Fuzzy Logic

Principles for a Free Society: Reconciling Individual Liberty with the Common Good, by Richard Epstein, Reading, Mass.: Perseus Books, 368 pages, $27.50

These days, fashionable environmentalists sound like neoclassical economists. They chatter about the need to "internalize externalities," pressing for eco-taxes on greenhouse gases, sulfur dioxide emissions, wasteful packaging, noise, fumes, mine tailings, chemical consumption, and any other perceived "bad" that captures their attention. This notion of externalities as a form of "market failure" opens up endless possibilities for state intervention.

The possibilities are endless because, as Richard Epstein observes in his latest book, Principles for a Free Society, "every action, every transaction has innumerable consequences--positive and negative--that spill over to other people." Leaves from one person's tree fall onto another's yard; a car door slams across the road, jolting someone from his midday reverie; a plane flies 30,000 feet overhead, leaving an unnatural scratch upon the sky; neon pink trim around the windows of a house offends a neighbor's sense of aesthetics and propriety.

Many staunch champions of property rights and market institutions have inadvertently aided and abetted this undisciplined demand to internalize externalities. They have done so by confidently asserting two absolute principles: the "do no harm" principle and the right to private property. Like their counterparts in the modern environmental movement, they have reduced complex matters of human interaction to bumper-sticker phrases. Under this absolutism, writes Epstein, all manner of "harms"--from the neighbor's falling leaves to slamming car doors--"cry out for relief."

Epstein, the James Parker Hall Distinguished Service Professor of Law at the University of Chicago, sets out to peel off the bumper sticker and replace it with a more nuanced depiction of classical liberalism, one that resurrects some ideas well understood and studied by Scottish philosopher David Hume, utilitarians like Jeremy Bentham, students of spontaneous order like F.A. Hayek, and contemporary social theorists like Robert Ellickson. He attempts to reinvigorate the political theory of laissez faire "not by restating its narrow anti-fraud conception, but by expanding it to accommodate hold-out and coordination problems."

Principles for a Free Society is a frustrating but, in the end, captivating book. Epstein aims, I think, for a nonacademic though erudite audience. The book has too few references and too little thoroughness in argumentation to satisfy academics. Yet it is much too densely written, with too few concrete examples and too little explication of the many court cases it cites, to appeal to the armchair political philosopher.

Epstein's intended audience is unclear in another way. Sometimes he seems to be arguing primarily with those he calls "libertarian absolutists." At other times, he seems to be speaking to modern critics of laissez faire in an attempt to convince them that libertarian philosophy is robust, practical, and desirable.

That philosophy, in Epstein's version, acknowledges that not all human action springs from economic self-interest. It accounts for problems of coordination and "holdout" threats of noncooperation. It makes a place for social norms and custom alongside economic institutions. Its remedies for harmful human action span a continuum from social opprobrium to coercive restrictions.

This is an admirable agenda. But I fear that Epstein tries to do so much that his effort will go right over the heads of most readers yet fall short of the careful argumentation necessary to really intrigue his fellow scholars.

Still, for the determined reader, Principles for a Free Society is chock-full of insights and wisdom. In discussing social norms, the concepts of harm and benefit, remedies for harm, and ideas of property, Epstein weaves together two primary tasks. First, he attempts to bridge the gulf between those who argue for private property, individual rights, and freedom of contract from a "natural law" perspective and those who advance these ideas from a more utilitarian perspective. Second, he explores ideas of property, contract, harm and benefit principles, and remedies against harm "at the margin,"--those blurry realms where boundaries are fuzzy, coordination and holdout problems are great, and Adam Smith's "invisible hand" is weak.

Epstein considers himself a consequentialist: Put simply, private property, individual rights, and freedom of contract are desirable because they enhance human well-being. Ideas of individual liberty are, he writes, "best understood not as an effort to glorify the individual at the expense of society, but as the embodiment of principles that, when consistently applied, will work to the advantage of all (or almost all) members of society simultaneously." He rejects as "obscure and occult" efforts to find individual rights "out there like a rock or stone."

This rejection of natural law theory will not sit well with many of those whom Epstein calls libertarian absolutists. Without claims to some natural right to property and individual liberty, the propensity to slide down a slippery slope to endless state intervention seems hard to resist. This is the fundamental worry that some modern classical liberal philosophers have about the works of Hume and Hayek.

Like Epstein, Hume and Hayek make an organic, "ground up," experiential case for liberty rather than one premised on some set of eternal, a priori natural laws intrinsic to humanity. Roughly speaking, they tend to argue that what works is what's good. This view is not as relativist as it might at first seem, since they anchor their measure of the good in the individual. They see values as springing from individuals rather than residing in some "public good" that is more than the sum of individual yearnings. Still, scholars who celebrate the works of Hume and Hayek have spent a good deal of time trying to square the consequentialist tone of their work with a more definitive (absolutist) protection of individual rights and private property.

Natural law theorists and absolutist libertarians will no doubt have the same complaints about Epstein's book. In acknowledging hold-out and coordination problems in particular circumstances, such as some pollution problems, he opens the door to the use of eminent domain or government intervention. If pollution is discharged, the costs to any individual neighbor of seeking an injunction may be greater than the benefits to that individual, even though total benefits to all neighbors may well exceed the costs of bringing a court action. Epstein writes, "while in principle it is possible to pool expenses to obtain that injunction, the familiar litany of coordination and holdout problems will likely scuttle that enterprise before it bears fruit." In this instance, Epstein concludes, "the state may assume a useful role in coordinating relief from threatened harms. Epstein also accepts denial of remedy when the harm is small but the public gain in denying a remedy is great: He gives the example of airplane overflight, where acquiring permission from every affected property owner would be prohibitively expensive, largely because holdout problems are substantial, yet harms to individual property owners are tiny.

But the strength of Epstein's book is precisely its recognition of nuance, semipermeable boundaries, and complexity in human affairs. He prods, pricks, and pushes the advocate of individual rights to think about what this might mean in real situations.

Discussing private property, Epstein notes that custom, tradition, and common law have allowed for occasional violations of its sanctity--and rightly so, he argues. He offers the example of the "necessity principle," which allows the unauthorized use of another's property in cases of emergency: a ship at sea in a severe storm docking at someone else's pier without permission (and with no requirement to pay for the privilege). His arguments do not constitute an open-ended justification for expropriation; he notes that the docking privilege ends once the storm is over.

Epstein also points out that defining who owns what is not at all straightforward, showing the limits of John Locke's "mixing of labor" theory as well as the limits of "first acquisition" theories. Does a landowner with an opening to a cave own the entire cave, even those portions under someone else's property? Does the owner possess just that portion under his own land? How does "mixing of labor" to develop the cave change, if at all, the allocation of property in the cave? Epstein describes court cases in which just these questions resulted in decades-long disputes that no mere appeal to either a "do no harm" principle or a "right to property" principle could resolve.

It is Epstein's discussions of fuzzy boundaries, harms, and remedies that I found most interesting, perhaps because they are issues that I often contemplate in the realm of environmental policy. Epstein argues for jettisoning the notion of completely rigid boundaries.

On the one hand, he notes, a legal system premised on internalizing all spillover effects would be enormously costly (and unpleasant). He writes that it would be "too burdensome to champion a system in which every individual action has to be justified to every other person"-- which is, in effect, what would result from demanding that all spillover effects be accounted for.

We tolerate accidental contact in a crowded mall, or the neighbor's slamming car door, or an occasional barking dog (maybe). We do so under a sort of "live and let live" attitude that recognizes, first, that these interactions among neighbors and within communities are usually reciprocal and, second, that they generally do not have very serious consequences. Social norms and customs handle these circumstances well without the intervention of laws, including laws to more clearly define boundaries and rights.

On the other hand, Epstein, in what seems like a subtle chastising of some property rights zealots, argues that it is "not costless to ignore spillover effects and to proceed as though the only gains and losses that count are those that are naturally borne by the actor himself." The "I can do anything I want with my property" mindset often seems to assume that the only thing that counts as a trespass or nuisance is a physical invasion of another's property. Not so, says Epstein; the trick is to figure out which of these invasions really matter and what sort of remedy is appropriate in each case.

This is where Epstein's book becomes truly fascinating. Any number of remedies for harms exist, from what Epstein calls "self-help" in which an individual, claiming harm, unilaterally acts to recover his property, to court damages, injunctions, and specific performance requirements. He distinguishes between a "property rule," which essentially requires restitution of the property in question and a ceasing of the harm, and a "liability rule," which provides compensation for damages. He rejects the absolutist notion that a strict property rule should always prevail and that the very idea of a forced transfer is contrary to individual liberty. "That heroic stance," he writes, "fails…in functional terms because it assumes, without contextual examination, that an absolute rule of property protection will always outperform the more nuanced protection of a liability rule."

Epstein does believe the presumption ought to be in favor of a strict property rule. If someone encroaches on a neighbor's property, building a structure one inch over the boundary, for example, the rule ought to require removal and restoration of the plaintiff's full property. Such a rule discourages intentional encroachment and encourages attention to detail. But Epstein cites cases (such as airplane overflight) where the externality risk is minuscule and the holdout risk (in this case, the risk that someone would demand near-extortionate payments before agreeing to the overflight) is large. In such instances, the law developed to minimize the holdout problem rather than avoid the extremely small externality.

Of course, a different way of viewing the overflight case would be to argue that a strict property rule should remain intact but that showing harm requires more than pointing to a spillover effect. As Epstein himself acknowledges, a strict property rule requires a showing that a trespass or nuisance has in fact occurred before a remedy can be provided. Depending upon how property rights and harm are defined, an airplane overflight may not amount to either.

The interesting point here is that either way of viewing the overflight issue--as a choice between a property rule and a liability rule, or as a conundrum regarding whether a boundary has been crossed and a harm has occurred--confirms Epstein's basic argument that an absolutist approach cannot resolve all real-world problems. Choices of legal rules involve not just facts but concepts that involve value judgments.

Those who worry about preserving liberty, private property, and freedom of contract can take heart that Epstein offers useful arguments on behalf of these concepts as centerpieces of his political vision. But he also offers, to those who recognize the omnipresence of fuzzy boundaries, shared spaces, and coordination problems, a broad-brush look at these issues and the ways in which social norms, economic practice, and legal institutions might (and often do) work out a balance between individual liberty and human cooperation.

Lynn Scarlett ([e-mail]) is executive director of the Reason Public Policy Institute.