The Volokh Conspiracy

Various defenders of the individual mandate have long argued that if the Court strikes down the law, it is likely to lead to the resuscitation of Lochner v. New York and the invalidation of a wide range of economic regulations. This meme has most recently been taken up by Jeffrey Rosen, who claims that striking down the mandate would be “resurrecting the pre–New Deal era of economic judicial activism with a vengeance.” Others have made similar claims, as I describe here.

I. Why there is no Doctrinal Connection Between Lochner and the Individual Mandate.

In reality, the individual mandate has no doctrinal connection to Lochner or any other economic liberties or property rights cases. I covered the reasons why in detail in this article (pp. 99-101). Co-blogger David Bernstein, a leading academic expert on Lochner, makes some additional relevant points here.

To briefly summarize, this case is different from Lochner for two reasons. First, Lochner restricted some types of economic regulations by the states as well as the federal government. If the Supreme Court invalidates the federal individual mandate because it is beyond the scope of congressional authority, states such as Massachusetts would remain free to adopt mandates of their own.

Second, even the federal government would still have extraordinarily broad authority to regulate actual economic transactions, including employment relationships, manufacturing, the purchase of goods and services, and so on. Congress would only be denied the power to impose mandates under the Commerce Clause in the absence of some preexisting “economic activity.” Even the Court’s most extreme previous Commerce Clause decisions – such as Gonzales v. Raich – would remain in force. I would be very happy to get rid of Raich, a dubious decision that concluded that Congress’ power to regulate interstate commerce allowed it to forbid the possession of medical marijuana that had never crossed state lines or been sold in any market. But doing so isn’t necessary to strike down the mandate.

Conversely, if the Court upholds the mandate, that will in no way prevent it from strengthening enforcement of constitutional protections for economic liberties and property rights in future cases. Even if there are no enumerated powers limits to congressional authority under the Commerce Clause, that authority is still limited by the individual rights provisions of other parts of the Constitution. Many libertarians, including myself, believe that the Constitution imposes both stringent structural limitations on federal power and substantial individual rights-based ones. But it is perfectly possible for one to exist in the absence of the other. A decision upholding the individual mandate would not dictate the proper interpretation of the Takings Clause of the Fifth Amendment. Thus, it would not make it any less feasible for the Court to alter the questionable second class status of property rights in current doctrine.

It also would not dictate the correct interpretation of the Due Process Clausesof the Fifth and Fourteenth Amendments, or the Privileges or Immunities Clause. Thus, the Court could uphold the individual mandate, yet still (in future cases) enforce these clauses’ protections for economic liberties, which as David Bernstein and others have shown, are deeply rooted in the text and original meaning of the Amendment. And even if the Court did begin to protect property rights or economic liberties more strongly, it would not necessarily go as far as the pre-1930s Court did, which itself was not nearly as far as many modern liberals imagine (the Lochner-era Court upheld far more economic regulations than it struck down).

Indeed, the case for increased enforcement of individual rights constraints on Congressional power would be stronger if the Court ruled that there are no structural limitations on its authority to impose whatever mandates it wants. And that is the likely effect of a decision upholding the mandate.

II. Lochner as Epithet and Guilt by Association.

Some of those who raise the spectre of Lochner to attack the case against the individual mandate may not have any specific legal doctrine in mind. They might simply be using Lochner as a synonym for any decision striking down “economic” laws that they think are constitutional. If that’s the case, however, then the Lochner analogy is just a political epithet rather than a serious argument – much like Republicans calling Obama a “socialist.” As David Bernstein puts it in his important recent book on Lochner, it’s yet another example of commentators using the case as a “vacuous, rhetorical shortcut” for denouncing “what [they] consider the ‘activist’ sins of their opponents” even in situations where the legal issues in question have little or no connection to either Lochner or the Fourteenth Amendment. Conservatives have often used Lochner as an epithet themselves. So it’s understandable that liberals would do the same thing. But such rhetorical ploys are not substantive arguments.

Finally, there is the notion that the case against the individual mandate is discredited by its association with “radical” libertarian arguments against various other parts of the post-New Deal legal order. Some invocations of the Lochner analogy may be intended to reinforce this meme.

David effectively dismantles such guilt by association claims here. I would add that the case against the mandate has attracted support far beyond libertarian circles, “radical” or otherwise. The anti-mandate plaintiffs include 28 state governments and many private organizations, including many who are far from libertarian. It also has the support of most of the GOP and the vast majority of the general public. As a libertarian myself, I wish it were true that all of these people had suddenly bought into a broad libertarian agenda. In reality, however, their support for the case against the mandate is mostly a result of the fact that it’s perfectly possible to conclude that this law is unconstitutional without being either libertarian or an opponent of the entire post-New Deal legal regime.

UPDATE: I have made a few slight revisions to this post in order to increase clarity and correct a typo.

Conor Friedersdorf compares former New Mexico Governor Gary Johnson with prior Libertarian Party candidates for President. His post concludes:

A former governor of New Mexico, he was re-elected by that state’s voters, left office popular after two terms, and therefore has the most executive experience of any Libertarian Party presidential nominee. He can also cite the state he ran as evidence that nothing radical happens when he’s put in charge. An economic conservative and social liberal, he represents a new direction for a party that has long wrestled with its paleo-libertarian wing. And yet he too is certain to lose on Election Day, as third-party candidates in American presidential elections do. The question is whether he can match his party’s 1980 high-water mark and win 1 percent or more of the vote, and whether he might win even more in the key swing state of New Mexico, where voters already know and have cast ballots for him.

“Bleeding heart libertarian” political philosophers Kevin Vallier and Matt Zwolinski have written responses to my post expressing some reservations about some BHLers embrace of the idea of “social justice.” They also comment on critics like David Friedman, Bryan Caplan, Mike Rappaport, and Todd Seavey, who have expressed related concerns. Both Vallier and Zwolinski make some good points. But I don’t either of them really addresses the issues I and some of the others raise.

Vallier attempts to answer the criticism that the BHL conception of “social justice” is vague and unclear by providing a definition of the concept:

How does the term “social” modify the term “justice” such that we are left with an important and illuminating concept that is a kind of justice that libertarians should accept? I’m going to give a Rawlsian answer to this question by holding that social justice is justice with regard to the arrangement of a society’s basic structure… Rawls defines a society’s basic structure as follows:

By the basic structure I mean a society’s main political, social, and economic institutions, and how they fit together into one unified system of social cooperation from one generation to the next….

[A] basic structure… rests on certain principles and shared ideas that are the subject of moral and political evaluation.

I certainly agree that a society’s “basic structure” is subject to moral evaluation and that an unjust basic structure should be rejected (at least if superior alternatives are available). However, virtually all political theorists accept the same idea, including libertarians who reject the idea of “social justice,” such as F.A. Hayek (who devoted much of his scholarship to trying to figure out what a more just basic structure of of society should look like). If social justice is simply used to denote the idea that the basic structure of society should be just in some general sense, then it’s not a very useful term because almost every political philosophy turns out to be committed to it. Nazis, communists, socialists, libertarians, liberals, and conservatives all agree that society should have a just basic structure. Where they differ is on the question of which basic structure is actually the most just, and on the criteria for assessing that question.

This definition of social justice also does not conform to the most widely accepted uses of “social justice” in contemporary discourse, which usually have to do with alleviating poverty and promoting economic equality. That said, I recognize that this may be a case where some academic political philosophers use a term in a different sense from that used by laypeople and scholars in other fields.

Zwolinski interprets me and some of the other critics as advocating utilitarianism and puts forward various standard philosophical arguments against utilitarianism. I agree with many of these arguments. However, they only count against a theory that holds that utilitarianism is the only standard by which the morality of our actions should be judged. That is not my view. I reject both absolute utilitarianism and absolute nonutilitarian rights theories. Utilitarian considerations should serve as a constraint on rights claims and vice versa. For example, we should not endorse an absolutist theory of rights that holds that we can never restrict freedom of speech even if doing so is the only way to keep a totalitarian regime from coming to power and slaughtering millions. On the other hand, we also should not embrace an absolute utilitarianism under which we would have to let sadists torture innocent children so long as the evidence showed that pleasure of the torturers was greater than the pain suffered by their victims.

At what point should rights be sacrificed for utility or vice versa? If I had an air-tight answer to that question, I would be a great political philosopher myself. Sadly, I don’t. But even though I don’t have a good theory for handling difficult borderline cases, I think it’s still easy to recognize that we shouldn’t sacrifice huge amounts of utility for minor rights protections, and neither should we do the opposite. Thus, we should not allow civilization to be destroyed by an asteroid strike, even if avoiding this fate requires some infringement on property rights. Similarly, we also shouldn’t let “utility monsters” gobble up small children. In my view, genuinely difficult tradeoffs between utility and rights

For reasons outlined by Mike Rappaport here and here, and earlier by David Friedman, I think utilitarianism also does a better job than “social justice” in explaining why libertarians (and others) should be concerned about poverty and economic well-being. One can recognize that without being committed to the idea that utility is the one true moral value that trumps all others.

Although I’m a strong advocate of property rights, I agree with most of what Georgetown political philosopher Jason Brennan says on the subject at the Bleeding Heart Libertarian blog:

The left believes that libertarians believe:

Property Rights No Matter What: People are self-owners. Respecting their self-ownership requires a particular kind of laissez-faire property-rights regime. We should have that regime no matter what, even if it immiserates the poor and systematically leads to widespread poverty.

In fact, hardly any self-described libertarians believe this. Instead, in one way or another, most believe that a system of property rights is supposed to solve real human problems and make our lives better. Most libertarians advocate free markets and property right in large part because they think this will tend to make people’s lives go better.

The left wants us to have a debate over whether “property rights no matter what” is true. They’ll win that debate.

What we’re trying to say in this blog is that if you look carefully at what the (smart) left means by “social justice”, almost all us classical liberals and self-described libertarians count as caring about social justice.

At least as a matter of moral theory, it’s a bad idea for libertarians to defend absolute property rights regardless of consequences. Doing so is both intellectually weak and unlikely to persuade anyone not already strongly sympathetic to libertarianism. The defender of absolute property rights will have to face painful hypotheticals such as the following:

What if redistributing a tiny fraction of George Soros or Rupert Murdoch’s fortune is the only way to save 1000 innocent people from starvation through no fault of their own? What if the only way to save the world from an asteroid strike is to violate the property rights of some misanthropic individual who doesn’t care if civilization is wiped out?

As I have pointed out previously, libertarian property rights absolutists are not the only ones who face such problems. The same issue arises with any theory of absolute rights:

Let’s say you believe that torture is always wrong. Then you would not resort to it even in a case where relatively mild torture of a terrorist is the only way to prevent a nuclear attack that kills millions. What if you think that it’s always wrong to knowingly kill innocent civilians? Then you would oppose strategic bombing even if it were the only way to defeat Nazi Germany in World War II. How about absolute rights to freedom of political speech? If you are committed to them, that means you oppose censorship even if it’s the only way to prevent Nazi or communist totalitarians from coming to power and slaughtering millions.

But the fact that advocates of other ideologies run into similar problems when advocating absolute rights is no reason for libertarians to replicate their mistakes.

Rejecting absolute rights as a matter of moral theory does not mean we should always reject them as a matter of policy. Political realities such as slippery slope problems, interest group power, and knowledge limitations might justify absolute prohibitions against some types of behavior even though there may be rare instances where it is actually justified. For example, while I recognize that there are rare cases where Kelo-style “economic development” takings cause more benefit than harm, I am skeptical that real-world governments subject to interest group lobbying are likely to confine their use to these unusual cases. For that reason, I favor an absolute ban on economic development condemnations in the real world, even though I would prefer a different policy if we had a completely benevolent government with perfect information. Similarly, one can favor an absolute ban on torture on the grounds that cases where it is the best way to prevent massive terrorist attacks are extremely rare, and real-world governments are unlikely to confine its use to those cases if given the opportunity to engage in it.

Rejection of absolutist rights theories also does not require us to be pure utilitarian consequentialists. While I would be willing to sacrifice free speech or property rights in order to stave off disaster, that doesn’t mean I have to sacrifice property rights for small increases in economic efficiency or free speech to protect oversensitive people from the psychic pain of exposure to opinions they find highly offensive – even in cases where potential offended listeners derive greater utility from censorship than the would-be speakers would from expressing their views.

Finally, while I agree with Jason’s major point, I’m only partially convinced by his characterizations of both libertarians and left-liberals. As he recognized earlier in his post, there are some “hard libertarians” who do support absolute property rights completely independent of consequences, or at least claim to do so. On the left, there are many who define “social justice” in terms of a broad ideal of economic equality that goes far beyond attention to utilitarian considerations, and concern for the plight of the innocent poor. Even if liberals and libertarians agreed on empirical issues, the differences between the two ideologies wouldn’t disappear completely. But they would surely decrease by a lot. Regardless, a libertarianism that eschews absolute rights theory is both sounder and more likely to win converts than one that is indifferent to consequentialist considerations.

The Cato Unbound website recently hosted an interesting debate over efforts by “Bleeding Heart Libertarians” to incorporate “social justice” into libertarian political theory. In the lead essay, “Bleeding Heart Libertarian” political philosophers Matt Zwolinski and John Tomasi argue that libertarianism is best defended not on the basis of absolute rights to property and self-ownershp, but on the grounds that it benefits the poor and the “least well off” members of society. They argue that this approach is superior to the property rights absolutism they associate with libertarians like Ayn Rand and Murray Rothbard.

As Zwolinski and Tomasi recognize, consequentialist considerations – including the impact of public policy on the poor – is far from a new idea in libertarian political thought. They note that 18th and 19th century libertarians repeatedly emphasized the negative effects of activist government on the poor as one of the justifications for restricting its power. In more recent times, such libertarians as Milton Friedman, F.A. Hayek, and many of the public choice economists have made similar arguments. The same is true of some of my own work on property rights, federalism, and the War on Drugs, and co-blogger David Bernstein’s work on labor regulation. Many of the above writers – including Friedman and Hayek – also argued that libertarianism is, at least in theory, compatible with a minimal welfare state focused on providing support to those of the poor who are genuinely incapable of supporting themselves.

In his response to Zwolinski and Tomasi, economist David Friedman points out that much of what they argue for is better justified by utilitarian considerations. Many prominent libertarian scholars – including Friedman – are utilitarians and defend libertarian institutions on primarily utilitarian consequentialist grounds. On that basis, the interests of the poor surely count no less than that of other people.

Despite the above continuity with prior libertarian thought, there are two important distinctive aspects to the BHL project. The first is the philosophical rigor with which they lay out the case for a version of libertarianism that leaves room for (tightly constrained) positive rights for the poor. I can’t fully cover this aspect of BHL in a blog post. But interested readers should consult Tomasi’s excellent recent book Free Market Fairness and various posts at the Bleeding Heart Libertarian blog.

The second is the use of the term “social justice” itself, which is usually associated with the left. Previous libertarian thinkers – including those who willing to accept a limited welfare state – generally eschewed this terminology. Hayek famously denounced the concept. This, I think, is what draws the ire of some critics of BHL, such as Todd Seavey. He seems to be concerned that adopting the terminology of social justice is a political dead end for libertarians, or at least likely to cut off possible alliances with conservatives.

I think Seavey’s critique is overblown, for reasons well articulated by Bryan Caplan. Furthermore, I highly doubt that allowing for the possibility of a limited welfare state will somehow prevent libertarians from forming alliances with conservatives. After all, most conservatives support some form of limited welfare state too (often a much larger one than even the most moderate libertarians).

On the other hand, like David Friedman and Michael Rappoport, I’m not convinced that “social justice” does any useful analytical work that is not better done by utilitarianism. Like the BHLers, I am not a rights absolutist. Even very important rights must sometimes be sacrificed if the consequences of sticking to them are sufficiently dire. But I think that the utilitarian idea of concern for human happiness and well-being is a more compelling consequentialist ideal than social justice.

In addition, there is some ambiguity in the way BHLers use the term “social justice.” To many on the left, social justice goes far beyond merely providing a minimal standard of living for the poor. It includes a concern for promoting economic equality more generally. In a recent post, leading BHL advocate Jason Brennan suggests that the BHL definition of social justice is more limited than that, focusing only on the idea that “the moral justification of our institutions depends on how well these institutions serve the interests of the poor and least advantaged. The basic institutions of society must sufficiently benefit all, including the least advantaged and most vulnerable members of society.”

This definition is hard for anyone to object to. Virtually any political theory recognizes that political institutions must protect the interests of “the least advantaged” at least to some degree (e.g. – they cannot be enslaved). However, as Bryan Caplan notes, a lot depends on how much consideration those interests are entitled to:

Does “depends” mean “depends to some extent”? Almost every moral theory says the same – including, as David [Friedman] points out, old-school utilitarianism. Does “depends” mean “depends entirely”? That seems implausibly absolutist – especially since “serving the interests of the poor and least advantaged” is (a) arguably supererogatory in the first place, and (b) dependent on how deserving the poor and least advantaged are.

On balance, I too am not convinced that the idea of social justice adds anything useful to libertarian thought that isn’t better captured by other concepts, such as utility. It’s also worth noting that not all BHL advocates endorse the idea of social justice. Jacob Levy, for example, does not. And, as Jason Brennan points out, endorsing a limited theory of “social justice” doesn’t necessarily require BHLers to embrace a large welfare state – or perhaps even a small one (Brennan calls himself “more or less an anarchist”). A BHLer who is highly pessimistic about the real-world impact of the welfare state on the poor could logically reject the welfare state.

Despite the ambiguity of their approach to social justice, I think the BHLers have made many valuable contributions to political theory. They are right to remind libertarians that we cannot be indifferent to the consequences of rights. They are also right to focus attention on the many different ways in which government intervention harms the poor rather than benefits them. Even if you believe that state-sponsored redistribution to the poor is necessary, the vast majority of the modern state actually provides benefits to the wealthy, the middle class, and organized interest groups - often at the expense of the poor. Finally, BHLers have made several advances in discussions of specific issues in political philosophy, most notably Jason Brennan’s work on the ethics of voting.

Ultimately, I think libertarians should reject both rights absolutism and absolute utilitarian consequentialism. The difficult question is how to strike the right balance between them. BHL doesn’t give us a completely satisfying answer, but it is a valuable contribution to the debate.

UPDATE: Brian Doherty gives a good summary of the BHL/social justice debate here, and Jason Brennan responds further to Bryan Caplan and David Friedman here.

On Tuesday, Charles and David Koch filed a second lawsuit against the Cato Institute objecting to a decision by the Institute’s Board of Directors to expand the size of the Board and reappoint four board members who had been removed when the Kochs installed new board members earlier this year.  Here’s a WaPo story on the suit.  The relevant documents are available on Cato’s website here.  The attachments to Charles Koch’s affadavit are of particular interest.

I may have more to say about this later. In the meantime, here are a few other recent items of interest:

• FreedomWorks sides with Cato against Koch;
• A new Cato-aligned blog, “KochvCato”;
• A post on KochvCato by Jerry Taylor that reveals the Board of Shareholders (as opposed to the Board of Directors) has only met twice before this year;
• Dueling op-eds on CNN.com by Bob Levy and Kevin Gentry;
• A Breitbart.com series on Ed Crane, “The Crane Chronicles” – Part I, Part II (more coming).

I also found this “open letter” from Cato’s Michael Cannon to be a quite powerful statement of what’s at stake.

Given that Cato’s current leadership has previously agreed to being the search for Ed Crane’s successor, and to give the Koch brothers a veto over any potential replacement, I’m still hoping for a settlement that can save Cato as an independent voice for liberty.

I don’t have time right now to say anything in-depth about the latest developments ongoing Cato Institute vs. Koch conflict. And, in any event, my view of the situation has not changed: I still think that all concerned would be better off if the Kochs were willing to drop their suit. But for those who may be be interested, I largely agree with co-blogger Jonathan Adler’s take on both the Kochs’ most recent statement and the dispute as a whole.

In the process of trying to figure out exactly what is going on in the Koch-Cato dispute, I was struck  by one thing: as near as I could figure out, the Kochs, according to Cato itself, had offered a compromise in which each side would choose eight board members.  Meanwhile, as of the last board meeting, the Cato board was composed of sixteen board members, seven of them Koch appointees.  Could all this acrimony at this point be over the identity of one board member, or were the Kochs insisting on retaining control beyond the initial selection of half of the board? Surely if the former, the Kochs could be persuaded to give up their legal battle given that the stakes were only 50% influence versus 42+% influence?

I haven’t had a chance to clarify whether the Kochs were indeed willing to move to board control of Cato if they got to choose 50% of the board, but David Weigel’s post yesterday explains why Cato’s nine to seven board majority was more significant than it might first appear:

Today, the board’s majority agreed to simply expand to 20 members, invoking a bylaw that allows that many people to serve if it’s so desired. They added four people — William A. Dunn, John C. Malone, Lewis E. Randall, and Donald G. Smith — who are more supportive of the non-Koch faction. “We now have a 13-7 majority,” said Ed Crane, Cato’s president since 1977.

On the other hand, Crane also told Weigel that the crisis would end if “we end the shareholder agreement and we have a majority on the board of directors who are not part of the Koch group.”  So maybe going back to a nine to seven board majority would satisfy Crane, so long as the board thereafter had control of Cato.  If so, the onus is on the Kochs to acknowledge that given their relative lack of involvement in Cato for the last two decades, they should be more than content with that level of influence over Cato’s future direction. Shareholder agreement aside, is there anyone out there who thinks that the Kochs deserve a 50% say in Cato? Or that this would be good for Cato, and libertarianism?

Koch Industries Executive Vice President David H. Koch has issued a nine-page statement regarding the Koch-Cato kerfuffle and directly responding to some of the claims made by Bob Levy.  As with his brother’s statement, more of the release consists of categorical statements or assertions, and there is relatively little in the way of verifiable detail, particularly when responding to Levy.  Where the responses are most direct, they are beside the point, and respond to mischaracterizations or caricatures of Levy’s claims (e.g. the statement denies that David Koch ever said Cato should work exclusively with or take direction from groups like Americans for Prosperity, when that is not what Levy claimed).  While the statement references compromise proposals put forward by the Kochs, it also lacks the level of detail Levy offered without disputing his specific claims (e.g. the discussion of beginning the search and creating a timetable for Ed Crane’s retirement).

The most interesting aspect of David Koch’s statement is how much it makes clear that (from the Koch’s perspective) this dispute is about Ed Crane, and that Crane’s behavior and what David Koch characterizes a “rule or ruin” approach to Cato makes a peaceful resolution difficult if not impossible.  The statement also claims Ed Crane was the “top Cato official” responsible for the quote in this paragraph from Jane Mayer’s infamous story on the Kochs.

[Richard] Fink, with his many titles, has become the central nervous system of the Kochtopus. He appears to have supplanted Ed Crane, the head of the Cato Institute, as the brothers’ main political lieutenant. Though David remains on the board at Cato, Charles Koch has fallen out with Crane. Associates suggested to me that Crane had been insufficiently respectful of Charles’s management philosophy, which he distilled into a book called “The Science of Success,” and trademarked under the name Market-Based Management, or M.B.M. In the book, Charles recommends instilling a company’s corporate culture with the competitiveness of the marketplace. Koch describes M.B.M. as a “holistic system” containing “five dimensions: vision, virtue and talents, knowledge processes, decision rights and incentives.” A top Cato Institute official told me that Charles “thinks he’s a genius. He’s the emperor, and he’s convinced he’s wearing clothes.” Fink, by contrast, has been far more embracing of Charles’s ideas. (Fink, like the Kochs, declined to be interviewed.)

David Koch is indisputably correct that some Cato staff and partisans have levied unwarranted attacks on the Kochs’ intentions and their influence on the libertarian movement — attacks they would have rejected had they been made by a journalist or progressive group several months ago.  As I have tried to stress in all of my posts on this matter (beginning here), I am concerned about the consequences of making Cato subject to the control of the Kochs or any single interest, but not because I believe they will necessarily make Cato more partisan or less principled.  I believe the Kochs have been principled supporters of libertarian ideas and have made immeasurable contributions to the fight for individual liberty — something most Cato supporters should also believe (and probably did until this conflict began).  I also hope that there will be a resolution to this conflict that leaves the Cato Institute standing.

UPDATE: Dave Weigel has an interview with Ed Crane, and Bob Levy responds to David Koch’s statement.

John Samples of the Cato Institute has an interesting recent piece on the conflict between Cato and the Kochs [via Gene Healy]:

The politically engaged have offered much commentary on the conflict over the future of the Cato Institute. Some prominent people on the left have spoken of their respect for the current Cato. In today’s polarized political world, an endorsement from the left often serves as a negative signal to conservatives. That reaction would be a mistake. Conservatives have something at stake in the continuation of Cato.

What is the issue here? Each reader will reach his or her own conclusions based on the evidence we have about the Kochs’ intentions in this takeover attempt. I would suggest that we look at the big picture about the recent development of think tanks. A few years ago a number of wealthy liberals including George Soros decided to contribute considerable sums to a new think tank. They deemed the old liberal think tanks (e.g. Brookings) ineffective and too removed from politics. They sought instead a think tank engaged with daily partisanship, grassroots mobilization, and electoral politics….

[T]he conservative will immediately recognize that the Kochs are proposing a “new model” think tank to replace the “old school” Cato. Of course, the conservative will not oppose all innovations though he will always insist on repair rather than reconstruction. But the conservative will ask, “What exactly needs repair here? What reasons counsel innovation at Cato?” Under Ed Crane, the Cato Institute has built a strong reputation for principled engagement in public policy….

[A] more partisan Cato wouldn’t necessarily further conservative ends of principled limits to government power. I am particularly concerned about an issue area I have worked in for over a decade: campaign finance regulation. It is true that the Republican party has supported the First Amendment by and large in these matters. However, partisanship sometimes requires divergence from principle. After all, the GOP is a party that seeks to win elections, a goal that might be served by restrictions on campaign finance. Indeed, the Republicans have supported a ban on political action committees and more recently, congressional Republicans tried to prohibit 527 committees when it served their electoral purposes….

The Koch brothers have done much to advance the cause of individual liberty and limited government. The “new model” they propose for Cato, however, is an innovation whose utility conservatives should doubt. The “old school” Cato has done much to raise doubt about Progressivism among Americans with an independent outlook. It has also contributed (and will contribute) to the valiant effort to preserve the core values of the American tradition. The conservative will wonder why such an institution should be cast aside in the pursuit of the latest political fad, an innovation fostered by none other than George Soros. On this matter at least, the conservative will judge the Kochs to be all too progressive.

I have myself commented on this issue several times, including here and here. I noted my various ties to the two sides in the dispute here.

P.J. O’Rourke, who has been designated an H.L. Mencken Research Fellow at the Cato Institute, discusses the Koch-Cato kerfuffle in The Weekly Standard. It begins:

Ideological snits and quarrels are the rightful province of feckless leftists. Their neverending dissensions give them something to Occupy (as it were) their time and distract them from making mischief. Sometimes these leftists are not so feckless and make the mischief of seizing power. Then they chop off each other’s heads with their logic-chopping, to the general relief of their neighbors. Ideological snits and quarrels are goods upon which a high value may be placed. And I, for once, am willing to be a socialist and freely redistribute them to our enemies.

We who hold the truth to be self-evident that all men are created equal and endowed with unalienable rights to life, liberty, and no less than an 8:1 ratio of gin to vermouth in our martinis stand above such petty arguments of political doctrine. Except when we don’t. And now we have in our midst a knockdown, a drag-out, a Katy-bar-the-door.

The wonderfully conservative Koch brothers are trying to take control of the magnificently libertarian Cato Institute, a spectacularly stupid thing to do.

O’Rourke also addresses his own relationship with Cato:

And because I know these people I won’t pretend I don’t have a dog in the fight. I’ve been friends with Ed Crane and Cato executive vice president David Boaz for 25 years. Cato has aided me with almost everything I’ve written about politics. Maybe saying so will lower the institution’s prestige enough that the Koch brothers will leave it alone. If they prevail they’ll lose Cato’s H.L. Mencken Research Fellow. (The position—unpaid and worth it—was conferred on me by Crane back when the insensitive language in Mencken’s diary was shocking the kind of people who’d later forget to be shocked by Bill Clinton and Monica Lewinsky.)

More to the point, the Koch brothers will lose the think tank’s impressive roster of thinkers and scholars. I haven’t polled them as to who would stay and who would go under a Koch regime. But, as I said, I know libertarians. If the Kochs win the pot, they’ll have to piss in it. It will be empty otherwise.

O’Rourke concludes observing that the Kochs may be “good citizens with honest wealth who’ve put their money where their minds are,” but with the Cato Institute, they are acting like “fools.”

I agree with most of what co-blogger Jonathan Adler says about Cato Chairman Bob Levy’s recent statement on the conflict between the Kochs and the Cato Institute. It is, overall, a persuasive document and much more detailed than Charles Koch’s earlier defense of the Koch position.

As I have said from the beginning, the best and easiest solution to this problem would be for the Kochs to drop their lawsuit. Regardless of whether their suit is legally meritorious (which is not clear), it is likely to do far more harm to the cause of libertarianism than good. Even if the Kochs win, and even if they have a good plan for the future of Cato, the new Institute is likely to lose much of its credibility, and many of its top scholars and analysts might well depart. The Kochs would end up acquiring an asset that has lost much of its value. If the Kochs aren’t willing to drop their suit, they can at least reduce the likely damage by announcing a credible slate of independent, libertarian board members whom they would appoint to the Cato board should they win.

I recognize that the Kochs genuinely believe that their legal rights have been violated and that Cato’s leadership has acted badly. Even if they are completely right about this, this is one of those cases where the best course of action is to forego asserting one’s legal rights.

For now, the legal and public relations war between Cato and the Kochs seems likely to continue. Unfortunately, both sides could end up losers. Cato because the lawsuit is a distraction from their work and contributors are less likely to give money to the Institute while its future is in the air; the Kochs because this confrontation is a public relations setback for them, and because it is more and more evident that they are unlikely to gain much from it even if they win.

Like Jonathan, I probably will not post again on this topic unless and until there are some new developments.

I had not planned to post more on the Koch-Cato kerfuffle, barring meaningful developments.  This morning, however, I received notice of a statement by Cato Institute Chairman Bob Levy responding to the statement by Charles Koch released last week.  It is a lengthy and powerful reply that goes far beyond his interview with Skip Oliva.  It is filled with detail about key events and other verifiable facts.  This is the sort of information necessary to evaluate the competing claims about each side’s actions and intent, and is the sort of information that was conspicuously absent from the Koch statement.  Levy’s statement, assuming it accurately recounts events, also makes a compelling case that the Kochs are after control of Cato above all else. Nothing I have yet seen from the Kochs or their representatives (on-the-record or otherwise) demonstrates otherwise, though I will try to keep an open mind on this point.

As before, I will update this post with any updates or substantive responses I come across.

UPDATE: Skip Oliva catches Cato conspicuously revising the text on its lawsuit website.

Skip Oliva, who has been collecting links galore on his blog “Under Penalty of Catapult,” has several must-read posts for those following the Koch-Cato controversy.  First, as noted below, he has an interview with Cato Chairman Bob Levy responding to Charles Koch’s public statement.  This interview provides lots of detail about the steps each side took before the Koch brothers filed their lawsuit.  If Charles Koch’s statement contained equivalent detail it would be easier to evaluate his claims.

Second, Oliva comments on the Cato Institute’s legal position, which has now been detailed by Cato.  As he notes, some aspects of Cato’s position are straightforward.  Others involve a contestable reading of the underlying legal documents.  One thing is clear, the shareholders agreement was not a model of legal draftsmanship.

Third, Oliva has two insightful comments on the dispute, “The Balance of Power” and “And Now We Play the Leverage Game.”  The latter of these two posts, in particular, is worth a read. He notes that there are really multiple issues here, including the “long-simmering feud” between Cato President Ed Crane and the Koch brothers.  Their personal differences have certainly contributed to the conflict, and any final resolution will likely turn on Crane’s future as Cato President and the selection of his successor.  Oliva writes:

Any resolution to this dispute must include a clear timeline for Crane’s retirement and selecting a new Cato president. The Kochs will definitely play a role in this. Levy himself conceded that Crane offered the Kochs veto power over the choice of successor in exchange for dissolving the shareholder agreement. The Kochs also offered to delay this entire matter until after the 2012 elections. That suggests there’s room for compromise, say, if Crane were to publicly announce his retirement effective March 1, 2013.

Of course, there’s still the issue of board composition. Levy was adamant the Kochs not be allowed to control half the board. Crane’s only real leverage here is to cling to power—he still controls a majority of the board, pending the outcome of the lawsuit—until the Kochs concede that point. The Kochs’ leverage, in turn, was time-consuming litigation that, as Levy acknowledged, cripples Crane’s ability to raise money. So now we’re left to see who blinks first while everyone else—Cato’s staff and donors—is held hostage.

Co-blogger Jonathan Adler has posted Charles Koch’s recent statement on the Cato vs. Koch confrontation. I think there are some positive elements in the statement, especially this part:

Some have speculated that we would micro-manage the enterprise. Others have suggested we would turn Cato into a partisan Republican organization. These rumors are absolutely false.

My objective is for Cato to continually increase its effectiveness in advancing a truly free society over the long term. This was my objective when, in 1976, I came up with the idea of converting the Charles Koch Foundation to a public policy institute and recruited Ed Crane to run it. My observation was that there was an urgent need for an institute that would flesh out the policy implications of the general principles of a free society. I still believe there is a great need for this work and that Cato can fill that need.

To that end, we would seek to elect board members and officers who will ensure that Cato becomes increasingly effective in advancing liberty while remaining dedicated to its core principles. These officers and board members would act independently from me or any other individual – instead, their role, as should be with any non-profit board, would be to ensure greater accountability and effectiveness. As someone who has created and helped build many organizations in both the profit and non-profit sectors, I know from first-hand experience that sustainable growth can be achieved only through leaders who are committed to core principles. Recognizing all that Cato has accomplished in the past, I envision a Cato that can accomplish even more in the future.

In my last post on this subject, I urged the Kochs to announce that, if they win their lawsuit and get control of Cato, they will “appoint board members who are well-known independent libertarian academics, policy experts, and activists and are not Koch employees.” I happy that Charles Koch has expressed an intent to appoint libertarian “officers and board members would act independently from me or any other individual.” But this laudable statement would be more persuasive if it were more specific. It would help if the Kochs gave at least a few examples of the kinds of people whom they intend to name who would qualify as “independent.”

In my post, I urged the Kochs to select “big-name libertarian scholars and commentators such as Tyler Cowen, Richard Epstein, Virginia Postrel, and co-blogger Randy Barnett.” I am not suggesting that they necessarily have to name these specific people. But it would help if they presented a list of individuals similar to the above, even if it does not include any of these particular individuals.

As I see it, the biggest problems we face right now are the atmosphere of distrust that has arisen between the Kochs and much of the libertarian community, and the cloud of uncertainty that hangs over Cato’s future arising from the widespread (even if erroneous) perception that the Kochs will fundamentally alter the Institute’s mission if they get control. Both of these problems would be greatly alleviated if the Kochs gave more specific details about the people they would name to Cato’s board and their plans for the Institute more generally.

Like Jonathan Adler, I am not endorsing all the actions of Cato’s current leaders. It is quite possible that both sides deserve at least some of the blame for the breakdown in negotiations that precipitated the Koch lawsuit. And, obviously, I am in no position to judge who deserves how much blame for what seems to be longstanding bad blood between the Kochs and Cato President Ed Crane. Nor do I believe that Cato’s present policies are perfect. There is surely room for improvement, as in any large organization.

However, Cato has played a very valuable role in the public policy debate over the last 35 years, and it is important that it continue to do so in the future. If the Kochs were to make the sorts of specific commitments I described above and in my last post, it would be a major step towards ensuring that Cato can continue its important work regardless of who prevails in the lawsuit.

Charles G. Koch has issued the following statement about the Koch brothers lawsuit to obtain control of the Cato Institute.  Here it is in its entirety:

Statement by Charles G. Koch
Chairman and CEO, Koch Industries, Inc.
Regarding the Cato Institute
March 8, 2012

In December 1976, when I co-founded and provided the seed money to establish the Cato Institute, which originally was the Charles Koch Foundation, my vision was to build a principled and non-partisan organization that would advance the ideas that enable all people to prosper – by promoting individual liberty, limited government, free markets and peace. This was my intent then, and remains my steadfast intent 35 years later.

With its emphasis on education, Cato has contributed greatly to the marketplace of ideas and is now a respected thought leader. My brother David and I have every intent to ensure Cato continues its work on the full spectrum of libertarian issues for which it has become known.

I am troubled by recent false allegations that our actions to preserve shareholder rights were done in disregard of Cato’s interests. Here are the facts behind what we have done and why.

We did not want to address this shareholder issue at this time. Although our legal filing has accelerated media coverage of this issue, this was not our desire. For months we made every effort to resolve, avoid, or delay this issue. We proposed a standstill agreement to delay for one year or longer any discussion on the shareholders agreement. We asked to delay any shareholders meeting, which would have left the pre-March 1 board of directors in place during this period. We proposed third-party mediation. We proposed alternative corporate structures. We made every effort to avoid this dispute –finally requesting just an additional four days to negotiate a potential resolution – but all of our proposals were rejected. Every counterproposal we received required we forfeit our shareholder rights and act contrary to the corporate governance documents.

The third Cato shareholder, Ed Crane, insisted that we have a shareholder meeting on March 1 to vote on new directors. At this meeting, a new shareholder was to be recognized in violation of our longstanding written agreement and the Institute’s bylaws and articles of incorporation. We warned Cato’s leaders about the negative consequences of forcing a shareholder meeting. They scheduled the meeting anyway. Faced with this intransigence, we did not seek damages or make claims of misconduct by individuals. Rather, we merely filed a declaratory relief action asking the court to confirm the meaning of the relevant corporate documents.

The actions of Cato’s leadership since the filing have provided evidence of their strategy. They thought we would back down rather than risk additional criticism from them and others on top of the many attacks we already face from opponents of a free society. They thought wrong. We will not capitulate to these threats and mistruths any more than we have bowed to other threats.

We have been asked why we did not choose to simply walk away from this dispute. Principle is not a matter of convenience. We firmly believe this is a pivotal moment in Cato’s history. We want to ensure Cato remains consistent with the principles upon which it was founded. The furtherance of this vision is possible only if Cato fosters a culture that adheres to core principles such as integrity, humility, and treating others with dignity and respect. We view recent events as evidence that Cato’s leadership has turned its back on these core principles. As we see it, we would not be acting honorably if we failed to stand up for these principles.

There is a great deal of speculation as to what direction we would take Cato if we were to be in a position to elect a majority of the board. Some have speculated that we would micro-manage the enterprise. Others have suggested we would turn Cato into a partisan Republican organization. These rumors are absolutely false.

My objective is for Cato to continually increase its effectiveness in advancing a truly free society over the long term. This was my objective when, in 1976, I came up with the idea of converting the Charles Koch Foundation to a public policy institute and recruited Ed Crane to run it. My observation was that there was an urgent need for an institute that would flesh out the policy implications of the general principles of a free society. I still believe there is a great need for this work and that Cato can fill that need.

To that end, we would seek to elect board members and officers who will ensure that Cato becomes increasingly effective in advancing liberty while remaining dedicated to its core principles. These officers and board members would act independently from me or any other individual – instead, their role, as should be with any non-profit board, would be to ensure greater accountability and effectiveness. As someone who has created and helped build many organizations in both the profit and non-profit sectors, I know from first-hand experience that sustainable growth can be achieved only through leaders who are committed to core principles. Recognizing all that Cato has accomplished in the past, I envision a Cato that can accomplish even more in the future.

We are committed to seeing Cato flourish because we believe it has the potential to make an increasing contribution to the advancement of liberty and prosperity. But none of this will be possible if Cato’s leaders abandon the principles they are supposed to uphold or otherwise violate the core values of a free society. Such a path has been the downfall of many organizations.

I think it is all to the good that Charles Koch has issued a statement, but there’s not much to it.  The statement does not really address the dominant concerns that have been expressed by non-Cato-affiliated libertarians and fellow travelers and there is a conspicuous lack of detail on key points.  Nowhere does he disavow that the Kochs’ aim to obtain majority control of Cato’s shares for the first time in Cato’s history, and there is no factual detail of the sort necessary to dispell (let alone disprove) some of the charges that have been leveled to date.  Further, some portions of the statement — such as the claim that his intent is to seek to elect “independent” board members — are contrary to the actions he and his brother have taken to date.   [This is not an aspersion on those the Kochs nominated -- most of whom I know and respect.  It is just a simple observation that only one could be fairly characterized as "independent" of the Koch brothers.]

What could Charles Koch say that would assuage the concerns I and others have expressed?  If I had the opportunity to sit down with either of the Koch brothers or an authorized representative, here are the questions I would ask:

• To what extent do any of your objectives not entail or require obtaining or maintaining majority control of the Cato Institute?
• If you and your brother have never had majority control of the shareholders before, why is majority control necessary now?
• Did you propose any alternative settlements or alternative corporate structures that did not entail establishing or maintaining majority-Koch control of the Cato Institute?
• You support and have helped to found many non-profit organizations with traditional corporate structures, such as self-perpetuating boards.  Why is it undesirable for Cato to have such a structure?
• Do you understand why so many of your friends and allies believe that majority-Koch control would undermine the Cato Institute’s credibility and effectiveness?
• In what ways could the Cato Institute be more effective?
• What does the Cato Institute or its current officers do now to hinder its effectiveness?
• What concrete steps do you think are necessary to increase the Cato Institute’s effectiveness?
• Do you consider any of the board members you’ve successfully nominated or proposed, other than Andrew Napolitano, are “independent”?
• Can you provide examples of the sorts of people you would consider to be appropriately “independent” board members of an organization like Cato?
• Is it desirable for any independent think tank or policy organization to be under the legal control of a single bloc of funders or interests?

These are the sorts of questions that need to be answered — and the answers to these questions would go along way to assuage (or confirm) the fears that I and others have expressed.  If the Koch brothers and their allies wish to quell the unrest that is surging throughout the movement, these are the concerns that need to be addressed.

A final point: While I would certainly characterize many of my posts as defenses of Cato, as an institution, I have not sought to defend any of the specific actions taken by the Institute’s current leadership or staff.  To me, this is about the Institute and the principles it represents, not the tenure of any specific officers.  Both sides in this struggle have acted like former spouses locked in a custody battle in which the desire to “win” has overshadowed the other interests at stake.  The question is not whether one side or the other will “walk away,” but whether the principals in this feud are willing and able to put the interests of the Cato Institute ahead of their own.  The shareholder agreement has been amended and the composition of the shareholders has been revised in the past.  No principle demands the current agreement remain in force.  Given the love of liberty all involved have shown throughout their careers, I retain some hope, however fleeting.

UPDATE: Under Penalty of Catapault has an interview with Cato Chairman Bob Levy responding to Charles Koch’s statement, detailing compromise offers Cato made to the Kochs, and providing answers to some of the questions I’ve identified above.  The specifics in Bob Levy’s remarks make the lack of detail in Charles Koch’s statement that much more conspicuous.

UPDATE: More on Cato’s view of the legal issues can be found on Cato’s website here.  The key points seem to be that Niskanen’s shares are held by Niskanen’s estate until it is wound up, and that (under the agreement) the Cato Institute could refuse to purchase back the shares and allow them to be distributed as part of Niskanen’s estate.  Skip Olive comments here.

The commentary on the Koch-Cato continues to multiply.  Three recent posts are particularly noteworthy.  The first are two former Cato staffers associated with so-called “liberaltarianism,” Brink Lindsey and Will Wilkinson.  Brink’s views, in particular, are quite close to my own.  In addition, noted progressive blogger Ezra Klein adds his voice to those wondering what the Kochs hope to accomplish by taking over the Cato Institute.  All three posts are excerpted after the jump.

In addition to these three posts, here some additional items of potential interest to those following this libertarian family feud:

• Jeffrey Toobin profiles Cato Chairman Bob Levy;
• Slate‘s Explainer explains what goes on at think tanks;
• Jessica Flanagan addresses charges of libertarian hypocrisy;
• Cato’s Jonathan Blanks proclaims “Just because we support legalized prostitution doesn’t mean we want to live it.”

Also, FWIW, I think Ilya outlines the sort of initiative that could resolve this conflict.  The question is whether either side is willing to set egos and personal interests aside to embrace such an outcome.

ANOTHER: In a series of posts, Brad Delong demonstrates that he doesn’t understand the concept of rights, or the idea that I may defend your right to do something even as I criticize or lament your choice to do it.

MORE LINKS: Some additional commentary.

• Arnold Kling and David Henderson at Econlog;
• Skip Oliva digs into the legal issues;
• Paul Pillar on the integrity of policy analysis;
• Gene Healy responds to the view from Koch.

Continue reading ‘Koch v. Cato — The Views of Former Cato Staffers and Ezra Klein’ »

I love the Cato Institute.  I admire the Kochs and greatly appreciate their contributions to libertarian causes.   I have ties to both sides too numerous to bore readers with.  So I’m distressed that they are at odds.  Here’s my small contribution to the debate:

(1) In one sense, the Kochs had no choice but to file their lawsuit, given that the two sides couldn’t come to terms on a modification of the shareholder agreement.  The point of that agreement, poorly drafted as it was, was obviously to ensure that Cato remained true to its libertarian mission by vesting personal control in particular stakeholders.  But let’s say that Bill Niskansen’s widow was  a closet socialist, and the Cato board had declined to buy back Niskansen’s shares thinking she was a Cato-style libertarian.  Think about John Kerry coming into Republican Senator Heinz’s fortune via Theresa, and you can see the potential problem.  Apparently, before the lawsuit, negotiations had broken down over whether and how to modify the shareholder agreement.  Without knowing each side’s position in those negotiations, I’m not in a position to judge who was acting unreasonably.

(2) The Kochs made  a huge error in nominating some directors without strong libertarian credentials (Hinderaker, Olson), and others with direct ties to the Kochs (including Olson, who does legal work for them).  This falls short of proof that the Kochs either want to “take over” Cato, or change its direction in any significant way, but it’s a p.r. disaster that clearly strengthens Crane’s hand in the court of public opinion.

(3) Cato claims that David Koch and a couple of directors expressed their dissatisfaction that Cato doesn’t act in a more partisan matter.  That’s not terribly surprising from David, given his funding of Americans for Prosperity.  But it’s brother Charles who strikes me as the more doctrinaire libertarian (he’s certainly the one who has been more involved in “movement” libertarianism over the years), and, as the one who co-founded Cato, likely the one much more involved in pursuing this dispute.  I very much doubt Charles wants Cato to be substantially different than it is now, though it’s well-known that he and Crane are at odds on a somewhat personal level, as well as to some extent on management. (‘m sure that Charles would like Cato to institute objective measures of its success and influence, consistent with his market-based management philosophy. That may or may not be a sound idea, but it’s not indicative of a change in ideology or non-partisanship.)  The problem, though, is that the way the shareholder agreement is currently structured, it’s entirely possible that David could wind up being in sole control of Cato upon Charles’s death.  This makes Cato’s concerns about the effect of a successful lawsuit on its ultimate direction quite reasonable.

(4) Given all this, and the fact that both sides have not-crazy reasons for what they are doing, I hope a compromise can be found that gives the Kochs a say in Cato commensurate with their contribution to the organization over the years (which, to my mind, clearly suggests a minority stake), while still preserving Cato as Cato.  Better yet, if the well hasn’t been poisoned, I would love to see the outcome of reconciliation between the two sides.  Some informal mediation undertaken by high-profile libertarians with ties to both sides may help, given what clearly is an atmosphere of mutual recrimination and suspicion.  Also, I like Ilya’s idea, below.

Many supporters of the Cato Institute in its conflict with the Kochs claim that the latter are trying to transform Cato into a partisan outfit that is less libertarian than the current Cato, and acts to promote the interests of the Republican Party. They worry that the Kochs will stack the Cato board of directors with conservatives, Koch employees, and GOP operatives. The Kochs, for their part, vehemently deny any intent to change Cato’s mission, arguing that they filed suit against Cato only because the Institute’s current leadership violated the Kochs’ shareholder rights. Personally, I am skeptical of claims that the Kochs want to turn Cato into a shill for the GOP. However, I still think that the Koch lawsuit is ill-advised for both public relations and substantive reasons.

The easiest way to address the critics’ concerns would be for the Kochs to drop their lawsuit. But there is another option as well. The Kochs could announce that if they win the suit, they will appoint board members who are well-known independent libertarian academics, policy experts, and activists and are not Koch employees. These people would need to be clearly libertarian and widely respected in their fields. I have in mind big-name libertarian scholars and commentators such as Tyler Cowen, Richard Epstein, Virginia Postrel, and co-blogger Randy Barnett.

Their commitment to libertarianism and longstanding differences with conservatives would assuage any concern that Cato is about to turn conservative or become a cats-paw for the GOP. Their scholarly orientation would ensure that Cato remains an organization focused on ideas and in-depth policy analysis rather than day-to-day partisan politics. And their independence and strong intellectual and academic reputations would make it difficult for any fair-minded observer to conclude that they are merely tools of the Kochs.

If I understand the Institute’s unusual legal structure correctly, the shareholders retain the power to remove board members. So skeptics could still claim that the Kochs intend to replace the independent libertarian board members with conservatives or GOP operatives at some later date. But they would suffer substantial public relations damage if they tried such a purge. Still, if there is a widespread belief that further safeguards are needed, the Kochs could act to change the shareholder agreement and give Cato a more conventional nonprofit structure under which the board is self-perpetuating rather than chosen by shareholders. As I understand it, this could be done by a unanimous agreement of the shareholders. And the non-Koch shareholders would likely be amenable to such a change should the Kochs succeed in their lawsuit. If I am wrong about the legal details here, I welcome correction from people who know more about the relevant law than I do.

Obviously, such an announcement would not resolve the legal dispute between Cato and the Kochs; nor would it completely eliminate all the bad blood between the two sides. But it would go a long way towards addressing the concerns of the libertarian community, and ensuring that Cato remains a politically independent, intellectually serious voice for libertarianism regardless of who wins the legal battle. It would also give weight to the Kochs’ contention that their purpose in filing the lawsuit was to protect their shareholder rights rather than alter Cato’s mission. By quelling the perception that they intend to transform Cato into a fundamentally different institution, the Kochs would also reduce the likelihood that many of Cato’s top scholars and staff would depart in the event of a Koch victory, thereby leaving the putative victors in control of an asset that has lost much of its value.

CONFLICT OF INTEREST WATCH: I described my connections to the two sides in this dispute here.

Here are two more worthwhile posts on the Koch-Cato kerfuffle: One by Tony Woodlief responding to Jerry Taylor, the other by Ted Frank.  Recognizing that not every reader of the VC is interested in this contretemps, I’ve placed excerpts from both posts below the jump.

[UPDATE: It appears Ted Frank's comment has been taken down.  If I can locate a cached copy, I will repost it.  Skip Oliva comments here.]

Continue reading ‘Koch v. Cato — Woodlief Responds, Frank Comments’ »

Some critics of Cato’s stance in the Cato v. Koch dispute claim that it is inconsistent for libertarians to criticize the Koch brothers’ exercise of their rights. After all, libertarians support property rights, so how they can criticize anyone’s use of their property? Such claims are misguided. They are the equivalent of arguing that if you are committed to freedom of speech, it is inconsistent for you to criticize anything anyone says.

In both cases, there is no inconsistency in saying that you have the right to do X, but you nonetheless should not exercise that right. For example, I believe that bloggers have the right to promote racist conspiracy theories. But I also believe that they should not actually do so. I oppose government efforts to censor racist conspiracy-mongering. But that does not mean I can’t criticize it when it occurs. Similarly, if the Kochs are legally entitled to take control of Cato (which is disputable), I would not want the government or anyone else to use force to take away their rights. As far as I know, none of the Kochs’ libertarian critics are advocating any such thing.

But there are many situations where it is unwise or even immoral for us to make use of our rights, whether they be property rights, free speech rights, or others. In this case, the Kochs’ exercise of their rights is ill-advised because it would damage Cato and the cause of libertarianism with little or no offsetting benefit. For that reason, I believe they should drop their lawsuit even if their position on the disputed legal issues is completely correct.

A more subtle version of the inconsistency argument holds that the real problem here is not property rights as such but libertarians’ supposedly unjustified defense of the right of wealthy people to spend money on political causes. However, if the Kochs prevail here, it will not be because they have somehow “bought” Cato with their wealth. For many years now, they have only provided a tiny proportion (about 4-8 percent) of Cato’s funding. The Institute could easily continue its work even if the Kochs never give it another dime. If the Kochs prevail, it will be because the arcane details of Kansas corporate law support their legal position – not because Cato has somehow “sold out” for their money.

More generally, if we bar wealthy people from funding think tanks and advocacy organizations, the only realistic alternatives are either government funding or requiring these institutions to raise all their funds through small donations from many different donors. The government alternative creates obvious conflict of interest problems. A public policy research institute exclusively dependent on government funding is not likely to bite the hand that feeds it. Indeed, the problem is much more severe than in the case of institutes dependent on private funds. If one private donor withdraws, there are many other alternatives (as witness Cato’s ability to survive despite the Kochs’ reduction of support over the last 20 years, and the withdrawal of other donors who opposed Cato’s stance on the 1991 Gulf War). By contrast, government is a monopoly. If it withdraws its funding, there is no other government to turn to, though perhaps state governments can fund think tanks that have fallen out with the feds.

Relying on small donations is also problematic. It makes it difficult for a research institute to survive if its ideas are unpopular or it is not well-known. Historically, many new ideas and causes have been successfully promoted by a small group of donors willing to buck conventional wisdom. Groups such as the NAACP and the ACLU were established in large part with funds provided by a few wealthy donors. The same goes for many more recently established organizations on both the left and the right.

Finally, it is simply not true that reliance on wealthy donors leads to a think tank market dominated by a monolithic “pro-corporate” agenda. Just looking at a few of the major think tanks located in Washington, DC, a very wide range of perspectives is represented: libertarian (Cato); conventional conservative (Heritage); neoconservative (AEI); moderate liberal (Brookings); conventional liberal (the Center for American Progress, the Economic Policy Institute, the Urban Institute, and others); radical left (the Institute for Policy Studies), and many think tanks addressing a narrower range of issues from a variety of viewpoints. Wealthy donors are a sufficiently diverse lot that we are in no danger of having a monolithic think tank market, even if think tanks were completely dependent on them for funding (which most are not). Indeed, there is considerably more ideological diversity among think tanks than in many parts of the academic world.

CONFLICT OF INTEREST WATCH: I have detailed my various ties to the parties in the Cato-Koch dispute here.

UPDATE: It’s not entirely clear to me whether AEI should be characterized as “neoconservative.” The organization has a number of scholars who fall into other conservative camps, and also a few libertarians. I think neoconservatism is probably the dominant strain of opinion there. But I can understand if others perceive the institution differently. In any event, whether AEI is distinctively neoconservative or a hodgepodge of different types of conservative and libertarian thought is not crucial to my broader point.

UPDATE #2: I have corrected the link in the third paragraph of this post. Thanks to readers for pointing out the initial error.

I have spoken with quite a few folks close to the Koch brothers and their organizations, but have not been able to get anyone to speak (let alone answer questions) on the record. I have, however, come across a letter sent to alumni of the Charles G. Koch fellowship program detailing the Kochs’ position. I believe the letter is sincere, but I think most of the arguments are beside the point. Yes, if the Kochs’ interpretation of the shareholders agreement is accurate, they are within their rights to enforce it and Cato’s other shareholder and the Institute are obligated to comply. But so what. The existence of the agreement says nothing about whether it should be enforced by the parties, and that’s the issue — a point the letter concedes when it notes that the Kochs are willing to consider alternative arrangements.

The concern I expressed in my initial post (and elaborated upon here) is that enforcing the agreement so as to establish Koch control of Cato comes at a cost. A Koch takeover of Cato, however well-intentioned, will necessarily diminish the Institute’s credibility and compromise Cato’s ability to advance individual liberty. This is true whether or not the Kochs are within their legal rights to take such actions and whether or not they have better ideas as to how Cato should be run than current Cato President Ed Crane. These have been the dominant concerns expressed about the Kochs’ actions, and yet to such concerns the letter offers no meaningful response. There is a brief mention of an offer to consider alternative corporate structures, but no indication of what alternatives were proposed or how such alternatives would preserve the Institute’s independence — real and perceived — and its reputational capital. A proposal that satisfied such concerns would be welcome — and would along way toward convincing many of the Kochs’ libertarian critics that they are not engaged in a hostile takeover. But until such a proposal is made, the fact remains that the Kochs are engaged in an effort to take control of Cato.

Meanwhile, the Koch-Cato feud has made the NYT. Here’s additional commentary from Patrick Brennan at National Review and Justin Logan at The American Conservative.

UPDATE: Tony Woodlief comments:

I don’t know much about this Cato business. I do of course know Koch. I know people there well enough to find laughable the notion that they are somehow opposed to liberty, or that they could ever imagine Cato is essential to some secret partisan or corporate agenda and must therefore be taken over. . . .

But I suppose right now the point is to circle the wagons, craft a narrative of conspiracy, and paint whatever side one is not on as intransigent and small-minded. None of which will have any bearing on the final legal decisions, but all of which is to the great delight of those who despise liberty and would love to see Cato torn down.

Former Cato staffer Will Wilkinson writes a lengthy post arguing the stakes in the Koch-Cato conflict are smaller than many suppose. He concludes:

I think it’s better for libertarians if some prominent libertarian institutions remain outside the Kochtopus . . . . Still, this isn’t a battle between good and evil, and the stakes are probably lower than you think. Of course, nobody likes to be on the wrong side of creative destruction’s wrecking ball, but it can be indispensable and revitalizing, even for ideological movements.

Over at Libertarianism.Org, Jonathan Blanks has an interesting series of posts criticizing libertarians who defend the secession of the Southern states that precipitated the civil war (see here and here). Like Blanks, I believe that any possible justification that the Confederates may have had was negated by the fact that they seceded for the purpose of perpetuating slavery – a far greater violation of libertarian rights than anything white southerners could complain of in 1861.

There are, generally speaking, three types of libertarian perspectives on the Civil War. Many libertarians actually support the war, some condemn it without defending the Confederacy, and some are actually pro-Confederate.

I. Libertarian Unionism.

Many libertarians actually agree with the conventional wisdom on the conflict: that, although it caused great harm, it was ultimately beneficial because it led to the abolition of slavery. Although I haven’t seen any survey data, informal discussions with libertarian intellectuals and activists lead me to believe that this view actually very common in the movement, perhaps more so than either of the others. However, few libertarian Unionists have actually written about the conflict, perhaps because libertarian scholars tend to focus on issues where we diverge from the conventional wisdom of non-libertarians rather than endorse it (Tim Sandefur’s article on the subject is an interesting exception). Pro-Union libertarians do, however, differ from many other defenders of the Union cause in so far as most believe that the preservation of the Union was not by itself a sufficient justification for the war, independent of slavery.

II. Condemning the War Without Endorsing the Confederacy.

A second libertarian approach to the Civil War recognizes that the Confederates seceded for the purpose of protecting slavery, and does not defend their actions. But it still holds that the war actually did more harm than good, because slavery might have been abolished soon anyway and the war did not result in anything resembling full equality for blacks. Libertarian historian Jeffrey Rogers Hummel is perhaps the leading modern defender of this view. I disagree with his perspective. But it is not unreasonable. The Civil War resulted in the loss of over 600,000 lives, extensive violations of civil liberties, and enormous destruction. And it is indeed true that blacks had to wait another century before they got full legal equality.

Nonetheless, I believe the war was worth the cost because the abolition of slavery was a tremendous advance even if it fell short of full equality. I am skeptical of claims that slavery would have disappeared quickly even without the war. As Blanks points out, slavery was not on its way out, either economically or politically, and the price of slaves was actually rising – indicating that the market expected the “Peculiar Institution” to last for a long time to come.

III. Pro-Confederate Libertarians.

We now come to those libertarians who actually defend the Confederacy and its “right” to secession, the targets of Blanks’ posts. These libertarians argue either that the secession wasn’t really about slavery or that the southern states had a right to secede regardless of their reason for doing so.

On the first point, as Blanks emphasizes, the Confederate leaders themselves repeatedly stated that protecting slavery was their principle motivation. This was forcefully articulated at the time by Jefferson Davis, Confederate Vice President Alexander Stephens (who famously called slavery the “cornerstone” of the Confederacy), and the southern state governments’ official statements giving their reasons for secession. Modern defenders of the Confederacy cannot get around the fact that the most damning evidence against it comes from the statements of its own leaders.

As for claims that the southern states had a right to secede independent of their motives for doing so, Blanks effectively dismantles this one. Slavery was a far greater violation of libertarian rights than anything that white southerners were suffering at the hands of the federal government in 1861. Even if a majority of the population in some jurisdiction supports secession, libertarians should still oppose if the purpose of secession is to perpetuate and extend a massive violation of libertarian rights. And few institutions violate such rights more blatantly than slavery. I don’t agree with all of Blanks’ arguments. Unlike him, I think it’s far from clear that secession was unconstitutional. But whether constitutional or not, Confederate secession was a great evil. Indeed, if the Constitution did permit secession for the purpose perpetuating slavery, that’s more an indictment of the Constitution than a justification of Confederate secession.

IV. Remembering that Blacks Count Too.

I would also add an important point that is overlooked by both Blanks and most modern defenders of the Confederacy: Even if you do endorse any secession that is supported by a majority of the population in a given state, you should still condemn the Confederacy. Southern secession can only be defended on majoritarian grounds if you discount the views of southern blacks. As of 1860, African-Americans constituted about 40% of the population of the states that formed the Confederacy. It’s a safe bet that they were overwhelmingly opposed to secession. When you combine this overwhelming black opposition with that of the substantial minority of southern whites who also wanted to stay in the Union, it is highly likely that a majority of southerners in 1861 opposed secession. Once you recognize that blacks count too, it becomes clear that Confederate secession was anti-majoritarian as well as proslavery.

I don’t believe that most of today’s libertarian defenders of the Confederacy ignore the views of blacks out of racism. They probably do so because they unthinkingly take for granted the laws of the time, which in the South excluded even free blacks from the franchise (as was also true in many northern states). But there is no reason to accept the validity of that exclusion. Indeed, libertarians should be the first to recognize that southern state governments had no right to rule over African-Americans without even the slightest pretense of gaining their consent.

The Koch brothers lawsuit to take control of the Cato Institute has continued to receive commentary, and has even inspired a Facebook page.  Over the weekend, I posted a statement from Jerry Taylor of the Cato Institute.  I will present the the Kochs’ perspective if and when I get a statement or am able to speak with a Koch representative on the record.  In the meantime, here’s some of what’s out there.

The Washington Post reported on the Cato Institute’s ”unusual structure,” as it is not common for non-profits to have shareholders, something Matt Yglesias also discussed here.  Relatedly, Frank Pasquale points to this paper on takeovers of non-profit organizations.

GMU’s Don Boudreaux discusses the relationship between ideas and advocacy, noting he believes the Kochs are “most imprudently and unwisely  threatening the long-term health of the liberty movement.”  Economist Arnold Kling believes less is at stake.  Cato’s Jason Kuznicki is quite upset with the Kochs’ actions. Jordan Bloom’s not happy, but notes the irony of these events so close to Murray Rothbard’s birthday.

Gene Healy, who was publicly toasting Charles Koch last fall, has written an open letter to Koch program alumni. Jacob Grier also has a comment worth quoting:

In the past I’ve defended the Koch brothers from charges that their political activities are motivated by narrow self-interest. Funding scholarships for libertarian college students or sending them to week-long academic seminars are hardly profit-maximizing uses of their money. Though they are famously secretive, the only sensible interpretation of their actions over the past few decades is that they sincerely believe in broadly libertarian ideas and want to see them succeed in the long-run. Their investment in think tanks, journalism, and other non-profits are groping attempts to discover how best to bring that about.

However this takeover attempt seems in no way compatible with the greater good of libertarian ideas. Whatever the legal merits of the Kochs’ claim, the best outcome for the cause of individual liberty is that Cato continues to operate as an independent, non-partisan, respected think tank with a diversity of funders. There is currently no other libertarian organization fulfilling that role in such a high-profile way. In acquiring the asset the Kochs would inevitably decrease its value. This view is, from what I can tell, widely shared among libertarians who have posted about the matter. Perhaps there is something we don’t know, but given how many people involved in institutional libertarianism have benefited at least indirectly from the Kochs’ donations, that dissent should be telling.

I’m left wondering about the internal institutions surrounding the Koch brothers. They are known for their advocacy of Market-Based Management, but do they receive enough criticism within their non-profit work from the bottom-up? Having become accustomed to holding the purse strings, are they open to negative feedback? Do they have advisers who have the security to be able to tell them to back off? If personal animosity is blinding them to the greater good of the causes they’ve spent decades supporting, is there anyone to tell them that?

Skip Oliva rounds up still more stuff here.

ADDED THOUGHT: I’ve seen lots of libertarian-types come out against the Kochs’ efforts, but hardly any in support.  Even those who have received Koch money and would hope to again are saying this a bad move.  Even more are saying this in private.  That should say something.

MORE: A longer story from Weigel.

MORE: Erick Erickson blames Ed Crane.

MONDAY EVENING UPDATE:  The New Yorker‘s Jane Mayer offers a follow-up report.  The conflict has also attracted the attention and concern of Salon and the Boston Globe.

Cato’s Julian Sanchez offers a “presignation” letter.  NRO’s Daniel Foster thinks this is premature.

Brad DeLong collects links, and makes the common error of assuming that a belief in property rights precludes criticism of how such rights are exercised.

My friend Jerry Taylor, a senior fellow at the Cato Institute, offered me his perspective on the Koch-Cato dispute.  Jerry’s obviously sympathetic to Cato President Ed Crane, but he also offers a fair amount of detail about recent events, including recent changes to the Cato Institute’s Board of Directors — changes that occurred last Thursday and I have yet to see reported in the press.

I understand that the Kochs have a different perspective on some of the relevant events but have not (as yet) gotten anything on-the-record beyond that which has appeared in various news accounts.  If I do, I will post that as well.

My prior posts on the Koch-v-Cato kerfuffle are here and here.  Ilya added his thoughts here.

Continue reading ‘Koch v. Cato — A View from Cato’ »