• David J. Theroux, President, The Independent Institute
• Edward J. López, Associate Professor of Law and Economics, San Jose State University
• David D. Friedman, Professor of Law, Santa Clara University
• Alex Kozinski, Chief Judge, U.S. Court of Appeals for the Ninth Circuit
• Audience Q&A

David Theroux

Good evening. My name is David Theroux. I’m the president of the Independent Institute. I’m delighted to welcome you to our Independent Policy Forum this evening. As you may know, we hold these on a regular basis to bring together top scholars and other experts to discuss, debate, and consider important social and economic issues and policy proposals. Our event tonight is entitled, “Is U.S. Justice Broken? Overcoming Government Legal Failure,” and we’re very pleased to have as speakers three really outstanding legal scholars and experts. In particular our program is focusing around the new book that we’re very pleased to be sponsors of called The Pursuit of Justice: Law and Economics of Legal Institutions, which is edited by one of the speakers, Ed López, who I will introduce in a few minutes. By the way, the book is available at discount both here and for those who are watching us on uStream on our website.

For those of you who are new to the Independent Institute, hopefully you got a packet when you registered. You’ll find information about our books, upcoming events, media projects, and memberships. This is the end of the year, and you’ll find also a great deal of information about us on our website, Independent.org. I’ll also mention that in the packet there is a flyer about another one of our new websites called mygovcost.org or the Government Cost Calculator. One of our research fellows, Emily Skarbek, who is here tonight, is the director of that, and I’m sure she’d be happy to talk to you about that. I think you’ll find it quite intriguing.

In addition, in your packet you’ll also find information about our summer seminar program for high school and college students. This is getting toward the season in which people are making plans for summer, and we would encourage you to enroll students who you know or encourage others to do so. One other note I might mention is this weekend, Saturday and Sunday, C-SPAN is going to be airing a program that we taped in our Washington Conference Center. It’s actually going to be shown on Saturday at 2 p.m. Eastern, 11 a.m. Pacific, and Sunday 2:30 Pacific and 5:30 Eastern. It’s based on this new book called The New Holy Wars, which is by another one of our senior fellows. His name is Robert Nelson, from the University of Maryland, and the topic that is being discussed is what’s called economic religion versus environmental religion. I hope you can tune in for that.

The question is, Is the legal system of the U.S. broke, or what? Many have noted that the legal system is fraught with injustice, backlogged courts, and billions of dollars and perhaps a lot more in waste. Let’s consider, for example, in August Thomas Lee Goldstein, a man who spent 24 years in prison for a crime he did not commit, was awarded $7.95 million from the City of Long Beach. He was released from prison after six years, after evidence of police misconduct came to light. For the past five years, defendants in federal criminal trials were forced to waive the right to DNA testing in exchange for plea bargains. Those waivers prevented federal inmates from using post-conviction DNA tests to prove their innocence, essentially ending the Innocence Protection Act of 2004. Thankfully, the Justice Department has just announced an end to the DNA waivers. Meanwhile, in San Francisco the police forensic lab has been accused of a cover up in fraudulently handling the switching of DNA samples. We could just go on and on with many of these types of examples. These are just a few of the problems of what can be called corruption—wrongful convictions that rob innocent people of years of freedom, judicial decisions that make a mockery of the rule of law, and court-sanctioned tort law and wealth distribution—that really harms consumers and wastes billions.

We’re actually quite pleased that there is a bright spot on the horizon in all of this, and the bright spot is that there are some very serious scholars and thinkers who have been working on this for years, and I think they have a lot to share with us. I’m delighted to begin our program. The way it will proceed is we’ll start with Professor López who will be discussing the topic, and we will be following that up with Professor Friedman and then Judge Kozinski. So, to begin our discussion, our first speaker is Edward López.

Professor López is Associate Professor of Law and Economics at San Jose State University. He is a research fellow at the Independent Institute. He is President of the Association of Private Enterprise Education. Before joining the faculty at San Jose State University in the fall of 2005, he held appointments at the University of North Texas and at George Mason University. He has also served as a staff economist on the Joint Economic Committee of Congress. His articles have appeared in many journals and books, and he is also editor of the new book, The Pursuit of Justice.

Edward J. López

Well, it’s great to see so many interested faces here this evening. Thank you, David, for that introduction, in particular the substantive introduction to the material because it makes it easier for me to describe the book. Thank you, everyone, for coming tonight. It’s a real honor and a treat to be here at the Independent Institute, especially in getting to share a panel with such distinguished speakers as Professor Friedman and Judge Kozinski. So, I’m very happy to be here, and thank you all for coming tonight. I hope we have a good discussion.

As David was saying, The Pursuit of Justice was published earlier this year. It contains 11 original chapters, 11 original studies, by 15 scholars in economics, law and politics. Each of these papers looks at an area of the legal system, and it looks at these areas of the legal system using sort of the basic economic tool kit, if you will, the basic economic tool kit especially of public choice economics.

I should be clear about a few things as I start. What is public choice? What do I mean by “legal system”? By “legal system” I mean generally the court system and particularly the individuals who make decisions every day in the court system, including police, prosecutors, judges, juries, forensics investigators and so forth. As for public choice, public choice theory began as an offshoot of economics to study politics. While the public choice toolkit has traditionally focused on politics—political institutions, if you will—it has been also increasingly applied to legal systems as well, to the courts. So the papers in the book, these 11 new papers, they continue this emerging area of research and they push the envelope on it. In doing so, they shed new light on the role that incentives of these key decisions makers in law play. What is the role that the incentives facing judges, juries, prosecutors and so forth? What is the role of those incentives in determining and explaining the outcomes from the legal system, such as what David was describing?

These studies also give us a good foundation in looking at legal institutions in a sort of realistic way. They give us a good foundation for thinking about how to improve the legal system, to improve the outcomes that it generates, and I think for this reason one of the reviewers or the book has been described as being a realistic yet hopeful treatment of the legal system. I think that captures well what I view to be the dual or the twin purposes of the book. One purpose is scholarly. The book has a scholarly purpose. The book has a reform purpose. And I think that those twin purposes make it an ideal fit for the Independent Institute. The scholarly purpose is to advance the study of law from the perspective of public choice theory, to draw attention by scholars to study the law in this way. The reform purpose is to use public choice to think through what are the systematic changes, what are the systematic tendencies in the law, and especially reforming toward the de-politicization and de-bureaucratization of the legal system.

David was mentioning some of the problems that emerge. How do we know that there are problems with the legal system? Well, because they manifest themselves pretty clearly. They manifest themselves in inefficiencies—or that’s what the economists would call it—wasting of resources, and they also manifest in injustices or inequities that are generated by the legal system. And the 11 papers in the book take this sort of hard-nosed analytical approach to uncover these things, things like wrongful convictions, which David was mentioning, but also things like frivolous lawsuits that waste and redistribute wealth, things like prohibitively costly legal services that lock out the poor, things like bias and inadequate access to the courts themselves or to some form of arbitration or dispute resolution themselves, and also very importantly political and other types of interference in the judiciary to keep it from doing its job, to keep it from, for example, combating corruption in the other branches of government, for example. One of the papers looks at the empirical relationship between how independent is the judiciary and how corrupt is the government, the other branches of government compared to that judiciary.

The overall argument is that these are problems, of course, but they are not problems of personality. They are not problems of having the wrong person on the bench. Now, I would be pleased personally myself to have more Alex Kozinskis on the benches of the judiciary, but that’s not the message of the book. The message of the book is to look at these problems as systemic problems as opposed to problems of personality; systemic problems that require not just throwing the bums out, but they require institutional reforms, changes to the way the legal system is set up. Changing the institutions of the legal system will alter the incentives of the key decision makers in the legal system to generate improved outcomes. That is kind of an overview of what the book’s message is.

To give you a little bit deeper sense of the scholarly motivation for the book, let me go behind the scenes a little bit. This will help also to let me review the contents of the book, which is the main part of my talk tonight. As I was saying, the core approach of economic analysis is that incentives matter. People make their decisions based on the incentives that confront them, and as economics has been used to study more and more areas of life, not just markets and production but things like legislatures, schools, sports, churches, families, other types of areas of life that you don’t sort of automatically think of as being economic areas of life. They have been studied by economists, and what we have seen is that as sort of the steady progression of analysis in these areas of life goes on. We have seen this sort of consistent analytical theme emerge. That is that, as I was saying, the theme is regardless of the area of life that you’re talking about, the incentives that pertain to that situation are going to determine the outcomes there. Because incentives are wrapped up in, defined by, and embedded in whatever the institutional arrangements are of that area of life, we have that same situation. So, in some sense the legal system is not special. It conforms to and is amenable to this more general form of analysis you can use to study institutions in any area of life. So it’s a very general approach, the scholarly motivation, but it’s also a very important one to setting up the more specific discussions of the actual issues. It’s important because of how ordinary people view potentially reforming the legal system, which may kind of lean towards a sort of “throw the bums out,” or put caps on behaviors we don’t like, or outright ban behaviors that we don’t like. Things like that, relatively simple, issue-specific, relatively narrow types of changes. The generality of the public choice approach lends itself more towards more general types of reforms, more systemic types of reforms as opposed to the specific.

Going on to the subject matter of the book, bringing it front and center to what the problems are with the legal system, I’ll make five points basically. I’ll organize the material into five points. The first is that generally finding empirical evidence that the legal system serves various sets of private interests as opposed to serving public interest. There are some chapters in the book that are in that vein. So, the law is meant to serve the public interest. Yet, too often it’s driven to serve particular narrow interests instead. So, one chapter in the book, it’s actually the final chapter in the book, by a policy analyst, Adam Summers, Adam shows how the regulation of the supply of legal services traditionally insulates lawyers from beneficial competition. What that does is it decreases the amount of legal services that are provided on to the market, which raises prices, which limits access by consumers, consumers of the law.

Again, this is a sense in which the law is not really special. When markets have high barriers to entry, this generally harms consumers and raises the profits of the incumbent firms who enjoy the barriers to entry. What Adam does is he looks at how legal services are regulated to erect barriers to entry and have these types of effects. For example, so Adam writes that all 50 states require a person to obtain a license from the state in order to provide most legal services. Of course, it works slightly differently in each state, but the licensure requirements are basically getting a law degree from an industry-approved school, passing the state bar exam written by the industry, being a member of the state bar association, paying various entry and license fees, and taking continuing legal education courses. In some states you have to satisfy a moral character determination, and interstate competition is limited by a general lack of reciprocity among the states. If you’re licensed in one, you can’t practice in another. Restrictions on advertising are also in place in many states. The intention behind these restrictions is rather noble sounding. It’s the old story that we want to protect consumers, but the effects of these restrictions are to decrease the supply of legal services, to essentially price many consumers out of the market and to essentially squash competition from many would-be competitors, from many people who might not have a license to practice but who could easily and competently handle things like wills, small claims cases, certain types of contracts and such. This chapter in the book demonstrates how the institutional arrangements of competition for legal services reduce supply, and that causes inefficiencies in the form of social costs. It also presents injustices in the form of falling heavier on poor people.

In a parallel chapter, a law professor at Benjamin Barton—he is a law professor at University of Tennessee—he presents what he calls the lawyer-judge hypothesis. I’ll just read the first sentence of Ben’s chapter to sort of convey this hypothesis. “If there’s a clear advantage or disadvantage to the legal profession and any question of law, judges will choose the route that benefits the profession as a whole.” So, Barton is a scholar who can survey vast areas of case law and draw connections together that other people don’t do as well. And he does this in this chapter. He goes on to demonstrate an array of areas of the law in which this lawyer-judge hypothesis seems to hold. These include the law profession’s generally broad powers to self regulate, so there is a lot of overlap with the previous chapter I mentioned. It also includes the high degree of confidentiality ascribed to the attorney-client privilege in the courts, which Ben puts the research together to make this point. The attorney-client privilege is held to be much stronger than privileges in other professions, say the doctor-patient privilege, clergy-penitent privilege, accounting and so forth. That is one other area where he teases this out. The lawyer-judge hypothesis draws attention to the potential biases that may result. For example, there is something called the merit plan, by which judges are appointed and then subject to uncontested re-elections. Now, the re-elections vary by state, but generally in states where they have the merit plan it’s a subset of the legal profession who is voting for retention. What this has the effect of, is judges that are selected by the merit plan. There is evidence to conclude that they have been ruling in favor more of lawyers’ interests on the margin. In other words, when there’s a clear advantage or disadvantage to the legal profession, judges are ruling for the legal profession, ceteris paribus.

One of the things I really strived to do in the book was to have all of the chapters discuss the reform implications, and the reform implications here with these two chapters are radical ones. They are to remove barriers to entry in the provision of legal services, and they are to make legal services broadly speaking, lawyers and judges services, more like competitive markets and less like government monopolies. That’s the general reform message there.

Second point, and it draws off the ending of the first point, was judicial selection methods. Judges are people too. Judges respond to incentives, and no body of evidence suggests this more strongly than the empirical results on judicial selection mechanisms. It turns out about half the states have elections; about half of the states do some form of appointment. Chapter three, by economists Russ Sobel, Josh Hall and Matt Ryan, finds that the quality of the legal system is sensitive to how judges are selected. There is this data set that goes out and says, “Are you familiar with the legal system in State X? If you say yes, then you can take this survey.” The survey asks, what do you think about the legal system in State X? Well, it turns out that in the responses to these surveys, the quality is lower in elected states compared to appointed states. The quality is even lower in those states that elect by partisan elections as opposed to non-partisan elections. So there the reform message is fairly clear: At least do away with partisan elections for judges.

There is some more evidence in the book in chapter six by another pair of economists, Aleksandar Tomic and Jahn Hakes. This chapter uses a very extensive data set of judges’ rulings on criminal cases, county-level data, 54 large-population counties in the 1990s, 70,000 cases, and they do some very advanced econometric analysis with this data set and find that elected judges have higher incarceration rates but they issue shorter sentences compared to appointed judges. This is a little bit of a puzzle, but it’s not so much a puzzle if you think about the incentives of the judges and who they are responding to: voters or state-wide elected officials who appoint them. It turns out that if you’re responding to voters, then your incentive is to treat the prison system like a fiscal commons. Every county can afford to be tough on crime and enjoy the benefits of that locally and send lots of people to prison but then share in the costs of that incarceration with the other counties in the state. This is the basic reasoning behind this result, and again I think it underscores the idea that the way that institutions are arranged to elect or appoint informs how people’s incentive are set up, fiscal commons or not. That leads to a clear explanation of the types of decisions they’re making: higher incarceration rates but shorter sentences.

Third, let market forces improve forensic science. This is getting to David’s first point. Like political institutions and electoral incentives, what economists would call the industrial organization of the legal system also matters. In chapter four, the economist Roger Koppl invites us to innovate cost-effective changes to easily prevent a lot of wrongful convictions due to fingerprinting errors. The chapter is about fingerprinting. It turns out fingerprinting—before it went digital, I suppose—was sort of equal parts science and art, and it has an error rate to it. I think it is about 3 percent, which is what is being reported in the chapter. So false findings in fingerprinting lead to thousands of false convictions a year, about 6,000 is Roger’s count. But the thing is, the institutional arrangements don’t handle this vulnerability of fingerprinting very well. We know there is a small error rate, but the way fingerprinting analysis is set up is that a forensics lab essentially belongs to the county. It’s not exactly a property situation, but a prosecutor and a police force uses a forensics lab for the most part, and that forensics lab has for the most part one client. So you have this bilateral monopoly that characterizes the market for forensics. Again, the message would be: put in some more competition among forensics labs. But the message is a little bit more specific in this case as well. Roger says that if you instill greater independence between the forensics labs and the prosecutors and police, it will do a lot because there is a lot of messaging that comes along when the evidence is submitted: “We really care about this case, we don’t care about this case, blah, blah, blah.” And some contextual evidence also kind of comes along the way. I was having a conversation at dinner earlier, and this point was brought up: What if the zip code of the defendant is on the evidence, and the forensics expert knows that is a “bad” zip code? That could be a contextual bias as well. The point is to increase that independence between forensic science and the administration of the courts.

Roger makes an extra point saying that triplicate-fingerprinting analysis would take this 3 percent and, through the laws of conditional probability, make it vanishingly small. And he does some cost-benefit analysis. What are these extra tests going to cost us money-wise? How are going to gain from it? Money-wise is what he is looking at. He’s looking at the reduction in incarceration costs. He doesn’t even include the non-money costs gained by not incarcerating innocent people, but even by this conservative estimate of his there’re orders of magnitude difference between the benefits of this and the costs of it. The reform there is fairly clear and obvious: more competition, more independence and more testing.

As I’ve been saying, the scholarly purpose here is a general one, but the chapters in the book cover a lot of different topic areas. So moving to the next topic area, eminent domain. There are two and a half (sort of) chapters in the book on eminent domain. Restrictions on the takings power, the public use requirement, and the just compensation requirement—these restrictions on the takings power have been sort of gradually eroded since the Progressive Era and the New Deal, as the Supreme Court and the court system increasingly deferred to legislative bodies to define public use. With this increasing deference to legislators came this increasing breadth of the definition of public use. By the middle of the 20th century, the stage was set for the Court to green light takings for such public uses as urban renewal programs, Berman v. Parker in 1954, the divestiture of oligopoly power in real estate—that’s the Hawaii Housing v. Midkiff case in 1984 that Judge Kozinski and I were talking about before the session here—and then, most famously from our perspective in 2010, Suzette Kelo’s house in New London, Connecticut. The takings power was okayed there to promote the public use of economic development.

By the final decade of the 20th century one prominent legal scholar described the public use clause as being of nearly complete insignificance. Sort of in the hallways of law and economics departments it has become the “public useless clause.” What do you expect? State and local governments have made a routine out of using the takings power to enhance their tax bases, to prop up inefficient glitzy developments. Defenders of this power argue that the just-compensation requirement is a sufficient deterrent to the overuse of takings. On the other hand, assessment disputes are heavily favored towards governments. Governments have the heavier legal firepower. They also have consultants in the repeated game, that they use on a regular basis, that develop their human capital around winning these types of assessment disputes. That is kind of the background.

In chapter seven, an economist named John Brätland argues that this very notion of just compensation is a farce because there is no voluntary exchange taking place. There is no way for any unrelated party to say whether that was just or not. It’s an ethical argument. The only way we can say if it’s just or not is if the person voluntarily consented to that exchange. The entire concept of just compensation is a flawed one, according to this contribution. Another legal scholar, Ilya Somin, in chapter eight shows the adverse consequences of relying on eminent domain for economic development. It’s targeted at the Kelo-style takings. He looks at a related case, Poletown, Michigan. It’s not a Supreme Court case. It’s a Michigan Court of Appeals case, but essentially the characteristics are very similar. It wasn’t a couple of dozen houses. It was a pretty big neighborhood that was wiped out to make room for a General Motors assembly plant.

In cases like these—in the Poletown case, in the Berman v. Parker case (urban renewal program from Washington, D.C.), in the Kelo case—in these cases where the takings power was used most expansively, Professor Somin’s chapter shows that the results have been the most disastrous. With limited time, I’ll just say one example. Five years and counting after the Supreme Court’s decision in 2005 on Kelo v. the City of New London, that parcel of land that the city acquired remains undeveloped. You can see, by the way, on Google Maps if you do a satellite view, this area of town. You can actually put in Suzette Kelo’s old address, and you can see where it is. You can see its waterfront, and you can also see it’s completely cleared, and it’s brown. In 2009 a story emerged that the entire neighborhood smelled of raw sewage. The point is to look at what we are promising through the use of eminent domain. What kinds of public benefits are we promising through the use of eminent domain, and what kinds of public benefits actually do emerge? The evidence in this chapter is that where eminent domain has been used most expansively, we’ve had the most disastrous failures of it.

Finally, is the law being used as a means to redistribute wealth, which destroys wealth? America’s tort system costs society upwards of $800 or $900 billion a year in higher prices for products and services because companies respond to the uncertainty of product liability with higher cost—which leads to higher prices. In the tort system, when lawyers and judges have incentives—if they’re chasing the jackpot justice cases—to innovate new ways to use the tort system to redistribute wealth, which increases this tort tax that I’m talking about. There is venue shopping. There is class padding. Those are nice, but there’s nothing compared to what has been going on with the legal doctrine know as cy pres. Cy pres is French for—from what I’ve read anyway—roughly “as close as possible” or “the nearest thing possible.” It’s a doctrine that goes back to situations where a judge has an award, a judgment, and cannot legally dispense that amount. Maybe it’s a trust that the person who wrote the trust says, “Do something with my money,” and it’s illegal. In that case the judge has to issue the money by this doctrine of cy pres as close as possible as he can.

Chapter eleven by law professor Charles Keckler shows that cy pres has been increasingly used to empower judges to distribute award funds to their preferred charities, typically the legal profession. There’s one case in Illinois from a few years ago where it was a case involving advertising of light cigarettes. Phillip Morris was the defendant. It was claimed that they were misleading their consumers through advertising that made them think that light cigarettes were safer and healthy. The damages were $10 billion, and the class was not easy to identify because who keeps their receipts for light cigarettes to show that they are a member of the class? Judge and lawyers on counsel from the plaintiff’s attorneys, a judge decides to invoke cy pres, as close as possible. In this case, what is as close as possible? Well, after taxes and the plaintiff’s attorneys’ fees there was about $5.8 billion left in the fund. Ninety-five percent of this went to the legal profession, the law schools in Illinois, the bar, legal aid, and one more. Three percent went to causes that you associate with smoking: anti-cancer research, domestic violence programs, and so forth and so on. This is one of the ways that the book illustrates how the law is being not just used but also increasingly used to redistribute wealth.

Let me conclude because I’m probably over my time already. These are basically the five categories where The Pursuit of Justice makes contributions to both scholarship and to reform in society. It’s a realistic yet hopeful analysis. By identifying those areas where decision-makers in the law have bad incentives we can not only better explain the undesirable outcomes, but we’re on better ground to recommend systemic reforms, reforms that provide better incentives to generate better outcomes from the legal services. So, I hope that I didn’t give everything away. I hope that you’ll still buy the book tonight and maybe more because, look, most stockings are bigger than this. It does fold a little bit. It’s a nice little stuffer. Thank you for having me tonight. I look forward to our discussion and the other panelists. Thank you.

David Theroux

Thank you very much, Ed. I’m glad to introduce our next speaker. David Friedman is Professor of Law at Santa Clara University. He received his Ph.D. in physics from the University of Chicago. He’s been a John M. Olin faculty fellow at the University of Chicago Law School, a visiting professor at Cornell Law School, Associate Professor at the Freeman School of Business at Tulane. He’s contributed to many scholarly volumes. He is the author of numerous books including Future Imperfect, Law’s Order, Hidden Order, Price Theory and probably his most famous book for many of us, The Machinery of Freedom. He is also a distinguished novelist with novels of Harald and Salamander and I understand a new one that might be called Eric.

David Friedman

I figure that Ed went about two minutes over his time, and I think tort damages of a thousand dollars a minute to be divided between the two victims of this tort would be reasonable, and conveniently enough we have a judge available to settle any disputes about the case.

The standard economic approach to the law consists of assuming that the individuals involved with the legal system act out of their own rational self-interest, and we apply that approach to criminals. We apply it to their victims. We apply it to tort. We apply it to their victims. We apply it to people who sign contracts. We apply it to producers and consumers, but we almost never apply it to the other side of the legal system—the people who make and enforce the law: the judges, the police, the prosecutors and the legislators. That’s a serious gap in the theories that now exist. I think this book takes at least a useful first step in the direction of filling that gap. It doesn’t really work out a full-blown theoretical scheme that incorporates all of those, but what it shows is that indeed the empirical evidence strongly suggests that judges, prosecutors, legislators—the people involved in making and enforcing the law—are also rational, self-interested actors and should be understood in that way. That said, what I would like to do is to discuss the question of how you might improve things, how you might change the system such that prosecution of crimes and torts produced more good results and fewer bad results, and then the more ambitious project: how you might rearrange the way the world runs in order that we would get good laws instead of bad laws. In each case what I’m talking about is not what laws should we have, but what institutions would make it in the rational self-interest of people to create good laws or good prosecution.

I’m going to start with the prosecution side of it, which is in a sense a smaller but more immediate issue. One of my interests is other legal systems. I teach a seminar at Santa Clara University which goes through a range of historical legal systems, trying to take each of them seriously and understand it as a way in which some set of human beings solved the same problems we solve. It sometimes is useful. One of the threads that runs through all of those systems is the incentive to enforce the law. If there is no incentive to enforce the law, the law doesn’t get enforced, but if there is too much incentive to enforce the law, people get convicted of things they haven’t done because it’s profitable for someone to do it. And that’s basically the class action problem that was being discussed here. I have a number of particular solutions, but I would like to point out that the ancient Athenians, who were a little bit crazy but very smart, recognized this problem and they had a solution to it. In the Athenian legal system what we would think of as crimes were privately prosecuted, and the incentive to prosecute them was, the prosecutor got a large cut of the fine that the defendant paid if he was convicted. That raises the obvious threat of: look for deep pockets, think up some excuse to claim he did something, and then ask to be paid off not to prosecute him. This is in front of a jury of several hundred people in a system where all sorts of rhetorical devices were legitimate in pleading.

Under Athenian law, however, if the prosecutor failed to get 20 percent of that large jury to vote for conviction, the prosecutor was fined. So it’s interesting to think about whether some variant of that might be used in our legal system to reduce the incentive to engage in lawsuits where the odds are you are going to lose, but the threat that you might win is enough to get you paid off because there is now a threat in the other direction.

Let me look at a related problem mainly in the criminal context. We would like a legal system where the people who are doing the convicting have a reason to try to convict guilty people rather than innocent people. In theory our rules for how we do trials are an attempt to do that, an attempt to make it harder to convict the innocent than the guilty although an attempt, which is far from completely successful as we all know.

I would prefer to find ways which improve on that, and the obvious solution to an economist is when somebody who is convicted is shown to be innocent, make the people responsible for convicting him liable, make them owe very large damages. That is a very dangerous solution because while it is true that is a punishment, it’s not exactly a punishment for convicting someone who is innocent. It’s a punishment for convicting someone who was discovered to be innocent, and thus while it’s an incentive not to convict innocent people, it’s also an incentive if you do convict innocent people to make sure nobody ever finds out, so that is a rather doubled-edged sword.

I have a better solution, and discussing it in detail would require a long digression into the legal institutions of 18th-century England. People who are curious can find the article on my web page. Find a way in which the people who are hiring the prosecutors want crimes prosecuted in order to get private deterrence, in order that it will not be in the interest of criminals to commit crimes against me. If the reward for convicting somebody is a bounty, then when my property is stolen, it makes perfectly good sense to grab the first homeless man who wanders by the door, frame him and get him convicted. But that does no good at all if what I want to do is to make sure that criminal knows that I’m a dangerous guy to rob. So if you have a system where private deterrence is what is driving the incentive for enforcing crime, criminal law, you then have a system where the people who are doing it actually have a reason to care whether you get the right person or not.

Let me mention one other small solution to or improvement in our system, which Stephen Schulhofer and I wrote about a good many years ago, and Cato has now gotten us to re-write in a more popular way, and that is the choice of lawyers to defend indigent felony defendants.

As you may know a sizable majority of all felony defendants are indigent and have their lawyer provided by the state. As you may also know, the choice of the lawyer is made by the state, not by the defendant. That means that in a majority of all felony cases the defendant’s lawyer is working for the prosecution in the literal sense that in a criminal case the case is The State of California versus (Defendant). He may not be working for the prosecutor directly. He’s a different employee of the state, but he’s working for the state. And Steve’s idea, which I signed on to and we wrote an article on, was that instead you should have a voucher system. You should say whatever amount of money the government is willing to pay for the defense of indigent felony defendants, let that money be paid to the lawyer chosen by the defendant not chosen by the state. There’s a story that goes with this. Steve was thought of as on the left of the faculty in question. I was thought of as on the right or at least libertarian side, and there was some discussion as to which of us had subverted which, and I thought the answer to that was perfectly clear when we gave a law and econ workshop on the paper and I had the pleasure of hearing Steve Schulhofer preaching to Judge Posner on the virtues of the free market.

All right, let me go on now to the question of how to get good laws, and the basic answer is to get some mechanism where the people who are going to be under laws choose whose laws they’ll be under. There are a number of real-world examples. One of them is private arbitration. Two firms sign a contract. They agree that it will be arbitrated by the American Arbitration Association or some other organization, and the American Arbitration Association then has a straightforward self-interested desire to write that set of legal rules that people want their cases decided under. All right, so that is a good example. A more imperfect example, but along the same lines, is choice of law of various sorts so that most corporations are under the laws of the State of Delaware. And presumably that is because the State of Delaware succeeded in writing laws corporations wanted to be incorporated under. And there are difficulties that I won’t go into but at least suggest. Freedom of contract—saying we can write the rules that apply between us—is another approach to doing the same thing, because it’s in our interest in drawing up a contract to try to draw the contract to maximize the size of the pie that we’re going to be dividing between us. But as it happens, I don’t really have any good general solution to the prosecuting problem.

I do have a good general solution to the legislation problem. I published it now about 40 years ago in my book, The Machinery of Freedom. I sketched out what a society would look like in which there was no government and in which all law enforcement was done by private firms in which the basic mechanism was that a firm sold me the service of protecting my rights, that each pair of such firms contracted with a private court to settle disputes between their clients because fighting is really expensive. It’s even more expensive than litigating, and therefore it’s in the interest of the firms to have some peaceful way of resolving disputes. In that context, the private judges of that system have a clear incentive to try to draw up the legal codes that the customers of the rights-enforcement agencies want to be under in order that rights-enforcement agencies will choose those courts. For those who are curious, I won’t say I have a book to sell, because at the moment the book is effectively out of print. But that’s all right; you can download it for free from my web page. It’s called The Machinery of Freedom. Some day there will be a third edition, but not yet.

I suppose my final comment to make with regard to the next speaker, who seems reluctant to accept my division of our loot, is that I can claim only one basis for superiority to Judge Kozinski, and that is that I was accepted by the University of Chicago and he was not. I know this because the first time I met Judge Kozinski was when he gave a talk at the University of Chicago Law School, where I was then a faculty fellow, and he began the talk by reading to the students his rejection letter from that august institution.

David Theroux

Our third speaker is, as you know, Chief Judge Alex Kozinski, who was appointed U.S. Circuit Judge for the 9th Circuit in 1985. Prior to his appointment to the appellate bench, Judge Kozinski served as chief judge of the U.S. Claims Court. He’s been special counsel for the Merit Systems Protection Board; assistant counsel, Office of Counsel to the President of the United States. He’s been an attorney in private practice, law clerk to Chief Justice Warren E. Berger, and law clerk to then Circuit Judge and now Supreme Court Justice Anthony M. Kennedy.

Alex Kozinski

Thank you, David. It’s great to be here. I always love coming to the Independent Institute, and I always look forward to The Lighthouse. In fact I so enjoyed not only the content [of The Independent Review] but also the cover that I actually have on my library wall a cover from one of your editions. It is a picture, and I hope it comes through. I pointed and I said, do you know who that is? It’s a rather thin-looking man, and nobody recognized him. But it’s Tocqueville. Do you remember that cover? Anyway, I had always heard of him to be a fat, jolly guy. Anyway, I appreciate being invited, and I have a few things to say. I hope what we will do is get into a discussion. I think that the book, The Pursuit of Justice—I’ve looked at it, and I’ve read through most of the chapters. It’s a very worthwhile enterprise. I think that the idea of applying the concepts of economics—and I have to tell you I was and I do have an econ degree as an undergraduate, so I have some appreciation for it, but I think applying the concepts of economics to those of us who toil in the law, who work in the law, I think is a good idea, and I think makes a very fine start on a number of subjects.

So, what I have to say is really more in the way of quibbles with some of the points made, and this is not to say that the points are not valid, but really by way of pointing out that this is just the beginning. As David said as well, I think this is something that needs to be pursued, and it’s a very good start, but it is far from the end. I would just hit a few of the topics.

Let me start with eminent domain. A good part of the book is spent on eminent domain, and we heard a lot about it tonight as well. I must tell you I am not as impressed by the eminent domain problem as a lot of my libertarian and conservative fellow travelers are. As I see it, the eminent domain problem—there is a constitutional clause that gives the government the power to exercise eminent domain, and you know what you get paid for it. We can sort of go back and forth as to whether or not you get enough compensation for it or whether what you get is worth it, but in the end this is not a situation where the government comes in and takes your property and gives you nothing in exchange. You do get money, and the money that the government spends winds up itself being an important check on that power.

You heard the story of Kelo, and sure the book shows the government makes mistakes when it exercises the power of eminent domain. But what else is new? The government makes mistakes in all sorts of ways that it does business, and if it were perfect, we would have a very different government and it would be a lot less costly. That is the nature of life that people make mistakes, and it is the nature of government that the government is making mistakes. The question is, are the costs of these mistakes internalized? Of course if the government could go in and take your property for nothing, then that would be a very different situation, but the cases that worry me in the takings area are the cases where the government doesn’t give you anything.

Those are what we call the inverse condemnation cases, and that is a situation where, for example, one day you’ve got a piece of property, you’re about to build on it, and the government passes a law, an ordinance, a statute that says, Not here. This is now a wetland or this is a beach, or this is just a property where we would prefer not to have anything built on. And all of the sudden you are entitled to have a piece of land that you can camp out on or you go and stand there and enjoy the view, and you can pay taxes on it, but you can’t do anything with it. The government says that’s regulation, that’s not a taking, and it refuses to pay you. Those are the cases that worry me because of what the government can do and not pay you anything.

Let me tell you the counter story to Kelo, and that is the story of Mr. Lucas, who had a piece of property like that in South Carolina. What happened was it was a beachfront property and he was going to build on it. A law was passed that said he couldn’t build on it because of the beach front, and he went all the way to the U.S. Supreme Court saying if they are going to prohibit me from building on the property, they’ve got to buy it from me. He wanted to get paid. So what happened was, he wins at the Supreme Court, he gets paid. The government now owns the property, and they realize, wow, we’ve got a valuable piece of property. I mean it’s worth a lot of money if you could only build on it, so what they do is they go and sell it for somebody else to build on it. That is the kind of case that worries me.

The question of whether or not you get just compensation, the question of whether something is a public use—let me tell you what the debate is about there. The debate is about not whether it’s a public use or not. The question is: who decides? Do executive and legislative branch officials make that decision, or does it get decided by judges? Now, I like the idea that you think that judges and juries ought to make that decision, but actually I think there’s a lot to be said for saying that the decision of whether or not something is a public use gets made by the legislature.

Let’s say you have a community, and the community decides we need to have a hospital because when people get sick and it’s an emergency, they have to be taken out. It’s far away. People die. It’s expensive. It’s dangerous, and they decide what we’re going to do is condemn a piece of property and then find somebody to build and run a hospital. Now, everybody agrees that if the government decides to run the hospital itself, then it is a public use. Correct? But what is the use of that? Governments are not good at running hospitals. So what they do instead is they say, look, we need a hospital. We took the land. And we’re going to hire people who actually know what they do when they run a hospital and we’re going to have them buy the property and have them run the hospital. To me that is a public use, and the decision to be made there is by the elected officials, not by the government. So the chapters that raise the issues I think are interesting chapters, but I think there are two sides. There are two sides to a lot of these issues.

Let’s talk about licensing of lawyers, which is one of the chapters in the book. I think there are very good points made about the idea that the cost of legal service is raised by having lawyers, requiring lawyers to go to law schools, and not just to law schools, but generally to law schools accredited by the ABA. There is no doubt about it, but one of the things you have to take into account—and this is one of the things I learned many years ago when I was still in economics—you’ve got to take into account all of the variables. If you don’t focus on all of the variables, you’re going to get a false conclusion. What I don’t think is fully taken into account is it is not just a question of whether or not an individual who is represented, whether that person is getting adequate representation. A lawyer is a dangerous weapon. This is somebody who can take somebody’s case good or bad, and by filing something and having it served on you, can turn your life into a living hell. So the question is, do we as a society want to let just anybody at all do that? Well, there is some advantage to licensure. One of the advantages is that first of all you get people who are or should be able to tell the difference between a meritorious case and a kooky case, and there are lots of kooky cases out there. There are lots of clients who would love to sue, but they can’t find a lawyer. They usually can’t find a lawyer because lawyers look at it and say, listen you haven’t got a case. If they could find somebody to sue, they could inflict great damage on other people if they were allowed to bring heat lawsuit until the lawsuit was gotten rid of.

But the other thing is, lawyers have a stake in the system. One of the beneficial sides of licensure is that you can take the license away. So if you have a lawyer and he brings a lawsuit that’s frivolous and if he does inflict damage on you and other people by suing when there is now a lawsuit, he can be disbarred. And the disbarment is itself a threat, and that keeps lawyers in line and keeps them from doing damage. So that aspect of the issue needs to be studied, and I think it is important to take into account.

There is a chapter that discusses lawyer-judges, and I think it’s a very good chapter, and I think it makes an entirely valid point that judges come from the legal profession and therefore, given all things being equal, they tend to come up with rules that favor lawyers. No doubt about it. There is no doubt that that is the effect. It’s just the nature of the beast. We understand a lot better what it is that lawyers do and why the legal profession is important. We all tend to have a sense of self-importance, but the reality is, what is the alternative? And the alternative suggestion is, well we ought to have judges who are not lawyers appointed to the bench. That was one of the alternatives offered. And you know I would want to think very carefully about doing something like that.

I know a little bit about legal problems, and I know a little bit about dealing with legal issues, and I can tell you I think most of you here could understand them if I had time enough to explain to you what the problem was about. Most intelligent people can understand legal problems. They’re not like calculus, which I’ll never get. It doesn’t matter how long I try, I will not ever understand it, but I can explain just about any legal issue to anybody in this audience. I might not be able to explain it to a six-year-old child. I might not be able to explain it to somebody who is sick, or senile, or has Alzheimer’s or something, but I think most intelligent people I can explain a legal problem. The issue, though, is that in order for you to understand the problem, to fully understand the problem, you have to know a lot of law. You have to know a lot of things that I would have to show you for you to be able to understand it, and by the time I got through explaining it to you, you would be a lawyer for those purposes. So, it’s hard to get away from it. The fact is we deal in law. We have to be legally trained, even if you appoint judges who wind up not being legally trained to begin with, they will in course in deciding a few cases wind up becoming a member of the profession as well. I think it’s important to think about creating incentives against those kinds of rules, but maybe sometimes some problems are simply inevitable.

Let’s talk a little bit about the problem of conviction of innocent people. I worry about conviction of innocent people a great deal. I know we have some. I know we may have executed one or two innocent people, and I’m not talking about in our entire history. When I talk about executions, I’m talking about the period from 1977, since the cy pres decision by the Supreme Court, the new regime of the death penalty, which is much more stringent, so it’s possible, but I am a little bit skeptical, but I think it’s possible. I know that of the million or so who are in prison, there must be quite a number who are innocent. It’s very hard when you work in the system to shrug it off and say, well that’s why they put erasers on pencils, no system is perfect, and every so often you make a mistake. It is in fact very difficult to avoid all mistakes, and it’s always good to come up with ideas that will try to minimize mistakes, but look at some of the examples given, and one of the examples given had to do with fingerprint analysis and the idea that every so often fingerprint analysis turns out to be wrong.

Well, this is a fact. This is a fact. When they do tests, blind tests on fingerprint analyses, it turns out there is an amazing degree particularly dealing with latent prints, there’s an amazing degree of error, and it’s surprising. I’m reminded of the time—this was 25 years ago when I was appointed to the court, and I was supposed to give fingerprints. An FBI agent came to my office, and he came with a little inkpad and card, and we did the fingerprints. Then he says, well, let’s do another one. And I said, why? He said sometimes they don’t take, and so we sat there and we did ten consecutive cards. I’m not kidding. I said, why ten cards? He says, well because sometimes they don’t take and we don’t want to come back. You know what? He came back. He came back. So fingerprints, in fact almost all forensic tests, are subject to error. The suggestion that’s made, and I think it’s a suggestion worth thinking about is have maybe perhaps double or triple checks of fingerprints. But you’ve got to look at the problem in the context of the entire legal system.

What you’re then doing is having triple fingerprints when you’ve got—what was it, a 3 percent error rate? And you’re doing triple fingerprints on the 97 percent of cases where there is no error. Another way of dealing with it, of course, is to give the guy a lawyer, which is what we do, and if in fact the case goes to trial—. And very often they don’t go to trial if there is a doubt, a real doubt about guilt—and believe me there are lots of cases where there is no doubt at all, fingerprints or no fingerprints, this is the guy. Well, that’s reality. It’s just the way it works because aside from fingerprints there may be a ton of other evidence. There may be eyewitness identification. There maybe DNA. There may be all sorts of other stuff, but where the fingerprints wind up being crucial—why not have those cases double and triple checked and not have them done by the government, but have another government agency, another set of government employees who do the fingerprints. Why not have them turned over to the defense lawyer, and have the defense lawyer hire somebody to do the fingerprint or DNA check or so on. It seems to me that would be a more cost-effective, and probably more effective, way of avoiding errors. But I think it’s important to think about these things, and I think it’s important to get away from the idea—which I think has been prevalent for many years—that if a forensic expert says this is the bullet that came out of this gun, or this is the footprint, or this is the bite mark, you know what this is the confession that the guy. A good percentage, something like 25 to 30 percent of confessions, turn out to be false confessions. It is truly amazing. There is really absolutely nothing—it’s not like CSI at all. I think these are things that we ought to think about.

Let me give you one more example, and then I want to sit down and have a conversation. Let’s talk about class action. I think everything that is said about class action here in the chapter is in fact fair. I have to be a little bit careful. The Supreme Court just granted a case that came out of our Circuit that I was involved in. This is the Wal-Mart case. You may have read about it. And it’s going to deal exactly with the problem of classification, when you have a huge class and where there is this potential of coercion due to the size of the class itself. But you’ve got to understand why class actions came about.

This was not a plot by the legal profession to try to rob industry of money and give it to themselves and their clients. At least the theory was that what would happen is you would have a case where a large entity, corporation, or a large employer or a large company would commit a small wrong to a lot of people. For example, you might have a bank, and the bank over charges all of its checking customers a few cents a month. So let’s say you are one of the customers, you find out and you realize I am out three bucks for the last two years because the bank has overcharged me, and it is perfectly clear that they overcharged me. You call the bank, and the bank says, well, too darn bad, you can go somewhere else. Well, are you going to fight over the $3? Well, it turns out that they took $3 from all of their customers, and they are making a fair amount of money. So what the law came up with was the idea that you should be able to aggregate your clients with other people who are similarly situated so that what is economically at stake is not your individual claim as a single individual but you and everybody else who is victimized or allegedly victimized. But let’s assume here that the claim is a valid one. Someone gets victimized by somebody who is having dealings with lots of people. Now, this is a real problem. This is not a fanciful problem, and it’s not a subterfuge. It’s a real problem. If you don’t allow class actions, if you don’t have class actions, you will in fact allow entities that deal with lots of individuals and commit small wrongs, to get away with doing harm without anybody having the incentive, availability or the economic wherewithal to fight.

So I think these are important issues. I think these are troublesome issues, but I think it is important also to be sure that we’re taking all of the considerations into account. I think this is a very good step, and I hope that it will be the incentive—there I used the word, incentive—for people who disagree to come up with something and start a dialog so that we come up with very fine solutions. Thank you very much.

David Theroux

Before we start our question and answer period, just to follow up also on what David was discussing—and I don’t want to distract you from the real book for the night—we also have another book called To Serve and Protect, which is a book that looks into many of these areas and looking at alternative incentive-based, market-based, etcetera, approaches to policing, criminal justice courts, and many other things, and in keeping with what Alex was just saying and also what Ed has been saying.

One thing also I should mention, Alex was very kind to mention that he has a cover of—actually I think it’s The Independent Review probably, which is what you have. This is our quarterly journal for those of you who are not familiar, and I forgot to mention that in your packet we have for the next month an offer that you can actually for the holiday season buy two subscriptions for the price of one. So we encourage you to do that. Let’s open it up to Q&A. I think we have plenty to discuss and different views that we can share. I guess we’ll start in the front. Wait for the microphone.

Participant

I had really two questions, but maybe I’ll just ask one. My experience with lawyers is their concern about losing their licenses is zip. So to think that they are inhibited in some way just doesn’t strike me as being realistic, and I’d like you to respond to that.

Alex Kozinski

Well, you probably have been sued. Lawyers do in fact take that into account, and they do get sanctioned for bringing frivolous lawsuits.

David Friedman

What percentage of the lawyers each year get disbarred?

Alex Kozinski

I don’t know the answer.

David Friedman

It’s relevant to whether your argument is right.

Alex Kozinski

Well, there’s a whole series of sanctions that you can impose, everything from monetary sanctions, to reprimands, to suspension, to disbarment.

David Friedman

There are all sorts of sanctions you could impose without licensing lawyers to somebody who made a bad law case, for example the Athenian solution. You don’t have to license the profession in order to be able to punish its members.

Alex Kozinski

It is possible, but this is one additional level that you have. In fact, you can impose attorneys’ fees. I mean this Athenian solution exists, and you can impose it by awarding attorneys’ fees to the opposing side. That provides some incentive, some disincentive, but losing your license or getting suspended is by far the more serious sanction.

David Theroux

Of course, you could also explore private certification that would be competing entities that would compete for quality, even having different kinds of certifications for different kinds of legal practices. This gentleman right here.

Participant

Judge Kozinski, and the other members of the panel. Incentivized witnesses, sometimes called snitches—I think for a short period of time maybe a panel of the 9th Circuit was going to prohibit snitches because they have so frequently led to wrongful convictions. Witnesses that are offered get-out-of-jail-free cards—sometimes the states lets them have prostitutes in preparation for their testimony so they can be relaxed on the witness stand, all sorts of things. Then you combine that with the statistic that you gave, the troubling question that maybe 25 percent of all confessions that are extracted by police may be false, and you come to the conclusion that maybe there have only been two executions of innocent individuals. We can go on and on, but I really think that some of your other colleagues would suggest that the numbers are much, much higher. I think the New York Times today had a piece on Kevin Cooper, who is pending execution. There was a stay about four or five years ago, and a lot of your colleagues now, who were on the wrong side of striking that case down, have started to speak out about his potential wrongful conviction. I’m wondering how many other judges like yourself, Supreme Court, Ninth Circuit, are willing to speak out in the face of a wrongful execution even though the courts may have decided that he got a fair trial. As you know, the Supreme Court has said that, have they not? If somebody gets a fair trial, so be it, the execution can go forward.

Let’s talk about incentivized witnesses and maybe about the possibility that you’re grossly under estimating the number of people that are wrongfully convicted in this country every year.

Alex Kozinski

The problem of snitches is a serious one. My colleague, Steve Trott, who used to be a prosecutor, he was both a state prosecutor in California and he was a U.S. attorney in California, and he was Associate Attorney General in the Reagan Administration. He has a lot of experience, and he is very skeptical of jailhouse snitches and rightly so. You mentioned Tom Goldstein’s case. That was the result if I recall correctly. It’s a very serious problem. The way lawyers deal with it is by, you know, we have a rule that requires the prosecution to come up with evidence about what incentives they have given. And what happens in the cases where there is a conviction anyway, as happened in Goldstein’s case, they simply concealed his track record so this didn’t come out until some years later. Again, I’m working from memory. I won’t say anything about Cooper. Cooper is still a pending case. I’m on record. I did write in Cooper. I read Judge Fletcher’s very long dissent in the Cooper case, and it’s a masterpiece. I think in order to decide whether or not you think Cooper is innocent, you would have to read both majority opinion and the dissent. But I will stick with it. I do not believe, and I have looked carefully at the cases where it has been claimed, that people have actually been executed. Again, I’m not counting the cases before 1977, because we had a very different regime then. I’ve looked at the cases where there have been claims that somebody has been executed, actually executed, and been innocent. I personally believe there have been none, but at most I’ve seen one or two that I thought were close. People disagree.

David Friedman

I think you have to distinguish two different questions. I think it is quite likely that there are fewer than two specific cases where you can be confident an innocent person was convicted. That’s very different than saying that your estimate of the number of cases where an innocent person was convicted is fewer than two because there might be a hundred cases in each of which you think there is a 3 percent chance the person is innocent. That would give you three cases. It seems to me that cases where it’s clear that the person is innocent are unlikely, but I would be surprised given that humans make mistakes, as you pointed out earlier, if out of the total number of people executed since 1977 there haven’t been several mistakes.

Alex Kozinski

It would be surprising if you didn’t know the process that you go through in order to actually get somebody executed. By comparison to other criminal cases, it is a far more rigorous process in many ways. It goes through many, many, many, many levels of review. Again, I’ve looked at the cases that have been claimed to be close. I haven’t looked at every single case, and there have been people, no doubt about it, that have come to the brink of execution and then been released, and had they been executed it would have been a mistake. Most death cases that I’ve seen, I think in most cases nationwide, the question is not guilt or innocence. The question is: are they guilty and deserving of the death penalty? Is the killing sufficiently aggravated to deserve the death penalty? There are relatively few cases where there is a real doubt about the guilt. There are a few, and there are going to be more coming up, but I worry about this a great deal and I have looked at the cases that have been touted as being the close ones. I have to believe that the other ones are not as close.

Participant

There may or may not be the problem of 25 percent who may be innocent or whose confessions are false. Is there not also the problem of people who are guilty and who were let go for any number of reasons, including the ridiculous amount of habeas corpus filings of which maybe one or two should be the limit? That’s just my opinion. What is your thought on that, Alex?

Alex Kozinski

Well, I think the release of people who are guilty is a feature of our system. It’s simply the way it works. The formula is that it’s better that ten guilty people go free than that we execute an innocent one, and that’s just the way we run our criminal justice system. Sometimes people who are in fact guilty are released.

David Theroux

Ed, do you want to add anything to that?

Edward López

In the second chapter of the book there is a quantitative analysis of wrongful murder convictions that had been overturned by DNA evidence in the State of New York. I was just looking through the book for the numbers. There are 109 such cases, but the chapter doesn’t say how many came before 1977 and how many came after. But that’s one piece of information.

David D. Friedman

Were those capital punishment cases or just murder cases?

Alex Kozinski

I’m sure they were all post ’77 because there was no DNA.

David Theroux

That’s what he said.

David Friedman

It could have been a case where the tissue was preserved and the DNA test was done later, or the innocence was established later.

Edward López

TheInnocenceProject.org is the organization.

Alex Kozinski

I would assume that, but ’77 doesn’t have any meaning in New York, because New York doesn’t have the death penalty, so I am not talking about people committing murder. I’m talking about people on death row, people who actually got the death penalty and got executed. And what happens in cases when the death penalty is imposed is, there is a far more rigorous appeals process. For example, in California there is an automatic appeal to the California Supreme Court. So the California Supreme Court winds up considering every single person on death row, all seven justices. It does not happen if the same individual gets life without parole. It goes to the Court of Appeals but may never see the California Supreme Court. The federal habeas process is much more abbreviated.

Participant

If I understood you correctly, when you spoke about eminent domain, you commented—and correct me if I’m wrong—that it was all right to take the people’s property as long as they were paid. I don’t really see it that way since I think they have a right to own that property, and I don’t think that there’s social justice—which ought to preclude that right to own their property and not sell it should they choose not to. Could you comment more on that?

Alex Kozinski

I think people feel strongly about that—that, you know, property is absolute. But property is not absolute. We all own property subject to some regulation by the state. We may own a piece of property today—it may be a pasture, you may have a cement factory there—and a city builds up around it, and all of the sudden you’re spewing fumes into people’s backyards. At that point they condemn it or they say you can’t run your factory. We live in a society, and part of living in a society is the give and take that is involved, and sometimes giving way to the will of the majority. It’s called democracy. Now, the idea that you have some absolute right to property or that you can’t value it—. You know, you’re going along the street, you’ve got your health, you’ve got your nice, new shiny automobile and some fool runs a stoplight and you wind up with a smashed fender for your Mercedes. It’s never going to be the same because you’ve put a dent in it, and then somebody wants to say, well, we’ll go take it to the shop and fix it. It turns out you’ve also got a neck injury for the rest of your life. This is the way it works. Life, property, liberty—they all can be destroyed as part of living in a society. They can be taken, and they can be destroyed. You don’t want it? Go live in the forest. Nobody will take anything away from you.

David Friedman

Alex, if that auto accident was deliberate—if the person chose to run you into it—it is then the criminal law and not the civil law that comes in, because you’re not supposed to do that. And in the case of condemnation under eminent domain, it is not that there was an accidental act by the state that resulted in you losing your property. It was that the state chose to take your property. Going back to your hospital, you did not explain in that story why the community did not simply buy the land for the hospital, just like every other person who wants land to build something does it. Why did they have to condemn it?

Alex Kozinski

This is true but irrelevant, David. The point is that you live in a society, and the idea that you have absolute right to your property and nobody can take it away without your will, it actually is not true. It is a myth. It is an illusion.

David Friedman

That does not answer the question of whether the state should have the right to choose to take it because it wants the property as opposed to arbitrating disputes about where my bundle of rights does or doesn’t intersect your bundle or rights. I agree with you that absolute property right is much too simple an idea, but that doesn’t imply that the state should have the absolute property right.

Alex Kozinski

I was answering the question that was asked. You want to ask a different question, and we can talk about that question as well. But the question that was asked is, don’t I have an absolute right to my property? And you and I agree, no.

David Friedman

However, you answered a different question a little earlier, and I was disagreeing with that answer.

David Theroux

There is another component to this, which is when you have people in proximity to each other, their incentives to negotiate terms of such arrangements, which creates incentives to create covenants and other terms, and so it isn’t necessarily an absolute situation because there are incentives for people to negotiate. Coase got the Nobel Prize for pointing that out. We also have people on UStream.

Edward López

One point about the eminent domain question. Pointing out a few innocuous cases about how the use of eminent domain doesn’t cause too many problems relative to all the other bad stuff that government does, it’s really not that big of a deal—I think this notion is absurd, if you’ll pardon me. I think that it ignores the other potential cases when the exercise of eminent domain ends up in a really inefficient and really unjust circumstance. So for every innocuous scenario, there could be a ten-times-worse harmful scenario. Democracy—another word for that is two wolves and a sheep deciding on what’s for dinner. When the legislature tells you that you can’t live in your home any more for three generations or perhaps that you’ve lived in with your spouse for 50 years and now you’re a widow—when the legislature tells you to do that because a majority of the citizens where you live say you can’t have your home anymore—that doesn’t sound like democracy. That sounds like tyranny of the majority.

Alex Kozinski

Why isn’t it democracy?

Edward López

The point would be, how do you have a constitutional democracy that does not always result in the tyranny of the majority? You put constitutional constraints on the power of the government to exercise the will of the majority.

Alex Kozinski

And you do.

David Friedman

I cannot resist my favorite quote on just this subject: “In nothing did the founders of this country so demonstrate their essential naiveté than in trying to restrain government from many of its favorite abuses and entrusting the enforcement of this restraint to judges; that is to say to men who had been lawyers; that is to say to men professionally trained in finding plausible excuses for dishonest and dishonorable acts.”

Now, if someone can just find for me where Mencken said that, I can make sure I’ve got the quote right. Mine is by memory.

David Theroux

I would suggest that I think the case can be made very clearly that property rights are absolute. The question is how to determine the exact boundaries. That is the question. Let me read this question from Ustream before we get another question from the audience. The question is—this is really more for Ed—how do you think we could prevent the increasing use of the law by judges to redistribute wealth benefiting, for instance, the legal profession at the expense of others in society?

Edward López

I think this is a great question, because again it interacts with some of Judge Kozinski’s comments, in particular about the lawyer-judge hypothesis. I think there was some general agreement or endorsement of that idea, but then the problem came in with suggesting, well, what is the alternative? The alternative is not to have non-lawyers on the bench. The alternative is to have more accountability on the bench, and market competition is a very effective means of instilling accountability. So judges under market competition would not be selected by elections or by the preferences of elected officials, but they would be selected by the quality of their opinions. If a judge has to hang a shingle and attract business for the quality of his or her rulings and make a livelihood out of it, that’s an entirely different incentive structure than what we have now under the lawyer-judge hypothesis.

Alex Kozinski

You know what I find? I find that half of the people love my opinions and half hate them. The first half is called the winners, and the other half is called the losers. I’ve never had somebody come up to me and say, you wrote a great opinion sticking it to me. Never.

David Theroux

Did you still have a question in the back, the gentleman with the glasses?

Participant

While I agree with the lady about eminent domain, the idea that you have absolute property rights is kind of dismissed when you have property taxes.

David Theroux

That’s exactly an argument about property taxes.

Participant

Exactly.

David Theroux

I think Wanda here was the next one in order.

Wanda

Everyone is going to like this because I’m going to change the subject and have you fight on something else. I have observed that as formal religion has been losing its grip, it has turned to the criminal justice system, the courts, and legislature, to mandate for other people, not of their persuasion, behaviors that they think are right according to their religious view. Whatever happened to separation of church and state, and why don’t the courts throw those things out?

David Theroux

So you’re referring to the rise of secular religion in the public square, the nanny state and all sorts of other—.

David Friedman

This surely isn’t something new.

David Theroux

Don’t call me Shirley.

Edward López

In honor of Leslie Neilson.

David Friedman

Government enforcement of religious preference is a very old story. If anything, it’s less common than it used to be, not more. Abortion, after all, used to be illegal pretty much everywhere in the U.S. That is, from about, I guess, late 19th, early 20th century on, far enough back.

Alex Kozinski

I remember it.

David Theroux

I think that’s a legitimate point, and that gets to part of the subject of this program of ours on C-SPAN this weekend, by the way, I should mention.

Participant

Judge Kozinski, you are one of my judicial heroes. However, I was somewhat disturbed by how easily you just simply dismiss the Constitution and ignore the phrase “public use.” You say, well, it’s inconvenient, we’ve got the other phrase that says you get compensation, but you just totally ignore public use. Why include public use, and why ignore the constitution?

Alex Kozinski

Do you know the Second Amendment?

Participant

Do I know the Second Amendment?

Alex Kozinski

Off the top of your head?

Participant

Off the top of my head, no.

Alex Kozinski

What it says is, in order to maintain a militia, more or less, the right to bear arms should be maintained.

David Friedman

It does not say that. It does not say “in order to.”

Edward López

It says, “being necessary to the security of the free state . . .”

David Friedman

It makes a conditional statement.

Alex Kozinski

It makes a conditional statement about the right to bear arms. Okay, let’s see it.

Edward López

I carry it with me always.

Alex Kozinski

“A well regulated Militia, being necessary to secure the free State, the right of the people to keep and bear Arms, shall not be infringed.” So you’ve got the first phrase, and the question is, is that a condition? Do you have to be a member of the militia in order to have an individual right to bear arms, or is that simply an introduction? The same thing with public use. You can read the phrase one of two ways. You can say if you’re going to take something for public use, you’ve got to pay just compensation, or you can view it as a limitation. You can say you can only take it as a public use.

Participant

It actually says “public purpose” and that’s the problem.

Alex Kozinski

It says “public use.”

Edward López

It says “public use” in the Fifth Amendment. It’s been interpreted as public purpose by the Supreme Court.

Alex Kozinski

You can read it as saying if you’re going to take something for public use you’ve got to pay compensation. That’s one plausible reading of the phrase, but the question ultimately is, if you think this is a requirement of public use, why is it something that judges or the courts decide? Why is it not something that the community votes on it and they say, we think this is a public use? We think, like in Berman, having urban renewal in Washington is a public use.

Participant

Marbury v. Madison.

Edward López

Just because the Court doesn’t get in to determine what is public use and what is not public use, does not mean that the Court has zero responsibility on this issue? I think that is an important point that we need to all think about. What might the Court be doing if it’s not defining public use?

Alex Kozinski

Let’s see what it says. It says, “nor shall private property be taken for public use without just compensation.”

Edward López

Comma, without just compensation?

Alex Kozinski

There is no comma. To me it says if the government is going to take something for public use, it’s got to pay money. That’s one of the requirements. You’ve got to pay money.

Edward López

If I could just point out a substitute, as Judge Kozinski pointed out by referring to the Lucas case in South Carolina, a substitute for eminent domain is regulatory takings. So if you can effectively condemn Lucas’s properties but not use eminent domain, then you don’t have to compensate, so that reading of the Fifth Amendment wouldn’t make sense.

David Theroux

Just to add to your Christmas list, the definitive book on the Second Amendment is this one [The Founders’ Second Amendment: Origin of the Right to Bear Arms, by Stephen P. Halbrook], and this was the basis, really, for the Heller decision and then really formed what led up to the McDonald decision. Bob, right here.

Bob

We seem to be talking a lot about the eminent domain, but I would take up an issue that I don’t think I hear too often. Two examples right here in Oakland. We have had more than one eminent domain decision—one involved the condemned territory in the Rockridge area in order to build the BART station, and also when they built what is now Interstate 980 that separates downtown from West Oakland. In both cases, as far as I know, the property owners were paid, but the effects in the neighborhood went far beyond those individual owners there. West Oakland got cut off from downtown, and that went into economic decline as my understanding is, and the same thing in Rockridge, it really fragmented the neighborhood and that went into a decline for a number of years, until recently when it sort of found a new niche. I don’t see how just saying that giving the individual property owners compensation solves the problem of the consequence that taking that property has on the larger community there.

Alex Kozinski

I don’t get it. Why isn’t eminent domain the right answer? Why isn’t this the answer to any other decision the government makes when it makes a mistake? Maybe it shouldn’t have built BART there. Why aren’t you complaining about the fact that they built BART?

David Friedman

But surely the solution to the problem he is raising is one you’ve already pointed out. You ought to be able to have a class action suit against the governmental action that did it by all of the people who suffered small injuries due to the indirect effect. You’ve told us that is the reason we need class action.

Alex Kozinski

Not just in Oakland but in Piedmont too. They are affected, aren’t they? Why isn’t the problem you’re posing is throw the bums out? Instead you make him governor.

David Theroux

I think this gentleman was next.

Participant

Before I ask my question, I should note that I’m a graduate of the University of Chicago and turned down admission to their law school.

I turned them down, yes sir. I came out to sunny California instead. I also have pending a case in a local county and state court on adverse condemnation, and I’m one of the lead plaintiffs in a pending class-action suit in southern California, which might run up in front of Your Honor at some point, so I won’t comment further. The question I have pertains to a word I only heard once, and that was from Judge Kozinski. That was “jury.” My question—really for Mr. López and Mr. Friedman, and perhaps Judge Kozinski if he wants to jump in on it—is about the incentives for the people in the jury. When I have a client come in for a case, I think about what the law is, what the judge might do, who is the judge I’m going to be in front of—which can be a big factor—but also, what is a jury going to make of this thing? What is the jury going to make of my client, and what are their incentives for deciding one way or the other? I’d like to have an answer to that so I can have better trials.

David Friedman

I agree with your question, that is to say, it would be nice to include in the law and econ analysis something that, as far as I know, no one has seriously tried to do, which is: how will rational jurors act? How could you set it up so it was in the interest of rational jurors to make the right decision? The closest I can think of is from the early origin of the jury in Anglo-Saxon law, where the jurors were in effect neighbors who had some interest in getting the right guy convicted, but that’s not the case anymore.

Participant

I have to disagree with your word “rational” in my understanding of this economic thinking.

Edward López

Just real quickly on that. I think these decision makers in the law probably have not as powerful incentive, at least not incentives that lead them systematically towards certain types of behavior over others. Juries are kind of wild cards, as I’ve heard from my brother, who is a trial attorney, and as you know from first-hand experience, I’m guessing. But the one institutional feature that really does kind of constrain this randomness—this irrationality of juries, if you want to go in that direction—is the unanimity requirement. They can’t act as individuals.

David J. Theroux

There is a literature also. In fact, I think there is a brand new book on it, and our research director, Alex Tabarrok, and another economist, Eric Helland, who is at Claremont, have done a book of ours called Judge and Jury, which is looking at essentially state cases and the relationships of juries to judges. Getting back to what Ed’s book discussed as far as appointed versus elected and are the accused and plaintiff in state or out of state—there are all these different other factors, so this is clearly important.

Edward López

The title of that chapter is “Runaway Judges.”

Participant

Speaking of jurors, we hear that people called up to be in a jury are discouraged from jury nullification and from disseminating information about jury nullification. I wondered what Judge Kozinski thinks of this problem, as I see it, that jurors are not allowed in some cases or are discouraged from that concept.

Alex Kozinski

It’s a lawless concept. They should not be told, and I think it’s an illusion. It’s something that people believe juries have a right to do, but juries do not have a right to disregard the law. In fact, juries are sworn to apply the law. If they can’t do that or won’t do that, you would not want to be before a jury that is lawless. People say, oh well, they can decide somebody is innocent because they don’t think the thing should be a crime. They could just as easily convict somebody because they think it’s close enough if they don’t apply the law. Or they could be like juries in the south that used to let off the KKK members who used to lynch blacks. They would be let off, and this was considered juror nullification. It’s an abomination. It’s a crime. It should not be allowed to happen. The juries should be told in no uncertain terms that if they can’t apply the law as instructed by the judge, they ought to get off.

David Friedman

This is one of the many interesting cases where a statement can be both true and dangerous. That is to say, as a proposition in moral philosophy it seems to me clear that if I’m on a jury and someone is charged for something that I believe ought not to be a crime, that my moral obligation is to acquit. It is also true for the reasons that Judge Kozinski has just pointed out, that having that belief widespread could have some very undesirable consequences.

Alex Kozinski

I disagree with the first statement you made. I think if you’re on a jury, you should resign. If you cannot do what you are charged to do when you take on that responsibility, then you resign.

David Friedman

What if the consequence of my resigning is that somebody will be punished for something that I believe he does not deserve being published for? Why am I obligated to accept the terms that the state imposes on me? I can see practical reasons for the state, but what makes the state’s rules morally binding?

Alex Kozinski

If you live in a moral society and you participate in the processes of government, in the processes of being members of society, then I think you have a moral obligation to adhere by those rules just like you have a moral obligation to abide by the law.

David Friedman

I don’t think I have a moral obligation to abide by the law when the law is wrong. I may have a moral obligation to violate it, but this could be a very long argument.

David Theroux

We’re running out of time, but it’s interesting that the argument that Judge Kozinski is using is he is saying there is a moral obligation. David is also saying there is a moral obligation. It’s a natural law argument, and that is the point of nullification. The nullification argument is that you can’t just unilaterally declare that people can be licensed to do whatever they want to anybody else. It’s that there is some standard of the natural law tradition that you are judging the current claim of legal statute as legitimate or not, and that was part of the common law tradition, don’t you think? We’re running out of time.

Alex Kozinski

There is dispute on that.

David Theroux

In any event, again Christmas stocking stuffers, and there are others. I want to thank our panel, if you’d join with me in a round of applause. As you can see, these are very serious issues, and there is a lot to be said. We’re delighted that you are part of this, and thank you for coming. For those of you who want to get copies of the book, Ed is available to autograph them. Don’t forget that C-SPAN will be airing our program on Saturday and Sunday. Thank you very much.