Judicial discretion under MMP: Smith v Fonterra

Robert Cooter's The Strategic Constitution is excellent. I used to teach from it in public choice. 

He provides a game-theoretic description of judicial discretion.

Imagine a unicameral Parliamentary system with no particular transaction costs in producing legislation. The executive and the Parliamentary majority have a unified ideal point. 

If the composition of Parliament and the Executive have changed since legislation was passed, and a case comes up revealing potential ambiguity in interpretation, the Judiciary can choose to interpret consistently with the bargain that was struck when the legislation was passed, the outcome that might obtain if the legislature and executive were to reconsider it, or the Judiciary's own view of what the public interest requires. 

The judiciary has zero discretion in that case. If it returns a decision inconsistent with Parliament's intention or views, Parliament immediately legislates to correct. 

In a bicameral system, legislating to correct a judicial decision requires agreement between the two houses. The executive will sit in the House; it needs the agreement of the Senate. If views between the two houses differ, the judiciary has discretion within the Pareto set: the set of all points between the ideal point of the House and the ideal point of the Senate. If the judiciary sets a decision outside of that Pareto set, the legislature reverts to some point within the Pareto set. 

He illustrates as follows.

In a unicameral Parliamentary system in a zero transaction-cost world, there is no opportunity to diverge. 

In a unicameral Parliamentary system that has a coalition, there is opportunity to diverge if the governing coalition does not understand the game or refuses to play consistently with it. 

If the bargain within the coalition is weak, the judiciary's discretion is constrained to the Pareto set of the members of the coalition. If it produces a decision outside of that range, the coalition can negotiate to overturn, returning legislation to the Pareto set. But it will not be able to find agreement to legislate to overturn a decision within the Pareto set: by definition, at least one member will prefer the Judiciary's stated position to the status quo.

A more clever coalition will realise that this game gives the judiciary room to unwind the bargain struck during coalition negotiations, and will pre-commit to overturn any decision that starts down that path - even if one party prefers the judiciary's decision in that particular case. 

That's the zero transaction cost world. A not-stupid coalition precommits to not letting the judiciary play shenanigans. And so the judiciary does not engage in adventures. 

Now let's move to the more realistic positive transactions cost world.

Parliaments have a habit of producing bad legislation whether through haste, incompetence, or unwillingness to resolve political conflicts within a governing coalition. In that latter case, explicitly political decisions may have been avoided through use of ambiguous language that will require the judiciary to take interpretive decisions of political consequence. You could imagine the legislation as not providing a point on the line, but rather a fuzzy shaded area spanning potential interpretations. And you'd hope that the legislature at least would have set legislation ruling out interpretations outside of the Pareto set.

Legislating around a decision is not costless. A governing coalition has its own legislative priorities. Time, effort, and drafting resource spent bringing an errant decision back in line means time, effort, and drafting resource not spent on other pieces of legislation. And some MPs' understandings of comity give the judiciary much room for shenanigans before the legislature would be allowed to act.

These transactions costs widen the range of judicial discretion. Even a governing coalition with tight agreement will not act unless the judiciary strays beyond a tolerable range. Beyond that range, the legislature will correct aberrant decisions. Within the range, the judiciary has discretion. 

And that turns things into an expectations game. If the judiciary expects that Parliament faces high transactions costs for reversion, then it will play as though it has a very wide range for discretion. Repeated refusals by the legislature to correct aberrant decisions affect those expectations. They reinforce the judiciary's view of its own discretion, and solidify legal academics' views that the court actually has that discretion. 

Smith v Fonterra looked like judicial shenanigans. Emissions have cumulative effects on global warming. No individual emission is the problem. It's their cumulative effect. Regulation makes far more sense than approaching it as tort. And we have a regulatory system around emissions. In the case of energy sector defendants, their emissions are fully covered by the ETS.

It took far too long to do it, but Parliament has finally moved to correct. 

I doubt it will be enough to convince the Supreme Court that the legislature is generally willing to incur costs to correct adventures by the judiciary. But it is a very good start. 

I'd love a Kalshi market on this one

There isn't really international law. 

There are treaties, there are conventions, there are norms, there are customs. 

But all of it is against a particular backdrop. 

If a country's government just doesn't wanna and it matters a lot to it, you're going to have a hard time making it unless you're ready to impose sanctions or invade. And if one of the ones that just doesn't wanna is on the security council, good luck with the invasion option. 

So international bodies work within that constraint. There are bounds on what's achievable based on countries' tolerance about being bound. 

And it seems important to stay within those bounds lest the whole thing collapse. 

I'd love to see a Kalshi or Polymarket contract on whether China or the United States or the Saudis will ever pay a fine assessed by the International Court of Justice for producing greenhouse gases. 

Here's The Guardian:

Today, Australia has found itself on the wrong side of history.

The International Court of Justice has handed down a landmark ruling in the most significant climate decision ever issued by a court. As a barrister representing Solomon Islands in the case, I was in the courtroom to hear the judges reshape the global fight for climate justice.

The world’s top court resoundingly rejected conservative arguments made by Australia and other high-emitting countries such as the United States, China and Saudi Arabia seeking to justify continued fossil fuel extraction. Instead, the court made a slew of progressive statements – ones that will have far-reaching implications.

Under international law, countries are now bound to rapidly reduce their emissions below 1.5 degrees of warming. Failure to do so could result in developed countries like Australia having to pay monetary compensation to developing countries or being required to rebuild infrastructure and restore ecosystems damaged by climate change. This means we could be entering a new era of climate reparations.

My bet: if claimant countries are careful, they will only sue countries like New Zealand, Canada, and some European countries. Ones that might at least pretend to comply with a ruling and provide some kind of transfers in response. Canada might promise to pay and then hand out coupons for Canadian cheddar, redeemable only on one single Tuesday afternoon between the hours of 13:45 and 13:46 at a Canadian Tire outlet in Iqaluit - subject to availability of cheddar and whether there is a Canadian Tire there in the first place. But it'd be something. 

If they sue the US, China, or the Saudis - they're not going to get compensation. 

And if they sue a mix of countries, some of which play nice and some of which don't, the whole ICJ process risks looking like a mug’s game. That risks delegitimising a court that might be better off maintaining a more modest, more enforceable remit.

I'm not an IR guy though. Weakly held view that this whole thing is a terrible idea with serious downside risk, happy to be convinced otherwise. 

The Guardian piece was from a couple of weeks ago; I'd had this post in draft. I was reminded of it though by comments from Labour's Deborah Russell in Carbon News, where Labour promised to reinstate the oil and gas ban:

Speaking in the general debate in Parliament last week, as the government was set to pass the bill to repeal the oil and gas ban, Labour Party list MP Deborah Russell slammed the coalition government’s lack of action on climate change.

Russell recalled Climate Change Minister Simon Watts’ comments earlier this year that “no one sends you an invoice” for climate change liability.

“But just last week,” Russell said, “the International Court of Justice delivered its judgment on the obligations of States in respect of climate change… it says that States must act on climate change or be held responsible.”

Russell referenced several of the judgement’s findings, including that States must regulate private actors' emissions, States have a responsibility around climate change and that climate action can trigger legal consequences.

Significantly, the finding opens the door for nation states to sue other countries for climate damages – legal consequences could include “full reparations to injured states”, including “restitution, compensation and satisfaction.”

I would hope that a sufficient defence for New Zealand would be:

"Every tonne of New Zealand emissions from any new gas well must be accompanied by the surrender of one NZU. If people burn gas, the ETS means that either someone else has reduced some other emission, or someone has sequestered a tonne of emissions - probably in a forest. So the new well has no effect on New Zealand's net emissions. The only thing that affects New Zealand's net emissions is the number of unbacked NZU that the government chooses to issue or allocate. And if you think that number is worth suing us over, whether new drilling is allowed or not is irrelevant."

Afternoon roundup

The closing-of-the-tabs worthies:

• Toby Young: when the heckler's veto rules the world, or at least wrecks his world.
• Every law is violent. In the limit, every law is enforced at the point of a gun. Don't legislate just to 'send a message'. Legislate where, in the limit, you are happy for guns to be used. HT: Marginal Revolution. Unfortunately, I can only read the MR summary as the Bloomberg one is subscription.
• Europe remains crazy on GMOs.
• Decentralisation is good, but requires mobility.  
• Trump and the rule of law.
• Extreme capitalism: New Zealand needs a hefty dose of it. Aldi in Australia. 

Grinch

As nice as Seuss's Grinch story is, we can't forget that it's the story told by the victorious Whos a century after the event. And so I told Ira the real story over Christmas. He prefers my version. And so I thought I'd share it with you as well. It's not in Seussean verse; maybe someday.

Recall that in The Lorax, insecure and ill-defined property rights, combined with a rather stupid Onceler and with a Lorax who cared more about grandstanding than about saving the trees, produced an outcome that none of the protagonists would have chosen. If the Onceler weren't an idiot, he'd have scaled back his capital investments to be commensurate with the stock of Truffala trees available. If the Lorax weren't a moralizing jerk, he'd have pointed out to the Onceler that re-planting trees as he went would let him get a return from his physical plant for a much longer period. And if property rights had been secure, either the Lorax could have sued the Onceler for stealing trees or have subsidized a faster replanting rate. 

And so we can see that the Grinch story is a problem of insecure property rights as well: does the Grinch have the right to peace and quiet, or do the Whos down in Whoville have the right to make as much noise as they like? In a Coasean world, it wouldn't matter as they could bargain to a solution. This could even hold in a world of poorly-defined property rights. If the Grinch really valued peace and quiet more than the Whos enjoyed making noise, and nobody knew which party had rights, the Grinch could still be sensible and pay them to stop even if he thought he had the right to peace and quiet. But only if he thought his rights would then be enforced; Seuss doesn't really like letting his characters find the efficient solution anyway*. And so in How the Grinch Stole Christmas, the Grinch isn't able to convince the Whos to stop making noise despite their most likely having come to his nuisance. 

In my version, the Grinch leaves the big noisy city and, after a tedious search, finds the perfect place for his studies: he homesteads a mountain overlooking an empty valley. There, he's able to read and write without interruption. Until the Whos show up and start building a town. The Grinch welcomes them, and tells them how much they'll love the peace and quiet of the place, hoping that they'll take the hint. After the noisy construction finishes, they have a raucous party in celebration. And then another for every holiday after, from Arbor Day to Xylophone Appreciation Day. But the biggest party they saved for Christmas. The Grinch pleaded with them; he was there first, surely they could try to keep the noise down. But they wouldn't. In desperation, he tried to steal Christmas, thinking that might stop them. But it didn't. So he gave up. He returned all their toys and dined with them before packing up his things and going off to find a new quiet place to live. He was there first, and by rights they should have compensated him for his loss, but enforcing the claim was more difficult than just leaving. And so he finally did the efficient thing and left. 

I tell it with a bit more embellishment, but you can fill in your own details.

* In The Zax, the North and South-Going Zaxes surely could have played leap-frog to solve their conundrum; instead, they just stood there until the city grew around them. By contrast, in The Sneetches, Sylvester McMonkey McBean is an entrepreneurial hero who profits by the prejudice of the Sneetches with Stars Upon Thars and the lame mopiness of Those Who Had None Upon Thars - the latter of which ought just to have had their own frankfurter roasts. A pox, or a McMonkey McBean, on both houses.

Update: In Lorax, it's possible to get complete forest decimation as being optimal from the Onceler's point of view, if the Truffala trees grow slowly relative to discount rates. But clearly he erred here given the massive capital investments and his intentions of biggering and biggering and biggering even as he chopped down the last tree. And so I expect decimation here was based on idiocy rather than rational calculation.

A lesson in contrasts

American legal scholars debate whether provisions in the latest defence appropriations bill would allow the government to hold citizens indefinitely without charge. Here's the latest summary:

The law provides that indefinite detention without charge may be imposed on anyone who has provided “substantial support” to groups that are “associated forces” of al-Qaeda; but it leaves undefined what constitutes “substantial support” and which groups might qualify as “associated forces.” Thus far, the lower federal courts have upheld detention of al-Qaeda or Taliban members, but not mere supporters, much less supporters of associated forces. And there is much dispute about whether the laws of war permit detention in those circumstances. Now Congress has essentially predetermined that question. Unless this and future administrations construe these provisions as limited by the laws of war, they risk authorizing detention that the laws of war would not. 

See also Volokh and Lawfare. And recall that American drug warriors have argued that marijuana users offer support to terrorist groups.

Meanwhile, in New Zealand, lawyers for the police have advised that sniffer-dog searches in schools breach students' civil rights, and so the police have stopped carrying out such searches, previously requested by the schools, pending further legal advice:

"Police are currently considering the legal implications regarding searches by drug dogs in schools," a spokeswoman said.

"Police understands the Ministry of Education is also working on good practice guidelines for schools so that they can search and confiscate items that may pose a safety risk."

She said police gave other support to schools, such as drug education, arranging counselling and prosecutions. "Where schools detect more serious drug offending, police become more actively involved."

Hutt Valley High School has historically had a police dog team conduct annual searches. But its request was refused this year "on the grounds that the police have no cause to search".

Picking the high variance play

Yeah, I know that Bill Easterly has thrown a big monkey wrench (data quality) into the notion that dictatorships produce high variance outcomes relative to democracies. But it's not implausible that a good choice of dictator could yield better than average outcomes. And far worse outcomes too.

No Right Turn lists some of the features of the legislation [draft as at first reading linked] under which Christchurch folk will be living for the next few... months? years?

CERA has the power to demand any information about anything from anyone. No warrant, no oversight, no safeguards. This is more power than the Serious Fraud Office, and with fewer checks and balances.

CERA, which means the Minister, also has wide powers to "assist" the rebuilding of Christchurch. They can:

• Overturn any planning decision;
• revoke or amend any resource consent;
• force councils to allow any resource consent;
• compulsarily acquire property without any public interest test;
• demolish your house even if it is undamaged;
• dissolve elected local bodies if they fail to do what Brownlee says.

And all of this without any effective rights of appeal and with only limited rights of compensation.

And to cap it all off, there's the same dictatorial power to amend laws by regulation originally seen in CERRA v1.0.

Dean Knight provides a few detailed objections.

Let's leave aside for now my usual weeping about the decline in rule of law and the lack of a constitutional spirit among voters that would restrain such things. Instead, let's look at the legislation as a high variance play.

A best case use of these powers could be really beneficial for Christchurch. If Ikea wanted to set up in Christchurch, they could probably start construction the day after buying some property out near the airport. We'd effectively be a special economic zone within New Zealand where competitors couldn't stop things through RMA objections. There will be at least some developments of this sort that come of the lifting of the regulatory lid; fast-tracking some of these kinds of projects through what would otherwise have been a multi-year regulatory approval process seems very beneficial.

But a plausible worst case use of the powers isn't particularly nice. I'm most worried about the potential for expropriation: consolidating some land titles downtown for urban renewal will be awfully tempting. I have a hard time imagining the worst case would be much worse than this; the government does face a re-election constraint. But I also would have had a hard time imagining a lot of what's already happened.

The case for expropriation is pretty weak. In normal times, government turns to expropriation with compensation as a solution to hold-out problems. In the US, this has often been used to steal people's homes and turn them over to developers (Go to Google, type Kelo v. City of New London); I've heard of nothing comparable here.

But imagine that government deemed it critical to reconstruction that some new private facility gets built downtown. If there were only one possible location for the facility, and if all the current owners knew that, each would try to extract maximally when setting selling prices; government might then try compulsory acquisition at post-quake prices, and hopefully they'd settle on something reasonable. But the earthquake has flattened enough of downtown that there ought to be multiple potential locations for any facility the government might want. Dominant assurance contracts should then have a good chance of working.

Here's a scenario. Suppose that sites A, B, and C are potential decent spots for some new project. Titles are spread over a dozen owners in each place. The developer approaches each of the three dozen owners and offers the following deal:

I'm looking to build and I'm eyeing up a few different sites. But I need a big enough space that I need to buy from a few folks to make things work. Here's the deal. I'll pay you $(some non-trivial amount) right now for an option to buy your property at the land assessment value from 2007. You get the cash in hand whether I exercise the option or not. If everybody else in the block of land where your property is signs on, I might exercise the option. Or I might go with one of the other sections if everybody signs on there. Point being - you get cash in hand right now if you sign on, and a great price for your land if I exercise the option. Can I get you a pen?

Holdout problem solved, and with it any need for expropriation is gone. I really hope that the government encourages this kind of thinking, or at least uses some of the properties Council already purchased over the last few years, before looking at compulsory acquisition.

Going too far

I'm not the biggest fan of cyclists. When I go out on the bike, I try pretty hard to hug the curb and stay out of cars' way. Petrol taxes pay for the roads and cyclists are free riders; hugging the curb is my way of thanking the cars for their contribution when I'm free-riding.

But this is ridiculous.

Charles Alexander Diez, the former North Carolina firefighter who shot cyclist Alan Simons in the head, has been sentenced to four months in jail.

In an Asheville courtroom last week, Diez pled guilty to shooting Simons during a July 26 roadside confrontation. Said to be upset that Simons was riding his bike with his 3-year-old child, Diez fired his .38 caliber pistol as Simons walked away after the two exchanged words. The bullet struck Simons' bike helmet, narrowly missing his skull.

As much as cyclists irritate me, declaring open season on them seems a bit excessive.

Caledonia

Three and a half years later, the Government of Canada and the Province of Ontario continue to abdicate their responsibility to protect property rights in Caledonia. It's one thing to declare yourself as having a monopoly on the use of force and to punish anyone who disagrees; it's quite another to both ban folks from purchasing their own protection against criminal gangs and simultaneously refuse to provide any kind of protection at all against that gang, for more than three years.

Native protesters claiming ownership over land being developed into a subdivision, known as the Douglas Creek Estates, occupied the site in February, 2006. The following April, OPP officers raided the site and ejected the protestors only to be driven back when several hundred natives from the nearby Six Nations reserve arrived.

The natives then erected barricades, which police have since respected, with the couple's home cut off from the rest of the community.

Life in their isolation has meant having to present a "passport" to natives when leaving or returning to their house, having their car searched by masked men at barricades, being refused access to their property, having no mail or garbage removal and enduring noise, fires, bright lights and their house being ransacked and defaced with vulgar and racist graffiti.

They have been threatened and intimidated and, all the while, police refused to intervene, the couple alleges.

Further acts of lawlessness will be highlighted in the case, such as newspaper and television reporters being beaten and equipment stolen or broken, a van being pushed off a bridge onto a roadway, and court orders and injunctions being ignored.

"This has created a lawless oasis in which the plaintiffs exist without police protection and in constant fear of harm," said Mr. Evans.

From the National Post. See also Christine Blatchford's piece at the Globe and Mail. She notes that when Mr. Brown, the homeowner, got uppity about having to present a passport at the illegal blockade on his street, he's the one who was thrown in jail for the night.