The Interest Rate For Slavery Reparations – More Complicated Than One Would Think

Over the last week some have begun raising again the issue of reparations for slavery, jim crow, redlining, and other past wrongs.  The assumption is that, if such things are compensable, there is a constantly compounding interest rate that makes it more expensive every year to postpone dealing with that debt.  Such an assumption is very likely wrong.

I don’t say that lightly.  This was an issue I wrote about in 2005 which I was going to attempt to have published.  However, the article needed some more work, and I lost interest in writing about it.  Hence, it never made it into a journal.  However, I did put a lot of thought into the topic at the time and I figured that some of those thoughts could be useful to the current debate.  To that end, I’m gong to do something novel.  I’m going to simply cut and paste almost the entire article here in the hopes that maybe a person or two will read it.

As a note – I haven’t read this over in years and just did a quick scan to correct a few obvious typos.  Knowing how I wrote at the time, portions of this are possibly unintelligible.  Moreover, I possibly don’t even agree with portions of it today.  But why let old ideas languish?  So, if you do read this – thanks for taking a look and feel free to give me your thoughts.


Elliot D. Fladen

Arbitrary Interest – Calculating the Moral Debt of Slavery

Spring 2005


             I.      Introduction

They owe us…We built this, but what do we get?

–          Lewis Andrews[1]


The estimates vary. Anywhere from ten to twenty-five million Africans died in slave ships en rout from Africa to the Americas. A lifetime of bondage awaited those who survived the passage. This massive crime against humanity – the enslavement and exploitation of tens of millions of human beings is an American holocaust. . .

–          Randall Robinson, The Debt[2]


Recent years have brought the debate about slave reparations to a head. In the contemporary discussion, the government has been assumed to owe generations worth of compounded interest and comparatively negligible principal. Receiving less attention is the manner in which the interest is to be calculated.  Conventionally, to fulfill our moral obligations it is thought compound interest should be calculated using the risk free rate of interest. Otherwise, the distant descendants of an immoral act will be made worse off than if the compensation had been paid immediately.

University of Chicago Professor Robert Fogel has sought to estimate this obligation:

“[He] estimates a cumulative bill for slaves’ expropriated wages of $24 billion in 1860.

Compound interest on this sum for 142 years . . . [at a] risk free interest rate of 6% a year. . . brings the cost to $97 trillion , more than nine times the size of America’s economy today. Awarding interest of just 3% would cut the total bill to $1.6 trillion.[3]”


Recent proposals to repay this amount are not necessarily in a lump sum transfer payment form, but instead take forms designed to foster long-term economic improvement for the descendants of slaves. Alan Keys recently called for a plan that would exempt African Americans from paying income taxes for at least a generation.[4] Randall Robinson and Robert Westley have called for expansive educational programs for up to two successive kindergarten through twelfth grade generations of African American children, funded out of the general government revenue.[5] Even for these proposals, the calculation of interest owed on a general debt is important, for it is much easier to convince the public to pay for an expensive program when the amount of interest owed is large rather than small.

Congressman John Conyers has sought to achieve the ends of these proposals by repeatedly introducing a bill to study redress of the moral debt of slavery.[6] Conyers initial bill in the house received only 28 cosponsors.[7] Since then Conyers has reintroduced it, without success, in each session of Congress.[8] Another legislator, Tony Hall tried the same thing years earlier – and it led to “inundating his congressional office with hate mail and nasty phone calls.”[9] This history led one commentator to voice concern that that our “norm against slavery reparations may infect political decisions and scuttle legislative efforts.”[10]

It is in the spirit of avoiding this supposed norm and instead investigating possible reparations that this article is written. However, this paper will not, unlike the commission Conyers sought, attempt to grapple with the broad questions of if and how much reparations or moral indebtedness was owed to the African-American population 1865. Rather, this paper will assume arguendo that those reparations have been determined as being owed.[11] This article will instead wrestle with a key problem: this payment was “due” in 1865. It is now almost one hundred and forty years later. How should we translate the money that was due in 1865 to present day dollars? In other words – what is the interest “owed” on a moral debt?

This article will show that automatically applying the risk free rate of interest may not be the correct way to look at this problem. As an empirical matter, mankind tends to discount the past as opposed to valuing it more than the present. One cannot say that constantly compounded interest merely returns descendants to the counterfactual position they would have enjoyed if the moral debt had been paid immediately; this requires illogical counterfactuals of its own and ignores evidence of squandering of assets. Other problems, including competing concerns arising from forcing those with only a tangential connection to the harm to make payments are also discussed in this article.

If we leave the conventional position behind, we are left in a search for a new schema to recompensate descendants of ancient immoral acts, a search that will prove futile. There are justifications for paying zero interest, paying interest that starts at the risk free rate but gradually declines to zero, and even making interest negative. However, each of these schemas shares common, morally repugnant flaws: they give governments immoral incentives to put of righting a wrong until the cost borne by future generations. These alternative schemas also each allow gaming of the repayment system by permitting the current generation to save less money than they would have under the conventional position because the interest received will be greater than the interest that will have to be paid. This leads to a startling conclusion: any schema for interest on long unpaid moral debts will have aspects that are immoral and choosing between these schemas is an arbitrary decision. This is not to say that the problem of calculating interest on slave reparations is unsolvable. Rather, it is the position of this article that since morality does not demand a specific schema, choosing a schema must be done on a basis exogenous to moral reasons as morality does not in itself command a specific schema.

As for the structure of this Article: Part II begins the discussion in earnest with a presentation arranged around first showing why constantly compounded interest at the risk free rate is thought to be the appropriate schema, and then attacking the very same proposition. Part III explains reasons for and against alternative schemas for addressing moral debts such as zero interest, the “slow discounting” hybrid of zero and risk free interest, and negative interest. Part IV concludes with a summary and the resulting observation that all interest schemas on moral debts are inherently arbitrary.

          II.      The Conventional Position – Pay the Standard Risk Free Rate

“If justice were immediate, there would never be an award of prejudgment interest.”

– Professor Michael Knoll[12]

This part of the article will examine the use of the risk free rate with compound interest [henceforth the conventional position] as a schema to calculate interest on a moral debt. Collecting interest on a long unpaid moral debt creates a unique problem. Unlike conventional contracts such as bonds or home loans, in cases of a moral debt there will not be a previously agreed upon rate of interest, requiring a rate of interest be imposed after the fact. This part of the article will explore the reasons for and against the conventional position of using the risk free rate of interest in calculating the amount owed on long unpaid moral debts.

  1. Reasons for the Conventional Position

The conventional position is based on the idea that people discount the future, creating a demand for interest. Not paying interest denies those who have been wronged the ability to earn the time value of money. To truly compensate the wronged for not having been timely paid, we would have to use the risk free rate of interest, compounded.

  1. The Need to Discount

Paying interest for past actions or its converse discounting of future actions may be justified on the grounds that “as an empirical observation of psychology, humans are often impatient.”[13] A pioneering paper by Eugen von Böhm-Bawerk linked this impatience with the existence of positive interest rates,[14] which today is the near unanimous view among economists.[15] Even though the wrong involved a non-monetary harm, the deprivation of liberty, this should not deter from granting interest. Workers use discounting when they choose to be monetarily compensated for increased danger on the job.[16] Even the Office of Management and Budget [OMB] has strongly urged the discounting of human lives.[17]

Imposing interest after the fact has been done in the context of tort law where “[p]rejudgment interest is assessed in order to place the parties in the same position they would have been in had the defendant paid the plaintiff an amount equal to the original judgment when the injury occurred.”[18] Moreover, in cases of postjudgment interest, the federal courts require interest from the date of judgment to the date of payment.[19] If a person is owed money that has not been repaid, that person has lost the opportunity to earn a return on it. By the theory of present value, the money must be transferred with interest in order to set them as well of as they would have been otherwise.[20] Economists have “general agreement” that paying interest for past acts—or its converse discounting of future acts—are useful in examining policies with long or complex time paths.[21] This general agreement carries also to policies whose effects existed across generations.[22] Thus, the use of interest in cases of moral debts is regarded as the conventional position of economists with remaining questions focusing on how the conventional position requires this interest to be structured.

  1. The Role of Hindsight and Using the Risk Free Rate

Due to hindsight, returning the wronged to their original position requires the risk free rate of interest be used. [23] Professors Fisher and Romaine examined this in the following interesting manner:

“Janis Joplin, the rock star, went to high school in Port Arthur, Texas. Suppose that when she graduated she signed one copy of her high-school yearbook. Suppose further that nobody had any idea that Ms. Joplin would one day be famous. Assume that signed high school yearbooks were being bought and sold for $5.00 in Port Arthur, regardless of whose signatures they contained.

Assume that a thief stole and destroyed the copy of the yearbook with Janis Joplin’s signature. The legal proceedings that followed took considerable time, and, by the time a damage award is to be made, Janis Joplin is known to have been a star, with her autograph selling for $1,000. Ignoring punitive issues (and assuming that the year book has no sentimental value), what damage award will make the plaintiff (the book’s owner) whole?”[24]

The conclusion the two authors come to is that if the goal is to make the wronged owner whole, the owner of the yearbook then does not get $1,000. Instead, the thief receives $5.00 plus interest, because in “choosing a discount rate with which to calculate the present value of the stream of returns associated with [a stolen] asset, [they] choose the plaintiff’s opportunity cost of capital . . . as of the time of violation.”[25] While the plaintiff is entitled “to interest compensating it for the time value of money, [it is not also entitled to] . . . compensation for the risks it did not bear.”[26] Implicit in this position is the idea that “hindsight should not be used . . . [r]ather, the stream of returns should be estimated using the information available as of the time of violation.”[27] Fisher and Romaine defend their conclusion, that the correct payment is $5 plus interest as opposed to $1000, in part by pointing out that the desire to award the one grand does not take account of one very important thing: risk.[28]

Another commentator, Knoll agrees fairness demands prejudgment interest be given at the rate the defendant would have had to borrow.[29] For the government that would be the risk free rate, for other defendants it would be an extreme short-term rate of interest.[30] As we are dealing with the government here, the latter would not apply. Another argument against setting the rate above the riskless rate for borrowing is that this would, as Farber and Hemmersbaugh point out, imply that we save too much currently. For if people “discount their own future consumption at a higher rate, they are irrationally trading current consumption for a level of later consumption that they actually regard as less valuable.”[31] Such a result is “contrary to a broad consensus among economists and the public that American savings rates are actually too low.”[32] Thus, under the conventional position, the correct rate of interest is the risk free rate.

  1. Compounding

To set the wronged as well off as they would have been otherwise, compound interest will need to be paid. Both simple and compound interest allow interest to be accrued on the original principal, but unlike simple interest, compound interest additionally allows interest to be earned on the accrued interest. As such, compound interest will grow significantly faster than simple interest given positive interest rates.

As Knoll points out, whether the prejudgment interest should be compounded is a “frequently contested issue.”[33] Under common-law the rule is that prejudgment interest is not compounded, and many state statutes “still insist on simple interest,”[34] while “[u]nder federal law the decision to award simple or compound interest is left to the discretion of the court.”[35] Knoll argues that there is a proper choice, and it is compound interest. He justifies this by three reasons. First, since “interest is not paid to the defendant as it accrues, [but rather] is retained by the defendant until the judgment is enforced” increasing the defendant’s obligation to the plaintiff each period, which is accounted for by compound, but not simple interest.[36] Second, compound interest would mirror the commercial sector, which almost exclusively calls for compound interest.[37] Finally, since simple interest does not fully compensate the plaintiff and encourages the defendant to drag on legal proceedings, “fairness and efficiency require that interest be compounded.”[38] As a result, the conventional position requires compounding of the risk free rate.

B.     Problems With The Conventional Position

The conventional position, although widely embraced, has problems with its justifications and leads to unethical results. Empirical evidence does not support it. It relies on illogical counterfactuals. It requires both that people would prefer their own non-existence and ignoring the possibility of squandering. It makes the ethically challenged choice of relying on the preferences of the dead and the ethically repugnant mistake of conflating discounting within one lifetime with discounting across lifetimes. The conventional position might also improperly compound interest. These flaws make the conventional position an unsatisfactory theory that a nation seeking to redress its past moral transgressions cannot be ethically required to follow.

  1. The Conventional Position Does Not Match Human Behavior

In the past section, it was shown one of the conventional reasons why interest is thought to both be paid, and is justified, is that people are impatient, and value the future less. Because the future is valued less than the present, when we look to the distant past, it seems logical that it should be valued significantly more, and the distant future valued significantly less, than the present.

Some sound a note of caution before making this jump. As Revesz stated “the issue of whether impatience and preference based on that emotion are a rational or prudent basis for public policy decisions remains open to debate”[39] especially when individual preferences can shift quite dramatically over time.[40] Other commentators have noted the wide literature on this topic,[41] which can raise difficult philosophical conundrums.[42] Even if one ignores these concerns, in focusing on human behavior as a justification for discounting, the conventional position has a justification that is vulnerable to attack. Instead of finding constant discounting in empirical studies as the conventional position would predict, instead “the studies show a consistent pattern under which the discount rate falls as the time horizon gets longer. More over, the discount rate with respect to very long time horizons is well under the rate of return on investments in financial markets.”[43] This decreasing aversion to discounting “has been observed in experimental studies concerning: people choosing between non-monetary alternatives. . . people choosing between monetary alternatives . . . and animals choosing between food or between other alternatives.”[44]

Using common sense, it should be apparent that this is not as counter-intuitive as it first appears:

“When asked most people would prefer having completed an onerous task last week over having to perform one this evening; they would prefer a pleasurable meal this evening to one ten years ago; and they would prefer to be leaving on vacation to returning to work when their vacation is over. Whenever one thinks, “I’m glad it is finally three o’clock and that lecture is over,” it reflects discounting of the past. The disagreeable experience is less painful when it is in the past than when it is being experienced in the present.”[45]

Given these arguments, these words of Charles Harvey perhaps ring true: “To advocate constant discounting, one must argue that a person or society . . . should change their preferences . . . or that they should act as though their preferences were in accord with constant discounting.”[46] The conventional position does the opposite. It imposes its vision of how people should act as a justification for itself. The cited material has shown this vision to be questionable at best. Thus, empirical evidence of the use of interest rates in day-to-day life is not a sufficient justification for the conventional position’s use of interest on long unpaid moral debts and probably even cuts against it.

  1. The Conventional Position Relies on Illogical Counterfactuals

Recall that a justification for paying interest at the risk free rate on a moral debt to the descendants is we are making the descendants as well of as they would have been if the moral debt had been promptly paid. The trouble is that it if the moral debt had been promptly paid, the very same descendants would not have existed, as their ancestors would have made different choices, that would have led to a similar, yet distinct group of descendants than which actually came to exist.[47]

Another counterfactual problem concerns how much, if the money had actually been paid, would have been received by the descendants. Remember, under the conventional position we apply standard risk free interest to the unpaid portion because if it had been sitting in the bank it would have received interest. However, it is dishonest to believe that money would have in fact been sitting in the bank – part of it would, but another portion would have been consumed. There is disagreement in the relevant literature on how much would have been consumed. Two commentators, Laurence Kotlikoff and Lawrence Summers argued in a 1981 paper that intergenerational transfers represent a significant portion of our total wealth – as high as 80%.[48] Other commentators have found fault with this estimate, and believe that the proper amount that is transferred from generation to generation is approximately 20%.[49]

Which estimate is closer to the truth may be of great importance. For if we assume that the vast bulk of our society’s wealth is passed from generation to generation, then the following argument gains credibility: “measures of wealth, more than other measures of socioeconomic status, capture long-term multigenerational scars of prior inequality and are not easily erased by measures intended to guarantee equal opportunity or equal access . . .Over the long run, small initial differences in wealth holdings spin out of control.”[50] However, if the intergenerational transfer is much smaller the above argument should not be given as much credence—for the current generation would not have received much of the reparation—it would have been squandered or consumed.

Even if one assumes a high rate of intergenerational transfer, one may still end up with the above conclusion if the transfer is in the form of consumption goods that do not bear greater consumption fruit in subsequent periods. The term consumption goods in this context refers to goods that are purchased for gratification at the time they are purchased as opposed to investment or savings which can be purchased to give greater consumption in a latter time period. This still requires an additional assumption: the intergenerational transfer of consumption goods would not have encouraged close to equal amounts of saving. Without this assumption, even if the reparations would have been squandered on consumption goods, this would be irrelevant if other money that actually was spent on consumption goods would have instead been directed towards savings. If the amount is not equal or close to it, it would imply an increasing squandering after multiple intergenerational transfers of the original reparation. Since the conventional position relies on these illogical counterfactuals, it is not a satisfying theory.

  1. The Conventional Position Makes The “As Good As” Mistake

“It may be possible to transform a frog into a prince, but this does not imply that a frog who stays a frog is as good as a prince.”

–          Tyler Cowen and Derek Parfit[51]


One possible defense of the conventional position to the squandering possibility is that whether the income was consumed or saved is irrelevant. Consumption in the past is worth more because “it could have” been freely exchanged for money in the past that would have been “as good as” money in the present with a higher rate of interest. Since it could have been exchanged, it would have been worth more than present consumption, making the fact that it would have been squandered a red herring.

The following demonstrates the problem with this logic:

We consider next . . . consumption units, which we can either eat now or plant in the ground for a positive return . . .

1. 1.05 units in period two are better than 1 unit in period two

2. 1 unit in period one can be transformed into 1.05 units in period two


3. 1 unit in period one is better than 1 unit in period two

This argument is invalid. The move from (1) and (2) to (3) confuses the two relations “can be transformed into” and “is as good as.[52]


Why is “can be transformed into” in the past not the same as “is as good as?” in the present? A good example is below:

“Suppose we know that if we adopt some policy, there will be some risk of causing genetic deformities . . . Suppose we know that we will not in fact provide compensation.. . . .If we will not pay compensation for such deformities, it becomes an irrelevant fact that in the case of later deformities, it would have been cheaper to ensure now that we could have paid compensation.”[53]

This is undoubtedly a complicated point. To understand it, is important to remember where it fits in the argument. Previously we saw that an attack on the conventional position was that it relied on the illogical counterfactual that the reparations, if they had been immediately repaid, would not have been squandered at all. One response to this attack on the conventional position is that it would be irrelevant if the money had been squandered because it could have been transformed into savings making past consumption as good as savings and hence deserving of interest. The quotes above show the problem with this: being able to temporarily transform consumption in the past into more money than today’s consumption can be transformed into does not mean the yesterday’s consumption that was not transformed is worth any more than today’s consumption. The quote in the introduction to this subsection sums this up best: “It may be possible to transform a frog into a prince, but this does not imply that a frog who stays a frog is as good as a prince.” [54] As a result, an argument that counterfactual squandered money is irrelevant due to the higher value of squandering in the past is illogical, and cannot be used as a justification for the conventional position.

  1. The Conventional Position Relies on the Preferences of the Dead

Another possible justification for the conventional position is that it takes into account what the deceased presumably would have wanted. We assume that they would have wanted their heirs to receive their property if they could not have had it.

In viewing this question, one first must ask “why we should care?” While some utilitarians may believe we should treat the utility of each generation equally, “common-sense” morality of the average person places the utility of strangers below the utility of those that we know.[55] It has been argued that there are groups to whom we all have a special connection or special relation: our “children, parents, pupils, patients, constituents, and fellow citizens” amongst others.[56] To each of these groups, not only may we give some kind of priority, but perhaps we should.[57] For “according to common sense, we ought to go to [our children’s] welfare special weight . . . [a]nd we have similar, if weaker obligations to our children’s children.”[58]

Perhaps such special relations at the individual level may be aggregated to the community level:

“Most people believe that their government ought to be especially concerned about the interests of its own citizens. It would be natural to claim that it ought to be especially concerned about the future children of its citizens, and, to a lesser degree about their grandchildren. Such claims might support a new kind of discount rate. We would be discounting here not for time itself, but for degrees of kinship.”[59]

Applying a discount rate based upon special relations, or kinship to the situation of a moral debt would imply a negative discount rate. As generations become farther removed from another, the preference for redressing past wrongs that occurred at ever increasing differences in time declines.

One should use caution in applying this argument to the reparations, as in the very paper it is made in, it is argued that preferring special relations should not be applied to cases where grave harm would be inflicted, for which slavery surely was.[60] Why we should prefer special relations for minor harms but not grave ones is clear. In any event, it is argued that because common morality cares about the welfare of strangers, there are limitations to an ever decreasing discount rate.[61] For each of our distant descendants will be roughly equivalent to us as a stranger, and if so, there will be no further diminishment of special relationship with their children, because the relationship with a stranger is the minimum line.[62]

Even if we decide that we should as a general manner care about the preferences of the dead, Cowen points out that “[w]hen we refer to preferences only, we have no commonly accepted means of making time preferences commensurable across different lives” and “no single individual has preferences that span the entire time period under consideration.”[63] However, assuming that the preferences of the dead can be measured and that they have altruistic motives, relying on these preferences as the justification for compounding, or even reparations in general can lead to odd results as pointed out with this thought experiment:

“We could try, in principle, to restore the dead to their pre-theft level of welfare by making the appropriate amount of restitution to their current descendants. Under this standard, the less the original victims . . . cared about their descendants, the more restitution the government must provide . . . Alternatively, if the original victims cared greatly for their (then forthcoming) descendants, the required restitutional sums will be correspondingly smaller . . . [W]e end up with the morally counterintuitive result that individuals held in high regard by their ancestors receive small rewards, and individuals who are relatively indifferent to their ancestors receive large rewards.”[64]

We can apply the logic of this thought experiment with the following example. Suppose I am killed in an accident with all my family save two survivors – my brother Harris, whose welfare I care half as much for as my own, and my distant cousin Mark Austrian, whose welfare I care one twentieth as much as I do my own. If the remainder of my life that I lost was worth X to me, Harris would have to be paid 2X in order to “make me whole.” However, if Harris also succumbs due to his injuries, to “make me whole” my sole remaining relative – my cousin Mark – would have to be paid 20X, because I only care about his welfare 1/20th as much as I do my own. Ending up with such a morally counterintuitive result may lead some to question counting the preferences of the long dead as justifying the conventional position.

One attack on this argument is that as a society we allow the survivors of wrongful death to collect for the full value of the person’s life that was lost, not the value of the person’s life to them. Given this jurisprudence, it seems the above argument advocates a standard that departs from existing law in an analogous situation by an arbitrary manner.

A more than superficial examination of this argument reveals the omission. Cases of wrongful death often involve, under the law, survivors who knew and were close by blood, spousal, or adoptive relationship to the deceased party.[65] For cases of ancient moral debts with a long time lag, such as slavery, this is clearly not the case. Few, if any, of those who would collect a restitution payment even knew somebody who knew one who had been enslaved, let alone knew those enslaved from the very beginning of the slavery era in the 17th Century. With such a distinction, it does not appear so arbitrary to have a different rule for cases of moral debts than cases of wrongful death.

  1. The Conventional Position Conflates Discounting Within One Lifetime With Discounting Across Lifetimes

I have a great deal of ethical difficulty with a concept of applying a discount factor to human life. The lives of my three children are worth every bit as much to me 10 years from now as they are now. [66]

– A. James Barnes, Former Deputy Administrator of the Environmental Protection Agency


When looking at repaying moral debts, it is important to recognize if the repayment involves only interest accrued to one’s own one generation (intragenerational discounting) or interest across a multitude of generations (intergenerational discounting). This is because the former “is merely a reflection of the individual’s preferences . . . In contrast [the latter] affects the quantity of resources available to each individual [where] . . . one must initially decide how to allocate resources to individuals in different generations – a societal decision with ethical underpinnings.”[67]

Why treat future generations differently at all? Farber and Hemmensbaugh, in suggesting some believe we should use discounting in intergenerational exchanges, point to this statement by Lawrence Summers as the World Bank’s chief economist speaking on which projects his organization was to invest in: “Each project must have a higher return . . . than alternative uses of the funds . . .Once costs and benefits are properly measured, it cannot be in posterity’s interest for us to undertake investments that yield less than the best return.”[68]

Other commentators argue for the value of life years “to be discounted at the time-value-of-money rate.”[69] In doing so, they argue such a policy gives future citizens an equal weight to present citizens. The ethical qualms of such an argument can be demonstrated with this often used hypothetical:

“Recall that, at a time–value–of–money rate of 5%, this approach equates the loss of one life today with the loss of a billion lives in 500 years. Stated somewhat differently, assume that the population of the world remains constant at about 6 billion people over the next 500 years. Under a model of time discounting, what would be the maximum current expenditure that could be justified in order to prevent the death of every living individual in 500 years? Placing a value of life of $5 million, in constant dollars, the maximum current amount that we could justify spending now to avert the destruction of the human race in 500 years would be $30 million. (At the OMB rate of 7%, this amount would be only about $10!) More conventional definitions of altruism would presumably call for a different result.”[70]

Given that discounting would require us to make the choice of saving $30 million dollars today over saving the entire human race in the future, it could be said that it strains credulity to believe that discounting treats all generations equally. Rather it shows us that the conventional position, since it engages in discounting across generations, can lead us to conclusions that would strike most as unethical, such as the previous example of the death of millions being essentially valueless 500 years from now. Granted, there are difficulties in this use of the example, since the example dealt with the future and we are dealing with the past. However, we can easily transfer the example to this debate; through this example, the conventional position would imply that an immoral act on the order of an ancient society confiscating a loaf of bread from a merchant could be worth our nation’s entire cancer research budget, so long as the harm occurred far enough back in the past.  An impartial observer must note that it seems odd that in the name of righting a moral or ethical wrong to agree to a principle—the constant discounting of lives at market rates—that leads to such a ethically or morally repugnant conclusion.

Revesz has argued that setting a discount rate based on the problem that “the benefits of controls accrue primarily to future generations.”[71] would be “ethically unjustified.”[72] Recall an earlier point of his: “In an intergenerational context, one must initially decide how to allocate resources to individuals in different generations – a societal decision with ethical underpinnings.”[73] Discounting indefinitely into the future is unethical:

“[This] represents a form of dictatorship . . . [which we label as] . . . the dictatorship of the present. Our view of this dictatorship is that it has all the same ethical pros and cons as other forms of dictatorship. . . it is hard to see why dictatorship should be embraced in the realm of time, where it is rejected, broadly speaking, in evaluating current allocations.”[74]

This dictatorship is possibly present when decisions on intergenerational transfers are made at the voting booth “since the electorate that votes to borrow is not necessarily the same electorate that has to repay the debt. An electoral decision to borrow is therefore a decision, in part, to shift costs to someone else.”[75] The decision to blindly follow the conventional position is to place the previous generations’ dictatorship of voting decisions on us; a dictatorship which would affect the allocation and consumption of our current generation’s resources, but a decision in which our generation did not have had the ability to partake.

One concern with failing to discount is that it would lead to “the Impoverishment of the Current Generation.”[76] The argument is best stated as the idea that we “clearly need a discount rate for theoretical reasons. Otherwise any small increase in benefits that extends far into the future might demand any amount of sacrifice in the present, because in time the benefits would outweigh the costs.”[77] Otherwise if we reasonably assume there is an ever-increasing productivity of resources than we cannot justify present consumption on anything except that necessary to maintain ourselves as, “the total benefits to infinite future generations will always exceed any cost to a single current generation.”[78]

This argument does not deal with the issue that current consumption is necessary to have increasing productivity in the future. If productivity does not increase in the future or stay constant, and actually declines, we may be required to consume now so as to use resources at most efficiently. Secondly, intergenerational efficiency may not be our primary goal; our goal may be instead to have intergenerational equity.[79] As Revesz points out, one difficulty of this strain of argumentation is that it “assumes implicitly that the objective of the decision maker is to maximize a social welfare function that adds up the interests of all generations . . . [but the] question of whether it is appropriate to determine our obligations to future generations by reference to an aggregate social welfare function can not be resolved as a matter of logic.” [80] Rather, “it must be defended by means of an ethical theory.”[81] As a matter of ethics the conventional position leads to repugnant conclusions. It cannot say that it would be an excessive present sacrifice to choose averting minor catastrophe in the not so distant future over averting a major catastrophe in the very distant future,[82] and it allows us to suffer under the dictatorship of an earlier time period that we did not have a voice in. Since the conventional position ethically requires unethical results, standing behind the proposition that it is ethically required borders on the comical; especially when the requirement is designed to remedy a problem that is ethical in nature.

  1. The Conventional Position May Improperly Compound Interest

Can the conclusion, that fairness and efficiency require that interest be compounded, be applied to the moral debt framework? Superficially, there seems no reason why not; there has been a wrong, and if we wish to “make the victim whole” we would need to make sure that interest was compounded, otherwise the victim would receive less than what had been taken from him. It is not necessarily true that this conclusion can be applied to the moral debt framework, but rather that “under a wide variety of assumptions, we should not use full compounding at the economy’s real rate of return.”[83] There is a distinction between two different rationales for determining the restitution owed to descendents of victims of a moral wrong. They can either be awarded the value of what was taken, or the value of what they would have received if no theft had occurred.[84]

The first possibility, that descendents of the morally aggrieved should receive the value of what was taken from them, is justified in part on the preferences of the now dead victims.[85] The ethical problems with relying on these preferences was be explored above.

Additionally, the time preferences of the generation that actually receive the benefits will not generate compounding, as their time preferences start only upon birth.[86]

Even if we do not compare the preferences of the dead, there is another argument to award compound interest – compounding would be required not due to an individual preference, but rather for a tribal, collective, or group preference. There are several areas for caution before embracing such an argument. First, tribal entities, collectives, or groups, might be too much in flux of the makeup of their members to justify such a framework for compensation.[87] Second, even if there is not flux, there is a question of whether our legal system should make an award based upon a group status as opposed to an individual harm. Finally, even if the previous two questions are dealt with by group compensation proponent, caution has been urged in applying compounding that “[o]bserved market rates of return give no information about the time preference of the tribe or ethnic group . . . [and] ‘tribal rate of time preference’ may be either of higher or lower than observed market rates.”[88] At the same time, even he admits that the argument for a tribal rate of time preference, if not traditional compounding used by economists, cannot be dismissed out of hand.[89]

These arguments show that compounding interest is not necessarily required. Nor is it necessarily a good idea. Compounding interest that accrued before birth to an individual has shaky philosophical foundations that can be remedied only if the preferences of the dead or tribal rate of time preference are used. As a result, the conventional position requiring compounded interest is open to serious question.

       III.      Alternatives to the Conventional Position

A.    No Interest

Having covered the problems with the conventional position, we will now turn our attention to other possible moral interest rate schemas. Some support not having interest on long standing moral debts because “no generation can be morally required to make more than certain kinds of sacrifice for the sake of future generations.”[90] Noted philosopher John Rawls likewise had significant problems with time preference schemas, finding that “in first principles of justice we are not allowed to treat generations differently solely on the grounds that they are earlier or later in time.”[91] He even went so far as arguing that one could respect democratic governance and still flout clearly decided policy possession of the general public on matters including the level of intergenerational savings, stating that

“[T]here is no reason why a democrat may not oppose the public will by suitable forms of noncompliance, or even as a government official try to circumvent it. Although one believes in the soundness of a democratic constitution and accepts the duty to support it, the duty to comply with particular laws may be overridden in situations where the collective judgment is sufficiently unjust. There is nothing sacrosanct about the public decision concerning the level of savings; and its bias with respect to time preference deserves no special respect. In fact the absence of the injured parties, the future generations, makes it all the more open to question.””[92]

Even noted economist Robert Solow found the following reasoning “persuasive”[93]; “In social decisionmaking . . . there is no excuse for treating generations unequally, and the time horizon is, or should be, very long . . . we ought to act as if the social rate of time preference were zero.”[94]

One problem with not having a social discount rate is that it will provide a motivation for governments to postpone payment of a claim. Suppose a citizenry realizes in year X that they owe a moral debt. If they don’t acknowledge interest on the moral debt, they could invest a trivial sum and with sufficient time, that trivial sum would grow to equal the amount of the moral debt. A disturbing result of this would be that those who actually suffer the harm of government action or inaction would become unlikely to be the ones who receive the actual benefit.

B.     Slow Discounting

A possible middle ground defending “the reasonableness of discounting methods that are intermediate between constant discounting and non-discounting in the importance they assign to future outcomes”[95] is one paper written by Charles Harvey. In it, he argues for the respectability of “slow discounting” otherwise known as methods of discounting “with positive discount rates that decrease and tend to zero as time tends to infinity.”[96] Farber and Hemmersbaugh also propose a middle ground between intergenerational efficiency and equity to ameliorate the distribution between generations tension. Their proposal is that if society discounts future benefits, yet limits total discount, the problem of “trivialization of distant future effects” would be prevented.[97] Harvey is careful in saying that he does not argue that people should have values in accord with “slow discounting” but rather that if they “have such values, then a slow discounting model can be reasonable and insightful as part of a public policy study.”[98] These values are likely present, since human behavior tends to discount both past and future as discussed supra.

As much as this purports to be a compromise, the same problem as with slow discounting is present here. It could be claimed by the moral debtees that a fluctuating interest rate is of high unfairness to them if it trends downward. For the government’s incentive to delay results in them having a progressively lower overall interest rate as the rate at the end will be lower than the market rate.


C.    Negative Interest

“Man, like a tree in the cleft of a rock, gradually shapes his roots to his surroundings, and when the roots have grown to a certain size, can’t be displaced without cutting at his life.”[99]

The analogies that have been used to this point suggest that a moral debt interest rate should be somewhere between zero and a multiple of the market rate. However, there is another possibility – the real interest on a moral debt in some circumstances may be justified as a number that is negative. One analogy justifying such a rate is that the reasons for taking that justify seizing adverse possession could be used to support a negative rate of interest for long unpaid moral debts. Another analogy potentially on point is that just as we have a legal statute of limitations, perhaps we should have a moral statute of limitations as well – which would imply also a negative rate of interest at a certain point. Finally, a negative rate of interest is most appropriate if any principle on an ancient debit places an unfair burden on a generation that has a tangential, at best, connection with slavery and in the process may create more moral debts than it solves.

All of these reasons for a negative rate of interest still do not answer the one flaw that the other alternatives to the conventional position have: giving government incorrect incentives. With a negative rate of interest, these incentives are even stronger than with the other alternatives to the conventional position. As a result, a negative rate of interest is just another schema that has its ethical advantages, but its moral flaws as well.

  1. The Argument From Adverse Possession Law

The basic elements of adverse possession law are relatively simple – for an Adverse Possessor [AP] to invoke the doctrine against a True Owner [TO], she must prove that her possession “was actual, hostile, open and notorious, exclusive, and continuous.”[100] There are similarities to the theories used to justify adverse possession with reasons that could be given for a negative rate of interest on moral debts.

The desire to avoid  “information costs, transaction costs, and hold out problems involved in discovering and securing the releases of these claims”[101] and also to avoid problems of the decay of evidence[102] could justify not only adverse possession, but also a negative interest rate for long unpaid moral debts. The ability to ascertain the extent, if any, the claimants of a moral debt are descended from the true debtees and the degree tainted wealth has mingled with the untainted effort of individuals unrelated to the immoral act diminishes with time. Add to this the costs of both establishing for paying ancient moral debts[103] and the difficulties of evaluating ephemeral concepts as time moves forward,[104] and this justification takes perhaps increased force when it moves from the realm of adverse possession to the realm of interest on moral debts.[105]

While these previous justifications for Adverse Possession are relevant to our topic, the one that is most applicable to interest on a moral debt and also closely mirrors earlier discussion focuses on the reliance interest on the individual who will take the land.[106] The assignment of a moral debt will have to be paid for with increased taxation – which will harm the interests of a variety of parties besides the taxpayers and those who will receive the payment. One might point out that it is the growth of our economy through the untainted efforts of future generations that make high demands of repayment for reparations possible; why should these individuals be penalized for their untainted effort? Today’s taxpayers are more like third parties who will have become blamelessly embroiled in a mess not of their making. Adverse Possession Law respects the idea that third parties may have an interest in the assignment of an entitlement.[107]

On the other hand, without the growth of the economy, the settling of a moral debt would have been at a level less than arguably the true amount owed. The result of the economy’s growth then is not to demand a rent, but rather to be able to achieve a closer approximation to the true amount owed. Further, it has been pointed out the arguments of reliance are troubling because they seem “to ignore a competing reliance-type interest: the interest of the TO and of society generally in preserving the integrity of the set of entitlements grounded in law.”[108] This latter argument is wholly unconvincing. There is no guarantee that if the freedom of Americans is abridged by a new nation in the future, that our setting an interest rate for settling such a debt now will have any bearing on a future country’s compensating our descendants upon their freedom. Given that moral debts seem each to be one shot deals as opposed to the repeated arising of adverse possession situations, an argument towards undermining integrity does not seem to translate from one context to the other easily.

A frequent argument that would be more controversial to apply to the slavery reparation debate is that of stripping the original owner of a property of his or her rights because they have slept on them.[109] Simply viewing that “the shift in entitlement [away from the original owner] acts as a penalty to deter the original owners] from ignoring their property or otherwise engaging in poor custodial practices.[110] Close examination reveals that to avoid forfeiture, all the original owner must do is periodically “assert his right” to exclude owners, which is justified on the guise that when the original owner is required to “assert his right to exclude . . . he is in effect being asked to flush out offers to purchase his property, to make a market in the land.”[111]

In transferring this rationale to the moral debt context, two issues must be dealt with. First, while to thwart adverse possession one needs to assert his right to exclude, it is not clear what action would be required to demonstrate that an owner has not slept on his rights in the context of a moral debt. Assuming this issue can be resolved, the following question would be whether a correct assertion by one person owed the moral debt relieves another from making the same assertion.

Both of these issues become important in the context of reparations for slavery, because many in the African-American community would argue that there has been an assertion of their moral rights to repayment. One reparations activist, Deadria C. Farmer-Paellman has done work on this issue and the legend of forty acres and a mule to the freed slaves as rough form of compensation had not in fact been a myth, but rather was roughly based upon history.[112]

This initial bout in restitution was not the only shot heard in the reparations for slavery movement heard until modern times. From the period of 1890 until 1917 “over 600,000 of the 4 million emancipated Africans lobbied our government for pensions because they believed their uncompensated labor subsidized the building of the nation’s wealth for two and a half centuries.”[113]

In the 1960’s, the reparation movement was alive. During that time, Elijah Muhammad and Malcom X, in the publication “Muhammad Speaks” demanded recompensation. He also points out that the Republic of New Africa made a demand for the payment of $400 billion for compensation in the year 1968.[114] More recently, an organization called the National Coalition of Blacks for Reparations in America, otherwise known as N’COBRA was founded in 1988.[115] This group was designed to be “a coalition in which individuals and organizations would work without stripping them of their right to engage in independent work on reparations; and it would not endorse any one form of reparations.”[116]

Shouldn’t these be viewed as proper assertions? It seems patently unfair to expect a population recovering from enslavement of their core freedoms to initiate an immediate assertion, leading one to want to be forgiving. Yet if they and their descendants don’t truly make a proper assertion, then others who are increasingly innocent as time passes will be ever more harmed. Even assuming these were proper assertions, the other question arises – namely whether they apply to those who did not assert their rights.

  1. The Argument From Statute of Limitations

A statute of limitations is intended to prescribe the time during which a party may raise a claim in legal proceedings. It is designed to “stimulate to activity and punish negligence’ and promote repose by giving security and stability to human affairs.”[117] Should there be a “moral statute of limitations” for cases of moral debts? On the one hand, since “ascribing a right to rectification for an injustice is a requirement of a justice, and since the temporal limit called for by a moral statute of limitations [henceforth MSOL] on injustice is a constraint on that requirement . . . [it is]. . . morally justified only if we have good reasons for accepting this constraint.”[118]

One possible reason for a MSOL that is suggested could be found in the underlying logic of any statute of limitations. Fairness to the defendant is said to be the “primary consideration” underlying the statute of limitations defense because “there comes a time when the defendant ought to be secure in his reasonable expectation that the slate has been wiped clean of ancient obligations.”[119] Wiping the slate clean is important “to avoid necessarily crediting questionable claims of rectification”[120] and avoiding “major disruptions for large numbers of people.”[121]

Even if we assume such claims will be numerous, it is said that “the very process of determining the validity of claims will . . . educate us and help us to avoid repeating the same errors.”[122] Avoiding major disruption may also be of questionable legitimacy as a reason to invoke a MSOL; it has been suggested that such is merely an idea that is paid lip service to when groups that are non-dominant ask for retribution and a stop to the disruption on their lives – such as the Cuyaga people in New York State whose forays to reestablish a homeland evokes virulent opposition.[123] The justification of a MSOL that should exist to guard the “expectations of those who would not benefit from the enforcement of a particular right to rectification . . . such that the moral right results in a . . . right being expunged or overridden” has also been questioned.[124] This justification has been said not to diminish the right itself, only the “moral importance we give to enforcing or satisfying [it].”[125]

On the other hand, once the precedent is there for crediting a claim with a less than perfect historical factual record from a point in the past, it seems to difficult to stop from sliding further down a slippery slope to crediting claims with a slightly less clear record and/or occurring farther back in the past. Nor is it clear an examination of our moral errors in the past will have any bearing on preventing us from committing actions that look today to be moral, but will be regarded in the future as having given rise to a moral debt. Finally, arguing that a moral statute of obligations diminishes a right is only a restatement of the obvious; the question is not whether a right is diminished, it is whether an obligation remains constant. In paying reparations we are not trying to set the world right we are trying our best to settle moral claims without creating newer ones that are even larger. If over time a new moral imperative gains strength, than we must include that in the balance in our quest to do justice.

  1. Negative Interest Places the Least Unfair Burden on A Generation that Has Little Connection to Slavery

In the context of reparations, the moral debt that may be created would arise in the repayment. To pay for reparations, there are several possibilities. One is that a non-monetary solution, such as a tax abatement on the businesses of the descendants of slaves, would be done, which would increase the tax burden on the rest of the citizen body if they wish to maintain their current level of benefits. Another possibility is that money will be taken out of the general federal governmental revenue fund to pay for reparations, reducing the public benefits that the rest of the citizen body enjoys for a given level of taxation. It might also happen that instead of sacrificing future consumption, the government will only increase the amount of debt that it holds, passing the same cost onto future generations, who have even less of a connection with the harm. Finally, it could be a combination of the above.

David Horowitz made this point more specifically, which Chad Bryan then sought to refute. Horowitz pointed out both that “only a tiny minority of Americans ever owned slaves”[126] and that “two great waves of American immigration occurred after 1880 and then after 1960.”[127] Presumably these two great waves further weaken an already arguably tenuous connection – one could say that not only did today’s citizens not significantly benefit from slavery in the United States, but neither did the majority of their ancestors, as they were not even here.

In examining this argument, Bryan is befuddled how “[Horowitz] fails to see the answer”[128] which he gives below:

On the surface, every American taxpayer should be aware that much (or at least some) of his tax money goes to fund programs that will never benefit him individually. Yet those taxes are paid from understanding a concept of “public good.” This concept alone should be enough to refute those who share Horowitz’s position. Most Americans likely even would not be cognizant of their contribution to a redress fund, and such contributions would be no further removed from the average taxpayer than tax dollars paid by a small farmer in the Midwest used to support remote space exploration.[129]

Several problems are apparent with this attempted refutation of Horowitz’s argument. The tax dollars that Americans pay for programs have not yet gone towards paying interest on moral debts of long past generations who did not give us, the ones who would presumably have to pay the check a voice in what constituted the “public good.” A farmer in the Midwest might not see the benefit of Space Exploration, but he at least has the benefit of making his voice heard through the political process to prevent this. A generation in the future does not have the same ability to make their preferences count in the current policy debate, just as if we assume market rate of interest as owed, we did not have the chance to make our preferences heard in the past policy debate. Second, given the size of Slave reparations that would result from using a market rate of interest as demonstrated in the Background section (supra), it is highly suspect that “most Americans would not be cognizant of their contribution to a redress fund” that would require trillions of dollars if the Conventional Position is taken.

A response to the first position may be that it is irrelevant that generations in the future do not have a say in our policy debate. They will be citizens of our nation and as such be bound to bear its debts. However, such a view is contingent on an all-or-nothing view of nationhood, when some commentators feel that there is a reasonable argument that national identity is instead a question of degree: “What is involved in the survival of a nation are just certain continuities, such as those of a people and a political system. When there is a weakening of these continuities, as there was, say, in the Norman Conquest, it may be unclear whether a nation survives.”[130] As a result, as time goes on the very identity of the country may shift; especially with birth, death, and immigration acting as accelerants. If the identity of the country has shifted, the case for payment of a moral debt by those who are by degree less of citizens of the old version of the country than the old version of the country’s past citizens, is correspondingly weaker as well, arguing for a smaller rate of interest than the conventional position would require.

  1. Not Having Negative Interest May Create More Moral Debts Than It Repays

The assumed moral debt of reparations arose when a lawful activity was conducted that was still against the moral code of some, though not all, at the time the wrong was committed. Eventually, the law was changed, and the attitude held by the few – that slavery was immoral – became held almost unanimously. Looking at this progression, we cannot be sure that several of the activities that we are doing, or may do today, perhaps with state sanction, may in the future be regarded as morally injustice, and perhaps lead to a moral debt.

With all of these possibilities however, two things are constant. First, citizens with no or only tangential connection to the harm that occurred would be shouldering the entire burden of the cost. Second, the redress would go not to the individuals who suffered the harm, but rather a group of people that they presumable cared about, but significantly less than themselves – their distant descendants. In the present, most people do not necessarily view being taxed without receiving benefits when you are not at fault as giving rise to a moral debt. Yet some do, and it is conceivable that more might in the future. If so, then the very program of paying of this moral debt would inefficiently pay of one debt and in the process create a debt that is perhaps even larger.

Even Bryant’s attempt to recognize that innocents[131] may be burdened by a reparation scheme in that the entire class of taxpayers were “neither alive during slavery nor [had] anything to do with it,”[132] fails to explain it away ends potentially in failure from this perspective. An argument that states: “There is something logical in the notion that it seems more fair, or at least as fair, that everyone be innocent and pay equally rather than the guilty and the innocent both being burdened alike,”[133] cannot be used as a safe harbor for paying returning moral debts to zero because it may appear to a future generation that a policy maker motivated by Bryant’s logic was acting in the height of unfairness.

Of course, there are reasons to discount this argument. If we acknowledge a moral debt, that debt is certain, while the range of other future moral debts would be merely speculative. At the same time it would seem to be quite ironic to urge that we disregard a future potential moral debt, yet at the same time be urged to pay the risk free rate or any rate of interest that does not eventually eliminate the principal as time transpires on a past moral debt that we would have just chosen to acknowledge.

  1. Reaction

Even if we find these justifications for negative interest to be persuasive, we still must wrestle with the same problem of perverse governmental incentives and heightened unfairness to recently repressed victims, except now they will be even greater. At the same time, the important things to note is there is at least a colorable argument for a negative moral debt interest rate based on societal standards that we have.

D.    It is All Arbitrary

In looking at these schemas for determining the correct moral rate of interest, one thing has become apparent. All of them have justifications, yet all of them have ethical weaknesses. We are either stuck with the six problems of the conventional position or the unfairness to victims and perverse incentives for governments of the other approaches. No matter what our approach is, it seems impossible for us to pick a schema that will not violate a general moral principle that society seems to hold. We are left with a quandary – on a debt that is paid only because we have a moral feeling that we should, any calculation of interest will violate some moral feeling. Thus, it seems we are left with a flawed range of possibilities of what interest could be, but no answer as to what it must be strictly based on an unassailable position of societal morality.

Without an unassailable position, we are left with a striking conclusion – that to chose any moral interest schema requires us to pick arbitrarily which societal moral principles are more, and less, important to us. In the end, this decision could possibly be made as one of policy and leverage as opposed to ethics. If interest is in fact arbitrary and chosen by leverage, there could be serious implications to the way society views slave reparations. We could agree on that the principle was owed in 1865, but not on whether it would even have to be paid today, as the interest could have been sharply negative. We may make a payment, but some will always feel that the moral debt was only partially settled because we chose the slow discounting schema to model the correct interest. We could choose to pay with market rate of interest, but future generations may say that by doing so, we created new moral debts.

Further, other possible solutions to a delay in payment could be threatened – such as instead of dealing with the complex interest payments today, those who have moral debts should be able to sell the rights to repayment of these debts on the open market to third parties. A problem with moral debts is that the payments, while at times large, may not be large enough to motivate individuals to engage sufficiently in action to collect what is morally owed to them. By selling their rights and concentrating them in the hands of third parties, these third parties will presumably be more motivated to make payment of these debts a reality. Since payment will be more likely to become a reality, the third parties would be willing to pay money immediately to those who are originally owed the moral debt, giving them the benefit of not waiting years for payment.

This solution though, might be thwarted by the realization that any interest to be paid would be arbitrary. For if the interest to be paid is arbitrary, and the calculation of that interest will be set by increasing political leverage through appearing sympathetic, any sale of rights to a third party where the debt was incurred at distant point in the past is sure to receive less money. For a third party will not appear as sympathetic as the party who was originally owed the money – and as such there is a strong risk that the third party will be unlikely to achieve remotely an equivalent interest rate as the aggrieved party. This risk will depress the value of the rights to the third party, and since the rights in the hands of the third party would be worth less, the third party in turn will be willing to pay less to those whom the moral debt is owed.


       IV.      Conclusion    

Through looking at all of these interest rate schemas, we are unable to find a compelling reason to choose one over another. All have their ethical justifications and must wrestle with the ethical underpinnings of the others. As such we are left in a quandary – in a debt that we assume ethical reasons demand must be paid, any strict choice of interest schema cannot be demanded by societal morality because other moral notions that we share would demand another schema. Any choice of schema must come from reasons outside societal morality.

If the schema cannot be selected strictly based on societal morality, it is likely to be dictated by leverage. In a sense this is fitting because the closer in time an action is to the setting of a payment the smaller the ramifications in a shift in interest rate will be. With an increasing time horizon interest on a moral debt not only becomes potentially ever larger relative to the principal of the debt but also decreases the ethical considerations for avoiding the conventional position along with the arbitrariness of leverage. In the end, delaying payment ever increases the degree this calculation is one of tension between competing moral schemas, and more disturbingly, arbitrariness.


[1] Manny Fernandez, Rally on Mall to Urge Reparations for Descendants of Slaves, Washington Post, Aug. 16, 2002, at B01.

[2] Randall Robinson, The Debt 33 (2000).

[3] A Price for Pain?, The Economist (Apr. 11, 2001) available at (last accessed March 29, 2005).

[4] Christine Phillip, Reversal of Attitude: Alan Keyes on Reparations (Aug. 18, 2004) available at (last accessed March 29, 2005).

[5] Randall Robinson avoided placing a monetary value on the reparations that he felt were owed, but spoke highly of the proposal of Robert Westley, in “Many Billions Gone.” Westley advocated for a private trust, funded out of general revenues of the United States, be established “for the benefit of all African Americans” in that they would be designed to accomplish “the educational and economic empowerment of the trust beneficiaries (African Americans) to be determined on the basis of need.” See Robinson, supra note 2, at 244. While Westley suggests that the trust be funded “no more than ten years,” Robinson disagrees. His belief is that “such a trust would have to be funded for at least two successive K-through college educational generations, perhaps longer.” One program that program would need to fund would be “special K-12 schools throughout the United States with residential facilities for those black children who are found to be at risk in unhealthy families and neighborhood environments.” Those African-Americans who remained in public schools would have the opportunity for rigorous schooling “funded to supplement public-school offerings in a fashion not dissimilar to the role performed by weekend Hebrew schools for the Jewish community.” He further feels that “all blacks who qualified academically and were found to be in financial need would be entitled to attend college free of charge.” Neither Westley nor Robinson specified an amount that this should cost, which Robinson justified on the basis that before there is an estimate of the cost of a program to remedy this moral debt there first needs to be an assessment on its amount. Id.

[6] 201.

[7] Id.

[8] Pat Schneider, City Council To Look At Slavery Reparations, Capital Times, Jan. 28, 2003 at 1B.

[9] Lee A. Harris, SYMPOSIUM: “Reparations” as a Dirty Word: The Norm Against Slavery Reparations, 33 U. Mem. L. Rev. 409, 431-32 (2003).

[10] Id. at 432-33.

[11] As Robinson mentions in his book, there are other grounds for Reparations such as state theft of African-American property that occurred after 1865. These are arguments are likewise outside the scope of this paper.

[12] Michael S. Knoll,  A Primer on Prejudgment Interest, 75 Tex. L. Rev. 293, 294 (1996).

[13] Daniel A. Farber & Paul A. Hemmersbaugh, The Shadow of the Future: Discount Rates, Later Generations, and the Environment, 46 Vand. L. Rev. 267, 281(1993) [hereinafter Farber] .

[14] Andrew Caplin & John Leahy, The Social Discount Rate, © (2000) available at  (last accessed March 30, 2005) (citing Eugen von Böhm-Bawerk, The Positive Theory of Capital, 9 Q.J.Econ. 113 (1895)).

[15] Id.

[16] Two commentators, Moore and Viscusi, authored a study designed to test whether using such discount rates was truly inappropriate by estimating the implicit discount rate exhibited by workers with jobs that force them to face the possibility of instantaneous death. After obtaining and studying a data set of 1463 workers, Moore and Viscusi calculated a real discount rate of 2%, which was roughly in line with “financial market interest rates for the period, once these nominal rates are adjusted for inflation.” The authors concluded by stating they could find “no clear evidence of systematic differences between discount rates for health and financial rates of time preference.” See Richard L. Revesz, Environmental Regulation, Cost-Benefit Analysis, And the Discounting of Human Lives, 99 Colum L. Rev. 941, 975 (1999) (citing Michael J. Moore & W. Kip Viscusi, Discounting Environmental Health Risks: New Evidence and Policy Implications, 18 J. Envtl. Econ. & Mgmt. S-59, S-61 (1990)).

[17] Id. at 946 (citing  Exec. Order 12,866, 2(b), 6(b), 3 C.F.R. 1993, p.638, reprinted in 5 U.S.C. 601 (1994).). Revesz also has the following observations about the OMB:

“The OMB policy on discount rates does not address specifically the issue of how to discount health risks. Thus, these risks are discounted at the rates used in the evaluation of government projects in general, and government regulation in particular. Until 1992, OMB employed a discount rate of 10% pursuant to a policy contained in its Circular A–94. In 1992, OMB amended this circular to mandate a real discount rate of 7%.  OMB justifies this rate as “the marginal pretax rate of return on an average investment in the private sector in recent years.”  The OMB policy, however, uses a different discount rate for cost–effectiveness analysis — that is, to determine which of several programs yielding identical benefits has the lowest cost in present discounted terms. For this purpose, OMB employs the real return on long–term government debt — the interest rate on long–term government bonds minus the rate of inflation.  In recent years, this figure has fluctuated between 3% and 4%.”

  1. at 978-79.

[18] Knoll, supra note 12 at 310 (citing Busik v. Levine, 307 A.2d 571, 573 (N.J. 1973) (“The defendant has had the use, and the plaintiff has not, of moneys which the judgment finds was the damage plaintiff suffered.”; Funkhouser v. J.B. Preston Co., 290 U.S. 163, 168 (1933) (“[Plaintiff] is not fully compensated if he is confined to the amount found to be recoverable as of the time of breach.”))

[19] See United States Courts, Post Judgment Interest Rates, at (last accessed March 29, 2005) (stating that

The types of judgments generally fall under one of three statutes: 28 U.S.C. 1961, which governs civil and bankruptcy adversary judgment interest; 18 U.S.C. 3612 (f)(2), which governs criminal judgments or sentences; and 40 U.S.C. 3116, which governs deficiency judgments in condemnation proceedings. These statutory references should be checked with reliable statutory data bases such as Westlaw. Lexis, or other appropriately maintained sources of the U.S. Code for the latest changes.

Under each of the above statutes the rate of interest used in calculating the amount of post judgment interest is the weekly average 1-year constant maturity (nominal) Treasury yield, as published by the Federal Reserve System. Prior to December 21, 2000 the rate of interest allowed under the statutes cited above was based on the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of 52 week t- bills settled immediately preceding entry of the judgment. The way the rate is used differs under each of the cited statutes, so those sections should be reviewed to determine how to apply it to any particular judgment. )

[20] See generallyHal R. Varian, Intermediate Microeconomics, 179-98 (4th ed. 1996).

[21] K.J. Arrow, W.R. Cline, K-G. Maler, M. Munsasinghe, R. Squitieri, J.E. Stiglitz, Intertemporal Equity, Discounting, and Economic Efficiency, in Climate Change 1995 130 (James P. Bruce, Hoesung Lee, &  Erik F. Haites eds., 1996).

[22] Id.

[23] Franklin M. Fisher & R. Craig Romaine, Janis Joplin’s Yearbook and the Theory of Damages, 5 J. Acct., & Fin. 146 (1990).

[24] Fisher, supra note 23 at 153.

[25] Id.

[26] 146.

[27] 153.

[28] Fisher and Romaine illustrate this concept by the following extension of their earlier example.

“The book’s owner was not deprived of a yearbook containing the autograph of a rock star. He or she was deprived of a yearbook plainly worth $5.00 that contained one or more signatures. Associated with that yearbook was uncertainty as to whether any of the autographs it contained would ever be worth anything. The $5.00 price of the yearbook included the value of the small probability that they would. It also included the value of the rather more likely outcome that they would not. A book equally valued by the owner at the time could have been purchased for $5.00, and the owner could have, in effect, mitigated the damage by purchasing a replacement and acquiring an essentially identical asset.

To put this another way, we extend the example somewhat.  Suppose that yearbooks without Janis Joplin’s signature are worth nothing by the time of the award. Suppose that the thief had stolen and destroyed another yearbook at the same time, a yearbook without Janis Joplin’s signature. It is surely unfair for the second plaintiff to be awarded nothing at all while the first one gets $1,000. At the time they were stolen, both yearbooks were considered interchangeable by their owners. The owner of the Janis Joplin yearbook has been deprived of a chance at $1,000, but so has the owner of the other yearbook. Moreover, the owner of the Janis Joplin yearbook has been relieved of the chance of discovering that his or her yearbook turned out to be worthless.”

  1. at 155.

[29] Knoll supra note 19 at 315.

[30] As a side note for future research and contemplation, if we accept that Fisher and Romaine’s argument should apply to the issue of Reparations for slavery, we end up in a predicament. The money that the former slaves would have been owed in 1865 could have been invested. Of course, in retrospect it was not, but had it been invested, it would have accrued the market rate of interest every year. However, perhaps this market rate of interest that would have been paid throughout the past two hundred years is the equivalent of having a Janis Joplin in your high school class: i.e. a lucky, unforeseeable fluke. In the past 140 years, the economy of our country has grown at an outstanding rate, perhaps unmatched by a large country in the course of human history. From the point of view of 1865, there was no special reason why this was necessarily foreseeable. Things could have turned out differently, if for example, in 1962, the Cuba Missile crisis had not been resolved, leading to an almost infinitely negative rate of return on capital Holding a position that ex-slaves should receive the resulting rates of interest over the past 140 years in hindsight does not take a counterfactually negative 140 year recent history into account, and leads to overcompensating this population.  This then begs the question: which rate of interest should be used, if not the resulting rate of interest over the past 140 years? Perhaps the correct answer is that we should use the risk free rate of interest that existed in the year 1865.

[31] Farber, supra note 21, at 284.

[32] 284-285.

[33] Knoll supra note 19 at 306.

[34] Id. at 306-307.

[35] Id. at 307.

[36] Id.

[37] Id.

[38] Id.

[39] Revesz, supra note 16, at 995-96.

[40] Id.

[41] Charles M. Harvey, The Reasonableness of Non-Constant Discounting, 53 J. Pub. Econ. 31, 38-40 (1994).

[42] See Derek Parfit, Later Selves and Moral Principles, in Philosophy and Personal Relations (Alan Montefiore ed., 1973) [hereinafter Later Selves].

[43] Revesz, supra note 16, at 995-96.

[44] Harvey supra note 41 at 36.

[45] Caplin, supra note 14, at 8-9. Caplin and Leahy do acknowledge however that there are exceptions – people may value memories, and they point to studies showing the regret of not having received more education by those looking back at their lives. See Caplin n. 6-7.

[46] Harvey, supra note 41 at 36.

[47] An illustrative example by Derek Parfit underscores this:


“The 14-Year-Old Girl: This girl chooses to have a child. Because she is so young, she gives her child a bad start in life. Though this will have bad effects throughout this child’s life, his life will, predictably, be worth living. If this girl had waited for several years, she would have had a different child, to whom she would have given a better start in life.

Suppose we tried to persuade this girl to wait [eventually stating] ‘This is not entirely your affair. You should think not only of yourself, but also of your child. It will be worse for him if you have him now. If you have him later, you will give him a better start in life.’ …

Were we right to claim that her decision was worse for child? If she had waited, this particular child would never have existed. And, despite its bad start, his life is worth living. Suppose first that we do not believe that causing to exist can benefit. We should ask, ‘If someone lives a life that is worth living, is this worse for this person than if he had never existed?” Our answer must be No. Suppose next that we believe that causing to exist can benefit. On this view, this girl’s decision [to have the child] benefits her child.

On both views, this girl’s decision was not worse for her child. When we see this, do we change our mind about this decision? . . . We cannot claim that this girl’s decision was worse for her child. What is the objection to her decision? This question arises because, in the different outcomes, different people would be born.”

PARFIT, REASONS AND PERSONS, supra note 64 at 358-59.

[48] Laurence J. Kotlikoff & Lawrence H. Summers, The Role of Intergenerational Transfers in Aggregate Capital Accumulation, 89 J. Pol. Econ. 706, 706-32 (1981).

[49] Franco Modigliani, The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth, 2 J. Econ. Persp. (1988) 15, 15-40.

[50] Dalton Conley, Calculating Slavery Reparations, in Politics and the Past 117, 122 (John Torpey ed., 2003).

[51] Tyler Cowen & Derek Parfait, Against the Social Discount Rate, in Justice Across the Generations: Philosophy, Politics, and Society, 144, 153 (6th ed., Peter Laslett & James Fishkin eds., 1992) available at  (last accessed March 29, 2005) [hereinafter Against the Social Discount Rate].

[52] Against the Social Discount Rate, supra note 51 at 153.

[53] Derek Parfit, Reasons and Persons 483 (1984) [hereinafter Parfit, Reasons and Persons].

[54] Against the Social Discount Rate, supra note 51 at 153.

[55] 149.

[56] Id.

[57] Id.

[58] Id. at 150.

[59] Id.

[60] Id.

[61] Id.

[62] Id.

[63] Id. at 175; Cowen points out the following argument which is frequently used by economists to avoid confronting the problem of quantifying the preferences of the dead:

“The First Generation waited forty years for restitution, and then died. The subsequent generation waited their entire lives for restitution, and then died, and so on up until the present generation. For each year after the theft, some generation had to experience abstinence, due to the occurrence of the theft. When converting past losses into present value ,we should use the time preference rates of the first generation (based on their preferences while alive) for their abstinence, and so on. This intergenerational summation of time preferences will approximate positive compounding at market rates of interest, especially given that real interest rates do not usually vary much over time.”

However, Cowen points out that this argument “mispecifies the events over which the preferences of the intervening generations should be considered” since only the current generation that is alive can be given restitution. Further if “we wish to count the preferences of the intermediate generations at all, we must count their preferences over what is actually proposed – restitution to the current generation.” Since these intermediate generations are deceased, we still are forced, even under this attempt to avoid it, to consider the preferences of the dead. 177.

[64] 177-78.

[65] Marilyn Minzer, Jerome H. Nates, Clark D. Kimball, Diana T. Axelrod, & William T. Barrante, DAMAGES IN TORT ACTIONS § 28.20 (1987) (stating that

“Most wrongful death actions . . . seek to remedy injuries suffered by the deceased’s survivors as a consequence of the deceased’s death. Depending on the law of the jurisdiction, such actions may be brought by a duly appointed personal representative in a fiduciary capacity on behalf of the estate or statutorily designated survivors or by the survivors on their own behalf. )”

[66] Revesz, supra note 16 (citing Subcomm. on Oversight and Investigations of the House Comm. on Energy and Commerce, EPA’s Asbestos Regulations: Report on a Case Study on OMB Interference in Agency Rulemaking, reprinted in Peter S. Menell & Richard B. Stewart, Environmental Law and Policy 111 (1994).

[67] Id. at 999.

[68] Farber, supra note 21, at 297 (citing Lawrence H. Summers, Summers on Sustainable Growth, The Economist 65 (May 30, 1992). The two authors also point out that the OMB subscribes to the same rationale (citing Randolph M. Lyon, Federal Discount Rate Policy, the Shadow Price of Capital and Challenges for Reforms, 18 J. Envir. Econ. & Mgmt. S-29, S-32 (1990)).

[69] Revesz, supra note 16, at n 276.

[70] Id. at 998.

[71] Id.

[72] 944.

[73] Id. at 999.

[74] Caplin & Leahy, supra note 14 at 2 (citing Arrow, K. and M. Kurz, Public Investment, the Rate of Return, and Optimal Fiscal Policy, (1970)).

[75] Theodore P. Seto, Drafting a Federal Balanced Budget Amendment That Does What It Is Supposed to Do (And No More), 106 Yale L.J. 1449, n.39 (1997).

[76] Revesz, supra note 16 at 992.

[77] Against the Social Discount Rate, supra note 51 at 148.

[78] Farber, supra note 21, at 291 (citing David W. Pearce and R. Kerry Turner, Economics of Natural Resources and the Environment 223-224 (Johns Hopkins, 1990)).

[79] John Rawls, A Theory of Justice 44 (1971).

[80] Revesz, supra note 16, at 993.

[81] Id. at 993.

[82] Against the Social Discount Rate, surpra note 51 at 149.

[83] Tyler Cowen, Discounting and Restitution, 26 Phil. & Pub. Aff. 168, 171 (1997) available at (last accessed March 29, 2005) [hereinafter Discounting and Restitution].

[84] 172-74.

[85] Id. at 176.

[86] 179. n. 14.

[87] See generally, Later Selves, supra note 42 at 139

[88] Discounting and Restitution, supra note 83at 178.

[89] Id. at 179.

[90] Against the Social Discount Rate, supra note 51 at 149.

[91] Rawls, supra note 79 at 260.

[92] Id. at 261.

[93]Robert M. Solow, Richard T. Ely Lecture: The Economics of Resources or the Resources of Economics, Vol. 64 No. 2 American Economic Review  1,9 (1974).

[94] Id. at 9.

[95] Harvey, supra note 41, at 32.

[96] Id.

[97] Farber, supra note 21, at, 292.

[98] Harvey, supra note 41, at 32.

[99] Jeffrey Evans Stake, The Uneasy Case for Adverse Possession, 89 Geo. L.J. 2419, n. 20 (2001) (citing Letter to Oliver Wendell Holmes).

[100] Id.

[101] Thomas W. Merrill, Property Rules, Liability Rules, and Adverse Possession, 79 NW. U. L. Rev. 1122, 1127, 1129 (1984).

[102] Id.

[103] Under such a precedent, while it is the government who will most likely pay for the moral debt, it is the taxpayer who will have to bear the burden of such a payment. Before taking a risk that is subject to taxes, a taxpayer who seeks to be informed would now have to additionally investigate the possibility of a large moral debt payout, and hence a heavier tax burden that could cut into or eliminate the profitability of a potential business investment. While the holdout problems that are associated with quieting titles are not present (A businessman is unlikely to acquiesce hold out demands from individuals because it would not likely be in there power to free him from a potential national tax) the other transaction costs still are. For example, if the precedent is set that claims for moral debts never expire, there is always the danger that a new claim from long ago actions could arise, causing increased uncertainty in the level of taxation and burdening our system.

[104] There is every reason to expect that these transaction costs would increase when it comes to valuing hard to define objects, which liberty undoubtedly is. For as Tyler Cowen puts it:

“Restitutional claims have the greatest moral force when the value of the loss or stolen resource is well-defined in material or dollar terms. If John steals $100 from Thomas, it is plausible to believe that John owes Thomas (at least) $100. If John steals a diamond from Thomas, but no one knows how much the diamond was worth, the relevant liability is small rather than large. Just as the law takes special care to protect the innocent, it should be especially reluctant to overpunish the guilty.”

Cowen, How Far Back Should We Go: Why Restitution Should Fail, available at (last accessed March 29, 2005).

[105] Supporting the underlying logic of adverse possession, Cowen notes, “As the number of generations increases [sic] since the crime, and the number of hypothetical counterfactual scenarios increases, the value of the stolen resources becomes less well defined. The concept of restitution as a strict property right becomes inapplicable in those situations.” Id. Even more difficult to evaluate than delayed stolen strict property rights would be delayed stolen moral rights, which have a changing value depending on the ethical code of the era. How can one evaluate how much freedom is worth? Is it worth differing amounts to differing people? Is it worth the same today as yesterday?

[106] Merrill explains the concept as follows:

“Suppose the AP has built an addition to his house which he thinks is on his own land, but which later turns out to be built on land belonging to the TO. Had the TO and the AP negotiated for the sale of additional land before the structure was built, the TO probably would receive no more than market value for the land because the AP could always redesign or relocate the addition, or move elsewhere. Now, however, the TO has the AP over a barrel, and may be able to extract not only the value of the land but the full value of the addition as well. In effect, the value of the addition becomes a quasi-rent from the perspective of the TO.”

Merrill, supra note 101 at 1131.

[107] 1132.

[108] Id.

[109] Merrill, supra note 101 at 1130.

[110] Id.

[111] Id.

[112] Deadria C. Farmer-Paellman, Excerpt from Black Exodus in Should America Pay? Slavery and the Raging Debate on Reparations 25 (Raymond Winbush ed., 2001) [hereinafter Should America Pay? ] (citing Walter Vaughan, Vaughan’s Freedman’s Pension Bill, 1891) (citing Special Field Order No. 15, William Tecumseh Sherman, January 16, 1865,  Available at (last accessed March 29, 2005).

[113] Farmer-Paellman, supra note 112, at 27

[114] Conrad W. Worrill, The National Black United Front and the Reparations Movement in Should America Pay?, supra note 112 at 204 (citing Lisa N. Nealy and Pfizer Shellow “Our Land is a’comin and Our Mule is on de Way.” Research Paper submitted to the National Black Caucus of State Legislators, Washington, D.C., 2002)).

[115] Id.

[116] Adjoa A. Aiyetoro, The National Coalition of Blacks for Reparations in America (N’COBRA): Its Creation and Contribution to the Reparations Movement in Should America Pay?, supra note 112 at 213

[117] Andrea E. Hayworth, Notes: Stolen Artwork: Deciding Ownership Is No Pretty Picture, 43 Duke L.J. 337, 342 (citing Mary K. Devereaux, Note, Battle Over a Monet: The Requirement of Due Diligence in a Lawsuit by the Owner Against a Good Faith Purchaser and Possessor, Loy. Ent. L.J. 57, 62 (1989) (quoting Wood v. Carpenter, 101 U.S. 135, 139 (1879)); see also Leake v. Bullock, 250 A.2d 27, 29 (N.J. Super. Ct. App. Div. 1969) (“Statutes of limitation . . . are intended to run against those who are neglectful of their rights and who fail to use reasonable and proper diligence in the enforcement thereof.”) [hereinafter Hayworth].

[118] Rodney C. Roberts, The Morality of a Moral Statute of Limitations on Injustice, 7 J. Ethics 115, 116-17.

[119] Hayworth, supra note 117, at 342-343; John G. Petrovich, Comment, The Recovery of Stolen Art: Of Paintings, Statues, and Statutes of Limitations, UCLA L. Rev. 1122, 1127 (1980); Order of R.R. Telegraphers v. Railway Express Agency, Inc., 321 U.S. 342, 349 (1944)).

[120] Roberts, supra note 118,at 119.

[121] 117-18.

[122] Id.(citing Mari J. Matsuda, Looking to the Bottom: Critical Legal Studies and Reparations, 22 Harv. C.R.-C.L. L. Rev. 323, 383-84, n.254  (1987)).

[123] 120-121 (citing Robert B. Porter, Indian Lands: ‘Stolen Fair and Square, 17 Native Americas 64 (2000).

[124] 123.

[125] Id.

[126] Chad W. Bryan, Commentary: Precedent for Reparations? A Look at Historical Movements for Redress and Where Awarding Reparations for Slavery Might Fit, 54 Ala. L. Rev. 599, 608 (2003) (citing David Horowitz, Uncivil Wars: The Controversy Over Reparations for Slavery 106 (2002)[hereinafter Horowitz).

[127] Id. (citing Horowitz, supra note 126 at 13 (2002)).

[128] Id.

[129] Id.

[130] Later Selves, supra note 42 at 139.

[131] Bryan cites to the work of Vincene Verdun identified several large groups of “innocents” who were “burdened by the Civil Liberties Act of 1988 (financial redress for Japanese Internment): “1) people who were not born in 1941; 2) people who were alive but objected strenuously to the internment; 3) people who immigrated to the United States after the internment was over; and 4) a host of other people who just had nothing whatsoever to do with it.” Bryan, supra note 126 at 609 (citing Vincene Verdun, If the Shoe Fits, Wear It: An Anlysis of Reparations to African Americans, 67 Tul L. Rev. 597, 653 (1993).

[132] Id. at 609.

[133] Id.

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About the Author

Elliot Fladen

He's the libertarian son of Modern Orthodox Jews, the Brother of Haredi Orthodox Rabbis who don't speak with him, the Husband to a beautiful Mexican wife with whom he has two hybrid daughters. His wife and daughters live with him in a cramped apartment where they frequently watch Disney musicals and other assorted cartoons.

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