Two related concepts that are hallmarks of free societies are individual

choice and the rule of law. Being “free to choose,” as Milton Friedman’s

title described it, distinguishes the responsible adult in a free society

from the small child or prisoner. But freedom of choice cannot be unlimited

if a society is to have more than one free individual. Each person must

exercise choice so as not to deprive others of the same right.

The mutual boundaries of freedom cannot be negotiated anew whenever

strangers meet. Instead, the rule of law provides a method for accomplishing

this task in a workable fashion. While it is a familiar story that those

charged with dispensing rules become tyrants, the rule of law establishes

conditions to try to prevent this result. It mandates that laws are clear,

that they are announced in advance, that they bind all members of the

society, including the lawmakers, and that they are general in nature.

The reason for most of these principles is readily apparent, but the need

for the generality of law is less clear. It might be possible for a society

to have thousands of volumes of regulations, covering every possible

contingency. But that would not be a set of constraints on otherwise free

individuals. Rather, this outpouring of rules would constitute the

operator’s manual for a human machine. The totalitarian mantra that

“everything not required is forbidden” leaves no room for individual

personality, tastes, or judgment.

It is possible, of course, for law to be too general. “Love thy neighbor as

thyself” is a good maxim, but leaves too much room for both opportunistic

self-preferment and honest disagreement. We would have to spend too much

time and effort figuring out what our rights and duties respecting others

are. We need to strike a balance between laws that are too detailed to

permit autonomy and too general to be useful.

Among lawyers and judges, this is known as the “rules versus standards”

problem. We could have general standards specifying the result desired, such

as “one must be attentive while driving.” On the other hand, we could have

specific rules delineating what we must do to reach the desired result, such

as “one may not drive while using a hand-held cell phone, applying makeup,

or admonishing unruly children.”

Some mistakenly believe that in the late 1990s Montana did not have a speed

limit. Their confusion arises from the fact that Montana had a speed

standard (“reasonable and prudent”) rather than a speed rule (“75 miles per

hour”). The advantage of the standard was that Montana is a big and mostly

rural state. For a long trip in a well-maintained vehicle on a straight, dry

freeway, higher speeds might be quite reasonable. Correspondingly, in

treacherous conditions, driving more slowly is the proper alternative.

Advocates of replacing the standard with a rule claimed that accidents

caused by immature or reckless drivers (often from out of state)

necessitated the change. While the rule admittedly places unnecessary

restrictions on personal liberty in many instances, they claimed it is

necessary to prevent irremediable injury or death to others. Passions run

particularly high when rules curtail what many believe to be important

personal freedoms, such as the right to bear arms.

Thus far, I’ve discussed rules advocated because of their advantage over

standards in establishing clarity. However, advocates in many current public

policy debates advocate complex rules precisely because they obscure the

clear choice of goals implicit in standards.

Those who believe in free markets believe that people have a keen awareness

of their own needs and resources, and that voluntary trades among them are

apt to make society freer and richer. Where government regulation is needed,

economists and law professors have a strong preference for rules that are as

simple and transparent as possible. Legislators, on the other hand, often

want rules that are complex and opaque.

The recent failed proposal for “cap and trade” for emissions of greenhouse

gases (GHGs) is a perfect example. The standard would be “don’t unreasonably

produce harmful GHGs.” The embodiment of that standard into a relatively

simple and transparent rule would be “you must internalize the costs you now

place on others by your production of GHGs by paying an offsetting tax in a

specified amount for each ton of GHGs you produce.” Industries that generate

GHGs would have to pay this “carbon tax,” and would, in turn, incorporate it

in the price of the fuels and goods they sell. Retail purchasers would

confront the carbon tax in the form of higher prices, and would chose, on a

case-by-case basis, whether or not to substitute other goods.

But legislators know that the shortest distance between two points is a

devious line. The public is skeptical of the need for GHG regulation and

doesn’t like taxes. Capping supply would make the regulated good scarcer,

and thus increase its price. The public would pay higher prices, as if there

were a tax, but without clear Congressional fingerprints.

Proponents found an extra advantage to cap and trade, too. Energy companies,

electric utilities, auto companies and unions, and many others were prepared

to spend large amounts to fight GHG regulation. Jettisoning the carbon tax

approach permits Congress and executive agencies to manipulate cap and trade

rules, to reward Wall Street with a role in facilitating the exchange of

tradable GHG permits, and, above all, to assuage politically potent energy

producers and distributors through grandfathering. These companies would be

awarded ownership of tradable GHG permits at the outset. Through giving them

this valuable property created by the regulatory scheme, many potential

opponents of GHG legislation could be bought off.

Carbon taxes would go directly to the Treasury, and potentially could offset

other taxes or reduce the deficit. However, President Obama eventually was

compelled to offer 85 percent of the value of GHG permits to industry groups

to garner their support. Unfortunately for those playing the “cap and trade”

game, the process became so highly visible that the public recoiled in

disgust and the legislative effort collapsed.

Our current political gridlock means that many important public policy

issues cannot be resolved through legislation. This encourages control

through regulation, a process typically captured by interested advocacy and

business groups. The upshot is the absence of clear standards, and the

perversion of the rule of law into a “rule of laws.”

The failure to achieve clear resolution of the GHG issue, for example,

increasingly results in the imposition of all kinds of micromanagement of

individuals’ behavior. Among other examples are the outlawing of most

conventional incandescent light bulbs, practical prohibitions on the

suburban lifestyle that most people have preferred, and the imposition of

ethanol on an unwilling public. While ethanol does not really result in less

GHG production and does raise food prices for the World’s poor, it permits

erstwhile presidents to pander to Iowa primary voters and companies that

make ethanol infrastructure.

Self-governance requires the kind of informed choices that standards

facilitate, and complex rules obfuscate. While some issues involve necessary

clashes between individual and societal rights, the rule of laws is the

enemy of both.