Good afternoon, folks. Once again, I'm sorry I'm so late in submitting this week's post.
In the interest of time, I'm going to take a slightly different approach – instead of longer commentary, I'm going to ask a central question about market failure. What do you think about it, and what does Hayek have to say?
So, market failure basically talks about overprovision of bads (negative externalities) and under-provision of goods. The bads are more easily handled, with decent property rights (if not perfectly), so I'll focus on (alleged under-provision). The theory goes that, in most cases the market will get things right. But sometimes, the market simply won't provide enough: this will happen in cases where the social benefit of goods is greater than the private benefit of providing them (hence the need for government), and typically when the profit can't be captured or the transaction cost is too high. (Note that I’m intentionally shying away from the traditional public goods definition of goods that are non-rival and non-excludable; that never made much sense to me… does it to you?).
So Hayek gives us rules for government involvement in the economy (chapter 15): basically, rule of law does not imply NO government involvement, but involvement that follows the generality rule of rule of law, and intervention only to fix a market failure, but nothing permanent, monopolistic, exclusive, or geared towards social justice or redistribution.
Fine. But what about the knowledge problem? Let's assume (1) indeed there are goods that are under-provided by the market; and (2) that the government can correct this market failure consistent with rule of law. How do we (and who is we? Voters? Government? Politicians? Bureaucrats?) determine the optimal level of public goods? What mechanism is used to aggregate information about what people – somehow – want, but aren't willing to pay a private entrepreneur enough for him to provide it?
I see a few explanations or possibilities:
1. Hayek is simply a 19th century classical liberal, rather than a libertarian, and is thus willing to bend the rules a bit on private sphere and the role of government… and maybe even on the rule of law.
2. Hayek was tired of being discredited as a policy hack (for his 1945 _Road to Serfdom_ which was considered radical and non-scholarly) and tired of not being invited to cocktail parties, because he's too radical for the left-leaning economists (Keynesians or market-failure Chicago Boys, if not outright socialists). So he throws a bone to the enemy, in the form of some economic intervention, and part III of _Constitution of Liberty_, which allows for some coercion in the provision of social/public goods, beyond the protection of individual spheres.
3. I'm missing something. Sorry. I simply can't square this in Hayek's thinking. Isn't market failure just a demonstrated preference? Doesn't the knowledge problem still apply? Or are there really cases where we need collective action through government – like for roads, or zombie attacks or asteroids? Or is that still an excuse for violating rule of law? To be perfectly honest, I do have some thoughts on this, but I wanted to see what you thought.
RULE OF LAW
OK. I can't help myself. A quick comment on rule of law… Chapter 16 didn't seem terribly innovative, compared to other parts of the book, but it did offer a nice restatement: in brief, there is a decline in respect for rule of law and constitutionalism. Just as democracy has become its own end, rule of law today ends up being procedural (see chapter 13) and democracy has been conflated with rule of law. And, I particularly liked the critique (239) of "the positivist doctrine that the state must not be bound by law" – because, of course, the state makes the law!
Those of you who want to go to law school may enjoy a new book that's out, by Walter Olson, _Schools for Misrule: Legal Academia and an Overlawyered America_. I have not read it, but have read two different reviews. The book argues (1) that law was originally rejected from the university, because it was considered to be a trade, rather than intellectual – lawyers thus are still overcoming an inferiority complex, which manifests itself in academia but also point #2; think also of the fact that a law degree used to be an LLB (bachelor of law), but was inflated to a JD (juris doctor), even though it's not at all a doctoral degree!; (2) lawyers have become the social engineers. This fits in perfectly with Hayek's worries about the administrative state (administrative "expertise" and coercion over emergent order) and the school of legal positivism (law – legislation, technically – as the will of the legislator, rather than (true) law, which is general and emergent).
Sorry, once again, about the delay. Eager to hear your thoughts on market failure especially.
Thursday, April 14, 2011
Tuesday, April 12, 2011
Delayed post
Sorry, folks. I'm at a conference, and tomorrow is a travel day... so, with my apologies, this week's post won't go up until Thursday. More soon...
Sunday, April 10, 2011
Economic Regulation and the Zombie Apocalypse
This week I found myself almost completely unable to disagree with Hayek. He successfully stressed the value of the state as a tool to be used to guarantee property rights, he pointed out the logical yet unfortunate decline in the rule of law, he explained the presence of state that can still be described as small. The only questions I have are impractical yet still present. The terrible 'what ifs' that can fester in many a young academic mind. Due to natural superstition and the presence of media today, I can not help but wondering how society and the free market could handle an extinction level event like a giant asteroid or the ever popular zombie apocalypse. What form of insurance will occur without the gargantuan state ready with its impractical level of insurance?
In the event of a national or global emergency what else has the ability to mobilize on such an aggregated level? Sure hardware companies will be able to react to the greater demand for home defense supplies. And gun companies can kick up production, even the media market provides plenty of how to's. But in the long run how can we deal with such an event? An apocalyptic event may be an example of non-coercive spontaneous order but that doesn't change how much it would suck.
So governments are created to decrease world suck. The methods may vary between egalitarian socialism or utilitarian economic growth but the idea still remains. Does Hayek just think liberty is more important than lowered world suck?
In the event of a national or global emergency what else has the ability to mobilize on such an aggregated level? Sure hardware companies will be able to react to the greater demand for home defense supplies. And gun companies can kick up production, even the media market provides plenty of how to's. But in the long run how can we deal with such an event? An apocalyptic event may be an example of non-coercive spontaneous order but that doesn't change how much it would suck.
So governments are created to decrease world suck. The methods may vary between egalitarian socialism or utilitarian economic growth but the idea still remains. Does Hayek just think liberty is more important than lowered world suck?
Public v. Privatized Services
The meat of Hayek's application of the rule of law, jurisprudence, and equity under the law seem to emerge in Chapter 15, as Hayek explains further which kinds of service are permissible for the government to provide, and under which conditions.
It is understandable the government should officiate services that are providing goods and services that on a larger scale than that of industry, such as mining statistical data and providing corrective measures in a monetary system.
Since the 1930's we've avoided another great depression and experienced periods of inflation, stagflation, and deflation, but never again a national economic meltdown. This is due to periods of balancing measures facilitated by forms of government coercion such a the federal reserve. But these scales of balanced coercion are becoming over-weighted, and the balancing act has become, completely out of range of what Hayek would describe as the government's general rule of law in the fiscal budget. The result has evolved into a disastrously large debt, not simply an imbalanced trade, but an imbalanced current account through increased spending. The government has attempted to aide more and more of privatized services, exercising its coercive powers through new laws and bills for education and health care, not to mention overseas military operations. As Camilla once pointed out: "We're talking about the government as if it is a person." A superhero...with fewer and fewer onlookers as time & resources pass into the black oblivion.
The government's providing of ever closer estimates of population statistics has made information more freely available under the Freedom of Information Act, and our constitutional rights to see the economic reports they produce and it provides industry with an upper advantage, as technology has made this more readily available.
I want to be so bold as to state the monopolistic markets have never diminished because counter-veiling duties have provided comparative advantages in some instances and inflation in other nations has provided competitive advantage in the U.S.. This is an example of privatized coercion that has been generally beneficial.
I have little conclusions to draw from Hayek's premise, since I am not a liberal by his definition, as I believe in the checks and balances of a constitutional republic, not a purely democratic government. If there are to be general rules of law, then their must be general systems that must remain relatively unchanged over time, and the privatized sphere he is discussing should be the one that changes more often. Our constitution is a solid example of this, it has remained relatively unchanged, and represents a good general rule of law. And the portion of the free sphere that information & technology industry consists of is a good example of a dynamic largely privatized benefit to the industry as a whole . Should the government coercively attempt to alter either of these outside of its general rule of law, our basic freedoms & economic freedom would be in danger.
Writer's block has really hit me this week, so please let me know your thoughts.
Peace out scholars!
It is understandable the government should officiate services that are providing goods and services that on a larger scale than that of industry, such as mining statistical data and providing corrective measures in a monetary system.
Since the 1930's we've avoided another great depression and experienced periods of inflation, stagflation, and deflation, but never again a national economic meltdown. This is due to periods of balancing measures facilitated by forms of government coercion such a the federal reserve. But these scales of balanced coercion are becoming over-weighted, and the balancing act has become, completely out of range of what Hayek would describe as the government's general rule of law in the fiscal budget. The result has evolved into a disastrously large debt, not simply an imbalanced trade, but an imbalanced current account through increased spending. The government has attempted to aide more and more of privatized services, exercising its coercive powers through new laws and bills for education and health care, not to mention overseas military operations. As Camilla once pointed out: "We're talking about the government as if it is a person." A superhero...with fewer and fewer onlookers as time & resources pass into the black oblivion.
The government's providing of ever closer estimates of population statistics has made information more freely available under the Freedom of Information Act, and our constitutional rights to see the economic reports they produce and it provides industry with an upper advantage, as technology has made this more readily available.
I want to be so bold as to state the monopolistic markets have never diminished because counter-veiling duties have provided comparative advantages in some instances and inflation in other nations has provided competitive advantage in the U.S.. This is an example of privatized coercion that has been generally beneficial.
I have little conclusions to draw from Hayek's premise, since I am not a liberal by his definition, as I believe in the checks and balances of a constitutional republic, not a purely democratic government. If there are to be general rules of law, then their must be general systems that must remain relatively unchanged over time, and the privatized sphere he is discussing should be the one that changes more often. Our constitution is a solid example of this, it has remained relatively unchanged, and represents a good general rule of law. And the portion of the free sphere that information & technology industry consists of is a good example of a dynamic largely privatized benefit to the industry as a whole . Should the government coercively attempt to alter either of these outside of its general rule of law, our basic freedoms & economic freedom would be in danger.
Writer's block has really hit me this week, so please let me know your thoughts.
Peace out scholars!
Saturday, April 9, 2011
The Fantastic Four
So this week I am going to try to delve in to the art of regurgitation with style in the efforts of furthering my knowledge and my retention of this knowledge of the four movements Hayek speaks of in chapter 16. He mentions that each of these movements opposed each other but all had the commonality in viewing that government’s authority to draft rules of law should not be limited, as through these powers governments can reduce social injustices.
At this point you may ask yourself what’s the point of reading this post if it’s just “regurgitation” when you can go the original work for the same information. I will answer this conundrum and provide you with the reasoning as to why this post does expand in a new direction by stating this summary of these four points goes in detail about each in comic book super hero style description. Presenting to you the Fantastic Four political theory style:
Legal Positivism- He’s our friend Reed Richards a scientific genius who is known as Mr. Fantastic. The reasoning as to why Legal Positivism is classified as this super hero is due the flexibility that this school of thought offers. The school stretches out of the bounds of the law. Mr. Fantastic has the ability to use his powers to alter the situation, but he himself is a giant loop hole which stretches outside of the law.
Historicism- The Thing! Though the Thing is known for his strength he himself is bound to the past, as he is the member of the club with the most emotional baggage on his shoulders. The Thing’s actions need a purpose that is tied to his personal interpretation of what is just. If a rule does not fit in to the Thing’s view of justice the answer is simple, “Its clobbering time!”
The school of “Free Law”- It’s Jonny Strom of course. Due his background of delving into shady activities, as a movement he is primarily concerned with criminal law. Also known the Human Torch, being the young troubled youth of the group he is not a fan of fixed rules. Generating flames and using them to fly is his power and he uses this to flee from fixed rules and as a result his decisions often can be seen as being endowed with an arbitrary nature.
The school of “Jurisprudence of Interest”- She is Sue Storm also known as the invisible woman. She is most closely related to her younger brother Johnny Storm. As the woman of the group she likes to think about the “interests” of the group as a whole. She uses her power to disappear with the attempt of escaping the type of law which relies on the strict application of rules to achieve a concrete verdict.
SO YEAH….
At this point you may ask yourself what’s the point of reading this post if it’s just “regurgitation” when you can go the original work for the same information. I will answer this conundrum and provide you with the reasoning as to why this post does expand in a new direction by stating this summary of these four points goes in detail about each in comic book super hero style description. Presenting to you the Fantastic Four political theory style:
Legal Positivism- He’s our friend Reed Richards a scientific genius who is known as Mr. Fantastic. The reasoning as to why Legal Positivism is classified as this super hero is due the flexibility that this school of thought offers. The school stretches out of the bounds of the law. Mr. Fantastic has the ability to use his powers to alter the situation, but he himself is a giant loop hole which stretches outside of the law.
Historicism- The Thing! Though the Thing is known for his strength he himself is bound to the past, as he is the member of the club with the most emotional baggage on his shoulders. The Thing’s actions need a purpose that is tied to his personal interpretation of what is just. If a rule does not fit in to the Thing’s view of justice the answer is simple, “Its clobbering time!”
The school of “Free Law”- It’s Jonny Strom of course. Due his background of delving into shady activities, as a movement he is primarily concerned with criminal law. Also known the Human Torch, being the young troubled youth of the group he is not a fan of fixed rules. Generating flames and using them to fly is his power and he uses this to flee from fixed rules and as a result his decisions often can be seen as being endowed with an arbitrary nature.
The school of “Jurisprudence of Interest”- She is Sue Storm also known as the invisible woman. She is most closely related to her younger brother Johnny Storm. As the woman of the group she likes to think about the “interests” of the group as a whole. She uses her power to disappear with the attempt of escaping the type of law which relies on the strict application of rules to achieve a concrete verdict.
SO YEAH….
Monday, April 4, 2011
Rule of Law
Good afternoon. Blog posts this week seemed to focus more on chapter 14, as well as lingering big-picture questions, so I will try to emphasize those.
CHAPTER 13
But first, a short comment on chapter 13. The two main points I draw from this chapter are (a) a proper understanding of "rule of law"; and (b) equality of outcome v. equality before the law.
Hayek complements the history of chapter 13 nicely with the theory of chapter 14. Rule of law has come to be understood as something that follow a set of procedures; thus, if an abominable, unconstitutional law was passed following all the established procedures – many today claim – it follows the requirements of rule of law. That is, it was procedurally passed. However, Hayek reminds us (p. 205) that rule of law is broader, and includes such things as conformity of laws and government action to principle; lack of coercion (or only to prevent coercion); law (as emergent reflection of the community's moral tradition) rather than legislation (the engineered reflection of the Legislator's will); equal application of laws to all (the generality principle) and the principle that laws must be known and certain. Thus, much like democracy, rule of law has been misunderstood. And, just as majority rule is taken to be its own constraint, so has procedure. Hayek sets us straight.
Parenthetically, somebody asked how much certainty there is in US law. Getting technical on this excellent question, I'll answer: US law is very certain and very clear. US legislation is confusing and obfuscatory. That is, the law – as reflection of decades and centuries of tradition – is clear. I suspect that most of us would have a decent guess, without ever having studied the law, about many (or most) principles of the common law. These are, after all, a reflection of the community's standards. See Tony Honore's great little book _About Law: An Introduction_ if you're curious. Legislation, on the other hand, is confusing. One of the big problems we've seen in the US, since the Progressive Era, but also since the 1960s and 1970s, is the expansion of statutory/administrative law in the US, to the detriment of common law. If you're REALLY curious about this, see Hayek's brilliant (but dense!) three-volume _Law, Legislation and Liberty_.
Two more sidebar notes.
First, Hayek points out that France's administration survived 1789. Indeed, the French revolution leveled just about everything in society – except the state's exemption for itself from judicial control, and its establishment of a separate "judiciary" for matters of state (for details, see Tocqueville's _The Ancient Regime and the Revolution_. Thus, as far as I can tell, one cannot sue the French government in an ordinary court, but only in a special administrative tribunal. So much for rule of law, right?! I wonder if we're not headed in that direction in the US – since the Progressive era, and based in part on the writings of Max Weber, many administrative actions were deemed too technical for regular courts, so Administrative Law Judges (attached to governmental agencies, like FTC, FCC, etc.) were established. There's still overall review from SCOTUS, but doesn't it seem odd that, if you sue a governmental agency, the "impartial" court is made up… of employees of that agency? What do you think? Specialists or generalists?
Second, somebody brought up Montesquieu. My reading of him is mostly based on secondary sources, but, yeah…mixed bag. On the one hand, we are largely indebted to Montesquieu for separation of powers. On the other hand, the climate stuff does seem goofy (so a country's ideal government depends on its climate). And yet... Jeffrey Sachs and other economists have argued this, and we do tend to see democracies in temperate zones (not from the equator to the tropics, basically). Of course one would have to control for colonization. But still…
CHAPTER 14
I can hear your sighs of relief all the way from Alaska. Finally, Hayek gives us something concrete! A five-point summary of the conditions for liberty, pp. 205-209. There you have it. In many ways, it seems to me, the rest of the book is background or elaboration on this summary. I don't have much to add, then, except (a) that the US is currently violating a lot of these conditions; and (b) you have good (and difficult questions) on some of these points.
On rule of law. As discussed above, the US currently faces an assault by legislation on law; likewise, we see many cases (income redistribution, regulation), where coercion is used for purposes other than preventing coercion.
On transparency and certainty of laws. Again, as discussed above. I once heard of an EPA administrator admitting that it is IMPOSSIBLE for any business in the US to be in full compliance with EPA regulations (legislation and not law); they're simply too complicated and too numerous. You've also probably heard of stories where a financial magazine will give the same income tax information to five different, established, top accountants: all five will come up with a different amount, because the law is so complicated in some places, and so vague in others (apparently, for a while, you could deduct a portion of business meals – but only if you had absolutely no enjoyment (!) of the meal, in which case it wasn't a business expense).
On equality before the law and the generality principle. The US has made great strides on equality before the law (although much remains to be done, I should think). The generality principle, on the other hand, is routinely violated. The GENERAL welfare clause in the US constitution means just that. A case can be made for military spending (within reason, see below), courts, etc. and maybe even provision of public goods as being in the GENERAL welfare. But privileging certain groups at the expense of others (the poor, the elderly, agribusiness, business general, domestic producers against foreign competition, etc.) is clearly not a promotion of the GENERAL welfare.
On separation of powers. Plainly, in the US today, we have a blend of powers (in the jargon, structural differentiation without concomitant functional specificity). The executive executes the laws, but also writes them (regulations and executive orders – legislation, technically), and adjudicates them (through ALJs, administrative law judges). The judiciary periodically rewrites laws (as judges think they should have been written) and executes them (busing of schoolchildren is but one example). And the list continues.
On discretion (non sub homini sed sub deo et lege, in the lovely Latin phrase: not under man, but under God and Law). We see this principle violated routinely. The prime example is congressional delegation of vague powers (in clear violation of the constitution, which vests sole legislative authority in the Congress) to administrative agencies with broad, unspecified mandates, and much discretion. I have also heard of cases where independent regulatory agencies can issue a "commissioner's finding" and reopen a case after the courts have either dismissed it or issued a ruling the commission doesn't like.
FINAL POINTS
I couldn't quite weave these questions into the discussion, so here are some consolidated answers.
Somebody pointed out the British tradition, in which there is no written constitution, but a set of "constitutional documents," which, combined with tradition, serves as a check. It's not perfect at constraining government, but it works pretty well (but then again, how effective is the written US constitution). In addition, there is some separation of powers (Lords v. Commons, Crown). Anyway, this brings up the importance of informal constraints, captured in the idea of "constitutional culture." A constitution is just a piece of paper; people must accept to be bound by it, must be vigilant, and rulers must accept to be bound by it (to an extent; they'll always need reminding, but if they completely disregard it, things fall apart). So, in the end, while a constitution is a good reminder (see chapter 12 on the importance of a paper reminder), a machinery is also required to maintain liberty and the constitutional principles (p. 182). This machinery includes separation of powers, federalism, and other formal constraints, but also "constitutional culture" – people being fed up, voting, taking to the streets, refusing certain behaviors, etc. And this ties in with the question of constitutional change: on the one hand, a constitution must be permanent and entrenched (with the possibility of amendment), or it will mean nothing and majoritarianism/opportunism will prevail; on the other hand, a constitution is just a piece of paper, or a reminder – it will guide constitutional thinking, but must ultimately be interpreted according to prevailing standards, customs, and emergent tradition. Thus, a constitution will evolve, both formally (by amendment) and informally (by interpretation). The question lies in the balance, and staying true to original principle (to the extent it's still desired – sorry, I'm a realist!) and binding rulers. Occasionally, we'll find a need to correct the path-dependence, as Hayek pointed out in earlier chapters, but only piecemeal.
So, will checks and balances still work for a big government? We can only hope so… In theory, they should prevent big government in the first place. In practice, well, we do what we can. Remember some of the nice words and thoughts from the founders, like eternal vigilance as the price of liberty, and "a republic – if you can keep it."
On taxation, I think I posted a few weeks ago on this. First, "progressive" taxes are clearly a violation of the generality principle. You already pay more (in gross amount) if you earn more, without being punished by a higher tax bracket. Besides, richer people consume fewer government services, so they should have a lower tax bracket, right?!
On war powers, we're back to the blend between constitutional culture and formal mechanisms. I agree with the post on limiting war powers. Then again, how do we do so? The constitution already has clear provisions (like Congress having the power to declare wars, and three-year appropriations), but those haven't worked…
Finally, on "government" v. "society" I think there is a big difference. Between the individual and government, there is civil society – it's non-coercive and it's spontaneous, and it does many things that individuals and governments can't do. I'm out of room, but I can comment later on the clear difference (as I see it, especially in light of information aggregation problems and public choice critiques) between the two.
CHAPTER 13
But first, a short comment on chapter 13. The two main points I draw from this chapter are (a) a proper understanding of "rule of law"; and (b) equality of outcome v. equality before the law.
Hayek complements the history of chapter 13 nicely with the theory of chapter 14. Rule of law has come to be understood as something that follow a set of procedures; thus, if an abominable, unconstitutional law was passed following all the established procedures – many today claim – it follows the requirements of rule of law. That is, it was procedurally passed. However, Hayek reminds us (p. 205) that rule of law is broader, and includes such things as conformity of laws and government action to principle; lack of coercion (or only to prevent coercion); law (as emergent reflection of the community's moral tradition) rather than legislation (the engineered reflection of the Legislator's will); equal application of laws to all (the generality principle) and the principle that laws must be known and certain. Thus, much like democracy, rule of law has been misunderstood. And, just as majority rule is taken to be its own constraint, so has procedure. Hayek sets us straight.
Parenthetically, somebody asked how much certainty there is in US law. Getting technical on this excellent question, I'll answer: US law is very certain and very clear. US legislation is confusing and obfuscatory. That is, the law – as reflection of decades and centuries of tradition – is clear. I suspect that most of us would have a decent guess, without ever having studied the law, about many (or most) principles of the common law. These are, after all, a reflection of the community's standards. See Tony Honore's great little book _About Law: An Introduction_ if you're curious. Legislation, on the other hand, is confusing. One of the big problems we've seen in the US, since the Progressive Era, but also since the 1960s and 1970s, is the expansion of statutory/administrative law in the US, to the detriment of common law. If you're REALLY curious about this, see Hayek's brilliant (but dense!) three-volume _Law, Legislation and Liberty_.
Two more sidebar notes.
First, Hayek points out that France's administration survived 1789. Indeed, the French revolution leveled just about everything in society – except the state's exemption for itself from judicial control, and its establishment of a separate "judiciary" for matters of state (for details, see Tocqueville's _The Ancient Regime and the Revolution_. Thus, as far as I can tell, one cannot sue the French government in an ordinary court, but only in a special administrative tribunal. So much for rule of law, right?! I wonder if we're not headed in that direction in the US – since the Progressive era, and based in part on the writings of Max Weber, many administrative actions were deemed too technical for regular courts, so Administrative Law Judges (attached to governmental agencies, like FTC, FCC, etc.) were established. There's still overall review from SCOTUS, but doesn't it seem odd that, if you sue a governmental agency, the "impartial" court is made up… of employees of that agency? What do you think? Specialists or generalists?
Second, somebody brought up Montesquieu. My reading of him is mostly based on secondary sources, but, yeah…mixed bag. On the one hand, we are largely indebted to Montesquieu for separation of powers. On the other hand, the climate stuff does seem goofy (so a country's ideal government depends on its climate). And yet... Jeffrey Sachs and other economists have argued this, and we do tend to see democracies in temperate zones (not from the equator to the tropics, basically). Of course one would have to control for colonization. But still…
CHAPTER 14
I can hear your sighs of relief all the way from Alaska. Finally, Hayek gives us something concrete! A five-point summary of the conditions for liberty, pp. 205-209. There you have it. In many ways, it seems to me, the rest of the book is background or elaboration on this summary. I don't have much to add, then, except (a) that the US is currently violating a lot of these conditions; and (b) you have good (and difficult questions) on some of these points.
On rule of law. As discussed above, the US currently faces an assault by legislation on law; likewise, we see many cases (income redistribution, regulation), where coercion is used for purposes other than preventing coercion.
On transparency and certainty of laws. Again, as discussed above. I once heard of an EPA administrator admitting that it is IMPOSSIBLE for any business in the US to be in full compliance with EPA regulations (legislation and not law); they're simply too complicated and too numerous. You've also probably heard of stories where a financial magazine will give the same income tax information to five different, established, top accountants: all five will come up with a different amount, because the law is so complicated in some places, and so vague in others (apparently, for a while, you could deduct a portion of business meals – but only if you had absolutely no enjoyment (!) of the meal, in which case it wasn't a business expense).
On equality before the law and the generality principle. The US has made great strides on equality before the law (although much remains to be done, I should think). The generality principle, on the other hand, is routinely violated. The GENERAL welfare clause in the US constitution means just that. A case can be made for military spending (within reason, see below), courts, etc. and maybe even provision of public goods as being in the GENERAL welfare. But privileging certain groups at the expense of others (the poor, the elderly, agribusiness, business general, domestic producers against foreign competition, etc.) is clearly not a promotion of the GENERAL welfare.
On separation of powers. Plainly, in the US today, we have a blend of powers (in the jargon, structural differentiation without concomitant functional specificity). The executive executes the laws, but also writes them (regulations and executive orders – legislation, technically), and adjudicates them (through ALJs, administrative law judges). The judiciary periodically rewrites laws (as judges think they should have been written) and executes them (busing of schoolchildren is but one example). And the list continues.
On discretion (non sub homini sed sub deo et lege, in the lovely Latin phrase: not under man, but under God and Law). We see this principle violated routinely. The prime example is congressional delegation of vague powers (in clear violation of the constitution, which vests sole legislative authority in the Congress) to administrative agencies with broad, unspecified mandates, and much discretion. I have also heard of cases where independent regulatory agencies can issue a "commissioner's finding" and reopen a case after the courts have either dismissed it or issued a ruling the commission doesn't like.
FINAL POINTS
I couldn't quite weave these questions into the discussion, so here are some consolidated answers.
Somebody pointed out the British tradition, in which there is no written constitution, but a set of "constitutional documents," which, combined with tradition, serves as a check. It's not perfect at constraining government, but it works pretty well (but then again, how effective is the written US constitution). In addition, there is some separation of powers (Lords v. Commons, Crown). Anyway, this brings up the importance of informal constraints, captured in the idea of "constitutional culture." A constitution is just a piece of paper; people must accept to be bound by it, must be vigilant, and rulers must accept to be bound by it (to an extent; they'll always need reminding, but if they completely disregard it, things fall apart). So, in the end, while a constitution is a good reminder (see chapter 12 on the importance of a paper reminder), a machinery is also required to maintain liberty and the constitutional principles (p. 182). This machinery includes separation of powers, federalism, and other formal constraints, but also "constitutional culture" – people being fed up, voting, taking to the streets, refusing certain behaviors, etc. And this ties in with the question of constitutional change: on the one hand, a constitution must be permanent and entrenched (with the possibility of amendment), or it will mean nothing and majoritarianism/opportunism will prevail; on the other hand, a constitution is just a piece of paper, or a reminder – it will guide constitutional thinking, but must ultimately be interpreted according to prevailing standards, customs, and emergent tradition. Thus, a constitution will evolve, both formally (by amendment) and informally (by interpretation). The question lies in the balance, and staying true to original principle (to the extent it's still desired – sorry, I'm a realist!) and binding rulers. Occasionally, we'll find a need to correct the path-dependence, as Hayek pointed out in earlier chapters, but only piecemeal.
So, will checks and balances still work for a big government? We can only hope so… In theory, they should prevent big government in the first place. In practice, well, we do what we can. Remember some of the nice words and thoughts from the founders, like eternal vigilance as the price of liberty, and "a republic – if you can keep it."
On taxation, I think I posted a few weeks ago on this. First, "progressive" taxes are clearly a violation of the generality principle. You already pay more (in gross amount) if you earn more, without being punished by a higher tax bracket. Besides, richer people consume fewer government services, so they should have a lower tax bracket, right?!
On war powers, we're back to the blend between constitutional culture and formal mechanisms. I agree with the post on limiting war powers. Then again, how do we do so? The constitution already has clear provisions (like Congress having the power to declare wars, and three-year appropriations), but those haven't worked…
Finally, on "government" v. "society" I think there is a big difference. Between the individual and government, there is civil society – it's non-coercive and it's spontaneous, and it does many things that individuals and governments can't do. I'm out of room, but I can comment later on the clear difference (as I see it, especially in light of information aggregation problems and public choice critiques) between the two.
Sunday, April 3, 2011
Is the government all up in your grill?
In his fantastic lecture on the the Rule of Law in chapter 15, Hayek mentions one particular feature that distinguishes a free society from an un-free society: A "Recognized Private Sphere." He doesn't really elaborate on this further, and is quite ambiguous in his mentioning that we "Can no longer make this claim today." Is Hayek stating that the developed world circa 1960 failed to recognize the importance of a personal bubble? I don't think anyone in the United States at this point would disagree that the implementation of the PATRIOT ACT was certainly a step in the direction of limiting personal freedom. Our government currently and legally holds the power to monitor your phone traffic without your permission! I am pretty sure Hayek would have had a conniption upon hearing of such a thing. I found myself very much agreeing with this notion after receiving a mandatory TSA pat-down at the San Francisco airport three weeks ago.
So, if we operate under the well established assumption that a free society is one that recognizes and respects a personal sphere, and assume that "within the United States at least" our personal spheres have been, ahem, coercively penetrated by the government on more than one occasion, can we the conclude that our society is un-free? Or at least becoming un-free? If we safely reach this conclusion, what repercussions does it hold? Is there any hope for the reemergence of the rule of law? Will this trend continue, or level off at a less-free-but-still-sort-of-free state?
Law: Known and Certain
Hayek argues that one of the criteria law ought to have is that is be know and certain. The law also should not be rapidly changing. As it effects people and commerce it should not be chancing from day to day. Case and point, the Alaska tax system on oil and gas seems to change every few years. As someone who has designed excel sheets and discounted future cash flows to present with taxation considered, having a tax system change every few years really messes up the model and makes it difficult to make positive economic decisions.
How much certainty is there in US law? The amount of certainty must surely be directly inversely proportional to the number of trail lawyers per capita. I mean if the law where so certain everyone would settle their disputes before they got to court, and in a case of criminal trails, if the law was very certain there would be no point in having a lawyer cause it would have no impact on the outcome. I will admit if the amount of cases that never get to court relative to the amount that do may be a better measure of certainty of the law, but I propose that it is much easer to gather data on the number of trail lawyers per capita. It does seem to be true that if you have enough money you can get away with just about anything, and this is largely true because you can hire the best lawyer with money.
On a side note I would like to introduce the idea behind a potential constitutional amendment. First in order to incentive the government to declare war before it actually engages in acts of war, it should be illegal for it to borrow money in any shape or form in time of peace. In other words, to run a deficit budget, the government must first be in a declared state of war. I believe this would solve the problems we have been having since world war 2, the problem of the government engaging in acts of war, on numerous instances, under Republicans and Democrats, with out first declaring war like our highest law states it must.
Next, to discourage war, in times of war a universal draft would automatically be but in place for all able bodied personnel. The first to be drafted would be the closest family members of the congress. Also they would be put into the most dangerous position in the war.
Problems we face: we fight to many wars, we break our law by not declaring war, and our government spends to much. If you agree these are problems you should entertain the idea of the previously mentioned constitutional amendments.
I still have to wonder, if your government so blatantly for the last 60 plus years failed to declare war with no penalty, what enforcement do we have if our government deficit spends with out declaring war? Also what happens if all the congressmen and womens sons and daughters magically get medically disqualified for service in times of war?
Goodness of Moral Laws?
In last week's discussion I pointed out that the British Parliament is ruled by a collection of differently scaled documents rather than one central constitution. This is largely made possible because of long standing British tradition. When dealing with a constitution we realize that the written words are far less important than the practiced traditions. It is the same in the case of law.
What is stopping me from bashing someone over the head, with our friend, the overly used shovel? Is it the fact that a word was written down by someone in a position of power? Or is it fear of the judicial system coming down upon me? Many people commit crime because they believe they can get away with it. I believe there are many things I could do without the law noticing, yet, I do not do them. Why is this? We could say that MB does not exceed MC, but there is something else stopping me. Perhaps if that equation included Utils. But why do I lose utility if I break a certain law beyond the eyes of the state? The typical answer will be the societal morals that have been ingrained in me.
Immanuel Kant believes “The constitution of a state is eventually based on the morals of its citizens, which, in its turns, is based on the goodness of this [social moral] constitution.”
This moral constitution, or idea of peace, that can guide a society sounds good until you look at some of the costs. For thousands of years women have had a lesser place than men in society. Think for a moment of 'Dr.' Laura, a conservative radio personality. She will be one of the first to separate men from women and tell women how they must act for men. She holds these beliefs not from any critical academic thought but from tradition and upbringing.
Societies laws can envelop people into lesser standing through their inability or unwillingness to fight. In many cases, tradition's stability and test of time can be touted as the argument against change.
It is a very personal belief that if someone is given a right then all, who would be able to use it practically, should be able to. Discrimination that stems from societies morals is the cause of much hidden grief. Though I believe that a right should be offered to all groups rather than just those in power, I must remind you that what is and isn't a right can certainly be debated.
Even a moral law can be an impure one.
We should not blindly follow the past but instead think for ourselves and find what we believe to be inherently true. That is law because it is axiomatic.
What is stopping me from bashing someone over the head, with our friend, the overly used shovel? Is it the fact that a word was written down by someone in a position of power? Or is it fear of the judicial system coming down upon me? Many people commit crime because they believe they can get away with it. I believe there are many things I could do without the law noticing, yet, I do not do them. Why is this? We could say that MB does not exceed MC, but there is something else stopping me. Perhaps if that equation included Utils. But why do I lose utility if I break a certain law beyond the eyes of the state? The typical answer will be the societal morals that have been ingrained in me.
Immanuel Kant believes “The constitution of a state is eventually based on the morals of its citizens, which, in its turns, is based on the goodness of this [social moral] constitution.”
This moral constitution, or idea of peace, that can guide a society sounds good until you look at some of the costs. For thousands of years women have had a lesser place than men in society. Think for a moment of 'Dr.' Laura, a conservative radio personality. She will be one of the first to separate men from women and tell women how they must act for men. She holds these beliefs not from any critical academic thought but from tradition and upbringing.
Societies laws can envelop people into lesser standing through their inability or unwillingness to fight. In many cases, tradition's stability and test of time can be touted as the argument against change.
It is a very personal belief that if someone is given a right then all, who would be able to use it practically, should be able to. Discrimination that stems from societies morals is the cause of much hidden grief. Though I believe that a right should be offered to all groups rather than just those in power, I must remind you that what is and isn't a right can certainly be debated.
Even a moral law can be an impure one.
We should not blindly follow the past but instead think for ourselves and find what we believe to be inherently true. That is law because it is axiomatic.
The Giant Hamster Wheel of Logic
This week I found chapter fourteen quite interesting, as this was a chapter which I felt that I ready understood everything he was saying…Yeah! One of his points I found very interesting was one that was a part of our regular (1pm) SWEET meeting last week.
This was his fourth point, “The third requirement of true law is equality.” This really reminded me what we were talking about, Ed was mentioned that we need an equal starting point for (in terms of opportunity) for maximum gain. This type of logic was kind-a freaking out the Austrians in the room (pretty much the whole room). Austrian prospective which with time I feel if I were to express it in the least number of words, it the basic gut feeling of “just please leave it alone.” After reading this and thinking about an earlier chapter where Hayek states that we need equality under the law which will in effect mean that we will have unequally because people are all unique by nature (If we wanted equality we would have unequal laws). Ed’s comments made more sense perhaps the basic view of having a system with equality under law is one which is more universal than one thinks as it fits in to many of economic schools of thoughts views. I do find this interesting though because equality and justice though important to concepts of liberty are outside the realms of realms of economics, as we deal with asking the question of what is efficient rather than what is equitable or fair.
Lastly, since I don’t really know how to end this since I am still mulling over this in my mind. I will wrap this up with a quote from Hayek on this topic from the chapter.
“Yet, though equality before the law may thus be one of the ideas that indicate the direction without fully determining the goal and may therefore always remain beyond our reach, it is not meaningless.”
This quote brings up an interesting point equality of the law is important, but is the whole concept nothing more than a giant hamster wheel? If it doesn’t lead us to the “goal” what does? Is this the culmination of characteristics (that “does”/is needed) even attainable? Yes, we want “liberty and justice for all”, but how can we take a book of political philosophy and develop a function out input characteristics to come up with the output of liberty? I would like to think so, but at the same time as I go further in to my studies I find more and more on how theory and reality are not forged together but are characterized by a stringent discontent.
PS a little randomness about Montequieu:
Hayek cited Montequieu as proponent of a government of law as the essence of liberty (p 194) \. This is totally a side note and completely unrelated to Hayek’s point, but hey I know very little about political philosophers so when I actually recognize a name it’s kind of a big deal. In high school I did a report Montequieu for AP government. Obviously, as one can deduce from his name he was a French dude...a French dude with attitude and some weird views to boot. What I remember as particularly strange about Montequieu was how he thought that a country’s political structure and promise was dependent of the area’s geographic latitude and climate. I really could not believe this guy (“really”) I mean come on he thought that good political governments could not ever work in countries by the equator as these where characterized by hot tempers and that the perfect place on his scale was can you guess…France. Yep Montequieu an interesting guy.
This was his fourth point, “The third requirement of true law is equality.” This really reminded me what we were talking about, Ed was mentioned that we need an equal starting point for (in terms of opportunity) for maximum gain. This type of logic was kind-a freaking out the Austrians in the room (pretty much the whole room). Austrian prospective which with time I feel if I were to express it in the least number of words, it the basic gut feeling of “just please leave it alone.” After reading this and thinking about an earlier chapter where Hayek states that we need equality under the law which will in effect mean that we will have unequally because people are all unique by nature (If we wanted equality we would have unequal laws). Ed’s comments made more sense perhaps the basic view of having a system with equality under law is one which is more universal than one thinks as it fits in to many of economic schools of thoughts views. I do find this interesting though because equality and justice though important to concepts of liberty are outside the realms of realms of economics, as we deal with asking the question of what is efficient rather than what is equitable or fair.
Lastly, since I don’t really know how to end this since I am still mulling over this in my mind. I will wrap this up with a quote from Hayek on this topic from the chapter.
“Yet, though equality before the law may thus be one of the ideas that indicate the direction without fully determining the goal and may therefore always remain beyond our reach, it is not meaningless.”
This quote brings up an interesting point equality of the law is important, but is the whole concept nothing more than a giant hamster wheel? If it doesn’t lead us to the “goal” what does? Is this the culmination of characteristics (that “does”/is needed) even attainable? Yes, we want “liberty and justice for all”, but how can we take a book of political philosophy and develop a function out input characteristics to come up with the output of liberty? I would like to think so, but at the same time as I go further in to my studies I find more and more on how theory and reality are not forged together but are characterized by a stringent discontent.
PS a little randomness about Montequieu:
Hayek cited Montequieu as proponent of a government of law as the essence of liberty (p 194) \. This is totally a side note and completely unrelated to Hayek’s point, but hey I know very little about political philosophers so when I actually recognize a name it’s kind of a big deal. In high school I did a report Montequieu for AP government. Obviously, as one can deduce from his name he was a French dude...a French dude with attitude and some weird views to boot. What I remember as particularly strange about Montequieu was how he thought that a country’s political structure and promise was dependent of the area’s geographic latitude and climate. I really could not believe this guy (“really”) I mean come on he thought that good political governments could not ever work in countries by the equator as these where characterized by hot tempers and that the perfect place on his scale was can you guess…France. Yep Montequieu an interesting guy.
Layin Down The Law
Protecting the citizens from the government. Quite the noble goal. In this week's reading what stuck out most to me was Hayek's explanation of the development of the the Rechtsstaat and its relation to the "rule of law" concept in the Anglo-American tradition.
I thought it was very important to see the stark contrast made between the American and French revolutions. The quote that summed up the French situation best to me was the following.
"This ardent resolve to sacrifice violently all rights to the revolutionary aim and no longer to admit any other consideration than an indefinable and changeable notion of what the state interest demands." (Hayek 195)
The deal here that arises is that the people come second to the revolutionary agenda which the world has seen time and again in the twentieth century. Pick any example: Soviet Russia, Khmer Rouge Cambodia, Nazi Germany etc. There needs to be an appeal to the "reign of law" against the "reign of clubs."
The objective of the the German Rechtsstaat and the Anglo-American Rule of Law to keep the states in check from achieving such things. The sharing of legally based civil liberties and the limiting of the state's power to protect the citizens from authority needs to be in place for a free society to exist.
Unconstitutional Acts & Rule of Law
The rule of law is often violated in the name of "legality" according to Hayek's definition. We see it happening today in Lybia, as an oppressive dictator Gadaffi is crushing all of his opposition under the authority given to him of unlimited power by the government.
It happens here in America as well, we are so concerned with constitutionality that we are trying to put specific limits on freedom by passing on all legal matters to the judicial branch, when really, the power is in the hands of the people. I wonder if we really know what the constitution say...shhh...don't tell anyone that. Of course we've all read it, it's the size of a pamphlet, it's smaller than your TV guide, and yet it's more powerful than your remote in modifying your behavior.
I think that trying to assign property rights to everything and regulating every nook and cranny of society, even the governing our morality is a power that has been handed down by the American public to it's government, in the process, the rule of law has been violated by us asking the courts what is legal and what is not. It is up to the individual to decide justice on a personal level, not the courts, specifically in the recent judicial activism that we have seen defining rights of individuals beyond what is in the constitution. It is in the process of asking others to judge morality for us (specifically the courts in in cases of racial discrimination, sexual orientation, and religious freedom) that we have violated our own constitution. I agree with Hayek that the legislative process cannot be scrutinized enough. Information is power, the truth will set you free.
It happens here in America as well, we are so concerned with constitutionality that we are trying to put specific limits on freedom by passing on all legal matters to the judicial branch, when really, the power is in the hands of the people. I wonder if we really know what the constitution say...shhh...don't tell anyone that. Of course we've all read it, it's the size of a pamphlet, it's smaller than your TV guide, and yet it's more powerful than your remote in modifying your behavior.
I think that trying to assign property rights to everything and regulating every nook and cranny of society, even the governing our morality is a power that has been handed down by the American public to it's government, in the process, the rule of law has been violated by us asking the courts what is legal and what is not. It is up to the individual to decide justice on a personal level, not the courts, specifically in the recent judicial activism that we have seen defining rights of individuals beyond what is in the constitution. It is in the process of asking others to judge morality for us (specifically the courts in in cases of racial discrimination, sexual orientation, and religious freedom) that we have violated our own constitution. I agree with Hayek that the legislative process cannot be scrutinized enough. Information is power, the truth will set you free.
Equality under the law
Equality under the law seems to be something that our country is constantly struggling for. It is hard for me to comprehend how an organization of men could write something like Majority rule with the protection of minority rights into our constitution, and then also add the 3/5 clause to the same document. Thankfully we have moved past the times of the 3/5 clause but it has been a long road, and our country still openly discriminates against an entire minority of people. It is this discrimination that lead me to disagree with Hayeks statement that, "a law may be perfectly general in referring only to to formal characteristics of the persons involved and yet make different provisions for different classes of people' (209).
Perhaps I live in a fantasy land where because I would like to imagine that classes don't exist, at least in the eyes of the law.I know the exist in human interaction amongst people, it is inescapable their, we are not communist we are individuals, but this individualism leads to one person always having a fancier car or bigger house than another, this is not a bad thing, this is just how it is. But while classes exist in society through human interaction must it also be recognized in law? In my opinion it is not the laws job to dictate what provisions each class might receive, "spontaneous social order" will take care of that on its own.
My dissent in recognizing classes under the rule of law guides me to the problem of taxation. As much as I would like to say that the rich should be taxed more because they have more, and the poor should be taxed less because they have less, this would be recognizing classes under the law, so as much as it pains me to say this as far as taxation is concerned perhaps a flat tax would be the best way to promote equality under the law. I make x amount of $ and you make x amount of $ but we both pay y% on our x, we both are contribute equal proportions of our lively hood to the governing of our state. Perhaps I am being ignorant in the bury your head in the sand, hide from a problem and it won't be there sort of way... but it's just thought,its not law. (Thank God).
Perhaps I live in a fantasy land where because I would like to imagine that classes don't exist, at least in the eyes of the law.I know the exist in human interaction amongst people, it is inescapable their, we are not communist we are individuals, but this individualism leads to one person always having a fancier car or bigger house than another, this is not a bad thing, this is just how it is. But while classes exist in society through human interaction must it also be recognized in law? In my opinion it is not the laws job to dictate what provisions each class might receive, "spontaneous social order" will take care of that on its own.
My dissent in recognizing classes under the rule of law guides me to the problem of taxation. As much as I would like to say that the rich should be taxed more because they have more, and the poor should be taxed less because they have less, this would be recognizing classes under the law, so as much as it pains me to say this as far as taxation is concerned perhaps a flat tax would be the best way to promote equality under the law. I make x amount of $ and you make x amount of $ but we both pay y% on our x, we both are contribute equal proportions of our lively hood to the governing of our state. Perhaps I am being ignorant in the bury your head in the sand, hide from a problem and it won't be there sort of way... but it's just thought,its not law. (Thank God).
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