Quotation of the Day…

by Don Boudreaux on June 29, 2015

in Law, Myths and Fallacies

… is from page 34 of the 2009 collection of some essays by the Italian jurist and political philosopher Bruno Leoni, entitled Law, Liberty and the Competitive Market (Carlo Lottieri, ed.); in particular, this quotation is from Leoni’s brilliant 1963 New Individualist Review article, “‘Consumer Sovereignty’ and the Law” (original emphasis):

If only one word had to be used to define this widespread change in the idea of the law, I would say that according to the man on the street the law today is something which must be manufactured, or even pre-fabricated.  That is, it is something produced with the minimum of time and effort judged necessary, according to plans prepared in advance, by the “suitable” people in the “suitable” places (the national legislatures), and presented to those who must obey the laws.  The latter people (we might say the “consumers,” if the word were not misleading for reasons which we shall shortly see) do not have – or are thought not to have – any other role than that of using the product ready made for them, just as they use the automobile or the washing machine.

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Here’s a letter to a gracious, learned, and smart long-time correspondent whose view of the world differs greatly from my view of it:

Mr. Claude Knowlton, Esq.

Dear Mr. Knowlton:

Thanks for your e-mail.

You think me “wooden” and “unrealistic” for criticizing the majority opinion in King v. Burwell.  Unsurprisingly, I disagree.

You are, of course, correct to note that the meanings of words and phrases are often ambiguous and, thus, require interpretation.  And reasonable people can and do frequently disagree about the best interpretations of ambiguous words or phrases in their specific contexts.  Recognition of this reality, however, is no license for a court to give to words and phrases meanings that those words and phrases plainly do not have.  Yet such a license was precisely what Chief Justice Roberts and his majority colleagues on the Court issued to themselves (and, hence, to lower courts in the U.S.) with the King v. Burwell decision.

If you excuse this sort of judicial rewriting of legislation, then where do you stop?  Suppose that in the future President Rand Paul, convinced by a great deal of empirical research and by sound economic theory, sensibly concludes that a minimum wage of $7.25 per hour harms low-skilled workers – an outcome exactly the opposite of what Congress ostensibly meant to achieve.  Pres. Paul then orders the Wages and Hours Division of the U.S. Department of Labor to interpret “$7.25 per hour” (the current minimum wage stipulated in the Fair Labor Standards Act) as “$0.01 per hour.”  Arguing that only such an interpretation of that term of the legislation will achieve the purpose that Congress intended, Pres. Paul directs the Department of Labor not to prosecute employers who pay their workers hourly wages of $0.01 or more.

This controversial interpretation of the statute is then challenged in court.  If Chief Justice Richard Epstein accepts – as he surely would – the administration’s claim that a minimum hourly wage of $7.25 harms many of the workers who Congress insists it meant to help, why should he and other like-minded members of the SCOTUS not use the logic of King v. Burwell to uphold the Paul administration’s reasonable argument that, to make the Fair Labor Standards Act work as Congress intended – to ensure that government’s most-recent change in the minimum wage in fact offers maximum possible economic opportunity and benefit to low-skilled workers without causing any of them to suffer unemployment – “$7.25” must be read as meaning “$0.01”?  I certainly now can see no good reason for any such “wooden” and “unrealistic” restraint on the part of the Court.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

UPDATE: No one has pointed out yet, but someone no doubt will eventually do so, in response to the above letter, a potential difference in the minimum-wage scenario that I present here and the Obamacare reality that was at issue in King v. Burwell.  That someone will, not unreasonably, say that Chief Justice Roberts’s re-writing of the statutory language was necessary simply to make operational the governmental apparatus created by the statute rather than to directly achieve the ostensible goal of the statute (here, greater health-insurance coverage).  In contrast (this someone continues) the minimum-wage hypothetical in the above letter involves no problem of the governmental apparatus set up by the Fair Labor Standards Act failing to work if the hourly minimum wage is interpreted as explicitly written (that is, as $7.25 per hour).

Such a difference is real.  Yet the relevance of this difference is unclear.  If courts are to take into overriding account, when they interpret statutory language, the (known or surmised) goals that the legislature intended to achieve with the statute and then give life to those goals even if doing so requires a rejection of the plain meaning of the statutory text, then it is not implausible – if not unavoidable – to argue that some court should, using King v. Burwell, uphold a government-agency’s decision to read “7.25” as it appears in the Fair Labor Standards Act to really mean “$0.01.”  That court could reason that Congress cannot possibly have meant to cast many low-skilled workers into the ranks of the unemployed, especially given that the stated purpose of the most-recent hike (to $7.25 per hour) of the minimum wage was to increase the incomes of low-skilled workers.  Because Congress cannot possibly have meant to cause such harm to the people who are the very objects of its concern in this statute, and because the best way to avoid the undesirable outcome of unemployment caused by the “inartful” use of the term “$7.25″ is to interpret it as meaning “$0.01,” such a re-writing by the court of the statutory language is necessary if Congress’s intention is to be achieved.  After all, according to economic logic and a great deal of empirical studies, the lower the legislated minimum wage, the better off economically is the typical low-skilled worker.

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… is from page 43 of my late colleague Jim Buchanan’s 1977 collection, Freedom in Constitutional Contract; specifically, it’s from Jim’s deeply insightful 1974 essay “Good Economics – Bad Law” (which is a review of the first edition of Richard Posner’s Economic Analysis of Law):

Attempts to shut off or to forestall trade when mutuality of gain exists encourage costly evasions.  The very legality of society itself may be seriously eroded if those who make collective decisions fail to understand this elementary consequence of the economists’ teaching.

People who endorse government efforts to prevent or to otherwise obstruct adults from voluntarily trading – efforts manifested, for example, in the likes of minimum-wage legislation, tariffs, occupational-licensing restrictions, and drug prohibitions – unavoidably create artificial “winners” (such as those workers who manage to remain employed at the minimum wage) whose gains come at the expense of people upon whom losses are imposed by the interventions (such as those workers who lose their jobs, or whose jobs are made less agreeable, because of minimum-wage legislation).  Such interventions are a cancer in the fabric of society – and this cancer is made no less debilitating by the good intentions of the economic witch-doctors who administer the poison.

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An Advantage No More of Legislation

by Don Boudreaux on June 27, 2015

in Law, Legal Issues

One of the benefits that legislation is said to enjoy over evolved, unwritten common law is that legislation’s meaning is allegedly more clear and more concrete and, hence, more objective and more certain.  This advantage for legislation is said to spring from legislation being carefully and precisely articulated and written down.  The written text of each proposed bill is (supposedly rationally) pondered, debated, and polished before it is enacted, and that which is enacted is written down explicitly and with precision in words that can be read and understood by all (or at least by each affected party’s agent-lawyer).

If and to the extent that such explicit articulation and writing of legislation ever really gave that form of rule-making an advantage over evolved common law, the U.S. Supreme Court’s majority opinion in King v. Burwell has done much to strip legislation of this advantage.

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Writing in the Houston Chronicle, my intrepid Mercatus Center colleague Veronique de Rugy exposes one of the many myths perpetrated by supporters of that great geyser of cronyism, the U.S. Export-Import Bank.

Nona Storr, Virgil Storr, and my former student Emily Chamlee-Wright have a new book on my hometown, New Orleans, post-Katrina.

Earlier this week I was a guest on Bob Harden’s radio show.  Here’s the audio:


Writing at Marginal Revolution, my colleague Tyler Cowen offers his thoughts on the Greek government’s recent call for a referendum.  Tyler isn’t impressed.

Larry Kudlow agrees with Casey Mulligan: Obamacare will destroy some jobs.  A slice:

University of Chicago economist Casey Mulligan argues that Obamacare disincentives will reduce full-time equivalent workers by about 4 million principally because it phases out health-insurance subsidies as worker income increases. In other words, Obamacare is a tax on full-time work. After-tax, people working part time yield more disposable income than working full time.

Mr. Mulligan calculates that both explicit and implicit marginal tax rates within Obamacare may rise to near 50% as the law discourages those who attempt to climb the ladder of success. National prosperity and economic growth are again the victims.

If all that weren’t bad enough, Obamacare enrollment is coming up short while the program is unable to sustain an adequate risk pool. Expert health-insurance analyst Robert Laszewski and the consulting firm Avalere find that exchanges are succeeding in enrolling low-income individuals, but are struggling to attract middle- and higher-income enrollees.

Cal State Northridge economist Robert Krol asks if governments impede innovation in transportation.

The Institute for Justice continues to raise eyebrows with its work that is both good and successful.

The great Walter Olson discusses the disappointing U.S. Supreme Court ruling that is Texas Department of Housing and Community Affairs v. Inclusive Communities Project.

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Quotation of the Day…

by Don Boudreaux on June 27, 2015

in Current Affairs, Hubris and humility

… is from a recent Facebook post by Bob Higgs:

I despise the culture war.  I wish it were possible for both sides to lose simultaneously.  It’s a war for control of government power – power that each side desires to use in order to discomfit and outrage its culture-enemies.

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Here’s a letter to Fortune:

A lone error mars Roger Lowenstein’s marvelous essay on the connection between TPP and the classical economist David Ricardo, who was a principled advocate of free trade (“TPP and fast track: Why Congress should listen to the world’s richest economist,” June 22).  That error is Mr. Lowenstein’s endorsement of Pres. Obama’s insistence that “that the [freer-trade] legislation also include retraining and support for the victims of trade.”

First, the word “victims” is inappropriate. Every producer – including every worker – is in business to satisfy consumers, and not vice-versa.  So when consumers choose to buy fewer units of whatever some producer offers for sale, that producer is not in any way victimized.  (If you doubt this claim, ask yourself if you regard people who switch to buying Priuses and other more fuel-efficient cars as being wrong-doers whose actions “victimize” Exxon and its fellow oil companies.)

Second, international trade is not unique in destroying particular jobs.  All economic change does so.  Chemical fertilizers, refrigeration, and motorized farm equipment destroyed lots of agricultural jobs.  Inexpensive kerosene destroyed most whaling jobs.  The telephone destroyed the jobs of telegraph operators.  Personal computers destroyed jobs in typing pools.  The Atkins diet destroyed some jobs in breweries and bakeries.  The polio vaccine destroyed the jobs of many workers who made wheelchairs, crutches, and iron-lung machines.

Because all economic change – including change in the patterns of purely domestic trade – destroys some jobs and creates others, there’s no sound economic reason to accord special treatment to workers and other producers who lose jobs and profits to those economic changes that happen to be sparked by foreigners rather by fellow citizens.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

(HT to Greg Mankiw for the pointer to Lowenstein’s essay.)

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Some King v. Burwell Links

by Don Boudreaux on June 26, 2015

in Health, Law, Legal Issues

David Berstein (my GMU colleague from over in the law school) writing at the Volokh Conspiracy.  A slice (coming after David documents the legislative malfeasance that Congress committed to rush a bill through to passage along starkly partisan lines):

King v. Burwell represented the best hope that the Supreme Court would take the appropriate posture on all this, which is that those who rush through a law they haven’t even read or understood and with no political support from the other side have to live with the consequences when inevitable mistakes arise. Instead, the majority took the position that its job is to help out the other branches when it turns out that such a law is unworkable as written. Too bad.

Georgetown University law professor Randy Barnett writing at SCOTUSblog.

George Will writing in today’s Washington Post.  A slice:

Conservatives are dismayed about the Supreme Court’s complicity in rewriting the Affordable Care Act — its ratification of the IRS’s disregard of the statute’s plain and purposeful language. But they have contributed to this outcome. Their decades of populist praise of judicial deference to the political branches has borne this sour fruit.

Michael Cannon writing at Cato@Liberty.

The editors of the Wall Street Journal.  (gated)  A slice:

Chief Justice Roberts has now become a co-conspirator in this executive law-making. With the verve of a legislator, he has effectively amended the statute to read “established by the State—or by the way the Federal Government.” His opinion—joined by the four liberal Justices and Anthony Kennedy—is all the more startling because it goes beyond normal deference to regulators.

Chief Justice Roberts concedes that the challengers’ arguments “about the plain meaning” of the law “are strong.” But then he writes that Congress in its 2010 haste bypassed “the traditional legislative process” and thus “the Act does not reflect the type of care and deliberation that one might expect of such significant legislation.” So because ObamaCare is a bad law, the Court must interpret it differently from other laws.

Ilya Shapiro writing at Cato@Liberty.  A slice:

Of course, Roberts explains his transmogrification by finding it “implausible that Congress meant the Act to operate in this manner,” to deny subsidies to millions of people as part of legislation intended to expanded coverage. But it’s hardly implausible to think that legislation that still says that states “shall” set up exchanges—the drafters forgot to fix this bit after lawyers pointed out that Congress can’t command states to do anything—would effectively give states an offer nobody thought they’d refuse. It was supposed to be a win-win: states rather than the federal government would run health care exchanges (yay federalism!) and all those who need subsidies to afford Obamacare policies would get them (yay universal healthcare!).

But a funny thing happened on the way to utopia, and only 14 states (plus D.C.) took that too-tempting offer, perhaps having been burned too many times before by the regulations that accompany any pots of “free” federal money. And that’s why we ended up with King v. Burwell: Obamacare the reality doesn’t accomplish Obamacare the dream. That may not be the absolutely, 100-percent correct reading of the Affordable Care Act. But it’s nothing if not plausible.

That should’ve been the end of the story: the clear text of the statute produces a plausible result, so courts should enforce that “natural meaning.” Alas, as Justice Scalia put it, “normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved.”

The Competitive Enterprise Institute.

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… is from page 23 of Vol. 12 – Economic Inquiry and Its Logic (2000) – of The Collected Works of James M. Buchanan; specifically, it’s from Jim’s December 1976 Liberty Fund lecture “General Implications of Subjectivism in Economics” (original emphasis):

The principle that exposure to economics should convey is that of the spontaneous coordination which the market achieves.  The central principle of economics is not the economizing process; it is not the maximization of objective functions subject to constraints.  Once we become methodologically trapped in the maximization paradigm, economics becomes mathematics or engineering.

Here, by the way, is Sheldon Richman writing on Jim Buchanan’s subjectivist economics.

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King v. Burwell in Short Compass

by Don Boudreaux on June 25, 2015

in Health, Law, Legal Issues, Politics

Here’s my summary of today’s King v. Burwell ruling: Congress may lie.

A somewhat more extended summary is that Congress may explicitly lie to the public even in the very words it uses in its statutes, and robed legislators will excuse and reinforce these lies.

See also my GMU colleague (from over in the law school) David Bernstein’s brief post.

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