“In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread.”
– Anatole France, 19th Century Poet

The first people who gathered under the banner of liberalism, in the 18th and 19th Centuries, loudly proclaimed the principle of equality under the law.  They strongly advocated for a regime in which every law would apply, in principle, to everyone.  Commoners and kings alike would labor under the same law.  This seems like a commonsense declaration nowadays.  But that’s just because the liberals won the argument so convincingly that virtually everyone grants the principle as obviously true.

At the time, though, this was a very controversial claim.  That’s because this was a sharp distinction to the old order they overthrew.  Under legal regimes descending from medieval law (often referred to as “feudalism”) various classes of people had been granted certain privileges (translated literally: “private law”) by the Crown.

An example of these were the sumptuary laws, which regulated by force of law the clothing and food people could consume.  The most luxurious and fashionable items were legally restricted to the upper classes; it was their privilege.

Crown monopolies were another form of even more narrowly tailored privilege.  In these cases, a specific named individual or group was granted the sole right to engage in a certain economic activity within the kingdom.  So, if for example the Earl of Chesterham was granted the monopoly over needle manufacturing, the State would drive his rivals out of business for him.  There would literally be a law on the books somewhere that said something to the effect of “The Earl of Chesterham has the sole privilege to manufacture needles in the Realm.”

As you’d expect, kings had a tendency to give these privileges out to their friends and supporters.  Often, they’d accomplish this by elevating someone to a certain rank in the nobility, after which they’d have all the rights and privileges accruing thereto.  Sometimes, they’d outright sell a privilege.  Something like: “Sure, you can have the rum transshipment monopoly for the next ten years, if you deliver a hundred gold bars to the Royal Treasury.”  This tended to happen a lot more in times of strife, when the king was hard up for money and raising taxes would be problematic.

Liberals, by and large, were the people who couldn’t stand what they saw as this meddlesome, venal, and inefficient regulation of private affairs.  So they figured that if everyone were forced to be seen as equal under the law, it would be impossible for the State to grant all of these privileges.  This is a big part of the reason why we have statues of Justice wearing blindfolds in front of courthouses, and why it is unconstitutional in the USA to name a specific person in a punitive law (called a “Bill of Attainder” in the text).

This ideological shift brought with it significant benefits.  But it also had significant drawbacks.  In particular, the code of laws and set of binding regulations in every Western country is now hilariously complicated and subject to innumerable loopholes.  Laws almost never mean in practice what they would seem to mean on the surface.  And even the most simple prohibition or regulation of activity requires countless exceptions or addenda to properly tailor the scope of the regulation so that it actually addresses the problem it was intending to address.

In practice, equality before the law is a harsh technical constraint.  And one that doesn’t really do a lot to stem the creation of privilege.  For instance, as Anatole France alluded to, laws that apply to everybody almost always have a real target in mind.  Laws are passed with the hope of changing behavior.  Anti-vagrancy laws apply to rich and poor in theory, but all the convictions just so happen to fall on the poor.

Or, to take another example, if Congress wants to give a tax break to some large company they just have to say that they’re lowering the effective tax rate on all companies who are headquartered in X city as of Y date and have annual revenues over Z.  In theory, this law could apply to anyone who meets the criteria.  But the law has been tailored carefully enough that only one entity will qualify.  And, like with the Crown monopolies, these laws are fairly readily bought.  Hence, the lobbyist industry.

So, I was thinking, could it be possible to increase the efficiency and effectiveness of the legal system by relaxing this restraint?  If we gave up on the ideal of equality before the law and acknowledged inherent inequalities among people engaged in different sorts of activities, what sort of system could we generate instead?  And what would be the benefits and drawbacks to such a move?

Let’s begin with the design goals.  First and foremost, the proposal should reduce the complexity of the legal code.  Ideally, this would mean that the average citizen would be expected to able to determine for himself whether or not he was in violation of the law.  Traditionally, there is a principle in law that ignorance of the law is not a valid defense.  But, at this point, literally everyone is ignorant of the whole of the law; even experts are only capable of understanding their own subset of the code.  In the aggregate, we are currently excused our ignorance only because of the difficulty of enforcing the laws.  This principle of “least law” is one that every legal code should be judged against, in analogy to the elegance and power found in a good scientific theory or computer program.

Secondarily, the system should use the newly relaxed constraints to manipulate social status directly wherever possible.  Prestige is an excellent driver of behavior.  When skillfully manipulated, policy results that would be otherwise completely uneconomical become plausible.

Tertiarily, the new system should seek to reduce structural energy costs wherever possible.  As detailed in God, Gold, and Glory, the major challenge of the age is that we are spending far more energy than we used to in order to accomplish basic civilizational functions.  Thermodynamic efficiency is a crucial yardstick by which the success of this proposal should be measured.

I believe that all of these goals can be best advanced by formalizing economic class.  Class, in and of itself, is historically a fraught subject.  This is largely because of Marx.  He made analysis of economic class the foundation of his social theory.  This emphasis was largely accepted by the intelligentsia for about a hundred years, coinciding with the shift from plutocracy to theocracy.  It also served as the official underpinning of the political system that ruled half the planet during the latter half of the 20th Century.  “Workers of the world unite,” as a slogan, only makes sense with a Marxist conception of “worker” as a class with collective interests vis-à-vis the rest of society.

This all seems rather old-fashioned nowadays.  That’s because the democratic socialist tradition has by-and-large shifted away from Marx’s core concern: the plight of the working class.  Since the upheaval of the ’60s and ’70s, and especially since the complete collapse of the Soviet Union, the energy in modern socialism is all in addressing racial and sexual inequities.  Every so often, old-line Marxist critiques and concerns bubble up to the forefront (like the Occupy Wall Street march against the “1%”), but they no longer have anywhere near the same staying power as they did fifty years prior.

Still, though, economic class provides a useful handle for the policymaker.  It serves as a decent shorthand for the physical and social conditions a person or household may be experiencing.  It also tends to encapsulate the aspirations of a set of people.  What someone is willing to consider as fair compensation for his labor, who is a suitable candidate for marriage, or their image of the good life are all intimately tied up in class.

So, when I say that I propose to formalize the existing class structure, what do I mean by that?  In a nutshell, I’m saying that I think the government should formally, in law, recognize several exclusive classes of people.  Then, the law code should be written such that there are substantially different laws for people in the different classes.  Finally, there should be a mechanism by which one’s rising and/or falling fortunes are recognized.  We’re not building an inflexible caste system here; people need to be able to move around somewhat based on their own initiative.

All right.  With all of that out of the way, it is finally time to get down to a concrete proposal.  Let there be five classes enshrined in law.  They will be in a strict order of prestige, meaning that to rise or to fall a level should be seen universally as a rise or fall in station.

The lowest class will be the Prisoner.  Prisoners are legally wards of the State.  By this, it is meant that the life, liberty, and property of the Prisoner are each entirely at the disposal of the State.  Now this does not mean that the State will (or should) choose to house every Prisoner in institutions that resemble modern prisons.  Any person that’s considered incompetent to manage their own affairs and is not the dependent of another person would also fall into this bucket.  So committed mental patients or the badly-disabled would legally count as Prisoners.  The key point is that the Prisoner is seen to have lost (or been unable to claim) the basic privilege of participating in the broader society.

Note that, unlike the modern legal code, this implies that there would not be terms of sentence.  Once a person transitions into the Prisoner class, they remain there as a ward of the State until such time as they die or they qualify for ascension to another social class.  Rehabilitation is therefore a necessary requirement for release.

This also implies that Prisoners have no recognized legal rights or recourse vis-à-vis the State.  This is a sharp distinction from the modern code, wherein the relationship between the prisoner and his jailer is fraught with controlling law, all of which is written with the expectation that the prisoner should have certain expectations of treatment that, if violated, should result in recompense by the State.  This does not mean that there would be no regulations on the behavior of agents of the State.  But it does mean that the definition of misconduct and the according punishments would be defined by State policy.

The next class above the Prisoners are the Undeserving Poor.  These people make up what are commonly known as the “underclass” and currently inhabit the most blighted of urban centers.  For clarity, when policymakers speak of “at-risk” or “disadvantaged” youth, children who would fall into this class are who they’re referring to.

The Undeserving are considered to have few enforceable rights and privileges.  Conceptually, the situation would be analogous to the modern institution of parole.  Someone on parole has the remains of their sentence suspended conditional upon obeying restrictions on their conduct that would be otherwise illegal to enforce.  For instance, a person on parole may currently be deprived of the liberty to leave a certain jurisdiction or not be permitted to consume certain substances.

In particular, my proposal would be very harsh on the Undeserving in terms of status.  So, for instance, all anti-discrimination rules would be waived for the Undeserving.  It would be both legal and encouraged for potential employers, landlords, private citizens, and agents of the State (e.g. profiling by the police) to discriminate against the Undeserving.  There would also be other intense regulations levied on the Undeserving: curfews could potentially be enforced; they would not be considered to have the right to assemble in groups; and they would not have the right to any formal political representation.  By that last statement, I mean that not only would the Undeserving not be allowed to vote, they would not even be considered as citizens of the jurisdiction for the purposes of determining representatives or electoral votes.

The purpose of all of these restrictions is twofold.  First, it should feel terrible to be labeled a member of the Undeserving Poor.  All the institutions of the modern world should be geared around making someone feel miserable for falling into this class.  This gives a strong incentive for people to rise out of it as soon as they can manage, and it gives a strong disincentive for people in the upper classes to behave, lest they be cast down with the Undeserving.

Second, if the sorting mechanisms are working properly, then most of the criminal element in society would be relegated to the Undeserving.  Certainly, the vast majority of the violent criminal element would be classified Undeserving or below.  This means that the police will have a free hand to do their jobs cheaply and effectively, while preserving the privileges of the peaceable and law-abiding.

The next class up are the Deserving Poor.  The Deserving are what were, in prior times, considered to be the working class.  The expectation is that every Deserving household has at least one breadwinner engaged in remunerative work or collecting short-term unemployment insurance.  They are also expected to be minimally financially solvent and to maintain a reasonably functional household.  Being fired for cause, getting a divorce, or declaring bankruptcy are all grounds for demotion back to the ranks of the Undeserving.

In contrast to the Undeserving, they have all of the traditional civil rights.  A cop treating a Deserving citizen as if he were Undeserving should be a major scandal, leading to significant penalties.  Deserving citizens count for purposes of representation but are not granted the privilege of the franchise.  Male Deserving Poor citizens are also expected to register for the draft.  For a similar reason, all enlisted military personnel (active and reserve) qualify as Deserving.  A dishonorable discharge is, in effect, a demotion.

Financially, the Deserving are allowed only a few options.  They only have access to a very few sources of credit (e.g. car loans or student loans).  They are not permitted to own any investments other than passive, fully-liquid savings accounts.  That means no stocks or bonds, no mortgages or real estate, and no substantial amounts of foreign currency.  The flip side of this is that all accounts held by the Deserving Poor are fully insured and usury laws on any loans they engage with are vigorously enforced.

The basis for this is that the State presumes that the Deserving Poor are not fully capable of or willing to put in the time and effort to handle their own affairs.  Therefore, it is of critical importance that they are presented with sound default options.  In particular, any deal that can be legally offered to a member of the Deserving Poor must be conceptually simple.  The idea is to reduce the cognitive load necessary for the Deserving to get through the day as far as possible.

There are a few core ideas here.  First, the system should do the best it can do to make the guy working at McDonald’s higher status than the corner drug dealer.  It’s critical that anyone who isn’t totally disabled can qualify for the status of Deserving Poor by just showing up and doing his best.  For this purpose, it doesn’t matter how little one’s labor is worth on the open market.  There won’t be any minimum wage laws to ensure that everyone can find a place in the economy, but as long as you’re Deserving there should be a relatively generous negative income tax to support basic consumption.

Second, the system is intended to prevent the Deserving from making the crucial mistakes that ruin downscale lives and cause large negative externalities.  Vice laws (such those against prostitution, gambling, drug use, etc.) should be vigorously enforced against the Deserving, on the pain of being labeled Undeserving.  Bearing children out of wedlock should also be grounds for lowering status to Undeserving.  The presumption is that these are the people who can thrive in the right environment, but are in significant danger of downward social mobility due to lower average impulse control.

Third, the system seeks to disconnect the Deserving Poor from the more complicated parts of the modern economy wherever possible.  When a stock market crash or a land speculation bubble roils Wall Street, that shouldn’t have any direct impact on Main Street.  In addition to removing a major potential source of stress from the lives of the Deserving, this should increase the stability of the economy and moderate the business cycle.  Come what may, much of the pattern of consumption and trade will continue apace.

Above them are the Middle Class.  Entry into the Middle Class requires that a person or household be a net taxpayer in addition to being a citizen in good standing.  By default, it is expected that everyone will be a net recipient of transfers from the State, so to achieve middle class status requires the person to act deliberately.  Technically, this can be accomplished by a combination of renouncing benefits from the State that one might otherwise be eligible for and paying an additional voluntary tax to take them over the net positive contribution line.

Rising to the Middle Class offers several privileges.  Foremost among them is the right to own land and take out a fifteen or thirty year fixed rate mortgage.  Notably, a member of the Middle Class can only own their own primary residence.  Additional financial options for investment above and beyond that available to the Deserving Poor are access to credit cards and the right to purchase US Treasury Bonds and shares in index funds.  Notably, individual stocks and corporate or foreign bonds are verboten.

Additionally, each Middle Class household is entitled to a single vote in all relevant elections (local, state, Federal, etc.), weighted by the total members of the household, regardless of age or other status.  So if a household contains four dependents in addition to the head of the household, then their vote would count as five.  The idea is to add further status incentives for additional population growth among people who are guaranteed not to be a net burden on society.

The divorce rules from the lower classes apply at this level as well, meaning that Middle Class status is lost upon the dissolution of a marriage.  This means that it isn’t legal for either successor party to own the house and it has to be sold as part of the settlement.  Custody of any children after a divorce is determined solely by class status: if one spouse ends up Deserving and the other Undeserving, then the Deserving one gets to choose where the children end up.  In the event both are Deserving, joint custody is assumed as the basis for negotiation.  If they are both Undeserving, then the State decides without regard to either of the parents’ wishes.

Also, the vice laws are greatly relaxed for Middle Class households.  The presumption is that, as long as the household is able to maintain Middle Class status, there is no victim in these so-called “victimless crimes”.  In the event that substance abuse, gambling losses, or such cause a household to be unable to meet their net taxpayer requirement, upon demotion they will be forced into rehab or the equivalent.  Facilitating vice for lower-class individuals or children is grounds for demotion.

Middle Class status is also required to serve as an officer in the military and brings with it an automatic draft deferral.  The assumption there is that the members of the Middle Class is necessarily doing their part by working productively enough to fund the war effort in the event that a draft is necessary, while the Deserving Poor have to carry their weight with national service.  The Undeserving Poor are considered too unreliable to be required to serve in the military, though if they enlist voluntarily and serve honorably and well, they will be discharged as Deserving.

All in all, the overarching idea here is that the Middle Class makes up the segments of the country whose labor makes up the largest share of the productive economy and who are responsible enough to be trusted with the franchise.  They should be recognized and supported as such.  Ideally, the enforcement of the official class markers (like clothing and such) defuses a lot of the wasteful status-signalling expenditures that are required in the current system to separate the middle class from the upper and lower classes.

Currently, a large portion of the price of real estate in the USA is a bid at auction for the quality of one’s prospective neighbors.  Hence the obsessive concerns about school quality and local crime rates and the desire to purchase as much house as one can afford.  But under this new proposed model, it is unnecessary to bid up the price of housing to keep out the undesirables.  Only the Middle Class can own homes, so purchasing a home in a neighborhood full of other Middle Class people is sufficient in and of itself to enable class sorting.  Similarly, open and legal discrimination enables landlords to restrict moderately desirable neighborhoods to the Deserving Poor without bidding the rents up to the maximum levels supportable by income.

Finally, above the Middle Class is the Upper Class.  To rise into the Upper Class requires a significant net cash payment to the treasury yearly, in a similar manner to the way one maintains Middle Class status.  This payment replaces all of the taxes intended to target rich directly: the corporate income tax; dividend taxation; the capital gains tax; the top income tax brackets; etc.  The point of this is that all of these other forms of taxation have distorting effects on the real economy and are often cleverly evaded or minimized.  If the tax burden falls directly on the wealthy households and does so voluntarily, as a condition of maintaining top status, there is no need for a complicated tax compliance regime.

Accordingly, members of the Upper Class are the only ones who are allowed to own investment properties or particular stocks.  This implies that they are the only ones who can start businesses, since the founders own shares of the new company.  Which means that angel investors or venture capitalists will need to provide sufficient funds to sponsor non-wealthy entrepreneurs to Upper Class status before they can begin operations.

In exchange, though, this restriction enables the system to basically get rid of the SEC.  The logic behind preventing insider trading or stock price manipulation is that unwary investors could get gulled into buying or selling stocks at ridiculously incorrect values, leading them to lose a lot of money to a sharp operator using unfair leverage.  But we’ve just outlawed the ownership of individual stocks by the Middle Class: they can only purchase index funds.  So the only people who stand to lose out from insider trading are other financiers and speculators.  As long as everybody knows it’s caveat emptor in the stock market, the only enforcement that’s required is basic accounting disclosure to ensure that the dividends are getting paid out correctly.

This has a couple of salutary follow-on effects.  First, it means that the stock market should update prices even more efficiently.  As soon as insiders know that there’s good or bad news coming, they’ll have incentive to move their shares and profit from the knowledge.  This necessarily makes it public.

Second, it means that there is no longer any strong incentive to separate ownership from management.  It would become normal again for the top executives in any given company to also be the largest stockholders.  It would also make it acceptable again for large single stockholders to influence the direction of the company instead of merely being forced into the role of absentee rentier.  Better aligned incentives mean better capital allocation decisions, which should increase the overall quality of management in the country’s firms.

Members of the Upper Class are also the only ones who are eligible for office at any level above local government.  Would-be politicians that do not have a family business or independent wealth to draw upon will require a sponsor in a manner exactly identical to that of potential entrepreneurs.  This is in effect roughly equivalent to the existing practical restrictions on attaining higher office.  But since the electorate is much smaller and more engaged in this system, the actual required campaign expenditures should be a lot less.  This means that a politician will only have to sell himself once instead of devoting a vast proportion of his time and energy to raising campaign funds.

Unlike the lower classes, the Upper Class is not restricted from publicizing their excess.  The soap opera travails that serve as fodder for TMZ and the celebrity magazines are the privilege of the Upper Class.  So, for example, divorce doesn’t drop a member of the Upper Class down a rung.  This contrasts with the Middle Class, which is expected to keep its vices private; the Deserving Poor, who are expected to try to not have vices because they can’t afford them; and the Undeserving Poor, who if they get caught indulging get thrown into prison.

There are three related ideas behind this decision.  First, the rich are currently rather decadent as it stands.  In this system, their irresponsibility is upper-bounded by their ability to continue to make their yearly tax bill.  If they manage to blow all of their money and end up bankrupt, they tumble back down the class structure and the normal rules apply to them again.

Second, this is a trade-off for the fact that members of the Upper Class are not expected to have private lives.  Modern technology has made keeping secrets impossible if you’re important enough.  And almost by definition everyone in the Upper Class is important.  If virtually everything is legal (albeit potentially embarrassing) for a member of the Upper Class, then there’s fewer grounds for blackmail or questionable legal settlements.

Third, it’s a really dramatic privilege to grant.  It makes it clear that the people at the top really are playing by different rules than everybody else.  This correspondingly increases the status benefits for making it.  Lots of people long for fame and riches; this channels that desire in ways that might possibly have positive spillover benefits.

So, that’s my brief outline for a model that could replace the existing legal regime.  I think it meets the main design goals I laid out, but it’s certainly possible that there are other improvements or refinements that could be made.

The most important takeaway from all this discussion, I think, is not in any of the specific suggestions.  Rather, it’s that there are likely very significant policy gains hiding well outside the Overton Window.  By abandoning such a core modern principle as equality before the law, we’re able to build a new system on old-fashioned-seeming lines that would probably work much more efficiently than our existing model.  I wonder: what other unquestioned parts of our modern ideology prevent us from reaching better overall equilibria?