Thursday, December 27, 2007

Caught Between the Infinite Regress of Rational Choice and Psychological Determinism

Posted by Jeff Lipshaw (cross-posted at Concurring Opinions)

I neglected to mention, in my original commentary on the Cerberus opinion over at Concurring Opinions, that I am indebted to Frank Pasquale (the real one!) for directing me to Paradoxes and Inconsistencies in the Law, edited by Oren Perez and Gunther Teubner.  I'm now doubly indebted to Frank because he pointed out another blog post that makes for an interesting counterpoint about practical reason - how we decide (particularly as lawyers) what to do.

In his introductory essay to Paradoxes, Oren Perez (Bar-Ilan) makes a point about rational calculation, in the context of the Learned Hand formula for negligence, that had never occurred to me, and which seems to make sense.  (I invite anyone to explain why it is wrong!)  This has broad application because it gets at the heart of the core relationship between the ex post outcome of cases (like Cerberus' "lessons" on eliminating ambiguities in drafting) and the ex ante calculation in respect of that outcome that lawyers (those most rational of actors) are supposed to make.

Perez's argument goes like this.  The potential tortfeasor, informed by the case holdings, knows that she will be liable for the injury she causes if the cost of precaution is less than the probability of an accident times the magnitude of the accident.  For the model to work, it has to assume that potential tortfeasors and judges are perfect welfare maximizers with perfect information.  But information and deliberation are not costless.  So maximizing actors need to make a decision about whether to invest costs in obtaining the necessary information and spending the time deliberating about the choice.  That decision is itself not costless; one needs to gather information about whether gathering information and deliberating is a fruitful way to spend one's maximizing time.  And so on to the infinite regress. This appeals to my intuition in the same way as, and seems to be related to, at least analogically, the idea that rules cannot determine their own correct application.  (If there were a rule for the application of a rule, then what would the rule be for the application of the rule for the application of a rule, and so on to the infinite regress.) 

Perez's conclusion is that this is why we have rules of thumb for deciding what to do - they sit somewhere between unsatisfying calculation and pure intuition.

But wait.  Maybe we don't calculate or intuit.  Maybe we just frame, conform, and comply.  That's a thesis proposed by Sung Hui Kim (Southwestern) over at The Situationist, a law and psychology blog affiliated with the Project on Law and Mind Sciences at Harvard Law School. In Part II of a series speculating on why lawyers acquiesce in the frauds of their clients, Professor Kim says:

Inside counsel, as employees of the firm, are inclined to take orders and accept the “definition of the situation” (a phrase coined by Milgram) from their superiors.  These superiors happen to be a cohort of non-lawyer senior managers vested with the authority to speak on behalf of the organization and entrusted to give direction to inside counsel.  They create the reality for inside counsel: they define objectives, identify specific responsibilities for inside lawyers and, ultimately, determine whether an inside lawyer’s performance is acceptable. And accepting management’s “definition of the situation” means accepting management’s framing of the inside lawyer’s role and responsibilities.

This framing provides that compliance responsibilities be segmented.  Although inside counsel’s duties include a prominent role in corporate compliance, it is business management that jealously guards the right to decide whether to comply with the law, which is seen as the ultimate risk management decision.  For inside counsel to challenge management’s decisions or management’s authority to make decisions would then amount to clear insubordination. Obedience in the corporate context will be substantial, so we should not be surprised by the banal tendency to listen to superiors.

Full disclosure.  I spent eleven years of my career as an in-house lawyer, so it's entirely possible that I resemble that remark.  (Professor Kim can also call on real-world experience as outside and inside lawyer, and in fairness, her very thoughtful and interesting Fordham Law Review article on the subject, which I recommend heartily, is more nuanced than the blog post.)  But I'd be a lot more comfortable accepting this sweeping conclusion were it made on broad empirical evidence of actual in-house lawyer conduct rather than on what appears to be a combination of inference from the Milgram conformity lab tests and well-known examples of lawyers behaving badly.  I knew a lot of in-house lawyers, and while I can't say how they would have performed in the electric shock tests, and can't deny the impact of framing on decision-making, I sure saw a lot of thoughtful and courageous pushback to management on lots of legal and moral issues.  Indeed, my casual observations were that individual moral choice and leadership in context, while certainly more elusive in its measurement, showed up more than just from time to time.  I can't determine whether that was the exception or the rule.  Indeed, I applaud the coda to Professor Kim's bio: "I tell my students that there are two questions that every lawyer should ask when counseling a client about a proposed course of action. The first is: 'Is it legal?' The second is: 'Is it right?'" But how do you make that call? 

I struggle with the line between psychological "truths" and moral free agency.  I am willing to accept the conclusion that we are hardwired to seek and justify physical and material well-being, and hence, a natural inclination for people, not just lawyers, is to comply and avoid conflict.  I don't like, however, blanket statements about in-house lawyers doing this and that, and having this and that tendency.  If I may engage in another exercise of shameless self-promotion, the point of my piece, Law as Rationalization:  Getting Beyond Reason to Business Ethics, was to explore the difference between lawyers using reason to justify a desired material world outcome, and lawyers using reason as autonomous moral agents trying to discern ethical obligation.

The implication is that I don't think you can change things by incentives (more cheese for the rats).  My answer is there has to be personal engagement in a continuing struggle to ask questions with the hope of getting answers along the way.  To borrow from Robert Louis Stephenson, sometimes it is better to travel hopefully than to arrive.

Economics, Ethics, In-House, Lipshaw | Permalink

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