INTERNATIONAL LAW

Putin’s grand strategy

File:Vladimir Putin - 2006.jpgThere has been a lot of loopy speculation about Putin’s motives, much of it based on conjectures about his psychological makeup. Some people think he is irrational. Another view, which is more plausible, is that he acts tactically in response to short-term opportunities but has no strategic vision. But this view is wrong as well. There is a simple, parsimonious explanation for Putin’s actions.

Putin sees the United States as a rival, not as a “partner,” and seeks to advance Russia’s interests by ensuring a sphere of influence around the Russian homeland. He has taken advantage of the fact that most of Russia’s neighbors have substantial ethnic Russian populations and, among these countries, most are poor and badly governed, except Estonia and Latvia. This means that Russia can, at low cost and risk, stir up unrest in these countries by encouraging the Russian populations to express separatist ambitions. It follows that countries without significant Russian minorities (like Finland) or are powerful (like China) have little to worry about. Russia today is not the Soviet Union; Poland (a non-neighbor with a tiny Russian population) has nothing to fear.

Putin is not interested in conquering his neighbors, which would be difficult to rule. He just wants them to be in Russia’s orbit. And so his strategy is to punish any neighbor that shows excessive pro-western inclinations by sowing disorder among the Russian speaking population. That is the story of Georgia and Ukraine. Russia would never have bothered annexing Crimea if a pro-Russian government remained in place in Ukraine. Where governments cooperate with Putin (Kazakhstan and Belarus), Putin does not trouble them.

This strategy is a less ambitious version of the Soviet Union’s strategy, and also not much different from what the United States did during the cold war, in places like Cuba and Nicaragua. It’s perfectly logical, and also likely to succeed because a big country cares more about its neighbors than other countries do, and can exert influence over them more easily than other countries can.

The implications for the West are also clear. It needs to decide whether the benefits of attracting Russia’s neighbors into the Western orbit are worth the risks of disorder that result from Russia’s retaliation. The bottom line, I fear, is that places like Georgia, Ukraine, and even Estonia are not important enough, in the long run, for the West to warrant conflict with Russia when Putin can stir up disorder at such little cost to the Russian treasury. Governments in those countries should do everything they can to appease their Russian populations so that they are not responsive to irredentist appeals from the Kremlin.

It seems to me that in the future the biggest problems will be Estonia and Latvia. Both are little countries with big Russian populations. Both are also NATO members, so the West is committed to defending them. Everything should be done to ensure the Russian minorities in those countries will be unresponsive when Putin starts stirring up trouble.

FINANCIAL REGULATION

The Lewisization/Gladwellization of social science

Lewisization and Gladwellization are synonyms for abuse of social science in the service of readability, or what one might prefer to call narrative-arcification. Lewis’ Flash Boys is the latest and most damaging because, while the book hovers around a real problem in financial markets related to high-frequency trading, it doesn’t identify it clearly or explain the need to regulate–indeed, one could finish the book thinking that the market cured itself.

I wanted to write about this but I can’t improve on Felix Salmon’s sparkling review and blog posts. I made an argument similar to Salmon’s in this piece written with Glen Weyl, but you can’t do better than read Salmon.

REGULATION

Is GM “hiding behind bankruptcy”?

This claim, which appears in many news articles, should sound strange to a bankruptcy lawyer. Owners of defective cars manufactured before GM’s bankruptcy in 2009 have claims again Old GM, which no longer exists, not New GM. In fact, as is standard in large corporate bankruptcies, a new entity was created, a pot of money that victims of Old GM can sue. That entity is called Motors Liquidation Co. I don’t know the details, but it appears–and this is standard–that some of Old GM’s assets were put in ML, so that victims who discover themselves as such post-2009 can collect damages against somebody. Of course, those victims (probably) cannot collect 100 cents on the dollar, but that is always what happens in bankruptcy.

Old GM’s shareholders were wiped out; New GM’s shareholders are Old GM’s creditors or people to whom those creditors sold their shares. There is no reason to hold any of these people liable for the sins of Old. An easy way to think about this is to imagine that Old GM had been liquidated, its Ion and Cobalt factories sold to investors. It would make no sense to make those investors liable for defects in cars manufactured in those factories before they bought them.

But this creates an odd situation. New GM might inspect its records or receive complaints and realize that those old Ions and Cobalts are defective. Does it have an obligation to alert the owners of cars manufactured by some other company (that is, Old GM)? To fix the cars? It appears that some such obligation exists in federal regulatory law. There is an interesting question here what would happen if GM had been liquidated and these lines of cars discontinued, and its assets divided among multiple companies. I suppose in such a case, no one would bear the obligation to recall and fix. Such a rule would make liquidation more attractive to creditors than reorganization, all else equal, which is not a good thing.

So what of the claim that New GM is hiding behind bankruptcy law? Maybe the argument is that New GM delayed the recalls because any fines levied on it by NHTSA would be minimal, less than the cost of fixing the cars, while tort liability is zero thanks to the bankruptcy. This wouldn’t surprise me. But it seems like a hole in the law that Congress should patch, and the way to patch it is not self-evident–again because burdening new firms with liabilities arising from the activities of predecessors will make reorganization unattractive relative to liquidation. It is not clear that that New GM has acted in a blameworthy fashion by minimizing its responsibility for liabilities that belong to Motors Liquidation.

INTERNATIONAL LAW

Can Russia oppose U.S. bank sanctions through the WTO?

The Russian government is mulling it over (or pretending to):

“The WTO gives us some additional possibilities,” Ulyukayev was quoted by Interfax as saying on Wednesday. “We at the WTO council in Geneva talked about the possibility of filing lawsuits against the U.S. over the sanctions against Russian banks and we hope to use the mechanism of the WTO to keep our partners in check regarding this issue.”

I know little about this topic so I emailed a colleague who had this to say (I edit slightly):

There is the purely doctrinal question whether the sanctions can be interpreted to contravene some GATS banking commitment by the US respecting market access or non-discrimination.  Even if yes, and I do not know the answer, there is still Art. XIV bis on national security exceptions that applies for measures to protect “essential security interests” in “war or other emergency in international relations.”  That arguably applies although there is no case law.  Add that a WTO case would take three years, by which time all of this is presumably old news anyway.

The broader question of to what extent sanctions can be used under WTO law has received some attention, but is of dubious practical significance.  We have embargoed Cuba (a GATT member) for 50 years.  No one worried much about GATT during apartheid in South Africa, either.

INTERNATIONAL LAW

Russian stock prices, Jan.-Apr. 2014

russia stock market 2This year is the 105th anniversary of the publication of Norman Angell’s The Great Illusion, which argued that states act against their self-interest by going to war. While its timing was poor (the book was published in 1909), the argument is actually ingenious: Angell argues that if Germany conquered England, it would simply deprive itself of a debtor and trading partner, while obtaining in return only some minerals, the Elgin marbles and a few other treasures, and an unhappy population. Germany would do far better for itself by instead continuing to trade with England.

People are now making exactly the same argument about Russia. Because the economy of Russia depends on an export market for its oil and on foreign investment, and a few slivers of Ukraine will most likely be a burden rather than a benefit, Russia’s self-interest should direct it to leash the dogs of war. But the graph above suggests that there is less at stake for the Russian economy than might first appear.

REGULATION

Dignity as a Value in Cost-Benefit Analysis by Rachel Bayefsky

This very good student note examines how “dignity” has played a role in regulatory impact assessments produced by regulatory agencies. President Obama’s executive order 13,563, which renewed a longstanding requirement that regulators conduct cost-benefit analysis of major regulations, famously introduced a new provision allowing  regulators to consider the effect of a regulation on “human dignity.” Implicitly, at least, regulators were thus authorized to issue a regulation that fails a formal cost-benefit test if it advances this value. (I briefly discuss the order here.)

Many commentators worried (or hoped) that the human dignity requirement would allow regulators to issue expensive rules that failed cost-benefit analysis. Couldn’t the EPA, for example, say that pollution of all types send people to hospitals, where they undergo procedures that violate their dignity? Or could the Department of Transportation impose expensive new safety requirements on cars because people who are maimed in accidents lose their dignity? In fact, Bayefsky cites an EPA analysis that suggested that a pollution regulation would be justified in order to avoid or minimize the indignity of a protracted death “involving prolonged suffering and loss of dignity and personal control.” If such a step were to be taken, there would be little left of cost-benefit analysis.

Yet there are numerous regulations that seem to advance values relating to dignity where the benefits would be hard to quantify. Bayefsky provides a number of examples: regulations that increase access to facilities like bathrooms to people with disabilities (who might otherwise need personal assistance), reduce the incidence of prison rape, and protect patients’ health information. Can the “dignitary” benefits associated with these regulations really be monetized?

Bayefsky says no. I suspect the answer is yes, at least sometimes. The paper is well worth reading for anyone interested in this topic.

(The image is from Wikipedia.)

INTERNATIONAL LAW

The “civil war” in Ukraine

From Bloomberg:

“Blood was spilled once again in Ukraine,” Russian Prime Minister Dmitry Medvedev said on Facebook today. “There’s a sense in the country that a civil war could break out.” Putin “is getting many requests” from eastern Ukraine “to intervene in one way or another,” his spokesman, Dmitry Peskov, told reporters yesterday.

It’s significant that Medvedev invokes “civil war.” No civil war exists in Ukraine–there is a bit of unrest, possibly a near-insurgency. But if a civil war did exist, it would help pave the way for a Russian intervention. Strictly speaking, foreign countries are supposed to stay out of civil wars under international law. But, in practice, they never do. If Russia does intervene, Putin will be sure to cite U.S. involvement on the side of the rebels in the Syrian civil war. An even better precedent is U.S. aid to the Contras in Nicaragua in the 1980s, where the U.S. played a facilitating role similar to Russia’s in Ukraine.

Still, if and when a civil war breaks out, it will break out in large part because of Russian encouragement and indeed leadership, so we will need to put into the category of “hubris” any future Russian argument that it must intervene because a civil war has broken out in a neighboring country. Yet if that happens, it will increase Russia’s bargaining power with the west, because Russia is in the best position to broker, monitor, and enforce a peace agreement between Kiev and the “rebels.”

 

MISC.

Reply to my post on Social Security overpayments, and a reply to the reply

A former student who works for Social Security responds to yesterday’s post:

I read your blog post today on Social Security overpayments and wanted to respond briefly (in my personal capacity, of course, and so my opinions don’t necessarily represent Social Security’s official policy on the matter). I think you’re seriously mistaken about the source of the agency’s claim to recoup alleged overpayments. Rather than a common-law argument of unjust enrichment, the Social Security Act and implementing regulations offer specific authority to collect overpayments using a variety of methods, including tax refund offsets.

The source of authority for collecting overpayments from claimants who received Title II benefits lies in Section 204 of the Social Security Act (codified at 42 USC 404). That statute allows Social Security to prescribe regulations to implement the overpayment process. 20 CFR 404.502 details the specific means by which the agency may collect overpayments. 20 CFR 404.502(b) covers situations when the individual overpaid dies before the adjustment is made, and 404.502(b)(3) specifies that such adjustment can be made by “withholding a lump sum or monthly benefits due any other individual on the basis of the same earnings which were the basis of the overpayment to the deceased overpaid individual”. In the case of the Post story, both Sadie Grice and Mary Grice were entitled to benefits based on the father’s earnings record (some combination of widow’s benefits, mother’s benefits, or child’s benefits, I would guess, though I don’t know for sure and have no personal knowledge of the case other than what’s in the Post article). Therefore, 404.502 would arguably allow collection of the overpayment from Mary because she received benefits on the same earnings record as Sadie did, and Sadie was mistakenly overpaid. 20 CFR 404.520 then permits the overpayment to be referred to the Treasury if the debt is certain in amount, past due, and legally enforceable, for a tax refund offset.

If the benefits in question were child’s benefits that Mary was entitled to solely because she was a minor child of an insured individual (20 CFR 404.350), that’s her entitlement, not her mother’s even though her mother acted as her representative payee because she was 4 years old when she gained the entitlement. I’m a little more unclear on how it would work if Sadie was receiving mother’s benefits (20 CFR 404.339) because of the minor children, but that presumed she wasn’t entitled to widow’s benefits in her own right. In any case, while the propriety of trying to collect such old debts is arguable and the agency should certainly be held to prove the overpayment occurred on the stated earnings record in the specified amount, I feel certain the agency is not relying on a common-law theory of unjust enrichment to do so.

Point taken, but I still believe that this program would not be upheld in court (and perhaps the author of the email agrees in part). I haven’t look at the regulations, but the regulations must be consistent with the statute, and 42 USC 404(b) contains this provision:

In any case in which more than the correct amount of payment has been made, there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this title or would be against equity and good conscience. In making for purposes of this subsection any determination of whether any individual is without fault, the Commissioner of Social Security shall specifically take into account any physical, mental, educational, or linguistic limitation such individual may have (including any lack of facility with the English language).

So the common law (or technically, equity) is relevant after all. And this means, among other things, the doctrine of laches would apply (even if Congress has suspended the statute of limitations); and equity would frown on (as they say) recovery from Mary on account of payments that Sadie may not have no turned over to her, may have spent on herself or the other kids, and so on. Clearly, as a four-year old, Mary was without fault; and the last sentence of the provision would seem to further strengthen her argument. Finally, consider again the policy of going after the oldest child alone for overpayments that benefited all the children if at all; this too is not explicitly authorized by the statute, and would, I am fairly certain, not be considered equitable by a court.

MISC.

Can the government recover from children on account of Social Security overpayments to their parents?

According to a report in the Washington Post, the government does just that.

A few weeks ago, with no notice, the U.S. government intercepted Mary Grice’s tax refunds from both the IRS and the state of Maryland. Grice had no idea that Uncle Sam had seized her money until some days later, when she got a letter saying that her refund had gone to satisfy an old debt to the government — a very old debt.

When Grice was 4, back in 1960, her father died, leaving her mother with five children to raise. Until the kids turned 18, Sadie Grice got survivor benefits from Social Security to help feed and clothe them.

Now, Social Security claims it overpaid someone in the Grice family — it’s not sure who — in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter. Why the feds chose to take Mary’s money, rather than her surviving siblings’, is a mystery.

If, as I think, the government’s claim is based on common law principles (as opposed to specific statutory authorizations), it’s claim is probably invalid. The issue is not the age of the claim–as the article notes, Congress eliminated the statute of limitations for government claims of this sort. Nor is this a case of a child inheriting the debts of a parent. In a way, this is a run-of-the-mill unjust enrichment case. Consider this simplified version.

The government overpays Sadie on account of her Social Security benefits. Sadie, unaware of the error, cashes the check and gives the proceeds to Mary. Neither knows of the error. The government is entitled to obtain restitution from Sadie or Mary.

Putting aside the time lag, this is our case. But there is a problem for the government. It has no evidence that Sadie spent the money on Mary, as opposed to her other children, or for that matter on herself. (Maybe the law required Sadie to spend the money on her children, but if she didn’t, the government has a (defunct) claim against Sadie, not against the children.) According to the Washington Post:

The government doesn’t look into exactly who got the overpayment; the policy is to seek compensation from the oldest sibling and work down through the family until the debt is paid.

I can almost imagine why this crazy policy was (presumably) approved by government lawyers. If you have a valid restitution claim against multiple people, you can go after whoever you want; you don’t have to go after all of them. The purpose of the payments was to benefit the children, and so overpayment would have benefited all of them, if it was spent on them. And so if it’s easiest to start with the eldest sibling, that’s a policy judgment that is consistent with the law.

But under the principles of unjust enrichment, the government needs to prove that Mary actually received money from Sadie, or that the money was spent on her in a way that made her better off. It can’t.

BOOKS

More Than You Wanted to Know

bookjacketHave you read your iTunes contract–the one that Apple asked you to read and accept before using the service? No? Neither have I. It’s 55 pages long. How about the mortgage disclosures that accompanied your last refinancing? In Illinois, you would need to read 49 disclosure forms spread out over 101 pages. When I refinanced my mortgage, the huge stack of disclosures induced a faint bout of nausea but no wisdom. A professor who teaches contract law and banking law, I quickly gave up trying to understand what I was reading.

The law overflows with disclosure mandates even though it is pretty obvious to everyone that they hardly do any good. Instead, they confuse and frustrate buyers. In this terrific book, Omri Ben-Shahar and Carl Schneider exhaustively describe this phenomenon. Mandatory disclosure is law’s biggest and phoniest panacea, as they amply demonstrate.

The appeal of mandatory disclosure laws is easy to understand. They seem like a good way to protect buyers without interfering with the seller’s power to choose terms that protect its interests–an early form of “nudge.” And while in certain circumstances they can do good, they more often cause the seller to game the system by reducing quality along dimensions that the disclosure mandate does not cover, leading the government to force the seller to disclose more and more. The upshot is that consumers are overwhelmed with information they can’t understand.

In a kind of infinite cycle to hell, courts strike down contracts because buyers can’t pick out a key term among the Borges’ library of information, and sellers protect themselves by pointing out the most important terms and demanding that buyers initial them. I can’t remember how many terms I was required to initial in my mortgage but it was surely dozens. (I didn’t read any of them as an act of defiance and self-preservation.) Eventually, people will be required to initial every sentence of 100-page contracts and be required to take exams that test their understanding before being allowed to go home with their toaster or space heater. We will understand every last detail of everything we buy but have no time to use it.

ORIGINALISM

Originalism: my dialogue with Will

Below are links to posts written by me and Will Baude while we co-taught our seminar on originalism.

Date Author Title and Link
January 7 Eric Posner Originalism Seminar Class 1:Heller
January 8 Will Baude Heller as an Advertisement for Originalist Methodology
January 10 Eric Posner Originalism: History vs. Law
January 14 Will Baude Printz, Commandeering, and the Federalist
January 14 Eric Posner Originalism Class 2: Printz As A Paean To The Living Constitution
January 21 Eric Posner Originalism Class 3: Precedent
January 22 Will Baude Precedent is not a threat to orignalism
January 29 Will Baude Does originalism justify Brown, and why do we care so much?
January 30 Eric Posner Originalism Class 4: Brown
January 31 Will Baude Originalism, the bear principle, and the reading of entrails
February 2 Will Baude Originalists need not be naïve perfectionists
February 3
 Eric Posner Response to Will’s Response to my Class 4 Comments
February 5 Eric Posner Originalism Class 5: Noel Canning
February 6 Will Baude Recess appointments and the size of government
February 6 Eric Posner Reply to Will on Noel Canning
February 6 Eric Posner Originalism and precedent: Baude v. Sunstein
February 7 Will Baude Originalism, false dichotomies, and the question of who decides
February 12 Will Baude Reasons for being an originalist
February 12 Eric Posner Class 6: Reasons for being an originalist
February 14 Will Baude Originalism in our legal culture: The case of the Ground Zero mosque
February 19 Eric Posner Originalism Class 7: The Evolving Constitution
February 19 Will Baude Originalism and Its Critics: The Critics’ Turn
February 27 Will Baude Originalism and ‘Accounting for Change’
February 27 Eric Posner Originalism Class 8: Accounting for Change
March 3 Will Baude Originalism and the rule that government actors don’t change the Constitution
March 5 Eric Posner Is there a rule that government actors don’t change the Constitution?
March 6 Will Baude When a change in constitutional practice is legally invalid
March 6 Eric Posner Originalism Class 9: Between Phony and Naive
March 7 Will Baude Originalism: the theory and the politics
REGULATION

Is the GM recall scandal an “availability cascade”?

I have dug deeper into the numbers and have found nothing to cause me to change my mind about my conclusion yesterday that GM may well have acted reasonably, and certainly that it is premature to conclude that it acted in a scandalous, criminal, or unreasonable fashion. A student of mine produced this spreadsheet, which makes clear that GM’s culpability depends on how soon it understood the problem. If within the first few years, then yes. If after 5 or 6 years, then probably not. (Her spreadsheet is based on my assumptions from yesterday, which are–caveat emptor–possibly dubious, plus she extends the time frame out another 10 years to consider cars manufactured just before the recall. She also treats this as an NPV exercise based on expected tort liability rather than a cost-benefit analysis but the conclusion would be the same assuming that the assumed tort awards reflect statistical valuation of life.) Until it is clearer who knew what when, one cannot determine whether GM acted wrongfully (in the sense of causing harm to people; it’s impossible to deny that their cars are crappy however safe they may be). I’m afraid it probably won’t be clear for years, until after lawsuits and investigations are concluded.

Cass Sunstein and Timur Kuran wrote a fine paper in 2007 that discusses regulatory panics based on what they call “availability cascades”–where some high-profile corporate misfeasance that feeds into people’s anxieties causes an enormous scandal despite no evidence that it harmed anyone. The most famous case is Love Canal, which harmed no one. Another is Alar. Also read this paper on the  Ford Pinto scandal by Gary Schwartz.The Pinto case was another regulatory panic where fears greatly outstripped the real harm and wrongdoing. The common elements in all these examples are (1) sympathetic victim groups who effectively work the media, (2) opportunistic politicians and commentators, and (3) lazy journalists.

REGULATION

The GM scandal: a little math

The House Committee on Energy and Commerce is holding a hearing on whether GM delayed too long before recalling cars with defective ignition switches. It was revealed at the hearing that the cost of the replacement part is only 57 cents, and this has led to calls for the heads of those responsible. This, from Michael Moore, is typical:

I hope the criminals at General Motors will be arrested and made to pay for their premeditated decision to take human lives for a lousy ten bucks. The executives at GM knew for 13 years that their cars had a defective ignition switch that would, well, kill people. But they did a “cost-benefit analysis” and concluded that paying off the deceased’s relatives was going to be cheaper than having to install a $10 part per car.

The $10 figure is from a Washington Post article; the 57 cent figure can be found in other sources.

I was curious about whether it is true that GM’s decision to install the switch (rather than replace it with a better switch) or not to recall the car in 2007 really would have failed a cost-benefit analysis. Here are some back-of-the-envelope calculations, based on (still murky) details from a House report and newspaper stories.

Let’s suppose that back in 2005, which was the model year for the first car with the ignition switch problem, GM knew that it would install that switch in 2.6 million cars (the eventual number that would be recalled). Those cars were sold over the next 9 years. If we assume a constant number of cars sold per year, we get 290,000 cars sold per year. A little additional math shows that this amounts to 13,050,000 car-years, by which I mean the number of years in which a car with the ignition switch was owned and driven by someone.

During this period, the switch problem caused accidents that caused 13 deaths, or 0.000001 death per car-year. It is worth noting parenthetically that the probability of an average person in an average car being killed in any year is 0.0000556. So the effect of buying a GM car with an ignition switch problem increased the risk from 0.0000556 to 0.0000566.

Still, no one wants to take an unnecessary risk of death, however small. But how much would you be willing to pay to reduce the risk of dying from a car accident by 0.000001 in one year? One way to get the answer is to use the U.S. government’s valuation of a statistical life, which was around $6 million when these decisions were made. (That number is based on data that measures how much people are willing to pay to avoid very small risks of death, as in our example.) Another is to look at tort awards, which at the time averaged about $3 million for deaths. Let’s call it $4.5 million. And assume that the average buyer drives the car for 10 years. Multiplying these numbers together, a person should be willing to pay about $45 to avoid this risk of death ($4.5 million * 0.000001 per year * 10 years).

Now if GM could have fixed the problem by using a 57 cent or $10 switch at the time of manufacturing, it should have. But it appears not to have recognized the problem until most of the cars were on the road. The Washington Post says that repairing the car would take less than an hour. Let’s call it half an hour, and assume $100 per hour in labor costs, which is roughly consistent with the CEO’s testimony that it would have cost GM $100 million to  recall the 2.6 million cars on the road. If all this is true, the decision not to recall–saving $50 to avoid an expected cost of $45 per car–seems reasonable, although as we have seen the proper measurement of a loss of life is controversial. The bottom line is that GM could very well have complied with a reasonable cost-benefit analysis; if not, it was probably close. To know the truth, we need more data than are publicly available. So why the headlines? (That’s a rhetorical question.)

Are my calculations or assumptions wrong? If you see an error, please contact me here.

INTERNATIONAL LAW

Chutzpah award, Ukraine edition

Alexei Miller, the head of Gazprom, has explained that the reason for raising gas prices for Ukraine is in part that Ukraine no longer is entitled to discounts that it received in return for leasing the Black Sea fleet base. According to Bloomberg:

In Kharkiv in 2010, Ukraine agreed to extend Russia’s lease to the Black Sea Fleet base in Crimea from 2017 to 2042 in exchange for cheaper gas. Russia has no need for the accords after the peninsula’s accession, Prime Minister Dmitry Medvedev said last month, calling for Ukraine to pay about $11 billion lost to Russia’s budget.

Of course, the lease is void because Russia now owns Crimea! The original purpose of the contract has been frustrated, as a contract lawyer would say. You can’t lease property from yourself. But shouldn’t Russia compensate Ukraine for the loss of a chunk of its territory, if we’re going to be legalistic about this? (Miller’s better argument is that Ukraine forfeited its discount by failing to pay prior debts.)

Joseph Blocher and Mitu Gulati argue that Putin should have bought Crimea rather than taken it:

Perhaps if Mr Putin had negotiated to buy Crimea instead of taking it over, Ukraine could have negotiated for both debt relief and multiple years of cheap gas in exchange. Russia might even have helped the current Ukrainian government track down some of the funds that the members of the prior government supposedly absconded with. On the flip side, there would not have been any need for all the chest beating, troop movements, and so on. And the international community surely would’ve been more likely to bless the result—a result for which Russia might be willing to pay some premium.

But why pay for something that you can take for free? Anyway, the chest beating seems to have been the major benefit for Putin. And if a sale was really in everyone’s interest, there is nothing in international law that would have blocked it.

INTERNATIONAL LAW

The IPCC report and climate justice

As the magnitude of the harms from climate change becomes clearer, poor countries have redoubled their efforts to achieve “climate justice”–large sums of money from rich countries, at least $100 billion, to compensate them for the harm caused by climate change. As the New York Times puts it,

Countries like Bangladesh and several in sub-Saharan Africa that are the most vulnerable to the effects of climate change say the report strengthens their demand for “climate justice” — in other words, money, and plenty of it — from the world’s richest economies and corporations, which they blame for the problem.

But there’s a problem: President Obama and Secretary of State Kerry

know there is no chance that a Congress focused on cutting domestic spending and jump-starting the economy will enact legislation agreeing to a huge increase in so-called climate aid. Since 2010, the Obama administration has spent about $2.5 billion a year to help foreign countries adapt to climate change and adopt low-carbon energy technology.

It will be a stretch even to continue that level of spending.

And not just for the United States. Other developed countries are also not likely to give much aid to poor countries.

So what’s to be done? The answer is pretty clear: countries will need to negotiate a climate treaty that does not redistribute wealth from rich countries to poor countries. You can have a climate treaty, but you can’t have climate justice, and the sooner everyone realizes this, the sooner a treaty will be negotiated.

I have made this argument (at greater length) in several places, including this book, this article, and this column.

CONSTITUTIONAL LAW

McCutcheon as a tax on millionaires

McCutcheon was a victory for gazillionaires, right? Yet what do we make of the headline of a striking article in Politico: Big donors fear shakedown after decision? (The article is dated April 2, not April 1.) And here are some choice quotations:

“I’m horrified, planning to de-list my phone number and destroy my email address,” said Ken Kies, who, along with his wife, has bumped up against the federal political contribution limits. “What I was really hoping for is a ban on lobbyists making contributions entirely.”

Podesta said for those donors, the new rule “eliminates an excuse that people have to say I’m done for the cycle and I can’t do anymore, which means that people who do max out will end up giving more money than they used to to candidates.”

“We were already getting drained before, now it’s another means to suck out more cash without any actual return on value,” said one GOP lobbyist.

“For the lobbying community, it increases the cost of doing business,” said David Rehr, a former association executive.

While Democrats publicly bashed the decision, they were far more positive in private. One top Hill Democrat suggested Democrats had larger number of donors, and they can now go back and ask these supporters for even more money.

Consider two models of campaign donation. In model 1, the donor gives a donation in return for a favor. McCutcheon improves the well-being of the donor in model 1 because the donor can give more donations and receive more favors in return. In model 2, the politician threatens the donor with a bad outcome (for example, delay in regulatory approval) unless the donor coughs up a donation. McCutcheon hurts the donor by giving politicians the power to make more threats and receive more donations in return. The difference between model 1 and model 2 is the difference between a bargain and extortion.

Which model is correct? Probably both describe some of the reality. Caro’s biography of LBJ provides a clear example of model 2 where LBJ threatened to delay a bank merger unless (if I recall correctly) the owner of the bank held off criticism of LBJ in a newspaper he also owned. The Politico quotes also support model 2 (though I suspect some of those quotes were tongue-in-cheek). But if model 2 were correct, it is hard to understand why Congress agreed to campaign finance limits in the first place. And it is hard to understand why the billionaires oppose donation limits, though it would not surprise me if people like McCutcheon himself, who espouse a crude libertarianism, never take the second step and ask how they fare if others are freed from the limits that frustrate them. Indeed, even under the more benign model 1, the lifting of donation limits can just lead to auctions in which the politician, who has quasi-monopoly power, can demand higher payments from those who seek favors. So while the donor still gets something of value for his money, he must pay more than in the past. Think of McCutcheon as a decision that imposes a tax on millionaires.

Kirkland and Ellis Distinguished Service Professor, University of Chicago Law School