Vanderbilt Lawyer - Volume 36, Number 1

First Class

Vanderbilt's Law & Economics program is open for business

This fall, Vanderbilt's doctoral program in law and economics will admit the first students in the country to earn both a J.D. and a ph.d. in law and economics in a cohesive program housed at one school-Vanderbilt Law School. Students in the program will explore the principal fields of behavioral law and economics, risk and environmental regulation, and labor and human resources as they take courses in econometrics, microeconomic theory, statistics, law and economics, and law.

The concept for the new program was developed jointly by Dean Edward Rubin, Interim Chancellor Nicholas Zeppos, and top economists W. Kip Viscusi and Joni Hersch, who joined Vanderbilt's law faculty from the faculty of Harvard Law School last summer.

Although Professors Viscusi and Hersch enjoyed teaching law students at Harvard, Hersch says, "We missed having doctoral students." As co-directors of Vanderbilt Law School's Ph.D. Program in Law and Economics, Viscusi and Hersch are looking forward to teaching both law and Ph.D. students.

Zeppos, a celebrated teacher and expert in administrative law, has long sought to develop a program that fully integrates the two disciplines at the heart of the program. "There are few areas of law, from practice to policymaking, that are not informed by economics," Zeppos says. "One of the reasons I was eager to convince Ed Rubin to become the dean of the law school is his strong interest in updating and upgrading the law curriculum with interdisciplinary programs. This program is a critical and exciting move along those lines."

Since his appointment in 2005, Rubin, a highly respected scholar of administrative law, has been a strong advocate for modernizing and expanding the law school's academic offerings. Like Chancellor Zeppos, Rubin identified an interdisciplinary program in law and economics as an immediate priority. "We both agreed that economics is among the most valuable disciplines to bring to bear on the study of law," Rubin says. "For example, in recent decades, civil litigation has come to take on a public, regulatory function beyond private dispute resolution. Lawyers and law professors with sophisticated training in empirically grounded cost-benefit analysis will be particularly well-positioned to address these and other cutting-edge legal issues."

"Kip and Joni have served on the faculties of economics departments and law schools, and both have published extensively in peer-reviewed economics journals and law reviews," Rubin says. "Kip has worked as a consultant to government policymakers and as an expert witness in high-stakes litigation. He and Joni are energetic and approachable, and they have an unmatched ability to identify and analyze empirical data so as to give structure and substance to what would otherwise be amorphous policy judgments. By equipping graduate students with these same skills, in the context of a small program with a tight focus on law, they will be training the leaders of the next generation of legal policy analysts."

Viscusi notes that experts in law and economics play an important role in helping courts and policy makers find the right balance between regulation and litigation. "Sometimes litigation serves a constructive role in drawing attention to a problem that regulation has failed to address," Viscusi says. "A prominent example would be litigation over alleged defects in silicone breast implants, and another is asbestos litigation, which also illustrates the danger of litigation spinning out of control. High-profile litigation drew attention to asbestos, which in turn spurred the regulators at EPA and OSHA to issue stringent regulations, which was followed by successive waves of additional litigation. Now asbestos is overregulated."

The Director of Graduate Studies for the program is Kathryn Anderson, a professor in Vanderbilt University's Department of Economics. Anderson, who also directs the undergraduate Public Policy Studies Program in the College of Arts and Science, is an expert in labor economics, human capital and economic development. "The Law and Economics Program adds a valuable new avenue of advanced study for students interested in the application of economics to public policy and the law," she says.

Vanderbilt's First University Distinguished Professor

Viscusi, who is the University Distinguished Professor of Law, Economics and Management at Vanderbilt University, was formerly the John F. Cogan, Jr. Professor of Law and Economics and the Director of the Program on Empirical Legal Studies at Harvard Law School. He was Vanderbilt's first University Distinguished Professor, with primary appointments at the Owen Graduate School of Management and the Department of Economics as well as the law school. His appointment recognizes the breadth of scope and the impact of his research on risks to life and health.

Viscusi is perhaps best known for his estimates of the value of what is known as the "statistical life," which government agencies such as Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), the Office of Management and Budget (OMB) and the U.S. Department of Agriculture (USDA) have used since the early 1980s to determine how to value the risk reduction benefits of government policy. Viscusi's estimates of the value of statistical life - which averaged more than $170,000 per year of life in 1986 dollars - have been the basis for important government regulations since 1982, when then Vice President George H. W. Bush asked him to help resolve a dispute between OSHA and the OMB. OSHA had submitted a proposal for a regulation addressing the labeling of dangerous chemicals in the workplace to the OMB. The case for the proposed regulation was based in part on a value established for what OSHA termed "the cost of death." In the proposed regulation, OSHA's analysis suggested that the cost of death should be based on the present value of the lost earnings of the deceased. However, the OMB rejected OSHA's proposed regulation after concluding that its potential costs to businesses outweighed its potential benefits in reducing the risk to their employees. Vice President Bush asked Viscusi to review OSHA's analysis, and when Viscusi applied his estimates of the "value of statistical life" to OSHA's analysis, the regulation's expected benefits increased by a factor of ten. The Reagan administration issued the regulation the day after receiving Viscusi's report, and government agencies continue to use Viscusi's estimates of the value of statistical life as the basis for regulations. Based on his current estimate, preventing one expected fatality has an economic value of $7 million.

Viscusi was a pioneering researcher in the exploration of the monetary value of environmental quality, having pursued research in this general area since the early 1970s. His first book, Damming the West, coauthored with Richard Berkman, was for a group affiliated with Ralph Nader. Damming the West explored adverse environmental consequences of the building and operation of dams in the western United States. Since 1983, the U.S. Environmental Protection Agency has continuously funded Viscusi's research on a variety of issues, including the valuation of risks of cancer and chronic bronchitis, water quality, risk information and communication, risk policy analysis, hazardous waste and climate change.

Viscusi is not only interested in prescribing sound and efficient government policies that address risk; he also studies the ways in which people view risk and uncertainty and how they make decisions regarding risk. In 1987, Viscusi founded the highly ranked, peer-reviewed Journal of Risk and Uncertainty, which moved to Vanderbilt with him.

"The field of behavioral law and economics focuses on how actual economic behavior often does not conform to the usual assumptions of economic rationality," Viscusi explains. "For example, people often react excessively to accidents in hindsight, even though they would have approved the risky actions before the accident occurred. A number of researchers, including me, have explored how various types of irrationality may affect jury behavior. I have found that jurors generally approve of a risky corporate decision ahead of time, but when the decision turns out badly, they believe the firm should be punished with punitive damages."

Viscusi recently helped garner three grants for which he will serve as project director. The first, from the Economics Research Service of the U.S. Department of Agriculture, was awarded to Vanderbilt in conjunction with Resources for the Future, a non-profit, non-partisan think-tank based in Washington, D.C. The grant funds a study, "Managing Invasive Species Risk," of risks related to mad cow disease that will be completed this year. Vanderbilt's share of the funding is $78,439. Thanks to Viscusi, Vanderbilt recently received an EPA star award for $675,173 for a study of the economic value of morbidity risks in drinking water. The project, "The Economic Value of Health Improvements to Drinking Water," involves collaborative work with Duke University and will be completed in 2009. Viscusi also has received another EPA grant dealing with using surveys to value environmental benefits, which will be in place later this year.

Exploring Complex Questions

Professor of Law and Economics Joni Hersch has produced a body of research that is diverse, yet focused. Her exploration of topics such as the effect of housework on market wages, job matching, and even some of her work on smoking relates to her primary focus on labor market outcomes. She began with the question of gender discrimination in wages. Although the question seemed simple - "My question was simply 'Why do men earn more the women?'" says Hersch - the search for answers took more than a decade of research. Early in the process, she explored the theory that home production, or housework, accounts for the difference in women's and men's earnings. However, she found that, while time spent on housework does have a negative effect on women's pay, this alone does not explain the gap. When Hersch explored the theory that compensating differentials, such as the fact that women work jobs that are safer, more pleasant or more flexible, or work better or shorter hours, account for the gender pay gap, she found that compensating differentials combined with housework still do not explain the entire gender pay discrepancy. After two decades of seeking an alternative explanation by the process of elimination, Hersch has concluded that sex discrimination is the most reasonable explanation for the remaining gap between male and female wages.

In recent months, Hersch has found herself in a maelstrom of media attention after completing her study on skin color discrimination against new legal immigrants to the U.S. She found that the lightest-skinned immigrants earn 8 to 15 percent more than comparable immigrants with the darkest skin tone. "This result astounded me," she says. After controlling for a number of factors, such as country of origin, English language proficiency, and even the fact that outdoor work darkens skin, she determined that discrimination on the basis of skin color is the most reasonable explanation. Her study may be important in future discrimination litigation, as not all skin color discrimination can be classified and treated as racial discrimination. Skin tone discrimination, Hersch points out, sometimes occurs among members of the same race. In the same study, Hersch found that height discrimination has a significant effect on immigrant earnings, with every inch of height adding an additional one percent to wages.

Hersch has also studied litigation. "You can't make a comparison of judge outcomes to jury outcomes since the vast majority of would-be jury trials settle," she says. "So instead, I examined the demand for jury trials." Her finding - that "cases in which jury trials are demanded are 5.5 percent more likely to settle without a trial than cases in which jury trials are waived" - may inform future settlement negotiations.

New Law & Economics Faculty

Paige Marta Skiba, who earned her Ph.D. in economics from the University of California at Berkeley, joined Vanderbilt's law faculty this summer. Skiba's research is also in the area of behavioral law and economics; her dissertation addressed "Behavior in High-Interest Credit Markets."

Skiba, who graduated Phi Beta Kappa with an undergraduate degree in economics and a minor in mathematics and statistics from the University of Massachusetts at Amherst, has been the recipient of a number of research grants and fellowships from institutions such as National Institute on Aging, the National Science Foundation, the Federal Reserve Board of Governors, the Burch Center for Tax Policy and Public Finance and the Horowitz Foundation for Social Policy. She attended the University of Massachusetts with the help of a varsity lacrosse scholarship.

Skiba studies how self-control and procrastination affect financial decision-making; her current research focuses on the causes and consequences of borrowing on high-interest credit such as payday loans and pawnshops, as well as the regulation of these industries. Recent papers, coauthored with colleague Jeremy Tobacman, include "Measuring the Impact of Access to Credit: Evidence from Payday Loans" and "The Profitability of Payday Loans."

The First Class

The program has admitted its first three students in its inaugural year, a result that pleases Viscusi and Hersch. "Our ultimate goal is to admit approximately four students a year," Hersch says. Jennifer Bennett, who earned her undergraduate degree as a magna cum laude double major in economics and history at Harvard, entered the law school as a J.D. candidate last year, where she has already compiled a distinguished record. She then decided to apply for a spot in the joint-degree program. "This program offers an incredible opportunity to explore an important field of study," she says.

Her classmates will include Jinghui Lim, who was a magna cum laude double major in economics and computer science at Duke University, and Matthew Bullington, who received the 2006 President's Award at Middle Tennessee State University, which honors one student each year for exemplary character and achievements in scholarship, leadership and service.

Students will write their dissertations in the final two years of study and are expected to publish several articles derived from their theses in peer-reviewed economics journals or law and economics journals. This will make students from Vanderbilt's Ph.D. Program in Law and Economics prime candidates in the job market for academic positions at top law schools. "That's the goal," Viscusi says.

Faculty Bios

W. Kip Viscusi

W. Kip Viscusi

W. Kip Viscusi received his a.b. degree in economics summa cum laude from Harvard, where he also received his a.m. in economics, m.p.p. in public policy, and Ph.D. in economics. At Harvard, he received awards for best undergraduate thesis and best doctoral dissertation in economics. His publications have also earned accolades: Viscusi was recognized by the Western Economic Association in 1988 for writing the Best Article of the Year and by the Royal Economic Society in 1999. His books were awarded the Kulp-Wright Award for Outstanding Book on Risk and Insurance from the American Risk & Insurance Association (AIRA) in 1992, 1993, 1994 and 2000. The ARIA also awarded him the Mehr Article Award in 1999. Economic Inquiry has named Viscusi the second most productive economist based on articles published over the past decade in major economics journals. In 1998, the Journal of Risk and Insurance ranked him as the leading contributor to the risk and insurance literature, and in 2003 Health Economics ranked him as the leading contributor to the health economics literature.

Viscusi's research focuses primarily on individual and societal responses to risk and uncertainty. He has published over 20 books and 250 articles, most of which deal with different aspects of health and safety risks. Viscusi's honorary Arne Ryde lectures given at Lund University, Sweden were published as Rational Risk Policy by Clarendon-Oxford University Press in 1998. A recent book, Smoke-Filled Rooms: A Postmortem on the Tobacco Deal, was published by the University of Chicago Press in 2002.

Viscusi's estimates of the value of risks to life and health are currently used throughout the Federal government, and he has consulted to the U.S. Office of Management and Budget, the Environmental Protection Agency, the Occupational Safety and Health Administration, the Federal Aviation Administration and the U.S. Department of Justice on issues pertaining to the valuation of life and health. Viscusi served on the Science Advisory Board of the U.S. Environmental Protection Agency for seven years and currently serves on the EPA's Homeland Security Committee.

Over the course of his academic career, Viscusi has been the Allen Professor of Economics at Duke University, Professor of Economics at Northwestern University, and the Olin Visiting Professor at the University of Chicago. He also served as Deputy Director of the Council of Wage and Price Stability in the Carter White House.

Viscusi is the founding editor of the Journal of Risk and Uncertainty, which he continues to publish at Vanderbilt, and has served on the editorial boards of 12 other journals, including the American Economic Review and the Review of Economics and Statistics. He is also the founding editor of a new journal, Foundations and Trends: Microeconomics. He was the Associate Reporter on the American Law Institute's report, "Enterprise Responsibility for Personal Injury." He has been an expert on a variety of litigation issues, including risk perceptions, economic damages, product liability and hazard warnings.

Joni Hersch

Joni Hersch

Joni Hersch is a renowned economist whose recent work on the effect of skin tone on the earning potential of immigrant workers in the United States made headlines worldwide. Her research has addressed issues as diverse as sex discrimination in the labor market, smoking restrictions, the influence of race, gender and socioeconomic status on binge eating frequency, the impact of state regulation of smoking on voter preferences, punitive damages, health insurance disparities, the labor market for lawyers and the wages of married workers. An article forthcoming in the Economics of Education Review explore the impact of a double major on income.

Hersch earned her Ph.D. in economics at Northwestern University and her undergraduate degree in mathematics from the University of South Florida. She was a professor of economics at the University of Wyoming from 1989-99 and has been a visiting professor of economics at Northwestern, Caltech, Duke and Harvard. She served as adjunct professor of law at Harvard Law School before joining the Vanderbilt faculty.