Archives For free to choose

“[N]or shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

These words from the U.S. Constitution’s Fourteenth Amendment lurk behind a great many news stories these days.  For the next two days, the U.S. Supreme Court will consider whether they guarantee a right to same-sex marriage (or, more narrowly, whether they preclude a state from banning gay marriage after it’s been permitted).  The Court will also consider whether similar words in the Fifth Amendment, which applies to the federal government, preclude Congress from denying same-sex married couples the rights that are available to other married couples under federal programs.  Just today, the Court announced that it will consider whether the words preclude a state, by referendum, from eliminating the use of affirmative action in higher education.

But do the words place any meaningful restrictions on regulations of purely economic activity?  For the last two-thirds of a century, most people have assumed they don’t.  Sure, economic regulations are officially subject to Fourteenth Amendment constraints.  But the “rational basis review” courts have applied in scrutinizing economic regulations has generally amounted to  a rule of per se validity.

As Alan Meese explains, a recent Fifth Circuit decision suggests that might be changing, if ever so slightly.  Conservatives may balk (e.g., “you can’t have Lochner without Roe!”), but, as Alan discusses, the Fifth Circuit’s scrutiny was far less stringent than that engaged in by the courts that struck down economic regulations in the so-called Lochner era.  As Chip Mellor and Jeff Rowes explain, it seems the Fifth Circuit was just doing its constitutionally assigned job here.

My paper with Judge Douglas H. Ginsburg (D.C. Circuit; NYU Law), Behavioral Law & Economics: Its Origins, Fatal Flaws, and Implications for Liberty, is posted to SSRN and now published in the Northwestern Law Review.

Here is the abstract:

Behavioral economics combines economics and psychology to produce a body of evidence that individual choice behavior departs from that predicted by neoclassical economics in a number of decision-making situations. Emerging close on the heels of behavioral economics over the past thirty years has been the “behavioral law and economics” movement and its philosophical foundation — so-called “libertarian paternalism.” Even the least paternalistic version of behavioral law and economics makes two central claims about government regulation of seemingly irrational behavior: (1) the behavioral regulatory approach, by manipulating the way in which choices are framed for consumers, will increase welfare as measured by each individual’s own preferences and (2) a central planner can and will implement the behavioral law and economics policy program in a manner that respects liberty and does not limit the choices available to individuals. This Article draws attention to the second and less scrutinized of the behaviorists’ claims, viz., that behavioral law and economics poses no significant threat to liberty and individual autonomy. The behaviorists’ libertarian claims fail on their own terms. So long as behavioral law and economics continues to ignore the value to economic welfare and individual liberty of leaving individuals the freedom to choose and hence to err in making important decisions, “libertarian paternalism” will not only fail to fulfill its promise of increasing welfare while doing no harm to liberty, it will pose a significant risk of reducing both.

Download here.

 

According to Senators Barbara Boxer, Jeanne Shaheen, and Patty Murray, the Catholic Church is the real bully in the fight over whether religious employers must include coverage for contraception in the insurance policies they offer their employees.  In yesterday’s Wall Street Journal, the three responded to, in their words, the “aggressive and misleading campaign” against this new Obamacare mandate.  They wrote:

Those now attacking the new health-coverage requirement claim that it is an assault on religious liberty, but the opposite is true.  Religious freedom means that Catholic women who want to follow their church’s doctrine can do so, avoiding the use of contraception in any form.  But the millions of American women who choose to use contraception should not be forced to follow religious doctrine, whether Catholic or non-Catholic.

The three Senators seem to believe that as long as the government doesn’t force Catholic women to use birth control and the morning after pill, religious liberty is protected.  They also believe that in praying to the Almighty One (not that Almighty One) for permission not to pay for a medical intervention that offends their deeply and sincerely held religious beliefs, Catholic officials are trying to force women to follow their religious doctrine.

That’s ridiculous, and it shows how desperate the defenders of President Obama’s intrusion on individual conscience have become.  In a world in which religious employers were exempt from paying for a measure that violates their sacred beliefs, any woman who didn’t share those beliefs would be perfectly free to obtain birth control.  The Catholic Church, after all, doesn’t have the power to overrule Griswold v. Connecticut.

By contrast, in the world of Mr. Obama’s contraception mandate, Catholic officials who choose to follow their consciences by refusing to subsidize interventions that violate their religious beliefs may ultimately be thrown in jail.  That, Honorable Senators, is a full-frontal assault on religious liberty.

[More on the deeply misguided contraception mandate here.]

A thought experiment:

It’s late January 2016.  Newt Gingrich is President.  The House of Representatives is solidly Republican, and there’s a slight Republican majority in the Senate.  Because Republicans lack a filibuster-proof majority in the Senate, the Affordable Care Act (a.k.a. Obamacare) remains on the books.  (The reconciliation process, which allowed the law to be enacted without supermajority support in the Senate, could not be used to repeal the law.)  The Act continues to require employer-provided insurance to provide full coverage for all preventive care measures.

Secretary Rick Santorum of the Department of Health and Human Services has determined that conversion therapy for gay males will help prevent all sorts of costly health problems.  HIV and related health problems, it seems, are extremely costly to treat and are far more common among gay men than among straight men.  HHS has determined that the most modern conversion therapies can cheaply and successfully alter sexual orientation or, at a minimum, reduce homosexual impulses so that they can be managed by homosexually oriented patients who would prefer not to engage in homosexual activity.

President Gingrich and Secretary Santorum have therefore mandated that employer-provided health insurance policies cover gay conversion therapies.  Claiming to be sensitive to the concerns of gay groups, they have included a narrow exemption for employers who don’t employ or serve significant numbers of straight people.  In reality, though, none of the major gay and lesbian advocacy groups (e.g., the Human Rights Campaign, GLAAD) or publishing organizations (e.g., The Advocate, OUT Magazine) could qualify for this exemption because all employ a great many gay-affirming straight people and include outreach to heterosexuals as one of their objectives.     

Can you imagine the howls from the New York Times, the television networks, and basically every other political commentator in America?  Andrew Sullivan might just explode.  And rightly so.  Forcing gay groups to pay for a procedure that so deeply offends their core principles would be beyond the pale in a liberal society that respects personal conscience and the right of individuals to associate in groups that share their values – a right that can exist only if groups are allowed to express those values and, to the extent they aren’t hurting others, order their affairs according to them.  

So why do President Obama and HHS Secretary Kathleen Sebelius get a pass when they order Catholic schools, hospitals, and social service agencies to cover birth control, sterilization, and the morning after pill?  The ridiculous “exemption” they created shows how little they know about what churches actually do:  Christ’s apostles themselves wouldn’t have qualified because they, like any church worth its salt, served multitudes of nonbelievers.  Providing an extra year to come into compliance does nothing to alleviate the fundamental problem (Is the doctrinal conflict going to disappear next year?) and is a transparent attempt to deflect media attention until after the 2012 election.  There are lots of Catholics in Ohio and Pennsylvania, after all.

One might say that my analogy fails because the science doesn’t show that gay conversion therapy actually works, and it therefore wouldn’t reduce total health care costs.  But that’s beside the point.  Even if there were a therapy that could cheaply and effectively make gay people straight (i.e., a pill or a quick surgical procedure) it would still be inappropriate to force groups whose central objective is to affirm gay people and fight anti-gay bias to provide coverage for such a therapy.

My point is not to defend the Catholic Church’s views on birth control (with which I disagree), to defend gay conversion therapy (which I think is a harmful crock), or to question the mission of gay rights organizations.  Instead, I mean to point out that governments in liberal societies do not force individuals or voluntary associations to violate their consciences where their conscience-following does not violate the rights of others.  Yet another example of Obamacare’s heavy hand.

Welcome Baby 7B!

Thom Lambert —  31 October 2011

According to the United Nations, sometime around Halloween a newborn baby will push the world’s population above seven billion people.  Welcome to our spectacular planet, Little One!

I should warn you that not everyone will greet your arrival as enthusiastically as I.  A great many smart folks on our planet—especially highly educated people in rich countries like my own—have fallen under the spell of this fellow named Malthus, who once warned that our planet was “overpopulated.”  Although Mr. Malthus’s ideas have been proven wrong time and again, his smart and influential disciples keep insisting that your arrival spells disaster, that this lonely planet just can’t support you. 

Now my own suspicion is that modern day Malthusians, who are smart enough to know that actual events have discredited their leader’s theories, continue to parrot Mr. Malthus’s ideas because they lend support to all manner of governmental intervention into private affairs.  (These smarty-pants Malthusians, who are well-aware of their own intelligence, tend to think they can arrange things better than the “men and women on the spot” and are constantly looking for reasons to go meddling in others’ business!)  Whatever their motivation, Mr. Malthus’s disciples just won’t shut up about how our planet is overpopulated.

You should know, though, that this simply isn’t true.  The first time you hear one of Mr. Malthus’s followers decrying your very existence by insisting that our planet is overpopulated, you should ask him or her:  “Overpopulated relative to what?”  Modern Malthusians can never give a good answer to that question, though they always try.

Sometimes they say “living space.”  But that’s plain silly.  Our planet is really pretty huge.  Indeed, if all seven billion people on the planet moved to the state ofAlaska, each person would have 2,300 square feet of living space!  Now I realize lots of cities get crowded, but that’s because people choose to live in those areas—they’ve decided that the benefits of enhanced economic opportunity in a densely populated area outweigh the costs of close confines.  If they really wanted extra living space, they could easily find it in our planet’s vast uninhabited (or sparsely inhabited) regions.

Sometimes modern day Malthusians say the planet is overpopulated relative to available food.  Wrong again.  In the nations of the world where institutions have evolved to allow people to profit from coming up with new ideas that enhance welfare, individuals have developed all sorts of ways to get more food from less land.  Accordingly, food production has always outpaced population growth.  Now, modern day Malthusians will probably tell you that food prices have been rising in recent years – a sign that food is getting scarcer relative to people’s demand for it.  But that’s because governments, beholden to powerful agricultural lobbyists, have been requiring that huge portions of agricultural output be diverted to fuel production even though the primary biofuel (ethanol) provides no environmental benefit.  As usual, it’s actually bad government policy, not population growth, that’s creating scarcity.

In recent days, Mr. Malthus’s disciples have insisted that the world is overpopulated relative to available resources.  Nothing new here.  Back in the 1970s, lots of smart folks contended that the earth was quickly running out of resources and that drastic measures were required to constrain continued population growth.  One of those smarty pants was Stanford University biologist Paul Ehrlich, who, along with his wife Anne and President Obama’s science czar John Holdren, asked (in all seriousness): “Why should the law not be able to prevent a person from having more than two children?”  (See Paul R. Ehrlich, Anne H. Ehrlich & John P. Holdren, Ecoscience 838 (1977).)  (Ehrlich also proclaimed, in his 1968 blockbuster The Population Bomb, that “The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.”)

In 1980, Prof. Ehrlich bet economist Julian Simon (a jolly fellow who would have welcomed your birth!) that the booming population would raise demand for resources so much that prices would skyrocket.  Mr. Simon thought otherwise and therefore allowed Prof. Ehrlich to pick five metals whose price he believed would rise over the next decade.  As it turns out, the five metals Prof. Ehrlich selected — chromium, copper, nickel, tin, and tungsten – fell in price as clever, profit-seeking humans discovered both how to extract more from the earth and how to substitute other, cheaper substances.  Mr. Simon was not at all surprised.  He recognized that the long-term price trend of most resources points downward, indicating that resources are becoming more plentiful, relative to human needs, over time.  (Modern Malthusians may point to some recent price trends showing rising prices for some resources, especially precious metals.  It’s likely, though, that those price increases are due to the fact that central banks all over the world have been creating lots and lots of money, thereby threatening inflation and causing investors to hold their wealth in the form of commodities.)

The fundamental mistake Mr. Malthus’s disciples make, Little One, is to assume that our planet is the ultimate source of resources.  That’s just not true.  Our planet does contain lots of useful “stuff,” but it’s human ingenuity – something only you and those like you can provide – that turns that stuff into “resources.”  Take oil, for instance.  For most of human history, messy crude oil was a source of annoyance for landowners.  It polluted their water and fouled their property.  But when whale oil prices started to rise in response to scarcity (or, put differently, when the world started to look “overpopulated” relative to whale oil), some clever, profit-seeking folks discovered how to turn that annoyance into kerosene, and eventually petroleum.  Voila!  A “resource” was created!

Just as people once worried about overpopulation relative to whale oil supplies, lots of folks now worry about overpopulation relative to crude oil.  Well I’m not that worried, and you shouldn’t be either.  As oil prices rise, more and more clever profit-seekers will turn their energies toward finding new ways to obtain oil (e.g., hydraulic facturing), new techniques for reducing oil requirements (e.g., enhanced efficiency), and new substitutes for oil (e.g., alternative fuels).  Mr. Malthus’s disciples will continue to fret about the limits to growth, but the historical record is clear on this one:  Human ingenuity – the ultimate resource – always outpaces the diminution in useful “stuff.”

And so, Little Resource, your arrival on our planet should be celebrated, not scorned!  As you and your fellow newborns flex your creative muscle, you’ll develop new sources of wealth for the world.  As you do so, birth rates will plummet, as they typically do when societies become wealthier, and the demand for a cleaner environment, demand that rises with wealth, will grow.  We therefore need not worry about “overpopulation.”

We do, though, need to ensure the survival of those institutions – property rights, free markets, the rule of law – that encourage resource-creating innovation.  I, for one, promise to do my best to defend those institutions so that you and your fellow newborns can add to our planet’s resource base.

Before concluding that “there ought to be a law” to remedy an unhappy situation, one should ask whether it’s really a law that’s causing the problem in the first place.  I was reminded of that principle this afternoon when I read some remarks by Michael Pollan, doyen of the “slow food” movement, in today’s New York Times Magazine.    

Responding to the question, “How can you tell if food is genetically engineered?,” Mr. Pollan answered:

You can’t, unless you’re willing to move to Europe or Japan, where the government requires that it be labeled.  Ours doesn’t, so there’s no way to tell.  This is despite the fact that 80 to 90 percent of Americans tell pollsters they want it labeled, and Barack Obama, as a candidate, once promised to make it happen.  But the industry is afraid you won’t buy genetically modified foods if they’re labeled – and they’re probably right.

Mr. Pollan is correct on a couple of matters here.  First, lots of people do want to know if they’re eating genetically modified food.  My own view is that this is silly.  Nearly all food products are, and for generations have been, “genetically modified” via hybridization, selective breeding, etc., and the scientific consensus is that there’s no increased risk when the modification occurs in a laboratory rather than the old-fashioned way.  Nevertheless, many consumers do care about whether their food is genetically modified in the newfangled manner, and who am I (or you, or the government) to tell them that their preferences are invalid.  Second, Mr. Pollan is correct in asserting that Big Ag doesn’t want to label GM food products, lest people refuse to buy them (or reduce the price they’re willing to pay for them).  Indeed, large agribusinesses have lobbied vociferously against mandatory GM labeling rules like those imposed in Europe and Japan.

But Mr. Pollan is wrong to insinuate that regulations mandating GM labeling are necessary if consumers are to know whether food products are genetically modified.  Given that a great many consumers disfavor genetic modification (of the newfangled variety, at least), one would expect entrepreneurs to produce non-GM foods and to tout the pedigree of their products.  By engaging in “voluntary negative” labeling (e.g., “GM Free”), producers could boost demand for their products and provide consumers with useful information about GM status.  Just as mandatory labeling of “Gentile” food isn’t necessary to enable observant Jews to fulfill their preferences for kosher options, the government need not mandate GM labeling in order to protect the interests of GM-phobes.

This assumes, though, that producers of non-GM products, like producers of kosher foods, are free to label their products as such.  Unfortunately for consumers who would prefer to avoid newfangled genetic modification (the old-fashioned type is ubiquitous and unavoidable), current regulations hinder the sort of voluntary negative labeling that could accommodate heterogeneous preferences.  Under an FDA Industry Guidance ostensibly aimed at fraud prevention (and drafted with significant input from Monsanto), sellers of non-GM foods are precluded from:

  1. Using acronyms such as “GM” or “GMO” (according to FDA, saying something is “non-GM” or “non-GMO” is misleading because people don’t understand these acronyms);
  2. Utilizing the term “genetically modified” (according to FDA, saying that a non-gene-transferred organism is not genetically modified is misleading because nearly all foods have been genetically modified through cross-breeding);
  3. Referring to “organisms” or “GMOs” (according to FDA, a food label touting the absence of GMOs is misleading because it implies that foods which are not GMO-free contain “organisms” — that is, living things);
  4. Claiming to be GMO “free” (according to FDA, a claim that a product is GM “free” implies a complete absence of GM material, and it’s very difficult to ensure that there are no trace amounts of GM material in a food item); and
  5. Asserting any implication of superiority (according to FDA, any label that implies that the food product is superior because it lacks GM material misleadingly implies that non-GM is superior).

In light of this guidance from a captured regulatory agency, sellers of non-GM foods are essentially forced to label their products as though they were playing the board game “Taboo,” in which players provide clues to their partners to identify a word but, in doing so, are forbidden to say any of the words one would most naturally use in conveying clues.  Given the laundry list of terms the FDA has declared to be “taboo,” it should not be surprising that producers of non-GM products have not been able to market their products effectively.  And if you can’t market them, why produce them in the first place?

At the end of the day, then, Mr. Pollan is wrong to place the blame for consumer ignorance of GM-status on governmental inaction.  It is affirmative government regulation – not its absence – that precludes consumers from telling if their food is genetically engineered.

Geoffrey A. Manne is Executive Director of the International Center for Law & Economics and Lecturer in Law at Lewis & Clark Law School

The problem with behavioral law and economics (and its behavioral economics cousin) is not that it has nothing interesting to say, but rather that the interesting things it has to say do not mean what its proponents think they mean.  It is one thing to claim that people are less rational than we thought.  It even one thing to claim that people are systematically less rational than we thought, in predictable and important ways.  But it is entirely another to presume that the implication of this is a larger scope for government regulation to protect the market and market actors from the depredations of this irrationality.

Why?  Well, the market, of course.  Just because individuals may be less-rational than we thought does not mean that the complex and nuanced activities of markets can’t account for these deviations (particularly if they are predictable).  Add to this well-canvassed problems like government actors subject to the same biases, the problem of competing and conflicting biases, and the problem of unacknowledged, contrary implications, and the case for doing anything about behavioral quirks is extremely weak.

Thus, for example, let’s grant that, as many behavioralists aver, hyperbolic discounting exists.  Um, so, if that’s right, what should we do about it?  Force everyone to save more of their paychecks for retirement?  Insist on opt-out rather than opt-in retirement investing?  Ban cigarettes? Raise tax rates? (I don’t know if anyone has argued this one yet, but it seems like a plausible implication, and it’s only a matter of time)

Here’s the problem, as I see it:  Let’s say the behavioralists are right that, in the abstract, people save less money for future consumption than they would like.  Richard Thaler’s solution to this problem is the “Save More Tomorrow plan (pdf),” which takes advantage of people’s alleged current hyperbolic discounting to commit them to future savings that they actually want but can’t otherwise adhere to when the future actually arrives.  This is a “libertarian paternalist” (pdf) solution to the problem.

But there is a problem, even with a libertarian brand of paternalism here. Continue Reading…