The Outdated Economics of Conservative Ideologues

April 26, 2016

Some of you may have been following Shankar Vedantam on NPR or the discoveries of Daniel Kahneman, the Nobel Prize winning psychologist on the Princeton faculty, and their demonstration of the irrational ways that people very naturally and ordinarily reach decisions. Indeed, for quite a long time it’s been apparent that rational decision making often demands too much of people. As Cornell’s Vicki Bogan said in a talk in Albany, the rational choice model of economics assumes that people:

  • Think like Albert Einstein
  • Can store as much memory as IBM’s Big Blue
  • Can exercise the will power of Mahatma Gandhi
  • … [and] make unbiased forecasts

Nobel Prizes have been awarded to psychologists and economists who have been studying human decision making, showing that people literally can’t do what conservative economic theory expects them to. The rational man doesn’t exist, and for that reason, markets often don’t protect us. For both businessmen and consumers, rational choice is often impossible; it’s just too hard. Sometimes things aren’t currently knowable. Sometimes they’re beyond the capacity of individuals, even if institutions can figure it out.

A trip to the grocery store helps make the point clear. Even though much of the information exists, I can’t know enough about all the ingredients of the goods I buy, and their impact on my body, and still take the time to do my work and have a life to live. I have to trust someone or something else. But consumer ignorance shapes what businessmen have to do to survive. Those who cater only to the most informed, cater to small markets and often go under.

One consequence is that the market doesn’t protect us. That’s why workers’ compensation was started many decades ago – workers couldn’t figure out the odds of injury and didn’t have the ability to protect themselves as cheaply and effectively as informed employers could. Government stepped in to move that burden of knowing and choosing from the employee to the employer.

Those are examples. The broader impact of what is now called behavioral economics is that the economic theory of market ideologues is thoroughly discredited nonsense. It doesn’t work. A couple of decades ago there was a big debate about the efficient market theory which claimed that the market had it right even though individuals could be wrong. But they couldn’t tell me whether the market had it right the day before or the day after the crash. In other words it was nonsense on stilts.

That’s one of the reasons the public, all of us, have to get out of the glare of the outdated economics coming from conservative ideologues. It’s one of the reasons why it has been so important that Elizabeth Warren and Bernie Sanders have moved the Democratic Party to the left. That shift also clears the way for Hilary Clinton to return to the roots of the modern Democratic Party in the Great Depression, in Roosevelt’s New Deal, in being a party with heart.

Hilary and Bernie both have a lot to offer, but just as big a key to progress will be the Senate and the House of Representatives, which have blocked Obama’s efforts to push this country toward better, more caring solutions at every turn.

— This commentary was broadcast on WAMC Northeast Report, April 26, 2016.


What is Limited Government Anyway?

January 26, 2016

With the presidential primaries underway, the media is choked with talk about getting the government off the people’s backs, restoring limited government, making government let the people alone. But the Koch brothers, the Tea Party, their candidates and supporters are actually saying something very different – they want government to support their definition of their rights and push everyone else out of their way, and most important they want the courts to decide in their favor when others complain that they are trespassing on public land or polluting the air, land and water in ways that injure and interfere with the lives of others. That’s government in their favor.

We lawyers talk about law as a seamless web. That sounds like an idiom but it’s actually very precise. Everything is governed by rules. Judges always decide that someone does or does not have a privilege or a right. Those are all decisions about what the law is. Law always favors someone and disfavors someone else. If someone has a privilege, then everyone else loses when that person does whatever he or she is privileged to do. The question is not, cannot be, whether there is law; the question we have to deal with is whether it is fair and whether it is good for the public. Government off the backs of some means government on everyone else’s back, often leaving you and me poor and defenseless.

Limited government, regulation off people’s backs, are the tropes we hear when a government agency or legislature takes note of bad behavior – fraud, pollution or unconscionable business practices that cause decent people great loss. Unscrupulous companies, some very large and well known, as we discovered during the 2008 financial shock, want no regulations that would set a moral floor under their behavior, allowing more moral enterprises to compete instead of being bankrupted by cut-rate competition from the scandalous moguls. The only regulations that the unscrupulous like are regulations that keeps everyone else out of their way.

So when you hear that trope, look squarely at the privilege these anti-government claimants are defending. You hear it loudest when people are claiming the right to hurt the public. That’s not a claim of freedom that would have made any sense to the Founders of our country.

When the Founders spoke and wrote about government, their central questions were what’s fair and what’s good for the public. Those was central in every aspect of their work from the definition of property rights to the rights the public retained and what the public could and should do for the benefit of the people. Concern for public welfare was central to the building of the Erie Canal that defined the path of commerce in the State of New York for a century and a half, even as the canal was replaced by roads and railroads to continue developing the path the canal had developed. Concern for public welfare was central to the establishment of schools which made Americans among the most educated people on the earth, education that was at the root of all the good things that have happened since.

The Founders believed in public spirit, not a spirit of what the public could do for one’s selfish needs, but a spirit about what each of us could contribute to the improvement of the community, the states and the nation. When President John F. Kennedy told the American people “Ask not what your country can do for you; ask what you can do for your country,” he was channeling the spirit of the Founders.

— This commentary was broadcast on WAMC Northeast Report, January 26, 2016.


Who We Work to Support

September 29, 2015

We’ve all seen bumper stickers that complain, “I work so welfare queens don’t have to” and other complaints about taking care of people in need. Conservatives, Republicans, Tea Partiers all tell us the problem is “entitlements.” And people are mad. They do not want to work to pay for other people’s entitlements.

Except it is impossible. The richest 1 percent in the United States now own more wealth than the bottom 90 percent.[i]  And the top 20% of American households, whose average income was around a quarter million dollars get the majority of Americans’ yearly income from all sources.[ii] So, yes, we work for others, but not for the people who are poor, unemployed or disabled. We work to support the wealth of the people who get all the money. They claim not to need our help, but only because they already took our money.

They want us to believe that’s just “natural,” that they have that money because they sold us such useful things, and whatever the market does is perfectly proper. But actually it’s because of all the tax benefits they have, so that Warren Buffet properly pointed out that his secretary pays a larger percent of her earnings than he does. As Buffet understood, that’s not natural. It’s the kleptomania of the rich, the people who control the lobbyists for themselves and their businesses and who finance the political campaigns of the lackeys we call congressmen and senators.

Their forms of income are protected – the top tax rate is no longer high but they still get a break for capital gains, deductions for all the lobbyists and accountants they pay to make sure they don’t pay their share of the tax burden, and the privilege of moving their money to tax havens. Of course they will lend back to government, at interest, the money they aren’t investing in job creating activities, the money they have protected themselves from having to pay as taxes like the rest of us.

It’s also because they convince their lackeys that their companies shouldn’t be regulated either; they should be allowed to monopolize markets so we’d fill their pockets faster, and they should get government help for the very financial vehicles they used to wreck the economy, instead of helping the people that they took advantage of in scams called derivatives, credit-default swaps and subprime mortgages. It’s all rigged and it isn’t you and me that are taking advantage of the system.

But their lackeys say they’re the job creators – indeed even while they are sitting on money they don’t think it worth their while to spend. That’s called chutzpah!

What’s worse, this is a vicious cycle – the rich control the politics so they can get wealthier and control the system ever more tightly. When does it reach a point when we no longer have a democracy? Indeed, what kind of democracy is it if all the candidates have to get the blessing of the enemies of the people.  Is that the democracy we fought for? And can we get it back?

— commentary was broadcast on WAMC Northeast Report, September 29, 2015.

[i] Nicholas Kristof, An Idiot’s Guide to Inequality, NY Times, July 23, 2014. See also Tom Kertscher and Greg Borowski (March 10, 2011). “The Truth-O-Meter Says: True- Michael Moore says 400 Americans have more wealth than half of all Americans combined”. PolitiFact.
[ii] The Distribution of Household Income and Federal Taxes, 2011, Congressional Budget Office Report, November 12, 2014, https://www.cbo.gov/publication/49440.

Propensity to violate others – taking checks and balances seriously

April 28, 2015

Polls have found that more than 3 American men in 10 would rape or coerce a woman into sexual intercourse if they could get away with it.[i] Those findings have mostly been discussed only in conjunction with the issue of rape. But I think it has a broader meaning. I think it means that there is a proportion of people who will take advantage of defenseless others for their own benefit when they think that they can.

That creates problems in lots of areas. Like soldiers of countries that we think are less civilized then we, some proportion of American soldiers have resorted to forms of torture like waterboarding. Some go berserk, others are mean, but the misbehavior is predictable, if not who will do what. And like police of countries that we think are less civilized then we, some proportion of American police have also victimized demonstrators, people down on their luck, the homeless and racial minorities. That’s certainly not democratic policing. And it’s made worse by codes of silence in some police departments that are almost as sinister and sometimes worse than the codes among thieves.

I don’t think that most police are bad guys. But when we set things up so that people can get away with bad stuff, it is predictable that a significant proportion will. When we hand people guns and then make excuses for whatever they do because it’s a stressful job, we should expect that a significant proportion of them will do very bad things with the freedom we give them. A system of impunity encourages bad behavior. So one question is how we can set up our police forces so that policemen have the right incentives, incentives appropriate to a free and democratic country? Transparency and accountability matter.

The same is true of business, both international and local. When we take all the tools out of the hands of consumers and courts, we should expect a significant proportion of businesses to misbehave and take people for a ride, often for very dangerous rides. And in business the market mechanism can sometimes make things worse because it punishes those businesses which can’t bring their costs as low and their profits as high even when the mechanism is to take advantage of people, take their money, injure, and leave their lives in shambles. Responsible businesses need responsible regulation to keep the competition in line.

The same of course is true in politics. That’s why we value free speech so highly. But as my colleague, Timothy Lytton pointed out in a book called Kosher,[ii] a study of private marketplaces that do and don’t work, accountability depends on a sufficient number of people with intense interest in the subject, people the rest of us trust to check on what is happening, and a way to get the information out. It’s not automatic – there’s too much to know, too much work to find out.

So transparency is only the beginning. We have to have a culture in which we expect to hold people and organizations to account – without fear or favor for any of the groups and institutions that can hurt us. But in law, the Roberts Court seems to be developing the opposite – a legal culture of defenses and protections buried in contracts and doctrine. And in popular culture, stereotypes, ideology and polarization now substitute for facts. Heaven help us.

— This commentary was broadcast on WAMC Northeast Report, April 28, 2015.

[i] See Sarah R. Edwards,  Kathryn A. Bradshaw, and Verlin B. Hinsz, Denying Rape but Endorsing Forceful Intercourse: Exploring Differences Among Responders, 1 VIOLENCE AND GENDER 188, 190 (2014) available at http://online.liebertpub.com/doi/pdf/10.1089/vio.2014.0022. Though the survey size was small and localized, similar results have been reported before. See Only Psychos Think Rape is OK…Right? in Web Info on Sexual Assault and Abuse (University of Illinois at Chicago, Office of Women’s Affairs, Campus Advocacy Network), https://www.uic.edu/depts/owa/sa_rape_support.html collecting some of the studies.

[ii] Timothy D. Lytton, Kosher: Private Regulation in the Age of Industrial Food (Harvard Univ. Press 2013).


On Corporate Privilege – Have They No Shame?

April 21, 2015

In a legal system which holds corporations responsible for virtually nothing, corporate power, hypocrisy and the wall of corporate shame keep growing.

Corporations put clauses in consumer contracts that make suing them useless and impossible. They make us sign those contracts for most of what we buy from the modern economy. The Supreme Court says OK on the fiction that we don’t have to sign the so-called agreements. As far as the Court is concerned, all we have to do is opt out of the economy and then no corporation can bother us.[1] If a dispute ever gets to a hearing, it is heard by arbitrators chosen by the corporate sellers.

Industry groups repeatedly argue that they have to put such abusive provisions in their contracts or they couldn’t give us a good deal. In other words, when people are down, their mortgages underwater, corporations should just keep kicking – they’re really just doing it for us.

That’s bad enough for people who are just trying to be treated fairly. But corporations have been getting the privilege of trashing rules protecting us from toxins and pollutants in favorably disposed forums. These are so-called investor-to-state dispute settlement or ISDS clauses in international trade agreements. Corporations can attack any rules that will cost them money, which of course means all regulation is vulnerable. Like the domestic arbitration clauses that the U.S. Supreme Court has blessed, “These challenges are not heard in a normal court but instead before a tribunal of private lawyers,” as the Alliance for Justice and many prominent attorneys have told Congress.[2]

There’s already an ISDS clause in the North American Free Trade Agreement, or NAFTA.[3] Corporations are trying to keep the ISDS mechanism in trans-atlantic agreements that multi-nationals will use against food and environmental laws here and in Europe, claiming they restrict free commerce.[4] Cecilia Malmstrom, the European Union’s trade commissioner, responded “We want the rule of law, not the rule of lawyers.”[5]

Describing the terms of the 12-nation trade accord for a Trans-Pacific Partnership for which Congress is considering fast track authority for President Obama, Jonathan Weisman wrote in the Times that it would “allow foreign corporations to sue the United States government for actions that undermine their investment ‘expectations’ and hurt their business,” using the business friendly ISDS procedure.[6] Once again that is poised to protect multinational corporations from food, health and environmental regulation.

In D.C., the coal industry is trying to convince the U.S. Supreme Court to block the Environmental Protection Agency from going ahead with procedures for strengthening rules preventing toxic emissions of mercury.[7]

Here at home, toy industry groups are suing against efforts of Albany County to ban the sale of toxic toys, with such poisons as lead, mercury and arsenic, claiming it’s a violation of the Constitution and federal statutes.[8]

Business repeatedly claims regulation isn’t necessary because they are honorable and we can trust them and the economy. But their choice of legal targets make clear what they really believe.

No one has the right or privilege to put toxins in us, in our air, water, or our kids’ toys. Have they no shame? It’s time we had a government, all of whose branches respected the rights of the rest of us.

— This commentary was broadcast on WAMC Northeast Report, April 21, 2015.

[1] See American Express Company v. Italian Colors Restaurant, 133 S. Ct. 2304, 2313 (2013) (Kagan, dissenting); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006).

[2] Letter over the signature of many well-known law professors and sent by the Alliance for Justice to congressional leadership, available at http://org2.salsalabs.com/o/6539/p/dia/action3/common/public/?action_KEY=19342.

[3] NAFTA ch. 11.

[4] REUTERS, EU Seeks Solution to Keep Arbitration in U.S. Trade Deal, March 18, 2015, 12:22 P.M., http://www.nytimes.com/reuters/2015/03/18/business/18reuters-eu-usa-trade.html.

[5] Id.

[6] Jonathan Weisman, Trade Pact Seen as Door for Suits Against U.S. New York Times, March 26, 2015, at B1, available at http://www.nytimes.com/2015/03/26/business/trans-pacific-partnership-seen-as-door-for-foreign-suits-against-us.html.

[7] Editorial, Dirty Coal at the Supreme Court, New York Times, March 23, 2015, at A20, available at http://www.nytimes.com/2015/03/23/opinion/clean-air-act-and-dirty-coal-at-the-supreme-court.html?emc=edit_tnt_20150323&nlid=47098180&tntemail0=y.

[8] Matthew Hamilton, Industry contests toxic toys ban, Albany Times Union, April 17, 2015 at A1.


Libertarians on and off the Court

December 2, 2014

Most Supreme Court justices are libertarians in some sense. But what kind and for whom varies widely.

We all believe we have rights to decide lots of things for ourselves. But what are the limits? The more “conservative” the justices and others are, the closer to the Tea Party, the only limits they recognize are force and fraud. Various conservative philosophers have been very plain about that. Regulations, almost all regulations, interfere with that freedom of action.

People sign contracts every day that have draconian consequences for them, but, say the far right, you agreed to that. You signed a contract for which the only remedy is a stacked deck, arbitration in front of an arbitrator arranged by the company, and you have no right to unite with other people in the same situation to fight expensive battles together and share the costs – that’s called a class action, and the Court’s conservatives forbid it in arbitration, won’t allow the states to try to protect consumers from such restrictions on their rights. That protects the company’s liberty. And of course you had the liberty not to sign – if you read and understood the contract and had a realistic choice.

You signed a mortgage with a lender and it had all sorts of hidden costs, fees, rates and traps that put a lot of people underwater and helped to build and then break the housing bubble, and with it the economy. But, tough, you signed, say the conservatives.

Most states used to forbid usury, interest rates that no one could reasonably pay but that piled up so quickly bankruptcy was inevitable. Not any more – the Supreme Court made sure states could no longer forbid usury.

And where the conservatives on the Supreme Court couldn’t block federal law, like the antitrust laws which were intended to give us the benefit of competition and protect us from monopoly, they made it impossible to prove.

There are an endless set of examples. The company gets the liberty and you get the shaft.

But when you get the shaft, that doesn’t just affect the liberty that judges and legislatures say you have. Getting the shaft affects your real liberty – liberty to make wholesome life choices for yourselves and your families. Most of us think our liberty is limited by the effect on other people’s liberty. Giving people the shaft deprives people, ourselves and lots of others, of our very real liberty.

Most states tried to limit legal liberty to do things that harm others. There should be no liberty to foul the water we drink or the air we breathe. There should be no liberty to bury costs in fine print legalese, or propose terms that the company knows will do damage. There should be no liberty to put people into unsafe working conditions when the company could have saved their lives, saved people from collapses and explosions in coal mines, oil rigs, and similar disasters. It doesn’t matter that the workers agreed, signed a contract, took the job – the company knew and we should be able to stop it.

We too believe in liberty, but it is liberty bounded by what’s good for everyone. We have a choice between freedom for those who have the money and power to exercise it, or freedom for everyone based on some realism about what’s going to happen.

Do we care? The protectors of corporate legal liberties on the Court have a child’s idea of liberty – without responsibility. Children throwing tantrums at civilization have no place on the Court.

— This commentary was broadcast on WAMC Northeast Report, December 2, 2014.


Regulation and the Slide to Hell

August 28, 2012

There’s too much regulation, says Romney. Too much regulation, say some businesses. It’s always categorical, not about which regulation. Just that regulation is bad. Stop it.

The forests are burning. The drought continues. The deserts are growing. The earth is warming. The diseases are spreading. The storms are destroying our towns and farms. The glaciers are melting and the oceans are retaking our shores, submerging islands, making refugees and warriors. But oh block the regulation. Read the rest of this entry »


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