Posts tagged prior restraint

Column on Laws versus Regulations

Laws versus Regulations

Tibor R. Machan

Many moons ago I directed a conference on government regulation, out of which the book edited by me and the late M. Bruce Johnson, Rights and Regulation (Ballinger, 1983) was created. In this book some of those who supported government regulation–and most mainstream contributors did so–maintained that being opposed to government regulations is like being opposed to laws. And since laws are necessary for a just society, the inference was drawn that so are government regulations.

The logic is not impeccable but there is some plausibility to the argument until one considers just how different laws and government regulations really are.

The major difference is that most laws, especially those that comprise the criminal system, are prohibitions, bans on doing certain kind of things like murdering, robbing, assaulting, kidnapping and so forth. These are forbidden because they amount to the violation of people’s rights, intruding upon them and their realm, as when one trespasses on their private property. Government regulations are something else entirely.

When the government regulates our conduct, it sets certain standards for how the conduct must be carried out. Government regulations do just what they say, regulate, manipulate, regiment, nudge and so forth, mostly conduct that is peaceful, non-invasive, and non-aggressive, although sometimes risky. If one is a money manager or investment advisor or auto mechanic or TV repairer, government regulations amount to dictating how one should perform one’s professional responsibilities, how one should do one’s job. As if government had some kind of superior understanding to which others must be made to conform. This is why regulators usually need to poke into people’s lives, send out inspectors, trap people, etc., because there need be no victims when government regulations are not followed.

One of the essays in Rights and Regulation, by J. C. Smith then of the University of British Columbia, titled “The Process of Adjudication and Regulation, A Comparison,” argued that instead of approaching the concerns that supposedly motivate advocates of government regulation by means of meddling preemptively with the conduct of the regulated, the way to handle it is to have a system of tort and similar law that strongly discourages people from any kind of malpractice. This avoids one of the central injustices of government regulation, namely prior restraint.

This legal concept is usually associated with slapping restrictions on those engaged in writing for newspapers before it has been shown that their writing will do violence to innocent people and is considered unjust. Similarly, government regulations impose controls on how people conduct themselves before anyone has been harmed, hurt, imposed upon or the like. Government regulations are, in other words, precautionary and escape the restraint of due process of law.

Because of this, such regulations assume that government regulators are in fact more skilled and have better moral character than the targets of the regulations, an assumption that is entirely unwarranted. Such an assumption belongs in the political era of monarchies in which the members of the royal court were deemed to be anointed, selected by God to care for the realm. Even today it is a relic of this viewpoint, the idea of the police power, that serves as one of the legal justifications of government regulation. The government is viewed as the keeper of the realm–the Nanny, in short, who knows everything better than the members of the citizenry and whose intent is always pure.

Yes, there are arguments against government regulations that are based on how notoriously inept regulators really are, how very often they are in bed with the very people whom they are supposed to regulate, and yet other features of regulations that make them fail throughout the system. But the most important objection, as far as I have been able to discern, is that government regulations assume that government is a superhuman institution and that when things are risky or could go wrong, let’s just call upon the regulators and it’s all going to be fine. Well, that’s total bunk.

There is nothing in principle wrong with a society of law and order provided no preemptive laws are deployed, ones that prejudicially assume that those carrying on with their occupations, jobs, careers and so forth in the market place just are not decent and skilled enough people and may not be left to their own resources to do their work. Yes, sometimes they are careless and too ambitious and produce some havoc. But certainly far less so than do agents of governments–any familiarity with human political history ought to make this very clear indeed. And when they do actually misbehave, the law should come down on them good and hard, but not beforehand.

Column on Justice and Commercial Crime

Justice and Commercial Crime

Tibor R. Machan

No one in his right mind denies that people in commerce can become criminals. That’s because people in any walk of life can–it is a basic human capacity not only to do something wrong but to hurt others with it.

No other known animal is like us in this respect, which is why the courts aren’t flooded with cases of animal crime. Despite what all the champions of animal rights and liberation suppose, people are basically different from non-humans. And the source of that difference is free choice. Without it, all human misconduct, malpractice–including Goldman Sach’s, Enron’s, Bernard Madoff’s, etc.–would be but natural disasters, like earthquakes or tsunamis or volcanoes. No one could be deemed guilty of anything at all since personal responsibility would be what many philosophers and social scientists claim it is, a sheer myth.

OK, then, but there is another implication of our difference from fellow critters in the world. This is that one person’s or group of people’s guilt doesn’t imply the guilt of another’s. This is why it is wrong to form prejudices based on what people have done who are in some respects similar to a wrongdoer. I am a college professor and if I do something wrong as such, it doesn’t show anything about my colleagues. All we may infer from my misconduct is that, well, such misconduct is possible, that others like me might also act badly. But from my acting badly no one is justified in inferring that other professors are also doing so.

And this is a basic principle of justice within liberalism, be it classical or modern. Both type of liberals–be they like Milton Friedman or like John Maynard Keynes–insist that one needs to be convicted as an individual so as to be considered guilty of having done something wrong. And liberals also insist, in the same spirit, that the “sins of the fathers” do not extend to their offspring–your parents may have been racists but it doesn’t follow that you are, for example.

Nonetheless modern liberals, unlike classical ones and libertarians, seem to overlook this principle when it comes to people in commerce. So if one Wall Street firm has been found guilty of fraud–which is to say the managers of such a firm have been found guilty of a certain kind of crime–many modern liberals will unhesitatingly rush to condemn other such firms. This is shown clearly by how readily they move from an instance of commercial crime to condemning all those doing the kind of commerce done by the guilty and how they insist that all these others must now be severely regulated even though they have not been found guilty of anything.

This is wrong, and modern liberals should be first in line condemning it, yet they are often first in line showing such prejudice toward all those doing the sort of business done by the ones found guilty of malpractice, like Goldman Sachs, for example.

And this is not the only instance of modern liberal prejudice toward commercial agents. The very institution of government regulation of people in business is flawed–it involves what in other contexts is considered impermissible prior restraint. Just because a business might do something untoward, it is deemed a valid target of prior punishment or imposition of burdens.

In the criminal law this is nearly uniformly resisted and condemned. Just because one might do harm to another–is rumored to be planning such harmful conduct–it doesn’t mean one may be imposed upon via some kind of criminal sanctions. Due process requires that the suspect be shown to be guilty, not merely feared to be so.

But vis-a-vis commercial agents the modern liberal tends to carry on very differently. And today this is evident all over, from the highest political office to main street. Since some Wall Street folks have done what is criminal, so now all of them must be treated as if they were criminal as well and restrained, tamed, and regulated.

The injustice of this ought to be, but sadly is not, clear to anyone.

Machan Archives: Adoration of Regulation

Adoration of Government Regulation

Tibor R. Machan

On a recent Monday I went to hear a talk by Professor James K. Galbraith, author of the free market-bashing book, Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. The talk repeated what so many modern liberals have been saying about the current financial fiasco, namely, that it’s all due to the free market, to the late Milton Friedman’s influence, and that deregulation is mostly to blame.

This is not especially novel, given that nearly everything wrong with America is blamed by such modern liberals on, well, the absence of sufficient modern liberalism in the country’s governance. Why not? Champions of the free market make similar claims when trouble arises—modern liberalism is to blame. And I am often among the latter group. I admit—I am much more favorably disposed toward the principles of a fully free society than toward those of a mixed economy (or even fiercer government involvement in the economy).

Let me spend a line or two explaining why I find the hosannas sung to government regulation by the likes of Professor Galbraith so bizarre. First, government regulators are people, no different from those whom they set out to regulate. Second, governments make use of physical force or its threat in order to achieve their goals, while the free market relies on voluntary interaction by market agents. Third, government regulators lack the restraints that market agents face when they carry out their plans in the market place—namely, the need to earn their resources from willing lenders or buyers. Governments can raise their resources through taxation which is collected whether those paying it chose to pay or not. Fourth, government regulators tend to be far removed from the firms and people they regulate, relying on vague, general information instead of local knowledge that market agents use as they make their decisions.

Other differences exists that, in my view, clearly favor market processes as against government regulation—public choice theory (for which Professor James Buchanan received the Nobel Prize and which was left totally out of consideration by Professor Galbraith in his talk), explains them very well. But let me focus on one particular point made by Professor Galbraith in his support of extensive government regulation. He noted that people in the People’s Republic of China prefer buying goods from America because American goods are produced with the benefit of government regulation. So they can be trusted, while those in regions around the globe that lack government regulation are untrustworthy.

This is what is called in logic a non-sequitor because the conclusion does not follow from the premises. Chinese may buy American goods but that could be for innumerable reasons other than that government regulates the production processes. Generally American production has a very favorable reputation around the globe. Yes, American goods tend to cost more but that’s because American labor and management is more expensive than labor and management elsewhere. However, one tends to get what one pays for, namely, pretty good products.

American technology is far more advanced than technology elsewhere, which also contributes to the higher quality of American goods. Science and technology in America is top of the line—just count the number of American scientists who have won the Nobel Prize and consider how many foreigners come to study at American technical universities such as MIT and Cal Tech.

Furthermore, even if some of the confidence in American products stems from the fact that there is government regulation in America, it doesn’t follow that government regulation is indispensable. There are plenty of scholars who have found egregious flaws in the regulatory process, such as the slowing down of drugs coming on the market because of irrational rules imposed by the Food and Drug Administration, the capture of regulator agencies by the very firms they are supposed to regulate impartially, etc.

In addition, and very importantly, Professor J. C. Smith’s “The Processes of Adjudication and Regulation, A Comparison,” published in a book I helped edit, Rights and Regulation, Ethical, Political, and Economic Issues (Pacific Institute for Public Policy Research, 1983) lays out the case in favor of changing from government regulation to legal adjudication where now the former is deemed to be necessary.

Finally, there is a fundamental injustice involved in most government regulation. This is prior restraint. Burdens are imposed on citizens who are being subjected to government regulation without it having been demonstrated (in court) that these burdens are deserved. This amounts to treating citizens as if they had been convicted of a crime whereas, in fact, all that can be held against them is that they might possibly do something wrong, injurious, harmful to someone. If the criminal law operated this way we would all be in jail.

The adoration of government regulation is misplaced and belongs with the ancient practice of deference to the monarch who was deemed to be superior in wisdom and virtue to ordinary “subjects.” This habit should be tossed. Free men and women deserve better.