THREE NOTES ON CHECKS & BALANCES

AM | @agumack

"Checks and balances are our only security" — John Adams

[1] James Harrington Superstar! At Contrapesos, the next couple of weeks will be dominated by James Harrington (1611-1677), the author of Oceana (1657), one of the major works in the theory of mixed government, checks and balances, republicanism and the rule of law. I mentioned Harrington at the end of my second review-post of Alexander Thiele's book Der Konstituierte Staat. Eine Verfassungsgeschichte der Neuzeit (Frankfurt: Campus Verlag 2021) [see]. Among the resources at my disposal, I will be reading the 1737 edition of Oceana and other works by John Toland, available on Google Books and digitised by the Liberty Fund [see]. Next week I'll be receiving Harrington's recently published intellectual biography (*). It has been impossible for me, so far, to get my hands on Arihiro Fukuda's Sovereignty and the Sword: Harrington, Hobbes, and Mixed Government in the English Civil Wars (Clarendon Press, 1997). I'll also be scrutinizing Montesquieu's and James Adams's views on Harrington, as well as the pages devoted to the author of Oceana by Wilfried Nippel in his history of the mixed government [see].

(*) Rachel Hammersley. James Harrington. An Intellectual Biography. Oxford University Press, 2019.

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[2] Real-time constitutionalism. The excellent Verfassungsblog provides an enormous amount of information on the burning issue of "Rule of Law as a Perimeter of Legitimacy for COVID-19 Responses" under the care of Joelle Grogan and Julinda Beqiraj. I was struck by the notion of real-time constitutionalism applied in Nordic countries, especially Finland. To be sure, as Martin Scheinin writes, 'geographical' luck has been an important factor in containing the effects of Covid-19 (*). But this deserves to be quoted in extenso:

... the Emergency Powers Act does shift legislative power into the hands of the Cabinet. That said, it is an important feature of the regime for emergencies, as set forth in Section 23 of the Constitution and in the Emergency Powers Act that there is real-time constitutional and parliamentary scrutiny of any emergency regulations issued. As a consequence, major dimensions of Finland’s responses to COVCID-19 have all the time been decided by Parliament where the Constitutional Law Committee exercises continuous scrutiny over the constitutionality and human-rights-conformity both of legislative Bills and of Cabinet regulations issued under the Emergency Powers Act. This Committee, in turn, regularly hears constitutional law experts and is surrounded by a public debate.

No wonder Finland ranks No. 1 in Contrapesos's Index of Checks & Balances.

(*) Martin Scheinin: "Finland: Soft measures, respect for the rule of law, and plenty of good luck", Verfassungsblog, 23 February 2021.
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[3] The Sharpe ratio. I like to discuss, in class, the Bernard Madoff scandal before introducing the Sharpe ratio. Mr. Madoff, the Wizard of Lies, died two days ago at 82. But what does that have to do with checks and balances? One of the key take-aways of the financial crisis of 2007-2009 was the lack of checks and balances, in terms of corporate governance, at many financial firms. Thus the OECD: "The financial crisis revealed severe shortcomings in corporate governance. When most needed, existing standards failed to provide the checks and balances that companies need in order to cultivate sound business practices."

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And then there's the elegance of the Sharpe ratio, which measures the "reward-to-variability" of an investment fund by dividing its average rate of return by the standard deviation of its past rates of return (*). The fraudulent scheme of Bernard Madoff was uncovered, in part, by investigators who calculated its impossibly high Sharpe ratio. I like the sense of prudence, of balance, of μεσότης in the definition of this metric. Mr. Madoff was just the opposite—démesure, pure recklessness followed by lies, fraud and deception.

(*) William Sharpe: "The Sharpe ratio", Reprinted from The Journal of Portfolio Management, Fall 1994.
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