How Economic Theory Gets Hijacked By Special Interests

               Keith has suggested that snarky comments about Paul Krugman in my February 28 article somehow reflected a "Monetarist" perspective on our current economic situation. While I can see how Keith arrived at the observation, let me correct the record and point out that such is really not my inclination.

               Monetarism is today a largely antiquated economic theory that, while it has older antecedents too, really laid its root in the 1960's with the theoretical work and research to which Keith alludes that was undertaken mainly by Professor Milton Friedman at the University of Chicago. Monetarism started coming into its own during the following decade when the reigning Keynesian theorists of the day fumbled badly in their efforts to prescribe credible remedies for or even explain the corrosive "stagflation" that characterized that period. The monetarists blamed it all on misguided government policy and,  because they seemed like bright new thinkers, their ideas found a growing audience. Monetarists were prominent among the economic advisors to both the Reagan and Thatcher governments, and doing what economists always do, they started claiming credit for the economic turnaround that gathered steam under the auspices of their patrons during the 1980's. Soon they had largely displaced the Keynesians as the reigning economic ideologues of the era, despite the tenuous connection between their theories and the boom that followed the inflationary depression of the Carter and very early Reagan years.

               The Monetarists were not the only right-leaning economists in on the act, of course. The so-called "supply-side" theorists focused their attention on the need to nurture businesses and investors, whose energetic contribution was deemed essential to economic growth.  The "efficient market" theorists also rose in stature, arguing that every economic factor and resource has a "true" price that must be determined by a free market. They believed that only when these true prices prevail can an economy rid itself of bottlenecks and mobilize its recourses in a manner that achieves efficiency and prosperity.

               However, the problem any economic theorist creates for himself when he ties his star to an economic boom is that the star is still tied there when the boom crashes. Milton Friedman died in 2006 and thus did not live to see the 2008-09 financial crisis. However, he must have had premonitions, because shortly before his death he engaged in troubled speculation about how one of the lynchpins to his theory - the supposedly constant nature of the velocity of money - the 'V' in his famous 'VM=PT' formulation - appeared to have broken down. The U.S. central bank was creating new base money at a much faster clip than the economy was growing, yet inflation was not picking up the way it should have, implying that much of the new money was somehow getting stuck. And if this central tenet of monetarist thinking was failing to hold, then Professor Friedman's entire body of work seemed suddenly open to question too.

               And indeed when the financial crisis hit, Monetarism fell promptly out of vogue again. With it went the ideas of the "supply-side" and "efficient market" theorists, which now appeared not wrong so much as irrelevant to the current emergency. When Obama and the Democrats swept into power in 2008, they had few new economic ideas of their own and resorted to what was in effect a revanchist campaign to re-instate traditional Keynesian dogma as their guide to economic policy. Already tired when sidelined two decades earlier, this hoary set of ideas had gained nothing but moss during the intervening years.

               And thus today, our economic gods, right and left,  are all dead at time when our economy is limping along and capitalist democracy is again in crisis. The grinding warfare currently underway among our political factions is, in my judgment, more a reflection of this fundamental economic malaise than it is a cause of anything.

               I'm not an economist, but I've been interested in economics for most of my adult life and I enjoy discussing economic theory. It's my opinion that as long as economists confine themselves to the academic arena, they can,  like all good scholars,  provide us with useful insights into the world around us. However, watch out when an economist suddenly emerges from obscurity and acquires celebrity status! This is an unmistakable sign that special interests have taken note of his ideas and are promoting his career to provide themselves with intellectual cover for self-interested behavior. The economist is thereafter ruined.

               Keith himself dismisses monetarism, brainchild of the famous Dr. Friedman,  as a tool of the "comfortable" classes,  who have money and thus fear inflation more than anything else. While I believe this particular argument can be more aptly applied to gold-standard advocates than to the monetarists, I take Keith's point and applaud his effort to look behind the facade of economic theory, at least in this limited case.

               I also think it's fair to criticize the supply-side economists in a similar vein. In my judgment, they in the beginning had valuable insights into how incentivizing producers can power economic growth. However, when during the Reagan years Professor Art Laffer soared from his humble perch at Peperdine University to become a household name with his "Laffer Curve" idea, everyone should have suspected that something was fishy. The famous graph was supposedly first  sketched out on a cocktail napkin, and Laffer's followers later abandoned even much pretense of academic rigor as they became dogmatic cheerleaders for any tax cut proposal making the rounds in Washington. They helped enrich our growing class of hedge-fund billionaires,  while working hand-in-glove with big-spending Democrats to create a permanent budget deficit, which is currently ready to blow out again as soon as our sputtering economy stalls.

               And as for the "efficient market" theorists, their work was embraced by the early architects of the structured finance market. Those practitioners who bothered to think about a higher purpose for their labor liked to describe themselves as serving market efficiency by buying up underpriced financial assets, then packaging and re-selling them at "true value". The impact that these folks ultimately had on our economy needs no retelling at this point. The poster boys for efficient-market ideology were, of course, Robert Merton and Myron Scholes, who rocketed to world-wide fame in 1997 by winning a Nobel Prize for their speculations. The prize money must have burned holes in their pockets, however, because in the following year they teamed up with John Meriwether, recently fired from Solomon Brothers, and put their money and ideas to work guiding a live hedge fund.  Long-Term Capital Management promptly blew sky-high and gave the financial markets a small dress-rehearsal for the catastrophe that was to strike a decade later. Theoretical economics had met the real world.

               However,  these exploitations of economic theory are small potatoes compared to the granddaddy of them all, which is the corruption of the theories of John Maynard Keynes that has occurred over the decades.  Not to keep picking on Paul Krugman, but he is yet another celebrity economist and, for that matter, another Nobel Laureate, who has risen to fame by providing intellectual cover for real-world players.  Keynesian  economics has been with us now for most of a century, although few people today have the patience to wade through the Master's original work. What people do see are Dr. Krugman's well-written and easy-to-digest diatribes every week in the New York Times. Why does an economist even have a column in the New York Times? The answer is that he serves vested interests who have supported his career and want to ensure he gets the audience he needs. These interests are the burgeoning constituency of highly-paid bureaucrats, crony capitalists, consultants, and wealthy lawyers whose careers, fortunes, livelihoods and prestige are tied to government.

               Most importantly, modern neo-Keynesianism serves the interest of politicians who garner political power to themselves by dispensing government money. Even power-loving big-government Republicans have come to understand the compelling beauty, as when Richard Nixon, of all people, once happily declared, "We're all Keynesians now." The ideology promotes the need for endless growth in spending to compensate for the chronic insufficiency they espy in the elusive phantom they like to call "aggregate demand". Dr. Krugman never wants to bore his audience, and he usually softens the hard economics by emphasizing instead the social good the money does. He also constantly downplays the risk of any problems resulting from the massive increases in taxes and debt that will be necessary in the future to pay for all the expansion his patrons have in mind. It's reassuring to his readers to hear all this from a Nobel Laureate, who surely must know what he's talking about, and it's easy for them to imagine Dr. Krugman's critics as being both hard-hearted and stupid.

               Some of my best friends are economists, and I certainly to not mean to suggest in all this that there is something inherently dishonest about their chosen profession. I do think, however,  that they need to be aware of their limitations. And they should cast a gimlet eye on fame if it ever comes their way, because it can be a poison apple.

Contemporary Legal System Challenges to the Rule of Law

	Home > Publications > The Judges' Journal > 2015 > Court Innovation > Contemporary Legal System Challenges to the Rule of Law
	Contemporary Legal System Challenges to the Rule of Law The Judges Journal 2015 Vol. 54 No. 1 Keith Roberts Lawyers, judges, politicians, and economists almost universally praise the rule of law and consider it a foundation of liberty and prosperity. But what do we mean by “the rule of law”? This article began as an attempt to answer that question, and the first section offers an answer. As my research proceeded, however, I discovered that certain contemporary developments seriously challenge the rule of law’s primacy in the world, and in the U.S. legal system itself. The balance of this article discusses three of these developments: the effort to expand the rule of law’s definition to include respect for human rights; the effort to ease trial caseloads by favoring ADR methods like mediation and arbitration; and, finally, the effort to restrict political or legal access by various parties claiming injury. The Rule of Law What Is the Rule of Law? The rule of law is a characteristic of political communities within which, in the words of Justice Sandra Day O’Connor, “all persons shall be secure from the arbitrary exercise of the powers of government.”1 The legal system and the judiciary are traditionally central to the concept’s implementation, which may be why it is beloved by judges, lawyers, and the American Bar Association. Indeed, one of six strategic goals for the ABA Judicial Division is to “[a]dvance the rule of law throughout the world.” The rule of law in more expansive form has also become talismanic outside the legal world. As the Carnegie Endowment for Peace’s Rachel Kleinfeld Belton has noted,

"Like a product sold on late-night television, the rule of law is touted as able to accomplish everything from improving human rights to enabling economic growth to helping to win the war on terror. The rule of law is deemed an essential component of democracy and free markets. The North Atlantic Treaty Organization (NATO) demands that all new members demonstrate their commitment to it, and the European Union (EU) requires its existence before a country can even begin negotiating for accession. Building the rule of law is a strategic objective of the U.S. Agency for International Development (USAID), a growth field for the World Bank, and a rhetorical trope for politicians worldwide."2 The rule of law has thus gained worldwide acceptance as requisite for political legitimacy. But what is the rule of law? Two recent books tell us.3 For legal philosopher and Washington University law professor Brian Tamanaha, it means “the sovereign, and the state and its officials, are limited by the law.”4 For the late Lord Chief Justice of England and Wales Tom Bingham, more specifically, it means “that all persons and authorities within the state, whether public or private, should be bound by and entitled to the benefit of laws publicly made, taking effect (generally) in the future and publicly administered in the courts.”5 History Tamanaha and Bingham approach the history and use of the rule of law from somewhat different perspectives. Tamanaha leans more heavily on political theory and public affairs, describing contributions from Aristotle, the German lex salica, Thomas Aquinas, John Locke, Baron de Montesquieu, and James Madison. Bingham emphasizes Anglo-American legal history and international law, taking the reader from the days of King Alfred through the Magna Carta, Sir Edward Coke, and the 1701 Act of Settlement. But both, like many others, describe it as emerging from the realization that sovereign arbitrariness was unacceptable. The political historian Francis Fukuyama traces this realization to the Investiture Controversy of the late 11th century. Pope Gregory VII and the Holy Roman Emperor Henry IV each claimed the right to appoint (invest) the Church’s prelates. Soon after his election in 1073, Pope Gregory VII excommunicated and dethroned the emperor until, begging reinstatement by standing barefoot in the snow outside the pope’s residence at Canossa, Henry IV conceded the exclusive right of investiture to the Church. Once in control of its own bureaucracy, the Church developed a natural law–based jurisprudence that subjected sovereigns to moral constraints on arbitrariness throughout Catholic Europe.6 One result was the Magna Carta in 1215.

Eventually, the Reformation destroyed the Church’s universality, and the Enlightenment’s appreciation of science and rational inquiry undercut its moral authority. Divine-right monarchies gave way to what Tamanaha calls the “liberal state,” which “[r]ather than a community integrated by shared values, amounts to an aggregation of individuals held together by a mutual non-interference pact.”7 That pact, originally designed, in Montesquieu’s words, “to protect the ruled against the aggression of those who rule,”8 became the rule of law conceived as a legalization of sovereign exercises of power through procedural restraints on arbitrariness.9 A.V. Dicey and F.A. Hayek, each writing approximately a century ago, most notably delineated this procedural approach to the rule of law. Each derived its requirements from common law because, in their view, its antiquity and pragmatic case-by-case nature legitimately expressed community moral and political ideals. The rule of law, in their view, required sovereigns to act through the medium of law as validated by independent judges.10 This would not simply replace the arbitrariness of sovereigns with the arbitrary rule of judges, as some critics feared. Judges would be constrained by the ethos of their profession, their legal training, and the powerful influence of an organized bar.11 This procedural definition is the prevailing current understanding of the rule of law, along with widespread agreement that, as the late law professor Lon Fuller specified, laws themselves must be “general, public, prospective, clear, consistent, followable, stable, and enforced as promulgated.”12 Should the Procedural Definition of the Rule of Law Be Expanded to Include Human Rights? For two main reasons, many contemporary thinkers fault the procedural concept of the rule of law. First, it allows nasty sovereigns to claim adherence to the rule of law despite the immoral nature of their legislation. In Judith Shklar’s acidic words, “procedurally ‘correct’ repression is perfectly compatible with [the rule of law].”13 Second, as noted by legal realists and those who question literal approaches to the Constitution like those of Justices Antonin Scalia and Clarence Thomas, a legal system of formal rules that judges mechanically apply like umpires is a deceptive myth, simply masking prejudices, policy preferences, and assumptions.14 These powerful critiques have led Tamanaha, Bingham, and the British and U.S. organizations devoted to the international promotion of the rule of law to conclude that the “law” in the rule of law must also meet certain moral requirements. In one broad formulation of this principle, “even a structurally proper enactment does not and should not count as a ‘law’ if it is extremely unjust, or if the avowed purpose of the law is an inequitable one.”15 As a basic moral requirement, Tamanaha cites a provision in the German constitution specifying “respect for and the protection of the dignity of man as the guiding principle of all state action.”16 Noting that such measures resurrect natural law without the religious underpinnings,17 he would define the rule of law as based on “what limits on [government] are desirable and match prevailing social- cultural views and arrangements.”18

Bingham’s moral touchstone is the UN’s Universal Declaration of Human Rights because, as he says, “the rule of law now demands protection of fundamental human rights,” and the UN Declaration “has provided the common standard for human rights upon which formal treaty commitments have subsequently been founded. . . .”19 The ABA Rule of Law Initiative seeks to protect women’s rights and opposes human trafficking.20 Its British counterpart, the Bingham Centre for the Rule of Law of the British Institute for Comparative and International Law, seeks to demonstrate “how the rule of law upholds respect for human dignity.”21 And the World Justice Institute includes within its “Rule of Law Index” measures of civil and criminal justice, fundamental rights, and the absence of corruption.22 As law professors Sanford Levinson and Jack Balkin conclude, "the values behind the Rule of Law are as important as ever to restrain arbitrary power and violations of human dignity. . . . [But] mere adherence to legal formalities and the discourse of professional legal culture may not prevent arbitrariness, seizures of power, violations of human dignity, brutality, or even torture. Legal formality, or, we might say, adherence to legal “grammar,” is not the same thing as respect for the rule of law. . . ."23 Despite these important arguments, I question the wisdom of incorporating moral requirements into the rule of law. Its formal version has enjoyed almost universal acceptance. Even repressive regimes claim to honor it, and in a commercial age its importance to business and commerce is well known.24 As Tamanaha says, it is as close to an absolute good thing as exists in political thought.25 Whether followed or not, the rule of law therefore remains an established ideal for societies to pursue. But can we say that even the most cherished ideals of Western morality (such as the equal rights of all citizens; the dignity of all humans; or freedoms of religion, expression, and political participation) receive similar universal acceptance? As Tamanaha concedes, great complications arise when “substantial parts of the positive law, or limits on the law (like bills of rights), are transplanted from a Western society onto a non-Western culture. . . .”26 Justice Bingham asserts that the UN Declaration of Human Rights has “almost worldwide acceptance,” but many societies of different religious or customary outlook clearly do not share all its ideals, which derive largely from Judeo-Christian precepts that prevail in Western Europe and its former colonies.

In fact, the vigorous advocacy for human rights that occurs around the world is necessary precisely because so many disregard them. At best, to incorporate Western morality into the rule of law just adds another rhetorical exhortation to the array of arguments in favor of human rights. The outcome seems more likely to destroy the universal idealization of the rule of law than to effectively promote Judeo-Christian morality. Another objection is that “the outer edges of some fundamental human rights are not clear-cut.”27 For example, Tamanaha and Bingham, as well as legal philosophers like Ronald Dworkin and Richard Fallon, insist that the rule of law “should always be subject to evaluation from the standpoint of justice and the good of the community.”28 To objections that this sets an extremely vague standard, they answer that any given community usually has “a large measure of agreement” about what the good of the community requires.29 But a standard like “the good of the community” creates dilemmas like that of Justice Potter Stewart, who famously concluded that although he couldn’t define pornography, “I know it when I see it.”30 Such a variable and subjective standard undercuts the rule-of-law virtues of reasonable certainty and predictability that are so cherished in the business community and by due process advocates. In sum, a procedural rule of law can apply to bad legal systems as well as good ones. It does not prevent sovereigns from making and enforcing bad laws, nor fully delineate what makes legal systems admirable and desirable. Even so, to prevent the quest for perfection from destroying what is good, perhaps we should confine our notion of the rule of law to its universally accepted procedural sense, and leave the moral content of laws for other battles. Contemporary Challenges The great respect accorded to the rule of law makes it a valuable standard for measuring the quality of political communities and a worthy goal for them to pursue. Conversely, for countries considered to be exemplars of the rule of law, threats to the rule of law are reasons for alarm, even if statistical measures of the magnitude of threat are unavailable. Three current developments in the United States are examples. Does Alternative Dispute Resolution Undercut the Rule of Law? The manifest virtues of alternative dispute resolution (ADR) need no recitation here. Since receiving endorsements from the ABA (1955) and the U.S. Supreme Court (1984),31 ADR has enjoyed growing popularity. But ADR can also lead to less obvious and less happy consequences for parties, the judicial system, and the law itself. Parties

Bargaining power is always a factor in resolving disputes, but courts exist to substitute justice and reason for the exercise of power. Many court procedures aim to reduce disparities of power at trial, and reason’s role in legal decisions is to find a just solution, not simply to yield to bargaining power. In some arbitration forums and in court- ordered mediation,32 however, legal procedures are minimized. Often such mediation occurs before the completion of discovery because a prime motive for the parties to participate is to avoid discovery’s costs. But this leaves them more certain about the potential costs of trial and appeal, which are reasonably predictable on the basis of experience, than about the ultimate legal outcome. That’s because without discovery, the legal posture of the case is harder to evaluate. The fairly high certainty of litigation cost weighs more heavily than the low certainty of a favorable outcome, driving the financially weaker party to accept an unfavorable settlement. In my experience, this calculus in court-ordered mediation often favors the rule of money over the rule of law. The Judicial System ADR can not only fail to deliver the rule of law in itself, but it may damage the judicial system’s ability as well. Since the 1970s, business litigation has significantly moved away from courts of general jurisdiction and into private ADR. Consequently, civil case filings have not kept pace with population growth. The parties—the main constituency for the courts—have shifted from businesses toward individuals.33 As the authors of a 2000 National Center for State Courts (NCSC) study predicted, “In effect, private ADR groups [will have] skimmed-off the lucrative civil litigation. . . .”34 In fact, in 2009 even Delaware, the capital of business litigation, passed a law allowing judges to engage in private arbitration because the legislature feared “losing its ‘pre-eminence’ in corporate litigation to a growing market in private dispute resolution.”35 Not only has the business proportion of civil filings declined, but the share of filed cases actually resolved in court is now dramatically lower (1–2 percent of filed cases compared to 30 percent in 1935)36 —again, due in part to the growing popularity of ADR.37 Consequently, due partly to the rise of ADR, courts now play a substantially smaller role in legal outcomes of concern to business. In response, businesses presumably care less about the health of the courts38 and provide their budgets with less political support. As will be more fully described later, this consequence of ADR has a significantly adverse impact on the rule of law. The Law Itself The shift from trials to ADR also reduces the number of precedents created at trial or on appeal. Private or court-based ADR rarely leaves a public record of the facts or the legal thought involved. The substance of arbitral decisions hardly ever receives airing on appeal

and consequently never appears in the body of law that guides practitioners, judges, and arbitrators. In short, the rule of law becomes a rule of less law. Court Administration As political support for courts of general jurisdiction wanes because of business defection to ADR and federal courts, the faltering structure threatens the rule of law itself. The rule of law operates by judges and juries resolving disputes. These disputes get shaped into the form of cases, filed in court, moved to judgment, and resolved through an elaborate sorting and winnowing process. Each step involves trained people carrying out coordinated functions—lawyers, judges, court clerks, security officers, librarians, sheriffs, social workers, mediators, legal aid societies, probation and parole officers, and so forth, plus various caregiving, educational, and specialized entities. In other words, it takes an elaborate structure of court administration and ancillary institutions to animate the rule of law. Inadequate funding and a failure to provide courts with the tools and support they need to do their work efficiently and effectively have recently brought about considerable faltering, and as Chief Justice John Roberts states in his 2013 Year-End Report, a continuation of the same will cause even greater damage. A freeze on federal court spending at current 2013 levels, he predicts, would lead to “the loss of an estimated additional 1,000 court staff . . . [and] greater delays in resolving civil and criminal cases. In the civil and bankruptcy venues, further consequences would include commercial uncertainty, lost opportunities, and unvindicated rights. In the criminal venues, these consequences pose a genuine threat to public safety.” As he concludes, “It takes no imagination to see that failing to meet the Judiciary’s essential requirements undermines the public’s confidence in all three branches of government.”39 There are undoubtedly several reasons for this dangerously declining support for the courts, but the loss of business interest mentioned earlier is certainly one of them. Do Limitations on Recourse Diminish the Rule of Law? The procedural concept of the rule of law that has achieved widespread support heavily emphasizes the role of laws, courts, and judges. Implicit in this understanding is the idea that, as the World Justice Project puts it, the rule of law requires that “[t]he process by which the laws are enacted, administered and enforced is accessible, fair and efficient.”40 Almost by definition, a law that cannot be contested is arbitrary. Access to the law-making process and to the courts is therefore integral to the rule of law. In that light, and regardless of their reasoning or wisdom, certain recent U.S. Supreme Court decisions foreclosing access appear to weaken the rule of law in the United States. I will cite a few examples; readers can certainly

think of others. In Shelby County v. Holder, the Supreme Court terminated a 1965 Voting Rights Act requirement that certain political jurisdictions with a history of voting rights discrimination obtain prior U.S. Justice Department approval for laws that would affect voting.41 In the Court’s stated view, and despite substantial recent congressional documentation to the contrary, discrimination has faded away, terminating the constitutional justification for treating those political jurisdictions differently from any other. The announcement of this decision unleashed legislation in many of those same jurisdictions that imposed new hurdles to voting that may in reality deprive many minority citizens of recourse to the law-making process. Citizens United v. Federal Election Commission overturned federal restrictions on political campaign contributions by legally created organizations like labor unions and corporations.42 It accorded to them a right of free speech that such restrictions violated. A later decision nullified state campaign contribution limits for the same reason.43 As with Shelby County, these decisions reduce citizen access to the legislative process, in this case by awarding a vast advantage of political power to legal entities.44 The above two cases also challenge the rule of law in another way. They weigh especially heavily on the judicial independence that is central to the rule of law. Because many U.S. judges are either elected or subject to recall votes, those who seek to influence judicial decisions have increasingly financed judicial elections. Spending levels have jumped remarkably in the wake of Citizens United, and despite the legal profession’s strong ethos in favor of disinterested judging and fairness, empirical studies show that such spending has the desired effect.45 It is hard to imagine a more serious attack on the rule of law than corruption of judges. In AT&T Mobility v. Concepcion, the Supreme Court ruled that the Federal Arbitration Act permits arbitration clauses that preempt lawsuits in consumer contracts, such as the licenses consumers sign for using cell phones or computer software.46 Such clauses therefore forbid them from participating in class actions, even though class actions provide the only practical way for them to get redress. The ruling also held that the Federal Arbitration Act supersedes state laws to the contrary. In American Express Co. v. Italian Colors Restaurant, the Supreme Court extended this reasoning to employment agreements.47 One highly respected legal commentator noted that by this decision employees with employment contracts were “effectively divested of their claims altogether for reasons of simple economics.”48 Such cases, economically impractical for individual pursuit, now involve perhaps the majority of interactions between businesses and U.S. citizens. By denying individuals legal recourse, has the Supreme Court stripped from them the benefits of the rule of law?

Conclusion The rule of law is a code of conduct, an operating system for the application of coercion in a given political community. It mandates not when, where, or why, but how coercion may happen. Often enough disregarded, and hardly ever perfectly followed, the rule of law as a repudiation of and bulwark against arbitrariness nevertheless comes as close to a universally accepted value system as the world knows. In this quick survey of its meaning, history, and current status in the United States, I have challenged efforts to define the rule of law so as to serve substantive moral goals. I have also suggested that the trend privileging ADR over legal forums, as well as recent restrictions on voting access and legal recourse, may be undercutting the rule of law in many situations and for many people. Endnotes 1. Sandra Day O’Connor, First Annual White Lecture, Indiana University School of Law, Apr. 2, 2002. 2. Rachel Kleinfeld Belton, Competing Definitions of the Rule of Law: Implications for Practitioners, in Carnegie Papers at 5 (Carnegie Endowment for Int’l Peace, Rule of Law Series No. 55, 2005). 3. Brian Tamanaha, On the Rule of Law: History, Politics, Theory (2004); Tom Bingham, The Rule of Law (2011). 4. Tamanaha, supra note 3, at 114. 5. Bingham, supra note 3, at 8. 6. Francis Fukuyama, The Origins of Political Order: From Prehuman Times to the French Revolution 265 (2011). The capitulation was not just a matter of religious belief; many of Henry’s rival German princes supported the pope. 7. Tamanaha, supra note 3, at 33. 8. Judith N. Shklar, Political Theory and the Rule of Law, reprinted in Judith N. Shklar, Political Thought and Political Thinkers, ch. 2 (Stanley Hoffmann ed., 1998) (originally in The Rule of Law 24 (A. Hutchinson & P. Monahan eds., 1987). 9. Id. at 42. 10. The requirement that sovereigns act through the law served Hayek as a basis for rejecting the validity of administrative exercises of coercion because many such administrative actions are not reviewed, in substance, by the courts. See Tamanaha, supra note 3, at 67. 11. See Richard H. Fallon Jr., Rule of Law as a Concept in Constitutional Discourse, 97 Colum. L. Rev. 1, 11–12 (1997). Tamanaha, in On the Rule of Law, roots the professional constraints on judges in the establishment of the academic study of law, the increased complexity of law as a specialized body of knowledge with its own language and concepts accessible only to initiates, the consolidation of the legal profession as a self-regulating guild with a monopoly over legal services, the insinuation of lawyers as indispensable participants in the criminal law system, in establishing property ownership, and in facilitating commercial transactions, and the central role that persons trained in law came to play as advisors to kings and popes, and as advisors to, as well as becoming, gov’t officials and legislators, among other positions of public and private authority. Tamanaha, supra note 3, at 123.

12. Lon Fuller, The Morality of Law 33–39 (rev. ed. 1964) (paraphrased in Carnegie Peace Project, “History and the Importance of the Rule of Law”; Belton, supra note 2, at 20). 13. Judith N. Shklar, Legalism 17 (1964). 14. Tamanaha, supra note 3, at 78. The comparison to umpires comes, of course, from the testimony of Judge John Roberts in Senate hearings concerning his nomination to become chief justice of the Supreme Court. See also Stephen Breyer, Active Liberty: Interpreting Our Democratic Constitution 116–130 (2005). 15. BELTON, supra note 2, at 4. 16. Tamanaha, supra note 3, at 109. 17. Shklar, Legalism, supra note 13, at 30 (“If the core of natural law theory is the proposition that law and morals intersect, positivism lives to deny that proposition.”) Shklar means by “positivism” a procedural concept of the law. 18. Tamanaha, supra note 3, at 139. 19. Bingham, supra note 3, at 32–33. 20. Our Origins & Principles, ABA Rule of Law Initiative, http://www.americanbar.org/advocacy/rule_of_law/about/origin_prin ciples.html. 21. Bingham Centre for the Rule of Law, http://binghamcentre.biicl.org. 22. WJP Rule of Law Index 2014, World Justice Project, http://worldjusticeproject.org/rule-of-law-index. The fundamental rights measure takes note of freedom of speech, religion, and assembly, and measures protection for labor rights and privacy among other elements. 23. Sanford Levinson & Jack M. Balkin, Morton Horwitz Wrestles with the Rule of Law, in Transformations in American History: Law, Ideology, Politics, and Method 21 (Daniel W. Hamilton & Alfred L. Brophy eds., 2010). 24. See Brian Z. Tamanaha, The History and Elements of the Rule of Law, 2012 Sing. J. of Legal Studies 232, 233–36. 25. Tamanaha, supra note 3, at 3.

26. Id. at 138. 27. Bingham, supra note 3, at 68. 28. Tamanaha, supra note 3, at 141. See Ronald Dworkin, Taking Rights Seriously (1977); Ronald Dworkin, Law’s Empire (1986). 29. Tamanaha, supra note 3, at 141. 30. Jacobellis v. Ohio, 378 U.S. 184, 197 (1964). 31. Southland Corp. v. Keating, 465 U.S. 1 (1984); Ian R. Macneil, American Arbitration Law: Reformation-Nationalization- Internationalization 56 (1992). 32. In the absence of satisfactory information, or agreed-upon procedures for getting it, it would not be logical for a party to enter into voluntary mediation. But court-ordered mediation is not always so voluntary. 33. National Center for State Courts studies show that contract cases, primarily collections, dominate the civil caseload of the trial courts for which it has statistics. Contract cases represent 90 percent or more of civil cases in most states, and collections cases in a recent survey year (2008) ranged from 34 percent of contract cases in Connecticut to 92 percent in Utah. Robert C. LaFountain et al., Examining the Work of State Courts: An Analysis of 2008 State Court Caseloads 28 (Nat’l Ctr. for State Courts 2010), http://www.courtstatistics.org/other- pages/~/media/microsites/files/csp/ewsc-2008-online.ashx. 34. John A. Martin & Brenda J. Wagenknecht-Ivey, Courts 2010: Critical Trends Shaping the Courts in the Next Decade 9 (Nat’l Ctr. for State Courts 2000). 35. Judith Resnick, Renting Judges for Secret Rulings, N.Y. Times, Mar. 1, 2014, at A19. 36. The 1935 study is cited in Judith Resnick, Managerial Judges, 96 Harv. L. Rev. 374, 385 n.53 (1982). Although the NCSC has stopped providing annual data about case dispositions, the author heard Gordon Griller, Director of Trial Court Leadership Programs at the NCSC, estimate that trials resolve 1–2 percent of civil cases filed in state courts of general jurisdiction. For U.S. cases during the 12 months ending September 30, 2011, 1.05 percent were disposed of during or after a trial. Table C-4. U.S. District Courts—Civil Cases Terminated, by Nature of Suit and Action Taken, During the 12- Month Period Ending September 30, 2011, uscourts.gov, http://www.uscourts.gov/uscourts/Statistics/JudicialBusiness/2011/a ppendices/C04Sep11.pdf. 37. ADR is one of three main reasons. Nat’l Ctr. for State Courts, Trial Trends and Implications for the Civil Justice System, 11 Caseload Highlights: Examining the Work of State Courts, no. 3, June 2005, at 5, http://cdm16501.contentdm.oclc.org/cdm/ref/collection/civil/id/25.

38. Court efforts to counter this trend by creating specialized commercial courts have probably exacerbated this problem. Once given competent, comfortable, and efficient courts for themselves, businesses have less reason to advocate for the health of the court system in general. 39. Chief Justice John Roberts, 2013 Year-End Report on the Federal Judiciary 8–9 (Dec. 31, 2013), http://s3.documentcloud.org/documents/1001167/roberts-2013- year-end-report-on-federal-judiciary.pdf. 40. What Is the Rule of Law?, World Justice Project, http://worldjusticeproject.org/what-rule-law. See also Access to Justice & Human Rights, ABA Rule of Law Initiative, http://www.americanbar.org/advocacy/rule_of_law/thematic_areas/a ccess_justice_human_rights.html (first thematic area) (emphasis added). 41. 570 U.S. 2 (2013). 42. 558 U.S. 310 (2010). 43. Am. Tradition P’ship Inc. v. Bullock, 567 U.S. 1179 (2012). 44. It should be noted that conservative 7th Circuit judge Richard Posner has publicly criticized the Supreme Court’s decision for underestimating this consequence. See Richard Posner, Restrictions on Campaign Contributions—A Good Thing?, The Becker-Posner Blog (Apr. 8, 2012), http://www.becker-posner- blog.com/2012/04/unlimited-campaign-spendinga-good-thing- posner.html. 45. See Joanna Shepherd, Justice at Risk: An Empirical Analysis of Campaign Contributions and Judicial Decisions (Am. Constitutional Soc’y 2013). 46. 563 U.S. 321 (2011). 47. 133 S. Ct. 2304 (June 20, 2013). 48. Edward Siegel, Waiver of Employee’s Right to Bring Class Action, N.Y. St. L. Dig., No. 647, Nov. 2013, at 1.

Monetarism?

If I understand correctly, Mark is expressing what economists call monetarist theory. I am far from knowledgeable about monetarism, but my guess--Mark please correct me here--is that it bloomed around 1950 with the work of Milton Friedman and Anna Schwartz.

At that time, the primary mediums of exchange in the developed world consisted only of cash that sovereign nations created, and deposits held in their banks. The Federal Reserve and other central banks added these amounts together to determine the "money supply." Over the years other items have been added, so that today there are three successively broader measures of money supply--M1, M2, and M3. 

If I may simplistically describe the monetarist view that arose under these circumstances, it was that the money supply determined the health of the total national economy, a total now measured as Gross Domestic Product (GDP). If the money supply was too small, firms would find it harder to obtain money, they would spend less, unemployment would rise, and a recession would follow. If the money supply was too large, the nominal price of goods and services would rise. With inflation, loans would be repaid in money with less purchasing power. Creditors would adjust their terms, money would be harder to obtain, firms would spend less, unemployment would rise, and a recession would follow. The proper solution, then, was to maintain a steady or “Goldilocks” money supply relative to the economy’s GDP, and by adjusting interest rates prevent undue inflation or deflation.

This theory was very attractive to the more comfortable segment of society because such people were, by and large, the creditors who would suffer immediate losses in purchasing power if inflation occurred, and who would not suffer personally if raising the interest rates to prevent inflation resulted in job losses. It was also attractive in its simplicity: one factor alone, easily measured and controlled, could determine the health of the economy. Moreover, during a prolonged period of American economic growth (not counting the Depression), it seemed an adequate explanation of the economic cycles intellectually validated by Friedman and Schwartz’s massive statistics.

Applying this logic to the current economic situation leads many modern conservatives, such as the Peterson Institute, to something like Mark’s point of view. Since late 2008 the federal government and the Federal Reserve have greatly increased the money supply, and Mark claims this spending did not get us much of a recovery from the Great Recession, and “is about to give way again.”

I have two basic difficulties with this economic theory. First and most importantly, I think finance has greatly changed. Mediums of exchange have expanded well beyond cash and bank credit, and they come from many domestic sources that have grown dynamically, that the authorities do not regulate, and whose impact they cannot really measure. Moreover, a large and growing share of these money supply sources are international. Consequently, a simple effort to regulate the domestic money supply has much less impact than it did a few decades ago, and no longer serves as the simple lever that it once seemed to do.

My second difficulty is based on evidence. It has been seven or eight years since the Obama stimulus and the Fed’s quantitative easing began. Yet inflation has not arisen in the US, and similar stimulus efforts have not produced inflation in Europe. As Krugman likes to say, monetarists have predicted 15 of the last 3 recessions. Moreover, it seems there is a good reason for the lack of inflation: lack of demand. Monetarists see demand as determined by the money supply. But that hasn’t happened now. Nor did it happen in Japan in the early ‘90s. On the contrary, it seems pretty clear that low demand for money has led banks to hoard most of the funds that the Fed so generously provided, and has led to a much slower circulation of money in general—a circulation known as the velocity of money.

I will concede that, to some extent, the lack of demand results from the stifling of Democratic efforts to increase government spending, which could not offset the sharp reductions in spending that States experienced. As a result, the amount of money actually provided to counter the Great Recession has been very limited, far lower than most economists had thought necessary. Although this may be happy news for monetarists, it does mean that employment has been very slow and partial in recovery. But of course the monetarists are not themselves much affected.