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Against Legal Harmonization

October 26th, 2013

We don't know what laws work best. While we all agree that murder should be illegal, should drugs be? Sampling music? Insider trading? Libel? Private property? Abortion? Strong cryptography? To make things more complicated, for most things you might want to make laws about there are lots of different ways to set up the law. For example, you could prohibit chewing gum by via focusing on buyers, sellers, importers, or public consumption. US doctors have to go through four years of college, four years of medical school, three years of residency, and various examinations, but that's clearly not the only way to keep unqualified people from practicing medicine.

Because we have hundreds of countries with their own laws and legal systems, we're constantly exploring this space of ways to run a country. While we're mostly optimizing for welfare and not a thorough search of the space we still end up with lots of policy variance. This means that when we're trying to decide whether to decriminalize drugs we can look at Portugal's experience. In considering euthanasia policy we can see how it's gone in the Netherlands. This is really valuable, and we should do more of it. [1]

Unfortunately the international trend is in the other direction: harmonize the laws. The idea is that there are large costs to having different legal and regulatory setups in different countries so we can reduce those costs by making them more similar. This is a major goal of the EU [2], but also of many international treaties and conventions. The problem is that in many cases the economic benefits of experimentation are likely much larger than the reductions in costs provided by more similar systems. How long should copyright be for the best economic effect? With the progressive strengthening of the Berne Convention we've stopped collecting data.

Some amount of harmonization is definitely valuable. For example the 2005 Convention on the Use of Electronic Communications in International Contracts probably did a lot to reduce trade costs without cutting off exploration early. The problem is that the value of experimentation and the possibility that we might not know which laws are best until we try them seems to be entirely left out of the conversation.

[1] There are some areas of policy that are hard to explore because of freedom of migration. For example, countries can invest in their citizens in various ways, such as through education, and then recoup the money through lower salaries or higher taxes. If this ends up with some citizens acquiring especially valuable skills, such as medical training, then as adults they may leave the country for others with more privatized systems where they can earn much more. This was a particular concern of Eastern Bloc countries, who responded by prohibiting emigration. I doubt the knowledge gained from experimentation is anywhere near enough to make up for the level of oppression that keeping people from leaving allows.

[2] And while not separate countries, we see the same dynamic and effects at the state level in the US.

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