Regulations vs. Legal Systems

Regulations vs. Legal Systems

There are two ways to make citizens safe from large predators, say, big powerful corporations. The first one is to enact regulations—but these, aside from restricting individual freedoms, lead to another predation, this time by the state, its agents, and their cronies. More critically, people with good lawyers can game regulations (or, as we will see, make it known that they hire former regulators, and overpay for them, which signals a prospective bribe to those currently in office). And of course regulations, once in, stay in, and even when they are proven absurd, politicians are afraid of repealing them, under pressure from those benefiting from them. Given that regulations are additive, we soon end up tangled in complicated rules that choke enterprise. They also choke life.

For there are always parasites benefiting from regulation, situations where the businessperson uses government to derive profits, often through protective regulations and franchises. The mechanism is called regulatory recapture, as it cancels the effect of what a regulation was meant to do.

The other solution is to put skin in the game in transactions, in the form of legal liability, and the possibility of an efficient lawsuit. The Anglo-Saxon world has traditionally had a predilection for the legal approach instead of the regulatory one: if you harm me, I can sue you. This has led to the very sophisticated, adaptive, and balanced common law, built bottom-up, via trial and error. When people transact, they almost always prefer to agree (as part of the contract) on a Commonwealth (or formerly British-ruled) venue as a forum in the event of a dispute: Hong Kong and Singapore are the favorites in Asia, London and New York in the West. Common law is about the spirit while regulation, owing to its rigidity, is all about the letter.

If a big corporation pollutes your neighborhood, you can get together with your neighbors and sue the hell out of it. Some greedy lawyer will have the paperwork ready. The enemies of the corporation will be glad to help. And the potential costs of the settlement would be enough of a deterrent for the corporation to behave.

This doesn’t mean one should never regulate at all. Some systemic effects may require regulation (say hidden tail risks of environmental ruins that show up too late). If you can’t effectively sue, regulate.fn5

Now, even if regulations had a small net payoff for society, I would still prefer to be as free as possible, but assume my civil responsibility, face my fate, and pay the penalty if I harm others. This attitude is called deontic libertarianism (deontic comes from “duties”): by regulating you are robbing people of freedom. Some of us believe that freedom is one’s first most essential good. This includes the freedom to make mistakes (those that harm only you); it is sacred to the point that it must never be traded against economic or other benefits.

IV. SOUL IN THE GAME

Finally and centrally, skin in the game is about honor as an existential commitment, and risk taking (a certain class of risks) as a separation between man and machine and (some may hate it) a ranking of humans.

If you do not take risks for your opinion, you are nothing.

And I will keep mentioning that I have no other definition of success than leading an honorable life. We intimated that it is dishonorable to let others die in your stead.

Honor implies that there are some actions you would categorically never do, regardless of the material rewards. She accepts no Faustian bargain, would not sell her body for $500; it also means she wouldn’t do it for a million, nor a billion, nor a trillion. And it is not just a via negativa stance, honor means that there are things you would do unconditionally, regardless of the consequences. Consider duels, which have robbed us of the great Russian poet Pushkin, the French mathematician Galois, and, of course, many more, at a young age (and, in the case of Galois, a very young age): people incurred a significant probability of death just to save face. Living as a coward was simply no option, and death was vastly preferable, even if, as in the case of Galois, one invented a new and momentous branch of mathematics while still a teenager.fn6 As a Spartan mother tells her departing son: “With it or on it,” meaning either return with your shield or don’t come back alive (the custom was to carry the dead body flat on it); only cowards throw away their shields to run faster.

If you want to consider how modernity has destroyed some of the foundations of human values, contrast the above unconditionals with modernistic accommodations: people who, say, work for disgusting lobbies (representing the interests of, say, Saudi Arabia in Washington) or knowingly play the usual unethical academic game, come to grips with their condition by producing arguments such as “I have children to put through college.” People who are not morally independent tend to fit ethics to their profession (with a minimum of spinning), rather than find a profession that fits their ethics.

Now there is another dimension of honor: engaging in actions going beyond mere skin in the game to put oneself at risk for others, have your skin in other people’s game; sacrifice something significant for the sake of the collective.

However, there are activities in which one is imbued with a sense of pride and honor without grand-scale sacrifice: artisanal ones.