In most fields of intellectual endeavor, the highest praise is reserved for brilliant insights that overturn conventional thinking and common sense. Albert Einstein’s theory of relativity, for example, changed completely the way we think about the interrelationship of time and space. Economists and legal scholars, always looking over their shoulders at the “hard sciences,” traditionally have applied the same standards in their own fields. But actually, “brilliance”—new ideas that turn conventional thinking on its head—should count heavily against an economic or legal theory.
My first example, the famous “Coase Theorem,” is an especially good illustration of a theory done in by its own brilliance, because it derives from the boundary between law and economics. Before Professor Ronald Coase’s work two decades ago, the accepted wisdom was that legal rules could improve economic efficiency by preventing firms from imposing costs on outsiders. For example, people pollute because the cost is imposed on their neighbors, or society in general, not on themselves. If they had to pay the whole cost of their pollution, they wouldn’t do it.
Coase stood this notion on its head, showing that legal rules are virtually irrelevant because, with or without them, people can negotiate to reach the efficient result. For example, even without laws against pollution, pollution victims could band together and bribe polluters to shut down. Pollution is inefficient if the costs borne by pollution victims exceed the benefits to the polluter—and, Coase triumphantly asserts, these are exactly the circumstances in which rational victims would bribe the polluter to stop. There is a tale, possibly apocryphal, that when Coase first presented this paper at the University of Chicago, his audience was astounded and was persuaded of his theory’s validity only after hours of argument. Since then, the Coase Theorem has spawned a huge literature and has become a cornerstone of the conservative academic movement called “law and economics.
Although many scholars have attacked the Coase Theorem, the best reason to reject it is that it is simply too brilliant. The reason the Theorem astounded Coase’s audience is that we do not commonly observe people behaving as the Theorem contemplates. If we did, the Theorem would hardly be surprising. Saying that pollution victims pay bribes is startling precisely because it does not really happen.
In other words, brilliance is not merely evidence that a theory is invalid, but a likely cause of its invalidity. If the idea that victims could bribe polluters is startling, people are not likely to think of it themselves. If they do not think of it themselves, they are not likely to do it. If only a brilliant person can think of doing something, it is unlikely that most people will adopt that course of conduct. Most people, after all, are not brilliant.
Economics assumes that, by and large, people behave rationally, or at least that they act as if they were rational. Indeed, rationality has been said to be the core assumption of economics, distinguishing it from the other social sciences. When critics argue that real-life people and firms are incapable of performing the complicated mathematical calculations involved in modem economic theories, economists respond that whatever decision-making process they do use, people who act according to the theory will prosper and survive, while their competitors will be forced out of the market. But this illustrates the fundamental defect of brilliant theories. If a brilliant theory is true, it should have been discovered in the marketplace. Because it has not been discovered—or else it would not now be considered brilliant—it is very likely false.
Examples of truly brilliant economic theories abound. Unfortunately, most are simply too brilliant to be true. For example, “rational expectations” theory—another modish conservative school of thought—asserts that the government cannot control the economy. Whenever the government tries to do so, consumers and businesses cleverly adjust their own plans in a way that cancels out the effects of the government’s action. If economic actors are smart enough to predict and then cancel out the effects of the government’s actions, however, they must also be smart enough to realize that the government actions cannot have any truly lasting effect. Moreover, firms realizing that government actions are always ultimately ineffective should have a major competitive advantage, because their planning will not be distorted by the misconception that government policies have effects. Given this advantage, these firms should dominate the marketplace. Thus, rational expectations theory, far from being considered brilliant, would be nothing more than a cliché—if only it were true.
A final example: the theory of “efficient capital markets” holds that there is no way to predict the future course of the stock market because all currently available relevant information is already factored into the current price. According to this theory, investors who trust entirely to luck, numerology, or astrology will beat out those who pay money to brokers, investment counselors, and other experts. Hence, these “naive” investors should dominate the market. In reality, however, the theory sharply conflicts with most investors’ view of the market. This theory, like those discussed earlier, is just too much of a surprise to the rational economic actors who are its subjects.
The common thread in this discussion is rationality. It is all well and good for a theory about electrons to be a total surprise to physicists. If electrons were believed to be largely rational creatures, however, we would not expect to find truths about electrons that surprised the electrons themselves. Most social sciences tend to view human behavior as irrational, so the fact that a theory is surprising is not itself suspicious, because we might lack an understanding of the irrational parts of our behavior. It is much more suspicious, however, to claim—as economists do—that people behave rationally but nevertheless are ignorant of the factors that make their behavior rational. Of course, it is not necessarily impossible that people have all been unconsciously acting as if they believed in an economic theory that economists themselves find startling and novel. But is it likely?
The core problem is that if an economic theory is true, then people who behave rationally will act as if they knew the theory. If people are consistently acting this way, however, it is unlikely that the theory will be a surprising novelty. If people are not consistently acting this way, the theory cannot be true.
The case against brilliance is strongest in economics simply because economics takes the most positive view of human rationality. If a theory is brilliant, by definition everyone in history prior to its discovery was systematically wrong about something. The whole thrust of economic theory, however, is against the likelihood that everyone has been wrong.
Another field where brilliance should be counted as a disadvantage is constitutional law—an area in which brilliant scholarship has recently become rampant. Consider just two particularly brilliant recent theories. Dean John Hart Ely of Stanford Law School has addressed the question of how to interpret certain vague clauses in the Constitution, such as the privileges and immunities clause of the Fourteenth Amendment (“No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States”). Allowing judges an open-ended license under these clauses would be undemocratic, but to ignore the clauses would also be improper. Hence, Ely argues, judges should apply the clauses to strengthen democracy by striking down legislation that in some way encumbers the democratic process. This is Ely’s famous “representation- reinforcing” theory of judicial review, so-called because the courts reinforce representative democracy.
Professor Ronald Dworkin argues, by contrast, that the open-ended clauses of the Constitution are based on specific conceptions of equality, freedom, and justice. In interpreting these clauses, however, judges should rely not on the particular conceptions of the framers but rather on the deeper philosophical concepts that lie behind these conceptions. Thus, in exercising judicial review, judges should not be concerned with how the framers of the equal protection clause construed the concept of equality, or even with how the average citizen today understands equality, but rather with the true meaning of equality. Dworkin’s theory, like Ely’s, takes the constitutional text as the starting point, but then adds a brilliant gloss of its own.
Unfortunately, these theories share a flaw, a flaw endemic to brilliant legal theories. The Fourteenth Amendment was not written by Ronald Dworkin or John Hart Ely. Its primary drafter was a man named John Bingham. Bingham had a certain flair for sermonizing. But, based on his public speeches, it seems doubtful that he was as intelligent as the average law professor, let alone Ronald Dworkin and John Hart Ely. It is hard to see how he could have had in mind a notion so ingenious that no one thought of it until Ronald Dworkin and John Hart Ely came along.
Not everyone agrees that the intent of the framers is what counts in constitutional interpretation. But virtually everyone agrees that a bedrock principle of law is consent of the governed. A brilliant theory is by definition one that would not occur to most people. The general problem with brilliant legal theories is: How can most people have agreed to something that they could not conceive of?
Supreme Court decisions often fall victim to similar brilliant interpretations. Perhaps the mos famous recent example is Justice Rehnquist’s 1976 opinion in National League of Cities v. Usery, which struck down the federal minimum wage for state employees. Two brilliant Harvard professors have argued that Rehnquist’s opinion actually established a constitutional right to welfare. In his treatise, American Constitutional Law, Professor Lawrence Tribe explains that Justice Rehnquist “seemed sometimes to lay the foundations for precisely such a theory”; that some of the language “may be read to suggest” this theory; that the theory makes sense of “an otherwise problematic distinction”; and that a tension in the cases “may well reflect an unarticulated perception” that the theory is correct. A footnote adds that the author doubts whether any other explanation makes sense. Only through this brilliant re-interpretation, then, can the Court’s decision be salvaged.
Of course, this interpretation was so dazzlingly brilliant just because it was painfully obvious that Justice Rehnquist had no such thing in mind. Indeed, the only members of the Court who were remotely likely to be receptive to a constitutional right to welfare were the liberals, all of whom dissented from Justice Rehnquist’s opinion. There is something inherently suspect about an interpretation so clever that it never would have occurred to the speaker or the audience.
If my arguments are correct, then the standards for judging academic work in economics and constitutional law should be reconsidered. There is a tendency for high-flying theorists to scoff at those whose work stays closer to the ground. Icarus, too, was scornful of pedestrianism.
(But what if, as several readers have wittily suggested, this article itself suffers from the vice of brilliance? Would not its thesis then be self-contradictory and, hence, necessarily false? Although clever, such an argument is misplaced. Even if this article were brilliant, its thesis is only that brilliant first-order theories about the legal system and the economy are generally false. Thus, the attempted contradiction fails at three points: (1) the charge that this article is “brilliant” is damaging but unproven; (2) the thesis is that most brilliant articles are false; this could be one of the rare exceptions; and, most importantly, (3) this article does not present a first-order theory about economics or law, but rather a meta-theory about scholarship in those areas. The article’s thesis, therefore, does not apply to itself.)
Daniel A. Farber is professor of law at the University of Minnesota. A different version of this essay appeared in the Minnesota Law Review.