 We saw him, and I had seen him, speak extemporaneously in beautiful, fully-formed chapters. And not slowly, either. I'm confident that a recording of what I heard would scarcely need editing if it were going to be a book. He corrected me in front of the audience, of course, noting that his extemp talks and the answers to the questions that he had been answering earlier really came on topics that he'd been studying for years. That's a poor excuse for the fine performance that I've seen him give. A truly remarkable individual, Richard Epstein. One filled with all of the grace that is associated with staged performances. The lights are really quite something. Also, by the way, I noticed just as Rick got up, the music started to play, and I assumed that that meant that I was supposed to do a two-step in addition to speak about something having to do with the public trust documents. Have you hear those occasional applause as I suspect that they've understood what's gone and hear far better than any of you, and therefore are giving you gentle hints which, if you follow, I will be most grateful for. So anyhow, I'm happy to do both two numbers, one song and dance routine with respect to folks across the thing, and the other, another song and dance routine, which has to do with some aspects of American legal theory, common and constitutional law. And that, I suppose, has to do with the question of the public trust doctrine, how we ought to understand it, and what, if anything, we ought to do with it. And as always, the case at conferences like this, there's a certain kind of divine coordination with respect to topics. As I was sitting down this afternoon trying to begin to figure out how I would begin my speech, I heard Mr. Bishop give his talk. And what he did, in effect, was to give a talk in which the question before the House was whether or not the system of federalism, which has divided states and national control, is sufficient to handle the problem of the comments. That is a situation in which various state delegations go in and try to take a somewhat larger portion of the total wealth for their own state than they will leave for any other state. And he came up with a somewhat somber conclusion that we weren't quite sure whether or not the system of federalism would hold against the various tendencies of state delegation and other groups to try to get slightly more than their pro-rata share of the total take. And this, of course, leads in very naturally to the kind of topic that I'm talking about, which is the public trust. And the reason is that the public trust doctrine, like a whole variety of other doctrines which have to do with individual liberties, is essentially another way of trying to get at the same problem of the comments. Whereas there are monies which are other property which is held in common by the government, and various types of individuals are trying to get more than their pro-rata share of that common resource for their own private gain. And therefore, what one should do is to understand that in dealing with constitutional doctrine generally and with questions of public defaulcation in particular, the basic principle that you wish to believe is one of redundancy. That is the strategism that individuals can devise as sufficiently multifarious, sufficiently clever, and sufficiently persistent that no one single set of techniques is going to be sufficient until the day to keep them in line. And when you divide and design a constitution, you don't want to create the imaginable line mentality by trying to put all your eggs into one basket. So to the common question which I think divides a large number of American constitutional scholars, do we put our trust in structural protections on the one hand, be they federalism or separation of powers, or do we put our trust in various protections of individual rights and transgender bill of rights? The answer to that question is we put our trust in both. And the only question is how many resources do you have and which way at the margin is it more efficient to develop one to another? Now, I can't answer the great question of substitution in the time that's left to me. Indeed, I'm not even quite sure how I would answer it if I had all the time in the world. So what I want to do today is to start to figure out how it is that one would take the public trust doctrine, whatever that is, and I will describe it briefly later, and see the way in which it could be converted into an understanding of how it is that common law and constitutional rules might in combination be used to limit the power of government so that it performs those functions which it ought to perform but doesn't engage in the excesses that we try to prevent the Hobbesian sovereign from doing. And in order to give you some handle about it, let me just start with two kind of simple-minded maxim, which constantly appear in ordinary discourse, but generally are not given any systematic explanation. Then having stated dilemma, let me see if I could take the general theory of eminent domain, twist it a little bit so as to make the whole problem of public trust part and parcel of a larger inquiry of how individual rights can be protected by constitutionalism against intrusion. Well, one of these maxims is of course very old and it says that a public office is a public trust and everybody sits down there and they nod knowingly and then they go off and they start to think about something else because they have the usual low estimation that most of us have of our public trustees. And it seems to me that one of the things that we ought to do with this maxim is not forget it but to take it extremely seriously and to recognize that the private law of trust, which deals with exactly the same kinds of arrangements, indeed imposes an enormous amount of restrictions upon the ways in which trustees can deal with trust property, including those which are designed to prevent various kinds of self-dealing between the trust corpus on the one hand and the trust on the other. And to the extent that one tries to use private analogies as a source for understanding what public law is about, maybe this maxim turns out to contain a little bit more firepower than the customary dismissive attitude towards it would otherwise suggest. And the other point that one wants to mention comes from other areas of common law in which we are told again very solemnly that when you are dealing with certain kinds of public property we have to understand that they are inherently inalienable by the sovereign. And my own attitude towards that which I think is shared by a large number of other people is that whenever you hear the word inherently or essentially predicated before any other words what somebody is telling you and rather elaborate philosophical jargon is the following. We see a rule which is certain property is inalienable and we don't understand exactly why it is or ought to be the case. And so rather than confess our ignorance what we will do is retreat to a higher level of philosophical abstraction and pretend that it has to be in the nature of things assuming of course that everybody knows politely and precisely what the nature of things really is. But the argument it seems to me nonetheless is still of some value not concerning that methodological caveat. That is when you find out that there is a longstanding persistent rule and you're never quite sure where it arose but nonetheless that you see it manages to hold on tenaciously against all of the attacks on it chances are it contains a modicum of good sense. And so what that rule ought to do is to suggest you exactly the same thing as our first little maxim suggests which is maybe if you look a little bit more closely at the inalienability of public property you will be able to find some clue as to what is going on. And of course it's a very difficult and important question because we have an elaborate theory of private property, right? And for the most part if you were to ask people what it is about private property which renders it both valuable and distinctive one of the elements that they would give in the answer is its alienability. And the function of alienability is to say if I don't want it as much as you do we can find a price which somehow or other effectively splits the difference and makes both of us better off by virtue of the exchange so that essentially without alienability of property you don't have markets and without markets you have stagnation. So if you find in effect a rule which prohibits alienability of certain kinds of property you have to ask why it is that the restriction manages to endure when prima facie it appears that it ought to be highly inefficient so that we now have two ways of looking at this problem or two handles on the question and now the issue is how can we put them together in terms of some kind of a synthetic theory? Well the first thing it seems to me is that we have to ask ourselves what's the relationship between a theory of public property and a theory of private property? And here what I do want to do for at least a minute or two is to go back to stuff that I've written at some length on with respect to private property and to talk about the major constitutional protection of private property which is found in the Fifth Amendment. And for those of you who don't remember what it says maybe because you've been reading too many Supreme Court opinions what it says in effect is that nor shall private property be taken for public use without just compensation. And what I want to suggest is that there's another missing constitutional clause which ought to be put side by side with it which is nor shall public property be taken for private use without just compensation and treat the two as though they are mirror images of one another. Now once you do that it all of a sudden becomes exceedingly clear that you have, at least if you understand matters are right a rather large subject matter that you're going to have to deal with in connection with the public trust doctrine which now becomes the public just compensation doctrine or the public eminent domain clause. To give you some idea of just how vast an inquiry it is it's probably instructed to step back for a minute or two and to ask the question of what makes a sensible interpretation of the plain old eminent domain clause which we find present in our existing constitution and which is I think subject to a strict interpretation which yields nonetheless some very radical results. Before I get into this however I do want to say something about interpretivism which bears on remarks that were made today particularly in the discussions with Forrest McDonald. That is you can be in extremely strict constructions and still believe that a clause has very broad and powerful implications in the way in which it limits government. Strict construction is only an effort to try to take the words on their face and to make sense of them. It is not an effort to try to engraft upon the art of construction or interpretation some kind of hidden extra constitutional presumption which says that all constitutional guarantees ought to be construed narrowly or all constitutional guarantees ought to be construed broadly or more insidiously the constitutional guarantees I like ought to be construed broadly and the rest of them could go hang. That's not what you're after. In effect what you're trying to do is to figure out the logical connections between propositions that were contained with the clause and to be extremely aware that when you start to read in exceptions to the document is written they have to be comprehensive or consistent or congruent with the basic kind of intellectual theory which animates the clause itself. It's not as though there are no exceptions to various kinds of constitutional provisions. Of course there are but they simply cannot be wild cards which allow you to neutralize whatever the express test wants to state. So when we start to get to eminent domain in effect the first intuition that you want to have is what's the scope of the protection? And here it seems to me that we all ought to be card carrying Marxist with respect to the question. That is if you ask Karl Marx what's wrong with capitalism what's wrong with America what's wrong with a large number of Western democracies he would say it's that private property turns out to be their most pervasive and comprehensive social institution and the only way in which you could set things right would be to abolish the entire institution, root and branch and replace it with the collective ownership of the means of production. So if that's what private property is when you have a clause which protects it in effect they say that the one thing that you cannot do is to enact exactly that kind of a program. And so for example when we see Mr. Justice Holmes in Lochner in New York tell us well the Constitution doesn't enact Mr. Herbert Spencer social statics and you start looking at some of the provisions after a while you're not so sure. The protection that we give to private property is in fact covering the entire domain the Constitution doesn't say land it doesn't say copyrights it doesn't say easements it says private property of all forms kinds and descriptions and the kind of protection that it has is against takings of all kinds, sorts and descriptions. So that when I start to work out the implications of the theory what you have to do is to ask how is it that a government can take property from various kinds of individuals and it turns out virtually anything that it will do will be in one way shape or form of taking of the property from those individuals and giving it typically to somebody else or maybe back to the people from whom it's taken. And so when I work this through the book what I argued in effect is that we can identify three kinds of takings which are perfectly consistent with the basic texts of the eminent domain clause and which therefore call for constitutional scrutiny. One of them is all forms of taxation in effect of taking from large numbers of individuals put into some kind of a public purse and then we'll have to worry about the distribution of benefits from the taxes that are so collected. Then in effect you could make I think very powerful exactly the same argument with various forms of public regulations whether they be restrictions in the form of wage and price control or zoning or land use controls of any sort kind of description. And the third thing is any kind of modification of various kinds of common law liability rules which protect private property fall into the same category. And lest anybody doubt that on the theory that tort liability and property have nothing in common imagine yourself in a universe in which we decided tomorrow that all actions for trespass are abolished so that in effect if somebody decides to come and sit on your land there's nothing that you can do to get them off whether by common law action or to make things even nicer by a way of self-help. This is only a modification of a small common law tort rule and yet it turns out that this so-called small common law tort rule lies at the root of all of our organized civilization and the only thing is small about it is its lack of controversy not its lack of importance and one ought to be exceedingly careful in the way in which you keep these two things together. Now if you start with this view of private property then it turns out that somebody will say well government can't act at all and so that what happens is you've not created a constitution but instead you've created some kind of a suicide pact. But it turns out that that's wrong and the reason it's wrong is that if you look at the opposite side of the equation it turns out that there are all sorts of ways in which you can take property to wait under those circumstances in which you provide just compensation to those people who have taken it and when you get into the form of large and comprehensive social regulation one of the things that you must do to be consistent is to recognize that the forms of compensation that are available to individuals will in fact include more than simple cash transfer payments to those people from whom property has been taken. There's a whole variety of benefits of compensation that taxation that modification of liability rules can confer upon other individuals and what the constitution in effect requires by the just compensation by the just compensation provision is that person by person because remember we're methodological individuals that is we take all statements about aggregates and reduce them to statements about individual persons it basically requires that each and every person receive some form of an equivalent from everybody else or from this particular comprehensive government program to reduce them at least as well off as he was in the prior state of the world and for those of you who heard this talk this morning by Jim Buchanan, it's very close to the Wixellian Criterion with respect to unanimity. What it says in effect is that if you could find a program which generates some aggregate gain, in principle you could find a way so that the benefits will be distributed so that this particular kind of condition will be satisfied that is leaving everybody better off and nobody worse off than before and all that we have to be careful about in making these calculations you have to take into account the full pattern and forms of benefits associated with individuals and governments. Now this kind of a matching program in effect does impose very serious questions with respect to the way in which you determine who's better off and who's worse off and it turns out therefore you have to find all sorts of clever techniques in order to handle it. One of the chief techniques that one would use would be one which asks whether or not the patterns of benefits and burdens may which leave them somewhat asymmetrical. So for example if the benefits turn out to be evenly distributed across all individuals and the burdens turn out to be heavily skewed chances are you don't have a public interest type statute. What happens is that you have under the name of public interest is some kind of an implicit transfer from one group of individuals to another or as one might say from A to B in ways which violate the Constitution. And if you take this methodology it turns out that you're entitled to make extensive rump through the statute book and we'll discover I think that most of the standard 20th century New Deal legislation is in fact designed to flunk any appropriate standard of social welfare which comes out of what I think is a fair reading of the eminent domain clause. And this is a straight textual argument which happens to be consistent with various kinds of sound social programs not because you're trying to read the text in ways that go against its original meaning but rather because the fellows who drafted the text had themselves a fairly good and powerful understanding of what the principles of sound government would require. Now when you switch this thing over and you start to deal with the public side it seems to me that you could start to ask exactly the same kinds of questions that you can with respect to private property and try to address and understand them in connection with public property. So you're going to start to ask the questions of how it is that public property is going to be acquired and what it is that the government could do with that property once that it has and the public trust doctrine of common law and the public trust doctrine with its shadowy constitutional status is in effect an effort to try to make sure that with respect to other kinds of property to with public property that that same even handed distribution of benefits and burdens which is constitutionally required with respect to private property is also observed. The question is how could we make this analysis go? Well I think the first question that you want to ask under these circumstances is this how is it that any state or any government manages to acquire public property? And it turns out that there are a wide variety of answers all of which I think deserves some degree of mention. Well one way in which the government can acquire property in fact is by gift or by quest. It turns out that there are an odd number of citizens every year who decide to leave things to the state of Florida or to the United States in gratitude for all that has been done by this country for them. Mr. Holmes and his literary estate to the United States Mr. Justice Holmes are precisely precisely those kinds of reasons. So that's one way that the government can acquire property. The second way in which government can acquire property is by condemnation. Oftentimes what it does is it condemns property say land in order to use as a post office for a public highway and presumably when the government has it it holds it in the trust for the public whose tax dollars it used in order to condemn the property in question. The third class of property that one has is this funny kind of public trust property at common law which is property which inherently is said to belong to the state and which it does not have to acquire by condemnation and the most common illustration of that for example has to do with navigable waterways and one of the things that we typically discover is that whereas the banks and sometimes the mineral rights with respect to navigable water rates may be the privately owned or capable of alienation to private hands the waterway itself is something which is said to be inherently public and which cannot be conveyed out to any private hand. The question is why would that kind of restriction make any sense and is there any particular way that we could generalize from the particular case in order to have a fairly comprehensive view of what it is that governments could do with public funds no matter how acquired. In order to answer this question it seems to me that one of the things that we have to do is to ask ourselves why is it that one would want to put this public river into public ownership and here let me say that there's a clue that many times when people start to talk about rivers they talk about them as highways for navigation the moment you hear that then you have to start thinking about other kinds of highways and note that typically these are acquired by the acquisition of the eminent domain power well the first thing you want to ask is why do we need the eminent domain power in order to acquire land for highways why don't we acquire it in the market and what we typically discover is that there's an enormous risk of holdout because you have to assemble parcels by large numbers of individuals where any single person owning a very small and narrow strip of land strategically located can completely dissipate the entire value of the road and what one achieves by virtue of the eminent domain power is a way to prevent the kinds of market failures associated with blockade holds out bargaining games and so forth and that this is in fact simply rich small the same kinds of problems that you have associated with comprehensive social regulation for pollution or for the provision of defense through the raising of tax dollars and so forth and what the state does in effect is it raises taxes from those who have benefits uses some of that money to pay off the road increases the total degree of social welfare in ways that make everybody the gainer well it would be very nice to say why don't we do exactly the same thing with respect to the river why don't we simply announce that these are held in private hands at the front end and then go through the same routes with respect to condemnation so as to make it in parity with the highway and it turns out that there are rather neat functional differences which explain the disparity with respect to the two kinds of cases and the first one and the critical one is this it seems to me that when you're asking the question about should we condemn land for a highway one of the key questions we're asking is where ought that land to be and there is no way at the time that people originally set a land that you could figure the optimal location of any kind of a road rather it's the kind of question which is going to depend upon the way in which trade and commerce develop in the fullness of time so that you don't know which land it is that you want for a highway and what the compensation requirement to the eminent domain clause does is it disciplines people in a way that they are now under instructions to try to pick that land which maximizes net back if in fact you don't have a compensation requirement everybody is going to say sure you should take land for the public highway but make sure that it's somebody else's and what this the compensation requirement does is it buys off the kinds of opposition and prevents the strategic behavior which would otherwise dissipate the gain from the collective enterprise the point about rivers is you don't have that problem that is you know where the river is where it starts where it moves and where it ends and there may be some problems about maintenance of the right of way and so forth but it turns out generally speaking there is no question of strategic behavior because there's only one way the river will run and nature is determined that course under these circumstances if you treat the thing as though it's inherently owned by the state at the front end what happens is you manage to avoid all of the necessary costs that are otherwise incurred in the assemblage of the property and so what the basic theorem is is leave property in private hands without minimizes bilateral monopoly problems and bargaining problems but where in fact collective ownership can be seen to minimize those same problems then assign the original position in the opposite direction and whereas highways and riverways seem to have very similar functions it turns out that the bargaining patterns with respect to the selection of location are vastly different now the question is what should we do with respect to the alienation of this property once it's in public hands and here it seems to me that we ought to draw a very powerful distinction between components of value with respect to the river for example if you take the traditional common law doctrines you will discover that the state typically owns two things it will own the waterway that is navigation easement and in many jurisdictions including Florida it will own under the heading of sovereignty land as it's called in this state it will own the right to mineral extractions from the water bed of the river usually defined as the area between the mean or the ordinary high water marks on both sides of the river bed and typically it turns out that the mineral rights under the water bed are alienable whereas the water rights themselves are not and the question you have to ask why the distinction and it seems to me that the answer is pretty much straight forward if you're going to talk about the mineral rights it turns out that the original assignment in the public say in this case by grant from the federal government is such that you can be pretty confident the state is not going to do a very good job with respect to the development in question it has no natural advantage when it comes to ordinary mining therefore it's pretty easy to imagine a set of circumstances in which a private sale will benefit both the purchaser on the one hand and the public fiscal on the other hand by improving the productive value of the assets in question so here what you need is the kind of protection against public abuse which takes the form of the just compensation requirement what you want to do is to scrutinize that transaction just as you would scrutinize the transaction entered into by a private trustee to make sure that they're not giving away at something below market value if in fact you give the property away below market value all the other citizens apart from the recipient will in fact find that their stock on the public accounts has been reduced by the loss of the minerals which is in a way which is not offset by the increment of cash to the state and in addition the very opportunity to acquire property below market value will create all sorts of dangers of rent dissipation all sorts of dangers of political intrigue as everybody spends real resources in order to get the advantage of the favorable settlement or the favorable purchase and those resources spent on acquisition will be deadweight losses rather than simple transfer payments and so what we do is we impose upon the state some kind of adjust compensation requirement you have to make sure that they're getting fair value back and you could do that either by having independent appraisals and audits or by having competitive bids or allowing citizens to challenge the transactions being inadequate after the time and this technology is perfectly well known and understood because whenever you have a transaction in which a corporation for example sells some of its assets to its own shareholders you typically will scrutinize that transaction to make sure that the transaction is not a defaulcation of the interest of minority shareholders and the way to understand this is to treat the citizen and the shareholders as essentially functional analogs but let us suppose that you thought our priority that there was good reason to believe that there was absolutely no social gain which could be achieved by making the transfer from public to private hands well under those circumstances the right rule is not to go through the elaborate charade on seeing whether or not compensation is appropriate the right rule is to ban the transaction in its entirety and here with respect to public waterways we have pretty good intuitions that in fact the transaction ought to be banned why because if you make the voluntary transaction what happens is you're now giving somebody the position to hold up with respect to the road so if you start selling off navigation rights what you do is you create the same blockade situation that the eminent domain power was designed to prevent and so therefore you're quite confident that the partition of the river is in effect going to work a decrease in value which means that no amount of money can in effect compensate people for the real resources involved and hence what happens is you can have a kind of a general theorem which says that when you have open access which gets you something close to a competitive solution with free entry what the state can't do is to convert this into a kind of monopoly system where in fact that you expect that the social losses from the imposition of a high set of tariffs by the new private owners will in fact result in a form of social losses so what you do is you have a case in which it turns out the transfer of public property to private hands results in a total loss so therefore you cannot have the appropriate form of just compensation under my modified eminent domain clause which says that the private property cannot be conveyed or taken for private use without just compensation now this whole model which talks about government owning assets in ways which make them property and common has it seems to me a wide variety of applications to other kinds of areas and let me just mention a few of them some of them might be reasonably well understood others I think are perhaps somewhat more unexpected the first case that I always like to use is a case of ordinary language and if you reflect about it in some sense English for the most part is in fact as a language a public good there is no one who has essentially the exclusive right to use the language and could prevent all other individuals from doing so and the reason is just think of the utility of the language if there were only one speaker it would essentially be a situation in which we could not communicate and the very gains that are associated with languages are normally associated with their wide non-exclusive use and any privatization of the language would go very much against it and so we had a legislature which says that only four people in the United States were entitled to speak English and they got some sort of grant to that form we would say that's the kind of public asset to try to convey it into private hands would be exceedingly suspect now there are however various other kinds of exceptions and let me consider two one of you start to think about the whole doctrine with respect to trademarks and that's real resources in order to create private secondary meanings of given kinds of terms monopoly may be a state of the market it's also a board game by Parker Brothers sorry may be a way of saying I'm sorry and on the other hand it's a game I play with my little boy seven nights a week every week to the point where I wish that one would find another game so under those circumstances the board games get protection whereas the generic uses do not because of the patterns of private investment reflected in the privatization of the rights but more to our point suppose you found a single term which was in common usage and what you decided to do by legislation was to convey it out to a single individual and here there is actually a statute on the book which tries to create and affect private rights in the word Olympic for the National Olympic Committee which sponsors the United States participation in the games now my view is it's no different from the waterway here you have a term in which there's a wide scale set of investments and what the government does is it conveys it off to one group which doesn't have to purchase and to the extent that they turn out to be net winners there are going to be other individuals whose loss of this particular piece of common property is going to make them net losers and to the extent that you have uncompensated transfers real resources will be introduced in order to bring them about so you're quite confident that the general game is going to be negative some and so if you take the public use kind of doctrine seriously there's nothing which says in navigable waterways the exact same arguments will apply with respect to language and therefore it seems to me that the conveyance is bad in part because there's no compensation indeed one can take the argument one step further and you can ask yourself the question suppose they decided to pay a certain amount of money into the United States Treasury would that solve the problem the answer to that question is if you think about it individual by individual is no it turns out that even though the term Olympics is in common usage if they could utilize it there are certain people who have differential investments there are for example the special Olympics which run for the benefit of crippled children and if you put the money into the public treasury what happens is these people are still going to be net losers as those monies are spent on some general purpose from which they do not derive some kind of a special gain so that if you really want to work the system you have to be prepared to make compensation to handle for differential losses and simple payments to the United States Treasury it does not work and in fact I'm sufficiently confident under most circumstances that there's no aggregate gain that will be achieved by making the privatization of certain forms of public language that I would treat the word as though it's part of the river inalienable why inalienable? because when you prevent alienation you may prevent the movement of resources to higher use but at the same time you will prevent the systematic dangers of self-dealing which given the circumstances of the case that we use sensibly used in the comment probably says it's not a transfer worth doing at all shutting the whole thing down is fine well that may sound to you like something of a sport so let me just close by taking into account two other cases and then I think it will be quite enough for an after dinner speech too much for an after dinner speech one of the cases has to do with public employment there is an open question for example in modern theory as to whether or not one ought to allow the kinds of public employees to form unions in order to bargain against the state or the local government and the general view on this question is well it's all a matter of prudence after all we're told mistakenly I might add that unionization of private firms under the collective bargaining statutes is unquestionably constitutional so if in fact you can impose those kinds of duties on private employers why can't the state simply assume that kind of obligation for itself well it seems to me that the argument is wrong but there are those points first as a matter of principle I won't concede that any mandatory collectivization of bargaining in the private sector is constitutional in fact in my book I make rather extensive arguments that it's flatly unconstitution but suppose you get past that hurdle and somebody says but look it's the government only doing it to itself well now you've got the classic fallacy of composition the government is not a single individual it's large numbers of individuals what you have in effect is an interest group play in which some people are doing it to other people but all of us doing it to ourselves equally and what you do is you have the pattern of disproportionate benefits and burdens from collective legislation which is the hallmark of an implicit and illegal transfer and what happens with respect to the unionization situation is you convert a competitive market into a monopolistic market and at the very least you get the welfare laws associated with what is technically called as the triangle that is there's some people who would pay something below the monopoly price who are wiped out and their utility does not get taken into account and then there's the rectangle which is the total amount of wealth transferred from consumers to producers by virtue of the ship which may be dissipated in the endless political lobbying in order to get it well if that's correct then it turns out that there's no way that you can keep aggregate levels by customary theory up to the rebels they were beforehand if you have this kind of a transfer so what I would therefore conclude is that any effort on the part of the state that is by certain interest groups within the state to collectivize and cartelize a portion of the market would be per se unconstitutional and if one for those of you who are here in the afternoon session who heard about the multiple efforts on the part of the state to cartelize various kinds of markets everything from raisins to the provisions of local services if you understand the public trust doctrine are right it turns out that all of those things are flatly completely and totally illegal by exactly the same kind of theory which allows the protection of private property under the constitution to strike down most forms of new deal legislation and the last example that one wants to give is one that's very close to anybody's heart who lives in Chicago and always tries to battle his way into the airport and what you typically discover is that there are a whole variety of exclusive franchises which say that only certain kinds of companies can use the public roads in order to go out in and out of the very places that everybody wants to travel to if you start in Chicago I want you to all know there are long and honorable traditions in our history of exclusive franchises and we've always been looking for an appropriate constitutional way in order to attack them for example one illustration of this is given against Ogden which is the famous case which concerned the proper construction of the commerce clause in the 1820s by Chief Justice Marshall but what was at stake in that case was an act by the New York state legislature which gave the exclusive franchise of steam ships in Hudson Bay in New York to Livingston and Fulton and it turns out that here you took public waters and converted them to private use and if you go to the slaughterhouse cases what they did in effect was to create an exclusive franchise for butchery in the city of New Orleans in the hands of one or two operatives again it's the taking of an open business and converting it into a closed one and the same thing takes place with respect to the various uses of public highways now if you follow the analysis that one's done and can be quite convinced of the general superior resource judgment with respect to open entry as opposed to closed and restricted entry precisely because of the losses associated with monopoly then what happens is you have a taking of property from the public and giving it to the private where the rest of the public comes out of systematic net loser and so the application of something like the public trust doctrine will prevent this whole welter of petty and exclusive franchises which is constantly littered the public sector of our economy so it seems to me that if we have this public trust doctrine there's an enormous amount that one can do with it it becomes in its own way every bit as powerful and informative of a club against large government as the eminent domain clause unfortunately however it's not clear that we do have this particular clause the single most famous case of the public use was a case called Illinois Central against Illinois which involved the decision by the state to revoke a grant which it had made to the Illinois state railroad and that decision to revoke was upheld by the supreme court on the ground that the original grant had been in violation of the public trust doctrine and the opinion to make things more mysterious was written by a classic libertarian Justice Steven J. Field and the reason he wrote is that he understood the problems of self-dealing and was trying to craft some sort of constitutional doctrine to combat it now the difficulty with the opinion is that he says it's a constitutional decision but he manages to take the living constitutional fellows of today and put them something to shame because at no point does he mention site or even hint at which particular clause of which particular constitution may have been violated by that particular decision so what we really have here is we have something like an unloaded grant we have the most powerful theory imaginable but it's not at all clear that we have any kind of obvious constitutional home with which to house it but not to worry it seems to me in some sense the constitution with its protein provisions is probably equal to the task if you look at the taxing power you're told that it's limited to various kinds of expenditures for the general welfare of the United States and one of the things that you could start to say by that is when you start to create special deals for some individuals that exclude others we are quite sure that the taxing power has been misaligned in ways that are congruent with the public trust doctrine when you look at the equal protection clause in favor you can make a fairly credible argument that that clause is not tied in any explicit way to private property it says nor shall any person within the jurisdiction be denied equal protection of the laws and if it turns out that you take something in which everybody has one interest say in a hundredth and you manage to convert it so one guy has it all and everybody else has none they're not being equally treated and in fact some of them aren't even being protected at all let alone being protected equally and it turns out that there's I think an important lesson in all this the basic structure of the arguments are essentially the same no matter what guarantee of the constitution you're all looking at in effect what happens is the doctrine in its national law guys has fairly comprehensive protections for either freedom of speech or religion or protection of private property or impairment of contract and in effect nobody who's serious about it can believe that they're absolute if only because Justice Holmes for once was a crowded theater causing panic so that you have various kinds of limitations upon the freedom of speech or the protection of property we're dealing with harms to strangers that's often goes under the rather unilluminating name of a compelling state interest to limit the exercise of individual liberty and then you have the whole question of whether or not if in fact you're not within that class of externalities whether or not just compensation has been provided when the liberties have in fact been restricted and what I submit to you is that no matter whether you start with specific guarantees like speech or religion or property whether you start with clauses that are absolute on their face like the speech clause or those which have just compensation provisions in them like the property clauses it turns out that the same uniform analysis applies with respect to all of them so that what happens is if you understand the grand structure of the doctrine and the basic uniform theory that underlies it what happens is it turns out that political theory and interpretation tend to come together more closely than one would have otherwise expected and the reason I think is one which has to be stressed again is that constitutional interpretation may be strict in accordance with the principles that you use given that the doctrine was in place but if you remember it's a doctrine which was basically animated with a few exceptions to slave cases and so forth by a pretty coherent theory of limited government in private rights then a successful application of all of the levers and all of the cranks and all of the screws will come out with a coherent theory at the end and I would say and I think this echoes something that Forrest McDonald says today when you look at many of the modern perversions that one sees as a constitutional doctrine you cannot find in them some sort of linguistic justification which says that the question was open almost invariably if you look more closely there's just some fundamental wrong textural move which leads you to a wholesale invalidation of important kinds of constitutional protections or the misguided constitutional creation of certain kinds of constitutional liberties that ought in principle never to exist. So it seems to me that if you understand the theory and you understand the doctrine and you're reasonably patient with respect to both of them you can find in the Constitution the protection or the protection of individual liberties and the solution for limited government that I think many people here believe that it contains. Thank you. Anything's fair when you put yourself up like you can't go around in harm I'll even stand in front of the microphone I don't see any questions Oh I thought I was going to hear from Gordon Thank God Oh I was at it No no just shut him up No go ahead Oh I mean the question of whether or not I think that's a secondary meaning question and my sense about it is that to the extent that you invest capital on a term and give it a new meaning protection is going to be appropriate to the extent that the meaning is or the value in the term is already there before you get your hands on it is not and there may be some marginal cases where you're not quite sure how much has been added and nobody wants to say that the boundaries with respect to language are as clear as meets and bounds with respect to property but what you want to say is that if you keep the principle clear you could at least find out the few cases that are difficult and thank heaven I don't think light be a familiar or anybody although the generic point is difficult I think light beer in effect is a term which was probably understood before people began to market it and in that sense my guess is that you could not protect it and indeed that happens to be the way the cases came out which is why you have more than bud light and so forth so intellectual property by the way is a wonderful subject and it turns out the same principles applied to it is applied to everything else but it's difficult about it is that it turns out that you can't protect intellectual property by taking possession of it so what you have to do is to substitute a series of legal rules with respect to use which are much more complicated and cumbersome to enforce than the rules of exclusive possession or another way to say it one of the problems about a good idea is that two people could have it at the same time and one of the problems of that shared intelligence is it maybe worth nothing to either once it turns out to be shared Gordon is that your eyes ah I didn't get I cut that out of the speech because in fact there was that's a nice question Gordon it turns out it's exceedingly difficult to do that as you could imagine in terms of finding the meets and bounds the problem about doing that is that before you sold it it turned out that there was essentially access at zero price with no discrimination with respect to everybody in question once you start to sell the thing off presumably you're going to be able to get a price but now you got the problem of the monopoly and my general answer to that question is you probably could sell the river if you imposed upon the purchase of the same limitations that are associated with common carriers general which is that in fact they have to take all come as at a nondiscriminatory price because once you start to allow the discrimination to take place within the price terms you can't be sure that everybody's going to get as much back by access to this privately owned and maintained river as he could have gotten under the initial condition now the reason why the case is exceedingly difficult is that it turns out that rivers are wasting assets like anything else in this world and one of the difficulties about leaving them in public hands is that you have the Army Corps of Engineers trying to and it may well be therefore that the maintenance problem will be destructive and the privatization will be superior so it seems to me that if what you do is impose certain kinds of restrictions of the common carrier type that may be it ought to be principle in principle possible and so therefore the answer of selling it off was meant to be selling it off to somebody you could use it as an unbounded monopolist and I would make that qualification yes oh no my god the heavies are after me what is it Peter? yes I agree on the other hand however how did you mention the point? yes you know the Milton Joe oh Christ why a little why not a lot so I'm attracting this to a certain degree of enhanced scrutiny of the transaction to the age of the state the age of the ball bus on the first of the private sector who's getting this? you understand perfectly now on the other hand if we look at the analog of the private sector it's neither so easy nor so exact as you've made out in your talk which I try to otherwise fully act with for example there is the old business judgment absolutely right there is also the matter that which to the past would have protected managers in a lot of these sorts of things ok man and then there was also the whole notion of capital market theory that there's some virtue in having entrepreneurs running around looking for undervalued assets that no one else has discovered and you press the search for such assets and all of the value that that creates strikes me that the enhanced scrutiny you're proposing might very well turn out to be damaging to the public interest you're basically you're giving that's the long version of the paper but you're right I mean but let's just try to take the points one after another point number one the business judgment rule is obviously going to be appropriate because if you think of the arguments that one's made about analogizing this to the private trust or the private corporation it turns out the increased scrutiny rules do not kick in every case they only kick in in some cases what happens is that they tend to kick in under those circumstances where the conflict of interest is greatest and that is roughly identified in those cases where it turns out that they're self-dealing between the members of the trustee and somebody on the outside it could be that they're buyers and members of their family are buyers and so forth and it seems to me that what one has to really ask about in the political context is given that the political market for public officials doesn't work in quite the same way as the market for offices that the dangers of self-dealing are going to be somewhat greater so the need for scrutiny is going to be somewhat more powerful so that it turns out that the self-dealing problem is more acute it seems to me functionally and so therefore that risk is there the second half which again you're right is it turns out that the finding of value in these cases may in effect reflect two things it may reflect that you have mineral rights which are basically perfectly fungible and everybody's aware about it and so it's just a question of bidding to get the most efficient producer but then there's this other side, the search side that there may well be assets which have value which only some people perceive and others don't and what it seems to me is that when you start talking about just scrutiny to the extent that you have any kind of an ordinary auction or any kind of an independent evaluation by the state to measure those subjective values and that would be sufficient under my point of view to do it because essentially you've always got to protect two kinds of incentives those on the public people not to misbehave and those on the private people to make the original investments and basically essentially that suggests that no corner solution which gives all the surplus to one side of the other is going to be appropriate and that's exactly the way in which one would want to come out I mean one of the interesting things that I left out in the talk which is in the written paper is that if you actually try to figure out the conflict of interest rules work it turns out that two things happen simultaneously it turns out that you have a greater need for them in the public sector given the way in which political officials tend to take place but it's also that it's much more clumsy and difficult for you to figure out a way to impose the restrictions which turn out to have greater necessity and so since the trade-offs between the optimal level of freedom and the optimal level of restraint work unfavorably in the public sector it's just a very strong argument in favor of private property it turns out that for example if you take the foundation business which is one of my favorites you do work with the National Endowment for the Humanities they can't change forms unless they get the approval of OMB because everybody's afraid they're trying to get business to their brother-in-law and so that the degree of scrutiny that it turns out that they have is just much higher than the degree of scrutiny that any private foundation imposes upon that kind of relatively routine task and yet the need for it turns out to be greater and the implication you draw from that is perfectly clear you close the operation there because it turns out that it just can't possibly compete given these problems with private sides and the implication therefore is from the general theory is that there really has to be a comp which nobody else could replicate in the private market before you keep this thing under government control and they're relatively precious few and for example Gordon made the point you know why do you have to have the government own the river the government may have to exercise the condemnation power but there's no reason it has to run the railroad and it's exactly the same kind of point and the issue is what kind of quid pro quo you impose upon the railroad for giving it that power and if there's a monopoly problem where you have to impose non-discrimination conditions but if there are enough competition around there enough riverways close enough to one another you could forget about all that use the government for assembly and then sell the unit off to a competitive bid and let the private guys keep the surplus which seems to me to be the right answer I think basically we're in agreement with the question that pumping out the theory and it's absolute fullness requires a couple more wrinkles than one went to but I think in fact it's a pretty powerful theory and it's amazing when you look at the literature on the public trust doctrine essentially it's an environmental war club used in good cases and bad cases alike with a kind of a shall we say uncritical application as to what it's about and how it ties in with the general and more comprehensive theory of social control is there anyone who has a friendly question ah thank you as I said before it seems to me that the public trust doctrine is one of these things which does not have an explicit explicit textual table in front of it the way in which the private and the domain clause and I think that the Steven J. Field problem puts that there what I try to give at least at one level was an equal protection type argument in effect if you assume that there are certain degrees of holding that the public has in which we could then measure everybody's private interest in that public account what we want to say is that equal treatment says that each of these people with respect or equal protection says that each of these people with respect to their fractional interest in the public whole gets the same rate of return on their investment and it turns out that that condition cannot be satisfied to the extent that some people keep all the lolly and the others are left holding all the dust and the reason that I would say that that's a principled interpretation is because what it does and here Peter and Aronson and I are at one is it says that serious application of the equal protection clause in the constitution is not in any obvious sense a function of you first finding some fundamental right or suspect classification those are terms which are nowhere in the document it's basically a function of differential treatment and what one would want to do in order to get this result is to reverse what I think is a rather insidious line of supreme court decisions which essentially says that we figure out what are those provisions in the constitution that are written in red ink and those we really protect to the hilt and those written in black and those we more or less ignore and what I'm saying in effect the whole document's a red letter document and that the level of protection ought to be uniform and if you take that theory you have to reject basically all of modern supreme court equal protection law but that's a strength in favor of the argument rather than a weakness because the clause that they put on it is nowhere there texturally the clause is perfectly comprehensive and once you get away from the idea that the application of a doctrine depends on the applications that it's grant is thought of it then in effect you have to treat the text as a self-contained entity and ask why does you put the implication in and it turns out that there's absolutely no occasion or principle for doing it indeed you can have many more vicious wealth transfers in the so-called non-preferred interest than you can in the preferred interest kinds of cases so that or at least there's no obvious correlation you could have big swindles in economic cases and small one in race cases of ice first and I have no desire to undo the scrutiny that are given in other areas indeed I would make exactly the opposite argument which is to the extent that the court has been able to develop a reasonably coherent and stable doctrine independent of any theory to explain what they're doing they are innocent of that that theory could be carried over to the areas in which they refuse to apply it and if you go back and you look what's driving them it turns out that there's a thing known as footnote for the caroline products footnote and that's always the problem of factions and discreetness of minorities and political intrigue it's the Madisonian concern and the central point to remember is that concern doesn't stop with fundamental rights and suspect classifications it's all pervasive and if you have a constant government disease it seems to me you need a constant constitutional cure and the text were written in the right way and it's just our job to follow them rather than the clause so I'm not at all uncomfortable with reading this thing in in some sense because I think it's actually once you understand that equal property the way the eminent domain clause is it turns out the equality provision is very much tied into the comprehensive analysis for the protection of all property that is there is something in the eminent domain clause known as the equal protection dimension of it because essentially when you're trying to figure out how you handle the compensation question when you have comprehensive government taking that is taxation inequality of treatment is a very powerful game theoretical tell tale sign of implicit and impermissible transfers and a lot of people sort of understood that equal treatment is required under the eminent domain clause but they were unable to do is to realize that it wasn't an intuition which was ungrounded in text but rather it was a necessary application of how we measure compensation when direct measurement is not possible and that's by seeing the incentives that work upon people and the way in which those games play themselves out it is 9 30 it is 15 minutes I'll take no more questions unless anyone has one more question Gwadney what's your question Gwadney shut up is that the question