Law and Economics Expert Joins Faculty
by Mary Wood
Johnston was Robert G. Fuller, Jr. Professor of Law at the University of Pennsylvania Law School and director of the school’s Program on Law, Environment and Economy. He holds a J.D. and a Ph.D. in economics from the University of Michigan.
“Virginia has a great and continuing law and economics tradition, and a superb faculty in general. I’m really excited about helping to contribute to that tradition and build upon it,” Johnston said.
Johnston will continue to teach courses in contracts, law and economics, and natural resource law and economics, and hopes to add a course in global warming law and policy. He is currently in the midst of a series of articles and a book on global warming policy. That project has in turn generated a series of forthcoming articles that apply economics to analyze the incentives for regulatory science created by alternative regulatory institutions.
“One thing made perfectly clear by the recent Climategate scandal and the loss of credibility it has caused for the Intergovernmental Panel on Climate Change is that careful institutional design is the key to credible, unbiased assessment of regulatory science—meaning science that is produced to inform and guide regulatory policy,” Johnston said.
In addition to these public law and regulatory topics, Johnston is at work on a series of articles on design and enforceability of standard form consumer contracts.
“One of the reasons I’m excited about the move to Virginia is that it will give me the chance to once again do more general work in law and economics, and one of the most important areas of such general work is that dealing with the behavioral impact of different sorts of consumer contract terms,” he said. “Current policy proposals from Washington are animated by the belief that the recession of 2008 occurred in large part because consumers signed mortgage contracts that they didn’t understand. A rough look at the data suggests otherwise—that it was macroeconomic policy, in particular the unprecedentedly easy monetary policy pursued from 2002 until 2005—that caused an adaptive change in consumer borrowing behavior. But this question—bad contracts or bad monetary policy?—needs to be subjected to much more sustained and rigorous theoretical and empirical inquiry.”
After earning his degrees at Michigan, Johnston clerked for Judge Gilbert S. Merritt of the Sixth U.S. Circuit Court of Appeals. He taught at Vanderbilt Law School before joining Penn’s faculty.
Johnston has served on the board of directors of the American Law and Economics Association and on the National Science Foundation’s law and social science grant review panel. He won Penn Law’s Robert A. Gorman Award for Teaching Excellence in 2003.
“This is a really important time in the United States for natural resource law,” Johnston said, as dozens of new water infrastructure projects are in the works in the western United States.
“We haven’t had major new water projects in the U.S. since the late 1960s,” Johnston said, adding that such large-scale government building projects helped fuel the environmental movement at the time. “People thought they were gone, but they’re back.”
And ironically, developers have justified such projects as needed to cope with more frequent drought predicted as a future consequence of global warming. “If these new water projects happen out West, they will have enormous environmental consequences, and yet they seem to have been overlooked by many traditional environmental groups because of a sometimes hysterical concern about global warming,” he said.
Johnston said applying economic principles to areas like environmental law helps make better public policy. “If the law doesn’t create the right incentives, then it won’t improve our decisions about natural resources management, it won’t decrease pollution in a way that the laws are intended to do,” he said. “There’s a very big gap oftentimes between what the law says people should do and what they are going to do, and I think that gap exists because there hasn’t been rigorous attention paid to the incentives created by the law.”
And the same principle applies to consumer protection law. “There you need a model and some evidence—and much more than just experimental evidence—about what consumers actually do and how they respond to different contract terms before you start redesigning contracts used by credit card companies and banks.”
Johnston said he is excited to bring these topics to classes at Virginia.
“Having taught at UVA Law when I visited some years ago, I know that UVA students are talented, enthusiastic, and really love the Law School. This is really important to me, because it is talented and committed students who make teaching so rewarding.”