Planet Money - Econ's Brush with the Law

Episode Date: September 23, 2022

What happens when you take some of the most powerful people in America — federal judges — and teach them economics? We look at the swanky econ retreats that may have changed American law forever.Subscribe to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. Picture this. We're in Florida, just off the coast of Miami. It's the early 80s. We're at this fancy oceanfront resort on a little island called Key Biscayne. It's a perfect beach day. It's high 70s, a stiff breeze. You can even smell. Hold on. Is that a young Ruth Bader Ginsburg just hanging out under a beach umbrella? Oh, my Lord. Yeah, that's RBG. And who's that with her? Is that one of the most famous economists of the 20th century? That is the Nobel laureate

Paul Samuelson. Wow. Looks like they're having a great time. They're drinking piña coladas, splashing in the ocean. Oh, so fun. Economists and judges letting their hair down. Okay, we can't actually prove that RBG had cocktails on the beach with Paul Samuelson. But we do know that on January 10th, 1982, Paul Samuelson and Ruth Bader Ginsburg and 18 other federal judges did arrive at this oceanfront resort near Miami for a two-week crash course on economics for judges. Econ Judge Camp. The goal? Teach federal judges about competition, antitrust, how regulations affect the market, stuff like that. Because judges make decisions about these kinds of issues all the time. It wasn't a one-time thing.

Econ Judge Camp started in 1976. And judges were learning from some econ-heavy hitters. Big names like Milton Friedman, Marty Feldstein, Paul Samuelson. By 1990, 40% of the nation's federal judges had gone to one of these retreats. Including two judges who would wind up on the U.S. Supreme Court, Ruth Bader Ginsburg and Clarence Thomas. Econ judge camp arguably transformed the courts, changed the way federal judges made major decisions for decades. Hello and welcome to Planet Money. I'm Jeff Guo. And I'm Sarah Gonzalez.

Economics didn't always have a place in the courtroom. Econ and the law used to be separate worlds until some economists thought, let's put them together. Today on the show, what happens when you take the decision makers, the arbiters of what's right and wrong in society, and you teach them economics? Okay, we're back to Planet Money. In 1990, Vaughn Walker was just appointed to be a federal judge. He's brand new to the bench, and one of the first things he decides? Screw the robe. Yeah, I never felt comfortable wearing the robe.

Took the bench just wearing a suit. I didn't know you could do that. Pretty soon, though, he's like, oh, there is real value in these judge robes. If you don't wear them, you have to dress up every day. If you have a robe, it really doesn't matter whether you're extremely well-dressed, whether it looks good or not. So you're just in, like, sweatpants under the robe? Sweatpants and Birkenstocks. Birkenstocks. Birkenstocks!

Judge Vaughn was nominated by a Republican president. That's how federal judges get appointed. People considered him a conservative choice for the bench. But he's most famous for being the judge on the Prop 8 case. His ruling allowed same-sex marriage in California. But like years before that, just one month into becoming the Honorable Vaughn Walker, he gets the coveted invite to Econ Judge Camp. In March of 1990, I believe.

Spring break? It is kind of spring breaky, and it's a nice place in Tucson, Arizona. There was an opportunity to do a little bit of walking out in the desert. Walking out in the desert? That doesn't sound that fun. Well, it's a pretty nice desert right around here. Oh, okay, it's a nice desert, okay. It's like a toned-down spring break, you know,

like a judge spring break. I don't believe we had anybody dunked into the swimming pool, but sure, of course, there are jokes and stories told and cocktails and dinner, and of course. A bunch of judges have actually written about what these econ retreats were like. One of them wrote, naturally, one remembers stone crab, pecan pie, and great snorkeling more vividly than the macroeconomics. Naturally. Totally. But they

were spending a lot of time on the economics. Ruth Bader Ginsburg, who went to a Miami judge econ fest, she called the classes more intense than the Florida sun. Class would start, I don't know, 8.30 or thereabouts, generally a couple of lectures in the morning, and then you had the afternoon to do your homework. Homework? Homework, absolutely. What was the homework? Oh, the readings. They covered things like regression analyses. Of course, monopoly and competition, nuisance, prejudgment, interest, cost, damages. Those are subjects that come up all the time in cases and have direct application to what judges do. Economic issues have always come up in court cases.

But in the 1950s, as corporations got bigger and the government started writing more regulations, econ started coming into the courtroom more and more. And by the 1970s, one economist looked around and he was like, wait, these judges, they don't even know the basics. How could they possibly make smart rulings on this stuff? One day, I don't know how, I began thinking, wouldn't it be nice if judges understood some economics? This is Henry Manny, the economist behind EconCamp for Judges.

I still think it was the nerviest thing imaginable. This is Henry Manny speaking in 2005. And he was like, when it comes to econ, judges are just out of their depth. They're looking at cases about things like price discrimination, and they're maybe thinking, in my world, discrimination is bad. But an economist would say, well, price discrimination just means people pay different prices, which can be good for society because you can like charge, say, low-income people less than rich people. Not so bad. Henry Manny is like, judges have to know this stuff.

So in the 1970s, he starts designing these camps, putting together a syllabus, recruiting famous economists to teach. Today, there are lots of programs like this. Neuroscience for judges, climate change for judges. But the Henry Manning Economics Institute for Federal Judges. That was the first big one. Private program to educate federal judges, that's about as sensitive an idea as you can get. But the idea grew with me. I proceeded very, very carefully. Henry Manning passed away in 2015, but we spoke to a guy who was supposed to carry on Henry Manny's legacy, a guy who also happens to be named Henry. So he was Big Henry, okay,

and everyone else started calling me Little Henry. So that's how they kept us straight. Little Henry, whose full name is Henry Butler, is now the Henry G. Manny Professor of Law and Economics at George Mason University. He was Big Henry's protege. What did Henry Manny call you? Henry. He wasn't a little Henry kind of guy? No, no. Big Henry was a serious intellectual.

He was both a law professor and an economist. And he believed that the legal world needed the rigor of economics. So he helped create a whole field called law and economics. And he became its biggest hype man. He raised money to start an influential law and economics center. He got law schools to start teaching economics. And he started these boot camps for judges. And they were kind of a hit.

For years, there was this really long wait list. Little Henry taught some of the classes at Econ Camp. Clarence Thomas of the Supreme Court. Clarence Thomas, he was one of Little Henry's judge students, pre-Supreme Court, in 1991. Clarence was one of the most fun guys we had in the course. Clarence was in this one class about auctions. Half of the judges are pretending to be buyers, the other half are pretending to be sellers, and they're bidding for some product, like, I don't know, judge robes. So the people on one side are saying, I'll pay this much, and I'll accept this much,

and they're kind of yelling back and forth. And Clarence stands up. He hadn't said a word in class the whole time. And with this huge bellowing voice he has, he says, I have the urge to collude. Collusion, as in getting together with your competitors to rig the auction, which is illegal. It's cheating. In the real world, that's like an antitrust violation. Judges were hearing cases on this stuff all the time. And now judges were role-playing why someone would have the incentive to cheat. I have never seen a class erupt so quickly and funny. And it was just hilarious. We had to stop the auction for a little while for people to kind of get a grip again. I've got the urge to collude. It was so great. The mood at these seminars was apparently

very light and informal. Milton Friedman, celebrity economist, was just Milton. Ruth Bader Ginsburg, just Ruth. A lot of the learning is sort of happening like over wine in the evenings and at lunches and it's like the whole two weeks of immersion in this world is kind of an important part of why it's successful. Suresh Naidoo is an economist at Columbia University. And Suresh wanted to be an economist for a very compelling reason. I mean, they're very confident. I just kind of wanted the confidence of an economist.

Suresh, confident economist, has been studying these federal judge econ retreats for years. He's looked closely at what actually happened there. And he says these seminars didn't just cover the basics. They also tried to teach judges how to think like an economist, but like a particular kind of economist. A lot of the instructors at these seminars and big Henry himself, they came out of the University of Chicago, which was a really influential school of economics at the time. And they built a lot of their ideas on this one key assumption, that people are rational, that we look around the world, take in all the information, and then do what's best for us. Chicago school economists use this assumption that people are hyper-rational

to make these arguments about how the world should work. And these arguments tended to be conservative. These guys were big believers in the free market. Take regulation. The Chicago school teachers were like, in our model of the world, where you have these rational little people running around. Do we even need regulations? Do we need the government to like ban pollution? Maybe we can just let people hash this problem out for themselves. And so the idea is that like,

all you need to do is give people the right to not be polluted and then give them the ability to sue and enforce that right against a company. You don't need to, like, force companies to adhere to certain pollution standards. You just need to give the people the power to sue these companies, and that'll solve it. That'll make the company not really want to pollute. Yep. Yeah. Does that happen? I mean, the lawsuits do happen. The question is, like, are the lawsuits an adequate substitute for the EPA?

There are some caveats to this just sue the polluters theory. Like, in order for this theory to work, it has to be easy to file a lawsuit. But you can see where this style of thinking can lead you. Government intervention is bad. Leave corporations alone. These models often ended up justifying right-wing political positions. And the Chicago guys, they weren't just making models about the economy. They thought economics could help you see a lot of things more clearly. Like, here's how they talked about crime.

So there's someone lecturing on a blackboard and probably writing down some simple equation of, like, here's the benefit of committing the crime. Here's the probability of being detected. Here's the punishment. So if this thing goes up, then the total attractiveness of crime is going to fall. A cost-benefit analysis for crime. These Chicago economists are saying

criminals are just rational people responding to incentives. So they take their chances at like, I don't know, stealing a car because they might not even get caught. Right. And if they do get caught, the punishment might not even be that bad. So committing crimes is worth it. And so these economists would say, if you want to fight crime, you just have to change the incentives. It's like if we find you guilty, once we found you guilty, we should kind of throw the book at you because there's an additional value to punishment that it'll deter future crime. Meaning in order to deter other people from doing this again, we have to make it be like an extra bad punishment.

And this is an econ, like this is econ thinking. This is definitely econ thinking. At least the kind of econ thinking coming out of the Chicago school. Were there not, were there not econ professors there at the time who were like, now the flip side of this? It's interesting. I think it took a while to get the counter response to that, to figure out how, okay, well, what's wrong with that assumption?

So in this time period, no one is really challenging this economic thinking yet. I think there's lots of people outside of economics that are like, these people are bonkers. But the economists are like, you guys are just dumb and don't understand what we understand. This is how most economists, I think, react. Yeah. Inside of economics, the Chicago School was mainstream, though, of course, not every economist agreed with its conclusions. Some of them were also saying, this is a little bonkers. They're saying, OK, we get that people are rational. We use that idea in our models, too. But you all, you're taking it a little too far. And outside of economics, the conservative politics of the Chicago school were hard to ignore. A lot of people became suspicious of econ judge camp. Pretty quickly,

people start pointing out that a lot of the big shot of econ judge camp. Pretty quickly, people start pointing out that a lot of the big shot teachers at these econ fests are coming from this conservative world. And they're also like, and look who's funding Henry Manny's whole law and economics thing. DuPont, Exxon, Ford, Xerox. Companies that definitely have an interest in how judges rule on regulating pollution or antitrust, right? It was also big, right-leaning foundations. Henry Manning courted these conservative nonprofits to help him spread his ideas of law and economics. Groups like the Olin Foundation, the Scaife Foundation, the Liberty Fund. The guilt by association argument is that

the folks opening up their checkbooks are not kind of just blanket paying for all kinds of programs. They're paying for other kinds of right-wing programs. The Washington Post runs a front-page headline that says, Big Corporations Bankroll Seminars for U.S. Judges. People start to think, are these seminars a little indoctrination-y? Henry Manny always said the camps were not political. He made a point to have at least some liberal economists teach. One judge, a self-described liberal judge, once wrote that all the economists at EconCamp had, quote,

Neanderthal views on race and social policy. Neanderthal views. But even he said that the lessons were pretty useful. He said that it actually changed the way he thinks about social good, that it comes at a cost. Judge Von Walker, who, you know, had fun walking in the desert, he says, come on, guys. Judges are, like, professionally un-brainwashable.

People are trying to brainwash judges all the time with this argument or that argument. And if there's any group in society that has developed some instincts of skepticism, it should be judges. But economist Suresh Naidoo, he's like, we don't have to take anyone's word for it. These seminars ended in 1999. It's been decades now. We can look at what happened. That's after the break. All right, back to Planet Money. What happens when you take judges and teach them economics? And not just any economics,

but the conservative Chicago school version of economics. A few years ago, Suresh Naidoo and his colleagues decided to find out. I think the goal was to see, like, you know, did this kind of training program, did this kind of, like, teaching judges economics really change their jurisprudence? Meaning, does it make them, like, rule in... More conservatively on economic issues, I think think was like a natural hypothesis to start with. So first he has to figure out who actually went to these seminars and the years they went, which turns out to be slightly complicated. Remember, at the height of this program, 40 percent of all federal judges in the country had gone. But he gets it. The full list. It's like gold for economists. He's like, dude, you know what we

could do? We could link this list with like the court opinions and study the outcome of attending this program. Wouldn't that be awesome? Suresh looks at every decision a judge made before attending one of these econ camps and after. And he finds that this two-week immersion into economics had a big effect. Suresh says attending econ camp made judges more likely to rule against agencies that are in charge of environmental regulations. Same with the agencies in charge of labor regulations. So, like, more rulings for corporations and against unions. These judges were also apparently less likely to enforce

antitrust laws, like not break up monopolies. And Suresh says Econ Judge Camp didn't just make conservative judges more conservative. I think we find the effects are strongest for the Democrat appointees. So it's a program that has, I think, effects on liberal judges and makes them somewhat more conservative. Oh, so on the Democratic appointees, you saw more of a change of heart. Yeah, they behave the same way as more conservative judges. Suresh also looked at whether attending judge camp affected how judges hand out prison sentences. But the evidence here isn't as clear, because judges didn't have much discretion over sentencing until 2005. But after 2005, Suresh says the judges who went to these econ programs,

they tended to give out harsher punishments, more prison time. I think we like it as like some additional proof that it's like something changed about the judges' thinking such that when you gave them the discretion to sentence on their own, they exercised it in becoming more punitive. Suresh and his co-authors are still working on this paper. It hasn't been published yet. But what they're saying is that these retreats pushed the courts to the right. And now federal judges have been ruling more and more conservatively for decades.

But Suresh's paper argues that a third of the increase in conservative opinions happened because of the Henry Manning program. So how could a two week econ camp have this big of an impact on the courts? Suresh says, well, economists have this way of using logic that's really hard to argue against. It's like these judges that are super smart and like super skeptical. It takes something that's as powerful as economics to convince against. It's like these judges that are super smart and like super skeptical, it takes something that's as powerful as economics to convince them. And I think its analytical power is partly how it's able to work with these very smart judges, because if it was less analytically powerful, they would have been able to ignore it. This Chicago school thinking is still around, but it is no longer as dominant. And in general, econ has changed a lot since these camps.

Economic models have become a lot more complicated. They still often start with the idea that people are rational, but they also recognize the ways in which that's not always realistic. And most importantly, economists now do a lot more work with data. And when you check the data, some of the Chicago school predictions do not hold up. Like it turns out that harsher prison sentences do not really deter crime, not in any meaningful way. But the old school Chicago arguments did have a lasting impact on the law. And that influence went way beyond just these judges even. Henry Mning and his colleagues from the Chicago School spread their ideas about law and economics far and wide. They sparked a transformation in how we think about

monopolies and antitrust. And they were a big part of the deregulation that happened in the 1970s and 80s. They convinced a lot of people to listen to economists. And you know, I think I can understand why all those people, all those judges and lawyers took these arguments to heart. I got a degree in economics and then I went to law school. And econ, it feels way more logical than the law. When you learn how to think like an economist, you do feel powerful and confident. You want to take the tools of econ and use them everywhere in the world. Take them even places they weren't designed to go. Because you wish the world were that simple.

If you have questions about what's going on in the economy right now, send us an email. PlanetMoney at NPR.org. You can find us also on Twitter, TikTok, Instagram. We are at PlanetMoney. We, of course, want to give a special shout out to Suresh's co-authors on this study, Elliot Ash and Daniel Chen. This episode was produced by Emma Peasley with help from Dave Blanchard. It was mastered by Gilly Moon and edited by Sally Helm. Jess Zhang is our acting executive producer.

I'm Sarah Gonzalez. And I'm Jeff Guo. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.