Planting Seeds for the Long

3 Planting Seeds for the Long Run Rather than press the government and the public directly for changed policies, some philanthropists have chosen to have their effect by transforming aspects of intellectual life. Creating a new movement of thought usually requires long and steady invest- ment, a canny strategy, great patience, and an abil- ity to exploit opportunities when they arise. Those who succeed will often eventually see this new line of thinking transform people, institutions, laws, and culture. The changes may not be direct or immediate, Agenda Setting 37 PLANTING SEEDS FOR THE LONG RUN but a new cadre of leaders with seeds of revised thinking planted in their breasts can sometimes have wide long-term influence. Though it labors under a dull name, the “law and economics” movement is one of the more creative and influential departures in public thinking of the last half century. Over the course of a generation, it revolutionized legal culture, inspiring judges, lawyers, and law professors to rethink many of their basic assumptions about the consequences of laws and court decisions. The central premise of law and economics is simple: The lessons and tools of modern economics should be applied to legal rules and procedures. In addition to traditional factors like truth and fairness, legal rulings should consider economic outcomes and incentives in the dispensing of justice. The movement has been described by Yale professor Bruce Ackerman as “the most important thing in legal education since the birth of Harvard Law School.” This movement, described as the most important development in legal education since the birth of Harvard Law School, was largely the work of one insightful donor. This new approach to jurisprudence was largely the work of one insightful donor: the John M. Olin Foundation. When Ronald Coase of the University of Chicago Law School won the Nobel Prize in economics in 1991, the president of the Olin Foundation, William E. Simon, sent him a note of congratulations. Coase replied in a handwritten letter: “You should not forget that without all the work in law and economics, a great part of which has been supported by the John M. Olin Founda- tion, it is doubtful whether the importance of my work would have been recognized. So I give you special thanks.” The Olin Foundation birthed a variety of important intellectual movements during its existence. (The organization’s grantmaking essentially ceased in 2005, after the foundation deliberately depleted its endowment.) Olin invested more of its resources in law and economics than any other single area, though, with the total value of its grants there topping $68 million. Its support of this subject was especially determined, especially long-lived, and sharply focused on elite institutions, with a gimlet eye for unexpected opportunities. 38 The intellectual roots of law and economics stretch back to David Hume and Adam Smith. The modern movement, though, began to take shape at the University of Chicago in the 1950s. Aaron Director, whose sister, Rose, married Milton Friedman, was an economist on the faculty of the law school, hired to help law students understand economics. In his day, however, legal economics confined itself to a few narrow fields, such as antitrust regulation. Director and his students, who included future prominent judges like Robert Bork and Richard Posner, introduced economic thinking into entirely new areas. After Ronald Coase (the Nobel laureate) succeeded Director on Chicago’s law-school faculty, he quipped that “I regarded my role as that of Saint Paul to Aaron Director’s Christ.” The gospel of law and economics began to spread to other institutions after it came to the attention of the Olin Foundation in 1973. Frank O’Connell, who then ran the foundation, became acquainted with another disciple of Director, Henry Manne, who was trying to start a new law school that would make economic education a centerpiece of its instruction. When O’Connell first presented the concept to John Olin himself, the industrialist snapped skeptically: “What the hell is a lawyer doing teaching economics?” Olin changed his mind, however, after looking over materials O’Connell left with him. He sensed the real- world discipline that economic logic could bring to law, and decided to become the great patron of the effort. His foundation’s first grant in this area, worth $100,000, supported Manne in 1974 as he established the Law and Economics Center at the University of Miami. Its mission was to provide law-school fellowships for students with advanced degrees in economics. In what would become perhaps its most important activity, it also hosted economics seminars for judges. Over time, Manne’s LEC moved from Miami to Emory University in Atlanta, and then finally to George Mason Univer- sity, just outside Washington, D.C., in northern Virginia. In parallel, the Olin Foundation made special efforts to introduce law and economics scholars into the nation’s very top tier of law schools. It took aim at places where “faculties, alumni, and students tend to influence the climate of opinion.” One of its savviest interventions came at Harvard Law School, which in the 1980s had become torn by internal strife. Harvard Law had experienced an influx of scholars associated with a trendy field called critical legal studies, which viewed the law as an oppressive tool of the ruling class. These scholars were so aggressive they Agenda Setting 39 PLANTING SEEDS FOR THE LONG RUN made it impossible for several years for the school to hire anybody outside of their claque for a tenured job. Relations between new and older professors turned hostile, and frostiness enveloped the faculty. “It was ludicrous,” recalled Stephen Shavell of this time at the law school. “Students would hiss in the classroom. The climate was simply unbelievable.” Matters boiled over when one of the professors who specialized in critical legal studies urged young law-school graduates to act as subver- sives within corporate law firms. “Young associates should think of it as a requirement of moral hygiene that they defy the people they work for, and do it at regular intervals,” wrote Duncan Kennedy, giving alumni and potential employers great concern. Sensing an opportunity, Olin stepped into the breach. The foundation offered to fund a new program in law and economics with a multiyear grant. This would introduce a fresh intellectual spark into the school, and help balance the perception that it had become a one-party-line mono- lith run by Marxists. Harvard president Derek Bok leaped at the offer. The John M. Olin Center for Law, Economics, and Business eventually received more than $18 million from the Olin Foundation, and it was a smashing success. By 2005, the number of Harvard faculty whose central interests could be defined within the sphere of law and economics had jumped to 23. More than four dozen alumni of the program had been hired as faculty at other law schools, bringing law and economics insights to top schools like University of California-Berkeley and Michigan. The John M. Olin Fellowships for students have turned into springboards to prominent clerkships. Similar programs were established by Olin at the law schools of Stanford and Yale, and they experienced equivalent successes. The Olin Foundation had a small number of misfires—a law and economics center at Duke flopped—but these were the exception. The foundation also helped create the American Law and Economics Association, which linked scholars at all schools and helped them collaborate through con- ferences and publications. Very soon the fresh insights and activism of the law and economics movement began to produce victories in courtrooms and legislatures. Takings, a 1985 book by law and economics pioneer Richard Epstein of the University of Chicago, focused new attention on the clause of the Fifth Amendment to the Constitution that asserted: “...nor shall private property be taken for public use without just compensation.” Epstein argued that government should reimburse property owners not only 40 when it takes full possession of their holdings but also if it imposes new regulations that dramatically degrade the use or value of private property. This legal logic bolstered an emerging property-rights movement, and formed the basis of a Supreme Court decision that ordered South Carolina to compensate a beachfront landowner after a new law forbade him from building homes as he had planned under prior regulations. Although law and economics is often viewed as a force for conser- vative politics and policy, it is in fact better understood as utilitarian. It strives to obtain the greatest good for the greatest number of people. It puts its faith in people’s preferences as expressed by their market behav- ior. It prefers evolved voluntary solutions to government directives. Because it becomes a powerful analytical tool for decentralized decision-making rather than dictates by a mandarin class, and substitutes rational logic for sentimental visions of justice and resource allocation, law and economics has, however, been welcomed by many conserva- tive intellectuals and donors. Lots of subfields within the law continue to be dominated by the Left—labor law, family law, constitutional law, civil-rights law, etc. Thanks to John Olin’s determined backing, however, the law and economics movement has introduced a measure of balance to American legal education and practice. Agenda Setting 41 PLANTING SEEDS FOR THE LONG RUN Policy Player Profile GARA LAMARCHE Gara LaMarche leads America’s savviest network of large-scale liberal policy and politics donors—the Democracy Alliance. Roughly 100 of the country’s wealthiest left-leaning philanthropists, like George and Jonathan Soros, Tom Steyer, Chris Hughes, Weston Milliken, and others participate.

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