• 15 January 2010

Varieties of New Legal Realism: Can a New World Order Prompt a New Legal Theory?

Victoria Nourse & Gregory Shaffer

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In 1930, during the Great Depression, Professor Karl Llewellyn declared in the Harvard Law Review that “ferment” was abroad in the law, proclaiming “realism” a powerful new scholarly force.  In the past year, we have seen our own ferment: the world has shown us the folly of law’s most powerful intellectual assumptions.  Events have called into question the academy’s enthusiastic embrace of neoclassical law and economics.  Indeed, one of the principal authors of the theory, Judge Richard Posner, has openly recanted his views, admitting that events have shed a harsh light on the theory’s wisdom and predictive power.1 For over twenty years, free market legal theory has entrenched itself in the academy, underwritten by monied foundations and sold in the form of fancy mathematical equations.  The problem with law and economics is not economics any more than the problem with eugenics was genetics.  The problem is that any formal model for determining law and policy is only as good as its founding assumptions.

Legal theory and, in particular, neoclassical law and economics will not be the same after the worst market collapse since the Great Depression, and the political engagement that resulted in the election of the nation’s first African-American President.  A quiet revolution is underway in the legal academy.  Indeed, one way of looking at a vast amount of seemingly unrelated scholarship over the past twenty years is to see that, in one way or another, it has sought to challenge the unrealistic assumptions of the neoclassical law and economics model.  We survey this scholarship under the mantle of a “new legal realism” and argue that much of it is a direct or indirect response to the “new formalism” of neoclassical law and economics.  New legal realists are not anti-economics (many of them are economists themselves), but they are challenging the new formalism’s assumptions about the individual, the state, and judging, as well as its approach to legal scholarship.

On the surface, neoclassical theory may appear to be the opposite of the old formalism, which advocated a “science” of doctrine based on common-law principles.  Neoclassical efficiency theory has touted instrumentalism rather than doctrinalism.  Oddly, however, the new formalism turns out, upon examination, to parallel the old in its form of deductive reasoning from axioms and the substantive policy prescriptions derived from it.  Neoclassical theory may talk about efficiency, but it ends up celebrating the common law.  It may claim to be a new science, but, like the old nineteenth century science of laissez-faire, it denigrates politics as the realm of special interests.

Perhaps it is not surprising then that, over the past eight years, new movements have arisen that characterize themselves as representative of a new legal realism.  Earlier articles have elaborated distinct versions of new legal realism in isolation.  We provide a taxonomy and overview of this literature in order to evaluate its commonalities and differences, facilitate mutual engagement among scholars, and build our own version of a “dynamic new legal realism.”

 
I.
Mapping New Legal Realism: Three Approaches

We categorize the new legal realism into three broad types.  First, there are behavioral approaches: studies that borrow from behavioral economics and political science to reach conclusions about law-as-behavior.  Second, there are contextual approaches: empirical work that includes studies using mixed methods involving bottom-up forms of empirical inquiry.  Third, there are institutional approaches: studies focusing on the power of institutions and institutional choices to determine our policies and shape our very ideas of self, society, and the state.

 
A.     The Behaviorists

There are two forms of what we call the “behavioral wing” of new legal realism.  One takes its inspiration from behavioral economics and the other, the attitudinal model in political science.  In 2001, Daniel Farber reviewed Cass Sunstein’s work on behavioral economics and proclaimed that studies challenging the rational-actor model were the new legal realism.2 Farber argued that behavioral economists had successfully attacked the rational-choice models underlying neoclassical law-and-economics and public-choice theory by presenting a more realistic depiction of human behavior.

In a 1997 article, Frank Cross urged that a “new legal realism” take account of the “attitudinal model” of political scientists, which, in its more extreme variant, holds that legal reasons are irrelevant and that judicial decisions can be predicted based on ideological variables and political affiliations.3 This work, which forms part of the new empirical-legal-studies movement, has spurred a flurry of studies that find ideological bias across subject areas of judicial decision making.4 By 2008, Thomas Miles and Cass Sunstein dubbed such studies the cutting edge of new legal realism.5

 
B.     The Contextualists

Stewart Macaulay has deployed the term “law in action” to capture Wisconsin’s variety of new legal realism.6 Statistical studies are not enough for this version of new legal realism and are often complemented or replaced by sociological and anthropological approaches to law.  Macaulay’s canonical study of how businesspersons make bargains (largely in complete disregard of the law) is the starting but not the ending point of this model.  We call this work, for purposes of distinguishing it from other forms of empirical research, “action studies,” reflecting the subject of study—the law in action.

There are variations within the contextualist approach that reflect the variations in the law-and-society movement from which this version of new legal realism builds.7 Each of these variants uses different empirical tools to investigate behavior in social context.  Economists working in a contextualist vein, such as Ian Ayres, John Donohue, and Steven Levitt, deploy quantitative large-N studies and multivariate regressions.  Sociologists, such as Robert Nelson and Laura Beth Nielsen at the American Bar Foundation, use mixed qualitative and quantitative methods.  Legal historians, like Lawrence Friedman, Robert Gordon, and William Novak use qualitative and quantitative methods, as well as critical reflection.

 
C.     The Institutionalists

Building from different traditions in economics and sociology, a number of scholars have claimed that new legal realism should focus on institutional forces.  Neil Komesar has taken an important institutional turn for new legal realists, showing how social-goal choice alone is insufficient to inform law and policy decisions because the pursuit of all goals will be shaped and determined by institutional processes.8 Working in this vein, Ed Rubin advocates a microanalysis of institutions,9 an approach that is not limited to public institutions, but includes studies of private organizations, building on neo-institutional insights from sociology.10

“New governance” theory of law, coming out of Columbia Law School in particular, focuses on efforts to move beyond a court-centric and rights-focused basis of law and toward new forms of problem solving involving pragmatic institutional experimentation.11 New-governance theory emphasizes the importance of innovation, learning, and flexible adaptation in light of experience.  Finally, other new legal realists have attacked the root image of the autonomous individual, not on the grounds of potential irrationality, but on the grounds of interdependence.  This approach has its roots in critical theory and feminism.  For scholars such as Martha Fineman, institutions must respond to universal human vulnerability, and thus institutional responsibility becomes central to policy analysis.12

 
II.
Responses to the New Formalism in Neoclassical Law and Economics

One can understand neoclassical law and economics as a new version of formalism if by formalism we mean a theory of law based on rationally organized first principles deductively applied.  It sets forth coherent principles (efficiency and wealth maximization) that it attempts to apply descriptively and prescriptively to all areas of law.  Judge Posner recognized this formalist argumentative structure when he wrote that “[e]conomic analysis of law is a formalist edifice erected on a realist [i.e., instrumentalist] base.”13

Some have claimed that law and economics is a “realist” enterprise since it rejects formal, self-contained doctrinalism.  New realists, however, argue that neoclassical theory turns realism on its head.  They contend that neoclassical theory seeks hypothetical end-states-of-affairs (wealth or welfare maximization) deduced from simplified assumptions rather than real-life facts and institutional processes.  New realists acknowledge that the new formalism differs from the old because of its instrumentalist base, but they contend that the new formalism arrives at conclusions remarkably like the old doctrinal formalism of the late nineteenth century—an idealization of common law and market processes, and a distrust of political institutions and state regulation.

In our article, we go into much greater detail regarding the new legal realist challenge to law and economics theories of judging, the individual, politics, and the state, as well as its general approach to scholarship.  For our purposes here, we note that each of the varieties of new legal realism directly or indirectly challenges aspects of neoclassical law and economics’ reasoning.  Behavioral economists challenge neoclassical law and economics’ rational-actor model.  Attitudinalists challenge the neoclassical law-and-economics notion of the efficiency of judging in the name of wealth-maximization.  Contextualists and institutionalists challenge an economics that does not compare institutional alternatives and their relative imperfections, and that fails to recognize that individuals’ situations vary so that some are in privileged or dominant positions in relation to others.  Like the old legal realists, new legal realists take aim at the “status quo bias” of formalist reasoning, a bias once entrenched in Herbert Spencer’s “laissez-faire” philosophy and its libertarian ideal and, subsequently, Chicago-school neoclassical law and economics’ recast exposition of that same ideal.

 
III.
Conclusion: A Dynamic New Legal Realism for a New World Order

As an alternative to existing forms of new realism, we begin the effort to outline a “dynamic new realism,” building from what we consider to be the best of the new realism.  Our form of dynamic realism focuses on “mediating” theory, which aims self-consciously to theorize the bridge between the world and legal institutions.  Unlike the old realism, such a dynamic new realism stresses that law is important within its sphere, in part because legal institutions exert power—the power both of violence and of reason.  Theories that simply ignore law leave the field open to those who would manipulate the law to achieve not only bad ends, but also literally terrifying ones (even torture).  In this sense, realisms that tend to explain law in terms of other disciplines are profoundly “unrealistic” to the extent that they leave law no place to exert its influence for ill or good.  Law cannot be reduced simply to economics, political science, sociology, or anthropology.  Neither the attitudinal model nor behavioral economics, neither large-N quantitative studies nor fieldwork, is enough.  Why?  Because legal institutions have power, and that power may transform knowledge and preferences in ways that may make them completely unrecognizable to its authors.

We suggest five conceptual moves that should be associated with a new realism and that offer scholars tools to bring particular analytics to bear on existing problems.  The first notion is recursivity.  Borrowing from Terence Halliday, we stress that legal-reform efforts are dynamic and involve the recursive interaction between law and society.14 The second notion is the simultaneity of law and politics.  One of the great (and unfortunate) habits of an age in which everyone is a “realist” has been to tend to reduce law to politics.  Yet law and politics involve different institutional processes that interact simultaneously in real life.  Dynamic new realism attempts to capture this dualism by telling “double stories” of law and politics or “triple stories” of law, markets, and politics, rather than stories that reduce one to the others.  The third notion is emergent analytics, which is the idea that a dynamic realism takes its concepts from evidence-based empirical engagement with the world and not from disembodied theory.

Fourth, functionalism is no longer enough.  We cannot simply posit values and expect them to be realized, just as legal scholarship cannot be reduced to other disciplines’ methods.  Unlike the old realists’ functionalism, dynamic new realism looks for concepts of “mediation” and “participation”—concepts that describe the ways in which law’s purposes are thwarted, amplified, condensed, or switched once translated into the world.  We should examine functions and ends in terms of how participatory structures of human interaction divert them.  Thus, the concepts of participation and accountability become central.  Fifth, and perhaps most importantly, borrowing from Dean Hanoch Dagan, we believe that law’s constitutive tensions between “power and reason, science and craft, tradition and progress” must be embraced not as a cause of a fundamental essentialist contradiction or defeat, but as productive and positive contradictions, reflecting a progressive struggle and dialogue about our deepest value commitments (as against value relativism, skepticism, and nihilism).15

New legal movements do not arise in the abstract.  They resonate if they fit a particular political moment in light of their confrontation with a dominant theory and practice.  Old legal realists played this role in the 1930s.  So, in our view, will the new-legal-realist movement today.  Dynamic new realism seeks an understanding of how law, like other institutions, reciprocally responds to and shapes individual preferences and political behavior.  If this dynamic new realism is taken seriously, we anticipate that new forms of analysis will emerge that will reconstruct law’s concepts to focus less on the individual preferences and more on how institutions shape and redirect those preferences, less on functional ideas and more on participatory institutional forms, less on idealized end-states of affairs or values and more on recursive interactions between ends and institutions, less on an imagined state in which we live, alone, on islands counting our preferences, and more on our shared human vulnerability.dingbat

 

Acknowledgments:

Copyright © 2010 Cornell Law Review.

Victoria Nourse is the Burrus-Bascom Professor of Law at UW Madison Law School and is currently a Visiting Professor of Law at Georgetown University Law Center.
Gregory Shaffer is the Melvin C. Steen Professor of Law at the University of Minnesota Law School.

This Legal Workshop Editorial is based on the following Article: Victoria Nourse & Gregory Shaffer, Varieties of New Legal Realism: Can a New World Order Prompt a New Legal Theory?, 95 CORNELL L. REV. 61 (2010).

  1. RICHARD A. POSNER, A FAILURE OF CAPITALISM: THE CRISIS OF ‘08 AND THE DESCENT INTO DEPRESSION 260 (2009).
  2. See Daniel A. Farber, Toward a New Legal Realism, 68 U. CHI. L. REV. 279, 302–03 (2001) (reviewing BEHAVIORAL LAW AND ECONOMICS (Cass R. Sunstein ed., 2000)).
  3. Frank B. Cross, Political Science and the New Legal Realism: A Case of Unfortunate Interdisciplinary Ignorance, 92 NW. U. L. REV. 251 (1997).
  4. See Michael Heise, The Past, Present, and Future of Empirical Legal Scholarship: Judicial Decision Making and the New Empiricism, 2002 U. ILL. L. REV. 819, 836–39 (using the attitudinalist model as his primary example of empirical legal studies).
  5. See Thomas J. Miles & Cass R. Sunstein, The New Legal Realism, 75 U. CHI. L. REV. 831, 834 (2008).
  6. Stewart Macaulay, The New Versus the Old Legal Realism: “Things Ain’t What They Used to Be”, 2005 WIS. L. REV. 365, 367–68. In a related anthropological vein at University of Wisconsin, see ELIZABETH MERTZ, THE LANGUAGE OF LAW SCHOOL: LEARNING TO “THINK LIKE A LAWYER” 3–4 (2007).
  7. See Lawrence M. Friedman, The Law and Society Movement, 38 STAN. L. REV. 763 (1986).
  8. NEIL K. KOMESAR, IMPERFECT ALTERNATIVES: CHOOSING INSTITUTIONS IN LAW, ECONOMICS, AND PUBLIC POLICY (1994).
  9. Edward L. Rubin, The New Legal Process, the Synthesis of Discourse, and the Microanalysis of Institutions, 109 HARV. L. REV. 1393 (1996).
  10. See, e.g., JAMES G. MARCH & JOHAN P. OLSEN, REDISCOVERING INSTITUTIONS: THE ORGANIZATIONAL BASIS OF POLITICS 1–19 (1989).
  11. Columbia professors have authored a number of the leading works such as those by Chuck Sable, William Simon, and Susan Sturm.
  12. Martha Albertson Fineman, Gender and Law: Feminist Legal Theory’s Role in New Legal Realism, 2005 WIS. L. REV. 405 (2005); Martha Albertson Fineman, The Vulnerable Subject: Anchoring Equality in the Human Condition, 20 YALE J.L. & FEMINISM 1, 11 (2008).
  13. RICHARD A. POSNER, THE PROBLEMS OF JURISPRUDENCE 24 (1990).
  14. See TERENCE C. HALLIDAY & BRUCE G. CARRUTHERS, BANKRUPT: GLOBAL LAWMAKING AND SYSTEMIC FINANCIAL CRISIS (2009).
  15. Hanoch Dagan, The Realist Conception of Law, 57 U. TORONTO L.J. 607, 610 (2007).

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