Why What Everybody Thinks About Loopholes Must Be Wrong

A lawyer tells a client who is on the verge of declaring bankruptcy, to move to a state with generous exemptions: to convert most of his remaining assets into a house (exempt), designated pensions (exempt as well) and similar special assets, which the law deems to be the equivalent of the shirt on your back, which no creditor is entitled to take away from you. In this way, the debtor gets to keep most of what he owns and to thumb his nose at his creditors.

Another lawyer tells his client who is a visiting the US on a tourist visa but would very much like to make his home here, that he should try to qualify for political asylum. “But I’m not being persecuted back home,” the puzzled client says. “True,” says the lawyer, “but don’t you in fact live in a brutal dictatorship and wouldn’t you have to fear persecution if you ever did speak out against the government, and if you haven’t done so already, perhaps you should do so now … and thereby qualify for asylum?”

Although lawyers give this kind of advice routinely, they usually feel ambivalent about it. On the one hand they are pleased and proud to help someone out; on the other they feel themselves to be taking advantage of a loophole and loopholes are in bad odor. But that’s only true because everybody has an entirely misguided idea of why laws have loopholes.

The misguided idea which has been around forever and has been considered self-evident from the days of the Romans, at least, is that we have loopholes because it is very hard to get laws right, and what lawyers routinely do is take advantage of the impossibility of getting the laws just right, that is, of writing them in such a way that the law’s language exactly reflects its underlying purpose. I’ll call this the mismatch theory of loopholes.

A bit of reflection of the kind we routinely engage in when we question our students socratically—which usually involves getting them to draw out the implications of something they already know—should be enough to show that the mismatch theory is almost surely wrong.

Here are three counterexamples to the mismatch theory.

The First Counterexample: Evading God. Perhaps the most immediately compelling counterexample to the mismatch theory is the way the devout treat religious commandments. They circumvent them with a brazenness that would put the most aggressively loophole-exploiting lawyer to shame. Indeed Jesuitic and Talmudic reasoning are famous for the ways in which they seem to offer legalistic-looking shortcuts for complying with divine commandments with a minimum of inconvenience and sacrifice.

To circumvent the prohibition against dueling, the Jesuits recommend contriving to create a situation of self-defense: let your opponent know that you will be taking a stroll to a certain location at a certain hour. When you then encounter him there at the appointed time and you see him take position for the planned fight, your participation in the duel has become nothing more than self-defense.

Talmudic scholars recommend that to circumvent God’s prohibition on operating a business or even performing such a minimal task as turning on a light on Shabbat, Jews hire a gentile (the “Shabbes goy”) to perform that task for them.

Many religions prohibit lending money at interest. When they do, its followers usually feel free to circumvent the prohibition by a variety of devices, the most devious and simple of these being the sale of some valuable object by the debtor to the creditor, with an advance agreement that it be repurchased by him for a fixed higher price at some later date. The literature setting out and elaborating on such recommendations is no small part of a theological library.

The mismatch theory cannot make sense of these religious ruses. If the mismatch theory is right, what devout believers are doing involves nothing less than taking advantage of God’s failure to give a sufficiently airtight statement of his commandments. But that is clearly not what the devout see themselves as doing. Now, you might say that the mismatch theory never claimed to explain anything other than the law. But therein lies its problem. If one sees a phenomenon that resembles something that goes on in the law to a T, then it seems plausible to think that it is the same sort of phenomenon and that any explanation for that phenomenon within the law should also apply outside of law. And that is quite clearly not true of the mismatch theory.

The Second Counterexample: Evading Tyranny. Loophole exploitation also flourishes in another unexpected realm—dictatorial regimes. Subverting the ruler’s orders by seemingly obeying them but actually undermining them in subtle ways, though often in plain sight, is one the oldest forms of successful risk-minimizing resistance.

In the early 1980’s Poles wanting to protest the government’s suppression of the dissident trade union Solidarnosz did so by taking a walk on the city’s main promenade timed to coincide exactly with the official news broadcast. They did so, moreover, wearing their hats backwards. This was a non-trivial way of signaling to each other just how widespread opposition to the government had become and the government was at a loss about how to suppress it. Should they start to punish people for wearing their hats backwards?

In a similar vein, there is a story about the former East Germany. In 1988 a group of East German high school students tried to find a way of protesting against East German militarism without incurring the usual penalties associated with such gestures. After a careful search through East Germany’s official army newspaper they found an embarrassingly bad poem titled “Love Song to My Kalashnikov Machine Gun” and posted it on the school’s bulletin board, adding the coy caption “A poem which has impressed us deeply and given us much food for thought.”

These episodes make no sense under the mismatch theory. Since a dictatorship is not bound by the rule of law, why should it be possible to evade its laws in this way? And yet it is.

The Third Counterexample: Evading the Guilty Conscience. Like everyone else, when I want to deceive someone, I find it much easier to mislead than to lie. I have of course done both, but given the choice, I prefer indirection to outright mendacity. It’s not that I fear legal liability and think that this is a good way to avoid it, I just feel better when I lie circuitously rather than outright. The reason this humdrum fact about deception seems worth contemplating is that it poses a further challenge for the mismatch theory of loopholes. When I mislead, rather than lie, I am engaged in a legalistic-looking stratagem, but there is no law that I am anxiously trying to circumvent. There is no legislature that somehow drafted the rule against deception in an underinclusive way, allowing me to take advantage of the gap between the letter and the spirit of the rule.

Well, if the mismatch theory of loopholes isn’t right, how does one account for them? For some hint at an answer, the reader must await tomorrow’s blog post. For the more complete answer, he may want to look at Why the Law Is So Perverse, a book of mine just published by the University of Chicago Press.