The Constitution and Economic Liberty

By Ely, James W., Jr. | Harvard Journal of Law & Public Policy, Winter 2012 | Go to article overview

The Constitution and Economic Liberty


Ely, James W., Jr., Harvard Journal of Law & Public Policy


Does the Constitution simply establish a framework for the resolution of political disputes? Is the Constitution neutral with respect to political economy? Justice Oliver Wendell Holmes famously suggested as much in his Lochner dissent. "[A] constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the State or of laissez faire," he declared. "It is made for people of fundamentally differing views...." (1) Filled with quotable quips, the Holmes dissent frequently is invoked by scholars as though it contained Delphic wisdom. (2) Nonetheless, the dissent has its flaws, and, like the answers of the legendary oracle at Delphi, the opinion is maddeningly ambiguous.

The central premise--that the Constitution does not endorse any particular economic theory--seems clear and warrants exploration. In common with other remarks in the Lochner dissent, this point is more asserted than demonstrated. (3) There is a threshold question: Is Holmes referring to the U.S. Constitution or to a theory of what constitutions should contain? Constitutions can serve different purposes. (4) Moreover, Holmes curiously framed the debate by setting up polar opposites, (5) which arguably is a false dichotomy. In fact, the United States never has pursued a strict laissez-faire policy; even when Holmes wrote, lawmakers were enacting a host of economic regulations. (6) The vast majority of these regulatory measures either passed judicial muster or were never challenged. (7) The reference to "paternalism and the organic relation of the citizen to the State," (8) although somewhat opaque, likely points toward the attacks on individualism and claims of economic rights that characterized the Progressive era. (9) Of course, Holmes could be partly correct and partly wrong. That the Constitution affirms neither paternalism nor laissez faire does not establish the broader proposition that the Constitution has no relevance for economic policy.

Holmes was strongly committed to a majoritarian philosophy that entailed deference to legislative decisions. (10) In 1900, he insisted, "But wise or not, the proximate test of a good government is that the dominant power has its way." (11) It follows that Holmes was dubious about claims of constitutional rights. (12) In 1910, he revealingly observed, "I am so sceptical as to our knowledge about the goodness or badness of laws that I have no practical criticism except what the crowd wants." (13) In Lochner, therefore, Holmes may well have been projecting his personal disbelief in constitutional constraints onto the Founders. Moreover, Holmes offered no factual evidence to support his pronouncements, which he apparently regarded as self-evident. (14)

Can we seriously believe that the Framers had no economic program in mind? It is hard to square Holmes's agnostic position either with the expressed views of leading Framers or with provisions of the Constitution and the Bill of Rights. Indeed, the movement to establish a new government in 1787 was fueled in large part by the desire for a central authority capable of protecting private property, encouraging trade, restoring public credit, and defending American interests abroad. (15) According to one scholar, Alexander Hamilton and James Madison "agreed on the Constitution as necessary to provide the essential framework for commercial development through the creation of a national market, public credit, uniform currency, and the protection of contract." (16) In the words of two prominent historians, "Federalists proposed ... to place the new land in the mainstream of acquisitive capitalism." (17)

A brief review of the historical record may shed light on the intended relationship between the Constitution and economic policy at the formation of the new republic. The tenets of constitutional thought in the late eighteenth century should be considered first. John Locke and the Whig emphasis on the rights of property owners profoundly influenced the founding generation. …

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