Prudent economic calculation becomes more difficult as legal and regulatory regimes are subject to frequent changes and political upheaval. Original Article: Continuous change in the regulatory framework in which market players do business is a feature of modernity: while the perimeter of the state’s intrusiveness gets larger, rules expand and change constantly. On the other hand, every investment calls for a certain amount of calculation,1 given that business as a human activity has uncertain and risky outcomes in itself. To know the rules applicable in a precise moment is not a sufficient condition for “rational” planning if these rules will later change; in other words, a very reasonable action today could turn out to be quite unreasonable according to the
Topics:
Michele Corgatelli considers the following as important: 6b) Mises.org, Featured, newsletter
This could be interesting, too:
Frank Shostak writes Assumptions in Economics and in the Real World
Conor Sanderson writes The Betrayal of Free Speech: Elon Musk Buckles to Government Censorship, Again
Nachrichten Ticker - www.finanzen.ch writes Bitcoin erstmals über 80.000 US-Dollar
Nachrichten Ticker - www.finanzen.ch writes Kraken kündigt eigene Blockchain ‘Ink’ an – Neue Ära für den Krypto-Markt?
Prudent economic calculation becomes more difficult as legal and regulatory regimes are subject to frequent changes and political upheaval.
Original Article:
Continuous change in the regulatory framework in which market players do business is a feature of modernity: while the perimeter of the state’s intrusiveness gets larger, rules expand and change constantly. On the other hand, every investment calls for a certain amount of calculation,1 given that business as a human activity has uncertain and risky outcomes in itself. To know the rules applicable in a precise moment is not a sufficient condition for “rational” planning if these rules will later change; in other words, a very reasonable action today could turn out to be quite unreasonable according to the rules applicable tomorrow. A change in the tax code, for example, could retroactively make a past investment less profitable today. How many tax reforms has the US undergone in the last decades?
This article examines the “schizophrenia” of the modern legislator in the general context of the instability of the applicable rules and then recalls the thoughts of the libertarian Italian scholar Bruno Leoni on the need for “long-term” legal certainty.
Bruno Leoni, the Athenians, and “Long-Term” Legal Certainty
In multiparty systems, regulatory and legal programs can change substantially as power is passed from party to party. In some cases, governments are subject to an “eraser” political culture, in which each new political administration or coalition seeks to “erase” the political program of the governing coalition that came before it. This can create a significant degree of uncertainty over what comes next in terms of legislation and regulation. This presents a significant difficulty for the entrepreneur.
An entrepreneur is oriented toward the future, and, to be successful, investment is an action that requires accurate economic calculation. A legal certainty intended as an “imminent” certainty—in which the operators know the rules applicable now but only for now—is not sufficient to execute economic calculation. The “contingent” guarantee that the rules will be framed in a certain way in a certain moment, and that they will be enforced, does not substitute another important certainty that is necessary to exercise economic rationality, the certainty that these rules will not change through time, because the change in the rules will change the outcome of the economic calculation itself.
Bruno Leoni, the Italian libertarian scholar, noted this difference. In his book Freedom and the Law (Liberty Fund, 1991) he wrote a chapter called “Freedom and the Certainty of the Law” (p. 76), in which he explored this issue with relation to what freedom meant for the Athenians. Here are his words:
he Greeks, and particularly the Athenians, were to realize fully in the second half of the fifth and in the fourth century before Christ the grave inconveniences of a law-making process by means of which all the laws were certain (that is, precisely worded in a written formula), but nobody was certain that any law, valid today, could last until tomorrow without being abrogated or modified by a subsequent law. (p. 78)
The Athenians, however, actually tried to solve this problem. Leoni continues:
A rigid and complex procedure was then introduced in Athens in order to discipline legislative innovations. Every bill proposed by a citizen … was thoroughly studied by a special committee of magistrates (nomotetai) whose task was precisely that of defending the previous legislation against the new proposal…. Even when the bill had been passed at last by the assembly, the proponent was held responsible for his proposal if another citizen, acting as a plaintiff against the proponent himself, could prove, after the law had been approved by the assembly, that the new legislation … was in irremediable contradiction with the older laws still valid in Athens. (pp. 78–79)
In other words, the Greeks came up with a system designed to guarantee “long-term” legal certainty—namely, the preservation of the current rules applicable to a longer period alongside “short-term” legal certainty—that permits an “instantaneous” knowledge of the applicable rules.
As Antonio Masala, senior fellow at the Bruno Leoni Institute, notes:
Leoni … observes how written, general and abstract laws are not necessarily able to guarantee legal certainty in the long term (a new law can always easily replace a previous law that was “certain” up until the day before)…. What the Greeks had already understood, and which in the contemporary world seems to be underestimated, is that to be truly free from the interferences of political power, one must be able to foresee the consequences of his or her actions in view of future laws; long-term certainty matters as much and even more than the one in the short term.2
Conclusion
Repeated changes in political programs and party control can make it nearly impossible to prudently engage in economic calculation in the long run. In other words, economic calculation requires long-term legal certainty, because short-term legal certainty can only allow an entrepreneur to “navigate by sight.” The Athenians considered the need for “long-term” stability a problem; they did not repudiate legal change, but they made it harder to introduce. After all, recognizing the problem is the first step to solving it.
- 1. Italian jurist Natalino Irti dedicated a paragraph to the relation between the ability to calculate and capitalism in his book Un diritto incalcolabile (Turin, IT: Giappichelli, 2016), p. 39.
- 2. “Libertà e diritto nel pensiero di Bruno Leoni,” in Storia del liberalismo in Europa, ed. Philippe Nemo and E. Jean Petitot (Soveria Mannelli, IT: Rubbettino Editore, 2013), pp. 689–704. This quotation was translated from the Italian original.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
You Might Also Like
Weekly SNB Sight Deposits and Speculative Positions: SNB buying euros at high prices
2021-02-22
Update February 22 2021: SNB intervening. Sight Deposits have risen by +0.1 bn CHF, this means that the SNB is intervening and buying Euros and Dollars: The change is +0.1 bn. compared to last week.
What Is the Great Reset? Part I: Reduced Expectations and Bio-techno-feudalism
2020-12-20
The Great Reset is on everyone’s mind, whether everyone knows it or not. It is presaged by the measures undertaken by states across the world in response to the covid-19 crisis. (I mean by “crisis” not the so-called pandemic itself, but the responses to a novel virus called SARS-2 and the impact of the responses on social and economic conditions.)
What “Capitalism” Really Means
2020-12-14
Descriptive terms which people use are often quite misleading. In talking about modern captains of industry and leaders of big business, for instance, they call a man a “chocolate king” or a “cotton king” or an “automobile king.”
In October, Money Supply Growth Remained Near All-Time Highs
2020-12-02
In October, money supply growth fell slightly from September’s all-time high, although growth still remains at levels that would have been considered outlandish just eight months ago. October’s easing in money-supply growth comes after eight months of record-breaking growth in the US which came in the wake of unprecedented quantitative easing, central bank asset purchases, and various stimulus packages.
2020-11-25
According to Anne Applebaum, those who deny American “exceptionalism,” that is to say, global crusading for “democracy,” are dangerous extremists.
China’s New Five-Year Plan Exposes the Wishful Thinking behind Socialist Regimes
2020-11-23
On October 29, the nineteenth Central Committee of the Chinese Communist Party concluded its fifth plenum, a four-day meeting devoted primarily to laying the groundwork for China’s fourteenth five-year plan, which covers the period from 2021 to 2025.
James Mill: Laissez-Faire’s Lenin
2020-11-16
[An Austrian Perspective on the History of Economic Thought (1995)]
James Mill (1771–1836) was surely one of the most fascinating figures in the history of economic thought. And yet he is among the most neglected. Mill was perhaps one of the first persons in modern times who might be considered a true "cadre man," someone who in the Leninist movement of the next century would have been hailed as a "real Bolshevik." Indeed, he was the Lenin of the radicals, creating and forging philosophical radical theory and the entire philosophical radical movement.
A brilliant and creative but an insistently Number 2 man, Mill began as a Lenin seeking his Marx. In fact, he simultaneously found two "Marxes," Jeremy Bentham and David Ricardo. He met both at about the same time, at the age of 35, Bentham2020-10-27
The Democrats, Liz Cheney, and the Never Trumpers still want endless wars, and they hate Trump’s apparent lack of enthusiasm for embracing their dreams of empire.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "On Foreign Policy, Trump Is Still the Lesser Evil".
Tags: Featured,newsletter
Permanent link to this article: https://snbchf.com/2021/02/corgatelli-more-entrepreneurship-embrace-term-legal-stability-2/
On Swiss National Bank
Devisen – Euro kostet erstmals seit Ende 2019 mehr als 1,10 Franken
Weekly SNB Sight Deposits and Speculative Positions: SNB buying euros at high prices
Understanding Minimum Wage Mandates: Empirical Studies Aren’t Enough
Gold Could Offer A Way Out Of Switzerland’s Failing Inflationist Experiment
Devisenreserven der SNB steigen im Januar um 3,90 Mrd Fr.
Featured and recent
More from this category
Bulls, Bears, and Beyond: In Depth with James Grant
27 Feb 2021
26 Feb 2021
The Greatest Thing the Roman Empire Ever Did Was Go Away
25 Feb 2021
Why Dominion’s Defamation Lawsuits Are Garbage
25 Feb 2021
The Drive for State and Federal Protective Tariffs in Early America
23 Feb 2021
“Weapons of Mass Destruction”: The Last Refuge of the Global Interventionist
23 Feb 2021
Prohibition’s Repeal: What Made FDR Popular
19 Feb 2021
If America Splits Up, What Happens to the Nukes?
18 Feb 2021
Money, Interest, and the Business Cycle
18 Feb 2021
Down with the Presidency
17 Feb 2021
The Fight over Economics Is a Fight over Culture
16 Feb 2021
15 Feb 2021
The Depression of the 1780s and the Banking Struggle
14 Feb 2021
The World Needs a Gold-Backed Deutsche Mark
13 Feb 2021
How Wall Street Became an Enemy of Free Markets
13 Feb 2021
How Not to Argue against the Minimum Wage
12 Feb 2021
Why No State Needs Thousands of Nuclear Warheads
11 Feb 2021
AOC and Schumer Want Taxpayer Funding for Covid-19 Funerals
10 Feb 2021
The Dystopian Bubble: George Orwell Meets Charles Mackay
10 Feb 2021
Politics and Ideas
9 Feb 2021
Leave a Reply