I am grateful to William Barnette for his review of my book The Conservative Case for Class Actions. But I am not surprised he did not like it. The foil in the book is corporate America, and Mr. Barnette works for corporate America. Hence, he gives us the big business case against class actions. But as Milton Friedman reminded us over and over again (and I paraphrase here), “the free enterprise system is not going to be saved by General Motors.” Big corporations have their own agenda; sometimes it is conservative, and sometimes it is not. The corporate effort against class actions is one of the times that it is not. Mr. Barnette tries to parry Milton Friedman by arguing that big and small businesses alike are united against class actions, but I find that hard to believe. The amount of wrongdoing that a small business can perpetrate is not going to attract the attention of class action lawyers. This is why the “costs and frequency of lawsuits” and “threatened lawsuits” always appear at the bottom of surveys of the concerns of small businesses.

The conservative case for class actions begins with a question: what is the alternative to class actions for the small wrongs that are done to us by the companies we do business with?

One answer is no legal recourse at all. No conservative that I have ever read takes that view. Even libertarians like Friedrich Hayek acknowledge that markets need some legal rules to run effectively. In my research for the book, I found that conservative and libertarian economists are in almost universal agreement that we at least need rules against theft, breach of contract, fraud, and price fixing for our markets to work well. That’s the vast majority of class actions against businesses. I didn’t see Mr. Barnette contend otherwise. But if a company steals from us, breaches our contracts, defrauds us, or colludes against us only in small amounts, how can we stop it without class actions?

Another answer is that the government could do it for us. Mr. Barnette never comes out and explicitly says he would prefer more government policing of the market, but repeated statements like “government regulators would never pursue” cases that class action lawyers do suggest he would. If he would prefer more government, I completely understand why—big corporations have a lot of influence over the government (so much so that we have special phrases for it like “agency capture” and “crony capitalism”), and the government can’t match the resources of the private bar, so big corporations wouldn’t have to worry as much about being knocked off their pedestals—but does anyone seriously think more government is the conservative solution? It is the solution in Europe where corporations are forced to get permission from the government before they do new things, what we call ex ante regulation. But Europe is not known for its innovative, vibrant free markets. Nor is it known for its conservativism.

It is true the government solution doesn’t have to be ex ante. It could be ex post: we could simply replace class action lawyers with government lawyers. As I note in the book, this was proposed in 1978 by Jimmy Carter and Ted Kennedy, who wanted to eliminate consumer class actions in favor of a new government agency. They, too, were not known for their conservativism. Instead, I cast my lot with the long conservative tradition favoring private enforcement over government enforcement of the law, including the famous works in the 1970s by Richard Posner, William Landes, Gary Becker, and George Stigler. As I explain in the book, the same principles we invoke in favor of the private sector for everything else—smaller government, more self-help, better incentives, better resources, less bias in favor of campaign contributors, and less centralization—all line up in favor of class action lawyers over government lawyers.

Mr. Barnette seems to disagree with me on only two of these principles: class action lawyers have better incentives than government enforcers and class action lawsuits are less centralized than government enforcement. But I don’t think he is right on either point.

Although we conservatives usually love the profit motive of the private sector, Mr. Barnette argues that is has run amok with class action lawyers. His main complaint seems to be that it is too easy for class action lawyers to file meritless cases. He says that class action lawyers have nothing to lose by filing those cases and he thinks a loser-pays rule would correct for that. Although he is wrong that lawyers have nothing to lose by filing bad cases—they lose the value of their time, the exact same thing companies lose when they have to hire lawyers to get bad cases dismissed; this is the virtue of the profit motive, not the vice—I fully agree with Mr. Barnette that we need to give class action lawyers more skin in the game. I am most worried about the asymmetric costs of discovery when a lawsuit survives a motion to dismiss, and for this reason I support some form of discovery cost sharing or loser-pays in class actions. I say this clearly in the last chapter of my book, where I discuss a number of other changes I would make to the system to improve the incentives of class action lawyers. But I think the more important point here is that we cannot make the perfect the enemy of the good. It is true that our system does not always give class action lawyers perfect incentives. But you know who else does not have perfect incentives? Big corporations. The conservative response there is not to turn our industries over to the government; the conservative response is to tweak the rules to better align corporate profit motives with the public good. Our response should be the same when the industry is the legal profession. As I say in the book, we can mend the class action; we don’t have to end it. Indeed, it is easier to mend class actions than other things because the rules affecting lawyers’ incentives are largely put in place by judges; no legislation is needed. But even if we make no changes to the current system, I don’t think things are quite as dire as Mr. Barnette does. As I explain below, many of his critiques of our system are overstated and based on anecdotes rather than data.

Mr. Barnette also contests my argument that class action lawyers are a less centralized way of holding companies accountable. As he notes—and as I acknowledge in the book—class actions centralize all similar claims against a company into one lawsuit. He is right that it would be even more decentralized if each plaintiff could bring their own lawsuit. That is why I say in the book I am not sure that class actions are the best way to hold companies accountable when plaintiffs have individually viable claims; my case for class actions focuses on small-stakes claims. But small-stakes class actions are still more decentralized than the government alternative. When a federal agency in Washington D.C. is the only one that can pursue wrongdoing, all lawsuits in the agency’s wheelhouse against all companies come from one place. That is a far cry from class actions: even though they centralize one set of lawsuits against one company, all other lawsuits against that company as well as all the lawsuits against all other companies will be distributed throughout the bar and judiciary.

It is important to note that just because I believe private enforcement is usually better than the government, it does not follow that I think we should never use government enforcement. Government can do some things private lawyers cannot. Moreover, as the engineers tell us, redundancy in our systems can be a virtue not a vice (so long as we offset penalties assessed by one enforcer against those than can be assessed by another).

In fairness, Mr. Barnette does offer two private alternatives to the small-stakes class action: individual arbitration and small claims court. I have no beef with arbitration as a general matter—as I agree in the book, it is an even more privatized solution than litigation in court—but I do have a beef with arbitration if it cannot occur on a class-wide basis (and that is the way that too many companies like to write their arbitration agreements, as I note below). It is the same beef I have with small claims court: even though individual arbitration and small claims court can lower the cost of bringing claims by eliminating the need for a lawyer, that doesn’t help at all the people who are unaware that they have been ripped off and it does not help very much even the people who are aware of it. Why? Because most laypeople are too intimidated to file on their own. Moreover, even if they are not intimidated, how many hours of work are most people willing to miss for a $50 claim? Mr. Barnette says if you aren’t willing to miss work for small claims court it simply means the claim is not important enough to pursue to begin with, but shrugging our shoulders when people steal $50 doesn’t sound very conservative to me. Moreover, if corporations knew that they could steal $50 from us with impunity, how many more $50 thefts would they engage in? I try to answer this in a chapter of the book about the deterrent value of class actions. I find that both law-and-economics theory and the empirical studies say the same thing: a lot more.

It is true that there are many strands of conservativism, and the strands I invoke most often in the book—utilitarian conservativism and libertarian conservativism—are not the only ones. The strongest point Mr. Barnette makes is that the class action is inconsistent with another strand of conservativism: Burkeanism. I have to admit he is right about that. The modern class action marked a radical transformation from what went on before in our courts. But we have been living with it for over 50 years now and we can make an assessment at this point about whether it is worth keeping. I think the other strands of conservativism show that it is. It is true, as Mr. Barnette notes, that the libertarian case for class actions is not as strong as the utilitarian one because it cannot be denied that class actions do things to us—for better or for worse—without our affirmative consent; class actions are opt-out not opt-in. That is usually a no-no for libertarians. But, as I try to explain in the book, I don’t think libertarians should mind this much for the small-stakes claims that we are talking about here: as I explained above, there is no other realistic way to vindicate those claims. What is the value of affirmative consent if there is no alternative anyway? Consent in this context is purely symbolic. That’s not nothing, but it’s not much.

Most of the rest of Mr. Barnette’s review consists of examples of frivolous class actions he and other corporations have faced as well as critiques of Supreme Court class action cases that he says have not been friendly enough to corporations. I will leave his critique of the Court to the side, but I will concede here that I have been surprised how long it has taken companies to stamp out class actions under Supreme Court precedents that allow them to use class action waivers. I catalogued some of the leading theories why this might be in a law review article, but I still believe it is only a matter of time until more companies take advantage of class action waivers. I am not persuaded that Mr. Barnette’s recent examples of lawyers initiating expensive high-volume individual arbitrations against companies will change this calculation: the high-volume arbitrations are only viable because the companies agreed by contract to foot the bills for the arbitrations; once they change these terms in their contracts, the high-volume threat will subside.

I will, however, respond to Mr. Barnette’s examples of frivolous cases. Many of these cases are what he calls “copycat class actions,” where duplicate class actions are filed all over the country for the very same thing. I am surprised Mr. Barnette complains about these. Duplicate class actions offer corporate defendants one of their greatest strategic advantages in class action litigation: the ability to pit competing class action lawyers against one another in a reverse auction that drives down the settlement price. Although this dynamic does not apply when the duplicate class actions come in seriatim rather than in parallel, if that is his complaint, then I suspect it is no longer current: thanks to a recent Supreme Court decision called China Agritech v. Resh, the statute of limitations no longer tolls for successive class actions. Thus, class action lawyers no longer have much time to pull this off.

But my bigger criticism of Mr. Barnette’s examples is that they are anecdotes. One of the things I try very hard to do in the book is to base my assessment of our system on data rather than anecdotes. It is easy for anyone to find a few examples of abusive class actions. But are the abuses the rule or the exception? The data we have on some things is better than on others and it is admittedly hard to measure how many bad class actions are filed every year. I think motion to dismiss rates are a good proxy because, if a court thinks the case is plausible under Twombly and Iqbal, I think it is hard to argue that the case is meritless. When we debated my book before the Atlanta Lawyers’ Chapter of the Federalist Society, Mr. Barnette said that lawyers can just make up facts to get around Twombly and Iqbal. But, if that happens, then the response should be Rule 11 sanctions. If those sanctions are not forthcoming, then we need to change that. Indeed, I take this concern so seriously that I plan to study Rule 11 in future work. But with all that said, the best data we have suggests that there are probably too few class actions, not too many. The leading study is of securities fraud, where three very talented economists estimate that only one third of such frauds are ever caught.

Let me close by thanking Mr. Barnette again for his review. This is not the first time he proved himself to be a very worthy adversary. As I noted above, I had the pleasure of debating him in person, and, as he noted, I once served as an expert witness in a case against his company. But I promise that I am not a partisan; I hope that we will have the opportunity to work together on the same side soon enough.