Tag Archives: law

Take the power back

(Photo: Cato Institute)

With a mostly blank cover page and a quote from Ayn Rand, Ecuador’s largest newspaper, El Universo, protested the court’s ruling against its directors and former opinion editor – three years in prison and a $30 million fine for four lines in an opinion piece.

In the disputed piece, “No a las mentiras” (No to the lies), Emilio Palacios denounced Ecuador’s President, Rafael Correa, as acting like a dictator. President Correa claimed that in the opinion piece, Palacios wrongfully accused him of ordering forces to open fire on a hospital full of innocent civilians. Five months later, the court found Palacios, along with the newspaper, guilty of libel.

The court’s decision has incited the fury of freedom organizations.

To many, the ruling clearly violates basic freedoms. Yet libel and slander are legitimate, destructive offenses that most would agree ought to be prevented. So how is this different?

Among wealth-maximizing individuals in a free society, the freedom of speech and press does not protect slander and libel. Penalizing such negative behaviors incentivizes individuals to internalize the cost of their actions and protects their image and privacy against blatantly false and damaging accusations. In this context, the ability to sue for libel and slander is socially efficient – the law makes society as a whole wealthier.

Unlike individuals, governments are budget-maximizers, not wealth-maximizers. For individuals, the outcome from bad decisions may be bankruptcy. Similarly, firms that make costly, inferior products will lose against innovative, productive companies. Governments, on the other hand, do not typically face such incentive structures, leading them to be more wasteful of the population’s resources. Massively overpaying government contractors illustrates this waste.

As budget-maximizers, governments do not run more efficiently when their image and privacy are protected. On the contrary, criticism and questioning are essential for a more efficient state – one less burdened by corruption, rent-seeking and waste. When citizens are discouraged or outlawed from questioning and criticizing the government, public officials and bureaucracies gain free reign to strip the population of rights.

If citizens make false allegations against government officials, their claims should be subject to society’s scrutiny and evaluation. But they should nonetheless live in an environment without self-censorship due to fear of excessive punishment.

Rather than an effective deterrent against negative behavior, the massive fine is a glaring reminder of who’s in charge. While honor and dignity may be priceless attributes, the $30 million fine (plus the extra $10 million fine to the newspaper company) and three-year sentence is excessive by any standard. This ruling is not about fairly compensating an individual or discouraging socially and economically destructive activity. It is a signal meant to show who holds power and how the media is expected to behave.

Going Around the Law

I never went to a law school in the United States – but I would imagine that they essentially they teach you about law, its interpretation, and its enforcement.  Not so in Ukraine – there, legal complexities of the system lead to something different.

Last week I was in Kyiv, Ukraine where we held a rather interesting seminar at one of the country’s top universities.  After the seminar, I got to spend some time with law school students and learn a little bit more about their education.

They were quite open about the problems of Ukraine.  They were even more open about the quality of their education.  Especially after I highlighted some of the numbers from the Doing Business Database, where Ukraine ranks 181 in the world in dealing with construction permits as well as in paying taxes, 141 in registering property, and 134 in starting a business.

“This is not a problem,” I was told. 

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