Welcome to Cato Audio for June 2023. I'm Caleb Brown. We take you this month to the Cato Institute's Milton Friedman Prize for Advancing Liberty, where Wall Street Journal editorial board member Bill McGurn discusses the contributions of prize recipient Jimmy Lai. Former U.S. Senator Pat Toomey discusses our current troubles in monetary and fiscal policy. Law professor Eric Clays offers a defense of natural property rights. And Cato's Jennifer Huddleston pokes holes in the new ways lawmakers would like to protect kids online.
In May, the Cato Institute awarded the Milton Friedman Prize for Advancing Liberty to Jimmy Lai, an entrepreneur and newspaperman in Hong Kong now imprisoned for his newspaper Apple Daily and its strong editorial positions against Beijing's wholesale takeover of the island and Jimmy Lai's leadership and the resistance to that takeover. At the dinner held last month, the Wall Street Journal's William McGurn, friend and godfather to Jimmy Lai, spoke about what Jimmy Lai gave up to stand strong for freedom. McGurn was introduced by Cato President and CEO Peter Gettler. Princeton Professor Emeritus Perry Link, who we have with us tonight. has said, Hong Kong is probably the purest example we have of the confrontation between authoritarianism and democracy in today's world. He goes on to say that within that pure example context, Jimmy Lai is arguably the purest, sacrificing material comfort for an ideal, choosing prison over a plush life abroad. No media outlet, and perhaps no organization, has done more to publicize Hong Kong's confrontation between authoritarianism and liberalism and to support Jimmy Lai and his cause than the Wall Street Journal.
most particularly the editorial page. Since Beijing's assault on Hong Kong's freedom began years ago, the journal has made a point to emphasize the profound human cost of the crackdown and the symbolic importance of what was once one of the freest places on earth. A big reason for this is William McGurn. Bill is a member of the Wall Street Journal's editorial board, a weekly columnist at the paper, and a distinguished journalist whose commitment to liberty is well known. Most importantly, he is a longtime friend of Jimmy Lai.
Bill McGurn first met Jimmy Lai while working for the Far Eastern Economic Review in Hong Kong three decades ago. Jimmy and Bill shared similar interests in journalism, as well as the strong convictions, and their friendship gained a deeper meaning in 1997. That was the year Hong Kong was handed over to China. But it was also the year Jimmy Lai converted to Catholicism and chose as his godfather, Bill McGurn. After coming back to the United States, Bill served as President George W. Bush's chief speechwriter, following which he returned to the Wall Street Journal.
His return to the journal has been to the benefit of both Hong Kong and Jimmy Lai. In an op-ed last November, Bill reminded us that in addition to Jimmy, there are many other prisoners of conscience in Hong Kong, quote, alone and unknown, who are forcing their jailers to own their own lies, unquote. He closed that piece by saying, by insisting on his innocence, Jimmy Lai knows he has surrendered any hope for leniency. But he is showing that a man can live as a free person, even in a Chinese prison, as long as he refuses to lie. Hong Kong's communist-backed authorities have yet to realize that Jimmy's no longer really on trial. They are. Unquote. Ladies and gentlemen, please welcome Bill McGurn. Thanks, Peter. That was very kind of you, though you did make it sound like I couldn't keep a job.
Before I go any further, I just want to say this is a great evening. And two of Jimmy's closest associates are here, Mark Simon and Mark Clifford, and I want to recognize them. And I also want to point out his son and his new wife are here supporting their dad. Jimmy is in prison, but many people around him suffer. And the family has been incredible in their support. His wife is a rock. And there are many families, as I said, that are also suffering but are unknown, unlike Jimmy. So we're grateful.
Sebastian and Rhoda here tonight and Mark and Mark. When I asked Leslie what I should talk about, she was very clear. About three minutes. That's actually sound advice. The Ten Commandments fit on two stone tablets. The Gettysburg Address was 272 words. I cannot hope to match either in eloquence, but you'll be relieved to know I aim to equal both in brevity.
First, I'd like to thank the merry band of Cato for this evening. At its most basic, this night is a celebration of liberty at a time when it really needs celebrating. For me, that's very personal. My Wall Street Journal colleague, Evan Gershkovich, is in prison in Vladimir Putin's Russia for doing his job. Jimmy is in prison in what was once the freest Chinese society in history.
Before we go any further, I'd like to ask you to join me in showing our appreciation for this magnificent evening, and I ask you to make it loud enough for Evan and Jimmy to hear in Moscow and Hong Kong. I think that got through.
Jimmy's trial on these trumped-up national security charges is supposed to begin in September. If convicted, he could die in prison. I cannot say if word has reached him about this award. I can say he would be thrilled. Tonight, I will try to explain why in three broad points. Again, my first point is personal. I did two stints in Hong Kong for Dow Jones. My second was in the 1990s as editorial page editor for the Far Eastern Economic Review, something like The Economist for Asia.
One day, I noticed a new clothing chain that looked like a Hong Kong version of The Gap. Well-lit stores, well-stocked shelves, brightly colored polo shirts. It was called Giordanos. We wouldn't notice it here, but in Hong Kong then, there were basically two kinds of markets. One was for international luxury brands like Dior or Armani.
For everyone else, it was largely hit or miss. Sophia, my magazine, did a cover story on the entrepreneur who was one of the first to appeal to a Hong Kong middle class that was looking for quality and consistency and value. That entrepreneur was Jimmy Lai. After the article ran, Jimmy invited our editor, Gordon Krovitz, to lunch. When Gordon got back, he sent me a note in his very spidery handwriting. It said, Jimmy claims to be the only man in Hong Kong to have read all of Engels.
I thought, well, that's an achievement. But like the guy who carves the Iliad in Chinese onto a piece of ivory, you kind of wonder what the point is. It turned out that Gordon had actually written Hayek, not Engels. This is the first audience I don't have to explain the difference to. And that was my entree into the world of Jimmy Lai. Eventually, we grew close as brothers.
As Peter said, I was godfather when he became a Catholic a week after the 1997 handover. His wife, Teresa, is godmother to one of my daughters and my wife, Julie, to one of his. So again, this is personal, very personal. In October, my wife and daughter, Grace, were stopped and detained a few hours at Hong Kong's airport when they tried to visit what had been her former home. It was but a small example of the harassment that has now become routine in Chinese-ruled Hong Kong.
I think it's also personal for Cato. When Cato first set up the Milton Friedman Prize more than 20 years ago, Jimmy was on the International Selection Committee. Now that he's in prison for promoting these same values, Cato has not forgotten him. So again, let's express our gratitude to Cato for standing with Jimmy Lai when he most needed and the shared principles that once gave life to the remarkable city of Hong Kong. I'm proud to say my newspaper, the Wall Street Journal, has been a stalwart defender of Jimmy. So my friends, thank goodness for freedom, that goodness for this night, and thank goodness for the Wall Street Journal and the Cato Institute. My second point is what Jimmy's case says about today's China. In China under Xi Jinping, we have a resurgence of old-style communist oppression. We also have a resurgence of apologists. Many who have eaten at Jimmy's table and have benefited from his generosity now pretend they don't know him.
In awarding the Freedom Prize, we celebrate the economic freedom these two men championed their whole lives. Unfortunately, sometimes people take a solely materialistic view of this freedom. Both Jimmy and Milton had high hopes for China when it first began to open its markets to the world. Maybe they were too optimistic. But let us acknowledge that the turn to global markets...
has brought enormous benefits to Chinese people in terms of opportunity, life expectancy, contact with the outside world, and so on. That should not be missed. The willingness of so many American corporations to kowtow to Beijing seems to be confirming Marxist quip that when the last of the bourgeoisie is hanged, a capitalist will sum the rope. But one reason China gets away with this is just the sheer size of China and its market. Any normal-sized nation, even a relatively large one like Vietnam or Japan, simply lacks leverage over global investors and foreign governments to get away with what China gets away with routinely. Let me say, too, the story is still not over. In the midst of this, Hong Kong still makes Milton Friedman's point. The British never delivered political freedom to Hong Kong.
But the tremendous economic freedom Hong Kong enjoyed created a life ordinary Chinese people never knew before. And it's no coincidence now that China's crackdown on Hong Kong abuses many of these economic freedoms. That includes the government theft of Jimmy's newspaper from him because it gave people an alternative to the official point of view. Remember, it's not the free market that makes China a menace in today's world. It's a deliberate undermining of the rule of law that free markets can't create themselves but ultimately depend on, and there will be a reckoning. My final point about Jimmy is that he had a close relationship with Milton that stemmed from shared principles about man and freedom. It was a match made in heaven. Before he ever met Jimmy, Milton had been traveling to Hong Kong.
for decades. It was immensely useful for him, and Hong Kong routinely featured as Exhibit A in his case for free markets. It also featured prominently in his popular TV series, Free to Choose. Jimmy accompanied Milton on one of his trips into China, I believe in 1993. Jimmy told me they were in Chongqing, a city built on a cliff. One member of their group, an older man, looked up at the steep hill he had to climb from the river where they got off the boat and said, I can't do it.
So Jimmy took out 30 renminbi from his pocket and paid one of the Chinese who could be hired to carry luggage and packages up the incline. At the time, that was a lot of money for a Chinese worker. Jimmy asked him to carry his friend up, which the guy did on his back. Ladies and gentlemen, it wouldn't be the first time Jimmy found a market solution to solve a problem in China. Milton had also discovered John Calberthwaite before he met Jimmy.
Kaperthwaite was financial secretary in Hong Kong in the 1950s and 1960s. When I had lunch with Kaperthwaite in the 1990s, he described how Milton was rubbing his hands in glee while talking to him. I won't get into all the details of the Kaperthwaite years, but he's a one-man Kato before there was a Kato. At a time when Japan and South Korea and Taiwan were opting for forms of state capitalism, Kaperthwaite was so free market, he wouldn't allow the Hong Kong government to keep GDP statistics. At the lunch I had with Copperthwaite, I asked him why. Because they could only abuse him, he told me. Jimmy admired Copperthwaite so much, he had a bunch of bronze busts commissioned. I brought mine to the Bush White House, and I have a confession to make tonight. I turned Copperthwaite's face to the wall every time I had to write a speech defending ethanol subsidies.
Let me end by saying that tonight we will all be returning to our own beds, but Jimmy Lai will sleep behind bars. Despite all this, he is a man who is at peace with himself because he knows that being in prison means he has not betrayed his principles. Because of that, he has been honored with a number of awards. I'm sure there are more to come. He has even been twice nominated for this year's Nobel Prize. That itself is a tremendous honor. But if I know Jimmy, he'd be more delighted by the award tonight, bearing the name of his late great friend, Milton Friedman.
So, my friends, God bless Jimmy Lai and all those unjustly in prison because of their work for freedom. I hope, Peter, you'll invite me back on that glorious day. Jimmy comes to Cato and tells you himself how much this award means to him. Thank you very much. William McGurn is a member of the editorial board of The Wall Street Journal. He spoke last month at the Cato Institute's biennial Milton Friedman Prize for Advancing Liberty.
We're seeing larger and larger impacts now from reckless fiscal and monetary policy. At a Cato Institute discussion hosted by Cato President Peter Gettler, former Pennsylvania Republican U.S. Senator Pat Toomey gave his take on the money supply, congressional management of federal spending, and the resulting difficulties we now face. I want to start before we got into some of the longer term trends we've seen over the last couple of years, just asking about some of the things that have been going on now. Particularly, we've been running reckless monetary and fiscal policies for a long time, and they seem to get ever more reckless. Spending is now done in trillion dollar pieces. And we're starting to see the impacts of these reckless policies, sustained high inflation, and then the Fed coming from behind the curve to try to catch up to inflation and in the process.
creating an environment in which we're now seeing bank failures. And I really just wanted to ask the senator to kind of comment on that kind of current issue of the day and where you see it headed. Yeah, sure. Well, first of all, thanks again for having me. Great to be with you again. I enjoyed our conversation in Dallas. Look, one of the things I've tried to stress about this banking, it's not really a crisis, but it's characterized as that, is that the environment which gave rise to this is entirely a creation of the Fed. I think of it in sort of three steps, right? First, together with a completely incontinent Congress when it comes to spending.
and monetizing this spending, the debt that would go with it. There was just this flood of cash, right? We had a $2 trillion hole in the economy back when people were foolishly shutting down the economy. And we filled it with $6 trillion of spending thereabouts. So you have this huge surge in deposits that, unsurprisingly, wind up on bank balance sheets. Now, all the while, of course, the Fed is maintaining a zero interest rate environment, negative real interest rates, zero nominal rates. And so financial institutions...
unsurprisingly, decided to move out the risk curve. In the case of SVB, it wasn't a credit risk curve. It was a duration risk curve. But still, they had to find a way to get some kind of yield. And then when the Fed belatedly discovers the error of their ways, they jack up interest rates and they crater the value of the bond portfolios that they themselves are responsible for the existence of. So it's like every step along the way, it's the mismanagement of monetary policy. And it's just a classic case of the unintended consequences that come from this.
The other thing that I think happens along the way here is this whole episode has put a spotlight on, I think, an intrinsic instability of a fractional reserve banking system. It works fine as long as it works. The fact is, there's no bank that can survive a run. It doesn't matter how well capitalized, how liquid, how well managed. No bank can survive a run. And we have made this problem worse because at the relatively small end of the deposit spectrum, $250,000 and under, that's fully guaranteed. No need to be concerned. And if you put your money with a giant bank,
Well, we designate those as systemically important. Do you think the federal government's going to let one of them fail? Absolutely not. So it's the banks in between and depositors whose deposits are greater than a quarter million dollars who have to ask themselves, why am I the only one in the room taking a risk here? And I think that's a contributing factor to the deposit flight that we've seen. And it's, you know, when government sets up these programs, they always have unintended consequences, which are usually quite negative.
Where are we headed, do you think, with the phenomenon you described is pretty worrisome, that you won't have a flight from the smaller banks whose depositors are covered by insurance. You won't from the larger banks, from these banks in the middle. What's the policy endgame for that? Yeah, so what I worry about is if we see a significant continuation, maybe an episodic acceleration of this outflow, a lot of which is going into money market accounts, then we're going to see ever more calls for the government to fix the problem. Universal guarantee on all deposits.
Well, that'll end the run on the bank, right? It'll also introduce terrible moral hazard. It would basically be socializing the banking industry. There would be all kinds of subsequent steps, which would be very, very ugly. So what my theory has always been, and as a finance guy, Peter, you know this very, very well, I've always thought of the person in the capital stack that's most likely to impose managerial discipline on a company is an unsecured creditor, right? The equity investors have upside, so it's not in their interest.
Secured depositors, secured creditors have much less to worry about. It's the unsecured creditor. And if we could find a way to incentivize a layer of capital that is in the category of unsecured credit, or if we had private sources of deposit guarantees, which could be priced based on the risk of the bank, right? I have zero confidence that the supervisors are going to get this right. They never do.
But if we had, it could be insurance companies, it could be companies set up for the purpose, to provide guarantees of deposits, then that would get very expensive if you weren't doing a good job running your bank. And that might impose a kind of discipline that would be helpful. It doesn't matter whether it's... financial regulation or health care or housing, it seems like policy always follows the path of, I forget what the fairy tale was of the woman who swallows the fly and then swallows the spider to eat the fly and then a mouse and then a cat and keeps going and going. Here, deposit insurance is the original sin and here we are. Do you think that one of the things that I'm concerned about is the Fed having the
the fortitude to do what needs to be done on inflation at a time when we may be seeing more and more of this collateral damage, which will make it politically more difficult. I'm less worried about that. And the reason is, I can tell you, I really believe that the Fed governors are, at some level, pretty deeply humiliated by how badly they got this wrong, right? Many of us were telling them, when you grow the money supply by 40% in 18 months, when you maintain zero interest rates, I mean, nominal, negative real interest rates. And then you have a multi-trillion dollar unprecedented spending binge. How do you not think that's going to be inflationary? And I think this goes to a problem with the institution. The group think that the Fed is unbelievable. And there are no monetarists that I can gather, right, that I can see. Certainly not at the leadership level. So when you talk about those things, they look at you and say, no, that's all irrelevant. What's important is that inflation expectations are well anchored. Which my response is, so you're telling me inflation is a psychological phenomenon. I think it's a monetary phenomenon. And that's...
But so they then, remember, they compounded this problem by just sometime, I forget exactly when it was, but it was during the early part of the COVID lockdown when they decided that the 2% inflation rate that was their target would not be the maximum. It would be the average. And it was important for the world to perceive that as the average. And therefore, since inflation had been running a bit below 2% for a while, it would have to run above 2%. Indeterminate amount for an indeterminate period of time. They never specified that.
And we would have these conversations. Well, doesn't this create a really big risk that you're going to get way behind the curve? Because if it starts to take off, you're going to say, that's okay. Still averages out to 2% if we look over the right time frame, right? And so my point in all this is they realize they constructed the wrong paradigm. They got caught by it. They blew it badly. And they don't want to go down in history as the guys that just let inflation just spin out of control. They don't want to do stop and start. So I honestly think that they're more likely to go too far than not far enough, in part because they still don't care very much about monetary aggregates. They think that we have to crush demand. By the way, you can have a booming economy with tremendous demand-side growth and not have inflation.
You just need to match the economy with the quantity of money. But, you know, that's kind of a monetarist way of thinking. Pat Toomey is a former Republican U.S. senator from Pennsylvania. In his new book, Natural Property Rights, Eric Clays introduces and defends a theory of property relying on labor, natural rights, and traditional principles of natural law. Justified on those grounds, property rights protect individual freedom, but they also help government officials resolve the basic resource conflicts that arise in property law. Clays spoke at the Cato Institute in May.
So natural property rights introduced a surprise, a theory of natural property rights. But then the question is exactly how are they natural and how are they structured? And so here I guess I'm going to draw a very crude analogy between my book and a meatloaf. And so if my book is a meatloaf, the meat, the burger and the meatloaf is John Locke's theory of labor. The natural right is a right structured to facilitate labor. But that right, I guess, then going to the next part of the meatloaf. So meatloaf, you need something like Hamburger Helper to build out it. And so the Hamburger Helper comes from Hugo Grotius.
It comes from Samuel Pufendorf and from Thomas Aquinas. And Grotius and Pufendorf were more lawyers than philosophers, and they stressed that property rights needed to be structured in a way that made clear claims of possession. And so the natural rights, they facilitate labor in such a way that they signpost claims of possession to people who are not themselves proprietors. And then Aquinas comes in just because the labor and the claims of possession both are subordinated. They're expected to help people be the kinds of people they're expected to be as a matter of natural law.
In the scholastic tradition, natural law consists of principles of morality. They're knowable by human reason. And people are beings who can reason and understand what moves people, what makes people better or worse. And the best people flourish in an objective and rational sense. And so natural rights are rights to labor.
to survive, to preserve oneself, and to thrive, meaning to do things that are going to help the actor flourish in an objective and rational sense. And since well-socialized people understand that they need to operate with others, then natural property rights entitle the holders to freedom, but that freedom is coordinated then to be consistent with the like rights of other rational beings who might want to pursue their own flourishing. And so the first half of the book... then introduces natural law and natural rights and justifies natural property rights. And then the second half of the book takes these ideas about natural law and natural rights and shows how they apply in all the gory details that are first year that Chad mentioned on studies in a property core. So if there's a fox on the beach and nobody owns it, how does an unowned fox become a property that's of some private actor? Then how do simple property rights, how do simple rights justify as a matter of natural rights? How do they get justified and converted into private rights in law, like rights of ownership, where instead of having a right to use something, you have a broad right of managerial.
authority, you can sell, you can mortgage on the thing, and you can produce things and sell off the products from what you own. Rights of ownership at law can be limited by different servitudes and common carrier limitations, and the book walks through the justifications for those rights in natural law. Property law, though, also before you can have property in something like real estate, you need to know what real estate is. So go back to the fox and think about real estate. So if you catch a fox, that fox is the object on which property law focuses. If you buy something with a deed, the deed gets you the land, but it gets you dirt underneath the land. If there's minerals in the dirt, you have rights in the minerals. You have probably the right to the fixtures on the land. And so property law packages different resources. Some parts of property law, one resource, one legal thing. Other parts of property law, a cluster of resources, one legal thing. And so there's a chapter on those distinctions.
Then I go through the ways in which an owner can slice and dice rights of ownership. If you own land, you can become a landlord, assign to somebody else a leasehold, and keep for yourself a reversion. If you own a car, you can borrow with a lending or borrowing on the car, and so you have a car encumbered by a security interest like a mortgage. And those can be justified in natural law, subject to restraints respecting the rights of other people, especially third parties. And then finally, once you have a system of...
ownership and all the different lesser rights like present estates and future interests and security interests and easements and on and on and on, then you need a system of law to protect people's rights. And there are two systems of law in the Anglo-American tradition that do that. At common law, there are basic tort responsibilities not to interfere with others' property rights. And so the book studies nuisance to illustrate how those principles work, how property rights engender responsibilities to not interfere with others' uses. And then the government may also, by public law, secure and order property rights. And so the last two chapters in the book focus on the police power, the power to regulate property so that...
Legal rights are regularized or made specific and determinate in a manner that helps people exercise their underlying substantive rights. And government also has the power to condemn property via eminent domain. Sometimes the government needs to be a steward for everybody and acquire a resource to use on behalf of everybody. And the power of eminent domain justifies that power. But the power to regulate and the power to condemn via eminent domain have limits that run with the justifications. And so the two chapters on the police power and the eminent domain power justify each power but then mark off the limits on each.
So let me move then to the two case studies. And the two are, one is going to be called forced pooling and the other one I'm going to call eminent domain supported economic development. Eminent domain supported economic development occurs when a government decides that some neighborhood is not being put to the highest possible use. Sometimes governments say the neighborhood is a slum or is blighted. And the government uses the power of eminent domain to condemn private property in the neighborhood and hand it off to a commercial developer or to hand it off to a business.
So a condemnation to go to a big box retailer is an example. The condemnation to the condemnations that happened in Anacostia to make way for the Washington Nationals baseball park example. And most famously and probably known in this audience, the condemnations in the neighborhood Fort Trumbull in New London to make way for businesses and office facilities next to a new plant for the Pfizer company. That was a condemnation that led to the U.S. Supreme Court case Kelo versus New London.
And forced pooling is a government institution in energy law, oil and gas law. And in pooling, there will be many people who own land or they own the severed mineral rights in a reservoir of oil or gas. And they want to extract as much oil and gas as they can from the reservoir. And they worry that they will not, by their own voluntary coordination, get the most oil or gas out of the reservoir. So rights holders can petition a state energy commission, asking if the energy commission come in and pool all their rights. And if the rights are pooled, the government then decrees that the government gets control over how the rights are exercised. The government will bring in an energy producer to extract the greatest amount of oil or gas. And then the people whose rights are pooled then get royalties prorated to the interest that they had in the reservoir given the rights they had before pooling.
So why do I talk about eminent domain-supported economic development and forced pooling? And two reasons. One is it brings deep questions of theory down into the details of the practice of property. People who have practiced property know it's not all about things like Robert Nozick's hypothetical about whether you can, if you pour tomato juice into a seed, you've appropriated the seed with your tomato juice. There are a lot of interesting theoretical questions about why to have property and when it's just for one person to acquire rights in a resource. But for lawyers, you get into questions.
How can a government force a group of people together and on what legal criteria? And these two examples are two very representative meat and potatoes examples that way. At the same time, forced pooling and economic development with Eben Domain, they raise really profound questions of theory. They are analogous to questions. They're questions in property analogous to the questions one might ask in a system, like a theory of personal liberty. Why can the government order somebody to go sign up for the draft and go fight in a war? Why can the government order people to get a vaccination they might not want to get? In these two practices, the government is condemning otherwise valid conventional legal rights and saying there's some public need for you to surrender your valid legal rights. And libertarians and interested Catholics both are concerned about this.
Robert Nozick's book, Anarchy, State, and Utopia, the title suggests the challenge for libertarians. Is the state better than anarchy? Why is the state better than anarchy? In what circumstances is the state institution that provides results that secure rights better than anarchy would? And for Catholics, they know that the fountainhead of the Catholic intellectual tradition goes back to St. Augustine, and in City of God, he asks, what makes the state different from a gang of robbers? And in different ways, Nozick and Augustine are asking questions, why does a government have justification to force people to do things that they might not otherwise do?
especially when the government has a monopoly of force and can jail people or fine people or physically coerce people to do things they don't want to do. And the eminent domain is used in economic development. Force pooling are two vivid examples because the government's condemning property rights with the threat of government backing up the threats. So I posit that libertarians, they would say that eminent domain is used in economic development as troubling. And they would split. Some libertarians would think that force pooling is acceptable. It's facilitating the exercise of rights. And others would think it's troubling as eminent domain is used in economic development.
By contrast, interest to Catholics, I think they would think forced pooling is an acceptable practice, and they would split on the use of eminent domain in economic development. I have in mind, for example, that the Archdiocese of Detroit was very supportive of the use of eminent domain to clear out a neighborhood in Detroit called Poltown to make way for a GM plant back around 1980. And in the book, I suggest that natural rights offer kind of a split decision. Natural rights lay out a justification for property and a justification for regulation that allows for governments to reorder in cases like these. The justification sets out criteria. And I suggest that the criteria will apply differently in different cases, and you have to look at the facts of a particular case. But by and large, it seems unlikely or difficult for governments to justify using evident domain to clear out residential neighborhoods for economic development. And it seems likely that if the law is tailored the right way, a government can authorize and go along with forced pooling.
And the basic argument goes like this, that property rights, again, natural property rights are supposed to help people put resources to uses that contribute to human flourishing or human preservation. If the resource is oil or gas, those tend to lend themselves to a few narrow uses, most likely combustion for energy or use as an ingredient in chemicals like plastics. And for those kinds of uses, the oil or the gas has to be brought into human circulation. It's reasonable then to impute to people who have the rights an interest in seeing the resources get extracted to the greatest extent possible. And if government-sponsored oversight by pooling will help do that, then fine. And then in law, you need to analyze whether a pooling law seems necessary and it secures to the owners an advantage. And here, it's necessary to bring up oil by government supervision just because all of the people who have rights have rights in oil that moves around in one reservoir. And you need some centralized actor to take the greatest advantage possible of geothermal pressure to get all the oil up.
And then if that is, in fact, necessary, then you need to make sure that the people with the rights get back benefits, advantage from the government sponsorship in proportion to the rights they had. And the royalty schemes that you see in pooling systems allow that to happen. By contrast, if you're talking about eminence of domain and economic development, land is put to many, many different heterogeneous uses, and it's harder to impute to people one interest in using land in any one or two ways. And so when you ask whether it's necessary for a government to come in and move land around, you have to worry that you're threatening a lot of idiosyncratic, subjective land by different people. And in practice, with eminent domain and economic development, in lots of cases, a stadium can go in a bunch of different places, or development can make exceptions for the one or two owners or residents who want to stay there. And it's not as necessary to...
get all the people in the neighborhood to move out to realize the project. And in the details, as used in practice, eminent domain does not give people benefits like the benefits you get from the royalties. I think that owners tend to be shortchanged in eminent domain condemnations. So then what you see coming out of that is an understanding of government power where government power is acting on behalf of all of the relevant people in the community the way a partnership acts on behalf of all the partners. And that's more communitarian than a libertarian understanding of government justifications, but it might not be as communitarian as some understandings of the common good in the Catholic intellectual tradition. And that's the insight I'm trying to push through the entire book, working through all the details of property law, but that's probably a good place for me to stop. Eric Clays is a professor of law at the Antonin Scalia Law School at George Mason University.
Many states and the feds are mulling ways to protect young people online, but virtually all of these proposals introduce new problems for safety, and some proposals would compel you to give up your identity in order to use certain services online. I spoke with Kato's Jennifer Huddleston for this Kato Audio exclusive about protecting kids online without sacrificing everyone's privacy in the process. We all want our kids to be safe online. We all want to know that what they're doing is not putting them or us at risk of kidnapping, of being treated inappropriately in a sexual context, of not having things stolen from them or from us.
What has been generally the government role in trying to advance that kind of safety for young people? So the debate about how to keep kids safe online really goes back to the very beginnings of the Internet. When you look at kind of the debate around what was going on online in the 1990s, this was one of the chief concerns that parents and policymakers had. What we've seen in the time that the Internet has evolved is that there's been a range of options available. to parents through the free market, everything from filtering services at a browser level or at an operating device level, as well as individual specific things for different apps that a young person may be on. When it comes to the government's role, though, there's a lot of concerns about what might happen if the government started to dictate certain actions in the name of protecting young people. While that's often a just motivation, when we look at the specifics of these bills, their impact goes beyond just keeping young people safe and would also have a lot of impact on all users of the internet.
It would have an impact on the very young people it's claiming to try and keep safe privacy, as well as on their speech rights. And it raises a lot of concerns for adult users as well. Let's take these two things in turn, because I think they're both worth understanding. One, there are multiple federal efforts to advance requirements on platforms to gather information about young people or people who are trying to get online who may or may not be young people. Let's talk about those federal efforts first, and then we'll talk about the state efforts. So we've seen a couple of different bills introduced on a federal level.
with a focus on keeping kids safe online. Some of these bills are more specifically targeted at very specific types of technology. So when we look at things like the Earn It Act, which in theory is going after one of those great horrible things of trying to help prevent child sexual abuse material. But when you look at what the actual bill does, it doesn't do a lot to enhance the enforcement or going after the bad actors who are doing that. Instead, it has a lot of impact on things like encryption that are incredibly beneficial to any number of legitimate uses. When we look at some of these other proposals that are starting to come up, we're seeing things around like age verification that raises concerns about whether or not somebody is over a certain age online in order to access, say, social media or certain types of content. The issue there is that age verification laws won't just impact young people who will now have to show that they have.
parental permission or that they're of a certain age, every user of the internet might have to upload their ID, their driver's license, or their birth certificate in order to show that they're who they say they are and that they're how old they say they are. This, of course, raises a lot of concerns for individual privacy, as well as for people who may be needing to speak anonymously to, say, discuss their own concerns or to leave a review that they're worried might have negative feedback on them. So many people are aware of the government's terrible record at securing data. And many people are also aware that the private sector... doesn't have a great record when it comes to protecting and securing people's data, right?
When it comes to the level of data that many of these bills would require to be collected, we're talking about some very sensitive information if these companies are to comply with these bills. And some of these are companies that some people are a little nervous about their data practices anyway. Not necessarily because they're bad actors, but because there have been a lot of questions about what data is being used for or whether or not they want to give certain data over to certain companies. Right now, we all have a choice. But under some of these bills to say, get a social media account, you might have to upload your driver's license. Or perhaps in an even more concerning and weird way, if your child wants to get a social media account and you're OK with that.
You're going to have to prove you're that child's parent. That certainly creates a lot of concerns for individuals and then creates this huge amount of data for hackers to go after, much of which is very sensitive identity information. This is the Fed's compelling private actors to collect information. In order to comply with these laws, many of these private actors would have to engage in some degree of age verification. Now, many of these bills try and leave it open, but there are really only a couple of ways to meet the standards that they lay out. One of which is to collect, for example, some sort of formal government ID. Another of which is to collect biometric information or engage in some kind of age rating software that allows you to scan individual users' faces and identify what age you think they are. None of these are perfect tools in and of themselves, and there's often very potentially damaging consequences for companies if they mess this up.
The problem with this is, again, it's not only going to impact those young users, many of whom have found benefits online, but this is going to impact everyone. But the only way to verify that the person holding the phone is over 18 is to prove that they're not under 18. So at the state level... Multiple states have attempted to, for the residents of those states, create similar kinds of filters to prevent young people from accessing either certain content or making use of these platforms online. What do those proposals look like and what are the risks associated with them? I've seen a range of proposals introduced over the last term. This really started...
a year ago with California and an age-appropriate design code that's largely modeled after the debates that are going on in Europe. But this hasn't been just a red state or a blue state issue. For example, this year we saw Utah pass a law that creates a lot of requirements, or at least sets a framework up, that would require... go to the AG for interpretation that requires a lot of steps and potentially restrictions around online speech. What's interesting is if we look at this, it also raises other questions. Like, are we going to start seeing Americans using VPNs to get around some of these restrictions in order to access the information that they want? And what do those concerns mean? Particularly when you look at this on a state level, if you have one set of rules.
for, say, the state of Arizona and another for California and another for Utah can be very confusing to consumers. It can be very confusing, particularly for small companies who are trying to protect their users, who may not be able to afford the most up-to-date version of the biometric kind of face scanning and whatnot. So this puts a lot of barriers, again, to both user speech as well as innovation along the way. And all of this is to say nothing of the fact that parents that are interested in protecting their children, there's a wide variety of stuff that's been available for many years to do just that. And we see that companies are responding to increasing parents' demands and in new and different ways. One size doesn't always fit all, either for each parent and each child or for each technology. So some parents are really concerned about the amount of time that their children are spending on their devices. So something like a time limit, either at a device level or on an individual app, may be really useful for them. Others are really concerned about their children seeing specific types of content that they believe goes against their values or that they believe might be harmful to their child. And so they're more interested in things that allow them to filter. Because these are such unique to every child and every family.
Parents, not policymakers, are the best ones to be empowered to make those decisions. And in addition to the device level and the app level resources, we've also seen a range of civil society groups provide resources for parents about how to have conversations with their kids around these issues, what sort of things are out there, so that parents can, again, make the decisions that are right for their families. Jennifer Huddleston is a research fellow at the Cato Institute. If you have a topic you'd like to hear discussed on this Cato Audio exclusive, please send a note to catoaudio at cato.org, and we'll follow up in the coming months. The Cato summer book sale is in full swing now through July 1st. Select Cato Institute books are 50% off when purchased through the Cato online store. No code needed. Round out your summer reading list by visiting cato.org slash store today. That will do it for this edition of Cato Audio. I'm Caleb Brown. Talk to you again next month.