Category Archives: Privatization

Blog, Law and economics, Privatization

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

You’ve likely heard by now of the recent decision by the Federal Communications Commission (FCC) to end net neutrality. In case you haven’t, in a nutshell, on December 14, 2017 the FCC decided to end rules prohibiting internet service providers (ISPs) from discriminating among customers or among the content they carry. By ending these rules, ISPs can now slow down or entirely block access to one or more internet sites and can also charge internet users more money in order to have access to certain sites with high speed internet, creating what have been described as internet “fast lanes” and “slow lanes.”

Setting aside the huge unpopularity of the FCC’s decision (more than 80% of voters opposed it), the decision has been heavily criticized for a number of reasons. For example, Scott Galloway, the founder of L2, stated:

This is the worst thing that’s slipping under the radar in a long time…If net neutrality goes away, you can see small companies not being able to compete or have access to the pipes that bigger guys have…The idea that we don’t have equal, unfettered access to what has become the mother’s milk of all innovation, of all online shareholder creation, and that is data into our lives and into our phones. This could be probably one of the biggest errors in one of the slow moving train wrecks we’ve seen in a while. The threat to undermine net neutrality is the most underreported news story of our day right now.

In particular, the FCC’s decision to end net neutrality has been criticized as an attack on first amendment rights of freedom of speech. The US Supreme Court has described social media websites as providing “perhaps the most powerful mechanisms available to a private citizen to make his or her voice heard.” Further, today the internet plays an indispensable role in political expression and organizing. By ending net neutrality, both access to social media sites and, more largely, the use of the internet for political speech and organization will be subject to the mercy of ISPs, each of which is a private (not state owned or controlled) company, and so not required to respect first amendment rights.

Writing in the New York Times just before the FCC decision, Nick Frisch set up a particularly disturbing scenario:

To taste a future without net neutrality, try browsing the web in Beijing. China’s internet, provided through telecom giants aligned with the Communist Party, is a digital dystopia, filtered by the vast censorship apparatus known as China’s Great Firewall. Some sites load with soul-withering slowness, or not at all. Others appear instantly. Content vanishes without warning or explanation. The culprit is rarely knowable. A faulty Wi-Fi router? A neighborhood power failure? Commercial sabotage? A clampdown on political dissent? To most Chinese netizens, the reason matters little. They simply gravitate to the few sites that aren’t slowed or blocked entirely: the Chinese counterparts of Facebook, Google, and Twitter. But these Chinese platforms come with heavy government surveillance and censorship by corporate and party apparatchiks. For the Communist Party and its commercial allies, this is win-win, cementing respective monopolies on political markets and consumer power.

The Trump administration’s plan to dismantle net neutrality regulations has brought this nightmare scenario to America’s digital doorstep. [The rollback of net neutrality rules] not only imperils fair play and free speech; [it also] also empower[s] foreign entities with substantial market-making power, like China’s government, to meddle in American public discourse on a scale dwarfing Russia’s recent cyber-chicanery. Worse, abolishing net neutrality gives American corporations the means, motive and opportunity to become accomplices in selling out our freedom of speech.

In sum, for Frisch as well as for many others, rolling back net neutrality means rolling back first amendment rights of free speech on the internet.

While it hasn’t gained the attention of the wider public, a comparable proposal—to privatize regulation—has attracted the attention as well as the wide acclaim of legal academia and a number of captains of industry, and has received an airing in the Financial Times. I describe this proposal in detail here and I discuss it at length here.

In a nutshell, the proposal, as it is detailed in Gillian Hadfield’s book Rules for a Flat World: Why Humans Invented Law and How to Reinvent It For a Complex Global Economy, is as follows: Our public institutions are woefully inadequate for many kinds of regulation. They are hamstrung by their propensity for high levels of complexity resulting in high costs for businesses. Further, and perhaps worse, they do not have the financial, technical, or human resources needed to develop the new “legal infrastructure” that we need today. For these reasons, much of the power to determine the rules that govern and deeply affect us as a society (such as those relating to contracts, health and safety, employment, data security), and that govern businesses in particular, should be removed from our current public intuitions (executive, legislature and judiciary) and instead be placed in the hands of privately-owned, for-profit companies (or privately operated non-profits) whose principal “customers” for such rules will be other companies. Once this is done, the role of the public institutions would be limited to regulating these private regulators.

As mentioned above and discussed further here, this proposal has been lauded by a number of captains of industry as well as thought leaders in academia. One commentator described it as “original” and “compelling” for “how to reconstruct the regulatory structures necessary for a complex global economy.”  Another described the proposal as a charter “for a more rational and inclusive legal system.” A third called the proposal “a blueprint for a more efficient, inclusive and accessible legal system.”

These references to “inclusive” and “accessible” are difficult to understand, at least in so far as they apply to the United States and other wealthy countries. As discussed here and here, recent research by NYU PhD candidate Hannah Simpson demonstrates that if a wealthy group—such as corporations—opts out of a state (that is, public) legal system in favor of a private one, it is more likely than not to have negative effects for the remaining population (that is, for those who are excluded from the private legal system). Further, Simpson’s research demonstrates that if a legal institution is used as a source of revenue (something a for-profit regulator would obviously use its institution for), this results in the denial of access to justice to those portions of the population that cannot access that institution because of inability to pay.

Indeed, even without Simpson’s research the descriptions of “inclusive” and “accessible” are difficult to understand. By its very definition, the privatization of any previously public good or service excludes many persons from that good or service—it excludes the public—and makes it less accessible to many people—again, it makes it less accessible to the public. Real property as well as physical infrastructure, such as roads and bridges, are obvious cases in point. When real property is privatized it becomes accessible only to its owner and to those the owner allows on to the property, sometimes as guests but often as rent-payers. The general public, which previously had free access, must stay off. When physical infrastructure such as a road or bridge is privatized, it becomes accessible only to its private owner(s) and those who are able to pay the fee the owners charge to use it. The general public, which previously had free access, must stay off. Seen from this perspective, the suggestion that the privatization of any previously public good or service makes it more “inclusive” or more “accessible” is absurd on its face. To the contrary, the inclusiveness and the accessibility of that good or service is shifted from a large number of persons—the general public—to a very small number—the new private owner(s).

Further, the proposal to privatize regulation shares essential characteristics with the repeal of net neutrality: it would mean that corporate entities—not democratically elected or controlled bodies such as an executive, legislature or judiciary (or, at least, ostensibly democratic bodies)—would formulate and apply rules that would have consequences for a large number of persons, if not for the population as a whole (such as rules relating to employment and consumer law). As for-profit institutions, they would control access by their “customers” (no longer citizens) to rule-making and dispute resolution procedures, as well as to the rules themselves. There would be nothing to stop them from creating “fast” and “slow” lanes, notably with respect to the speed of dispute resolution or the quality of the rules themselves, dependent upon the price paid. To the contrary, by their very nature of being for-profit, they would necessarily restrict and award access to their products and services based upon ability to pay.

In essence, while the repeal of net neutrality will erode the constitutional right of free speech enshrined in the 1st Amendment, the proposal to privatize regulation, if implemented, would erode the constitutional right of equal protection of the law enshrined in the 14th Amendment. As the Legal Information Institute of Cornell Law School explains, “the point of the equal protection clause is to force a state to govern impartially—not draw distinctions between individuals solely on differences that are irrelevant to a legitimate governmental objective.”

The 14th Amendment applies only to state (public) actors, not to private ones. By removing regulatory powers from the state in order to place them in the hands of private, for-profit corporations, the corporations would, for the very reason that they are “for-profit,” draw distinctions between persons based upon their ability to pay. It is difficult to imagine under what circumstances differences in ability to pay for regulation are relevant to a legitimate regulatory objective: they would be relevant only to the objective of generating profit for the private regulator.

In 1938, Franklin Roosevelt warned:

Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people…The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is Fascism—ownership of Government by an individual, by a group, or by any other controlling private power… Among us today a concentration of private power without equal in history is growing.

Nearly 80 years later, in May 2017, Chris Hedges confirmed the realization of Roosevelt’s fear of American fascism:

Forget the firing of James Comey. Forget the paralysis in Congress. Forget the idiocy of a press that covers our descent into tyranny as if it were a sports contest between corporate Republicans and corporate Democrats or a reality show starring our maniacal president and the idiots that surround him. Forget the noise. The crisis we face is not embodied in the public images of the politicians that run our dysfunctional government. The crisis we face is the result of a four-decade-long, slow-motion corporate coup that has rendered the citizen impotent, left us without any authentic democratic institutions and allowed corporate and military power to become omnipotent. This crisis has spawned a corrupt electoral system of legalized bribery and empowered those public figures that master the arts of entertainment and artifice. And if we do not overthrow the neoliberal, corporate forces that have destroyed our democracy we will continue to vomit up more monstrosities as dangerous as Donald Trump. Trump is the symptom, not the disease.

Our descent into despotism began with the pardoning of Richard Nixon, all of whose impeachable crimes are now legal, and the extrajudicial assault, including targeted assassinations and imprisonment, carried out on dissidents and radicals, especially black radicals. It began with the creation of corporate-funded foundations and organizations that took control of the press, the courts, the universities, scientific research and the two major political parties. It began with empowering militarized police to kill unarmed citizens and the spread of our horrendous system of mass incarceration and the death penalty. It began with the stripping away of our most basic constitutional rights—privacy, due process, habeas corpus, fair elections and dissent. It began when big money was employed by political operatives such as Roger Stone, a close Trump adviser, to create negative political advertisements and false narratives to deceive the public, turning political debate into burlesque. On all these fronts we have lost. We are trapped like rats in a cage. A narcissist and imbecile may be turning the electric shocks on and off, but the problem is the corporate state, and unless we dismantle that, we are doomed.

It is in this context that the proposal to privatize regulation as well as the repeal of net neutrality can be best understood. They are logical steps in a “four-decade long, slow-motion corporate coup that has rendered the citizen impotent.” Rather than serve to dismantle the corporate state that Roosevelt feared and Hedges has confirmed, each serves to build it larger and stronger. We need to take Hedges’s list of basic rights that have been stripped away—privacy, due process, habeas corpus, fair elections and dissent—and add to it freedom of speech (due to the repeal of net neutrality) and equal protection of the law (if the proposal to privatize regulation were implemented).

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, Part 3 and Part 4

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Blog, Law and economics, Privatization

Democracy? It’s Messy. Who Needs It?

Since I first read Gillian Hadfield’s work I’ve been a huge fan. I’ve greatly appreciated and learned much from many of her articles, such as “The Cost of Law: Promoting Access to Justice through the (Un)Corporate Practice of Law,” “Life in the Law-Thick World: The Legal Resource Landscape for Ordinary Americans” (with Jaime Heine), and “Legal Barriers to Innovation: The Growing Economic Cost of Professional Control Over Corporate Legal Markets.” So when I saw that she was publishing a new book, I pre-ordered and waited impatiently.

As soon as the book arrived, I dove in. I found it fascinating. Hadfield weaves gripping stories. Her arguments are presented logically and her style is highly engaging. With my trust in Hadfield from her earlier works, I was effortlessly drawn in.

But once I finished the book and put it down, something started bothering me. It started as niggle but grew to bother me a lot. At first, I couldn’t put my finger on what it was. Then, after some time and distance from the book, the scales began to fall from my eyes.

Rules for a Flat World: Why Humans Invented Law and How to Reinvent It for a Complex Global Economy proposes the privatization of regulation. This proposal could appear to some to be mundane, even innocuous. After all, a number of previously public services have been privatized in the US and in other countries in recent years, and there are plans underway to privatize a great deal more. What’s one more to add to the list?

Before coming to that conclusion, however, let’s go back and re-consider Hadfield’s proposal with attention, and, even better, with very careful attention. Privatize regulation. What does Hadfield mean by that? In her words, she means allowing “markets” (or, private enterprise) to produce what she refers to as “legal infrastructure.” For Hadfield, this includes legal services, but most especially—and by far most importantly—it also includes “legal/regulatory rules and procedures themselves.”

Hadfield argues that our public institutions are woefully inadequate for many kinds of regulation. They are hamstrung by their propensity for high levels of complexity resulting in high costs for businesses. Further, and perhaps worse, they do not have the financial, technical, or human resources needed to develop the new “legal infrastructure” that we need today.  For these reasons, Hadfield argues that much of the power to determine the rules that govern and deeply affect us as a society (such as those relating to contracts, health and safety, employment, data security), and that govern businesses in particular, should be removed from our current public intuitions (executive, legislature and judiciary) and instead be placed in the hands of privately-owned, for-profit companies (or privately operated nonprofits) whose principal “customers” for such rules will be other companies. Once this is done, Hadfield maintains, the role of the public institutions would be limited to regulating these private regulators.

A Rose by Any Other Name

What if Hadfield’s proposal was phrased in another way? What if it was explained as a proposal to move political rule-making and the procedures that follow—that is, moving government itself—to private, for profit enterprises (or to nonprofit organizations seeking to achieve private nonprofit goals). Phrased in this manner, the proposal is not mundane and it’s certainly not innocuous. It’s an unabashed rejection of democracy and democratic processes.

You may or may not be ok with this. Some people are perfectly ok with it. Whether you are or not, we must honestly and openly recognize the proposal for what it is. We must look through the veil of highly engaging rhetoric to the final reality of its profound consequences for democracy and for how our country is governed.

Is Rules for a Flat Worldengrossing?” Definitely. Is it “thought provoking?” Absolutely. Is it “sweeping in scope?” Unquestionably. It’s also neoliberalism par excellence. It is neoliberalism (or, if you prefer, libertarianism) taken to a logical extreme. In that sense, it is by no means “new,” “original,” or “visionary.” Instead, it follows a path already well-trodden by Bob MurphyBruce Benson, Bryan Caplan and Edward Stringham, Bruno LeoniMurray RothbardDavid Friedman and his father Milton FriedmanFriedrich Hayek, Ayn RandLudwig von Mises, Lewis Powell, and James Buchanan, as well as by The Heritage FoundationCATO InstituteAmerican Enterprise InstituteAmerican Legislative Exchange CouncilCitizens for a Sound EconomyThe Heartland Institute, the Independent Institute, Foundation for Economic Education, Competitive Enterprise Institute, and the Mises Institute, to name a few. (See more about these organizations below).

A Framework for Misgivings

Just as I was coming to realize the full implications of Hadfield’s proposal, I came across an article by Anna Yeatman, “Freedom and the Question of Institutional Design.” It was a timely discovery. Her article helped me to organize my many, but jumbled, misgivings about Rules for a Flat World into a coherent framework.

Yeatman explains that in early modern Western political and juristic thought the question of how authority can serve freedom centered on the idea of the state. It is the role of the state to provide a public and lawful ordering of social life, as well as to provide a “jurisdictional container for society organized as a self-determining political community.” This idea of the state has been the foundation of modern democratic constitutionalism. Among other things, Yeatman continues, the exercise of the authority of the state by public agencies and public officials “has to be politically accountable to the individuals whose freedom they serve.”

Neoliberal thinkers reject this concept of “institutional design.” Instead, they posit that freedom already exists naturally. “It is expressed in the spontaneous order (as Hayek put it) of market society.” They are equivocal regarding the need for the state. Yeatman explains that on the one hand, they don’t want the state to interfere with the spontaneous order. On the other hand, they do want the state to impose the institutional design of market society. Yeatman further states: “In making it seem that the state simply recognizes a market society that already exists, neoliberal thinkers deny what it is that they actually do which is to have the state construct (in law and policy) the specific market ordering of relationships that they champion.”

According to the rhetoric of neoliberal thinkers, Yeatman clarifies, a market economy is a natural and spontaneous order that must be placed beyond politics. This justifies the “subjection of the inherently political nature of the state to supposedly impersonal economic forces.” In this manner, neoliberalism privatizes government services and strips the public service of its traditional role. “The idea of public office falls into desuetude in a mode of thought where private interest is said to motivate action. While the formal trappings of democratic institutions are maintained, the citizen public finds itself increasingly locked out of an informal, secret and insider-driven decision-making process.” A new set of rules is used. These rules distribute power to powerful, concentrated units of private capital (the modern corporation), and away from the state, which is thought of as both the public authority and the political community.

These words of Yeatman describe with precision Hadfield’s proposal for privatized regulation: Move power away from public institutions in order to place it in the hands of private ones, and, in particular, the hands of corporations. But, as you are doing so, deny that you are doing anything other than recognizing “natural order.” Although Hadfield’s denial describes the process as “supremely practical” rather than “natural.” As she states in Rules for a Flat World (citing Hayek): “The reason is nonideological and has nothing to do with liberal democracy and the proper role of government in promoting human well-being. It is supremely practical.” (Hadfield also rejects that her proposal is ideological in this video).

Yeatman’s Components of Neoliberal Thought

Yeatman tells us that while neoliberal thought is dynamic, “adaptive to opportunity, and informed by different intellectual strands,” it is also a distinctive worldview that has a number of components. She lists and describes a total of ten components, each highly pertinent in the context of Rules for a Flat World:

1. The importance of re-engineering the state to establish the institutional framework of a market society.” Or, as Hayek put it, of a “competitive order.” In Rules for a Flat World, Hadfield proposes to re-engineer our current regulatory state in order to establish a new form of regulation, based upon markets and competition among private enterprises.

2. The reduction of the role of “government” (favoring that term over the term “state”) to only provide “a lawful order for rules of conduct that are already immanent within a spontaneous market order.” More specifically the function of government is not to produce any particular services or products to be consumed by citizens, but “rather to see that the mechanism which regulates the production of those goods and services is kept in working order.” Hadfield proposes to reduce, if not eliminate, the function of government with respect to providing regulatory services that affect citizens (again, Hadfield proposes that companies be allowed to set rules governing areas such as contracts, health and safety, employment, and data security). She favors, instead, a government whose function is limited to assuring that private regulatory services are kept in working order.

3.The elaboration of economic action to become the prototype for all human action.” Stated another way, it is a singular rather than plural conception of life in society that reduces all human action to economic action. This justifies the adoption of “competition policy” where publicly funded services (Yeatman’s examples are education, health and welfare) are redesigned as market-based services. This requires the service providers to shift to a business model where the paramount goal is efficiency. Further, former citizens are redefined as customers whose “choice” to use the service in question is guided by its price. The assumption, Yeatman explains, is that if the customer does not wish to pay the price of the service, it is because they do not value it sufficiently.

Rules for a Flat World fails to contemplate any kind of human action other than economic action. This is underscored, for instance, in Hadfield’s remarkably restrictive examples of what law “should” be: to “promote trade or investment in new technologies, improve incentives for workplace safety, or design cost-effective taxes.” Conspicuously absent from her examples of what law “should” be are areas like protection of human rights and civil liberties, protection of the environment, equitable rules for marriage, divorce, and child custody, and rules for immigration. Further, Hadfield complains of the high “costs” of governmental regulation, in large part because government regulators have no incentive to be efficient. In contrast, under her model, private regulators would have every incentive to be efficient, else they’ll “get thrashed by competitors.” Finally, she confirms that “users” will (or at least should) have a choice of private regulator, and that private regulators will need to be sure that their high fixed costs are spread across enough “users” (Hadfield does not refer to them as “citizens”), “relative to how much each is willing and able to pay.”

4. The rejection of public planning. Yeatman explains that public planning requires “a sense of history, an ability to live between past and future.” In this context, the public collective “we” has to ask the question of how do we build on past achievements and meet future challenges. The emphasis is on “a public discursive process within which opinion can be voiced, made to take account of contrary or different opinion, and some kind of considered collective judgment arrived at.” In contrast, neoliberal thinking “rejects the political arts, and instead embraces technologies of quantification.” This way of thinking dispenses with a sense of history or place, and is given to a mathematical matrix of living in the now. It does not allow for “prudential consideration of the consequences and implications of conduct for the future wellbeing of individuals, their families and communities.”

Hadfield rejects what she terms “central planning,” which she defines as “rules crafted in bureaucracies, discussed in committees and voted on by elected or appointed officials.” She rejects it because it is incapable of collecting, analyzing, synthesizing, weighing, and choosing the information required for the “best solution,” because information “does not play nice.” For Hadfield, markets are a far better solution for building legal infrastructure, where coordination is accomplished not by “analysis and committee,” but by Adam Smith’s “invisible hand.” Hadfield is clear that the priority should be for “our legal infrastructure to innovate in step with the innovative pace of our economy.” The consequences and implications for the future wellbeing of individuals, their families and communities aren’t mentioned.

5. The reduction of politics to competition between private interests. As Yeatman explains: “The older patriotic conception of a partisan politics that is tempered by consideration of the public interest as this is informed by advice from a disinterested and independent professional public service is jettisoned.” While attentive reading of Rules for a Flat World is necessary in this case, a merely inattentive one would suffice to reveal that Hadfield firmly—if not categorically—rejects the value of political processes in the formulation and application of legal rules and procedures (they are too complex, too costly, too bureaucratic,…). At no point in her 396-page book does Hadfield raise any concern for the public interest. Hadfield’s entire focus, instead, is on the interest of the economy. And the best interest of the economy, Hadfield argues, lies in competitive, private regulation.

That’s five of Yeatman’s ten components of neoliberal thought. I could continue with the remaining five, but this post is already quite long, and I think you get the idea.

“An Organised Takeover of Common Sense”

Yeatman’s conclusion is worth quoting at length:

The doctrine of neoliberalism is a drastic reduction of the modern idea of freedom to a monism of market-oriented action… Neoliberals offer the artifice of market design where the competitive order of market relationships becomes the framework for social life in general. To establish this institutional design, neoliberal doctrine uses the authority and sovereignty of the state against the very nature of the state as a political-legal container for social life.

This approach to how our lives and conduct are framed has assumed the status of common sense at least for the governing elites: [quoting Andrew Dean] “Writing against such powerful and often invisible beliefs is no easy task: there are certain positions that are now fundamental to public debate, most of which rest on the assumption that markets, allowed to operate freely and independently, will in every situation allocate resources more efficiently, and make everyone better off.”

The progressive penetration of neoliberal thought into the mode of thinking of our governing elites has been driven not just by its highly organised promulgation but also by the same eagerness not to defy what are represented as new impersonal historical forces: economic globalization, automation of jobs, market forces. The impersonality of the market mechanism itself creates the ultimate resource for deniability—no one has to assume personal responsibility in a context where decisions are driven by market forces…For an ideology that trumpets freedom of choice, neoliberal doctrine is profoundly committed to representing our collective situation as one where we have no choice to influence the key decisions that affect our lives.

No doubt many members of the governing elites are influenced by neoliberal doctrine in ways that they can hardly account for, and perhaps they would think again if they were invited to consider the assumptions and content of neoliberal doctrine. The difficulty is that when a doctrine has successfully shaped common sense it is difficult to see how it has been formed, promulgated, disseminated, and networked.

In sum, for Yeatman, the development of the neoliberal thought collective is “an organised take-over of common sense.”

Why Insist?

You may be wondering why I’m so insistent with respect to Rules for a Flat World (I also address the book at length but from another angle in my book Modernizing Legal Services in Common Law Countries: Will the US Be Left Behind?, and I mention it here and here). If so, it’s a fair question. There are several reasons:

For many people (those that are paying attention), the suggestion to privatize regulation is, on its face, difficult to take seriously if not outright laughable. Hadfield herself acknowledges that it can sound “crazy.” At the same time, however, suggestions to privatize other public services, such as water, education, policeprisons, and the military have also, at one time, appeared laughable—crazy—to many people (and they still do). This did not stop the privatization of any of those other public services, as well as others, each with disastrous consequences.

Further, in contrast to Hayek, whose book The Road to Serfdom was spurned and widely ridiculed at the time of its publication, Hadfield is highly respected in her field of law and economics, and her publications are widely read and quoted. Many (like me) no doubt eagerly awaited the arrival of her book, many have read it, and many more will surely read it in the future. One commentator has described Hadfield as “one of the most consequential legal scholars doing evidence-based work.” If Hadfield were less respected or less known, I, let alone many others, might not have even noticed a book such as Rules for a Flat World, much less have actually read it. If Hadfield were less respected and less known, it’s unlikely that no fewer than 15 captains of industry together with recognized thought leaders would have agreed to provide marketing blurbs recommending her book. (One commentator referred to them as a “long list of endorsers…with ‘A’ level credentials in the new economy“). If Hadfield were less respected and less known, it’s unlikely that the Financial Times would have allocated column space for her to explain her proposal.

A recent online symposium hosted by Prawfsblawg focused on Rules for a Flat World (together with Richard and Daniel Susskind’s book, The Future of the Professions: How Technology Will Transform the Work of Human Experts). Nine law school professors and other academics contributed to the symposium. Of those nine, just one, Javier de Cendra, expressly raised the question of how Hadfield’s proposal might relate to democracy. (De Cendra did not, however, propose a response to the question, simply writing obliquely “the need for new rules for a flat world forces us to rethink the foundations of our democracies [and] the distribution of power therein”). One contributor went so far as to imply that Hadfield’s proposal would be beneficial to democracy, describing Rules for a Flat World as offering “a blueprint for a more efficient, inclusive, and accessible legal system.” All the other contributors were silent in this regard, instead praising the book and/or Hadfield as “sensible,” “excellent,” having “tremendous scholarly rigor,” and stating that Hadfield “may be right.”

It is for all these reasons that I am so insistent with respect to Rules for a Flat World. It is important to call the book out for what it is. It is important to get past platitudes such as “tour de force,” “amazing accomplishment,” and “widely acclaimed” in order to really understand Hadfield’s proposal, to understand the origin and purpose of its ideology (indeed, to simply recognize that it has an ideology*), and, especially, to understand the full import of the consequences of her proposal, were it to ever be implemented.

I do not want to argue that private organizations should never have any role to play with respect to regulation. They already do, and, indeed, that train left the station long ago, as evidenced in this article by Philip Weiser, for example. I do want to argue that any such role must be carefully constructed. Any private organization acting in a regulatory capacity must be required to act in the public interest, and not in the interest of the private organization or its shareholders. Further, it must be required to act in a manner that is fully transparent to all stakeholders and it must be subject to close oversight by and accountability to at least one democratically controlled public authority.  And that public authority must not be starved of the resources and authority it needs to be effective in its oversight role. Anything less than this careful construction would be disastrous for our already highly fragile democratic institutions.

*Postscript: Underscoring the ideology behind the proposal to privatize regulation, Rules for a Flat World was recommended, albeit hesitantly, in a post on the website of the Competitive Enterprise Institute (CEI). One of the more remarkable elements of the recommendation is its inclusion of Hadfield in a group referred to as “the libertarian legal community.” Also remarkable is the association of Rules for a Flat World with two other books that are described as exposing “politicized science” and that are recommended without any hesitation. One of these books, Scare Pollution: Why and How to Fix the EPA by Steve Milloy, argues that the Environmental Protection Agency is “rogue” and “out-of-control.” The other book, Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex by Rupert Darwall, is described as showing that “the climate industrial complex has totalitarian roots both in the National Socialist Party (the first green party in power), and in the Frankfurt School of cultural Marxism. [Further, the book discusses] the threats to our freedom of speech and democratic institutions posed by the totalitarian mindset of global warming alarmists.” Libertarian community, indeed.

If you found Yeatman’s article interesting and you’d like to explore further, try these books and articles:

The Strange Non-Death of Neoliberalism and The Knowledge Corrupters: Hidden Consequences of the Financial Takeover of Public Life, both by Colin Crouch: Many books on the topic of neoliberalism are so technical and jargon-filled, they are unreadable. That is definitely not the case with either of these two books. Their clear and straightforward prose sheds valuable light on what neoliberal ideology is, how pervasive it has become, and what its consequences are for economies and democracies.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, by Philip Miroswki. This book is a bit too heavy on the jargon, but not so much that the book is inaccessible to the average reader. With a little effort (but not an inordinate amount), this book becomes entirely accessible. And the effort pays off, especially with respect to the book’s discussion of the strong influence if not control that Charles and David Koch have exercised over economics departments at a variety of US universities and its repercussions on the functioning of our democratic institutions.

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right, by Jane Mayer.  This book explains how Charles and David Koch, Richard Mellon Scaife and others have “weaponized philanthropy” by the creation of foundations and think tanks like those mentioned above (that is, The Heritage Foundation, CATO Institute, American Enterprise Institute, American Legislative Exchange Council, Competitive Enterprise Institute, and Citizens for a Sound Economy), and by using them to promote policies of limited government and the privatization of public services (among other policies, such as the denial of  a human factor in climate change and opposition to environmental regulations.). Of particular interest is the book’s discussion of the creation and funding of organizations like the Olin Foundation and the Hoover Institution, and the role those organizations have played in the development of “Law and Economics” programs at US universities, inspired by Hayek’s argument that “to conquer politics, one must first conquer the intellectuals.” (Hadfield is a professor of both law and economics at the University of Southern California. She is the Director of Gould’s Center for Law and Social Science and the former Director of its predecessor, the Center for Law, Economics and Organization, which received significant sponsorship from the Olin Foundation. Hadfield has held four Olin Fellowships and is a past National Fellow of the Hoover Institution. Hadfield credits her “dear friend and coauthor,” Barry Weingast, as helping her to develop the “grounded theory” of Rules for a Flat World. Weingast is a Senior Fellow with the Hoover Institution).

Democracy in Chains: The Deep History of The Radical Right’s Stealth Plan for America, by Nancy MacLean. This book is a timely and highly pertinent complement to Meyer’s. It exposes the historical origins of the policies of limited government and the privatization of public services championed by the Kochs and their myriad of organizations that are described in Meyer’s book. Like Meyer’s, MacLean’s book also references John Olin and the Olin Foundation, describing their role in transforming prestigious (and less so) law schools by funding the methodical training of selected faculty members and judges in principles of “Law and Economics” and by the sponsorship of university “law and economics” programs, such as the one at Gould. Of particular note is this observation by MacLean: “Many [liberals] have tended to miss the strategic use of privatization to enchain democracy.”

Neoliberalism – The Ideology at the Root of All Our Problems,” by George Monbiot. If you don’t have the time or patience for an entire book, then this short article from The Guardian will take you just five minutes (well, maybe ten).

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, Part 3 and Part 4

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

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Blog, Law and economics, Privatization

Part 4 – Law and Economics Programs: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule

The last two posts (here and here) described the pivotal role that The Calculus of Consent, a book by James Buchanan and Gordon Tullock, played in Henry Manne’s development of law and economics programs at US law schools.  (Read more about law and economics programs at US law schools here). The last post explained that Dwight R. Lee described The Calculus of Consent as offering a means of “protecting capitalism from government.”[1] However, Nancy MacLean flipped that description on its head, stating that The Calculus of Consent “might more aptly be depicted as protecting capitalism from democracy.”[2]

The last post also explains how, in her book Democracy in Chains,[3] MacLean argues that Buchanan and his colleagues were motivated by racial prejudice, and, in particular were motivated by opposition to the Supreme Court’s 1954 decision in Brown v Board of Education to oppose as a matter of urgency the “problems of equalitarianism,” including “the tax structure,” “income redistribution” and “the welfare state.”[4]

Finally, the last post described how certain commentators have rejected MacLean’s depiction of Buchanan’s motives. Most notably, Henry Farrell and Steve Teles assert that Buchanan’s role in the development of the conservative intellectual movement was too small to be significant (an assertion with which Henry Manne would certainly disagree[5]) and that, even if Buchanan’s role had been significant, there is no proof that he was motivated by racism.

Let’s say that Farrell and Teles are right. In that case, where can we turn to know who did play a significant role and to better understand what were their motivations?

What if we turn to Teles’s own book: The Rise of the Conservative Legal Movement: The Battle for Control of the Law.[6] His book, published in 2008 (nine years before MacLean’s), tells the story of how conservatives sought to challenge what they perceived to be the “liberal domination” of law and of American legal institutions. They did this, the book explains, not through “traditional electoral politics”[7] but through law schools, professional networks, public interest groups and the judiciary. Teles describes this phenomenon as the “conservative legal movement”[8] and he focuses his narration on three principal developments: the development of conservative public interest law,[9] the establishment and growth of the Federalist Society,[10] and the creation and advancement of law and economics programs at US law schools.[11]

As regards law and economics programs, Teles begins with the University of Chicago,[12] whose law and economics program he describes as the “mother ship,”[13] and the “spiritual center of the movement,”[14] especially for those who see it as a critique of “government activism” and a “method for studying law.”[15]

But for all the importance of Chicago, the bulk of Teles’s analysis is focused on the “myriad projects”[16] of Henry Manne.[17] For Teles, Manne’s role in the development of law and economic programs around the country cannot be underestimated: Manne was the movement’s first “organizational entrepreneur”[18] and he, along with Richard Posner of Chicago, “evangelized the gentiles.”[19] According to Teles, while there were “larger forces” encouraging law and economics, “Manne’s activities are essential in explaining the rapidity and depth of its diffusion in the 1970s and 1980s.”[20]

Teles explains that the “conservative legal movement” was born out of frustration with the Warren Court, and in particular with the decisions of Brown v. Board of Education, Baker v. Carr, and Roe v. Wade.[21] According to Teles, the “liberal legal network”[22] sought to entrench the work of the Warren Court by arguing that Brown demonstrated that a muscular role for the judiciary was “indispensable to the cause of equality and justice.”[23] Further, the “hegemonic”[24] liberal (as opposed to conservative) voices in law schools sought to ennoble the legal profession, “making it a tool for the pursuit of justice rather than a mere lubricator of commerce.”[25] Law schools (again, under the “hegemonic” power of “liberals”) sought to create a “heroic” conception of law and a heroic role for courts, which would “not incidentally” result in an elevated status for law professors.[26] For Teles, these “legal liberals” had an unfair advantage:

An egalitarian understanding of the Constitution, with civil rights at its core, was for them part and parcel of a new legal professionalism… Sanctifying legal liberals’ aspirations for the law was the powerful moral status of “rights” produced by the civil rights struggle and the image of the Warren Court that was simultaneously legally orthodox and substantively humane, whose actions rested on genuine authority as well as decent and civilized instincts. At the same time, the reputation of the institutions that they sought to reform, such as southern state governments, urban machines, and big business, was at a low ebb, and the ability of those institutions to compete in the cultural and ideological marketplace acutely limited. The place of legal liberals at the pinnacle of an increasingly well-resourced and influential legal academy gave their framing of legal politics real legitimating power, helping to preserve the role of legal liberalism in the legal profession even as its electoral grip was slipping away. The power of these ideas, which claimed to be above normal politics, would infuriate, frustrate and ultimately mobilize conservatives in the years to come.[27]

Look at that quote carefully. Its placement of the word “rights” in quotes indicates that there is some idea in that sentence that Teles does not agree with. Is it that “rights” have moral status? Or is it that what the civil rights struggle produced was not “rights?” It is hard to say with what exactly he is disagreeing. But his mockery of the “civil rights struggle” is crystal clear.

Let’s look at the quote again. It says that the power of “these” ideas is what infuriated, frustrated and ultimately mobilized conservatives. To which ideas is Teles referring? Is it ideas of an “egalitarian understanding of the Constitution, with civil rights at its core?” Is it ideas of the “moral status” of “rights?” Is it ideas of the Warren Court that are “substantively humane,” and “whose actions rested on genuine authority as well as decent and civilized instincts?” Is it perhaps all of those ideas? Again, it is hard to say to what exactly Teles is referring. But his affirmation that the conservative legal movement was born out of opposition to civil rights and to the civil rights movement is crystal clear. And, as Teles himself explains, the law and economics programs currently in place at a number of US law schools are a crucial element in that movement.

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, and Part 3

[1] Dwight R. Lee, “The Calculus of Consent and the Constitution of Capitalism,” Cato Journal 7 (1987): 332, http://heinonline.org/HOL/LandingPage?handle=hein.journals/catoj7&div=32&id=&page=.

[2] MacLean, Democracy in Chains, 81.

[3] Nancy MacLean, Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America (London: Scribe, 2017).

[4] Ibid., 46.

[5] Manne described Buchanan as “one of the great towering figures of intellect in the world in the 20th and early 21st century.” “Dr James Buchanan’s Contributions to Social Philosophy and Political Economy,” Mercatus Center, published November 14, 2014, 2:05, https://www.youtube.com/watch?v=NeDf7Xhk9WY&t=3494s.

[6] Steven M. Teles, The Rise of the Conservative Legal Movement: The Battle for Control of the Law (Princeton, New Jersey: Princeton University Press, 2008).

[7] Ibid., back cover.

[8] Ibid., 5.

[9] Ibid., 58-89, 220-64.

[10] Ibid., 135-180.

[11] Ibid., 90-134, 181-219.

[12] Ibid., 91-101.

[13] Ibid., 91.

[14] Ibid.

[15] Ibid.

[16] Ibid., 90.

[17] Ibid., 101-34.

[18] Ibid., 101.

[19] Ibid.

[20] Ibid.

[21] Ibid., 44-46.

[22] Ibid., 22.

[23] Ibid., 45.

[24] Ibid.

[25] Ibid.

[26] Ibid.

[27] Ibid., 45-46.

Blog, Law and economics, Privatization

Part 3 – Law and Economics Programs: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule

The last post introduced The Calculus of Consent and explained its pivotal role for Henry Manne and for the development of Law and Economics programs at US law schools. (Read more about Law and Economics programs here). What was this book that was so critical for Manne, “the true founder of law and economics,” and under what circumstances was it written?

In his 1963 review, Manne admits that the reading of the book “frequently is very difficult, and few compromises have been made…to make the going easier.”[1] In his 1987 article “The Calculus of Consent and the Constitution of Capitalism,”[2] Dwight R. Lee explains that the essential argumentation of the book included the following:

  • There is no “general interest” or “public interest” as such; there is only the self-interest of each individual;[3]
  • The self-interest of each individual is advanced only through market exchanges of private property under a capitalistic order: “No other economic order comes close to capitalism in fostering social harmony and widespread prosperity, that is, in promoting the general interest;”[4]
  • In a market (or capitalistic) economy, the principal if not only purpose of government is to protect private property rights;[5]
  • The power of the government should be limited, preferably through constitutional amendment, in such a manner that it would be impossible for the government to infringe upon the market process through “predatory behavior,” predatory behavior being defined as the violation of private property rights.[6]

In sum, The Calculus of Consent argues that the democratic notion of majority voting should be rejected in favor of requiring unanimous consent. The problem with majority rule, according to Buchanan and Tullock, is that it results in “overinvestment in the public sector.”[7] This violates the interests of the minority and limits private capital accumulation and investment, and thus limits economic growth. Only measures that are adopted with unanimity can be understood to be in the public interest. Or, as Charles K. Rowley puts it in his Introduction to a 2004 reprint, the book identifies “the principle of unanimity as the ultimate normative benchmark,”[8] in rejection of “politics as a mechanism for conflict resolution and of the principle of majority rule as an absolute doctrine of popular sovereignty.”[9]

Lee describes The Calculus of Consent as offering a means of “protecting capitalism from government.”[10] In her book Democracy in Chains,[11] Nancy MacLean states “it might more aptly be depicted as protecting capitalism from democracy.”[12] MacLean further explains:

[Buchanan and Tullock] made it clear that they preferred the constitutional rules of 1900 rather than 1960 – a kind of dog whistle to those who would catch the reference. It was that of the unique period referred to by legal scholars as the era of Lochner and Plessy, two pivotal Supreme Court decisions that ensured extreme economic liberty for corporations and extreme disempowerment for citizens on matters from limits on working hours to civil rights…[Buchanan argued] that representative government had shown that it would destroy capitalism by fleecing the propertied class—unless constitutional reform ensured economic liberty, no matter what most voters wanted.[13]

In their preface to The Calculus of Consent, Buchanan and Tullock explain that the seeds for the book were planted in 1958-59 at the University of Virginia, where Buchanan was head of the Thomas Jefferson Center for Studies in Political Economy and where Tullock had been awarded a research fellowship.[14]

In Democracy in Chains, MacLean draws a direct line from opposition to the Supreme Court’s 1954 decision in Brown v Board of Education to the creation of the Thomas Jefferson Center.[15] She recounts how in 1956, two years after the Brown decision, Buchanan submitted to Colgate Darden, the President of the University of Virginia, a proposal for the creation of an economics program within the university’s economics department that would be guided by  the traditions of “old fashioned libertarians” and “’Western conservatives’ who feared the ‘revolt of the masses.’”[16] Buchanan argued that the creation of such a center was urgent because of the Brown decision, which accentuated the “problems of equalitarianism,” including “the tax structure,” “income redistribution” and “the welfare state.”[17] Buchanan explained to Darden that the center needed to have an innocuous name so as to “not draw attention to its members’ ‘extreme views…no matter how relevant they might be to the real purpose of the program.’[18]

MacLean’s book recounts in detail how the Thomas Jefferson Center, once created at the University of Virginia, not only fostered the collaboration of Buchanan and Tullock on The Calculus of Consent,[19] but also served as the prototype for the Center for Study of Public Choice that Buchanan and Tullock later created at George Mason University—the same university whose law school Henry Manne came to head in 1986, as a result of Buchanan and Tullock’s orchestrations.[20]

Many warmly welcomed and praised MacLean’s book upon its publication. For example, George Monbiot wrote that the book is “the missing chapter: a key to understanding the politics of the last half century.” And Genevieve Valentine wrote the “sixty year campaign to make libertarianism mainstream and eventually take the government itself” is at the heart of the book.

On the other hand, some also heavily criticized it. Two vocal critics have been Henry Farrell and Steve Teles. Writing in the Boston Review, they refute MacLean’s contention that the school of public choice emerged as a response to the Supreme Court’s decision in Brown. They reject what they describe as MacLean’s argument that “Buchanan discovered a political ‘technology’ or ‘operational strategy’ for undermining liberalism, and this technology, as applied by Charles Koch, explains why the US right has been so successful in the last two decades.” In doing so, they acknowledge the potential importance of the story MacLean tells:

If this were all true, it would be a historical (and political) discovery of the greatest importance. It would radically alter our understanding of the history of the American right, placing a semi-peripheral individual and intellectual movement at the heart of the story. It would also mean that an intellectual movement that has usually been seen as motivated by its general opposition to regulation and the welfare state would instead have its origins in the white backlash against court-enforced desegregation.

Yes, Farrell and Teles concede, if MacLean’s story was an accurate one, it would force us to take a much more careful look at the libertarian movement in the United States—it would force us to recognize that its origins lie in large part not in an ideology of smaller government for its own sake, but in an ideology of smaller government for the sake of racism. That is, smaller government for the sake of continuing—entrenching—the economic and social subjugation of people of color generally and of African Americans in particular.

Yes, Farrell and Teles concede, this would be highly remarkable, if only it were true. The problem is, they assert, it is not true. Why is it not true? Because, they argue, “strong claims require strong evidence,” but “MacLean has scanty support:”

The problem with MacLean’s claims about Buchanan’s underlying motivations…is that they are her own interpolation rather than directly grounded in the source material she provides. MacLean does not back up her contention that the foundation of Buchanan’s entire school of public choice was motivated in his white Southern resentment of Yankee intervention with textual evidence. Instead, the reader has to rely on her belief that “individual liberty” had a coded meaning for Buchanan and the president whom he was writing to. This is a decidedly slender reed to support such a massive claim.

In sum, Farrell and Teles say that given MacLean does not have sufficient proof of her claims regarding Buchanan’s racist motivations, nor of his historical importance in the conservative “intellectual movement,” she should stop making such claims.

Let’s say that Farrell and Teles are right. That is, let’s say that Buchanan’s role in the development of the conservative intellectual movement was too small to be significant (an assertion with which Henry Manne would certainly disagree[21]) and that, even if Buchanan’s role had been significant, there is no proof that he was motivated by racism. In that case, where can we turn to know who did play a significant role and to better understand what were their motivations?

The next post will propose a response to that question.

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, and Part 4

[1] Henry Manne, “Book Reviews: The Calculus of Consent: Logical Foundations of Constitutional Democracy by James M. Buchanan and Gordon Tullock,” George Washington Law Review 31 (1963): 1071, 1065-1072.

[2] Dwight R. Lee, “The Calculus of Consent and the Constitution of Capitalism,” Cato Journal 7 (1987): 331-36, http://heinonline.org/HOL/LandingPage?handle=hein.journals/catoj7&div=32&id=&page=.

[3] Ibid., 333.

[4] Ibid.

[5] Ibid., 332.

[6] Ibid.

[7] Buchanan and Tulluck, The Calculus of Consent, 125, 148. See also Charles K. Rowley, Introduction to The Calculus of Consent: Logical Foundations of Constitutional Democracy, The Selected Works of Gordon Tullock, Vol. 2 (Indianapolis: Liberty Fund, 2004), xiv.

[8] Rowley, Introduction to The Calculus of Consent, xv-xvi.

[9] Ibid., xvi.

[10] Lee, “The Calculus of Consent and the Constitution of Capitalism,” 332.

[11] Nancy MacLean, Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America (London: Scribe, 2017).

[12] MacLean, Democracy in Chains, 81.

[13] Ibid.

[14] Buchanan and Tulluck, The Calculus of Consent, 15.

[15] MacLean, Democracy in Chains, 45-60.

[16] Ibid., 45.

[17] Ibid., 46.

[18] Ibid., 48.

[19] Ibid., 76-81.

[20] Ibid., 108-111, 115-126, 169-89.

[21] Manne described Buchanan as “one of the great towering figures of intellect in the world in the 20th and early 21st century.” “Dr James Buchanan’s Contributions to Social Philosophy and Political Economy,” Mercatus Center, published November 14, 2014, 2:05, https://www.youtube.com/watch?v=NeDf7Xhk9WY&t=3494s.

Blog, Law and economics, Privatization

Part 2 – Law and Economics Programs: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule

The last post began the story of law and economics programs in US law schools, described the importance of John Olin and the Olin Foundation in their development and introduced Henry Manne as playing an indispensable role. (Read more about Law and Economics programs here).

As John J. Miller explains in his book A Gift of Freedom: How the John M. Olin Foundation Changed America,[1] during Frank O’Connell’s visit with Manne at the University of Rochester in the early 1970s, Manne gave O’Connell a prospectus for a center dedicated to law and economics. After examining the prospectus, O’Connell became enthusiastic about the “law and economics movement”[2] and recommended to Olin that the Foundation invest in it. At first Olin was skeptical, asking “What the hell is a lawyer doing teaching economics?”[3] Clearly, however, he overcame his skepticism because, as noted above, the Foundation ended up investing upwards of $68 million in law and economics programs at a number of US law schools before the Foundation closed its doors in 2005. Miller explains that “of all the foundation’s activities, this was perhaps its most significant,”[4] and Olin remain convinced of its importance until his death in 1982.[5]

Manne’s role did not end with the delivery of that prospectus to O’Connell. To the contrary, his role was pivotal for decades to come. While the Olin Foundation contributed the funds, Manne contributed the organizational know-how and the enthusiasm. Miller explains that “although his scholarship had great impact, Manne made his most lasting contribution as an organizer.”[6] With Olin’s funding, Manne was able to realize his dream of exposing as many as possible to “law and economics thinking.”[7] He did this through the development of law and economics programs at several law schools and through providing the blueprint for the development of programs at many other law schools, through the creation of fellowships for graduate students studying economics, and through programs to educate judges and law professors.[8] Throughout it all he enjoyed the financial support of the Olin Foundation. Eventually Manne would write to Olin:

Your support was an entrepreneurial act comparable to funding a large and risky new enterprise…Without your financial and moral support…my own aspirations and ambitions would have come to nothing.[9]

Indeed, Miller explains that by the late 1980s, Manne had come to be recognized not only as a leading scholar in the field of law and economics, but also as one of the movement’s “greatest organizers.”[10]

Henry Manne graduated from Vanderbilt University in 1950 with a BA in economics and then went on to study law, first at the University of Chicago, receiving a JD in 1952 and then at Yale, receiving an LLM in 1953. At that time, Aaron Director, an economist, was head of the law school. Manne later described Director as a “steel-minded devotee of free markets”[11] and Manne said that he was “certainly influenced”[12] by him. At Yale, because he was a law and not an economics student, Manne was not allowed to take the economics classes that he wanted to. Later he said that he “hated ”[13] Yale, and he returned to Chicago as soon as he could, obtaining a position as a research associate for an “Antitrust Study” funded by the Ford Foundation. However, just one week after he assumed the role the Air Force called him to active duty, requiring him to report within 24 hours.[14] After leaving the military, Manne taught law at Saint Louis University and the University of Wisconsin.[15]

When Manne was at Yale and forbidden from taking the economics classes he wanted to take, he read independently the works of Ludwig von Mises and Friedrich Hayek.[16] Later, in 1957, he had the opportunity to hear Armen Alchian lecture on what was later published as “Some Economics of Property Rights.” Manne later described this encounter with Alchian as the “seminal intellectual event”[17] of his life: “everything I had done intellectually for 13 years came together, with this one idea of Alchian’s about the real nature of property rights and the Misesian notion of people making choices, with every choice being a tradeoff.”[18]

In sum, Manne’s exposure to Aaron Director at the University of Chicago, Manne’s independent reading of von Mises and Hayek while at Yale, and Manne’s encounter with Alchian primed him for another pivotal moment in his career. This occurred in 1962, the year when he accepted an appointment at George Washington University and the year when James Buchanan and Gordon Tullock’s book The Calculus of Consent[19] was published.

During the year before his death, Manne spoke publicly on at least two occasions of the importance of this book for him. Speaking on one of these occasions, Manne said:

I got the book and I was blown away. I said this really rounds out what became “law and economics.” This is very important. And I said the lawyers certainly ought to know about this. I had to twist arms as only a very junior professor can in the law review at [George Washington University] to get them to allow me to review that book. They didn’t think anyone else would be interested. And that review…is literally the only book review of “Calculus of Consent” to appear in any law review in the United States. That tells you something about the level of intellectual curiosity and scholarship in law circa 1962. When [the review] came out, I sent a copy to both Buchanan and Tullock…Within a matter of days I had a telephone call from [Tullock] inviting me to Charlottesville to give a paper and the rest was more of my personal history of a long and very close association mainly with Gordon but also very much with Jim. That came back some years later. I had started the law and economics center first at Miami and then at Emory. I got a call from [Buchanan] …They had moved the Public Choice Center down to George Mason [University] at that point…and they wanted to know if I would be interested in being dean of the law school.[20]

In sum, for Manne, The Calculus of Consent served as the fuel he was looking for: to spread the word of Alchian on property rights and of von Mises on public choice to lawyers.  Manne used this fuel to start a pilot law and economics program at the University of Rochester, before moving on to the University of Miami and then to Emory, creating law and economics centers at both with funding from the Olin Foundation. Further, Manne’s review of The Calculus of Consent lead to his long friendships with the book’s authors, and, ultimately, to Manne’s 1986 appointment to head the law school at George Mason University, alongside Buchanan’s and Tullock’s Center for Study of Public Choice. Manne remained at George Mason for the rest of his career, all the while with funding from the Olin Foundation (up until the Foundation closed its doors in 2005). At the time of his death in early 2015, Manne was hailed as “the true founder of law and economics.”

The next post will examine The Calculus of Consent, the book that was so pivotal for Manne, in greater detail.

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 3 and Part 4

[1] John J. Miller, A Gift of Freedom: How the John M. Olin Foundation Changed America (San Francisco: Encounter Books, 2006).

[2] Ibid., 62

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid., 65.

[7] Ibid., 65-66.

[8] Ibid., 66-69.

[9] Ibid., 66.

[10] Ibid., 79.

[11] “Securities and Exchange Commission Historical Society – Interview with Henry Manne – Conducted on August 6, 2012 by James Stocker,” 10,  http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/oral-histories/20120806_Manne_Henry_T.pdf.

[12] Ibid.

[13] Ibid., 12.

[14] Ibid., 14-15.

[15] Ibid., 16-17.

[16] Ibid., 13-14.

[17] Ibid., 20.

[18] Ibid., 20-21.

[19] James M. Buchanan and Gordon Tullock, The Calculus of Consent (Indianapolis: Liberty Fund 1999), http://files.libertyfund.org/files/1063/Buchanan_0102-03_EBk_v6.0.pdf.

[20] “JLEP Tenth Anniversary Symposium: Opening Remarks and Panel 1 – Armen Alchian,” Journal of Law, Economics & Policy, November 8, 2013 (video published January 3, 2014), 15:08-17:21, https://www.youtube.com/watch?v=7Rye088-avQ&t=1342s. Speaking on a separate occasion, Manne said:

My connection with Public Choice Theory and therefore with Jim [Buchanan] began in 1962 when I read, to my utter amazement, a book called “The Calculus of Consent.” I was totally enamored of it and I said this is something that the lawyers and the legal scholars have been looking for and have needed for a long time. And so I wrote a review of the book, which I’m guessing – it wasn’t easy in those days – five or six different major journals turned down. I was able to lean on my own local review at George Washington University to publish the review, and I can tell you, it is the only review ever written of that book in a law review…[Buchanan and Tullock] introduced great analytical power of economics to the field of political science, of political activity. I was very active in doing the same thing with law. Thereby, both those fields that had been extremely moribund intellectually came alive. They are very different fields today, each worthy of being in the university, than they were back in the days before Public Choice Theory.

“Dr James Buchanan’s Contributions to Social Philosophy and Political Economy,” Mercatus Center, published November 14, 2014, 3:14-5:44, https://www.youtube.com/watch?v=NeDf7Xhk9WY&t=3494s.