Sunday, January 11, 2009
The Difficulties of Law and Finance: An Update from Roberta Romano
In a 2005 article entitled After the Revolution in Corporate Law, Roberta Romano said that an economics Ph.D. was not the "best match" for business law scholarship. Romano argued that finance, not economics, was the future for corporate law scholarship, and that empirical work was more important than modeling. She wrote:
[T]he building blocks of the revolution in corporate law originate most prominently in modern finance, which (as hopefully is clear) is a specialized field of economics. As a consequence, there is a highly imperfect match between the body of knowledge imparted in an economics Ph.D. program and that which is critical for analyzing corporate law issues, and particularly for the direction in which the field has been moving, using quantitative methods.
To this end she discussed a new Yale program, combining a J.D. with an accelerated finance Ph.D. program, as a way for the next generation of corporate scholars to get that training. A brief blurb about the program can be found here.
This past Saturday, at a fascinating AALS Business Associations panel, Romano provided an update on the Yale program. Romano had been disappointed, she confessed, about participation in the program. While she had initially hoped for one or two students a year, it appeared that only one student would be graduating from the first few years of the program. Although three students had signed up, two had subsequently dropped out. Romano mentioned the difficulties of being a lone law student in a class of finance Ph.D students, many of whom had foreign training. The rigors of the math, together with the attraction of law school "extracurricular activities," had made the joint JD/Finance Ph.D less popular than expected.
Romano's comments added an intriguing subplot to the panel, which was on the potential for synergies between finance and corporate law. The finance folks on the panel lamented the failures of their models, while the law professors talked about the problems of regulating without reliable empirical findings. Bankruptcy and Madoff featured prominently. Despite the gloomy tone, however, the panelists remained upbeat about the potential for collaboration between the two disciplines. I'd love to hear thoughts from folks out there. After fall 2008, are we now in the post-post-revolution period?
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Well, given the extraordinary failures of risk-modeling by financial professionals, who would want to get a PhD in something akin to alchemy?
Posted by: Anon | Jan 13, 2009 7:53:51 PM