Friday, February 1, 2008

Ben Stein Bats .500

"Long ago and far away, I was a student of law and economics at Yale. The economics I found fairly easy, probably because the material was the same as what I heard my two economist-parents discussing around the dinner table all my life. ... But the law was a total puzzle. Here would be one case that went for the appellant, but a circuit away, or maybe even in the same circuit, there would be another case--with identical or almost identical facts--that went for the appellee. ... I sat in the Sterling library reading cases over and over, but still could not get it. Then one day, out of the blue, my learned brother-in-law Melvin, who had gone to Harvard Law School, asked me if I knew about 'legal realism.' I didn't, but I soon learned. 'Legal realism' said that the whole common-law system of abiding by past decisions was a fig leaf. What really happened, at the appellate level and probably at the trial level, too, was that judges made up their minds based on their predilictions, their biases, which lawyer was their friend, what they had for breakfast that day. ... The scales fell from my eyes, and I went on to finish law school in fine fettle. It was just all show business and personal bias and what's in it for the judge. That made law school easy. ... But the lessons of legal realism have always been uppermost in my mind when I think about law or anything else important: Stated reasons are often not the real reasons", Ben Stein (BS) at http://www.nytimes.com/, 27 January 2008.

I agree with BS about "legal realism", having spent about 3,000 hours in the University of Southern California's (USC) law library reading thousands of cases. I made BS's observation with regard to cases with "identical or almost identical facts". I learned judges can always "distinguish cases" on the facts. So? No two cases have "identical facts"; there is always something different. In two auto accident cases: one car was red, the other blue. So? A judge ignores another case for some reason, so says, "the case is distinguished on the facts". He states no reason. Arguably, Oliver Wendell Holmes (1841-1935) was the first legal realist (LR). The LR movement became significant at Yale and Columbia law schools in the 1930s. Some books worth reading to understand LR are: Courts on Trial, Frank, Jerome, 1949 and Woe Unto to You Lawyers, Roddell, Fred, 1939. An excellent law review article is: 10 Harvard Law Review 457, "The Path of the Law", (1897), Holmes. Look at Stoneridge. I doubt any of Stoneridge's stated reasons are its basis, which was: "enhance American capital markets" or some such thing. But our Supremes lack the intellectual integrity to say, "We are adopting Hank Paulson's policy". President Bush decries "judicial activism". What was Stoneridge, if not judges putting Bush's policy preferences into law?

The balance of BS's article is about traders affecting markets. If interested, read Yves Smith's dissection of it at http://www.nakedcapitalism.com/, 27 January 2008.

2 comments:

Tom Selling said...

I don't understand why you Ben Stein only bats .500. I read the article and thought it was a home run. In particular, contrast it with Stanley Fisch's piece which appeared in NYT online one day later.

Independent Accountant said...

I suggest you read Yves Smith's comment on Stein's article. I've heard this "traders move the market stuff" for decades. It's economic nonsense. Over any significant amount of time, only being right on the market pays. If traders destabilized markets, they would go bankrupt, excepting the "Big Trader", i.e., Bernanke & Co. Only market stabilizing traders make money. Traders like to think they move markets. This must make them feel important. As a practical matter, they can do little to influence prices except over short periods of time, probably not over 30 minutes.