Quantifying Economic Reasoning in Court: I find that judge economics sophistication is positively correlated with a higher frequency of pro-business decisions even after controlling for political ideology & a rich set of other covariates

Quantifying Economic Reasoning in Court: Judge Economics Sophistication and Pro-business Orientation. Siying Cao. November 13, 2020. https://drive.google.com/file/d/1U5tFHXqrcmNbCWOw5t7MqAcZ8BDMlMIN/view

Abstract: By applying computational linguistics tools to the analysis of US federal district courts’ decisions from 1932 to 2016, this paper quantifies the rise of economic reasoning in court cases that range from securities regulation to antitrust law. I then relate judges’ level of economic reasoning to their training. I find that significant judge heterogeneity in economics sophistication can be explained by attendance at law schools that have a large presence of the law and economics faculty. Finally, for all regulatory cases from 1970 to 2016, I hand code whether the judge ruled in favor of the business or the government. I find that judge economics sophistication is positively correlated with a higher frequency of pro-business decisions even after controlling for political ideology and a rich set of other judge covariates.

Keywords: law and economics, judicial decision making, text as data

JEL Classification: K0, L5, Z1

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This research can be extended in several ways. First, we can look at whether economically sophisticated judges tend to rule in a certain direction along an issue66 in tort, property, and commercial contracts. These are subject areas that have been significantly influenced by the law and economics approach. Second, the hypothesis proposed and analysis conducted in this paper can also be applied to circuit court judges. There we expect to find an even greater impact of economics knowledge because the ideological stakes are typically higher than in lower courts. Furthermore, my results suggest that economics sophistication as a shifter of decision outcome during the first stage can be used as an instrumental variable to investigate the causal effect of such decision on subsequent individual/household/firm outcomes. Finally, I hope my measure of judge economics sophistication will spur future efforts to causally identify the effects of judge knowledge through exogenously generated variation in it.