Is “Fair Trade Coffee” Really Fair? A Lesson in Supply & Demand

At church a Sunday ago I was given a brochure to attend a community service event where “we can buy fair trade coffee to benefit those in Africa”. Immediately I shook my head and said there is a better way to increase welfare. This topic is really important to understand, because many organizations try pushing “fair trade” products yet it is not the most efficient way of increasing public welfare.

First , according to fairtradeusa.org, fair trade is,

“products…from farmers and workers who are justly compensated”.

To show that fair trade products are not an efficient means of redistribution, teaching a lesson about markets, particularly an Econ 101 lesson on supply and demand, will be helpful. In a free society, and by this I mean one in which people are not slaves and do not have to produce goods for an owner/dictator, workers can choose whether or not to sell their products to others in exchange for money to buy goods and services.  This is  best explained with an example. So for example, Mark has a coffee plant and processes the beans to make 36 bags of coffee each day. Now, he can choose to drink an insane amount of coffee each day or he can choose to sell it to others who may want coffee. In exchange for Mark selling coffee at $3/bag, Mark may buy beef or milk from someone else. Mark is not forced to sell coffee at $3/bag, but rather that is the price that the coffee market is in equilibrium.

Let’s look at the linear supply and demand graphs below to fully understand what is going on here. Mark chooses to supply coffee at the local farmer market in town. It may cost him $0.50 to make a bag of coffee, but Mark, like most normal-minded workers, would love to get the maximum amount of money in exchange for the bag of coffee. The supply curve represents Mark’s willingness to supply coffee at desired prices. At a price of $1, Mark is only willing to sell 6 bags of coffee; at a price of $2 Mark is willing to sell $12 bags of coffee and so on. At higher prices, Mark is more willing to sell his coffee beans and not save them or consume them himself.

 fairtrade

On the demand side of things, people who attend the local farmer’s market want to buy coffee, but would prefer to do so at the cheapest price possible. The cheaper they pay for coffee, the more money they have to spend on other products they want. The demand curve represents consumer’s willingness to pay at desired prices for bags of coffee. At a price of $5, consumers only want to buy 6 bags of coffee. At a price of $4, consumers want to buy 12 bags of coffee and so on. Consumers would really be happy to buy coffee at $1/bag, however Mark would not be happy to sell it for such a low price. The intersection of supply and demand gives us market equilibrium, which is the price that no one else has an incentive to alter the price or quantity. Equilibrium in this case is P*=$3/bag of coffee and Q*=18 bags of coffee are sold.

Now, let us say that there is an argument for “fair trade” and by this I mean pay farmers, like “poor” old Mark more money for coffee. Let’s say that a church group goes in and decides to pay Mark $4 for coffee, as opposed to the market price of $3. If this is the case then at $4, Mark is willing to supply 24 bags of coffee, but consumers are only willing to buy 12 bags of coffee. There is excess supply in the market (when supply > demand). What this means is that Mark is willing to supply more than what people want at $4/bag. To get rid of the extra bags of coffee on the shelves, consumers have to buy more coffee. Since we cannot force consumers to buy more coffee, the only way consumers are encouraged to buy the excess 12 bags of coffee (24 bags supplied, 12 demanded) is if the price drops. However, the price cannot drop to $2, because if it does than there is excess demand (demand > supply) in the market.   Consumers want to buy 24 bags of coffee, but Mark is only willing to put 12 bags on the shelf! In fact, at this price a line may start to form to buy coffee. If there are so many people willing to buy coffee, Mark will raise his price until some consumers drop out of line such that there is no more shortage of coffee. Exactly what is demanded is what is sold at the market-clearing price, or equilibrium price. A price other than equilibrium is not stable such that there will be pressure to alter the price up or down depending on excess supply or demand.

We measure welfare simply by a concept called consumer and producer surplus. At a price of $3 and 18 bags of coffee sold, consumer surplus is the triangle from $6 to $3 and 18 bags of coffee (represented by the red triangle, or triangle A). Consumer surplus is thus ($6-$3)*0.5*18= 27. Producer surplus is represented by the black triangle, or triangle B, and is ($3-$0)*0.5*18= 27. Now, if we go back to the fair trade example, where coffee is told to be sold at $4/bag, consumer surplus would be ($6-$4)*0.5*12= 12; while producer surplus would now be ($2-$0)*0.5*12+ ($4-$2)*12= 36. Here we can see that total surplus has gone down. Originally consumer surplus + producer surplus= $54, but now it only equals $48. This is because we have deadweight loss. Deadweight loss is the consumer surplus we lost out by setting a price higher than what market equilibrium in a free market would be, or $54-$48. Consumers are made “worse off” such that they get less surplus with a higher price and are unable to buy as much coffee beans, while Mark gains more surplus.

So, in reality “fair trade” is not really fair at all…at least for consumers. However, if the intent of fair trade coffee (or other products) is to make the farmer better off than perhaps it will and  in this case it did. But, it isn’t efficient! In the fair trade example above, Mark gains $9 while consumers lose $15 worth of surplus. $6 of surplus is deadweight loss and thus no one receives this money. If instead the price was at market equilibrium, then Mark receives $27 and consumers receive $27 of surplus. Consumers could then donate to give Mark the same extra $9 (thus leaving $36 for Mark and now $18 for consumers in surplus). In this example, Mark is just as well off as with fair trade coffee and consumers are better off! There is no deadweight loss, consumers can buy more bags of coffee and pay a lower price! This to me seems like a more efficient way to redistribute money than setting what is like a price floor via a fair trade platform.

To give a bit more background on the fair trade movement in recent year. The founding of Fairtrade International occurred in 1997 with a goal to give “producers in developing nations a minimum price—a safety net to cushion farmers and producers against market fluctuations—as well as a premium, a separate payment (for example, 20 cents per pound for coffee) that workers and farmers can invest in environmental, educational or infrastructure projects.”

This safety net, however, comes at a cost. Besides the, now obvious, decrease in consumer surplus and increased costs to consumers what else is the problem with fair trade?

  1.  Fair trade does not help out the world’s poorest countries. “We might think of sub-Saharan subsistence economies when we think of fair trade, but the biggest recipient of fair trade subsidy is actually Mexico. Mexico is the biggest producer of fair trade coffee with about 23% market share.” Roughly 200 of 300 fair trade coffee producers are located in South America or the Caribbean. 
  2. There is a question about how much of this extra price actually goes into the hands of farmers or whether there is an institutional cut before farmers see any increase. A George Mason policy series study shows that after paying a fair trade co-operate program and its employees, farmers may only seek to make an extra 5 cents.
  3. Farmers outside of fair trade product networks stand at a disadvantage or those who use the fair trade product as an intermediate good. Fair trade encourages producing more in one industry at the expense of another when there can be better uses of employee time than coffee production.

To be clear, economic inequality between third-world farmers and CEOS on Wall Street is large and concerning to many. However, demanding reallocation of resources by inefficient means is not the best or fairest solution.

A great quote by Gene Callahan at FEE sums this up great,

“The belief that any group with power – government officials, economic experts, or social activists – can establish a price that’s “fairer” or “more just” than the actual market price is a fallacy that bedeviled communism for decades and it’s bedeviling the fair-trade movement today.”

The Enemy of the Good

This week’s quotation comes from recently departed Nobel laureate, Ronald Coase. When it comes to economic models, he observed that:

Contemplation of an optimal system may provide techniques of analysis that would otherwise have been missed and, in certain special cases, it may go far to providing a solution. But in general its influence has been pernicious. It has directed economists’ attention away from the main question, which is how alternative arrangements will actually work in practice. It has led economists to derive conclusions for economic policy from a study of an abstract of a market situation. It is no accident that in the literature…we find a category “market failure” but no category “government failure.” Until we realize that we are choosing between social arrangements which are all more or less failures, we are not likely to make much headway (Coase, 1964, p. 195).

A.K.

John Cochrane on Inequality

Really great article on The Grumpy Economist blog this week about inequality as the minimum wage debate continues to be a main topic. John Cochrane is a world-renown Professor of Finance at the University of Chicago. Go to his page and read it since it is worth the time, but I will sum up a few of the points he, and other economists, make in the meantime.

  • Raising the minimum wage will raise wages of the poor, but also those who are second and third earners of households with incomes well above the poverty line.
  • Every time an immigrant comes ashore and does not earn the average income, economic inequality increases. Many immigrants come to America because they have zero job opportunities in their country and they come here knowing that they will be on the bottom of the income ladder. They are not victimized.
  • Why do we give federal aid to Ivy league students? Sure, some of them are poor, but their lifetime expected earnings are well above average.
  • Lotteries create large inequality.
  • Those who get married and have children earn more money than single parents, particularly those with women head of households. Single motherhood is increasing. But, here is the big question: has single motherhood been increasing on its own, or is the government keeping people from otherwise destitution?

All in all, John Cochrane basically states that our inequality comes from social dysfunction and economic dysfunction. Less marriage, less education = more inequality in wages; bad social policy such as giving Ivy students gov’t money when they will out earn us all or lotteries to fund governments = greater inequality; lastly, I think this direct quote sums it up best, “The poor are smart, and huge single parenthood rates do not happen because people are just too dumb to realize the consequences, which they see all around them.”

It is the policies of our government that encourage economic inequality, yet minimum wage always seems to be the big thing that is debated. Why?

Supreme Court Decision Making: Institutions Matter

In my last post I surveyed two ways students of the Supreme Court have conceived of judicial decision making: the legal model and the attitudinal model. As I noted previously, although the attitudinal model is now the predominant view among political scientists, there are many notable scholars who insist that attitudes (i.e., political ideology) alone cannot account for the richness of the Court as an institution and judges as complex, social creatures. The diversity of this literature presents a challenge for anyone attempting a quick summary. Based on my own makeshift categorization, the discussion proceeds as follows. First, I discuss studies which emphasize the internal dynamics of Court decision making; next, the external or inter-institutional dynamics; finally, I discuss studies which remind us of the more human aspects of judicial decision making, such as role orientation and reputation.

Deciding to Decide

Internal Dynamics

Research on the intra-court factors that influence judicial decision making can be subdivided into studies which examine the easily overlooked bargaining over the agenda-setting of the court (Perry 1991; Black & Owens 2009) to consensus building on the disposition of a case, to bargaining over the nuances of the opinion itself which contributes to the formation of consequential legal doctrine (Maltzman, Spriggs, & Wahlbeck 2000). This literature can also be distinguished methodologically, especially between scholars who favor highly technical quantitative analysis (e.g., Epstein & Knight 1997) and those, like Gillman, who favor “traditional legal-historical methods (e.g., reviewing conference notes, draft opinions, memos, and memoirs) in order to better understand the justices’ jurisprudence and deliberations” (Gillman 1997b, 11).

One important set of questions about Supreme Court decision making involves agenda setting. Black and Owens provide a helpfully succinct description:

The agenda-setting process begins when a party in a lower court loses, wants the Supreme Court to review her case, and files a petition for a writ of certiorari (‘‘cert’’) or an appeal with the United States Supreme Court. Before the Court decides whether to grant or deny review to it, the petition must first make the ‘‘discuss list.’’ This list is created and circulated by the Chief Justice, who initially identifies the petitions he thinks deserve formal consideration by the Court. Each associate justice can add petitions to the discuss list that they think merit the Court’s attention…If four or more justices vote to hear the case, it proceeds to the merits stage, where it receives full treatment (Black & Owens 2009, 1063).

Of the thousands of requests for cert each year, less than one hundred survive this filter. Indeed, according to Chief Justice John Roberts2013 Year-End Report, 7,509 cases were filed in the Court, “and 76 were disposed of in 73 signed opinions.” About one percent of cases filed made the cut! Scholars speculated for decades about the factors that drive this critical determination. Some scholars found evidence that justices look for cues within the cert petitions themselves, signals from the number or content of amicus curiae briefs, or signals from the executive branch (Tanenhaus, Schick, & Rosen 1963; Caldeira, Wright, & Zorn 1999; Brenner, Whitmeyer, & Spaeth 2007; Collins 2007). Many of these practices were also confirmed through the use of in-depth elite interviews (Perry 1991 interviewed five justices, sixty-four former U.S. Supreme Court clerks, seven DC Circuit judges, four U.S. solicitors general, and one Court staff member). Recently, Black and Owens were able to confirm that the justices are strategic “policy-driven agenda-setters who analyze both the Court’s expected policy decision and the status quo” (Black & Owens 2009, 1067) but that significant predictive power can be attained when legal factors such as lower court conflict and other indicators of legal importance are incorporated the an otherwise attitudinally based model.

Other scholars have taken a more expansive view of agenda setting, finding strategic interaction among the justices at later stages in the decision making process:

Court scholars focus the discussion of agenda setting on the Court’s vote on whether to place a case on its docket. Yet, because any individual case raises numerous issues that can potentially be addressed in an opinion, agenda setting occurs in at least two other decision-making stages: the assignment of the majority opinion and the writing of that opinion (Maltzman, Spriggs, & Wahlbeck 2000, 33).

Crafting Law on the Supreme Court

Maltzman, Spriggs, and Walhbeck seek to improve upon the attitudinal model by emphasizing judicial behavior as strategic behavior motivated by policy preferences but mediated through institutions, both formal and informal, which render Supreme Court decision making a highly collegial and interdependent process. They also return attention to the content of the judicial opinion which is obscured by the attitudinalist tendency to reduce complex holdings to dichotomous outcomes (but see Ruger, Kim, Martin & Quinn 2004). The Court, Maltzman, Spriggs, and Wahlbeck argue, is more than the aggregation of individual policy-seekers. Each element of the opinion is determined by a collegial game in which “A strategic justice…pursues his or her policy preferences within constraints determined by the interdependent nature of decision making on the bench” (Id. at 18).

To test their theory, the authors rely on the Spaeth-Gibson judicial database, calling it “the most reliable and comprehensive record of Supreme Court decision making yet to be uncovered and mined” (Id. at 27), plus assignment sheets, docket sheets, and circulation records newly made available from “the private papers of Supreme Court justices” (Id. at 26). What they find is that policy “preferences alone do not dictate behavior on the U.S. Supreme Court” (Id. at 147). Holding attitudinal factors constant, justices are, for example, significantly more likely to join an opinion once a majority coalition has formed or when the opinion writer has cooperated in the recent past, and increasingly less likely to join as their colleagues signal disagreement through internal memos. Each of these collegial factors significantly increases predictability over attitudinal factors alone. In short, “A justice’s decision to join is also influenced by concurrent choices of his or her colleagues” (Id. at 143).

External Dynamics

Scholars have also recently begun studying the broader institutional environment in which the Court operates. For example, some studies deal with the impact of public opinion on Supreme Court decision making (McGuire & Stimson 2004; Giles, Blackstone, & Vining 2008 each find the Court responsive to public opinion), while others examine the Court’s behavior vis-à-vis other governmental actors. With respect to the latter, scholars such as Marks (1989) and Clark (2009) theorize that the justices on the Court may moderate their preference-seeking behavior in order to avoid potential backlash from the other two branches which might generate less favorable legislative outcomes. This literature tends to distinguish sharply between sincere and strategic voting behavior by the justices and has focused on veto points in the elected branches within which the Court has latitude to pursue its sincere policy preferences. To date, this literature has been more formal than empirical and reached few settled conclusions. One question which remains is whether the Court, having reached internal consensus, should ever find it very likely that Congress, with its many veto points, will muster the votes necessary to overrule it. Due to selection effects, Segal (1997) finds it highly unlikely that the Court’s membership will have extreme preferences relative to congressional majorities. Graber (2005) suggests that the Court is “established and maintained by elected officials” to entrench their own constitutional vision and shift responsibility. Even if the Court did consist of preference outliers, Segal (1997) argues, there is no reason to assume, as many separation-of-powers models do, that Congress will have the last word, especially with respect to constitutional issues. Finally, Owens, in a rare empirical test of the separation-of-powers approach found that “Across every model tested, justices failed to exert behavior consistent with a separation of powers effect” (Owens 2010, 412).

Justices are People Too

Other students of the Court, in reaction to the dominance of the attitudinal model and the emergence of strategic-institutional models have thought it prudent to remind their colleagues that Supreme Court justices are both more and less than policy-preference maximizers and political strategizers. After all, justices are “still human, and thus still somewhat vulnerable to the pull of reputation, the desire for esteem, and the wish to avoid public criticism” (Schauer 2000, 630). Justices “make arguments that are based on more than personal policy preferences” and “the reasons they offer in opinions matter to other justices” (Richards & Kritzer 2002, 307), other officeholders (Clark 2009), and members of the public (Casillas, Enns, & Wolhfarth 2010). “Courts and judges are certainly part of the political world, but they are also part of a distinctive legal culture” (Richards & Kritzer 2002, 305) in which members apparently value law for its own sake. While cites to precedent and carefully reasoned arguments might certainly be described as strategic behavior (Epstein & Knight 1997), Gillman (1997b) cautions against the conceptual strain that results from a strategic-institutionalist propensity to re-characterize all institutionally-guided behavior as constrained preference maximization. For Gillman, law and courts scholars should not assume that the goals pursued by justices are exogenous to the value-laden institutions in which they are situated, and the best method for taking legal institutions seriously are “traditional legal-historical methods (e.g., reviewing conference notes, draft opinions, memos, and memoirs) in order to better understand the justices’ jurisprudence and deliberations” (Gillman 1997b, 11).

Contempt

Like Gillman, Frederick Schauer (2000) also warns that Supreme Court decision making should be viewed as other than mere attitudes and strategy. He calls for more empirical research on the more “inglorious determinants of judicial behavior” such as the ambition and reputation (Id. at 615). While Supreme Court justices might seldom have ambition for higher office, there is no reason to suppose that they might not “also desire to have an impact for the sake of having an impact” (Id. at 633). Scholars cannot neglect the possibility that justices “could plausibly select outcomes, or select substantive or methodological ‘trademarks,’ for the purpose of maximizing their own influence” (Id.). [See New York Magazine‘s recent interview with Justice Antonin Scalia in which he claims to have no concern for his intellectual legacy.] Though we have certainly come a long way in our understanding of Supreme Court decision making since the days of the naïve legal model, “perhaps,” says Schauer, “it is now time to investigate whether ideologies and attitudes are not all that ideologists and attitudinalists claim that they are” (Id. at 636).

Conclusion

So, what factors drive decision making on the Supreme Court? This review of the law and courts literature has revealed quite a bit. We have strong evidence that judges are driven by their policy preferences. This point is no longer controversial. What is becoming increasingly clear, however, is that this picture is very incomplete. Justices are obviously influenced by aspects of their institutional environment both within the Court and without. As Brigham put it, “Institutions share a capacity to order social life because people act as though they exist, as if they matter” (Brigham 1999, 20). Most recent scholarship has taken the attitudinal insight to heart, and then moved forward to specify its limits. More than mere curiosity motivates this inquiry into judicial motivation. As Frank Cross put it, if we conceive of the law as “ropes binding a judicial Houdini,” it behooves us to discover “which brand of rope and which type of knot are the most effective and inescapable” (Cross 1997, 326).

A.K.

Is Bitcoin the New Kleenex?

Boston University Finance Professor, Mark Williams, in a published Forbes article today, suggests that Bitcoin will become a shorthand name for digital currency, equivalent to Q-tips for cotton swabs, Kleenex for tissues and Xerox for copies.  Bitcoin is the next “BIG” thing, but Bitcoin is NOT a stock, bond or even company. Rather, it is a virtual currency. In 2013, Bitcoin cost $13/coin, today it is at $864.70/coin. Many speculate that Bitcoin could reach unprecendented values for coins ($100,000) due to a finite amount that can made (21 million to be exact). So, WHAT is this crazy phenomenon called Bitcoin and is it here to stay or is it just speculative?

 

According to Bloomberg Businessweek,

“Bitcoin is the digital currency that thrills nerds, inspires libertarians, and incites the passions of economists who debate the value of money made from nothing but ones and zeroes.”

Bitcoin’s main selling point is that it is decentralized and does not have to go through a clearing house. Bitcoins are “made” on the internet, by mining (a free application that allows you to create these things, albeit not easily). Bitcoins are adjusted by the network site to ensure that the amount is predictable and limited (think supply and demand analysis here in order to keep prices increasing for investors, supply must be increasing slower than demand).  Supply can only expand 25 Bitcoins per 10 minutes. You can use Bitcoin not only as an investment vehicle, but also to pay for many items on the Internet such as food, clothes, toys, computers etc. However, what is the incentive for a company, like Target, to start accepting Bitcoins for payments? Well, Bitcoin charges no fees, so accepting them is financially free, unlike using Google’s payment system or Visa. Further, many exchanges have popped up so a store that accepts Bitcoin, such as Target, can convert Bitcoins into dollars or euros.

 

With nearly a 64% return in a year, Bitcoin is drawing lots of attention, but many question whether it a ‘real’ thing since it closely resembles a commodity, yet, the government is not involved in regulating it.  Investors are putting faith behind Bitcoin because it is fully open-sourced. This means anyone can verify the source code and know exactly how Bitcoin works. Payments can be made without a third-party system and to ensure no fishy business is going on there are peer-reviewed cryptographic algorithms to verify the payments. Remember when I said you can actually “mine” or make a Bitcoin, but it wasn’t easy? Mining is making cryptographic algorithms that certify transactions before anyone else can do it to earn Bitcoins as a payment.

“It’s like a worldwide math competition that resets six times an hour. There are a total of 21 million possible Bitcoins; about half are currently in circulation. The last will be mined in about 2140 at the earliest.”

To be clear, each new algorithm that is computed to verify a transaction makes it more complicated to solve the next algorithm. How complicated are things getting? Well, in 2010, ordinary desktops become too slow for the mathematical crunching needed. Large computers are required to mine the data with savvy math and computer knowledge required to keep up with the mathematical coding. However, 10 minutes of your time can pay 25 Bitcoins (~$25,000).

Also, in terms of trusting Bitcoin, no one organization or individual can control Bitcoin, or so the site’s fact page boasts. However, 47 people own 29% of all outstanding Bitcoin; and 75% is owned by just 10,000 people. The last 25% is owned by roughly a million small investors. In comparison to Google, 1,667 institutions hold approximately 87% of Google shares in which these institutions (such as Vanguard, State Street, J.P. Morgan Chase) each have millions of individual investors. So, are the elite few that own Bitcoin the ones speculating and really driving up the prices? Many countries seem to think so. Bundesbank, Germany’s central bank, is warning people of the speculative risk or in other words irrational exuberance behind the stock’s inclining value. China went ahead and blocked the country’s Bitcoin exchanges from accepting new Bitcoin “cash” and banned anyone from accepting Bitcoin trades.The EU even warned that they will take no part in bailing out losses from Bitcoin and warned against the investment.  The U.S. so far has not made such a bold statement, but economists everywhere are collecting data. In a National Bureau of Economic Research (NBER) working paper, economist David Yermack shows that Bitcoin is more volatile than any sovereign currency and does not serve a traditional money role as a unit of account or store of value, although it is performing as a medium of exchange.  Based on the volatility of Bitcoin, he claims that the inclining in values are due to speculation and not actual value that people should put faith in.

Based on economist predications, I think there is still time to invest and make some money, if you have $864.70 for one Bitcoin that is.  With the potential returns high and intellectually stimulating work, computer geeks, math whizzes and technology gurus are flocking in droves to mine for Bitcoins first.  A start-up company claims that one fast computer working to come up with these algorithms can yield approximately $150,000/year.  Therefore, I see no reason in the immediate future for Bitcoin to run dry since demand is very high right now, while supply can only make incremental, steady increases. However, in the long term I do not think Bitcoin is a viable alternative to dollars as it stands little chance to run free too long. With high profits to be made, everyday citizens are not just the ones who want in, but surely the government will, too. Taking a cut of the profit from investors in Bitcoin clearly takes away the competitive advantage Bitcoin serves as an Internet marketplace currency.

If you want to buy Bitcoins or learn how to get some, here is a pretty good site to help you get started.

Supreme Court Decision Making: Just Politics?

Over time, American political scientists have conceptualized the work of the judicial branch in several distinct ways, producing a rich literature on judicial decision making. A disproportionate share of that literature focuses on the U.S. Supreme Court. This focus is unsurprising given the Court’s distinct role in the American legal system. The Supreme Court is the court of last resort, and it is the unique province of the Court “to say what the law is” (Marbury v. Madison, 1803).  The Supreme Court is also distinct from the other branches of national government. It is the only branch whose members are unelected, its members are the least publicly visible, and their work the most obscure. Perhaps in part for these reasons, the Court enjoys much broader support among the American public than its sister branches. Meanwhile, students of the Court have often asked “What drives Supreme Court decision making?” In this post, we’ll take a look at the traditional legal formalist understanding of Supreme Court decision making and then discuss the attitudinal model which has supplanted it. In a follow-up post I will survey some alternatives to the attitudinal model which purport to offer a more complete picture.

The Good Ole Legal Model

The traditional way of thinking about judicial decision making, legal formalism (or “legalism”), can trace its lineage back to such notable figures as Sir William Blackstone. Legal formalists emphasize the role of legal considerations—adherence to precedent, strict interpretation of relevant legal texts, and the law as a closed logical system—in shaping judicial reasoning.[1] By the early twentieth century, “realists” began pointing out the often indeterminate and nonbinding nature of legal considerations—e.g., the availability of precedents to support either outcome in an adversarial dispute and the hopelessly vague or ambiguous nature of many statutes—and alleged that judicial decision making was more about who was deciding the case than any objective body of law from which outcomes could be logically deduced.[2] These criticisms have the most force when it comes to the Supreme Court because one might expect cases for which there is a straightforward legal answer to be resolved at a lower level if litigated at all. In fact, while scholars have come to agree that ideology plays a much smaller role in the lower federal courts (Zorn & Bowie 2010), and these courts are generally “faithful agents” of Supreme Court doctrine (Haire, Songer, & Lindquist 2003, 154), the Supreme Court itself seems to be another story.

Because of the indeterminate nature of legal considerations at the level of the Supreme Court, a great deal hinges on the motivations of each justice. By the mid-twentieth century, it was to this study that political science research and some empirical legal research soon turned. Broadly, the shift toward this type of inquiry was dubbed “behavioralism”. Behavioralist “models emphasize the role of judges’ social background or personal attributes on judicial decisions” (Heise 2002, 833). The early behavioralists looked for patterns related to the judges’ socio-economic background, race, sex, and prior work experience. However, each of these factors was found to have very limited explanatory power:

Consequently, Dan Bowen’s pronouncement thirty years ago about the efficacy of behavioralism judicial decision-making models still holds force today: “A final inescapable conclusion about the explanatory power of the sociological background characteristics of [judges] is that they are generally not very helpful” (Heise 2002, 835).

In short, studies in this area found little relationship between social background characteristics and judicial decisions (cf. Segal & Spaeth 1993, 231-234). Scholars next began exploring whether a judge’s political ideology could be used to predict judicial decisions, and the attitudinal model was born.

Along Came the Attitudinal Model

Following the realist critique of legal formalism, judicial scholars Jeffrey Segal and Harold Spaeth published The Supreme Court and the Attitudinal Model in 1993, a culmination of work begun decades earlier by C. Herman Pritchett’s The Roosevelt Court (1948), Glendon Schubert’s The Judicial Mind (1976), and crystalized by Spaeth in the intervening years. Although it was Schubert who “first provided a detailed attitudinal model” (Segal & Spaeth 1993, 67), Spaeth’s greatest contribution to the field came in the creation of the U.S. Supreme Court Judicial Data Base in 1990. This data base constituted a major breakthrough in the ability of scholars to reliably and comparably test hypotheses about Supreme decision making. According to Djupe and Epstein:

Prior to the Spaeth Data Base, judicial specialist relied on several publicly-available data sets…or collected their own data. Either way, issues of verification, reliability, and the like went virtually ignored; neither Schmidhauser’s nor Schubert’s, nor Ulmer’s documentation contain any statements about reliability or verification; of the ten articles on judicial decision making in the American Journal of Political Science in the decade prior to the appearance of the Spaeth Data Base (1980-90), only two were attentive to matters of replication or reliability (Epstein, Walker, and Dixon 1989; Gates 1987)—and, in all likelihood, neither would pass muster under contemporary standards (Djupe & Epstein 1998, 1012-13).

The Supreme Court and the Attitudinal Model was indeed the culmination of a tremendously successful research program establishing the prima facie case for the validity of the attitudinal model. However, the work did come under increasing criticism for its lack of a direct test of the influence of legal factors. An updated work, The Supreme Court and the Attitudinal Model Revisited (2002) was Segal and Spaeth’s answer to this criticism. The discussion that follows focuses on key features of the later work.

The Supreme Court and the Attitudinal Model Revisted

The model they present is premised upon a simple assertion: “the Supreme Court decides disputes in light of the facts of the case vis-à-vis the ideological attitudes and values of the justices” (Segal & Spaeth 2002, 86), rather than the legal considerations with which most legal academics concern themselves. In their work, Segal and Spaeth attempt first to discredit the legal model and then to establish their own attitudinal model as the best explanation of Supreme Court decision making. We’ll explore some of the technical details of their work and consider some limitations.

Though legalists vary somewhat, argue Segal and Spaeth, they are united by a common belief that law matters in judicial decision making. While legalists scour Supreme Court opinions for insight into the justices’ reasoning, Segal and Spaeth, in behavioralist fashion, insist that the only relevant factor is what the justices do in fact. All of the legal reasoning, cites to precedent, and quibbling over statutory text obscures the fact that justices are merely voting their ideological preferences. In furtherance of this claim, Segal and Spaeth devise a test to determine whether precedent can be observed to exert any “gravitational force” on justices. They devise a test examining the progeny of non-unanimous precedent-setting cases to determine whether justices who dissented in the original case conformed to the precedent in progeny cases despite their previously demonstrated preferences to the contrary. The authors find that “the justices are rarely influenced by stare decisis” and “rather easily avoid supporting precedents with which they disagree” (Id. at 298, 310).

Dismissing many other legalist arguments as non-falsifiable and therefore unworthy of full consideration, Segal and Spaeth then proceed to present the attitudinal model as an alternative explanation of Supreme Court decision making. To test their model, the authors “examine all Supreme Court decisions dealing with the reasonableness of a search or seizure from the beginning of the 1962 term through the end of the 1998 term (N = 217)” (Id. at 316). The measure the effect of several factors on “the decision of the Supreme Court whether or not to exclude evidence or find a search unreasonable. A liberal decision is one that prohibits the use of questionably obtained evidence; a conservative decision is one that admits such evidence” (id.). In measuring attitudes, the authors rely on “newspaper editorials that characterize nominees prior to confirmation as liberal or conservative insofar as civil rights and liberties are concerned” (Id. at 321).

From a predictability standpoint, the authors’ model performs surprisingly well. Specifying the dependent variable as each justice’s vote in the search and seizure cases (N = 1,900), Segal and Spaeth find that attitudes alone “achieved a 70 percent prediction rate, for a 32 percent reduction in error over the justices’ mean of 56 percent” while the facts alone produced a 62 percent prediction rate and 14 percent reduction in error (Id. at 324). “This suggests,” say the authors, “that in predicting votes, one is clearly better off knowing the attitudes of the justices than the facts of the case” (Id. at 325).

While the rate of prediction is significant and lends substantial support to Segal and Spaeth’s arguments, many scholars consider it premature to declare the victory of the attitudinal model. One obvious drawback to this approach is its quite narrow application heretofore. Segal and Spaeth only test their model on a very limited range of cases: non-unanimous Supreme Court civil liberties cases on the merits. All other legal subject areas  and cases decided on procedural grounds are necessarily excluded. Unanimous decisions, roughly one-third of all Supreme Court decisions (Epstein, Landes, & Posner 2012), are also excluded. Even on their strongest ground, predictability, the authors must demonstrate that their model can be applied more generally before many other scholars will concede.

Moreover, predictability is not the only test of a model’s worth. A good social science theory not only predicts but explains the phenomenon in question. Several scholars charge that the attitudinal model is overly dismissive of the immense legal-institutional environment in which the justices operate (Black & Owens 2009). Any account of what drives Supreme Court decision making which does not deal seriously with justices as individuals operating within a diverse institutional network is fatally incomplete. “Thus, theories of judicial behavior must become more complex if they are to achieve a higher level of explanation and prediction” (Gibson 1983, 7). To be sure, most alternative theories of Supreme Court decision making take for granted that attitudes play a significant role, but go on to specify ways in which the relevant legal institutions matter (See Gillman 1997a). In my next post I will survey some of those theories.


[1] Edward Levi’s classic An Introduction to Legal Reasoning (1962) provides a full discussion of legal textual interpretation and case analysis.

[2] See, e.g., Laura Kalman’s Legal Realism at Yale, 1927-1960 (1986).

A.K.