prior probability

As I mentioned in a previous post, I have decided to review Robin Paul Malloy’s Law and the Invisible Hand. (Note and full disclosure: I was going to review Better Call Saul and Philosophy, a collection of essays published last month, but I have decided to prioritize Professor Malloy’s work because I haven’t received my copy of the “Better Call Saul” book yet, while Malloy graciously gave me a copy of his beautiful book when we met at the History of Economics Society last weekend.) So, let’s get started with Chapters 1 and 2 of Malloy’s new book, shall we?

Professor Malloy not only quickly introduces his readers to the most compelling and memorable metaphors that appear in Adam Smith’s writings (see p. 5), such as the invisible hand, the impartial spectator, and the man in the mirror; he (Malloy) also identifies perhaps the single-most important question of all time, a paradox that Smith himself spent a lifetime trying to solve: how is it possible to reconcile the pursuit of private self-interest while at the same time promoting the common good?

For my part, however, although I commend Prof Malloy for putting this key question center stage, I am highly skeptical of his attempted solution: his mystical and multiple invocations of the ideal of “justice.” In Malloy’s own words (p. 3, footnote omitted), for example, “Smith subordinated concerns for self-interest to the requirements of justice because he understood that justice was the most important pillar on which civil society rested.” (Malloy repeats this same argument in different ways in Chapter 2 as well.) To the point, Malloy’s justice thesis has a fatal flaw, for what is Adam Smith’s theory of justice? Alas, Smith never developed one, since he ended up abandoning the book he was writing on law and justice in order to write The Wealth of Nations. (Malloy himself acknowledges this embarrassing omission on page 7 of his introduction.)

The best we can do, then, is to try to guess what Smith’s theory of justice — had he ever decided to develop one — might have looked like, and in fairness to Malloy and to his ambitious project, we do have some material to help us make this guess. Among other things, we have Smith’s 1759 treatise on moral philosophy, The Theory of Moral Sentiments, to which he made significant revisions in subsequent editions. We also have Smith’s “Lectures on Jurisprudence,” a set of lecture notes transcribed by one of Smith’s students, and we have the last part of The Wealth of Nations (Book V), which talks about the administration of justice and the proper role of government generally.

As such, like a good Bayesian, I will try to keep an open mind as I read the remaining 10 chapters of his book. Even if we are unable to reconstruct Smith’s theory of justice, this effort is still a worthwhile one, for the tension between the public interest and the private pursuit of self-interest is not only a major theme in Smith’s writings; it is also very much relevant in our times–think of climate change, the proliferation of “fake news” on social media, and NIMBY-hypocrisy, just to name a few contemporary challenges.

I will resume my review of “Law and the Invisible Hand” in my next post; in the meantime, below are some of the pictures my wife Sydjia and I took during our visit to “George Floyd Square” in Minneapolis this weekend.

The first full paragraph of Robin Malloy’s Law and the Invisible Hand reads thus (footnote omitted):

“Fundamentally, law is to society as gravity is to the solar system; it is the invisible force that holds society together and keeps it operating smoothly and productively. Law enchances social cooperation, facilitates trade, and extends the market. In these ways, law functions like Adam Smith’s invisible hand, guiding and facilitating the progress of humankind.“

Alas, as Brett tells Jake at the end of Hemingway’s novel The Sun Also Rises, Isn’t it pretty to think so? Although I am a law professor, I don’t agree with this “law-centric” view of the world for three reasons. First off, what if the causation between law and markets runs in the opposite direction? That is, are legal institutions necessary for markets to evolve, or is law a by-product of prosperous markets?

Secondly, what about laws that protect monopolies and prohibit free trade, such as zoning and licensure requirements? Also, the existence of too many laws and regulations might actually deter trade and economic growth. As a result, we need some criterion or set of criteria for distinguishing laws that promote markets from those that inhibit trade. (Paging public choice theory!)

Last but not least, even if we could agree on how to distinguish “good” laws from “bad” ones, law’s role in life is often secondary to the role of ethics and morality, to our sense of right and wrong. To begin with, from a purely economic or “rational actor” perspective, the efficacy of law depends on two key variables: p1 and p2, the probability of detection and the severity of the punishment if one is caught, and p1 and p2, in turn, will vary depending on the costs of monitoring behavior and the costs of enforcement. Morality, by contrast, relies on self-monitoring and self-enforcement.

But what is the relationship between law and morality, and what happens when people have different conceptions of right and wrong, different moral codes? I will proceed with my review of “Law and the Invisible Hand” in my next post.

Adam Smith is mostly known as a political economist (The Wealth of Nations) or a moral philosopher (Theory of Moral Sentiments), but did you know that he was also a legal scholar? In fact, Smith was awarded a Doctorate of Law by the University of Glasgow in October of 1762, and he had lectured about law and jurisprudence during the 1762-63 academic year. (Update: Smith’s “Lectures on Jurisprudence” are available here, via AdamSmithWorks. Hat tip: Inverted Logic.)

Although Smith himself promised to write a book about the law, he never completed that work. To help fill this gap, my colleague and friend Robin Paul Malloy, a law professor at Syracuse University, recently published a book on “Law and the Invisible Hand” (the cover of which is pictured below), which explores the legal side of Adam Smith’s thought. I got to see Professor Malloy present his work at this weekend’s History of Economics Society, and I will be reviewing it here soon.

I will be presenting my most recent work on Adam Smith (see here) at the annual meeting of the History of Economics Society, which is taking place at the University of St Thomas in downtown Minneapolis. Updates from the conference to be posted here soon.

See here. (Hat tip: Brian Leiter.) Update (6/16): If you are unfamiliar with this ugly and time-wasting legal monster, check out Judge Richard Posner’s review of The Bluebook. (Also, appendix 2 on pp. 854-857 of this scathing review contains Posner’s own simple and common-sense citation rules.)

Postscripts: I have developed my own set of simple citation rules for law and legal studies, which I call “Antiblue“; in addition, here are my previous posts about the hideous Bluebook.

Did you know that on this day (June 14) in 2002 the planet Earth almost collided with a near-Earth asteroid known as “2002 MN“. The asteriod missed us by a mere 75,000 miles (121,000 km), only about one-third of the distance between the Earth and the Moon.