One equation, two variables

This post is going to be hard for me to write because when I sent the linked article to colleagues, including an economics professor and a finance whiz, I said some unflattering things about the ideas espoused in the article and about the author who claims them as his own. The author complains that markets don’t work because he wants to hear country music but lives in Miami, or likes soul food but lives in Maine — whatever, the concept is the same. Unfortunately, it takes all of about ten seconds to identify where the author, who is apparently a finance professor, misses the boat. Take your pick: route A, common sense, which gives you the answer; or route B, the thought experiment, which also gives you the answer but is more interesting in its implications.

Route A: the author isn’t exactly saying that he wants to hear country music on the radio: he’s saying that he wants to hear country music on the radio and not pay any more for it. Once you extract the hidden agenda, the argument that the free market fails to provide you whatever you want is revealed as plainly incomplete. The free market will provide you whatever you want as long as you’re willing to pay the price. How else might we discover that price is the secret issue here? Simple — the word “price” does not even appear in the article. It’s hard to talk about supply and demand, and the intersection of those two curves, without using the word price.

Route B: what you could do to investigate the article’s premise is to put yourself in the other guy’s shoes. If we imagine that we are a radio station, we know that we have chosen to serve a certain market because its characteristics will allow us, we believe, to make a profit after selling ads, paying for licensing fees, and running the station. If we are asked to serve a market of one, we quickly calculate that our existing business model doesn’t work, in which case we’d have to raise our price somehow, either directly or indirectly. Broadcast radio is more or less free; the indirect price is our time spent listening to ads. Perhaps a market of one would work if there were 23 hours of ads and 1 hour of music. Would the author listen? Would you?

This last item, the thought experiment in Route B, is what (hopefully) turns this post from a rant about a poorly written article into a broader comment on society. It has often seemed to me, over the past 15 or 20 years, that our political divisions were not best categorized as democrat or republican, liberal or conservative. Instead, it seems to me that the two types of people are those people that want laws, policies, and programs they agree with, regardless of how those elements are chosen, and those people that want a reasonable fair process for choosing laws, policies, and programs, which is generally more important to them than the actual results.

In the first group are those that believe new Supreme Court justices should be elevated for the purpose of “changing the law,” whether that law is Roe v. Wade or the Patriot Act. The method of bringing about change, even though it would undermine the checks and balances embodied in our Constitution, is irrelevant to people consumed by their hatred of other people’s rights or their disgust for President Bush.

In the second group are those who understand, for example, that the legal principle of precedent (including the restatement known as stare decisis) is important for its own sake, in much the same way as we balance the Constitutional protections of the Fifth Amendment (no forced self-incrimination) against the possible release of factually guilty persons. Or they recognize that with a myriad number of voices represented in Congress, affecting both the drafting and passage of a statute as well as the confirmation of Justices, the process of balancing the competing interests is probably thorough enough to get within the range where reasonable people might disagree. (What that means is finding the zone, outside of which most people would say a law had gone too far or had not gone far enough.) In the Patriot Act example, I believe most people would agree that warrantless searches of all domestic communications of citizens would go too far. Similarly, I believe most people would agree that communications of foreigners or terrorists might not be entitled to the most expansive protections of the 4th Amendment.

Where else might we try the Golden Rule approach to rulemaking? Thinking about the other guy when making rules helps expose fallacies and prejudices in our own thinking — which may be exactly why it doesn’t happen often enough. This is what we would like politicians to do before they choose to draft a new law or vote on one. Why, besides laziness, short-sightedness, pride, selfishness and generally vague sociopathic tendencies, would someone, particularly in government, fail to consider the other side of any story? One thought is that there are substantial contrasts between the system of the common law, derived from England, with the civil law systems found elsewhere in Europe. In the common law system, even though judges have obligations to avoid mistakes and seek justice, the burden of exposing the truth falls on the adversary system — we have two (or more) sides with attorneys advocating their own case and pointing out flaws in the opposing case. Since, too, cases are required to be decided and cannot be infinitely deferred like legislation, a judge has to decide at the end of the case. The common law system assumes that as a result of the back and forth by interested parties, “the truth will out.” Another aspect of a common law system is that cases, decided on their specific facts, inform people of what the law actually is. You might say that it’s a Miltonian perspective: we will not respect a “fugitive and cloistered” judgment.

The civil law system is often proposed by people who are unhappy with some common law outcome as the solution to all our problems (the other bugaboo is the (apparent, because I’ve never researched it) Scottish verdict of “not proven” as a purgatorial alternative to “not guilty” when we think the accused probably committed the crime). In the civil law system, judges have a more inquisitorial role, with more independent power to shape a litigation and direct proceedings. Also, the law as written is the law, and cases are much less valued as guideposts for what is likely to happen in a different case with similar facts.

This dichotomy helps explain why legislative and administrative (in the rule-making sense) activities can seem so misguided sometimes. I think that in the background of every legislator (and Congress is plenty filled with lawyers: at least 218 who have a JD or LLB, according to CongressMerge) is that fundamental familiarity with the adversarial system embodied in our judicial proceedings, and that expectation carries over to the business of making laws. What’s missing is an analogue for the justiciability concepts such as mootness and standing that help judges determine when the adversary system isn’t likely to be up to the challenge of actually getting the truth out. For legislators, there’s certainly no formal process to raise similar issues, nor are they likely ever discussed explicitly — there may only be one voice in the room whereas litigation necessarily embodies two parties at least at the table, even if there are other problems. (Mootness or standing are typically raised by motion of one party.)

Would an explicit finding or process make sense? Maybe, but if a legislator can’t be counted on to think about an issue in a larger context, I think the sensible answer is to remove the legislator (and now we’re back to my first point: some people won’t care about bad lawmaking if they think the laws are themselves good; they won’t care until it’s too late and the winds have shifted).