Hayek, or the Recursive Model of the Rule of Law

What Friedrich A. Hayek sought with his three volumes of Law, Legislation and Liberty was to propose a legal-political system in which the Rule of Law principle would not be de facto replaced by the rule of men through laws (Rule by Law).

To do this, he built a recursive model of a legal system whose initial conditions were the legal customs as the only source of law. Thus, in such a system, the rule of recognition  –in the sense of H.L.A. Hart’s concept– would initially regard the customary law as the only set of rules to be enforced by the government.

In the said model of legal system, the law is separated from the state, which enforces the former and legitimises itself by that enforcement. Sovereignty resides in the law and the state is its agent and executor – but, without the said enforcement, the customary law -the initial condition of the recursive model- would only be natural law.

From a genealogical point of view, in Middle Ages monarchs were entitled as rulers by a law of succession derived from customary norms and it is from that mediaeval period that the term “Rule of Law” comes: Since their prerogative of ruling had come from legal customs, the rulers had the moral duty of enforcing them – which, in turn, acted as a limit to the power of the rulers, or at least to their legitimacy.

Evolutionarily, the administration of public affairs -as related by Max Weber in his General Economic History– ceased to be in the hands of wise men and mandarins, advisers to the monarchs, to become a matter managed by jurists, who incorporated for the decision-making and its justification the procedures and figures of private law: the social contract, the commission, decisions based on evidence, etc.

Such evolutionary emergence of the public law set new boundaries to the legitimate use of power by the rulers, in many occasions needing a written document to warrant them, such as the Magna Carta, the Bills of Rights or the declarations inserted in the Modern constitutions.

Consequently, successive layers of legality were added to the initial conditions of Hayek’s model of political legal system: constitutional laws, declarations of rights, principles and guarantees, procedural laws and statutes. It was these same legal concepts of private law that allowed giving a legal foundation to the nascent republics of the Late Middle Ages, for example, the legal figures of association, representation, etc..

However, Hayek already complained in The Constitution of Liberty –and later in Law, Legislation and Liberty again- about the consequences of the sovereignty of parliaments, that is, the competence of the legislative chambers to enact laws, replacing legal customs. It was the principle of popular sovereignty that rendered obsolete the principle according to which customary law acted as a limit to the rulers separated from the people, since the people went on to govern themselves and make their own laws.

This emancipatory narrative -in terms of Jean Francois Lyotard- collides with the evidence that, on numerous occasions, we do not obtain in return the Rule of Law but rather the rule of men through laws emanating from political will. Consequently, the path is open for critics of the Rule of Law to denounce its inconsistencies: a government of laws created by the rulers themselves is a mere masking of the political will, which is not legitimated by law but by the pure imposition of the force.

That is why the ultimate message of Hayek’s legal and political works consists of a sort of return to initial conditions of his model of relations between law and politics: legal norms are ineffective without the enforcement provided by the public force, but the process of creating them can be disentangled from that enforcement.

Of course, the choice by the political system on which norms to enforce -that is, the enunciation of a rule of recognition- can mean in itself an act of creation of law; but if, on the other hand, a constitutional system foresees the separation of the legislative functions from the functions of government, obliging the latter to enforce the laws emanating from the former, the distinction between the Rule of Law over the rule of the men is restored.

As Hayek himself recognized in his work, his proposal to create two separate assemblies, one legislative and the other governmental, is not really a proposal intended to be put into practice, but rather an ideal model that exemplifies a concept that is as fundamental as it is abstract and elusive: the separation between law and political power.

Beyond the feasibility of Hayek´s model, it does provide a demarcation criterion between liberal democracy and authoritarianism: the one that indicates that the main duty of a government towards its citizens is to enforce the rules of peaceful coexistence that respect the so-called fundamental rights, such as life, personal liberty and property, and that any program of social transformation or economic development can never justify their abrogation. Thus, any rulers who do not take into account such institutional restrictions to their policies would be involved in a true road to serfdom.

Some Monday Links

Perfectionism: a modern malady born in the Middle Ages (CBC)

Why don’t nations buy more territories from each other? (Marginal Revolution)

I’m Put on the Spot—and Forced to Defend the Humanities in a Room Full of Medical Students (The Honest Broker)

The last link is from Ted Gioia, a – I understand – musician and author of note. Since my oldest one started a preliminary class in keys, I have tried some cursory delves in the music department, where I’m totally lacking. The particular blog offers insights from music history, culture and business.

Nightcap

  1. The Philadelphian System: Sovereignty, Arms Control, and Balance of Power in the American States-Union, Circa 1787-1861” (pdf) Daniel Deudney, International Organization

Nightcap

  1. Hamas’ Gaza-last strategy Michael Koplow, Ottomans & Zionists
  2. Race/Ethnicity, Religious Involvement, and Domestic Violence” (pdf) Christopher Ellison, et al, VAW
  3. Love in the ruins of the sexual revolution Josh Herring, Law & Liberty
  4. The logistical state Chris Shaw, Libertarian Ideal

Nightcap

  1. Expansion and Incorporation into the US Republic (pdf) Max Edling, JICH
  2. The Savage Constitution (pdf) Gregory Ablavsky, DLJ
  3.  
  4. The Emergence of Sovereignty (pdf) Julia Costa Lopez, ISR

Nightcap

  1. The International Dimension of the US Constitution (pdf) Tom Cutterham, JAS
  2. How China avoided Soviet-style collapse Adam Tooze, Noema
  3. Really good essay on sovereignty (pdf) David Strang, SSSC
  4. Foreign Relations between Indigenous Polities 1800-1920 (pdf) Brian DeLay, CHAW

The case for Taiwan’s statehood

When Russia invaded Ukraine a few short weeks ago, some people began to worry that China might try to do the same thing with Taiwan. I didn’t worry about this myself, as China is mostly a paper tiger, but also because the US has close military ties with Taiwan. Taiwan has close economic relationships with several wealthy democratic states in East Asia, too. Contrast this geopolitical context with Ukraine, and the parallels, while tempting, do not add up.

The whole debate and worry over Taiwan got me thinking again about federation as a libertarian foreign policy. Why shouldn’t Taiwan just join the United States? Here are the most common objections to such a federation:

Geography. This is probably one of the strongest cases against Taiwan joining the US, since it’s so far away from not only the mainland but Hawaii, too. Aaaand it’s just off the coast of China, which would likely cause friction with the regional power were Beijing to suddenly find itself neighboring a transoceanic republic.

This is all much ado about nothing. A plane ride from Dallas to Taipei is 14 hours if you take out the layovers. Somebody living in Kaohsiung could send me an email after reading this essay and I could access it within minutes. Geography still matters, but its not an insurmountable barrier to a freer, more open world via the federative principles of the United States constitution.

Culture. A big complaint I see about adding “states” to the American republic is “culture.” Fellow Notewriter Edwin does this all the time, and it can make sense, on the surface, in some cases, but not in Taiwan’s, and not in the Indo-Pacific more generally.

Look at Taiwan’s 2020 presidential election results:

Look familiar? There’s only two colors. It’s a contest between a left-wing and right-wing, and both wings are committed to, and bound by, liberty and democracy. There are no “ethnic” parties, no “religious” parties, and no radical parties, mostly because Taiwan has the same electoral system as the US does: a “first-past-the post” one. So the cultural angle is even weaker than first imagined. Taiwan started out as a nationalist holdout against the Communist Party, but today nationalism doesn’t carry a whole lot of weight. Adding Taiwan to the republic would be like adding another California or Hawaii, albeit with more conservative votes. It’s plausible that adding Taiwan would give Democrats two more reliable seats in the senate, but this is merely cause to invite a polity that would reliably vote Republican to also join the United States.

Self-determination / cultural autonomy. There’s an argument in some circles that joining the US would be akin to losing self-determination and even cultural autonomy. I don’t see how any of this could be true. Even today, people in American states retain a “state-centric” identity when it comes to thinking about their place in the US. That Taiwanese would be able to add “American” to a plethora of other identities already at their disposal could only be a good thing.

China. Would China fight a war against the US over Taiwan statehood? Maybe, but given Russia’s poor showing in Ukraine, the war would end quickly, at least from a Taiwanese statehood perspective. The CCP’s military has no fighting experience, unproven tech, unproven hardware, and…no fighting experience. The worst that would happen, I think, is that the CCP threatens war, maybe sends some warships to the strait, maybe fires some rockets over the island and flies some fighter jets over the island, but that’s about it. The CCP just doesn’t have the muster to fight a war against the United States over Taiwan.


These four objections are so common that I can’t help but be exasperated by their banality, especially given the rich tradition of republican security theory and federalist thought over the past three or four thousand years. There are two reasons for Americans, and especially libertarians, to support Taiwan’s federation with the US:

The free riding problem. The first thing that all libertarians complain about when it comes to “foreign policy” is the free riding problem. This is a problem in political economy where agents will enjoy the benefits of a policy at the expense of other agents who are required to bear the costs. Libertarians aren’t wrong to complain about the free riding problem. It’s a big problem. Think of a Russian attack on NATO ally Lithuania.

Taiwan has a fairly hard guarantee of US military support were the Communist Party of China to attack it. This, the argument goes, allows Taiwan to be a bit more reckless than it otherwise would be when dealing with Beijing. Therefore, according to non-interventionists, the US should simply stop guaranteeing Taiwan’s military security and just trade with the people of the island instead. It would be an awful scenario to face were Taiwan to goad China into attacking it and thus draw the US into a war with China.

Federating would end the free riding problem once and for all. Taiwan’s citizens would be American citizens. They would benefit, and pay the costs, associated with such citizenship.

Sovereignty. Taiwan is not a sovereign nation-state, as China has blocked all of the island’s attempts to become so, and it never will be so long as nation-state status depends upon recognition by large states such as Russia and China (as well as the US). This actually makes it easier for Taiwan to join the republic. The American senate is a tool of international diplomacy that was utilized to bind independent states together in a federal union by trading their sovereignty for seats in a powerful upper house of Congress. Taiwan wouldn’t have to go through the arduous process of debating whether or not its sovereignty is worth the price of admission into a North American federal order, because its status as a Westphalian sovereign nation-state is non-existent.

By incorporating Taiwan into its federal order, the US could revamp the liberal world order, and it could do so by adhering to the principles which made it a beacon for liberty in the first place.

No nightcap tonight

I’m buried in a special issue for Cosmos + Taxis. It’s gonna be awesome. It’s on libertarian foreign policy. The list of authors contributing is astounding, but the list of peer reviewers might be the crowning achievement of the issue. I’m dealing with academic rock stars.

Some of the subjects being tackled in the issue:

  • human rights and the liberal world order
  • indigenous sovereignties
  • the populist world order
  • Somaliland
  • hawkish libertarian world orders
  • F.A. Hayek
  • the polycentric orders of pre-colonial Nigeria

Nightcap

  1. State anarchy as order (pdf) Hendrick Spruyt, International Organization
  2. Classical liberalism, world peace, and international order (pdf) Richard Ebeling, IJWP
  3. Sovereignty in Mesoamerica (pdf) Davenport & Golden, PSP-CM
  4. The distributive state in the world system (pdf) Jacques Delacroix, SCID

Some Monday Links

Beyond the Nation-State (Boston Review)

The Failure of a Socialist Dreamer (Law & Liberty)

A New Guild System (The Hedgehog Review)

Our (Mis)represented Digital Rights (CIGI)

State formation in Korea and Japan

State formation in Korea and Japan occurred a thousand years before it did in Europe, and it occurred for reasons of emulation and learning, not bellicist competition. Korea and Japan emerged as states between the 4th and 8th centuries CE and existed for centuries thereafter with centralized bureaucratic control defined over territory and administrative capacity to tax their populations, field large militaries, and provide extensive public goods. They created these institutions not to wage war or suppress revolt – the longevity of dynasties in these countries is evidence of both the peacefulness of their region and their internal stability. Rather, Korea and Japan developed state institutions through emulation and learning from China. State formation in historical East Asia occurred under a hegemonic system in which war was relatively rare, not under a balance of power system with regular existential threats. Why? We focus here on diffusion through a combination of emulation and learning: domestic elites copied Chinese civilization for reasons of prestige and domestic legitimacy.

This is good, and it comes out of the most interesting journal in international relations today, but it doesn’t quite do it for me. I think China’s imperialism was far looser than contemporary scholars imagine, especially as China spread territorially outside of its cultural hearth. I think China’s imperial sovereigns were more akin to Emperors in the Holy Roman Empire than, say, Louis XIV. I do think that Japan and Korea mimicked China, which is exactly why both countries had relatively decentralized political systems up until the 19th and 20th centuries.

Contemporary scholarship has a soft spot for pre-modern (before 1500 AD) non-Western state systems, so you get stuff like this. Again, this is a great article, and you should read it right now, but I don’t buy it. I don’t think Japan and Korea were states that existed for centuries “with centralized bureaucratic control defined over territory and administrative capacity to tax their populations, field large militaries, and provide extensive public goods.” That’s too rich for my blood. There were cultural hearths and polities in Japan and Korea that tried to mimic China, but sovereignty was still far too fractal until the Europeans arrived with their formal imperialism. See this piece for an example of why I’m skeptical of the author’s claims.

Immigration in the Time of Joe Biden: What to Do (Part 4 of 11)

The Nation-State and Borders

Nation-states have to possess immigration policies or they cease to exist. I mean any number of things by “cease to exist,” including falling apart organizationally and economically, to the point of being unable to provide a minimum degree of order, of predictability. (This last sentence might rub pure libertarians the wrong way. I am willing and eager to engage them on the topic of nation-states, societies, and social order.) This failure to function can be the result of an influx of large numbers of immigrants unable to provide for themselves, obviously. I am not suggesting that this is the only possible cause. It’s one cause and it’s staring us in the eyes as I write (April 2021, three and half months into the Biden presidency).

More prosaically, but also a little mysteriously, “cease to exist” may simply refers to the nation-state becoming something else, subjectively less desirable than what it was. The insulting word “nativism” does not do justice to the complex and subtle issues involved here.

Right now, for example, many French people believe that the large presence in their midst of un-assimilated Muslim immigrants endangers the fundamental building blocks of their society’s ethics and laws. These would include, for example, the separation of church and state (of religion and government) and the equality of men and women. Many French people who are not “white supremacists,” (or, more pertinently perhaps, not Christian supremacists) are calling for an end to all Muslim immigration. (Note that I have said nothing about whether I believe their fears are justified.)*

Guarded national borders have been the conventional way to protect the nation-state since the mid-19th century. They don’t have to be but other available methods are even less palatable to those who love freedom. If, for example, every resident of the US carried a personally identified GPS that it is illegal to turn off, it would be easy to monitor the totality of the population. Those moving about without an authorized GPS would stand out. Legal immigrants might be given a GPS with a different signal. Legal visitors who are not immigrants would get yet another with a signal set to come off on or just before their visa expiration. Illegal immigrants would carry no authorized GPS. This absence would designate them the attention of immigration authorities. (Of course, fake GPS would soon be for sale but they would be more difficult to create than are current SS card and other such paper or plastic documents.) And, thinking about it, a microchip painlessly implanted under each person’s skin might work even better! See what I mean about guarded borders not being so repugnant after all?


*The French left-wing media do not offer substantive arguments to calm the widespread alarm raised by the center, by the right, by many others. Instead, they try to make the alarmed feel guilty of “Islamophobia,” supposedly a close cousin of racism. This accusation quickly losses forces because many people realize that Islam is a set of beliefs and of values that Muslims are free to abandon, unlike race. At least, they may abandon it in the French legal context. (In several Muslim countries, such “apostasy” is theoretically punished by death.) By the way, a month before this writing, I talked on a Santa Cruz beach with a pleasant young French Muslim, a pure product of French public schools born in France. He told me calmly that he believed French law should forbid blasphemy.

With all the agitation and all the negative emotions, people with Muslim names appear well represented at all levels and in all sectors of French society. (Firm numbers are hard to come by because the French government does not allow its various branches to collect information on religious affiliation nor on ethnicity.) And, by the way, I just love what Arabic influence has done to French popular music and songs.

[Editor’s note: this is Part 4 of an 11-part essay. You can read Part 3 here, or read the essay in its entirety here.]

“The German Question” of the 19th century

I know most of NOL‘s American readers are familiar with the German question that puzzled the Allies after World War II, but there was a different German Question that puzzled statesmen and policymakers in the 19th century:

From 1815 to 1866, about 37 independent German-speaking states existed within the German Confederation. The Großdeutsche Lösung (“Greater German solution”) favored unifying all German-speaking peoples under one state, and was promoted by the Austrian Empire and its supporters. The Kleindeutsche Lösung (“Little German solution”) sought only to unify the northern German states and did not include any part of Austria (either its German-inhabited areas or its areas dominated by other ethnic groups); this proposal was favored by the Kingdom of Prussia.

And this:

While a number of factors swayed allegiances in the debate, the most prominent was religion. The Großdeutsche Lösung would have implied a dominant position for Catholic Austria, the largest and most powerful German state of the early 19th century. As a result, Catholics and Austria-friendly states usually favored Großdeutschland. A unification of Germany led by Prussia would mean the domination of the new state by the Protestant House of Hohenzollern, a more palatable option to Protestant northern German states. Another complicating factor was the Austrian Empire’s inclusion of a large number of non-Germans, such as Hungarians, Czechs, South Slavs, Italians, Poles, Ruthenians, Romanians and Slovaks. The Austrians were reluctant to enter a unified Germany if it meant giving up their non-German speaking territories.

This is from Wikipedia, and it appears that the German Question of the 20th century was still the same one as the 19th century. It took an invasion by the Soviet Union and the United States to decisively answer the question. Happy Easter!

Monetary Tales from the Farthest Shore

The second bank by the sea

My music playlist has nearly stagnated for years and, depending on your age, maybe yours has too. Evidence suggests that (partly) because of mind shenanigans, our musical palette does not quite expand past the age of 30. I think that something similar goes for gaming. I am still fond of those (pc) games from my late teen – early adult years and stay happily ignorant about the newer ones. Those single player games immersed you through substance over eye-candies. Some in-game scenes remain pure gold after all these years. Like that dialogue, when one of my younger siblings was delving in a fictional setting resembling the Caribbean during the Golden Age of Piracy. (Escape from Monkey Island. I preferred RPGs. Nowadays, only books – like this one.)

At some point, the protagonist, a witty swashbuckler, visited the Second Bank of an island called Lucre. “What happened to the First Bank of Lucre?”, he inquired. “Nothing”, said the bank teller, “It was our public relations department’s idea. They felt that being called the ‘First’ bank didn’t project an image of experience”. At the time I thought it as just a funny anachronism. Later, I recognized a jab to brand marketing practices and the corporate-speak more generally. But it was also the scheme of a “fledgling” first banking institution versus a “trustworthy” second one that almost held a real-world analogy. 

Some kind of a theory

There is a rich discussion on the origins of money, its form and the proper control of it, as well as a few historical cases of either state or private currencies thriving – or failing. Hard. In the thick of it, we talk about two positions. From the one hand, the “economics textbook” approach proposes that money emerged in the realm of private economic relations, to minimize transaction costs and facilitate trade. (Francisco d’Anconia would approve.) Here be a decentralized, bottom-up acceptance of the medium of exchange. This view sits well with the classical liberal dichotomy between the civil and state spheres, which can be expanded to envision a very limited role for the state in monetary affairs. From the other hand, the “anthropological – historical” position articulates that trust on money comes mostly from the sovereign’s guarantee, marked by the sign of God and/ or Emperor. This top-down explanation is more receptive to the state control of money, rhyming with the monetary power as a prerogative of the ruler and an expression of sovereignty. 

Beginning with some important judicial decisions in the second half of 19th century, the official assertion of state power over money came in the 20th century. Per the Permanent Court of International Justice, in 1929, “it is indeed a generally accepted principle that a state is entitled to regulate its own currency”. You know, the norm of modern national monetary monopolies. There was a time though, when things were more colorful and less unambiguous. From the 13th century onward to the Golden Age of Piracy and beyond, it was only normal for different monies of various issuers to flow from one territory to the other. Reputable currencies required not only a resilient authority backing them, but also a nod by society and custom. This kind-of-synthesis of the two positions outlined above rung especially true in the case of the young Greek state in 1830s – 1840s. (For this section I draw from the comprehensive “History of the Greek State 1830 – 1920”, by George B. Dertilis [the 2017 Crete University Press edition, in Greek. An extended version, under a different title, is forthcoming in English in 2021/22]. Btw, on Mar. 25 we celebrate 200 years from the Declaration of the Greek Revolution versus the Ottoman rule, an [underrated?] event with connotations of nationalism and liberal constitutionalism.)

Over there at the (Balkan) shore

As the new state needed to break free from all the institutions of Ottoman Empire, its hastily assembled first Bank of Issue sought to introduce a new national currency (the Phoenix). The impoverished, ravaged and cut off from international debt markets nascent state reflected bad upon the Bank. The government tried to force public’s trust via legislation. By decree, payments from/ to the state coffers would include a mandatory percentage of the new banknotes (later the percentage was set at 100%). Revenue from state natural resources – present and future – would back the currency. The administrative magic did not do it. The public actively tried to avoid the Phoenix banknotes, in favor of traditional silver/ gold coins. Bank and currency failed to crowd out the foreign monies and ultimately went out of business. A few years later, the overall environment had improved somewhat and a more vigorous state established the second Bank of Issue. Another new national currency, the Drachma, was already circulating in – copper – coins along with the foreign ones. 

The second Bank received an exclusive charter of issue and undertook the task to roll-out the Drachma banknotes (silver/ gold coins would follow) and, in doing so, integrate the fragmented Greek countryside to a more cohesive national economy. Up until then, the local markets had operated as loosely hierarchical oligopolies. At the bottom of the chain, each small village or group of villages was dependent on a merchant-money lender who held monopsonistic power over the (tiny scale) agricultural production and, at the same time, monopolistic power in cash and credit. These rural businessmen depended on the respective merchant-money lender of the nearest town for brokerage. Next in line was the merchant-money lender of the nearest city, usually with access to international trade routes. You get the picture. These informal networks contained competition among neighboring lesser merchant-money lenders and promoted trade through a complex web of transactions (involving forward contracts, insurance premiums and bills of exchange, among others). (The official site for the anniversary features a fancy piece about the first attempts to establish a national bank as well. It includes a few names and dates, while noticing the “exploitative” networks and the “primitive” credit system .I find its lack of nuance disturbing somewhat misleading.)

Becoming one with the forces

The Bank opted to tap and complement the existing disjointed market forces, in order to gently nudge them. It channeled its primary tool, lending in banknotes, to the local money markets, firstly, to a limited number of large merchant-money lenders, later to the middle ones. (According to the Bank’s ledgers, these clients usually chose respectable job titles, such as “Banker” or “Broker”. Others, a bit blunter, went by the Greek equivalent of “Usurer”.) This lending – apart from being short-term, relatively safe and profitable – enabled the Bank to gradually assume a leading position, without the need to deep dive at the specifics of each end-user of the market. The soft, indirect entry in the century-old customary networks lowered the cost of money and contributed to the integration of the national economy. The transition was not always smooth, with the occasional episode (people switching from banknotes to metallic coins, the Bank returning the favor by aggressively cutting back lending, the government setting compulsory percentages etc  – you know the drill), but still, the stakeholders’ incentives aligned. Society at large recognized Bank and currency, with the system reaching a workable equilibrium

The merchant-money lender of old was finally phased-out by regular bank lending in the next decades. Further underpinned by a cozy relationship with the state (always a valuable client, usually a partner, sometimes even an opponent), the Bank acted as a quasi-central banking institution until 1928, when the charter was transferred to the newly found Bank of Greece. The Drachma continued as official legal tender (albeit with numerous conversions) until the end of 2001.

Nightcap

  1. Should international law be part of our law? (pdf) McGinnis & Somin, Stanford Law Review
  2. Are small autonomous political units economically viable? Chhay Lin Lim, NOL
  3. Institutions, machines, and complex orders Federico Sosa Valle, NOL
  4. Classical liberalism and the nation-state Edwin van de Haar, NOL