Law reviews vs. economics journals

One thing economists are always amazed about, when they talk to law professors, is the way that law review publication is handled. Leaving aside the special-topic faculty-edited journals (e.g., Tax Law Review at NYU, Journal of Legal Studies at the U of Chicago), the law reviews are of course student-edited. More specifically, by second-years who have newly been selected to editorial positions. Important decisions, in terms of junior law profs' careers, what gets read, who has the buzz, etc., then end up being made by these individuals, who, with no criticism intended, are not very far along yet in terms of the background needed to recognize serious, good, or important work.

Lucky for me, I've almost completely stayed out of the law reviews' way for almost a decade, what with books and invited pieces. But at the end of this month, when the new boards have been installed, I'm planning to submit "Beyond the Pro-Consumption Tax Consensus," significantly revised for greater clarity and readability since I posted it on SSRN (and linked it here) about a month ago. I actually do feel that this is an important article in the tax policy lit, and also a good one. We will see if this view ends up being shared by the people who get to decide.

Knowing that you have law review readers making publication decisions can have bad effects. It can simply be boring to have to go through the ABC's of ideas that your main target audience will already know about. But okay, it's actually a good discipline, up to a point, to force yourself to communicate more broadly. The problem is that it creates over-long detours. Sometimes it means you can't make an interesting & significant side-point since it would take 5 pages to set the stage for it. Worse is the incentive to have to sell articles' conclusions as extra-significant, and to tart them up in stupid ways so people who don't know the field that well will think they should publish it. "This is the first article to show that 1 + 1 = 2, a point that will transform the law and economics of arithmetic." One strategy I've heard about is putting these claims in the version you send out, then taking it out before publication so that your peers won't laugh at you.

Another bad incentive, the man bites dog scenario, isn't limited to law reviews. Perhaps it's even more true for professionally edited economics journals. If you can devise a study showing that 1 + 1 actually equals 3, you're in clover. The moment you get that finding from your regressions, but only if you get that result, you know you have a publishable paper. (Econ journals won't publish a paper confirming that 1 + 1 = 2.) Luckily, most reputable empirical economists are honorable, plus they do have to worry about reviewers asking for back up data runs.

Rare instance of thinking that the law reviews sometimes aren't as bad came from last Thursday's Tax Policy Colloquium at NYU, where Dhammika Dharmapala presented a paper (co-authored with Mihir Desai) finding that well-managed firms get more of a boost in stock price from tax savings than do poorly-managed firms, suggesting the possibility that the market expects the managers in poorly managed firms to loot or dissipate more of the tax savings. In some ways, the theoretical story wasn't that strong (since the effect would depend, not on total looting or waste, but on extra marginal looting or waste when extra tax savings emerge). Also, one could criticize the methodologies used for two key empirical components of the analysis. First, they tried to identify tax planning via gaps between tax and book income. But deliberate and systematic gaps between the two can reflect either tax planning or earnings management. It was unclear that their methodology for identifying the latter could do the job well enough. (Which is not to say that the authors overlooked a better way of doing it - the point is simply that they're very hard to distinguish). Second, the paper's proxy for well-managed firms, which was higher-than-average ownership by institutional investors, was theoretically questionable since it's unclear how much these investors actually improve governance. This device also causes big endogeneity problems (i.e., we might be picking up some aspect of how the institutional investors pick firms or directly influence stock prices).

In the paper as it stands, Dharmapala & Desai mention a robustness check for their governance finding, which is that the results are the same if one uses a governance measure relating to institutional mechanisms for managerial entrenchment. This, in general, is the really good thing about their paper - questionable though the results seem since they are so distantly and indirectly related to the underlying things of interest, the results are not only statistically significant but apparently quite robust to alternative specifications. So something has to lie behind their findings, and although we spent much of Thursday at the colloquium spinning alternative stories that would explain the data, in the end they really seem to have something.

But back to the law reviews versus econ journals. The authors may actually agree with us about the better way to test for well-managed firms, via the entrenchment measures that don't give rise to comparably serious endogeneity problems. But the reviewers at the journal that will likely be publishing the paper made them switch.

Not a problem one ordinarily has with student law review editors, with whom it's often more a matter of negotiating over whether you need a footnote for the claim made in passing that 1 + 1 = 2. So score one for the law review process.