How does the United States rank in homeownership?


There are a lot of different housing-finance systems in the world, but the U.S. system is unique in being centered on government-sponsored enterprises. These GSEs—Fannie Mae and Freddie Mac—still dominate the system even though they went broke and were bailed out when the great housing bubble they helped inflate then deflated.

They have since 2008 been effectively, though not formally, just part of the government. Adding together Fannie, Freddie and Ginnie Mae, which is explicitly part of the government, the government guarantees $6.1 trillion of mortgage loans, or ­­59 percent of the national total of $10.3 trillion.

On top of Fannie-Freddie-Ginnie, the U.S. government has big credit exposure to mortgages through the Federal Housing Administration, the Federal Home Loan Banks and the Department of Veterans Affairs. All this adds up to a massive commitment of financing, risk and subsidies to promote the goal of homeownership.

But how does the United States fare on an international basis, as measured by rate of homeownership?  Before you look at the next paragraph, interested reader, what would you guess our international ranking on home ownership is?

The answer is that, among 27 advanced economies, the United States ranks No. 21. This may seem like a disappointing result, in exchange for so much government effort.

Here is the most recent comparative data, updated mostly to 2015 and 2016:


Advanced Economies: Homeownership Rates
Rank Country Ownership Rate Date of Data
1 Singapore 90.9% 2016
2 Poland 83.7% 2015
3 Chile 83.0% 2012
4 Norway 82.7% 2016
5 Spain 77.8% 2016
6 Iceland 77.8% 2015
7 Portugal 74.8% 2015
8 Luxembourg 73.2% 2015
9 Italy 72.9% 2015
10 Finland 71.6% 2016
11 Belgium 71.3% 2016
12 Netherlands 69.0% 2016
13 Ireland 67.6% 2016
14 Israel 67.3% 2014
15 Canada 67.0% 2015
16 Sweden 65.2% 2016
17 New Zealand 64.8% 2013
18 France 64.1% 2015
19 Mexico 63.6% 2015
20 United Kingdom 63.5% 2015
21 United States 63.4% 2016
22 Denmark 62.0% 2016
23 Japan 61.7% 2013
24 Austria 55.0% 2016
25 Germany 51.9% 2015
26 Hong Kong 48.9% 2017
27 Switzerland 43.4% 2015

Sources: Government statistics by country

It looks like U.S. housing finance needs some new ideas other than providing government guarantees.

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Hurricane Harvey isn’t about climate change, it’s about bad federal policy

In the wake of Hurricane Harvey, many have questioned the roles played by climate change and Houston’s loose zoning rules in the devastation that faced that America’s fourth-largest city. R Street Senior Fellow R.J. Lehmann sat down with Nick Gillespie of the Reason podcast to discuss how explicit government policy encourages people to live in harm’s way and what can be done to reverse that trend. The full audio of that conversation is embedded below.

Section 230: When should online platforms be liable for the unlawful activity of their users?

When should online platforms be liable for unlawful activity? Section 230 of the Communications Decency Act (CDA 230) generally immunizes online platforms from liability when users engage in unlawful activity, but there are several exceptions to that immunity. Still, some websites have successfully hid behind CDA 230 while sex traffickers and other criminal enterprises run rampant on their platforms. In response, several bills have been introduced in Congress that would narrow the scope of CDA 230’s immunity and expand potential liability for online platforms that harbor unlawful activity. A panel of legal and policy experts discuss the current scope of CDA 230 and what impacts the proposed amendments would likely have on law enforcement, victims of sex trafficking, and the internet ecosystem writ large.


Elizabeth Nolan Brown, Associate Editor, Reason Magazine

Arthur Rizer, Director of National Security and Justice Policy, R Street Institute

Berin Szóka, President, TechFreedom

Jeff Kosseff, Assistant Professor, United States Naval Academy Center for Cyber Security Studies

Stacie Rumenap, President, Stop Child Predators

Mary Graw Leary, Professor of Law, Catholic University of America

Taina Bien-Aimé, Executive Director, Coalition Against Trafficking in Women (CATW)

Arthur Rizer talks jail reform on KJZZ

R Street Justice Policy Director Arthur Rizer appeared recently KJZZ, a National Public Radio affiliate in Phoenix, Arizona, to discuss how reforms to the nation’s jail system can be the key to safer communities. Audio of the story is embedded below.

How supporting internet freedom in Cambodia makes America great


I’ve had the privilege of working on internet freedom issues in a range of foreign countries, but none of my partnerships abroad has meant more to me than my work in Cambodia. Which is what you’d expect when you find out that, in the course of this work over the past three years, I met Sienghom, who just this summer has become my wife.

I’ve written about my internet work in Cambodia here before. And I think Freedom House’s 2015 assessment that the internet “remains the country’s freest medium for sharing information” still holds true. That’s why I’ve generally been optimistic about Cambodia’s prospects for increasing internet freedom and democracy, as well as its increased engagement with the pan-Asian and world economies, which should lead to higher standards of living in the country generally.

It’s also why I was particularly troubled when Sienghom pointed out to me a range of disturbing news items emerging from Phnom Penh, starting just last month and continuing into this past week. The bad news started with the Cambodian government’s decision to shut down the U.S. Agency for International Development-funded National Democratic Institute in late August. NDI has focused on offering training and workshops for Cambodian politicians and would-be public servants—both in the majority Cambodian People’s Party (CPP) and in the opposition Cambodia National Reform Party (CNRP)—aimed at enabling stakeholders to function effectively and democratically in a government framework that has been edging (thanks in part to internet engagement) toward a more truly representative parliamentary democracy. In response, USAID expressed its disappointment, as did the U.S. State Department, while Cambodian Prime Minister Hun Sen—who in other decades has sought to thaw U.S.-Cambodia relations—has ramped up criticism of the United States and USAID in particular.

In August, The Cambodia Daily, an English-language independent newspaper, quoted University of New South Wales professor of politics Carl Thayer about these latest trends, saying “[a]t this point, it looks like the U.S. is losing leadership by default and China’s gaining it by design.” But this past week, The Cambodia Daily itself was shut down, ostensibly for tax reasons. This represents a new wave of government actions designed to quell not just dissent, but any criticism whatsoever. In the same few days, the government has arrested CNRP leader Kem Sokha, who is now charged with treason.

As Thayer remarked to The New York Times, ““The current crackdown is far more extensive than ‘normal’ repression under the Hun Sen regime.”

But what’s been triggering this latest wave of repression in a country that, as a U.S. ally, has been inching, not always steadily, toward democracy in recent years? Longtime observers will point you first to the last round of elections in 2013; as I wrote here in 2015:

It hasn’t helped the current government’s sense of insecurity that the 2013 Assembly election was marked by civil protest, which the government is inclined to blame, along with its slipping majority, on the rise of social media like Facebook, where individual Cambodians have felt free to share their political views.

But there’s another, more recent factor at work—namely, the messages the Trump administration has been sending to Cambodia’s leadership. One obvious message, per a report in the Phnom Penh Post, is the administration signaling its intent to cut foreign aid to Cambodia to zero. Another is President Trump’s often antagonistic relationship with the American press, which Hun Sen interprets as legitimizing his own treatment of the Cambodian press.

President Trump’s relationship with American journalists may not be improved anytime soon, but the president could reconsider whether to cut aid entirely. Understandably, Americans who feel they didn’t adequately benefit from the post-2008 economic recovery may favor the administration’s expressed commitment to disengage from (or at least reduce) the United States’ longstanding commitments to both our allies and to an international order aimed at increasing peace and promoting progress. The current “America First” foreign policy—combining promises of military strength with renegotiated trade deals—certainly resonated with these voters.

But there’s also a risk that disengagement from the role we’ve played in the international framework projects weakness rather than strength. That’s a message that can undercut the administration’s goal of a world that is “more peaceful and more prosperous with a stronger and more respected America.”

We may debate whether North Korea’s current in-your-face attitude about its nuclear weapons program has been improved or worsened by President Trump’s “fire and fury” threat last month. What’s less debatable is that the perception in many foreign countries is that the United States intends, if not to exit the world stage, then to reduce its role to a walk-on part. Whatever else that does, it doesn’t give the impression of a stronger, greater America.

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Prominent carbon tax skeptic admits it could increase economic growth

carbon tax

A lot of writing opposed to carbon taxes is, frankly, not of high quality. But there are exceptions. Bob Murphy, an economist with the Institute for Energy Research, has written some of the strongest and most sophisticated arguments for carbon-tax skepticism. So it was with interest that I read his latest broadside on the subject in the Canadian Free Press.

In the piece, Murphy focuses his ire on what might be called the nonenvironmental case for carbon taxes. Even if climate change was a hoax invented by the Chinese, a carbon tax still might be a net benefit to the economy if it allowed for cuts to more economically damaging taxes. As Murphy summarizes the case:

[W]hen proponents of a carbon tax pitch it to American conservatives and libertarians, they explain that if we have a revenue-neutral carbon tax where 100% of the proceeds are devoted to cutting taxes on capital, then reputable models show that this could boost even conventional economic growth, in addition to whatever environmental benefits accrue from reduced greenhouse gas emissions. This is called a ‘double dividend’ that arises when policymakers began to ‘tax bads, not goods.’

This sounds reasonable. And R Street has, of course, argued for swapping the corporate income tax for a carbon tax on precisely these grounds. But would it really work?

To show the limitations of the “double dividend” argument, Murphy highlights a chart from a 2013 analysis by Resources from the Future, showing the economic impact of instituting a carbon tax and using the revenue to reduce various other forms of taxation.

carbon tax

As the chart shows, it matters a lot what type of tax you are swapping out for a carbon tax. Using carbon tax revenues to offset reductions in consumption taxes, for example, would be a net negative for the economy. Swapping a carbon tax for cuts to taxes on labor would have a smaller, but still negative effect. And simply returning the money to people in the form of lump sum payments would be worst of all.

But look at the blue line. If carbon tax revenues were used to cut taxes on capital, this would result in a net increase in gross domestic product. Murphy himself acknowledges this, stating that “the RFF model shows that only if carbon tax revenues were devoted entirely to a corporate income tax cut would the economy’s growth rise above the baseline.”

That’s overstating things a bit. For example, just eyeballing the chart, it looks like a plan that used half of the revenue from a carbon tax to cut taxes on capital and the other half to cut taxes on labor would still be a net positive for economic growth, albeit not as much of a positive as if all the money went to cutting capital taxes. I’m not saying that R Street would favor such a split, just noting that you could still end up ahead economically even if not all the money from the carbon tax went to cutting taxes on capital.

And remember, the above analysis assumes no benefits to the economy from limiting climate change. To the extent that one does think there are risks from climate change that taxing carbon emissions could mitigate, it makes the case even stronger.

So why isn’t Murphy on board with swapping carbon taxes for capital taxes? Basically because he doesn’t think it’s politically realistic:

There is no way in the world that a massive new U.S. carbon tax is going to be implemented, in which all of the new revenues are devoted to cutting corporate income taxes… We can see that the ‘fashionable’ proposals that are anywhere close to actual political proposals do not consist entirely of tax cuts on corporations. For example, the recent Whitehouse-Schatz proposal, unveiled at the American Enterprise Institute, is ostensibly revenue neutral. Furthermore, one of its features is a reduction in the corporate income tax rate from 35 to 29 percent. So far, this sounds like it’s a ‘pro-growth’ measure, right?

But hold on. The Whitehouse-Schatz proposal would also use its revenues to fund a reduction in payroll taxes (but it is a flat $550 tax credit, so it lacks ‘supply-side’ incentives and acts as a lump-sum check), and to allocate $10 billion annually in grants to states to assist low-income people who will be hit the hardest by higher energy prices.

Murphy is right that the Whitehouse-Schatz proposal is flawed (we’ve written about why here). But I’m a bit surprised to hear him dismiss ideas on the grounds that they aren’t politically realistic. Murphy is an anarchist (not that there’s anything wrong with that). His preferred solution on climate is to abolish the government and have a system of private sector judges work everything out. Whatever the merits of that idea, I would submit it’s at least as unlikely as swapping a carbon tax for cuts to the corporate income tax.

More generally, lots of political ideas start out being unrealistic, only to become law later. People who advocate for Social Security privatization or drug legalization probably recognize the uphill struggle they face in advancing their views, but that hardly means they should just give up. As Milton Friedman famously said, the basic function of a policy advocate is “to develop alternatives to existing policies, [and] to keep them alive and available until the politically impossible becomes the politically inevitable.” I happen to think the time is a lot closer for revenue-neutral carbon taxes than Murphy probably does. But it’s only going to happen if people make the case.

The Equifax Hack: Time to get serious about consumer data protection


What’s said about money can be said about data: No one treats other people’s information the way they treat their own.

This week, Equifax—one of the “big three” consumer credit rating and reporting agencies— disclosed a massive hack that compromised the personal information of 143 million U.S. consumers. What makes this hack so damaging is that Equifax’s databases contain a motherlode of information about consumers—names, addresses, dates of birth, Social Security numbers, bank accounts, credit cards and more—all in one place.

Such hacks fuel the supply side of identity fraud and theft. Criminal hackers then sell the information wholesale via the “dark web” to other criminals who then use it to create fraudulent credit cards or other financial accounts. The “street” value of personal data goes up the more information there is to connect to a specific individual. By itself, a credit card number has a small degree of value. Add the expiration date, and the value ticks up. Add the CVV code (the three-digit number of the back of the card), and the value ticks up more. Connect it with a name and address and Social Security number and the value skyrockets.

If you’re lucky, the process ends with a phone call from a credit-card issuer asking you to verify a big-ticket purchase in a far-flung foreign capital. If not, you can find yourself debited for thousands of dollars in purchases you did not make and face years of battling with banks to clean up your credit rating. In the worst case, your personal or business bank accounts may be accessed and drained.

The Equifax hack is damaging in at least three ways: the number of records stolen, the wealth of information they contain and that, as a major credit-reporting company, consumers are obliged to use it to conduct everyday business, ranging from applying for retail credit to renting an apartment. This last point is critical, because it’s where the curmudgeonly criticism—that if you don’t want your data stolen, don’t put it online—breaks down. Consumers today increasingly have no choice but to put personal data online. The so-called “internet of things” will depend on it.

This is not meant as a slam. The internet of things will have enormous social benefits. Further development of the platform and accompanying applications should be encouraged. But a key element in making it work will be consumer confidence in the security of the personal data that’s collected as a matter of course.

This why both the government and commerce must address the Equifax hack as a significant problem. Although I tend to favor that government takes a light hand on business, there needs to be a thorough investigation as how this hack happened. Unfortunately, if the past is any indication, the Equifax hack will likely be traced to disregard of internally published cybersecurity protocols. The hacker may have been clever enough to break through a firewall, but that breach probably was aided by system information acquired by the target’s carelessness, such as:

All these and more violate best practices for data protection that can be found on any basic list of ways to safeguard data, be it on a home PC or a corporate server farm. When there’s loss because of failure to follow established standards of behavior, whether or not encoded in law, it’s negligence. And negligence is actionable.

If consumers are to remain confident in the security of their data in an environment where they are asked to share it in greater quantities, policy attitudes must change. That starts with the government realizing that cybersecurity is too big to be managed top down by a single “office” or “czar.” Responsibilities, strategies and tools must be distributed throughout the federal and state levels of government with the understanding that different hackers have different objectives. The Equifax hack was motivated by criminal profit. That means detection, prevention, regulations and response should be quite different here than for other targets, such as the Pentagon or defense contractors (espionage) and critical infrastructure (terrorism and cyberwarfare).

For one, the Equifax hack should be treated as an international organized crime problem. Solutions call for multilateral efforts with Interpol as well as other national police agencies. Treaties and accords should be pursued, but cooperation is possible without them. A model could be the Virtual Global Taskforce, an international private-public partnership of law-enforcement agencies, nongovernmental organizations and industry that has successfully targeted child pornography and child sexual exploitation.

But the private sector should be held accountable as well, especially when breaches occur because internal cybersecurity protocols and processes have been routinely ignored. Prosecutors should push for stronger penalties and judges should be reluctant to approve defendant-friendly settlements that fail sufficiently to punish a company for its carelessness.

Legislators should enact laws that guarantee baseline protection for consumers and compensation when negligence leads to loss. When a company requests or requires valuable personal data, it should be treated as under contract to do its best to protect that data. The best practices are already there. All the public needs are legislative teeth to ensure they are followed.

In the end, this transcends Equifax or any single data breach. Policymakers are still coming to grips with how the internet has exponentially increased the value of personal information. If consumers have little or no confidence in those they must entrust with it, the digital economy will be worse for it.

Image by Michael D Brown

The great Texas gas shortage


The great Texas gas shortage of September 2017 is over. But did it ever happen?

For me, it all began last Friday morning. As I was driving to my local coffee shop, I passed a gas station with a line of cars stretching out into the street. The next station I passed was even worse, with lines stretching around the block. The third station I passed had no line: it was out of gas completely. By the time I returned from my coffee run, the first two stations were out too.

The scene I witnessed that morning was playing out all over central and north Texas, as worries about supply disruptions from Hurricane Harvey led to the gasoline equivalent of a bank run. Worries that stations would soon run out of fuel became a self-fulfilling prophecy, as a cycle of panic buying caused shortages, leading to even more panic buying.

Soon, almost everywhere was out of fuel. One friend had to abandon their car part way between San Antonio and Austin because they couldn’t find gas. Another described the “post-apocalyptic” feel at a Buc-ee’s mega-gas station, which continued to be just as full of people as normal, but with empty pumps.

Public officials took to the airwaves to reassure people that there were no gas shortages. Whether this was true is mainly a matter of semantics. Claims that there was no shortage were correct in the sense that there hadn’t been a major disruption in supply. Texas is a big state, and much of the affected regions had escaped serious flooding. While some refineries were offline temporarily due to the storms, there was still plenty of fuel flowing.

The real problem was not falling supply so much as a spike in demand. Some of this spike was due to sheer stupidity (pictures circulated on the internet of people filling up garbage cans with gasoline; hint – don’t be that guy!). But this was only part of the problem. A bigger issue was a shift in demand. People normally wait to refill their gas tanks until they are mostly empty. Depending on the type of car and how much it gets used, a typical person might go a week or more between fill-ups. Gas stations thus ordinarily only need enough gas on any given day to fill the tanks of a small fraction of the local population.

The concerns over fuel shortages pulled much of that demand forward. Instead of waiting until the fuel light goes on, people decide to fill up with half a tank or more remaining.

In a situation like this, what is collectively irrational can be individually rational. In fact, keeping a cooler head in such circumstances can leave you worse off, as the race goes to the swift. Luckily, in this case, the situation was short-lived. It stabilized after a few days and, by Tuesday, things were mostly back to normal. The experience, however, does not bode well for what might happen in the case of a real shortage.

There is, of course, a simple way to avoid fuel shortages when you have rising demand and steady or falling supply: raise prices. Higher prices would encourage people to conserve fuel and might even have blunted the cycle of panic buying in the first place. Higher prices also would have served as a signal to bring in more fuel to meet the higher demand. One of the strange features of the whole situation for me was how little the price of gas increased, given the lengths to which people went to get it.

The answer to this is admittedly obvious. Stations were reluctant to raise prices lest they be charged with price gouging. Laws against gouging are supposed to protect consumers but, like all forms of price control, they can easily end up making consumers worse off by denying them access to the product at any price. It’s something to consider as we look to the likely strike of Hurricane Irma this weekend, and all the other storms in the months and years to come.



It’s crucial that STB noms support railroad deregulation


The Surface Transportation Board, a federal agency with broad authority over the nation’s railroads, is currently weighing a petition that could undo most of the progress made since railroad deregulation in the early 80s. That makes it particularly crucial that the Senate think long and hard about two pending appointments to the STB, which are set to come before the Committee on Commerce, Science and Transportation in the near future.

Formed in 1996 as a successor to the Interstate Commerce Commission, the STB interprets laws, promulgates rules and settles disputes related to railroads. It’s crucial that it be run by people who understand the need for a light regulatory touch, because the industry that it oversees has been a poster child of the power of deregulation.

Congress was able to achieve that substantial railroad deregulation with the Staggers Rail Act of 1980, which eliminated costly rate controls and regulatory review processes that needlessly drove prices upward. The law was an important step to ensure that privately operated railroads could sustain themselves in a competitive manner. In fact, in the decade following the passage the law’s passage, the rail industry was able to cut its costs and prices by half. By some estimates, shipping rates have dropped 51 percent since reforms went into effect.

But that all could change. Shipping interests who are reliant on moving their goods by rail are seeking a rule that would force railroads to lend their tracks to other railroads. This so-called “reciprocal switching” rule is based on a pair of faulty assumptions.

The first incorrect assumption is that rail lines are public property and should be treated the same as roads; they aren’t, and they shouldn’t be. For the most part, rail lines are owned by private firms. The second bad assumption is that railroads can’t coordinate use of each other’s rail lines on their own, even though they do it all the time.

President Donald Trump hasn’t yet made public his choices for the two STB seats that are set to be filled. It is vital that new members of the STB, whoever they may ultimately be, understand that a reciprocal switching rule would effectively re-regulate our nation’s rails. It is up to the Senate to ensure the nominees understand not only the details of the Staggers Act, but also its intent: to keep U.S. rails free and competitive.

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The 9 lives of Richard Posner


The following blog post was co-authored by R Street Senior Fellow Ian Adams.

Love him or hate him, there is no disputing that Judge Richard A. Posner, who retired from the 7th U.S Circuit Court of Appeals Sept. 2, is a legend of American jurisprudence. Known for his deep knowledge of economic theory, which he regularly weaved into his opinions, Posner authored some of this generation’s the most profound rulings in the fields of antitrust, copyright and patent.

Named by President Ronald Reagan to the 7th U.S. Circuit Court of Appeals in 1981, when Posner was just 42, he later became the favorite to replace Sandra Day O’Connor on the Supreme Court in 2005. Alas, his ascent to the nation’s highest court did not to come to pass. Posner’s outspoken nature and personal disdain for the role of the high court—which he likened to “the House of Lords, a quasi-political body“—scuttled his candidacy before it could move forward in earnest.

Yet from his perch on the 7th Circuit, Posner was able to do more to develop his uniquely pragmatic and economically informed take on jurisprudence than many Supreme Court Justices accomplish during their careers. His significance as a jurist is evidenced not only by his more than 3,300 opinions as a member of the federal bench, but the fact that he became the most cited legal scholar of the 20th century. In an era defined by “purposive” and “textual” jurisprudence, Posner’s approach followed a straightforward approach: find what is right and what is wrong and express it in colloquial language familiar and accessible to those outside of the legal profession.

Naturally, strict constructionists, who aspire to hew closely to the four corners of the U.S. Constitution, saw Posner as everything that is wrong with the third branch of government. His occasionally flippant disregard for the Constitution—once going so far as to say that he saw “no value to a judge” spending any amount of time studying the Constitution’s text—could not have been better designed to trigger outrage from his colleagues and friends on the right.

Perhaps because he was largely unmoored from the past, Posner’s jurisprudence translated well to new frontiers of legal thought. Throughout his career, he was an undisputed champion for user-rights in the digital age. In 2012, he wrote that protections for copyright and especially patent had become excessive. His view was simple: when protections provide an inventor with more “insulation from competition” than needed, it will result in increased prices and distortions in the market. As more companies seek overly broad patents, the parties who suffer most are consumers.

In his essay “Intellectual Property: The Law and Economics Approach,” Posner spoke openly about his views of limiting copyright terms, the idea/expression dichotomy and fair use, as well as laying out a novel approach to piracy. He maintained that the analogy to “piracy” was born of a misconception that intellectual property is indeed physical property. In Posner’s view, if an individual who was never going to buy a copy of a registered work illegally copies the work, there is no market deficit. It’s only when pirates make and sell copies to individuals who would normally buy the work that the copyright owner is affected. Poser didn’t excuse bad actors, but applied rigid cost/benefit analysis to the parties and judicial economy.

Posner also was a thoughtful academic with a longtime appointment to the University of Chicago School of Law. He was committed to mentoring legal talent. Lawrence Lessig—famous for his work on remixed works and as creator of Creative Commonsonce clerked for Posner.  He has authored three dozen books thus far, on subjects that range from terrorism to sex. He was also the co-creator of the Posner-Becker blog, which ran until Nobel laureate economist Gary Becker’s death in 2014. The blog provided an outlet for the University of Chicago professors to muse over rulings, explore current events and show a human side to their work.

Despite this heady list of accomplishments, the single act that may garner Posner the most ongoing acclaim from law students was his hatred of the citation manual known as “Blue Book.” In his essay, “The Blue Book Blues,” he wrote—tongue firmly in cheek—that all copies of the style guide should be burned because it “exemplified hypertrophy in the anthropological sense.”

Posner’s legacy will be felt for generations to come. His opinions and his other writings make clear the law is as much a tool for learning as it is a tool for justice.