The Real Reason for Loopholes

Not everyone was convinced by my contention in yesterday’s post that the mismatch theory of loopholes is wrong, to put it mildly. Their reservations are understandable. More detail is needed to make the claim convincing, more detail than a blog post allows.

More importantly, however, it is hard to be convinced of the wrongness of a plausible theory, like the mismatch theory, whatever its defects, if one doesn’t have a plausible alternative. In this post, I will try to offer you one.

It has often been suggested that the prohibition on sex discrimination was added to the Civil Rights Act of 1964 as a devious attempt to kill the Act. Supposedly its sponsors calculated that there would be a majority to support the amendment regarding sex discrimination, but that once the amended bill went up for a vote, a majority would find it too repellent and the entire Civil Rights Act would go down in flames.

Whether this is what really happened is controversial. But what is not controversial is that killer amendments are often a successful strategy for derailing a bill that is about to be passed. There is something deeply paradoxical about this. If a majority of legislators support the amendment, why would a majority then not support the amended bill?

What we have here is a particularly interesting version of Condorcet’s voting paradox, first discovered in the late 18th century (actually by a colleague of Condorcet’s, Borda, and then misattributed to the former), which says that it will sometimes happen that as between three alternatives, a majority might support A over B, a majority might support B over C, but that it will then not necessarily be the case that a majority will also support A over C. The very reverse might happen: A majority might support C over A. Not because anyone has changed his mind about anything, but just because majority voting can do funny things. (For a simple demonstration, just look up “voting paradox” in Wikipedia.)

The killer amendment is an illustration of this. When it works, it works because three things are true at the same time, though it is hard to believe that they could be: (1) A majority supports a proposed new bill over the status quo. (2)A majority supports the amended proposed bill over the unamended proposed bill. And (3) A majority supports the status quo over the amended new bill.

Which alternative comes out on top, thus depends on the sequence with which votes are taken. If the process starts by having legislators compare the proposed bill with the amended bill, and voting on it, and concludes by having them compare the amended bill with the status quo, and voting on it, then the status quo will prevail. Under the usual rules of parliamentary procedure, the legislators will never get an opportunity to compare the status quo with the unamended bill, and vote on that.

Modern voting theory, starting with Arrow’s famous impossibility theorem, established that the possibility of such manipulative killer amendments afflicts all half-way plausible voting systems.

What makes the killer amendment interesting in the context of thinking about loopholes is that it is one more counterexample to the mismatch theory of loopholes I discussed yesterday. Killer amendments smack of loophole exploitation but they clearly are not to be explained by the mismatch theory. The killer amendment strategy obviously doesn’t involve exploiting the divergence between the spirit and the letter of the pertinent voting rules.

But the relevance of killer amendments to loopholes goes way beyond this. That’s because it was understood from early on that the insights of voting theory are relevant not merely to voting, but to decision-making more generally, even if it is individual rather than collective decision-making.

Most individual decision-making is of the type decision theorists like to call multi-criterial. What decision theorists soon realized, after voting theory came on the scene, is that when you are synthesizing a multiplicity of criteria into a final decision, you are doing something very similar to synthesizing the preferences of a multiplicity of voters into a final selection among various alternatives.

To be painfully explicit about it, suppose you are trying to decide which of several cars you should buy. You rank the cars along a variety of relevant dimensions: price, safety, looks, and so forth. In the end, you have to somehow aggregate these various rankings into a master ranking that dictates which car you will actually buy. By whatever means you do this (and whether you do it informally and through your gut, or by actually using some kind of algorithm), what you are doing is going to be closely analogous to that of aggregating the preferences of several voters into a master ranking in the way that voting rules usually do. Your decision making mechanism is therefore subject to a version of the various paradoxes of voting theory, such as Condorcet’s voting paradox, Arrow’s impossibility theorem and so on.

What several legal scholars came to realize—chief among them Bruce Chapman and Matthew Spitzer—is that this makes for an interesting and hitherto unexplored connection between voting theory and the law. Legal decision making can be thought of as a kind of multi-criterial decision-making, and therefore the various paradoxes of voting theory might be helpful in explaining certain paradoxes of legal decision-making.

What is most interesting for my purposes here is that one can use this perspective to explain loopholes, in a way that is very different and more satisfactory than the mismatch theory. If we think of legal doctrines as being structurally very similar to voting rules, then should they not be vulnerable in some way to analogues to the killer amendment?

And so they are. Loopholes it turns out are the exact analogue of the killer amendment in the context of multi-criterial decision-making. Looked at in the right sort of way one can think of each of the tricks I described in yesterday’s post as being a kind of killer amendment. And just as all voting rules are inevitably vulnerable to killer amendments, all laws, so long as they involve the application of a multiplicity of criteria, which is true of virtually all laws, are bound to be vulnerable to loophole exploitation. Wishing loopholes away is a bit like wanting every child of Lake Wobegon to be above average. As a matter of logic, it can’t be done.

Perhaps the most important implication this has for lawyers is that they really need not feel bad about exploiting loopholes, no worse anyway than a parliamentarian who makes use of a killer amendment.

But perhaps you in fact think the parliamentarian ought to feel bad about using a killer amendment? Once you think about the matter a bit more, it is hard to see that what the parliamentarian did as the least bit objectionable. To be sure, he did derail a bill that had majority support. But did the bill he derailed in fact deserve to pass? To be sure, a majority supports it as against the status quo. But there is another bill, the amended bill, that yet another majority would prefer, and then there is another majority that would prefer the status quo over that one. Given that, what makes the proposed bill anymore expressive of the legislature’s “true” wishes than these other alternatives?

If you are interested in seeing the analogy between loopholes and killer amendments shown to be an exact rather than merely a loose analogy, and in understanding why Arrow’s famous impossibility theorem actually guarantees the ubiquity of loopholes in law, you will find an explanation of it in Why the Law Is So Perverse.