The premise behind Gresham’s Law is that money of a higher intrinsic value will be hoarded while the money of a lower substantive value but legally recognized as having the same nominal value will be circulated throughout the economy. Succinctly put, “..bad money drives out good money…” pithily sums up this economic phenomenon. However, is this occurrence solely confined to the commodity of money? Doesn’t the observations convey in Gresham’s Law applicable to other goods? For example, unless a baseball card collect is presented with an astronomically large monetary offer, odds are they will be unwilling to part with a limited-run rookie card of a legendary major league player. This scenario reflects many of the assumptions regarding commodity value implicit in Gresham’s Law. Generally, rare collectibles are held on to, while mass-produced memorabilia is readily available at the local garage sale or swap meet. Most collectors will hang on to the items that are considered valuable unless another interested party can provide a commodity in exchange that exceeds the perceived value of the collectible held by the hobbyist in possession of the coveted item.
However, how does Gresham’s Law interact with the intangible commodity of human capital? A firm or a business unit within a firm would want to retain top-level talent and let go of the mediocre/poor performers. Before we can delve into this analysis we must distinguish what human capital is. Human capital is the economic value that the employee brings to the firm. Typically through their experience, education, certifications, knowledge of company procedures and policies, position-specific “tribal knowledge”, critical thinking skills, and other pertinent soft skills. For readers who have never worked in a corporate environment before tribal knowledge is the informal and unwritten knowledge of best practices of how to perform within a specific job role. It stands to reason that a potential employee possessing all of these attributes would be a hot commodity on the job market. If currently employed by a company would be an employee of a high value.
If human capital is valued in a similar sense to other commodities such as money, how do businesses act in a manner to retain this high-quality talent? The answer most human resources representatives would give is that their organization creates an environment that fosters career advancement. Stressing the perks such as tuition reimbursement, possession of company stock options, and opportunities for placement in vertical job positions. While these factors may play a role in some employees choosing to work long-term for the same company, there is another variable that HR will not be forthright about. That is oftentimes exceptional employees with a high degree of human capital end up getting pigeonholed to the same role. Oftentimes these individuals are blocked from transferring to other business units or positions within the company by the request of middle and executive management. The reason behind limiting this MVP’s potential is quite pragmatic, the business unit cannot afford to lose this individual. Their skills and knowledge are essential to the day-to-day operations of the business. It would be nearly impossible to fill the void if they were to get promoted or transition to a lateral position within the firm. In the corporate world, this individual may be referred to as a subject matter expertor colloquially known as a SME.
It should be noted that the desperate attempts of management to relegate this individual to the same job role has the propensity to backfire. Why? Because this individual gets fed up with their limited job prospects and ends seeking career advancement at another firm. In a free market for employment, a high-quality employee has many prospective options when it comes to their career. If a firm stubbornly, confines them to a shallow career path they will simply look for employment at another company.
“…When there is no probability that any such repeal [of a tariff in a foreign country] can be procured, it seems a bad method of compensating the injury done to certain classes of our people to do another injury ourselves, not only to those classes but to almost all the other classes of them. When our neighbors prohibit some manufacture of ours, we generally prohibit, not only the same, for that alone would seldom affect them considerably, but some other manufacture of theirs. This may no doubt encourage some particular class of workmen among ourselves, and by excluding some of their rivals, may enable them to raise their price in the home market. Those workmen, however, who suffered from our neighbors’ prohibition will not be benefited by ours. On the contrary, they and almost all the other classes of our citizens will thereby be obliged to pay dearer than before for certain goods. Every such law, therefore, imposes a real tax upon the whole country, not in favor of that particular class of workmen who were injured by our neighbors’ prohibition, but of some other class…” (Bk. 4, Ch. 2)
The Biden Administration’s commitment to free trade is questionable at best. The extent to which he will champion laissez-faire policies is a difficult determination to make in the nascent period of his presidency. Biden being a centrist is more concerned with appeasing the median voter than taking principled policy positions. Only time will tell whether or not he will capitulate to the anti-market sentiment of the vociferous and passionate populous wing of the Democratic party. Epitomized in the heated rhetoric of elected officials such as Elizabeth Warren and Alexandria Ocasio-Cortez. However, there may be some light at the end of the tunnel. Free trade may not necessarily be dead in the water. Despite the multitude of flawed policies that have so far been supported and promulgated by the Biden Administration they may have done one thing correctly. Repeal some of the Trump-era tariffs. Arguably one of the most disturbing aspects of the Trump administration was his hostility towards foreign trade. Biden has taken one small step to repair America’s tarnished image in the arena of international trade. This attempt at redemption has manifested itself in an unlikely form, the abolition of the importation tariff on Scotch Whisky.
The previous statement is not wholly accurate. The United States agreed to relinquish all tariffs on goods imported from the United Kingdom. Responding to the UK’s lift all of its tariffs on US imports back in January. Scotch Whisky is one of Scotland’s most highly esteemed exports. Making it an iconic symbol of the UK’s presence in the arena of global trade. Considering back in 2012 the United States was estimated to be the largest export market for Scotland’s prized spirit, it stands to reason that the tariffs were detrimental to United Kingdom’s economy. Even in light of the Trump tariffs the United States still maintained this position as top consumer nearly a decade later in 2020. Despite the United States remaining big-time scotch imbibing nation the tariffs still sent shock waves throughout the industry. It projected that since the 25 percent tariff was imposed back in 2019, Scotch producers lost an aggregate “$682 million (£500 million)” in sales. In 2019, the United States imported $2.07 billion worth of distilled spirits from the U.K., the majority of it being scotch whisky. The year 2020, delivered a two-punch blow to Scotland’s whisky producers. The COVID-19 pandemic also eroded profit. Leading to an overall 23 percent dip in global scotch sales. The US tariffs have been attributed to a 32 percent decline in overall whisky exports. As recent as last month the losses incurred by the tariffs have been described as “unsustainable” for some producers.
The United States did not escape with impunity from retaliatory tariffs being imposed by the United Kingdom. It should not be ignored that the UK is a significant trading partner of the United States. Approximately 20.3 percent of all agricultural exports from America to the UK were alcoholic beverages. The United Kingdom slapped a 25 percent tariff on American whiskey after Trump applied tariffs on steel imported from the UK. As predicted by several experts and commentators American whiskey serves as a salient target for reciprocal tariffs. The United Kingdom was previously viewed as the largest market for bourbon exports. Since the application of the tariffs overall exports declined by 35 percent. Overall, bourbon sales in the United Kingdom decreased by a staggering 50 percent. The United Kingdom did relax tariffs on American Brandy, Rum, and Vodka. However, the UK and other European Union countries will continue to maintain tariffs on American whiskey as a result of a “two-year trade war on steel and aluminum”.
The question become what was the impetus behind this fatuous trade dispute between the US and the UK? It all came to a head in 2019, after a 16-year dispute between aerospace rivals Boeing and Airbus. The UK applying tariffs on up to $4 billion worth of goods over subsidies received by Boeing. The United Kingdom started to ratchet down the conflict by easing tariffs on some US goods and Biden reciprocated by lifting tariffs on UK imports. While Biden is not a perfect free trader, this was a shrewd decision on his part. Not from the standpoint of political strategy, but the point-of-view of sound economic theory. The words once-famous uttered by Ronald Regan ring true here: “If you want more of something, subsidize it; if you want less of something tax it”. Here is the crux of the idiocy of protectionism. Proponents seek to limit imports to encourage domestic consumption-based out on a sense of nationalism. However, they ignore the fact that their hostility towards foreign goods may stir the ire of lateral trade partners. Resulting in defensive actions that will result in the decreased consumption of American goods globally. Wouldn’t a proud nationalist prefer to see American goods consumed all across the world? After all, the two best-selling whiskies globally in 2019 were Jack Daniels and Jim Beam. This was not the byproduct of using taxation to punish Americans who enjoy drinking imported whiskies, but through many years of savvy marketing, product consistency, and rightfully earned brand recognition.
Observation: The concept of comparative advantage operates as a natural extension of the division of labor. If it is most efficient for each worker and firm to focus on what they are most proficient at producing, this naturally gives way to vocational specification. The more specification within the division of labor the more complex and advanced the economy. As technological innovation drives the consumer demand for intricate technologies, the need for specialization within the workforce becomes more pressing. An advanced technological product such as a smartphone could not possibly have all of its components harvested, processed, and manufactured by one firm. Generally, the constituents of such a device are produced by multiple companies. These parts serve as the higher-order goods in the production of a smartphone. It would be naïve to assume that all of the companies that possess a comparative advantage at crafting these components all reside in the same country. If we look to Leonard Read’s iconic essay I, Pencilit becomes evident that even a commodity as simple as a pencil requires the services of companies across the globe to be satisfactorily produced. Demonstrating that the principle of comparative advantage extends the division of labor to an international scale. It is impossible that one nation would possess all the conditions necessary to efficiently make one product of any degree of complexity. Never mind a gadget as elaborate as a smartphone. Providing another concise yet realistic reputation of the obstinate justifications for protectionism.
“By means of glasses, hotbeds, and hot walls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?”
The Trump era will forever be distinguished by its notable shift away from free trade economic policies. Generating a resurgence passionate resurgence in the advocacy of protectionism. This rhetoric was salient even in the nascent period of the Trump phenomenon, dating back to his iconoclastic speeches on the campaign trail in 2015. Championing a quasi-neo-mercantilism that challenged the decades-long conventional wisdom of the Republican Party. This prevalent truism being that liberalized trade is a core component of any sound economic platform. Taking into account the modest reforms we saw under the Regan Administration. The wave of neoliberal trade policy continued through the 1990s with the bipartisan support of the NAFTA bill. It seemed as if the trend towards globalized trade was seemingly unstoppable. Until right-wing populism swept the United States indicating a change in public perception of moderately unfettered international free trade.
The Trumpian position on international trade dates back to the years of the NAFTA bill of the 1990s. Vocal high-profile opponents of the bill included columnist and former Presidential aide Pat Buchanan and Ross Perot. Expressing concern over the outsourcing of production and its direct impact on the American economy. Mainly, all of the U.S. workers have been displaced by outsourcing jobs to foreign countries. From a prima facie standpoint, this argument seems sound. However, after closer examination, it becomes quite clear that economically it is profoundly flawed. There is a moral dimension embedded in this argument because people do suffer from losing their jobs. The unfortunate economic vicissitudes of the American Rust Beltcan be speculated to have been greatly impacted by the outsourcing of domestic labor.
On a deeper level, most of the variable causing the shift towards foreign production of goods has been engendered by faulty economic policies. Economic behavior is guided by the unwavering laws of economic exchange. Analogous to the laws of physics they cannot be indefinitely contradicted without serious repercussions. Since each economic agent acts in their self-interest they respond accordingly to government initiatives and laws that violate these immutable laws and informal laws guiding commerce. Domestic regulations laws governing minimum wage, production, transportation, and taxation become so onerous that firms become incentivized to move to manufacture abroad. While policies such as minimum wage laws are billed as means of improving the quality of life for low-skilled workers, it tends to have the opposite effect. Such measures only serve to benefit a few while harming many through increasing the unemployment rate. Raising the price floor for labor will impact profitability that leaves employers with a difficult choice. Either cut labor expenses through automation, outsourcing and working with a skeleton crew or succumb to bankruptcy.
Driving the shift to off-shore production is the comparative advantage that many countries have over the United States when it comes to manufacturing and other services. Classical economists such as Adam Smith and David Ricardo believed that it was more advantageous for each economic unit (whether it be an individual worker, firm, or national economy) to focus on the goods and services they produced most efficiently. In a sense comparative advantage logically extends the anything else that can be obtained through various trading partners. For example, it is well known that Adam Smith was a big fan of Claret wine, a beverage fermented in France. The soil in Scotland is not generally unsuited to winemaking, therefore it would not be sensible to produce Claret in the United Kingdom. But Scotland does have climate amendable to the production of some of the world’s finest Single Malt whiskies.
The comparative advantage that countries such as China as over the United States are lower labor costs and fewer regulations. Due to measures such as minimum wage laws operating as price controls (functioning as a price floor), they are bound to create disruptions in the labor market. Tempting producers to take actions such as outsourcing jobs to curtail losses. A sensible reaction to policies that effectively undermine the core purpose of prices. That purpose is to serve as a quantifiable signal that communicates the market supply and demand of a commodity. Suppliers and producers need to respond to the inflated value of labor accordingly to stay solvent. That unfortunately requires workers to be laid off and to find more affordable labor alternatives. To quote Milton Friedman manipulating prices is never a “free lunch”! The disutility of mandating a higher minimum is evident not only from the qualitative reason of human nature but also in quantifiable data. While estimates suggest that raising the national minimum wage to $15/hr would lift 900,000 Americans out of poverty. Simultaneously, such a change would also be projected to put 34 million Americans out of work. Demonstrating how the costs of raising the national price floor outweigh the minor benefits.
From a superficial standpoint, it is easy to label the competition of foreign as being the taproot of our economic woes. It makes for wonderfully succinct bumper sticker slogans that are catchy and fun to chant at rallies and protests. The protectionist approach of blaming others for our economic problems ignores the inherent issues with our domestic policies. Its restrictive regulations and high corporate tax rates drive businesses to go abroad. There was a lot of social currency in placing the blame on other countries for our inefficiencies in production during the Trump years. These admonishments of free trade are predicated upon economic fallacies and illusory thinking. For a politician, it is easier to play the blame game than to encourage innovation to stay competitive. It is also much quicker to mobilize crowds through economically illiterate bluster than to tell them to take control of their destiny.
Politicians often support policies that they indirectly benefit from. One example of this is supporting legislation or various forms of deregulation that has a populous bend to it. The kind of policies that set this individual apart from the political establishment. Typically, the politicians that support such policies tend to operate within the context of a Bootleggers and Baptist dynamic.
However, these attempts to garner public support through supporting policies that attack the status quo are not the typical B&B dynamic. Much of the time these actors (the politicians) economize the benefits on two fronts. Supporting their ideological agenda and securing firm endorsements from their constituency. Meaning that as economic agents in the marketplace of ideas, they operate as dual-role actors. Effectively they operate as the Bootlegger and the Baptists simultaneously. Through advocating for a specific policy position, the outspoken politician operates as a Baptist. They stress the moral and technical concerns of a specific stance on policy. Whether it is AOC advocating for the Green New Dealor Rand Paul arguing for term limits, both positions take on a moral dimension. For this very reason, both economic actors in the political sphere are Baptists.
But we would be remiss to assume that they also do not take on the role of Bootlegger concurrently. Why? I will give both Rand Paul and AOC the benefit of the doubt and assume the defense of their ideological pet projects is sincere. The economic agent’s sincere belief in the moral aspects of their advocacy is a crucial contingency for it being a true Dual-Role actor dynamic. All because some are sincere in their moral arguments for tax cuts (for example) doesn’t mean they do not stand to benefit. Neither Dr. Paul nor AOC benefits monetarily from supporting policies that are popular among common people. The most conspicuous benefit is both political figures getting re-elected for another term. However, what they stand to gain through “pollical popularity” extends well beyond merely keeping their sear in the House or the Senate. In the age of social media, politicians now have a very different kind of relationship with their constituents. With platforms such as Twitter, there is a much higher degree of personal interaction. The days of listening to your public figure from afar as they pontific upon public policy at the podium (political pulpit) are over. The voter can now to a limited degree interact with their elected officials on social media. Many of them have amassed something of Fanclub on various social media platforms. Their social media presence has permanently shifted the dynamic between politicians and voters. Various political leaders are now being quoted, re-Twitted, and immortalized in internet memes at a mind-boggling magnitude. One only needs to remember the emergency of the Bernie Brosto see in current times the line between celebrity and political renown have been blurred. Formulating a subculture of political celebrity. That could have never existed without the on-ramp of cyberspace.
The cult of personality has morphed into a political bastardization of celebrity culture, politicians have quite a bit to gain through maintaining a positive image. These figures now carry social currency with people outside of their constituency. You have people in Hawaii following Rand Paul on Twitter and he is a senator for the state of Kentucky! Political forces such as Paul and AOC carry enough populous clout they have mobilized political activism across the country. Their influence extends well beyond the jurisdiction of the state they represent. This is how they truly benefit! They reap the rewards of advocating for policies that concern the public. If James M. Buchanan was correct politics is a form of exchange. In most cases (except bribery, welfare programs, and subsidies) money is not being exchanged. One of the most obvious examples of the non-monetary exchange in politics is log-rolling. Politicians trading votes in the House or Senate. However, the social currency earned through supporting policies popular among the public such as term limits is a different kind of exchange. The politician gives lips service to policies that benefit the average person. In exchange, you get the support of the people. The catallactics of this trade-off is quite salient once you give it some thought.
Since the introduction of the concept of an “unconfined” application of the Public Trust Doctrine the legal construct has been utilized in a diverse number of ways. Typically in a manner that is divorced from its original purpose of preventing public resources from being occupied by private use. For example, preventing a private owner of an interior river from blocking off passage to anyone headed down. This becomes problematic because the operator of the boat is effectively stuck with no means of arriving at his destination. While there are several ways to resolve the issue of the unreasonable blockade, for example treating the river as a club good, at least the original intentions of the construct were limited to a clear concern for the public good. In the years since the Just case, the public interest justification has become more opaque. The overall lack of clarity and formal limitations on the doctrine has led to an appalling erosion of private property rights. Arguably has created a two-tiered system of public interest. On one hand, the doctrine has served to undermine public interest by destroying confidence in the state’s protection of personal property. The Just case is not a dead ringer for being the Public Trust equivalent of Kelo V. New London. However, both are horrifying demonstrations of how the Eminent Domain and the Public Trust Doctrine can be used in a manner that side-steps the Fifth Amendment.
The ruling on the Kelo case was unacceptable. No proponent of private property rights would argue otherwise. At least this illegitimate transfer of property was purportedly done for economic development. While this approach may have been morally and economically flawed, it still had pragmatic intentions. Whereas the Just case aimed to benefit the public interest in a more circuitous manner. Many of the goals of environmental preservation tend to reflect abstract objectives and ecological metrics that are far removed from the concerns of the average person. This does not mean that is not harm imposed by pollution or other ecologically destructive actions are not problematic. Such actions are loaded with externalities and adverse consequences. It is nearly impossible to separate the pragmatic concerns of the conservation movement from its ideological agenda. In reality, conservation should be about voluntary resource management, rather than forcibly separating American citizens from their property. Much of this conflation between political goals and practical environmental concerns is evident in the Green New Deal proposal.
The aftermath of the “liberated” Public Trust Doctrine is evident in the subsequent ruling giving a difference to this uncodified legal norm. It is difficult to conclusively say that using this construct to hold public property is inherently in the interest of the public. Public interest infers that all individual citizens benefit from the policy. In actuality, it operates more as an averaged aggregate of well-being, “… following utilitarian standards…” (p.159). The individual who is forced to surrender their property for the sake of environmental objectives without compensation is worse off. The matter is only compounded by the fact that the decision to transfer private property for public use is made by a third party with no rights to that property (p.159). This third party is the judges interpreting the law on the behalf of the state. Having the conditions under which this amorphous construct can be applied in case law does little to inspire that individual property rights will be considered. Especially because the metrics and even definition of public welfare are as unclear as to the constraints of the Public Trust Doctrine.
The National Audubon case colloquially knows as the Lake Mono case does not directly address the issue of the conflict between Public Trust and private property. As the dispute was focused on the interests of the municipal government of Los Angeles and environmentalism goals. But it demonstrates another graduation in the flexibility of the interpretation of the doctrine. The city of Los Angeles was diverting from tributaries to Lake mono, as prescribed under state law (p. 196). However, the National Audubon Society decide to challenge the validity of these water withdrawals from various tributaries. Why? As water levels began to fall it started to have adverse consequences for the wildlife native to the ecosystems surrounding these bodies of water (p.196). Justifying questioning these redistributions of water and suggesting that the state was neglecting its Public Trust responsibilities.
What makes this case significant to expanding the scope of the doctrine is that it was no longer being limited to navigable bodies of water. There may have been some hints of this departure from this unspoken restraint in Just. But the “Lake Mono” case formally cements this shift in jurisprudence in case law. The California court ruled :
“ The purpose of the trust; the scope of the trust, particularly as it applies to non-navigable tributaries of a navigable lake; and the powers and duties of the state as trustee of the public trust (33 Cal. 3d at 434).. (p.197)”
The above statement alone arguably is a departure from the traditional interpretation of public trust. In terms of managing navigable waters ways, the management of tributaries is an adjacent concern. Such an expansion appears to be a mild form of judicial mission creep. This 1983 ruling went further in its claims of further broadening the doctrine. Suggesting that the doctrine isn’t locked into merely sticking to the “traditional triad” of navigation, fishing, and commerce (p.197). The doctrine needs to be made amendable to the growing and ever-changing concerns of public welfare (p.197). Opening up the doctrine to more progressive and looser applications in the broad sphere of public interest. Without a precise definition or sound metrics to assess whether these open applications are benefiting the public, at best advocacy of the doctrine’s expansion is audaciously careless. Making any absolute claims of benefits spurious. Particularly when the outcomes of the unconstrained doctrine only benefit a select few.
The Expansion into Recreation:
If it wasn’t concerning enough that the doctrine was being applied to opaque conservation goals, the foray into recreational justifications only serves to push the doctrine one step closer to being a fixture of arbitrary law. In Montana Coalition for Stream Access v. Curran, it was decided that the public has the right to have access to any body of water in the state for recreational purposes (p.197). This serves to go beyond the original Common Law and Roman Law precepts of the doctrine. However, it does not go so far as to invalidate the navigability requirements of the submerged lands covered under the doctrine (p.197). In the years since this 1984 decision, the recreational justification for invoking the doctrine has continued to be used. However, over two decades later in 2008 test of navigability requirement comes under scrutiny. In a disturbing twist, in Bitterroot river protection Ass’n V. Bitterroot river Conservation Dist., which expanded public right to recreational use of water for non-navigable and private water sources. Citing the Steam Access Law“… enacted in response to Curran…” for justifying this expansion into privately owned bodies of water (p.198). This byproduct of an expanded Public Trust Doctrine defies even the most conventional Samuelsonian definitions of public goods. A privately owned body of water that is non-navigable is most certainly excludable. Would it be appropriate to allow strangers to use the Koi pond in your backyard for “recreational” purposes? I believe that most people would oppose such an encroachment on private property rights. Reading the Bitterroot River decision without any context and could lead to such obtuse conclusions.
The non-aggression principle has been considered the pillar of the philosophical underpinnings of libertarianism. In a nutshell, the non-aggression principle forbids us from imposing undue harm upon another. Whether it be through violent action or misappropriation of their property. However, under these philosophical precepts, violent action is only justified if it is for self-defense. The non-aggression principle does not mention anything overtly about voluntary violence. If two adults of sound mind get into a fistfight, clearly articulate the terms of the skirmish, and do not withdraw consent at any point how could this be illegitimate? Both parties agree to these terms and neither choose to abruptly end the confrontation. If we rigidly apply the NAP would a consensual fight violate its terms? In a narrow sense, we already have voluntary violence in American society. Anyone who willingly participates in combat sports such as mixed-martial arts engages in consensual acts of violence. To a lesser and more oblique manner, anyone who has participated in sadomasochistic sexual acts has also consented to engage in violent acts. If consent is the operative contingency that separates charity from theft and intercourse from rape, then why couldn’t it be applied in more novel applications?
For example, why does law enforcement need to be immediately notified of a brawl in the parking lot of a bar? Often, bystanders not affiliated with the bar nor patron will automatically resort to calling the police. Even though they are merely witnessing the fight from across the street. If the bar owner and the two patrons fighting are all okay with the arrangement, then it would be transgressive to call the police. While a bare-knuckles brawl in a bar parking lot is tantamount to how Neanderthal would solve a dispute, if it isn’t harming anyone else then it isn’t a problem. Unless a bystander happens to get hit by accident. Then the prospect of ligation nears its ugly head in the equation. Although both quarreling patrons may consent to the fight, they may still sue the bar owner in the event of serious injury. This can be remedied by having the customers wishing to fight on the premise to sign a waiver absolving them of any responsibility for personal injuries sustained. This perspective may be unorthodox as conventional wisdom suggests we should alert the authorities regardless of whether the two men consent to the conditions of the fight.
Another form of voluntary violence that has become viewed as barbaric anachronism is the old institution of “trial by combat”. This may seem antithetical to our modern convention of evidence-based innocence. In the honor-based culture of medieval Europe, such as test was viewed as being completely valid. Why not? We sentence murders to death in our current legal system, so what if we were to have an accused murder fight for their life? The suspect, the court, and the family of the victim would all have to agree to this arrangement. They would also have to be unanimous agreement also in the parameters of the trial. The weapons that could be used, what are the rules of engagement, the conditions under which the suspect would be exonerated in the event of a victory. If the suspect is guilty and an inept fighter then it is analogous to being executed. But if the suspect is innocent but is killed in the trial, then it would be something of an injustice. However, it would be an injustice he fully consented to. The private law court in which he provided this option as a form of the trial made him sign a document. This document detailed all the potential hazards of this form of legal trial and required him to acknowledge the risks. Once he signed on the dotted line he transferred his right to an evidence-based trial (the common form of trials in liberal democracies) away to the court.
The other old-fashioned form of voluntary violence is the practice of dueling. Considering we as a society have “evolved” beyond handling disputes in such a manner (why would you when you can launch a tactical drone strike) this method of conflict resolution seems primitive. Again, if the participants provide mutual consent and do not at any point withdraw that consent. Part of that consent requires agreement on the parameters of this engagement. What kind of weapons should be used, how many paces before commencing the attack, will the victor be responsible for the medical bills of the loser (providing he survives), is this a fight to the death or merely the first contact? All of this rule formulation is a crucial component of establishing consent. Violating any of these informal rules would be equal to transgressing against the other party involved in the duel. Making the rules transparent and to adhere to them is paramount in establishing the legitimacy of the duel. Another part of keeping this arrangement legitimate would be to manage it in such a manner that would limit spillover effects. A prime example of this would be a spectator or bystander getting hit by a stray bullet. If this were to happen the duelers would be held liable for damages. Such externalities could be limited by the choice of weaponry or even tapping off a safe perimeter in the surrounding areas where the duel is planned to take place. Another alternative would be to allow spectators to observe the duel near the action. The audience members would in turn relinquish their right to not be subjected to violence. Essentially selling this right for up-close and personal entertainment. They relinquish this right by signing a waiver saying they acknowledge the risks and will not sue for damage if on the off-chance they are injured.
Among the common arguments against privatizing policing services, one common repudiation is that it would leave the poor under-protected. A security and protection service based on direct billing or a subscription service would exclude individuals of meager means. Raising concerns that a two-tiered system of justice would arise (Benson,1990, p.309). Under a publicly funded criminal justice system, a “two-tiered” system already exists. Historically, poor neighborhoods have been either under policed or provide an inferior quality of policing services. After years of receiving a low-quality service, the natural consequence is that the residents of these lower-income communities will grow to distrust the police. Justifying the provision of state policing services does not stand up to closer scrutiny. If anything suffers from many of the market failures that critics theoretically attribute to a privatized system.
Many of the over warmed arguments that a for-profit system only stands to skew incentives. The assumption being that firms will desire to keep the costs of production down to increase profits. This notion conjures images of the inadequately trained, middle-aged, and overweight mall security guards making just over minimum wage(Benson, 1990, p.301) . However, few people realize that in light of the growth of the private security industry over the years specialization has created a diverse continuum of security services. Even over thirty years ago there was a vast range of salaries in the field of private security. Some agents even earning $100,000 annual at managerial positions (Benson, 1990, p. 303) . Different types of security would require various levels of credentials and training. Meaning that to a certain degree that a private security detail with armed guards and the security agent at the local mall provides two distinctly different services. Hence, the differential in compensation. It would also be overkill to put the highly trained and combat seasoned armed guard in the security detail for a mall. As the mall has invested in a multi-million dollar security system and cameras (Benson, 1990, p.302) . Reducing the need for such high caliber human capital. If anything does not demonstrate underinvestment in security services, but a high degree of investment in technology. Having a state-of-the-art security system and an experienced arm guard would be enough more than a misallocation of resources. In other words, the firm would be wasting money. Especially when the aptitude of an armed robbery is much lower in a strip mall when compared to a bank.
State-funded policing services are insensitive to the profit-loss mechanism, misaligning the incentives of operations away from efficiency. From a public choice standpoint, the institutional incentives for policing services have been profoundly perverted. Government-funded departments are constantly in competition with other adjacent bureaus for budgetary allocations. Creating the need to demonstrate a demand for the services provided by the agency (Benson, 1990, p. 94-95) . Those in law enforcement keep the demand for their services high through advocating and influencing policy (Benson, 1990, p.109) . Police unions operate as muscular lobbying organizations. For example, police unions funding anti-marijuana campaigns to thwart legalization attempts. Why? Because keeping the sale and consumption of cannabis criminalized (one of the most commonly used illegal drugs) will help solidify job security. Budgets are determined based on need. The publicly funded police respond to crime on a first-come first-service basis leaving many incidences of crime unaddressed until it is too late (Benson, 1990, p.137) . This method while not wholly intentional does help facilitate larger budgets towards various local policing bureaus. A more reactive approach towards crime versus a preventive approach tends to reward the local agency. This is because budgets are predicated on crime statistics (Benson. 1990) . All of these concerns make it kind of ironic that there is so much distrust of private enterprise in handling policing. The claims that private firms will cut corners and “fabricate” offenses to increase profits (Benson, 1990, p.303) , when much of this behavior seems to model what is done by state police agencies.
The postulation that a for-profit policing system would benefit the rich, does not take into account that the poor take on most of the costs of the current system. It goes beyond just the misaligned incentives of the public police agencies. A woman living below the poverty line is significantly more likely to be raped (Benson, 1990, p.310) . While this fact may not prove causation is qualitatively indicative of a lack of protection under the current system. Due to higher tax rates in affluent neighborhoods, there are more resources for patrols and crime investigations (Benson, 1990, p.309) . Demonstrating a disparity between the quality of service between poor citizens and rich ones. In a private arrangement, the state would not hold a monopoly on the production and policing services. Allowing less affluent citizens the ability to form their firms and organizations to provide policing for their community (Benson, 1990, p.308-309) . If firms do not provide affordable services the economically disadvantaged can form their institutions. Something that would not be an option for government-provided policing due to political opposition. A prime example of this was measures taken against the Black Panthers’ neighborhood patrols back in the 1960s.
Many pundits could respond by mentioning the difficulty for disaffected communities lacks the organization to form their institutions. However, if we truly treat policing and law enforcement services as a purchasable commodity this collective action problem may soon dissipate. Charitable foundations can be formed to provide communities or individuals with free private security and protection services. Security services can also be gifted on an individual basis through gift cards for private security services. The idea of transferring security services to another person either as a gift or through charity was influenced by an adjacent concept practice in medieval Iceland. In this medieval society like most during the “dark ages” there was no central government. Most adjudication took place within the context of customary law. Meaning that most infractions were resolved through restitution, mimicking modern-day Tort law. If a poor man could not afford to pay his restitution for an offense, a wealthy member of the community could pay it on his behalf. Treating this obligation as a transferrable right (Benson, 1990, p.307) . If historically, the obligation to pay restitution can be transferrable, why cannot policing services also be transferrable? Beyond being able to give such services charitably or as a gift, couldn’t individuals also sell, less, or otherwise transfer unused services? We could even set up private voucher programs for poor communities to receive funds to patronize any security firm of their choosing. All of these possibilities from a prima facie standpoint, appear to be better than the present system.
Most economists from Adam Smith onward have sung the praises of the division of labor. It has even been said that the more specificity a labor pool is the more advanced the economy. A more productive economy has more task specialization. However, doesn’t the law of diminishing turns apply even to the division of labor? At some point, does specialization shift beyond the equilibrium point of the utility function / production frontier and result in inefficiency? I am not the biggest fan of neoclassical methodology, but in certain areas of economic life, Pareto-efficiency makes sense. It should not be rigidly applied without any qualitative context. That only provides us with a one dimensional account of economic activity.
At work, I am being assigned to help out with some of the workload in our parent division of the company. I can’t help but be awed by how inefficient their process is. This is where my observation of applying the law of diminishing returns to the division to labor becomes pertinent. The way the process was devised for processing orders for the headquarters of our company, requires actions to be passed off to multiple teams. The total process can take up to forty-eight hours. The process that was originally trained on, takes only four hours and a transfer between only two departments to complete. Does having a hyper-diversified and stringently delineated process help the customer? I would argue that it does not. Giving tasks that could easily be done by one person to three people means there could be a time gap in between task serving only to make the process more lethargic. Making the premise of utilizing a proverbial “assembly line” method counterproductive and detrimental to the customer.
The renewed interest in raising the federal minimum wage is gaining steam as a hotly contested debate. Especially considering President Biden is inserting a $15 an hour minimum wage requirement in his latest Coronavirus relief bill. There are many proponents on both sides of the issue. Many advocates of a higher minimum wage claim the moral high ground on the issue, considering the rate has not kept up with inflation. Suggesting that raising it to $15 per hour would aid those working in low paid professions with being able to afford the bare necessities. Some even boldly advocating for a pricing floor of $24 per hour as being an adequate minimum wage.
However, is it economically sound to raise the minimum wage to even $15 per hour? Over the past couple of years, several papers have suggested so, but their interpretation of the data did suffer from some misconceptions. If we underwent an extremely rudimentary cost/benefit analysis of raising the pricing floor for labor we would see that it is a detrimental policy. A recent study found that raising it to $15 an hour would lift approximately 900,000 people out of poverty. As many advocates enthusiastically indicate as being evidence that this would be a good policy. Per the 2020 U.S. Census, it is estimated that 34 million people were living in poverty in 2019. Making 900,000 only a drop in the bucket in terms of battling the social issue of poverty. What the pro-raise the minimum wage camp neglects to inform us of that the same study they cite also estimates that 1.4 million people would also stand to lose their jobs! Making it reasonable to question whether raising the minimum wage would truly benefit the poor members of society.
The resurgence of the minimum wage debate mirrors the arguments for imposing pricing ceilings on in-demand goods during the beginning of the COVD-19 pandemic. Why? Because minimum wage laws and price gouging laws both operate as forms of price controls. Generally, these policies are implemented to insulate the consumer or work from “exploitation”. Either being paid inadequate wages or having to pay exorbitant prices for commodities during a time of crisis. However, prices are the key market signal that bridges the information asymmetries between consumer and supplier. Prices are contingent upon the supply of a product or service and the level of demand. Hinging on one of the most basic and universally known economic laws. Despite the good intentions of the activists pushing for an elevated minimum wage they are doing more harm than good. By mandating by law that the minimum wage needs to be at a certain dollar amount it immediately creates distortions in the labor market.
In an abstract sense, the worker is selling their time, services, and human capital when they agree to accept a job offer. In the job market, the corporations and small businesses looking for workers are the consumers. The job seekers are the ones supplying the labor. High wages alert prospective job seekers were the most lucrative job opportunities are which generally require less common skills. Directing the job seekers to make the appropriate investments in human capital. Implicitly detailing which degrees, certificate programs, and other forms of job training are required to stand out in the job market. Workers with little in the way of skills command a lower starting wage. Compensation is based on a worker’s productive output capacity. If a worker has few skills their productivity would be relatively lower from an economic standpoint. When the minimum wage is raised there is an imminent risk of displacing low-skill workers. If a fast-food worker is only producing $9 an hour worth of productive output and the minimum wage is raised to $15 an hour the business owner stands to take the loss. Then he may decide to cut corners and operate with fewer people, compromised product quality, or automatic the process. The threat of automation is real. Several studies have found that driving the price floor for labor up results in increased automation of operations. It is clear that the distortion of prices in the labor market could lead to displacing more low skill workers. The result being more low skill workers harmed than helped. Some income better than no income at all?
The initial shift towards an unconstrained Public Trust Doctrine may have begun with the Illinois Central case. The emergence of a truly fluid Public Trust jurisprudence did appear until the early 1970s. The cultural revolution of the 1960s permeated an activistic ethos that eventually made its way to the legal system. It was first noted by legal scholar Joseph Sax, an environmental lawyer who was a strong advocate of the conservation movement. Professor Sax was the first legal theorists to suggest the Public Trust Doctrine was not being used to its full potential. Sax believed that a more liberal application of the doctrine could be utilized to benefit the objectives of the environmental movement. Implicitly arguing that the preservation of natural resources is within the scope of the legal construct. Due to the fact that nature itself is a commons, that we all benefit from clean water, air, and a modest reserve of nonrenewable resources.
However, over the years the Public Trust Doctrine has been extended far beyond the original intentions of the concept. The doctrine was initially applied to manage public waterways, fishing, and commercial purposes. Since its inception in the United States has been stretched to be utilized in the interests of recreation and political objectives. The most disturbing aspect of this evolution to an unchained doctrine has been the blatant erosion of private property rights. In most applications of land seized by the government in the name of public trust, the takings clause under the fifth amendment. Meaning that equivalent property value compensation is not required for land commandeered for the “public good”. The lack of adequate compensation for land taken operates as nothing more than a redistribution of property. Whether this transfer is for the moral good of clean water, recreation, or free passage through a navigable body of water, it is the same result. As the doctrine becomes more malleable, less justifiable these coercive acquisitions become. The hapless side effect of the courts showing less discipline in their application of this construct starts to become arbitrary.
An Unchained Doctrine:
As previously mentioned, in the 1970s the doctrine began to radically drift away from its Common Law roots. These ties were severed by the “prima facie rule that extends state title to submerged lands, rather than as evidentiary presumption of the title” (p.195). Several courts have ever ruled that the alienation of any public lands is a clear violation of the state’s Public Trust obligations. Despite the fact that these opinions run counter decisions made by the Supreme Court (p.195). The 1970s being the formative years of the environmentalism movement, legal scholars started to turn to the doctrine as a means of reaching lofty political goals. Those sympathetic to the conservation movement calling for “..effective judicial intervention..” (p.195). Posing as the haunting battle cry of the ambitious legal scholar Joseph Sax. Sax called for a liberating doctrine. Fully proclaim the need shift in the doctrine’s utilization in his seminal paper: The Public Trust Doctrine in Natural Resource Law: Effective Judicial Intervention(p.196)
Even a decade later Sax is just as fervent as he was back in the 1970s of being a proponent of loosely applied Public Trust Doctrine. In his paper, Liberating the Public Trust Doctrine from Its Historical Shackles, Sax surmises that the concept has been constrained by historical precedence. He succinctly distills the general idea of the doctrine to the single function of generating stable expectations of common resources (p.4). He suggests is the purpose of all property rights is to create and maintaining expectations. Keeping within the obligations of the trustee (the government) must utilize mechanisms to preserve the stability of these expectations. Identify areas of destabilization that can benefit from a creative application of the construct (p.9). From the standpoint of judicial consistency, the advocacy of a “use-it-where-it-fits” approach is quite a trouble. If advocates of the doctrine want to expand the scope of its use, they could at the very least formulate unwavering parameters for its application. In the event, the situation does not meet the test, the doctrine cannot be used. However, this would require the Public Trust Doctrine to transition from a semi-unwritten rule to a codified legal convention. While there are many troubling aspects regarding making the doctrine into statutory law, at least there would be some institutional pressure to constrain frivolous or inappropriate application.
Sax goes so far as to suggest that the doctrine can and should be applied with no regard for previous case precedence. In other words, no need to cite previous cases because that will only limit the doctrine from achieving its ends. Staying within the context of historical uses of Public Trust only serves to continue to hold it back from serving its purpose (p.10). Past case precedence is the ultimate safeguard against arbitrary adjudication of law. To exposit the idea that this is unnecessary in the discretionary deliberations surrounding the doctrine is wrong on so many levels. With no institutional constraints or reliance on past adjudicatory history, the doctrine becomes formless. No rules limiting it, allowing it to become amorphous and be applied at the pleasure of the judge. Making it subject to the biases and whims of the judge(s) ruling on the case.
The First Victim of The Freed Public Trust Doctrine:
One of the first cases to feature Sax’s brand of jurisprudence was in the Just case, decided in 1972 two years after his paper has been published (p.196). In 1961, the Just family purchased approximately thirty-six acres of land “along the south shore of Lake Noquebay”. The area in which they had purchased this land was designated as marsh/swampland. However, Marinette county’s shoreland zoning ordinance number 24, went into effect in October 1967 requiring permits for any alterations impacting wetland habits. In the months of February and March 1968, Mr. Just filled in an area of his property that was technically considered wetlands with sand. The litigant did so without procuring a permit. It should be noted that it has also been claimed that he was denied the ability to obtain a permit by the county. Operating as a circuitous form of unconstitutional “takings”(p.196). After all, he did own the portion of the shore in which he did fill in with sand. But it was ruled by the court that the police power of the state can extend to the enforcement of zoning laws. Declaring it within the scope of the state’s Public Trust duties to preserve the natural condition of the wetlands for navigation, fishing, recreation, and “scenic beauty” (p.196). Mr. Just was denied this right to alter his property in the absence of any degree of just compensation.
Regardless of the intention or objectives of denying the alteration of the wetlands two concerns arise. The first concern being would couldn’t have Just have been grandfathered out of having to acquire a permit? He did purchase the land years prior to the implementation of the new zoning ordinances. If we go by the laws governing water use rights (a different but adjacent area of law) in certain parts of the country there is a first-come, first-served policy. This is known as an appropriative system of water rights. Generally under this type of system whoever has the oldest prior use date of harvesting the water to beneficial use has the primacy to water usage. Keeping this logic in mind, could the same apply to other laws as well. Hence, why excluding the litigant from the permit requirement makes sense. He bought the land prior to the implementation of the zoning requirements, he gets grandfathered in.
The second and more profound concern is what does this court decision say about the state of property rights? There wasn’t any direct evidence that Mr. Just’s actions engendered any genuine harm to the environment. Per the courts’, ruling it appears there was a strong emphasis on keeping the wetlands intact. Versus cited or proving ecological harm caused by filling in that patch of wetlands with sand, the court justified the uncompensated takings with a blanket explanation defending their position. Of the core reasons, recreation and “scenic beauty” were cited as being reasonable justifications for invoking police power of the state. Both seem awfully frivolous reasons to violates some property rights. Also, how does the court ascertain the objective of maintaining “scenic beauty”. Isn’t that an extremely subjective criterion? One man’s eyesore is another man’s oasis.
It appears as if the concept of a stratified market for legal services, may have a future in the state of Arizona. Well… sort of. Back in October 2020, the state legislature passed a measure that allows nonlawyers to own law firms and on a limited basis represent clients. This alteration to Arizona state law came in the form of ACJA 7-209 (Alternative Business Structures). It could be argued that the loosen of these restrictions have more benefits than drawbacks. Like most forms of occupational licensing, it does more to inhibit the interests of the consumer than it does advocate for it. Concerns linger about legal services being commodified, resulting in perverse incentives driving law firms rather than acting in accordance with the best interests of the clients. It has been cited that a firm owned by business interests would be ignorant of the “culture” encompassing legal services. Such as law firms heavy on investor input may not take up pro bono cases. Are these concerns of twisted incentives guiding investor founded law firm legitimate or merely perceptions facilitate by many of the fallacies implicit in anti-market bias.
Does a founder of a tech firm needs a degree in Computer Science? Not necessarily. So why should be incredulous of the fact that a law firm is founded by a businessman? Yes, legal services do entail a lengthy array of ethical obligations that may not be required in other service professions. State law does mandate that at least one lawyer works at the firm for it to be legally recognized. That lawyer would be the influence guiding how to the legal philosophy of the business. The operative phrase in this sentence is business. Making it kind of absurd to preclude a seasoned entrepreneur with some insight into legal services from engaging in forming such an enterprise. Due to merely not having a degree and having based a state-sanctioned exam. Any shrewd businessman regardless of the law would hire on a consultant a knowledgeable consultant to help fine-tune operations. In the case of a law firm, it would probably be a veteran attorney.
The qualms regarding a nonlawyer owned law firm not being privy to the “culture” of legal services is another perplexing criticism. Any proprietor in any service industry worth their weight in salt will “learn the rules of the game”. If you want to stay in business, you are going to have to become acclimated to the customs and norms of the industry. If not, under entrepreneurial natural selection, the business will fail. The successful law firms will be
self-selected through a process of consumer sovereignty. Those firms completely driven by an ethos of profit-above-all will crumble and be victims of their avarice. If the customer does not come first you cannot possibly succeed. Part of that would be adhering to customs such as pro bono cases for low-income clients. One only needs to briefly walk down the aisles of Costco to see that the concept of pro bono services hasn’t been lost on private industry. The mundane example of the omnipresent free samples of food. Some may argue that the scale of a free sample of salsa cannot compare to that of free legal services. They are both predicated on the same principle, reciprocity. Money comes and goes. Your pro bono bankruptcy today may be keeping you on retainer tomorrow once they hit the lottery. It makes business sense to sometimes give out free services.
Some of the most puzzling critiques of this legislation revolve around allowing nonlawyers to represent clients in legal matters. Creating the potential of a subclass of legal work, paralegals can presents clients for “simple civil and criminal cases”. Hypothetically, creating a tiered market for legal services. Those who cannot afford to hire a bar accredited lawyer would have to settle for the more limited expertise of paralegal. Forming the foundation for an archetypical socio-economic objection to this policy. This ignores the fact that this greatly benefits economically disadvantaged defendants and paralegals. If an individual is accused of a crime and cannot afford a reputable lawyer they either must represent themselves or be provided a bottom-rung public defender. Hiring the paralegal at a rate lower than that of an accredited lawyer is a far superior option than the public defender or self-representation. A well-trained and diligent paralegal is vastly superior to self-representation. Odds are the paralegal has a much stronger command of the law than the defendant. The paralegal also is a better option than the public defender. Public defenders have a reputation for providing low-quality legal services. They are often overworked and earn significantly less than the average lawyer. Given the incentive structure of a public defender, enlisting their help in legal matters is a recipe for subpar results. No one who is underpaid and overworked is going to have the drive to overachieve. A wide-eyed and quixotic recent law school graduate may be eager to join the fight to represent the economically dispossessed. After years of stress, low pay, and disenchantment with bureaucratic institutions and humanity could make even the most bleeding-heart crusader jaded. In contrast, a paralegal providing legal representation would most likely do so as a side-job. Undertaking such a “gig” to supplement their regular income could be viewed as advantageous. Versus the public defender drowning in law school debt and disillusionment.
Placing tight restrictions on who can provide legal services is nothing more than a broad form of occupational licensing. Occupational licensing gives the initial impression of protecting the best interests of the consumer. In theory, limiting who can practice law is intended to shield the customer from the consequences of malfeasance. It limits the pool of representatives the poor can hire for legal defense. It also reduces opportunities for paralegals to earn some side cash. It outright eliminates the potential to gain some hands-on experience if they one day aspire to become a lawyer.
The Public Trust Doctrine has over the years been subjected to judicial innovation. Typically, this advancement of the scope and application of the law has traditionally been done to achieve environmental objectives. However, in some instances has veered into the areas of accommodating recreation and even private businesses. By some legal experts, this broad application of the doctrine is a clear overextension. Especially when there are a plethora of private alternatives that can be used instead to achieve successful conservation efforts (p.44-45). What makes the extension of the Public Trust Doctrine so alarming is how it has been utilized to undermine private property rights. Demonstrating how flexibility can also be as detrimental as being completely static. As the scope of application increases, the rules applying to its administration become more elastic. Veering into the unfortunate territory of arbitrary use of the legal construct could open the possibility of doctrinal abuse by interest groups.
The roots of the Public Trust Doctrine date back to ancient Roman law and continued to live on in the vestiges of English Common Law. Its adjudicatory influence was not truly exported to the United States until the nineteenth century. It was in that century the modern concept of the legal construct was formed. By the end of the twentieth century, the doctrine had evolved to such a degree it barely resembled its legal heritage. Shifting into a near amorphous instrument for activism and indisputable property transfers. A far cry from its original intent of managing public waterways to avoid private stakeholders from impeding boat traffic through blockades. Shifting it from a judicial tool to prevent monopolization of waterways to a highly malleable workaround.
The early 1820s brought the Public Trust Doctrine to U.S. shores, both figurative and literally. Involving a case where the New Jersey supreme court ruled against the private right to harvest oysters in tidal flats (p.191). This case presents a classic example of the issues that can arise due to unclear property rights. However, per the plaintiff, their rights to exclusivity were quite solidly pronounced and legally binding. Arnold claimed that the private right to the oyster bed dates back to the conveyances of king Charles II from the seventh century (p.7-8). As the privilege had been granted “… to his brother, the duke of York..” (p.8). Keeping in alignment with the purported purpose of the doctrine of holding navigable waters in trust for the intended usages of commerce, navigation, and fisheries the court ruled against the accusing party (p.4). Justice Kirkpatrick perceiving the common law precedence a little differently than the plaintiff. Reasoning that under the authority of the crown “… was obligated to hold such lands as a trustee to support the title for the common use…” (p.8). Because the crown never possessed the authority to transfer title to “submerged lands”. Per legal scholar James R. Rasband: “ In dicta, Kirkpatrick added that New Jersey was under the same obligation as the crown: to hold land under navigable water in trust for the people..” (p.8). Meaning that the ruling justice saw that the state of New Jersey was under the same fiduciary responsibilities as the crown. Therefore, muddy tidal lands along the shore could not be alienated from the ownership of one party. Meaning Mundy had not engaged in any form of theft by cultivating oysters planted on the coastal lands Arnold purportedly laid claim to.
However, this is not to say that the ruling in this 1821 case has never been subjected to any scrutiny. Legal scholar James L. Huffman provides some formidable critiques of Justice Kirkpatrick’s decision. Huffman went so far as to state that Kirkpatrick suggesting that the crown could not convey submerged lands has “no basis in English law” (p.191). Even more pertinent to the 1821 ruling was that it contradicted recently implemented state laws. In the previous year, the legislature enacted 1820 N.J. Laws 162 recognizing that people owning “lands adjacent to the waters” had the “exclusive right to plant and harvesting (p.191). In the United State’s first entry into the interpretation of the Public Trust Doctrine, there is already a lack of respect for general property rights. How could the doctrine be valid if a recent state law suggested that submerged coastal lands could be alienated for private oyster harvesting? This precise the type of discrepancy that makes the doctrine worthy of incredulity. Demonstrates how it has had a long history of justifying circumvention of private property rights.
Two decades after the Arnold case the Public Trust Doctrine was invoked once again. Once again there was another dispute over the right to privately harvest and plant oysters in the “public” shores of New Jersey. Particularly relating to the tidal lands of “ Raritan Bay, in the Township of Perth Amboy” in New Jersey. Justice Taney rejected the plaintiff’s claims on the basis that if the crown held such waters in trust for the use of his subjects, it could not be alienated for private use (p.192). However, this conveniently side-steps the fact that the accusing party was rising the complaint about 1824. statue (p.192). This law did detail the private right to harvest oysters. This distinction did not have much influence on the 1842 ruling.
Per Huffman the Arnold and Martin cases are often seen as the “cornerstone” of the modern application of the Public Trust Doctrine, that does not mean their influence was consistently applied in adjudication (p.192). Nearly a decade later the court ruled against invoking Public Trust on a similar case, Gough V. Bell (1850) (p.50). Effectively overruling the decision in Arnold by reasoning that such an application of the doctrine violated several existing state laws and was antithetical to the intentions of preserving public property (p.192). To anyone concern with the erosion of private property rights, such a legal rationale may sound like a welcomed relief. It fair to note there is a profound degree of inconsistency in the application of this doctrine. Possessing a checkered past even in its nascent history in American law is quite alarming. Gives us down the clear analytical path to how it became an instrument of judicial activism. Being constructional there are not any firm legal tests or normative constraints, the doctrine can be applied in a sundry array of various applications. With little in the way of logical consistency. Leading us into the perilous territory of arbitrary law.
The seminal case that laid the foundation for the modern judicial interpretation of the Public Trust Doctrine was Illinois Central Railroad Company V. Illinois (1892). Huffman among many other commentators has referred to this case as the “lodestar” of modern Public Trust law (p.192). The railroad company’s complaint is centered around the city of Chicago reneging on an agreement made back in 1851. The agreement is that the railroad is allowed to construct tracks on the lakefront under the condition that they also constructed a breakwater to protect the harbor. In 1869, the legislator granted 1,000 acres of shoreline to the railroad company to undertake their project (p.193). Four years later the grant was revoked. The Supreme court ruled that the 1869 grant violated the state’s Public trust obligations (p.193). Holding that due to the 1873 revocation of the Lakefront Act was valid since common property cannot be excluded for private use (p.193). Therefore, these actions did not constitute a breach of contract, because the agreement was invalid from the start.
It is reasonable to question the court on the veracity of this decision. Why? Upon closer examination of the court’s decision, it becomes evident that the ruling lacked the nuisance and subtlety requisite to justly adjudicate on the Public Trust concerns. In other words, the law did not prevent submerged lands from being alienated for private use (p.193). However, the state did possess the power to stop private interests from seizing control of public waterways (p.193). As Huffman explains the court decision ends up operating as a double-edged sword. Yes, it does combat the expansive creep of private interests from veer towards commandeering control of navigable waterways. Simultaneously, extending the state’s authority to the submerged shorelines could be economically detrimental.
“As professors, Kearney and Merrill have demonstrated in their in-depth explanation of the history of Illinois Central, the court had good reason to fear that the public’s rights might be compromised due to political expediency and private rent-seeking. At the same time, the court clearly understood that the alienation of submerged lands was essential to the economic future of the state and city (p.194)”
These are some excellent points, however, there is a much more troubling question lurking in the background that Huffman does not thoroughly address. After the Illinois Central can the Public Trust doctrine uses a mechanism for nullifying agreements. It is well established that the interests of private industry are intertwined with the government is the recipe for an unholy union. However, could this breed of jurisprudence be utilized to excuse disrupting agreements between private parties? Did the legislature revoke the grant promised in the 1869 Lakefront Act fall within the fiduciary duties of the state? This action on the behalf of the late 1800’s Illinois legislature was a knee jerk reaction. A preemptive strike against an institution that already suffered from a poor public image. Making exercising the might of the Public Trust Doctrine all the more politically convenient.
The Public Trust Doctrine is a legal concept that has its basis in ancient Roman law and English Common Law. Being a legal construct, it has been subject to interpretation causing it to evolve over the centuries. Arguably some of the most radical shifts in its judicial application have occurred in the nineteenth and twentieth-century American courts. Shapeshifting from a doctrine used to prevent monopolization of public waterways to a blunt instrument wielded by the interests of the environmentalism movement. Subordinating water usage rights and other forms of private property to loosen conditions that public trust law has been applied. Some scholars such as Joseph Sax perceiving a contextual application of the concept as being too narrow. Believing that having more malleability with the application of the doctrine will help sustains its core function (p.4). This function being putting common resources to the best use for society. Rather than allow these resources to be sold off and alienated by private interests.
At first glance, Sax’s assessment of the doctrine may seem fair to those who are concerned about economic equality. The keen insights of legal scholar Richard Epstein provide an interesting perspective on the Public Trust Doctrine. He essentially likens the concept to be an inverted version of Eminent Domain law (p.8). Meaning that the Public Trust Doctrine mitigates private individuals from commandeering public lands without just compensation. Implying that an individual for example buying public land should not be doing so below the market price. Mirroring how just compensation is an implied right in any takings case as depicted under the Fifth Amendment of the Constitution. In a society where taxes have been collected this premise makes sense. As taxpayers being the primary contributors to public funds, they own all public assets. In instances, where the costs of selling a public good to a private party outweigh the benefits it can be disputed whether the asset(s) should be sold.
Epstein successfully demonstrates the reciprocal nature of both Eminent Domain and the Public Trust Doctrine. The reason why both legal concepts parallel each other is the fact they are at their core interpretations of property rights. Both provide a framework for the conditions under which property can be transferred from one party to another. One describing the contingencies under which private property can be transferred for public use. The other presenting the conditions under which public property can be alienated for the use of a private party. If we are to hold property rights in high esteem both are subject to the conditions of the Takings Clause. Unfortunately, both concepts wavered in front of protecting property rights. Proponents of a liberated form of the Public Trust Doctrine have no problem utilizing its amorphous nature to circle property rights to achieve environmental objectives. Theorists such as Sax show little concern for this erosion of property rights. Anything even remotely of a Classical Liberal disposition can be nothing but horrified by the diminished regard for private property in the American legal system. In terms of the property being misappropriated to satisfy environmental objectives, it is easy to point to Sax being the linchpin for this decades-long trend.
It is not fair or intellectually honest to point all of the blame on Sax, technically the unfettered application of the doctrine began back in the nineteenth century. Formulating from the seminal case Illinois Central R. Co. v. Illinois, 146 U.S. 387 (1892)considered by many to layout the rubric for the modern American interpretation of the doctrine. However, legal scholars such as Richard J. Lazarus point out that there was a precipitous change in the interpretation of the legal doctrine in the years following the 1970s (p.3). Displaying that there was a radical shift in the jurisprudence surrounding the doctrine that happened to coincide not only with the insights of Sax but also with the nascent period of the Environmental movement. Surmising that the environmental movement hastened the development of the doctrine isn’t at all outlandish. Especially considering it has traditionally been utilized as a legal construct to manage public waterways. Shedding some light on why property rights and environmentalism have historically been at odds. Truly prudent environmentalism manifests itself in sound resource usage and allocation. This can only take place in a world where property rights are enforced. Not nullified through arbitrary and tilted interpretations of legal traditions. Particularly ones that have never even been fully fleshed out in statutory law that take on capricious attributes. Merely shift due to a change on the whim of social trends.
If good resource management aligns itself with good economic policy, why couldn’t more market-friendly approaches to environmental problems be proposed as a compromise? At the very least devise compromises that respect the ownership of private property. One such compromise could entail a theoretical statutory codification of the Public Trust Doctrine. This would mandate compensation regardless of conditions under which land is transferred by the state. While the author is not completely comfortable with the idea of formal written law, this would be a pragmatic solution for two reasons. First off, it would operate as a formal constraint against loose interpretations of the Public Trust Doctrine. Second, it would demand compensation to those who were experience damages by the transfer of a property. Through a formal revision, not only can the doctrine be constrained to its original purpose it also will serve as a safeguard against unjust takings.
The commodity of water is unquestionably crucial to sustaining human life. Many humanitarians suggest that it is a basic human right that should not be subject to market pricing. However, market pricing serves a crucial role in bridging the information asymmetry between the consumer and supplier. Operating as a quantifiable signal to the consumer indicates the supply of a good or service. While the moral concern of safe drinking water for the poor is a valid consideration, distortions in the price may lead to other unintended consequences (p.228).If the equilibrium price of water is relatively high by the estimates of the consumer this could be an indication of a low water supply. Making pricing mechanisms the prime instrument for curtailing water shortages during a drought. Some pundits would find the idea of placing a premium on the water to be ethically objectionable. Not allowing water prices to rise to market levels may result in dwindling supplies of potable water. Potentially impeding any sincere conservation initiatives making these moral concerns somewhat inconsequential. If all the aquifers, reservoirs, rivers, and tributaries are dried up no one regardless of socio-economic status will have access to water.
Per the book Aquanomics, as of 2012, the state of Utah was the second-largest consumer of water in the western United States. Ironically, Utah also had some of the lowest prices in the region (p.225-226). Part of the reason why the cost of water is so low in Utah is related to the fact that water districts in the states are subsidized by ad valorem taxes. Property taxes have proven to be a “reliable” source of funding for various water projects and regular maintenance in the state of Utah(p.226). Due to water services being supplement by property taxes the connection between the cost of water and consumption has been severed (p.228). Misaligning incentives away from conservation and making excessive use incentive to the price of water. Whereas if customers were directly billed for water usage based on consumption volumes, people would be more cautious about their overall consumption. As the water supply decreases, naturally the price would rise to make it a built-in mechanism to combat shortages.
Unfortunately, there are several objections to charging customers for water based on consumption. One of the more perplexing arguments against directly billing customers for water services is that it would result in wasting water. Predicated upon a prima facie application of basic economics would assume that higher costs of water usage would incentivize more conservative consumption. Never the less this is a common objection against deriving all revenue from directly billing based upon water consumption. As one could predict that when the price of water increases the demand for water decreases. So what happens to the excess water that is left unconsumed due to the higher prices? In the state of Utah, unused water tends to be stored in “..reservoirs, lakes, and groundwater aquifers until filled..” (p.230). Demonstrating that the assertion that the excess water would be wasted is inconclusive (p.230).
Despite concerns of water being wasted due to allowing the cost of consumption to rise to market levels, there is a great irony in this justification. Even in a system where the cost of water is subsidized the water districts in the state of Utah still face surpluses (p.231). Considering the long duration of time it takes to appropriate water from new sources and that “… new water comes in lump quantities, supply and demand are seldom equated in the same year..” (p.231). Excess supplies will remain until population and industrial growth drive demand towards the water supply (p.231). Meaning that there will excess water supplies until demand reaches the equilibrium point. Single-handedly invalidating this justification for continual subsidizing, the water in the state of Utah. It has even been found that demand for water increases in lockstep with the rise in per capita household income (p.231). This fact only further serves to validate the point that with development the demand for water increases. Per capita income will not increase until more jobs come to a specific geographic area. This tends to be correlated with the development of infrastructure. Displaying the integral relationship between the demand for water and urbanization.
One variable that is outside of the realm of human economic behavior that can influence the water supply is participation. Regardless if more development occurs throughout the water districts of Utah, no one can control weather patterns (p.231). Should customers be locked into a flat rate in years where there is a large amount of rainfall? Vice versa in a year with scant precipitation is it reasonable to charge the same amount as a year with abundant rainfall? Anyone familiar with the underlying principle behind the Law of Supply and Demand would be baffled by this logic. Could easily speculate how the water supply could become distorted by such a flawed approach to pricing. Providing credence to the approach of utilizing market-style pricing to the provision of municipal water. Market pricing mechanisms provide a degree of flexibility based upon environmental conditions (p.231). This provides a rational approach to the allocation of water and would most likely not lead to the shortages projected by many critics.
In his seminal pamphlet, The Unconstitutionality of the Laws of Congress, prohibiting Private Mails, Lysander Spooner provides twenty-seven brief arguments countering the veracity of the government-held monopoly on mail services. More specifically arguing from the perspective of Constitutional law. Utilizing the precepts of the U.S. Constitution, Spooner derives numerous thought-provoking arguments that challenged the government prohibition on private mail carriers. One of Spooner’s more novel arguments is presented in argument # 25 (p.12) of his pamphlet.
“25. If the exclusive right of carrying letters, has been granted to Congress, then it is unconstitutional for a person even to carry a single letter for a friend. And Congress is bound to punish such an act as an offense against the constitution.”
At first glance, this argument may seem thin or even frivolous. However, the implications of this refutation are much deeper than loose extrapolation. If we were to replace “letter” with any other legal commodity, such sanctions would be absurd. For example, the United States government has the exclusive right to sell, produce, and distribute bread. Making the production, sale, or transfer of bread by any private company Constitutionally barred. Any commentator with a market-oriented position on economic would be quick to decry this as “socialism”. The government attempting to monopolize and control the market for bread. If such a notion of government control of bread production seems inordinate, couldn’t the same be said of letter carrier services? The transaction costs of private companies delivering letters domestically are low. The government’s fixation with keeping private carriers out of the market back in the 1840s was puzzling.
Spooner carries the argument to its logical conclusion by extending it to the potential of congressional restrictions on gifts. He states that “… then it is unconstitutional for a person even to carry a single letter for a friend. And Congress is bound to punish such an act as an offense against the constitution. “Hand delivering a letter to a friend is only a step away from giving a gift to a friend. The only difference is the intent. Hand delivering a message is intended to disseminate information. Giving a tangible item to a friend with no expectation of direct reciprocity is a gift. As soon as you are trading tangible goods it becomes a form of barter. Does transporting a letter somehow become crass or require the need for state intervention upon exchanging money for this service? Even if we are paying someone to deliver a letter to someone else, this is a form of volunteer exchange. Just as much as giving someone a gift or opting to cut the middleman out and hand-deliver a letter to a friend. If I am not stealing the envelope, ink, and paper to compose a letter. No laws are being violated while transporting the letter, there shouldn’t be an issue. If a private company (subject to taxation) wants to provide the service of transporting that same letter for a fair price, congress should not obscure this free exchange. Especially if the company is being taxed. However, the legitimacy of taxation is a whole other stand-alone argument. If an organization pays to play and the transaction costs of such a business are low. Any functional counterargument is at best flimsy.
Outside of the Constitutional concerns of congress veering into unjustly regulating trade. Something that happens frequently in modern society as the Commerce Clause has been stretched beyond its original intent. Generating several perverse interpretations of this clause. There is a strong natural rights perspective implied in Spooner’s twenty-fifth argument. If a person composes a letter, it is their letter. As in the own the physical paper it was written on and the envelope it is sealed in. While the letter is in their possession they can do as they like with the letter. They could burn it in their fireplace. The author of the letter could elect to frame the letter. They could throw it into the recycling bin. Even better yet they could choose to give it to another person. To convey a message to the letter’s intended recipient. Instead of wasting time, energy, and resource on driving across the country to deliver the letter, they can decide to transfer this duty to a third-party. In effect, temporarily consigning possessing of the letter to the third-party carrier. In any developed market system, it would be fair to say that the consumer shouldn’t be restricted to using one carrier. By owning the letter, the consumer should not be restricted by legal barriers when choosing a vendor. It would be one thing if there was a natural monopoly (if such a thing exists) then the only other choice the customer has is to transport the letter by their efforts. When the government skews the interpretation of the Constitution to carrier barriers to entry into the market. Spooner highlights this point in his earlier arguments. For instance, argument #1:
“1. The Constitution of the United States (Art. 1. Sec. 8.) declares that II the Congress shall have the power to establish post-offices and post roads.” These words contain the whole grant, and therefore express the extent of the authority granted to Congress. They define the power, and the power is limited by the definition, the power of Congress, then, is simply” to establish post-offices and post roads,” of their own not to interfere with those established by others.” (p.5).
Spooner fully asserts that has written, Congress has the power to establish a postal service along with the parallel infrastructure to support mail delivery. Nothing more. The power is not extended to ensure that no other entrants pursue the same line of work. Nor does it explicitly state that congress is required to distribute sanctions for market entry. Not only does congress acting against private mail carriers inhibit natural property rights, but it is an overextension of the intended duty of creating a postal service. Meaning that any action taken against Spooner’s business The American Letter Mail Company was illegitimate. Did nothing more than preserve the jobs of bureaucrats and place artificial barriers on the natural cadence of market processes. The antithesis of preserving our natural rights and liberties.
“What was that power? It was, as has been shown, merely a power concurrent with that of the states and people, .. to establish post offices and post roads.” Only a concurrent power, then, having been delegated, and a like power not having been prohibited to the states or people, it necessarily follows, from the terms of the amendment itself, that a concurrent power to establish them is .. reserved” to the states respectively, or to the people-or to both.“
Lysander Spooner (P.21 The Unconstitutionality of the Laws of Congress, prohibiting Private Mails. 1844)
Before the founding of private parcel carriers, such as UPS or FedEx, the United States Postal Service had a monopoly on the delivery of small packages. Until one man, Lysander Spooner decided to openly challenge the government’s industry dominance. Ultimately, the U.S. government won the battle. Spooner arguably won the war. His victory immortalized in the fact that he forced the hand of the U.S. Mail service to lower the costs of stamps through his valiant entrepreneurial efforts. Effectively driving the cost of stamps down to actual market rates. Earning the bold political philosopher the moniker “Father of the Three Cent Stamp”. Spooner observing the illegitimate manner in which the government monopolized this service, braving the risk of legal action, decided to create his private mail service. Servicing parcel and letter delivery from Boston through the mid-Atlantic. All the while undercutting the grossly inflated shipping rates set by the government.
Lysander Spooner was born on a rural farmhouse in Athol, Massachusetts on January 19th, 1809. He was one of nine children. It was speculated that Spooner’s fervently religious upbring influenced his later turn towards deism. Along with a commitment to religion, his family also were staunch supporters of the abolition movement. At the age of sixteen, he entered an agreement with his father to work on the farm until he was twenty-five. In exchange, Spooner was provided with food, room and board, and “educational advantages”. After fulfilling his obligation to his father, Spooner worked as a clerk for the Register of Deeds in Worcester, Massachusetts. In 1833, studied law under John Davis while working in his office. Spooner eventually went on to start his legal practice. Acting in defiance of the Massachusetts mandate that lawyers either have a college degree or study five years under a practicing lawyer. Spooner perceived this law as being discriminatory towards the “well-educated poor”. Drawing parallels to the artificial barriers to entry created through state occupational licensing requirements. Spooner even petitioned the Massachusetts General Court to challenge the veracity of this requirement in 1835.
In 1844, Spooner founded the American Letter Mail company. Audaciously announcing the incorporation of his enterprise to the U.S. Postmaster General. Reacting to the skyrocketing costs of postage in the 1840s. The cost of sending a letter from Maryland to Massachusetts was 18.75 cents. Approximately twenty-five percent of workers’ daily wages at the time. Two weeks after his grand announcement Spooner was delivering letters between Boston, New York, and Baltimore. Offering patrons this service for a mere 5 cents per stamp rate. A drastically more economical option than the exorbitantly priced stamps required to be delivered by the USPS. Doing something the Postal Service of the nineteenth century could not accomplish. Deliver mail quickly, efficiently, and all at a fair price. All benefits could not be achieved by the U.S. Mail due to the organization be rife with corruption and bureaucratic red tape. The U.S. Postal Service possessing a monopoly position in the market afforded the organization the ability to set prices.
Naturally, Spooner soon came under fire from the U.S. Post Office. Less than a week of being in business “… Congress introduced a resolution to investigate the establishment of private post offices..”. After only being in business for several months Spooner and a few of his employees were detained for transporting letters by train to Baltimore. After being incarcerated for nearly three months and grappling with other legal troubles Spooner was released from prison. The American public became accustomed to lower postage rates, meaning the U.S. post office had to lower the cost of their stamps. This resulted in many of the customers using private carriers returning to using USPS. This combined with the legal fees incurred through Spooner’s legal battles with the U.S. Government contributed to the bankruptcy of his business. After the failure of his business venture, Spooner went on to be an influential figure in the abolitionist movement.
Spooner was able to give the inefficient appendage of the federal government dedicated to delivering mail a run for its money. Through this market distribution despite the failure of Spooner’s business, he succeeded in lowering the price of postage in the United States. He did so through market forces. Directing the U.S Post Office to follow suit with providing comparable pricing to the public. This was achieved in the absence of legislation or other typical forms of political action. Truly living up to his reputation as an anarchist. Regulation suffers from the lethargy of political processes. Changes made to adjust to market conditions are much more instantaneous. Demonstrated how quickly postage rates dropped after Spooner started delivering letters.
In the spirit of Spooner and his contributions to anarchist political theory, it is interesting how there is a discrepancy between when the government engages in questionable conduct and when a private citizen does. Few questioned the government monopoly on mail delivery, but when a private citizen attempts to bring competition into the market he is ligated out of business. However, when private companies start to dominate specific industries at the end of the 19th century, there was then a moral imperative to break up this concentration of market power. The christening of this crusade was punctuated by the passage of the Sherman Antitrust Act in 1890. It would be fair to respond to this charge of hypocrisy, by stating that when Spooner waged war on the monopoly in letter carrier services there wasn’t any precedence for antitrust law in American jurisprudence at the time. Good point, but even in the light of the fully developed and sophisticated antitrust law we have today there are still state-dominated monopolies on the production of goods and services. The most salient example being defense. Some cling to the Samuelsonian public goods argument for keeping the government monopoly on defense. Keen scholars of political economy may even invoke Coase’s Theorem to justify state provision of defense services. For those who are skeptical of the legitimacy of state intervention, there still appears to be a double standard.
Environmentalism and free-market economics have long been viewed as being adversarial. The very notion of combining these two ideas seem like nothing more than an oxymoron. This popularly perpetuated stereotype is echoed in the rhetoric of the Green New Deal. Why should conservation efforts not be guided by the signals of profit and loss mechanisms? Better yet, why should conservation efforts be insensitive to incentives and rely solely on legislative fiat and sanctions to enforce such initiatives? It is about time that environmentalism sheds its crunchy -granola image in exchange for more of a pragmatic approach. After all, conservation does entail conserving resources. Any economically conscious actor would consider the limitations on nonrenewable resources. Meaning that economic agents would strive for the more efficient use of resources of limited quantities. Efficient uses of resources tend to be rewarded in free-market economics. Ironically demonstrating how environmental conservation and free-market economics dovetails perfectly to one another.
One of the most notable leaders in market-based environmentalism has been PERC. Founded in Bozeman, Montana back in 1980 and has been committed to devising economically sound solutions to environmental issues. All the while, respecting private property rights. This research institute flips the conventional notion of environmentalism on its head. Seeking to pursue private solutions to environmental versus automatically resorting to legislation and regulation. One of Terry Anderson’s, a senior fellow at PERC, favorite examples of this was the story of Hank Fisher. A leader in the wolf restoration effort in the 1980s.
Fisher came to an epiphany in 1984, after meeting with a group of local ranchers in a schoolhouse in St, Anthony, Idaho. Fisher assembled the ranchers to hear their concerns regarding wolf reintroduction at the Yellowstone national park. The consensus was that the majority of the ranchers were concerned about the cost of losing livestock as a result of an increase in the wolf population. It was the response of one of the ranchers that solidified the foundation for Fisher’s market-based solution. One of the ranchers told Fisher: “It’s easy to be a wolf lover. It doesn’t cost anything. It’s the people who own livestock who end up paying for wolves.” Fisher then remembered a livestock compensation plan that was implemented previously in Minnesota. However, the ranchers were incredulous at the fact that they ever would be compensated for their losses.
In the summer of 1987, Fisher was able to test out the concept of a livestock compensation program in Montana. As wolves returned to northwestern Montana, local ranchers lost thousands of dollars’ worth of livestock. Killed by the wolves migrating back to their natural habitat. The indignation of the ranchers was reflected in the flurry of headlines in the local papers. Fisher quickly sent out a fundraising newsletter out to” ..Defenders of Wildlife members in Montana…”. He was able to raise the necessary funds to compensate the ranchers for their losses within 48 hours. After seeing the success of his first initiative, Fisher decided to continue to implement and maintain rancher compensation programs. He collaborated with local artist Monte Dolack creating posters depicting what Yellowstone would look like with a restored wolf population. Selling posters to the public for $30.00 apiece. Since 1987 (reference article was published in 2001), the program has raised $175,000.00 in rancher compensation. The scope of the program has been extended to ranchers in Idaho, Wyoming, Arizona, and New Mexico. Defenders of Wildlife also implemented a program in 1997, compensating for grizzly bear damages. Raising $60,000.00 by 2001.
The story of the environmental efforts of Hank Fisher is an illuminating one. Challenging the conventional wisdom that we need to dispense with free-market economics when pursuing environmental restoration efforts. Both are perfectly compatible with one another. With a little bit of ingenuity and understanding of market incentives, other aspiring pioneers could follow in his footsteps. By doing so create a win-win scenario versus the zero-sum policies that are favored in government-sanctioned penalties and inflexible regulations.
In a 2005 blog entry from economist and George Mason professor, Bryan Caplan disputes the veracity of time preference proving why interest rates tend to be positive. Time preference asserts that people prefer present consumption over future consumption. Providing some insight into why people would be willing to receive money now and later pay it back with interest. From the standpoint of an individual’s assessment of value, $1000.00 today is worth more than $1000.00 three months from now. Dr. Caplan launches a two-pronged attack against the assumption that time preference explains why interest rates are positive. Caplan suggests that dimmishing marginal utlity, not time preference demonstrates the proclivity of interest rates being positive.
Professor Caplan’s first point regarding the failure of time preference to adequately explain positive interest rates relates to the allocation of nonmonetary resources. He details a scenario where an individual is marooned on a desert island with only two bananas. Per a loose application of time preference, in theory, the person stuck on the island would eat both bananas today. Since we prefer present consumption to future consumption. A “perfectly patient” person would be willing to eat only one banana a day to more effectively curb their hunger. This is because we disvalue hunger today equally as much as we do tomorrow. Making dividing consumption between the two days a more effective use of resources.
Caplan goes further elucidates this point by demonstrating the fact that often in barter interest rates are negative. Per the blog entry:
“Suppose we knew the price of food would double next year. Then a pound of food now trades for half a pound of food one year from now. Translation: a negative 50% interest rate!
If this seems crazy to you, suppose the food was the only commodity, and you expect a famine next year. Wouldn’t you happily trade 2 pounds of current food in exchange for a promissory note good for 1 pound of food next year?”
This example explicates depending on the context we may forgo present consumption for future consumption. Even when we are expected to take a loss on the value of that commodity. This foils the main tenants of time preference. If we were to delay current consumption for future consumption we tend to do so for future gain. To quote the Austrian economist Roger Garrison “ We save up for something”. We hang on to stocks, gold, annuities, bonds, or cash holdings with the anticipation they will increase in value. It is important to note that inflation does take its toll on cash holdings. In the mind of the average person, it is more about amassing large quantities of money than an expected increase in value. Per time preference, if we did anticipate no gain from delaying consumption, we would be more apt to consume now than take the loss. However, in the situation presented by Dr. Caplan, it may be reasonable that a logical person may do the opposite. The rationale why loans for money tend to be positive is the fact that money does not spoil and is of little cost to store.
The second prong of Professor Caplan’s argument is the most compelling. In modern society, people have the ex-ante perception that they will be richer in the future. Anticipating being wealthier at a later date will drive a person’s demand for consumption up for the present. As the individual exhausts their desire to consume, the hope is that they have more money to pay back the sum that was loaned with interest. That is certainly a point that the Austrian perspective on interest rates ignores. Is it possible that if we excepted to get a raise in our compensation next year, we are more apt to spend more now and around the time we start to experience the disutility of consumption we experience a bump in pay? This is a very likely scenario. Presents arguably the biggest blind spot in the theory of time preference.
However, there is one looming question that Dr. Caplan does sidestep in his arguments. Few sane economists would ever argue that the law of diminishing marginal utility doesn’t apply to consumer behavior. But are we truly measuring the utility of the same commodities if we delay present consumption? Our Christmas decorations three weeks before December 25th the same commodity as these same decorations on the clearance rack the first week of January? It could be reasonable to argue no. While diminishing marginal utility could explain this decrease in demand, but it fails to consider the full scope of the customer’s subjective evaluation of the goods. The marginal utility can only explain the assessment of the value of a commodity. It cannot explain if the customer perceives the good as being categorically different. The variable of time could very well influence whether Christmas decorations now or a month ago are truly the same product. Applying this reasoning to interest rates, this point becomes quite clear. Is $1000.00 today plus avoiding a late payment on a credit card the same as $1,000.00 next week? Especially when we consider late fees, damage to our credit score, etc. On top of it, you still owe the credit card company $1,000.00. It is difficult to quantify the intrinsic value of having a clear credit score. $1,000.00 plus interest may be worth more to the individual than taking a hit on their credit score.
A shout out to the Ludwig Von Mises Institute for the Free books. Yes, I have read Economics in One Lesson in the past. However, I didn’t own it. The Mises Institute edition is a beautiful hardcover that does the book justice.