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*

RICHARD EPSTEIN

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

THOMAS MERRILL

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: https://nyu.qualtrics.com/SE/?SID=SV_bfnE62d3f2x28Bv

 If you have any questions, please contact Jennifer Canose, Program Manager at the Classical Liberal Institute, at jennifer.canose@nyu.edu.

Waging War

Judge Andrew P. Napolitano*

JUDGE NAPOLITANO

JUDGE 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*

RICHARD EPSTEIN

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*

JUDGE NAPOLITANO

JUDGE 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. 

Rand Paul’s Fatal Pacifism

Richard Epstein*

RICHARD EPSTEIN

RICHARD EPSTEIN

This past week, President Barack Obama shocked those on the left, right, and center when he announced that he had not yet developed a strategy for responding to the threats that ISIS posed to the Middle East, Europe, and the United States. It would, however, be a mistake to think that his paralysis in foreign policy is characteristic only of the progressive wing of the Democratic Party. Libertarians, both within and outside the Republican Party, are equally clueless on the ISIS threat. In fact, their position on ISIS is, if anything, more dangerous than that of the President. While the President has yet to formulate a strategy on the question, the hard-core libertarians have endorsed a strategy of non-intervention, which I believe is totally inconsistent with libertarian principles.

For my entire professional life, I have been a limited-government libertarian. The just state should, in my opinion, protect private property, promote voluntary exchange, preserve domestic order, and protect our nation against foreign aggression. Unfortunately, too many modern libertarian thinkers fail to grasp the enormity of that last obligation. In the face of international turmoil, they become cautious and turn inward, confusing limited government with small government. Unwisely, they demand that the United States keep out of foreign entanglements unless and until they pose direct threats to its vital interests—at which point it could be too late.

The most vocal champion of this position is Senator Rand Paul. Senator Paul has been against the use of military force for a long time. Over the summer, he wrote an article entitled “America Shouldn’t Choose Sides in Iraq’s Civil War,” for the pages of the Wall Street Journal arguing that ISIS did not threaten vital American interests. Just this past week, he doubled down on this position, again in the Journal, arguing that the past interventions of the United States in the Middle East have abetted the rise of ISIS.

His argument for this novel proposition is that the United States should not have sought to degrade Bashar Assad’s regime because that effort only paved the way for the rise of ISIS against whom Assad, bad as he is, is now the major countervailing force. Unfortunately, this causal chain is filled with missing links. The United States could have, and should have, supported the moderate opposition to Assad by providing it with material assistance, and, if necessary, air support, so that it could have been a credible threat against Assad, after the President said Assad had to go over three years ago. The refusal to get involved allowed Assad to tackle the moderates first in the hope that the United States would give him a pass to tackle ISIS, or, better still, even assist him in its demise, as we might well have to do. It is irresponsible for Paul to assume that the only alternative to Obama’s dithering is his strategy of pacifism. Paul’s implicit logic rests on a worst-case analysis, under which no intervention is permissible because the least successful intervention may prove worse than the status quo. It is hardly wise to wait until ISIS is strong enough to mount a direct attack on the United States, when its operatives, acting out of safe havens, can commit serious acts of aggression against ourselves and our allies. It is far better to intervene too soon than to wait too long.

It is instructive to ask why it is that committed libertarians like Paul make such disastrous judgments on these life and death issues. In part it is because libertarians often have the illusion of certainty in political affairs that is congenial to the logical libertarian mind. This mindset has led to their fundamental misapprehension of the justified use of force in international affairs. The applicable principles did not evolve in a vacuum, but are derived from parallel rules surrounding self-defense for ordinary people living in a state of nature. Libertarian theory has always permitted the use and threat of force, including deadly force if need be, to defend one’s self, one’s property, and one’s friends. To be sure, no one is obligated to engage in humanitarian rescue of third persons, so that the decision to intervene is one that is necessarily governed by a mixture of moral and prudential principles. In addition, the justified use of force also raises hard questions of timing. In principle, even deadly force can be used in anticipation of an attack by others, lest any delayed response prove fatal. In all cases, it is necessary to balance the risks of moving too early or too late.

These insights help shape the serious libertarian debates over the use of force. Correctly stated, a theory of limited government means only that state power should be directed exclusively to a few legitimate ends. The wise state husbands its resources to guard against aggression, not to divert its energies by imposing minimum wage laws or agricultural price supports on productive market activities. Quite simply, there are no proper means to pursue these illegitimate ends.

In contrast, self-preservation and the protection of others form the noblest of state ends. The late economist and Nobel Laureate James Buchanan always insisted that a limited government had to be strong in the areas where it had to act. Perhaps his views were influenced in his time as an aide to Admiral Chester Nimitz in the Pacific theater during World War II. In responding to aggression, the hard questions are strategic—are the means chosen and the time of their deployment appropriate to the dangers at hand? Move too quickly, and it provokes needless conflict. Move too slowly, and the situation gets out of hand.

Senator Paul errs too much on the side of caution. He would clamp down, for example, on the data collection activities of the National Security Agency, which allow for the better deployment of scarce American military resources, even though NSA protocols tightly restrict the use of the collected information. It is wrong to either shut down or sharply restrict an intelligence service that has proved largely free of systematic abuse. The breakdown of world order makes it imperative to deploy our technological advantages to the full. Sensible oversight offers a far better solution.

The same is true in spades about the use of force in Iraq and Syria, where matters have deteriorated sharply since Paul’s misguided plea for non-intervention in June. It was foolish for him to insist (and for President Obama to agree) that the United States should not intervene to help Iraqis because the Iraqis have proved dangerously ill-equipped to help themselves. Lame excuses don’t wash in the face of the heinous aggression that the Islamic State has committed against the Yazidis and everyone else in its path.

Rand Paul likes to insist that the initial blunder was the invasion of Iraq in 2003. Whether that invasion was right or wrong is irrelevant today. The question now is how to play the hand that we have been dealt. Whatever the wisdom of going into Iraq, peace had been restored by the surge when President Obama took office in 2009. Since then Iraq’s factionalism has grown because Obama signaled disengagement the day he took office, and found himself unable to forge a status of forces agreement in Iraq in 2011. Being eager to get out, he could not figure out a credible way to stay in.

Unfortunately, Rand Paul writes as if Iraq’s many deficits are fixed facts of nature, wholly independent of the flawed U.S. policies that he has consistently backed, in sync with Obama’s aloof detachment. Yet these policies, tantamount to partial unilateral disarmament, have given our worst enemies the priceless assurance that they can operate largely free of American influence and power. There is nothing in libertarian theory that justifies dithering at home as conditions abroad get worse by the day.

A nation that believes in the primacy of liberty has to defend it at home and abroad, and do so over the long haul, without imposing artificial deadlines on its military commitments. Our enemies place no such limits on their efforts to kill and uproot innocent people. Our limited airstrikes have shown that force can make a positive difference. Only a fresh willingness to confess error about the President’s decision to remove ground troops from Iraq and keep all American forces out of Syria can reverse the present downhill trend. Containment is wishful thinking, not a stable option. Sadly, where the Islamic State goes, there we must ferret them out.

The American people may be weary of war. But they will become wearier still from the chaos that will follow if we neglect to fight the forces of death and destruction. Senator Paul’s position is inexcusable. It renders him unfit to serve as President of the United States should he be eyeing the 2016 candidacy. Our commander-in-chief cannot be a bystander in world affairs. He has to have the courage to lead and rally a nation in times of trouble, lest the liberties that we all cherish perish by government indifference and inaction.

*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.

Lessons From Ferguson

Richard Epstein*

RICHARD EPSTEIN

RICHARD EPSTEIN

Last week, I wrote a response of Paul Krugman’s critique of libertarian economics. As I mentioned there, it often turns out that libertarians are their own worst enemies in their critique of tough current affairs. Consider Nick Gillespie assessment of the Libertarian Moment in Ferguson, which is instructive both for what it does and does not say.

Gillespie argues that the modern libertarian movement ranges far beyond the traditional bread and butter issues of limited government. He points out that America is now “more socially tolerant” and that high on the agenda of libertarian causes is gay marriage, smoking pot, and “other forms of self-expression.” The attacks on government are less focused on the choice between monopoly and competition, and more on the perceived heavy-handedness of the government bureaucrats. Mainstream libertarians—and this is where I break with them—harbor grave doubts about the use of military force overseas, the perceived invasions of privacy done in the name of security, and, most recently, the use of police power in places like Ferguson, Missouri. Forget for now the libertarian principles on labor unions, cartels, and rent control. Today’s libertarians are more passionate about police, police militarization, and matters of racial justice.

It is not that I entirely part company with modern libertarians on all issues relating to the police. It is that I would like to see libertarians of all stripes slow down their denunciation of public authorities, without whom we cannot enjoy the ordered liberty that we all prize. The correct attitude on the police force is to see it as a regrettable necessity, but a necessity nonetheless. Without police intervention, many cities in this country would turn into Iraqi-style war zones. The point remains true even if it is the case, as it is in Iraq, that most people have a strong desire to live out their lives in peace So long as some fringe groups are intent on using violence, they can force everyone else to follow suit, until by degrees entire nations can be plunged into chaos and sectarian violence unless there are some organized institutions to protect us.

But that is only half of the story. The next step is to ask what should be done to make sure that the police, with their own monopoly over the use of force, don’t convert the traditional police power into a police state, with all the shuddering connotations that this term carries with it. And so it is back to the old story about the importance of institutions. Running the police is in part a big business, where we have to ask and understand how police are recruited, trained, equipped, deployed, supervised, promoted, punished, and paid. The basic deal is that we give the police extra powers, but we expect them to meet higher standards, which justifies their right to use of deadly force. And when they fall short, the sanctions on them are often the heaviest because they cannot plead the excuses available to ordinary people who have neither the training nor the temperament to engage successfully in the use of force.

All of this then gets us to Ferguson, where Gillespie joins the swollen ranks of those who believe that the police have presumptively misbehaved in killing an unarmed black man, and thus must prove their innocence, much as George Zimmerman was able to do, to the surprise of many, in the Trayvon Martin case. But in these cases, condemnation can run ahead of the evidence. I often like to say that I am a professor of law and not a professor of facts, and thus have no particular insight as to the course of events in fatal confrontations of which I have at most third-hand knowledge. But I do know something about how treacherous individual cases can become contentious whenever the issue of self-defense comes into play. These cases resist any orderly characterization, which makes it imperative not to jump to judgment before the information comes out.

It is not that the problem is not serious. One report indicates that there were 18 unarmed black men shot in the first three months of 2012. More recently, there was the homicide of Eric Garner by a chokehold, where the visual evidence makes it all too clear that the police wildly overacted in subduing the now dead man. It is no wonder that there have been recent peaceful public protests in Staten Island about the incident. Then there was the 2012 killing of the unarmed black man Trayvon Martin, where the acquittal by a Florida jury was, it seems, supported by all the available evidence. The word “unarmed,” as in the sentence, “the police shot an unarmed teenager” is often given too much weight in making snap judgments about right and wrong in these confrontations. A strong-arm robbery, such as that which happened minutes before Michael Brown was killed, is a crime of violence, which is, by definition, done by an unarmed man.

In the case of Ferguson, the hard question is what does that evidence say. The accounts vary all over the map. On one version reported on the Huffington Post, Brown was “compliant” when approached by police office Darren Wilson. Another version, reported on Fox, told a very different story: that Wilson had been jammed back into his car by Brown, and subjected to serious injuries, including a damaged eye socket, that led up to the shooting when, by this version, Brown had started to go after the police officer. Whether the Huffington Post or Fox is correct is something that requires the evidence, which at this point has not been made fully public. Yet all of the general statements about the sorry state of race relations in places like Ferguson are no substitute for an accurate account of what happened.

The role of institutions again surges to the fore here. There is no question that Gillespie (and everyone else) is right to condemn the Ferguson police and Missouri state officials for acting poorly insofar as they kept the release of evidence to the public to a trickle. Full and prompt disclosure has to be the norm in cases of killings by police officers, in order tamp down on local distrust that could easily lead to violence. In Ferguson, moreover, the disputed question of whether a police officer has suffered serious injuries is something that can be answered easily enough by photographs or a direct viewing of the officer. Yet nothing of that sort was done. By the same token, the interventions of Attorney General Eric Holder in the situation only compound the difficulty, because his job is not to seek evidence of a civil rights violation, but to ask whether Wilson had committed any civil rights violation in the first place, which you cannot do effectively if you align yourself publicly with Brown’s parents. It is a sorry state of affairs if every potential investigator of the situation is perceived by some constituency to have axe to grind. There is no faster way for public confidence to go south.

The situation does not get any easier when we seek to draw broad implications from this tragic incident. Crime rates over the past generation are sharply down for both white and black people. It is of course an open question as to why this has happened. In dealing with this issue, Gillespie attacks repeatedly criticizes the “militarization” of the police for the obvious risk that it could give them the reason to attack as if they were soldiers. But the declining numbers of fatalities don’t support that conclusion, and the use of military gear in some cases at least could protect the police from serious bodily injuries. Do shields and tasers save lives, or do they serve only to inspire public resentment?

These are fair questions. But Gillespie goes a bit over the line when he notes, quoting both Reason and Cato, that “The buzz phrase in policing today is officer safety.” At the very least that ought to be a serious consideration. Indeed, even at the height of racial unrest in the late 1960s a liberal Supreme Court in Terry v. Ohio, approved, after anguished reflection, a stop and frisk regime when police had reasonable suspicion of the potential commission of a crime. That decision was not idle. Police officer deaths in the line of duty, year to date for 2014, were 67 of which 27 were by gunfire. For the full year of 2013, the numbers were 105 total deaths, with 30 by gunfire. It would be odd to say that police officer deaths (which are more common than deaths to citizens from police officers) should not count especially since it is very difficult to envision circumstances where killing a police officer counts as a form of justifiable homicide, and easy enough to imagine cases where killings by police officers are justified.

As in the case of mass killings, we have to be very careful before we draw general conclusions from particular cases. The killing of Eric Garner raises lots of serious questions, but it doesn’t seem that one of them should be whether New York City should keep to its “broken windows” policy, which worries about quality of life issues in an effort to create a social climate in which lax policing is taken as a sign of public indifference to serious offenses. The clear point here is that broken windows or no broken windows, the use of excessive force by police is always inexcusable, so that the proper policy is to tamp down on those forms of abuses without redoing general policies of community relationships which, while always subject to revision, should not be regarded as a weak link in the system.

These arguments speak, moreover, to the overreach of modern libertarian thought, which in the end does not have any distinctive take on these critical issues of public administration. No one should condone excessive police force, private crime, or violent public protests. The hard question is figuring out the ways in which to tamp down on these issues. That is ultimately the challenge of any responsible system of public administration. Oddly enough, that task need not raise profound questions of what counts as right and wrong conduct. The inconsistent accounts of the Brown killing all play off a common moral substrate. Killing an unarmed civilian in cold blood is a crime. Killing in self-defense is not. The task of public administration is to find out which happened, and to do it quickly and in a way that can command public confidence and respect. No easy job, it seems. 

*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.

Setting Krugman Straight

Richard Epstein*

RICHARD EPSTEIN

RICHARD EPSTEIN

The recent story in the New York Magazine, “Has the ‘Libertarian Moment’ Arrived?” by Robert Draper, has given rise to a great deal of speculation about whether we are poised for another great political transformation. Needless to say, the prospect of this “moment” fills the New York Times set with dread. The Times’ all-purpose scold Paul Krugman followed up Draper’s tell-all story with his own harsh critique of “libertarian economics” in his column “Phosphorus and Freedom.” He concludes that it is “foolish” for defenders of free market economics to believe that “we have a vastly bigger and more intrusive government than we need.” Unfortunately, Krugman knows nothing about the libertarian principles that he blithely dismisses.

Krugman points to three places where he thinks that libertarian enthusiasts have gone sadly astray: pollution, the Food and Drug Administration, and the Department of Motor Vehicles.

In order to set the stage for this critique, it is necessary to first establish how libertarians understand free markets. Most emphatically, these markets do not operate in a vacuum. They require that we have clear assignments of rights to both human labor and external objects. The standard position here is that all individuals own their own labor and the various resources, both physical and intangible, that they acquire either by initial capture or by transfer from a prior owner. Its basic system of exchange must be protected by vigorous rules that prevent all self-interested individuals from disrupting voluntary transactions. There must be formalities with certain classes of contracts to increase security of exchange. And there must be strong rules to prevent bad actors from bypassing the market by seizing things that do not belong to them. That prohibition against theft in turn requires the state to provide remedies against other actions that destroy the property of other persons, not only by direct blows but also by pollution. Far from rejecting these government limitations on individual activities, a responsible system of laissez-faire capitalism necessarily embraces them. A sensible libertarian is a classical liberal in the tradition of Adam Smith and David Hume. On economic issues he is no anarchist, but a believer in limited government.

Libertarians and Pollution

Krugman sums up his criticism of libertarianism in one word: phosphorus. Evidently, Erick Erickson, a prominent blogger at Red State, frothed at the mouth when a local city council banned phosphorus in dishwasher detergents. Erickson’s categorical denunciation was ignorant and ill-informed, but so too was Krugman’s purported refutation of that overheated position.

There is little doubt that phosphorus is a pollutant that can kill aquatic life. One possible remedy against parties whose discharges poison the land and waters of others is a tort suit brought to stop its use or collect damages for harms caused. But a moment’s reflection shows that this solution is creaky. First, there are too many users to sue, and second, it is not clear which people should bring suits for the assorted harms. For hundreds of years it has been widely understood that direct regulation is often an efficient substitute for an inferior tort system, which achieves a legitimate government goal at low costs. Krugman is right that the system cannot work if farmers can evade controls, and the sensible libertarian recognizes that as well by expanding the scope of enforcement.

Indeed, the key challenge for regulatory design is what form of regulation works best. Perhaps a total ban of phosphorus in detergents or farming is too costly to productive activities. It is therefore always a fair question to ask whether small amounts might be used, and if so by whom, and further whether to tax those users to give them private incentives to avoid the additional harms.

So stated, the libertarian critique against government regulation no longer operates as a blunderbuss. Instead it asks whether the regulation comes too soon and is too severe. Thus it is commonplace today to require individuals who wish to build homes at a distance from the water to go through extensive government approvals, often administered by an overzealous Army Corps of Engineers, before getting a building permit. The paperwork is expensive and never ending; the delays inordinate, and the required precautions a waste of time and money. For example, the record in the 2006 case Rapanos v. United States, revealed that “The average applicant for an individual permit spends 788 days and $271,596 in completing the process, and the average applicant for a nationwide permit spends 313 days and $28,915—not counting costs of mitigation or design changes.”

Rather than engage in this unending charade, just let the construction start, and then impose a prompt cease-and-desist order, clean-up obligations, fines, and damages—but only for builders whose activities pose an imminent threat of pollution, which, given everyone’s knowledge of the looming sanctions, will typically be a tiny fraction of the cases. In the face of this sensible alternative, and in light of similar difficulties in getting building permits in urban settings, Krugman is a pure ideologue in denying that government is “vastly bigger and more intrusive” than it ought to be.

Abolish the FDA?

Krugman’s second sally ridicules Milton Friedman for suggesting that we should abolish the FDA and use tort law in its place. In this case, both economists get failing marks stemming from their inability to master the institutional details. For starters, the FDA has three distinct functions in regulating drugs: insuring purity, testing for safety, and testing for effectiveness. No serious libertarian mounts an existential attack on the FDA for discharging the first function. An action in tort law (or in contract law for a breach of the implied warranty of merchantability) presupposes that you can find the rogue supplier who puts dangerous stuff into the marketplace. As with pollution, the inadequacy of the individual lawsuit requires some concerted government action to stop these deadly incidents before they occur. Indeed, in practice, the risks of contamination and adulteration are so severe that reputable pharmaceutical manufacturers work hand-in-hand with the FDA to stop illegal imports and domestic sales of bogus drugs.

It hardly follows, however, that the FDA does as well when it oversees clinical trials of new drugs. Here its practices are rigid and obsolete; they impose unconscionable delays on letting new drugs into the market. As a consequence of its incompetence, the FDA is besieged with pleas for exceptions by people for whom all approved therapies have failed. Indeed, the extensive market for off-label uses of FDA-approved drugs shows that physicians are a lot better at making treatment prescriptions than the FDA. Moreover, its effectiveness studies almost always miss the boat. Individual healthcare programs, armed with knowledge of their customer base, can do this job better.

Nor is the tort law any panacea. The actions today are not confined to suits for drugs that are improperly formulated. Those cases are rarities. Virtually all the litigation brought today is by disgruntled patients who insist that the FDA-required warnings did not adequately inform them of the associated risks of the product. These lawsuits are almost always counterproductive given that the FDA warnings are typically far too alarmist, so that they serve no useful function at all. Private systems of warnings developed by such organizations as the National Comprehensive Cancer Network provide far more accurate and up-to-date information than the FDA, because they systematically address such key issues as dosage levels, treatment sequences, and drug interactions that the FDA overlooks. Is this intervention “bigger and more intrusive than we need”? You betcha.

The Case for the DMV

Last, Krugman fantasizes that libertarians recoil at the Department of Motor Vehicles. This is not the case. The case for that body is similar to that for collective controls over pollution, only easier. Keeping bad drivers off the road is often better than allowing them to kill innocent people. Keeping a system of fines and tort remedies in place offers a sensible three-prong program that tends to minimize the risks of keeping too many good drivers off the road and letting too many bad drivers on it. The tests can be reasonably objective and easily processed. It is government at its best. Illinois, which can hardly do anything right, runs a perfectly fine DMV for ordinary drivers.

Yet it hardly follows that all motor vehicle licensing is risk free. Former Illinois Governor George Ryan went to jail for taking bribes to issue licenses to unqualified truck drivers, with deadly results. The abuses of licensing power become greater when the licenses limit the number of trucks that ship tomatoes from Illinois to California, but not back again, or rations taxi cabs medallions that sell at artificially high prices. A sound system of regulation never lets the state use its licensing power to restrict competition on a facility over which the state has monopoly power.

The Bigger Picture

The overall pattern should now be clear. One reason why the debate between hard-line libertarians and their fevered opponents like Krugman has taken such a know-nothing turn is that neither side bothers to take seriously the nitty-gritty institutional details on the uses and limits of regulation in a variety of complex areas. Milton Friedman tended to miss these points because his main targets were minimum wage, rent control, and agricultural price supports, where the hard line libertarian solutions make a good deal of sense.

Krugman doesn’t have that excuse. He fails to understand how institutions work because it is so much easier to slam libertarians for their cultish devotion to Ayn Rand. The truth is, as I argued in an earlier critique of Rand Paul, libertarianism has a strong and useful theory of rights, but offers only loose guidance on the mix between public and private remedies for both breach of contract and harms to strangers, including pollution. All Krugman’s popular work is marred by his obsessive attention to monetary policy and the Fed. If he ever cared to study mid-level regulations on pollution, drugs, and highway usage, he would discover that not all libertarians are as clueless as his New York Times screeds have become. 

*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.