Richard Epstein: Why Obamacare Is Collapsing and He's Not Voting for Trump, Hillary, *or* Johnson

Q&A with the great libertarian law professor on cigarettes, global warming, foreign policy, and much, much more.


The architects of Obamacare could have foreseen today's crisis, says NYU Law Professor Richard Epstein, except they were intellectual "super jocks" with a "superior Ivy-League sneer," who knew so much better than anyone else "how to run this Rube Goldberg contraption" designed to "defeat the law of gravity."

Epstein speaks as an insider to elite circles. A graduate of Columbia, Oxford, and Yale Law School, he's the Laurence A. Tisch Professor of Law at New York University, a senior fellow at the Hoover Institute, and a professor emeritus at the University of Chicago. A towering figure in his field, Epstein has had a profound impact on libertarian legal theory, especially with his 1985 book, Takings: Private Property and the Power of Eminent Domain.

Throughout his career, Epstein says, he's been surrounded by "people cleverer than myself putting up schemes that are dumber than you can imagine."

Reason's Nick Gillespie sat down with Epstein for an extended discussion about the collapse of the Obamacare exchanges (0:43); why cigarette companies don't owe smokers a dime (15:49); the recent legal campaign against Exxon Mobile related to global warming (27:00); Obama's dismal record (35:23); where the U.S. went wrong in Iraq (45:00); why he thinks Gary Johnson is a weak candidate (57:00); Hillary Clinton's criminal offenses (58:26); whether he favors Hillary or Trump (1:04:51); and why he's planning to sit out this election (1:05:34).

A transcript of the conversation is below.

Camera by Jim Epstein and Kevin Alexander; edited by Epstein.

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This is a rush transcript that has not been checked for accuracy and punctuation. Check any quotes against the video.

Nick Gillespie: You were among the people who predicted that Obamacare would fail not simply because it was a bad idea but the implementation would be virtually impossible to do. In the Obamacare exchanges, now we are seeing basically some sort of death spiral or some kind of predictable outcome. Talk a little about that and what is happening and why didn't more people see it come

Richard Epstein: Well, I think we start the second question first. Why didn't more people see it coming? I think the explanation really is that these were all the kinds of Ivy League super jocks. And what they always believe is that they can defeat the law of gravity by the ingenious schemes that they could put into place in order to keep things under control. So when this thing was actively debated in 2008 and 2009 there were two approaches to the problem. People like myself said look you know health care insurance is not really special. What you have to understand about all insurance schemes is the greatest chance of conniving is typically with the insured and not with the insurer. And I said the way in which we kind of know this is you go back to the history of marine insurance and you start to see that the insurance companies were always given the options to pull out because they understood that the concealment of information by the insured would have very adverse effects on what they did and it was also clear that the people who would come for insurance were those who had private information which made it more likely than average that they would be the ones who would need the stuff

Nick Gillespie: You know you are at NYU and Chicago, not at an Ivy League school. We fixed that because you have to buy insurance.

Richard Epstein: Well we didn't fix it because of that. First of all what we do is we say you have to buy it but the mandates were extremely unpopular and the idea that you were going to run a social program with very popular acceptance which says you have to pay if you don't take something that you don't want to buy really sticks in the craw of just about everybody, because this is sort of libertarian moment that is respected by all people, because it's not dealing with what large business and industry does, its dealing with what you have to do in your particular life. So what you have to do is to tell people we want you to go into these plans and you're going to be damned if you do and you're damned if you don't. Well you're damned if you do because as it turns out many of the people going to be forced in are those who will be forced to pay premiums higher than the actual value of the policy because the implicit assumption in all systems of social insurance is that you have cross subsidies against different groups. So that the one guys that will be running for the exit and then there is another group which is going to be diving to get into the program because they will be paying average rates of insurance for a superior level of coverage.

Nick Gillespie: So that basically this is you know if you're under 30, you're paying a lot more than you would in the free market, or what passes for the free market in insurance, to get less stuff but then if your over 50 or over 45 you're actually getting a real break and so it means that more people…the older people go in. They tend to be sicker they tend to use more.

Richard Epstein: Well it's even worse than that. The basic ratio is typical person in their 20s is going to pay about 20% of the premium of the sick person whose 60, but remember there's going to be a dispersion amongst the people inside their 20s and there will be some of these people unfortunately who will be quite sick and they will know they're quite sick and so they will join into the system at the same level that people in their 60s in that are very healthy and they will decide to stay out of the system so even though you're talking about the basic situation what your doing is your underestimating the level of the skew because private information will mean that both groups will be self-selecting in a very powerful way.

Nick Gillespie: And the wiz kids who put this together, they did not even consider that? Or they missed the math? They didn't understand the multiples of the kind of skew going on?

Richard Epstein: I think what they did is they understood the math but I think they thought that they would be able to persuade people morally or otherwise to do this. They also missed another feature which has been explained to me for which I had missed for a long period of time. We treat this as though it's a matter of individual people enrolling in these particular plans. But people who are sick are always members of various kinds of health groups. So if you have a kid with juvenile diabetes you join all the associations online to learn about it. These association then direct you to the way in which you can enroll so that instead of it being a relatively slow resorting of the marketplace, these interest groups tend to drive these things much more rapidly. On the other side when you start to deal with people who want to get out of the plan they now realize that oddly enough there is a market alternative which was not that commonly available under Obamacare, and that's the walk in medical care, CityMD and so forth. And so if you turn out not to be part of these programs you can get pretty good primary care without having to endure the ordeal of an emergency room by getting yourself involved with one of these things. And so it turns out that there is rapid entry on one side, which was underestimated and rapid exit on the other side that was underestimated. And what strangely happened is that given that the rules of the game were established by Obamacare, then market forces come in and they accelerate the movement in both directions. And so by the time this thing turns out to be done, what happens is all the individual plans which are not buffered essentially are going to go belly up. And you know I said this I can't tell you how many times in 2008 and 2009. And what you were always met with was this sort of you know superior Ivy League sneer by individuals who knew so much better than you as to how to run this Rube Goldberg contraption that they thought that they could defeat the law of gravity.

Nick Gillespie: Let's just put it out there, you do have an Ivy League degree or two in your background okay.

Richard Epstein: I have so many Ivy League degrees…

Nick Gillespie: So this is the equivalent of you making fun of your own mother. You can do it.

Richard Epstein: I will happily do that. I mean I was always in the Ivy League in terms of my education but I was always out of the Ivy League in terms of my general intellectual disposition, and the reason I feel so strongly about this issue in so many cases is I was always at places with people cleverer than myself putting up schemes that were dumber than anything you could ever imagine. That was the kind of intellectual environment you went to. A little bit at Columbia College, and even more at the Yale Law School. At oxford, which is another very elite institution, what was striking about the English experience was that the pro-labor sentiment on the part of everybody in town was just inordinate. And I get there in 1964, stayed till 1966, and I watched the slow motion decline of the English system, which essentially imploded when Margret Thatcher took over in 1980. So I've been around failure for a fairly long time and what happens is that people just don't seem to change their mind in response to adverse information.

Nick Gillespie: Well just to kind of stick on that point for a second, do you think in today's world, you know clearly something like Obamacare centralizes power in many ways in the healthcare industry. You point to a couple ways in which its actually created markets that didn't exist before but is this a bigger or worse problem than it's ever been… of a kind of an elite dictating more and more parts of our lives, not because they're not trying to, but do we have more…is power centralized or decentralizing in any kind of understandable way in American society?

Richard Epstein: Well I think it's clearly centralizing. In part it's in the congress but more conspicuously in the last 8 years, its tend to centralize in the president. Because what happens is George Bush sort of made announcements or murmurs that he would engage in executive vetoes of one kind or another or initiatives but he was never prepared to play the nuclear option. Obama comes into the office and while he'd been a critic of presidential powers in the senate, when he faces the Congress which is trying to frustrate most of what he does, he doesn't take any rejection by Republicans as being legitimate. He simply says their obstructionists so I'm going to do it to the extent that I can by myself. So unilateralism becomes a dominant mode. And now when you have unilateralism…

Nick Gillespie: But is the president more effective? You know or is a single…President Obama has been trying to do all sorts of things that he can't get done or that people are like forget about it. Is he controlling immigration policy? He might try to control immigration policy, he gets rebuffed by the courts, but more to the point he gets rebuffed by immigrants because they aren't coming because the economy sucks. That's what I'm getting at in the larger sense is power fully only going in a centralized way or are there all of these kind of loopholes are that people squeeze through?

Richard Epstein: Well what happens is that if you centralize power in a president, it's what they said about the little girl, when she was good she was very, very good, and when she was bad she was horrid. What happens is you don't have the buffer of multiple institutions so that you tend to lurch one way or another. If you have strong movements of government power, what you will do is have decentralized responses to it by people who're trying to minimize the results so what you do is you get politics at both levels. You get people being very politically directive at the center and then people being very politically responsive on the outside in an effort to sort of minimize the flow. So for example on Obamacare what happens is we're now entering into a compliance culture which if you do something wrong the sanctions are always draconian. So you A) have to have somebody to fix it so you don't get punished. And B) you have to have all your ducks in order so that if something goes wrong you have all sorts of defenses against these kinds of things. So the compliance culture essentially requires industry concentration to be acceptable. If you double the size of a firm, you don't double the size of your compliance costs. And so one of the things that Obamacare has done is that it has led to a wave of hospital and industry mergers in an effort to minimize compliance costs thereby creating higher levels of market concentration, which leads to monopoly power.

Nick Gillespie: And the reason why that's bad is because they can be…or tend to…or they become overly bureaucratized, but they don't have to respond to customer demand.

Richard Epstein: Yeah so this was one of the central choices you face in a political situation when you see an imperfection is as follows, either you try to remove it or you try to create a compensating imperfection. And my view is you always do the former, you never do the latter. So they're restraints on entry which make the markets relatively monopolistic at the state level, what you do is you allow insurance companies that operate outside the state to sell business inside the state in order to create essentially more levels of competition. What Obama did was essentially cut a deal with the insurance companies. He said you join in my monopolistic program, and I going to make sure that the barriers against entry are in place, and so what you do is you get a dumb monopoly instead of a reasonably intelligent competitive system. This gets done over and over again. There is always the tendency to say ah this doesn't work so now we have to put that in place. Well it turns out that the cure that you have for the disease is not specific to the disease and what you do is that you now create distortions in third markets and then you play the game over and over again. So there is always this constant ready supply of justification for meddlesome interventions and it's going to ruin all markets whatever they are.

Nick Gillespie: I have heard some people who are kind of trying to find a pony under the pile of Obamacare say you know one possible good thing is that by pushing more and more providers or more and more companies, and employers, to having high deductible, low premium, high-deductible plans. That first three thousand or five thousand dollars that you're paying out of pocket for various things, that that will actually create market incentives. And I know this going back because I've been on a high deductible plan for years before Obamacare. At various points I would go into the doctor and for the first time oh here's a drug for something and I would ask him how much it costs, and he would actually ask you know somebody in the office to find out what it was and then say, you know that's kind of expensive, here's a cheaper alternative. Market forces at work. Do you think Obamacare's push towards that kind of lower high-deductible thing, will that help create a market? And will that help medical care or will it just kind of be closed in another way?

Richard Epstein: This the CityMD phenomenon. It turns out that if the plans are some clunky and so expensive and you can't actually give people the things that they want, you have to give them things they don't want, you're basically going to do this by having a deductible, and now they're spending their own money for a large portion this situation, and they will tend to it. There have been many studies for example at the costs of cosmetic surgery opposed to the costs of covered surgery, and cosmetic is elective and people care a great deal about it, but they shop for this because they know they're paying out of their pockets. And you know this very simple view that people actually take into account costs and benefits when they bare both will tend to ignore costs when they are borne by somebody else is thought to be one of the shibboleths that only a Chicago-based market economist can believe.

Nick Gillespie: But medical care, health care, like a couple other things operates totally differently than another market.

Richard Epstein: Yeah everything is special. I mean years ago I wrote a series of papers on why health care is special, claiming that it isn't special and that the moment that you start to make it special, it just turns out that it overheats in particular ways, but the special metaphor is used everywhere. So to give you an example in the 1930s we started to introduce the Agricultural Adjustment Acts which completely wrecked farm prices. Why did we do it? Because farmed goods are special. Why're they special? Because they're highly responsive to changes in supply and demand, which is a good thing and we have to quote unquote stabilize the market. It's a disaster. Then we have labor relations, oh these are special. Why are they special? Because these employers have complete dominant power, even in competitive market. So even in the face of rising wages, when productivity increases, we unionize this stuff and we create the imbalances because labor markets turn out to be special. And then of course rent is clearly special. You can't allow people in New York City to figure out how to rent an apartment, you have to put a rent stabilization program in there because real estate is special. Anytime you call something special it's the mark of Zorro, it's the mark of Cain on your forehead. You are about to kill a particular market in the name of trying to make it accessible and affordable to everyone

Nick Gillespie: Lets, you know we're trying to reach a wider and wider audience with Reason TV.

Richard Epstein: Good

Nick Gillespie: So let's, have you had work done? Let's go back to cosmetics. You look fabulous. Have you had work done?

Richard Epstein: Absolutely not

Nick Gillespie: But if you did, you would shop for the best price?

Richard Epstein: I would have my wife shop for the best price. I understand where forces of agency work their best, and they don't work with me. I'm a terrible consumer as it turns out, so I delegate the responsibility to somebody who is a terrific consumer.

Nick Gillespie: So let's talk about another special case of kind of law enforcement or government investigation and this has to do states' attorneys general going after Exxon Mobil and we assume many other companies and many other fields, but claiming essentially analogizing between tobacco companies and the research they generated knowing about the carcinogenic effects of their products to Exxon Mobil knowing about global warming. Tell us…walk us through what is the case that the attorneys general are trying to make and what do you think?

Richard Epstein: First of all, I think you actually have to understand the tobacco cases better than is commonly known and I say this as somebody who actually as an avid anti-smoker, organized much of the defenses

Nick Gillespie: You're to the left of Hitler on the anti-smoking question

Richard Epstein: Oh I mean I just hate smoking, but I actually represented Phillip Morris for many years and I tried to figure out how you put together the defenses in the tobacco cases. Because if you believe in the notion of individual responsibility and you start to think that the risks of tobacco are covert or latent, you're living in a myth man. I can recall in 1952 with my radiology father, we were all the kids riding him about being a smoker, saying dad why do you want to kill yourself when you know this stuff is very, very dangerous and we actually got him to quit and so…

Nick Gillespie: How could that be? Because nobody knew until the surgeon general put the….

Richard Epstein: No that's complete nonsense

Nick Gillespie: Obviously

Richard Epstein: I mean if you just look cigarettes were called coffin nails in the 1930s. Readers Digest just decided to put this huge expose out in 1952.

Nick Gillespie: But it is true also that the tobacco companies kept a constant line of information going out about mitigating or just saying no it's not, it actually just gives you…

Richard Epstein: I agree that they should not have done that. My view is that it was completely ineffective in part because the information you got from independent sources was much more valuable. Let me give you one of the ironies about all this. One of the things is there was a program, I think it was by Chesterfield, which says that medical doctors, and they show you a guy with a thing over his eyes, tell you that Chesterfields are easy on your T-zone, smoke Chesterfields, right. What do you think the effect of that particular commercial was? Well it had two effects. One is that if you didn't smoke Chesterfields what these guys were telling you is that these other cigarettes are really deadly, so that for the first time the dangers of cigarettes were brought home by the cigarette companies. And then people looked at Chesterfield and said why're these guys different from anybody else. So the effect of these ads to give you medical assurances essentially reduced the level of smoking more dramatically in the 70s than the warnings of 1964.

This is a rush transcript that has not been checked for accuracy and punctuation. Check any quotes against the video.

Nick Gillespie: Should they have paid out anything to smokers?

Richard Epstein: No, I mean we organized the defenses and they never did pay out anything to smokers. They paid out many things to Medicaid it's a big difference. What happened with the cigarette case is that we came up there we had a two-part defense and the first part of the defense was to exculpate what it means to talk about tobacco increasing the risk of various serious health problems. The stupid position would be to deny this. The correct position is to say when you're talking about this it is not the same kind of causation of when you are hit by a falling brick. The probability of getting cancer increases with smoking, but it's a curve and you have to figure out what it is. It turns out that the really negative adverse effects tend to be delayed in time and the frequency is not quite as high as many people go. So you certainly are talking about a risk that to me was large enough that I never wanted to get near the stuff but if people really find that cigarettes give them some other collateral advantage you can explain it in equilibrium why it is that they're going to smoke. As the information gets better that cigarettes are more dangerous what happens is you start to see a systematic decline in the rate of smoking and in the toxicity of the cigarettes that are being smoked. And one of the real negatives…

Nick Gillespie: When does that take place?

Richard Epstein: Its starts in the late…mid to late 1950s. By this particular time, you start seeing the rise of the filtered tipped cigarettes and so forth. You start to see low tar low nicotine, if you look at the brand switches, the Pall Malls and the Old Golds which were the really deadly ones start to go out, so it turns out that the rate of smoking goes down and the toxicity of the particular cigarettes starts to go down which is perfectly consistent with a rational market of information being absorbed. And you know, the cigarette companies may have done some terrible things at the time and I have seen some of this stuff, and I really don't want to defend any of that, but when it came to the smoking stuff, we gave this account of causation, and then we went on the assumption of risk side. The most famous case of Rose Cipollone, and by god, everyone in her family from the beginning of time to the end said Rose this stuff is going to kill you, it's going to hurt your baby, why do you smoke? It was her doctor, it was her minister, it was her family, it was her friends. She knew all of this stuff and you could never win these cases before a jury precisely because the enormity of the knowledge was an everyday affair to these people and the fact that somebody is putting out a commercial here there or the other thing really isn't dominating the information flow. And this was I think is correct. The way the cigarettes got beaten is the Medicaid arguments made by the providers, saying we actually had to pay these particular people to take care of you, and we have an independent cause of action. This is bogus as a matter of general law, but the moment you allow for the independent cause of action, it turns out all the assumption of risk defense is disappeared. And so now it becomes a collection case and you can make a fortune, which they promptly do and then they securitize this stuff and the great irony is that once the tobacco stuff makes the settlement with the states on these various issues, what they do is they now have a protector, because the states don't want that cash flow to disappear. They make it impossible for new cigarette companies with cheap tar, low tar and nicotine to enter into the market, because you now have a government-sponsored cartel. The state owns a fraction of the tobacco companies.

Nick Gillespie: And every year or every couple of years you hear states starting to complain about how they are getting, bringing in less and less money from tobacco settlements so what are they going to do next?

Richard Epstein: well they're not going to get it from Exxon Mobil, if that's what the question is. I just think it's the dying stream of revenue

Nick Gillespie: Well just so we're clear, you don't think tobacco companies should have paid anything to anybody beyond the taxes that they paid.

Richard Epstein: Yeah I mean I was and this was the position of the restatement in the second of torts in 1965, this was the common position. The way in which it was stated is good tobacco, that was the words in the restatement, basically is something that we expect because there is no deviation between what you get and what you want. But if its contaminated with something like marijuana that's what does it and when I worked for Phillip Morris one of the questions I asked them was what would you do if you found out that you had a defective bunch of tobacco that had contaminants that could hurt, and this is what they said. If we thought there were a thousand cigarettes like this, we would remove a million from the marketplace because we knew then that if a single product deviated from the expectation that we had, we were cooked. We are slaves to our reputation, and we move aggressively. This is true of every consumer product.

Nick Gillespie: And the idea that they fed a stream of disinformation, or misinformation to consumers or to regulators or anything, that's really not appropriate or relevant here because nobody believed?

Richard Epstein: Well, A) no one believed it and B) you have to go back and read these things because what happens is they did say things that you would disagree with, but whether it was open and shut in the way that it was put. Remember that all the guys that are putting all the spin and interpretation are the plaintiff's lawyers and my view was that if you went back and read these as evidence as one after another, I would find some of them less credible, some of them more credible. There is always some degree of doubt and one of the things that I think is widely misunderstood is the rate at which the increased risk takes place. The best work on this stuff was actually done by this guy hired by the tobacco companies, a guy named Kip Viscusi and in his rates of information on this were much lower than those put on the other side

Nick Gillespie: And merely having Ronald Reagan famously or Jackie Robinson or opera singers saying this cools my throat or that it gives me pep, that's not fraud, that you know

Richard Epstein: That's what we call puff, but those ads were actually blocked by 1960. It used to be standard baseball endorsements. Stan usually smokes x, y and z cigarettes. Look I don't want to say that this is not crazy and let's suppose we did find out that there was some degree of systematic degree of fraud by the companies. The correct response is a fine by the government, which tries to measure roughly speaking what the social cost is. But given the fact that there are so many sources of information, the thought that this information, the thought that this information is decisive any more than a tiny smoking cases strikes me as being wildly overstated, and it's interesting because when people like Vacco come out and say I'm against Exxon Mobil prosecution but I did the cigarettes sentiment…you read what he said about them, and it turns out he doesn't quite get the case. The tobacco companies won the following litigation every time. A health provider that was not Medicaid came forward and said our costs have been increased because your representation to smokers has led them to increase smoking and therefore you owe us the increased cost of care for these people. Every single court that faced those issues said no these particular damages are much too remote. It was only the peculiar and special status of Medicare that the public side could get money even though the private side could not.

Nick Gillespie: So speaking of Medicare and Medicaid. What is it about those programs…?

Richard Epstein: It's only in Medicaid

Nick Gillespie: Medicaid rather. Government funded health insurance, why was that a decisive difference?

Richard Epstein: What happened is these people said we have a government obligation to take care of those people, and since you increase the particular work that we had to do, you have to pay for the increased cost. The traditional rule about this has always been the exact opposite. Suppose there was a smoker who got Medicaid coverage, what would happen is he would then be asked to assign the health portion of his tort claim against the tobacco companies to the government to pursue. The basic rule on this assignment of this subrogation claim has always been that you take subjects of the defenses that could be raised against the smoker. So if you treat this as a derivative action from the smoker, all the assumption of risk stuff, the public and private comes in, and we win as the tobacco companies. But if you treat it as an independent cause of action with a statutory base, which the private guys don't have, then it turns out you lose. And then what you do is you get very favorable judgments on causation because its assumed that everything that happened would have been different if the information flow had been different from the government. But that of course is overstated given the huge amount of private information that people chose to disregard because they wanted to smoke. So I don't think that these cases are easy. As I said is that I am a strong anti-smoker, but one of the advantages

Nick Gillespie: As a matter of fact, I think you likened yourself to Hitler when it came to anti-smoking. You said that you were worse than Hitler.

Richard Epstein: Well whatever it is, is that I have never had a cigarette in my life and I take a lot of credit in persuading many people who should have known better to quit, starting when I was a boy.

Nick Gillespie: How old are you now?

Richard Epstein: 73

Nick Gillespie: You know, do you want to try? We can run out and get some cigarettes.

Richard Epstein: I have no desire whatsoever

Nick Gillespie: It would be an exciting moment.

Richard Epstein: I would regard it as an mortal death threat. I just don't want to have a puff of that stuff in me. But I think most people understood is they have different trade-offs from me and look one of the things about having a no liability regime which is actually important is that now when people decide to smoke they realize that they are going to have to bear the consequences of this, and so it's a nice sort of gentle reminder that costly activities, the costs are going to be borne on you. If you give the warranty, then you externalize the cost on somebody else.

Nick Gillespie: So let's talk about this new case, which is kind of fascinating which that attorneys general who, lord love them, they're pretty inventive, but now they want to go after Exxon Mobil for the effects of global warming. Talk a little about that

Richard Epstein: Well I mean first of all I think first of all they did want to do this. there was this great press conference at the end of march of this year in which Eric Schneiderman trotted out a hapless Al Gore and they sort of announced while the first amendment doesn't protect fraud and all these companies have engaged in systematic fraud on global warming and we're going to go after them he said and I have the Martin Act to do this. I'm actually doing a fairly detailed study on the martin act for the Manhattan Institute and it certainly gives you a leg up in these particular cases, but no decisive…

Nick Gillespie: Explain the Martin Act.

Richard Epstein: Well first of all to explain what the Martin Act is you have to understand what the basic common law rules of fraud are, and we commonly talk about a kind of five finger fraud. And in order for it to be fraud, we have to have scienter, the knowledge that the statement that you make is false, or reckless disregard as to whether it's true or false. Then it has to actually be a statement of fact. It can't be a prediction; it can't be an opinion. then it turns out that someone has to rely on it, that's the causal connection, he has to rely on it to his detriment. And then it turns out that he has to have injury, and in addition to this, generally speaking, its required that the statement on which people rely on material that is sufficiently important so that they moved the rational investor. And when you refer to the puff, this is best cigarette in town. Materiality is the opposite of the puffery. and the puffery has never been defined as fraud. So if you say this is the finest restaurant on the south side of Chicago, and 18 people are saying it, you can't sue 17 of them for fraud. So that's the basic situation. What the Martin Act tended to do was to relax some of the requirements. It said you don't have to prove scienter, but in most cases it was perfectly evident that it happened. Then it would say you don't have proof individual reliance because you're making these announcements to the world, and we don't want people buying worthless stock and we're going to enjoin it before there actually is reliance taking place. And then we said we don't have to prove damages, and if you're dealing with injunctions that is also perfectly sensible because why would you want to have to have people getting injured if you could stop the injury beforehand, and when applied to garden variety commercial fraud as was originally starting in the 20s and so forth the Martin Act was used. Elliot Spitzer comes along and decides to rev it up, going against public corporations and it's a little bit more complicated. Hank Greenburg is the main target of this, and it's a very contentious sort of litigation. But now he is trying to do it in the area of global warming, and you see wait a second this is crazy. First of all, let's just start with a single thing. What does Mr. Eric Schneiderman know about global warming? I think the answer is nothing whatsoever. And so what I've done is I've always been a skeptic on the gore global warming side. But it's important to explain what skepticism means. There is kind of a basic fundamental formula out there widely accepted by everyone on both sides that what you do is you measure the change in temperature as a function of the increase in say the doubling of carbon dioxide and what it is the function is logarithmic, which means that if you double something then it turns out the actually change in temperature won't double, it will be less than that and the question is then just how much. There is something called the sensitivity co-efficient, and that if number is very big then the effect is going to be very large. If that coefficient is small, then the effect is going to be very small. Well the proposition which says that everybody understands that increases in carbon dioxide results in increases in temperature is true for anybody who believes that this sensitivity coefficient is greater than zero. Everybody on every side of the debate. The issue is not whether or not there is an increase, the issue is how big is the coefficient, which will tell us how rapid the increase will turn out to be. on that question there is an enormous amount of dispute. The IPCC the International Panel on Climate Change the UN type of operation tends to put the coefficient at 3. The people who are more skeptical say it's probably closer to 1 and much lower. If you then start to look at these things, the data is a better fit to the lower coefficient more recently than it is to the higher co-efficient, and even this turns out to be somewhat mysterious. if you take the last 16 years, the increase in carbon dioxide concentrations in the atmosphere has been about 13 percent. The increase in temperature over this same particular period is pretty close to zero. The other great measure that you're looking at is the number of sort of storm-like events, typhoons, hurricanes, and so forth. And if you look at a graph, there is a high variability across years, but there is no question that if you took a single trend line its actually down rather up over the last hundred and twenty years. So if you're trying to put these two things together, what happens is it ensures that there is some increase but that it is much lower. Then the question is there is one more point. Is what is the consequence of the increase? Well, increases in carbon dioxide without major increases in temperature are wonderful because they improve plant life. So the issue is much more complicated and if Exxon Mobil changes it points of view, maybe it actually knows something that Mr. Schneiderman doesn't.

Nick Gillespie: So what are the AGs trying to do though? Is this just an assertion of will over an industry that is very easy to vilify? I mean is it that blanket abuse of power? What are they hoping to get out of this?

Richard Epstein: Well actually its very interesting because this particular campaign is in complete disarray. Schneiderman thought he had put together an alliance in march of this year, but as he started to go deeper and deeper into this thing, all the various other attorney generals started to back off. There was this fellow Claude Walker in the Virgin Islands who wanted to put subpoenas to the Competitive Enterprise Institute and AEI to figure out the whether people who had received money from Exxon Mobil had been crooks and you know there was a huge blowback on this because now it looks like it's the Spanish Inquisition being run by some ignoramus who doesn't have a large stake in anything at all, so he's backed off a little bit. It turns out that Schneiderman has now backed off the effort to try and figure out what they did in the 70s, 80s, and 90s. If you look at the studies on which he relied, these sort of revelation by these various climate groups, the only reason the why revelations looked to be plausible is that they have complete certitude that they understand what the impact is of the climate change and if you look at other people they don't. So recently I spoke with a group of physicists, all retired, because I think they're worried about political blowback, and they've put together something called the carbon dioxide coalition, and I've actually read their literature. And you know this is the most boring literature imaginable because of a bunch of graphs and tables and charts and so forth and you come away from that stuff saying look I'm not sure that they're right, I mean good scientific procedure says let them be attacked by somebody on the other side and let them respond, but the thought that they can be ignored given the data that they assembled and the sophistication that they've put it together in is something of a travesty. And so this entire climate debate has been characterized by a shrillness and dogmatism based on one sense that 97 percent of the scientists in the world believe in climate change. Well I would count myself one of that 97 percent if I were a scientist, but I'm not going to be somebody who is going to be absolutely alarmed about all this stuff. And what's happened is that when people start using the word deniers, they're trying to bring back memories of the holocaust, and they are saying look we will lose millions of people to global warming and it's just like what Hitler did when he slaughtered innocent people those days. Well this is not that particular situation. The future, it's a prediction. If you're trying to figure out what the remedies are, one of the things that's so disgraceful about the Obama administration is they don't even know how to a put together an intelligent program to deal with pollution, and there is so many things they can do which would limit his problem and a thousand others, but they insist upon using rather antiquated environmental statutes instead of retooling the entire project from the beginning.

This is a rush transcript that has not been checked for accuracy and punctuation. Check any quotes against the video.

Nick Gillespie: Let's talk about Obama and his legacy. He's still the president or at least that's what I read in the newspapers. How would you sum up his…the effect that he has had after two terms as president, taking office during a difficult economic moment, and also passing what we constantly are told is a transformative healthcare bill? How do you sum up his legacy? What are the things that we should be mindful of? Both of what he did right and wrong, and what we should be looking to avoid or replicate in future administrations.

Richard Epstein: Well I think the right list is pretty short. I can't think of any major initiative that he made that I agree with. There're things on which he's less bad, there's things on which he's kind of neutral, and then there's a largest list of things that are kind of terrible. I mean the first thing that one has to say about him is that he absolutely projects the wrong moral tone as someone who sits in high office. He is dogmatic beyond all possible belief, and yet his information base turns out to be extraordinary weak. One of the things I that I always ask when I think about a professor or a president is what was their undergraduate education like, and it's quite clear that he didn't have any at that particular level, so he works with a very thin information base and he makes these very striking assertions

Nick Gillespie: What's an example of that?

Richard Epstein: Well you start with the global warming stuff. The guy looks out at a beautiful ocean he says and I see just terrifying consequences in the future, but he has no idea of whether this stuff is right or wrong and if you actually asked him to sit down and go into the science, I'm not even sure he knows what a logarithm is which would be essential to figuring out the way this thing works. On the health care stuff, he's just dismissive of every private organization so when they had this disastrous roll out that everyone knew was coming in 2012 this man gets up and sort of announces to the world well I'm getting rid of all these crummy private insurance plans and I'm giving you a better plan, he had no idea what the content of those private plans was, or what the public plans are. And it turns out the public plans are just terrible because they require you to buy the insurance on this that you don't want, whereas the private plans tend to concentrate on the things that people start to want. so you throw 6 million off of there and at the same time you won office in part because of this insidious campaign against Mitt Romney back in the summer of 2012 in which you said when Bain Capital took over this business one guy lost his health care insurance and died of cancer six years later. The individual instance was a complete fabrication and the larger implication that somebody else who works in private business doesn't care about individual people is crazy. When 8 or 9 million lose their insurance in the fall of 2012, businesses usual adjust to the transition. When the system starts to go bad, they doctored the stuff, he writes this incredibly bad article in the Journal of the American Medical Association extolling Obamacare, I don't know if you've read this thing. And you know it's a political piece. He didn't write a word of it as far as I can tell. He got some assistants to write it, and he kind of uses it to grandstand the success of a program and never once in that article talks about the adverse collection collapse problem which is taking place at the time that the thing was written

Nick Gillespie: Well these are

Richard Epstein: I'm just getting started

Nick Gillespie: Yeah yeah no I want to give you a second to find the eight gear on the way up, but those are kind of personal observations. Or they're psychological observations about Obama. Where, how does he get so far if he has a thin knowledge base, his programs are bad and are constantly failing?

Richard Epstein: I mean if you ever met the guy, remember he worked at the University of Chicago, I was his interim dean for part of the time, his first impression is tremendously positive. He really knows how to carry himself. Everything from his accent, his voice, his smile and so forth, it's the kind of thing that brings people in, and in politics, if you can make a very good first impression, you're going to do pretty well. He's also pretty astute in managing to avoid getting involved in things. So if you wanted to take for example the bungled situation with respect to the potential indictment of Hillary Clinton for various frauds of one kind or another, the most striking thing about the president is he is nowhere to be seen in this particular discussion. All it could do is to bring him down, so if you're looking for fall guys, its Jim Comey at the FBI, and its Loretta Lynch sitting in the department of justice, and god knows who else. Whatever I don't know who it is doing all of these things and he tends to be able to stay out of the particular fray.

Nick Gillespie: It's kind of interesting that nobody is asking where was he. He must have known he was running a personal server etc.

Richard Epstein: I mean all of this stuff, he just manages to keep out of this. He has a press which is probably 80 percent liberal. I mean put aside Fox News and the Wall Street Journal. They don't ask him particularly hard questions. And what he does is he always manages to go public with this speech about empathy, explaining how he's going to start to help people. he also essentially he starts moving in other areas with other areas with populist fervor. He's terrifically good at taking after the banks. I mean the prosecution and settlement with respect to JP Morgan chase on the so called Madoff scandal is a true outrage. Eric Holder in my judgment is the worst attorney general who served in that office.

Nick Gillespie: Why is that?

Richard Epstein: Because he was abusive with respect to the people whom he hated and was unduly charitable to the people whom he favored

Nick Gillespie: So explain how that played out with the JP Morgan chase

Richard Epstein: What happened was that Madoff essentially used JP Morgan to distribute payments to various people and there had been an elaborate report by the Securities and Exchange Commission trying to figure out why it is that this fraud escaped detection of everyone inside the business and all people on the outside knew that management of the sec and its antifraud campaign was terrible because Madoff was turning out a relatively stable rate of returns in a highly volatile market just didn't happen in the universe and countless numbers of people, many of whom actually spoke to me about this, said to the sec this does not look right to us and they missed it all, right. And now they have this guy, he was not mentioned once at his JP Morgan chase in the entire report. They're giving out payments to annual people and all of the sudden they are the real culprits because if they had warned us we would have done it, so let's fine them ten, twelve, fourteen billion dollars or whatever it is for this kind of thing. this is just outrageous. Then the abuse of the Justice Department with respect to various kinds of private enterprises, universities, with a big club. Either you give your civil rights protections in the form we wanted or we're going to pull all the money from your medical research kinds of programs. Everybody starts to capitulate under these kinds of threats. And so there is in this administration, the use of what they call the guidance, and what the guidance says is that this is not really enforceable, but don't you cross us anyhow even though it's not enforceable, and so we will then throw the book at you and so people capitulate. They don't have to give notice and commentary, and they don't have to enforcement procedure. So for example on what kind of hearing you start to give to people charged with sexual harassment cases or racial discrimination cases, they say the standard for very a serious charge is simply a preponderance of the evidence. No private university independently would want to use that lower standard but sure enough once you get the Obama threat, everybody starts to capitulate.

Nick Gillespie: Where is, where is congress during all this because, and other forces that should be pushing back? Obama has faced, I mean he helped create a republican congress that he had to deal with through his first two years in office. are they to blame? Or how does their lack of action, or potency, factor into an assessment of the Obama years?

Richard Epstein: Well what you have to do is congress can do in the way of investigation and they do investigate, but it's easy to stonewall investigations and all the rest of that. But if they try to pass legislation, its subject to a presidential veto and then once the presidential veto comes into place, the sphere of executive action become very much larger. The only time that it really matters that you get congress is on some of these big budget issues, like the showdown over the deficit and so forth but otherwise

Nick Gillespie: Which last seen the Republicans were trying to break the sequester caps just so they could spend more money.

Richard Epstein: I'm not

Nick Gillespie: I know you're not defending it

Richard Epstein: I just saying on the military side, it's pretty unilateral in respect to the president. Many libertarians are much more dovish than I am, but I think everyone agrees that he is incompetent as a commander in chief

Nick Gillespie: And you think so because he hasn't been interventionist enough

Richard Epstein: I don't think he has a coherent policy I think the first thing is. And he doesn't know how to reassure his allies. Suppose you want to be non-interventionist, you don't become non-interventionist by essentially announcing red lines in Syria and then withdrawing. You don't start making deals with the Russians which gives them sway. You don't start announcing publicly well they're going to get themselves into this quagmire from which they will never emerge. And then basically Putin treats this kid as though he is a child.

Nick Gillespie: And you don't bomb Libya. Who was the last president, I think you were right that Obama does not have or did not articulate a clear coherent foreign policy that could even be debated. George Bush kind of had one which was equally disastrous I would argue.

Richard Epstein: Well let me give you my Bush view. There were three or four foreign policies by Bush, and I have different attitudes toward all of them. On the question of whether or not to go in or not given the knowledge at the time.

Nick Gillespie: To Afghanistan?

Richard Epstein: Not Afghanistan, everyone wanted to go into Afghanistan

Nick Gillespie: But then the question is when how long do you want to stay there

Richard Epstein: and Iraq. Yes, but in Iraq it was very tense. I can recall at the Hoover Institution attending briefings by people who generally frightened out of their wits by the weapons of mass destruction. My own guess in retrospect is as follows. The reports that we intercepted we read correctly but they were all lies designed to deceive Saddam Hussein who would otherwise kill them if this program had not been advanced, so we thought they were more advanced than they were. The war, the liberals basically thought it would be a disaster, it was a pretty effective war. The occupation immediately after that was a complete and total disaster. Bush had no idea what to do. He put people in office who had no idea what to do. They didn't basically know how to deregulate the economy. They basically de-armed the Baathists and they created all sorts of enemies of one kind or another and the place was a complete disaster and then he got himself together, and if you saw what Petraeus did, the guy was a miracle man. He managed, he knew how to run it, and he was not just a military guy, he understood that whenever you want to do these things, it's a hearts and minds operation, it's a cooperation operation. you got to pay bribes to the devil in order to keep them going. He wrote about this in foreign affairs in 2013 and It's clear he was remarkable. So in 2009 comes and you have an uneasy stability, and then Obama makes it very clear that he is a short-termer. This is a terrible mistake. Whatever your views were about the first three stages, getting in, fighting the war, the first failure then the surge, you have to play the hand that you're dealt, and the moment that we made it clear that we were going to get out it was very clear that chaos would break out there and it became very clear to everyone else that the United States would not intervene anyway so it's a free for all.

Nick Gillespie: We're still there. We're in Syria, we're in Libya, we're in Yemen, we're in, I mean

Richard Epstein: Always in places where we're in trouble, because essentially what Powel said, Colin Powell said was correct. either you stay out or you get in right

Nick Gillespie: Yeah I agree, and I think the weight of evidence now on the let's stay out, because we are not very good at staying in

Richard Epstein: Let me put it this way. With Obama as commander in chief, the correct rule is stay out because he's incompetent to try to run one of these things because he doesn't believe in it. If you had somebody…

Nick Gillespie: Why do you say that I mean as opposed to he's incompetent and he doesn't like it, I mean what is the evidence that he doesn't believe it? That the united states can forcibly reform various countries? I mean he's probably right about that

Richard Epstein: No I don't think that's what I mean. This is probably a point of contention between us. I think what happens is that he does not believe that the United States is better than any other nation in anything that it ever does. He is very much an opponent of American exceptionalism and he constantly kind of thinks of us as a colonialist power, of one sort or another. So there are many disastrous interventions by the United States, and many pretty good ones. But I think in his particular case the presumption is that we are always worse than we are. And what happens is that this gets communicated to the rest of the world that the president doesn't believe in his own country. He's always trying to figure out why we're wrong. So idle musings from a president can be absolutely deadly. So this guy gets in and you see some of these atrocities against the Yazidis and so forth. Thousands of people giving concern, what does the president do? He says well remember the crusades. What does he know about the crusades? I dare say absolutely nothing one way or another. Why are they relevant? He never explains.

Nick Gillespie: I don't disagree with kind of a lot of your thinking. The conclusions, I guess, for me I don't understand how Obama thinks the way you say he does but then he's willing to bomb Libya, he's willing to use drone strikes all over the place, and he very clearly believes in his exceptionalism, and it seems people around him are able to plan and distribute knowledge and peace and rainbow kisses everywhere.

Richard Epstein: That was the first point about the domestic economy. He certainly does believe that.

Nick Gillespie: I mean I wish he was as non-interventionist as many of his critics claim.

Richard Epstein: in many cases, what you have to do is pick your spot. That's the first thing. To the second thing is how credible are your threats. That is when people start looking at the United States, seeing the reduction in military power, the unwillingness to use it. When the cats away, the mice will play. So you now you start to see other types of alliances form in which the instabilities are really great. You see the situation in Yemen another proxy wars taking place. You see the takeover in Crimea, you see the Chinese building islands of the south china sea, and starting to move there, you start

Nick Gillespie: Now we are back to Republican convention.

Richard Epstein: Well let me put it this way, this is a serious issue. I mean if they can claim, put up an island which is a pinprick in the ocean and have a 200-mile zone everywhere around it in which they have exclusive control.

Nick Gillespie: By the same token, in many ways you're channeling I think a kind of an American cold war policy circa 1960 where its wherever anybody else is, we need to be there. And you know some of these are regional issues that really the American government can't do much about and shouldn't do much about.

Richard Epstein: Well you remember 1960, the great talking point for our good friend John Kennedy, Kinmen and Matsu, two little islands which were still under control of the nationalists. but the idea that you go to war over Kinmen and Matsu is crazy. Vietnam, much more complicated kind of…

Nick Gillespie: Didn't quite work out so well

Richard Epstein: Didn't work out well and of course there are reasons again. I mean it's strange, it's the same problem. Johnson goes in, he's willing to put in 530,000 troops at the time, but he's not willing to bomb the north and he's not willing to bomb churches. So what happens, they use all the churches to store all the materials. And then you have Kennedy, an Ivy League guy, what does he do? He takes Diem and throws him out of office in November of 1963 before he's assassinated. They never get decent leadership afterwards. It's extremely difficult to play the intervention game. Eisenhower of course would be was much more reluctant to get in, but he always kept the NATO line firm, but he wasn't prepared to go into hungry in 56, he forced the Israelis out the Sinai peninsula in 1956, both just before the election right taking place. He basically did not get involved big time in Lebanon. I think he was pretty smooth about it, but on the other hand he did understand that one of the things that you're trying to do is make sure that the soviet threat coming into Western Europe is going to be met and all of the sudden Austria gets divided in a sensible way, you manage to keep the German situation relatively stable. Japan becomes relatively free. Greece is no longer threatened by being in the thing. He actually did a lot of stuff was very good.

Nick Gillespie: And of course this is a very different world too where there were essentially two superpowers as opposed to a radically different distribution of power. Let's bring it in to the 2016 election and let's start with foreign policy. We have you know three major candidates who polling levels say are above 8 percent. Hillary Clinton, Donald Trump and Gary Johnson. In terms of foreign policy, do you see any of them capable of articulating a you know not necessarily a foreign policy that you agree with, but a coherent strategy in the first place? And then do you agree with it or not?

Richard Epstein: Well let me start with this. In Donald Trump, incoherence is his middle name and he has never thought hard about any problem in the world except how it is he can advance Donald trump, through means private or public. So I don't

Nick Gillespie: So you are on the trump train it sounds like [laughs]

Richard Epstein: Oh god, I mean he just, for example, on domestic policy he is now in favor of paid family leave. He's a pure politician on this stuff and has no experience on this stuff and has no experience on international affairs and what is terrible deadly about him is he suffers from another Obama vice. He doesn't know how to take advice from anybody and he will not bring around him any good people, and no good people want to serve him, so I regard him as a disaster. Hillary Clinton I mean when she was secretary of state, my friends at Hoover who were the ex-generals and so forth thought she was actually much more competent than Obama in terms of the way in which she was realistic of the assessment of these things, but after she goes out on the husting she now meets Bernie Sanders and she starts making public imperatives. It's always dangerous. Maybe you don't want to go into Iraq again, but you don't want to say never again because you don't know what's going to happen.

Nick Gillespie: Can I ask with foreign policy, what were Hillary Clinton's big successes that the generals…

Richard Epstein: None

Nick Gillespie: But the generals are like yeah, but she's better than Obama

Richard Epstein: Well they basically think she didn't have much power.

Nick Gillespie: Okay

Richard Epstein: So their attitude was that the way at which this came back to me and this is all second hand was that in the deliberations, they thought she made more sense than the president, but he was such a strong willed fellow that he always did what exactly what he wanted. The Benghazi thing was the classic evasion that you often see with respect to people. And you know look, Harold Koh is a distinguished anti-war guy when he is a dean at Yale law school, then writes these ridiculous memos to the effect of we're shooting at them and they're not shooting at us, then it turns out that we are not engaged in military activities that would trigger some kind of requirements under the Declaration of Wars Act and so forth. So I mean I think at this particular point she is going to be adrift. My view about it is that you have to have a big stick but you can't wield it in every particular case,

Nick Gillespie: Let me ask

Richard Epstein: And I think there is too much unilateral surrender before the fight begins.

Nick Gillespie: Talking more broadly you had mentioned that Trump is incoherent. He is walled off from expert advice other than that which reflects what he already believes. Hillary Clinton, you're worrying about her. Talk a little about the Bernie Sanders effect on her, not just in terms of foreign policy, but in general policy. And are you worried, I mean you, you trash talked Obama pretty well. Do you have similar concerns about her? Maybe not that she doesn't know a lot, I mean she has had a lot of experience in office, and you know in and around the white house, but is she, is she a bad person to be president?

Richard Epstein: Well let me put it this way. She certainly is extremely thorough, extremely conscientious. She briefs pretty well and so forth. But the difficulty is A) does she have a core and I think the answer to that question is no. I mean she has buffeted about.

Nick Gillespie: So she isn't, I mean in the…

Richard Epstein: She isn't like Sanders, who is a true believer. The issue you asked about her is will she stay bought by anybody because she is somebody who goes with the flow. She was the second most left senator when Obama was the first most left senator in the United States, and this was back you know before 2008, and I think she has basically left her domestic policy like things like labor are terrible and the anti-discrimination laws are terrible and all of that stuff. I think the difference between her and Obama is that she is temperamentally a little bit more cautious. Afraid about her flanks being attacked. So while he is prepared to go from here to there, move very rapidly, she is going to go more incrementally with respect to what has happened. I also think that unlike other people, she does listen more to her advisors. I mean it is noted even around this building the number of people who are really rather able that she's recruited to work in her particular campaign and they tend to be the sort of technocratic, professorial type.

Nick Gillespie: And can we announce here the news that you are going to be her attorney general?

Richard Epstein: Well that's the hope and the plan, yes.

Nick Gillespie: Yes

Richard Epstein: Actually I am running for all three guys right? Not going to happen but I mean but she does have people who are actually smart, even Obama had some who were smart, but it turned out that nobody matters but Valerie Jarrett and she's just not up to that kind of a job.

Nick Gillespie: What about Gary Johnson? He is doing historically high for a Libertarian Party candidate. It is unlikely, and you know let's define unlikely as impossible that he would win, is he doing a good job injecting libertarian discourse into mainstream politics?

Richard Epstein: Doesn't seem to be. I mean look I don't follow particularly closely and in fact I don't think anybody follows him particularly closely. He has tended to get tied up in the drug issue and so forth which is tangential to the great issues of America. You know, if he can't pronounce Aleppo, know where it is, or what's going on. It's the kind of gaffe is impossible to paper over no matter how much you apologize. I thought his post-Aleppo statement was pretty good, but in politics the 5-second gaffe gets 90 percent of the attention and the two-minute thoughtful apology gets 5 percent or 10 percent of the attention. Well at that particular rate you're going backwards. He won't get into the debates, and we know why that happened, and that's not going to give him a chance to project himself. He actually has to share the sidelines with Jill Stein with, on the left-wing party, so I don't think he'll turn out to be much of a force in this case. I think he will get votes, but my guess is that most of these votes are protest votes. I mean I understand perfectly well people who say I cannot vote for a woman who I think belongs in jail and I cannot vote for a man who I think is emotionally and mentally unstable.

Nick Gillespie: What has Hillary done that puts her in jail?

Richard Epstein: Well I mean if you actually go through this stuff I mean, first of all the server situation. The creation and the use of a server whether or not the leaks take place is pretty clearly a criminal offense judged by a recklessness standard. There is probably a very strong set of obstruction of justice charges that could be made when you start wiping these servers clean after you're on notice of the fact that an investigation is going to take place. In the second Bush years there was an expansion of the obstruction of justice statutes to cover exactly cases like this and Comey did not even talk about them when he gave his whitewash saying I think she was seriously you know negligent but not culpably negligent which is double talk of the worst sort.

Nick Gillespie: Right well and also had anybody else did it he wants to reserve the right to put them in the slammer.

Richard Epstein: And then of course the shenanigans that took place when they dropped the whole investigation. He refuses to prosecute and Loretta Lynch says I'm bound to accept his advice. She was just wrong. The correct thing to do is if she compromises herself is not to cede the authority to the FBI who doesn't have it. It's to find someone in her department who can actually review these things. I think this whole case has gone forward without anyone doing a serious memo on any point of relevance with respect to the mental states or the actus raes, the particular conduct that takes place. There is also I think a real question of undue influence and cooperation with the Clinton Foundation which was never subject to this and there is the very annoying fact the way in which this investigation was conducted by the FBI, they did not follow standard procedures. They interviewed her at the end of the process rather than at the beginning of the process. I don't know all the records but that's part of the problem in this particular case.

Nick Gillespie: Let me ask

Richard Epstein: But the math is completely off

Nick Gillespie: Here, what one of the things that I've heard you talk about is what happens when every aspect of life becomes politicized? And obviously political investigations or investigations of political players are always politicized but um are we at a point where the united states is essentially moving from a sort of high trust society or a high trust community where we kind of agree that our leaders, they're not perfect, they're not saints, but they're trying to do the right thing and they pretty much follow the laws that they write for the rest of us to one in which looks more and more like southern Europe or developing parts of the world where it's like no you understand that people go into politics because they're bad people and they act poorly, rules get adjudication depending on who the subject is, so that if it's a wealthy, connected person, they skate, if it's somebody else they get screwed. Do you feel like we're going in that direction and if so what are some of the outcomes?

Richard Epstein: Well the obvious situation is just look at the difference in the treatment of Scooter Libby who gets charged after they set him up for trivial things, and Hillary Clinton who manages to dodge this situation even though I think the charges were really very serious. And they were delayed in the enforcement and all the rest of it, but that's at the top level. But I do think that is what's happened is two things really matter. One is that an increasing polarization inside this country, the middle is essentially hollowed out. Twenty years ago Bill Clinton was at the center and he was basically a right-wing democrat, pretty pro-market, respect for the bond market, more interventionist than you would be, but kind of committed to keeping the welfare framework in place. Now you look at what's happened, all his compromise positioned are spurned. So you know the Religious Freedom Restoration Act, the ACLU put it in place, very sensibly in 1993 they repudiate it today. DOMA which is the stuff on same-sex marriage which is now unconstitutional, where as it was a very high consensus operation. Welfare reform which seemed to work pretty well in the 1990s is now basically regarded as terrible.

Nick Gillespie: Free trade

Richard Epstein: Free trade has gone in the completely opposite direction.

Nick Gillespie: What about the Republicans or the conservatives who constantly saying now that because planned parenthood gets some money from the government not specifically to do abortions we have to shut the government down. I mean the polarization is in both directions

Richard Epstein: I think it's more on the Democratic side than the republican side but you're right. I think the greatest mistake Newt Gingrich made was shutting down the government when he had the disagreement with Kennedy, with the president in the mid-1990's, 1995. This is just absolute insanity. I don't think this is true about Paul Ryan but the best way to explain your position which is quite credible is you get the guys like Boehner and he resigns because he can't deal with his tea party opposition. I mean they basically say we are pure and ineffective and we don't get anything changed but we stand for our principles. He said we got to make compromises and he was done, so I think there is some of that on the Republican side but I think in effect that the biggest difference is the republicans who are being resistant to try to basically keep to the status quo while the whole system are getting larger, there democrats are moving very aggressively to get things further to the left. The most conspicuous areas of this are banking regulation, labor market regulation and so forth. I think it has been quite dramatic. Civil rights enforcement has really been ratcheted up and I think they're the ones who have tended to make the main policy initiatives. But look the president in the modern economy being a single office with a single man is more powerful than a divided and a confused congress and what we are seeing it is fair to say unfortunately is this playing forward with a guy who in my judgment a very weak president because he doesn't know the limits, sensible limits, that should be imposed upon himself. But if you look at our constitution and I'll just end on this note, there are lots of gaps and what it does and what you need to do is have comedy, a sense of self-restraint so that people continue to operate in what you say is a high cost environment. But now the tendency is that everyone pushes their legal rights to the limit, these soft buffers tend to be understated and you're going to get much more ugly confrontations. The net effect is going to be a slow decline in American growth, happiness, prosperity and wisdom and so you know the trajectory is down. The first order of business is to reduce the rate of decline. The second order of business is to try to get it into reverse. I'm a little skeptical.

Nick Gillespie: Yeah I'd say a little. The lights are going off all over America. Very quick, what is the worse scenario, a Hillary presidency or a trump presidency?

Richard Epstein: Well there is high variability on both sides and it depends which trumps shows up. Hillary I think you know what she is going to do, she is going to push hard to the left with the conventional reasons and not do anything crazy. With Trump, if he kind of as it were keeps to the script he could be better on the high side, regulation, domestic issues, and maybe a better foreign negotiator because he is a little bit crazy, but if he goes insane then in effect god knows what's going to happen, so the argument in favor is Hillary is low median and a low variance and the argument in favor of trump is it's a low median and a high variance. If you think it's going to be low on thing, high another thing.

Nick Gillespie: So who are you going to vote for?

Richard Epstein: I'm going to sit this one. I mean I can't bring myself to vote either of these particular candidates, and for me I will just end on this note. I am an academic I know it sounds odd, buying a candidate is like buying a market baskets of goods, half of which you want to throw out.

Nick Gillespie: That is the basket of deplorables.

Richard Epstein: Yeah whatever, and by not voting for either of them is feel free to criticize them or to praise them as the case may be on an issue by issue basis. I'm an issue guy. I'm not a candidate guy in this world. Nobody is ever going to get me for public office. I hope I have some influence on opinion. I hope that even our sparring on this issue is of interest to your audience we're hoping to attract. So thank you

Nick Gillespie: so thank you very much. We will leave it there. We have been talking to Richard Epstein. He is an NYU professor of law. He is also at the University of Chicago law and the Hoover Institution. Richard thanks so much for your time

Richard Epstein: Oh it was great

Nick Gillespie: For Reason TV, I'm Nick Gillespie.

This is a rush transcript that has not been checked for accuracy and punctuation. Check any quotes against the video.