From Form to Reform in Law and Finance: Tammy Lothian

Robert Hockett –

As with most topics having to do with our primary modes of production and distribution – “microeconomics,” “macroeconomics,” “industrial economics,” “labor economics,” … – so with “financial economics” there is a well-entrenched orthodoxy that seems to enjoy pride of place in the academy and on the hustings. Indeed, one often hears “the financial markets” described as that site of economic activity which most closely approximates, in respect of its principal players, constitutive features, and felicitous outcomes, the received Smithian wisdom on decentralized market economies and their virtues.

Financial market participants lack market power, we are told, and the trading mechanism quickly impounds privately held value-pertinent information into publicly observable securities prices. Hence the financial markets can generally be relied upon smoothly to channel investment capital toward its “most valued uses” on a real-time basis. Continuous buying and selling produce informational efficiency, that’s to say, while informational efficiency produces allocative efficiency. Et voila, we are all of us left better off, producing more of what’s most valued and less of what’s least valued than could otherwise be reasonably expected. All thanks to our financial system – like our healthcare system, “the envy of the world.”

If there is any realm, then, in which public intervention should be “light touch” and minimal, orthodoxy tells us that it is the realm of finance. Sure, many a self-styled progressive economist will concede, there are market failures aplenty in some spheres that warrant public intervention. There is “the labor market,” for example, where monopsony power on the part of employers must be counterbalanced by state-sanctioned monopoly power on the part of employees. Or there is “the environment,” in connection with which pollution externalities are an ever-present source of inefficiency that must be made to be re-internalized. But the financial markets are one place where nature is best left to take its beneficent, Scottish Enlightenment course.

It is almost as if the vaunted “Fundamental Theorems” of welfare economics were conceived and derived with the financial markets as their “intended interpretation.”  And maybe they were: note the work done by futures markets, for example, in Hicks’s foundational Value and Capital – work of which Hicks’s intellectual descendants Ken Arrow, Gérard Debreu, and others made similar, and seminal, use later. Surely, then, the financial markets are our most market-like markets – they are markets at their just and efficient best, they are markets par excellence.

Now to anyone who has been paying attention to “real world” economic or even political developments over the past decade or so, the foregoing remarks must ring facetious. Isn’t “Wall Street” the seedbed of all that went wrong in the American and global economies during the lead-up to 2008 and its aftermath? Isn’t Wall Street itself what was accordingly “occupied” once it grew clear that neither Congress nor President Obama were going to do much beyond Dodd-Frank to put things right? And didn’t bank-bashing figure prominently, even if cynically, in certain “AstroTurfed,” pseudo-populist rightwing political movements in 2010 and 2016?

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Structural Inequality and the Law: part II

K. Sabeel Rahman

In the 2015 case Texas v. Inclusive Communities Project (2014), the Court upheld the application of a disparate impact standard for judging violations of the Fair Housing Act, enabling advocacy groups to challenge urban development policies that (re)produced patterns of racial and economic segregation. In justifying this interpretation of the statute, Justice Kennedy offered in his majority opinion a brief account of the ways in which racial and economic segregation has persisted and been codified by a variety of legal and policy regimes, despite the formal elimination of de jure segregation.  Meanwhile, writing in dissent in the 2013 Shelby County v. Holder case where the Roberts Court struck down the preclearance protections of the Voting Rights Act, Justice Ginsburg provides in her opinion a lengthy exposition of the various “second-order” forms of voter suppression and discrimination, outlining how an apparently well-functioning democratic process in fact was riven by systemic patterns of discrimination and political inequality.

These glimpses are indicative of a growing awareness that social justice must be understood as a structural phenomenon encompassing a complex interplay of economic, racial, gender, and political dimensions. Many different legal and policy choices combine to create systemic forms of inequality and exclusion. As discussed in the previous post, one of the key ways these claims for greater inclusion and equity are precluded is by casting them as products of “natural” economic forces, not subject to human agency and alteration. However, even if structural forces are acknowledged to be within the scope of public redress, how to combat them is often viewed too narrowly. This post suggests that the remedies for structural inequities require a similarly structural approach.

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Structural Inequality and the Law: part I

K. Sabeel Rahman 

In the 2007 school desegregation case, Parents Involved in Community Schools v. Seattle School District No. 1, the Supreme Court struck down the voluntary school desegregation efforts by Louisville, Kentucky, and Seattle, Washington for employing an overly aggressive mode of racial balancing. In his majority opinion, Chief Justice John Roberts argued that de jure segregation—of the sort that marked the Jim Crow South—had been officially eliminated as in the case of Louisville, and had never been employed in Seattle. Thus whatever racial disparities existed in these regions were not the product of law. For such schools, Roberts wrote, “[t]he way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” The systematic racial segregation of modern metro areas, long documented by urban scholars as a result of economic inequalities, racial wealth disparities, and deliberate policies of zoning and urban planning, did not factor into Roberts’ analysis.

A relative lack of concern for what might be termed “structural” inequality has characterized the Roberts Court’s voting rights jurisprudence as well. In Citizens’ United v. FEC, which upheld corporate campaign contributions as political speech, the Court ignored how disparities in economic wealth could skew the otherwise free-flowing marketplace of ideas or the dynamics of political competition. In Shelby County v. Holder, Roberts suggested that the preclearance regime established by the Voting Rights Act of 1964 to oversee voting regulations in many Southern states was no longer needed. In her dissent, Justice Ginsberg castigated Roberts’ argument as, among other things, exhibiting a blindness to more subtle “second-generation” barriers preventing minority groups from exercising their voting rights in full.

These glimpses point to a larger challenge for legal scholarship, analysis, and policymaking. The question of structural inequalities often stump courts and lawmakers alike. What does it mean for inequality to be “systemic”? Can any single actor be held responsible for such systemic or structural disparities? If these disparities are so diffuse, so baked into the background patterns of social and economic activity, how would they even be redressed or counteracted? This two-part series offers a means of conceptualizing both structural inequality and its means of redress.

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Where Is Race in Law and Political Economy?

Angela Harris

In their first post on this blog, Amy, David, and Jed assert that “politics and the economy cannot be separated.” Nevertheless, as they also observe, the separation of the two – as, for example, in the idea that economic activity is determined by laws of supply and demand that lie outside the power of governments to influence, other than through misguided “intervention” – continues to influence law and policy. A similar separation runs through scholarship in several disciplines, including law, between the study of economics and the study of race. As the new field of “law and political economy” grows, one of its tasks must be to trouble this separation as well.

We know the separation most familiarly as the “race or class?” question (note the either/or framing). In the affirmative action debate, it manifests as this: Isn’t a poor white kid from Appalachia more deserving of the last spot in a freshman class than a black doctor’s kid? In academic discussions, here’s how it typically goes: All this stuff about race, or more broadly, all of this “identity politics,” is a distraction from the deeper and more fundamental realities of wealth and poverty, production and exchange. Sometimes race distracts because it is considered to be a matter of “culture,” which is “epiphenomenal” to material relations: It’s about exploitation, stupid! Other times, race is considered a distraction for pragmatic reasons, because its appearance is “divisive,” threatening the solidarity of labor, or the electorate, or progressive communities, or women. At still other times, especially within academia, the separation of race from economics looks something like a polite form of intellectual self-segregation: while all the black kids are sitting in the cafeteria together talking about critical race theory, the law and economics kids are at their own table, drawing supply and demand curves and talking about Pareto optimality. To each their own, and everybody’s happy.

But this story of race and racism as either irrelevant to or reducible to the story of production, exchange, and consumption is wrong. Black studies scholars have been saying so for quite some time. In 1935, W.E.B. Du Bois argued that what turned the tide of the Civil War was a mass withdrawal of slave labor, amounting to a “general strike.” In his view, the North’s victory was neither a race story nor a labor story, but a powerful demonstration of how the two were intertwined. Generations later, Cedric Robinson’s Black Marxism provided a similar attempt to take race seriously within a materialist frame, arguing that the Eurocentric origins of Marxist theory left it unable to adequately account for black history.

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Law, Political Economy, and the Legal Realist Tradition Revisited

K. Sabeel Rahman — 

As David, Amy, and Jed note in their opening post, the economic, social, political, and ecological crises of the current moment are helping fuel an exciting wave of legal scholarship. This emerging trend, the “law and political economy” (LPE) approach, interrogates the relationships between law, politics, and economics, exploring issues of power, inequality, democracy, and social change. As we explore what this approach might mean and what its implications might be, it is important to situate these inquiries in a larger history of legal scholarship and reform politics. This is not the first time that a similar moment of crisis has helped spur creative new thinking about the relationships between law, capitalism, and democracy—and it won’t be the last. In this post, I want to sketch a particular aspect of this trajectory: the long legacy of legal realism and its relationship to our current debates around law and political economy.

This legacy is important for two reasons. First, now, as then, we face a similar period of socioeconomic upheaval and political conflict, prompting us to rethink our legal structures. As a result, the substantive insights of legal realism remain valuable for an LPE approach today. Second, recalling the trajectory of legal realism and its successor intellectual movements is helpful in highlighting the kinds of tensions and questions that an LPE approach will have to continue to address.

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Thinking Intersectionally About Race and Class in the Trump Era


Noah Zatz –

More than a year after the 2016 election, progressive analysis and strategy continue to be limited by the ping and pong of class-not-race and race-not-class accounts, and recriminations they provoke. Understanding what happened and charting a way forward require an alternative, a thoroughly intersectional analysis of race and class. On such a view, taking race seriously is necessary to understand how class works, not to diminish its importance.

“Intersectionality” risks depletion with its rise as a buzzword, but I mean to invoke specific insights animating the pathbreaking work of Kimberlé Crenshaw and other feminist scholars of color. In particular, they argued that understanding race and racial oppression requires an analysis of how race is gendered and gender is racialized. As Sarah Haley argues in a recent tour de force in this tradition, “gender is constructed by and through race.” So, too, we cannot understand and respond to the racism on display in the 2016 election and since without understanding its intersection with class, and how class is constructed by and through race.

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Law & Neoliberalism

David Singh Grewal and Jedediah Purdy –

Neoliberalism is an indispensable term for making sense of the legal, political, and ideological conflicts of the moment, and also one of the most maligned. Liberals who feel criticized by it have insisted so often and so loudly on its uselessness that even those on the left who use it often seem compelled to apologize as they do so, to distance themselves from all its other uses and users. People thus use the term in the very conditions it should work to criticize: isolated, idiosyncratic, mutually mistrustful, and “entrepreneurial.”

The term matters because it names key strategies in one of the major conflicts of the time: the struggle between democratic claims on economic life, usually on behalf of the security and autonomy of workers and other “ordinary” people, and the claims of capital and management: for higher profit, greater capital mobility, the subjection of non-market practices to market logic (from childrearing to universities to the professions), and “freedom to manage” through “labor flexibility.” To use the term, in the early twenty-first century, is generally to acknowledge the lines of this conflict, and often to take sides. For this reason, it is often discomforting to anyone whose view of the social and legal worlds is fundamentally conciliatory – Make the pie bigger through overall efficiency! – or organized by a different division, such as good Democrats versus wicked Republicans, or responsible conservatives versus heedless liberals.

If you are looking to identify neoliberal forms of argument, look first for four overlapping kinds of claims. The first and simplest is an efficiency-based view, sometimes called (by its critics) “market fundamentalism,” holding that strong property rights and private contracting are the best means to increase overall welfare, and that law should promote these except when it intervenes to “correct market failures.” Second is a more explicitly moral line of argument (though of course promoting overall welfare is an intensely moral project) that property and markets best protect the freedom and dignity of individuals, so a market society is the most decent social order possible. The third line of argument adopts a tragic register to deny that democratic politics and public institutions can ever successfully discipline and shape economic life. This pessimistic position tends to serve as a backstop when it is clear that market arrangements are failing to deliver overall welfare – because of intermittent crises and runaway inequality, let us say. “That may be so,” the neoliberal argument now runs, “but the alternatives are always worse – corruption, abuse of power, utopian tyrannies.” The last line of argument is the subtlest, often implicit, and also often the most important: the exclusion of certain kinds of ideas and proposals from any place at the table. Continue reading

Why Law and Political Economy?

David Singh Grewal and Jedediah Purdy –

Why focus on what we call law and political economy, and why now?

In the last decade, inequality has become impossible to ignore. The 2008 financial crisis and the foreclosures and dislocation that followed it shook public and (to a limited extent) elite confidence that financial markets would “police” themselves and work for everyone. The Occupy micro-movement, although it was small and short-lived, led many people who had thought distributive conflict disreputable to begin naming it again. The Bernie Sanders campaign and Black Lives Matter have both drawn fresh attention to the deep and pervasive role of “structural” inequality – long term class divides, often acutely racialized – in shaping American life.

Two basic facts lie at the place where these crises and mobilizations intersect. One is that economic inequality has been growing markedly for decades, in most of the developed world but especially in the United States. The other is that elites, especially economic elites, dominate policy-making, marginalizing the views and interests of most citizens in rich democracies. These two trends reinforce each other, and both are pervasively intertwined with the law. In fact, neither is intelligible without a careful study of both “private” and “public” law. Continue reading

Law and Political Economy: Toward a Manifesto

David Singh Grewal, Amy Kapczynski and Jedediah Purdy –

This is a time of crises.  Inequality is accelerating, with gains concentrated at the top of the income and wealth distributions.  This trend – interacting with deep racialized and gendered injustice – has had profound implications for our politics, and for the sense of agency, opportunity, and security of all but the narrowest sliver of the global elite. Technology has intensified the sense that we are both interconnected and divided, controlled and out of control.  New ecological disasters unfold each day.  The future of our planet is at stake: we are all at risk, yet unequally so. The rise of right-wing movements and autocrats around the world is threatening democratic institutions and political commitments to equality and openness.  But new movements on the left are also emerging.  They are challenging economic inequality, eroded democracy, the carceral state, and racism, sexism, and other forms of discrimination with a force that was unthinkable just a few years ago.

Law is central to how these crises were created, and will be central to any reckoning with them.  Law conditions race and wealth, social reproduction and environmental destruction.  Law also conditions the political order through which we must respond.

How should legal scholars and lawyers respond to this moment?  We propose a new departure – a new orientation to legal scholarship that helps illuminate how law and legal scholarship facilitated these shifts, and formulates insights and proposals to help combat them.  A new approach of this sort is, we believe, in fact emerging: a coalescing movement of “law and political economy.” Continue reading