The Vogue of "Social Responsibility"

Richard Epstein*



In September 1970, the late Milton Friedman published a bold manifesto entitled “The Social Responsibility of Business is to Increase its Profits” in the New York Times Magazine, where he argued that businesses do not need to engage in various charitable or public-spirited activities, even those that generally meet with approval from shareholders. The best defense of the Friedman thesis is that any discrete corporate effort to advance collateral ends will not enjoy the unanimous consent of all corporate shareholders, so that the contribution operates like an implicit tax on dissenting shareholders. The better track is for the corporation to make the shareholders rich, so that they in turn can embark on their own charitable operations, without having to bind their fellow shareholders.

Friedman’s overall thesis is subject to several lines of attack. The first difficulty is that no one quite knows what counts as a charitable gift. Thus a corporate giving campaign could easily be regarded as a device to promote corporate good will by establishing a favorable image for the company, created by doing good deeds unrelated to its direct business interests. Virtually any charitable gift could fit into this category, at which point it becomes a business judgment as to whether these expenditures are the best way to woo future employees, suppliers, and customers. The exception, in other words, can swallow the rule. 

The second criticism insists that it is not the job of any economics or law professor to tell corporations how to run their businesses. That decision should reside in each corporation with its distinct shareholders. Nothing prevents a corporate charter from allowing charitable giving. All potential shareholders are then on notice of its powers and prospects, and can buy or sell shares based on whether they share the corporation’s fundamental policy choice. If shareholders think that corporations make better and more informed donors than they do individually, then it is perfectly rational for them to take the risk that some of these corporate gifts will not be to their individual liking. It becomes a question of trading one risk (individual ignorance of the charitable universe) against another (corporate activities gone astray). The market can handle this problem like so many others.

Assuming that corporations have good reasons to engage in charitable giving, the harder question asks how a corporation should best engage in these activities. This issue has been raised as of late in connection with the otherwise technical questions of corporate supply chain management. This esoteric field asks how corporations can best organize their complex chains of supply. The objective of this task is to ensure that the firm gets the right goods in the right quantities to precisely the right place and at the right time, with the right quality for just the right price. This juggling act presents a massive challenge because the system only works well if all of its discrete pieces are in alignment. A single break can stop the entire process. Knowing this, sound chain managers may use procurement strategies that involve multiple chains. 

Additional efficiencies may be added if a firm has long-standing contracts with two or more suppliers so that one can pick up the slack when the other goes down. Further efficiencies can be gained if multiple competitors purchase from the same supplier, where each of them can share the benefits of the lower average costs that can come from larger production runs.  

The success of supply chain management depends on the ability of the firm to assure the quality of its outputs at each point, preferably by direct inspection at the critical stages of the process. Especially when overseas operations are involved, it is virtually impossible for a distant American firm to keep tabs on the conditions internal to the facilities that produce components in its supply chains. Only in rare instances is it cost effective to use direct inspection of foreign facilities to monitor the conditions under which the product is made. 

Unfortunately, government efforts to impose socially responsible regulation in a top-down manner can easily go awry, by limiting the ability of a firm to develop efficient supply chain practices, which might for a whole host of reasons require rapid shift from one supplier to another, perhaps in response to unanticipated regulation from the host state. Diversification of supplies is often the best response to sovereign risk. 

The point here is not that corporations should cease socially-responsible activities, but rather that they should organize them independently of their production efforts. Thus if a corporation wants to show good will to a developing country, either by voluntary choices to improve worker conditions or to make charitable gifts entirely apart from the core business operations, it should be allowed to do just that.  It may well be better, for example, to send aid to local schools than to enter into inefficient agricultural contracts. 

Recent legislative and administrative developments have put this standard supply chain model under serious pressure. New regulatory programs seek to impose on American firms obligations to monitor the labor conditions of their overseas contractors and subcontractors in order to prevent or reduce the likelihood of disasters such as the collapse of the Rana Plaza manufacturing plant in Savar, Bangladesh, where 1,120 were killed when the commercial building collapsed. No one can defend the dangerous construction and maintenance practices that led to the massive loss of life, but it is much more difficult to figure out what should be done to control these behaviors. The ideal social response is for local governments to monitor these practices directly. Properly done, local regulatory efforts should produce net benefits to workers that should offset any wage loss attributable to higher construction and inspection costs, wholly without American involvement at a distance.

Yet the discussion quickly enters the world of second-best regulation, given the total lack of confidence that everyone has in local regulation. Long after Milton Friedman wrote his manifesto, modern business began treating supply chain management as “Imperative for Global Corporations” which generates legal as well as moral obligations. The hard question is how best to design this oversight mechanism. One device, adopted in California’s Transparency in Supply Chains Act of 2010, relies on disclosure that requires all firms doing business in California with over $100 million in world-wide receipts to explain what steps, if any, they have taken to “eradicate slavery and human trafficking from their direct supply chains for tangible goods.”

The difficulties with this system are twofold. First, the term “direct” gives no indication as to how deep down the supply chain a given firm should go to meet this obligation. Second, it is not clear how any firm could conduct the necessary audits and inspections to ensure that remote suppliers comply with these obligations: it is all too easy for products made in a non-compliant plant to be surreptitiously sold through the offices of a compliant firm. 

The good news is that the sole sanction under the California Act is an action for “injunctive relief” brought by the California Attorney General. The bad news is that nothing in this act explains what should be done if the firm overstates its efforts to deter local abuses. Do these deficient disclosures become the basis for actions for fraud and non-disclosure under some separate common law or securities law cause of action that operates outside of this Act? 

Ironically, it is doubtful that any system of mandatory disclosure is needed to deal with this information problem. It is clearly the case that firms who do take effective steps to secure worker welfare in foreign countries can, wholly without regard to the California Act, make voluntary disclosures of their own efforts to improve local working conditions, letting consumers draw whatever inferences seem fit from the silence of their competitors. These firms can bond themselves by indicating the damages they are prepared to pay, and to whom, in the event that their representations prove to be false.

If disclosure measures are of uncertain worth, stronger sanctions, such as those found in the September 2012 Presidential Executive Order “Strengthening Protections Against Trafficking In Persons in Federal Contracts” could turn out to be downright mischievous. The Executive order begins by reaffirming its “zero tolerance” policy with respect not only to sex trafficking, but also “the recruitment, harboring, transportation, provision, or obtaining of a person for labor or services, through the use of force, fraud, or coercion, for the purpose of subjection to involuntary servitude, peonage, debt bondage, or slavery.” The unstated sanction for breach of the Executive Order is the cancellation of present contracts or the inability to acquire future ones. 

The risks of this strategy are substantial. The first danger is that of mission creep, such that “using misleading or fraudulent recruitment practices during the recruitment of employees” could fall within the scope of the order, wholly without regard to sex trafficking or involuntary servitude. The second risk is that the extension of these policies several layers down the supply chain makes departures from the policy virtually inevitable. The United States government does not have the resources to systematically enforce this policy, which makes it ultimately a matter of discretion as to which firms face sanctions and which do not. That selective enforcement of any open-ended obligations does not, as the executive order insists, “increase stability, productivity, and certainty in Federal contracting,” but is likely to have the exact opposite effect on private contracting behavior, by inducing private efforts to have the United States direct its enforcement activities to other firms.

The effort to control abuse overseas by imposing obligations on head contractors to supervise their remote subcontractors is a bit like pushing on a string. The locus of the enforcement action is too far removed from the site of the abuses to do that much good. Indeed, given the obvious inefficiencies associated with both of these enforcement schemes, it is appropriate to ask the public choice question, namely, whether the named beneficiaries of these programs are the actual beneficiaries. 

On that question, there has to be more than a modicum of skepticism. There is little doubt that any legal regime that hits American companies for sins overseas will increase the cost of doing business in those locations. It is hardly clear that these shifts will ultimately benefit the vulnerable workers who are the targeted populations for these measures. Instead, the higher costs could easily lead American firms to abandon foreign markets where the plight of local workers is most desperate, at which point the prime beneficiaries of these programs are the domestic firms for which any inspection, disclosure, or audit obligations are far less onerous. 

It is too soon yet to see how these conflicting forces will play out, but it is at least possible that the actual consequences can imitate those that Benjamin Powell has demonstrated with his alternative history of sweatshops in the global economy. More stringent enforcement drives vulnerable populations underground, improving the position of domestic firms and their higher-paid, and oft-unionized, workers. The law of unintended consequences does not stop at the American border, for the effort to enforce ethical obligations through law could easily hurt the very people they are meant to help.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

Freedom Friday

Obamacare's mandates are becoming due for millions of Americans, and many are being notified that their insurance has been cancelled.

In a move that should thrill libertarians, Apple's Tim Cook announced that the iOS 8 update will increase security to the point that not even Apple will be able to access data on your device, even when compelled to by law enforcement with a search warrant.

Congress passed a continuing resolution that will maintain funding for the government for ten weeks beyond September 30th. Some elements that are gaining attention are the fact that the resolution fully funds Obamacare and also authorizes the use of federal funds to arm Syrian rebels.

The Institute for Justice has filed a cert petition that could reaffirm the canonical U.S. v. Carolene Products conception of the rational basis test, allowing litigants to challenge the constitutionality of a statute predicated upon the existence of a particular state of facts by demonstrating that those facts no longer exist.

Despite pleas from many Libertarians and free-market supporters, including our own Editor-in-Chief, the House voted to extend the Ex-Im bank's charter to June 30th, 2015.

Would a modified independent counsel statute be an improvement to current checks on the executive branch?

New York Times columnists Nicholas Kristof and Thomas Friedman urge caution in the nation's response to ISIS.

Finally, as Congress and the President move the country closer to war, consider the wisdom of Ron Paul in 2012:

More Unlawful Presidential Killing

Judge Andrew P. Napolitano*



As the debate rages over whether the president needs congressional authorization for war prior to his deployment of the military to degrade or destroy ISIS, the terrorist organization that none of us had heard about until a few months ago, the nation has lost sight of the more fundamental issue of President Obama’s infidelity to the rule of law.

On the lawfulness of his proposed war, the president has painted himself into a corner. Last year, he quite properly recognized that the Authorization for Use of Military Force (AUMF), a statute enacted by Congress in 2002 to permit President George W. Bush to use the military to track down, capture, degrade or kill all persons or organizations that planned the attacks of 9/11, cannot apply to organizations that did not exist at the time of 9/11, of which ISIS is one.

That leaves the president with two remaining alternatives. One is the War Powers Resolution (WPR), a statute enacted by Congress in 1973 to limit presidentially ordered military invasions absent congressional assent to 180 days or fewer. But the WPR is unconstitutional, as it consists of Congress giving away to the president express authority to declare war, which the Constitution delegates to Congress. The Supreme Court has prohibited such giveaways of core powers and responsibilities from one branch of the federal government to another.

Even if Obama decides to rely on the WPR, and expects that no federal judge will interfere with that decision, his military advisers have told him he cannot achieve his objective in 180 days. They also have told him he cannot achieve his objective by the use of air power alone.

The remaining mechanism for starting a war is to follow the Constitution by seeking a congressional declaration of war. But Obama has not yet asked for such a declaration. Why not? No doubt, he has two fears. One is that Congress will impose restrictions on the location and duration of hostilities, unlike the AUMF, which is open-ended. The other is that he will disaffect his loyal political base by doing what he promised he would never do: bring the country into another offensive war in the Middle East.

In 2008 and in 2012, Obama ran as a candidate and an incumbent determined to end American military involvement in the Middle East, not increase it. Hence his promise, by now made many times, that he will not introduce ground troops into this war. Apparently, just as when he bombed Libya into chaotic instability in 2010, he does not consider bombs an act of offensive warfare.

But he does consider the use of boots to be an act of war. When the president promises no ground troops, note the phrase he uses: “No boots on the ground.” This is a term of art that apparently has different meanings to different folks.

There are already more than 1,000 pairs of American military boots on the ground in this effort to destroy ISIS. Yet, because they are not yet directly engaged in the use of violence in pursuit of ISIS fighters (they are training others to do so or finding targets to destroy by air), or because they are Special Forces and thus out of uniform (but no doubt armed and violent and wearing boots), the president feels he has a clear conscience when he says there are no boots on the ground.

When he says that, he means, “There is no one in an American military uniform shooting from the ground at an enemy target” -- but there are military personnel in uniform on the ground, and there are military personnel out of uniform shooting ISIS fighters. Is this hair-splitting language consistent with the president’s moral obligation to be truthful to us?

In another deceptive move, Obama announced on Monday that the operation against ISIS, whether authorized by Congress or not, will be directed by retired Marine Corps General John Allen. This is a novel use of government assets, as Allen is no longer a part of the Pentagon and thus not subject to the military chain of command. Apparently, the president does not trust his military advisers, whose advice he has repeatedly rejected, to run his war. Is the White House planning to run this war directly as LBJ did in Vietnam? Is the State Department? How can a civilian who is not the president command military troops?

On Monday of last week, the White House announced that in its pursuit of ISIS, the U.S. will go wherever it finds ISIS targets, and if ISIS hides in Syria and the government of Syria does not permit U.S. jets to use its airspace, the U.S. will attack Syria. That sounds like Russian President Vladimir Putin in the Ukraine.

Attacking Syria because its government denied the U.S. airspace would be an unprovoked and unlawful act of war that would probably provoke Putin. Congress rejected declaring war on Syria just a year ago. If it does so now, there would be no lawful or moral basis for such a declaration, as Syria is a sovereign country, lawfully entitled to control its airspace, that poses no present threat to American freedom or security. The U.S. can no more legally commandeer Syrian airspace than Syria can commandeer ours.

Something is amiss here. Last year the president wanted to help ISIS indirectly by degrading the Syrian military. Now he wants to help Syria indirectly by degrading ISIS, but only if Syria stays out of our way. And he is prepared to violate the Constitution, break the law and lie to the American people to achieve his purposes.

Why all the unlawfulness, when he could and should leave these disputants to their own devices and keep the American military at home for genuine defensive purposes?

*Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written seven books on the U.S. Constitution. 

America Cannot Extend the Ex-Im Bank Charter

Thomas Warns*

Deep within the United States federal government lurks an independent agency that functions as the United States’ official credit agency. The Export-Import Bank (Ex-Im Bank) was chartered to insure and finance foreign purchases of U.S. goods when customers large and small were unwilling or unable to accept the accompanying credit risk. The Ex-Im Bank website claims that it does not compete with private institutions, but instead fills gaps in the private credit market; they also boast a profit of $1 billion over the last year and $2 billion over the last five. One could ask how it is possible to claim that the private credit market would not compete with the bank for that profit, but that would imply that the Ex-Im bank’s website was inaccurate.

The Ex-Im bank has survived far longer than intended.

The Ex-Im bank has survived far longer than intended.

The Ex-Im bank’s charter is due to expire at the end of this month, reigniting debates over whether or not it should exist in the first place. The bank was a creation of the New Deal, when credit was particularly difficult to get for companies that wished to import goods from the U.S. Like many creations of the New Deal, however, the bank soldiered on long after the Great Depression ended, and morphed into a monster from a Mary Shelley novel (other Franken-programs exist to this day, such as Fannie Mae and the NLRB).

How does the Ex-Im bank work? When foreign companies looking to buy U.S. goods are rebuffed by private banks, the buyers can seek help from the Ex-Im bank. If the Ex-Im bank decides to get involved (and here it helps to be politically well-connected), it collects a fee from the foreign buyer, and in return will secure the buyer’s line of credit at a private bank for up to 85% of its value. This takes most of the risk away from the bank, allowing the bank to extend a more generous line of credit to the buyer. The buyer then purchases U.S. goods with the loan, boosting that U.S. company’s bottom line. That, of course, is only half the picture.

The most obvious objection to the Ex-Im bank is that it is crony capitalism at its worst. As a candidate for President in 2008, Barack Obama railed against the Ex-Im bank, calling it “little more than a fund for corporate welfare.” Unlike the impartiality of the free market, the Ex-Im bank gets to choose winners and losers when it extends lines of credit to certain businesses. It is easy to spot the inequity of their lending processes. Though they finance just 2% of all exports, 61% of their total financing benefited 10 large corporations. By one measure, the bank creates 200,000 jobs in America, of which 85,000 are in Washington State. The reason? Boeing.

Washington-based Boeing received about $8 billion in loan guarantees, or 30% of the bank’s total authorizations, in 2013. That’s why many call Ex-Im “Boeing’s bank.” If you find yourself flying with a foreign carrier in a 787, there is a decent chance that your tax dollars underwrote the loan for that plane – nearly one in five Boeing jetliner sales hinges on Ex-Im financing. If you are skeptical about how desperately a multi-billion dollar corporation needs the government to secure lines of credit for potential purchasers, you aren’t alone. The Tea Party has been a vocal critic of crony capitalism at the Ex-Im bank; even Washington’s Cathy McMorris (R-Spokane) has opposed the bank, though every other Representative from her state supports it. Perhaps they are swayed by the 18 lobbyists that Boeing has sent to Capitol Hill in order to assure the bank’s charter is extended.

Boeing is the largest beneficiary of the Ex-Im bank's operations.

Boeing is the largest beneficiary of the Ex-Im bank's operations.

The bank has assuredly created losers as well. Besides redistributing taxpayer money to one of America’s largest corporations, it has hurt competition in the market. Delta has complained that the Ex-Im bank leaves it at a competitive disadvantage when buying airplanes vis-à-vis foreign competitors. Foreign airlines can obtain cheap credit through the Ex-Im bank, and essentially pay less for the same plane as Delta does, being an American company; the foreign purchases also act as a subsidy, which drives up the price of Boeing planes. Delta tried to lobby against the renewal of the Ex-Im bank charter in Congress, but found the Boeing lobbyists so well entrenched that they gave up and decided to take their fight directly to the people.

And what of those profits claimed by the bank? Even that claim has come under fire. The non-partisan Congressional Budget Office released a report which contradicted the Ex-Im bank, and stated that it would actually contribute $2 billion to the deficit over the next decade if the Ex-Im bank used a more accurate accounting method which reflected the riskiness of the loans. Even by the bank’s own accounting standards however, it has not always been successful – in the 1980’s, the bank racked up a deficit of $5.3 billion. This doesn’t even take into account the hidden costs: the costs to all the other small and mid-size businesses that sought bank loans but were rejected because the banks’ money was tied up in Ex-Im backed loans.

We just need to cut back, like waste at the...Export-Import bank, which has become little more than a fund for corporate welfare.
— Presidential Candidate Barack Obama (2008)

Even environmentalists are joining in on the criticism, arguing that the bank has backed loans for coal producers and loans to construct coal burning power plants abroad. The loans in a sense keep coal-fired plants in operation, even as a variety of forces push the energy industry towards cleaner energy. In 2013, President Obama moved to restrict Ex-Im loans towards constructing coal-fired power plants abroad; however, Ex-Im bank still helps guarantee loans for coal mining and exporting.

So where does all this leave things? The Ex-Im bank is reviled by the right for meddling in the free market, was denounced by Barack Obama as a fund for corporate welfare, has indeed served as a fund for corporate welfare, is likely going to lose taxpayer money over the next decade, and is hated by environmentalists. With the bank’s charter set to expire on September 30th of this month, libertarians ask: what is there to debate?

* Thomas Warns is a J.D. Candidate in the Class of 2015 at New York University, and the Editor-in-Chief for the N.Y.U. Journal of Law & Liberty.

Keep the U.K. Together: The Presumption Should Be Against Shattering the Union

Will the vote be Aye or Nay?

Will the vote be Aye or Nay?

Richard Epstein*



Most of the discussion about the Scottish referendum on independence, scheduled for September 18, 2014, has focused on the fact that as of late the pro-union forces have maintained a narrow lead, most recently at about 47 to 41 percent.  What has gone less remarked as to why any reference to the 50 percent vote reveals a serious defect in the entire electoral process.  Why should the issue of Scottish independence be decided, as is the case, by a simple majority vote?

There is little doubt that in democratic societies decision by majority vote is often  appropriate for routine legislative matters.  Yet even here that approach can be slowed down by, for example, the requirement of a majority in two Houses, as in the norm in the United States and Canada.  Indeed, it surely the case that majority rule is never the correct standard to apply in elections that contemplate major structural and governance changes, which will shape, irreversibly, the future course of national history and identity.  By way of analogy, most voluntary arrangements, whether they serve business, social, religious or charitable ends, only execute major structural changes, like mergers and separations, by supermajority vote.

The same pattern holds politically,  For example, under Article I of the American Constitution, a Congressional override of the presidential veto (itself a major deviation from simple majority rule) requires a vote of two-thirds of the members of each house of Congress.  The background norm is self-conscious endorsement of the view that all new legislative interventions should be examined under a presumption of error, even in a democratic system.   The same sentiment is evident in the Amendment Process of Article V of the US Constitution, which creates an elaborate set of obstacles to amending the American Constitution, born of a worry that temporary political pressures could produce a permanent change in the government structures that even its proponents could come to regret.

Nothing in the theory of democratic politics requires all matters of public import be decided by simple majority rule.  These same  basic institutional concerns apply in the UK, especially on independence, wholly independent of the strong cultural and social arguments that, as Zac Tate has argued, point to the retention of the current system.  Any referendum that results in changes to the political structure should require a supermajority vote, probably in the range of three-fifths to two-thirds vote.  Under that standard the proponents of Scottish independence would have no chance, which in the absence of any major local grievance is just as it should be.

It might be asked whether any arguments from political theory might cut in the opposite direction.  The most persuasive argument in that direction rests on some version of the EU principle of “subsidiarity” principle, which says that key decisions should be made by the smallest unit that has the capacity to govern the particular issues at hand.  In this connection, without question Scottish politics are further to the left of those of England on domestic issues, given the Scottish preferences for higher taxes and transfer payments, stronger labour market protections, and more extensive economic regulation of the economy as a whole. Membership in the U.K. subordinates what would otherwise be a local majority decision to the collective preferences of the far larger English  population, which at 52.6 million people is about 10 times the population of Scotland. It is just this theme on which Scottish National Party leader Alex Salmond has pitched his case for independence: Edinburgh should exert complete control over taxation and economic regulation inside Scotland.

Yet this simple calculation misses the real complexities of the succession question.  The decisions that any, indeed every, government has to make are by no means all local.  The interconnections in operations between England, Scotland, and Wales have grown far tighter because of centuries of cooperation among them.  Thus while some issues could be decided locally, for many issues local solutions are manifestly inappropriate.  It is to just these functions that David Cameron and other pro-unionists appeal in making their pleas to doubtful voters, urging them to stick with the union.

Indeed, as this theory suggests, the unionists are on solid practical grounds. It is quite clear that Scottish independence will transform the landscape in foreign affairs.  The new nation will have to apply from scratch, if it so chooses, for membership in NATO, the European Union, and the UN for starters, as well as countless other mid level organizations that deal with everything from trade barriers, crime cooperation. to global warming.  In addition to the large number of multilateral treaties, the new Scottish government will have to establish bilateral treaties with virtually every major nation on tax and other business matters.  A quick search of UK Treaties Online shows that there are many hundreds, probably thousands, of current arrangements in place that will have to be sorted out in a very short period of time.  Yet there is nothing that indicates that other nations will sign on quickly to an extension of old relationships to the new government, without some unavoidable rethinking of the basic terms.

Four countries, one United Kingdom.

Four countries, one United Kingdom.

The same kind of complexity is sure to occur in connection with internal UK operations, which do not take place entirely within Scotland or England.  For starters, it is sufficient to think about the operation of air, boat, road, and train traffic as between the two countries for disputes over the control of military bases now used by U.K. forces that will (or is it might be?) transferred to English control. There is also the nasty question of whether Scotland can start up a new stable currency, given that it is surely unwise for England to allow an independent Scotland to piggy-back the pound, precisely because England will retain no economic levers over Scottish economic, tax and fiscal policy, which are likely to result in lower economic growth.  Much of the major problems in the EU today stem from the stress that major transfer payments and pro-union labor policies in the PIGS (Portugal, Italy, Greece and Spain) have placed incredible stress on the Euro which could been mitigated if national currencies were permitted to float freely from one another.

Wholly apart from these legal ramifications, an independent Scotland will be able do nothing to stem the loss of existing and fresh foreign capital and withdrawal to England of local businesses, including such iconic firms as the Royal Bank of Scotland Group and Lloyds Banking Group.  That major business shuffle coming on top of the legal transformation would be accentuated by the strong left-wing policies that are likely to gain traction in the wake of Scottish independence.

The pity of this all is that it is all so unnecessary.  Scotland has no major grievance or bitter unhappiness with current institutional arrangements.  Indeed, of the great advantages of the current federation model is that within an acceptable margin of error it allows both Scotland and England to get the best of both worlds.  The national government can take the lead in foreign and military affairs, and can control those network industries that span both, while allowing for some greater degree of autonomy on local issues.  The American constitutional model was initially designed on just that assumption and, ironically, it worked far better before the rise of the New Deal, in an earlier age when it was largely understood that local functions should not subject to the control of the national government, which was unfortunately toppled by the New Deal Constitutional Revolution of 1937.  Yet Scottish independence smashes these present cooperative arrangements, and necessarily blocks an incremental changes in the current system.

It is not possible now to reset the voting rules so that Scottish independence could only achievable by a supermajority vote.  But the case for that system justifies making this stern warning to the large number of Scottish voters who remain on the fence.  The presumption should always be set against major structural changes by simple majority vote. That same presumption should influence fence-sitting Scottish voters to vote “no” this coming Thursday.  There could always be another referendum down the road if Scottish conditions were to become intolerable.  But once the UK is broken up, it should be painfully evident that the Scottish voters, acting alone, cannot by simple majority vote force the creation of a new union with England.   In these uncertain waters, an emphatic no is the only responsible vote on Scottish independence.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

Tenth Annual Hayek Lecture with Professor Thomas Merrill



We are pleased to invite you to the Tenth Annual Friedrich A. von Hayek Lecture featuring Thomas W. Merrill, Charles Evans Hughes Professor of Law at Columbia Law School.  This year marks the fortieth anniversary of Hayek’s Nobel Prize in Economics.  Professor Merrill will deliver the evening’s keynote address titled “Possession as a Natural Right.”  Trevor Morrison, Dean and Eric M. and Laurie B. Roth Professor of Law, NYU Law, Richard Epstein, Laurence A. Tisch Professor of Law, NYU Law, and Mario Rizzo, Associate Professor of Economics, NYU, will make introductory remarks.

The event is jointly sponsored by the Classical Liberal Institute at NYU Law and the New York University Journal of Law and Liberty and will be held on Thursday, October 16, 2014 from 6:00 to 8:00 p.m. in Vanderbilt Hall, Greenburg Lounge, located at 40 Washington Square South.  A reception will immediately follow the lecture.

 This event has been approved for 1.5 New York State CLE credits.  It will be appropriate for both experienced and newly attorneys (those admitted to the New York Bar for less than two years) and is presented in traditional (in person) format.

 Professor Merrill writes widely in the fields of property and administrative law. In property, he has authored, with Henry Smith of Harvard, a series of articles relating the structure of property rights to information costs, as well as a leading casebook (“Property: Principles and Policies,” 2012); a series of studies, with Joseph Kearney of Marquette, on the role of public property rights in the development of the Chicago lakefront; and a variety of writings on constitutional property. In administrative law, he has written a number of pieces about the history of administrative law, and about judicial review of agency interpretations of law.

Professor Merrill is a graduate of Grinnell College (1971) and Oxford University (1973), where he was a Rhodes Scholar, and the University of Chicago Law School (1977). He clerked for the Hon. David L. Bazelon, U.S. Court of Appeals for the District of Columbia Circuit, and for the Hon. Harry A. Blackmun, U.S. Supreme Court. From 1987-1990 he was Deputy Solicitor General, U.S. Department of Justice. Professor Merrill has previously taught at Northwestern Law School (1981-2003) and at Yale Law School (2008-2010). He is a member of the American Academy of Arts and Sciences.

As is the custom with the Hayek lectures, Professor Merrill’s talk will be published in the New York University Journal of Law and Liberty.  The Hayek lecture series has addressed many different topics since its inception, but it remains true to its mission: to challenge audiences to help shape a better world.

 If you would like to take this opportunity to register online, please click here or copy and paste the link below:

 If you have any questions, please contact Jennifer Canose, Program Manager at the Classical Liberal Institute, at

Waging War

Judge Andrew P. Napolitano*



James Madison is commonly referred to as the Father of the Constitution in large measure because, in the secrecy of the Constitutional Convention in Philadelphia in 1787, he kept the most complete set of notes. He also had a very keen mind and a modest demeanor and an uncanny ability to solidify consensus around basic principles that are woven into the Constitution.

After he wrote the Constitution and before he became Thomas Jefferson’s secretary of state and eventually a two-term president, he was a congressman from Virginia. When he spoke on the floor of the House, the parts of the Constitution he was most adamant about restrained the president. Chief among those restraints, in Madison’s view, was the delegation to Congress, and not to the president, of the power to wage war.

Madison knew that kings became tyrants through war. He fervently believed that by keeping the war-waging power in the hands of the president and the war-making power in the hands of Congress, the Constitution would serve as a bulwark against tyranny. He explained:

  “Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force, of the people. … No nation could preserve its freedom in the midst of continual warfare.”

Madison is instructive for us today as President Obama decides whether to ask the nation to go to war or to order hostilities on his own.

Under the War Powers Resolution (WPR), the president can deploy U.S. forces anywhere outside the U.S. for 180 days upon his written notifications of congressional leaders. He does not need a declaration of war to deploy forces for 180 days, yet he cannot deploy forces beyond that without express authorization from Congress.

Obama used the WPR as the legal basis for his air invasion of Libya in 2010. That resulted in the destruction of the government there, which the U.S. had supported with $1 billion annually since 2005 (we literally destroyed armaments that we had paid for), the death of Col. Gadhafi, whom President George W. Bush and British Prime Minister Tony Blair called a friend in the war on terror, the instability of the nation, the death of our ambassador, and the seizure by mobs of U.S. government-owned real estate. The president declined to use the WPR authority last year when he sought -- and did not receive -- express congressional authority to use military force to degrade the offensive weaponry of the Syrian military.

The WPR is a two-edged sword. Though the courts have never reviewed it, it is certainly unconstitutional, as the courts have consistently ruled that one branch of government cannot give away its principal constitutional powers to another. Congress surely cannot give its war-making power to the president any more than it can give it to the courts. So, the political question with respect to war remains: Who will take the heat for fighting a war against ISIS -- the president via the WPR or Congress via the Constitution? 

Yet, beyond the political question is the more profound question of who will enforce the Constitution. In addition to Madison’s fears about foreign wars leading to domestic tyranny, there are profoundly practical reasons why war is a decision for Congress alone.

Here is where it gets dicey and inside the Beltway. Republicans want war because they see ISIS as a dreaded enemy and can use its televised barbarity to rally voters to their candidates. Democrats want war because they can use it to show the voters that they, too, can be muscular against terrorists. Yet, Republican leadership in the House is reluctant to permit the House to debate and vote on a resolution authorizing hostilities, because they can’t agree on how to instruct the president to end the war.

But war often has surprise endings and unexpected human, geopolitical and financial consequences. A debate in Congress will air them. It will assure that the government considers all rational alternatives to war and that the nation is not pushed into a costly and bloody venture with its eyes shut. A congressional debate will compel a written national objective tied to American freedom. A prudent debate will also assure that there will be an end to hostilities determined by congressional consensus and not presidential fiat.

What should Congress do? It should declare once and for all that we will stay out of this ancient Muslim civil war of Shia versus Sunni. We have been on both sides of it. Each side is barbarous. In the 1980s, we helped the Sunni. Now we are helping the Shia. Last year, Obama offered to help ISIS by degrading its adversaries; now, he wants to degrade ISIS. We have slaughtered innocents and squandered fortunes in an effort to achieve temporary military victories that neither enhance our freedom nor fortify our safety. We will only have peace when we come home -- when we cease military intervention in an area of the world not suited for democracy and in which we are essentially despised.

I suspect most Americans have had enough of war, and they understand that if the political class ignores Madison’s warnings, it will do so at its peril.


*Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written seven books on the U.S. Constitution. 

Presidential Indecision

Richard Epstein*



Today’s debate over the uses and limits of American military power is, and should be, solely over means and not ends. In previous columns on the death of Pax Americana and the isolationist follies of Senator Rand Paul—follies that have perhaps diminished in recent days—I argued that there is no principled political disagreement on the ghastly and immoral activities of ISIS, the Islamic State. The only serious debate, therefore, lies in fashioning the right response. On that score, the prompt use of massive force, ground troops included, against an identified target with territorial control must be the first and indispensable step in the overall plan. Long-term economic responses, as some are advocating, may be wise but they will not work now.

Unfortunately, President Barack Obama does not quite see it that way. The President has been immobilized by his deep ambivalence over the use of force. Right now, his stated campaign relies on the limited use of air power largely to knock out ISIS fighters who threaten key dams and other infrastructure—which is all to the good—but he will not budge beyond that target. Before he will move more decisively in Iraq, Obama must be satisfied that the local factions will unite behind a viable plan. Yet he ignores the deep problem that no such plan is possible unless and until the United States puts more resources on the table and more troops on the ground. Before he will move against ISIS, he has to cobble together a coalition of nations and then gain buy-in from Congress—but, he insists, no troops on the ground, please. That decision has powerful consequences for by the President’s own reckoning, the lack of ground forces means that ISIS has a three-year lease on life, during which catastrophe can strike. It is no wonder that the President’s potential allies in the Arab world are skeptical of his all-too measured response.

Committing ground forces is always risky business. But not committing to the fray is risky business as well. Wars are subject to sharp turns, and, as Robert Kagan reminded us recently, dangerous situations can quickly spiral out of control, as they did in the 1930s and may again do so today. The successes of NATO in the dangerous post-war years came from the U.S. willingness to keep ground troops in Europe, where right now they are needed in places like Estonia, lest Putin try to repeat the 1939 annexation. The Israelis learned that lesson quickly when it became apparent in Gaza that even a splendid air force could not remove the need for a bloody land invasion to close the tunnels, disrupt ground movements and communications, and capture enough rockets to reduce the direct threat to Israeli citizens and territory. Indeed, historically, Israel as a nation could not have survived if it had not been prepared to use preemptive force in 1967 to take out Egyptian opposition. Not surprisingly, its greatest peril came in 1973 when it was caught flat-footed in the Yom Kippur War.

So why doesn’t Obama commit himself to decisive actions with ground troops? It can’t be because of the logistical difficulties that are involved. It is one thing to try to ferret out terrorists—which, tellingly, is a term the President won’t use—who are hidden away in mountain caves or inner city safe houses. But the moment they lay siege to helpless cities, occupy air bases, and proclaim their Caliphate, their strong territorial presence makes it possible to confront them on advantageous terms, at least before they further build up strength. We should do everything we can to help the Kurds and other Iraqis, but it is foolish for us to wait until their forces coalesce to bear the brunt of the fighting alone, even if aided by American advisors. A strong military presence is the only way to counter the territorial expansion of ISIS.

The Obama personal hesitation stems, unfortunately, from reasons unrelated to the military and political issues. Part of his problem is that he cannot bring himself to acknowledge that he was wrong to oppose the Iraqi surge in 2006, and wrong to pull out American troops from Iraq as President. A strong president learns from his past mistakes, but Obama does not.

One reason for his dogged persistence lies in his flawed world view, which deep down, regards the United States (and Israel) as akin to colonial powers, whose actions should always be examined under a presumption of distrust. His ingrained uneasiness with the values of western civilization makes it impossible for him to think and act as the leader of a western nation. Instead, he much prefers to regard himself as a nonpartisan critic and a bystander to world affairs. He has no firm conviction in the rightness of his cause, and hence no confidence in his ability to get others to act as perils mount.

What makes the situation even worse is that Obama receives support from commentators and public intellectuals who think that his reluctance to commit military force should be commended as part of some grand plan to restore American hegemony by gentler means. Just that kind of thinking was evident in a recent column by Thomas Friedman, “Leading From Within,” which refuses to come to grips with the short-term peril that ISIS presents. Friedman accepts the conventional analysis that the 2003 invasion of Iraq was a mistake and ignores the current short-term military crisis in order to piece together some long-term strategic plans to make things better. One of his suggestions is that the United States remove its self-imposed limitations on the export of oil products. Of course, that proposal is correct. But it is an insufficient response to the perilous military situation today in the Middle East. It is also correct even in times of peace because free trade policies always work to the long-term advantage of our nation and the world. In good times, as well as bad, a global increase in the supply of oil will enhance prosperity at home and abroad.

The dubious arguments against fracking technology have ever weaker foundations as the technology continues to become both safer and more energy efficient. There is little environmental risk at home (especially compared to coal), and there is much to gain from boosting overall levels of economic activity, which can never be done by piling huge subsidies into Friedman’s preferred clean energies that still don’t work very well. Indeed, if freeing up oil exports had been done years ago, it would have long ago reduced world dependence on both Russian natural gas and Middle Eastern oil, which could have reduced the risk of aggressive action long before it occurred.

It is also clear that the release of American oil overseas suffers from none of the serious difficulties associated with the imposition of sanctions. Quite simply, no adversary (and no friend) can evade the reality of more abundant energy supplies. Yet, it is often difficult to get our friends to implement sanctions, and easy for our enemies to dull their effect, by dealing with third parties who treat the absence of American competition as an open invitation to expand business with rogue nations like Russia.

That said, Friedman’s approach is insufficient because it works off of the wrong time frame. The issue of oil exports is inevitably contentious and the President’s self-image as a reluctant champion of free trade will slow this train down for weeks, months or years. Friedman makes matters still worse by insisting that we tie the change in oil export policy to an acceptance of his regime of stiff carbon taxes to counter global warming, thereby dashing its chances of passage, thereby further delaying a sensible economic response. So after Friedman’s endless speculations, the vital issue that remains is what should be done today militarily, and not tomorrow economically.

So it is back to the military and diplomatic options. At this point, it is quite clear that the greatest obstacle to getting things done overseas is the allergic reaction domestically to foreign entanglements, given our mixed record of failed ventures. Indeed it is just on this point that presidential leadership is so critical. It is instructive that even Friedman’s co-columnist at the Times, Maureen Dowd, rightly frets that an embattled Obama, convinced of his “Solomonic wisdom and Spocky calm” will continue to wallow in self-pity—thinking of himself as the helpless prisoner of events—rather than make a decision about what to do. In this time of peril, we need a President with courage to put aside the political and ask this one question: what mix of American force and diplomacy can bring a halt to the growing disintegration of world order.

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

An Unhappy Summer for Liberty

Judge Andrew P. Napolitano*



At the root of the chaos in the Middle East and here at home are governments that respect no limits on their exercise of power. Public officials -- who are supposed to be our public servants -- routinely behave as if they are our masters. They reject the confines of the Constitution, they don’t believe that our rights are inalienable, and they fail to see the dangerous path down which they are leading us.

 It is a path to an authoritarian America, predicted by the British writer George Orwell in his dark and terrifying novel “1984,” in which governmental power was fortified by fear at home and war abroad.

 President Obama has dispatched 60,000 NSA spies to monitor the cellphone and landline calls, as well as the emails, texts, bank statements and utility bills, of nearly all Americans, in utter disregard for the constitutional standard required for doing so: probable cause of criminal acts by the persons spied upon. Yet his spies somehow missed the Boston marathon bombing, Russia's invasion of Ukraine and theft of Crimea, the downing of the Malaysian civilian airliner and the growth of ISIS in the Middle East.

 ISIS was fomented by the tragic, immoral and illegal American invasion of Iraq. That invasion was carried out under the false pretenses that the United States needed to find the weapons of mass destruction we had sold to Saddam Hussein. The Iraq war cost the lives of 650,000 Iraqis and 4,500 Americans. It displaced more than 2,000,000 Iraqis and, because it was paid for by borrowed funds, added $2 trillion to the U.S. government’s debt.

 The consequence of American Middle Eastern imperialism has become the virulently anti-American and viciously efficient fighting force called ISIS. President Bush and his generals and Obama and his spies knew or ought to have known about it. This disciplined group of fanatics is the latest American bogeyman at whom the warmongers are aiming their cries for more American military action and thus more American blood.

 Bush was reckless to have fought an unjust war, and Obama is reckless to have misguided our intelligence resources toward Americans and then feign surprise at the growth of this foreign disease right under his nose.‎ But this is a disease that he and the military-industrial complex will use to terrify us into another useless war. By their standards, any group or government -- except for the U.S. and our allies -- that uses violence to get its way should be eliminated by more violence. That will literally bring war without end.

 Congress is a potted plant. It has permitted Obama -- in defiance of the Constitution -- to destroy Libya, bomb innocents in Pakistan and kill Americans in Yemen. There is a reason only Congress can declare war: to ensure debate about war, to discover whether there is a legal basis for it, to explore all options to it, and to prepare for its human, geopolitical and financial consequences.

 The next domestic political battle will be a fight between the Senate and the CIA, as the Senate Intelligence Committee releases its report on CIA torture. Sen. Dianne Feinstein, D-Calif., the committee chair, has accused the CIA of spying on her and her staff, and just as Congress began its summer break, CIA Director John Brennan admitted the spying. That spying is a felony, and Brennan's job and his personal freedom are at stake, even as he and Feinstein argue about how much of the report should be released.

 Why is this report important? According to those who have seen it, it will demonstrate not only that the U.S. government tortured victims all over the world, but that its techniques were not those revealed and approved by congressional regulators, that the CIA repeatedly lied to its own congressional supporters and, most importantly, that the torture did not produce any material actionable intelligence, including the whereabouts of Osama bin Laden.

 The report is also important because in a democracy, all persons have a fundamental right to know what the government is doing. Transparency is a disinfectant for political corruption, and a people cannot be free when the government gets away with law breaking and lying about it.

 The other coming domestic issue is the militarization of the police. We learned this summer that in New York City, you can be choked to death by cops while selling untaxed cigarettes, and in Ferguson, Mo., you can be shot in the head by a cop while unarmed -- and none of the killers has yet been arrested, charged or prosecuted. This is the result of recent Supreme Court opinions that give the police qualified immunity. That doctrine makes it nearly impossible to sue or prosecute cops who kill innocents so long as they can claim that a reasonable cop would have done as they did. That is no protection from thugs in uniform; it is a license to kill.

 And speaking of killing, why do the police in America now have grenade throwers, a weapon that kills indiscriminately and is banned from use against the civilian population by international law? They have them because of a lack of transparency. The Department of Defense in secret gave or sold these weapons of mass destruction to American police departments in secret and thus without the consent of the public, whom the police are supposed to protect.

 Locally and nationally, we live under governments that prefer to rule rather than to serve, that choose not to tell us the truth but to keep it from us, and that have enacted laws that purport to make their behavior legal.

In 1949, when he wrote “1984,” Orwell predicted all this, including the secret torture, the perpetual warfare, the continuous spying and the fear of the government. His predictions were right on the mark -- he was only mistaken by 30 years.

 *Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written seven books on the U.S. Constitution.