Tuesday, April 26, 2016

Immoral Laws And Regulations

     Jeff Carter at Points and Figures makes a strong case for deliberately disobeying them:

     Regulations aren’t what you assume. Economic Nobel Prize winning Chicago Booth Professor George Stigler found, many times regulations aren’t written to protect innocent people. They are written to provide a regulatory barrier for the corporations that endorse them. I think this is especially topical today as we see politicians rail against special interests.

     Stigler uses a simple model of regulation: A regulator faces special interest pressure from producers and electoral pressure from consumers. The special interest pressure is always more “persuasive,” so producers always win. Regulations are passed only for the benefit of large firms, not for the benefit or protection of consumers.

     Are these regulations that are passed “moral” any more than Jim Crow laws passed after the Civil War?

     Stigler did, indeed, demonstrate that regulatory bodies are routinely captured – i.e., their operation is bent toward the protection of the supposedly regulated companies – by the largest and strongest players in the regulated sector. However, the mechanism to which Carter alludes is a step more complicated than he makes it appear.

     The trick lies in “reasonable and proper” enabling legislation. Most regulatory enabling bills leave a large amount of discretion in the hands of the regulators. In effect, the regulators will write the “working parts” of the law. That makes the regulatory body a target. Those who most want to control commerce in that sector will have the strongest incentives to influence it. Those are, of course, the managements of the companies in that sector – and in the usual case, the way lies open to them.

     The adit exists because of the regulatory body’s need for “subject experts.” Such experts are more likely to be found in the existing companies to be regulated than anywhere else...and of course, they’re highly likely to “advise” the regulators in a fashion that would benefit their employers.

     Such benefits can be of several kinds. One variety is the requirement that products sold in that sector must incorporate features that the existing players control, perhaps by patent. Another is the imposition of mandatory liability provisions: i.e., large escrow accounts from which judgments against the product would (notionally) be paid. A third is the creation of a regulatory maze or process that favors high-volume sellers, such that startups in that sector would be unable to afford an adequate compliance department. There are others.

     The net result is invariably a tailwind for the existing players and a headwind – often a prohibitive one – for anyone else. Thus can supposedly well meaning, “consumer oriented” regulation become a shield for a de facto cartel, by indirectly foreclosing competition from newer or smaller organizations.


     As soon as government management begins it upsets the natural equilibrium of industrial relations, and each interference requires further bureaucratic control until the end is the tyranny of the totalitarian state. – Adam Smith
     Government has always exercised the right of universal interference, and nobody ever questioned its right to do so. – Herbert Spencer
     The state seeks to hinder every free activity by its censorship, its supervision, its police, and holds this hindering to be it duty, because it is in truth a duty of self-preservation. – Max Stirner

     Regulation of industry and commerce under color of law is, in Adam Smith’s terms, government management of industry. It is an intrusion into the private affairs of supposedly free men. If it were viewed in the same light as the regulation of land use – i.e., the curtailment or removal of the property rights pertaining to a tract of land – it would be too obviously a taking, for which “just compensation” must be paid. Needless to say, such compensation is never offered.

     Though it’s a longstanding principle of American law that a government may not interfere with a man’s livelihood, if it’s lawful under the penal law, that principle has been vitiated by the application of regulation. Carter mentions licensure in this connection, which is the most obvious case. Licensure has been described as “government taking away your rights and offering to sell them back to you.” In some cases, the State refuses to return those rights for any price.

     A great deal has been said and written in this connection about the Food and Drug Administration’s effectively absolute power to inhibit the production and sale of particular drugs. Many cases of sufferers at the edge of death pleading for access to as yet unapproved drugs have appeared in the media. The excellent movie Dallas Buyers Club, which featured Oscar-winning performances by Matthew McConaughey and Jared Leto, tells of a real-life workaround Ron Woodroof employed to acquire and distribute unapproved drugs for the treatment of AIDS. However, such workarounds are not always possible.

     Would anyone care to argue for the proposition that denying a dying patient access to any possible hope – effectively denying him the right to try to sustain his own life by his own decisions and efforts – is a legitimate, moral function of government?


     Some of the above would horrify even the most enthusiastic promoters of the Omnipotent State. They agree on how deplorable it is...just before they present their “but” arguments. In the usual case, their minds are closed to the moral argument, because it would undermine their assumption of moral and intellectual superiority. They have an infinite supply of “buts,” and will change the subject in ways both blatant and subtle, to avoid grappling with the horror. As there is no persuading them, there’s no use arguing with them.

     When argument is useless, there remains defiance. However, defiance puts one on a different scale: one that balances possible benefits against possible government vengeance. Ron Woodroof defied the FDA, and eventually the entire edifice of the federal government, because his life was at stake: He had nothing to lose. Few of us, and approximately none of our business enterprises, would be willing to make that bet.

     In conclusion: Yes, it is morally acceptable, and in some cases morally obligatory, to defy the State by violating an unjust law. How often a man or an organization will find the spine for such defiance is an entirely separate and much more challenging question.

1 comment:

  1. My daddy wanted me to become a lawyer... he said that's the only way I might protect myself from other lawyers.

    ReplyDelete

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