[A selection from "Restitution in Theory and Practice" in Volume 12, Number 1 (1996) of theJournal of Libertarian Studies.]
Japan takes restitution very seriously, and it appears to work. A key feature of Japanese culture that apparently underlies the success of restitution is that there is no acceptable excuse for criminal activity. Criminals are expected to acknowledge their guilt, repent, and seek absolution from their victims, and this is the dominant focus of each stage of the criminal justice process.37 In fact, the vast majority of all criminals show repentance, admitting responsibility to the victim through an intermediary (e.g., family, friend), before public prosecution. Then the criminal bargains with the victim through the intermediary (as a mediator), offering restitution in an effort to convince the victim to write a letter to the prosecutor or judge stating that no further punishment is necessary. Thus, the victim generally receives restitution before prosecution occurs, and as Evers explains: “The emphasis on restitution and pardon by the victim in the Japanese approach tends to satisfy the victim’s desire that justice be done.” The criminal then asks for mercy from the public sector criminal authorities and, given a letter from the victim, the punishment imposed by the state tends to be “lenient” relative to other modern countries. Without such a letter, punishment can be harsh. Indeed, the victim typically has an advisory role (although not control or a veto power) as decisions regarding charges, prosecution and sentencing are made.
The victim might be in a position to hold up the criminal by demanding a large restitution in exchange for a letter to the judge or prosecutor. The victim’s ability to do so is clearly constrained, however, both by the moral standards of the society and by the fact that the criminal can refuse. The victim cannot really force payment because the criminal has a choice between making such a payment or facing what may be a harsher punishment if he is prosecuted without a victim’s pardon. Even then, of course, it is likely that confessing to the prosecutor/judge, expressing sincere remorse, and explaining the unreasonable demands of the victim might mitigate the punishment, so victims’ incentives are to not demand excessive restitution.
The importance of confessions in the Japanese system might suggest that there are strong incentives to extract confessions through force. However, the bargain between the victim and the offender takes place outside the official channels of coercion. The victim is not likely to benefit from a coerced confession. Furthermore, confessions alone are not sufficient for convictions in the Japanese courts. Indeed, there is no guilty plea (e.g., as through plea bargaining) in the Japanese process, although many proceedings are summary in nature. Every case that is prosecuted (not all cases are, as explained below) must involve a hearing on the evidence, and even when a confession exists, the burden of proof remains with the prosecutor who must show that the confession was freely given, and must also provide corroborative evidence. Furthermore, the underlying focus on admission of responsibility and remorse also has a great moral force in Japan. In contrast to prosecutors in the U.S., who appear to be more concerned with getting large numbers of convictions, these officials in Japan apparently are concerned with obtaining confessions that are sincere, and expressions of remorse that are genuine. Thus, as Evers explains, “The rectification of crime, leniency of punishment, and rehabilitation of criminals in Japan have a moral basis that would be undermined by false confessions.”
Japan’s clearance rate apparently is very high: Evers cites sample figures that exceed 52 percent compared to the roughly 20 percent average in the U.S.. Why? Perhaps because victims, who can anticipate restitution as well as a good deal of influence on the criminal justice process, are much more likely to cooperate with policing? But not all criminals are prosecuted. Over 21 percent of the criminals who could be referred for prosecution are released by the police without additional criminal proceedings. They have the power to do this for simple cases where they and the victims are satisfied that the offender is sufficiently remorseful. The vast majority of the cases that are prosecuted are settled in a summary procedure based on documented evidence, for which the maximum public penalty (on top of the privately negotiated restitution) is a fine. For example, in 1983, 85.8 percent of the adult criminal cases that were prosecuted were through summary procedures while only 5.1 percent involved ordinary criminal trials (prosecution was suspended for 9 percent of the adult accused). Summary proceedings are not allowed for serious offenses like murder, fraud, and extortion for which fines are not statutory options for punishment (although prosecution can be suspended in such cases). While convictions rates are very high (almost 99.5 percent), few offenders receive government imposed penalties on top of their restitution other than small fines or short prison terms.
How successful is this criminal justice process which substitutes holding criminals responsible to their victims (restitution) for harsh punishment? The number of offenses and the numbers of criminals are substantially lower in every crime category than they are in any other modern, industrialized country. Furthermore, among these industrialized countries, only Japan’s crime rates have fallen continuously since World War II.38 Finally, there is evidence that recidivism is very low in Japan. This is not surprising, however, since the Japanese system breeds a very different attitude among criminals. In the U.S., “Criminals all too often try to relieve their moral and psychological guilt for their crimes by portraying themselves in the forum of their own consciences as victims of society who are not responsible for their deeds. But the process of confession and restitution found in Japan discourages such self-indulgent self-forgiveness and develops honest attitudes and patterns of conduct by punishing in moderation only when criminals show remorse and pay restitution.”
Could such a system be implemented in the United States in the context of the exiting system of public prosecution and corrections? Perhaps, but it is highly unlikely. It would clearly take some significant changes in law, in procedures, and most significantly, in public-sector attitudes. In fact, as Evers notes, trends appear to be running in the opposite direction, as the government's influence in society is rising, while: “In Japan, society runs largely on its own; government officials do not figure importantly in making things work. Norms are mostly enforced through social pressure in the family, school, workplace, and local neighborhood. Face-to-face communities enforce conformity … [and] strive to curb criminal violence and to correct its practitioners. … In Japan, it is mostly society rather than government that is in charge of crime control.” What makes restitution work well in Japan is that private individuals and groups are much more responsible for controlling crime.
Canada’s socialized health care is a failure, as measured against the service the government promised to provide. Tom Kent, the senior government policy person when the Medical Care Act was passed in 1966, described the government's objectiv : “The aim of public policy was quite clearly and simply... to make sure that people could get care when it was needed without regard to other considerations.”
However, according to a Fraser Institute survey, the median waiting time for patients in Canada from a referral by a general practitioner to the date of actual treatment, was 19.8 weeks in 2018, compared to 9.3 weeks in 1993. Waiting for treatment has deadly consequences: “Justices of the Supreme Court of Canada have noted that patients in Canada die as a result of waiting lists for universally accessible health care.” The Fraser Institute “estimates that between 25,456 and 63,090 … Canadian women may have died as a result of increased wait times between 1993 and 2009.”
When the price of something falls, all else being equal, demand rises. Since socialized health care is funded with debt and taxes, the price at the point of service is zero, and demand explodes. Supply must be rationed because it can never keep pace with demand at a zero price. The government was fully aware of this basic economic principle in 1966. Its promise to provide care “when it was needed” was always a fake promise, a pretense for expanding the power and scope of government at the expense of thousands of dead Canadians.
Each year, the state forces you to purchase a product which you may not want or need, for a price which it dictates, raises, and confiscates annually. Then, the state often refuses to deliver the product without refunding your purchase price, while forbidding you from purchasing a replacement product elsewhere within its jurisdiction.
Kent described the impetus to universal health care : "... many poorer people just did not get care when it was needed."
In an imperfect world, it is probably true that some people did not receive care when it was needed. However, the increasingly poor performance of socialized health care gives us reason to doubt whether more people lacked access to care under a private system, than under the current system. Former U.S. Congressman Ron Paul, a medical doctor by trade, wrote:
“Before those programs [Medicare, Medicaid] came into existence, every physician understood that he or she had a responsibility toward the less fortunate, and free medical care for the poor was the norm. Hardly anyone is aware of this today, since it doesn’t fit into the typical, by-the-script story of government rescuing us from a predatory private sector.”
“… thousands of privately funded charities provided health services for the poor. I worked in an emergency room where nobody was turned away for lack of funds.”
The Canadian experience mirrors the U.S. experience described by Paul.
In the early 20th century, medical care was private, and many Canadians contracted with doctors to provide annual medical care at a cost of one day’s wages.
In 2018, Canada’s socialized health care cost approximately $4,389 per capita.
Let’s consider a household of two working parents with two children, and conservatively (high estimate) assume this household had a median income of $100,000 in 2018. Annual income (260 working days) converts to $385 daily income or $193 per worker. Therefore, the cost of socialized health care for each parent is about 23 working days ($4,389 / $193), or about 1 calendar month. And between them, they must work another 46 days to pay for their children’s health care.
The cost of socialized health care in 2018 was twenty-three times the cost of private health care in the early 20th century, measured by how long a person must work to pay for health care. (Again, I am being conservative by not including private costs in 2018 for dentists, alternative practitioners e.g. naturopaths, prescription drugs, private health insurance for non-hospital/physician services, etc., all of which would raise the per capita cost by roughly 50% )
Moreover, between 1997 and 2019 , “the cost of public health care insurance for the average Canadian family increased 3.2 times as fast as the cost of food, 2.1 times as fast as the cost of clothing, 1.8 times as fast as the cost of shelter, and 1.7 times faster than average income.” Notably, government intervention in these four categories is much less severe than it is with health care.
A common objection to this analysis goes something like this: “The high price of health care is not caused by the government’s monopoly. Rather, it reflects the rising cost of modern medical technology.” This argument is unconvincing. There are many complex products — e.g. computers — where competition and technological innovation produce lower prices. Indeed, this is typical of unhampered markets.
Competition in the medical-care-market has been restricted — thereby raising prices — by politicians, bureaucrats, and the elitist medical establishment for so long that we have forgotten the lessons of our ancestors, who were not fooled by attempts to impose licensing criteria. As Ronald Hamowy wrote in Canadian Medicine, A Study In Restricted Entry (p 125):
“Despite the actions of the College to suppress unregistered physicians, the public continued to firmly oppose prosecution of these practitioners throughout the nineteenth century. Nor did they believe the College and the medical journals when they insisted that their campaign against “quacks” was designed to separate … educated from unqualified physicians.”
“… many, especially poorer, Canadians persisted in consulting unlicensed physicians, whose fees were lower and who appeared no less competent in prescribing medications than did their registered brethren. The profession’s attempt to suppress these doctors was not motivated out of a selfless interest in improving the quality of medical care offered the public, but out of a desire to lessen competition, which would in turn increase their incomes.”
Curiously, there were some principled politicians amongst our ancestors. In 1851, the medical establishment drafted a bill that would grant them the power of regulating, through licensing, the number of persons who would be legally permitted to practice medicine. Parliament rejected the bill, with one politician proposing a substitute bill, the opening paragraph of which read, in part (Hamowy, p 322):
“… experience has shewn that penal enactments have not deterred unqualified persons from practising Physic, Surgery, and Midwifery, but, on the contrary, such enactments have often had the effect of preventing benevolent persons, well qualified, from lending their aid to relieve physical suffering, and it is therefore expedient and proper to repeal such penal clauses as may exist in any Acts now in force in Upper Canada …”
The medical establishment eventually got what it wanted when principled politicians were relegated to minority status, where they remain today.
Voters, however, seem to believe the government’s performance is superior to that of market entrepreneurs. As long as they continue to ignore the wisdom of their ancestors, Canadian voters are ultimately responsible for the government’s fake promise and deadly stranglehold on health care.
Housing is one of the main drivers in the cost of living. Government increases this cost through zoning regulations, complicated impact fees, and permitting delays. This is a fact that was even acknowledged by the Obama administration when it stated:
“Barriers to housing development are exacerbating the housing affordability crisis, particularly in regions with high job growth and few rental vacancies.”
Land-use laws are one of the most prohibitive of housing regulations. It takes a scarce resource and makes it even scarcer.
A study by Glaser and Gyourko of Harvard University, found that land use controls play a dominant part in making housing expensive. They found that measures of zoning strictness are highly correlated with high prices. In areas such as New York City and California, where land-use regulations are strict, the cost of housing strongly diverges from the cost of construction. Owners and those who rent are paying for the cost of the land. So whilst regulations are put in place for one reason or another, it is the final consumer that pays for the privilege.
We only need to look at Japan for the benefits of reduced regulation. It relaxed development rules the Urban Renaissance Law of 2002. The rules were relaxed, allowing apartments to grow higher. Height,is a key factor in increasing affordability due to very high land prices.
This approach has helped make Tokyo a relatively affordable place for a city of its size and type. For example, the price a 2 bedroom apartment rental is over 40 percent less than what it is San Francisco. It’s also 31 percent less than New York and 23 percent less than London.
Meanwhile, prices in the leading cities of North America and Europe continue to rise. But prices in Tokyo have flat-lined. Some might turn to Japan's declining Japanese population as an explanation — and that would work were we talking about housing demand nationwide. The population of Tokyo itself, however, has continued to increase due to increasing urbanisation. Between 2000 and 2015, Tokyo's population increased by 1.5 million, as more and more citizens moved to the city to find employment. The population of London also grew by a similar amount. By contrast, New York City added less than 400,000 people to its population between 2000 and 2018. Yet Tokyo is seeing more modest price growth.
Naturally, the price of housing is known to go down — or at least remain stable — when supply is able to keep up with demand.
Is Tokyo keeping up? It is true that the city of Tokyo does destroy lots of housing. However, it still creates a netgrowth of close to 2 percent. This is over double the growth rates found in London, New York, and Paris. Tokyo's housing growth rate is far in excess of its population increases of just under 1 percent per year.
So how is Tokyo able to produce so much housing so quickly? First, its units are smaller. The average property in Tokyo is 55 square metres, compared to 80 square meters in London. Second, there are fewer regulations within zoned areas. This means specific zoning areas can easily be turned into residential buildings. Moreover, zoning is also much less complex in Japan than in the US. Even then, residential housing can be built in any zone, providing flexibility in areas where housing is needed the most.
Indeed, housing producers and customers have a more flexible attitude toward housing overall. For example, housing is built in Tokyo with the assumption it will be replaced within a few decades. The average life-span of housing units is usually 30 years. In part, this is a historic and cultural phenomenon. After the Second World War, there was an urgent need for housing. Pre-fabricated buildings became the norm. There is also the need to keep rebuilding to improve earthquake resistance as more sophisticated techniques develop.
In a city with rapidly rising housing needs, there is really only one way to keep housing prices stable or falling: produce a lot of housing. Although Tokyo's population has continued to rapidly increase, builders in the city have managed to keep up far better than has been the case in cities like San Francisco and London. We often hear a lot about the need to produce more affordable housing, often accompanied by schemes for relatively small numbers of subsidized units. Meanwhile, cities simultaneously intervene to prevent the production of more housing overall. A widespread lack of affordability and availability of units has been the result. Officials in Tokyo, on the other hand, appear to be taking a different approach, and it may be working.
Bob Murphy analyzes Dave Chappelle’s Netflix special, “Sticks & Stones.” Bob applauds one bit and criticizes another, but overall thinks Chappelle has done his duty as the court jester.
Governments can and do try to fix prices, but history tells us it never works.
From the price-control dikats of the Roman Empire’s Diocletian, to the wage and price controls of President Richard Nixon, governments have tried and failed.
The historian Edward Gibbon said the Roman Empire imploded owing to economic disasters and less to barbarians at the gate. More recently, President Nixon imposed wage and price controls before the 1972 elections. He was re-elected when they seemed to be working. However, owing to the Watergate scandal, he wasn’t around when his price control scheme failed and dragged down millions of Americans in the disastrous decade-long horror show called stagflation.
Yet governments continue to try various kinds of price controls, even though most people with even the barest acquaintance with economic history or basic economics understand they’re the equivalent of economic crack. However, most New York pols, for instance, are economic illiterates.
They support continued rent controls because they are politically popular, at least in the short run. In the case of rent controls, the New York political classes recently extended them. They believe, almost uniformly, that they provide better housing at decent prices. But history and many economists say otherwise.
I believe some pols are privately convinced that they are witchcraft but they are not going to say so because they might then no longer be on the public payroll.
The politics are why New York’s state and city lawmakers have consistently backed rent control laws. That’s even though most economists, both left and right, agree they lead to housing shortages; that they’re a good deal for the minority of people who get coverage while the rest of New Yorker pay excessive rents.
Supply dries up. Builders spooked by controls won’t build new units. The minority of those who get cheap rents won’t leave their units no matter what. Turnover rates decline. Most New Yorkers paying free market rents pay through the nose.
If you have a rent-controlled apartment: stay forever. You have cheap rent. If not, be prepared to pay very high housing prices as the housing stock can’t keep pace with demand. The quality of life in the city declines as more and more people pay a high percentage of their income for housing.
“In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing,” wrote Swedish economist Assar Lindbeck, a Social Democrat.
This comment is part of a historical arsenal of rent control/stabilization critiques. They’re a piece of a federal lawsuit challenging the recent extension of New York rent controls, which are supported by most elected officials.
“The passage of these historic bills is a victory for housing justice and for hardworking tenants across New York,” New York City Comptroller Scott Stringer wrote in a press release. Stringer declined repeated requests for comment on a story I recently did for the New York Post Business section about the economic aspects of controls.
The extension immortalizes rent control rules for some one million New York City units. And yet no one disagrees with that, after generations of rent controls in New York, that the average New Yorkers pay huge housing bills, despite these laws.
They come at a time many New Yorkers “pay half or more of their income for housing,” says State Comptroller DiNapoli. There are about 3.2 million units in New York City.
Rent control critics warn these new laws will raise rents on most people except those New Yorkers living in rent-controlled apartments, who are sometimes well heeled.
“In 2017 upper-income households occupied 12 percent of pre-1974 rent stabilized units, or 98,780 units,” according to a report by the Citizens Budget Commission (CBC) report “Reconsidering Rent Regulation Reforms.”
CBC wrote that “Of these upper income stabilized households, 28,377 earn more than $200,000 a year.” The CBC report also finds that rent-controlled/rent stabilized tenants have a greater chance of having apartment problems than unregulated units.
This rent stabilization law (RSL) often helping the rich theme is cited in the lawsuit.
“The RSL does not in any way target its relief to low income populations. There is no financial qualification or standard at all for retaining or obtaining a rent stabilized unit,” the complaint says.
The lawsuit charges rent regulations violate the property and Fourteenth Amendment due-process rights of property owners forced to rent at below market prices. The laws, the suit continues, are a violation of the United States Constitution’s Takings Clause. That bars “forcing some people alone to bear public burdens.”
About 45 percent of rental units in New York City are rent regulated, according to a New York University Furman Center report.
Rent control applies only to buildings built before February 1947 and to units occupied by a tenant who has lived in the unit continuously since before July 1, 1971, Furman said. Rent stabilization generally applies to buildings of six or more units built between February 1, 1947 and December 31, 1973.
Despite the popularity of rent control laws with politicians, the majority of people who have studied the issue are critics.
Blair Jenkins, the editor of a compilation of rent research entitled, “Rent Controls: Do Economists Agree?” says most economists condemn them.
In the book, economist Peter Navarro wrote “the economics profession has reached a rare consensus: Rent control creates more problems than it solves.”
Pace University professor Joseph Salerno argues New York’s laws have made housing problems worse.
“If rent controls are imposed that are lower than rents dictated by market forces, an excess demand for apartments almost immediately appears,” he says “Over time, if the demand for apartments increases, the shortage grows worse leading to long waiting lists.”
“In the long run, as taxes, utilities, maintenance and other costs of operating an apartment building continue to rise, the supply of apartments actually decreases, as landlords convert their apartments into co-ops or condos or abandon them altogether,” Salerno adds, noting higher costs lead to reduced maintenance.
Salerno is a libertarian economist. He is an opponent of the liberal Keynesian school. However, economist Paul Samuelson, who was a prominent Keynesian and Nobel Prize winner, agreed.
“New York City rent controls,” Samuelson wrote in his economics textbook, “do favor those lucky enough to find a cheap apartment; but they inhibit new private building of low-cost housing.”