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— Rules of the Road —
Manne's approach called for applying economic analysis to gauge the impact of laws and regulation. His effect on today's legal framework is widespread -- the law and economics movement is part of mainstream legal analysis. And two schools in the movement, the University of Chicago and Virginia's George Mason University, lay claim to Nobel Prize winners. Now a top foundation wants to build upon Manne's work by adding the study of entrepreneurial risk taking and innovation to the mix. On Dec. 11, the Ewing Marion Kauffman Foundation announced it is launching a $10 million program for research in the area. The late entrepreneur and philanthropist Ewing Marion Kauffman created the Kansas City, Mo., foundation in the mid-1960s. It is the 30th-largest foundation in the U.S. with roughly $2 billion in assets.
Robert Litan, Kauffman's vice president of research and policy, will oversee the program. Litan worked at the Brookings Institution for nearly 20 years, ultimately as director of economic studies. The genesis of Kauffman's project began a year and a half ago, when Litan and foundation CEO Carl Schramm compared observations of entrepreneurs and their readings of economic literature. "Carl and I both got the feeling that law and tax policy is very, very important to entrepreneurship and in both a positive and negative sense," Litan says. "Entrepreneurs need a stable legal system of intellectual property rights and contracts to feel comfortable taking the risks necessary to start businesses and grow them." On the other hand, "too much law or the wrong kind of law can be an impediment." The notion that a single think tank and its cloistered scholars can have a meaningful impact on public policy may appear naive, but the law and economics movement was established essentially just that way. The John M. Olin Foundation, which the munitions and chemicals industry magnate founded in 1953, financed law and economics departments at the University of Chicago and other colleges, which had a profound effect on the policies their graduates promoted. The Olin Foundation disbanded in 2005, but Kauffman aims to keep its methods alive by providing funding for legal research and fellowships for new faculty and seminars at law schools around the U.S. The $10 million outlay will provide some $2.8 million over three years to Boston University, Columbia University, Stanford University, George Washington University, Harvard University, the University of Iowa and Yale University. Litan says the seven schools were selected because they produce most of the country's law professors. "We hope to grow a new generation of scholars," Litan says. Harvard's Berkman Center for Internet & Society will also get $2.8 million. A further $2.2 million will fund Kauffman Legal Research Fellows and encourage law schools to form curriculum on innovation and growth. Funds will also help build the Stanford Intellectual Property Litigation Clearinghouse, an online database on intellectual property disputes within the country. The movement is often associated with conservatism, but Litan insists it was not limited to conservatives, nor is Kauffman pushing a political bent now. Examples of the kind of research Kauffman wants to promote include an upcoming article in Michigan Law Review by the University of Pennsylvania's Gideon Parchomovsky and Cardozo School of Law's Alex Stein arguing that tort practice in negligence, defective product and medical malpractice cases is biased against innovation because standard defenses favor established industry practices. Litan hopes to draw attention to patent law as well. While essential to protecting entrepreneurs' intellectual property, Litan says the "landscape is littered with patents" and entrepreneurs often must pay off claims that stand in the way of getting products to market. Kauffman's initial commitment is for five years, though Litan predicts it will last longer. "This is basic R&D, and we're realistic enough to know it may take longer to pay off," he says. "Kauffman has no plans to go out of business." Bill McConnell is The Deal's Washington bureau chief. |
Nearly 40 years ago, legal scholar Henry Manne set his mind to finding a law school willing to combine the study of law and economics. Manne's goal was to give future lawmakers, regulators and judges an educational foundation to create policies that foster economic growth rather than hinder it.
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