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MATT BURGESS: Welcome back to The Free Mind podcast, where we explore topics in Western history, politics, philosophy, literature, and current events with a laser focus on seeking the truth and an adventurous disregard for ideological and academic fashions. I'm Matt Burgess, assistant professor of Environmental Studies and faculty fellow of the Benson Center for the Study of Western Civilization at the Â鶹ӰԺ. 

My guest today is Todd Zywicki. Todd Zywicki is the George Mason University Foundation Professor of Law at George Mason University Antonin Scalia School of Law. He's also the Visiting Scholar in Conservative Thought and Policy here at the Benson Center. He has served as chair of the Consumer Financial Protection Bureau Task Force on federal consumer financial law, as chair of the Association of American Law School Section on Law and Economics, and as director of the Office of Policy Planning at the Federal Trade Commission. We discussed the rule of law and its importance to economic development and Western civilization and the threats it faces in our society today. Todd Zywicki, welcome to The Free Mind podcast. 

 

TODD ZYWICKI: Hey Matt. Great to be here. 

  

Matt Burgess: Yeah. So, we're going to talk about the rule of law today, which seems like a dry esoteric topic. But I would argue that it's one of the most important concepts to understand both in development and also one of the most precious aspects of our Western civilization. Would you agree? 

  

TODD ZYWICKI: I would agree. And some evidence of how precious it is to people is the fact that even though we've traditionally thought of it as a very dry subject, every time you turn on the news or up in the newspaper today, we see people talking about the rule of law. We see it whether it's the prosecutions of Trump and whether that is vindicating or violating the rule of law, whether it's the matters involving Hunter Biden. There's obviously a sense in which the rule of law matters to people. They know what it is, or they know that it matters, but they're not always quite sure what it is. 

  

MATT BURGESS: Okay. So, let's take it back a little bit before we get into the current events aspects of this just in a basic way, what is the rule of law, and why is it so important to economic development and generally the well-being of an advanced society? 

  

TODD ZYWICKI: The rule of law is the idea that when the government acts against somebody when the government coerces you, rule of law says that it should only do so when it announces its rules ahead of time and applies those rules equally to all citizens. And the great accomplishment of the rule of law in the Western world is the idea that the government itself is under the rule of law. That unlike historically, where kings were thought to be above the law, for example, the rule of law is really the linchpin of freedom in a sense that the government derives its powers from the law, and that the legitimacy of the government's powers are just only when they act in compliance with the law. 

What we've seen is that this then is really the key buttress for individual freedom. If you look at the Constitution, for example, both explains how the government is allowed to act, and they can't act in an arbitrary manner, preserves individual liberty through the Bill of Rights and the like, and it is really important for economic development because it allows people to make plans and see those plans through to fruition. 

  

MATT BURGESS: You mentioned freedom and you mentioned prosperity. I think the prosperity thing makes a lot of sense to people. Investment is an enormously important part of development. Investment is basically paying a cost for some future benefit. And if you have large uncertainty about the security of your property rights, expropriation, drastic changes in some kind of law or policy, it's harder to invest, and therefore harder to be prosperous. The freedom thing may seem intuitive, but I want to unpack one thing about it. And that is if the rule of law is just that the government makes rules and they write them down and they stick to them and they apply them equally to everybody, what's to stop the government from just having really restrictive rules? Couldn't they still have that within a framework that would fit the definition of the rule of law, or they really intertwined? 

  

TODD ZYWICKI: And this is Matt, where the debate gets joined with respect to what the rule of law actually means. So for philosophers, often what you'll see is what you say is accurate, which is that the rule of law has no inherent justice to it or any notion of individual liberty. They say so long as there is some formalistic nature to the rule of law that that's okay. 

But I think when you look deeper at particularly the Anglo-American tradition, but the tradition of the Western world generally, what you see is that the rule of law, as it's been articulated by say, Hayek and Michael Oakeshott, that the rule of law really is in some sense an organizing principle of a free society. And Hayek in particular made the point that the rule of law only makes sense in a world that is premised on individual liberty where people have the ability to form their own plans. So, for example, he compares it to traffic rules, which is, the rule of law essentially tells you how you got to drive on the road, but it doesn't tell you what exit to get off of. And something that goes beyond that, that starts trying to direct people in particular directions and that sort of thing and subordinates people to the will of the government, inherently becomes problematic for the rule of law. 

  

MATT BURGESS: Back to your traffic example. Is there some presupposition in what the government's limits should be in the philosophy you just articulated that has to do with the degree... Limiting freedoms only in so far as that's required to safeguard other freedoms. So, we don't let people drive on the wrong side of the road because if we did, that would limit many more other people's freedoms to drive safely. Whereas telling people what exit to get off at doesn't necessarily make anyone else more free or prevent an infringement on other people's liberties unless there's some rare case, we need to build something at that exit, and so we're temporarily closing it. 

  

TODD ZYWICKI: Essentially what they do in that sense is they essentially suspend the rule of law, which is, the opposite of the rule of law is discretion by the government, which is the ability of the government to discriminate, and as Hayek would say, "To basically organize society to advance some particular plan." So, you could talk about closing an exit, but a more classic example is during times of war. Where during a time of war you will often see the government kind of suspend the rule of law or during other crises. Now, whether that's always justified I think is questionable. 

Clearly, one premise is to the extent that the government feels it's necessary to suspend the rule of law, it should be done as mildly and as temporarily as possible. And so what we saw for example, during the COVID years was this huge grant of emergency powers to the government and basically just sort of willy-nilly making up new rules, new executive mandates that would change from day-to-day, and really the will of governors or an executive largely unchecked by democratic process or sort of standard mechanisms for making laws such as bicameralism deliberation and the like. 

  

MATT BURGESS: Okay. So let me revisit and maybe reframe that example of COVID. Because as I understand it, the COVID restrictions and government interventions were controversial among the masses, among the general public more so because it seemed like in the view of critics, they got the cost-benefit analysis wrong than because of some deeper philosophical critique about the rule of law. So, for example, the hypothesis for long-term school closures was that we would not have a huge impact on education, and we would have a huge impact on mortality. It seems to me that the main reason people are pissed off about the long-term school closures is that basically the authorities got that backwards in terms of what the evidence we're seeing now, the impact on death and on transmission for kids, and the same thing with masking for really little kids didn't seem like it had a big effect on the adverse outcomes of COVID, and it seems like it had a huge effect on children. Am I getting that right or is there some deeper philosophical critique related to the rule of law that should take precedence? 

  

TODD ZYWICKI: The answer is yes; you're getting that right about what the public believed. But also, there's a deeper philosophical point wound up there. And so let me address both parts of that. The first is I think that what your example points out is that voters, citizens tend to focus on short-run pragmatic responses to things, which is one reason why the government is able to see so much emergency powers during what they can perceive or claim to be a crisis. But what ends up happening in those situations is that once you get the government acting, number one, the government, once they get power, they tend not to give it up. And we just saw this, for example, this week, if people have following what happened in New Mexico where the governor of New Mexico has basically tried to declare an emergency for gun violence, that she is basically using the justification of her COVID emergency powers to basically suspend the second amendment is essentially what she's doing. Emergencies tend to become extended. Government, once it gets power, tends not to give it up. 

The second thing we see is that once you make an exception for an emergency, it tends to become the precedent for the next emergency. So let me explain. Which is that back during 9/11, the government claimed the need to take emergency powers for national security reasons and did all sorts of things. A lot of the things they did in response to 9/11 became precedents for how the government responded, particularly in financial markets during the 2008 financial crisis. In turn, all the things the government did in the name of emergency powers during the financial crisis became the precedent for a lot of the things that the government did, particularly in financial markets and the like during the COVID crisis. 

And so, the point here is yes, citizens usually respond in the short run to these sorts of concerns, but what the rule of law says is we need to be concerned about the long run as well. We need to be concerned about preserving the overall institutional structure and the regularization of government precisely in part because the government itself will often look to expand its powers and to make exceptions to the rule of law. Oftentimes they'll be joined by powerful special interest groups who want to do the same. And so, I think that one of the lessons we learned from the rule of law, and the focus on the rule of law is the importance of thinking about these long-term principles and not just focusing on the short-run concerns, which is I think you accurately state is what most people focus on. 

  

MATT BURGESS: Okay. So let me try first a friendly rejoinder and then a steel man. On the side of friendly rejoinders, you're making this argument from the perspective that some people would identify as conservative, and yet it has strong parallels to arguments that people like Naomi Klein, for example, have made in her work, The Shock Doctrine, from the Left about the same kind of thing. And in fact, 9/11 is an example of something that is often criticized from the Left of the post-9/11 Patriot Act-type powers. So at least, in an abstract sense, there are thinkers on both sides of the divide that think about the rule of law in the way that you do. 

Now, the steel man. Let's talk about cases where many people at least would argue that the short-term incentives the government got right. Because I think those cases are instructive for separating that concern from the conceptual concern about the long-term and the rule of law. So starting with World War II, I believe there was a draft in World War II. There were price controls. There was the Defense Production Act, correct me if any of this is wrong, I'm not a legal scholar. There were government interventions in the economy and in the day-to-day lives of Americans, that I think it would be fair to say we're much more extreme than anything we've seen in my lifetime. Would you argue that any of that shouldn't have been done? 

  

TODD ZYWICKI: I'll say two things. First, the rule of law is just one of the virtues we may want to have in a society. What I want to emphasize is that we should not be indifferent between the rule of law as government by discretion governed by sort of arbitrary decision-making. There's reasons why we want to organize our society around the rule of law, and if we're going to make exceptions, we should make the exceptions very clear, as narrow and as temporary as possible, and be very clear about how we're going to end those exceptions. 

One of the things we saw with COVID and one of the things we see is happening now is that it was something that was different from what we'd had in the past. There were grants of emergency powers to a lot of governors and the like, but people hadn't really thought through the exit strategy. And so, what we see now is because of the abuses of many governments with respect to emergency powers, now we're going back and the legislature in these various states is trying to reestablish orderly processes, redefine the emergency powers of governors and the executives basically because they abused their power in the way that they did. 

There's nothing inherent in the rule of law that says that certain actions in times of emergencies, for example, such as the ones you describe, those can be permissible right now. Having said that, you give the examples of perhaps the benign process, the way in which the government during a time of war might seize industrial production, that sort of thing. But remember the same principle that sustains that is the same principle that sustained the government's action in just rounding up Japanese Americans and interning them indefinitely in internment camps with no due process, no individualized suspicion and that was upheld as a national emergency, this extreme violation of civil rights. 

We see this going on right now with litigation coming out of Louisiana, just appealed to the Supreme Court where the White House was essentially saying that the COVID crisis and sort of generalizing the principle, that the COVID crisis allowed them to engage in essentially coercion of social media companies in violation of the First Amendment according to the Fifth Circuit because you needed to suppress misinformation and the like. So as soon as you open that Pandora's box for good discretion, you also open the Pandora's box for things like Korematsu and other sorts of issues. 

  

MATT BURGESS: I'm really glad you brought up the internment example because that's a very compelling example. I think a lot of people would argue that Defense Production Act that even the draft may have been necessary to defeat the Nazis. I think we'd be very hard-pressed to find somebody today who would argue that internment was good. So, can the rule of law offer us a solution to that? Is there a way to write a law that codifies the distinction between those two types of cases and those two types of justifications? 

  

TODD ZYWICKI: I think there is, but there's two aspects of it. Which is first is, we have to be clear-eyed about the threat. What often ends up happening here is as we've seen 9/11 as we've seen during COVID, is that there's a lack of appreciation for the degree to which the grant of powers to the government can be abused both by the government itself, as well as I mentioned earlier, special interest. You may have something to gain. Obviously, not in the internment example, but what we've seen during the financial crisis, we saw during the COVID crisis, there are a lot of people made money off of these things, to be frank, and they liked what the government was doing. 

I think the first thing you have to do is you can't just give a blank check to the government, number one. Number two, you could have expedited processes for this. But there's still a need I think to try to follow regularized orders such as a somewhat careful legislative process, for example. During the financial crisis, it was kind of chaos in terms of how did the bank bailouts and that sort of thing. 

But the third thing, and I think perhaps most important, is that this is where the courts need to stand up. This is where the last line of defense are the judges are the courts and they need to be supervising. And I think in my view, courts have been very deferential to these claims of emergency powers, and they have been unwilling to cabin the claims of emergency powers by governments either in terms of their scope or in terms of their timing. And so, I think somewhere in there needs to be some check on the desire for the government to expand its powers and to claim an indefinite extension of powers over time. And the courts seem to me to be the ones who are the last line of defense for that. 

  

MATT BURGESS: Let me ask a follow-up about that. It seems like the court's job is to interpret the law, which means that they'd have to, in order to get the balance right that we were talking about earlier, there'd have to be some law written down by Congress or somebody else that allows them to do that. So, let's go back to the World War II example. On what legal basis might a forward-thinking court have say allowed the draft of the Defense Production Act but not allowed Japanese internment? 

  

TODD ZYWICKI: Yeah. So, you mentioned law, but obviously, the Constitution matters as well. And if you read the opinion in Korematsu, the Japanese Internment Act, it's really a pretty embarrassing opinion and it's really a dark spot for the United States. And the background to this is really pretty creepy, which is, the way... What we really see has arisen over the past century or so is a conflict between really frankly sort of the progressivism that started a century ago and the idea of expert management of government versus the constitution and individual liberties. And this goes back first to upholding the compulsory vaccination back in 1906. But then what we see is, in a case called Buck versus Bell, which was a case in which states had started passing eugenics laws that allowed forcible sterilization of people who were declared mentally unfit basically by the government through processes, they were upheld, and they said there was constitutional... 

By 8:1 vote, Oliver Wendell Holmes writing this famous opinion where he said, "Three generations of imbeciles are enough." A principle that is broad enough to support compulsory inoculation is clearly broad enough to support tying the fallopian tubes. And he drew as his basis for that on the case, allowing the mandatory smallpox vaccination. 

Now, why do I go back that far? Because that logic that Holmes relies on in that case is, all the medical consensus at the time was eugenics. The medical consensus at the time was that for the good of society to get rid of the so-called social externalities, the government should have the power to forcibly sterilize people. That's the principle that then upholds in Korematsu. And a lot of the other problems that we've seen over time is, again, we saw during the COVID crisis, which is, who are we as courts to try to weigh individual rights and individual liberty against what the experts tell us is necessary for the good of society? 

I think that's just an abdication of the judicial role. That's the abdication of everybody's role to take individual rights seriously, even in times of crisis. And so yes, it requires some, I think, pragmatic and prudential judgment to draw those lines between the draft and just sort of rounding up Japanese with no individualized assessment of their potential guilt, but I just don't see that in a free society, we really have any alternative but for courts to actually try to stand up for individual liberty in the Constitution when it's most important. 

  

MATT BURGESS: Really powerful examples there, which I think raised the question of to what extent is the rule of law always going to be limited much more severely than people think by the prevailing norms of the time, however good or bad. So if people have these kinds of views that today we would rightly recognize as repulsive about eugenics and about race and infirmity and whatever, can we as a positive matter, meaning a non-normative matter as a matter of prediction, empirical prediction, can we really expect that if we write the law in a perfectly magic way, that someone with the wrong norms isn't going to find a way around it? 

  

TODD ZYWICKI: And that's the big point, Matt, which is in the short run, we can rely on institutions and structural protections like the constitution courts and the like. 

  

MATT BURGESS: But hang on. In that case, I thought that the lesson was we couldn't. 

  

TODD ZYWICKI: Well, yeah. I mean in theory, in theory. Right. It's even worse if the courts don't do it. But in the short run, at least, yes, we need to count on the courts. But what really matters, and I think what you're putting your finger on now, Matt, is there has to be a belief in society among the public at large in the general importance of the rule of law, that there are ways to do things, that there is an overarching value, and the importance of the rule of law and preserving the overall integrity and structure of a free society, that there just has to be a belief that we support the rule of law, that we as citizens see the value in using these processes even when they frustrate us in the short run, and so we don't make exceptions to the First Amendment just because we don't like what people are saying, whatever the case may be. That requires something deeper and a commitment in society. 

One of the things you see when you look at, for example, the concept of the rule of law was really articulated by a guy named A. V. Dicey in England beginning in the late 19th century. And what Dicey says is that Britain was unique at the time. Britain and Britain offshoots like the United States were unique because there was this spirit of legality, the spirit of the rule of law that people felt like this was an important value and that distinguished the Anglo-American world from the rest of the world. And that then was instantiated in the common law. And I think that's really what it requires because there will always be demagogues, there will always be politicians, and there will always be people like that who are ready to jettison the rule of law because they can promise some short-term benefit to some group. But once you start doing that, you run the risk that everything is going to unravel, which is to some extent my concern of where we're headed right now in this country. 

  

MATT BURGESS: The United States seems like it's especially... The Madisonian Constitution is kind of especially robust to this kind of thing. Even in Britain and Canada, for example, and I'm from Canada. I forgot if they mentioned that. A lot of our free speech policy is much more of a tradition than a policy, and there's some even more extreme examples. So, we have a Governor General who's the figurehead, the Queen's representative or the King now, sorry, representative in Canada. And the Governor General has on paper much broader powers than the average Canadian would understand but also powers that they have pretty much never used, at least since I've been alive. 

But there's a kind of non-Madisonian weakness in our system that way, and certainly, some contemporary debates around free speech and around non-discrimination in Canada are looking at that. So, for example, in the US after the recent affirmative action decision that came down this past summer, there's been some controversy and consternation over the fact that many universities have signaled publicly that they intend to not follow the spirit of the rule. That basically, they want to try to find some way to get around it. 

And this is not really a new phenomenon. I mean everybody talks about DEI statements in hiring, for example, in universities as a free speech issue, which it is. But few people talk about how the origin of DEI statements in faculty hiring comes from California as a way to get around Proposition 209, which was their anti-discrimination ballot measure that passed in the '90s. 

In Canada, it's actually not illegal to discriminate as long as you're doing it in the so-called correct direction. So, if you look at, for example, go to Universityaffairs.ca, which is where they post faculty jobs in Canada, and Canada has this thing called Canada Research Chairs, sort of prestigious faculty positions basically that come with like an endowed chair from the federal government. And I think it's a little bit more than half of the ones that are posted right now that have an explicit restriction in who can apply on demographics. In every case, it's no able-bodied straight white men, and in some cases, it's even more restricted than that. 

And similarly with free speech. There's a whole controversy around the truckers and their speech rights and bank accounts and et cetera where it's possible that the Trudeau government went further even in the law allows. But I think many Americans were sort of surprised at how much actually the law allows if you sort of look at the letter of it. So, am I right that that's a positive attribute of the United States system? So, for example, if you take the modern controversies around social media censorship, around nondiscrimination, it seems to me like you could make an optimistic case from the perspective of rule of law that eventually the courts are going to sort those wrinkles out. 

  

TODD ZYWICKI: Yeah, I think that's right. I'll say first, what we've seen over the past few years is pretty egregious violations of the rule of law, whether it's this First Amendment censorship case, whether it was the blatant defiance of the Supreme Court when it originally temporarily upheld the CDC's so-called eviction mandate moratorium, and the Biden administration just reauthorized and basically dared the Supreme Court to strike it down, which they did, whether it was that massive student loan bailout that they tried to do knowing they had dubious legal authority, whether it was the overreach of the vaccine mandate via OSHA. In each of these situations, the courts have stepped in, and they have been willing to stand up for the rule of law. And I think that's a very important point, which is that the institutions matter, the institution of the independent judiciary matters to try to check these government overreaches. And there's a lot sort of back and forth going on now between the courts and particularly this administration, and this administration using the administrative state and then runs around the democratic process to accomplish a lot of these goals. 

That is not to be dismissed the importance of the constitutional culture in the United States. But I think your question points to another larger point, which is over the long arc, what does seem to matter in many ways is history. What matters is a commitment of a society to the rule of law. Now obviously, in the United States, one of the reasons we're so vigilant about equal protection on race is we fought a Civil War over that. During the case you mentioned in the Supreme Court, the Fair Admissions case, the lawyer for Harvard for example, was talking about giving preferences for oboe players. If the orchestra needed an oboe player, to which Chief Justice Roberts responded, "We did not fight a Civil War over oboe players." So that history matters in a lot of these things. 

And this was one of the things that... I'm teaching this class on the rule of law this semester. One of the things that comes out of Dicey. But one of the things that I've emphasized when I've looked at this is this point about history. And so, for example, Edmund Burke has this wonderful speech called Speech on Conciliation with the Colonies. And it's always kind of perplexed a lot of people because while he was critical of the French Revolution, he was largely praising of the American Revolution. 

In part, his argument was, "It's futile to, at this point, try to put the genie back in the bottle for the United States." And his arguments have very little to do with natural rights. What they have to do is with the unique history of the colonies and the spirit of liberty that imbued in the American citizens. So, for example, he talks about the extreme distance across the ocean, got the American colonies used to governing themselves. He talks about, for example, fascinating disquisition on slavery where he says in the American South, living with slaves created this sort of it might seem perverse, but also this great spirit of liberty among those who were not slaves to not be treated like slaves like the British government. 

In the North, it was basically settled by all these religious dissenters who were basically troublemakers were hard to tame. And then funny enough, and sort of warming my heart is he said, "The other thing with the United States is it's a nation full of lawyers." 

"And lawyers," he says, "See the principle inherent in the evil." Which is he says, "Lawyers can anticipate where the slippery slope is going to go." That this one little exception, this one little incursion on liberty can create a precedent, as I was saying earlier, for a whole train of subsequent abuses. 

And so, one of the things he draws is a distinction between the United States and France is the United States at that point had liberty, was used to governing themselves, had this sort of history, and that's something that comes out of Dicey. Then when he turns the same focus on the rule of law, and he says, "The rule of law is operative on the ground in England and the United States. The rule of law exists because individual citizens bring individual disputes that are litigated and decided by courts in a concrete fashion as opposed to being sort of abstract rights that the government grants to people." 

And I would suggest an example would be say the glorious Constitution and Bill of Rights of the Soviet Union, which the Soviet Union had a great Bill of Rights. They guaranteed freedom of religion or freedom of press and all kinds of great things, but it didn't do a lot of good because obviously, the Soviet Union had neither the institutions nor the spirit of the nation to actually vindicate those rights, that individual liberty and to instantiate anything that looked like the rule of law. 

  

MATT BURGESS: Let me push you a little bit on that actually. Because my experience as a Canadian is that if you go to other Western countries and describe the United States as a nation of lawyers, people will agree with you but not in a way that is intended to be flattering. And so, for a specific example that I think conservatives are fairly sympathetic to and many liberals in the context of climate change, it takes almost a decade on average to get a federal NEPA permit for cross-state transmission line. And if we don't drastically accelerate the rate at which we build transmission lines, we're never going to come close to meeting anybody's targets for decarbonizing, be that the Paris targets, be that the Biden administration's general targets, be that the Inflation Reduction Act projections. As I understand it, one of the reasons it takes NEPA so long to approve things is that they have to make their reviews airtight against frivolous litigation, which happens frequently. So what would you say to that? 

  

TODD ZYWICKI: Yeah. So I think you put your finger on an important point, which is what I was talking about was making a general point about history matters. And I think supporting your point that the rule of law fundamentally doesn't look that much different in Canada from the United States. We may have seen some more egregious behavior in Canada than in the United States or less of an independent court. But over the long arc of history, what seems to matter in say the United States, in Britain, in Canada, and a lot of other former Commonwealth countries is a spirit of the law. That's what I was speaking to is that the courts are part of this, our constitution is part of this, but there's also just sort of a sense among the citizenry of what's allowed. 

Now, you're pointing to a different point, and this is a point that I've emphasized, and I think, where the philosophers need to listen more to the economists. And one of the problems I think with the way the rule of law gets discussed is it's kind of been taken over by the philosophers. So, you want to have kind of abstract theories about did the Nazis have the rule of law and stuff like that. I mean, that's fine. If you don't have that discussion, then that's fine. But what I think that is lacking is the lawyer's view of the rule of law and the economist's view of the rule of law. 

Why do people care about the rule of law? They don't care about it because it can be some sophomore discussion and the dorm about whether Nazi's had the rule of law. Why we care about it is because we feel like it matters to our everyday life. It matters on the ground. And so when you ask lawyers about the rule of law, they think about these sorts of things or economists. 

And so why does that matter? Because I think your example is a good example, which is about the NEPA permits and all that sort of thing. And this is something we see as we look around the world, which is that it's well understood, that for the rule of law to pertain, you have to be able to physically comply with the law. So if you are required to hold your breath for 15 minutes in order to get a license everywhere to say that violates the rule of law. Yeah, it's a general rule. Yeah, it's announced in advance. But if you can't physically comply with that rule, then it's not consistent with the rule of law. And so, what you end up seeing is exceptions to the rule and that sort of thing, or you just don't get any... You can't have society. 

I think the example you're giving, and I think there is a problem in the United States now with too much law, too much regulation, and what I see when I look at the literature is the philosophers will tend to say, "Well, heavy economic regulation, for example, is not inconsistent with the rule of law." You can just fill out a lot of forms. But in some sense, it really is. In some senses the laws of supply and demand are lost in the same way that you can't hold your breath for 15 minutes. 

If you look at Hernando de Soto's research, for example, if it takes you a year and hundreds of hours of missed work to stand the line, filling out forms, bribing officials, doing all these sorts of things in order to get a license, in some sense, that's not the rule of law. And so, what we need to understand is that the kind of examples you are giving, that what you end up seeing, when you have too much regulation, when regulation is too thick for anybody to reasonably able to comply with it, what ends up happening is the government ends up making exceptions. You end up basically turning into sort a cronyist-type system. And as I'm sure you are familiar with the literature that finds that these countries that have a lot of these rules and permitting and all that sort of stuff, there's no discernible improvement in quality of government services. They just sort of say it's like a tollbooth system where you have to go and grease the palms of various different government officials to be able to do business. 

And so what we see in these countries as Hernando de Soto has documented is a huge underground economy created simply because it's not plausible in any meaningful sense, to be able to be legal and stay legal. It's a matter of actually conducting day-to-day business. 

  

MATT BURGESS: Really interesting. So let me ask a clarifying question. It sounds like you're saying that to have rule of law as you understand it's not just that things have to be written down and followed and applied equally, that there also needs to be some underlying norm of limited government and value on individual liberty. Is that right? 

  

TODD ZYWICKI: And that's where I end up departing from a lot of the philosophers, which is particularly, I get this from Michael Oakeshott, the great British philosopher. But yes, in my view, I think I'm accurately portraying Oakeshott's view. The rule of law is not just sort of an abstract formalistic way of making law. The rule of law is an organizing principle of a certain type of society. It's the society that we started talking about of traffic rules, where it tells you how to go about your business, but it doesn't tell you what exit you have to get off. And that's what the rule of law does. In my view, there is this essence to the rule of law or what I call the rule of law society, which is fundamentally in conflict with a society that is not organized around individual liberty and free markets and which is directed towards the accomplishments of certain social ends. 

  

MATT BURGESS: Let me ask one more clarifying question. In your view, are the principles of individual liberty and limited government important to the concept of rule of law because they're good and because they lead to outcomes and societal functioning that you see as good? Or are they important because if you have a legal system that doesn't assume those principles and priorities, that the rule of law becomes self-contradictory because of all the loopholes and everything else? 

  

TODD ZYWICKI: Right. And I think it's actually both, which is the rule of law makes no sense. In some sense, what is the purpose of a rule of law and its tyrannical society? It's kind of a senseless concept to say the government can just throw you in jail anytime it wants to as long as there's some arbitrary... Some law passed that allows them to do that. I mean, you start thinking about what does it mean to have the rule of law. And again, you could think about this in an abstract sense, in a theoretical sense. Yeah, you could have a rule of law in a Nazi society, but what's the point? What I take away from this is the only reason we care about the rule of law is because it accomplishes some purpose. It's not an end in itself. 

And what is that purpose? To me, the whole concept only seems to make sense in the context of a free society, which is, it doesn't kind of make any sense to have the government constrained by rules if we don't think there's some independent value in individuals being able to pursue their own ends. Does that make sense? Otherwise, it would just allow the government or majorities or whatever to just use their judgment as to what everybody should be doing. And so, in that sense, the rule of law I think is really more inherent in a certain way of conceiving of society than just this abstract free-floating concept that you could describe, but it's not really clear why you would care about it if that makes sense in a communist society or in Nazi Germany or something. 

  

MATT BURGESS: Okay. Let me push you in a couple of different modern examples that we've brought up in passing. Then I want to ask you something about norms. So first, let's talk about the bank bailouts after the Great Recession. I've read a lot about the economic aspects of this. And as I understand it, the folks who were conservatives, and many of them in the Bush administration who were the architects of the TARP Act, the big bailout. As I understand it, their hypothesis was that had they not done it at the size that they had, in fact, I think some of them thought it needed to be bigger, but they knew that Congress wouldn't pass something with a T, a number that was in the trillions. Their hypothesis was, "If it hadn't been the size it had been and the speed it had been, and it hadn't been given out to all of the banks..." They made all of the banks take it whether they needed it or not, as a way to prevent bank runs being caused by banks taking it seem to be in trouble. 

Their hypothesis was that if they hadn't have done that, there would've been a catastrophic cascading collapse in the American financial system that would've caused credit crisis and eventually an economic crisis more like the Great Depression than what we ended up seeing. People can argue on the economics of that, but I think for the purposes of this conversation, let's just assume as a premise that that hypothesis is correct. If it were correct, would you still see the TARP and other bank bailouts as a bad thing, and would you still see it as a violation of the rule of law? 

  

TODD ZYWICKI: Well, here's where, thinking about this through the lens of the rule of law and the concept of the rule of law, I think suggests a different way of thinking about that whole incident, which is you start reasonably by saying, "All right, now we've got a financial crisis, what do we do about it?" But if you're thinking about it from this perspective, and we'll look backwards before we look forward, because I think the value of this is thinking about how we want to organize this in the future. Why did we end up in that situation? 

Well, if you look at Lehman Brothers for example, what you see with Lehman Brothers is one reason Lehman Brothers kind of went down in a relatively messy way was why? Because they expected to be bailed out. And why did they expect to be bailed out? Because Bear Stearns had been bailed out. And so Lehman Brothers just refused to do anything to prepare for bankruptcy because they figured the less we prepare, the less willing we are to sell ourselves to some other business, the more likely we'll be to get bailed out because we're obviously more important than Bear Stearns. The government didn't bail them out, and then the government bailed out everybody after that. 

What's the problem? The problem was not bailing out the Lehman brothers. The problem was bailing out Bear Stearns. And so what we see... What is the lesson we have for the rule of law? Which is why that all came about was because the politicians, even though they didn't have legal authority, had de facto authority to engage in this discretion to bail out banks. Why? Because they had done it in the past. They did it with Bear Stearns, and so there came to be these expectations that they would bail out banks in the future. And when they didn't bail out banks of the future, that turned out, and make things much worse. 

And so, what's the point? The we should be thinking about these incidents in the future is, going forward would be, how do we think about this? The government in a financial crisis is going to be tempted to bail out. Why? Because the politicians have this short-termism that they are afraid... They'll create a moral hazard problem for the future, but they're afraid right now that if they don't bail out, there's going to be an economic catastrophe, so you kick the can down the road. 

Now what happens? That makes it more likely that you're going to have similar problems in the future, more likely that you're going to have moral hazard in the future because now everybody knows that's what the incentives of the politicians are. Does that make sense? 

  

MATT BURGESS: Yeah. 

  

TODD ZYWICKI: And so, what we see then is we do the bailouts. The bailouts were done in a completely ad hoc way. They set up all these supposed rules, but it turns out, the empirical evidence is, the banks that actually got bailout money, were not the banks who met the checklist of what their criteria were but they were banks that either had a former Treasury official or a former Federal Reserve official on their board of directors, the banks who gave the most money to the relevant oversight committees in Congress all were more likely to get bailed out. That's the reality of how the discretion operates. As I was saying, politicians in the interest groups are going to do that. 

And what do we see? We then saw Dodd-Frank. Dodd-Frank supposedly was going to get rid of bailouts forever. Does anybody think that? No. I've traveled the country for 10 years talking about Dodd-Frank. Talked to thousands of people. Not a single person thinks that Dodd-Frank got rid of bailouts are too big to fail, including say, Elizabeth Warren and Jeb Hensarling who couldn't otherwise agree on anything. 

And what do we see this spring with Silicon Valley Bank and the like? What happened? We essentially got bailouts again because it wasn't a credible commitment. And so the way I would suggest we want to think about these kind of issues, Matt, going forward is, we need to be clear-eyed about the fact of what politicians incentives are going to be. If the politicians or incentives are going to be to bail out regardless of the legal authority for it, then market actors are going to rely on that. We're going to have a moral hazard problem. And so then we need to think about what does an actual rule of law system look like, not just in theory, but also what is actually a credible commitment for the government to tie its own hands so that we won't get into these problems in the future. 

And that becomes a much more difficult question than just pretending we can have this magical world where we'll just write a law and that the government's going to abide by it. Like I said, if the courts aren't going to enforce it, which they really didn't during the 2008 financial crisis, whether on that or on the auto bailouts for example, then we need to come up with some system more like a Barry Weingast kind of system of self-enforcing constraints on how the government acts rather than pretending like the government is going to voluntarily tie its own hands. 

  

MATT BURGESS: Yeah, really interesting. You've basically articulated a concept that won the Nobel Prize in Economics for Kydland and Prescott called Time Inconsistency. So for those listeners who don't know what I'm talking about, it's the idea. There are cases like negotiating with terrorists where when the terrorists don't have your CIA agent, then you want your policy to be we don't negotiate with terrorists because you don't want them to take your CIA agent. But once they have your CIA agent, you want to negotiate to get him back. But then the problem is the terrorist knows that and so they're going to ignore your policy of we don't negotiate with terrorists. There are all kinds of examples, and the one that you articulated is one. 

  

TODD ZYWICKI: Wall Street bankers are pretty good at figuring this game out, I think, Matt. 

  

MATT BURGESS: And in fact, Kydland and Prescott argue for rules rather than discretion. I think that's in the title of their paper. So, your conclusion matches the one that they recommend in this case. 

  

TODD ZYWICKI: Right. 

  

MATT BURGESS: Now, a couple of challenges I see with banking. One is that unlike terrorists having CIA agent or houses in a flood plain is another example. A countrywide banking collapse is just such a higher order of magnitude of crisis. So it seemed like you'd need some other safeguard to prevent it if you were going to have a rule where you really tied your hands that you're never going to bail at a bank. And so two questions I wanted to ask you about that. One would be, do we need to have some kind of policy against extremely risky speculative lending that has jail time teeth to it, or would that kind of cause more problems than it solves under the individual liberty doctrine that you outlined earlier? 

And then secondly, if we're going to have more of a Laissez-Faire bank bailout policy or a non-policy, does that need to be combined with some kind of antitrust? Because it seems like if the government got out of the game of bailing out banks, for sure, what would happen in the best-case scenario, is the banks would bail out each other and thereby consolidate, and that would make the too-big to fail problem worse. 

  

TODD ZYWICKI: One of the great ironies of Dodd-Frank of course, is that it has made the big banks even bigger and even more too big to fail. Now, apparently, we've decided that a lot of the medium-sized banks are going to more or less fit in the same category. And one of the reasons for that though, one of the big drivers for that is that the regulatory cost of the Dodd-Frank law that was enacted after the financial crisis is much more costly for small banks to comply with than large banks. And as you know, this is a common feature of regulation is that there's kind of economies of scale and complying with certain regulatory requirements, and that's basically what we've seen here is that big banks, they have to hire another hundred compliance attorneys. That's a rounding error where some small bank has to hire a new lawyer that could be a big hit to their bottom line. 

We have this kind of irony that Dodd-Frank has actually accelerated consolidation because of the regulatory costs that don't impose as well as the continuing too-big-to-fail subsidy as it's called by the fact that everybody believes that big banks are still going to be bailed out. 

But what you're raising is a larger point that I think is important, which is that the world of regulation is a world of trade-offs, not solutions. And that's very familiar to us as economists. There are no solutions to these problems. And so if you want to start thinking seriously about banking, you have to go back to the question of deposit insurance. And deposit insurance makes sense because of the fact that the ordinary depositor does not have an incentive or ability to monitor the bank where their money is in. So we create deposit insurance. The problem is as soon as you create deposit insurance, then depositors don't have to monitor the bank, which means that now we've got the bank basically being able to be protected from typical scrutiny. Then we have to bring in the government to supervise the banks is how it's been understood. 

But then as soon as you bring in the supervision process, now you have the whole regulatory apparatus piled on top of that. And the question is how are they going to operationalize the regulatory apparatus, and then that creates its own set of headaches and other sorts of things that we could go into. 

With respect to your point about risk taking, the problem is that there is going to be risks somewhere in the world, right? 

  

MATT BURGESS: Right. 

  

TODD ZYWICKI: People are always going to be pushing the envelope. There could be reasons, and this is essentially what we're doing now. We've essentially shifted risk outside of the typical banking system in the United States. For example, the majority of mortgages are made now by non-bank institutions. Now, that may be good in some sense for the reasons you're saying. But what does that mean? 

We've basically put mortgages back in the world of the people who we regulate the least, which is what we thought was the problem for Dodd-Frank, was all these mortgage brokers and sort of mortgage companies out there doing wild things. So risk is inherent in an economy. Risk is inherent in banking. You can't wish away risk. And then basically the... Because risk is necessary for progress, there's always going to be people pushing the envelope on risk. And so the question is how do we first prevent risk? But I think more important than something I've thought a lot about and written on is, what do we do with the fact that risk is part of life? How do we keep our regulatory process for thinking about preventing systemic risk of a catastrophic value of the bank system may not be the same as we think about when we think about keeping individual banks from failing? And that's something that our regulatory system, I think is very poorly adapted to do, which is to think about big problems of trade-offs rather than redefining their problems and the little problems that then they can claim to solve. 

  

MATT BURGESS: Yeah. So just a quick interesting point on the mortgages. I believe it was the case in the lead-up to the crash. The derivative market for mortgages was something like 20 times larger than the market for mortgage bonds themselves. So arguably, the bad mortgages was less than half of the problem. But I want to get to trade-offs. Your point about trade-offs I think is really pertinent to another case that I wanted to push you on, and that is vaccine mandates. 

Let's think about it first as an economist. From the perspective of utility, I think you can make a case for vaccine mandates, at least for adults, and that case would hinge on the fact that it's a fact that the death rate is enormously higher among the unvaccinated than the vaccinated. And in regions where there's higher rates of unvaccinated people, it's true that the vaccines have side effects, which in rare cases are really serious. But I believe in most of those cases, if not all of those cases, having COVID has a similar potential for side effects that's larger. 

One example that we've talked about a lot in the news recently is myocarditis in young men as a side effect of the mRNA vaccines. So that's true, although it's not what made LeBron James Jr. sick. It turns out he had a heart defect. It's also the case that having COVID has about a twice as large risk of causing myocarditis in young men. So it seems like you can make a case for vaccine mandates on a utilitarian perspective. And yet, I admit that I'm also sympathetic to the visceral personal liberty argument that the government forcing me to take a medicine that might harm me even though there's a larger chance that it will help me violate some kind of fundamental moral principle. I think I was for, and I think I still am in hindsight, for vaccine mandates for the first couple of additions, and then for making the boosters optional. And I guess that's sort of my way of rationalizing the tension between the moral individual liberty issue and the utilitarian issue that I was just articulating. But what are your thoughts on that? 

  

TODD ZYWICKI: Yeah, so a couple of thoughts. First, and this is important. I don't know if every state, I know Virginia, where I live usually, except for when I'm here, it is not true that this country has vaccine mandates. People claim that there's a vaccine mandate for kids to go to school. That's not true. What all the states I'm aware of have is immunity mandates. Which means what? Either a vaccine or evidence that you have recovered from the illness. 

  

MATT BURGESS: I believe it is the case that in some states, early in the pandemic and certainly was the case in some workplaces including this one. That you did have to have a vaccine. 

  

TODD ZYWICKI: Right. Yeah, but I'm talking about sort of standard thing, measles, mumps. Everybody claims that you've got to... That, oh, this is just another vaccine. It's not true that there's vaccine mandates. There are immunity mandates which means if you had measles as a kid and you could prove it by an antibodies test, then you don't have to get a measles vaccine, mumps, rubella, you name it. That's the law in these states. 

COVID in Virginia, for example, when the governor decided, my university decided to impose a vaccine mandate was literally the only vaccine that could not be satisfied by natural immunity. Every other one, you could satisfy it by natural immunity. How? By showing evidence of an antibody test. 

  

MATT BURGESS: Antibodies, yeah. 

  

TODD ZYWICKI: And so one of the things that was illegal in my view and unconstitutional about the COVID vaccine mandates is they made no allowance for natural immunity. 

And to give the more general point when it comes to law, the argument going back to this Jacobson case, the smallpox inoculation case in 1906, was that it's not about protecting the individual. It's about protecting the community. So if it was just about making sure that people were healthy or that people didn't have severe side effects from COVID, then they could pass a law that says, "Everybody who's overweight has to get bariatric surgery regardless of the risk to them because we know obesity is a risk factor for bad outcomes for COVID." 

  

MATT BURGESS: Sure. Sure. Sure. 

  

TODD ZYWICKI: Or, "Everybody's going to now be required to exercise five days a week." And so the only argument, and in fact, it turns out obesity was not just a risk for you getting sick for COVID, but obesity also is a risk for higher viral spreading, as it turns out in the evidence. So the only argument that justifies vaccine mandates is not the benefit to you, it's the benefit to society. So number one, natural immunity, it was known at the time and is really known now, is clearly superior to vaccines in terms of preventing infection and preventing transmission of COVID. There's really no doubt about that anymore. We could talk about why it is. 

But it was already known at the time that the vaccine mandates went into effect. So then, the only thing you had left at that point would be the question of COVID vaccines for people who didn't have demonstrable natural immunity. And what we also knew at the time was that COVID vaccines did not meaningfully reduce infection or transmission and that they only did so for a very short period of time. By the time the vaccine mandates went into effect in the United States in the end of the summer, like for those of us in universities, the United States was already making plans to roll out booster shots because it was already known that people were getting sick. People were dying. People were... Ever since we released that case up in Provincetown, Massachusetts. 

What you see when you look back at the history on this is, the smallpox vaccine was a vaccine that had been around for a century. It was known exactly how it operated. It was known what the risks were and what the benefits were. It was a highly contagious, highly deadly disease. That's very different than what we saw in the COVID situation where it was clear that it couldn't prevent infection and transmission. It was clear it never could because it didn't create mucosal immunity. And the larger point is think about what I said earlier about where the eugenics laws came from. The forced sterilization laws came from. The precedent for that was the Jacobson case, which is as we call what Justice Holmes said is, "Principle that allows... Mandatory vaccinations clearly broad enough to forcibly tie someone's fallopian tubes." Which is once you go down that slope, you get eugenics, you get Korematsu, which was based on the same idea that the government had a right to protect the public from these people that they judged to be dangerous, and you could see where that line runs. 

And so I think the idea that the government really needs to be the burden really needs to be on the government, I think when it comes to overriding individual liberty, making these claims about externalities and protecting the public because that can really be a rationalization for some very dangerous things in terms of this sort of utilitarian calculus, including things like the Tuskegee experiment. You can just think of all the different ways that all the different places that can lead you. If you start weighing just sort of diffuse broad, vaguely defined public benefits against individual liberty. Sometimes the calculus is appropriate. It's just to say, we shouldn't just blithely ignore individual liberty in the claims that there's some public benefit from some action. 

  

MATT BURGESS: It sounds like, to put it succinctly, you're saying that we should be very cautious about any structural infringement on individual liberty, lest it be misused by somebody, some tyrannical power whose norms we find repulsive, like those who would perpetrate, internment, or eugenics. 

Okay. Last really quick question about vaccines, because I think there's often nuances lost in this debate because it's so charged. So on the one hand, I've heard you articulate I think a skepticism to the forms of vaccine mandates, excuse me, that some employers enacted, and yet... So just two really quick yes or no questions. Number one, would you be in favor of a vaccine mandate that had a natural immunity exception? And number two, forget the law, forget the policy. If a friend of yours said, Todd, do you think it's a good idea for me to get a vaccine, what would you tell them? 

  

TODD ZYWICKI: On the first one, I would say that it is quite clear with respect to the COVID vaccine that there's no justification for vaccine mandates. The only justification is if it protects against infection and transmission. Otherwise, it's a matter of individual choice, just like how often you exercise, what you eat, how much you sleep, all the other sorts of things that just affect or general tensity to get ill. 

On the second one, my view personally, at this point is, I would tell people, "Absolutely not." I do not think that the risks of this vaccine outweigh the benefits and among the risks, I'll just mention ones that people could find on my Twitter account if they want to know more about it, but there's something called original antigenic sin that is a well-known principle of virology that basically says, "Your first exposure to a variant basically locks you in forever." 

For example, all this hullabaloo now about the new variant vaccine is largely irrelevant because the way the immune system works is it's going to just reactivate people's defenses against the original Wuhan variant that's been long extinct. There's a problem called immune exhaustion. There are various other things such as what's called immune tolerance, which is repeated exposure at high levels to certain stimulants can have all kinds of problems. So it turns out, the only way this strategy that's been proposed makes any sense is, only if you think of the immune system, in my view, is some sort of machine that can just get activated over and over again and not what it really is, which is an organic adaptive system that is very complex and simply trying to simplify it, doesn't work very well. So that would be my view. 

  

MATT BURGESS: Quick follow-up question. Is your position basically that it's not worth it now because basically everybody at this point has either had it or had a vaccination or both? And then if no, what's your response to I think the pretty clear statistics that people who were vaccinated have dramatically lower death rates? 

  

TODD ZYWICKI: What I would say is I don't think anybody has ever made the case in any persuasive way that the benefits of the COVID vaccine to anybody but high-risk individuals outweigh the costs. 

  

MATT BURGESS: Even at the beginning. 

  

TODD ZYWICKI: Yeah. We know overwhelmingly that those who died from COVID were the elderly. We know there was a huge age stratification and the unhealthy, and really primarily those who were obese or who had obesity-related issues like diabetes, hypertension, comorbidities, those sorts of things. 

With respect to everybody else, younger people, healthier people, the risk of COVID was trivial. And if you look at the average risk reduction versus the relative risk reduction, it's almost zero because so few younger or healthy people died from COVID or even got seriously ill from COVID. And so I think you can see what Jay Bhattacharya says, or others who have looked at this, and it seems pretty clear, I think at this point from the very beginning that lower-risk people, the benefits were highly unlikely to have outweighed the cost. And now, we've had other issues that I could go into in terms of the way in which mass vaccination prompted... That seems to have been the cause for the rapid appearance of immune escapist variants such as Delta and various other problems that have arisen from that. So I think it was a catastrophic public health decision to give everybody the same immune profile. And I think, in that sense, it was bad for a lot of individuals and bad to vaccinate a lot of otherwise healthy people with this particular variant. 

  

MATT BURGESS: That's interesting. I've certainly seen data that suggests that the average death rates were lower for vaccinated people in all age groups, even though you're right that the baseline was relatively low for young and not at-risk age groups. And I've also seen data suggesting, at least for the mRNA ones, it's true that J&J and AstraZeneca were both a bit less effective and had a bit worse side effects. But for the mRNA ones, I've seen data that suggests, at least for the main side effects, that the side effects were worse with COVID. So we might have to agree to disagree on the medicine there, but I think that you make an interesting point about the rule of law and the legal aspects. I had more questions about norms and other things I'd love to ask you, but we're out of time, so let's just say thanks so much Todd Zywicki for coming on The Free Mind podcast. This was loads of fun, and we'll see you soon. 

  

TODD ZYWICKI: Sounds great, Matt. I think we could have talked for another hour, huh? 

  

MATT BURGESS: Yeah, indeed. The Free Mind podcast is produced by the Benson Center for the Study of Western Civilization at the Â鶹ӰԺ. You can email us feedback at FreeMind@colorado.edu or visit us online at Colorado.edu/center/ Benson. You can also find us on social media. Our Twitter, LinkedIn, and YouTube accounts are all @BensonCenter. Our Instagram is @TheBensonCenter, and the Facebook is @BruceD.BensonCenter.