How Much is that Simulacrum in the Window?
posted by Frank Pasquale
When America’s wealthiest families start beating the drum for estate tax repeal, remember this heartwarming story of canine cathexis from Leona Helmsley:
[Helmsley's] instructions, specified in a two-page “mission statement,” are that the entire trust, valued at $5 billion to $8 billion and amounting to virtually all her estate, be used for the care and welfare of dogs, according to two people who have seen the document and who described it on condition of anonymity.
This news reminds me of part of John Chung’s fascinating article Money as Simulacrum, which comments on the unreal differentials of power created by contemporary inequality:
In 2007, the average amount of compensation for the top 25 highest paid hedge fund managers was $892 million. The compensation for the highest paid manager was $3.7 billion. . . . Earlier this decade, the price of some paintings broke the $100 million mark. Single family homes also have broken the $100 million mark this decade. To the ordinary person, such amounts are beyond comprehension. Such numbers are the product of a different world, a different reality that bears no resemblance to the reality of most people.
Perhaps the numbers seem unreal, even unimaginable in an increasingly innumerate society. But the power they manifest is all too real, all too able to shift scarce resources from increasingly hungry persons in the developing world to spoiled pets in ours.
July 2, 2008 at 2:53 pm
Posted in: Economic Analysis of Law, Tax
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Responses (14)
Paul Gowder - July 2, 2008 at 5:33 pm
I don’t know any trusts and estate law, but is there any sort of public policy doctrine allowing the courts to handle egregious cases like that? I mean, seriously.
Anonymous - July 2, 2008 at 5:57 pm
What if someone told you that you couldn’t spend your money on your pet project - let’s say its contributing $$$ to NASA, b/c you really think space exploration is important. Would you set about to make yourself a fortune, or would you decide accumulating a bunch of money just isn’t worth it? At least at the margin, you’d probably not work quite as hard.
So what you say? Less wealth gets concentrated in one person with idiosynchratic preferences; we’re all better off. Except that we lose two important things: 1. Whatever extremely productive activity/idea that you used to accumulate all that money (I assume you didn’t steal it, and that’s a whole lot of money to earn based on something thats not worthwhile) and 2. Your tax dollars, which get redistributed to many (ok, so Helmsley didn’t always pay these, but she was supposed to!).
You act like this is a zero-sum game - there’s a fixed pot of money and these idiot rich folks are keeping it from the poor. I highly doubt that’s true. When people earn a whole pile of money, they generally do it by creating something good for society.
And yes, maybe distributing this money to the poor would be a better result, but if you mandate that rule then there’s less money and less societal benefit. How is that a good result?
A.J. Sutter - July 2, 2008 at 8:17 pm
Anonymous’s comment illustrates a typical rhetorical trope in the “economistic” approach to law and society. Step 1: Take some principle (another example is the precautionary principle in environmental law) that is proposed to be applied on a case-by-case basis. Step 2: Treat it as an ironclad rule. Step 3: perform a reductio ad absurdum or ad horribilem, i.e., show what ridiculous or terrible consequences will flow from this “rule”, usually, though not necessarily, based on lower efficiency, reduced aggregate amount of money, or putative reduction in some vague social benefit. Hahn & Sunstein have a 2005 article attacking the precautionary principle that uses exactly the same technique.
No one talked about mandating any rule. Judicial discretion to deal with unconsiconable cases or cases that are violative of public policy was the proposal.
Dave - July 2, 2008 at 8:22 pm
If one were to agree with you that spending $8 billion on pet maintenance is absurd (while many of us might, at least one other person does not), what is to be done? Presumably you are advocating more than increased taxation, as I doubt that your outrage would be much reduced if $4 billion was being thrown to the dogs while the other half went to taxes.
And if you are advocating something more than increased taxation, what would that be? Again presumably, it seems you would like a world without billionaire dogs, and other such absurd results. Would there be some sort of vetting committee for expensive ideas? Is there an appropriate line somewhere between leaving your billions to alleviate poverty and leaving it to your poodles? Who would decide where that line is and what is an appropriate purpose to put your wealth? And if you do not control the lawful activities to which you can put your money, isn’t that essentially communal ownership? Isn’t that idea, like, so pre-1989?
It seems to me that for every Queen of Mean one can point to a whole range of other people using their wealth in a manner you might perceive to be much more socially useful (such as Gates and Buffet). Pointing out this one egregious case in the otherwise successful functioning of the free market brings to mind the old line from my undergrad days: the plural of anecdote is not data. The data show that well-regulated systems of private enterpise and free markets function much better at solving social problems than state directed economies. That we have to live with outliers such as Helmsley is an unfortunate byproduct of a free society.
Dave - July 2, 2008 at 8:45 pm
In response to AJ-
Well, you actually are proposing a rule - a rule whereby judges can tell people what to do with their money. I’m sure in your mind this will only take place in extreme cases that you disagree with, such as this one. But what if a judge decided that funding for reducing AIDS in Africa was pointless, and thus blocked it for public policy reasons? What set of rules would judges use to determine when and where they can intervene in people’s private economic choices? What would be a threshold amount for a judge to make that determination? And is $8 billion on dog care really that worse of s decision than $8 billion contributed to the trillions being wasted in Iraq, which is where a significant sum of our taxes are currently going? Why should we see the government as any better at making spending decisions than Leona? No one has ever died from excess shampooing, as far as I know.
Unconscionability as a doctrine to limit the harm that can come to someone due to imbalances in contracting ability is one thing. Unconscionability as a doctrine allowing the judiciary independent discretion in approving economic choices should be called what it is: communal property. If the state wants to tax your property, so be it. But telling you what you can do with it (and what you can’t, short of it being illegal) means the property is not really yours in the first place, no?
AYY - July 3, 2008 at 1:24 am
I was reading somewhere that the money doesn’t have to be used to pamper pets but that it could be used for a vet school (or two), or for research into canine diseases, etc. So maybe it’s not so bad after all.
Aaron - July 3, 2008 at 9:16 am
I think we are getting to a strange place in our country where apparently there is a newly fashioned right to gay sex, but we should tax someone heavily because we are afraid they might use their money unwisely. You have a virtually unfettered right to an abortion, but you can’t open a bar and say, “everyone can smoke here–and if you don’t like it, leave.”
Of course what she did with her money is silly. But I fail to see how it is our business. If the right to privacy is anything more than a cornucopia of wished-for policies, then it has to mean that you can leave your money to whomever or whatever you damn well please and it is no one’s business but your won.
Finally, if you are making the argument that rich people don’t know how to handle their money, well, frankly that is a strange argument to make. Aside from this outlier, if you are rich when you die, it generally requies a certain competance in your handling of money. I mean let’s take two kind of outlandish examples: Vanilla Ice and MC Hammer. If those “behind the music” shows are to be believed (big if, but oh well), Hammer has blown through most of his money and Ice has actually kept a nice nest egg and is basically living the rest of his life comfortably on that money. But who has to fork over more money to the Feds when he dies? Ice, ice, baby, that’s who. But clearly, Hammer did a much worse job handling his money.
And on a less dramatic and hilarious scale this is happening every day. Those who keep their money are punished for it. How on earth is that wise or fair?
A.J. Sutter - July 3, 2008 at 11:12 am
To Dave: I’m not sure that the situation regarding property is as pristine as you believe. For example, patents are usually considered as a form of property; certainly in my experience, patent holders tend to believe they own their patents. But injunctions are granted as a matter of equitable discretion by the court, including in patent cases. (See, e.g., the 2006 USSCt decision in eBay v. Mercexchange.) If you can’t get an injunction against an alleged infringer, your property ain’t worth much. The judiciary intervenes in peoples’ private economic choices in other situations as well, e.g. antitrust cases that are subject to “rule of reason” analysis.
I haven’t taken any position as to whether or not a court should change what this convicted felon did with the money that she in large part inherited. However, I will hazard a guess that if someone sought to block the execution of her will, there would be some sort of equitable principle involved. So if I am proposing “a rule” that judges have discretion to deal with such cases when equitable remedies are sought, it isn’t as revolutionary as you suggest. I’m not a T&E lawyer, so I’m not proposing here what the cause of action might be, who would have standing, etc.
The notion of “Why should we see the government as any better at making spending decisions than Leona?” is a red herring. No one is suggesting that judges would initiate proposals for what to do with the money. If there were some litigant with standing to sue, I would suppose he, she or it might have some proposal. I agree that spending on the Iraq War has been a disaster, but I was against the war from the get-go so that’s an easy concession. But if your belief in the sanctity of peoples’ economic choices leads you to believe that no one can come up with a better use for the money, probably you should re-examine that belief.
As for me, I think that the egregiousness of this case merits further thinking about a reasonable basis on which the will might not be enforced. I’m not proposing a legal theory here (nor was that the intent of my original post, which was merely to point out some tricky rhetoric). But yes, that means I do believe it’s not always OK for rich people to do whatever they want with their money. That is as a matter of principle, not a legal rule.
skeptical - July 3, 2008 at 12:27 pm
A.J. Sutter writes:
No one is suggesting that judges would initiate proposals for what to do with the money. If there were some litigant with standing to sue, I would suppose he, she or it might have some proposal.
I wonder what that proposal might be. I’m willing to guess that in most cases it’s going to be some form of “give it to me.”
Anonymous - July 3, 2008 at 12:43 pm
A.J. Sutter-
The problem is the existence of judicial discretion. If I know my money will not go to my preferred use with some probability, then I will not work as hard to accumulate it. Whether or not judges are capable of deciding what to do with property does not change this problem.
And I can’t agree with your counter argument to Dave. In the end, its a judge making the decision about what is a good or bad use of money - whatever the ideas of some private litigant with standing (and seriously, who would have standing? anyone that doesn’t get the money?). Besides, the theory is that the government (or anyone else for that matter) might do better than Leona sometimes, but on balance, Leona knows best.
Dave - July 3, 2008 at 5:38 pm
AJ-
Lacking experience in IP, I don’t have much too say about the IP stuff, except that it doesn’t appear to be a case where a judge is telling you what you can or can’t spend your money on. As far as antitrust is concerned, monopolies and other actions in restraint of trade are illegal. As far as I am aware, spoiling pets is not illegal. If the legislative branch waHTTP/1.1 200 OK Date: Sat, 04 Jul 2009 05:03:58 GMT Server: Apache X-Pingback: http://www.concurringopinions.com/xmlrpc.php Connection: close Transfer-Encoding: chunked Content-Type: text/html; charset=iso-8859-1
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