ProfessorBainbridge.com

Weak Form Efficiency in an Emerging Market

The fundamental thesis of the efficient capital markets hypothesis (ECMH) is that, in an efficient market, current prices always and fully reflect all relevant information about the commodities being traded. In other words, in an efficient market, commodities are never over- or under-priced. The current price is an accurate reflection of the market?s consensus as to the commodity?s value. Of course, there is no real world condition like this, but the U.S. securities markets are widely believed to be close to this ideal.

Studies of the ECMH, as applied to the securities markets, have explored three forms of the theory. Each tests a different level on which markets process information. The weak form posits that all information concerning historical prices is fully reflected in the current price. Put another way, the weak form predicts that price changes in securities are random. Randomness does not mean that the stock market is like throwing darts at a dart board. Stock prices go up on good news and down on bad news. If a company announces a major oil find, all other things being equal, the stock price will go up. Randomness simply means that stock price movements are serially independent: future changes in price are independent of past changes. In other words, investors can not profit by using past prices to predict future prices. (People trying to sell you technical analysis hate this, but it's true.)

An important question for investors is the extent to which the ECMH is a valid model for emerging markets. An interesting new paper, Testin g the Weak-Form Efficiency of the United Arab Emirates Stock Market, sheds light on that question:

This study examines the behavior of stock prices in United Arab Emirates (UAE) stock market. The data consist of the daily prices of the 43 stocks included in the Emirates market index covering the period commencing October 2, 2001 through September 1, 2003. The returns of all the 43 sample stocks do not follow the normal distribution, so the study utilizes only the nonparametric runs to test for randomness. The results reveal that the returns of 40 stocks out of the 43 are random at a 5% level of significance. Hence, the empirical study supports the weak-form EMH of UAE stock market.

These results are surprising and challenging to traditional views because the UAE stock market is newly developed and just recently became official with sound regulations. Furthermore, the market is very small and thin suffering from infrequent trading. However, the results of the paper may be attributed to the essential steps that have already been taken by the authorities to improve the operating and pricing efficiency of UAE stock market during the last two years.

I find this a particularly significant result, because it suggests that weak form efficiency may develop quite early in an emerging market's development. Hence, a whole host of trading strategies (such as charting), likely will be unprofitable - or even counter-productive - even in relatively underdeveloped capital markets. (On the other hand, as the paper notes, studies of other thin capital markets have reached the opposite result. Caveat emptor.)

Profiling the Securities Fraudster

From SLW:

A study earlier this year by KPMG (discussed in this post) found that the "profile" of the most typical corporate fraudster was a male director or senior manager between the ages of 36 and 45, who has worked in the finance department of a public company for more than 10 years. Apparently we can now add "workaholic" to that profile.

According to this article , a new anti-fraud guide due to be released today by Ernst & Young warns that "employees who work excessive hours, refuse to delegate and fail to take up their full holiday entitlement are more likely to commit fraud."

Fascinating. BTW, if you're thinking about hiring me, let me assure you that I do not fit the profile.

UCLA surging

Leiter opines:

In summary form, the schools most improved among the top 18 over the last five years are: Columbia University; University of California, Los Angeles [!]; University of Texas, Austin; Vanderbilt University; Yale University.

The schools who lost the most ground are: Cornell University; Northwestern University; University of Chicago; University of Michigan, Ann Arbor.

Cool. (My alma mater, UVa, "broke even," which sounds about right from what little I hear these days.) Larry Solum has an intersting post on trends (rather than quality) in hiring by the schools covered by Leiter.

Why Wasn't Ken Lay Indicted for Insider Trading?

The SEC's civil suit against former Enron CEO Ken Lay charges Lay with insider trading; alleging that:

Lay took advances on a non-collateralized $4 million line of credit with Enron in the total amount of $77,525,000. Thereafter, in twenty separate transactions, Lay repaid the credit line by selling $70,104,762 worth of Enron stock back to the company, at prices he knew did not accurately reflect Enron's true financial condition.

In contrast, the Justice Department's criminal indictment of Lay does not allege insider trading. Why not?

Lay has defended the transactions in question by arguing that he needed to raise cash to satisfy margin calls on stock:

Lay insisted that his sales of Enron stock were made to meet margin calls, which are demands to pay back loans made to buy the stock, that kicked in as Enron's stock price dropped in late 2001. Lay noted that he tried to do everything he could to hold onto his Enron shares, including using a $10 million company bonus, instead of stock, to pay down debt.

Lay's defense raises a technical, but highly important issue in the law of insider trading; namely, can one be held liable for insider trading where the government merely shows that one possessed material nonpublic information at the time of the trade in question or must the government show that one used that information (i.e., that one traded on the basis of that information)? [The following discussion is excerpted from my book Securities Law: Insider Trading.]

The SEC long has argued that trading while in knowing possession of material nonpublic information satisfies Rule 10b-5, the regulatory provision governing most insider trading (including that of Ken Lay). The difficulties with the SEC’s position, however, are readily apparent to any securities lawyer. Most importantly, a mere possession test is inconsistent with Rule 10b-5's scienter requirement, which requires a showing that the defendant had intent to defraud (or, at least, acted recklessly).

In SEC v. Adler, 137 F.3d 1325 (11th Cir.1998), the Eleventh Circuit rejected the SEC’s position in favor of a use standard. Under Adler, "when an insider trades while in possession of material nonpublic information, a strong inference arises that such information was used by the insider in trading. The insider can attempt to rebut the inference by adducing evidence that there was no causal connection between the information and the trade—i.e., that the information was not used." Although defendant Pegram apparently possessed material nonpublic information at the time he traded, he introduced strong evidence that he had a plan to sell company stock and that that plan predated his acquisition of the information in question. If proven at trial, evidence of such a pre existing plan would rebut the inference of use and justify an acquittal on grounds that he lacked the requisite scienter.

The Ninth Circuit subsequently agreed with Adler that proof of use, not mere possession, is required. The Ninth Circuit further held that in criminal cases no presumption of use should be drawn from the fact of possession—the government must affirmatively prove use of nonpublic information. United States v. Smith, 155 F.3d 1051 (9th Cir.1998).

In 2000, the SEC tried to resolve this issue by adopting Rule 10b5-1, which states that Rule 10b-5's prohibition of insider trading is violated whenever someone trades "on the basis of" material nonpublic information. Because one is deemed, subject to certain narrow exceptions, to have traded "on the basis of" material nonpublic information if one was aware of such information at the time of the trade, however, Rule 10b5-1 rejects the Adler/Smith position. In its effect, if not in its precise language, Rule 10b5-1 tries to resurrect the mere possession test.

Did the SEC have authority to adopt Rule 10b5-1 in the face of contrary judicial holdings? The SEC cannot adopt rules that go beyond the scope of the statutes authorizing them. Admittedly, there is some evidence that supports the SEC’s position. In adopting the Insider Trading Sanctions Act of 1984, for example, Congress imposed treble money civil fines on those who illegally trade "while in possession" of material nonpublic information.

The bulk of the evidence, however, raises serious doubts as to the validity of Rule 10b5-1. The Supreme Court has consistently held that Section 10(b) of the Securities Exchange Act, which provides the authority under which Rule 10b-5 was adopted, prohibits only fraud and manipulation. In turn, as we have seen, fraud requires proof that the defendant intended to deceive (i.e., scienter). Indeed, the Supreme Court explained in Dirks that "[i]t is not enough that an insider's conduct results in harm to investors; rather a violation [of Rule 10b-5] may be found only where there is 'intentional or willful conduct designed to deceive or defraud investors.' " Dirks v. SEC, 463 U.S. at 646, 663 n. 23, (1983). Yet, as the Ninth Circuit pointed out in Smith, “a knowing-possession standard would … go a long way toward making insider trading a strict liability crime.” Second, as the Ninth Circuit also noted, “the Supreme Court has consistently suggested, albeit in dictum, that Rule 10b-5 requires that the government prove causation in insider trading prosecutions.” In other words, the government must prove that the defendant used the inside information in making the relevant trading decisions.

Bottom line? I’m guessing that the Justice Department is loath to rely on Rule 10b5-1. Instead, the Justice Department seems to assume that Smith is the law of the land. If Ken Lay had a plausible argument that his trades were intended to satisfy margin calls, the government would have a very difficult time proving beyond a reasonable doubt that he used inside information in connection with the trades. Lay would be in the position of a forced seller, who would have traded anyway. In contrast, the SEC’s complaint makes clear that it is relying on Rule 10b5-1 and going forward on a mere possession basis. If Lay defends himself as vigorously as he claims, perhaps the Lay case will finally give us a definitive ruling as to the validity of the Rule.

Groping Towards a Conservative Theory of Judicial Review

In a WSJ ($) column today, Chicago law professor Richard Epstein notes that same-sex marriage provides "powerful evidence of an unhappy wedge between the majoritarian and libertarian wings of conservative legal thought," which is certainly true. I am a great admirer of Professor Epstein, whose contributions to the cause of liberty cannot be denied. Yet, I think he makes an error in this column that is common to what he calls "constitutional libertarians" and I call "libertarian judicial activists."

Epstein presents the debate over same-sex marriage as a clash between two competing philosophies. On one side, he identifies the conservative preference for democratic majoritarianism:

Generally ... conservatives insist that most important structural questions in the U.S. should be decided through the democratic political processes, in the separate states. ... Conservatives regard the Goodridge decision as unprincipled meddling of the worst sort. After all, current canons of constitutional interpretation require judicial deference to legislation. The courts must uphold any statute, however unwise, as long as a rational basis can be discerned. But after Lawrence v. Texas last year, in which the Supreme Court struck down a longstanding Texas antisodomy law, social conservatives are right to ask why -- if such laws are struck down as unconstitutional -- the prohibitions on same-sex marriages won't be next on its agenda, notwithstanding the Court's own disclaimers on this explosive question.

On the other side, he identifies the constitutional libertarian's preference for individual autonomy:

The libertarian wing regards democratic government as an imperfect means in service of the larger end of personal liberty, and thus strongly pushes the guarantees of individual rights to their logical conclusion. ... Constitutional libertarians hold that the state must always put forward some strong justification to limit the freedom of association of ordinary individuals. Those justifications might include stopping pollution and cartels, but they cannot include the offense that the majority takes to practices they regard as contrary to public morals. Their remedy is to refrain from participation in the practices they dislike, not to stop others from doing as they please.

So much for morals legislation of any form. In any event, Epstein makes clear that he would privilege individual autonomy over democratic majoritarianism in all cases (in contrast to left-liberals, who privilege it only with respect to favored interest groups):

The question here is not just whether the courts will impose their views on the people of the several states. It is whether they will allow a majority of the public to impose its will on a minority within its midst in the absence of any need for a collective decision. The claim for same-sex marriage is no weaker than any other claim of individual rights on personal and religious matters. ...

The case against state prohibition of same-sex marriages becomes clearer when we ask how much further we are prepared to take the principle of democratic domination. Where is the limiting principle on majority power? Suppose that the proponents of gay rights get strong enough politically to require traditional churches to perform gay marriages, or to admit gay individuals into their clergy. Or to demand that people accept gay couples as tenants in their homes, even if they regard their relationship as sinful. Now the shoe is on the other foot. I think that the paramount claims of individual liberty should not have to yield to democratic decisions intended to impose an alternative enlightened view of public morals.

A plausible and principled account. Yet, I think Epstein errs by mischaracterizing the conservative position.

Conservatives do not privilege present (and possibly temporary) democratic majorities against all other claims. Instead, as Russell Kirk explained long ago:

The conservative endeavors to so limit and balance political power that anarchy or tyranny may not arise. ... Knowing human nature for a mixture of good and evil, the conservative does not put his trust in mere benevolence. Constitutional restrictions, political checks and balances, adequate enforcement of the laws, the old intricate web of restraints upon will and appetite—these the conservative approves as instruments of freedom and order. A just government maintains a healthy tension between the claims of authority and the claims of liberty.

How is that tension to be resolved in particular cases? As noted, the conservative does not rely on the will of temporary present majorities. Instead, the conservative looks to the collective wisdom of society over time:

Conservatives are champions of custom, convention, and continuity .... Order and justice and freedom, they believe, are the artificial products of a long social experience, the result of centuries of trial and reflection and sacrifice. Thus the body social is a kind of spiritual corporation, comparable to the church; it may even be called a community of souls. Human society is no machine, to be treated mechanically. The continuity, the life-blood, of a society must not be interrupted. Burke’s reminder of the necessity for prudent change is in the mind of the conservative. But necessary change, conservatives argue, ought to he gradual and discriminatory, never unfixing old interests at once.

Custom and tradition thus function as a check on both democratic majorities and judicial activists in the conservative scheme. To use Epstein's examples, nothing in our traditions or customs requires traditional churches to perform gay marriages or to admit gay individuals into their clergy; to the contrary, custom and tradition preclude such efforts. Hence, in the face of a democratic majority commanding such "reforms," courts would appropriately strike down such laws. Perhaps the vehicle for doing so would be the privileges and immunities clause of the 14th amendment, which the conservative might see as embodying a sort of Blackstonian common law of the customary and traditional rights of individuals. Conversely, courts would have no right to impose same-sex marriage against the will of democratic majorities:

It is old custom that enables people to live together peaceably; the destroyers of custom demolish more than they know or desire. It is through convention—a word much abused in our time—that we contrive to avoid perpetual disputes about rights and duties: law at base is a body of conventions. Continuity is the means of linking generation to generation; it matters as much for society as it does for the individual; without it, life is meaningless. ...

Conservatives sense that modern people are dwarfs on the shoulders of giants, able to see farther than their ancestors only because of the great stature of those who have preceded us in time. Therefore conservatives very often emphasize the importance of prescription—that is, of things established by immemorial usage, so that the mind of man runneth not to the contrary. There exist rights of which the chief sanction is their antiquity—including rights to property, often. Similarly, our morals are prescriptive in great part. Conservatives argue that we are unlikely, we moderns, to make any brave new discoveries in morals or politics or taste. It is perilous to weigh every passing issue on the basis of private judgment and private rationality. The individual is foolish, but the species is wise, Burke declared. In politics we do well to abide by precedent and precept and even prejudice, for the great mysterious incorporation of the human race has acquired a prescriptive wisdom far greater than any man’s petty private rationality.

Modern day judges should not be able (especially by 5-4 votes) to overturn the collective wisdom of society as expressed by statutes and common law for generations.

I confess that I am still groping towards a fully realized conservative theory of judicial review. I have merely tried to develop some thoughts here from conservative first principles, without demonstrating that the law should incorporate those principles. I also have not worked out how one would hold judges accountable when they pursue personal policy preferences rather than enforcing the customs and traditions of society (relatedly, I have not worked out how judges will identify those customs). But those are tasks for another day.

Update: Richard Epstein sent along a typically cogent response, which I am glad to republish here:

Steve Bainbridge was kind enough to send me his sympathetic critique of the position that I outlined earlier today in the Wall Street Journal. It is very clear to me that his Burkean (or even Hayekian) conservative whom he takes as the finest exemplars of the conservative position. To these great thinkers of the past, rational comprehension of complex political issues and forces was hard to come by. Those who tried too hard to plan the right result often ended up doing far more harm than those who are content to allow slow, often subterranean processes to control the pace of change and social organization. Hence tradition and custom become the watchwords of our times, so that there is a built-in bias in favor of the status quo, so long (I will add) as we think that it has come about by processes that in broad outline should command our political respect. Slavery, no matter how well entrenched, would not meet that test. A prohibition against gay marriage, polygamy or incest would.

There is much about this account that strikes me as correct. The key provision, as a constitutional matter, may well be the privileges and immunities clause of the Fourteenth Amendment, which before its evisceration in the Slaughter House Cases (1982) seemed to hint at the protection of traditional liberties, which were much more oriented toward economic liberties and property rights, and which by then then current understanding did not include anything that related to the somewhat distant topic of marriage and morals. If that clause were dispositive, then there would be no case for striking down the prohibition against same sex marriages under the constitution, even though there could be strong political reasons to doubt the wisdom of the prohibition.

It was one of those peculiar twists of fate that the evisceration of privileges and immunities led to a greater constitutional expansion under the equal protection and due process clauses. Both apply to all persons, not just citizens, and the due process clause refers to liberty, which is probably a somewhat broader notion than privileges and immunities in that it is not subject to modification by the traditionalist requirements. When that becomes the battleground for constitutional argument, the case becomes much closer.

Here the soft underbelly of the traditionalist account is that, while it might be able to catalogue past practices, it does not offer any coherent justification for them. The heightened level of judicial review that was found first between 1870 and 1937 was noted for its effort to offer rational grounds (not the flimsy rational basis test, but real systemization) of the reasons that justified government actions. Here are some that last: protection against external harms, e.g. nuisances; solution to coordination problems, e.g. public goods and common pool resources; the constraint of monopoly, e.g. rate regulation and antitrust laws; and the protection of minors and incompetents.

That is a pretty solid summary of how the limited state libertarian looks at the world, and when we flash forward to the morals questions, the dilemma is real. If we stick to our theoretical guns, then a prohibition on sex marriages cannot be justified on any of these heads. So it has fall, even as a constitutional matter.

Now it is possible to block this maneuver by the insistence on the "traditional" before "liberty," but it is much harder if one is trying to make sense out of doctrine. I might also add that the antidiscrimination laws for private homes and ordinary businesses (not common carriers) was always to recognize the right to exclude. I am quite happy to take on the antidiscrimination laws in employment. My question is how should the traditionalist respond to the Boy Scouts, or to the general antidiscrimination laws. I think that they should want to strike them down. The moral: even within tradition it is hard to keep to judicial restraint if the logic of a constitutional approach. Once this can of worms is opened up, it is difficult to get all the worms to crawl in the same direction.

I agree that his moral is the key sticking point. But it also seems to me that ensuring judicial restraint is the key sticking point of any theory of judicial review. Indeed, the strongest argument for democratic majoritarianism may be the impossibility of achieving judicial restraint, as it is not clear to me that judicial restraint is any more easily obtained under a constitutional libertarian theory either.

CEO Responsibility

In his Political Capital column in today's WSJ ($), Alan Murray suggests that CEO responsibility might be the "right cure" for the woes of corporate governance:

The Enron scandal -- and those at WorldCom, Tyco, Adelphia and others -- exposed a glaring flaw in the oversight of America's top executives. At the time, three cures were suggested: the regulatory cure, the corporate-governance cure, and a third tonic, advocated by U.S. Federal Reserve Board Chairman Alan Greenspan and former Treasury Secretary Paul O'Neill, which might be called the "CEO responsibility" cure.

After explaining that neither of the first two have proven fully satisfactory, Murray turns to the possibility of using CEO responsibility as the basis for regulating corporations:

In unusually clear testimony in July 2002, Chairman Greenspan railed against the "infectious greed" that had invaded American business, arguing that the best antidote was strong and ethical CEOs. "It has been my experience on numerous corporate boards that CEOs who insist that their auditors render objective accounts get them," Mr. Greenspan said, "and CEOs who discourage corner-cutting by subordinates are rarely exposed to it." "Although we may not be able to change the character of corporate officers," he concluded, "we can change behavior through incentives and penalties."

I agree completely. In fact, many of my posts in this blog have made the case for using CEO responsibility as a principal - if not the principal - tool for deterring corporate misconduct. The argument is most fully developed, however, in my TCS column The Wrong Way to Right Wrongs.

Is there a "new consensus" on the minimum wage?

Steven Landsburg's Slate article on the minimum wage has generated considerable discussion in the economic end of the blogosphere. (See, e.g., Cowen, Quiggin, and DeLong.) Some of the commentary seems to suggest that there is a new consensus among economists that minimum wages do not harm employment. Quiggin's post works "new consensus" into the title and Landsburg's claims such a consensus exists among "labor economists." I don't follow the field very closely, but I found it difficult to believe that there is a "consensus" on this point. After all, I vaguely recalled that the work of David Card and Alan Krueger (who claimed that minimum wage increases don't cause increased unemployment) had been seriously challenged by folks like Thomas Sowell and David Neumark. Being curious as to whether there really was a new consensus to which folks like Sowell and Neumark are just outliers, I did a little digging and came across Consen sus Among Economists: Revisited by Dan Fuller and Doris Geide- Stevenson, published in the Journal of Economic Education (Fall 2003). They find a decline in agreement among surveyed economists between 1990 and 2000 with respect to the minimum wage: "It is likely that the recent research and debate concerning the effect of a minimum wage increase on employment have shifted economists? opinion toward less agreement." Yet, while there has been a shift, in 2000 a plurality of the surveyed economists (45.6%) still agreed with the statement "Minimum wages increase unemployment among young and unskilled workers." Another 27.9% agreed with provisos, while only 26.5% disagreed. So perhaps there is less of a consensus than some would have you believe. Update: J acob Levy asks some very good questions about Landsburg's statistical argument. Update 2: Over at Mirror of Justice, I ruminate a bit about the implications of the consensus data for the Catholic Social Thought analysis of the minimum wage. Update 3: My friend and fellow law prof Brett McDonnell writes from the frozen north (Minnesota):

(1) The statement in the J. of Econ. Ed. questionnaire simply states that the min. wage increases unemployment among the young and unskilled. It does not say anything about the magnitude of the increase. If you re-read the Landsburg piece, I think you'll see that this is an important qualifier. Critics of the old consensus would agree that there might be a small effect, but it appears to be a quite small effect indeed.

(2) The J. of Econ. Ed. article is a survey of all economists. Landsburg made a statement about a new consensus among labor economists. If indeed there has been a recent shift among labor economists (I'm not one of them, so I cannot say whether there has been or not), it might well be that that shift has not yet fully made it's way into the rest of the profession. It has started to change opinion within the full profession, but that change is not yet complete. There are a lot of specialties within economics, and it can take a while for results within one specialty to make their way into the rest of the field.

Fair enough. Update 4: Mike Beversluis sent along a link to a post by Russell Nelson.

The Politics of Investor Activism

I'm no fan of shareholder activism, especially the brand practiced by state pension funds. A Wall Street Journal editorial today offers a succinct explanation of why we should have doubts about such activism:

It used to be that the job of treasurer was a modest sinecure for someone who wanted to protect the state fisc. But as state pension-fund assets have soared, these former nobodies are now trying to leverage their dollars for their own political profit. Most notably, California Treasurer Phil Angelides has been helping to steer Calpers to promote union causes in the expectation that the unions will return the favor when he runs for governor against Arnold Schwarzenegger. As if this country didn't have enough politicians bent on redistributing wealth rather than creating it.

Johnson and Millon on Duties of Officers

Washington & Lee law professors Lyman Johnson and David Millon have posted to SSRN a paper entitled Recall ing Why Corporate Officers are Fiduciaries, which I found quite insightful. They argue:

To lump officers and directors together as generic fiduciaries with no distinction being made between them, suggests - as patently is not the case - that their institutional function and legal roles within the corporation are the same. Such a view, consequently, undermines efforts more sharply to distinguish, not blur, the governance responsibilities of these two groups.

This is, of course, much the same policy position as articulated by my work on direct or primacy. Johnson's and Millon's argument that "courts can and should more closely scrutinize officer conduct than they now review director performance" is a logical corollary of the director primacy model. Am I annoyed that they didn't cite my article? A little bit, although that's offset by their citations to my treatise. Do I recommend that you read their article anyway? Yep.

Ken Klee

My friend and UCLA Law colleague Ken Klee is a remarkable fellow. Nationally respected bankruptcy expert, professor, and practitioner. An article in today's LA Times sheds new light on Ken, who it turns out is running an unusual sideline:

Ken Klee, a UCLA law professor and prominent corporate bankruptcy lawyer ... practices energy healing on the side. A seven-year student of more than half a dozen healing methods including reiki's radiance technique, pranic healing and Theta Healing, Klee practices eight hours a week out of his Brentwood home office, stacked high with stones and crystals, massage table at the center. ...

Klee says, "If I can do it, anybody can do it. I'm a conservative guy, a lawyer, a skeptic. I believe in verifying things. Seven years ago, I would have thought this was completely nuts. Now I'm convinced science is going to validate this. It's going to happen in my lifetime."

Fascinating. Who knew the secret life of a law professor could be so ... out there.

Leiter on UCLA

My friend Brian Leiter's blog plays a valuable role in keeping us posted on the state of legal education. In a recent post, he summarizes UCLA Law's hiring this year:

Mark Grady (law & economics, torts), who recently announced he was stepping down as Dean at George Mason, will return to teaching at UCLA Law School. That's a loss for George Mason, and caps a good year for UCLA, in which they hired a new Dean, Michael Schill, from NYU, as well as Neil Netanel (intellectual property) from Texas and Katherine van Wezel Stone (labor law) from Cornell, as well as several junior faculty. Grady's return is a particular boost for UCLA's relatively weak presence in law and economics. (UCLA's only loss this year [may end up being] Jody Freeman [environmental and administrative law], who ... has an offer from Harvard, and will visit some or all of next year, but hasn't accepted the offer.)

I'd say we had a damn good year. Of course, the powers that be in Sacramento still seem determined to balance the state budget on, inter alia, our backs, but such things as are in our control seem to be going pretty well.

Remembering Gettysburg: Joshua Chamberlain

With the 141st anniversary of the Battle of Gettysburg upon us, assuming I've done my sums correctly, Dave Kopel, Paul Gallant, and Joanne Eisen offer up a very fine appreciation of Union General Winfield Scott Hancock, whose heroics indeed well deserve to be recalled. Yet, if I were asked to select the real hero of Gettysburg, I'm afraid my choice would not be Hancock. Instead, I would nominate Joshua Chamberlain. If one were forced to pick just one moment that saved the Union, it would almost surely be Chamberlain's stand on Little Round Top. Let him describe it in his own words (from his action report):

Mounting a large rock, I was able to see a considerable body of the enemy moving by the flank in rear of their line engaged, and passing from the direction of the foot of Great Round Top through the valley toward the front of my left. The close engagement not allowing any change of front, I immediately stretched my regiment to the left, by taking intervals by the left flank, and at the same time "refusing" my left wing, so that it was nearly at right angles with my right, thus occupying about twice the extent of our ordinary front, some of the companies being brought into single rank when the nature of the ground gave sufficient strength or shelter. My officers and men understood wishes so well that this movement was executed under fire, the right wing keeping up fire, without giving the enemy any occasion to seize or even to suspect their advantage. But we were not a moment too soon; the enemy's flanking column having gained their desired direction, burst upon my left, where they evidently had expected an unguarded flank, with great demonstration.

We opened a brisk fire at close range, which was so sudden and effective that they soon fell back among the rocks and low trees in the valley, only to burst forth again with a shout, and rapidly advanced, firing as they came. They pushed up to within a dozen yards of us before the terrible effectiveness of our fire compelled them to break and take shelter.

They renewed the assault on our whole front, and for an hour the fighting was severe. Squads of the enemy broke through our line in several places, and the fight was literally hand to hand. The edge of the fight rolled backward and forward like a wave. The dead and wounded were now in our front and then in our rear. Forced from our position, we desperately recovered it, and pushed the enemy down to the foot of the slope. The intervals of the struggle were seized to remove our wounded (and those of the enemy also), to gather ammunition from the cartridge-boxes of disabled friend or foe on the field, and even to secure better muskets than the Enfields, which we found did not stand service well. Rude shelters were thrown up of the loose rocks that covered the ground. ...

The enemy seemed to have gathered all their energies for their final assault. We had gotten our thin line into as good a shape as possible, when a strong force emerged from the scrub wood in the valley, as well as I could judge, in two lines in echelon by the right, and, opening a heavy fire, the first line came on as if they meant to sweep everything before them. We opened on them as well as we could with our scanty ammunition snatched from the field.

It did not seem possible to withstand another shock like this now coming on. Our loss had been severe. One-half of my left wing had fallen, and a third of my regiment lay just behind us, dead or badly wounded. At this moment my anxiety was increased by a great roar of musketry in my rear, on the farther or northerly slope of Little Round Top, apparently on the flank of the regular brigade, which was in support of Hazlett's battery on the crest behind us. The bullets from this attack struck into my left rear, and I feared that the enemy might have nearly surrounded the Little Round Top, and only a desperate chance was left for us. My ammunition was soon exhausted. My men were firing their last shot and getting ready to club their muskets.

Now comes the moment when Chamberlain assured his place in Valhalla:

It was imperative to strike before we were struck by this overwhelming force in a hand-to-hand fight, which we could not probably have withstood or survived. At that crisis, I ordered the bayonet. The word was enough. It ran like fire along the line, from man to man, and rose into a shout, with which they sprang forward upon the enemy, now not 30 yards away. The effect was surprising; many of the enemy's first line threw down their arms and surrendered. An officer fired his pistol at my head with one hand, while he handed me his sword with the other. Holding fast by our right, and swinging forward our left, we made an extended right wheel, before which the enemy's second line broke and fell back, fighting from tree to tree, many being captured, until we had swept the valley and cleared the front of nearly our entire brigade.

Meantime Captain Morrill with his skirmishers sent out from my left flank, with some dozen or fifteen of the U.S. Sharpshooters who had put themselves under his direction, fell upon the enemy as they were breaking, and by his demonstrations, as well as his well-directed fire, added much to the effect of the charge.

Having thus cleared the valley and driven the enemy up the western slope of the Great Round Top, not wishing to press so far out as to hazard the ground I was to hold by leaving it exposed to a sudden rush of the enemy, I succeeded (although with some effort to stop my men, who declared they were "on the road to Richmond") in getting the regiment into good order and resuming our original position.

Four hundred prisoners, including two field and several line officers, were sent to the rear. These were mainly from the Fifteenth and Forty-seventh Alabama Regiments, with some of the Fourth and Fifth Texas. One hundred and fifty of the enemy were found killed and wounded in our front.

Chamberlain was awarded the Congressional Medal of Honor.

Chamberlain's memoir of the battle, Through Blood and Fire at Gettysburg, is well worth reading. As a university professor, Chamberlain was one of the best-educated soldiers to fight in the war and wrote a superb account of the fight. I would also recommend Conceived in Liberty: Joshua Chamberlain, William Oates, and the American Civil War, which is a dual biography of Chamberlain and the Alabama officer who commanded the Confederate troops opposing him on that fateful day. Finally, of course, Chamberlain is one of the heroes of Michael Shaara's classic novel The Killer Angels .