Arthur Seldon, “Capitalism”

Lord Ralph Harris, Arthur Seldon, and Friedrich Hayek

Arthur Seldon, Capitalism (Oxford: Basil Blackwell, 1990).

I can honestly say that until I read Arthur Seldon’s Capitalism several years ago I was a socialist, at least in that vague and unreflective way that many socialists are socialist. It would have been difficult for me not to be, given that I was a scholar who had spent much time in an academic environment, and among academics for whom socialism is almost a conditioned reflex.

To this day I cannot remember what possessed me to read Seldon’s book, since at the time its very title would have held so little appeal to me, given my intellectual interests and proclivities. The experience of reading it ended up being a sort of smallish vision on the road to Damascus, my tiny conversion experience. I could easily entitle this post “How I Learned to Stop Worrying and Love Capitalism”. I have since steeped myself in literature of a free market and libertarian bent, but none of it (except Hayek perhaps) has hit me over the head with a hammer in the way this understated book has. In fact, it produced such a profound effect upon my views that I always make sure I own at least two copies, one for my own use, and another that I can give away to potential converts to the religion of capitalism (much like my optometrist, who keeps a stack of Bibles on his desk in case one of his patients should manifest any signs of receptivity to the “Good News”).

To be frank, there are things not to like about Capitalism. It is very much a book of its time, and many of the political events and figures it deals with are now rather dated. And being of its time, it oozes a sense of triumphalism that can only be found in a book about capitalism published in 1990, at the very moment that global communism was collapsing. To be fair, it is understandable that Seldon would be in a gloating mood. He had spent many decades as a voice in the wilderness, defending what had been — and is again — an unfashionable cause before living to see its ultimate triumph.

Seldon came from very humble beginnings, an orphan from the East End of London whose Jewish immigrant parents had been killed in the Spanish flu pandemic of 1918 when he was two. He was adopted by a childless cobbler and his wife, but the cobbler died when Arthur was eleven. His adopted mother, now widowed, provided for the family by selling stockings out of their home until she remarried, to a tailor. Being a gifted student, Arthur managed to get himself a scholarship to the London School of Economics, where he met and studied under Friedrich Hayek. After the LSE and subsequent wartime military service (where he observed widespread government waste and inefficient allocation of resources first-hand) he worked for a while as a consultant in the brewing industry and an editor of a trade journal, until he was called upon by his friend Ralph Harris to join the free market think tank, the Institute of Economic Affairs (IEA) in 1958, marking the beginning of a decades-long friendship and collaboration. The IEA was started up in 1955 by Sir Antony Fisher, and Harris was its General Director, with Seldon acting as Editorial Director.

Nowadays we tend to think of right-wing think tanks — with considerable justification — as establishment bastions, lavishly funded by corporations and moneyed elites with a vested interest in legitimating the market order. But this was not always the case. To be pro-market and anti-socialist in postwar Britain was to be very much on the wrong side of history (or so it was perceived at the time) and very much outside mainstream thinking. Britain had just come out victorious from a devastating World War, which was won by a massive national effort involving the nationalization of industry and economic central planning. Since such socialistic efforts had helped defeat the Nazis in wartime, it was thought that it could accomplish even more in peacetime. Socialism has become a mainstream idea and the centralizing government policies of the Labour and Conservative parties in this period were practically indistinguishable from each other (which is why Seldon was a lifelong Liberal Party member, at least until they too gave in to the siren call of statism).

Indeed, the very reason Fisher had started the IEA was because, alarmed by the message of Friedrich Hayek’s The Road to Serfdom, he contacted its author with the idea of running for Parliament in an effort to turn back the relentless advance of the state. Hayek told him he would be wasting his time in politics, since politicians of all stripes had long ago come to a consensus on the welfare state. In short, Fisher would get nothing done in Parliament. Instead, said Hayek, he would be better advised to turn to the painstaking but ultimately more effective strategy of influencing the intellectuals, whom he referred to as “the second-hand dealers in ideas”. In other words, before political change could be effected, a change in the general culture was required.

Thus, for many years, the free market policy prescriptions of the IEA were either ignored or ridiculed by the state’s kept intellectuals. Seldon and his colleagues toiled in relative obscurity. However, at least one person of influence was listening to them: Margaret Thatcher. When she came to power, the IEA suddenly had access to the ear of government and became a major source of public policy.

Seldon’s working class origin is a very important component of his thinking, as throughout Capitalism he is at great pains to point out the hypocrisy of socialism’s inflated claims to being the self-appointed guardian and savior of the working class, advocating high-minded social schemes which at the same time do much to hurt that same class. Take for instance, the following pungent criticism of the prevailing socialist intelligentsia:

“I have therefore not withdrawn my criticism of the mostly middle-class academics and writers who, for over a century since the time of Sidney and Beatrice Webb to this day, urged socialist solutions without suffering their coercions nor their foregone living standards, but who continued their comfortable lives as teachers in state-financed universities, politicians in state institutions, writers of ‘fiction’ that transparently condemned capitalism, or beneficiaries of government grants in academia, the arts and cultural life provided in part by the poor whose living standards their teaching and administrations have repressed.” (p. xii)

Scathing stuff, but working in a socialist university, I can identify with Seldon’s barely-concealed rage at the ignorance and self-righteous hypocrisy he saw around him, consisting of half-baked ideas put forth by privileged people who mostly know less than nothing about economics but who have learned that bad arguments can be given a sheen of surface plausibility so long as they are prefaced by hot words such as “equity” and “social” justice (whatever that means).

In reality, Seldon argues, the working class was doing just fine before bourgeois socialism appeared on the scene. As he outlines in Chapter 11 of Capitalism entitled “The Galloping Horses”, the story of the working class in liberal Gladstonian England is one of gradual improvement without the help of government programs. Literacy was very high and getting higher, and this without a government-run school system. Pretty much every child had access to a primary school education, and it was a quality education, unlike today’s public school system (using “public school” in its North American sense). Quite serviceable pension and insurance schemes were available, self-organized by various private and working men’s associations. Contrary to popular mythology, just about everyone had some access to health care, making due allowance for the less improved state of medical knowledge and technology at the time; many doctors served the poor and working class either pro bono, or through reduced fees or in-kind payment — which is more feasible through a private system that was more personal than public health care is today. Doctors back then could make up the difference by charging higher fees to their richer clients, arguably a more equitable way of doing things than, say, the NHS, in which the relatively affluent middle class gets a free ride, over-consuming scarce health care resources at the expense of both the rich and the poor. I doubt today that you will find many doctors who would accept payment for their services from the poor in chickens or trade, even if they wanted to. The system simply doesn’t allow it.

Seldon’s point is that the working classes had access to various services or had found their own creative solutions to problems in the absence of government assistance. Not every problem requires a government “program”. Unfortunately, Fabians and other do-gooding socialist elites decided that they knew better than workers what was good for them, and the self-organization of the working class was strangled in its cradle in order to create a socialist utopia that turned out to be a feeble offspring. Seldon waxes wistfully about what could have been if only the socialists had allowed the British state to develop naturally. I guess we’ll never know. In truth, Seldon’s account of the working class in the pre-welfare state sounds a little too perfect to me, and it is rather at odds with George Dangerfield’s classic The Strange Death of Liberal England (1935) — in Dangerfield’s account it is in part the workers themselves who contrive the downfall of the liberal state for lack of a living wage.

Of course, Seldon could argue that he has no doubt that there was suffering among workers and the poor in Gladstone’s Britain, just as there is today, and as he himself knew from personal experience. But where socialists and Marxists saw the degradation of the working class, the truth was that things were gradually improving. A difference of perspective, I suppose. But at least Seldon can claim some direct knowledge whereof he speaks: all his life he had little patience with the description of his own childhood as “deprived”, and the sense of optimism shared by Seldon and those he grew up with in his East London neighbourhood is rather touchingly portrayed in the afterword of Capitalism entitled “Envoi: A Promise Kept”.

There is one central theme of Seldon’s Capitalism that is right on the money (pardon the pun), and which has had a great influence on my own thinking. Seldon observes — and my own experience tallies with this — that if you read socialist literature, in addition to the obligatory denunciation of the market and of capitalism, you will typically find a lot of rhapsodizing over the limitless possibilities of socialism. In other words, says Seldon, capitalism as it exists is found wanting, while socialism as it supposedly could be is found to be desirable:

“The critics of capitalism have persisted in the device of contrasting imperfect capitalism as it is, or has been, with a vision of socialism as it has not so far been, and could not be in the foreseeable future…. This is an act of faith that sustains the intellectual effort long performed by the critics of capitalism to show its contrasts with the alternative of faultless socialism. The familiar non sequitur, ‘capitalism as we have known it, bad; socialism as it could be, good’ (or at least better) still permeates most socialist writing.” (p. 223)

This is hardly a fair comparison, for a number of reasons. First, capitalism as it is exists in nothing like its pure form anywhere, overlaid as it is by decades of socialist experimentation and adulterated by state tampering. Second, socialist experiments have been tried in various places, so shouldn’t these be the relevant examples to juxtapose against existing capitalism? Third, if we want to speculate on an ideal socialist world, shouldn’t the relevant comparison be an ideal capitalist one?

In Capitalism Seldon from the very beginning proposes a more fair comparison: socialism as it exists/has existed with capitalism as it exists/has existed. On every score Seldon makes a compelling case that in this more fair comparison capitalism comes out smelling like a rose, while socialism comes out smelling like week-old unrefrigerated salmon. Perhaps this was a much easier case to make in 1990 than it is today, but I think that if we were to repeat the exercise in good faith, capitalism would still look pretty good.

Seldon never tries to argue that the fair face of capitalism has no blemishes, and he even makes room for government functions that would not be popular among more doctrinally pure libertarians (e.g. environmental protection, the preservation of cultural heritage, and adaptation to new technologies). But according to another strand in his argument, capitalism has at least one crucial virtue that socialism lacks: corrigibility.

Consider this: The well-functioning of markets depends on the free flow of information, not just of capital. Capital can only be put to its most efficient uses if people have the means of finding out what those most efficient uses are. This requires information. Some of this information will come through the mechanism of price signals in markets (another advantage of capitalism over socialism), and some of it will come through people communicating directly with each other. The best way of facilitating the latter kind of communication is through the free institutions of an open society.

By contrast, in a socialist society information is either unavailable or more costly to obtain, for at least two reasons. First, the absence of free markets (or presence of over-regulated ones) means that price signals are missing or distorted. Second, the political institutions necessary to carry out the task of centralized economic planning will necessarily be coercive, and thus closed rather than open. In a coercive state, dissent is not tolerated. But dissent is a form of information signaling and in many circumstances it is the best way a government has of finding out that its policies are not working.

(And that may be where I have some limited support for the Occupy protests — the understanding and proposed solutions of the Occupiers may be simplistic, but the protesters are at least managing to signal that all is not well in the economy. After all, no system is incapable of being improved upon, not even capitalism.)

Thus, although there is no perfect or necessary connection between capitalism and freedom, capitalism will tend to work best where there is open communication and openness in institutions. A country like China seemingly represents a prima facie counter-example to this trend, but I predict it will be a relatively short-lived one: China will either become more open or it will regress economically; “capitalism with Chinese characteristics” is an unstable transitional state.

Getting back to Seldon’s point about corrigibility: capitalism is corrigible because a) it tends to facilitate access to the information necessary to correct mistakes, and b) it tends to have more open and flexible institutions that can respond to the need for change. Unfortunately, if that change comes in the form of socialism, the result will likely be another historical cul-de-sac from which it will be difficult to escape.

Since 2008, we have been moving backward. We have lost hold of that triumphalist “Spirit of 1990”. We have lost that faith which Seldon strove most of his life to instill, and we are reverting to the old gods of planning, government “programs”, and the uninspiring vision of a society of social workers and their clients. Seldon did what needed to be done: a comparison of socialism as it has been to capitalism as it has been. What we need now are more capable voices that will give us inspiring visions of capitalism as it could be, as an antidote to all those voices, so prominent now, who, in focusing exclusively on the faults of capitalism, too easily forget the gifts it has given them, and all the while doing so through media which capitalism has made possible.

Bibliographic Note

The original edition of 1990 has become a little difficult to get hold of and is to my knowledge out of print, though used copies are to be found. However, a more recent and affordable edition was published in 2004 by Liberty Fund as Volume 1 of The Collected Works of Arthur Seldon. The volume is entitled “The Virtues of Capitalism” and combines Capitalism with Seldon’s earlier book Corrigible Capitalism, Incorrigible Socialism. An electronic version is made available for free through the publisher’s “Online Library of Liberty”.

A Canadian Vice

Viscount Haldane

Anyone who reads a casebook on Canadian constitutional law or on Canadian public law in general, must be struck by the prevalence of reference cases. These are cases submitted to a court, not at the instance of parties to a suit, but rather by a single party (usually a provincial or federal government) in order to seek a judicial opinion before a suit is brought. This will often be done in advance of some piece of legislation or executive action which the government proposes to enact or perform but which it suspects might be subject to legal challenge.

The submission of reference cases is a peculiarly Canadian practice, and fundamental questions of Canadian constitutional law have been “decided” by references (the reason for the scare quotes will become apparent later on).

The Canadian-ness of the practice was recognized in Great Britain as long ago as 1928. I recently came across the following portion of a speech from Viscount Haldane in the context of a debate in the House of Lords on a Rating and Valuation Bill, which would have empowered a Central Valuation Committee, if it appeared that a question of law had arisen or might arise with regard to a valuation, to refer the question to the High Court for judicial opinion. And no, I haven’t taken to reading old British parliamentary debates for pleasure. The extract of Haldane’s opinion that follows appeared in Lord Hewart of Bury’s The New Despotism (London: Ernest Benn, 1929), pp. 126-127:

“VISCOUNT HALDANE: I referred on the last occasion to the liking which had grown up in Canada for submitting abstract constitutional questions to the Courts there and ultimately to the Privy Council [at the time, the Privy Council in London was effectively Canada’s supreme court]. In my opinion experience of that course has led to enormous inconvenience, and successive Lords Chancellor have objected to and denounced it. The late Lord Herschell said some strong things about it, and at times refused to give an opinion. The late Lord Loreburn was even stronger, and other Lords Chancellor and other judges in the Judicial Committee have expressed themselves without restraint upon a system which they deemed to be very mischievous…”

Why did all these British Law Lords view our peculiar Canadian custom with such suspicion? Because, Haldane continued,

“it invited the Court to go beyond the particular case which it had to decide, and to say things beyond the facts to which the decision would be applied, which might prejudice future suitors…. I think this clause [in the Rating and Valuation Bill] is an objectionable one also as drawing the judges into the region of administration…”

There are several threads of argument that might be teased out of these deceptively short passages, leading to serious concerns about the practice of obtaining courts’ references opinions on potted questions posed by the government.

First, note that when a government refers a question to a court, it is in effect setting the terms of the court’s deliberations. The government frames the question, presents the relevant facts (or what they characterize as the relevant facts) to the judges, and invites who it wants to take part in the proceedings.

It is not difficult to see how this process might be open to abuse by government and administrative officials, who might be tempted to use it as a sort of machine to crank out whatever decision they’d like to see on a question they refer to a court. They can set the parameters to generate a preordained answer, by exploiting the fact that the court can only consider the question and the arguments put before it.

The executive can underdescribe the fact-situation on which they wish the court to give its opinion. They can carefully select precisely the experts they would like the court to hear. But even when the executive makes a good faith effort to accurately present all relevant facts, backed by impartial and expert opinion, it is still easy to see how the spirit of the legal rule audi alteram partem — to “hear the other side” — might not be adhered to. For is it realistic that the executive will be as adept at thinking up all the possible opposing arguments against their position as an actual opponent would be? The best test of the legality of the executive’s exercise of its powers is through having that power challenged by an adversary at trial. An adversary who has an interest in the outcome of the challenge is likely to be more creative and thorough in constructing counter-arguments than is the executive’s own legal counsel, who would essentially be acting as mere advocatus diabolus. Judicial review works best in an adversarial context.

This leads to a second problem: the reference process can make it look as if the courts are simply an administrative arm of the executive branch of government. The courts are put in the awkward position of appearing as if they are at the beck and call of the executive, to help and advise it in the execution of its administrative duties. This is especially so where the process is being abused in the fashion outlined above: if the courts are giving the expedient kinds of reference opinions an unscrupulous executive has primed them to give, the traditional and fundamental separation of powers between the executive and the judiciary will be blurred, to the detriment of our constitution.

This Canadian love affair with the reference case seems to me to be in considerable tension with other areas of our national legal sensibilities too. For example, the process by which Supreme Court justices are appointed in Canada has been a source of controversy for its lack of transparency. In 2004 the government was looking into ways to reform the appointment process. Some had floated the idea of US-style parliamentary confirmation hearings. The Canadian Bar Association was adamantly against such hearings. According to its submission to the Prime Minister, the CBA noted that a “U.S. type confirmatory process seeks to predetermine how a prospective judge would decide cases.” No doubt this is true. And to date, no such process has been attempted. But isn’t this objection against pre-judging cases essentially what courts are being asked to do when the government places a reference case before it?

Such pre-judging of cases is dangerous for reasons already outlined: it is not a perspicuous way of examining legal issues because there is no adversary present, and it erodes the constitutional separation of powers between the executive and judiciary. One effect of this is that it trespasses on the traditional principle of judicial independence. Even where such judicial independence isn’t being violated in fact, it can contribute to the perception that it is, which as just as damaging in the long term.

Let us not forget the close etymological and semantic relation between “pre-judging” and “prejudice” or “prejudicial”. When one is prejudiced against someone, one is not inclined to hear their case, to consider that they may have a right, or to look for their merits. Similarly, when one’s case has been pre-judged, it has been prejudiced, in that its merits are not heard or given due consideration. A reference case is a hypothetical case, put by a party (i.e. the government) who has an interest in finding out the answer to its hypothetical question. This interest is likely to be more than intellectual, more than merely hypothetical. Possibilities for future legislation and future executive action will depend on whether it gets the answer it wants to hear. And citizens are apt to take the answer in the reference case for good and current law, even though it is no such thing.

This leads to the last point that Lord Haldane made in the excerpt I gave. Reference opinions might have a “chilling effect” on parties who might otherwise wish to bring a suit before the courts. Where a reference case has been submitted to the Supreme Court, and where the Supreme Court has offered its opinion, that opinion is apt to be taken for law, even though it most certainly is not such (for various reasons already outlined). This might discourage people from bringing their suits to court, despite having a reasonable case, based on facts not perhaps considered in the reference, and backed by reasonable arguments not perhaps considered by judges or government counsel in the course of the reference.

I don’t know if these dangers have ever been empirically verified. The “chilling effect” in particular would be difficult to demonstrate empirically, since it’s obviously more difficult to study cases that aren't brought to court than cases that are. Nevertheless, the dangers of the practice are so great, and its advantages so few (and nefarious), that I would recommend the submission of reference cases be abolished.

Expert Blind Spots

The Act of Settlement, 1701

So, I’ve been reading an introductory casebook on Canadian public law, entitled Public Law: Cases, Materials, and Commentary (Toronto: Emond Montgomery, 2011). Don’t ask me why; I’m not exactly sure myself. In part, I suppose it’s because I realize that I now know more about American constitutional law than I do about Canadian, which I say with some degree of shame, since Canada is my home and native land. But it has actually ended up being an engrossing read so far. In particular, I’m finding interesting the intellectual blind spots of respected jurists, and the rubbish that consequently makes it into the textbooks they write. (Of course, to be fair, experts from every discipline will invariably display peculiar blind spots, so it’s not just a jurisprudential shortcoming.)

Here is an example. It comes in the context of a discussion of the famous (in Canada at least) “persons” case of Edwards v. AG Canada [1930] AC 124 in which s. 24 of the British North America Act (1867) empowered the Governor General to appoint “qualified persons” to the Senate. Now the question that came up in this case was whether or not the BNA Act, one of the most fundamental of this nation’s constitutional documents, intended “persons” to include women. In 1930 Canada didn’t have a Supreme Court per se. Rather, the Privy Council back in London decided matters of fundamental justice on our behalf (one of many reasons why I find it amusing that 1867 is considered Canada’s national independence year). Luckily, in this case the Privy Council was wiser than any of the lower courts in Canada, for it found that women are indeed persons, and are thus eligible to sit in the Senate.

The editors of Public Law pronounced this a triumph. No doubt it was a step forward, but it was hardly a basis for them to trumpet that “while gender discrimination is no longer part of the Canadian Constitution, the appointments process [to the Senate] continues to fuel substantial controversy” (p. 155). For the sad fact is, the ultimate constitutional source of all legislation in this “country” is the British Crown. And the even sadder fact is, no woman can be the representative of that Crown so long as she has a brother with a pulse, even if that brother is a mere babe in arms. For some reason, the editors of the text allowed this plain fact to slip their minds.

It also slipped their minds at another place, while they were discussing the Act of Settlement (1701): “This venerable statute bars Catholics from assuming the Crown, and even precludes the monarch from marrying a Roman Catholic. Furthermore, the monarch must be in communion with the Church of England. The Act’s dictates are clearly discriminatory, viewed from the optic of modern human rights law” (p. 150). The term “venerable” was obviously used with a sense of the utmost irony, and they rightly deplore such a discriminatory piece of legislation, which is still of force and effect as I write. But again, nary a mention of the fact that it discriminates against women. The editors, it seems, are more concerned about the rights of Papists than of the fair sex.

Public Law was put together by a team of seven editors, only one of whom is a woman, and so perhaps this partly explains the text’s gender blind spot. But the discussion of the Act of Settlement is illustrative of a blind spot that is shared by many in Canadian society. Allow me to explain what I mean.

At a meeting of the Commonwealth nations recently, a reform was approved which would remove the gender discrimination in the laws of succession to the British Crown: women will now be able to succeed to the Crown in preference to their younger brothers (but not their older ones). This was being hailed by the media as a giant leap forward into modernity. As if somehow the monarchy is a fundamentally modern and just institution that only needs a bit of tweaking to bring it into the 21st century. In reality, the removal of gender discrimination from the laws of succession is just a red herring, to make us forget about the fact that the very institution is inherently discriminatory, regardless of whether or not the person wearing the Crown happens to possess a penis. You see, in Canada, I still cannot teach my child that if (s)he works hard and plays by the rules, (s)he can someday hope to become our monarch. This is not because of gender. It is not even because (s)he is Canadian rather than British (although this is true too). It is because (s)he was born in the wrong family.

Imagine a job posting concocted by a malicious and demonic HR hiring manager, the qualifications for which are so peculiar, so narrow, and so seemingly capricious that only one person on earth could possibly qualify for the job. Imagine further that these qualifications are such that you could never have possessed them, no matter how hard you tried to acquire them. And finally, imagine that even if you are that one qualified person, you have the job whether you applied for it or not. That, brothers and sisters, is the core injustice of hereditary monarchy. And it cannot be removed save by the removal of the institution itself. No amount of reform can scrub away this moral blemish on the fair face of our constitution.

I suppose that there is this to be said for the monarchy: It is pretty much the only political appointment process in Canadian society that discriminates against both rich and poor equally. You can be rich as Crassus, yet you will still never even have a shot at becoming Monarch of Canada. Of course, the fact is that the one unique person who is qualified to be King or Queen will ipso facto be rich as Crassus.

I can’t forebear mentioning another injustice attached to the institution of monarchy in this country, although at least this one is not inherent to the institution and could in principle be reformed. Take a look at s. 17 of the Interpretation Act (1985), the legislation governing how federal courts are to interpret the terms of federal statutes. There you will find that unless otherwise stated, a statute is to be construed as not binding on the Crown. The Queen is not to be considered bound by the laws she enacts in right of Canada unless Parliament includes in the bill words to the effect that she is so bound. In other words, the Crown’s default position in our constitution is that it is above the law. This I find repugnant to every republican bone in my body.

Returning to the blind spots of writers of legal texts, here is another one. There is a (disproportionately) long chapter in Public Law devoted to the concept of judicial independence. Much here is said on the need for judges to be well-remunerated, and for this pay to be independent of political decision-making. Unseemly bargaining over pay between judges and politicians is to be avoided at all costs. There then follows an excerpt from a couple of cases, including Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island et al. [1997] 3 SCR 3.

Both the writers of the text and the court in the reference case seem inordinately concerned with making sure judges are not underpaid. The great fear is that their independence would be compromised if legislatures were to have the power to reduce their pay. I find two striking blind spots here, both of them so obvious to the non-expert, that they can only be the result of a kind of self-serving false consciousness on the part of the legal experts.

First, the jurists concerned show no awareness of the possibility of legislatures overpaying judges. After all, if politicians can threaten judges with financial sticks, can they not just as easily bribe them with financial carrots in the form of promised pay raises contingent on good political behaviour? And yet, it is only pay reductions that are spoken of as a threat to judicial independence. It seems these jurists’ high-minded scruples about judicial independence show a remarkable “quantitative easing” at the prospect of greater remuneration.

Second, why in the reference case (and others like it) do the judges involved never once question the legitimacy of their bearing responsibility for deciding cases involving the remuneration of themselves and their peers? Isn’t there something rather strange about the practice of having the bench literally acting as judges in their own case? It seems to violate the most fundamental maxims of justice. Apparently, judges (along with the textbook writers) are not overly scrupulous when it comes to possible conflict of interest on the part of the legal profession — though they are untiringly vigilant in sniffing it out on the part of politicians.

Of course, what do I know? I am, after all, a mere layman, not an expert.

“The Federalist”

Hamilton, Madison, and Jay, The Federalist (New York: Modern Library, 2000).

In Philadelphia in the summer of 1787, delegates gathered to come up with suitable changes to the Articles of Confederation, the document that had outlined the terms of cooperation of the thirteen American colonies in their struggle for independence from Great Britain. During the Revolutionary War and in the years immediately following, the Articles had proved themselves woefully inadequate. They bound the confederacy too loosely. Many states were not paying up for their share of war costs, and the Articles provided no powers for forcing them to do so. Interstate commerce was being hampered by state-imposed tariff barriers that were self-canceling at best, self-destructive at worst. And Shays’ Rebellion in Massachusetts seemed to indicate the need for some centralized military power to maintain public order and security.

Even so, the delegates to the Philadelphia Convention went well beyond their brief. Rather than simply improving on the Articles of Confederation, they instead ended up drafting a new Constitution that would form a more perfect union between the states. Many people today, especially Americans, tend to believe that this Constitution emerged fully formed from the heads of the framers. In reality, as the notes of the convention taken by James Madison make clear, the room in which they worked became a veritable sausage factory of political deal-making.

The Federalist papers were an attempt to sell the resulting sausages to the American people during the ratification process that followed. On the other hand, despite the papers’ purpose as propaganda, never has political hackery contributed so much to Western political thought.

The papers offered wise and sometimes profound meditations on the human political animal that ventured far beyond their limited purpose as defense of a particular constitution. They were also very persuasive, although at the time their persuasiveness lay as much in the fact that they were published in such rapid succession — often three per week — that opponents hardly had time to reply. Anti-federalists simply couldn’t keep up with the fertile minds of Hamilton and Madison.

I say “Hamilton and Madison” while leaving out Jay because in reality the latter only ended up penning five of the papers (numbers 2, 3, 4, 5 and 64), before dropping out of the project due to ill health. Thus, of the other numbers, Hamilton authored fifty-one, Madison authored twenty-six, and the remaining three were co-authored by the two of them.

Federalist No. 1 was signed by “A Citizen of New York”. However, Madison then joined the team and he was a Virginian, so every paper thereafter was subscribed “Publius”, the name taken from one of the founders of the Roman Republic, Publius Valerius Publicola (Publicola = “friend of the people”). Since there were eighty-five papers altogether, there isn’t space here for a thorough analysis of all of them, or even for anything like a comprehensive overview. Instead I will discuss three sample papers, the first two of which are stand-alone classics of political theory.

Federalist No. 10 (Madison)

Number 10 is a tour de force of republican political argument and is possibly the most famous of the Federalist papers. It has also become a canonical text for the so-called “public choice” school of economics, of which I consider myself an amateur devotee.

Public choice economists such as James M. Buchanan have criticized mainstream economists, who too often adopt the standpoint of policy adviser to some benevolent despot (i.e. government). Buchanan has spent much of his career arguing that the despot is neither benevolent nor disinterested, and that this fact must be taken into account when designing or proposing to reform political institutions. Buchanan professes himself to be a follower of Madison, who in Federalist No. 10 (and elsewhere) argued that there is no such thing as a disinterested legislator. For one thing, a legislator is a human being (or a group of them), just like anyone else, so why should we expect that he alone would be exempt from the self-interest that motivates the rest of us? As Buchanan would put it, government is an actor in the market, not a spectator standing outside it.

For another thing, legislators legislate, and all legislation involves taking sides. Legislation is not impartial. And because it is not, we can expect the realm of politics to be a battleground where competing interests duke it out. The most that can be hoped for is that the battle remains more or less civilized. In the pursuit of their competing interests, people will form factions. As long as people are free to pursue their ends, competition and factions are natural concomitants of a free society:

“Liberty is to faction, what air is to fire, an aliment, without which it instantly expires. But it could not be a less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life because it imparts to fire its destructive agency.”

In other words, there are no utopias in politics.

It was common for eighteenth-century political thinkers to abhor factions or parties, as these were signs of interest, and politics was ideally supposed to be disinterested and public-spirited. But for Madison, the pursuit of factional self-interest was natural, and since there was no impartial agency that stood outside the fray to mediate, the best that could be hoped for in a free society was to have well-designed institutions that could limit the damage factions can do:

“Is a law proposed concerning private debts? It is a question to which the creditors are parties on one side, and the debtors on the other. Justice ought to hold the balance between them. Yet the parties are and must be themselves the judges; and the most numerous party, or, in other words, the most powerful faction must be expected to prevail…. The inference to which we are brought, is, that the causes of faction cannot be removed; and that relief is only to be sought in the means of controlling its effects.”

This is especially necessary in a democracy, where there always looms that most dangerous of factions, the democratic majority. Imagine a democracy of three people, A, B, and C. It is always a possibility for A and B to form a voting bloc to deprive C of his wealth or rights or liberty. The best way to avoid this outcome is to have institutions and constitutional constraints which prevent A and B from effecting their intentions. Such a constitution may provide for a list of protected rights and liberties that may not be infringed upon by a democratic legislature. Or it may provide that in order for anyone’s rights to be infringed, unanimity is required. Or it may give citizens of C’s description two vote to compensate. Or it may provide for more than one legislative house, with different rules of representation to ensure that one may act as a check upon the other.

 Whatever the precise constraints a society chooses, Madison’s point is that men are — or should be assumed to be — imperfect and selfish creatures, and that there is no power that can be assumed to be impartial. Interest must oppose interest because there is no disinterested power to oppose it. These considerations lead naturally to a discussion of Federalist No. 51, another great masterpiece by Madison.

Federalist No. 51 (Madison)

Because humans are self-interested, and because their interests often clash, there must be some power that can restrain their pursuit of interest. In most political theories, this role has been played by government. But governments are composed of human beings, so they too are subject to the same self-interested motivations and must be restrained. As Juvenal rightly asked, sed quis custodiet ipsos custodes? (“But who will guard the guardians themselves?”). Here is how Madison famously stated the paradox in Federalist No. 51:

“But what is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither internal nor external controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: You must first enable the government to control the governed; and in the next place, to oblige it to control itself.”

One of the ways of doing this was by a constitution which provided for separation of powers and functions in different branches of government, branches which could act as checks upon one another. It is this that has become the central hallmark of Madisonian republicanism. But just as Madisonian is his encouragement of pluralism: The more groups and subdivisions there are, the less likely it is that any one of them can form a majority and overpower the others. In our three-person democracy, it is very easy for A and B to form a faction to prey upon C. But in what Madison and Hamilton called an “extended republic” a vast number of citizens can form a vast number of factions, no one of which is likely under those conditions to become powerful enough to dominate the others.

This line of thinking informs Madison’s reflections on the separation of church and state. For example, regarding religious pluralism, even though Madison was probably the least religious of the Founding Fathers (he may even have been an atheist), he encouraged freedom of worship because he wanted as many religions to flourish as possible: the more of them there were, the less dangerous they would be to the state. With no single religion having any hope of dominating over the others, religious groups would spend less time trying to take over the reins of government, and more time making jealously making sure that no other sect tried to do so.

Federalist No. 72 (Hamilton)

This work of Hamilton’s is part of a running argument defending a strong executive branch. This is in response to anti-federalist arguments that an executive magistrate should only hold power for a brief term and should not be subject to re-election. It is to the topic of re-election that Hamilton’s attention turns in this paper. I chose to look at this piece because it well illustrates the Federalist’s adeptness at designing republican institutions through incisive analysis of the springs of human political behavior and the incentive structure of political office-holding. In other words, beginning with how humans can typically be expected to behave in political contexts, institutions are proposed that, in the words of Hamilton, best balance the “energy of government” with the “liberties of the people”.

This tension between strong government and individual liberty would in the coming years be reflected in the growing tension between Hamilton’s and Madison’s respective views of republican government. Hamilton tended to stress the necessity of energetic government, seeing a strong federal government as the guarantor of individual liberty (while implicitly viewing the state governments as liberty’s greater threat). Madison, on the other hand, had a growing jealousy of energetic government’s ability to trample on individual rights. His solution was to weaken government through intricate institutional checks and balances, having power oppose power. Despite their collaboration in 1787-88, Madison and Hamilton a rift would eventually form between the two men that was never healed. But the rift still lay in the future when Hamilton wrote Federalist No. 72.

Excluding the executive from seeking re-election would have several pernicious effects, argued Hamilton. For one thing, it would reduce the magistrate’s incentive to good behavior; since he had no hope of being re-elected, he had less incentive to be exemplary in the performance of his office. “There are few men who would not feel much less zeal in the discharge of a duty when they were conscious that the advantages of the station with which it was connected must be relinquished at a determinate period, than when they were permitted to entertain a hope of obtaining, by meriting, a continuance of them.”

In addition, Hamilton argued that the exclusion from re-election would result in a more urgent temptation of the office-holder to make the most of his short time in office financially: “An avaricious man, who might happen to fill the office, looking forward to a time when he must at all events yield up the emoluments he enjoyed, would feel a propensity, not easy to be resisted by such a man, to make the best use of the opportunity he enjoyed while it lasted, and might not scruple to have recourse to the most corrupt expedients to make the harvest as abundant as it was transitory.”

A greater danger than peculation was the possibility of usurpation. An unscrupulous magistrate might simply decide he doesn’t want to give up his office. Without any hope for continuance in office, “such a man, in such a situation, would be much more violently tempted to embrace a favorable conjuncture for attempting the prolongation of his power, at every personal hazard, than if he had the probability of answering the same end by doing his duty.”

I have personally been favourable to limiting the tenure of elected officials to one term, of whatever the length. One of the reasons I have favoured such a policy is the notion that the officeholder would be more independent and willing to make hard decisions if he did not have to worry about re-election. To this, Hamilton conjectures that such a magistrate might actually be just as inclined to pander to the public as one with an eye on re-election, since at the end of his term he would be compelled to return to the people as a private citizen: “May he not be less willing by a firm conduct, to make personal enemies, when he acts under the impression that a time is fast approaching, on the arrival of which he not only MAY, but MUST, be exposed to their resentments, upon an equal, perhaps upon an inferior, footing? It is not an easy point to determine whether his independence would be most promoted or impaired by such an arrangement.” This argument may have been more convincing in the eighteenth century, when a gentleman ran in smaller and more localized circles than the typical politician does today. I am not convinced by it.

Finally, and most dangerously, there may be times where the people themselves wish the person to remain in office. What happens when the wishes of the people for a favourite son are thwarted by such a rigid constitutional restraint? “There may be conceived circumstances in which this disgust of the people, seconding the thwarted ambition of such a favorite, might occasion greater danger to liberty, than could ever reasonably be dreaded from the possibility of a perpetuation in office, by the voluntary suffrages of the community, exercising a constitutional privilege.” Hell hath no fury like a mob scorned. The people may simply decide to pull down completely the constitutional barrier separating them from their fancied man. Again, I do not find this argument of Hamilton’s overly convincing. Organized collective action of that nature takes considerable effort and enough time that the fickle mob is likely to grow indifferent to their erstwhile favourite.

Despite their later divergence in thinking, Hamilton’s approach is similar to Madison’s in assuming that human beings are largely self-interested and that because politicians are humans too, they should also be assumed to be self-interested. Institutions cannot be designed as if people are angels. Instead, writes Hamilton, because “the desire of reward is one of the strongest incentives of human conduct… the best security for the fidelity of mankind is to make their interest coincide with their duty.”