Wednesday, September 06, 2006

Native Title: a Hayekian analysis



Australia is a country where legislative solutions to social problems are very popular. ‘Someone should make a law against it’ and ‘they should do something about that’ are oft-repeated mantras on all sides of politics. They’re even commoner among ordinary citizens, who — as F A Hayek argued some sixty years ago — soon get used to authority taking personal choice out of their hands. Legislators pass more (and more complex) laws, laws under which the rest of us are supposed to live.

One of Hayek’s great insights was his understanding that governments are bad managers, especially when they seek legislatively to micromanage every possible outcome. The Road to Serfdom concerned the totalitarian abuse of power, but Hayek leaves us in no doubt that ends-directed, teleological legislation — even in a democracy — ultimately shares some of the same fascistic tendencies.

The ‘impenetrable thickets’ of the Native Title Act — as memorably described by Gaudron J — exhibit many of the qualities about which Hayek warned in The Road to Serfdom and Law, Legislation and Liberty. As an important contributor to classical liberal economic and jurisprudential theory, Hayek remained concerned throughout his life with formal equality, the dangers of arbitrary legislation and the risk that arbitrary legislation would derogate from the rule of law — and with it the formal equality he so prized.

In this paper, I argue that the NTA derogates from the formal equality that underpins all liberal democracies, and the manner in which it does so is arbitrary. This arbitrariness undermines the rule of law. Before turning to the Act, I outline Hayek’s evolutionary theory of law, particularly his discovery that the common law manifests the characteristics of a ‘spontaneous order’.


In Hayekian terms, the common law is end-independent, general and applicable to an indefinite number of future situations. Like the common law but unlike much legislation, our society is also a ‘grown’ one, not one crafted to some intelligent design. The detailed attempt to manage outcomes evinced in the NTA is characteristic of a belief underlying much legislation and explains many of its inadequacies. The NTA is symbolic of the delusion that it is possible for a single mind or a small group of minds to know everything about a large, complex system and then manage it accordingly.

Hayek demonstrates that the common law was not deliberately made; it is ‘grown’ law. One cannot trace it to a superhuman entity or design, or to some historic legislator. Anthropology and palaeontology contradict the proposition that all law emanated from the will of a known lawmaker. Law 'predated both society and legislation in all known civilisations'. It is possible for a small, indigenous culture to have ‘a government of laws, and not of men’ and yet have no obvious central authority. Hayek has some harsh words for social contract theorists, who try to pretend otherwise. Law for Hayek is both self-organising and complex.

Later theorists adduced Hayek’s ‘spontaneous order’ not from anthropology but from biology, deploying evolutionary epistemology’s key insight: human knowledge forms part of a continuum with biological evolution, having undergone heritable change over many generations in the same trial and error fashion. It is possible to discern selection for fitness and descent with modification within cultures, although it is important to distinguish adaptation from progress. Neither organisms nor cultures become ‘better’ in any absolute sense over time.

Similarly, even when much of our law is governed by positive legislation, it can still emerge spontaneously. Internet rules and the lex mercatoria (private international law) are two examples of this phenomenon. Positivists, Hayek argues, make the mistake of seeing law as a product of society. Instead, law is constitutive of society. We did not develop laws because we became civilised. We developed laws and then became civilised.

Hayek’s thesis posits an uncanny and generally unconscious collective intelligence working not by top-down diktat but rather in dynamically evolving arrangements. These arrangements are common in nature. Economist James Surowiecki discusses giant flocks of starlings evading predatory hawks. From the outside, the cloud of birds seems to move in obedience to one mind. In fact, each starling is acting on its own, following four simple rules: ‘1) stay as close to the middle as possible; 2) stay two to three body lengths away from your neighbour; 3) do not bump into any other starling; 4) if a hawk dives at you, get out of the way’. The result is safety, and an almost magical, organic coherence of motion: unconscious wisdom.

The judges in common law countries are not always aware of each other’s reasoning, and where they are aware, are not always bound by it. Instead, they are bound by simple, end-independent rules (distinguish between ratio and obiter; apply the law to the facts in the instant case; follow precedent, but not slavishly) in the same way as the starlings. What looks like teleological, organic unity from the outside is in fact highly individual and unguided.


Although Hayek is refreshingly non-judgmental, he maintains that societies that evolve effective, end-independent rules of just conduct ‘will tend to prevail’ over those that do not. He does not question why some cultures develop a ‘more effective order’ than others do, although societies with clearly defined property rights tend to prosper:

"That men can use their own knowledge in the pursuit of their own ends without colliding with each other only if clear boundaries can be drawn between their respective domains of free action, is the basis on which all known civilisation has grown."

For this reason, Hayek favours abstract rules of just conduct like contract, tort and property law. That the NTA derogates from property rights — by treating interests in land unequally based on arbitrary distinctions — is of particular concern in this context.

Hayek argues that attempts to micro-manage individual outcomes (either through judicial discretion or legislation) not only undermine the spontaneous order but are — due to the complexity of that order — epistemologically impossible. We cannot know everything about a large, complex and purposeless system and then change it accordingly. Hayek describes this common belief as ‘the synoptic delusion’ and demonstrates that not even polymaths can design a perfect system, although plenty — including Karl Marx — have tried.

The synoptic delusion arises due to the tendency among humanities scholars to treat all complex cultural institutions as evidence of social engineering and deliberate planning. In the sciences, by contrast, complexity is evidence against design. The more complex a system, be it biological or social, the stronger the evidence against social engineering and deliberate planning. This means that complex and seemingly chaotic human interaction produces spontaneous order. Civilisation does not have a purpose, or end. Even if it does, it is not possible for us to discover that end without reliance on an unproven ‘revealed truth’.

The failure to appreciate spontaneous order has led legislatures to design end-dependent laws that characteristically produce unintended outcomes. In a noted study, John Jewkes discusses the spectacular failure of the post-war British Labour government’s ‘social justice’ reforms. Britain wilted under a mass of absurdly detailed regulations, civil service incompetence, shoddy goods of a kind later characteristic of the Warsaw Pact and a rampant black market.

Similarly, Onora O’Neill points out that the attempt to render bureaucracies and institutions more accountable through extensive regulation and administrative micro-management have had precisely the opposite effect. Instead of serving abstract, universal principles, institutions now serve the regulations. This means — in the case of those bodies meant to uphold the rule of law — that both law and its enforcement are undermined. She also cites empirical studies demonstrating that people trust government, lawyers and corporations less than they did 10 years ago. Further, 10 years ago, public trust had declined relative to the 10 years before that, and so on regressively until data is no longer available.

B Spontaneous Order and the ‘Synoptic Delusion’

Like many central European philosophers , Hayek developed a technical vocabulary to describe his theory. The labels are simply his way of pointing out that there are always two ways of thinking about law: one based on an acceptance of the spontaneous order and evolutionary epistemology, and the other based on purposive attempts to alter that order. He labelled these ‘evolutionary rationalism’ and ‘constructivist rationalism’.

Constructivist rationalism has its origins in Rene Descartes’ thought. It holds that we should accept only propositions that we can derive logically from known, explicit premises. Hayek contrasts it with evolutionary rationalism, which accepts we often follow practices adapted to the world we live in. We cannot demonstrate some useful practices to be true or rational – they simply ‘work’. These gave rise to principles of nomos – abstract rules of just conduct, which apply generally to an unknown number of persons and future events. They are not directed to specific outcomes, and exist for the simple scientific reason that people who observed them survived to reproduce.

The common law is nomos’ exemplar: developed by the courts, it relies on practices and reasonable expectations. Disputes before the courts emerge when reasonable expectations are defeated. Courts articulate the common law rule in the process of determining what expectations are reasonable. For Hayek, legislation can (and should) mimic the abstract, end-independent quality of the common law, but often doesn’t. He argues that legislation has four acceptable roles. These are:

(a) To correct the common law when it has gone up an evolutionary ‘blind alley’, like the Torrens improvement on Old System Title;

(b) To adapt the law to new situations engendered by rapid social change;

(c) To provide for administration of the state; and

(d) to provide for public services like social security.

Hayek argues that constructive rationalists suffer from the synoptic delusion — they think one mind can know all relevant facts, and that this mind can construct a desirable social system from that knowledge. He emphasised that the desire to ‘do good’ in society can also feed the synoptic delusion, often with disastrous consequences. As Lenin and Stalin’s capacity to direct their country to a particular purpose weakened, both did ‘more of the same’ in an attempt to cure the disease, trying desperately to plan their subjects’ lives in ever more minute detail. Hayek therefore counsels that humility is required when proposing changes to the legal order.

In Hayekian terms, the legislative creation that is the Native Title Act involves the synoptic delusion. Drafters and politicians — Hayek’s ‘planners’ — have attempted to micromanage every conceivable outcome, creating a document of staggering complexity. It is truly a ‘horse designed by a committee’ — in other words, a camel.


A Substantive and Formal Equality

When considering the NTA’s derogation from the principle of formal equality in a liberal democratic context, it is worth recalling the distinction between it and substantive equality. Briefly, formal equality seeks to get everyone to the starting line on the same terms, and to make the race fair. Substantive equality attempts to ensure that everyone finishes the race together. Hayek’s research established that the achievement of formal equality is empirically possible, while substantive equality is not. Any attempt at the latter involves not only extensive planning and regulation, but also godlike omniscience.

The ‘main offenders’ in a Hayekian sense are the 1998 amendments, not the original 1993 legislation. This is not to pretend that the 1993 legislation was flawless — it wasn’t — but acknowledges that the earlier statute was somewhat closer to the Hayekian ideal. It mimicked the abstract, end-independent quality of the common law, arguably fulfilling Hayek’s second legislative role — that of adapting the law to new situations engendered by rapid social change. It also performed an important administrative function. The amendments — cobbled together in haste, amended and re-amended as John Howard and Brian Harradine danced around a legislative minefield — were clearly designed to fulfill a particular political purpose. Australia stood on the brink of a race election in 1998. Passage of the amendments averted such an election, but exacted a terrible price.

B Sui generis and ‘clear and plain’ intent

The derogation from formal equality lies in the High Court’s ruling that the source and substance of native title is to be found in the Act, not the common law. This has allowed native title to develop what the Court calls a sui generis character, making it uniquely ‘susceptible to extinguishment’. Unfortunately, native title’s susceptibility to extinguishment has its origins in Brennan J’s seminal judgment in Mabo (No 2), later enacted in s 223 (1) of the NTA.

Brennan J held that ‘the preferable rule equates the inhabitants of a settled colony with the inhabitants of a conquered colony in respect of their rights and interests in land’. However, s 223 (1) enacted his sourcing of native title in indigenous laws and customs, not in the common law. This is now coupled with the Ward Court’s use of the Act as the starting point when considering extinguishment. There is thus a coerced conformity between the statute and the common law. That the common law — in Wik and the Native Title Act Case — seemed to be heading in a different, less teleological direction before the 1998 amendments remains a moot point.

Normally, the extinguishment or impairment of property interests must be authorised by ‘clear and plain’ legislative intent:
"[T]here is no reason why the long-established principle, applied in respect of other Australians, obliging that a clear and plain intention in Parliament be established to deprive people of their rights (including rights to property interests), should not inure to protect the rights of indigenous Australians."
The presumption against taking away private property rights is of considerable antiquity, having been enshrined in both the US and Australian Constitutions in combination with a compensation requirement. In Mabo (No 2) Toohey J followed established House of Lords and High Court authority with respect to the legislative element. He noted the importance of unequivocal language if proprietary rights are to be abrogated without compensation. ‘In this regard’ he noted, ‘traditional title does not stand in a special position’.

Further to that point, Crown grants are executive acts, and inherently more difficult to review on their merits than legislative equivalents. For this reason, the Wik majority rejected the possibility that inconsistent executive grants would be sufficient to bring about extinguishment without clear legislative backing. Interestingly, in Mabo (No 2), Deane, Gaudron and Toohey JJ also held that the loss of native title rights was compensable, a finding only defeated by Dawson J’s dissent.

In Ward, the Court moved away from this principle towards an assessment based on ‘inconsistency of incidents’. The Ward test requires an ‘objective inquiry [that] requires identification and comparison between two sets of rights’. The court held that 'two rights are inconsistent or they are not. If they are inconsistent, there will be extinguishment to the extent of inconsistency; if they are not, there will not be extinguishment.'

Although the Ward Court discussed the clear and plain intention requirement, the majority shied away from any further consideration of it, arguing that ‘subjective thought processes’ are ‘irrelevant’.

In Wik, the majority echoed Toohey J’s judgment in Mabo (No 2), requiring clear and plain legislative intent. The dissenting judgment — which Brennan CJ wrote — argued that native title’s ‘weakness is that it is not an estate held from the Crown nor is it protected by the common law as Crown tenures are protected from impairment by subsequent Crown grant’. This meant that a ‘clear and plain intention to extinguish’ is required ‘only where no rights inconsistent with native title are otherwise created’. The judicial reverence for Brennan J’s judgments — coupled with changes in the bench’s composition and the enactment of the 1998 amendments — means that native title is now inherently ‘fragile’ or ‘uniquely vulnerable’ to extinguishment by inconsistent executive grant.

The High Court treats the NTA as the locus of all meaning with respect to content, proof and extinguishment of native title. This excises much subtle common law jurisprudence at a stroke and exposes a given class of plaintiffs’ property interests to unequal treatment at law. Native title (based on Hayek’s reasoning in Law, Legislation and Liberty) should be treated in the same way as any other interest in land, but is not. Treated instead as ‘sui generis’ — a term more flattering of than useful to Australia’s indigenes — it is not grounded in a secure common law principle. Instead, its substantive content is vulnerable to changes in the political climate and the not-so-gentle ministrations of political planners — those who seek to draft laws for purposes, rather than people.

C Formal equality and ‘Special Measures’

The ‘inequality of interests’ outlined above is confined to a class of plaintiffs definable by race, arguably a more serious derogation from core liberal democratic principles than simple unequal treatment of property interests. Nonetheless, there is no doubt native title’s critics may argue that what benefits conferred by the Act are solely conferred on the members of a particular racial group. This is acknowledged in the preamble, which states that the Act is a ‘special measure’ for the advancement and protection of Australia’s indigenous peoples.

Under the relevant international convention, a 'special measure' discriminates in favour of a disadvantaged group in order to further the achievement of fundamental rights and social justice. Like all ‘deeming’ provisions, it embodies a large measure of discretion and is fraught with danger for the rule of law. Race is once again used to define group membership, in contradiction of the colour-blind laws that should buttress rights in a liberal democracy.

Hayek remained opposed to all forms of differential treatment on the basis of race, noting the wide discretion such treatment inevitably embodied and its potential for abuse: ‘a recognised bias of some rule in favour of a particular group can[not] be corrected only by biasing it instead in favour of another’. The division that discretion causes — especially where exercised towards one racial subgroup when everyone in a given community is poor — is readily apparent to anyone who has spent significant time outside Australia’s capital cities.

However, if one recalls that Aboriginal people were deprived of their property rights on settlement, this difficulty may be at least partially overcome. Prima facie, those deprived of interests in property should be compensated under s 51(xxxi), at least with respect to compulsory acquisition since Federation. If this is not practical, then for Hayek, another set of analogous rights must be conferred on the deprived group in lieu. If native title is to be that alternative, then it must be placed on an equal footing with other property interests.

This leads us back, then, to my first argument. What ‘compensation’ regime there is (and I use that word in its broadest sense) is manifestly unfair. It denies standard legislative presumptions to indigenous Australians while granting them ‘to settlers and their descendents and successors’.


Some of the rights derogation present in the NTA is plain on the face of the statute. That is, it provides for differential treatment to different classes of potential plaintiffs based on not only race but also the arbitrary fixing of particular dates. A notable example arises in the Act’s definition of categories of ‘acts’ with respect to extinguishment under Divisions 2 and 2A. Pastoral leases fall into Category A under the ‘past acts’ regime, which runs from 1975 to 1994. Category A irrebuttably extinguishes native title. By contrast, pastoral leases fall under Category B for the period prior to 1975 and the ‘intermediate period acts’ regime between 1994 and 1996. Category B does not extinguish native title, or does so only to the extent of inconsistency.

Ostensibly, this pastoral shape shifting reflects how the law was viewed before and after Wik. That is, pastoral leases were assumed to extinguish native title under both the 1993 version of the Act and in Mabo (No 2). Once the Wik Court found this was not the case, tremendous public confusion (and political opportunism) resulted. The 1998 amendments arbitrarily and unevenly apply the Wik ruling, forgetting that the Court ruled on all pastoral leases of that type across all historical periods without one eye on the economic implications of the Racial Discrimination Act.

H L A Hart observed that all judicial decisions in the common law world are essentially retrospective: they address the law as it has been until now. While parliament can prevent such rulings from binding the future, it cannot undo their effect on the past. In a roundabout way, this is what the Act attempts to do. It defines parties’ positions based on sets of incorrect assumptions rather than mimicking the abstract, end-independent and universal qualities of the common law (as articulated by the majority in Wik).

The universality of the common law — that it should be end-independent and ontological, rather than teleological and goal driven — is at the core of liberalism and in Hayek’s view is essential to preserve liberal institutions. The NTA’s extinguishment provisions undermine this universality. This arbitrariness — particularly in its application to members of a particular race — raises a rule of law issue. Central to the rule of law is the understanding that laws should apply equally to all. Aristotle famously asked whether it is best to be ruled by the best laws or the best men, and for a natural lawyer his answer is remarkably Hayekian. The best laws ‘speak in … general terms’, while ‘passion must ever sway the heart of man’.

The law should not allow the placing of given plaintiffs into different arbitrary categories based on fixed points in time or the interests those plaintiffs hold. As the legislation stands, pastoralists who received their grants between 1975 and 1994 enjoy better rights vis á vis Aboriginal claimants than do pastoralists with identical interests who obtained grants in other periods. The same situation pertains in reverse: should a grant have been made over your ‘mother’s country’ between the years 1975 and 1994, the chances of obtaining a native title ruling in your favour are nil. This is patently absurd.


According to Hayek’s student, Richard Epstein, we live in a world of ‘too many lawyers and too much law’. Many statutes — not just the NTA, although it is unusually bad — require simplification. Epstein provides a clear program for reform, based on the rationale that the best laws do not try to create outcomes, but merely facilitate citizens’ individual purposes.

Is this possible in Australian context? The NTA is not assisting Australia’s poorest ethnic group. It cannot in large part because it is a ‘plan’ with which no one was happy, a cobbled compromise between competing interests. The inevitable effect is a change in the composition of legal work. Australia’s law of property — traditionally the engine of wealth creation in any society — has moved away from commercial transactions (which produce wealth) towards politics (which transfer and diminish wealth simultaneously). Whether those who rule over us have the wisdom to see this is debateable. Politicians are likely irredeemable planners, unable to see that what we need is not a ‘better plan’, but better law.


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