Henry Manne: A Champion of Law Informed by Economics

Wall Street Journal
January 19, 2015

Editor’s note: Henry G. Manne, dean emeritus of the George Mason School of Law, died Saturday at age 86. The author of “Insider Trading and the Stock Market” (1966) and a pioneer in the field of law and economics was a frequent Journal contributor. Some samples:

From “For Milken, Verdict First, Trial Later,” Feb. 3, 1990:

The government wants $1.8 billion in RICO forfeitures from [Michael] Milken and his co-defendants. The government claims that Mr. Milken’s alleged securities infractions were RICO violations, which made Drexel part of a RICO “enterprise,” which means he must forfeit all his Drexel compensation. Kafka, hell; anyone for Torquemada?

The government wants $1.8 billion in RICO forfeitures from [Michael] Milken and his co-defendants. The government claims that Mr. Milken’s alleged securities infractions were RICO violations, which made Drexel part of a RICO “enterprise,” which means he must forfeit all his Drexel compensation. Kafka, hell; anyone for Torquemada?

Every American’s basic civil liberties are critically endangered by this hysterical, politically inspired drive to demean our financial markets and convict or at least disgrace targeted individuals. That the principal defendant has been a disruptive and unsettling innovator in the usually staid financial world makes it all the more important to be vigilant about possible abuse of fair procedures. We hardly need a regime of civil liberties to protect passive, unventuresome members of the community. Tough business competitors should get at least the same legal fairness we normally give Klansmen or crack dealers.

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‘Scoring’ Legislation for Growth

by Edward P. Lazear

Wall Street Journal
January 6, 2015

The House of Representatives on Tuesday adopted a rule that will change Washington and lawmaking for the better. When legislation is proposed, the Congressional Budget Office is tasked with estimating its fiscal consequences. In most cases, the CBO assumes there is no effect on economic growth, positive or negative. In the future, the House will instruct the CBO to take macroeconomic effects into account when estimating the cost of legislation.

The old approach, that ignored effects on economic growth, has been defended as being “neutral,” a way to prevent political pressure from affecting nonpartisan CBO calculations.

The White House has already released a blog post that opposes the change, based on the supposed neutrality of the old approach and arguing that the new rule will introduce bias. But the House, not White House, has it right. Ignoring the macroeconomic impacts of legislation is far from neutral.

Every piece of legislation has economic consequences. Most are small, but some are significant. When the CBO ignores them, it disregards the detrimental effects on economic growth of bad legislation as well as the positive effects on growth of good legislation.

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