From the comments: follow on effects of liability rules?

Far be it from me to to tell anyone how to think, or what a word belonging to everyone really means. But I’m going to quickly indulge in a No True Scotsman-ism. Libertarianism means being skeptical of power. (I recently saw a great line on libertarians that needs sharing: “…every libertarian agrees on two things: that there’s only one libertarian and it’s them.”)

So I’m optimistic to see reductions in the amount of power government agents can exercise. I’m particularly optimistic to see changes that don’t take the form of “we’re going to manage that bit of power over there with a new bit of power over here” (i.e. regulation). A very short term version of such a change happened when Buffalo’s police union announced they wouldn’t cover the legal fees of their riot squad.

My enthusiasm was followed by the right question in the comments: “If this obtains, what is the likely effect upon the lives and property of Buffalo dwellers?”

In principle, we could dig into this question empirically, but not until we’ve got decent data with variation in the liability rules governing police behaviors. In the mean time…

Let’s break the question down: What are the average effects and how will those effects differ between different parts of Buffalo? What will be the effects on violent crime? What will be the effects on property crime? And how will those effects affect property values?

The most obvious and immediate change will be a reduction in police use of force. As we’ve seen, at least some of that force is used criminally. This change in the rules means reducing the likelihood of another Gugino incident. Which means a reduced likelihood of pulling resources away from productive uses to cover all the various costs involved in such incidents–the medical care and suffering, the resources surrounding arresting the perpetrators and keeping them safe should they end up incarcerated, the legal fees, etc. All else equal (i.e. ignoring secondary effects), this is equivalent to raising the cost of breaking windows–bad for the glazier, but more than offset to window owners.

Of course, the real question is about the impact of reducing the non-criminal use of force by police. The Buffalo experiment looks to be short-term and restricted to the riot squad, so we won’t be able to draw any conclusions from this (except, of course, that it confirms my priors and you’re looking at things the wrong way if you disagree with me. </s>)

The more interesting question is how extending this liability issue–i.e. curtailing qualified immunity–would affect the long run equilibrium? That outcome would eventually be capitalized into the prices of real estate. Safer neighborhoods will have higher property values.

Here’s my prediction: property values will increase in poor and non-white neighborhoods relative to wealthier and whiter neighborhoods.

Some caveats are in order:

  • I suspect that in most American cities poor neighborhoods are under-served by the police, so reduced legitimate police force will have minimal impact.
  • I also suspect (hopefully someone will share some helpful resources in the comments) that illegitimate police force is mostly concentrated in poor neighborhoods.
  • Wealthy neighborhoods might see some increased crime from reduced legitimate police force, but I’m doubtful. I think more likely the impact will be more like the effects of price discrimination–why pay more if the alternative isn’t terrible? To the extent poor neighborhoods get less terrible, the relative draw of rich neighborhoods will decreases.
  • There are any number of other changes coming down the pipeline that will make it difficult to disentangle the effects of qualified immunity holding all else equal.
  • To the extent we see a general improvement in the quality of policing (more ‘serve & protect’ and less cracking skulls) we should see an increase in property values across the board.
  • White flight is likely to happen which will bias results towards my conclusions. I want my hypothesis to be interpreted holding white flight constant.
  • The effects will go beyond just real estate price. I would expect something like this: for every $1 price reduction in rich neighborhoods, there will be <$1 price increase in poor neighborhoods, but the gap will be made up in other quality-of-life changes such as reduced chance of incarceration for victimless crimes, fewer hours of work missed, fewer injuries at the hands of police, etc.
  • I hope that these quality of life changes will make empirical analysis even more difficult as other follow on effects extend the time horizon of people in poor neighborhoods–e.g. if fewer people are sent to jail, that could lead to fewer young men getting involved in crime leading to entrepreneurs being more willing to invest in their communities.

My predictions are absolutely shaded by my ideological biases. And there’s no getting around how complicated these changes are (hopefully) going to be. But I feel confident predicting an implicit shift of wealth from the paranoid wealthy to the disenfranchised.

Is there anyone here who disagrees enough to help me clarify my thinking by putting money on it?

Legal silences

In law, there are different silences.

When lawmakers set out to establish legal standards, they inevitably don’t address every contingency. There are spaces for flexibility, for breadth of application, for unforeseen developments, for the careful discretion required for sound law enforcement. There are always gaps.

Yet the gaps raise serious questions. Foremost among these is the problem of delegated lawmaking power. The United States Constitution vests the legislative power in a bicameral congress. Exclusively. Yet gaps, though inevitable and sometimes desirable, can result in leaks of this exclusive authority to non-legislative actors–police, prosecutors, juries, regulators, etc.

Take a classic example, when the National Industrial Recovery Act of 1933 gave the President authority to make”codes of fair competition” for slaughterhouses and other industries. That was more than a gap–that was a gulf. It’s one of only two laws that the U.S. Supreme Court has ever invalidated as an unconstitutional delegation of lawmaking authority to a non-legislative actor.

But at what point does a crack become a crevasse? During Justice Neil Gorsuch’s confirmation hearing, Senator Al Franken mocked the notion that any line should be drawn at all: “When Congress passes laws that require agencies to implement them, … those agencies turn to experts to develop those policies …. And I think that is a good thing. We want experts doing the work. What we Senators do not want to be doing is deciding … what the distance in the slats are in a baby’s crib.”

As with most statements made by politicians in confirmation hearings (or most anywhere else), Franken tilts at a straw man. But his example helps to highlight different types of legislative silence. On one hand, Franken is of course correct–a legislature needn’t and probably shouldn’t become entangled in minutiae.

But Franken fails to see that there are different kinds of silence. On the one hand, permissible gaps to be filled in by agencies and law enforcers involve conditional lawmaking where a certain legal requirement hinges on delegated fact-finding responsibilities. I’m a bit skeptical that we want Congress legislating safety standards for baby cribs, but let’s run with Franken’s example anyway. Congress might pass a law that requires crib manufacturers to ensure that crib slats do not pose a serious safety risk to occupants. It can leave an agency to determine the exact distance between crib slats requisite for child safety because the agency is making a factual determination (again, I’m not sure we need or want regulators doing this but bear with me). We’ll call this crib-slat silence.

Crib-slat silence is not an unlawful delegation of lawmaking authority. It simply commits to federal agencies the fact-finding responsibilities already inherent in the executive branch’s duty to “take care that the laws be faithfully executed.”

Crib-slat silence is different in kind from an unlawful delegation of lawmaking power. An agency is doing something quite different when it sets a safety standard for crib slats than when it establishes “codes of fair competition.” It isn’t simply a difference in the size of the silence; it’s a silence of a different kind altogether. Take, for instance, how President Roosevelt put together “codes of fair competition” under the broad power given him by the National Industrial Recovery Act. He let New York poultry butchers do it for him. Anyone with a basic understanding of public choice theory can appreciate how a business allowed to write the law that governs its competitors might go about this task.

To no one’s surprise, the codes of fair competition made life harder for minority business owners, in particular kosher butchers. Specifically, the code prohibited butchers from letting customers select the specific chicken they wanted–a part of at least some kosher practices in New York at the that time. The Schechters brothers, who ran a kosher butcher shop, were criminally indicted for letting a customer select an “unfit” chicken, among other things. The Supreme Court held this to be an unlawful delegation of lawmaking authority because the National Industrial Recovery Act didn’t just make application of a particular law contingent on executive fact-finding–it delegated the policy choices inherent in the legislative power. This type of silence we’ll call Schechter silence.

Schechter silence and crib-slat silence aren’t just different in terms of the relative size of the gap. Take, for instance, an example of a smaller instance of Schechter silence, where the silence is not quite so huge as “codes of fair competition,” but still has the essential quality of letting the agency make policy choices rather than find facts. The Environmental Protection Agency and the Army Corps of Engineers share regulatory responsibility over the Clean Water Act. The Army Corps has statutory authority to issue permits for polluting protected water bodies, and the EPA has statutory authority to veto those permits, even after they’ve been issued, if the EPA decides that the permitted activity will have an “unacceptable adverse effect” on the environment. The statute hasn’t delegated the authority to create a regulatory code from whole cloth, but it has delegated authority to make normative judgment calls, not just executive fact-finding. Determining whether a certain adverse effect is “unacceptable” is unavoidably subjective and calls for much more than establishing the existence of certain objective facts. “Unacceptable” involves the weighing of various competing interests–economic, environmental, etc.–and making a judgment, not based on facts, but on agency policy preferences. Note also, that the EPA can decline to veto the permit even if it does find an adverse effect to be unacceptable. Hence, while the EPA’s veto authority isn’t especially sweeping in its effect, it still is an exercise of legislative power.

On the other hand, crib-slat silence can authorize executive acts of great national significance, like tariff rates. In 1928, an importer challenged the president’s statutory authority to set tariffs as a delegation of legislative power. But the statute at issue required the president to set such rates based on a variety of factual determinations–not on what the president considered appropriate in his own judgment.

There’s yet a third silence. Rather than interstitial gaps in statutory language, this thrid silence is the vacuum where Congress has chosen not to speak at all. Sometimes, courts and agencies have mistaken this silence for crib-slat silence. That mistake can be a serious problem for the structure of sound government.

One example is the Department of Labor’s regulation of “tip pooling.” The Fair Labor Standards Act establishes federal minimum wage law. The law allows businesses to set their wages below the default minimum if the businesses use a “tip credit”–the deficit between the wage and the legal minimum is filled in with the employee’s tip money.  If a business elects to use the tip credit, that business is prohibited from divvying up tip money among staff–you earn it, you keep it.

But the statute says nothing about prohibitions on tip-pooling for businesses that don’t take a tip credit. The Department of Labor didn’t like tip pooling, so it decided that the statute’s silence about tip pooling for non-tip-credit businesses was a delegation to the agency to do as it pleased. The Department of Labor promulgated a rule that extended the tip-pooling rule to all businesses, whether or not they took a tip credit. Incredibly, a federal court of appeals for the Ninth Circuit said this rule was just fine.

The silence extending outward from the edges of a statute are bookends, not blank pages.  Hence, I’ll call this third silence bookend silence. The idea that an agency can simply promulgate rules to fill up this endless silence destroys our system of separated powers. After all, the clear implication of allowing the Department of Labor to fill in that silence is that the executive branch of government has a boundless and inherent law-making authority that can only be circumscribed if Congress expressly tells the executive branch “no.” This is essentially a reversal of the first two articles of the Constitution, vesting the Executive with lawmaking authority and Congress with what amounts to no more than a glorified veto. Yet this is precisely what the largest appellate court in the country allows.

There’s no doubt, of course, that the Executive does have some inherent authority to act without legislative imprimatur, in areas like foreign affairs. But those are expressly granted powers, or they’re necessarily implied. For instance, the duty to take care that the laws are faithfully executed necessarily implies the ability to hire staff, promulgate regulations for managing staff , law enforcement practices, etc. This is all quite different than filling in bookend silence, a free-floating power to extend statutory prohibitions beyond the express scope laid out by Congress, simply on the basis that Congress hadn’t said “here and no farther.”

In law as in life, silence can be a virtue. But federal agencies can turn it into a vice. That depends on the kind of silence we’re talking about. Conflation of crib-slat silence and Schechter silence or bookend silence has resulted in a flaccid judicial response to delegations of lawmaking authority. It would help if courts acknowledged distinctions between the types of silence statutes exhibit.

Liability Rules!

“The union representing Buffalo police officers told its rank and file
members Friday that the union would no longer pay for legal fees to
defend police officers related to the protests…”

From Buffalo News.

This could be excellent news (at least in Buffalo). The threat of lawsuits means police will either be on their best behavior or won’t show up to work.

Paid Sick Leave and Schelling Focal Points

Paid sick leave is something I want more people to have. Of course it’s a good thing. Sick leave is valuable, but it’s not free so we have to ask it it’s worth it.

Right around the 11:30 mark is a tragic and hilarious line: “Dildos are not essential items. Books for kids, yes, but dildos? … No!” Good for John Oliver noting that deciding what is essential isn’t straight forward–apparently frivolous things might keep people inside and so serve the public health.

This is a classic Austrian point: prices (are supposed to) communicate information about how urgently people want a product. We run into trouble trying to prevent prices from reflecting the underlying economic crappiness of a crisis. Price gouging should be allowed for toilet paper and especially for grocery/Amazon workers. And the price of grocery workers should be passed on to consumers.

What we’ve got now requires each of us to not only ask “am I willing to pay this price?” but also engage in a moral calculus that is hard. I have to ask (as a person striving to be moral) if it’s really worth ordering X, Y, and Z from Amazon. But as a person who has to strive to be moral, it’s entirely too easy to fall for bad rationalizations.

So how do we help these essential-yet-replaceable* workers? Paid sick leave sure sounds good. And given the externalities involved in a pandemic, there’s a strong argument for mandating it.

But it’s worth remembering (particularly as a long run policy) that if we push on one part of a compensation bundle, something’s going to give. If we require employers to provide a company car (or simply encourage company cars through preferential tax laws), we shouldn’t be surprised to see monetary compensation fall. The same logic applies to paid sick leave.

But I’m my own devil’s advocate, so let me make a counter argument. I rarely use my sick days. I think I’ve taken 2 or 3 in the last 6 years. (I’m absolutely reevaluating that position now!) There’s this idea floating around in the back of my head that tells me to just tough it out and keep working. This isn’t because I carefully weighed pros and cons, it’s just received “wisdom” picked up by osmosis from the broader culture.

American culture values work over value. There’s no shortage of bullshit work because we’re in a work-too-hard equilibrium. This is not to say that hard work doesn’t have benefits. I’m happy when ambitious entrepreneurs work “too” hard to provide greater value. But there are a lot of cases where we create work for its own sake (especially in the higher ed racket, but apparently we’re not alone).

Essentially, we’re all playing a coordination game where we choose between “[appear to] work to make things better” and “stay home instead of passing your illness to other people.” Given American work culture, the Schelling focal point is <work, work>.

On the compensation end of things employers have to decide between offering more sick leave or some other compensation (like money). In this end, there is some benefit to zigging where other employers zag. If I’m running the only business to offer paid paternity leave, I get my pick of the best family-oriented workers while my competitors have to outbid each other to get the best of the other workers. But any mid-level HR manager is more likely to play the risk-averse strategy of following “best practices.”

So we’re in an equilibrium that underrates sick leave. We want to be in an equilibrium where it’s just good business sense to offer sick leave during a global pandemic. But coming from our current equilibrium, offering sick leave is a costly decision to privately provide a public good; it’s unlikely to happen unless the culture already promotes it.

I think we can get that equilibrium. I think we’re already moving towards it (ask yourself: would the board of the East India Company be more likely to offer sick leave than Amazon?). But we’re not there yet.

Paid sick leave should be good business sense right now**. But it depends on a culture where such behavior is widespread. I’m not convinced we could flip a switch and get that culture over night. Given that, I’m at least somewhat okay with contradicting my libertarian priors and calling for emergency mandates for paid sick leave. 2020 America isn’t likely to coordinate on the “right” short-term solution and coercion is probably the most efficient*** way to deal with this common pool problem. But outside of a public health emergency we shouldn’t allow top down mandates about the mix of compensation offered in markets (certainly not with the sort of people we elect to be on top).


(A couple rhetorical points: First, John Oliver isn’t speaking the language of those on the right. They won’t even be convinced that the issues he’s talking about are important. I think that’s a shame. Second, this is a tough time to try to argue against paid sick leave. In 2020 America, mandatory paid sick leave is probably required because we’re at the wrong Schelling point. Again, I don’t think conservatives or right-libertarians will find Oliver’s motivations convincing, but I believe that they could be persuaded. But that’s another blog post.)

(Two important counterpoints to the above: first, price increases hurt the poor. The way to solve that is to give charity money to the poor, not to try to make markets communicate information about relative scarcity and act as charity–that’s half-assing twice and it’s bound to be more inefficient than the charity would be costly. Second many people categorized as “essential” aren’t in a position to demand higher wages*. I don’t have an easy solution to this issue. Let’s talk about it in the comments.)

*Which is to say, workers who are in the same position as water in the diamond-water paradox.
**Not to say it would be cheap or easy.
***There you go. Now my friends on the left can accuse me of being a bloodless economist for opposing paid sick leave in general, and my friends on the right can accuse me of being a bloodless economist for supporting

Religious speech gets shorted again

Today, the U.S. Supreme Court denied a petition asking whether a transit authority can reject a Christmas ad for display on its buses just because the ad is religious. This is an easy question, and it’s a shame the Court denied the petition. Justices Gorsuch and Thomas, though, did write a short consolation prize, saying what they would have said if they granted the case: namely, the government can’t discriminate against a religious viewpoint on a topic while allowing other non-religious viewpoints.

The sides of buses are a frequent and heated battleground for free speech. Transit authorities often draw revenue by selling blank space on their buses. In this case, Archdiocese of Washington v. Washington Metropolitan Area Transit Authority, the Catholic Church tried to place a Christmas ad on D.C. buses with the silhouettes of a few shepherds and the phrase “Find the Perfect Gift.” The transit authority rejected the ad.

    The key fact here was that the transit authority allowed other ads about Christmas. All the parties, and the various courts, agreed that Christmas has a “secular” component and a “religious” component. Hence, Wal-Mart and Macy’s and every other retailer could slap their ads on buses across the metropolitan area clamoring about how to celebrate the holiday (by buying their stuff). But a religious advertiser could not express their views on how to celebrate the holiday in that same space, the only difference being the religious nature of the content.

    The Supreme Court has repeatedly stated in other settings that similar restrictions constitute viewpoint discrimination. If the government allows speech on a particular subject matter, it cannot then restrict speech on that topic simply because the viewpoint is religious. That’s true even if the proposed speech drips with religious sentiment–such sentiment deserves equal footing under the First Amendment.

    This isn’t to say that D.C. buses can now be overrun with religious zealotry. D.C. could lawfully limit advertisements to only commercial ads (they don’t). And of course they could always just forego the revenue and say no ads at all. But if the government opens up a space for expression, it must do so even-handedly.

    Life

    Screenshot 2020-03-26 at 12.15.15

    No matter how old, frail or vulnerable it may be, a life isn’t something to take or risk at another’s discretion. Nor does it undermine culpability when someone dies as a result of negligence. The common law ‘eggshell skull’ rule reflects this moral principle.

    During the Coronavirus pandemic, some erstwhile defenders of the famous Non-Aggression Principle (NAP) appear to have forgotten that natural rights are conceived to protect life as well as liberty and property. They seem to think that the liberties we ordinarily enjoy have priority over the right to life of others. The environment has changed and, for the time being, many activities that we previously knew to be safe for others are not. They are not part of our set of liberties until a reformed set of rules, norms and habits establishes a sufficiently hygienic public environment. To say that bans on public gatherings violate natural rights a priori is as untenable as G.A. Cohen’s claim that a prohibition on walking onto a train without a valid ticket is a violation of one’s freedom.

    The clue for anarcho-capitalist state-sceptics that this is a genuine shift in social priorities is that even organized criminal gangs are willing to enforce social distancing. You do not have to believe that the state itself is legitimate to see that the need for social distancing is sufficiently morally compelling that it can be enforced absent free agreement, just as one does not need free agreement to exercise a right to self-defense.

    Not every restriction is going to be justified, although erring on the restrictive side makes sense while uncertainty about the spread of infection persists. Ultimately, restrictions have to balance genuine costs with plausible benefits. But rejecting restrictions on a priori grounds does not cohere with libertarian principles. Right now, our absolute liberties extend to the right to be alone. Everything else must be negotiated under uncertainty. Someone else’s life, even two-weeks or so in the future, is a valid side-constraint on liberty. People can rightfully be made to stay at home if they are fortunate enough to have one. When people have to travel out of necessity, they can be temporarily exempted, compensated or offered an alternative reasonable means of satisfying their immediate needs.

    Seattle’s landlord regs at the Supreme Court

    Landlords in Seattle must rent to the first person to walk in the door, so long as they check out on paper. This “first-in-time” rule has slogged through several years of litigation over whether the rule violates landlords’ constitutional rights (full disclosure–I represent the plaintiffs). That case, called Yim v. City of Seattle, has now crescendoed with a petition to the United States Supreme Court. The Court should seize the chance to decide two pressing questions about the Constitution’s role in protecting property rights: (1) if regulation destroys a fundamental attribute of property ownership–like the right to exclude, or the right to sell–does the regulation result in a taking that requires compensation? and (2) if a regulation is “unduly oppressive” of individual rights, does it violate due process?

    The first-in-time rule is something of a novelty. The rationale behind the rule is to prevent implicit bias; a landlord can’t unconsciously discriminate if she doesn’t have any discretion to decide whom to rent to. Hence, the rule allows landlords to set pre-established criteria, though all criteria must have minimum thresholds (i.e., minimum credit score). The landlord cannot thereafter deviate from that criteria and must simply rent to the first person who qualifies, even if ten or fifteen applicants check all the boxes. After the landlord rents to the first comer, the lucky winner has 48 hours to sit on the offer, after which time the offer moves on to the next person in line.

    The bottom line is that landlords can no longer make common-sense judgment calls about who will live on their property. The practical challenges that result are daunting, for small landlords in particular. A landlord cannot, for instance, deny an applicant because they feel threatened or unsafe when an applicant tours a unit. That’s a big deal for plaintiff Kelly Lyles, a single woman and sexual assault survivor. Or for MariLyn Yim, who owns a triplex and lives in one of the units with her husband and kids. They share a yard and common spaces with their tenants–compatibility and safety are key. And some of the Yims’ units have roommates, where the ability to select people that will get along and feel comfortable with each other is essential. But basic discretion is out the window with first-in-time. If Lois Lane advertises the fortress of solitude for rent and Lex Luthor shows up with his spotless credit score and seven-digit income, she’s out of luck.

    And renting property often involves a give-and-take negotiation that’s no longer possible under the rule. Tom Riddle’s credit score is shabby, but he offers a two-year lease instead of one to make his application more appealing. Not under first-in-time. Pam Isley offers to do landscaping if the landlord drops rent by $50 a month. Nope. Nor can landlords offer leniency by deviating from their criteria because they want to give a second chance to someone down-and-out.

    MariLyn Yim and Kelly Lyles sued on the theory that removing everyday discretion in this manner constitutes an unconstitutional taking and a violation of due process. They won at trial and lost before the Washington Supreme Court. Now, the questions they bring to the Supreme Court’s attention raise some fundamental questions about the Fifth Amendment’s takings clause and the Fourteenth Amendment due process guarantee.

    The plaintiffs argue that a taking occurs when regulation destroys a fundamental attribute of property ownership. They invoke a well-known metaphor in property law: the “bundle of sticks.” Property is not really a single right–it’s a bundle of various rights that a person has with respect to a physical thing, such as the right to exclude others, the right to use the property, to occupy it, to sell it, and so on. Plaintiff’s theory is that each of these “sticks” in the bundle is entitled to independent constitutional protection; when one of those sticks is destroyed by regulation, that constitutes a taking of property as surely as a seizure of land. In this case, plaintiffs argue that denying them the right to decide who will occupy their property destroys their right to sell property to the person of their choosing and their right to exclude people not of their choosing.

    This is an important and uncertain question under the Fifth Amendment. The Supreme Court has held in the past that a taking occurred where various attributes of property ownership were destroyed. For instance, when the United States required a marina to open a private lagoon to the public, the Supreme Court held a taking occurred because the government had destroyed the right to exclude, “one of the most essential sticks in the bundle of rights that are commonly characterized as property.” Likewise, the Supreme Court held that a taking occurred when Congress prohibited owners of tribal lands to pass on the property to their heirs, which was a “total abrogation” of a right that “has been part of the Anglo-American legal system since feudal times.”

    The trouble is, though, that some other decisions of the Supreme Court can be read to refute this approach to takings. Hence, the city of Seattle argues that these takings precedents don’t represent the current state of takings law. This question thus presents an important opportunity for the Court to clarify the scope and meaning of the Fifth Amendment.

    The second issue is no less compelling: does the oppressive impact of a law bear on whether it satisfies due process? The federal courts tend to answer yes, while a large number of state courts answer no. The Fourteenth Amendment’s due process clause imposes, at minimum, a floor of rationality–a law must be rationally related to a legitimate government interest. The question raised in the Yim petition asks the Court to address whether an unduly oppressive means (obliterating discretion) of achieving a legitimate government purpose (preventing discrimination) satisfies this threshold of rationality. The Supreme Court has repeatedly held that a law’s oppressive nature bears on whether the law is arbitrary or irrational. That is, a government has no legitimate interest in imposing oppressive laws on its people, and the use of oppression to achieve an otherwise legitimate government interest is arbitrary and irrational, in violation of due process.

    The Washington Supreme Court, however, held that the U.S. Supreme Court had implicitly overruled this “unduly oppressive” analysis. It also overruled a whopping 61 of its own cases recognizing and applying this “unduly oppressive” test–so many that it provided a separate index of cases fed through the shredder. By joining a growing number of states that refuse to recognize that an unduly oppressive law violates the rational basis test required by due process, the Washington Supreme Court has teed up an important issue that warrants the U.S. Supreme Court’s attention.

    These questions will grow in significance as government control of the rental market expands. Since enacting first-in-time, for instance, Seattle has imposed a ban on criminal background checks, a ban on winter evictions, a requirement that landlords rent to a tenant’s choice of roommate, and more. Other cities are enacting similar restrictions on landlord control over their own property. The U.S. Supreme Court should address the pressing constitutional questions that such regulations raise.

    Coronavirus and takings

    City governments are flirting with a ban on evictions during the coronavirus pandemic. I doubt, however, that doing so comports with the Constitution’s takings clause or, perhaps, the contracts clause.

    San Jose has introduced legislation that will ban evictions due to un/underemployment resulting from coronavirus. Seattle’s socialist firebrand, Kshama Sawant, calls for similar action. Her letter, though, betrays the truth behind many proposed emergency measures–she’s leveraging the crisis to further her political agenda, particularly her hatred of capitalism. In the letter, she froths: “The status quo under capitalism is deeply hostile to the majority of working people, and it would be unconscionable to place the further burden of the Coronavirus crisis on those who are already the most economically stressed.” Never mind that the status quo in the absence of capitalism would be grinding poverty.

    But, in any case, the proposal to ban evictions and force landlords to renew leases as the pandemic sweeps across the states raises serious constitutional concerns. Even in times of crisis, observance of constitutional norms remains essential. In part, this is because laws passed as emergency measures tend to hang about long after the emergency subsides. New York rent control began as a wartime measure, for instance, and that curse still plagues the New York rental market. The other reason, of course, is that the Constitution is built for just these moments. The pressure to invade rights, after all, comes when things are not going well. As Justice Sutherland once put it, “If the provisions of the Constitution be not upheld when they pinch, as well as when they comfort, they may as well be abandoned.”

    Forcing landlords to either renew leases or forego eviction for lease violations likely raises at least two constitutional problems: takings and impairment of contractual obligations. While such laws don’t literally seize property, they effectively impose a servitude on landlords’ property, stripping them of control over the disposition and occupation of their land. When an essential attribute of property ownership is destroyed by regulation in this manner, the government must offer compensation. We already know this compensation requirement applies during national emergencies. During World War II, for instance, the Supreme Court held that the United States had to compensate property owners and leaseholders when it temporarily seized factories for wartime production.

    The contract clause problem is also straightforward: barring landlords from enforcing lease terms impairs obligations under pre-existing contracts. The contracts clause, though, has been severely undermined in recent decades, such that a showing of a compelling interest like mitigating the impact of the pandemic may well satisfy the flaccid demands of the modern contracts clause.

    It may seem profoundly harsh to impose constitutional constraints on governments trying to resolve a crisis. But three things ought to be kept in mind.

    First, an emergency certainly means that some will face a heavy burden, but that fact tells us nothing about how that burden should be allocated. Why should landlords bear the costs? Indeed, As the Supreme Court said in Armstrong v. United States, the takings clause exists to avoid imposing societal burdens on specific individuals: “The Fifth Amendment’s guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”

    Second, we should keep in mind that lease agreements already account for risk. That’s baked into the price and terms that give rise to a mutually agreeable arrangement between parties. To simply allow one party to slip out of the terms of the lease distorts that arrangement.

    Third, the takings clause does not bar emergency measures, including the seizure of property, but only upon just compensation. No exigency should excuse cities like San Jose or Seattle from compensating for the costs they’re hoisting upon landlords. And in the case of the contracts clause, the government could still honor existing leases by acting as a guarantor for tenants who can’t pay the rent.

    All of these points apply to a world in which landlords do not voluntarily exercise leniency. But I think we’ll find that most landlords are forgiving during a temporary crisis. Most landlords have an extreme aversion to evicting tenants–it’s the nightmare, last-ditch option that they try hard to avoid. That, plus the simple dose of compassion that many landlords will feel inspired to offer, may do more toward helping see us through than any emergency measures.

    Broken Incentives in Medical Innovation

    I recently listened to Mark Zuckerberg interviewing Tyler Cowen and Patrick Collison concerning their thesis that the process of using scientific research to advance major development goals (e.g. extending the average human lifespan) has stagnated. It is a fascinating discussion that fundamentally questions the practice of scientific research as it is currently completed.

    Their conversation also made me consider more deeply the incentives in my industry, medical R&D, that have shaped the practices that Cowen and Collison find so problematic. While there are many reasons for the difficulties in maintaining a breakneck pace of technological progress (“all the easy ideas are already done,” “the American education system fails badly on STEM,” etc), I think that there are structural causes that are major contributors to the great slowdown in medical progress. See my full discussion here!

    Departments of Higher Education should have mystery shoppers

    As you know, I teach at a SUNY campus. As you can imagine, the views I express here are only my own and certainly not those of any authority figure in the bureaucracy I live in or the higher ed industry more broadly. My union would be mortified.

    In my opinion–coming from a limited perspective within the sausage factory–the problem we’re facing is that universities are good at education and bad at credentialing (at least when there’s a significant demand for the signal value of a degree). This has lead to a host of problems–Baumol disease, growing administrative expense, all sorts of cultural unsavoriness, declining standards, grade inflation, etc.

    Education just happens. You can’t plan for it. You don’t do x amount of philosophy and then you’re enlightened. But a navel-gazing, consequence free environment with a culture of inquiry is a fine place for education to happen.

    Credentialing on the other hand is a common pool with the usual problems. It doesn’t have to interrupt the educational component of the university, but when actors in this setting follow the basic economic logic of their situation enrollments (and budgets) expand and the nature of the good produced by schools shifts from unquantifiable to commodity.

    In such a setting there is a strong case to be made for regulation. At the very least to manage the common pool resource of the signal value of a bachelor’s degree, but more ideally to ensure students aren’t simply learning to minimize cost while navigate a bureaucracy.

    Of course, NOL readers know that regulation is never easy and comes with many problems of its own. In fact, many of the problems I see in the industry are the natural bureaucratic outcome of such regulation (particularly as I sit here avoiding the work I’ve got to do making my tenure packet more closely resemble a checklist version of the guidelines my campus gave me. God I hate this!). For a taste of how this mess is currently killing the goose that laid the golden eggs, check out BadAssessment.

    How do we improve the regulatory quality? Mystery Shoppers!

    My industry is disciplined through:
    * direct state regulations,
    * marginal nudges through strings-attached financing,
    * “self”-regulation through quasi-public regional accreditation and much-less-public discipline-specific accreditation,
    * direct consumer experience,
    * U.S. News (and similar) rankings, and
    * Peter Theil and other critics complaining about how the education system is broken.
    My proposal could be done at any of these levels, but to my knowledge is only actually done at the statistically invalid level of direct consumer experience.

    Governments could invent many students and their traits and send copies of these students to a sample of online programs. Teams would manage sets of students and gather data. With several of these students taking different paths through each school the agency could learn something useful about the school as a whole–is it a degree mill? How does the actual student experience compare to other schools? Are there pitfalls that might put vulnerable groups at a disadvantage?

    Peter Theil could do it more aggressively and generate an upper-bound estimate on the bullshit in the industry.

    The College Board or U.S. News would probably turn it into a new costly margin of competition between schools, but that’s probably an improvement over what we’ve got now.

    To my knowledge, nobody is doing this. In my opinion, given the stakes and the size of the industry, it’s worth approaching this from many directions. Mystery shoppers would certainly be a more direct evaluation than the hundreds of pages of sacrificial paperwork we’re currently using.

    More campaign-finance fiction

    Today, Jacobin reports on Bernie Sanders’ proposal to give each American a $50-$200 voucher to spend on politicians’ political campaigns. I’m the lead counsel challenging a similar voucher program in Seattle, so I have some feelings on this subject.

    The article opens with this classic ipse dixit: “Everyone knows that rich people skew our political priorities through big-money donations to candidates.” Really? I didn’t know that. But of course this is the big assumption behind so much campaign-finance hype, one that is vague and unprovable, like all good political rhetoric.

    My first question here would be an attempt to resolve an ambiguity: what does “skew” mean? Where’s the magical baseline of “unskewed” political priorities? That baseline does not and never has existed. This opening line also fails to account for causation. That is, do donations influence eventual votes, or are both donations and votes attracted to candidate strength? I’ve yet to see a convincing argument that donations have ever “bought” a major federal election.

    The article also seems to assume, as many do, that liberal politicians are the ones losing out in the big-donor world. This just isn’t so. Candidates from across the political spectrum receive plenty of cash. Heck, Hillary outspent Trump 3 to 1 in 2016. If she was hoping her donors would “buy” her the election, she was sorely disappointed.

    The article also parrots the frequent refrain about our “broken” campaign-finance system. Again, compared to what? Where’s the unbroken system and what does it look like? At the end of the day, politicians need to figure out how to appeal to voters with all that money. How are our politics “skewed” if both parties are receiving plenty of funding with which to present a message that draws votes?

    As for the actual voucher proposal, I think most Americans would rather keep their $50-$200 dollars and spend it on something other than a politician, but that’s just a hunch.

    Ban on inquiries into wage history upheld

    I haven’t read the decision in much depth yet, but the Third Circuit Court of Appeals this week upheld a Philadelphia ban on employer inquiries into job applicants’ wage history.

    This is part of a troubling trend. More and more governments are banning inquiries into information that they don’t want people to use. Seattle and other cities have begun banning criminal background checks by landlords. Portland is set to pass a law that bans landlords from asking about a person’s immigration status. Other municipalities have passed and likely will pass more laws banning inquiries into wage history. The Third Circuit opinion will make it much harder to challenge this kind of speech restriction.

    The Third Circuit decision held that the wage inquiry ban should be subject to the “commercial speech” test. In First Amendment jurisprudence, courts are more forgiving of restrictions on commercial speech than other types of speech. This doctrine, however, is meant to be reserved for advertisements, not any speech that happens to be related to a possible transaction. Here, the Third Circuit extended the rule to include questions asked in the context of an anticipated transaction–an employment contract. This is an unfortunate expansion of a doctrine that arguably shouldn’t exist at all. The First Amendment doesn’t distinguish between commercial and other types of speech, and neither should the courts.

    The problem of value in regulatory takings

    Regulatory takings law is a mess. The Fifth Amendment promises: “nor shall private property be taken for public use, without just compensation.” This constitutional mandate encompasses direct acquisition of property, government action that damages or restricts property, and regulation of property that effectively results in a taking. Defining what constitutes a regulatory taking has vexed the courts for decades.

    I believe much of the trouble comes from the Supreme Court’s fixation on loss of value. The primary test for a regulatory taking looks to reasonable investment-backed expectations dashed by the regulation (i.e., I’d amassed resources and did a lot of footwork to build a house, but a new shoreline buffer prohibits construction), the resulting economic loss, and the character of the government action.

    Examining value creates intractable line-drawing problems and fails to establish a predictable rule. How much loss of value is too much? As one might expect, courts come out with wildly different answers, though all of them tend to lean toward not requiring compensation. A Massachusetts court, for example, recently held that a regulation that forbade any development on a parcel of land and resulted in a 91.5% loss of property value was not a taking that requires the government to compensate the property owner.

    Hence, no one going into court with a takings claim really has any way to predict what a court might do, though it’s safe to guess that the result will be bad. Courts are reluctant to draw a line in the sand, so they just hand wins to the government. This is not to say that loss of value is wholly irrelevant, of course, but it’s more relevant to the question of how much compensation is due, not whether a taking has occurred in the first place.

    Takings law doesn’t have to be this way. In fact, nineteenth-century takings law took a totally different approach. Early courts looked to the burden on the property interest, not the loss of economic value. Most fledgling regulatory takings law developed in the state courts, for two reasons: the Fifth Amendment wasn’t applied against the states until the Fourteenth Amendment was ratified in 1868, and the federal government in the nineteenth century wasn’t much in the business of regulating land.

    The early state cases didn’t even consider economic loss in their approach to what constitutes a taking. For instance, in Woodruff v. Neal, an 1859 Connecticut case, a government granted ranchers licenses to graze their cattle on public rights of way that crossed over private land. The private landowners sued for a taking and won because their property rights included rights over the “herbage” that the cows ate. The economic loss had to have been puny, but the court didn’t even bother addressing this, probably because they saw economic loss as pertinent only to the question of compensation due.

    Most of the other regulatory takings cases of that time period involved riparian rights–wharfage rights and so on. So it was with one of the United States Supreme Court’s early forays into regulatory takings–a case where, like the state cases that preceded it, did not even bother to mention loss of value. The case was Yates v. Milwaukee (1870). Yates owned land adjacent to a river and had built a wharf that extended out into the water. The city didn’t like his wharf, so they declared it a nuisance and sought to tear it down. Yates argued this was a regulatory taking, and the Supreme Court agreed. They didn’t bother to mention how much the loss of the wharf would cost Yates. They just held that access to a river was among the rights held by owners of a riverbank. The city had destroyed that right, so a taking occurred and compensation was due.

    Strangely, seven years later, the Supreme Court started to retreat from regulatory takings altogether and didn’t really return to the doctrine until the early twentieth century. Much later, when the Supreme Court thought up its value-based regulatory takings test in a 1978 case called Penn Central v. City of New York, the Court completely ignored Yates and all the many non-value-based takings cases in the state courts of the nineteenth century. In fact, the Court seemed to believe that regulatory takings law was a twentieth-century creation that began with a 1920 case called Pennsylvania Coal Co. v. Mahon. This bizarre blindness to the real history of regulatory takings law has resulted in an incomprehensible labyrinth of takings jurisprudence. The Supreme Court could learn a few lessons from the state courts of two centuries ago.

    Climate crisis or censorship crisis?

    Yesterday, the Chair of the U.S. House Select Committee on the Climate Crisis wrote an ominous letter to the CEO of Google. For the second time, the Chair is leaning on Google to police and remove “dangerous climate misinformation” on YouTube. The letter doesn’t threaten direct legal action against Google, but it nonetheless raises serious concern because it runs so counter to the free speech tradition and the value of a robust internet.

    According to the Chair, “YouTube has been driving millions of viewers to climate misinformation videos every day, a shocking revelation that runs contrary to Google’s important missions of fighting misinformation and promoting climate action.” The Chair states her own unequivocal commitment to “promoting ambitious federal policy that will … eliminate barriers to action, including those as pervasive and harmful as climate denial and climate misinformation.” It’s hard not to see the veiled threat here.

    Note the letter’s subtle casting of the consumers of information as passive actors that must be protected, rather than rational actors who choose what information to consume, a choice they’re entitled to make. She says “YouTube has been driving millions of viewers to climate misinformation” and that Google should “correct the record for millions of users who have been exposed to climate misinformation.” This language strips accountability and action from the viewers, as if they are a captive audience held down and forced to view climate denial videos with eyelid clamps like a scene from A Clockwork Orange. But if that content is promoted and viewed, that’s because there’s a consumer demand for it. The passive language used in the letter exemplifies the paternalism that often lurks behind censorship: for their own welfare, we must protect the public from information they wish to consume.

    Note also the absolutism woven into the letter. Google cannot both be committed to climate action and committed to an open culture of public discourse. In the war for humanity’s survival, one priority must dominate above all others.

    The letter also relies on the tired tactic of impugning speakers’ motives. Anyone who expresses “climate misinformation” on YouTube just wants “to protect polluters and their profits at the expense of the American people.” It’s impossible for an absolutist to consider that views opposed to her own might be sincerely held. Plus, research has shown that political views frequently do not line up with individual self-interest. Only a shallow thinker or someone with an agenda assumes a political viewpoint is rooted in a selfish motive.

    As for the constitutional implications of the letter, there is no question that the federal government cannot impose on Google the duty to remove “climate misinformation” or “climate denial” content. False speech is not exiled from the sanctuary of First Amendment protection. Of course, some false speech can be penalized, such as libel, slander, or fraud. But these are circumstances where there’s some other legally cognizable harm associated with the false statement for which recovery is warranted. There is no general rule that false speech is unprotected.

    Government should never be in the position of arbitrating truth. Particularly in the context of hotly debated political controversies, allowing government to label one side as gospel and penalize dissidents opens the door to legally enshrined orthodoxy. As Justice Robert Jackson said 80 years ago: “If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.” That’s what the power to ban “climate misinformation” entails.

    Indeed, government refereeing of truth will almost always shade toward discrimination against disfavored viewpoints. For example, there is “misinformation” out there on both sides of the climate debate. Those who peddle wild doomsday predictions are just as unhinged as those denying the realities of climate change. Yet the Chair does not propose to censor such misinformation.

    When I see such zealous effort to shut someone up, I can’t help but ask myself why the censor is so afraid. The targeting of this speech is likely only draw attention to it. Why worry about the hacks? I’ve always believed what John Milton expressed centuries ago in the Areopagitica: “Let [Truth] and Falsehood grapple; who ever knew Truth put to the worse in a free and open encounter?” Of course, that doesn’t mean that falsehoods lack convincing power, but truth in the end has the edge. Rather than pick the winner in advance, we do much better by letting truth emerge through open debate, bloodied but victorious.

    Supreme Court hears vital freedom-of-religion case

    Today, the Supreme Court heard  the most important case on the intersection of religion and education to arise in decades–Espinoza v. Montana Department of Revenue. A few years back, Montana had passed its first school-choice program, a tax-credit scheme that allowed a small tax credit for donations to scholarship programs that helped kids afford private school.

    As in any state, many of Montana’s private schools are religious. Right after the state legislature passed the tax-credit statute, the Montana Department of Revenue promulgated a rule that immediately gutted the program by forbidding students attending religious schools from receiving scholarship money.

    The Department based its rule on Montana’s Constitution, which says the legislature can’t “make any direct or indirect appropriation or payment from any public fund or monies . . . for any sectarian purpose or to aid any church, school,” etc. Plenty of states have very similar “no-aid” clauses. Revenue claimed that scholarships for religious students under the tax-credit scheme violated the “no-aid” clause.

    It’s worth taking a moment to consider how bizarre this argument is. These scholarships are funded by private donations–the money never enters a public coffer. Yet Revenue thinks such donations would constitute state aid to religion because the donor gets a tiny tax credit (up to $150) for the donation. Underlying this argument is the strange notion that any money the government declines to collect from you is still the government’s money.  This would mean, for instance, that every charitable donation eligible for a tax deduction would likewise constitute a government appropriation. Revenue’s argument has always looked to me like an extremely weak pretext for blatant discrimination against religious students.

    So Kendra Espinoza and a few other parents with kids at religious schools sued the Department of Revenue, claiming, among other things, that Revenue’s rule violated their free exercise of religion under the First Amendment. Kendra won at trial, and then lost spectacularly at the Montana Supreme Court. In fact, the Montana Supreme Court did something even worse than the Department of Revenue–it invalidated the entire tax-credit program, such that even students at secular private schools could no longer receive scholarship assistance.

    Thankfully, the Supreme Court took up the case, and they heard oral argument today. (My colleagues and I filed an amicus brief with the Court in support of Kendra).

    The oral argument transcript shows a Court divided along the typical ideological lines. The liberal justices seemed preoccupied with standing–whether the petitioners had the right to sue. One justice implied that only taxpayers (who have a financial interest because of the tax credit) and schools (who receive the scholarship money) should have the right to sue. This is a weird take, given that families and students are obviously the intended beneficiaries of the scholarship program.

    A number of the justices discussed a odd quirk about the Montana Supreme Court’s decision. The basic question they raised is this: since the Montana Supreme Court took the scholarship program away from everyone, are petitioners now being treated equally? But the sole reason the Montana Supreme Court struck down the program was to prevent religious students from receiving scholarship. A government action taken for a discriminatory reason is, well, discriminatory. If the legislature had excluded religious students when it enacted the program, the program would still stand. And if the legislature tried to enact the same program, providing equal treatment to religious and secular students alike, the Court would strike it down. That’s discrimination based on religious status–pretty straightforward.

    One justice cited to James Madison’s famous Memorial and Remonstrance Against Religious Assessments, arguing that the founders wouldn’t have wanted public funds flowing to religious schools like this (again no public funds were flowing to Montana religious schools under this program, but why let accuracy get in the way of a good narrative). That’s a terrible misreading of Madison. The Memorial and Remonstrance was an attack on preferential aid to religion, not to a program that provided public benefits to all groups, including religious ones. The difference is vital. Can the government deny churches police protection, fire protection, sewer connections, electrical service, or any other public benefit on the grounds that the government would be providing indirect public funding to religious institutions? Surely not. In fact, that’s exactly what the Supreme Court said in a recent case called Trinity Lutheran, where Missouri denied a church daycare access to a government program that helped renovate playgrounds.

    There is a difference between Trinity Lutheran and this case, arguably, which is that here the money goes more directly to religious indoctrination, not something secular like playground materials. But at bottom, public funding is fungible. Providing police protection and other general public benefits obviously makes it easier for a religious institution to fulfill its religious mission.

    This case should be an easy one. The government offered a benefit to all private schools. To include religious schools doesn’t “establish” religion. It just treats religious groups equally, as the Constitution requires.