CLEO Mission Statement
Interdisciplinary study is nothing new to the USC Law School. For years, the school has confronted the study of law not as an independent academic discipline but rather as the embodiment of the ideas, expectations and policies that are developed within and informed by a range of other disciplines.
USC's law faculty itself is a testament to the school's commitment to interdisciplinary research. Its professors are experts in fields such as psychology, communication, history, philosophy and medicine, but USC's law faculty are particularly recognized as national leaders in law and economics — an increasingly popular field of study that uses economic analysis to examine relationships between law and individual behavior. Eight of the school's faculty members hold graduate degrees in economics and many others frequently conduct research within the field — provide a solid basis upon which to build this important new center.
USC has taken advantage of this wealth of expertise by establishing the Center in Law, Economics and Organization (CLEO), a research center that will work to improve our understanding of how economics, law and organizations interact. CLEO is both an interdisciplinary and a multi-departmental center; it draws upon the resources of the Law School, the Marshall School of Business and the College of Letters, Arts and Science's department of economics to sponsor front-line research, provide scholarships and fellowships, and organize conferences, symposia and workshops that offer new insights and fresh perspectives on the intersections of law and economics.
Although the center is housed at the Law School, its affiliates include faculty and students from throughout the university. Its directors are Simon Wilke, Senior Fellow at the Annenberg Center for Communication and former Chief Economist at the Federal Communications Commission, and Dan Klerman, Professor of Law and History.
CLEO's goal — and challenge — is to integrate the Law School's traditional role as a locus of interdisciplinary scholarship with these emerging and increasingly eclectic accounts of organizational behavior being developed in the academic circles of law, business, psychology and economics.
CLEO has met tremendous success. Throughout the school year, CLEO sponsors bi-weekly faculty workshops at the Law School that draw faculty and graduate students from across the university. The center has hosted several major conferences, including one on corporate law and another on behavioral economics, and its working paper series has given scholars in a range of disciplines the opportunity to gather insight, criticisms and advice from their colleagues.
The center's success has generated immense optimism about its prospects for the future, and that optimism is shared by the school's alumni and friends. Matilda Barnett, a longtime supporter of the Law School, recently established the Gabriel and Matilda Barnett Faculty Research Endowment in Law and Business to provide research stipends to law and business professors. Over the years, generous funding has been provided by the John M. Olin Foundation, the Alfred P. Sloan Foundation, Emily Yukich, and the USC Gould School of Law. With the support and commitment of generous friends and top faculty and students, CLEO will undoubtedly position USC as a preeminent force in the study of law, economics and organization.
An Evolving Field
Effective legal regulation of business requires that policymakers correctly diagnose the problems in need of resolution, and that they correctly anticipate how business will respond to new laws. Law and economics scholars believe economic analysis of business organizations can help regulators gain this understanding.
Over the past half-century, the economic study of business organizations has undergone at least two significant transformations. Initially, such analysis centered on the premise that businesses were motivated by the desire to maximize profits — and nothing more. Little attention was paid to the internal workings of an organization or the people who managed it. Consequently, most early law and economics scholarship focused on when and how the law could regulate product markets and consumers through mechanisms such as antitrust and tort law.
During the mid-1980s, economists began to recognize that companies cannot necessarily be assumed to be profit maximizing entities that invariably do whatever is in their own best interests. Rather, a company's behavior is determined by a multitude of individuals — including shareholders, directors, managers and employees — who each pursue and are motivated by distinct interests. Thus, to understand how a company would behave, economists theorized, it is necessary to understand the incentives facing the individuals who control it.
This insight held important implications for the law: It implied that legal rules could serve an important purpose not only in regulating arm's-length market relationships, but also in regulating relationships within organizations themselves through employment law, fiduciary law and corporate governance rules.
Still, this analysis of behavior within the firm retained a standard assumption of economic theory that presumes all individuals make rational choices. Recently, scholars within both economics and cognitive psychology have challenged this assumption based on a rich body of psychological research — and individual experiences — that suggests people often do not behave in a strictly rational way, and in fact tend to deviate from the assumptions of rational-choice theory in systematic and often predictable ways.
These insights have given rise to a third wave of scholarship, behavioral economics, which hopes to incorporate a more nuanced model of human behavior into pre-existing economic methodologies. When combined with economic analysis of organizational behavior, behavioral economics promises to create a more sophisticated, realistic and parsimonious account of organizational behavior. The consequences for law are of equal importance, since the prudent design of legal rules turns critically on making accurate predictions about how individuals and organizations respond to their environment.
An Intellectual Advantage
CLEO's goal — and challenge — is to integrate the Law School's traditional role as a locus of interdisciplinary scholarship with these emerging and increasingly eclectic accounts of organizational behavior being developed in the academic circles of law, business, psychology and economics.
Because USC has such strong programs in all of these areas, CLEO already has an intellectual advantage. In addition, the Law School's long-standing commitment to interdisciplinary scholarship and its own faculty expertise in business law and economics — eight of the school's faculty members hold graduate degrees in economics and many others frequently conduct research within the field — provide a solid basis upon which to build this important new center.
Indeed, CLEO already has met tremendous success. Throughout the school year, CLEO sponsors bi-weekly faculty workshops at the Law School that draw faculty and graduate students from across the university. The center has already hosted several major conferences, including one on corporate law and another on behavioral economics, and its working paper series has given scholars in a range of disciplines the opportunity to gather insight, criticisms and advice from their colleagues.
The center's success has generated immense optimism about its prospects for the future, and that optimism is shared by the school's alumni and friends. Matilda Barnett, a longtime supporter of the Law School, recently established the Gabriel and Matilda Barnett Faculty Research Endowment in Law and Business to provide research stipends to law and business professors. Over the years, generous funding has been provided by the John M. Olin Foundation, the Alfred P. Sloan Foundation, Emily Yukich, and the USC Gould School of Law.
With the support and commitment of generous friends and top faculty and students, CLEO will undoubtedly position USC as a preeminent force in the study of law, economics and organization.
