Tuesday, January 27, 2009


According to attorney Philip Howard, we can right our failing economy by exercising individual initiative and taking risks. Most especially we need to activate our confidence in our ability to "grab hold of a problem and fix it."

Yet, as Howard wrote in a persuasive op-ed in yesterday's Wall Street Journal, our legal system has been stifling these very qualities. "The growth of litigation and regulation has injected a paralyzing uncertainty into everyday choices." Link here.

In brief, we are suffering from legalism. As I am using the term, legalism describes a culture where more and more laws are used to regulate human conduct, generally through an extensive system of rewards and punishments.

Howard's argument is counter intuitive. Most people have concluded that the current financial crisis was caused by too little regulation. How many times have we heard that the system is in crisis because of insufficient oversight and lax regulation. Can a blizzard of new laws and rules be far behind?

Still, Howard is correct. License is merely the other face of legalism. Our culture of regulation contributed to the crisis by undermining the ethical virtues that would have fostered the values of restraint, responsibility, and prudence.

In a legalistic culture hyper-regulation states all of the actions you are forbidden to take. The underlying assumption is: if it is not forbidden, it is allowed. Legalism promotes a culture where people hire lawyers to help them find out what they can get away with.

Say that you sign a contract with a supplier for delivery of a product. Your lawyers draw up a contract to protect you against any and all contingencies. You are protected against cost overruns, late deliveries, and shoddy workmanship.

Note well: this process assumes that your supplier is a person lacking in honor and integrity. It assumes that, absent contractual restraint, he would necessarily rip you off.

If you think that the contract is going to protect you, think again. More often than not your supplier will find a loophole, a detail your lawyer overlooked, and will try to take advantage of it.

If your crackerjack lawyer has really covered each and every contingency, your supplier will assert that he did not understand what he was signing.

The alternative is business conducted by handshake, where each party values his reputation and will do everything in his power to ensure that deliveries are on time, as agreed.

The difference is stark and simple: legalism tells you what you cannot do. Ethical character tells you what you must do.

As Howard suggests, the alternative to legalism is a culture based on personal responsibility, honor, and dignity. People who value their reputations do not need a system of rules and regulations to do the right thing. They do not waste their mental energy thinking about whether they can get away with doing the wrong thing.

Howard's prescriptions are simple and profound. He recommends that we try first to restore freedom in everyday decision-making. We should allow teachers to discipline children without fear of being sued; we should allow school districts to promote competitive sports without fear of being sued; and we should allow physicians to use their best judgment without fear of being sued.

The current regime is supposed to be protecting everyone's rights. In reality, it is promoting chaotic classrooms, overweight school children, and an exodus from the medical profession.

Howard's prescriptions will probably require some serious tort reform. Dare I say that this is not likely to happen in the current political climate. While we are waiting for it, it would be a good idea to read Philip Howard's new book: Life Without Lawyers... and dream.

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