Category Archives: Richard Posner

Richard Posner: Constitutional Interpretation

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Is investor state dispute settlement a form of overseas development assistance?

Would objections to the Investor State Dispute Settlement provisions in the proposed Trans-Pacific Partnership wilt away if the adjudicating body was the International Court of Justice? The left-wing opponents of investor state dispute settlement genuflect at the very mention of the International Court of Justice and international law generally (unless it is international economic law).

Disputes over the provisions of European union treaties are adjudicated by the European Court of Justice. The judgements of that court brought by individuals against member states so annoy the British that it is a leading reason for many British wanting to leave the European Union and replace the Human Rights Act 1998 with a British Bill Of Rights policed by British courts rather than by the European Court of Justice and European human rights law.

It is routine for any treaty to have some provision for arbitration of disputes. This includes trade and investment treaties.

The World Trade Organisation treaty includes a dispute settlement provision with arbitrators based in Geneva. Some of the more than 400 cases heard have been motivated by discrimination against imports on the basis of a breached environmental protection policies of the importing country.

A number of countries want to ban imports that are produced in ways that upset them. Others want to include labour and environmental standards in trade agreements to impose developed country standards on developing countries in what is a new form of colonialism.

I have previously said that investor State Dispute Settlement provisions have no place in trade and investment treaties between democracies. I must now admit there are good reasons to have arbitration clauses in treaties between democracies.

The puzzle is why refer these trade and investment disputes to a little-known arbitration body adjunct to the World Bank rather than the far more prestigious International Court of Justice.

Perhaps the reason is both sides want an arbitrator who is not too strong and not too credible. It would look very bad if the International Court of Justice was to rule against you.

William Landes and Richard Posner contended that judicial independence maximises the value of legislative deals with interest groups by enhancing the durability of those deals.

Why no International Court of Commercial Law? When deciding what type in judiciary to enforce international trade bargains, the signatories may prefer a less credible adjudication and enforcement mechanism in case they want to opt out of it or chip around the decision.

The jurisdiction of the International Court of Justice is to settle, in accordance with international law, legal disputes submitted to it by special agreement and matters specifically provided for in treaties and conventions in force.

UN member states are the parties to any litigation but that doesn’t stop them raising cases on behalf of individuals. That said, organizations, private enterprises, and individuals cannot have their cases taken to the International Court, such as to appeal a national supreme court’s ruling. Only the states can bring the cases and become the defendants of the cases.

The International Court of Justice is different from the European Court of Justice because individuals cannot easily bring complaints before it. One of the causes of action before  the European Court of Adjusters is under European competition law over member states providing financial aid to industries.

Democratic countries with high levels of economic and  social integration, such as the  European union, do find it in advantage to set up a European wide Court to adjudicate disputes over rights under European law.

Why then would a democracy sign up to an investment protection treaty with a developing country? One reason is overseas development assistance.

Developing countries with corrupt and incompetent courts, politicians and bureaucracies sign international treaties as a way of assuring foreign investors and trading partners of some degree of security of their property rights and their ability to enforce contracts with suppliers and buyers.

By folding these assurances into trade treaties, the developing country has a stronger incentive to honour its promises. There will be domestic constituencies wanting to retain reciprocal export market access who will lobby for the honouring of the promises of legal protection to investors and businesses in their home country.

New Zealand signing up to the Trans-Pacific Partnership is an example of this form of overseas development assistance. Exporters and investors from the developing country who export and invest in New Zealand have another reason to support more secure property rights and better enforcement of contracts in their home country as a way of securing their treaty rights to export and invest in New Zealand.

The Left of the political spectrum should be keen on this form of overseas development considering their general belief in greatly increasing the amount spent on overseas development assistance. Rather than pay cash to the development country, the payment is in kind as reciprocal legal promises.

Trade treaties that include investor state dispute settlement are forms of governance assistance to developing countries. The reciprocal exchange of promises about investor protection and the enforcement of contracts and property rights improves the quality of governance in the developing country.

The countries most likely to be subject to investor state dispute settlement are those with weaker governance. Even in the European Union, the member states most likely to be sued are former communist countries. The most common course of action was the cancellation of a licence or permit.

Investor state dispute settlement clauses are no different from any other international treaty include environmental and human rights treaties. All these treaties require countries to give up part of their sovereignty.

Democracies give up their sovereignty in investor state dispute settlement in the hope that developing country partners to the treaty will improve the development potential of their country through better governance and more secure property rights.

That is an overseas development aid objective the Left of the political spectrum should support, but it does not. The Left of the political spectrum is happy to use trade agreements to impose developed country labour and environmental standards on poor countries desperate for access to rich country markets, but is not willing to give up anything in return.

Labour Party betrays working class again: nanny state obligations to enrol to vote

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Extraordinary. Political junkies don’t realise that there are people out there that have better things to do with their lives than take an interest in politics.

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It’s a free society. They are free not to listen, not engage and not vote for anyone. Free speech includes a right not to speak and not to participate. If you disappointed with that political apathy, put forward a party platform that excites them enough to vote. Get out the vote by being worth voting for.

What is more extraordinary is a party that claims to speak for the working class first opposed obligations on welfare benefit receipt regarding looking more intensively for work and paying court fines and so forth, but it is happy to use the same provisions for their own political advantage because they are on the ropes. The New Zealand Labour Party’s party vote at the last election was at record low levels. It is still at the same level in the opinion polls.

As for voter registration drives in working-class electorates, the New Zealand Labour Party has no large donors apart from unions. The reason for this is as their former president, Mike Williams says " if you don’t ask, you don’t get ".

Voter registration is voluntary in the USA and for all its flaws, and I think there are far fewer than people say, Richard Posner could still give an excellent defence of political participation in the USA:

American democracy enables the adult population, at very little cost in time, money or distraction from private pursuits commercial or otherwise, to punish at least the flagrant mistakes and misfeasances of officialdom, to assure an orderly succession of at least minimally competent officials, to generate feedback to the officials concerning the consequences of their policies, to prevent officials from (or punish them for) entirely ignoring the interests of the governed, and to prevent serious misalignments between government action and public opinion.

Too many as Richard Posner has argued well in his writing want to remake democracy with the faculty workshop as their model. Such deliberation has demanding requirements for popular participation in the democratic process, including a high level of knowledge and analytical sophistication and an absence, or at least severe curtailment, of self-interested motives.

Much empirical research demonstrates that citizens have astonishingly low levels of political knowledge. Most lack very basic knowledge of political parties, candidates and issues, much less the sophisticated knowledge necessary to meet the demands of a deliberative democracy.

One reason for these low levels of political knowledge is a large number of people are simply not interested in politics even if they have the time to take an interest.

Because of this political ignorance and apathy, Posner championed Schumpeter’s view of democracy. Schumpeter disputed the widely held view that democracy was a process by which the electorate identified the common good, and that politicians carried this out:

  • The people’s ignorance and superficiality meant that they were manipulated by politicians who set the agenda.
  • Although periodic votes legitimise governments and keep them accountable, their policy programmes are very much seen as their own and not that of the people, and the participatory role for individuals is limited.

Schumpeter’s theory of democratic participation is that voters have the ability to replace political leaders through periodic elections. Citizens do have sufficient knowledge and sophistication to vote out leaders who are performing poorly or contrary to their wishes.

The power of the electorate to turn elected officials out of office at the next election gives elected officials an incentive to adopt policies that do not outrage public opinion and administer the policies with some minimum honesty and competence.

The outcome of Schumpeterian democracy in the 20th century, where governments are voted out rather than voted in, is that most of modern public spending is income transfers that grew to the levels they are because of support from the average voter.

Political parties on the Left and Right that delivered efficient increments and stream-linings in the size and shape of government were elected, and then thrown out from time to time, in turn, because they became tired and flabby or just plain out of touch.

I wouldn’t revel too much on the higher voter turnout  as as yet another saviour on the horizon to bring the Left over Left back from the political wilderness. The most votes ever won by a political party in the UK was 14 million by John Major’s Tory party in 1992 when the shy Tories came out in force to re-elected the incumbent government much the surprise of the opinion polls.

Higher voter turnout is not necessarily always a good thing in terms of good governance. William Shughart found that voter participation increases in gubernatorial elections in the USA when evidence of corruption mounts. Candidates, political parties, and interest groups have incentives to invest in mobilising support on Election Day.

Those who stand to gain from being office through their corruption invest considerable resources in mobilising voter turnout that is in their favour. Corruption increase the value of winning public office and strengthens the demand-side efforts to build winning coalitions.

In a prophetic article at the dawn of the Internet, Robert Tollison, William F. Shughart II, and Robert McCormick wrote in 1999 about how voting is not the only way in which people express their political preferences effectively.

Observers of American democracy complain that voter turnout and voter registration are low and had been low from 50 years. Tollison, Shughart, and  McCormick reminded these critics that:

Voters now have more political information available to them than ever before, and they are no longer confined to expressing their political preferences at the polls once every two or four years.

Newly available technologies have lowered voters’ costs of becoming informed about political issues and of communicating with their political representatives.

Voter registration and voter turnout is lowest among young people who also happen to be the most Internet savvy. This is not surprising considered the prophetic observation of Tollison, Shughart, and  McCormick in 1999 that:

What is more important, the opinions voters form on the basis of the information available to them can be communicated to policy makers rapidly and effectively.

E-mails, faxes, and phone calls are substitutes for ballots. By the time an election rolls around, politicians and policy makers already know what the voters think and, hence, their wishes have already been incorporated into laws and policies.

Tollison, Shughart, and  McCormick asked why vote when you have already influenced political outcomes through alternative means between elections such as social media:

Having affected policy outcomes, voters are naturally less interested in voting on candidates. Low turnout rates on election day may paradoxically be evidence of greater voter participation in the political process.

In fact, we are fast approaching a return to the town meeting, where individuals register their preferences on specific policy proposals and politicians can assess the intensities of those preferences by reading their e-mail. Indeed, voters can vote as much and as often as they want in the information age.

It is not surprising therefore in this prophetic article that Tollison, Shughart, and  McCormick predicted that politicians would pay close regard to social media, and if they did, democracy works:

As long as politicians are good agents who read their faxes and e-mails correctly, voters will correspondingly have less need to go to the polls.

Voters will vote only when their representatives ignore their electronic opinions. Indeed, that is the implicit threat.

And because voters don’t have to go to the barricades to voice those opinions, political discourse should become more civil and political protests less frequent and disruptive.

HT: Nick Kearney

How a Death with Dignity Bill will pass in New Zealand

The right to die with dignity has long had substantial public support in New Zealand. Opinion polls show that about 60% of the population support it and these opinion polls date back 20 years.

Members of Parliament won’t touch it. Late last year, a backbench Labour MP withdrew from plans to put a Death with Dignity Bill in the ballot for private members’ bills. This was done because of pressure from Labour Party colleagues not wishing euthanasia to be a distraction in the forthcoming general election.

The two previous attempts at passing a Death with Dignity Bill failed despite widespread public support:

In each of these cases, the MP concerned had a compelling personal narrative about the loss of family member or friend after a long fight with cancer as their motive.

Any future attempt to introduce such a bill will also require the MP concerned to have such a personal narrative. It is also not unimportant that both MPs that introduced the previous bills were little-known and their particular activities had nothing to do with whether they got re-elected or not.

Peter Brown was a list MP whose presence in Parliament solely depended on the popularity of Winston Peters. New Zealand First is a one-man party. Michael Laws had quit the National Party and was sitting as an independent.

The law has long acted to prevent, by force if necessary, suicide – including suicide by refusing to take appropriate measures necessary to preserve one’s life after the point at which life become unbearable. Justice Scalia argued that:

I believe in liberal democracy, which is a democracy that worries about the tyranny of the majority, but it is the majority itself that must draw the lines.

Whether the patient’s wishes to be honoured in this area is left to elected representatives to legislate. Justice Scalia asks

Are there, then, no reasonable and humane limits that ought not to be exceeded in requiring an individual to preserve his own life? There obviously are, but they are not set forth in the Due Process Clause.

What assures us that those limits will not be exceeded is the same constitutional guarantee that is the source of most of our protection – what protects us, for example, from being assessed a tax of 100% of our income above the subsistence level, from being forbidden to drive cars, or from being required to send our children to school for 10 hours a day, none of which horribles is categorically prohibited by the Constitution.

Our salvation is the Equal Protection Clause, which requires the democratic majority to accept for themselves and their loved ones what they impose on you and me.

Many who support euthanasia in principle have serious reservations about the ability to craft a Bill that prevents abuses. Parliaments have an interest in protecting vulnerable groups–including the poor, the elderly, and disabled persons–from abuse, neglect, and mistakes.

The democratic process must strike a proper balance between the interests of terminally ill, mentally competent individuals who would seek to end their suffering and the State’s interests in protecting those who might seek to end life mistakenly or under pressure.

The pros and cons of euthanasia as a practical matter is ably summarised by Richard Posner:

 Countries and states that authorize physician-assisted suicide impose strict requirements that minimize the danger of involuntary euthanasia—too strict, some believe (such as the requirement in Dutch law that the patient’s suffering be “unbearable” before he can invoke physician assistance to end his life).

These requirements (which further reduce the stigma of physician-assisted suicide by confining the practice to cases of genuine desperation) are not airtight, or uniformly observed. Any system will be abused. The question is whether the incidence of abuses, combined with the other costs of the system, outweigh the benefits.

Gary Becker has written frequently on the issue of euthanasia and suicide. Indeed, he wrote the Economic Theory of Suicide, not long after his wife took her own life in the early 1970s. He argues well about people’s ability to weigh the considerations:

Rational forward–looking persons with good information about their future circumstances would commit suicide only when convinced that they would be worse off by continuing to live.

David Hume said (in his Essays on Suicide and the Immortality of the Soul) “That suicide may often be consistent with interest and with our duty to ourselves no one can question, who allows that age, sickness, or misfortune may render life a burden, and make it worse than annihilation.”

Schopenhauer was also confident about the rationality of suicide, “It will generally be found that, as soon as the terrors of life outweigh the terrors of death, a man will put an end to his life” (Parerga and Paralipomena).

Becker also wrote insightfully of the terrors of death:

Hume adds “I believe no man ever threw away life, while it was worth keeping. For such is our natural horror of death”, and Schopenhauer makes the same observation “But the terrors of death offer considerable resistance…”

The reason why Death with Dignity Bills fail in Parliament is those in the community who are against it are passionately against that it and will change their vote if it passed. Those that are for it are not swinging or single issue voters.

Whoever moves the Bill will be a less well known MP with a personal narrative as to why they did it. What will be in that Bill? Scalia again:

Leaving this matter to the political process is not only legally correct, it is pragmatically so. That alone… can produce compromises satisfying a sufficient mass of the electorate that this deeply felt issue will cease distorting the remainder of our democratic process.

 

Posner and Easterbrook opine upon the law and economics of rent control

POSNER, Circuit Judge, with whom EASTERBROOK, Circuit Judge, joins in 819 F. 2d 732 – Chicago Board of Realtors Inc v. City of Chicago:

The stated purpose of the ordinance is to promote public health, safety, and welfare and the quality of housing in Chicago. It is unlikely that this is the real purpose, and it is not the likely effect.

Forbidding landlords to charge interest at market rates on late payment of rent could hardly be thought calculated to improve the health, safety, and welfare of Chicagoans or to improve the quality of the housing stock.

But it may have the opposite effect. The initial consequence of the rule will be to reduce the resources that landlords devote to improving the quality of housing, by making the provision of rental housing more costly. Landlords will try to offset the higher cost (in time value of money, less predictable cash flow, and, probably, higher rate of default) by raising rents. To the extent they succeed, tenants will be worse off, or at least no better off.

Landlords will also screen applicants more carefully, because the cost of renting to a deadbeat will now be higher; so marginal tenants will find it harder to persuade landlords to rent to them. Those who do find apartments but then are slow to pay will be subsidized by responsible tenants (some of them marginal too), who will be paying higher rents, assuming the landlord cannot determine in advance who is likely to pay rent on time. Insofar as these efforts to offset the ordinance fail, the cost of rental housing will be higher to landlords and therefore less will be supplied–more of the existing stock than would otherwise be the case will be converted to condominia and cooperatives and less rental housing will be built…

The provisions that authorize rent withholding, whether directly or by subtracting repair costs, may seem more closely related to the stated objectives of the ordinance; but the relation is tenuous. The right to withhold rent is not limited to cases of hazardous or unhealthy conditions. And any benefits in safer or healthier housing from exercise of the right are likely to be offset by the higher costs to landlords, resulting in higher rents and less rental housing.

The ordinance is not in the interest of poor people. As is frequently the case with legislation ostensibly designed to promote the welfare of the poor, the principal beneficiaries will be middle-class people.

They will be people who buy rather than rent housing (the conversion of rental to owner housing will reduce the price of the latter by increasing its supply); people willing to pay a higher rental for better-quality housing; and (a largely overlapping group) more affluent tenants, who will become more attractive to landlords because such tenants are less likely to be late with the rent or to abuse the right of withholding rent–a right that is more attractive, the poorer the tenant. The losers from the ordinance will be some landlords, some out-of-state banks, the poorest class of tenants, and future tenants.

The landlords are few in number (once owner-occupied rental housing is excluded–and the ordinance excludes it). Out-of-staters can’t vote in Chicago elections. Poor people in our society don’t vote as often as the affluent. See Filer, An Economic Theory of Voter Turnout 81 (Ph.D. thesis, Dept. of Econ., Univ. of Chi., Dec. 1977); Statistical Abstract of the U.S., 1982-83, at pp. 492-93 (tabs. 805, 806). And future tenants are a diffuse and largely unknown class.

In contrast, the beneficiaries of the ordinance are the most influential group in the city’s population. So the politics of the ordinance are plain enough, cf. DeCanio, Rent Control Voting Patterns,Popular Views, and Group Interests, in Resolving the Housing Crisis 301, 311-12 (Johnson ed. 1982), and they have nothing to do with either improving the allocation of resources to housing or bringing about a more equal distribution of income and wealth.

A growing body of empirical literature deals with the effects of governmental regulation of the market for rental housing. The regulations that have been studied, such as rent control in New York City and Los Angeles, are not identical to the new Chicago ordinance, though some–regulations which require that rental housing be "habitable"–are close. The significance of this literature is not in proving that the Chicago ordinance is unsound, but in showing that the market for rental housing behaves as economic theory predicts: if price is artificially depressed, or the costs of landlords artificially increased, supply falls and many tenants, usually the poorer and the newer tenants, are hurt…