Low Corruption Derives From Weird Extended Family Norms

Yglesias correctly argues that the social-democratic Nordic/libertarian Anglophone dichotomy is less important than what the two types of cultures have in common (relatively low corruption and good governance, lack of loyalty to extended family):

I’ve been drawn to the “common cultural attributes” thesis just based on the observation that Nordic pop culture (Max Martin, Stieg Larsson, Ida Maria, Robyn) penetrates the Anglosphere very easily and has done so for a long time (Abba, Aha, Ibsen). It still strikes me that the most plausible mechanism here has to do with corruption and good government rather than individualism per se. I imagine that everyone looks out for his or her own interests, but the question becomes what does that balance with. If you balance it with fairly abstract principles of correct conduct, you get good government and enlightened self-interest. If you balance it with loyalty to extended family groups or long chains of personal connections, then you get corruption.

But that’s just ideas I made up.

Yglesias could read the very unfashionable Frederic W. Maitland. The Teutonic cultures all shared a weird set of inheritance structures, in which both collateral maternal kin and paternal kin could inherit. Lots of stuff follows from that.

Why Cap-and-Trade Schemes Ought to be Giveaways to Business

Megan McArdle thinks that, morally, we should allocate rights to pollute under a cap-and-trade system by auction, rather than by giving the rights proportionately to those who are already emitting. However, she thinks giving the rights to incumbents makes sense politically.

I disagree about the moral case. "Prior in claim is prior in right" is a precept every legal system uses. By hypothesis, the incumbents had every right to emit prior to the cap-and-trade being put in place, and they made investment decisions in reliance. Allocating a valuable cap-and-trade permit is just providing compensation for an expropriation for public benefit, in just the same way that making private land with an endangered species into a park calls for a cash payment for the value of the land.

Also, from a social-democratic perspective, an auction would probably have the features of a regressive tax. There is no clear distributional impact of giving incumbents tradeable rights to emit.

The one downside is that if you allocated rights to emit to incumbents, and everyone knew that's what you were going to do, then you would create an incentive to increase emissions now. So you should use some past year before the cap-and-trade scheme was seriously contemplated.

Update: That commie Greg Mankiw disagrees.

Xeni, I Shrunk the Province?

Just when I thought I was out, I get rumblings that some out there would be interested in the Pithlord's take on the Mr. Justice Vickers decision in Tsilhqot'in Nation v. British Columbia. (Warning: Large PDF file. May result in 2% of British Columbia's population owning 98% of its landmass)

I hate to disappoint the fans, but the Pithlord has not read it. This is partly because life is short, and partly because they changed the citation after I figured out that "Xeni'Gwetin" is pronounced "hun-EE-Gwuh-TEEN". But it's mostly because I think Beverley is going to decide this one and not some failed NDP leadership candidate-cum-trial judge, "non-appeallable advisory judgment" or no. And I think she's figured out what she is going to do.

Marshall #2 tells us that aboriginal title requires possession in more-or-less the same sense in which the English law required possession. Nomadic groups only possessed village and burial sites in this way. So aboriginal title will not, in the end, extend much beyond the current reserve boundaries.

Aboriginal hunting, fishing and other "usufructuary" rights, on the other hand, will probably extend to the whole province. The forests of BC will continue to be Crown land, but aboriginal groups will get a veto on any further development. That will mean they will have to get a royalty check, but it won't change much else. The Coase theorem will win in the end, as it always does.

Update: Commenter "sacmano" objects to my use of the term "nomadic". I withdraw it. "Nomadic" is a bad description for Coast Indians. However, the principal point is that there is a distinction between hunting/gathering territories and winter village sites, burial sites and the like. I believe McLachlin CJC thinks she can solve the BC land question with a narrow reading of *title* combined with a broad reading of site-specific rights. So title will be found to no more than 2% of the Province, but rights may be found over all of it (or all of the parts anyone would want to live in, anyway).

So even in the example of vary specific fisheries, those won't be found to be the basis for title.

This is just as well. The "lock, stock and barrel" view that aboriginal people own everything not covered by treaty (which means small parts of Vancouver Island, and the Northeast corner east of the Rockies and nothing else) would just precipitate a constitutional crisis. The overwhelming majority of the people of BC would never stand for it, and you'd have premiers quoting Andrew Jackson. It would also be a gross injustice for Ontarians to assauge their guilty conscience by expropriating everyone west of the Rockies. McLachlin knows this and she isn't going to let it happen.

Epstein's Takings (3)

Epstein's foray into political theory at the beginning of his book ends badly. There is nothing appealing about the principle "From each according to his ability to each according to how well he would do in the general prison population." So why did his book cause such a stir? What is there in it that those outside the libertarian ghetto are required to take seriously?

Epstein's great achievement arises out of his ability to use the master's tools to dismantle the master's house (or at least pay the previous owner for it). Epstein takes the intellectual basis for the decline in constitutional respect for property rights in the Progressive Era and the New Deal -- what we could call the "modernist" view of property -- and turns it into a sweeping takings doctrine far more extensive than a conservative, formalist nineteenth century judge would have imagined.

Naively, we tend to think of property as things or land. We may know that there is a species of "intellectual property", but it doesn't quite seem real, which may be why there are far fewer social sanctions for ignoring it. Locke and Blackstone had a more sophisticated view, but they emphasized the naturalness and unity of property. The acquisition, use and disposition of property is pre-political and distinct from coercion. The question of what rights property gives is logically prior to the remedies that the legal system might provide when those rights are violated. Locke and Blackston'es view is a natural fit both with the naive views of non-lawyers and with classical liberalism/libertarianism.

The modernist "bundle-of-sticks" view, on the other hand, was developed by people who thought nineteenth century liberalism was holding back progress. Painting with a broad brush, it holds:

*Remedies define entitlements. In other words, having a property right just is being able to go to court and get an injunction or damages in certain circumstances. As a result, property rights cannot be contrasted with state coercion -- they just are (regularized) state coercion. The distinction between private law and public law breaks down.

*Relatedly, tort and criminal law don't protect things because they are property -- they are property because tort and criminal law protect them. It isn't a trespass because it is an invasion or a nuisance because it is an interference: it's an invasion because it's a trespass and an interference because it's a nuisance.

*While it is perfectly possible for rights of possesion, use and disposition (the ability to sell or give) to belong to a single person, there is no necessity that this be so. Use and disposition rights can be limited and/or divided.

*Contrary to Locke, there is no natural mode of property acquisition. If property is transferred, then it must be in accordance with the rights of disposition that the transferor held (which have already been said to be conventional and mutable). And if property is originally acquired, it must be in accordance with some pre-existing rule. First possession isn't the only such rule.

In general, this modernist conception was used to break down classical liberal ideas and institutions. If both public law and private law are coercive, then the only issue seems to be what will provide the best result for the public as a whole.

Epstein takes ahold of this modernist conception and uses it to reestablish a strict classical liberalism. If property is a bundle, then the removal of any stick becomes a taking. There is no principled difference betwen a tax, a zoning by-law, a change in tort law rules and the occupation of a lot for a post office. If the legislature says that farmland can no longer be developed as anything else, the state now has a restrictive covenant that a neighbour would have to pay for. The value of mere regulation may be less, but it may not.

Moreover, Epstein justifies this rule in consequentialist terms. As David Suzuki will tell you, the way to get firms to respect the environment is to make them pay for environmental harm. If they do that, they will have to internalize the otherwise external environmental costs in their own decision making. Epstein's point is that the same goes for governments. If they don't have to (somehow) compensate those affected by their decisions, their incentives will be all screwed up. Something with overall negative consequences will make sense to the government so long as the losers have less political clout than the winners.

Epstein has no trouble showing the coherence of his approach and the intrinsic difficulties of traditional attempts to make distinctions between "mere" regulation and true takings. The problem is that his approach seems to go too far, and potentially make even positive-sum governmental activity impossible. My next post will try to evaluate how he addresses this.

The Politics of Property Rights

If Harper were to take it up, how would strengthening the Bill of Rights' property rights provisions play out?

David Cheifetz is skeptical:

The Trogs are going to have a big problem beefing up the property rights portions for the Bill of Rights for the same reasons the attempts to add those protections failed in the Charter run-up. You're also right, I think, that it would divide the Grits.

But, and here's the big big but: there's a real "be careful what you wish for" danger for the Trogs in what you're proposing. My suspicion is that the attempt might "unite the left" and the traditional centre. That's still a bigger voting group that the Tory core and the newly successful entrepeneurial immigrant core.

My sense is that the political context has changed since 1982. The economic left has been in retreat for that entire time: lots of serious people announced they wee socialists twenty five years ago. More importantly, the PCs were fighting on two fronts at the time. The cause of parliamentary supremacy being lost, property rights would no longer be divisive on the right.

Also, I don't think this would be as unifying for the centre-left as all that. There are arguments against entrenched or semi-entrenched property rights, of course, but they aren't easy ones to articulate in a politically compelling way. A parade of Lochner-style horribles can be met by incredulity that the Canadian courts would ever countenance such things. If the opponents of property rights expresses distrust in the courts, they can be met by questioning their Canadianness. The Pope is only infallible when speaking ex cathedra on matters of faith and morals: the Supreme Court is infallible on everything. If you allow the possibility that the courts might err, what would come next? You'll be denying that Tommy Douglas introduced medicare or that Justin Trudeau has a three digit IQ! If the critic persists, then "that's what the override is there for, man" should work.

The most appealing reason to do this is that it would appeal to the key constituency Harper has been trying to attract: "market dominant minority" immigrant communities. If your experience consists in being expropriated by envious majorities, then this could be the symbolic issue to shake you from your historic attachment to the Liberals. Alternatively, enough Liberals will realize this to support the government, in which case it works for Harper as well.

Why Property Rights?

In response to my proposal to put strong protections for property rights and economic liberties in the Diefenbaker Bill of Rights, BKN asks a question that deserves another post:

What is the problem (beyond closing the barn door after the F*ck You Vets Act has bolted) that your proposed amendment is meant to solve?

There are two ways of interpreting "problem." The first is what problem facing Stephen Harper would merit taking on a project like this. I don't think that's what BKN means, but I hope to post on it next.

The other interpretation is what social mischief, as seen from the disinterested and Olympian perspective of the Pithlord, could be avoided? That's what I'll talk about right now.

There are two things going on in my mind. The first is a suspicion that the F*ck You Vets Act isn't totally isolated. The sovereignty of the legislature is a mighty club, and sometimes it is used to create individual injustices. So far, everyone seems to recognize the FYVA as one of these. It would be nice if there were a way that judges could do the right thing and just invalidate the sucker. The state gets its chance to make the public spirited case for what it is doing under s. 1. If it still disagrees when the SCC rules, Parliament can use the notwithstanding clause. So there's something to be said on that naive level.

But the second thought is more systemic. Security of property and freedom of contract have well-understood benefits, and make for good default rules for a liberal society. If we are going to take from somebody's private holdings and put it in to the public pool, then the cost should be borne by the whole community, not just by the private holder. Countries where this isn't the case develop parasitic states and strangle development. Ethiopia is an example I'm semi-familiar with. British Columbia in the 1990s is a less extreme example.

Governments can always compensate. Sometimes they don't want to because it would be too costly to do that. But that just means that the true social costs aren't showing up in the budget. The government uses the law-making power to do what it doesn't want to through the tax spending power not because it is more efficient, but because it is less transparent.

The risk of taking-by-regulation, like all risks, gets monetized in investment decisions. Capital requires a bigger expected profit than it otherwise would, which means that there are losses on the other side of the capital-labour transaction.

Granted that there have to be limits to a system of private property and free exchange. The institutional question is whether it is a good idea to require the state to justify those limits in court, subject to an exceptional non obstante power, or just to rely on the political process to keep the state from going too far?

As we've seen with the Charter, the non obstante doesn't answer the whole problem of judicial overreach -- at least not if it is going to remain exceptional (and if it isn't, then the whole process becomes meaningless). There are going to be costs of courts striking down beneficial legislation.

On the other hand, the existence of a property rights-guarantee will make governments think more about what they are doing and who is being affected. If they know they are going to have to justify what they are doing, they are going to have to figure out what the justifications are, and whether they could achieve their purposes less intrusively or with compensation to targeted losers.

I am sure that the judiciary would dismiss claims that represent a fullscale attack on the mixed economy or welfare state. On balance, I think that state would become smarter and less intrusive on the margins. I suppose I could be wrong, but this is a statutory instrument and there is an override.

Mr. Harper, Strengthen the Diefenbaker Bill of Rights!

Russ Brown blogs about the Ontario Court of Appeal's decision in Authorson #2. In a nutshell, the federal government screwed over some war veterans by not investing their pensions so that they got no interest. The pensioners eventually found out and threatened to sue. The government then enacted the F--k You Veterans Act,* which provided that the federal government would pay no compensation whatever for its screw up and the veterans would get no interest.

The Charter of Rights provides no protection for property rights. However, there is another quasi-constitutional document binding on the federal government, the Diefenbaker Bill of Rights. Section 1(a) recognizes and affirms "the right of the individual to life, liberty, security of the person and enjoyment of property, and the right not to be deprived thereof except by due process of law." The pensioners tried to argue that the depriviation of their right to compensation offended this section. They lost at the Supreme Court of Canada. Any act of Parliament, by definition, complies with "due process of law."

Russ Brown's comment relates to the aftermath of the SCC decision. Amazingly, an Ontario superior court judge allowed the pensioners to bring an identical lawsuit to the one that had been dismissed. As Brown notes, this is contrary to our system of court hierarchy, and pretending otherwise doesn't really do the pensioners any good.

But the larger, political question is why there hasn't been a bigger backlash against the SCC decsion, comparable to that after the Supreme Court of the United States upheld the expropriation (with compensation) of someone's home for an "integrated development plan" in Kelo. The situation of the veterans seems more outrageous. While the SCC's decision was consistent with the anemic manner in which the Bill of Rights has been interpreted historically, it would have driven Mr. Diefenbaker himself to paroxysms of indignation.

The Bill of Rights is a statutory instrument, and it could be rewritten by a majority in Parliament. The Harper Conservatives could sensibly make it a priority. The key would be to include language that parallels that in the Charter, thereby importing the stronger tests for the protection of property rights. I've made an attempt at drafting below:

1. The Canadian Bill of Rights guarantees the rights and provides for the obligations set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society with a market economy.

Economic Rights and Responsibilities

2. Every person has the right:

(a) To lawfully acquire, use and dispose of private property without unreasonable interference.
(b) To enter into contracts with other willing persons and to have those contracts respected.
(c) To practice any trade or profession.
(d) To associate with other persons for the purposes of commerce or labour relations.

3. The Government must not:

(a) Deprive any person of property except for public use and with full compensation, or for an offence prescribed by law as determined by an unbiased tribunal after a fair hearing.
(b) Interfere with an existing civil right or obligation, including a right or obligation under a contract or collective agreement, except for a public purpose and with full compensation.
(c) Discriminate in the awarding of public employment or contracts on any basis other than obtaining value for the public, and in particular, on the basis of residence or any ground of discrimination prohibited under s. 15 of the Canadian Charter of Rights and Freedoms.
(d) Enact a retroactive law, except a tax measure retroactive to the beginning of the taxation year on which it is introduced.

4. (a)Parliament may expressly declare in an Act of Parliament that the Act shall operate notwithstanding a provision included in this Bill.
(b) An Act or a provision of an Act in respect of which a declaration made under this section is in effect shall have such operation as it would have but for the provision of this Bill referred to in the declaration.
(c) A declaration made under subsection (a) shall cease to have effect five years after it comes into force or on such earlier date as may be specified in the declaration.
(d) Parliament or the legislature of a province may re-enact a declaration made under subsection (a).
(e) Subsection (c) applies in respect of a re-enactment made under subsection (d).

*Actual name of statute may differ. Image of J.G. Diefenbaker CP Staff Photo.

Epstein's Takings (2)

Takings mostly sets out Epstein's alternative constitutional property rights doctrine, but it starts and ends with more philosophical musings. The worst part (unfortuantely) is right at the beginning. Epstein identifies what I would consider the least.persuasive.normative.principle ever.

Following Hobbes and Locke, he says the state is justified because -- without it -- we would be in a state of war-of-all-against-all. We're better off in a regime of civil peace. Nothing new there. Epstein gets original when he claims that the surplus caused by going from anarchy to order should be distribute proportionately to the holdings people would have under anarchy:

What can the state demand of the individual citizen whom it both governs and represents? The simplest way to present the problem is to draw two pies...

The first of these pies represents the situation in a world without effecitve government control. Each individual is endowed (according to the natural rights tradition) with certain individual rights. Yet the value of these rights in a state of nature is low because some individuals continually try to take that which by right belongs to others...

The larger pie indicates the gains that are possible from poltical orgainzation. The outer ring represents the total social gains, while the divided lines indicate the proportion of the gain received by each individual member. The implicit normative limit upon the use of political power is that it should preserve the relative entitlements among the members of the group, both in the formation of the social order and in its operation.

In other words if the ratio of the value of a person's entitlements under political organization to the value of their entitlements under a Hobbesian state of nature should be constant. The better off you would do in civil disorder, the better off you should do in a world with government.

There are multiple objections to this principle. It wouldn't be true of a libertarian night watchman state, since that kind of state would put a premium on entrepenurial talent, as opposed to the ability to use weaponry and motivate teenage thugs, which would be more useful in civil disorder. Not that this is an objection to the night watchman state -- the principle itself is just nuts.

If Epstein's book stayed this silly, it wouldn't be worth reviewing. But when Epstein turns to legal doctrine, he grabs ahold of a crucial difficulty with the post-New Deal understanding of property rights...

A Belated Review of Epstein's Takings (1)

A couple months ago, I decided to order Richard Epstein's Takings: Private Property and the Power of Eminent Domain, possibly the most important libertarian work of legal theory of the last twenty-five years. Epstein meditates on the Fifth Amendment's "nor shall private property be taken for public use, without just compensation" (the "takings clause"). He rejects the limited reading that American courts (including conservative judges like Rehnquist and Scalia) have given to this clause since the New Deal. In the end, he decides that the US Constitution prohibits most of what the government currently does, including progressive taxation and welfare, although he allows for a bigger role than more stringent libertarians might.

Unfortunately, the radical conclusions may have had counter-productive effects on the protection of property rights. Behind every leftist attack on the legal dimensions of NAFTA and other investment treaties, or on the entrenchment of property rights, and behind a lot of judicial nervousness, is the feeling that if property rights are real, Epstein's conclusions might follow. During his confirmation hearings and before "Long Dong Silver," Jospeh Biden tried to get Clarence Thomas to renounce any support of Epstein's book. One of the criticisms levelled at Janice Rogers Brown when she was considered for a nomination to the federal judiciary by Bush was that she had cited Epstein favourably in a case -- even though she cited him for examples of non-takings, which is rhetorically equivalent to citing Catherine Mackinnon for pickup lines that aren't sexual harrassment.

I am going to break up this review into a number of posts. The next one will explain Epstein's system and why it is (somewhat) redundant.