Bankruptcy

It's All Academic

By Elizabeth Warren

A long-standing academic divide now separates two presidential candidates.  For nearly three decades, legal scholarship has been dominated a deductive, theoretical approach that analyzes incentives and assumes outcomes, with the rational actor playing the starring role.  The newer empirical approach is far more inductive, and data are often deployed to show that the rational actor is nowhere to be found.

In this morning's New York Times, David Leonhardt explains the key differences between presidential candidates Clinton and Obama using exactly this construct (although not these terms). 

Leonhardt notes Clinton's proposals to use complex incentives to prompt certain behavior (e.g., matching tax credits to encourage low income families to save).  Obama, by contrast, favors plans that don't rely on a rational actor, but that are outcome driven.  For example, contrary to theoretical predictions, data show that if people must take a simple step to opt out of a savings plan that far more people will save than if they must take an equally simple step to opt into a savings plan. Observing this, Obama favors requiring employers to set up savings plans except when employees opt out.   

Is this life imitating art (or politics imitating the academy)? 

We don't do retail politics on CreditSlips, and I don't want to start now.  Besides, this isn't a division along traditional conservative/liberal lines (Leonhardt argues that Clinton and Obama are far more similar than any other two candidates).  But I couldn't resist the observation that at least one very astute observer thinks that the deeply philosophical issues that we debate in the academic world represent a very real philosophical divide in the political world as well.   

Full post as published by Credit Slips on January 03, 2008 (boomark / email).