Of the founding fathers, Alexander Hamilton has always been my favorite—and not because of the arcane fact that my uncle, Robert Ward McEwen (variant spelling), was the 14th President of that well-regarded upstate New York liberal arts college named for you-know-who.
No, I’ve been a fan of Hamilton (1755—1804) ever since I first began studying the economic history of the US, and Hamilton had it all: Illegitimate child, immigrant, soldier, lawyer (member of the New York bar), economist, co-author of the Federalist Papers, founder of the Bank of New York, proponent of the notion that New York, not Washington, be the Capitol of the new nation (a well-intended but misbegotten notion—business and governmental capitals fundamentally don’t get along), Treasury Secretary, and ultimately martyr to his own sense of honor, killed across the river from here in Weehawken in a duel with Aaron Burr. (Although the circumstances of the duel are much disputed, the most authoritative biographer of Hamilton, Ron Chernow, concluded that Hamilton fired first, missing Burr on purpose [his shot hit a branch over Burr’s head] but that Burr took deliberate aim.)
And did I mention that my alma mater Princeton must to this day rue its refusal to accommodate Hamilton’s request in his admission application that he be allowed to study at a quicker pace and graduate in an accelerated period of time? Columbia accepted his request and today Hamilton Lawn separates Hamilton Hall and John Jay Hall on Columbia’s Frederick Law Olmstead-designed campus a mile north of here. A pity.
Now, readers regular or occasional must know that Adam Smith, Esq. is resolutely nonpartisan and nonpolitical, but occasionally an essay that could be viewed as espousing a political view is so worthy of attention that we can’t resist. David Brook’s column a few days ago in the Times, “The Role of Uncle Sam,” is such an occasion.
Brooks contrasts the Hamiltonian tradition of what the government’s role in the national economy should be with the Jefferson-Jacksonian tradition. This has indeed been the great debate in the history of governmental intervention in the economy. Since you already know that I’m firmly in the Hamiltonian camp, you are at liberty to take what follows with a grain of salt, but I always endeavor to be objective and fair:
| Hamilton | Jefferson | |
|---|---|---|
| Primary government unit of interest | federal | state and local |
| Government role | cautious, constrained and limited | energetic, open-ended, and evolving |
| Priorities | long-term structural development, infrastructure, education, R&D | short-term security |
| 99%/1%? | interests of capital and labor are harmonious in the long run | haves and have-nots |
| Time horizon | you eat in the long run | you eat today |
| What works | innovation, experimentation, and entrepreneurship—”we’ll see” | what’s worked in the past, with a gloss of “experts know best” |
| Spending priorities | on the unproven, the promising, and the future | on the incumbents who have the power |
| Economic policy should protect | competition | competitors |
One of the more conspicuous clashes between Hamilton and Jefferson the individuals (as opposed to the philosophies) came when Hamilton was Secretary of the Treasury and Jefferson Secretary of State. Over Jefferson’s strenuous opposition, Hamilton estabished the country’s first national bank.
Now, we may seem to strayed a long way from LawFirm Land, but bear with me.
I discern an analogy—think about it—between the Hamiltonian approach to governance and that of firmly united partnerships bound strongly together for the long run, and the same between the Jeffersonian approach to governance and that of partnerships celebrating individual super-stars in the here and now. If you grant me license to describe what I believe to be relative, not absolute, distinctions, consider:
- the H partnership invests in professional development for all and keeps a lid on the divergence between highest paid and lowest paid;
- the J partnership invests in the proven stars and rewards them accordingly, no matter what high:low compensation ratios that might entail;
- the H partnership is willing to let people pursue new and potentially unproven areas, within reason, understanding that success would redound to the benefit of the entire firm;
- the J partnership prefers to invest in what’s proven to work (and if it’s worked elsewhere that’s even stronger proof);
- the H partnership is oriented towards the long run, understanding that B players are as essential as A players, and that individuals migrate between the two categories over a career, sometimes more than once;
- the J partnership wants results now, and has little patience for anyone who’s not hyper-successful today.
On a national level, one can compare the relative dynamism, vibrancy, and success of the US when we were at our apex of investing in infrastructure (the transcontinental railway, the interstate highway system) and R&D (DARPA, NASA, the NIH and the NSF), with the US today (or more strongly, with continental European nations in general).
If you think that too glib or polarizing a comparison to make, perhaps you’d prefer to look at it through a different lens: What’ are the essential characteristics of a country, or a firm, you can believe in and want to believe in? Is it of something being built for the long run, with intergenerational equity, generous investment in individuals and the environment they need to thrive, and a recognition that not all progress at the same pace but that all deserve equal opportunity?
Or instead is it a hallucinatory redistributionist engine, running Robin Hood in reverse, where the spoils go to those with the greatest power today, and the way forward is not to invest in providing an environment that would nurture others up to that high-performance level, but to corral more and more of the already powerful?
Is it led by individuals who are aware of their limitations and the unpredictability of life, or is it led by those undeterrable in their convictions?
Does management assume it knows everything worth knowing, or do those at the top honestly welcome differences and seek to build strength on the back of diversity?
Use your imagination.
Statue of Hamilton in front of Hamilton Hall (Columbia University)
Your analytical framework seems well posed to me, Bruce. Here’s a follow-on question, in three parts:
1. Is there anything analogous to Research & Development in the legal profession? I would have thought there must be, as an engine for new developments.
2. Given that there were, or might be, what (if anything) are we to take form the American experience in recent years with respect to R&D in other sectors? When I was a lad (and well after), the exemplar of successful R&D was Bell Labs, and American industry widely had internal R&D entities, often doing groundbreaking work. Today, in most sectors, one looks for such investment and activity to the universities (including in Pharma the joint ventures with universities), with much funding from government.
3.Assuming that the “”R&D” answer for American law also in the universities, is that entirely healthy? What would Mr. Hamilton, or Mr. Smith, say to that?
Mark
Thanks, Mark, for your kind words. In terms of R&D in LawLand, it’s shockingly all but nonexistent. I think the only real innovations (the “poison pill,” for example) come from the brains of practitioners, but not as the result of any concerted or certainly not any industry-wide or firm-wide effort. The beauty of the Common Law is, of course, that once the appropriate court (Delaware, with the poison pill) endorses the innovation, it’s available far and wide.
More broadly, law firms don’t view it as part of their mission to conduct R&D, perhaps because you can’t patent ideas, but more broadly I suspect because there is no such thing as a line for “retained earnings” on a law firm’s balance sheet and therefore no funding mechanism for R&D even were the firm so visionary. Every $1 spent (or saved) this year is perceived by the partners as coming out of their pockets. Not structurally conducive to long-term investment.
Finally, the shameful (so say I, anyhow) state of “research” in law schools you can largely lay at the feet of the bizarre tradition of student-edited and -published law reviews, which carry the entire weight of academic water for the legal profession. What’s wrong with that? They’re not peer-reviewed–and nothing else is either. So far antithetical is this to normal standards of rigorous research that it requires no elaboration.
You pose a fabulous question but I’m afraid Messrs. Hamilton and Smith would both say that legal R&D is a backwater at best.
Don’t mean to be critical of my own profession, but I try to call ’em as I see ’em.
I’m a young corporate lawyer and not an MBA, but it seems like a lot of the problems in the corporate world are driven by short-term perspectives (e.g., institutional investors with short-term investment horizons, management with annual bonuses tied to short-term goals, pressure to drive stock prices in the short-term, etc.). This results in suspect mergers, acquistions, decisions, etc. to drive stock prices in the short-term, without much thought about the long-term implications for the companies, employees and communities involved. I think this problem also exists, and is even worse, with many big law firms because they are both controlled and managed by short-term investors (i.e., older partners who will retire soon or rainmakers or laterals looking to make the next move) who will have no financial ties to their firm after they are gone. In the corporate world, a CEO or senior officer with equity or a retirement package may retain an interest in his or her company’s success after they leave but that generally isn’t the case with law firms. Consequently, even though law firms are service businesses that should theoretically benefit from things like R&D, continuing professional education, meaningful publishing, etc., those things are pushed aside and not encouraged because they can’t be billed to a client in the short-term. I admit that I am young and don’t know all the details regarding law firm management (I’m sure it is very complicated), but the prevailing model doesn’t seem to incent the behaviors necessary to drive innovation, efficiency and the highest quality client service at a good value–which should be focus of any client service business. It just doesn’t. This is one of various reasons for my belief that the two-tiered partnership model (or lifetime income partner model) will never work over the long-term. Young partners who are competent and motivated are not going to settle for career, second class income partner positions, and will eventually realize that their long-term investment horizons and lower rates are a selling point for winning business, especially in this economy. There will always be a place for high-end, bet the company firms and matters, but corporations and legal departments are getting smarter and need to consider whether the current “biglaw” model is delivering the innovation and value they need.
Given that Jefferson once said, “I am not a friend to a very energetic government,” how is he here positioned as the opposite, believing that the role of government should be “energetic, open-ended, and evolving”? I’m not saying it is inaccurate, per se, just trying to get a handle on it.
Dear Doug: I wrote primarily in the context of each one’s desired role for the government vis-a-vis the economy. Hamilton believed in a (strong, yes) referee/peacekeeper/Rule of Law-enforcing government, but otherwise thought government should stay utterly out of picking winners and losers, favoring incumbents or empowering rent-seekers, etc. Jefferson believed in a government that was interventionist in the economy, protecting agrarian interests and small merchants and shopkeepers against aggregations of wealth or other property.