Sunday, September 26, 2004

More on Epstein:

Sandefur has an excellent post on Richard A. Epstein, out-and-out genius, and (lucky for us) libertarian superstar. I have seen Epstein speak on TV and heard him on radio and can attest that what Sandefur has written about him is accurate:

If you’ve ever heard him speak, you know that his written work sounds just like his lectures, which come out in fully formed, highly articulated paragraphs, at rapid-fire rate. They’re often very hard to follow, and so are his books, which are written at a very advanced level. Following Epstein requires understanding things like Pareto optimality, Prisoner’s Dilemma games, and other law-and-economics talk.

Watching his mind tick can be quite fascinating. I’ve often thought that I missed something by not having him as a professor in law school. Yet, I’m not sure if I would want to be tested by him or have to worry about understanding all of his lectures. It might be too challenging (and I’ve heard from at least one former student—a prominent blogger and a fairly accomplished pundit in libertarian circles, who shall remain nameless—that many of Epstein's students found his classes too challenging and abstruse).

In a subsequent post, Sandefur asks my advice on how Epstein puts his theory of approval of government forced exchanges that are Pareto justified, with government restraints on private discrimination. Let me note two points that Epstein makes in Forbidden Grounds (a polemic against anti-discrimination laws). First, like me, Epstein doesn’t believe that the pattern of segregation that we saw in the Jim Crow south could have persisted absent enforcement by state and local governments. He notes the efforts of segregationists to restrict the black vote as powerful evidence of this. “Without ironclad white political control, someone, somewhere would have tried to gain entry into local markets, given the supra competitive returns.” (Epstein, Postscript, 8 Yale Law & Policy Rev. at 331).

In those areas of life where explicit ordinances demanding segregation weren’t present, private violence enforced the color line and the Jim Crow governments let that violence go by refusing, in violation of the 14th Amendment, to enforce the “equal protection of the laws.” Moreover, Epstein points outs that state governments could also enforce collateral restrictions against such firms that bucked the color line—taxes, zoning permits, health inspections, and the like, “could be brought to bear on firms that did not toe the line set by Jim Crow.” (Epstein, Forbidden Grounds, at 246.)

Yet, Epstein would indeed be willing to allow for the existence of anti-discrimination laws in the private sector so long as they were Pareto justified. But the problem is, according to Epstein, they clearly aren’t. Much of Forbidden Grounds and his law review articles on the subject were written to demonstrate this. Here is a passage from my unpublished law school paper on him:

According to Epstein, the rate of black social progress does not correlate well with the expansion of civil rights enforcement. The figures cited by [James J.] Heckman and [J. Hoult] Verkerke [two scholars whose work attempts to justify such civil rights legislation in private markets] show that the greatest black gains occurred immediately after the passage of the Civil Rights Act, and then leveled off after 1975. These gains coincide with the dismantling of the Jim Crow system, not with greater civil rights enforcement in private markets. Blacks made the greatest gains when the budgets available to the federal government were small and the EEOC was limited to the task of reconciliation and mediation with no specific enforcement powers. A greater push for civil rights enforcement in private markets came after the 1970s. The disparate impact theory was adopted in 1971. The EEOC was given judicial enforcement powers in 1972. The Supreme Court did not fashion the present day disparate impact tests until the mid-1970s. Voluntary affirmative action for blacks and other protected groups did not receive official Supreme Court sanction until 1979 and a stronger consensus emerged to make civil rights enforcement a national priority. Yet, as the engine of civil rights enforcement gained its greatest momentum, black progress slowed down, and perhaps stopped.

The black middle class did indeed continue to make gains throughout the late 1970s and onward. But around the 1970s, black unemployment rose such that it was worse in 1990 than it was prior to the passage of the Civil Rights Act of 1964. The black unemployment rate rose faster than the white rate did after 1975 when civil rights enforcement reached its mature form. Not only did Title VII not result in shrinking the unemployment gap between blacks and whites, Title VII’s regulatory constraint on private markets most likely, in Epstein’s opinion, contributed to the increasing black unemployment rates. In short, if the law makes it harder to fire people, the unintended consequence might be that that firms will less likely hire them. But if firms don’t hire blacks, aren’t they discriminating against them at the entry level? Well if you avoid interviewing blacks, it’s harder for a claim of discrimination to be advanced than if someone makes it to the interview but then gets turned down (or gets hired, then subsequently fired). Note this recent finding heralded by civil rights activists.

Anyway here is what I wrote on Epstein and whether antidiscrimination laws are justified under social welfare criteria [with some updated paraphrasing]:

Within economic theory, two ways exist in which to measure social welfare, by summing of individual welfare. The first is Kaldor-Hicks, which asks “do the winners from the social program obtain enough in benefits that they could wholly compensate the losers from that program and still come out ahead?” (Epstein, The Paradox of Civil Rights, 8 Yale Law & Policy Rev. at 301.) The Pareto test is the second. This test insists not only that compensation is sufficient to leave all parties at least as well off be not only payable, but also paid. (In other words, the winners have to compensate the losers for their loss—but the winners get the keep the excess gain). Some direct evidence of an overall shift in social welfare attributable to the Civil Rights Act is needed to justify the Act. According to Epstein, it is appropriate to adopt a standard that requires all white gains to meet the Pareto standard (so that no black losses occurred), and simultaneously justify black advances under Kaldor-Hicks (so that black gains exceeded white losses). In examining the relative wage figures provided by Heckman and Verkerke, Epstein concludes that neither test for social welfare can be justified using the relative wage measure. For instance, if black wages remain constant at $80, but white wages fell from $100 to $90, this move would show up as a favorable reduction in the relative wage ratio. Yet, this move would also likewise fail the relevant social welfare justificatory tests. If the black/white ratio reduction occurred along with rising absolute wage levels for both groups, the reduction would still not evidence a social benefit, unless it is also shown that “the overall rate of increase was as large as it could have been without incurring the administrative costs and allocative dislocations associated with the statute.” (Id.)

In my paper I note Rutgers Newark University of Law Professor Alfred Blumrosen, who sums up a critique that I’m sure many readers already may have in mind: “[C]ivil rights are a quest for individual and collective dignity—concepts that Epstein has difficulty converting to dollars.” (Blumrosen, Responses to Epstein, 8 Yale & Policy Rev. at 321.)


Jack Naka said...

Nice blog. Please check out my fashion dress site. It is all about fashion dress informations.

Marketing man said...

You have a great blog here! I will be sure to book mark you.
I have a direct email marketing software site. It pretty much covers direct email marketing software related stuff. Check it out if you get time :-)