Economic Trends and Judicial Outcomes: A Macrotheory of the Court

We investigate the effect of economic conditions on the voting behavior of U.S. Supreme Court Justices. We theorize that Justices are akin to voters in political elections; specifically, we posit that the Justices will view short-term and relatively minor economic downturns—recessions—as attributable to the failures of elected officials, but will consider long-term and extreme economic contractions—depressions—as the result of exogenous shocks largely beyond the control of the government. Accordingly, we predict two patterns of behavior in economic-related cases that come before the Court: (1) in typical times, when the economy cycles through both recessionary and prosperous periods, the Justices will punish the Copyright © 2009 by Thomas Brennan, Lee Epstein, and Nancy Staudt. † Assistant Professor of Law, Northwestern University School of Law. †† Henry Wade Rogers Professor, Northwestern University School of Law. ††† Class of 1940 Professor of Law, Northwestern University School of Law. We are grateful to the National Science Foundation and Northwestern University School of Law for research support, to Casey Mulligan, participants at the Northwestern University School of Law Faculty Workshop and participants at the October 2008 meeting of the Midwest Law and Economics Association for valuable insights, and to Jonathan Hillel for research assistance. This essay, prepared for the Duke Law Journal Symposium on Measuring Judges and Justice on February 6, 2009, is part of a longer book project entitled: A MacroTheory of the Court: How National and Local Trends Affect Judicial Decision-Making, which is under contract with the University of Chicago Press. The project’s website houses a full replication archive, available at http://epstein.law.northwestern.edu/research/EconomicTrends. html. BES IN FINAL.DOC 5/5/2009 4:01:11 PM 1192 DUKE LAW JOURNAL [Vol. 58:1191 elected branches of government when the economy contracts by voting less frequently for the government; and (2) in atypical times, when the economy moves into a period of deep depression, the Justices will work with the other branches of government by voting more frequently for the government. We test our hypotheses through statistical analysis of taxation opinions rendered by the Supreme Court during the period from 1913 to 1929 (a relatively normal period) and the period from 1930 to 1940 (the Great Depression). We find broad support for our hypothesis in the data we analyze, and we verify that our results are robust to a change in the measure of the economic condition as well as to a change in the specification of the regression model. We conclude that U.S. Supreme Court Justices exhibit voting patterns similar to voters in political elections when it comes to the economy. TABLE OF CONTENTS Introduction ...........................................................................................1192 I. A Macrotheory of the Court ...........................................................1197 A. The Economy as a Signal ........................................................1197 B. Judicial Behavior: Voting with the Masses to Achieve Elite Goals?...........................................................................1201 C. Differences between the Macrotheory of the Court and the Legal and Political Models of Decisionmaking ..........1204 II. Assessing a Macrotheory of the Court .........................................1208 A. The Basic Plan..........................................................................1208 B. Implementing the Plan ............................................................1209 C. Statistical Models and Predictions .........................................1214 D. Unobservable and Immeasurable Variables.........................1216 III. Empirical Results...........................................................................1219 Conclusion..............................................................................................1226 Appendix................................................................................................1226