For much of its history, the United States enjoyed a comparative advantage over nearly every other nation with respect to its legal institutions. Our laws were widely known and understood, applied to all, were fairly administered, and were not subject to capricious change. That environment made America attractive to people around the globe because the rule of law was weaker or even nonexistent in their native lands. A large part of what made the United States the land of opportunity that attracted people and capital was the fact that here law protected liberty and property—against both criminals and overreaching government officials.

As this elegant book makes clear, however, what advantage we once had with regard to our legal framework has turned into a severe disadvantage—our illness.

Editor and contributor F. H. Buckley, a George Mason University law professor, has assembled an all-star cast of law and economics scholars whose work exposes the damage we have inflicted on ourselves because our commitment to the rule of law has so atrophied over the last half century. That damage is largely economic. We now divert more and more resources from productive uses—all those lawyers who are needed in our hyper-litigious system could otherwise be doing work that adds to our national wealth. And our entrepreneurs face the constant risk that even their most innocuous-seeming decisions will result in ruinous legal consequences.

The damage has a moral aspect as well. Americans who have unwittingly fallen into the spider’s web of regulation face crushing fines and even prison terms. We are less of a nation when peaceful individuals regularly suffer injustices at the hands of our legal system.

Foreign competitors / With regard to the rule of law, the idea of American exceptionalism has been turned completely around. We are now exceptionally bad compared with many developed countries. Yale University law professor George Priest writes that our legal system has turned into “a significant instrument of redistribution that harms economic welfare in the U.S. and places us at a substantial competitive disadvantage to other nations.” A good example is the thick minefield of regulations sowed by the Sarbanes-Oxley law, which was a gigantic overreaction to the Enron scandal. Instead of preventing misconduct by corporate officials as it was supposed to do, it has driven lots of business away from the New York Stock Exchange to London. Brokers there have framed photographs of Paul Sarbanes and Mike Oxley, labeling them “our favorite Americans.”

The book provides many illustrations of the superiority of foreign law. In Canada, for instance, the tort regime is far less hostile to enterprise than ours is: cases are decided by judges rather than juries (easily misled and swayed by emotional appeals), the cost of discovery rests on the plaintiff rather than the defendant (which discourages “fishing expeditions”), and the losing party pays the other side’s costs.

Arguably, the most shocking element in the decline of the rule of law in the United States is the way the formerly sharp line between criminal and civil liability has been blurred. Under traditional legal concepts, criminal behavior required a showing of mens rea—a guilty mind. That is, prosecutors had to prove intentional wrongdoing beyond reasonable doubt. That is no longer the case. We now have an expanding category of “public welfare crimes” under which a person can be convicted of a crime over mere mistakes or accidents, even when the conduct was by a subordinate. Environmental enforcers, such as the Environmental Protection Agency official who proclaimed that he liked to “crucify” some businessman in order to terrify others, are eager to make their reputations by proving their “toughness.” (That particular official was subsequently removed for having blurted out the truth.) The law ought to restrain prosecutorial excesses, but no longer does.

Another aspect of the erosion of the rule of law in America is the departure from upholding contracts as the parties wrote them and allowing a judge to “interpret” or simply ignore the terms on paper so as to bring about what he thinks would be a more fair result. Columbia University law professor Robert Scott explains that this move away from textualism and toward contextualism empowers judges to tamper with even carefully negotiated business agreements. That encourages disappointed parties to run to the courts when a deal turns against them, thus undermining the reliability of contracts.

Looking at that development from a British perspective, Michael Bridge, a law professor at the London School of Economics, points out that English courts are aware that firms are apt to forgo ventures if they cannot count on the enforceability of contracts. Bridge also observes that English courts (and those of other advanced nations) often tend to think globally: considering how their decisions will affect their country’s attractiveness for business. American courts rarely think that way.

The American legal culture is also inferior to that of other nations in the way it tells lawyers that they can and in fact should put the interests of their clients above everything else. As University of California, Berkeley law professor Robert Kagan writes, “American lawyers’ professional culture is unique in permitting and implicitly encouraging them to advance unprecedented legal claims, coach witnesses, and attempt to wear down their opponents through burdensome pretrial discovery.” To their benefit, other nations put some restraints on lawyers to dampen the “win at any cost” mentality with concern over justice and the broader social impact of cases.

Special interests vs. the public / Defenders of the American litigation/​regulation complex contend that its costs are outweighed by a large benefit, namely that it makes business more inclined to improve the safety of their products. Not so, says Vanderbilt law professor W. Kip Viscusi. He argues that huge product liability awards (themselves a consequence of the erosion of common law defenses such as contributory negligence) do not lead to safer products, but rather impede the introduction of safer products. Innovative companies are prime targets for lawyers when a new design turns out to be less than perfect. Moreover, the prospect of enormous payoffs for successful lawsuits is a strong incentive for lawyers to go prowling for any case, no matter how minor or even speculative the injury.

Viscusi also explains how litigation often substitutes for regulation. Inefficient as regulation tends to be, the results of litigation are much worse. Regulatory agencies have access to expert witnesses and testing procedures, and are required to accept public comments on proposed rules. Courts have none of that, but when they rule in lawsuits, they effectively dictate regulations. Viscusi points in particular to the litigation that led to the Master Settlement Agreement (MSA) over the tobacco industry. The MSA was negotiated without the safeguards of administrative rulemaking, public input, or any cost-benefit analysis. It also showered money on the law firms that managed to get themselves in on the process. Viscusi thinks that the MSA is a terrible precedent that is likely to encourage more regulation through litigation.

In his essay, New York University law professor Richard Epstein points to the ideology of Progressivism as the root of the decline of the rule of law, weakening it through “a thousand cuts.” The Progressives of a century ago looked with disdain on a nation where the grubby self-interest of free enterprise was dominant. We needed to bring order out of all that chaos with a wide-ranging administrative state under the Progressives’ control. They could, of course, only see the imagined benefits of the transformation and none of the costs. Epstein observes, “The rush to greater government control over the economy downplayed the risks of faction and confiscation, and belittled the role of traditional institutional safeguards—separation of powers, checks and balances, constitutional protection of economic interests—that had been put in place to blunt their force.” The Obama years have been marked by increasingly rapid decay of those safeguards.

Among the many undesirable effects of the Progressive tide is what Epstein calls “permititis,” which is to say, the need for a business or individual to obtain permission from some government agency before being allowed to do something. Under the old rule of law, people could act, but with the understanding that if that action harmed others, there could be legal consequences. Now, we must fill out applications, wait, fill out more forms, wait some more, and in the end abide by the official ruling—which might be that permission is denied. Like a spreading rash, permititis is taking a toll on our economic vitality.

Conclusion / Is there any hope for a cure, or at least remission, of our disease? In his concluding chapter, Buckley explains that in a political system such as ours, with divided governing authority, it is very hard to line up all of the levers for change. Therefore, federal legislation to undo some of the damage, such as repeal of Sarbanes-Oxley, is unlikely. He does, however, point to some hopeful signs that we now realize that we have this problem and are starting to address it. The U.S. Supreme Court has taken a few small steps to make our legal system more rational, such as insisting on tougher standards for what will count as “expert” testimony and tightening rules for class actions. Also, some states have managed to curtail the misuse of their courts as places where the tort bar goes to reap gigantic judgments.

All in all, however, this is a pessimistic book. The rule of law has been eroding on many fronts and it won’t be easy to catalyze a countermovement. “Restore the Rule of Law!” just isn’t much of a political rallying cry. The damage that is done by the decline of the rule of law falls mostly into Bastiat’s “unseen” category and is therefore overlooked, but at least it won’t be by readers of this excellent volume.