Consent of the Governed

“Consent of the Governed” is a phrase found in the United States Declaration of Independence.

In political philosophy, the phrase, consent of the governed refers to the idea that a government’s legitimacy and moral right to use state power is only justified and lawful when consented to by the people or society over which the political power is exercised.

For investors, a more practical view may be appropriate.  In order to be effective, legislation has to be accepted by a large percentage of the governed.

For example, under prohibition, a period of nearly 14 years, the manufacture, sale, and transportation of intoxicating liquor was made illegal.  However, a significant percentage of Americans did not accept this restriction, giving rise to speakeasies, gangsters and a period when even the average citizen broke the law.   Consequently, prohibition was repealed, leading to the establishment of a large and growing U.S. alcoholic beverage industry.

Today we have efforts to legislate, for or against, a wide variety of citizen activities, including, but not limited to, the use of marijuana, guns and energy.  Investors should seek to understand likely public response as part of any investment decision process.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA