Wednesday, September 30, 2015

A Problem with Today's Legal Structures

Many people are surprised to learn that the primary job of a judge in the US is not to deliver fair, just judgments, but to deliver judgments consistent with precedent. This is the principle of common law: every court decision is itself law. Judges have the power to create new law in situations with limited precedent, but are bound by precedent when available.

The idea behind common law is that goodness is not the primary objective of law. Rather, the primary objective of law is to be predictable. If a law is sufficiently problematic, then the legislature has the power to change it. But if laws change frequently or are applied unpredictably, then people will be unable to plan around them. Society's day-to-day functionality depends on knowing that the law isn't going to apply in new and potentially inconvenient ways every week.

In Kosher Hot Dogs, I mentioned a major problem with common law in practice: a lack of central principles. Common law as practiced in the US mostly guarantees that people can continue doing what they're doing without unforeseen legal interference. But today's legal body, whether tort or regulatory, has become so unwieldy that non-experts cannot reliably predict how the law will apply to any new plans they make.

Despite the inevitable libertarian rhetoric, this is probably a new problem. The rapid growth of complexity in society has been one of the largest underlying social changes of the twentieth century. In 1900, a single person could understand every industry and their interactions, every significant political or religious group and their interactions, etc. The world was a simpler place. The end of communism was, as much as anything, a clear signal that central planning could no longer keep pace with economic complexity. It was precisely this complexity explosion which powered the early growth of information technology. IBM's first computer was built for the 1890 US census, when the population became so large that human calculators could not hope to complete the census totals before the 1900 census. The explosion of business complexity drove mainframe purchases up to the era of personal computers. All along, accelerating innovation has driven accelerating complexity growth, creating a feedback loop as more innovation is needed to handle the new complexity. With these patterns in mind it should hardly be surprising that our foundational legal principles are failing under this new complexity load. No one has ever designed a legal system for an era of runaway complexity.

What does this failure look like? Opacity. In regulation, it looks like a large bureaucracy creating tremendous amounts of new law. The Federal Register has a regular email containing a "table of contents" for the daily activities of the bureaucratic agencies. Today's table of contents runs for 11 pages, with each line linking to much longer documents from the individual agencies. That's one day's worth of new regulatory law. All this buys the US a well-deserved reputation for complex regulation, onerous for small businesses. Similar incentives drive similar results in tort law, where the US public is routinely surprised by outrageous lawsuit settlements. Companies are forced to protect themselves with farcical "terms of service" and "end user license agreements".

In the libertarian view of the story, all this results from the "ratchet effect". Every time some new sob story hits the press, courts and regulators create new law to prevent it happening again. Often whole new departments are created to handle the problem, accelerating the effect. Many of the laws and positions are poorly thought out, and none are ever removed. The result is a steadily increasing mountain of onerous law.

I don't think this story captures the full picture. Sure, we can point to specific cases which fit the ratchet narrative, but let's step back. England has operated under common law for literally a thousand years. The Muslim community has operated under common law even longer, and the Jews longer still. Much of the Torah and all of the Talmud is Jewish common law, consisting of the (often enjoyably snarky) rulings and commentary of rabbis. Yet for all those centuries, nobody seemed to think that runaway complexity was an issue. The Talmud certainly hasn't shrunk, but the growth of rabbinical law just wasn't a major problem. On the regulatory side, Napoleon famously created a meritocratic civil code similar to the bureaucracy of most first-world nations today. Less meritocratic bureaucracies have existed much longer throughout the world. Complexity didn't seem to be a major issue with these institutions until recently. Today's massive lobbyist infrastructure, for example, is an artifact of the last 50 years.

In our narrative here, the ratchet effect is real but not the main problem. The main problem is that our legal systems weren't designed to handle the runaway complexity of the modern world. As complexity grew beyond the grasp of civil servants, opportunists quickly appeared to take advantage. In tort law, these opportunists take the form of ambulance chasers and class action lawyers, combing the legal mess for lucrative lawsuits. In regulatory law, the lobbyist community "helps" civil servants "understand" the complexity in ways which align conveniently with sponsored interests. Meanwhile, well-meaning judges and bureaucrats try to keep up with demand, cranking out new law to handle the proliferation of new situations.

Unlike the ratchet narrative, our story attaches the ills of today's systems to complexity growth, especially over the past 50 years. Thus we would predict, for instance, that the lobbyist community emerged within that time range in response to new opportunities, and this is indeed the case.

Next post will discuss how to solve this problem.

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