With the sad passing of my friend and mentor Henry Manne, it seems appropriate to point out that he is one of the few American legal scholars whose works have been collected into a single set of three edited volumes. The Collected Works of Henry G. Manne consists of:
Volume 1, The Economics of Corporations and Corporate Law, includes Manne's seminal writings on corporate law and his landmark blend of economics and law that is today accepted as a standard discipline, showing how Manne developed a comprehensive theory of the modern corporation that has provided a framework for legal, economic, and financial analysis of the corporate firm.
Volume 2, Insider Trading, uses Manne's ground-breaking Insider Trading and the Stock Market as a framework for many of Manne s innovative contributions to the field, as well as a fresh context for understanding the complex world of corporate law and securities regulation.
Volume 3, Liberty and Freedom in the Economic Ordering of Society, includes selections exploring Manne's thoughts on corporate social responsibility, on the regulation of capital markets and securities offerings, especially as examined in Wall Street in Transition, on the role of the modern university, and on the relationship among law, regulation, and the free market.
I was honored to be chosen as the editor for the second volume. You can download my introduction, Manne on Insider Trading, from SSRN: http://ssrn.com/abstract=1096259
Todd Zywicki reports that Henry Manne has passed away http://t.co/FAsh7Sp88G— Stephen Bainbridge (@ProfBainbridge) January 18, 2015
RIP the great Henry Manne.— tedfrank (@tedfrank) January 18, 2015
We share the sad news that Henry Manne, founder of the Law & Economics Center has passed away. http://t.co/LFNhS8wGYX— MasonLEC (@MasonLEC) January 18, 2015
Henry Manne, scholar and great intellectual entrepreneur, has passed away. The GMU school of law and law & econ movement are his monuments.— Alex Tabarrok (@ATabarrok) January 17, 2015
http://t.co/YVehHhbRFx Henry Manne was a Gramscian— Henry Farrell (@henryfarrell) January 18, 2015
EconLog: Henry G. Manne, RIP: Henry G. Manne, one of the pathbreaking contributors to Law and Economics, died ... http://t.co/1DPbzUruXm— Andy Surtees (@LibPar) January 17, 2015
Todd Zywicki blogs:
It is with deep sadness that report the news of the passing of Henry Manne today at the age of 86. I will post my own remembrances on the man and his legacy at a later time–for now though I just want to express my deepest condolences to his family. He has been a larger than life figure–scholar, leader, intellectual entrepreneur, mentor, and father–and he will be missed by many. There are few men, and even fewer academics, who leave a mark on the world as large as Henry Manne.
There will be a memorial service at George Mason Law School on February 13 at 4:00 p.m.
Henry was one of the great legal scholars of the second half of the 20th Century. He was a key founder of the law and economics movement and laid the groundwork for the revival of corporate law scholarship. He was a ceaseless and potent advocate for economic analysis, training generatons of law professors and judges through his summer programs. He was a creative educator who put George Mason on track to become a major law and economics center.
He was also a friend, mentor, and hero. I admired and liked him greatly.
My essay Manne on Insider Trading (available at SSRN: http://ssrn.com/abstract=1096259) lays out his immense contributions to that important field. In it, I wrote that:
Henry Manne’s 1966 book INSIDER TRADING AND THE STOCK MARKET therefore ranks among the truly seminal events in the economic analysis of law. One exaggerates only slightly to say that Manne stunned the corporate law academy by daring to propose the deregulation of insider trading. As we will see, the response by all too many traditionalist scholars was immediate and vitriolic.
Although Manne’s policy prescriptions have found neither legislative nor regulatory acceptance, history has vindicated Manne’s daring in at least one important respect. Although it is hard to believe at this remove, corporate law scholarship was moribund during much of the middle decades of the last century. Manne’s work on insider trading played a major role in ending that long intellectual drought by stimulating interest in economic analysis of corporate law. Whether one agrees with Manne’s views on insider trading or not, one therefore must give him due credit for helping to stimulate the outpouring of important law and economics scholarship in corporate law and securities regulation in recent decades.
Manne’s work on insider trading straddles what Richard Posner recently called the first and second generations of law and economics scholarship. The first generation, which consisted of scholars such as Gary Becker, Guido
Calabresi, Ronald Coase, and Aaron Director, blazed the trail by establishing the tools of microeconomics—most notably the rational choice model—as a methodology by which legal doctrines usefully may be examined.
The second generation took these tools and ran with them, applying them to a host of legal doctrines. Their projects typically entailed translation of some legal principle into economic terms. They then applied a few basic economic tools— cost-benefit analysis, collective action theory, decision making under uncertainty, risk aversion, and the like—to the problem. Finally, they translated the result back into legal terms.
Manne was among those first-generation scholars who paved the way for law and economics to become an accepted jurisprudential methodology, but he also was one of the first and most important second-generation scholars. As Ronald Cass observes, “Manne was one of the first legal scholars ... to use economics to generate a new insight into a legal issue and to do so in a way that dramatically changed discourse about that issue.” Indeed, Manne did it twice—once with respect to the market for the corporate control and again with respect to insider trading.
A friend recently sent me an imaginative article that proposes a radical change in the law that IMHO has a zero percent chance of becoming law. It called to mind Suzanna Sherry’s comment that there is "a phenomenon that has come to pervade legal scholarship: the idea that novelty is the ultimate test of an idea's worth. It often seems today that proposing counterintuitive ideas is the fastest way up the academic ladder. As one young scholar puts it: 'It is the intellectually innovative candidate who is most likely to get hired and succeed professionally, and ingenuity is not the same as dependable judgment.' The more radically an article departs from conventional wisdom, the more likely it is to be published in a prestigious law review." Suzanna Sherry, Too Clever by Half: The Problem with Novelty in Constitutional Law, 95 Nw. U. L. Rev. 921, 926 (2001).
In that article (which I highly commend), Sherry also observes that "cleverness can take a theory only so far. At some point, a scholar must use judgment or common sense to evaluate the results. One flaw common to all of these theories is a lack of judgment and common sense. Their authors have forgotten that 'it [i]s more important to be right than to be clever [and] [i]t is the thinkers with all the razzmatazz who are likely to get it wrong,'" citing Richard Epstein's article Life Boats, Desert Islands, and the Poverty of Modern Jurisprudence, 68 Miss. L.J. 861, 887 (1999).
For those of you who need still more on the point, see Dan Farber's classic articles The Case Against Brilliance, 70 Minn. L. Rev. 917 (1986) and Brilliance Revisited, 72 Minn. L. Rev. 367 (1987).
Usha Rodrigues reminds us that my old friend Larry Ribstein used to blast Business Associations teachers who waited until the end of the semester to teach LLCs and other "uncorporations" but then explains why she still leaves LLCs to the end:
I don't leave LLCs til the end of the semester because I think they're unimportant. It's because the cases are so damn thin. It's still such a new form, I just don't see much there there. Most of them wind up being trial courts who read the statute in completely stupid ways. Blech.
So I teach corporations and partnerships emphasizing fiduciary duty, default vs. mandatory rules, and the importance of the code. In fact, one semester I confess that I would ask a question and then intone, "Look to the code!" so often I felt like a Tolkien refugee. By the time I get to the LLCs cases, which are pretty basic, the class is ready for my message: the LLC is a new form. When dealing with something new, judges look both to the organizational statutes and to the organizational forms they know as they shape the law. Plus the LLC is such an interesting mix between the corporate and partnership form, it just makes sense to get through them both before diving in.
I take a slightly different approach. I do agency, partnership, and corporate law through formation to limited liability. Then I digress to cover LLCs. Then I go back to finish corporate law. (See sample syllabus here.) Why? I agree with everything Usha says, but I frequently run out of classtime before I cover the entire syllabus. If I left LLCs to the end of the semester, there'd be a substantial risk that some semesters I'd never get to them.
OTOH, Joshua Fershee agrees with Larry:
I want students (and lawyers and courts) to treat LLCs as unique entities. Leaving them to the end of the course reinforces the idea that LLCs are hybrid entities the combine partnerships and corporations. I just don't think that's the right way to think about LLCs. ...
In my experience, teaching LLCs at the end of the course seemed to frame the LLC as an entity that is just pulling from partnership or corporate law. As such, it seemed the students were thinking that the real challenge for LLCs was figuring out whether to pull from partnership law or corporate law for an analogy. Part of the reason for that, I think, is that so many of the LLCs cases seem to think so, too. See, e.g., Flahive. As Usha would say, "Blech."
The LLC is prominent enough in today's world that I think it warrants a more prominent role in the introductory business organizations course. If we don't bring the LLCs more to the fore, we allow courts to continue to misconstrue the entity form, in part because we aren't giving students the tools they need to ensure courts understand the unique nature of the LLC.
I take his point. But I think you can solve that problem by repeatedly mentioning that courts err when they treat LLCs as mere hybrids.
Prawfsblawg reports that Yale is offering stress relief dogs for its pampered pups students:
It seems that things have become so stressful for some law students that therapy dogs are in order.
In my day, we had to walk ten miles to school to take our exams. Through knee deep snow. Uphill. Both ways.
Over at his blog Excess of Democracy, Derek Muller (Pepperdine) has a provacative post titled "NCBE Has Data To Prove Class of 2014 Was Worst in a Decade, And It's Likely Going to Get Worse." Derek recounts that the overall bar passage rate across the country for the July 2014 sitting was down as compared to previous years, and he posits that the lower results were caused by "student quality and law school decisionmaking." He believes that the data suggests that lower quality students, and educational decisions of law schools, are producing graduating classes that are less qualified overall, in turn resulting in lower bar passage rates.
In essence, students come into law school having done worse on the LSAT, and they leave law school doing worse on the bar exam.
Apropos of which, Paul Caron has the latest California bar passage data:
The big story this year is the striking decline in the bar passage rate:
- First time test takers from ABA-aproved law schools: down 6.5 percentage points
- All test takers: down 7.1 percentage points
These declines are concentrated in the lowest ranked schools:
- First time test takers at the 5 highest ranked schools: down 1.5 percentage points
- First time test takers at the 5 lowest tanked schols: down 12.3 percentage points
The state’s overall passing rate has declined in the past five years, from 89 percent in 2009 down to 80.9 percent this year.
One might reasonably infer that the slump in law school applications has meant that all schools are taking in students today that they would not have taken 10 years ago, but that the bottom tier schools have been disproportionately affected by this trend, which makes sense. As Brian Tamanaha has noted:
A sharp decline in applicants inevitably leads to a decline in the quality of law students, manifested in declining LSAT/GPA medians and rising acceptance rates. A decade ago, for the entering class of 2003, only 4 law schools accepted 50% or more of their applicants (the highest at 55.4%). Jump forward to 2011: 42 law schools accepted 50% or more of their applicants, broken down as follows: 29 schools accepted between 50% and 59%; 7 schools accepted between 60% and 69%; 5 schools accepted between 70% and 79%; one law school accepted 80.1%.
Here is another comparison to put the decline in perspective: A little more than half of the applicants who applied to law school in 2004 were accepted somewhere; in 2013, around seventy-five (and perhaps eighty) percent of the people who apply will be admitted somewhere. As law schools reach ever deeper into the applicant pool, they will admit students who should not be in law school. Applicants with low LSAT/GPA scores, in particular, have a higher risk of failing out and a higher risk of not passing the bar exam.
The bottom tier schools now are truly scraping the bottom of the barrel, which is reflected in their bar passage rates.
In this corner, we have Stanford law professor Joseph Grundfest counterpunching earlier criticism by Yale law professor Jonathan Macey:
It takes some fancy footwork even to argue that the Harvard Proposal, with its glaring omissions, complies with SEC regulations. And, I am happy to concede that Professor Macey is a talented and clever dancer. But the problem with Professor Macey’s arguments in defense of the Harvard Proposal is that they get tripped up by the facts and the law.
But back comes Macey with a combination of jabs and uppercuts:
As I explain below, the Reply reverses field and drastically modifies and weakens the authors’ allegations. Furthermore, in conceding some key points that I made and in failing to address some others, the Reply itself demonstrates that Gallagher/Grundfest wrongfully accused the SRP and should withdraw their allegations.
I jest, of course, but it really is a bit like watching a heavyweight fight. The difficulty that Joe and Jon now find themselves in, however, is that once you start one of these fights, you have to win.
I want to include modules on Citizens United (personhood) and B Corps/L3Cs in my corporate social responsibility course new spring. Anybody got some?
Rick Garnett blogs:
For everyone planning on attending the AALS Annual Meeting in DC -- and for any law professors or law students who'll be in the area in early January! -- here's information about the upcoming Lumen Christi / Law Professors Christian Fellowship event, featuring our own Rob Vischer and Prof. Barbara Armacost (U. Virginia). Sign up now!
I won't be there, of course, because I never go anywhere I can't get to in my RV. But people willing to subject themselves to the terrors and trials of modern air travel should probably go. I've been to several of their events over the years and they are always rewarding.