A Serious Debate on Empiricism and Theory in Bankruptcy

Last April, we posted the abstract of Robert Rasmussen's (Vanderbilt) working paper, "Empirically Bankrupt," which critiques three empirical papers in the bankruptcy area.  The abstract concluded that "[f]or empirical work to be credited, at a minimum, it has to look in the right place, ask the right question and draw the right inferences. When empirical work fails to cross this threshold, it conclusions must be rejected."

One of the articles being critiqued was Elizabeth Warren's (Harvard) & Jay Lawrence Westbrook's (Texas) recent study, Contracting Out of Bankruptcy: An Empirical Intervention, 118 Harv. L. Rev. 1197 (2005).  A few months ago, Warren & Westbrook posted a rejoinder, "The Dialogue Between Theoretical and Empirical Scholarship," that not only addresses Rasmussen's criticism, but also tries to articulate an optimal relationship between theory and empiricism.   The entire exchange between Rasmussen and Warren & Westbrook is worth reading. Here is the abstract of the rejoinder essay:

In this essay we offer brief reflections on the best process for critiquing empirical work in law and sustaining an engagement between theoretical and empirical approaches. We emphasize the importance of theoretical work in helping to shape the scholarly agenda, but we urge that theory should be more closely tied to fact. We illustrate our argument by responding to a recent critique of our own empirical work by Professor Rasmussen. His principal claim is that our work should be discounted because we reported on all business bankruptcies, both those of entrepreneurs and those in corporate form. In response, we reanalyze our data, separating the individuals from the corporations; in every case the re-analyzed data support the conclusions of our original paper to the same extent or more strongly.  Similarly, his other claims about our work are shown to be incorrect.

Comments

[Hayden J.]

In philosophy, empiricism is a theory of knowledge which asserts that knowledge arises from experience. Empirical data is essential because it is the first hand and actual situation experienced by those factors concerning the specific problem. Say, Newspapers are taking hard hits in this recession. Thorough studies must be conducted to solve the problem. Newspapers have been suffering a loss of readership, as more and more people move towards reading online editions instead of the time honored format. Currently, there are 4 newspapers that are seemingly doomed for extinction, according to the Wall Street Journal. The Philadelphia Daily News, Miami Herald, Detroit News, and Minneapolis Star Tribune are all in dire straits; 2 of them have already filed for bankruptcy. The Seattle Post Intelligencer has moved to an online edition, as no amount of payday loans could save them. The idea of people starting their day with coffee and crisp newspapers may be a thing of the past.

[Bob Rasmussen]

A quick note for anyone interested in the exchange between me and Elizabeth and Jay. Rather than writing a response to Elizabeth and Jay's reply (three papers on this point seemed to me to be enough), I inserted responses in the soon-to-be-published version of the piece which show that the arguments in Elizabeth and Jay's response fail for basically the same reasons as did the arguments in their original piece. The data they produce simply cannot carry the weight they put on it. These responses are not in the electronic version of the piece currently posted on SSRN, but if anyone is interested in looking at them, if you send me an email I will send you a reprint once they are available.