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.

Nomic-nomics?

Perhaps the coolest thing I’ve found on the Small Internet so far is the game Nomic. From where I found it:

Nomic was invented in 1982 by philosopher Peter Suber. It’s a game that starts with a given set of rules, but the players can change the rules over the course of the game, usually using some form of democratic voting. Some online variants exist, like Agora, which has been running since 1993.

It’s a game that’s about changing the game. Besides offering a tempting recreational opportunity, I think this could be formalized in such a way to make it rival the Prisoners’ Dilemma (PD) in shedding light on the big social scientific questions.

The PD is a simple game with simple assumptions and a variable-sum outcome that lets it work for understanding coordination, competition, and cooperation. One of my favorite bits of social science is Axelrod’s Evolution of Cooperation project. It’s basically a contest between different strategies to an iterated PD (you can play a variation of it here). That the “tit for tat” strategy is so successful sheds a lot of light on what makes civilization possible–initial friendliness, willingness to punish transgressions, and willingness to return to friendliness after punishing these transgressions.

A fantastic extension is to create a co-evolutionary simulation of a repeated PD game. Rather than building strategies and pitting them against each other, we can be totally agnostic about strategies (i.e. how people behave) and simply see what strategies can survive each others’ presence.

The evolutionary iterated PD is about as parsimonious a model of conflict/cooperation as we could make. But there is still a lot of structure baked in; what few assumptions remain do a lot of heavy lifting.

But if the structure of the game is up for grabs, then maybe we’ve found a way to generalize the prisoners’ dilemma without assuming on extra layers of complexity.

Of course, the parsimony of the model adds complexity to the implementation. Formalizing Nomic presents a formidable challenge, and getting it to work would surely create a new

But even if it doesn’t lend itself to simulation, it strikes me as the sort of exercise that ought to be happening in classrooms–at least in places where people care about building capacity for self governance (I’ve heard such places exist!).

Let’s play!

A bit of stage setting, then let’s start a game in the comments section. I get the impression that this game is nerdier than Risk, so you’ve been warned (or tempted, as the case may be).

The basic premise is that are mutable rules and immutable rules (like Buchanan’s view of constitutions). Players take turns to propose rule changes (including transmuting rules from a mutable to an immutable state). As part of the process, we will almost surely redefine how the game is won, so the initial rule set starts with a pretty boring definition of winning.

We’ll use Peter Suber’s initial rules with some variations to suit our needs. The rules below will be (initially) immutable.

117. Each round will happen in a new comment thread. A new round cannot start until the rule change proposed in the previous round has been voted on. If technical problems result in having to start a new comment thread, that thread should include the appropriate reference number and it will be understood to be part of the same comment thread.

I will take the first move to demonstrate the format in the comments section.

118. The final vote count will be determined after 24 hours of silence. Players may discuss and cast votes, and change their votes. But after 24 hours of no new comments, the yeas and nays will be tallied and the outcome determined accordingly. In cases requiring unanimity, a single nay vote is enough to allow a player to start a new round without waiting the full 24 hours. The final vote will still occur (for purpose of calculating points) after 24 hours of silence.

Despite being numbered 118, this rule will take priority over rule 105.

119. Anyone who is eligible to comment is eligible to play. If it is possible to start a new round, anyone may start that round. In the event that two people attempt to start a round at the same time (e.g. Brandon and I post a comment within a couple minutes of each other) priority will be given to whichever was posted first and the second comment will be voided.

120. The game will continue until someone wins, or everyone forgets the game, in which case the winner will be the last person to have had their comment replied to.

A happy ten-year anniversary to the case people love to hate

This month marks the ten-year anniversary of one of the most despised and misunderstood Supreme Court cases: Citizens United v. Federal Election Commission.

I love Citizens United. It stands as perhaps the most important First Amendment decision of the last decade. Yet it’s come to symbolize the illicit marriage between money and power, while what actually happened in the case is largely an afterthought. I remember encountering an enraged signature-gatherer outside a Trader Joe’s a few years ago who was engaged in one of the many campaigns to amend the Constitution to put an end to Citizens United. I thought he might have a coronary when I told him that it was one of my favorite Supreme Court decisions. I deeply regret not asking him if he could rehearse for me the facts of the case. Maybe he would’ve surprised me.

So what did Citizens United actually say? The law at issue banned corporations from using general treasury funds for electioneering, with civil and criminal penalties for corporations that spent money to speak on pressing political issues of the day. The Supreme Court said that a small-time political organization (that happened to be incorporated), Citizens United, could not be banned from publishing a film critical of a presidential candidate. It’s hard to find speech of a higher order of significance than that.

Citizens United held that government cannot ban political expenditures just because people choose to speak through the corporate form. This is a classic example of an old rule–government cannot censor speech based on the identity of the speaker.

Much of the fury over Citizens United is premised on a guttural abhorrence for the corporation. But corporations are just groups of people who have chosen to organize through a particular structure. And most don’t realize that the law at issue in Citizens United also banned unions from using general treasury funds for electioneering communications.

Much of the popular criticism of the case that I’ve seen seems to believe that Citizens United was the first case to establish that corporations had First Amendment rights. It wasn’t. In fact, not even the dissenters in the case would’ve held that corporations lack such rights. That was an uncontroversial and settled matter. And it should be obvious as to why. If corporations don’t have First Amendment rights, then the New York Times doesn’t have First Amendment rights, along with many other media organizations. (I’ve heard the excuse that freedom of the press would still protect media organizations independently, which is a misunderstanding of the freedom of the press, which doesn’t offer greater speech protections to media than non-media).

Citizens United gets a bad break, and I wish it a happy anniversary.

A blatant campaign-finance boondoggle

The City of Seattle is poised to pass a plainly unconstitutional campaign-finance law later this month. The bill would limit contributions to political action committees that are not controlled by or connected to a candidate to $5000 per election cycle. The Ninth Circuit Court of Appeals, which would govern the outcome of any litigation, has already said several times that limiting contributions to independent PACs (meaning independent of a candidate’s campaign) violates the First Amendment.

The rationale is pretty straightforward. Any limit on political spending is a limit on speech, so it must satisfy the First Amendment. In Buckley v. Valeo, the United States Supreme Court said that contribution limits directly to candidates are usually okay because they (arguably) reduce the likelihood of corrupt quid pro quo exchanges between candidates and donors. But Buckley struck down limits on independent expenditures (meaning expenditures that aren’t donated to a candidate but speak independently for or against a candidate). Independent expenditures, unlike direct contributions, are not coordinated or controlled by the candidate, so there is less of a risk that an independent expenditure is actually an illicit quid pro quo. Since limits on independent expenditures restrict speech without actually doing anything to prevent corruption, they violate the First Amendment.

Contributions to PACs that engage in independent expenditures are basically the same as independent expenditures–there isn’t a direct connection to a candidate, so there simply is no genuine risk of corruption. The City of Seattle probably knows this, and they either don’t care or they hope to change the state of the law. I look forward to the forthcoming judicial rebuke.

Really, I find the entire premise behind limits on either contributions or expenditures to be highly dubious. While there are no doubt a few instances where a contribution to a candidate is given in direct exchange for some future favor once the candidate wins office, the vast majority of contributions are not that. They’re donations to support a candidate because his platform reflects the donor’s policy preferences. Most corrupt exchanges of money, when they do occur, almost certainly occur under the table and outside the context of highly regulated campaign contributions. Thus, contribution limits penalize a wide range of legitimate political speech to get at a vanishingly small (and unknowable) number of malefactors.

Defenders of campaign-finance laws tend to emphasize the huge amount of political spending as per se evidence of the need for reform. (When you compare the amount of political spending to other spending in the economy, it becomes quite clear that the amount of money in electoral politics simply isn’t that much). This claim that money in elections is fundamentally bad has always struck me as bizarre. That money is spent by both sides on political speech that informs the public. Why should we assume that this is a bad thing? Of course all political speech has a partisan aim–to convince voters to vote for so-and-so. But the information hardly compels voters to do so. At the end of the day, it seems much better to have a public informed by politically motivated communications than to have less information.

Campaign-finance advocates also like to point out that candidates who receive the most money tend to win. Again, it isn’t obvious why this is a bad thing. It seems rather obvious that popular candidates will attract both dollars and votes, not because they get lots of money, but because they’re popular. This is a classic failure to acknowledge the difference between correlation and causation. To date, no significant evidence has surfaced demonstrating that dollars cause votes.

And what about the concern over undue influence? Of course, politicians may be responsive to high-dollar donors. But again, this is a correlation issue. The NRA gives money to candidates who support the NRA’s  policy preferences. When the candidate reaches office and fights gun control, is it because of the NRA’s support, or was the NRA’s support prompted by the candidate’s pre-existing policy platform? Over and over, the deeply felt convictions of campaign-finance advocates seem to rest on a house of cards.

In any case, even if risk of quid pro quo corruption is a valid reason to restrict speech, Seattle’s bill goes well beyond that rationale. PACs engage in core political speech, as do the individuals who donate to them. That speech merits protection.

Hyperinflation and trust in Ancient Rome

Since it hit 1,000,000% in 2018, Venezuelan hyperinflation has actually been not only continuing but accelerating. Recently, Venezuela’s annual inflation hit 10 million percent, as predicted by the IMF; the inflation jumped so quickly that the Venezuelan government actually struggled to print its constantly-inflated money fast enough. This may seem unbelievable, but peak rates of monthly inflation were actually higher than this in Zimbabwe (80 billion percent/month) in 2008, Yugoslavia (313 million percent/month) in 1994, and in Hungary, where inflation reached an astonishing 41.9 quadrillion percent per month in 1946.

The continued struggles to reverse hyperinflation in Venezuela are following a trend that has been played out dozens of times, mostly in the 20th century, including trying to “reset” the currency with fewer zeroes, return to barter, and turning to other countries’ currencies for transactions and storing value. Hyperinflation’s consistent characteristics, including its roots in discretionary/fiat money, large fiscal deficits, and imminent solvency crises are outlined in an excellent in-depth book covering 30 episodes of hyperinflation by Peter Bernholz. I recommend the book (and the Wikipedia page on hyperinflations) to anyone interested in this recurrent phenomenon.

However, I want to focus on one particular inflationary episode that I think receives too little attention as a case study in how value can be robbed from a currency: the 3rd Century AD Roman debasement and inflation. This involved an iterative experiment by Roman emperors in reducing the valuable metal content in their coins, largely driven by the financial needs of the army and countless usurpers, and has some very interesting lessons for leaders facing uncontrollable inflation.

The Ancient Roman Currency

The Romans encountered a system with many currencies, largely based on Greek precedents in weights and measures, and iteratively increased imperial power over hundreds of years by taking over municipal mints and having them create the gold (aureus) and silver (denarius) coins of the emperor (copper/bronze coins were also circulated but had negligible value and less centralization of minting). Minting was intimately related to army leadership, as mints tended to follow armies to the front and the major method of distributing new currency was through payment of the Roman army. Under Nero, the aureus was 99% gold and the denarius was 97% silver, matching the low debasement of eastern/Greek currencies and holding a commodity value roughly commensurate with its value as a currency.

The Crisis of the Third Century

However, a major plague in 160 AD followed by auctions of the imperial seat, major military setbacks, usurpations, loss of gold from mines in Dacia and silver from conquest, and high bread-dole costs drove emperors from 160-274 AD to iterative debase their coinage (by reducing the size and purity of gold coins and by reducing the silver content of coins from 97% to <2%). A major bullion shortage (of both gold and silver) and the demands of the army and imperial maintenance created a situation where a major government with fiscal deficits, huge costs of appeasing the army and urban populace, and diminishing faith in leaders’ abilities drove the governing body to vastly increase the monetary volume. This not only reflects Bernholz’ theories of the causes of hyperinflations but also parallels the high deficits and diminishing public credit of the Maduro regime.

Inflation and debasementFigure 1 for Fiat paper

Unlike modern economies, the Romans did not have paper money, and that meant that to “print” money they had to debase their coins. The question of whether the emperor or his subjects understood the way that coins represented value went beyond the commodity value of the coins has been hotly debated in academic circles, and the debasement of the 3rd century may be the best “test” of whether they understood value as commodity-based or as a representation of social trust in the issuing body and other users of the currency.

Figure 2 for Fiat paper

Given that the silver content of coins decreased by over 95% (gold content decreased slower, at an exchange-adjusted rate shown in Figure 1) from 160-274 AD but inflation over this period was only slightly over 100% (see Figure 2, which shows the prices of wine, wheat, and donkeys in Roman Egypt over that period as attested by papyri). If inflation had followed the commodity value of the coins, it would have been roughly 2,000%, as the coins in 274 had 1/20th of the commodity value of coins in 160 AD. This is a major gap that can only be filled in by some other method of maintaining currency value, namely fiat.

Effectively, a gradual debasement was not followed by insipid ignorance of the reduced silver content (Gresham’s Law continued to influence hoards into the early 3rd Century), but the inflation of prices also did not match the change in commodity value, and in fact lagged behind it for over a century. This shows the influence of market forces (as monetary volume increased, so did prices), but soundly punctures the idea that coins at the time were simply a convenient way to store silver–the value of the coins was in the trust of the emperor and of the community recognition of value in imperial currency. Especially as non-imperial silver and gold currencies disappeared, the emperor no longer had to maintain an equivalence with eastern currencies, and despite enormous military and prestige-related setbacks (including an emperor being captured by the Persians and a single year in which 6 emperors were recognized, sometimes for less than a month), trade within the empire continued without major price shocks following any specific event. This shows that trust in the solvency and currency management by emperors, and trust in merchants and other members of the market to recognize coin values during exchanges, was maintained throughout the Crisis of the Third Century.

Imperial communication through coinage

This idea that fiat and social trust maintained higher-than-commodity-values of coins is bolstered by the fact that coins were a major method of communicating imperial will, trust, and power to subjects. Even as Roman coins began to be rejected in trade with outsiders, legal records from Egypt show that the official values of coins was accepted within the army and bureaucracy (including a 1:25 ratio of aureus-to-denarius value) so long as they depicted an emperor who was not considered a usurper. Amazingly, even after two major portions of the empire split off–the Gallic Empire and the Palmyrene Empire–continued to represent their affiliation with the Roman emperor, including leaders minting coins with their face on one side and the Roman emperor (their foe but the trusted face behind Roman currency) on the other and imitating the symbols and imperial language of Roman coins, through their coins. Despite this, and despite the fact that the Roman coins were more debased (lower commodity value) compared to Gallic ones, the Roman coins tended to be accepted in Gaul but the reverse was not always true.

Interestingly, the aureus, which was used primarily by upper social strata and to pay soldiers, saw far less debasement than the more “common” silver coins (which were so heavily debased that the denarius was replaced with the antoninianus, a coin with barely more silver but that was supposed to be twice as valuable, to maintain the nominal 1:25 gold-to-silver rate). This may show that the army and upper social strata were either suspicious enough of emperors or powerful enough to appease with more “commodity backing.” This differential bimetallist debasing is possibly a singular event in history in the magnitude of difference in nominal vs. commodity value between two interchangeable coins, and it may show that trust in imperial fiat was incomplete and may even have been different across social hierarchies.

Collapse following Reform

In 274 AD, after reconquering both the Gallic and Palmyrene Empire, with an excellent reputation across the empire and in the fourth year of his reign (which was long by 3rd Century standards), the emperor Aurelian recognized that the debasement of his currency was against imperial interests. He decided to double the amount of silver in a new coin to replace the antoninianus, and bumped up the gold content of the aureus. Also, because of the demands of ever-larger bread doles to the urban poor and alongside this reform, Aurelian took far more taxes in kind and far fewer in money. Given that this represented an imperial reform to increase the value of the currency (at least concerning its silver/gold content), shouldn’t it logically lead to a deflation or at least cease the measured inflation over the previous century?

In fact, the opposite occurred. It appears that between 274 AD and 275 AD, under a stable emperor who had brought unity and peace and who had restored some commodity value to the imperial coinage, with a collapse in purchasing power of the currency of over 90% (equivalent to 1,000% inflation) in several months. After a century in which inflation was roughly 3% per year despite debasement (a rate that was unprecedentedly high at the time), the currency simply collapsed in value. How could a currency reform that restricted the monetary volume have such a paradoxical reaction?

Explanation: Social trust and feedback loops

In a paper I published earlier this summer, I argue that this paradoxical collapse is because Aurelian’s reform was a blaring signal from the emperor that he did not trust the fiat value of his own currency. Though he was promising to increase the commodity value of coins, he was also implicitly stating (and explicitly stating by not accepting taxes in coin) that the fiat value that had been maintained throughout the 3rd Century by his predecessors would not be recognized going forward by the imperial bureaucracy in its transactions, thus signalling that for all army payment and other transactions, the social trust in the emperor and in other market members that had undergirded the value of money would now be ignored by the issuing body itself. Once the issuer (and a major market actor) abandoned fiat currency and stated that newly minted coins would have better commodity value than previous coins, the market–rationally–answered by moving quickly toward commodity value of the coins and abandoned the idea of fiat.

Furthermore, not only were taxes taken in kind rather than coin, but there was widespread return to barter as those transacting tried to avoid holding coins as a store of value. This pushed up the velocity of money (as people abandoned it as a store of value and paid higher and higher amounts for commodities to get rid of their currency). The demonetization/return to barter reduced the market size that was transacted in currency, meaning that there were even more coins (mostly aureliani, the new coin, and antoniniani) chasing fewer goods. The high velocity of money, under Quantity Theory of Money, would also contribute to inflation, and the unholy feedback loop of decreasing value causing distrust, which caused demonetization and higher velocity, which led to decreasing value and more distrust in coins as stores of value kept this cycle going until all fiat value was driven out of Roman coinage.

Aftermath

This was followed by Aurelian’s assassination, and there were several monetary collapses from 275 AD forward as successive emperors attempted to recreate the debased/fiat system of their predecessors without success. This continued through the reign of Diocletian, whose major reforms got rid of the previous coinage and included the famous (and famously failed) Edict on Maximum Prices. Inflation continued to be a problem through 312 AD, when Constantine re-instituted commodity-based currencies, largely by seizing the assets of rich competitors and liquidating them to fund his army and public donations. The impact of that sort of private seizure is a topic for another time, but the major lesson of the aftermath is that fiat, once abandoned, is difficult to restore because the very trust on which it was based has been undermined. While later 4th Century emperors managed to again debase without major inflationary consequences, and Byzantine emperors did the same to some extent, the Roman currency was never again divorced from its commodity value and fiat currency would have to wait centuries before the next major experiment.

Lessons for Today?

While this all makes for interesting history, is it relevant to today’s monetary systems? The sophistication of modern markets and communication render some of the signalling discussed above rather archaic and quaint, but the core principles stand:

  1. Fiat currencies are based on social trust in other market actors, but also on the solvency and rule-based systems of the issuing body.
  2. Expansions in monetary volume can lead to inflation, but slow transitions away from commodity value are possible even for a distressed government.
  3. Undermining a currency can have different impacts across social strata and certainly across national borders.
  4. Central abandonment of past promises by an issuer can cause inflationary collapse of their currency through demonetization, increased velocity, and distrust, regardless of intention.
  5. Once rapid inflation begins, it has feedback loops that increase inflation that are hard to stop.

The situation in Venezuela continues to give more lessons to issuing bodies about how to manage hyperinflations, but the major lesson is that those sorts of cycles should be avoided at all costs because of the difficulty in reversing them. Modern governments and independent currency issuers (cryptocurrencies, stablecoins, etc.) should take lessons from the early stages of previous currency trends toward trust and recognition of value, and then how these can be destroyed in a single action against the promised and perceived value of a currency.

The mythology of Lochner v. New York

In the highly competitive world of most misunderstood Supreme Court decisions, Lochner v. New York sits high on the list. The reason is simple enough: it has undergone a transcendent ascent to the world of abstraction, where it now embodies the platonic essence of a black-robed cadre of old, straight, white men hankering to smash the plebeian’s face in the dirt.

Yesterday, the Intelligencer–a publication of New York Magazine–dragged out these old tropes with the galumphing rhetoric typical of someone simply parroting a battered playbook with no real concern for its accuracy. The article is entitled, “Conservatives Want a ‘Republic’ to Protect Privileges.” Its basic premise is to push back against the anti-democratic tendencies of those who oppose direct, untrammeled democracy.

The article lists several “limitations on democracy to justify and even expand privilege.” The second references the conservative legal movement’s supposed attempt to resurrect the “Lochner era,” in order to protect the wealthy from democratic majorities.

First, off, it’s wrong to say that the “conservative legal movement” wants to revive Lochner. Both progressive and conservative jurists are generally united in their rejection of Lochner. Robert Bork, a thoroughly majoritarian conservative, railed against the case, as did Justice Antonin ScaliaGranted, this is because the conservative legal movement, sadly, has largely embraced the progressive juridical project of the 30’s, which was devoted to weakening the judiciary in order to shove the New Deal down the nation’s throat.

Second, Lochner‘s many detractors almost never grapple with the facts of the case. As a result, they frequently misunderstand it. Here’s what actually happened. In the early 1900’s, New York enacted a nitpicky law that saddled bakeries with an avalanche of finite requirements–limits on ceiling heights, limits on the kind of floor, and the demand to whitewash the walls every three months, among other things. But the provision dealt with in Lochner was this: “No employee shall be required or permitted to work in a biscuit, bread or cake bakery or confectionary establishment than 60 hours in one week or more than 10 hours in any one day.”

A Bavarian immigrant named Joseph Lochner who owned a Utica bakery was criminally indicted for violating this law. Aman Schmitter, another immigrant, lived with his family above the bakery and worked for Joseph. Aman happily worked over sixty hours a week in order to care for his family and increase his skills, and he said so in a sworn affidavit.

It is undisputed that New York’s law was not about health, safety, or protecting workers, though New York tried to say so at the time. Rather, New York passed the law at the behest of powerful bakeries and baker unions in a patent attempt to crush small, family-owned bakeries that relied upon flexible work schedules. It gets worse–the law intentionally targeted immigrant bakeries in particular, which tended to be of the small variety that leaned on overtime. The state’s legal brief contained a detestable line that progressives today would certainly associate with Trump: “there have come to [New York] great numbers of foreigners with habits which must be changed.” This is the law that progressives who hate Lochner are defending.

In a 5-4 decision, the Supreme Court thankfully struck down this law that was passed to serve the powerful and crush a weak immigrant population. Put that way, it seems startling that anyone today would wish to stand up for this piece of anti-immigrant, protectionist garbage.

But then again, Lochner is no longer about Lochner. It’s about rejecting a mythical “Lochner era.” Progressives believe that Lochner represented an entire ecosystem of turn-of-the-century jurisprudence in which corrupt judges were smothering the will of the people wholesale. Turns out that era never existed. Law professor David Bernstein has examined old court records concerning state exercises of their police power during that time period and found that there simply was no lengthy period in which courts were whack-a-moling every piece of social legislation that dared to lift its head.

To the extent that courts of that era did strike down social legislation under the liberty of contract, they did so not to serve the wealthy, but to protect weak minorities–which is of course why robust judicial review exists in the first place. For instance, the Illinois state supreme court struck down a deeply misogynistic law limiting women’s maximum work hours. The Court used the same liberty-of-contract reasoning as Lochner, arguing that women “are entitled to the same rights under the Constitution to make contracts with reference to their labor as are secured thereby to men.” And in Bailey v. Alabama, the wicked Lochner Court struck down a Jim Crow law that created a presumption of fraud when a worker quit after getting an advance payment. The law was aimed at penalizing black workers–an attempt essentially to revive peonage. Do progressives really want to own up to disagreeing with these “Lochner era” precedents? Somehow I doubt it.

Lochner did not, as Lochner‘s enemies love to claim, replace the legislature’s judgment with the judgment of the Court. Instead, the Court was willing to look skeptically at the legislature’s motives and demand that the legislature do its work and show that a law burdening a basic right is necessary. The New York law failed that test spectacularly.

Of course, Lochner‘s legacy does demand that courts counter democratic will when it conflicts with fundamental rights. Alexander Bickel famously called this the counter-majoritarian difficulty, something that has preoccupied the judiciary for a century. If you really care about minorities, though, you might consider Judge Janice Rogers Brown’s insight: “But the better view may be that the Constitution created the countermajoritarian difficulty in order to thwart more potent threats to the Republic: the political temptation to exploit the public appetite for other people’s money–either by buying consent with broad-based entitlements or selling subsidies, licensing restrictions, tariffs, or price fixing regimes to benefit narrow special interests.”

In any case, if progressives continue to take a polly-anna view of unfettered democracy despite the evidence, they should at least bother to get the facts right on Lochner.

 

Be Our Guest: “Of Monies and Juries and Freedoms”

Be Our Guest is a new, experimental series at NOL. Basically, NOL is invite-only but you can, and should, submit your thoughts to us. The latest piece is by Michalis Trepas, a Greek national working in the financial sector. An excerpt:

The judicial system was reluctant to intervene, out of respect of the separation of powers (according the Weimar Constitution, currency matters were reserved for the parliament). So, at first, the courts upheld the nominalistic principle and refused to accept a revalorisation of debts. But then, something began to change in the courts’ reasoning. The currency’s slide prior to 1921 could be attributed to the conditions of the “war economy”, whose burden was to be shared by everyone in the country. The unrestrained fall thereafter, the courts said, was a monetary phenomenon, punishing “blindly and unpredictably” only the creditor class.

If you cannot guess by now what Michalis is writing about, read on! If you have figured out what the subject of his piece is about, read on, as it only gets more interesting.

There are cultural and geopolitical considerations to think about here, too, in regards to Greece and Germany and financial markets and constitutionalism.

Mass shooting in perspective

Each of the past few years, about 35,000 Americans died in traffic accidents. This fact should be taken into account when considering recent massacres of civilians. I was wondering if anyone else would be cold hearted enough to go that way. So I waited a few days to comment on the massacres in Gilroy, El Paso, and Dayton, to avoid duplicating others’ commentaries. Plus, I have technical difficulties associated with my current location. Please, comment or wave if you see this.

Of the approximately 35,000 victims about half died in accidents involving alcohol. I will assume, against my thesis, that only 10,000 people each year died indirectly or directly because someone drank too much alcohol and drove.

How to count victims of mass shootings has become – strangely enough- controversial. Nevertheless, I am quite certain that shootings, specifically, of strangers for other than greed, or jealousy, or disappointed love have not caused 10,000 deaths in any of the past few years, not even close.

Do you agree; do you see where I am going?

So drunk drivers kill many more people – about 10,000 annually – than mass shooters. The victims of the ones are just as dead as the victims of the others; the loss and grief associated with the ones must be similar to those associated with the others. The deaths from one cause seem to me to be as meaningless as the deaths from the other. (That’s by contrast with the death of a firefighter in the line of duty, for example.)

A rational collective response should give priority to the avoidance of the many deaths from drunk driving over the much fewer deaths caused by mass assassins. Yet, the public reactions of the left are exactly the reverse of those rational expectations. In part, this inversion of priorities is due to the magnification the media affords mass shootings but not the slow massacre on the roads. In part, it may be due to the sometimes concentrated nature of the death tolls by mass shooting. This explanation, however, has only limited value because the small death toll at the Gilroy Garlic Festival, for example, was given much more publicity than is conceivable for any drunk driving accident with three lethal casualties.

This irrational ordering of priorities is made all the more puzzling by the fact that it would be much easier to reduce the number of deaths from drunk driving than by domestic mass shootings. Two reasons. First, people in jail can’t kill anyone with a car. The second reason is a little more subtle; bear with me.

Drunk drivers fall into two main categories, alcoholics who think they have to drive, and self-indulgent slobs. My intuition is that there are many more of the latter than of the former (especially among the young, who are overrepresented in car accidents) but I don’t have any figures. Self-indulgent slobs are capable of rational calculus. If the relevant punishment is severe enough and certain enough, they will become less self-indulgent. I used to be one of them. When the penalty for drunk driving went from about $100 to several thousand during my lifetime, I discovered that I could take a taxi, or pay a friend to drive me back, or drink at home. The quality of my life declined but it was worth it. It’s likely that my fear of heavy punishment saved someone’s life over the long run.

So, a credible remedial scheme is simple: withdrawal of driver’s license for a long period on the first offense associated with heavy fines for driving without a license. A significant jail term without possibility of parole would punish each subsequent infraction. Again, imprisoned drivers don’t kill anyone through their drunk driving. That’s a valid reason in itself to keep them locked up for a long time. It’s probably also economically reasonable.

So, I wonder why is there not a passionate public outcry on the political left and among its media partners in favor of a nation-wide remedial endeavor of the kind I just described?

Drunk driving kills many more Americans than do criminal mass shootings of the Gilroy, El Paso, and Dayton kind. This, although suppressive remedies to drunk driving are conceptually straightforward. My friend Vernon Bohr pointed out in a comment on Facebook that accidental drownings of children alone claim more lives of all categories of Americans than do mass shootings. There are better priorities.

The indifference of the left to those more important preventable causes of mortality as compared to its display of strong collective emotion with respect to sudden death by shooting seems strange, on the surface. This strong emotion is usually, almost always associated with urgent calls for some sort of federal gun control.

The contrast is made all the more striking by the following legal facts: First, the regulation of behavior that is potentially harmful to others – such as driving automobiles – falls squarely within the purview of state legislatures, primarily, of Congress, secondarily. Number two, driving is nowhere a right, except by default. Possessing weapons, by contrast, is a right explicitly guaranteed by the US Constitution, and twice reaffirmed by the US Supreme Court.

So, why would the considerable emotional and political resources of the left, aptly guided by the mass media, be expanded on the deaths of comparatively few, on a problem that is difficult to understand, one whose resolution would also encounter strong legal obstacles? Why this relentless emphasis when there are obvious, bigger, more rational objects of collective compassion?

I am thinking of two answers. One, the unpredictability of shooting events make them seem more disruptive than the somewhat routinized highway deaths, including by drunk drivers. The logical implication of this explanation is that if mass shootings became more frequent, they would appear more routine, and thus, less disruptive, and less deserving of left-wing attention. Note that there is a long way to go between the few hundred annual casualties by mass killings, and the 10,000 I attribute to drunk driving alone.

Thus, mass shootings garner both attention and emotion – including on the left – precisely because they are comparatively rare. If this were correct, attention and emotion would diminish with an increased frequency of such events. That is not a trend I observe. Others may see it.

Two, the left, and its media component, may focus on mass shootings in preference to making more rational choices, not in spite of the legal obstacles in their path but because of them. In this perspective, the focus on mass shootings may not be an exercise in misguided compassion, but a means to a higher end.

Americans are, on the whole, much attached to their Constitution. Modifying it is an arduous and uncertain task. Shortcuts to this effect are much appreciated. It would be difficult to find a more effective shortcut than the guided emotionalism the left supplies on the occasion of each mass shooting perpetuated by an American who is not also a violent jihadist. The spectacle of perfectly innocent victims, including children, cut down by someone seemingly exercising his constitutional right to bear arms must be the most formidable nonrational argument against that constitutional right. It can be mustered to sidestep collective choices – such as further reductions in deaths by drunk drivers – that would make the most sense from the standpoint of simple compassion. Thus, a one tenth reduction in deaths by drunk driver, and the corresponding shrinking of human misery, would do about twice more good than would the total (total) elimination of mass shootings.

The outburst of emotionalism expertly guided by the media we witnessed following three civilian mass shootings in quick succession is not about compassion, it’s about power. Every reduction in the autonomy of individuals increases the power of government, of those who are in charge of it through legitimate political means, and of the permanent bureaucracy.

Incidentally, I suspect there must be libertarian solutions to the vast and continuing problem of death by drunk driver, solutions that don’t involve putting people in jail. I don’t know what those are. I would like to hear about them.

Link: The Most Controversial Tree in the World

https://psmag.com/ideas/most-controversial-tree-in-the-world-gmo-genetic-engineering

Tending an ecosystem is hard. With all the interconnections it’s impossible to do just one thing. We should absolutely be skeptical of calls to engineer the environment from the top down, but we should also recognize that we’ve already been unintentionally doing so.

To me, the linked article raises interesting questions about the sort of common law restrictions on GMO that seem reasonable. Default infertility seems like an efficient Coasian compromise for industrial GMO. But the case of the American chestnut seems like an exciting opportunity to reverse an ecological tragedy.

This case seems like a good polar opposite to Jurassic Park on the spectrum of GMO threat/promise.

One weird old tax could slash wealth inequality (NIMBYs, don’t click!)

yesnoimputedrent

What dominates the millennial economic experience? Impossibly high house prices in areas where jobs are available. I agree with the Yes In My Back Yard (YIMBY) movement that locally popular, long-term harmful restrictions on new buildings are the key cause of this crisis. So I enjoyed learning some nuances of the issue from a new Governance Podcast with Samuel DeCanio interviewing John Myers of London YIMBY and YIMBY Alliance.

Myers highlights the close link between housing shortages and income and wealth inequality. He describes the way that constraints on building in places like London and the South East of England have an immediate effect of driving rents and house prices up beyond what people relying on ordinary wages can afford. In addition, this has various knock-on effects in the labour market. Scarcity of housing in London drives up wages in areas of high worker demand in order to tempt people to travel in despite long commutes, while causing an excess of workers to bid wages down in deprived areas.

One of the aims of planning restrictions in the UK is to ‘rebalance’ the economy in favour of cities outside of London but the perverse result is to make the economic paths of different regions and generations diverge much more than they would do otherwise. Myers cites a compelling study by Matt Rognlie that argues that most increased wealth famously identified by Thomas Piketty is likely due to planning restrictions and not a more abstract law of capitalism.

Rognlie also inspires my friendly critique of Thomas Piketty and some philosophers agitating in his wake just published online in Critical Review of International Social and Political Philosophy: ‘The mirage of mark-to-market: distributive justice and alternatives to capital taxation’.

My co-author Charles Delmotte and I argue that for both practical and conceptual reasons, radical attempts to uproot capitalism by having governments take an annual bite out of everyone’s capital holdings are apt to fail because, among other reasons, the rich tend to be much better than everyone else at contesting tax assessments. Importantly, such an approach is not effectively targeting underlying causes of wealth inequality, as well as the lived inequalities of capability that housing restrictions generate. The more common metric of realized income is a fairer and more feasible measure of tax liabilities.

Instead, we propose that authorities should focus on taxing income based on generally applicable rules. Borrowing an idea from Philip Booth, we propose authorities start including imputed rent in their calculations of income tax liabilities. We explain as follows:

A better understanding of the realization approach can also facilitate the broadening of the tax base. One frequently overlooked form of realization is the imputed rent that homeowners derive from living in their own house. While no exchange takes place here, the homeowner realizes a stream of benefits that renters would have to pay for. Such rent differs from mark-to-market conceptions by conceptualizing only the service that a durable good yields to an individual who is both the owner of the asset and its consumer or user in a given year. It is backward-looking: it measures the value that someone derives from the choice to use a property for themselves rather than rent or lease it over a specific time-horizon. It applies only to the final consumer of the asset who happens also to be the owner.

Although calculating imputed rent is not without some difficulties, it has the advantage of not pretending to estimate the whole value of the asset indefinitely into the future. While not identical and fungible, as with bonds and shares, there are often enough real comparable contracts to rent or lease similar property in a given area so as to credibly estimate what the cost would have been to the homeowner if required to rent it on the open market. The key advantage of treating imputed rent as part of annual income is that, unlike other property taxes, it can be more easily included as income tax liabilities. This means that the usual progressivity of income taxes can be applied to the realized benefit that people generally draw from their single largest capital asset. For example, owners of a single-family home but on an otherwise low income will pay a small sum at a small marginal rate (or in some cases may be exempted entirely under ordinary tax allowances). By contrast, high earners, living in large or luxury properties that they also own, will pay a proportionately higher sum at a higher marginal rate on their imputed rent as it is added to their labor income. Compared to other taxes on real estate, imputed rent is more systematically progressive and has significant support among economists especially in the United Kingdom (where imputed rent used to be part of the income tax framework).

This approach to tax reform is particularly apt because a range of international evidence suggests that the majority of contemporary observed increases in wealth inequality in developed economies, at least between the upper middle class and the new precariat, can be explained by changes in real estate asset values. Under this proposal, homeowners will feel the cost of rent rises in a way that to some extent parallels actual renters.

For social democrats, what I hope will be immediately attractive about this proposal is that it directly takes aim at a major source of the new wealth inequality in a way that is more feasible than chasing mirages of capital around the world’s financial system. For me, however, the broader hope is the dynamic effects. It will align homeowners’ natural desire to reduce their tax liability with YIMBY policies that lower local rents (as that it is what part of their income tax will be assessed against). If a tax on imputed rent were combined with more effective fiscal federalism, then homeowners could become keener to bring newcomers into their communities because they will share in financing public services.

Introducing: the Federation of Free States, an ongoing thought experiment

The most popular article I have ever written, in terms of views, has been, by far, “10 Places that Should Join the U.S.,” a short piece at RealClearHistory pining for an enlarged geographic area under the American constitution.

This is not a strange concept for longtime NOL readers. I’ve been pleading for stronger political ties between the U.S. and its allies for quite some time. There has been lots of push back to this argument, from everywhere. So I’m going to spend some more time explaining why I think it’d be a great idea for the American constitutional regime to expand geographically and incorporate more political units into its realm. Here is what an initial “federation of free states” would look like in, say, 2025:

NOL map United States in 2020 with 79 states

I’ve incorporated two of the strongest voices against such a federation, NOL‘s very own Michelangelo and Edwin. Michelangelo’s Pacific and Caribbean bias is somewhat acknowledged, and Edwin’s pessimistic socio-linguistic argument against adding continental European states to the federation has also been incorporated.

I’ve also tweaked the “10 places” that I originally saw fit to join the US.

In the map above I’ve got parts of Canada (the 3 “prairie provinces”) and Mexico (3 “ranching states”) joining the American federation. The prairie provinces of Canada – Alberta, Saskatchewan, and Manitoba – would be admitted as separate “states,” and would thus get to send 2 senators each to Washington. According to my napkin calculations, Alberta would only be sending 3 representatives to DC while Saskatchewan and Manitoba would only get 1 representative each in the House. The ranching states of Mexico – Coahuila, Tamaulipas, and Nuevo León – wold likewise be admitted as separate “states,” and would also get to send 2 senators each to Washington. These three states, which have plenty of experience with federalism already, are a bit more populated than the prairie provinces, but not by much. Nuevo León would send 4 representatives to DC, while Tamaulipas would send 3 and Coahuila, 2. Why be so generous to these polities? Why not lump them together into one unit each – a Mexican one and a Canadian one? Mostly because these new states would be giving up a lot to leave their respective polities. Military protection and the rule of law wouldn’t be enough, on their own, to persuade these states into joining the Federation of Free States. They’d need disproportionate representation in Washington, via their Senate seats, in order to leave Canada and Mexico and join the republic.

Antilles (Cuba, Dominican Republic, US Virgin islands, and Puerto Rico). This is a random collection of polities, I admit, and lumping them together into one “state” is even more random. But lump them together I would. On their own I don’t think these polities would do well in a federated system, even with their own Senate seats. There’s just not enough historical parliamentary experience in these Caribbean states. If they were lumped together, though, they’d be a formidable presence in Washington. While Antilles would only get 2 Senators, its combined population would be enough to send 19 representatives to the House, more than Florida, New York, and a gang of other influential states in the current union. At the heart of Antilles joining the US as a “state” in its union is a great trade off: sovereignty in exchange for the rule of law and democratic self-governance.

IsPaJo. Israel, Palestine, and Jordan would also be incorporated into 1 voting state, though I don’t have a good name for this state yet. This isn’t nearly as crazy as it sounds. The populations of these 3 polities would benefit immensely from living under the US constitution. Questions of property would be handled fairly and vigorously by the US court system, which is still widely recognized as one of the best in the world when it comes to property rights. Concerns about ethnic cleansing or another genocide would be wiped away by the fact that this new state is now part of the most powerful military in world history. Sure, this state would only get to send 2 Senators to Washington, but its representation in the House would be sizable: 18 representatives.

England and Wales (but not Scotland or Northern Ireland). England would be the crown jewel of the federation free states. The United Kingdom is dying. Scotland wants out. Northern Ireland wants to rejoin Ireland. In England, London is thriving but the rest of the country is suffering from the effects of de-industrialization. The kingdom’s once-vaunted military depends on the United States for nearly everything. Adam Smith put forth a proposal in his 1776 treatise on the wealth of nations that’s worth re-discussing here. Smith argued that the best way to avoid a costly war with the 13 American colonies was to give them representation to go along with taxation. He proposed that the U.K.’s parliament should add some seats and give them to North American representatives. This way both sides could avoid the whole “no taxation without representation” dispute. Smith further opined that, were this federation to happen, the center of the British empire would inexorably move in the direction of the North American colonies. England and Wales would both get to send 2 Senators to Washington, giving the Isle of Liberty 4 Senators in the upper house. Wales wouldn’t get much in the way of the lower house (only 2 representatives according to my napkin calculations), but England, in exchange for its sovereignty, would become the republic’s most populated “state” and would therefore get to dictate the terms of discourse within the republic in much the same way that California and Texas have been doing for the past 3 or 4 decades. That’s not a bad trade-off, especially if you consider how awful life has become in once-proud England.

Liberia. In 1821-22, the American Colonization Society founded a colony on the Pepper Coast of West Africa and called it Liberia. The aim of the colony was to provide freed slaves in the Americas a place to enjoy their freedom, since racism was still rampant in the Americas. The freedman quickly came into conflict with the locals (a clash of cultures that has continued into the present day). Liberia, governed by its New World migrants, declared its independence in 1847 but it wasn’t until 1862, in the early stages of the American Civil War, that the US recognized Liberia’s declaration. The African continent’s first and oldest republic, predating Ghana by over one hundred years, survived, as an independent entity, the Scramble for Africa in the late 19th century and has been at the forefront of regional coalition-building in Africa since the end of World War II (when the British and French empires collapsed). Liberia, like almost all republics, has decayed politically and socially, especially over the last few decades. Federating with the United States would do wonders for Liberians, and give the federation of free states a legitimate stamp on the African continent (and breath new life into America’s own republican decay). The West Africans would send 2 Senators to Washington, and about as many representatives as Louisiana or Kentucky.

Japan (8 “states”). With nearly 127 million people, Japan’s presence in the American federation would alter the latter’s composition fundamentally. Federating the United States with Japan also presents some logistical problems. As it stands today, Japan has 47+ prefectures, which are roughly the equivalent of US states. If we added them all as they are, the Japanese would get over 100 senate seats, which is far too many for a country with so few people. So, instead, I would bring Japan on board via its cultural regions, of which there are 8: Kantō, Kansai, Chūbu, Kyushu, Tōhoku, Chūgoku, Hokkaidō, and Shikoku. The country formerly known as Japan would get 16 Senate seats (which would be roughly divided between left and right) and the new “states” would be able to send a plethora of representatives, ranging from 32 for Kantō to 3 for Shikoku. In exchange for its sovereignty Japan would get the military protection from China it wants. The US would no longer have to worry about a free-rider problem with Japan, as its inhabitants would be citizens under the Madisonian constitution. It is true that a federation would lead to more non-Japanese people being able to migrate and take root in Japan, but this is a feature of federation, not a bug. (A federation of free states would devastate ethno-conservatism in several societies around the world.)

Micronesia.” Made up of 8 current countries and territories in the Pacific Ocean, Micronesia is also a cultural territory that encompasses a huge swath of the Pacific. While it doesn’t have a whole lot of people, Micronesia has been important to US military efforts in the Pacific for centuries. Federating with the area is the least we could do for the inhabitants of the Northern Marianas, Guam, the Federated States of Micronesia, the Marshall Islands, Palau, Nauru, Kiribati, and Wake Island. Micronesia would only get 1 seat in the lower house, but with 2 sitting Senators in DC the area would finally get a say in how the United States conducts its business in the region.

Visayas, Mindinao, and Luzon. These 3 regions in the Philippines would do much to enrich the federation of free states. Like Japan above (and South Korea below), the Philippines has a complicated representative system that would need to be simplified in order to better fit the Madisionian constitutional system. Through this cultural-geographic compromise, the Philippines would be able to send 6 senators to Washington, but these three “states” would also get to send more representatives to Washington than New York, Pennsylvania, and a bunch of other current heavyweights. There is already a long history between Filipinos and Americans, and while the first half century was a rough one for both peoples, today Filipinos hold some of the most pro-American views in the world. Of course, Americans who live near Filipino communities in the United States know just how awesome Filipinos are.

Taiwan. Even though Washington doesn’t officially recognize Taiwan as a country (a deal Washington made with post-Mao reformers on the Chinese mainland, in exchange for peace and trade), the two polities are deeply intertwined. Taiwan spends billions of dollars on American military equipment, and the U.S. spends significant political capital protecting Taiwan from China’s bellicosity. Taiwanese statehood would not only bring two close societies even closer together, it would force China to either fight the United States or reveal itself to be a paper tiger. That’s a gamble I’m willing to take, since China is a paper tiger.

South Korea (5 “states”). Another wealthy free-riding ally of the United States, South Korea has 5 cultural regions that could easily become “states” in a trans-oceanic federation: Gangwon, Jeolla, Chungcheong, Gyeongsang, and Gyeonggi. This would give South Korea 10 senators and 50 representatives (spread out according to population size, just like all the other states in the union).

Altogether we’re looking at adding 29 states to the union. That’s a lot, but I think you’ll find that not only would we be expanding liberty but also limiting the size and scope of the federal government, and forcing it to do more of what it is supposed to do: provide a standardized legal system with plenty of checks & balances and maintain a deadly, defensive military.

Ending Empire

Check out this map of known American military bases in the world today:

NOL known US bases
h/t Dissent Magazine

Expanding liberty and the division of labor are not the only positive side-effects of an enlarged federation under the Madisonian constitutional system. Ending empire – which is expensive and coercive, and gives the United States a bad name abroad – would also be a key benefit of expanding the republic’s territory.

Most American libertarians are isolationists/non-interventionists. Most European libertarians are wishy-washy hawks. Neither position is all that libertarian, which is why I keep keep arguing that “a libertarian position in foreign affairs should emphasize cooperation, choice, and trade-offs above all else.” Non-interventionism is uncooperative, to say the least, but you could argue that it’s at least a position; the Europeans seem to take things on a case-by-case basis, which is what you’d expect from a people who haven’t had to make hard foreign policy decisions since 1945. Open borders is a cool slogan, but that’s just a hip way of arguing for labor market liberalization.

It’s time to open up our doors and start talking to polities about going all the way.

Nike’s speech rights?

Nike’s decision to scuttle the Betsy Ross flag shoe design says so much about how touchy we’ve become as a society. Maybe Nike’s being too politically correct, maybe Nike’s critics are being too outraged. Probably both. What interests me, though, is Arizona’s threat to withdraw financial incentives dangled in front of Nike as an incentive to build a plant in the state. Does this implicate Nike’s free speech rights? I think it might.

The interesting aspect of this scenario is that it features the flip sides of two coins. Rather than being punished for speaking, Nike is being punished for refraining to speak. And rather than punishing my Nike by, say, imposing an additional tax, Arizona is threatening to withdraw an incentive that the state isn’t obligated to provide in the first place.

As to the first point, it has long been clear that expression itself is not the only thing protected by the free speech guarantee. Rather, the First Amendment protects decisions about expression, including the decision not to engage in speech. The unusual aspect of this situation is that the government is not trying to compel Nike to speak a message created by or sponsored by the government. Rather, Arizona is penalizing the company for creating its own expression and then changing its mind. Still, I think this would likely be considered to be part of one’s right not to speak.

As to the withdrawal of incentives, the free speech guarantee forbids the government from placing an unconstitutional condition on a government benefit–i.e., you better sell that shoe with the Betsy Ross flag on it, or you don’t get those tax breaks. Government can’t force someone to waive a constitutional right in exchange for a government benefit.

The other interesting question here is whether Nike’s speech–or lack thereof–would be considered commercial speech, which is less protected than other forms of speech. In a way, the Betsy Ross flag shoe nicely demonstrates why this is a silly distinction–the flag has deep political meaning. Why does it matter that it’s printed on a retail shoe rather than stuck on a sign in someone’s yard?

In any case, it seems like there’s a plausible free speech problem behind Arizona’s overreaction, here. I’m curious to see if anything comes of it.