Profession of Power

A critique of Bob Tarantino’s celebration of the legal profession

In a new post over at his blog, bad platitude, Bob Tarantino continues his defence of the Law Society of Upper Canada’s right to exact ideological conformity from its members. His focus is on Jonathan Kay’s National Post op-ed that tied the Law Society’s demands to a belief  in the “myth that lawyers comprise a moral vanguard within society, with sacred duties that extend beyond the daily humdrum of litigating divorces and drafting contracts”. Mr. Tarantino concedes that Mr. Kay “correctly diagnoses … the profession’s seemingly inherent vainglory” ― and proceeds to defend thinking of law as a profession, not “‘just’ an occupation” in a way that demonstrates just how vainglorious this profession can be.

Before getting to the point, I pause to note Mr. Tarantino’s rather remarkable appeal to the forces of the market in an implicit attempt to justify the Law Society’s right to force lawyers to come up with, or at least copy-and-paste, “Statements of Principle” acknowledging a purported obligation to promote equality and diversity. Contra Mr. Kay, Mr. Tarantino observes that some clients ― he mentions Facebook ― want lawyers to take these things seriously. Mr. Tarantino also insists that he has “the right to decide not to spend [his] money at businesses that espouse views [he] find[s] unpalatable, and even to enthusiastically encourage others to avoid spending their money there”. Very well ― though at least some human rights statutes (including those of Quebec and New Zealand) include political opinion among the list of prohibited grounds of discrimination, which suggests that even enlightened individuals like Mr. Tarantino might disagree with some instances or applications of such legislation. But how exactly does Mr. Tarantino justify the coercion of lawyers whose clients are not as enlightened as he or Facebook, or indeed those lawyers who do not have any clients? At best, this is not a free-market argument, but a paternalistic one. The Law Society knows better.

On now to Mr. Tarantino’s main argument, which is that “it is precisely in law’s status as a profession and as a locus of power in society that the importance of collective value-setting arises”.  A profession, says Mr. Tarantino, is distinguished by involving the application of “a body of specialized knowledge and subordination of the practitioner’s interests in favour of three ‘others’: the client, the profession, and the public”. Lawyers, even more than the members of other professions, wield power over “our society and over the affairs of their clients, and if they adopted a self-interested ethic, a sort of syndicalism, they could quickly become a manifest danger to the rest of society”. For this reason, it is essential to make lawyers “virtuous” ― “so that their power is channeled in favour of others”. This is what both the Law Society’s latest demands and the oath lawyers are required to swear upon entering the profession (to which these demands bear a close resemblance, as I have noted here) are supposed to accomplish. Mr. Tarantino adds that it is very important that these exercises in “collective identity-formation” are “voluntary”; that they “do not find their origins in the government [but] arise from lawyers themselves.” He sees the legal profession as “in some ways just a big club … that gets to set its own rules about membership”, and there is nothing “illegitimate” about that, is there?

It is as if the last 250 years of history and political thought had not happened. As if it were possible to believe, after Smith and Madison ― not to mention Robespierre ― that public good is achieved by virtuous agents rather than by competition and ambition counteracting ambition. As if it were possible to claim, regardless of Constant and Berlin, that rules that a majority imposes on a minority not really an imposition and an interference with liberty. As if it were possible to maintain, despite Friedman and public choice theory, that a state-backed monopoly is not self-interested and syndicalist, working to exclude competition and raise prices for its services. Or, if Mr. Tarantino does not actually believe that such things are generally true, he must then suppose that lawyers, of all, people, are uniquely immune to the fallibility of other human beings. This is the sort of presumption, as self-serving as it is vainglorious, that Mr. Kay rightly decried.

Moreover, Mr. Tarantino’s argument involves a rhetorical sleight of hand. The lawyers’ power, of which he makes so much, is mostly not collective, as he suggests, but individual. It is not the legal profession acting as a united whole that drafts statutes, prosecutes alleged criminals, adjudicates disputes in administrative tribunals, or handles the personal and financial affairs of vulnerable clients. It is individual lawyers or, at most, firms. In any litigation, there are two sides ― normally, though admittedly not always, each with its own lawyer. When lawyers draft or apply rules that bind citizens, other lawyers are ready to challenge these rules or their application. If a lawyer mishandles a client’s case, another can be retained ― including to sue the first. (This is not to make light of the possibility and cost of mistakes or incompetence, of course. Still, the point is that a mistaken or even incompetent lawyer does not represent the profession as a whole.) The one circumstance when lawyers do act collectively is when they act through the Law Society. When the Law Society exacts compliance with its demands, that is the profession exercising power ― backed up by the armed force of the state. That is where we really ought to worry about power being exercised unethically. And in my view ― though perhaps not in Mr. Tarantino’s ― the exercise of power to impose ideological conformity on those subject to it is unethical and indeed oppressive.

Unlike many other defenders of the Law Society, Mr. Tarantino has the merit of not trying to minimize the seriousness of what is going on. His first post contained a forthright admission that the Law Society’s demands amount to a values test for membership in the legal profession. His latest doubles down on this admission, and makes clear that it the Law Society’s actions rest on a conception of public power that is paternalistic, confident both of its own moral superiority and of its ability to make others virtuous, and takes no notice of disagreement or dissent. Those who do not like how this power is exercised can simply get out and leave the legal profession ― and find some other way of making a living. Many of those who support the Law Society seem to be surprised by the force of the opposition which its latest demands have provoked. Perhaps, thanks to Mr. Tarantino’s posts, they can understand better.

One’s Own Self, Like Water

The Law Society’s demand for a “Statement of Principles” is a totalitarian values test

In my last post, I outlined the scope of the Law Society of Upper Canada’s demands that all lawyers subject to its regulation, including those who are retired or working outside Ontario, produce a “Statement of Principles that acknowledges” a purported “obligation to promote equality, diversity and inclusion” ― not only in the practice of law but “generally”. I also explained that no such obligation exists at present, because none is imposed by the Rules of Professional Conduct or other rules applicable to lawyers, as they now stand, and that it is doubtful whether the Law Society could lawfully impose such an obligation under its enabling statute.

I have not seen meaningful responses to these concerns. On the contrary, they have been echoed in an op-ed in the Globe and Mail by Arthur Cockfield. Instead, those who defend the Law Society argue that whatever limitation of our rights the Law Society’s demands produce, the limitation is justified if analysed under the proportionality framework of s 1 of the Canadian Charter of Rights and Freedoms. They also point to the fact that lawyers are already required, by s 21(1) of Law’s Society’s By-Law 4, to swear an oath upon entry into the profession.

I agree with the Law Society’s defenders that the “Statement of Principles” that it wants us to produce is indeed similar to an oath, and in particular to the oath required by s 21(1), which I will refer to as “the lawyers’ oath”. They are similar in nature, in purpose ― and in their uselessness and questionable constitutionality. I will discuss these points below, drawing heavily on the criticisms of the Canadian citizenship oath (and, specifically, of its reference to the Queen) that I have developed over the course of four years of blogging on this topic, and especially in an article on this issue published in the National Journal of Constitutional Law. (Indeed, though it was not the focus of my argument, I briefly discussed the lawyers’ oath in the article.) Some of those who defend the Law Society have sought to accuse its critics of hypocrisy over our purported failure to object to oaths, and especially to oaths of allegiance to the Queen. Whatever the rhetorical value of such accusations ― and I think that it is nil, since they do not refute our substantive objections ― this topic is not new to me.

Start, then, with the nature of the oath or “Statement of Principles”. Both are forced expressions of commitment to acting in certain ways. Though a “Statement of Principles” might, depending on the way in which it is formulated, ostensibly stop just short of being a promise, I think that any distinction between acknowledging an obligation and promising to fulfill an obligation is one without a difference in this context. In his National Post op-ed criticizing the Law Society’s demands, Bruce Pardy treated the “Statement of Principles” as a forced expression of support of support for the Law Society’s policies, which I think is quite right. As Prof. Pardy pointed out, in National Bank of Canada v Retail Clerks’ International Union, [1984] 1 SCR 269, the Supreme Court has condemned such demands as “totalitarian and as such alien to the tradition of free nations like Canada”. (296) Although in Slaight Communications Inc v Davidson, [1989] 1 SCR 1038 the Court made it clear that this holding did not apply to compelled statements of fact, this (wrongheaded, in my view) narrowing of the National Bank holding is not relevant here. But, as I have argued in my blog posts and article, coerced commitments are more than expressions of opinion. They are impositions not only on the freedom of speech of those who must make them, but also on their freedom of conscience. Oaths, as the Supreme Court explained in R v Khan, [1990] 2 SCR 531 work by “getting a hold on [the] conscience” of those who take them, notably ― but not only, as I shall presently explain ― by making the thing sworn to a matter of moral, and not merely legal, obligation. The  “Statement of Principles” is similar, in that it is an attempt to make every lawyer embrace, as a matter of his or her personal morality, and thus conscience, the principles set out in that statement.

The other way in which oaths typically impinge on conscience, and also a point of similarity between the lawyers’ oath and the “Statement of Principles” is that, because they typically impose vague obligations that go well beyond the requirements of any positive law, they demand frequent if not constant exercise of moral judgment about the precise scope of the duties being sworn to. As I wrote in my article, the lawyers’ oath

requires lawyers, among other things, to “protect and defend the rights of interests” of their clients; to “conduct all cases faithfully”; not to “refuse causes of complaint reasonably founded, nor [to] promote suits upon frivolous pretences”; to “seek to ensure access to justice”; and to “champion the rule of law and safeguard the rights and freedoms of all persons.” These (and the other requirements of the oath) are not straightforward obligations. Discharging them requires lawyers to think about just what their duties are. … [T]o a considerable degree, the judgment required is a moral one. In some cases, that is because the lawyers’ duties are couched in moral terms (like “faithfulness” …). In other cases, the degree to which one can and ought to fulfill these duties must necessarily be left to individual conscience. (How far must one go to “ensure access to justice”: does it require one to limit one’s fees? How much pro bono work need one do? Can one “ensure access to justice” while being a member of a state-enforced cartel devoted to raising the cost of legal services?) In other cases still, it is because the lawyers’ duties can conflict (for instance, when the defence of a client’s interests might suggest launching a “suit upon frivolous pretences”), requiring moral judgment about which is to prevail. In short, a lawyer must constantly, or at least frequently, rely on his or her conscience to determine just what it is that his or her oath requires. (152)

The “Statement of Principles” would be meant to do the same thing, requiring lawyers (those, at least, who take it seriously) to be constantly asking themselves what their general “obligation to promote equality, diversity and inclusion” requires. It is no answer that the requirement is merely to comply with relevant human rights legislation. Not only is no “Statement of Principles” necessary to achieve that, but this legislation does not actually apply to many lawyers, such as those who are retired and not engaged in the sorts of relationships or activities which such legislation covers. The whole point of a “Statement of Principles” is to go beyond the positive law.

These impositions on freedom of conscience ― and, of course, the compelled expression  of opinion that the lawyers’ oath and “Statement of Principles” also are ― require justification. I do not think that any exists. In my article, I take the Canadian citizenship oath through the Oakes proportionality analysis, and find that it fails at every step. (Interestingly, as I also note in the article, the Law Society itself dropped the mandatory oath to the Queen due to constitutional concerns.) Of course, the issues with the lawyers’ oath and the “Statement of Principles” are not the exactly same. Yet there are also some common points.

In particular, both supposedly serve the sort of “[v]ague and symbolic objectives” of which the Supreme Court told us to be wary in Sauvé v. Canada (Chief Electoral Officer), 2002 SCC 68, [2002] 3 SCR 519 while having a tenuous relationship to these objectives. The lawyers’ oath is unlikely to make many lawyers more ethical, or more committed to the Rule of Law. One is ethical, or a “champion of the Rule of Law”, because one believes in these things ― not because one was made to swear to them. Similarly, even the Law Society’s defenders tend to acknowledge that requiring us to produce a the Statement of Principles is not going to do much to make the legal profession more diverse or inclusive. A symbolic expression of commitment to a set of values, no matter how attractive, is no more necessary than a symbolic expression of commitment to one’s country, no matter how great ― which, I explain in the article on  the citizenship oath, and as Liav Orgad explained in more detail in his study of loyalty oaths, is to say not necessary at all.

This is all the more so since the Law Society explicitly states that the requirement to produce a “Statement of Principles” can be satisfied by the simple expedient of “adopting” one of the sample “Statements” supplied by the Law Society itself. Indeed, the Law Society’s defenders suggest that since we could easily “adopt” one of those sample statements, regardless of whether we believe in them, or some other “Statement” so vague and bland that, as Annamaria Enenajor put it to me on Twitter,  “a closet [sic] neo-nazi lawyer could get down with” it, the whole thing is really no big deal. This again is similar to the lawyers’ oath. I have no doubt that if Justice Abella chooses to re-join the bar after her retirement from the Supreme Court, she will feel no compunctions about promising to “champion the rule of law” ― even though it is a matter of public record that “[t]he ubiquitous phrase ‘rule of law’ annoys her“, and that she prefers something called “the rule of justice”. But to the extent that the Law Soceity’s fellow-travellers are right, it is difficult to see how the “Statement of Principles” is meaningfully addressing a pressing and substantial concern, and it must fail the proportionality test for that reason.

There is, however, another possibility. As with the citizenship oath and the lawyers’ oath, while most people may be content to make a pretended commitment to ideas or principles they do not understand or indeed secretly despise, some are not. They take a thing of that nature, whether called an oath or a Statement of Principles, seriously. They agree with Robert Bolt’s Thomas More that “[w]hen a man takes an oath … he’s holding his own self in his own hands. Like water. And if he opens his fingers then—he needn’t hope to find himself again”. And, just like More refused to falsely swear an oath to regard Henry VIII as head of the Church, they will not tick off box on the Law Society’s form to acknowledge an obligation to promote ideals the Law Societey’s interpretation of which  they do not share, or indeed the Law Society’s authority to impose which they reject. As to such people ― as to those who refuse to live in the closet ― the Law Society’s demand is not a trivial, if useless, imposition. As prof. Pardy argues, and as the Supreme Court has long accepted, forcing people to endorse opinions that they do not share is totalitarian ― or at any rate no less oppressive than the government of Henry VIII. As to such people, the Law Society’s demands will, at all events, fail the “proportionality strictu sensu” test, because totalitarian demands for ideological compliance always impose a greater cost than whatever benefit the state (or, in this case, the Law Society) can hope to obtain by imposing them.

Beyond the dry terminology of proportionality analysis, it is important to understand that what is at stake here is neither more nor less than a values test for the practice of law. While some have resisted this implication (going so far as to argue that a requirement to produce a “Statement of Principles” is not a values test even though a requirement to provide it to the Law Society would be one!), others among the Law Society’s fellow travellers are quite comfortable with it. In their view, there is nothing wrong with a legal profession in which only people who hold the right values ― and those who are sufficiently unprincipled to dissemble about theirs ― are welcome to remain, while those who are deemed to be wrong, and who refuse to hide in the closet in response, are shown the door. The undesirables are not yet pushed out ― it may be that the Law Society’s policy is nothing more than a paper tiger, a “demand” that will not be meaningfully enforced. But it could also be a warning, and a test. Even if the Law Society does not try coercion now, acquiescence to its demands it will embolden it do so in the future. As others have argued, it will also show that the legal profession is supine enough to comply with the authorities’ attempts to impose orthodoxy on it. And this leads me to a final question for those who support the Law Society. Are you really so confident of always being among those whose orthodoxy will be imposed on others? Thomas More ― the historical one, the one who confiscated books and rejoiced in the burning of heretics ― was so confident. May you fare better than he did.

Lawless Society of Upper Canada

The LSUC’s attempt to make lawyers “promote diversity and inclusion” is lawless and incompatible with a free society

The Law Society of Upper Canada (soon to be renamed something less historic), prepares to require its members ― of whom I am one ― to supply it with

individual Statement[s] of Principles that acknowledge[] [our] obligation to promote equality, diversity and inclusion generally, and in [our] behaviour towards colleagues, employees, clients and the public.

Bruce Pardy has written an excellent op-ed in the National Post to denounce this imposition as an essentially totalitarian attempt at thought control by the legal profession’s governing body. (He and Jared Brown also discussed the issue with Jordan Peterson; I am not fully on board with some of the things said in that conversation, but it is worth listening to.) While prof. Pardy’s op-ed makes the essential points, I will canvass a couple of further issues on this blog. In this post I will discuss the scope of the Law Society’s demand and what seems to me be the lack of legal justification behind it. I will have at least one other post to address the freedom of expression and freedom of conscience issues the demand raises, and probably another one about some broader concerns regarding the regulation of the legal profession.

The first point I want to make here is that it is important to be clear about just how far the purported obligation that the Law Society wants us to acknowledge extends. (I say “purported” because, as I shall presently explain, the obligation is, for the moment, a fictional one.) It is not merely a requirement that we act consistently with the values of equality, diversity, and inclusion insofar as they are embodied in legislation in force for the time being. No “statement of principles” would be necessary to accomplish that. The idea is to make us go beyond what the law actually requires. Yet in a free society people cannot be forced to do things that the law does not require, still less to hold or uphold beliefs.

People in free societies disagree ― including about the value and, even more so, about the scope and implication, of things like equality and inclusion. (Just compare human rights legislation in different jurisdictions. The differences between these laws are testimony to disagreements that can arise even among those who accept the general principle of such laws.) These disagreements are resolved for the time being by the enactment of legislation, and it is antithetical to the Rule of Law to demand that people who might not share the values, or the version of the values, that underpin the legislation in force for the time being act on those values beyond what the legislation actually requires.

Worse yet, the purported obligation is said to exist not only in the course of our practice of law (and any “behaviour towards colleagues, employees, clients and the public” that we engage in qua lawyers), but also “generally”. The fact that, as the Law Society’s “FAQ” repeatedly state, the obligation is said to fall not only on those engaged in legal practice but on all licensed lawyers, including, for instance, those who are retired, reinforces the natural reading of the obligation as covering aspects of our lives that go beyond the practice (and business) of law ― perhaps our every waking moment. This, once again, is utterly at odds with the idea that the demands that a free society makes on its members are limited, and typically do not extend into a certain private sphere, except of course to restrain actions that would actually violate the rights of others.

In concrete terms, I take it that, according to the Law Society, I have a duty to devote my scholarship to the promotion of equality, diversity, and inclusion. Certainly any topics or argument deemed, by the Law Society, to be antithetical to these ideas, would be verboten. Perhaps I must devote my personal life, and not only my professional activity, to the promotion of the Law Society’s preferred ideals. There is, after all, no natural limit to the generality of the word “generally”. Will the Law Society police my Twitter and Facebook accounts to see if they are sufficiently egalitarian, diverse, and inclusive?

The second point I want to make here is that it is not clear what the source of the Ontario lawyers’ purported “obligation to promote equality, diversity, and inclusion” even is. So far as I can tell, neither the By-Laws of the Law Society nor the Rules of Professional Conduct impose one. The closest they come to doing so is in commentary to Rule 2.1-1, which provides that “[a] lawyer has a duty to carry on the practice of law and discharge all responsibilities to clients, tribunals, the public and other members of the profession honourably and with integrity”. The commentary states that

[a] lawyer has special responsibilities by virtue of the privileges afforded the legal profession and the important role it plays in a free and democratic society and in the administration of justice, including a special responsibility to recognize the diversity of the Ontario community, to protect the dignity of individuals, and to respect human rights laws in force in Ontario.

Of course, the Commentary is not the Rule. But, in any case, “recognizing diversity”, “protecting human dignity”, and respecting the law ― all in the course of practice of law ― are much lesser obligations than promoting diversity and inclusion, and not only in one’s practice but generally.

Now, the “five strategies to break down barriers faced by racialized lawyers and paralegals” adopted by the Law Society from one of which the demand for a “Statement of Principles” derives, also say that

The Law Society will review and amend, where appropriate, the Rules of Professional Conduct … and Commentaries to reinforce the professional obligations of all licensees to recognize, acknowledge and promote principles of equality, diversity and inclusion consistent with the requirements under human rights legislation and the special responsibilities of licensees in the legal … profession[].

But even if the Law Society “will review and amend” the relevant rules, it does not seem to have done so yet. Thus, quite apart from any substantive issues with the Law Society’s demands, the fact is that the governing body of Ontario’s legal profession is demanding that lawyers “acknowledge” obligations that do not yet exist in law. Since the Law Society is now considering its rebranding options, may I suggest the Franz Kafka Appreciation Society?

But there is more. Even if, or when, the Law Society wants to amend its Rules of Professional Conduct to actually impose an generalized obligation to “promote principles of equality, diversity and inclusion”, it is not clear that will have the authority to do so. The Law Society Act, as it now stands, provides that

[i]t is a function of the Society to ensure that all persons who practise law in Ontario or provide legal services in Ontario meet standards of learning, professional competence and professional conduct that are appropriate for the legal services they provide. (Section 4.1(a))

It adds that

[s]tandards of learning, professional competence and professional conduct for licensees and restrictions on who may provide particular legal services should be proportionate to the significance of the regulatory objectives sought to be realized. (Section 4.2.5)

It is not clear to me that the imposition of an obligation to promote certain values, be they ever so laudable, and especially of an obligation that extends beyond the practice of law or the provision of legal services are within the Law Society’s lawful powers under this legislation. The standards of professional conduct that the Law Society is authorized to impose have to be “appropriate” for the provision of legal services (and “should be proportionate” to the objective of regulating the provision of legal services). Admittedly, “appropriate” is a capacious word, and the deferential approach of Canadian courts to reviewing administrative decision-making means that it might take a lot of persuasion to get a court to hold that policing a lawyer’s beliefs and actions unrelated to the actual practice of law is not an “appropriate” way of regulating the provision of legal services. Still, I for one have a hard time seeing how it is appropriate for a professional regulatory body to transform itself into a committee for the promotion of virtue and the prevention of vice and, should it eventually come to litigation, it might be worth trying to raise this argument, in addition to those based on the Canadian Charter of Rights and Freedoms, which I will discuss in the next post.

In any case, quite apart from what the courts may or may not do, the Law Society, if anyone, shouldn’t be trying to strain the limits of its statutory powers. The Law Society Act provides that it “has a duty to maintain and advance … the rule of law” (s 4.2.1), which among other things requires public authorities to act within their lawful powers ― not to test their boundaries. The Rule of Law also prevents public authorities from imposing on those subject to their coercive powers obligations that do not exist in law. On many views, at least, the point of these strictures is to preserve a sphere of autonomy within which individuals can act without being supervised or hassled by the authorities. The Law Society’s attempt to make those subject to its regulations into the torchbearers for its favoured values is at odds with these commitments, which one would hope most lawyers would adhere to even apart from their statutory recognition. One can only hope that the profession will resist its regulators, who have sacrificed their longstanding principles in a quest to make everyone embrace newer and supposedly more progressive ones.

UPDATE: Annamaria Enenajor insists that I was wrong to claim that the Law Society is  demanding that we “supply it” with copies of the “Statement of Principles” that it wants us to produce. I take the point that the Law Society’s explanation does not actually say that we must supply it with our statements. I find the idea that we merely need to tell the Law Society that we have created the statements it demands, without proving that this is so, more than a little odd, which is why it hadn’t occurred to me originally, but it could well be correct. That said, I do not think that whether or not the Law Society wants to see our statements changes anything to the analysis.

Ideas of the Marketplace II

What we can learn from thinking about the marketplace of ideas as a market

In a very interesting post over at EconLog, Bryan Caplan considers what he describes as the “dogmatic libertarian” claim that all markets work well, as it is applies ― or, rather, doesn’t apply ― to the marketplace of ideas. The marketplace seems to reject this claim, which suggests that it cannot be true. Prof. Caplan agrees that it is not, and makes two further observations. In reverse order, they are that “[t]ruth doesn’t largely win out in a well-functioning market for ideas, because consumers primarily seek not truth, but comfort and entertainment” (emphasis prof. Caplan’s), and that while “[m]ost markets work well … the market for ideas doesn’t … [b]ecause ideas have massive externalities. … The market for ideas … works poorly because strangers bear almost all the cost of your irrationality.” I think that’s largely right, but want to add a couple of additional points regarding prof. Caplan’s second observation.

First, while it is often true that we do not internalize the costs of our irrationality, this is less true in some contexts than in others. Most obviously ― this a point that Ilya Somin makes in his discussions of political ignorance ― we do internalize a much greater share of the costs of our bad decisions, and also of the rewards of the good ones, when deciding for ourselves, in our private lives, than when we vote or, more generally, act in the political sphere. Even in our private lives, we pass on some of the costs of our irrationality to family, friends, and sometimes the broader society as well, but we do absorb a much more substantial fraction of these costs. This is perhaps a trite point, and prof. Caplan might only have been referring to the marketplace for political ideas (political in a very broad sense), but I think it’s worth spelling it out.

More interestingly, I think, it is also the case that, even in politics, there is a way in which people can be a made to internalize at least a small fraction of the costs of their bad decisions in the marketplace of ideas: democracy. This, I think, is what H.L. Mencken’s famous quip that “[d]emocracy is the theory that the common people know what they want, and deserve to get it good and hard” means. The theory is only partly true, because as prof. Caplan says, in the political sphere “strangers bear almost all the cost of your irrationality,” but self-government ensures that you bear at least a little fraction of the cost of your opinions and decisions. When you vote for a lousy politician, or convince others to do so, you increase ― albeit usually by very little ― your odds having to reap the consequences of the lousy policies that that politician will implement. By contrast, in a dictatorship, the few who decide typically bear even less of the cost of their views than the voters in a democracy, because they are even better able to pass these costs on to others, while those who do not (which is to say, almost everyone) are even freer to know nothing and believe everything, since their ignorance, credulity, and irrationality have no impact whatever on anything. If you think that voters and politicians are bad in democratic countries, just compare them to the people and the rulers in authoritarian ones. Once again, Churchill was quite right to say that while democracy is a bad system of government, others are even worse.

The second point I wanted to make might be too obvious for an economist like prof. Caplan to discuss, but bears repetition by a lawyer writing for non-economists. That the marketplace of ideas may be malfunctioning as a result of massive externalities does not justify intervention by the state in order to make people internalize these externalities or prevent them from occurring. Market failure may be real, but so is government failure ― and there are situations in which government failure is more severe than the market failure government intervention purports to correct. Indeed, this point is, I think, more widely accepted (albeit not necessarily in these terms) with respect to the marketplace of ideas than for just about any other market. Distrust of, and opposition to, censorship, in the face of widespread evidence of malfunctions in the marketplace of ideas reflects, at least in part, an understanding that giving the state the power to rectify these malfunctions would be disastrous, both because the state is a bad judge of ideas and because this power would be abused in various self-interested ways be the people entrusted with wielding it. Unfortunately, people often fail to transpose this understanding to their analysis of other markets. Yet there is no reason why they should. The marketplace of ideas is just not that special.

Thinking of the marketplace of ideas in economic terms ― assuming, in other words, that it is a marketplace more or less like any other ― is, I think a useful exercise. (I attempted it here already.) It both allows both to sharpen our understanding of the marketplace of ideas itself (and of the related markets, such as the one for votes), and can serve as a reminder of some broader truths about markets and regulations that we intuitively sense when thinking about the marketplace of ideas, but forget in other contexts.

Law and Innovation, Again

In my July post for the National Magazine’s blog I wrote that the decision of Ontario’s Superior Court rejecting the attempt by the city of Toronto to stop Uber operating there without a “taxicab broker” license was a reminder of the fact that technological innovation often challenges the law not directly, but by enabling innovative business models. In a recent post for the Hoover Institution’s Defining Ideas, Richard Epstein offers a similar argument, and draws similar conclusions from it.

Prof. Epstein’s post, as it happens, was also prompted by litigation against Uber ― this time in California, where an administrative tribunal recently concluded that its drivers were “employees” and thus entitled to certain benefits. (It is worth noting that New York City’s authorities have since taken the contrary position.) Prof. Epstein points out that

There is no question that [“sharing economy”] platform systems require a contractual framework for a three-party relationship that is not found in the playbook of traditional industries, where there is a direct relationship between the party that supplies the goods and services and the party that requests them.

The law, says prof. Epstein, has a choice in how to respond to the situation. It can let the market work out new forms of contractual relations, which might combine elements of pre-existing standard arrangements (such as the employment contract) if the parties want it. Alternatively, it can try to simply fit new commercial relationships into the pre-existing forms.

For prof. Epstein, the choice is clear:

it is a hopeless task to apply traditional regulatory structures to modern arrangements, especially when they block the implementation of new business models. Indeed, it is necessary to go one step further: it makes no sense to apply these regulatory statutes to older businesses, too. Time after time, these statutes are drafted with some “typical” arrangement in mind, only for the drafters to discover that they must also try to apply the statutes to nonstandard transactions that do not fit within the mold.

No disagreement from me. Here’s what I had written last month:

[t]he law ― including the regulation of taxis ― is written with specific business models in mind. When the business models in question are no longer the only ones around, the legal rules based on the assumption that they are lose their efficacy.

We should, I said, resist “[t]he temptation to expand the scope of the existing regulations, to close the ‘loopholes’ opened up by innovation,” and take “the disruptions caused by innovation … as an opportunity to ask whether any of the arguments for the old rules … still apply.”

But if you didn’t want to take it from me then, you should take it from Prof. Epstein now.

The Uber Decision

Last week, Ontario’s Superior Court of Justice delivered a much noticed judgment rejecting Toronto’s claims that Uber could not operate there without registering and obtaining a license as a taxicab or limousine broker. Needless to say, the ruling is of great practical importance to Uber’s users, both passengers and drivers, as well as those who seek to regulate it out of existence. Legally, the decision, City of Toronto v Uber Canada Inc., 2015 ONSC 3572, is about a very narrow issue of statutory interpretation. Yet the recently-appointed Justice Dunphy’s thorough and well-written opinion provides us an opportunity to reflect on the importance of the Rule of Law and the processes of legal change.

The City of Toronto, like many others in Canada and elsewhere, has chosen to cartelize the transportation of persons by privately owned cars. All the cars used for that purpose are divided into the categories of “taxicabs” and “limousines.” The number of the former is fixed; the number of the latter is restricted indirectly, by imposing a variety of regulations on their owners and operators. In addition, the City requires “taxicab brokers” and “limousine service companies” to obtain licenses in order to operate within its limits. The City’s case against Uber was that Uber was acting as a “taxicab broker” or a “limousine service company,” without having done so. It asked the Court for both a declaration and an injunction that would have ordered Uber to stop its operations in Toronto. Uber, for its part, claimed that its operations were not covered by the City’s by-laws.

Justice Dunphy begins by determining whether Uber cars might be “taxicabs” or “limousines” within the meaning of the applicable by-law, chapter 545 of the City of Toronto Municipal Code. The definition if a “taxicab” is limited to categories defined by the various types of permits issued by the City. Since Uber cars lack such permits, they do not fall within this definition, reasons Justice Dunphy, and must be “limousines,” which include all cars “used for hire for the conveyance of passengers in the City of Toronto” other than “taxicabs.” To say that unlicensed cars used for that purpose are still “taxicabs” “would make nonsense of the definition of ‘limousine’ in the same enactment” [57] and thus cannot be the correct interpretation.

Having concluded that Uber cars are “limousines,” Justice Dunphy asks himself whether Uber ― or, more precisely, any one of the three members of the Uber group of companies actually sued by the City ― acted as a “limousine service company.” The by-law defines such a company as a “person or entity which accepts calls in any manner for booking, arranging or providing limousine transportation.” Uber, Justice Dunphy holds, does not “accept calls,” and thus is not covered by the definition. In Justice Dunphy’s view “accepting” a call or any sort of request “requires the intervention of some element of human discretion or judgment in the process and cannot be applied to a merely passive, mechanical role of receiving and relaying electronic messages.” [78] Yet that is precisely what Uber does.

Having provided prospective passengers and drivers with software that allows them to connect, often well in advance of any specific trip being envisioned by either party, it relays passengers’ requests for a ride to the nearest car available. Unlike a traditional taxi broker or limousine company, it cannot reject the request (for example if there are no cars available) or undertake to fulfill it. It is the driver who receives the request who takes the decision. Uber no more “accepts” requests for rides than does a phone company whose networks are used to transmit traditional calls for cabs, or automated services that connect a prospective rider with a broker. In Justice Dunphy’s view, it “is very likely” that “the by-law was drafted and the word ‘accepts’ was selected in lieu of the more generic ‘receives'” precisely in order “to exclude such businesses from the scope of the regulation.” [70]

Justice Dunphy also considers the meaning of the word “calls,” used in the definition of a “limousine service company” ― but not in that of a “taxicab broker” which, unlike the limousine company, can accept “requests.” This difference in wording, Justice Dunphy says, it must be given effect, so that “calls” cannot be taken to mean “requests.” Besides, the word “requests” is a recent innovation in the definition of a “taxicab broker,” and the City could have amended the definition of “limousine service company,” but has not done so. Online requests handled by Uber are not “calls” in any normal sense of the word, and this is an additional reason for concluding that it is not a “limousine service company.”

Although it might seem like excessive legalistic pedantry to some, I find Justice Dunphy’s analysis persuasive. Needless to say, it only applies to the specific legislative framework before him. Had the relevant definitions been drafted differently, his conclusions would presumably have been different too. But given the by-laws that were actually before him, I think that Justice Dunphy was quite right to distinguish the passive or mechanical functions of receiving or transmitting a communication and the (at least somewhat) discretionary function of accepting an order, as well as to give effect to the distinction between “calls” and “requests” which the City itself has created.

As I said in the beginning, beyond the narrow point about the meaning of the specific words used by Toronto’s city council to regulate its taxi industry, there is a broader one about the Rule of Law. As Justice Dunphy points out, “[t]he goal of statutory interpretation is not to start with the desired outcome that the regulator seeks in light of new developments to see what means can be found to stretch the words used to accomplish the goal,” [69] which as he says is what he would have had to do in order to rule for the City in this case. The Rule of Law requires, among other things, that legal rules be public and relatively stable. It also requires the government to be bound by the existing legal rules. A legal system where the meaning of the rules can change because the government wants it to, even though it cannot be bothered to follow the procedures available for legal change, is not one where the Rule of Law prevails.

It is often said that insisting on this “formal” sort of Rule of Law is not enough, because requirements as to the publicity and clarity of legislation and insistence on legal change following recognized procedures does not do much to constrain government. Government can still enact whatever rules it wants, so long as it goes about it the right way. But if it really were so easy for government to change the rules while following the applicable procedures, would it really be fighting so hard to avoid having to do so? As Justice Dunphy recognizes,

[t]he City finds itself caught between the Scylla of the existing regulatory system, with its numerous vested interests characterized by controlled supply and price, and the Charybdis of thousands of consumer/voters who do not wish to see the competition genie forced back into the bottle now that they have acquired a taste for it. [9]

Changing the rules, in this context, is not as easy as those who denigrate the formal understandings of the Rule of Law would have us believe. And so it matters a great whether

the City’s regulations, crafted in a different era, with different technologies in mind [have] created a flexible regulatory firewall around the taxi industry sufficient to resist the Uber challenge, or … instead [have] created the equivalent of a regulatory Maginot Line behind which it has retreated, neither confronting nor embracing the challenges of the new world of internet-enabled mobile communications. [12]

Justice Dunphy’s conclusion, of course, is that the City’s regulations have done the latter, and Uber is thus free to pursue its (charm) offensive. In theory, the regulatory troops can still be withdrawn from the useless, antiquated defences and thrown into the battle to stop the invaders. In practice, it may well be too late by the time they can be mobilized.

Justice Dunphy understands this, no doubt. Although he insists, as most judges not named Richard Posner are wont to do, that “[q]uestions of what policy choices the City should make or how the regulatory environment ought to respond to mobile communications technology changes are political ones” [13] and not for him to resolve, his awareness of, and willingness to mention, the conflict between “vested interests” and the “competition genie” suggest that he knows that his decision will influence the choices that will end up being made. Indeed, Justice Dunphy’s attention to the details of Uber’s technology and business model, as well as his awareness of the broader context in which the case before him fits, not to mention his rhetorical flourishes, have something at least vaguely Posnerian about them. The decision he has delivered is not only an Uber decision, meaning a decision about Uber. It’s also an über-decision ― one that is superior to what one usually sees.