakable passion for empirics. And it is the empirical flavor of his economic analysis that landed Stigler the Nobel in 1982 for his "seminal studies of industrial structures, functioning of markets, and causes and effects of public regulation," though in an ironic twist, Stigler was initially rejected by the University of Chicago Economics Department for being "too empirical"! In his 1964 presidential address to the American Economic Association, Stigler announced that the "age of quantification is now full opon us," and that this age would be characterized by policy analysis informed by empirical evidence:
It will become inconceivable that the margin requirements on securities markets will be altered once a year without knowing whether they have even a modest effect. It will become impossible for an import-quota system to evade calculus of gains and costs . . .. Studies will inevitably and irresistably enter into the subject of public policy, and we shall develop a body of knowledge essential to intelligent policy formation.
It is this devotion to empiricism that suggests to me that Stigler's prominence in modern "law and economics," and empirical legal studies, is unduly small. For example, Richard Posner's recent review of Shavell's "Foundations of Economic Analysis of the Law sketches the history of law and economics without mention of Stigler. By way of casual empiricism, I doubt that the ratio of legal scholars even vaguely familiar with the details of Stigler's scholarship relative to, say, Coase, is greater than 1/10. By way of contrast, Stigler's many contributions have not been underappreciated by economists. The Nobel and Stigler's influence in industrial organization, public choice, price theory, and economic history suggest otherwise. But I do sense that his place in "law and economics" goes understated. This is unfortunate because his body of work represents a scholarly commitment to evidence rather than assertion, a commitment to quantitative and qualitative verification, and a relentless pursuit of Marshall's "concrete truth."
A few examples to support the previous sentence are probably unnecessary, but one can find more than a dozen in Stigler's Organization of Industry, which contains a reprinting of 17 of his contributions to "Microeconomics-with-evidence," of which he wrote "The ratio of hypotheses to reasonably persuasive confirmation is distressingly high in all of economic literature, and it must be my chief and meager defense that I am not the worst sinner in the congregation." Milton Friedman praises the methodology employed by Stigler:
Article after article combines subtle theoretical analysis with substantial nuggets of empirical evidence, presented so casually as to conceal the care with which the data were compiled and the effort that was expended to determine what data were both relevant and accessible.
Perhaps it would disturb Stigler that the ratio of hypothesis to empirical confirmation has grown significantly with the popularity of game theoretic modeling in IO economics (a topic I touched upon in my last post). And perhaps my view that Stigler's role in empirical law and economics and law and economics more generally has been undervalued correlates greatly with the fact that this ratio remains "distressingly high" in IO economics. Nonetheless, I find the following conclusion to Stigler's Nobel lecture, "The Process and Progress of Economics," a useful reminder of the benefits of the Stiglerian research agenda is a fruitful one for empirical law and economics/ ELS, and at the very least, a reminder of why I love to do economics:
The fascination of scientific work does not lie in the craftsmanlike utilization of the tools of a science. It is admirable for the gymnast to put his splendidly disciplined body through intricate maneuvers, and it is no doubt equally admirable for the scientist to put his disciplined mind through a sequence of complex analytical or experimental maneuvers. The great fascination of the scientific endeavor, however, is precisely in the speculative pursuit of new ideas that will widen the horizon of our understanding of the world. This endeavor is not that of a graceful intellectual gymnast: on the contrary, the scientist is stumbling about in a jungle of ideas or facts that seem to defy system or logic, and usually he fails to emerge with anything but scratches. The dangers of the search include the chance that a gifted rival will reach the goal, and the danger is not reduced by the fact that the rivalry is conducted under what for able and ambitious competitors are unusually chivalrous rules. Still, learning more about how this search for new knowledge proceeds is itself a worthy search for new knowledge, and we shall not abandon it.
R.H. Coase, Law and Economics at Chicago, 36 JLE 239 (1993).
R.H. Coase, George J. Stigler in Essays on Economics and Economists (1994).
Harold Demsetz, George J. Stigler: Midcentury Neoclassicalist with a Passion to Quantify, 101 JPE 793 (1993).
Timothy J. Muris, Improving the Economic Foundations of Competition Policy, 12 George Mason L. Rev. 1 (2003).
George J. Stigler, The Economists and the State, 55 American Economic Review 1 (1965).
George J. Stigler, The Process and Progress of Economics, Nobel Memorial Lecture (Dec. 8, 1992).
George J. Stigler, Memoirs of an Unregulated Economist.