SIMPLE RULES FOR A COMPLEX WORLD By Richard A. Epstein. 361 pp. Cambridge, Mass.: Harvard University Press.

Text:

RICHARD A. EPSTEIN, a professor of law at the University of Chicago, has a record of proposing radical and extreme alterations in key areas of law -- alterations that perhaps initially could be dismissed as so far from the center of legal thinking as to be of only theoretical interest but then turn out to have much more political life in them than one could have thought possible.

Thus, in "Takings: Private Property and the Power of Eminent Domain" in 1985, he took the radical position that any governmental restriction on the rights of private property, broadly considered, should be properly compensated, and his views on what was proper compensation went far beyond what judges then allowed. Zoning, wetlands regulation, urban redevelopment, whether for housing for the poor or convention centers, would all involve such huge public expenditures, one would think, as to become impossible. Yet today legislation making its way through Congress incorporates much of what Mr. Epstein was proposing; the level of outrage discovered among many Americans at such property restrictions, which had been radically expanded under environmental regulations, required some response.

In 1992, in "Forbidden Grounds: The Case Against Employment Discrimination," Mr. Epstein argued not only against affirmative action but also against the prohibition of discrimination in employment on grounds of race in the Civil Rights Act of 1964. He himself recognized his position as being "well outside the mainstream of American political thought," but defended it on the ground that academics and scholars need not be constrained by such considerations. Interesting theoretically, one could have thought, for Mr. Epstein is a powerful reasoner and worked out his case meticulously, but of no consequence practically.

Yet today not only government-sponsored affirmative action is threatened. It has dawned on many of us who want to preserve a voluntary right of affirmative action, whatever the fate of governmental requirements, that the desire of an employer or a college to favor African-Americans, for whatever reason, falls under the ban of that very civil rights act that everyone, defenders and critics of affirmative action alike, accepts and defends. So at the very least Mr. Epstein has to be taken seriously, and not only because of the power of his reasoning and his authoritative command of the common law and political philosophy.

In "Simple Rules for a Complex World," he lays out the principles that are at the base of his positions on eminent domain, employment discrimination law and many other bodies of law and regulation. There are four basic "simple rules." The first is "individual self-ownership." One owns oneself. That would seem uncontroversial and even unremarkable, but Mr. Epstein places it in opposition to John Rawls's influential basic principle of justice, in which one's natural abilities are to be considered a collective asset, and one should derive no benefit from them unless it helps those who are less fortunate. Mr. Epstein will have none of that: one owns oneself, and the product of one's labor, and this is the best route to a productive society.

The second rule, dealing with the ownership of property, is "first possession," which Mr. Epstein does not hesitate to describe as "you take what you can get" but which can be dignified under the term "natural occupation." The third is "voluntary exchange," or the right of contract. The fourth "deals with how to protect the things you have." It "forms the basis of the law of tort," he writes. "In its simplest and crudest form, the irreducible core of this body of law can be succinctly expressed: 'keep off.' "

While these rules lie at the basis of 17th- and 18th-century liberalism, and would have met full approval from John Locke, David Hume and Adam Smith, they seem today to be a set of principles suitable for a world of Robinson Crusoes. So Mr. Epstein adds a few more rules for our more complex society.

First is a rule of "necessity." Sometimes one must interfere with person and property. He gives the example of a man dying of thirst who is offered water by its owner for a million dollars. While he does not shy away from the tough implications of his basic rules, Mr. Epstein takes this as too much: "The standard, strong-willed libertarian will say that this contract is as good as any other, given the mutual gains from trade. Those of us who are a little bit more tempered in our beliefs will generally recognize, as did the common law in England and the United States, and the earlier Roman law, that the basic rules of property will normally be suspended in the face of necessity."

How far the necessity rule extends is not clear to me. Added to this is a rule about "takings": if the state "imposes a tax on the land, or limits the rental that can be charged a tenant, or imposes minimum lot size, setback or side yard restrictions, or density requirements of any sort, it must run the gantlet set by the takings clause" of the Constitution.

Are these all that is necessary for a good society? Much of the work of government today, we all know, consists of the redistribution of income, and there is no room for it in these rules. Mr. Epstein would resist redistribution by modifying the rules affecting the protection of property and the right of contract -- for example, a minimum wage law or mandated health benefits -- but reluctantly allows a seventh rule. "If there must be public redistribution," he says, then it should be from taxes and from taxes levied at a flat rate. There will be no robbing Peter to pay Paul.

One hears little more about redistribution, and the rest of the book develops the implications of the six simple rules for labor relations, employment discrimination law, professional and product liability law, the government of corporations, environmental protection. Much that is challenged by almost nobody is sharply challenged here. Protection against harm from consumer products? The traditional approach -- if there is no misinformation, and the problems in using the product are evident (e.g., a saw can cut off your finger) -- is covered by freedom of contract. Insider trading? The original contract can cover that. Nothing more is necessary.

To give Mr. Epstein's positions without his fully developed arguments is to make them appear outlandish. And yet the reasoning is strong, the knowledge of specific areas of policies is deep, and behind them stands his basic commitment to a more productive and efficient society. Governmental regulation requires enormous transaction costs in litigation and the like; a more productive and efficient society is promoted by reducing transaction costs. In the current political environment, these objectives have become paramount, and arguments based on them have to be taken seriously.

The simple rules set themselves up for the answer "too simple," and in one key respect the answer is right. They leave out the political order, which is also part of the classic liberalism from which Mr. Epstein derives his simple rules.

IT is the political order, for example, that makes irrelevant the reasoning that supports his radical proposal for the labor market, "contract at will," no matter how powerfully he argues that employers and employees would both be better off. Under "contract at will," the employer is free to hire, fire or promote at whatever wages and conditions the worker will accept. "The employer can fire a worker without offering any justification," Mr. Epstein writes. "It is only necessary to say, 'You're fired.' By way of a set-off, and it is a critical set-off, if a worker doesn't want to stay on the job, she is not required to give a long song-and-dance routine either. All that she has to say is 'I quit,' and the relationship is forthwith terminated." (Mr. Epstein's one major concession to contemporary fashion is his consistently writing "she.") A long history, going back to the heyday of classic liberalism, instructs us that this kind of contract for labor will not fly, and it still doesn't, whatever the value it might have in reducing transaction costs and increasing incentives to work and produce.

Clearly we have gone too far, as most of us now agree, in ignoring transaction costs and incentives in many areas. (Mr. Epstein cites a finding that nearly as much of the $30 billion spent so far under the Superfund toxic waste law has gone to legal fees as to cleanup of toxic wastes!) It is bracing to undergo a cold bath in the pure doctrine of the simple rules, and in many areas they will give us some practical guidance. This is sufficient virtue. But in the end one concludes that not all of our departures from the simple rules have been for the worse.