Hobby Lobby: Yes, corporations can have religious beliefs. No, those beliefs aren't necessarily the beliefs of the shareholders.

The Supreme Court of the United States may be a politicized out-of-touch super-legislature, but it sure knows how to troll the blogosphere. In June, it released two abortion-related decisions. The first was boringly unanimous.  But the second, Hobby Lobby, once again proved that abortion is an intimate decision between a woman, her doctor, talk-show hosts, and bumper-sticker manufacturers.

99% of Internet commentary on Hobby Lobby is ill-informed tribalist crap, but the case raises genuinely interesting issues. The story is that back in 1990, a conservative Supreme Court held that the free exercise clause of the First Amendment does not give rise to a constitutional right of accommodation for religious minorities whose practices are affected by general laws with secular motivations. That's the rule the bad reactionary people in Quebec want now. It means that believers in traditional American Indian religions cannot take ritual peyote, and, to take the Canadian example that went the other way, observant Sikhs can't work on construction sites if the only headgear permitted is a construction helmet,

Nobody in Congress liked that ruling. The religious right didn't like it, because they saw themselves as protecting religious freedom. And liberals didn't like it, because they saw themselves as protecting unpopular religious minorities. So the 1993 Religious Freedom Restoration Act was enacted to near-unanimous support. It required that genuine religious objectors be accommodated when their practices violate general statutes, so long as any compelling purpose of the statute can be met with less restrictive means. It is a compromise. Society can definitely ban human sacrifice, and may be able to tell people to remove their veils to get drivers' licences, but it can't do whatever it wants without a good reason just because it is more convenient for the majority who don't share your wacky cultish belief system.

Under Obamacare, employers are mandated to provide health insurance to their employees. From a progressive perspective, this is a second-best to having the state provide universal health insurance, but for various historical reasons, that is how it had to be. Of course, this could easily be sidestepped if there were no rules about what "health insurance" must cover. So the Affordable Care Act delegates the power to require that certain preventative services be part of the insurance package. Among those services are birth control, and among the methods of birth control are some that many evangelical Christians believe are equivalent to abortion because they prevent a fertilized zygote from implanting. Of course, this happens all the time and no one organizes a funeral, but nobody says your religious views have to make sense to the Pithlord, who has been known to wonder whether the Athanasian creed is completely down with the law of non-contradiction.

Hobby Lobby is a successful arts-and-crafts chain with a fair number of employees. Its shares are held by the Green family, all of whom are committed evangelical Protestants and believe that "morning-after" contraception is abortion and therefore wrong. We don't know what its employees think.

The five conservative justices held that requiring Hobby Lobby to provide insurance that includes morning-after birth control to its employees violates the corporation's sincere religious belief under RFRA and that in light of a number of accommodations given to churches and religious non-profit organizations (who are themselves legally corporations), the mandate cannot be imposed on it.

Interestingly, only two of the liberal dissenters objected to the first step in the analysis, which was that Hobby Lobby could have religious beliefs, and it makes sense to attribute to it the religious beliefs of its shareholders. Personally, I think that is the most interesting issue, since the accommodations do seem to create a huge problem for the government's assertion that Obamacare would fall apart if Hobby Lobby does not have to include the morning after pill in its insurance coverage.

This ought to be a hard case for liberals, which makes Ginsburg's rhetoric and much of the rhetoric in the feminist and liberal blogosphere a bit disturbing. However, some on the right don't even see why it should be hard. Liberals don't take the legal fiction of a distinct corporate person very seriously in other contexts. So why not agree that if the law requires a corporation to do something, this is logically the same as requiring its shareholders to do it? Even a libertarian as fair-minded as Julian Sanchez doesn't really get it.

Who is the firm?

Legally, a corporation is a person who is not an individual. Alito, for the conservatives, points this out. Since we widely acknowledge that religious colleges or hospitals have religious beliefs, Alito argues that the difference between 'for profit" corporation and a "not-for-profit" one is arbitrary. Kosher butcher shops come up.

Some corporations, though, are also the legal embodiment of a firm or business. A firm is not a legal fiction. It is a tribe, or community, or team. The corporation in a legal sense is a useful organizing device to bring together investors and employees. Either investors or employees might prefer to take their compensation as fixed claimants on the value produced by the firm or as residual claimants. Generally speaking, it is economically more efficient for a subset of investors (equity investors) to take their compensation as residual claimants because investors are better able to diversify risk that the firm will fail. But employees have more control over whether it will succeed, so this is not always the case. In practice, employees get some of their de facto compensation as residual claimants too, if only in the sense that job security and satisfaction is better when the firm is doing well.

Progressives differ from libertarians about workplace issues precisely because they are sensitive to the ways in which the firm is both a tribe, and a hierarchical tribe. Sure, when negotiating to enter the firm as an employee, the individual is free to do so or not depending on what is in their advantage. But once inside, the potential for mobility is less, and anyway the employee becomes part of an already-existing social structure that has norms of deference and of reciprocity. As Marx put it (anticipating Coase), inside the firm we leave the sphere of market freedom for the sphere of authority.

The consumption of labour-power is completed, as in the case of every other commodity, outside the limits of the market or of the sphere of circulation. Accompanied by Mr. Moneybags and by the possessor of labour-power, we therefore take leave for a time of this noisy sphere, where everything takes place on the surface and in view of all men, and follow them both into the hidden abode of production, on whose threshold there stares us in the face “No admittance except on business.” [....]

This sphere that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself. The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.

On leaving this sphere of simple circulation or of exchange of commodities, which furnishes the “Free-trader Vulgaris” with his views and ideas, and with the standard by which he judges a society based on capital and wages, we think we can perceive a change in the physiognomy of our dramatis personae. He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own hide to market and has nothing to expect but — a hiding. 

Social democrats and progressive liberals disagree with Marx that the wage labour relation is inherently exploitative. But they do agree that it is potentially so, and that the freedom of the employee to quit or never apply for a job in the first place does not fully answer Marx's point. On this, I think their intuition is the intuition of most people in democracies, including even the United States, and is backed up by the transaction cost economics that gives a better picture of industrial organization than Marx was capable of.

On the social-democratic view, the right of shareholders to a residual claim on the surplus of the firm is just one part of a complex social contract. It is legitimized (to the extent that it is) by corresponding rights and expectations in the workforce. In the United States, this critically includes a right to employer-paid health care. Of course, as an economic matter, this is part of total compensation and therefore reduces the amount of take-home wage the employee would otherwise get. So it is even more, a right of the employee.

Once seen as a right of an employee -- at least an employee in an enterprise that is not itself religious -- the question of religious freedom seems very different. No liberal has an objection to an employee who thinks the morning after pill is murder refusing to use the coverage. So the issue only comes up when the employee thinks she needs it, and does not believe that God has forbidden it (or, perhaps, has decided to act contrary to what she thinks is God's will -- itself a religious act). In that situation, it seems that the Greens are interfering with her exercise of conscience because they are taking from her (in this one area) a right that American society has considered belongs to the employee.

In short, for the purposes of exercising options on medical insurance, the corporation is the employee, and not the shareholder. So for that purpose, in the only case that would matter, Hobby Lobby Inc. either disbelieves or accepts the divine wrath associated with post-fertilization pre-implantation birth control. The shareholders have no more right to interfere with that decision than the government. 

Tough Guys Negotiate

Those who pay attention to the ephemera of the blogosphere know that Hillary Clinton has been attacking Barack Obama for being willing to meet with "America's enemies." Obama has cannily responded by pointing out that Clinton is just continuing the moronic identity politics of Dick Cheney. Negotiation is just communication with adversaries in non zero sum games. It is not a reward for virtue.

In light of this min-controversy and in service of my overweening ego, I have decided to republish a comment celebrating James Baker I left at Legal Fiction back when it was still active. Apologies for the macho sexism. It's in a good cause:

You know who's an actual tough right-wing-WASP-son-of-a-bitch unlike those faux macho warblogger dweebs? James Baker. That guy could make Dick Cheney his personal bitch anytime he wanted. When the family has a real problem -- an inconvenient body, a court-ordered recount or a no-win war, they call the Bakerman.

And the Bakerman has explained your point, well, Publius. Tough guys talk to their enemies. Every hardass litigator I ever knew loves the without-prejudice settlement discussion almost as much as making a witness cry in cross-examination. Tough guys love to negotiate because they love to explain calmly how solving their problem solves your problem.

Think tankers, interns and other luncheon attenders hate negotiating because they know they don't have the stones to do it.

What's Wrong With Inducing Breach of Contract? (2)

I see my fatwa against the tort of inducing breach of contract has not won universal acceptance. Obviously, if this state of affairs is allowed to continue, the terrorists will have won. In hopes of attaining greater oneness, I propose to do an "economic analysis" of the relative merits of a rule allowing parties to a contract to sue 3rd parties that interfere.

For those who did not have the benefit of a U of T legal education, and might be getting a bit nervous at this point, I should hasten to explain that an "economic analysis of law" does not require the use of calculus or graphs or the investigation of empirical reality in any way. That stuff is all really hard, and if we knew how to do it, we wouldn't have gone to law school. What we will do might better be called "intuitive cost-benefit analysis," but that doesn't sound as good. We take each rule (no liability for inducing breach of contract without the use of illegal means; liability for inducing breach of contract even if the means are not otherwise illegal) and add actual costs under each rule with incentive costs. Incentive costs will be taken as the value of the exchanges that would occur in a transaction-cost-free universe and those that actually occur in the world with these rules. Whichever rule has the lower total costs (determined by intuition and thought-experiment, naturally) wins.

In tribute to the pre-1985 DC Universe continuity, we will call the world with an inducing breach of contract tort in addition to an unlawful interference with contractual relations tort Earth 1. The Pithlord-preferred reality with just an unlawful interference tort will be Earth 2.

OK, let's get started. Suppose that on Earth 1 and Earth 2, all judgments can be enforced and legal process is costless and error free. (Also, Wonder Woman and Superman are married, and Lex Luthor is Clark Kent's best friend.) Assuming as well that a defendant in an inducing breach of contract action has a claim over against the actual contract-breaker, then Earth 1 and Earth 2 will be equally efficient. The incentives will be the same because anyone worried about being sued for IBC will know that they can always recover against the actual breaching party.[1] Let's suppose Batman agrees to sell the bat cave to Hawkman, and Green Lantern is thinking of making a better offer. On Earth 2, Hawkman couldn't sue Green Lantern, so Green Lantern's incentives won't be affected, but on Earth 1, Green Lantern will still know that if Hawkman ever sues him, Batman will indemnify him, so the rule will still have no effect on his behaviour. On the other hand, Batman won't break his deal unless he is willing to compensate

Making things a bit more realistic, let's say the legal process is somewhat costly and prone to the occasional error. (And Luthor is a Republican.) Earth 1 and Earth 2 still won't be that different. It would almost never pay Hawkman to sue Green Lantern in IBC because it will always be cheaper and easier to make a case against Batman, the breaching party. All Hawkman has to show against Batman is that he had a contract, that Batman didn't perform and that Hawkman has suffered damage as a result. Against Green Lantern, he has to prove all these things, and the other elements of inducing breach of contract, as well. Who needs the grief? But if no rational agent sues in IBC, then all rational agents know this, and the incentives don't change.[2] Some inefficient contractual breaches will occur when it just won't be worth the innocent party's while to expend litigation costs and take the risk of legal error. So some incentive costs will exist, but they won't be higher on either Earth.

The existence of a cause of action in Inducing Breach of Contract becomes important when its possible that some contract breachers will be judgment proof. If Green Lantern tempts Batman into breaching his contract with Hawkman, but the Wayne estate turns out to already be heavily leveraged and insolvent, then Hawkman could be out of luck if Batman was the only one he could sue. Green Lantern might be the only deep pocket left. So on Earth 1, alleged inducers will sometimes be sued.

Obviously, Earth 1, with the tort of inducing breach of contract, has higher litigation costs.

On Earth 2, all the incentive for controlling the risk that a party to a contract will not be able to pay damages in the event of breach will be on the other party to the contract. On Earth 1, that incentive will be lessened somewhat, but there will be an incentive for people who might be considered "inducers" to do the same. I think it's fair to say that due diligence/risk management costs will therefore be higher on Earth 1, leading to fewer otherwise-efficient transactions. This is especially the case because it is easier to define and control risk when you have a contract with someone. So, again, Earth 1 is a less efficient place.

There will be a greater deterrence of breaches of contract on Earth 1 than on Earth 2. This will be a good thing sometimes (since the existence of litigation costs and errors and judgment-proofedness means that some inefficient breaches will occur on both Earths), but not always (efficient breaches will be more thoroughly deterred). Because of risk aversion and legal error, some potentially valuable interaction between Green Lantern and Batman won't happen on Earth 1, even though it would not have led to breaches of contract. Let's call the incentive effects here a wash.

The result is that Earth 2, without a tort of inducing breach of contract, is closer to the Coasian ideal of efficiency than Earth 1, with such a tort.


[1] If there isn't a claim over, then the Earth 1 will just plain suck in commercial efficiency. The disincentive to engage in inefficient breaches of contract will be less than it should be since at least some plaintiffs will sue in IBC instead, leaving the breacher off the hook. Also, socially-beneficial activity that could be considered IBC will be deterred.

[2] The existence of legal error complicates things somewhat. If there is uncertainty about the outcome of Hawkman's case, both Batman and Green Lantern might be tempted to contribute towards a settlement for less than the full amount, providing Hawkman with an incentive to sue Green Lantern, and therefore affecting everyone's ex ante incentives.

Slobbiness as Fairness?

It is a fact* that women do more domestic work in heterosexual couples than their menfolk. Matthew Yglesias argues -- rather dangerously -- that this is not just exploitation: much of the effect can be explained by male tolerance for living in filth.

The result here actually shows that there are two different things happening here. One is that men and women have different ex ante levels of cleanliness. Single women do 10 hours of housework, whereas single men only do seven. A perfectly equitable division of labor, should result in a couple doing a combined seventeen hours and then splitting it evenly -- 8.5 hours each.

That, however, doesn't happen. Instead, you see male shirking to the tune of 3.5 hours -- cutting the male second shift down to five hours a week, and boosting the woman's up to 12 hours. But then women put three more hours of housework in per week. The effect of those three additional hours is to raise the couples' cleanliness standard up to the 10 hours per week per person maintained by single women.

Scott Lemieux puts an ostensibly feminist spin on this ancient male argument:

I continue to disagree with the implied solution of creating equality within domestic work norms that are an unholy marriage of 1)patriarchy, 2)the related assumption of one partner devoted full-time to domestic work, and 3)general cultural assumptions that unstructured leisure time is somehow immoral, and instead think that it makes more sense to try to achieve equality within a more rational allocation of priorities that doesn't take 50s-bourgeois standards of tedious domestic busywork as a given. An additional advantage of my idea is that I think gender equality will be much more viable if the total work is reduced.

I'd like to show some gender solidarity here, but I am afraid that I can't agree with the implicit normative premises either Matthew or Scott employs. If the position of our sex is to be vindicated at all, it must be on some other grounds.

I'll start with Scott's assertion that modal female norms of cleanliness are the product of patriarchal indoctrination. Now, the Pithlord is not in principle opposed to all arguments that depend on endogeneity of preferences or false consciousness. But I agree with Karl Popper and Jon Elster that such arguments require microfoundations. If the patriarchy acts, it acts through agents. And in my household, the only plausible agent of the patriarchy is me.

Now, in seven years of cohabitation/marriage, I can count the number of times I was the first to say, "Jeez, we'd better do something about the [vacuuming/ hamster cage/ bathroom." And even when I add the number of times my lovely wife said, "Let's leave that for now" I still get a number that children are expected to know if they want to graduate from kindergarten without being diagnosed with learning disabilities. On the other hand, if I add all the times that I have suggested that a lower standard might be appropriate to the complaints about our squalid living conditions from my life partner, I would get a number that would make Roger Penrose nervous.

So if average cleanliness (which we have occasionally achieved) is a patriarchal norm, it is being enforced by the feminist grad student and not the cranky Red Tory male lawyer.

Personally, I prefer a pop evolutionary psychology explanation to a social constructionist one. I think there's general agreement that in the Environment of Evolutionary Adaptation, women spent more time in high density settlements (at least by the standards of the day) and with poopy babies than did their more nomadic menfolk. Ceteis paribus, infectious disease was a bigger problem for women than for men. It is a quick theoretical line to the funky smell of the contemporary frathouse.

The best argument for a social constructionist approach is that the capacity of women of Scott and my generation (let alone Yglesias's) would cause their grandmothers heart attacks. (The same could be said of our grandfathers if they knew how bad we males are at fixing things.) No one keeps house like they used to. Two points. First, behaviour isn't just about preference -- its also about costs, including opportunity costs. The opportunity cost of time for women in our generation and social class is quite a bit higher than it was fifty years ago.

To the extent not only cost but preference has changed, I would say that this can be consistent with sociobiological theory. Our minds tend to define things relatively, not absolutely. It could always be the case that the average women would prefer a cleaner world, while learning to accept that it isn't going to be much cleaner than it is.

Further, and in any event, even if Scott is right that female preference for cleaner living conditions is the result of socialization by a sexist society, I don't think this has the normative implication that a greater degree of slovenliness than current heterosexual couples achieve would be more rational. On a purely instrumental view of reason -- which eschews evaluation of ends as opposed to cost-effectiveness of means -- each gender's preference is as rational as the other. As far as justice is concerned, preferences that derive from socialization are entitled to as much respect as those that come from biology. On a more pre-modern view of reason as encompassing pursuit of the Beautiful, the True and the Good, the estrogen-laden position seems to win on the first count.

It's true that a just solution might involve bargaining to a less clean solution than the female partner would prefer. But the disutility that creates for her should count in the balance just as much as the pain of extra work or lost leisure time.

Yglesias makes a still-more-subtle error. He tacitly takes it as just if the relationship leaves the woman no worse off than she would have been without it. If it would be OK with Pareto, it's OK with Matt. The trouble is he doesn't take into acount relational contract theory. Paretian optimality works as a criterion of justice for a one-off transaction: if both parties are better off and no one else is worse off, then we have as much justice as we're going to get in this vale of tears. But as Oliver Williamson or Dr. Phil could tell you, a relational contract involves investment in relationship-specific human capital. The mere fact that a party to such a contract would be better off sticking with it then exiting doesn't show that the contract is fair. So even if a woman would do about the same amount of housework if she were single, there is still the possibility of injustice if the male partner takes most of the economic surplus created by the relationship, even if there is sufficient surplus left over such that exit is not rational.

So just doing less housework or comparing women in couples to single women won't solve the problem of justice. But it could still be the case that at least some relationships in which women do more housework are just. Let us grant -- as I think Yglesias and Lemieux would in other contexts -- that a division of labour is not in itself unjust. The real issue is not whether each party gets the same specific benefits and burdens out of a relational contract (indeed, if that were the case, it is unlikely that the relational contract would exist in the first place), but that the sums of benefits and burdens be approximately equal. A traditional division of labour -- with the man in the coal mine and the woman doing domestic drudgery -- might fit the bill. The problem is the unequal distribution of unpaid labour when there are similar expectations of paid labour. (Even if there is fairness in the relationship, there may be unfairness in relationship breakdown if -- as is often the case -- the woman has paid for domestic work and childrearing by lost ability to earn income).

The trouble is distinguishing between division-of-labour as increasing the overall wellbeing of both parties and acting as a rationale for male exploitation. I don't have a solution to this, but I'm pretty sure putting women in charge of quality control is welfare-enhancing.



*The empirical facts in this post, such as they are, are British, but I'm sure that a bit of googling would show the same in Canada or the US. But I have to change the baby.