THE CHRONICLES OF A CAPITALIST LAWYER

RANDOM THOUGHTS OF A CAPITALIST LAWYER ON LAW, ECONOMICS, AND EVERYTHING ELSE

  • An Economic Analysis of Rape Crimes (Working Paper)


    Pursuant to my post here, I manage to elaborate my arguments into a decent working paper. I'm planning to submit this paper to an Indonesian law journal, but I would like to hear first some useful comments from my readers that I can use to improve the paper. So if you have any comments, please don't hesitate to contact me, I would be grateful for that. 
  • Two Major Issues on Same Sex Marriage


    The legalization of same sex marriage will always be a controversial issue to be discussed as it encompasses many fundamental aspects of human life, including religion, morality, law and economics. In this post, I will focus on two issues that in my opinion are worthy to be discussed before we can consider the incorporation and legalization of same sex marriage into our law, i.e. (i) the problem of equal position in traditional heterosexual marriage, and (ii) the legal complexity that same sex marriage will impose to ordinary family law.

    A. The Problem of Equal Position in Heterosexual Marriage

    As you may be aware, even in the most developed nations, there is still a tendency for distribution of domestic tasks between the husband and wife. In general, the husband will be most likely responsible for providing the main family income while the wife will be responsible for maintaining the household chores, which usually includes the additional task of grooming and raising the children. I don't know whether this task distribution is incorporated into a law in other jurisdictions, but in Indonesia, the incorporation is pretty much clear. Under Law No. 1 of 1974 on Marriage, the husband is responsible for providing the living needs of the wife to the best of his ability (in his capacity as the head of family) and the wife is responsible for maintaining the household (in her capacity as the house wife).

    Though seems simple, in reality, the effect of the above arrangement is significant and I dare to argue that such arrangement has already turned out into a baseline (see my discussion on baseline here). In countries and communities where economic activities are dominated by men, women position is generally weak and it affects their bargaining power within the marriage. It is true that by imposing the legal obligation on the husband to provide the main financial support for the family, it seems that the regulator is protecting the interest of the wife on the assumption that the wife is the weaker party. However, there is an inherent problem that might have been overlooked.

    Logically, if you are financially dependent to a person, you will need to comply with such person's demand to the extent that it is necessary to maintain the benefit that you receive. Even when the law says that husband and wife have the same rights, it is nothing more than dead letters in front of economic reality, i.e. those who have better economic power within a marriage tends to control the relationship within such marriage (and in worst cases, the control issue can turn the marriage into an abusive relationship).

    In my opinion, imposing a legal distribution of domestic tasks might create the wrong incentive (though in the case of Indonesia, I would say that our culture and religion hold the bigger portion).First, it forces the husband to always become the family's financial backbone even though in some cases he does not have enough capability. Second, it creates an impression to the wife that working outside the family household is a bad thing, forcing them to believe that stay at home housewife is the best option for them. Would not it be better if a couple can determine by themselves how they will regulate their family relationship, including on getting family income, maintaining assets and raising children? Further research will be needed to answer this problem.

    Unfortunately, the notion of distribution of job has been deeply embedded into our subconscious, making a considerably slow progress in creating equal position within a marriage. Even nowadays when women position has already getting better in marriage due to their higher involvement in the job market, it is not uncommon to find women who will trade their economic power for the sake of raising the children in the family.

    So what's the connection between the issue of equal position and same sex marriage? To answer that question, we need to understand first whether the traditional distribution of task is also applicable in same sex marriage. Since this is a marriage between same sexes, there are no husband and wife, no head of family and housewife, and therefore, I would assume that the distribution of role within such family will need to be agreed between the couple themselves instead of relying on any particular standard. In other words, to accept same sex marriage in our law is to revolutionize the entire concept of equal position in a marriage.

    The grand question is: can we accept same sex marriage if we have not even reached the state of equal position in heterosexual marriage? It would be questionable to legalize same sex marriage without even reforming laws on ordinary heterosexual marriage and redefining the position of husband and wife in such marriage. In the end it's a whole package.

    B. Family Law Complexity

    Another major issue that is sometimes overlooked when dealing with same sex marriage is the complexity that it will create toward traditional family law. Legalizing such marriage does not mean that we can just simply give the right to marry to same sex couple and everyone would have a happy ending, further revisions must also be done the the overall body of family law which may include: child status, inheritance, divorce requirements, and joint assets (which may also cover tax issues). And revising those provisions would be a major challenge.

    1. Child Status 
     
    Child status will be the first to be caught under the complexity. The problem is clear, same sex couple cannot produce children without the help of other sexes. So what would be the status of the children produced from the offspring of unmarried biological parents? Should it go to the father or the mother or to the ones who have established a family, i.e. the same sex couple?  The current default rule is that a child produced by unmarried couple can only be claimed by the mother. In short, it is impossible to authorize same sex marriage, without revolutionize the concept of a legitimate child.

    Imagine also when each of the couple want to produce a child. If successful, it would mean that a same sex family might have two completely separated by blood children, and these kids are not prohibited from marrying each other since they don't have any blood relationship anyway. So that would be an interesting form of family. I won't give a moral assessment for this kind of family, but I am quite certain that it would be more complicated. Thus, I would say that for same sex couple, adopting an unrelated child might be easier than having a child from their own flesh and blood. 

    2. Inheritance  

    Further, the complexities caused by the child status will directly affect inheritance. One thing for sure, by default, only one person in the same sex marriage will have family relationship with the child (in case they choose to use their own offspring). Assuming that they have two separate children, one will inherit based on blood relationship, the other one will only be able to inherit through a testament in case one of the parents died. Again, another complexity.

    It would also be interesting to learn about how the couple in same sex marriage will inherit each other assets especially in a regime where there are differences of inheritance portion for husband and wife (such as in Islamic law). Or should the law create a different set of inheritance system for same sex marriage? What would be the efficient inheritance system?

    3. Divorce and Child Care

    The process of divorce in same sex marriage will need to be amended in case there are differences in the procedures for husband and wife. Furthermore, in such divorce, who will be responsible for the child custody? Can we sue for a husband alimony payment as in the usual heterosexual marriage? Although I doubt that can happen if there is no distinction. Should alimony be imposed upon the party having better financial conditions? Or if there is no blood relationship with the child, can we actually impose alimony payment?

    4.  Joint Assets and Tax Problems

    Revising the concept of joint assets for same sex couple would be easy to the extent that we only need to change the definition of marriage. But there might be some problems from tax perspective, especially for the  tax relief usually given to married couple. Is that something that the tax department will ever give? Of course if the amount is not that big, the same sex married couple might renounce such right for the sake of legalization (there is always a trade off). But if the amount is high, would these couple agree or will they claim that there is a discrimination? That would be an interesting case. I heard though in the US that same sex couple are fighting for this kind of tax equalization. One thing for sure, even getting a tax equalization for a booming industry in the biggest muslim populated country such as Islamic finance is very difficult, so I wonder whether that kind of equalization will be granted to a controversial arrangement like same sex marriage.       
       
    5. Conclusion

    Like I said in the first portion of this post, accepting same sex marriage means that some radical changes must also be done toward heterosexual marriages main concepts. The same is also applicable to the laws surrounding the marriage. Again, it's a single package. An additional thought, with all of these complexities, would it be better for same sex couple to govern their relationship purely through agreement/contract instead of waiting the government to regulate the structure of same sex marriage?

    Now, I will not offer any solution here nor any endorsement on what would be the best concept of marriage, the analysis within this post is purely positive, not normative. However, if you are interested to read further on this issue, you may download this paper from Harvard Journal of Law and Public Policy, titled: "What is Marriage?" Happy reading!
  • Should We Ever Impose a Good Samaritan Liability?


    Good Samaritan liability basically means imposing a legal obligation to a bystander (to the extent he has the capacity to help) to save a person in need of help. Thus, in case the bystander fails to save the person in need, and such person is harmed, the bystander will be liable. This is one of the interesting issues discussed in law and economics of torts. The case that inspires me is the Chinese toddler case (you can read the details here), where a Chinese toddler was being struck by a car, and no one helped her for quite a long time until a second car hit her again. When someone actually helped her, it was already too late, and she died in the hospital. If only the bystanders around the toddler helped her immediately, she might be saved and the story will be a happy ending one. Unfortunately, that's not the case here.

    I asked some of my LLM Chinese friends in University of Chicago about this case and they confirmed that there was a case in the Supreme Court of China where a person is being penalized for helping an old woman from an accident. The facts of the case were never clear and people make their own conclusions, one of them is that helping other people may cause problem to you, especially when you don't know whether the people are really in need or they are just trying to put a scam on you (apparently, there are also cases where some swindlers trick people by pretending as accident victims and then blame anyone who nice enough to help them).

    This is a serious matter, especially under the basic principle that people respond to incentives. If people can't determine whether their altruism as bystanders would be beneficial to all parties or at least don't cause them into any unwarranted trouble, their best rational choice is actually not to help anyone. And that is really bad to the society because it imposes a huge social costs to people in need. They can be helped with small costs, but because people fear that they will be in trouble if they try to help, these people in need end up with nothing or even bigger losses.

    Now I remember that one of the comments that I see in Twitter is why not imposing a Good Samaritan liability? We impose liability to bystanders to help those in need in case those bystanders have the capacity to do so and the costs for doing such action would be low and lesser than the losses imposed to the victim due to the inflicted harm. Example: you're trying to cross the street and suddenly a car in full speed is about to hit you. I can easily save you by holding your hand and thus prevent you from being hit by the car. Doing that will not cause any additional risks to me (the car will not hit me) and if I don't do that minor action you'll die or at least be significantly injured.

    Some people argue that liability should be imposed to me in this case based on the least cost avoider principle under the famous Hand's Formula (if you want to know more about Judge Learned Hand, see here). The principle basically says that a person should only be liable for torts in case the costs to avoid such harm (taking precautions) is lower than the loss imposed to the victim multiplied by the probability of the occurrence of such losses. Using standard economic approach, it's difficult to resist the strength of this argument, after all, the costs are lower than the benefits, surely, we should impose such duty to give the correct incentive for people to help other people.

    However, I find this kind of approach as simply perverse. Not from morality point of view, but from an advance economic analysis. First of all, there is a problem of causation. It's easier to pinpoint a causation effect from an action rather from omission (as a caveat, I would like to emphasize that it's easier not easy). The standard of proof would be very expensive to prove causation in a case of omission. There is no solid evidence that even when I hold your hand, I can save you from a significant injury, after all it's an "ïf only"case. If you can't impose causation, how can you hold responsibility in economic terms? An easier solution for my hypothetical case is to impose liability to the car driver, because he is the one who hits you. In reality, if you survive, you will most likely sue him. If not, your family will sue him. And that would be easier for all parties. 

    Second, if we apply the notion that we are legally obliged to help other people whenever we are the least cost avoider (and there will be sanctions for failure to do so), it would be a disaster. Let us use an extreme case, imagine that there is a hungry child in front of you (you don't know him at all). Without food, he will not survive. You don't help him even though you are able to do so and he died shortly. Should you be liable in this case? My answer is no and it's for good reason. It will impose an enormous costs to everyone to always be aware whether there are people in need around them. Furthermore, the costs for enforcement will also be humongous. People will start to sue other people if they don't get help in case they think that they can be helped by bystanders. It can turn out to be a lucrative business for lawyers, but for great expenses to the society.

    One solution to this, which has already been incorporated in our penal code, is to impose liability only to specific people who have clear legal duties to take care of such people in need. Example: duty of care by parents to their child. This can be an efficient rule if the duty is strictly imposed to people who have control over the people in need and therefore are in a better position to understand the need of such people.

    Another solution is to protect bystanders from any liability in case they try to help. You don't need to give additional benefits to altruists, after all for these guys, helping other people has already increased their utility. But you may want to protect them from liability imposed by their good intentional action. The problem with this rule is again standard of proof in causation. Like I said above, in case of omission, it is harder to perceive the causation. But once an action has been done, that action can be placed in the causation analysis.

    A no liability rule for all helpers might not be efficient in cases where bystanders don't actually help and instead cause additional problems. So another set of rule can be added, i.e. the no liability rule will only be applicable for bystanders who can show good faith in his actions and have the minimum reasonable skills to help. In this case, hopefully, people having no capabilities to help will stay away from helping other people in need and therefore they can avoid unnecessary problems. It's not a perfect system, some people who think that they are reasonably well to help other people may end up liable for reckless help but it is better than creating a system where everyone is not liable and thus there are less incentives to be careful in helping other people.
  • Birthday of The Capitalist Lawyer - 2nd Edition: Some Reflections on Legal Thoughts


    Today is my 28th birthday and I guess it would be nice to start a-once-in-a-year reflection in my blog (started it in 2009, but completely forgot to follow up in 2010, typical). I will not make any reflection about my life (nothing to reflect, it's a damn good life anyway), so for this year, I'll reflect the development of my own legal thoughts.

    I started my formal legal education in 2001 without knowing a thing about the law, I didn't know whether I will be interested with it or what I will do after I graduated. My primary reasons at that time? Just following my intuition plus chasing my dream of being admitted at the University of Indonesia (my second choice was UI's Political Science, don't ask me why I picked that, cause I can't answer that even until today). So yes, it's more about getting into UI rather than picking a subject that I really like. Fortunately, I was lucky. By the second semester I knew for sure that I love this subject!

    At first, my primary choice of specialization was constitutional law. 2001 was the time where many constitutional law professors secured high positions within Indonesian government. It was a transition era in the Republic and constitutional scholars were needed to guide the process. However, a fated encounter with a really weird lecturer caused me to change my mind entirely. It was so bad that I said to myself, "all the good professors are in the government now and we're stuck with these buffoons. Like hell I will take constitutional laws." So I decided to specialize in other fields: procedural and business laws. Again, I am a lucky guy. Turns out it's a correct decision, as now I work as a corporate lawyer, a profession that I literally enjoy not only professionally, but also academically.

    But those things only affect my professional skills. What really affects and shapes my legal thoughts is a whole different subject of law that I accidentally learned during my law school days, i.e. Islamic legal theory. It started with a challenge from my best friend, saying that I will never master Islamic law, because I can't differentiate the type of waters that you could use to purify yourself (wudhu). Of course, knowing how predictable I am, I took that challenge and soon I regularly went to UI's mosque's library. Although I planned to start with the library's classical Islamic law books collection, I ended up with Islamic legal theories first. And I was impressed, by the 9th century, Islamic legal scholars have already developed a concise legal theory that will put common law and civil law scholars at that time to shame.

    Granted, the current development of Islamic legal theory is pretty much gloomy (no new development), but I learned something from my personal study, the existence of a theory called Istislah or Maslahah Mursalah, which basically states that legal scholars, in the absence of clear legal rules, should take the welfare maximization of the society as a prime concern in deciding cases. The concept is simple, but the insight is very deep. Such insight helped me to think for the first time about what constitutes a good law.

    During my early years, I got an impression that my faculty only taught its students to become technical masters of law. We know the laws, we can easily apply them into concrete cases, and we are proud with that. The famous motto in my faculty, "If you're a law student, always talk with a legal basis." It's nice, but something is missing here. Being a technical master means that you are only acting as a spokesman of the law. You don't care whether it's good or not, heck, that's not even important. This is what I call as an abuse to Hans Kelsen's Pure Theory of Law (See my discussion on Kelsen at here, here, and here).

    So for me, this is non sense. This kind of education reduces the profession of lawyers into simple craftsmanship. Lawyers should be able to do more than that, they should be able to work as policy makers, they should analyze the quality of laws and propose a better version if they think that the current ones suck. Istislah theory helped me to see that error earlier and I am thankful for that.

    Now, when we're eventually getting into the question of what constitutes a good law, there are various methods to determine the standards. I started with the believe that a good law should reflect the society's sense of justice, local wisdom. But that belief didn't last long. Why? I come to realize that there is no standard for reflecting the society's sense of justice. In the end, it will always be a matter of preference. Suppose the society deems honor killing as a part of their justice system, would we still agree to enforce it in the name of local wisdom?

    Logically, I move forward to a standard which seems to be universal and applicable in every situation and condition. So I turned out to legal principles established by religious belief, i.e. Islamic law. Yet, it didn't satisfy me. Years of researches show that other than the agreement among Islamic scholars on the mandatory prayer, fasting, zakat and hajj, there is no unity of opinion in Islamic laws. Cultures or 'urf have a great impact on how scholars interpret the laws and there is a never ending debate on what standards that are deemed applicable for eternity and that are subject to changes. As a result, there isn't any production of worthy new ideas within Islamic law, it's just a repetition of the old ideas and debates that ended in the 15th century. Thus, I concluded that similar to the notion of society's sense of justice, Islamic law is not that reliable for providing a clear standard on what constitutes a good law. FYI, the use of Istislah itself is still controversial within Islamic legal scholars, so that could explain why its development has been halted for a very long time.

    Finally, I end up with the law and economics movement. It's ideas of welfare maximization and promotion of efficiency as guidelines for determining a good law really captivate me. First, I see law and economics as the modern interpretation of Istislah theory, its spiritual successor. Second, since it is a combination with economics, it is easier to assess the standards to determine whether they really work or not (empirical research is very encouraged in this field and I think it is very helpful). Furthermore, economics is a science that can be applied to almost every aspect of human life, so applying such science into legal conceptions prove to be an eye opening of things that we have already taken as granted. The notion that incentives matters still amaze me on how we can use different incentives to structure a law that will work efficiently and to explain the behavior of the people in facing the law and legal enforcement. 

    When I choose law and economics as my primary tool for assessing the quality of laws, I don't close the opportunity of using other helpful methods. No tool is perfect, and maybe in the future, we will develop an even better method for analyzing the law. But until that day comes, I'll stick for a while with law and economics.
  • Why I Favor Votes as Commodities rather than Duties


    A couple of days ago, I received an interesting comment from @tirtasusilo on my latest post. His question is: "How would you persuade someone who is against vote buying because he/she considers voting a duty, not a commodity?" First of all, a rational person should not consider voting as merely a duty as I argue here. But surely, giving that kind of answer would be cheap. So I'll try to answer that question through this post.

    What would a person think about his vote if he considers it as a duty? My assumption: he takes voting as a way to do the right thing. He votes because he believes that he does something for the betterment of society. Consequently, voting should never be traded. You don't trade what is right only for money. While his notion might be tempting for a lot of people, I'm afraid I have to say that it is this notion that persuades political parties to use vote buying to get what they want.

    First of all, we cannot effectively prevent people from picking their own preferences, whether they want to protect the integrity of their votes or they think that voting is a crap mechanism which means nothing, or that voting is a valuable item that can be traded for a good price, etc. The fact that there are many preferences means that sly politicians can use different methods of persuasion for getting as many support as possible from the voters, including building an image as good politicians in front the media to get votes from the duty oriented guys and using tricky methods (including money and political promises) to gain additional votes from the commodity oriented guys. In this case, we are not maximizing the utility of the duty oriented guys, we're maximizing the utility of politicians and commodity oriented guys.

    Now, if duty oriented guys really want to maximize their interest, i.e. preventing politicians from vote buying, they should agree with the system that I proposed, i.e. legalizing vote buying with certain conditions. The reason is simple, such system is created for the sole purpose of reducing vote buying, it is created not to let people trade their votes like crazy but to keep people from buying and selling their votes. Think it as a more efficient solution that basically satisfies the interest of the voters (for getting a better election in term of fairness and quality) and imposes significant additional burden to politicians who dare to use money in getting their support.

    Sure, we can always resort to the old school style, such as making vote buying as an illegal act and enforcing heavy punishments against violators of vote buying restriction. The question is: will that be efficient in Indonesia case? How much money do you think that we have spent for the entire national and regional election? These costs include campaign costs, the "hidden" vote buying costs, candidates disputes costs, enforcement costs, etc. Not only that these costs are damn expensive, we still end up with buffoons as our leaders. And being rational, these buffoons will most likely try to do anything to recoup all of their costs during the election. After all, no sane people will go and spend most of his fortunes for securing a position if he don't expect some benefits from getting that position. What could be even worse than that?

    So, considering the above argument, if these duty oriented guys really care about doing the right thing, would they pick the "right" method that will produce the "not right" results, or would they pick the seemingly "not right" method that will produce the "right" results?

  • The Protection of Criminal Suspects in Law and Economics Perspective

    Forthcoming in Jurnal Teropong Edisi RUU KUHAP 2015 | 23 Pages | Posted: 10 May 2015 | Date Written: April 28, 2015

    Public Choice Theory and its Application in Indonesian Legislation System

    24 Pages | Posted: 8 Oct 2012 | Last revised: 8 Nov 2014 | Date Written: October 8, 2012

    Special Purpose Vehicle in Law and Economics Perspective

    Forthcoming in Journal of Indonesia Corruption Watch, 'Pemberantasan Kejahatan Korupsi dan Pencucian Uang yang Dilakukan Korporasi di Sektor Kehutanan', 2013 | 15 Pages | Posted: 22 Aug 2013 | Date Written: August 18, 2013

    Legal Positivism and Law and Economics -- A Defense

    Third Indonesian National Conference of Legal Philosophy, 27-28 August 2013 | 17 Pages | Posted: 22 Aug 2013 | Last revised: 3 Sep 2013 | Date Written: August 22, 2013

    Economic Analysis of Rape Crime: An Introduction

    Jurnal Hukum Jentera Vol 22, No 7 (2012) Januari-April | 14 Pages | Posted: 12 Nov 2011 | Last revised: 8 Oct 2012 | Date Written: May 7, 2012

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