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Host Gregg N. Sofer welcomes back to the podcast Richard Epstein, Laurence A. Tisch Professor of Law at New York University Law School, and Steve Renau, Husch Blackwell's Head of Thought Leadership, to discuss the U.S. Supreme Court's recent decision in Securities and Exchange Commission v. Jarkesy. The Court held 6-3 that the Seventh Amendment's guarantee of a jury trial requires the SEC to pursue civil penalties for securities-fraud violations in federal court. No longer can the SEC rely on its own in-house tribunal to secure these penalties. Although Jarkesy applies only to the SEC, the Court's reasoning could have far-reaching implications across a number of federal agencies, particularly when “the ‘public rights' exception to Article III jurisdiction does not apply.”Our discussion highlights the administrative law history that was brought to bear upon the case and how it was that the adjudication of civil penalties came to be matters before non-Article III courts. We then pivot to some of the impacts Jarkesy could have in the future, including whether the Supreme Court will take up related issues of due process in future challenges to federal agency enforcement actions.Finally, we discuss Jarkesy in light of the Supreme Court's Loper Bright decision that ended the doctrine of Chevron deference and the implications of both decisions for administrative agencies and the private businesses they regulate.Gregg N. Sofer BiographyFull BiographyGregg counsels businesses and individuals in connection with a range of criminal, civil and regulatory matters, including government investigations, internal investigations, litigation, export control, sanctions, and regulatory compliance. Prior to entering private practice, Gregg served as the United States Attorney for the Western District of Texas—one of the largest and busiest United States Attorney's Offices in the country—where he supervised more than 300 employees handling a diverse caseload, including matters involving complex white-collar crime, government contract fraud, national security, cyber-crimes, public corruption, money laundering, export violations, trade secrets, tax, large-scale drug and human trafficking, immigration, child exploitation and violent crime.Richard Epstein BiographyRichard A. Epstein is the Laurence A. Tisch Professor of Law, New York University Law School, a senior lecturer at the University of Chicago, and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution.Professor Epstein has published work on a broad range of constitutional, economic, historical, and philosophical subjects. He has taught administrative law, antitrust law, communications law, constitutional law, corporation criminal law, employment discrimination law, environmental law, food and drug law, health law, labor law, Roman law, real estate development and finance, and individual and corporate taxation.Epstein's most recent book publication is The Dubious Morality of Modern Administrative Law (2020). Other works include The Classical Liberal Constitution: The Uncertain Quest for Limited Government (2014); Design for Liberty: Private Property, Public Administration, and the Rule of Law (2011); The Case against the Employee Free Choice Act (2009); Supreme Neglect: How to Revive the Constitutional Protection for Private Property (2008); How the Progressives Rewrote the Constitution (2006); Overdose (2006); and Free Markets under Siege: Cartels, Politics, and Social Welfare (2005).He received a BA degree in philosophy summa cum laude from Columbia in 1964; a BA degree in law with first-class honors from Oxford University in 1966; and an LLB degree cum laude, from the Yale Law School in 1968. Upon graduation he joined the faculty at the University of Southern California, where he taught until 1972. In 1972, he visited the University of Chicago and became a regular member of the faculty the following year.He has been a senior fellow at the MacLean Center for Clinical Medical Ethics since 1984 and was elected a fellow of the American Academy of Arts and Sciences in 1985. In 2011, Epstein was a recipient of the Bradley Prize for outstanding achievement. In 2005, the College of William & Mary School of Law awarded him the Brigham-Kanner Property Rights Prize.Additional ResourcesThe Justice Insiders, “The Administrative State Is Not Your Friend: A Conversation with Professor Richard Epstein” (Episode 7), June 21, 2022The Justice Insiders, “SEC Plays Chicken with Jarkesy” (Episode 18), October 16, 2023U.S. Supreme Court, Securities and Exchange Commission v. Jarkesy, June 27, 2024Gregg N. Sofer and Joseph S. Diedrich, “Landmark Supreme Court Decisions Restrain Federal Administrative Agency Power,” June 28, 2024© 2024 Husch Blackwell LLP. All rights reserved. This information is intended only to provide general information in summary form on legal and business topics of the day. The contents hereof do not constitute legal advice and should not be relied on as such. Specific legal advice should be sought in particular matters.

Host Gregg N. Sofer welcomes back to the podcast Richard Epstein, Laurence A. Tisch Professor of Law at NYU School of Law, to discuss the U.S. Supreme Court's consideration of Securities and Exchange Commission v. Jarkesy, a case that has the potential to vastly alter the way the SEC initiates and adjudicates enforcement proceedings, as well as its ability to choose its own in-house venue for those proceedings.Gregg N. Sofer BiographyFull BiographyGregg counsels businesses and individuals in connection with a range of criminal, civil and regulatory matters, including government investigations, internal investigations, litigation, export control, sanctions, and regulatory compliance. Prior to entering private practice, Gregg served as the United States Attorney for the Western District of Texas—one of the largest and busiest United States Attorney's Offices in the country—where he supervised more than 300 employees handling a diverse caseload, including matters involving complex white-collar crime, government contract fraud, national security, cyber-crimes, public corruption, money laundering, export violations, trade secrets, tax, large-scale drug and human trafficking, immigration, child exploitation and violent crime.Richard Epstein BiographyRichard A. Epstein is the Laurence A. Tisch Professor of Law, New York University Law School, a senior lecturer at the University of Chicago, and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution.Professor Epstein has published work on a broad range of constitutional, economic, historical, and philosophical subjects. He has taught administrative law, antitrust law, communications law, constitutional law, corporation criminal law, employment discrimination law, environmental law, food and drug law, health law, labor law, Roman law, real estate development and finance, and individual and corporate taxation.Epstein's most recent book publication is The Dubious Morality of Modern Administrative Law (2020). Other works include The Classical Liberal Constitution: The Uncertain Quest for Limited Government (2014); Design for Liberty: Private Property, Public Administration, and the Rule of Law (2011); The Case against the Employee Free Choice Act (2009); Supreme Neglect: How to Revive the Constitutional Protection for Private Property (2008); How the Progressives Rewrote the Constitution (2006); Overdose (2006); and Free Markets under Siege: Cartels, Politics, and Social Welfare (2005).He received a BA degree in philosophy summa cum laude from Columbia in 1964; a BA degree in law with first-class honors from Oxford University in 1966; and an LLB degree cum laude, from the Yale Law School in 1968. Upon graduation he joined the faculty at the University of Southern California, where he taught until 1972. In 1972, he visited the University of Chicago and became a regular member of the faculty the following year.He has been a senior fellow at the MacLean Center for Clinical Medical Ethics since 1984 and was elected a fellow of the American Academy of Arts and Sciences in 1985. In 2011, Epstein was a recipient of the Bradley Prize for outstanding achievement. In 2005, the College of William & Mary School of Law awarded him the Brigham-Kanner Property Rights Prize.Additional ResourcesJarkesy v. Securities and Exchange Commission, No. 20-61007 (5th Cir. May 18, 2022).SCOTUSblog, Securities and Exchange Commission v. Jarkesy

Richard Epstein is our returning guest. Richard is an American legal scholar known for his writings on torts, contracts, property rights, law and economics, classical liberalism, and libertarianism. He is the Laurence A. Tisch Professor of Law and director of the Classical Liberal Institute at New York University, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution In this episode we talked about: Historical Perspective of  Land Use and Regulation Government Real Estate Agencies Inflationary and Interest rates Environment Macroeconomic Outlook ​​Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Richard is an American legal scholar known for his writing on torts, contracts, property rights, law and economics, classical liberalism and libertarianism. He is the Lawrence, a Tish professor of law at nyu, and the director of the university's Classical Liberal Institute.   Richard, it's great to have you back on. How you doing?   Richard (39s): It's always great to be here, Jesse.   Jesse (41s): Well, we're gonna have a bit of a, a crash course here in in property rights land use regulation, and kind of talk about how we got to where we, we are right now in, in the US in Canada as it as it relates to property rights. And it'll be topical for anybody interested in real estate, real estate investing development law. And you know, if you're ever interested to see why certain investment firms pick different states or pick different countries, you know, we'll, we'll touch on the intricacies and differences between how some of these laws develop.   But Richard, why don't we, why don't we start from the beginning? You talked about a historical perspective when it comes to land use and regulation, so I'll leave it with you here.   Richard (1m 29s): Okay, look, well the first thing to note is that when densities and real estate densities are very, very low, there's very little reason to have any kind of land use regulation. Land use regulation is a function of having large numbers of people within relatively close levels. One way to try to regulate this is from the private law of nuisance dealing with offensive smells and so forth. And that certainly is a part of the system. But when you're dealing with modern zoning laws, it turns out it's a relatively unimportant part of the system unless you're dealing with certain kind of very difficult industrial manufacturing areas.   But if you're going to the sort of the city life, the, the story really begins in 1916 when in New York City they realize that if you put up certain kinds of large buildings, the equitable building, what it's gonna do is gonna block light in other parts of town. And so the question was, are you willing to suffer that and let people build as they will, or do you think that you could kind of regulate densities and distances? And the initial New York statute was designed to deal with exactly that. And so they put up kinds of restrictions and they were relatively modest, but nonetheless they were there.   The one that was put into place in Washington was a high limitation. And in 1909 the Supreme Court said it's okay for you to do that. There's some kind of average reciprocity of advantage in everybody having the same kind of stuff. And so it's also another effort to sort of attack the light interest one way or another. And zoning of that particular sort was a relatively modest affair. I think the entire zoning book was, you know, 20 pages or something of that sort. But the movement got Abe boost from a very strange location in the United States.   And that strange location was a Department of Commerce where the Secretary of Commerce was none other than Herbert Hoover, later known for his other kinds of deeds. And what he did is he called together a national conference of local people trying to explain why it was that a general kind of zoning law was something that ought to be put into place throughout the United States. And federal government at that time had no power to regulate zoning within cities today in the United States. And in principle has that power, but it is virtually never exercised.   But what Hoover did was to persuade all of these towns and all these governments that they should put together a zoning package which is much more comprehensive than the ones that they had before. The theory behind this stuff was how you organize land uses as opposed to blocking light. And the notion of a zone actually quite literally meant this. We put in this zone, we put manufacturing in that zone, we put commercial in this other zone, we put in apartment houses, this other zone we put in single family homes.   And the theory was that if you have each zone with a pure type of, what would happen is you would prevent all sorts of nasty kinds of interactions between people and everybody would be better off. It turns out that this is a colossal blunder in the way in which you organize because what it does is it gets you uniform zones within use. It prevents incompatible uses from taking place, but it also prevents compatible uses from taking place. And so if you wanna get a sense of how, for example, real estate is organized in a more or less voluntary market, take any city, whether it's Toronto or New York and just go vertical.   And at the bottom what you do is you see a series of real estate stores, mainly commercial one way or another in New York. And probably in many other places, the escalator in these real estate stores goes down, not up because what you do is you have a lot of space below ground that doesn't change the profile, the building above ground. And so you do that. And then above that what you do is you probably have some degree of office space, which is a different kind of use. And above that you start having hotels in one kind of amenities.   And then above that what you do is you probably have some residential units and on the top you have some fancy club where everybody could look out at fine dining or a conference center. So you get four or five different uses stacked with one another. If you change the order, you would realize that this is not a random phenomenon, it's the way of maximizing value. A traditional zoning statute makes that extremely difficult. And so when Jane Jacobs wrote her famous book in 1961, she was always against single use areas because she said, if you're alive during the day, you're gonna be dead at night.   Or if you're alive at night, you're gonna be dead during the day. If you have the right kind of mix, you can have a steady flow of people in and out of the city and get greater utilization of your public resources. So the zoning system essentially made this mistake. And the case that demonstrated this was a case called Ewa cited in 1926, which was the same year that Hoover called his particular meeting in Washington. And what was the UK case about? It was about an industrial site between the nickel white railroad and some fancy highway on the south.   And what happened was a unified plot, and it was ideal for a major plant of one kind or another, but the city fathers decided that they were gonna change the way that this thing operated. And so what they did is they created zones going from top to bottom in that area and there was a zone that was designed to be manufacturing and then there was a commercial zone and there was a certain kind of residential zone and then a over the apartment house and a play zone. And what happened is you start looking at this stuff, you realize that having divided this thing, the loss and value is necessarily enormous.   You had a single owner of this patent and as you know Jesse, one of the fundamental theorem of real estate is if you have a single owner, every time you decide to do something on behalf of one of your potential buyers of renters, you're gonna hurt somebody else. So your constant job is to try to figure out how it is that you maximize the net value of all the uses that you sell, taking into account direct and indirect benefits like views and so forth. And sure enough, if you start looking the way these things go, you never see any of these things where the rental units are buried down below and the parking spaces are above.   The whole thing is organized in a way to sort of maximize access on the one hand and views on the other hand. And people really know how to do that and they're experts in excuse. So what you're doing is you're taking away the actual owner who's all the right incentives. He can only maximize his values if he maximizes that of his buyers and renters and and putting in place a government organization. And what it did in zoning, excuse me, what that did in zoning is it knocked out 75 or 85% of the total value by creating artificial barriers, discontinuities of one sort or another.   And it goes to the Supreme Court and the question is, is this thing constitution? Well, it was argued that it was a taking of one kind or another cause you saw the huge value. But the Supreme Court in a sublimely stupid opinion by a conservative judge known as Sutherland, a decent man, but a terrible judge on this stuff said, well, you know, you gotta have zoning laws because you have to have traffic regulations of one form or another. So what he was doing was talking about this areas where these units were already divided and you had to coordinate them and saying, that's the rule that we have when we already have a coordinated unit.   And so what you do is you know, for certainty that you've got a huge loss in net value. And the net question as a social thinker is, is there gonna be some external benefit that justifies the losses that you're imposing? And then you look around and you say, well, is it gonna be the fact that you're gonna prevent nuisances? Well, you could do that by saying you can't admit slope. And in fact, if it's a large part of land ly, every landowner wants a little bit of setback from the street, right, in order to give themselves a little bit more flexibility.   And so they have a garden or they have some kind of a statute in front of the place and so forth. And so there's gonna be zero probability of nuisances against neighbors. But on the other hand, you shut this thing down as a con industrial site, there are gonna be a lot of people who live in the neighborhood who now will not be able to get jobs. So if you're trying to figure out what the net effect of construction is, the standard zoning model is every time you build something here, it's gonna have a negative effect everywhere else. The more accurate situation is there a few uses that you have to ban and you can do that.   But most of the interactions that are gonna take place within the nearby neighborhood are gonna be positive. And so you put into place a system which essentially is doomed to fail from the start. And then the question is, what about constitutional attacks on? And what you always have to say about something like the Euclid decision is the moment you sustain the constitutionality of what must be the dumbest plan imaginable for land use planning, you're never gonna be able to attack anything else because every other program's gonna be less stupid than the one that you have here, even though they're plenty dumb.   And so essentially in the United States and in Canada, I believe there was no serious challenge to zoning ordinances that took place for the next 50 or 60 years. The system essentially went on autopilot and the positive externalities would be taken into account in some cases politically but never legally. So one of the things you mentioned, you can interrupt me at any time, is how do different towns respond to this stuff? Well, it's a very funny game. I'll tell you just a little anecdote is we wanted to build a house in Michigan at a time when the area was somewhat depressed and there was a zoning ordinance that was administered by the local government on behalf of the state and they were desperate to get our house in there.   Why is that? Because in the usual exurban communities, they have two tiers of taxes. They have low taxes for people who live there full-time and high taxes for com, people who live there for the summers or the weekends or whatever. And they were desperate to get those revenues. So our architect goes out and presents his plan and this is what the host of the situation said, this is 35 years ago, but it's the same story. I said, Mr Grun, would you like to go first? You came a long way. Now what's going on is they really wanted that stuff.   And there are many towns in the United States where zoning has done in exactly that way. So that what happens is if you have the equid frame of mind in Ohio, it gets taken over in New York, it then spreads to building permits and other situations like that. And so essentially to construct something in New York City is about as difficult as breaking into a bank cuz nobody wants you to come. You go to Texas, it takes, you know, two weeks to get a building permit as opposed to three years to get a building permit, the land use review processes, is your building gonna fall down?   Will you let us know? Is your building going to have no access to the street? Will you let us know? So essentially what they worry about is a little bit about massing. They worry a lot about safety construction floors and so forth. And the very important issue of how you coordinate entrances and exit from a large building onto a complicated city set of griefs. And those are all the things that you really have to worry about. But what goes on inside the box is something for which in general it is very unwise zoning board to take hold of.   But you take a place like New York, it's not only zoning, it's handicapped regulation. So somebody will tell you how wide the hallways have to be in order to accommodate a wheelchair that you don't need of a bill that's no longer made, which will reduce the value of your house by 20% every time you try to do a renovation. So the thing to understand is every community is not so stupid as to try to take advantage of the full powers of the zoning law, but you can easily find configurations where local politics are such that the dumbest of the dumbest get to the top of the roof.   And if you wanna find a place in which that's likely to happen, you go to San Francisco, you go to New York, not so much Chicago, although they have a terrible mayor and so forth, it's essentially major progressive communities tend to be most insistent and what they do is they drive people away with their stupidity.   Jesse (13m 46s): So Richard, the, this kind of, it reminds me a bit of this common misconception between freedom and license and the, I guess we could back up and say from, from a standpoint, I don't think I, if you are extremely lez fair in disposition that you think that there's no limits on on, you know, what you can do with your property, but, but there is seems to be a certain balance. So there are certain externalities that are easy to control and, and others that are different. For instance, you know, the law of trespassing, it's very obvious but the, you know, the externality of environmental issues or you know, smell emanating front property.   So I, I'm curious to, to know that for instance, I live in downtown Toronto. If I'm walking down the street, as much as I don't like to be the nimbyism not in my backyard type of person, when there's certain condos put up in certain sight lines where there was one sun is there's no longer sun, we, we certainly lose something as a community the way that we go about ameliorating that or or dealing with it is, is not efficient. And it reminds me a bit of a book by Charles Murray, I think it was by the people and it was talking about like what you're talking about a lot of regulations that you know, say you have a commercial building and the steps need to be this many inches and have these, these spindles and and realize it doesn't apply to a certain case.   So, so where's the balance when it comes to the ability for you to have efficiencies and be able to have that quick turnaround time like in some of the southern states as opposed to not, not limiting other rights that are external to say your   Richard (15m 21s): Property. Now look, as I mentioned to you, light is one of these very difficult issues as is density. And the point about light and views is everybody knows that you attach an enormous positive value to their use. And so for example, if you have in New York an apartment on Central Park West that looks over the park, it's gonna be worth $40 percent more than a unit in the same building and that looks down the street that another street. So these things are extremely valuable and so the question then is how do you manage to preserve them?   And it turns out I think the only thing that you can say is that in plan unit developments, these things are gonna be naturally taken to account for the reasons that I mentioned at the outset. The developer who denies somebody of view in order to give somebody else a lot of space, he may lose more money on the view apartment than he will gain on the space apartment. So he'll do something else. When it comes to uncoordinated development, it's an absolutely killer and one of the kinds of regulations that have been sustained and it's one for which I have a little bit of sympathy, I'm not sure exactly how hard a setback regulation.   So the same time they put Euclid into place, they said you could require everybody to set back 10 feet from their neighbor, 10 feet from the floor. Now is this a good or a bad idea? Well it really depends. So let me give you the Epstein situation circa 1950. I grew up in a duplex, not a duplex, it's a semi attached house. We had a neighbor on one side with a common party wall and it was open on the other side. And essentially this was a kind of an effort to sort of create that sort of compromise that you want to have, you reduce the density a little bit by having that common wall and so forth but you kept the openness by making sure that every two units instead of every single unit has some setback or partition from the guy behind you.   And and I think trying to put zoning ordinances like that into place is not going to give rise to a huge thing. And there's a simple way to try to test this out. The zoning ordinances that I mentioned in equi were ordinances that resulted in a loss of value, easily measurable because of the market value of the land of 80%. Now you put a setback regulation in on a large unit owned by a common developer and you ask yourself how much is gonna be the reduction in value if any from this situation?   And remember the people who live in the houses, houses are the people who walk on the public streets and probably it's gonna be the case that the sort of setback regulations you're talking about will have relatively modest effect on property values and positive effects on neighborhood amenities. And so they should be upheld is being some kind of constitutional, the reason why this is so difficult is I suppose you have a part which is 25 feet wide, having a setback on that is gonna be very, very difficult than the width. But if you have one of 40 feet you can start to do it.   So the sizes make a difference, the ratios make a difference, which means that it's extremely difficult when you're doing these things that kind of figure out the way in which they go. One of the things I do when I teach land use, however it is kind of interesting is you wanna see how a constructive zoning situation did the case book. I had my friend Bob Eon and Vicki Beam with the editors at the time, they had a proposed plan for development with entrance entrances on various streets and configurations within the law.   And then they, that was before they spoke to the planning bureau and then what happened? They show the same thing after you look at the planning bureau and I'm very happy to say this was a positive story. The revised plan was much better than the original plan by any standard that you could ought to do better access in the right places, better internal configuration on the roads and so forth. So what it does so is that planning should not be regarded necessarily as an evil to send all evil, but it has to be done with a set of incentives where it is that the people who are designing these particular program are trying to maximize the value of the unit development, not trying to destroy it.   And so, so much depends when you go into a government as to whether they're the welcoming kind of government or whether they're just people or outright hostile. Now this has huge implications for constitutional law. If you have government which is responsive and reliable, giving in their reign is almost a wonderful thing cuz they're doing good things and they'll do 'em better. But if you have a terrible government and giving it its reign, they're gonna take advantage of you and wipe out private values. Well when you plan your law, you have no idea in the same state or in the same county whether the local zoning boards are gonna be the good guys of the bad guy.   And how do you then put together a set of rules to deal with people who are so fundamentally different than the way in which they approach land use? That's the fundamental challenge. And essentially the way I think you do it is you start off worrying about the bad guys and what you say is the kind of test that we're gonna put into place is that which talks about overall diminution and value taking into account all the members of the community. And then if you take that over and you look to the good guys, they'll pass that test.   The bad guys won't. So that overall will make a difference. Let me give you an illustration. Okay, nice one. I think having to do, not so much with urban planning but with beach fund planning and as you know as a real estate guy, beach funds are very sensitive because the value of the land is so much determined by access to the public road. Everything changes. When you're in most parts of the world you tend to have squareish lots or when in beachfront company tend to have bowling alleys, very narrow cuff to give as many people possible, some degree of frontage with respect to the beach and so forth, right?   Well one of the things that you have when you face the beach is you have an erosion risk. And once you realize that the maximum private values come from having relatively narrow and deep plus you realize that there's no way that individual owners in an uncoordinated fashion are going to be able to stop their erosion risk. Your parts are too small, you build a wall on your thing and it simply destroys the guy to the left of you and the right of you. So you need to do is have a common wall if you're gonna be able to do this at all.   And then the question is how do you put this into place? And here's a scheme called stop the beach nourishment was the name of the case decided by Justice Scalia who came out with the right result having no idea what the actual logic of the scheme was. So these guys realized they had an erosion risk, they realized they had a collective action problem because there was no way any single owner alone could make his press situation better without making his neighbors worse. And if you're trying to figure out how you're put together a wall that's gonna have to deal with say 40 or 15 homes, a single continuous wall's gonna be much better than a HighSpot a little one.   So they did is they said we're gonna require that, but they made a deal and the deal was what you have to do when we put this wall up is give up the rights that you have to exclusivity on the seawood side of that wall. So what was once a private piece of land above the high watermark now became collected, okay, you lost something. But on the other hand we're gonna give you two things in exchange. One, we're gonna protect your house and that's worth the law. And two, we're gonna make sure that nobody builds on the seawood side of the wall so that your views are protected on the one hand and your access to the beach are protected on the other.   So you look at this kind of scheme and you say, are these people entitled to compensation? Well you'd have to be a little bit nuts to think. So if it turns out when you're taken into account the cost of construction and all the other net benefits, the value of every piece on the breach goes up by 10%, right? At that point, compensation is not what you want. It's what we call technically implicit in-kind compensation. That is the nature of the project itself imposes reciprocal obligations on people. Each of them have to pay X, each of them get y Y is greater than X.   So if you have NX N Y minus nx, it's a greater gain still. So it works. Now is this always gonna work? No, Jesse, life is unkind to us. If the units are heterogeneous, it turns out it's harder to get common projects that work. So think of the beachfront in which some guys on a rocket, he doesn't care about the erosion risk given where he's located. Or some people have bigger houses, some people have a small narrow part. When you have heterogeneity, it's harder to make the thing work.   And so what do you have to do? There's an institution with the odd name of owl, T O W E L T Y. What you do in effect is you start making side payments so that those people who are given burdens that are greater than their benefits receive cash payments from the other. And if they could make the cash payments and still come out net winners, what you've done is you've taken an unequal distribution of good fortune that is somehow need the protection and some don't. And the side payments allow you to equalize the benefits so that everybody in this particular area get the same rate of return from common project.   And I think you, you've worked real estate, right? Yep. And you understand that in certain cases where you make global improvements with local disadvantages, you have to have implicit transfer payments or explicit one, if it's a common unit development, it comes out in the pricing. If it turns out they're separate units, it has to be an explicit make and you can do all of that stuff. But the key thing to understand when you're doing land use regulation, given the adjacencies, you can't say that what goes on in one plot of land is irrelevant to what goes on the next.   What you try to do is to put into a project that satisfies two conditions. One, overall all values of all the unit owners and so forth of property owners are increased. And B, you are going to give a uniform rate of return because if you don't do that, then the following will take place. We have a development and 60% of the percent of the people game a hundred percent and 40% of the people lose 50%. If you don't have transfer payments, you're gonna have a Holy War taking place because the losers are gonna do everything they can to bottle that up.   And as you know, generally speaking on this conflict, a simple majority is not enough to prevail over determined resistance. That's just the way committees and organizations struck. It's a multiple stage project in order to put legislation through and the veto guys that all they have to do is to shut down one of the gates. Whereas the pro guys, all they have to do is to keep every gate open, which is a much harder tan. So given that fundamental asymmetry the correct solution of transfer payments so is to make it that foolish for people to object if the side payments will leave them better off than they were before.   And so that's how you have to start thinking about managing various kinds of real estate projects. And that's why it is at the zoning model so utterly rigid because the other thing that it does, it doesn't allow the subsequent contractual variation.   Speaker 3 (26m 34s): So   Jesse (26m 35s): That's, yeah, it's fascinating to, to see cuz we, we deal with different, like we were mentioning before, different provinces or different states and you just have obviously varying sets of, of norms, varying sets of laws for regulation. I wanna get your take on something that was recently passed or pushed forth in, in the Canadian context. I think every country in some aspect, I know in the states and in Canada we're, we're affordable housing is constantly talked about. And the question of how do we deal with affordable housing, you know, depending on your political disposition you'll have a different tool or different, you know, different view.   You know, obviously I'm biased in the commercial and residential real estate space that we think, I think a lot of the regulations really hamper us and and limit the supply. Now, I'm not sure if you're aware of this, but recently something called the prohibition on purchase of residential properties by Non Canadians Act was was passed and it was basically it, it's a two year moratorium on foreign individuals buying property in the states. Now if you really look at the actual details of it, you realize that people in MySpace and the commercial real estate space aren't really affected because it's limited to I think three or four or less units.   I think it's four or less units. So you know, the large companies buying properties or multi-residential or commercial pro larger commercial properties. But I'm curious of your view of how, you know, you see a government agency, C M H C, the Canadian Morgan Housing Corporation as our equivalent of Fannie Mae, Freddie Mac, you see them past this with the talk about how we're gonna increase affordable housing and, and we're gonna address supply con issues by, you know, banning, you know, foreign individuals from, from buying it.   And I feel like that's, that's kind of doing it as backwards, you know, we're, we're not looking at the actual source of what the issue is. So I'd like to get your take on that. I know we didn't chat about it before.   Richard (28m 29s): Hope swings the eternal on this stuff. I am a fierce opponent for the most part of a firm of affordable action affordable housing programs. But let me explain why this is not just a sort of a terrible situation. There are two ways in which you could try to expand the housing for the port. One of them is you could reduce the various regulatory obstacles that stand in the path of constructing that or two, what you could try to do is to force a subsidy on somebody else so that people are going to pay only a fraction of the price that the housing that they occupy is going to cost.   And very, the first thing you used to do is you always start with the first. If there are a series of barriers to entry that you could remove, what it does is it will lower cost, lower administrative expenses and increase the availability of units so that you will start with the housing program just by getting rid of the obstacles. Let me give you an example. Many places, so like New York City have rent control. What rent control does is it means that people have large houses when they had children keep their large houses when the children have gone away.   And so there's nothing more common than in New York City to have a 2,500 square foot units with one person living in them if you had no rent control system subsidy kind of right? Well what happened is that woman would sell her house to a family of four. So what you would be able to do just by getting rid of the rent control restrictions would prevent residential mobility is increase the supply of housing without changing a single thing in the external world by making sure that units are fully occupied up to their rational level.   And so that's the kind of thing that you want to start with. Always get rid of the crazy restrictions before you put something else into place. And we know that there are many kinds of odd restrictions on zoning, how many units you could vote in a given area. The neighbors are always trying to Beto these kinds of things and if they succeed, you're gonna s cut down the supply. The liberal progressive view on this is we keep all of this stuff in place, we have a housing shortage, what we then do is we decide that we're gonna subsidize housing. This is what Governor HOK is trying to do in New York State in a lame brain program where she thinks she can force every single community in town to get some state money in order to build the housing that she would like to be built in the places where she wants to build them.   These programs of coercion never worked and they're costly. So you're talking about affordable housing, they're two ways you can do it. One way, the honorable way is to put it on the public budget. You say, we happen to believe that it's important to have poor people in the community, it's going to cost us a thousand dollars a unit per month to get them here and they can only afford to pay $600. So what we are gonna do is we're gonna appropriate money from the public treasury $400 a month for each of the units that we want to create.   And there will then be political decisions as to how far you want to go with this program. And my view, the moment you put this on balance on the balance sheet for the public, what you will see is a huge diminution in the desire to do this. And this will create greater pressures to increase housing by reducing barriers to entry, which is exactly what you want. So you want to do is if in fact you're going to have a public subsidy, make it outta general revenues. But local communities don't like general revenues. So what they try to do is they try to put it on the developers, right?   And so you get the following kind of scheme. All developer, if you wish to build three market rate units of housing, you have to build one affordable unit. And what you do is you take your excess rents from the market rate housing and use that to support the other housing. And we the public have to pay nothing about it. Well it turns out, of course there is no free lunch on this situation. The first thing you're gonna have to do is you're gonna have to raise the the rents or the sales prices on the unaffordable market rate units above what they were.   If you assume that the demand is constant regardless of the price, then you live in a world that I do not understand. So what's gonna happen is the market rate housing is gonna be above market rates. You're gonna see essentially a kind of price control system put into place a form of monopolization and you're not gonna be able to sell as many of those. And if you can't sell as many of those, you're not gonna be able to sell as many of the affordable units. And so what happens is you put this thing, the total stock is going to start to go down in the availability.   Then of course what happens is the people are being forced to pay this stuff, they're gonna try to fight one way or another in order to cheat on this. So you're gonna have to have excessive monitoring on the way in which it goes. Then on the other side, the moment you have affordable housing, it turns out you have affordable housing criteria. And so to give you a kind of a simple illustration, suppose you assume that the affordable housing unit at $600 a month as opposed to a thousand dollars a month must go to a family that earns under $40,000 a year.   So you elect family in at $40,000 a year and then it turns out in the second year the spouse goes to work and total family income is $48,000, not $40,000. Well one of the two things could happen, either the second job is kept off the books so that what happens is the person don't move but they violate the criteria. And once one person does it, everybody does it. So after a while it's just subsidized housing, but you're not gonna be able to keep your target population or what you can do under these circumstances say, all right, we're gonna throw you out of this affordable housing unit, which isn't gonna do anybody any good cuz then you have all the costs of trying to find another tenant to fill it in.   Or what you can do is you say, okay, well we'll do is you now got $48,000 for this thing, we're gonna raise you by 10% and so forth. But somebody has to figure out what those increments are and then you're gonna have to calculate them on an annual basis and you're gonna have to do this for 50,000 units inside a very large town. It becomes a completed administrative nightmare. And so it's just very, very difficult to kind of put these programs into place and yet the more difficult it becomes, the more insistent people are creating them.   And so what happens is you get this kind of situation where you get a lot of cheating at the bottom and real restriction to elite people at the top. And then you have to know what are you gonna do with the rest of the zoning system. So it's just another piece and a messy kind of puzzle. If you want to give subsidies to people, the only way that really works is to give them a subsidy of them and say if you spend $500 on a unit a month, we will give you a 10% increment over that.   So you could get $600 and sure enough the landlords will be aware of that. Then what will happen is the price that you bid will have to be a little bit higher because they're gonna try to take some of the subsidy for themselves. It's very, very difficult to run cross subsidies in a housing market and that's what they're trying to do in Canada. And when you said the last point you mentioned, oh you can't sell to Americans, right? Well who's that gonna hurt amongst other people? Canadians, right? Because the Canadians who want to sell their property are now gonna be forced to take a lower price for what's going on.   If you'll let the Americans in, you're gonna get more on the real estate taxes and so forth gonna increase the general vibrancy of the community and you can now start to afford to open up new housing. And so you don't wanna put these models in place which assume we have to keep the bad guys from out because there's a static source of housing, there's a total fixed amount of supply that you can't increase if you know that people wanna come in, the appropriate thing to do is to build more unit and that means to relax these units. Canada last I looked, is a big country, right?   It has what, 35, 40 million people, right? Well I mean I think that you can figure out a way to find some plot of lands to build additional units so as to accommodate virtually everybody. But what happens is all the people in favor of affordable housing and subsidy have no idea of the resiliency or the sense of how markets work. And they don't have any idea as to how the eminent domain and the regulatory power should be done. Remember, I'm trying to figure out what you do with regulation. I didn't say you could build anything you want anywhere you want to do it.   There are certain kinds of minimum constraints, but the constraints that I'm talking about, you know, on structural integrity, parking places, access to streets and so forth is about 10% of what they're doing today. But it's the 10% that is most valuable and it turns out it's the 10% that it's least controversial. And so it turns out that you do all of that stuff, which is fine, but all the other stuff that you do is largely a mistake.   Jesse (37m 20s): So a couple points first of all that it kind of reminds me of the, if, if anybody hasn't read Capitalism and Freedom by Milton Friedman, I think it's a, it's a great tax and the the cutoff example you use, I think was how he described his negative income tax of if there are transfer payments, you know, you don't just have a cutoff where people now start try to game the system. And the piece I'm curious about, you mentioned the honorable way to do it and, and I guess the dishonorable way in the honorable way situation there where you have a, a certain amount from the public purse that, that you appropriate to provide to people for affordable housing.   You, you find whatever, whatever test or criteria that that you know, that is needed, what is the mechanism? You mentioned giving them subsidies, but would there be a situation where you have a, you have a developer, they're building X amount of units, the government says this amount has to be affordable, however, the the c the rent, the, the payment will be a payment directly from, you know, whatever a Canadian agency or are you saying put it directly into the hands as a subsidy for rent so that it can only be used in one fashion from the prospective tenant?   Or are you saying give them cash?   Richard (38m 34s): Well this is the way way I would do it. You wanna get units at a subsidy, what the government does. You take a private developer and it says we are gonna rent this unit from you for X dollars and you're gonna give us permission to rent it to Subedit to somebody else for X minus Y and we will pay that difference cause we're gonna have to pay you the rent and then we'll collect less and the rest will take from the public purse. You could do it. Justice Scalia actually talked about that in a case called Pinella as a potential way of dealing with it.   But what it does in effect is it means that you can't hide behind various indirect loses and tie in arrangements of one kind or another. You put it on the public budget and once you put it on the public budget, there's gonna be a public debate as to how it ought to be done. And so, strangely enough, using a taking wall makes democratic processes more true because otherwise what you do is now imagine what the discourse is gonna be like on rent control or an affordable housing where you know that you, if you get a political majority, your majority can force some vulner minority to have a net loss in order to stay in business, right?   So you have to have this heavy tax and so the de deliberative process will work, this follows all the progressives in on in New York or in oil Toronto will come together and say, how much can we extract from landlord my way of rent control and not drive them completely out of business? And I said, well you know, we got a lot of working room here. And of course they always miscalculate because generally if you're a progressive, you underestimate the, the violence of response, the dramatic nature of response to regulation. You assume people are gonna be relatively indifferent when in fact they're gonna be furiously backed.   So what you do is you get a deliberative process, which is designed to say how can a 70% majority really stick it to a 30% minority? But if on the other hand you do it the way I'm talking about it through the public trust, there's no way that any group can hide a general revenue tax is gonna hit them all. So now they're going to have to ask whether they think this is important enough to them to support it. And since they're paying the money, they're gonna be a lot more reluctance since Margaret Thatcher's old jokes, she says, you know, socialism last so long as you haven't run out of other people's money.   And that's exactly what people are kind of trying to do with this system. So, but you have to understand about affordable housing, rent control projects and so forth. There are all various reasons of price control schemes and the simple price control scheme is just a cap. And what happens is you discover at the cap and a price control scheme, there are lots of buyers and there are very few sellers. You have a systematic shortage. And then you're gonna have to figure out what kind of political intrigue is going to figure out who are gonna be the lucky winners amongst the shortages.   All right? And who's gonna be left out to drive? This is a terribly unstable system, but that's what you're doing. And as you mentioned where ways to do that, you could find minority groups and you could exclude them. You could take people who don't live in the community and exclude them. And so just to give you the sort of the political dynamic in any large city, there's always a strong constituency for rent control cuz these are sitting tenants who now think that they could get a subsidy in New York City or in Toronto. We're not talking trivial numbers.   No, oftentimes the difference between a rent controlled price and a market price in that very small part of the market, which is unregulated, could be a difference of four or five fold per square foot as you well know, right? And so   Jesse (42m 6s): I can give you just a, it's just a quick one that just we, a property we're dealing with today, the market rent is $4,300 or sorry, the, the, yeah market rent is $4,300. The, the on the books rent right now in, in a, you know, rent controlled AR area is, I think it's 1,650. So yeah, you know we're now   Richard (42m 26s): It's two half, right? Yeah. And you know, in some places it's higher in New York City it's actually larger than that because what they did is they put the stabilization cap in at $2,500. So essentially a 22,000 square foot unit that's controlled in New York City's $2,500, the same unit on the open market is 10 to $12,000, right? So it's a five or six fold difference. So let's just assume it's a thousand dollars a month, right? That's $12,000 a year, that's a trivial amount.   And then you have to capitalize as a hundred thousand dollars subsidy. If you're talking about these larger numbers, it gets close to a half a million dollars in that transfers to people they'll fight very hard for. So then somebody said, I remember this well if there's a short is what we have to put as a maximum cap on the sales price of homes. Now this is different, the landlords are people you're willing to screw, but the voters that you have are these homeowners and you're not gonna be able to win a lot of election if you tell a given homeowner your house is worth 3 million. But we like the rent control model when you sell at the maximum that you could ask for is $1,800 and then all of a sudden, amazingly you've got 1500 people standing on your front door, he is trying to bid for the property below that, somebody's gonna try to sneak you a few extra dollars to put it his way.   So we don't have sales control, we do have rent control, but the basic maximum about this is supply and demand aqui brace. Whereas all price control systems create chronic shortages, which lead to chronic intrigue, affordable housing is essentially a price control system which is much more complicated than the simple rule, but it's gonna create all the same kinds of distortions and more why? More because it gives you more room to wiggle and giggle. And what happens is when people start making private accommodations for their own benefit, what it always does is reduce the total amount of social welfare and that can take place.   And what happens is you give it to take the progressive mind in New York City and you see the complete failure. They don't talk about deregulation or destabilization very often. They say, oh we gotta have another set of restrictions, another set of taxes and another set of subsidy. And then they wonder, well why are all the people leaving this state? Now I don't think this has happened in Canada, right? I mean cuz I don't think you have anything close to the disparities that you have in the United States, but let's be very clear about this.   New York state has the largest percentage of people leaving the state each and every day. California is next. You are talking about hundreds of thousands of people abandoning the state in a given year. I mean, it's gotten to the point where it's that large. And then you ask yourself, well what are you going to try to do in order to keep them here? And we know this, we're gonna have more affordable housing, higher taxes, greater subsidies, more pro-union benefits. So you want to increase the cost of housing, just require everything to be done by union construction firms and so forth.   And so more people are gonna leave, right? And then you have the same cycle over and over again. Some people will not learn that essentially the exit, right? Is a constraint on what you can do. People don't like to leave their homes in order for you to get somebody to leave their friends and their neighbors. You have to create massive dislocations and the political system to override the local benefits that you have by just being in a community with your friends and family. And that's exactly what's happening.   California lost a half a million people I think in the course of a year. Well it's a 40 million people state. So it's 2%, you do this for five years, however, it's all of a sudden, hey you really have completely rewritten the map of the United States unless you can control the exit rights. And so you know what they're trying to do, of course you're aware of this. They're trying to control exit rights. Now how are they trying to do that? They try to impose wealth taxes, crazy system. And they say, if you leave the state in order to avoid the wealth tax, we're going to impose an exit tax on you equal to the wealth tax that we would've imposed upon you if you had stayed.   And that's the sign, that's what East Germany did to keep people. And that's what these countries are trying to make themselves   Jesse (46m 40s): Like. So Richard, I I know that's, it's fascinating. I think we could talk, we could talk for another half an hour on that point alone. I think we talked, chatted a little bit about it on the last time that you were on, but we got up five minutes here and it's not a lot of time, but I'd be, it'd be remiss me not to ask you about, you know, with your work and, and writings on, on law and economics, our current inflationary and interest rate environment. I know it's a broad topic, but I would like to get your take on not necessarily what has happened in the last 12 months.   Obviously we use historical aspects as a way to look at the future. You know, we can say that feds acted too late, feds acted improperly. But what I'm curious about is what your view is on the next short to midterm. How we, how we, where we go from, from here and how you think this will unfold or it ought to unfold.   Richard (47m 33s): Look, I mean it, it's quite clear that we kept interest rates artificially low for a very long period of time. And it's like everything else you say, ah, this is going to stimulate investment. But on the other hand, you now have people who are living off their retirement savings and the interest rates have been cut by two-thirds under this situation. And so they are really kind of hurting. So it turns out manipulation of interest rates are like wealth transfers from one group to another. And in general, the winners always get less by way of profit than the losers do because the uncertainty means that the whole game is going to be bad.   So the first thing you have to do when you think about this stuff is to figure out how you stabilize this and take it out of politics. One of the reasons why the gold standard actually worked, not withstanding the fact that it seems highly improbable to do so, is it's a lot more difficult to manipulate the supply of gold than it is to manipulate the supply of paper, right? And so what it did is it created a natural degree of stability and then people could adjust to that situation. The current situation, when you have this uncertainty, it means that every financial transaction has an additional degree of risk associated with it.   Cuz you don't know whether the dollars that you're gonna get tomorrow are gonna relate in some particular way to the dollars that you're spending today. So the stability point is, I think the first thing that you want The, the second thing I think that one wants to recognize is that inflation is not just a monetary phenomenon. It is too many dollars tasting too few goods, right? And well, you can screw this equation up in two ways. One is you could create too many dollars, which is running the printing press to the point where the money starts to come out in a pandemic.   There may be a lot of dollars out there, but there's not gonna be a lot of activity. So the velocity of money will be slow, which means that the increase in the quantity of money is not going to show itself immediately. But the moment the velocity of money starts to speed up and the quantity of money starts to speed up, then you got a problem. But on the other side, it's chasing too few goods. You can have a system on direct regulation of the production of goods that favors it or destroys it. If you increase overall productivity, you're gonna reduce inflationary pressures because what's gonna happen is you have more dollars chasing more goods and the more goods offset, the more dollars on the other side.   What you see in the United States, I think more so than in Canada, is this relentless effort to shut down production through a system of transfer payment. So this kind of exacerbates the overall problem, and it's something of course, which the Fed cannot solve or any monetary problem can solve because the determinants of overall goods production are going to be industrial organization. They're gonna be labor laws, they're gonna be zoning laws, they're gonna be taxes and tariffs on imports and experts, all exports, all of which fall outside of the purview of the Fed.   It's not that the Fed is irrelevant, it has a huge role to play on one side of this equation, but it has no role to play on the other. You see somebody like Joe Biden, I mean, you know, he is generally regarded as one of the dumber people ever to take in public office that widely known but not widely spoken today. But you know, every time he sees something, if it's a good move, it's because government has done it. If it's a bad move, it's because greed has taken play. He has no idea that changes in market conditions could lead to changes in prices.   And that changes in prices that reflect scarcity are generally a good thing. Because if you raise the price, the people will stay on the market the longest of those that get the net profit, largest net profit out of the use of goods. It's not great that you have to cut things down, but better to do it that way than by some government allocation scheme, which is the only question that you start to add. And so what you do is you get these constant drumbeat of people on top of the market. And one of the things that happened is if you look for example, at a Congress which has lost its way, or a government in Canada that loses its way, even the threat of regulation will have very bad effects on the operation of A, so if somebody says there's a 20% chance that there's gonna be a windfall profits taxed on oil in the next year or so, it is going to skew investment in consumption systems all the way down the line, even if it never passes.   And the reason why you like constitutional prohibitions against certain kinds of fools errands like this is very simple. What it does is it gets that element of risk outta the situation. So the ideal theory of constitutionalism is you put into a constitutional, those constraints that make sense in good times are bad, but you don't try to constitutionalized those restrictions that will work on one set of times. But not only. So for example, on taxation, there is no way you wanna put in a rule that says you cannot tax more than 22% of the economy and put it into the government in wartime or crisis.   You may need more money than that. But what you can do is to say, look, when we do this taxes, we are going to do it through a flat tax, and that means that everybody's gonna go up or down at the same ratio. That constraint doesn't stop you on the revenue side, right? But what it does is it does a great deal to stop the partisan fighting where one group is strong enough to impose specialized taxes on another or to get disproportionate gain. So the theory of pro-rata benefits off of common investment was the exact same theory I talked about was stop the beach renourishment, right?   Hmm. Have hydrogen as people, and you're trying to get uniform rates of return by side payments and so forth. Well, with taxes, you don't have to worry about those complications. You keep the system flat and that you then do is just change the rate. But of course, course the progressives have exactly the opposite situation. They're trying to figure out how to get 90% of the money outta 1% of the people. And so you take a state like California and tech was good last year, and they get huge surpluses from these rich folks. The tech business seems to be fairly bad this year, right?   Google's laying off people, everybody's laying off people, and all of a sudden they run enormous deficits. Well, that's what's going to happen to you if you don't use a more robust tax. A flat tax is much more stable when you're starting to deal with differences and conditions and so forth, which is one of the political economy reasons why you want it. If you listen to people like a manual size, and Elizabeth Warren, all they're interested in is shoveling money from people they don't like the people they do like, and they seem utterly oblivious to the whole question about growth and political stability.   And so this is a great tragedy that's taking place right now. The movement of getting rid of the standard limitations on the income tax, the realization requirement, the net increase in wealth requirement and so forth, is likely to take hold in some places. There'll be a huge constitutional battle over it. I think much of it will fail, but some of it might succeed. And what happens is just what I mentioned, every, every state that wants to impose a wealth tax, wants to impose an exit tax as well.   And that's East German, the sign of a socialist. The government is a prohibit exit because they know they don't have enough to offer you to keep you here in a voluntary.   Jesse (54m 59s): And on that ominous note, my guest today has been Richard a Epstein. Richard, thanks again for being part of Working Capital.   Richard (55m 6s): Great.   Jesse (55m 13s): Thank you so much for listening to Working Capital, the Real Estate Podcast. I'm your host, Jesse for Galley. If you like the episode, head on to iTunes and leave us a five star review and share on social media. It really helps us out. If you have any questions, feel free to reach out to me on Instagram, Jesse for galley, F R A G A L E. Have a good one. Take care.

In this episode of The Justice Insiders, we welcome Richard A. Epstein, Laurence A. Tisch Professor of Law at NYU School of Law. Host Gregg Sofer and co-host Steve Renau explore with Professor Epstein the implications stemming from the recent Fifth Circuit decision in Jarkesy v. SEC, as well as possible future developments with respect to administrative law and regulatory compliance.Richard Epstein BiographyRichard A. Epstein is the Laurence A. Tisch Professor of Law, New York University Law School, a senior lecturer at the University of Chicago, and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution.Professor Epstein researches and has published work on a broad range of constitutional, economic, historical, and philosophical subjects. He has taught administrative law, antitrust law, communications law, constitutional law, corporation criminal law, employment discrimination law, environmental law, food and drug law, health law, labor law, Roman law, real estate development and finance, and individual and corporate taxation.Epstein's most recent book publication is The Dubious Morality of Modern Administrative Law (2020). Other works include The Classical Liberal Constitution: The Uncertain Quest for Limited Government (2014); Design for Liberty: Private Property, Public Administration, and the Rule of Law (2011); The Case against the Employee Free Choice Act (Hoover Institution Press, 2009); Supreme Neglect: How to Revive the Constitutional Protection for Private Property (2008); How the Progressives Rewrote the Constitution (2006); Overdose (2006); and Free Markets under Siege: Cartels, Politics, and Social Welfare (Hoover Institution Press, 2005).He received a BA degree in philosophy summa cum laude from Columbia in 1964; a BA degree in law with first-class honors from Oxford University in 1966; and an LLB degree cum laude, from the Yale Law School in 1968. Upon graduation he joined the faculty at the University of Southern California, where he taught until 1972. In 1972, he visited the University of Chicago and became a regular member of the faculty the following year.He has been a senior fellow at the MacLean Center for Clinical Medical Ethics since 1984 and was elected a fellow of the American Academy of Arts and Sciences in 1985. In 2011, Epstein was a recipient of the Bradley Prize for outstanding achievement. In 2005, the College of William & Mary School of Law awarded him the Brigham-Kanner Property Rights Prize.Links of InterestJarkesy v. Securities and Exchange Commission, No. 20-61007 (5th Cir. May 18, 2022).Epstein, Richard A. The Dubious Morality of Modern Administrative Law. Rowman & Littlefield. 2020.Diedrich, Joseph S. “Judicial Deference to Municipal Interpretation,” 49 Fordham Urb. L.J. 807 (2022).

Richard Epstein is our returning guest. Richard is an American legal scholar known for his writings on torts, contracts, property rights, law and economics, classical liberalism, and libertarianism. He is the Laurence A. Tisch Professor of Law and director of the Classical Liberal Institute at New York University, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution In this episode we talked about: Richard's View on Lockdown Moratoriums on Evictions Policy Responses to Covid Pandemic Check here the previous show with Richard: https://workingcapitalpodcast.com/the-impact-of-rent-control-and-eviction-moratoriums-with-richard-epsteinep52/ Transcriptions: Speaker 1 (0s): Low everybody. Okay. So this week, and next we're going to do something a little bit different and we're having on returning guests, Richard a Epstein. If you saw his old episode, we talked quite a bit of boat, eviction, moratoriums, and a bit of a history of rent control. And I thought this week, and next we would talk a little bit more about the actual pandemic and COVID-19 in general, talk a little bit about its impact vaccine mandates and kind of the political landscape in Canada and the U S so I thought Richard would be a perfect guest for that. He's practiced law for over 40 years. He's a legal scholar, and I believe still working with the Hoover Institute and New York university. So without further ado, check this episode out. And I should just note, if you liked this episode, feel free to go to working capital podcast.com. You can also download our financial model at that address. Okay. Check it out. All right, ladies and gentlemen, my name's Jess for galleon, you're listening to working capital. We have a returning guest on the show. Richard Epstein. Richard is an American legal scholar known for his works on contracts, property rights, law, and economics towards classical liberalism and more. He is the Lawrence eight-ish professor of law and director of the classical liberal Institute at NYU and Peter and Kirsten Bedford senior fellow at the Hoover Institute. Richard. Good to have you back. How are you doing, Speaker 2 (1m 27s): Thank you. I'm in given the set of the circumstances in the larger world. Speaker 1 (1m 31s): Yeah, it is a, a lot has happened since we last spoke. We currently in, in the city of Toronto are back in a modified lockdown, which fingers crossed is going to be something that opens up on the 26th. I think today we had teachers going back to school, but then it was a snow day. So can't get more Canadian than that. Speaker 2 (1m 50s): Well, snow is no surprise. Look, the, the good news is, and this is a result largely and natural forces is one of the rules about viruses is what goes up, must come down. And it turns out the Alma chronic virus now seems to be on its downward slope a little bit earlier than some people expected. My view about this, is that the way in which we have handled the entire COVID situation? It means we're not talking about pandemics that in cleanly, we're talking about cyclical arrangements or endemics, and it's just going to be very difficult to predict aid the length of the cycle, be this intensity of the cycle and three, the severity of the disease that comes with the intensity of the cycle. And so, I mean, if we are going to continue to have a kind of a lockdown mode mentality as the first alternative, it's likely we will be continuing to face this with COVID for the indefinite future. I mean, the notion that people had when they postponed their admissions to college or to law school in 2020, we'll be out of this by 2021, nobody postpones today because they think they're going to be out of it next year, or what's also happened. And I think quite justifiably is nobody has any competence whatsoever in today's experts who believe in only the science and all the science that nobody seems to think that that's true, or if it is true, then science is very, very bad. So there's going to be an increasing level of popular discontent that's likely to spill over. And I know in the United States, one of the things that will lead the Democrats into serious difficulties was that Joe Biden overclaim when he says, I know the cure to cancer at the cancer at the COVID and made the silliest recommendation imaginable where a mask outside, where they don't do any good for a hundred days, and this thing will stop. Nobody's going to believe that. And when you overclaim and under produce, your credibility is shot not only in the field that you bungle, but everywhere throughout. So the COVID performance ratios will influence not only the COVID issues, but the general coloration of the political economy. Speaker 1 (3m 51s): So on that point, I think when we last spoke, we talked a little bit about the history of rent stabilization. We talked a bit about how the COVID policies affected the real estate development community as a result of the moratoriums on, on evictions. How do you see from the, you know, the time we last spoke to the cases that have now come forward in, in your Supreme court with, with mandates, how have you seen this thing evolve from when we last spoke to now with this latest variant kind of coming through both the states and Canada? Well, Speaker 2 (4m 25s): It turns out there's a twofold issues are that you have to contend with one, there are the various sort of legal arguments associated chiefly with administrative and constitutional, or that people bring to bear in the discussions about the COVID mandates talking largely in terms that are independent of the substantive merits of the program. And then there's the other way where it says, let me just look at this vaccine, let me look at the underlying disease. Let me look at the available treatments and so forth, which take a much more medicalized view or the way in which it's commonly dealt with. And it was the way it was dealt with in the Supreme court is they did it in the first way. They were straight administrative lawyers. And with respect to the grand mandate, what they discovered was that the key issue was what sort of presumptions do you set in favor of or against government action, or there was an interesting conflict of authority with respect to this mandate. The general rule with respect to ocean mandates is there's a lot of administrative deference for, but the general rule with respect to these emergency situations that apply only in grave times is that the presumption is set against them in the two decisions down below in the fifth and the sixth circuit, one of them is centered in Texas, the other and Ohio, the fifth circuit basically said, oh, this is the narrow COVID emergency problem. The presumptions are against you. You lose, you get up to the sixth circuit and they say, oh, this is a general administrative law problem. The presumptions of seven, your favor, you win. When it got to the Supreme court, what they essentially did, they decided to stay with the skeptics on this issue. So they required very strong proof on this particular issue. And what they then found is that for something which was of this importance, it could not be done by an administrative fee that it required something that looked more like congressional authorization. Now notice when I said that, I did not tell you whether the COVID thing was a good or a bad or in different ideally a mile understanding about most academic lawyers is that they are extremely skiddish in dealing with the underlying science. And so what they do is they tend to move their cases sharply in the other direction. I'm not a constitutional lawyer by initial training. I was changed in the English system. I started off as an Oxford lawyer and my torts casebook was actually prepared by a Canadian law professor named sessile, right? So I mean, it wasn't as though I was a stranger to all of this. And so we tend to not to start with administrative law. We started with Commonwealth when I came back to the United States. What I discovered quickly is that while the paradigmatic towards case of 1964 was one that involved an automobile collision at an intersection, you had to figure out who had the right of way. You can see what the rise of product liability law. We are now painting on a much wider canvas. We had starting to talk about medical injuries associated with Des and similar quantities. And I was told by some very smart lawyers, they said, young man. And I was young at the time. They said, if you want to understand how to defend or deal with any one of these cases, you must master the science. Now they didn't say you had to do the signs because you can't do that. But they said, it's like punching in the air. If you don't know what's going on. If you're talking about Des you're talking about asbestos and so forth, and I basically drank the Kool-Aid, I had a reasonably good, not spectacular science background. And so I've always made it a point to start in the opposite direction. And so I keep up regularly on that literature. I do it with respect to global warming. I do it with respect to the various kinds of health conditions of which COVID is only one. And at that particular point, you start thinking about this case, Jesse, in a very different way, you say, well, the first thing you want to know is what's the upside and the downside with respect to the various kinds of programs and the insight that I started with a long time ago in which I made a spectacularly wrong prediction under a thoroughly, right analysis, was that you look at this stuff and you start with 1918 and the Spanish flu, it killed 675,000 people, usually in a one day spurt. And then you always ask people, how long did this last? And do you know how long it lasts? I bet you, it was nine weeks, nine weeks, nine weeks. And virtually everybody who died was in the prime of life. And they died ultimately of pneumonia because of what they call a cytokine rush, which is healthy. B people, seeing the virus try to set out the killer fluids, do it. And what they did is they drowned. You might literally, and we know much more about it today. We could a control for these things, but virtually the entire new movement is completely different from the old one. This is something that affects people who are relatively old with serious comorbidities and anybody under 60 has only a meniscal chance of dying, unless they also have some very serious kind of comorbidity. So it's a completely different kind of profile. And so what you kind of guessed it, looking at this sort of thing is if you sort of let it run, its course, it would go up and it would come down Shaw. But since it didn't have the potency associated with the Spanish flu or the death rates would be very much slow, then that's the way I thought about it. I looked in the New York times and I looked also with respect to the Imperial college situation. And they have the following projections that they set up by the media, by July 15th, 2020, we will have 10 million active COVID cases in the United States and a similar proportion in Canada and in great Britain. And if you talk that the chart, it said as of July 1st, it would be relatively modest. And I said to myself, this has to be crazy because of everybody knows that this isn't just going to come at that particular level and they're going to take precautions much earlier on and they will be holy without regard to government action. A lot of the adaptive behavior. There's no point in engaging in strategic games. The bluff of your own life is at stake. And what you saw on March 9th, the day before this thing, and you know, everyone, transportation was down by 78%. Now people are taking all sorts of strange. I had that patients when they went to restaurants, this bumps and all the rest of that stuff. And you realize that these adaptions were going to take place. The government comes in and makes it more dramatic. But the projections that you actually had was the first peak that not come on, July 15th, 2020, it came on April 9th or 10th in 2020. And it was follower than anything that anybody had predicted what the predictions were extremely dangerous at that high level, because people tried to gear up for something that was going to be just absolutely enormous. And so one of the things they did in New York city and several other major metropolitan areas, they said, we're going to have such an onslaught of people in the hospitals. We have to take people who are COVID positive and move them out. So they moved them back into nursing homes where they probably cause an extra 30,000 best simply because you took a very potent person and put them into an environment where there were a lot of variable honorable people. And what they then did is they opened up in New York city. The jab had sent the, you know, thousands of beds. The Trump administration sent a bunch of hospitals, ships, and none of it was ever used. Right? And all the people who made those projections 16 months later, essentially apologized for the fact that they were very, very wrong, but the interim damage had been done. And once you start to intervene, the natural cycle that you had in 1918 is not likely to continue. What you're going to do is when you create an artificial foreign team, you slow down herb immune. So I did some calculations. If you're curious, tell me if you're not well, it's 675,000 deaths. And that was essentially a two and a half percent death rate out of people who got the disease, which was putting it around 20 odd million people coming out of this stuff that doesn't get you to herb immune gossip, because you need to get the 60%. Well, we got there because it was a pretty rapid prop and some of my guests, and I'm not assigned this, but I am a structuralist is that there were a lot of asymptomatic transitions, which created an immunity, even though it didn't create a disease. And this is consistent with something you have to understand in dealing with COVID, which is you just don't talk about medians. You have to talk about the bearings. And that means in effect that disease like the deadly Spanish flu is relatively innocuous for say 95% of the population that gets it. There may be some people don't die, but get very sick and so forth. And the herd immunity took effect and it slows things down. We don't have her. So I remember waking up one day in about may or June. And I said, oh my God. So long as we protect a large portion of the population, it means that we're not going to get the herb immunity. And the next time a new variant comes along, it's going to have a highly vulnerable population because it turns out, and this is, I think a point that's been well-established, but systematically ignored is that natural immunities are extremely effective in terms of dealing with the condition of my friend, Jay bought the Charia who's collected and read all of these studies. I have not, you know, it says there's not a single identification of a breakthrough case in either direction. And nobody who has natural immunity has ever been seen to give the virus to anybody else. And nobody who has natural immunities has been seen to get the virus from anybody else. So you get a perfect wall. Well, at that point, what you want to do is when you start seeing natural immunities is you'll let them ride. But when I made my terrible predictions very low and then try to correct them, what everybody said is you have to understand that people who are asymptomatic and give you COVID. But again, the key thing to understand is the distribution. And so you have to do it in, let's just do it in discrete terms because the continuity's don't matter for the well, so now you have either very high resistant people or very low resistant people. Okay? And you have you the very powerful, very weak viruses. And so you start looking at the parents and if you have essentially a very high resistance rate, you can carry in you a very high dosage of stuff and not get sick. And then when you transfer that some to somebody who has a low resistance state, you can actually give them the disease, the question your then have to ask what's the probability of that happening, as opposed to the other distribution, which has people have ordinary levels, they get the week COVID stuff. And then they transfer the week COVID stuff, all of the people who condemn asymptomatic transplant at the high high to the low load person, that was probably 2% of the case. That means that 98% of the cases are doing what they did in 1918. I used spreading the immunity asymptomatic so that you come to a conclusion much more quickly. If you would ignore the second tab and only worry about the 2% you are going to ban the transfers. If you take the whole hundred percent of the distribution into account, you're not going to do that. What you'll try to do is isolate two kinds of specialized cases. If by some miracle you could figure out who is a very high resistant high transmitter type. You try to keep them out of circulation. And if you could certainly identify vulnerable populations, which you can, you try to keep them out of circulation. So they appointed a COVID test would not be the test that driver coming from Canada to the United States will reverse something. You mentioned happened to me before the show. It would be that you will not let the grandkids visit the grandmother. If it turns out that she was in the COVID vulnerable portion. And so you'd get private administration of the cases in an effort to enforce this policy. And I'm all in favor of that. But when we do it, the other way, what we say is we forget the probabilities. We forget the benefits side. So we systematically overregulate as far as I'm concerned. And I think that the folks who did the great Barrington declaration, Jay and one called door, what probably not, probably pretty surely write about all that stuff. Although interestingly enough, they didn't do the probabilistic analysis either. Right? What they did is they just said, this stuff generally works. And what I try to do, knowing a little bit about games, theory and so forth was to figure out why they were right. Not to figure out why they were wrong. And I think they are right with respect to their general conclusion, but then you get everybody up. So that's the first mistake they made. Second mistake is X. And they post, you can try to attack these things in two ways. One is you can try to stop it from happening until you can try and cure it after it happened. Right? And it turns out there's no dominant solution that is you're not going to do only one or only the other. You want to get the optimal mix. So what's the advantage of doing it. Soon. You can spare people. The illness what's the danger is you have wild over breath, because if you're talking about protecting 0.1% of the general population and so forth, you stop Miami. But the ex post situation says this. If you get sick, we're going to treat you. And the advantage of that is if you get it in time and know how to do the treatments, what you do is you have to now tackle 1% of the population instead of a hundred percent of the population you don't need to quarantine. You certainly don't want to give any medication to people whom you think is going to be asymptomatic. What slide, which means that virtually everybody under 40, probably 50 or even 60 doesn't get any kind of treatment except maybe some HCQ ivermectin and kind of stops it. The question you have to ask is safety. You have to ask effectiveness, okay, Jessie, on the safety stuff, it doesn't matter what you use a drug for both of these drugs have been out there for a very long time with billions of usages. There's a kind of an epic, epidemiological and FDA and drug type situation, which says the acid test for any drug is, do you give it to a pregnant woman? And the reason is during the first trimester of pregnancy, the rapid levels of cell differentiation can be easily interfered with, by some foreign substance resulting in something like the food over the mind flips, right? And it, both of these drugs have been recommended and found safe for women who are pregnant, chances are there's going to be no subgroup of the population for whom they're going to be especially vulnerable. And we don't have clinical studies of a hundred or 200 people. There have been hundreds of millions in the case of ivermectin billions upon applications, but which the safety has never been questioned. So what's the downside. Well, it turns out Mr. Fallacy, who I think is a terrible master on this particular study. He says, well, you may get some kind of hard complications, but he's talking about extremely low numbers, one in 10,000 or so for the relatively minor conditions. But the overall profile on the safety is long use establishes general say, well, what about effectiveness? And I'm here. I like the Pope Rhett Butler, frankly. My idea, I don't know, but I don't give a damn. And what do I mean by that? Well, let's suppose the thing is effective. What will happen is people will quickly use it. And when you measure effectiveness, it's a completely different inquiry from measuring safety, with safety. You're worried about, you know, that kind of, oh my God, this is going to take you from 0.1 to 1.4, 1.0 adverse effects. You make, take a drug off the market when you get things like that. But if you can sell a drug, that's going to have a 1% effectiveness and nobody's going to buy, I possibly going to buy a drug, which can take you from a 2% cure rate to a 3% cure rate. So the effectiveness stuff has to be much larger to make it worthwhile. And then when it's much larger, it's much more easily detectable, right? Because we have 40% rate you can do. So the key thing is to let this stuff out there and then to get essentially a quantitative assessment. Well, what did we do? Well, first we have the phony subjects that were done in Lancet, right? Edited. It should have been filed five because of the recklessness moves. You'd put his vote, but since he was anti-Trump, he was perfectly okay. And they had to retract that and they did. And then there was a Ford study in the news, and then the journal of medicine, they had to retract that because it turns out clinical studies are extremely difficult to do with viruses because essentially the theory of both ivermectin and HCQ is you have to catch it at a very early stage that prevent the things from breaking through. Once they broken through, it's useless to give the drug and it may have a slight negative effect. So if you don't get the right controls on this, you can't do it most critical studies. You know, people in a third degree, third stage cancers or something, you can begin everybody on April 15th and this drug, you have to do it on very different dates. And you have to have a physician who can record the accuracy. Well, this is extremely difficult to do through an organized clinical trial. And so what happens is people start to put together these various kinds of indices recording, all the cases that have come through my all sorts of people, this, by the way, in the United States and it's worldwide is the common way. Nobody trusts formal government warnings. They're too rigid, too stiff, too out of date. So they do is they form voluntary associations and they collect the information and then they organize it and update it and give you recommendations as to which drugs and what combinations at what sequence at what those images at what time. And self-worth in an effort to do that. And so what you need to do is to encourage that ex-post collection rather than to rely on clinical trials. And then it's also, if this is a game of trying to get advantages, you have to have a theory. And what happens is it turns out there is a general theory that says, zinc is a very powerful agent for doing this, but if you give it alone, it's not going to work. And so I have to do is you have to give them some other drug as this role might as soon as something which prevents in probation, and then you have to give them something else. The HCQ in order to make sure that you can find a way to protect those zinc from being wiped out. So they're kind of tripartite situation. You're not going to ask me to tell you everything about it. I don't know enough about, but what you do know is the way in which this stuff ex-post works is it does not depend simply on trial and error because trial and error, cherish Jeffries, Jesse is too slow. What it does is you got a theory that zinc in this combination has worked in other cases, and then you carry it over. Now, is this something which is just done for this, you know, or there is a wide class understanding of what we call off-label drug uses. I don't know if you're familiar with the term, but essentially it gets approved by a government agency. And then once it's on the market, a doctor could use it for any other condition that he or she wants to do it. And in the United States where the numbers are pretty good, for many cancers, off-label uses are dominate. On-label uses by five to one 10 to one ratio or whatever it is. And all of this is outside the formal system. It becomes the standard of care for malpractice, the standard of care for insureability and forth. So you get this back culture what's happened here is they're killing this off with respect to this drug. And they're saying, if you go through the clinical trials or we're going to go after you. And so, you know, the last blog that I read said, you can only get ivermectin in the United States. If you get a court order, they're killing the off-label mark, right? So now you kill off the ex post market. It puts greater pressure on the ex-ante market and you start getting these quarantines. But if you understood what was going on, it turns out that some people might be good targets for HQ, some not, but by having this thing on the wraps for the last 18 or 19 months, it means that you don't get the aggregate data, which will start to tell you whether or not there are subpopulations that are especially prone to damages with this or 72 real advantages for trying to use it. What we do now is the same point I said before, everything is a matter of Marion's right? Same block won't have the same effect on more people and the larger, the samples that you get, you can do it, and you're reasonably happy to do this because you know that for all of these subsets, the negative side has been ruled out by the extensive use that has happened before. So this is the perfect case for running that situation. Then what we do is everybody wants to do basically become German autocrats. You know, the famous Maxim in German, I will say it in English because my German is terrible. At least today, all of that is not required as forbid or all that is not forbid and as required required, there's nothing left the choice. What this means is once we decide, this is a very good vaccine, everybody's got a tick. Yep. But again, what have they done? They've ignored the variants, which is the key. Speaker 1 (25m 31s): I want to ask you about that. So we've been kind of going through this process back to the extreme again, I think we talked before about us in Ontario, Canada being in lockdown again. Now what we have seen from businesses, chamber of comments, commerce, I think announced today that the biggest thing that's killing us right now from a business standpoint that can be in real estate or business in general is the uncertainty of what the government is doing when we're supposed to come back in any clarity. Originally, the vaccines, my understanding was that, you know, it was the target was to actually stop, you know, flatten the curve and then it had shifted. And now the conventional wisdom we're told is that it is you're, you're far, far more likely to end up into the, in the ICU or the hospital, if you are not vaccinated. Now in Canada, I believe double vaccination is at 82% as of right now. So I think Mo majority of Canadians do want to get vaccines. However, just to your point, natural immunity was, was almost a word you couldn't use words you can say a year ago. And it's interesting to me that I had COVID over the Christmas break and mail, like, God, Speaker 2 (26m 44s): Yeah, there you go. Giving it Speaker 1 (26m 46s): To each other. We might have. And what I find funny is that you have the congressional hearings in your country that just happened in the Supreme court cases. You have policymakers saying one thing, but I called the U S embassy about cause I'm flying to Florida next week. And basically they they've said just like Canada has, as long as I give them a positive test. I think the us needs a physician to show that you have recovered. Now you can cross without a molecular test. So to me that says that it's admitting natural immunity from a policy standpoint. So it, maybe you could talk a little bit about the, the kind of moving target and just as a footnote, one thing we do know in Canada, the last lockdown, what they said was no, no. The difference now is cases don't matter anymore. It's about hospitalizations. And I do think Canada is probably, I think it is the worst in the , if not one of the worst four per capita ICU beds. And one of the issues just to aggravate this even more is the fact that because of our policies, when it comes to testing, we have a bunch of nurses that have tested positive for this new variant. So we're even understaffed to a greater degree. So maybe talk a little bit about how this target has shifted and you know, where do you, where do you see this going? Because it is certainly impacting not just individuals but businesses, the at large, in, in both of our countries. Speaker 2 (28m 7s): Okay, look, I mean, let's just state this, first of all, it is true as a statistic that there are relatively few vaccinated people who end up in ICU, a similar place as relative, do they own vaccinate, which is an argument in favor of vaccination. So it doesn't want to be, but you have to break the unvaccinated populations down into two plots unvaccinated with natural immunities and unvaccinated without natural moon. And if it turns out that the, all of the situations, all with unvaccinated people with no natural amenities, then the number is actually higher than it might otherwise appear. And if you were somebody like that, you should think very seriously about the vaccine or getting yourself a natural immunity. So there are a couple of papers that have been written recently, which says, now that everybody gets this thing, if they're under a certain age, because they're going to survive that, and it's better than the vaccine. And there's a lot to be said for that position, but it's certainly wrong to treat that statement as though it carries with it, an implication that natural immunities are no good or uncertain. And one of the lasting disgraces of the CDC is just kind of throws up his hands and says, we don't really know very much about the door ability of the natural amenities or the backseat. Now, one of the things we do know about is that some of the immunities that we're talking about in these cases that come from natural sources and date from previous epidemics 10 years ago, even 50 years ago, if you were old enough for it. So we used to have something on durability with the vaccines. We have no information whatsoever. And so, so then the question is, well, what do you look at? You look at the past numbers and I'm just going to make a two comparison, and then I'm going to extrapolate from it. It turns out that the more potent vaccine is the maternal, but less potent is the Pfizer. The more journal last longer, it gives a greater penetration than does the fine. But if you start looking to adverse side effects, the other side of that, it turns out that the Moderna vaccine is associated with more adverse events than is the Feisal, which is exactly what you would expect, right? The good and the bad are both simulated bias all above. So the question that you then have to ask as well, what is this situation? And the numbers in my view, keep changing that is what's really happened in this case, is that people have to understand MRN. A vaccine is not a vaccine. It's a drug because if you look, but the CDC did was to change its definitions in the United States. So it's no longer kind of a diluted version of the original stuff. It can be totally fabricated the way in which the MRR and a vaccine. Well, the natural immunities are like a bore spectrum antibiotic, but the MRI is a specific situation. And the way to understand that is you have a large number of links in this particular chain, and they take advantage of a principle known in a railroad, which is you take out 10 feet of a railroad. You can't go from one end of the country to the other, right. What they forgot to say is you take out 10 feet of a railroad. It turns out you can build a bypass around it at 40 feet and fix it back up again. And so what's happening is that my guests and I would want, you know, I'm not a biologist, but I am a strategic game player. And I think is that you see the part of the track is broken and you're a virus. You don't do this by deep connotation, right? But you have so many mutations that are thrown up at a very rapid rate. All of a sudden, one of the managers, the go around the particular break and all of a sudden, the vaccine turns out to be worthless because it's been circumvented or compromised in some way. And that you have to really know what the composition is of subclasses Alma viruses. But the point I'm making is the prediction you would make from this theory is that it will turn out that the vaccines will be progressively more on ineffective because there'll be more workarounds that the virus is able to do in order to defeat it. So the prediction that you're going to get is that it's going to be less effective and it's going to be less effective with each future innovation. That's why Robert Malone, the guy who invented this stuff. I mean, he's out there freaking out in public, right? Essentially an answer. I, you know, I may have created a deaf machine in some sense. Now he was right. I mean, early on the first round, possibly the cost benefits were very enormous, but the law marginal rates of return applied to everything, including vaccine usage. And so if this thing is evolving in the way in which I suspect it is, then what would you would suggest is that the immunities that you get from the backseat will be a flow with durations. And in fact, the breakthroughs in both directions giving and getting will become watcher. And so the ratio of success between the natural immunities and the artificial immunities very heavily in favor of doing the natural immunities rather than this. And so this constant re vaccination program that'd be terrible. So that's the first part. Second part is what are the adverse events? When they did the swine flu thing, it turned out they were a real rush. They got the numbers completely wrong, and they gave all sorts of people. The vaccine, they didn't give sufficient warnings, particularly for pregnant women. And the government had assumed all liability for bad warning. They ended up paying $4 billion in 1970s and 1980s for the bad vaccines that they put out on the market. Well, there is no government liability today, as far as I can tell. And under the emergency use authorization, I don't think there's one either for the companies or I'd have to check that, but I'm going to check it very soon because it's something worth writing about. And so what you're going to see is diminished the effectiveness of this and the rising adverse side effect. So right now, I mean, I've seen at least one publication, which just simply collected a hundred articles, all of which pointed to some adverse events associated with Mr and a vaccine. Now you look at the studies and I did with a couple of handfuls, and they're exactly what you'd expect in conclusive that somebody reports six cases of this three cases of that one case of that, somebody that clinical studies very hard to get broad spectrum stuff. But if you then start to aggregate them and try to figure out, well, we've got 50 of these studies, which have three cases of death after taking a certain kind of vaccine. Now you've got 150. You have to make sure that you don't have double counting a lot of other stuff, but you then become more cautious. And the same thing with respect to administration, just in the last several days, people said, Hey, this seems to lengthen the menstrual cycle. You do this to a woman who's 35 years old, right. Who's trying to get pregnant and this could be just devastating kind of stuff. And do we know how long it lasts? Of course now, do we know how serious it is? Of course not. Right. Well, what's the rule you take with respect to major conditions in essentially the population that's right in the core of the distribution 20 to 40. Well, my view is you say the cost of COVID is very well. You say in effect the effectiveness of the various kinds of remedies, like ivermectin and ACQ is doubted, but certainly possible. Oh, last thing you want to do is to give people other conditions for which there is no known cure. And so you do is you back off in the middle generation. So what are universities doing? They have undergraduates in their late teens. They have graduate students, postdocs in the twenties and thirties, and they impose the vaccine mandate and all of that. But me, I took it as it were under protest. Not that anybody care, but when you understand is when you're 78, as I am, you're not worried about reproductive success. You're not worried about, you know, going out and playing competitive sports in the Olympics and things like that. You all worried about something that might happen. And so the cost benefit analysis tends to shift by age a little bit more in favor of doing it. But rather than that, what you do is you look at these things and what are they counting? They shameful. What they say is, everybody knows it. This is not a question of individual Liberty. This is a question of collective responsibility, and everybody's doing this to serve the common. Good. Have you ever heard that expression? The promise. They don't know how prisoner dilemma game place. And so I'm going to be just a little bit technical for a second, but the traditional prisoner's dilemma game was that you get two people going into jail. And if each of them keep silent, then neither one gets convicted. But if one of them starts to Blab and the other one does and Blab, the guy who blabs gets the lightest sentence, and then a guy who doesn't want to get so much heavier sentence. So some say, I don't know what that other guy's going to do. I can't talk to him. So they both Blab and they're both worth or worse off than they would have been. If not the report. Now, the way this works is you now have a need for a public facility. It's perfectly homogenous. It turns out, let's say it's a road on which there are houses on both sides and you impose the special assessment by majority vote. And every unit has to paint Penn dollars into it. And every unit gets $15 worth of benefit. If you did it by voluntary agreement, instead of all one, everybody would sit, let the other people build the road and it never gets built at all. Right. So why is that not work? You don't have how much in aid, right? And it also turns out that not only do you get differential effectiveness, but you get differential worse off. So you don't have a prisoner's dilemma game. If you turn out Jessie to be better off not taking the vaccine, no matter what anybody else does. Right. And if the same tools or somebody out, or what happens is under these circumstances, you now have the ability for self protection by isolation or by taking a vaccine or by teaching HCQ. So you can get several solutions, which you can't do when you're building a road down the middle of the situation. So what happens is all of the collective action systems, all wildly optimistic because you can't get the initial homogeneity on either the cost side or on the benefit side to make this thing work. So you have to just chill that particular language. This is not the kind of case where to apply. That doesn't mean it doesn't work like that with all diseases. And so it turns out smallpox is a very rigid virus. It doesn't change virtually at all. It also turns out that Cal parks is relatively innocent and we give everybody count pops. It's an actual immunity against smallpox, and you do it individually and you do it collectible. But what happens to people look at this and they come to the following conclusion. I don't care whether anybody else wants to take the stand backseat. I'm going to take it anyhow, because I'm better off. So it's not a prisoner's dilemma, gamma. And when you know the polio vaccine, you're not old enough to remember this, but the polo polio vaccine came at the Joan speech and a mother place. It got shut down every summer because of polio. And then the Salk vaccine comes out. And I mean, I was 11 at that time. And my father was adopted. You see people lining up around the block to take the shot, because essentially they were reasonably confident that it would prevent this forge. And they were reasonably confident that they didn't seem to be any kind of potent side effects because it was done in the attenuation method, right? Like the small, like the other thing. And then there was a huge fight between him and save it whether you use the live virus or the dead virus, right? Because the dead virus turns out to be as effective, but less, she was side effects, whatever. And they fought over this for 15 years, but this is just not what we are today. And if you would see people lined up around the block in order to get it, and the fact that you don't see them lined up, suggest that maybe they know something that the other guys don't, but the people who run me, Mr. Bouncy may have been a great firewall, just in some sense. But you know, now all of a sudden it becomes a social commentator talking about epidemiology, public health and game theory about what she knows less than nothing. And ironically, he doesn't learn those things. Right. When I said is, I'm sitting down there and I read the scientific reports. I don't try to perform them. I don't check the calculations on the this on, but I look at the abstracts and the major discussions on this stuff and try to figure out something from the methodology. And as I said, at the beginning of the show, that was the way I was told you had to do law at the beginning with the sire. And I think it's, it's the correct approach. So this has become an international travesty and the quarantines prolong the situation and expose you to something else. And as far as I can see, I have not seen a single serious public official in out. I didn't say commentator, who's actually got this right. And I've seen many commentators who seem to get it right, or at least on some of it. And there's some people who are really smart and they get much of it. Right? Some of it won't, your job is in my case, it is not to essentially reproduce the date. I can't do that, but I've been trained in, you know, I'm just old lawyer, right. But no, I mean, I've been trained in the science. I, you know, I had to learn some games. I'm not a game theorist, but I had to learn it. It turns out from a very long time, I did sociobiology and evolutionary theory and inclusive fitness and all that stuff, which is absolutely critical for understanding how these things start to go in one way or another. And so having done the sociobiology and the games theory, and then all this other stuff, what happens is lawyers have the following set of tax advantages over specialists. I worked in five or six different areas that are relevant to this thing. And, you know, I spent my entire life learning everything one-on-one, but the point is knowing one-on-one about a lot of stuff is extremely important. And many other people come in and they know 5 0 5 about one thing and 0.0 on other things, right. They had it, it turns out the person who has my kind of intellectual profile is probably better suited for figuring out what the systematic response would be on one condition. They don't run ahead of the evidence in substance and barriers. Why always talking to people who know more than they do about any one of these particular things. So your job is to synthesize the best rather than to make it up yourself. So, I mean, I do a lot of work on science cases have been for many, many years, starting in the early eighties with Des and the specialists and agent orange and the whole thing. And you don't go near one of these cases unless there's a specialist who's worked in the area for years, it yourself. Speaker 1 (42m 55s): So that was part one of two with Richard Epstein. And we're going to cap off the second half of that conversation next week. So I hope you enjoyed it. And I hope you tune in next week. And if you want to download our financial model or check out other episodes, go to working capital podcast.com, hope to see you there.

As liberal historians urge President Biden to “go big,” will any new policy shifts have the same lasting effect as the New Deal? Richard Epstein, the Hoover Institution’s Peter and Kirsten Bedford Senior Fellow, discusses the similarities and differences between what Franklin Roosevelt set in motion in the 1930’s and what the Biden Administration is […]

As liberal historians urge President Biden to “go big,” will any new policy shifts have the same lasting effect as the New Deal? Richard Epstein, the Hoover Institution’s Peter and Kirsten Bedford Senior Fellow, discusses the similarities and differences between what Franklin Roosevelt set in motion in the 1930’s and what the Biden Administration is pursuing at present. 

On November 11, 2020, The Federalist Society's Intellectual Property Practice Group hosted a virtual panel for the 2020 National Lawyers Convention. The panel covered "Intellectual Property Rights and the Rule of Law."The world’s first democratized intellectual-property legal system, initiated by Art. I, Sec. 8, Cl. 8 of the U.S. Constitution, is intended, per Federalist #43, to: provide uniformity for the protection of IP rights; secure those rights for the individual rather than the state; and incentivize innovation and creative aspirations. Predictability, rooted in uniform application of the rule of law, is essential for property rights and economically sustainable growth. This is especially true in the context of intellectual property and the tremendous investments required for innovation and creative expression. These intended goals can be jeopardized in times of crisis if they are seen as being pitted against health, safety, security, and humanitarian needs that arise during actual or perceived crises such as the COVID-19 pandemic.How can private IP rights be achieved and maintained in a manner that genuinely promotes public good without capture issues? Does a crisis necessitate a suspension or weakening of intellectual and/or other property rights –– or is it in times of crisis that rule of law and its attendant stability/predictability are most crucially needed? What we can learn for IP from how the rule of law has been affected by national crises in the past? This panel will discuss IP law in the 21st century and especially in 2020, considering court decisions, public advocacy, and data-driven lessons of history and how they should be applied to ideas for reforms that would weaken IP and rule of law versus those that may construct and restore predictable rights in support of vibrant and productive innovation and creative output.Featuring:Prof. Jorge Contreras, Professor of Law, University of Utah School of LawProf. Richard Epstein, Laurence A. Tisch Professor of Law and Director, Classical Liberal Institute, New York University School of Law; Peter and Kirsten Bedford Senior Fellow, Hoover InstitutionMr. Phil Johnson, Founder and Principal, Johnson-IP Strategy and Policy Consulting; Former, Senior Vice President and Chief Intellectual Property Counsel, Johnson & JohnsonHon. Karyn A. Temple, Senior Executive Vice President and Global General Counsel, Motion Picture Association; Former Register of Copyrights, United States Copyright OfficeModerator: Hon. Ryan T. Holte, United States Court of Federal Claims*******As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speakers.

China cheats on trade, Iran cheats on nukes, Trump cheated his way into office…or so the allegations go. And of course, there’s baseball’s cheating scandal. Richard Epstein, the Hoover Institution’s Peter and Kirsten Bedford Senior Fellow and the voice behind The Libertarian and Law Talk podcasts, weighs in on the balance of virtue and rules-flaunting in modern society. Did you like the show? You can rate, review, subscribe, and download the podcast on the following platforms:Podbean | Apple Podcasts | Stitcher | RadioPublic | Overcast |Google Play | Google Podcasts | Spotify | RSS

34 Minutes Suitable for All Audiences Pete welcomes Professor Richard Epstein to the show. Prof. Epstein is the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, the Laurence A. Tisch Professor of Law, New York University Law School, and a senior lecturer at the University of Chicago. Professor Epstein comes on the show to take apart the proposed "Green New Deal," as well as comment on other programs pushed by Progressives such as the $15 minimum wage and Medicare for all. Professor Epstein at the Hoover Institute Wikipedia Page Pete's Patreon Pete's Bitbacker Pete's Books on Amazon Pete's Books Available for Crypto Pete on Facebook Pete on Twitter  

Constitutional law is frequently thrown around as a justification without people fulling understanding the document. From Speaker Pelosi believing she’s President Trump’s co-equal, to air traffic controllers demanding pay and senators wanting to know more about the president’s finances, constitutional law often arises. But are any of those justifications valid? Richard Epstein, the Hoover Institution’s Peter and Kirsten Bedford Senior Fellow and the voice behind “The Libertarian” podcast, examines what the Constitution does and doesn’t allow in terms of executive power and impeachment proceedings. Did you like the show? You can rate, review, subscribe, and download the podcast on the following platforms:Podbean | Apple Podcasts | Stitcher | RadioPublic | Overcast |Google Play | Google Podcasts | Spotify | RSS

A funny thing happened to America’s libertarian movement – it expected a champion to emerge in the 2016 election; it may or may not have one in Donald Trump. Richard Epstein, the Hoover Institution’s Peter and Kirsten Bedford Senior Fellow and the voice behind “The Libertarian” podcast, grades the Trump presidency from a libertarian vantage. Did you like the show? Please rate, review, and subscribe!

On March 29, 2016, the Supreme Court decided Friedrichs v. California Teachers Association. A group of public school employees sued the California Teachers Association and various other entities, arguing that the agency shop arrangement itself--as well as the opt-out requirement--violated the First Amendment. The district court denied their claim and the U.S. Court of Appeals for the Ninth Circuit affirmed based on existing precedent and the 1997 Supreme Court decision Abood v. Detroit Board of Education. The two questions before the Supreme Court were (1) whether the Abood precedent should be overruled and public-sector “agency shop” arrangements invalidated under the First Amendment; and (2) whether it violates the First Amendment to require that public employees affirmatively object to subsidizing nonchargeable speech by public-sector unions, rather than requiring that employees affirmatively consent to subsidizing such speech. -- In a one-sentence per curiam opinion, the judgment of the Ninth Circuit was affirmed by an equally divided Supreme Court, a 4-4 split. -- To discuss the case, we have Richard A. Epstein, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, Laurence A. Tisch Professor of Law, New York University School of Law and Professor Emeritus and a senior lecturer at the University of Chicago Law School.

On January 11, 2016, the Supreme Court heard oral argument in Friedrichs v. California Teachers Association. Under California law and existing Supreme Court precedent, unions can become the exclusive bargaining representative for the public school employees of their district and establish an “agency shop” arrangement requiring public school employees either to join the union or pay a fee to support the union’s collective bargaining activities. Although the First Amendment prohibits unions from compelling non-members to support activities unrelated to collective bargaining, in California non-members must affirmatively “opt out” to avoid paying for these unrelated or “nonchargeable” expenses. -- Here a group of public school employees sued the California Teachers Association and various other entities, arguing that the agency shop arrangement itself--as well as the opt-out requirement--violated the First Amendment. The district court denied their claim and the U.S. Court of Appeals for the Ninth Circuit affirmed based on existing precedent and the 1997 Supreme Court decision Abood v. Detroit Board of Education. -- The two questions now before the Supreme Court are: (1) Whether the Abood precedent should be overruled and public-sector “agency shop” arrangements invalidated under the First Amendment; and (2) whether it violates the First Amendment to require that public employees affirmatively object to subsidizing nonchargeable speech by public-sector unions, rather than requiring that employees affirmatively consent to subsidizing such speech. -- To discuss the case, we have Richard A. Epstein, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, Laurence A. Tisch Professor of Law, New York University School of Law and Professor Emeritus and a senior lecturer at the University of Chicago Law School.

The notion of reasonable expectations filters in and out of many given areas of law. It is often derided as circular claim in which reasonable expectations are shaped by the law that they are supposed to shape. On the other hand, it is often treated, most notably under the Supreme Court's now pivotal decision in Penn Central Transportation Co v. City of New York, as the linchpin of modern real property law, and has been used as well in other areas, including financial regulation and the law of searches and seizures. Both of these views are incorrect. Reasonable expectations can never be banned from the law, but they must be domesticated, where their primary role is to facilitate cooperation between people who otherwise are unable to coordinate their social behaviors. Richard A. Epstein is the James Parker Hall Distinguished Service Professor Emeritus of Law and Senior Lecturer at the University of Chicago Law School. Epstein started his legal career at the University of Southern California, where he taught from 1968 to 1972. He served as Interim Dean of the Law School from February to June 2001. He is also the Laurence A. Tisch Professor of Law at New York University, and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution. Recorded April 22, 2015, as part of the Chicago's Best Ideas lecture series.

The notion of reasonable expectations filters in and out of many given areas of law. It is often derided as circular claim in which reasonable expectations are shaped by the law that they are supposed to shape. On the other hand, it is often treated, most notably under the Supreme Court's now pivotal decision in Penn Central Transportation Co v. City of New York, as the linchpin of modern real property law, and has been used as well in other areas, including financial regulation and the law of searches and seizures. Both of these views are incorrect. Reasonable expectations can never be banned from the law, but they must be domesticated, where their primary role is to facilitate cooperation between people who otherwise are unable to coordinate their social behaviors. Richard A. Epstein is the James Parker Hall Distinguished Service Professor Emeritus of Law and Senior Lecturer at the University of Chicago Law School. Epstein started his legal career at the University of Southern California, where he taught from 1968 to 1972. He served as Interim Dean of the Law School from February to June 2001. He is also the Laurence A. Tisch Professor of Law at New York University, and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution. Recorded April 22, 2015, as part of the Chicago's Best Ideas lecture series.