The Volokh Conspiracy

For readers who may be interested, many of Vaclav Havel’s writings and speeches are available for free in English translation at his official website. Havel, who passed away on Sunday, was a great writer and the leader of the anti-communist dissident movement in Czechoslovakia. In addition to such classics as The Power of the Powerless, there are lesser known works such as “Stories and Totalitarianism” (1987), which includes the following interesting discussion of economic liberty:

The history of the system I live in has demonstrated persuasively that without a plurality of economic initiatives, and of people who participate in them, without competition, without a marketplace and its institutional guarantees, an economy will stagnate and decline….

When he can no longer participate with relative autonomy in economic life, man loses some of his social and human individuality, and part of his hope of creating his own human story.

I mention this now because although the standardizing and therefore nihilizing impact of political and intellectual centralization is clear, the analogous impact of economic centralization-as one of the indirect methods of manipulating life in general-is far from being so obvious. And that is what makes it more dangerous.

Where there is no natural plurality of economic initiatives, the interplay of competing producers and their entrepreneurial ideas disappears, along with the interplay of supply and demand, the labor and commodity markets, and voluntary employer-employee relations. Gone too are the stimuli to creativity and its attendant risks, the drama of economic success and failure. Man as a producer ceases to be a participant or a creator in the economic story, and becomes an instrument. Everyone is an employee of the state, which is the one proprietor of economic truth and power. Everyone is buried in the anonymity of the collective economic “non-story.”

When economic plurality disappears, the motives for competition in the marketplace of consumer goods disappear with it. The central power may talk all it wants about “satisfying differentiated needs” but the pressures of a nonpluralistic economy compel it to do exactly the opposite: to integrate production, standardize goods, and narrow the range of choice. In this artificial economic world, diversity is merely a complication.

Not only do consumers have to depend (as all who live in modern industrial societies do) almost exclusively on commodities they have not produced themselves; they do not have a choice of different commodities, and cannot express their individuality even in this limited way. All they have is what has been allocated by the monopoly producer: the same things that have been allocated to everyone.

Havel was no libertarian, and he favored a much larger economic role for the state than I would. But because of his experiences under communism, he understood the importance of economic liberty much better than most Westerners.

Another of my favorite Havel works is his 1990 speech delivered soon after becoming first post-communist president of Czechoslovakia:

For forty years you heard from my predecessors on this day different variations on the same theme: how our country was flourishing, how many million tons of steel we produced, how happy we all were, how we trusted our government, and what bright perspectives were unfolding in front of us.

I assume you did not propose me for this office so that I, too, would lie to you.

Our country is not flourishing. The enormous creative and spiritual potential of our nations is not being used sensibly. Entire branches of industry are producing goods that are of no interest to anyone, while we are lacking the things we need. A state which calls itself a workers’ state humiliates and exploits workers. Our obsolete economy is wasting the little energy we have available. …

We had all become used to the totalitarian system and accepted it as an unchangeable fact and thus helped to perpetuate it. In other words, we are all – though naturally to differing extents – responsible for the operation of the totalitarian machinery. None of us is just its victim. We are all also its co-creators….

If we realize this, then all the horrors that the new Czechoslovak democracy inherited will cease to appear so terrible. If we realize this, hope will return to our hearts.

In the effort to rectify matters of common concern, we have something to lean on. The recent period – and in particular the last six weeks of our peaceful revolution – has shown the enormous human, moral and spiritual potential, and the civic culture that slumbered in our society under the enforced mask of apathy. Whenever someone categorically claimed that we were this or that, I always objected that society is a very mysterious creature and that it is unwise to trust only the face it presents to you. I am happy that I was not mistaken. Everywhere in the world people wonder where those meek, humiliated, skeptical and seemingly cynical citizens of Czechoslovakia found the marvelous strength to shake the totalitarian yoke from their shoulders in several weeks, and in a decent and peaceful way…..

We had to pay, however, for our present freedom. Many citizens perished in jails in the 1950s, many were executed, thousands of human lives were destroyed, hundreds of thousands of talented people were forced to leave the country. Those who defended the honor of our nations during the Second World War, those who rebelled against totalitarian rule and those who simply managed to remain themselves and think freely, were all persecuted. We should not forget any of those who paid for our present freedom in one way or another….

We must also bear in mind that other nations have paid even more dearly for their present freedom, and that indirectly they have also paid for ours. The rivers of blood that have flowed in Hungary, Poland, Germany and recently in such a horrific manner in Romania, as well as the sea of blood shed by the nations of the Soviet Union, must not be forgotten. First of all because all human suffering concerns every other human being. But more than this, they must also not be forgotten because it is these great sacrifices that form the tragic background of today’s freedom or the gradual emancipation of the nations of the Soviet Bloc, and thus the background of our own newfound freedom.

UPDATE: Unfortunately, many of the links to individual items on the Havel website don’t seem to be working properly. However, you can find these works yourself simply by going to the site yourself and looking for them.

Former Florida Governor Jeb Bush in the WSJ:

The right to rise doesn’t seem like something we should have to protect.

But we do. We have to make it easier for people to do the things that allow them to rise. We have to let them compete. We need to let people fight for business. We need to let people take risks. We need to let people fail. We need to let people suffer the consequences of bad decisions. And we need to let people enjoy the fruits of good decisions, even good luck.

That is what economic freedom looks like. Freedom to succeed as well as to fail, freedom to do something or nothing. People understand this. Freedom of speech, for example, means that we put up with a lot of verbal and visual garbage in order to make sure that individuals have the right to say what needs to be said, even when it is inconvenient or unpopular. We forgive the sacrifices of free speech because we value its blessings.

But when it comes to economic freedom, we are less forgiving of the cycles of growth and loss, of trial and error, and of failure and success that are part of the realities of the marketplace and life itself.

Protecting the freedom to engage in business is not the same as protecting business. Advancing the interests of politically connected capitalists does not advance capitalism. It’s a lesson many of those who claim to believe in free enterprise too often forget.

I was going to write a post about the Institute for Justice’s important recent victory in the bone marrow case. However, I see that co-blogger Eugene Volokh has beaten me to the punch, and said most of what I would have wanted to say.

I would add only that the sale of organs and medically necessary body parts (including bone marrow) can save many lives. I answered some of the standard objections to organ markets here and here.

In some ways, bone marrow markets are even more defensible than organ markets. Unlike transplanted organs, transplanted bone marrow grows back, and the donor avoids even the very modest long-term health risks that kidney donors undertake.

CONFLICT OF INTEREST WATCH: I have had the privilege of working with IJ on a number of other cases, but had no involvement in this one.

I’m delighted to report that Clark Neily of the Institute for Justice will be guest-blogging this week, about IJ’s “judicial engagement” project. IJ is one of the leading libertarian public interest law firms in the country, and I’ve always much respected their work.

As readers of this blog doubtless know, both conservatives and libertarians are split on the degree to which courts should act aggressively in reviewing legislation for constitutionality, as opposed to deferring to legislative action, especially in the area of so-called “substantive due process.” My sense is that different bloggers on this blog themselves disagree on this subject; and I suspect that I wouldn’t always agree with IJ’s broadest positions on this. But I much look forward to Clark’s explanation of IJ’s views, and I think our readers will find them interesting as well.

A few days ago, I was asked to participate in the New York Times Room for Debate forum on West Hollywood’s recent enactment of a law banning the sale of fur clothing. Here is an excerpt from my contribution:

West Hollywood’s ban on the sale of fur clothing is ultimately trivial because it will have little effect. Local residents who want to buy fur coats will simply drive to a neighboring town. Nonetheless, the law will raise an important constitutional issue: Whether it is permissible for the state to ban an economic transaction that does not harm any person or pose a threat to the community.

Under current Supreme Court precedent, the government can ban or restrict virtually any economic activity so long as there is some “rational basis” for the law, which could be almost anything. The Court even allows the government to make up justifications after the fact that the legislature did not consider when it enacted the regulation.

This highly permissive approach has allowed state and local governments to enact numerous laws that benefit organized special interests at the expense of the general public…..

In recent years, some federal courts have begun to recognize that the Fourteenth Amendment’s protection for “liberty” should have at least some teeth in economic liberty cases. There is growing recognition that economic freedom was one of the most important rights that the framers of the amendment sought to protect….

If the [West Hollywood] law is challenged, judges will probably conclude that there is at least some “rational basis” for it, such as the need to protect fur-bearing animals from overhunting….

Nonetheless, the debate over this case and others like it could help increase public awareness of the need to enforce constitutional protections for economic liberty.

Because I had only about 300 words to work with, I chose to address the constitutional economic liberty aspect of this issue, while leaving the animal rights question to other participants in the forum. For what it’s worth, my general view is that most animals (with the exception of highly intelligent primates, whales, and a few others) do not have rights that are binding on humans. However, for reasons I described here, I have some doubts about the validity of my view. It could be that my judgment on this issue is corrupted by self-interest – not because I particularly like fur clothing, but because I love eating meat. And if it is wrong to kill animals to make (nonessential) clothing, it seems equally wrong to kill them for the purpose of eating them if doing so isn’t necessary for our own survival. A possible way out of the dilemma is to conclude that killing animals for food or clothing is moral so long as we do so in ways that aren’t “cruel.” But it seems to me that any animal that has a right to be free of human-inflicted pain would also logically be entitled to a right to life.

None of this changes my view of the West Hollywood law. Even if animals are entitled to greater rights than I currently believe, that law still restricts economic liberty without providing any real benefits to either animals or humans. But the broader question of animal rights is a genuinely difficult moral issue that I continue to struggle with.

Some New Jersey state troopers got law degrees with the help of a state-sponsored loan repayment program.  Then sought to practice law on the side — doing wills, real estate closings, etc.  Then the State Ethics Commission for the Department of Law and Public Safety decided that it was unethical for troopers to engage in the private practice of law.  The troopers sued, alleging (among other things) that the prohibition violated their rights under the 14th Amendment.  Alas, their case did not get far, as the U.S. Court of Appeals upheld the restriction, finding that the state had a rational basis for concluding the rule would prevent some potential conflicts of interest.

(Hat tip: John Steele)

Thank you to The Volokh Conspiracy for allowing me to guest blog this week about economic liberty and the law. Economic freedom is one of the most crucial of human rights, and it is a shame that government violates this right in so many ways today, and with little serious opposition by the courts that are supposed to protect our rights.

Check out the new Right to Earn A Living book page, and if you haven’t joined our Facebook page, please do so today!

I hope readers will check out PLF Liberty Blog for more updates on the cases I and my Pacific Legal Foundation colleagues are litigating. Also, in the coming weeks I’ll be speaking at events across the country, and would love to meet any VC readers or PLF supporters. I’ll be speaking in Boston on Tuesday, Hartford on Wednesday, Portland and Brewer, Maine, on Thursday, and again in Boston on Friday. Check out the book page for a full schedule of future talks in those and other cities across the country.

Please also drop by my personal blog, Freespace, and Panda’s Thumb, where I sometimes write about creationsim/evolution issues.

There’s a surprising amount of great poetry about economic liberty; perhaps the most famous is Shylock’s comment in The Merchant of Venice, when Antonio recommends that the state confiscate Shylock’s property: “Nay, take my life and all; pardon not that: / You take my house when you do take the prop / That doth sustain my house; you take my life / When you do take the means whereby I live.” The Supreme Court quoted this passage in Adams v. Tanner, 244 U.S. 590 (1917), when it struck down a state law that outlawed employment agencies. While the government could certainly regulate such agencies to protect the public and to police against fraud or force, it could not “justify destruction of one’s right to follow a distinctly useful calling in an upright way.”

Other poets have celebrated economic dynamism; there’s Whitman’s evocative praise of American industry, and Sandburg’s ode to muscular Chicago; the New Deal’s insane restrictions on economic freedom led to Ogden Nash’s famous parody “One From One Leaves Two,” and also inspired a poem about the Shechter Poultry case by Mrs. Shechter herself.

But I’ve always most enjoyed Maya Angelou’s poem “Times Square Shoeshine Composition.” Although Angelou’s shoeshiner speaks ironically of capitalism, he is actually a prime example of the opportunity that free markets offer to people in his position, and Angelou’s warm celebration of his boastful pride in his work harmonizes remarkably well with Whitman’s mechanics and artificers. He really is a capitalist; an entrepreneur who has achieved a degree of self-reliance and pride that was, of course, totally denied to his ancestors. When he insists on the quarter and a dime instead of just a quarter, he brings to mind Frederick Douglass, who described in The Life And Times how he felt upon being paid for his first job after escaping from slavery:

I was not long in accomplishing the job when the dear lady put into my hand two silver half dollars. To understand the emotion which swelled my heart as I clasped this money, realizing that I had no master who could take it from me — that it was mine — that my hands were my own, and could earn more of the precious coin — one must have been in some sense himself a slave…. I was not only a freeman but a free-working man, and no Master Hugh stood ready at the end of the week to seize my hard earnings.

Angelou certainly has valid reason to be ironic in her poem, but that irony doesn’t cloud the deeper truth of the shoeshiner’s free independence — which brings me to the case of Ego Brown.

Brown ran a shoeshine stand in Washington, D.C. — except that city ordinances prohibited the running of shoeshine stands on the sidewalks. Other kinds of merchants could sell things on the sidewalk; just not shoeshiners. The rule was a holdover from the days of Jim Crow, when white shoeshiners generally worked indoors, and thus used economic regulations to exclude competition from black shoeshiners who worked outside. Represented by the Institute for Justice, Brown sued, and a federal district court struck down the law under the rational basis test: “There must be at least some plausible connection between the ‘uniqueness’ of a bootblack and the purpose of the law. To find this connection, we would have to ‘strain our imagination’ beyond that which is required under the rational basis test to justify prohibiting bootblacks from the use of public space while permitting access to virtually every other type of vendor. Even the minimal rational basis test does not require the court to muse endlessly about this regulation’s conceivable objectives nor to ‘manufacture justifications’ for its continued existence.” Brown v. Barry, 710 F. Supp. 352, 356 (D.D.C. 1989).

Brown, who’s still shining shoes today, is Angelou’s creation brought to life — every bit as independent and admirable as his poetic counterpart.

Intrusive business regulations have a disproportionately negative impact on the poor and members of minority groups, who lack the political influence that whereby wealthy corporations and politically well-connected people are able to obtain special government favors. Nobody has done better scholarship on this point than Volokh Conspiracy blogger David Bernstein. The historical examples of the abuse of licensing laws and other regulations to oppress racial minorities are legion, and depressing. But they aren’t surprising. The lesson of public choice theory is that when government can redistribute wealth or opportunities, that power will fall into the hands of politically well-connected groups, who use it to their own advantage at the expense of less favored groups.

The treatment of the Chinese in California is a distressing example. At the California Constitutional Convention of 1878 — organized by the anti-Chinese Workingmen’s Party — many delegates spoke of their readiness to exploit government’s regulatory powers to keep out the Chinese workers who competed with white labor. As one delegate said, the Chinese laborer was

Continue reading ‘Racial Impacts and Business Regulations’ »

When talking about “substantive due process,” as I’ve been doing, one must address a number of myths about that theory that, sadly, are so common that many law students are never even taught what the theory even means.

I.

Here is a good example: “the Supreme Court has never in its entire history tried to derive [substantive due process] from the text of the Constitution.” Nelson Lund & David B. Kopel, Unraveling Judicial Restraint: Guns, Abortion, and the Faux Conservatism of J. Harvie Wilkinson III, 25 J.L. & Pol’y 1, 3 (2009). Now, whether one accepts or rejects the idea of “substantive due process,” this claim is just false. The Supreme Court had repeatedly explained how substantive protections arise from the Constitution’s text.

Continue reading ‘Two or Three Myths About Substantive Due Process’ »

A commenter asked whether illegal immigrants have the right to earn a living. Obviously they do, as all human beings do, although that has nothing to do with whether they may violate U.S. immigration laws. But it does bring to mind the many ways that government has used immigration restrictions to give economic favors to favored constituents.

Probably the most famous case is Truax v. Raich, a 1915 decision in which the Supreme Court struck down an Arizona law that capped the number of (legal) immigrants a business could employ. That law existed solely to “protect the jobs” of — i.e., bar fair competition with — natives. The state certainly had the authority to regulate industry to protect the public, the Court said, “[b]ut this admitted authority…does not go so far as to make it possible for the State to deny to lawful inhabitants, because of their race or nationality, the ordinary means of earning a livelihood…. [T]he right to work for a living in the common occupations of the community is of the very essence of the personal freedom and opportunity that it was the purpose of the [Fourteenth] Amendment to secure. If this could be refused solely upon the ground of race or nationality, the prohibition of the denial to any person of the equal protection of the laws would be a barren form of words.”

But a recent decision by the Ninth Circuit is more troubling. In the little-noticed case of Sagana v. Tenorio, that court upheld a law of the Commonwealth of Northern Mariana Islands which bars the employment of non-resident aliens in certain jobs, and imposes very severe restrictions on their employment in other jobs. This law exists solely to bar competition in the labor market, not to protect the general public. Yet, the court of appeals allowed this, saying “[t]he CNMI legislature has seen fit to create a temporary class of employees for the purpose of bolstering the CNMI economy, giving job preference to its residents, and protecting the wages and conditions of resident workers…. These are reasonable, important purposes.” This is protectionism, plain and simple, with no connection to advancing public health, safety, or welfare; it is the exploitation of government power to serve the self-interest of resident workers at the expense of non-resident workers and consumers. Sadly, the Supreme Court declined to review the case.

Immigration restrictions aren’t just an economic matter, of course. But the abuse of economic regulations to block fair competition in the labor market by immigrants is a shameful, and common phenomenon.

One of the most common ways government violates the right to make a living is through rules that prohibit businesses from charging low prices. Probably the most famous case about this issue is Nebbia v. New York, in which the state of New York, in the depths if the Great Depression, made it illegal to sell milk for low prices. The Supreme Court upheld this law in a decision that basically invented the “rational basis” test.

But there are many similar laws on the books in most cities and states today — laws that do not protect the public, but only protect established companies against competition. Tampa, Florida, for example, requires limo companies to charge at least $20 per hour. Why? Well, some years ago, I asked that question, and the Hillsborough County Public Transportation Commission answered that the restriction exists to “create a balance between the different transportation ‘markets’” so that taxis and limos would “not directly compet[e] against each other. This way, both manage to survive in their respective market area and the ‘balance’ is maintained.”

Balance? Why should the government impose an artificial “balance” in the market if it doesn’t reflect what consumers prefer? What authority does government have to force people to pay more for limo rides so as to protect the taxi companies from having to improve their services? Only if you think government exists to promote the interests of taxi drivers who can’t compete fairly, would you think the government should block mature adults from deciding for themselves what transportation choices to make. Such rules do not even arguably protect the public from fraud or violence or anything; they only exploit government’s coercive power to protect one private interest group against competition from another. That is arbitrariness — when the government decides to use its power simply as an act of will — not lawfulness.
 
Then there’s “predatory pricing” law. The theory goes like this: if one company cuts its prices really low, maybe even below cost (“loss leaders”) it’ll succeed in the market, and other businesses will fail. Then the first company will be a monopoly and jack the price up! The horrors! Thus the law forbids companies from trying to “harm competition” (i.e., succeed) by charging “unreasonably” low prices, and particularly by charging below cost. Loss leaders are illegal, for example, in California.

Of course, a child can see the problem with the theory: the instant the “predator” does raise his prices, the other companies will open their doors again, charge the market rate, and the clever “predatory pricing” strategy will fail. As Frank Easterbrook wrote, when he was a law professor, predatory pricing is “not a very good gamble,” because without some barrier to entry that prohibits the old companies from coming back, there’s no way for such a strategy to work: “it is quite unusual for a firm without a patent to hold a 100% market share and charge a monopoly price for very long.” (Although history books nowadays still often claim that Standard Oil used “predatory pricing” to drive out competition, that turns out not to be true.)

In a case called Brooke Group, the Supreme Court said that a plaintiff accusing a company of “predatory pricing” must not only prove that the “predator” charged low prices, but also that he had a “realistic probability” of recouping the losses incurred from the initial price-cutting. This is an eminently reasonable rule, because in theory, a successful “predatory pricing” strategy must include “recoupment”; without recoupment, price cutting is just price cutting, and that’s good for consumers.

But does antitrust law exist to protect consumers? The federal courts say so, and that is why they adopted the Brooke Group rule. But many state courts disagree. In fact, a case recently decided by the California Court of Appeal refused to adopt the Brooke Group rule precisely on the theory that California’s antitrust laws do not exist to protect the public — instead, they exist to protect “smaller, independent retailers” against having to compete aginst their “more powerful neighbor[s].” The California Supreme Court will soon decide whether to review that case.

In Minnesota a few years ago, the Midwest Oil company charged customers less than cost at its four Minneapolis area gas stations. I don’t know why — seems like a foolish idea to me, but they have the right to sell their gas for whatever they want. (That’s called “liberty.”) Certainly there was no likelihood that this four-station chain would come to monopolize gasoline sales in Minneapolis, which is full of Shells and Mobils. Still, other gas stations (not consumers, of course) complained, and Midwest Oil was assessed a heavy fine.

How exactly did this protect the public? It didn’t. It employed the state’s coercive powers to promote the interests of gas stations that didn’t want to lower their prices. And because Minnesota doesn’t employ the Brooke Group rule, Midwest Oil couldn’t make the argument that it had no actual chance of becoming a monopoly one way or the other.

This is just one of many examples of government violating the rights of business owners to make their own choices about what to do with their property and their liberty, not to protect the general public, but only to protect other businesses against having to compete by lowering prices and improving their products or services.

Update: To clarify, the Midwest Oil case and the California case I refer to are decided under state antitrust laws, as opposed to the federal Robinson-Patman Act. That’s why state courts are not bound by the Supremacy Clause to apply the Brooke Group recoupment rule.

Commenter rpt asks “Have you studied motor vehicle dealer restrictions?” Indeed, I have (and discuss them in chapter 7 of my book). Restrictions on auto dealerships are often explicitly designed to protect established businesses against economic competition.

Take, for example, Illinois. That state’s Motor Vehicle Franchise Act establishes a government committee that decides whether to allow new car dealerships to open, and gives them a long list of criteria to consider in making that decision. These criteria are explicitly anti-competitive: factor 10 requires the board to consider “the effect of an additional franchise…upon the existing motor vehicle dealers [selling] the same [ types of cars] in the relevant market area.” Factor 2 requires the bureaucrats to consider “the retail sales and service business transacted by the objecting motor vehicle dealer or dealers…during the 5 year period immediately preceding.” Factors 3 and 4 require the board to weigh “the investment necessarily made and obligations incurred by the objecting motor vehicle dealer” and “the permanency of the investment of the objecting motor vehicle dealer.” Factor 7 explicitly declares that “good cause” for the board to allow a new business “shall not be shown solely by a desire for further market penetration” — in other words, the desire of a car company to succeed in the market is not enough reason to let it open a new dealership.

This law was challenged in the Illinois Supreme Court in 2006. As I wrote in Pacific Legal Foundation’s friend of the court brief, this law was simply a “naked preference,” by which established businesses were exploiting government power, not to protect the general public, but to insulate themselves against competition. “[W]hen government limits one person’s liberty merely to give a benefit to another person, then the government has exceeded its authority under the Due Process Clause. As this Court put it in Giebelhausen v. Daley, 407 Ill. 25 (1950), ‘Each person subject to the laws has a right that he shall be governed by general, public rules. Laws and regulations entirely arbitrary in their character, singling out particular persons not distinguished from others in the community by any reason applicable to such persons, are not of that class.’”

Sadly, the Illinois Supreme Court upheld the statute under the rational basis test. But as dissenting Justice Lloyd Karmeier wrote, “this Act is clearly nothing more than a protectionist measure favoring existing motor vehicle dealerships, and it should be acknowledged as such. In my opinion, there is no rational basis to justify a distinction between the class the statute benefits and the class outside its scope. In short, it is special legislation.”

Thank you to Prof. Volokh for the opportunity to discuss my book The Right To Earn A Living. One of the major themes of my book is that under today’s legal standards, courts refuse to participate in one of the mist crucial tasks of a free government: to prevent the exploitation if government’s coercive powers by self-interested lobbying groups. As originally understood, the “due process of law” clause barred the government from using its powers in fundamentally arbitrary ways — meaning, in ways that only promoted the interests of powerful factions, without a serious connection to the true public welfare.

In The Federalist, Madison makes it clear that while the first task of government is to protect the people, equally important is to “oblige [the government] to control itself” — that is, to prevent the “mischiefs of faction,” which means, the tendency of private interest groups to wield government power to advance their private interests, instead of “the permanent and aggregate interest of the community.” Courts have an important role to play in preventing thus evil, but thanks to the “rational basis test” that courts use today when addressing cases about private property rights and the freedom of economic choice, that role is going unfilled. Instead, courts simply look the other way, or cooperate in abuses by rationalizing unjust restrictions on economic freedom.

Consider for example, the case of Michael Munie. Munie is a businessman in St. Louis, Missouri, where he runs ABC Quality Moving. Running a moving company in Missouri ought to be a simple matter of owning a truck and painting “Moving Company” on the side of it. But in Missouri, if you want to run a moving business, you first have to get permission from all the existing moving companies.

When you file an application for the legally required moving company license, the stare Department of Transportation notifies all the existing moving companies, and they enjoy the exclusive privilege of filing objections to your license. When that happens, you’re required to prove to a group of bureaucrats that there needs to be a new moving company. How do you prove such a thing? Nobody knows. There are no real standards, and even if there were, it’s not really possible to prove there “needs” to be a new business in just about any trade. Could you have proven, before Starbucks got big, that there “needed” to be a new coffee shop?

Such laws do not protect consumers — they protect established companies against fair competition. This is a prime example of what public choice economics calls “rent seeking,” and what Madison called “faction.” It’s inherently arbitrary — it restricts liberty for no other reason than that the legislature chose to do it — and it’s contrary to centuries of Anglo-American common law precedent, that, since at least The Case of Monopolies, has barred government from dividing up the market to give economic advantages to preferred businesses. Last month, I filed a civil rights case challenging the constitutionality of the Missouri law.

Sadly, the “rational basis” test that courts apply to laws restricting economic liberty places the burden of proof on Munie to show that the law has no reasonable connection to a legitimate state interest. That means he must prove a negative, something that’s impossible if taken literally. And what exactly is a “legitimate state interest”? Nobody actually knows. In Nollan v. California Coastal Commission in 1987, the Supreme Court admitted, “Our cases have not elaborated on the standards for determining what constitutes a ‘legitimate state interest.’” But if we don’t know what a legitimate state interest is, how can we tell whether something is “rationally related” to it? You can’t judge the propriety of means without knowing what ends you’re pursuing.

In a case like Munie’s, the question becomes, “is protecting established businesses against competition a legitimate state interest?” And on that issue, there’s a split between the circuits.

In 2002, the Sixth Circuit Court of Appeals held that government may not use occupational licensing laws for the some purpose of protecting established companies from competition. That case, Craigmiles v. Giles, struck down Tennessee’s law that prohibited anyone except licensed funeral directors from selling coffins — in other words, it required people to spend two years in training, learning how to embalm bodies and whatnot, simply to sell a box.

But in a virtually identical case in Oklahoma, the Tenth Circuit Court of Appeals held the opposite. In Powers v. Harris, the court said that “intrastate economic protectionism constitutes a legitimate state interest.”

Then in 2007, the Ninth Circuit agreed with the Sixth, barring states from using licensing laws simply to protect established companies from competition. In that case (which I litigated) the court held that states may use licensing laws only to protect the public in some way — not for the arbitrary purpose of promoting the economic interests of a politically powerful constituency.

That last rule is just what we mean when we say “due process of law.” The due process principle requires government to act only in a lawful, and not in an arbitrary way — that is, only in the furtherance of genuinely public ends, and not for the private benefit of a particular group or for the mere ipse dixit whim of the lawmaking authority. Courts already accept this principle when it comes to other rights — such as freedom of speech or religion. Yet because of the look-the-other-way attitude embodied in the “rational basis” test — because courts systematically ignore the freedom to make economic choices — legislatures have almost unlimited power to violate that freedom, not in the service of the public good, but simply to reward politically successful groups.

For more, see my article, “Is Economic Exclusion A Legitimate State Interest?”

Occupational licensing laws aren’t the only realm in which government deprives us of the freedom of economic choice simply to serve private interest groups. Consider the United Food and Commercial Workers’ war on non-union grocery stores like Wal-Mart.

In many communities, union supporters persuade local officials to use zoning restrictions to bar the opening of Wal-Mart Supercenters or other stores, often using rhetoric about preserving the “local feeing” of “small towns.” In reality, these laws exist to force you to pay more for groceries, not to advance the public good, but to promote the interests of unions that can’t compete fairly in the labor market. This special-interest legislation, however, is allowed by courts that simply look the other way under the “rational basis” test.

Take, for example, the case of Hernandez v. Hanford. That case didn’t involve grocery stores, but furniture stores, yet the principle is the same. The city allowed furniture sales only in one specific place — thus forcing people to travel farther or pay more for furniture they needed. When one store tried to sell furniture outside this region, the established furniture stores complained(not consumers, mind you, who were happy to have more choices for furniture). The city had actually carved out a special exception in its law for Target, because they didn’t want to lose that store. But other stores were barred from selling furniture, solely to serve the interests of established stores. Still, the California Supreme Court upheld this restriction, writing

language [in some precedents] could be interpreted to suggest that a zoning ordinance is valid only when the ordinance has merely an “indirect impact” on economic competition, and never when the regulation of economic competition is a direct and intended effect of the ordinance…. [This] would be inaccurate…. [M]ore recent decisions have upheld zoning actions even when regulation of economic competition reasonably could be viewed as a direct and intended effect of a challenged zoning action, so long as the primary purpose of the zoning action — that is, its principal and ultimate objective — is to achieve a valid public purpose such as furthering a municipality’s general plan for controlled growth or for localized commercial development, rather than simply to serve an impermissible anticompetitive private purpose such as investing a favored private business with monopoly power or excluding an unpopular company from the community.

What can this realistically mean? If promoting the commercial success of those merchants located in one specific neighborhood (“localized commercial development”) qualifies as a “public” goal, then anything does, because every private interest group is going to claim that giving them special privileges is somehow good for the public.

Given the leniency of the “rational basis” test, courts are systematically incapable of distinguishing private from public interests. In Kelo, the Supreme Court allowed the government to seize property and give it to private developers for their own private use, because this would have some sort of “public” benefit. The Hanford decision adopts basically the same rationale for zoning laws. It allows private interest groups to wield zoning laws to protect themselves from competition or to advance their private interests, at the expense of the consumer and with no realistic connection to protecting the public from harms — all with little meaningful judicial review.

Another interesting example of private interest lawmaking is pending before the California Supreme Court right now. The case of California Grocers Association v. Los Angeles involves a city ordinance that restricts the right of businesses to terminate certain employees. If company A buys grocery store B, company A may not fire grocery store B’s employees for six months. When it enacted this restriction, the city claimed it was a public health measure, designed to ensure that supervisors who know how to handle food would stick around to teach the newbies how to do it. Except that — surprise! — the restriction doesn’t apply to managers. And, of course, the law doesn’t apply to union stores.

As I argued in PLF’s friend of the court brief, this law creates a sort of type of “featherbedding,” only this time it forces non-union employers to retain unnecessary employees, as a way of driving up their costs and decreasing their competitive advantage over union shops. This restriction doesn’t really protect the public, even arguably — it advances the interests of politically influential unions, as represented by a group called “LAANE,” Los Angeles Alliance for a New Economy (presumably, not a free economy).

Cass Sunstein once used the term “naked preferences” to describe “the distribution of resources or opportunities to one group rather than another solely on the ground that those favored have exercised the raw political power to obtain what they want.” When government yields to activists who want to use zoning laws to forbid the opening of Wal-Marts, or health and safety regulations to increase the costs of non-union businesses, it isn’t serving the public interest, as required by the principles of due process of law — it’s acting out of pure political will; out of pure arbitrariness. Yet because courts refuse to treat economic liberty with the same seriousness that they accord other realms of liberty, such abuses continue, and the courts remain silent.

The Benedictine monks at St. Joseph Abbey in Covington, Louisiana, saw much of their timber felled by Hurricane Katrina.  To make the best of the situation, they began turning their downed trees into hand-crafted caskets.  Business was brisk, prompting complaints from funeral homes and an investigation by the Louisiana State Board of Embalmers and Funeral Directors.  In Louisiana, as in some other states, only a licensed “funeral parlor” may sell caskets or other “funeral merchandise.”   Funeral caskets are high-margin items, so local funeral parlors don’t like the competition, and in-state parlors largely control the state regulatory board.  The WSJ reports:

This past March, the Louisiana State Board of Embalmers and Funeral Directors subpoenaed two abbey officials to a hearing. If found guilty of illegal casket sales, each official would face fines of between $500 and $2,500 per violation, the board warned. The hearing, scheduled for mid-August, was cancelled due to a tropical storm.

By then, the monks had already prepared their own federal lawsuit, citing Louisiana’s “casket cartel.”

The state funeral board has nine members, eight of whom are funeral industry professionals. The board “really has it in for the abbey,” complains Jeff Rowes, senior attorney at The Institute for Justice, an Arlington, Va., libertarian public-interest law firm representing the monks. The law, he says, “is an unconstitutional invasion of the right to earn an honest living.”

There’s more on the lawsuit at the Institute for Justice website here.

In his Stop the Beach opinion, Justice Scalia writes, “The first problem with using Substantive Due Process to do the work of the Takings Clause is that we have held it cannot be done.”

But hold on! The Takings Clause does not apply to the states. The Fourteenth Amendment’s Due Process Clause applies to the states. The Supreme Court has held that the rights protected by the Clause include the rights delineated by the Fifth Amendment via “incorporation.”

You can see where this is going. Enforcing the Fifth Amendment’s Takings Clause against the states via the Due Process Clause is literally an exercise in protecting a substantive right through that clause, and therefore is “substantive due process.”

I understand, of course, that in modern constitutional discourse we distinguish between “substantive due process” and the “incorporation doctrine.” But I think this distinction is incoherent, an illogical historical artifact.

Basically, the post-New Deal Justices who wanted to protect some or all of the rights contained in the Bill of Rights against the states needed to blunt criticism that they were emulating their discredited pre-New Deal predecessors. The pre-New Deal Justices had also protected some of those rights–freedom of speech speech, Takings, etc.–via the Due Process Clause, often with no reference to the Bill of Rights. So the post-New Deal Justices and their defenders asserted that the liberty of contract cases and other unenumerated rights cases involved illegitimate “substantive due process,” while cases “incorporating” the rights found in the Bill of Rights against the states did not.

Grounding the Due Process Clause’s substantive protections in the Bill of Rights and avoiding unenumerated rights may constrain judicial activism, but it’s still a quite literal exercise in “substantive due process.” And given precedent going back to the 1870s implicitly acknowledging that the rights protected by the Due Process are not constrained by the Bill of Rights but apply to all arbitrary deprivations of important rights, and precedents from the 1880s holding that the criminal procedure protections of the Bill or Rights are unprotected by the Fourteenth Amendment, it’s not clear why one kind of substantive due process is inherently more legitimate than the other, or why conservatives should privilege nonsense made up by the liberal Vinson and Warren Courts.

My DU colleague Thomas Russell, who used to teach at the University of Texas Law school, has a written a paper, available on SSRN, which urges the University of Texas Law School to rename Simkins Hall, a law and graduate male student dormitory named for William Stewart Simkins. Simkins taught equity, contracts, procedure, and related topics at UT for three decades in the early 20th century. He was also a founder of the Ku Klux Klan in Florida, and every year at UT he gave a formal speech extolling the Klan.

Most of Russell’s paper concentrates on Simkins’ career at UT, as well as the 1954 decision (five weeks after Brown v. Board was announced) to name the dormitory after him. I was curious to learn more about Simkins had actually done with the Florida Klan, so I read Michael Newtown’s book The Invisible Empire: The Ku Klux Klan in Florida.

Continue reading ‘The Bernardine Dohrn of the early 20th century: The terrorist professor at U of Texas law school’ »

Held on April 28 at the University of Colorado law school, under the sponsorship of the American Civil Liberties Union of Colorado. Arguing in favor of constitutionality was Jean Dubofsky, former Justice of the Colorado Supreme Court. Arguing the other side was me. The video is here. (Video and audio are often out of sync by several seconds.) The format was Kopel presentation, Dubofsky presentation, Kopel rebuttal, Dubofsky rebuttal, and then questions from the audience. Pursuant to the framing of the question, both of us devoted substantial attention to whether Colorado Attorney General John Suthers made the right decision in joining the 20-state coalition lawsuit against the new law. The pro/con presentations take about an hour, and the full program is 1 hour and 36 minutes.

One source of the impending constitutional challenge to the Obamacare mandate is that exceeds the enumerated powers granted to Congress under Article I, section 8. For example, that the people’s grant to power to Congress to regulate commerce  among the several states does not include the power to compel people to engage in commerce. Jack Balkin, writing in the New England Journal of Medicine, has two responses: 1. Yes it does, because of Wickard and Raich, since people without insurance will eventually get sick and then buy health services; and allowing these people to buy health services outside the congressional system would undermine the congressional regulation. 2. The mandate is structured as a tax.

For the moment, let’s put aside the question of whether the Obamacare tax is an Article I tax, or a 16th Amendment income tax. Does Congress have the infinite power to control people’s behavior (such as by ordering them to engage in commercial transactions) via the tax power?  I suggest not. When the Bill of Rights was being debated in front of Congress, the skeptical Rep. Theodore Sedgwick of Massachusetts asked if there should also be an enumeration that “declared that a man should have a right to wear his hat if he pleased; that he might get up when he pleased, and go to bed when he thought proper.” 1 Annals of Congress 759-60 (Aug. 15, 1789). Sedgewick’s point was that national laws about bedtimes and hat-wearing were self-evidently beyond the authority of Congress.

However, if the tax power means that Congress can order citizens to buy something they don’t want to buy, why does Congress not have the power to assess taxes on people who get too little sleep, or too much sleep, and thereby harm their own health and the public fisc? Or who wear hats so little that they increase their risk of skin cancer? Or who wear hats so often that they dangerously reduce their levels of vitamin D? In Sonzinsky v. United States (1937), the Supreme Court declared that it would not inquire into hidden regulatory motives that might have motivated a tax. But in Sonzinsky, the underlying activity (running a for-profit commercial business selling machine guns) was unquestionably within the scope of commercial activities that might be subject to an excise tax.

In contrast, not buying health insurance is not in its nature a commercial taxable activity. Neither is wearing a hat, or getting up when you please, or going to bed when you think it proper.

Sonzinsky is deferential to congressional motives, but it does nothing to support the claim that non-commercial activity may be taxed. Construing the tax power as less than infinite–as not encompassing the power to tax bedtimes or the decision not purchase a product–is strongly supported by the Ninth Amendment. This is so whether one agrees with Randy Barnett’s view of the Ninth Amendment (as an enforceable guarantee of natural rights) or with Kurt Lash’s (as a rule that enumerated powers should be narrowly construed so as not to violate natural rights, including the right of self-government in the states).

Finally, as Jack Balkin has ably argued, “Constitutional change occurs because Americans persuade each other about the best meaning of constitutional text and principle in their own time. These debates and political struggles help generate Americans’ investment in the Constitution as their Constitution and they create a platform for the possibility – but not the certainty of its redemption in history.”

Americans today are not bound to meekly accept the most far-ranging assertions of congressional power based on large extrapolations from Supreme Court cases that themselves come from a short period (the late 1930s and early 1940s) when the Court was more supine and submissive to claims about centralized power than was any other Supreme Court before or after in our history. American citizens, in the political process and in their personal lives, will ultimately have the final word on the Constitution.

A large and permanent majority of the American people immediately accepted Social Security as a constitutional solution to poverty among the elderly and to massive unemployment (since Social Security would open up jobs by encouraging people to retire sooner). The American people have not accepted Obamacare as a constitutional solution to health insurance problems. If the American believe that there is a “crisis” about the high cost of health insurance, then the American people can also believe that the solution is not to punish people for refusing to buy overpriced insurance that they don’t want. The American people can reject the notion that our Constitution should be contorted and distorted to accommodate such a destructive and intrusive scheme.

It is eminently within the authority of We the People to act politically on our constitutional beliefs that the congressional power to regulate interstate commerce does not extend to forcing people to buy a product which Congress has forbidden to be sold across state lines; that the power to regulate interstate commerce is not the power to compel a person to participate in instrastate commerce; and the that power to levy income or excise taxes does not include the power to impose punishment in the form of punitive taxes on persons who choose not to buy something–or who choose whether to wear hats and when to sleep.

p.s. PENNumbra had a good debate on the topic last fall, featuring Jack Balkin vs. Lee Casey & David Rivkin.

Monday’s NYT reported the Securities Industry and Financial Markets Association is investigating potential constitutional challenges to the President’s proposed $90-billion bank tax.  It’s apparently not enough to argue that the President’s various economic and regulatory initiatives are bad policy — as this proposal is — it must also be unconstitutional.

Based on the article, SIFMA hopes to argue the tax is an unconstitutional bill of attainder or ex post facto law.  I suppose another challenge, if the tax legislation is poorly drafted, could be that it is a direct tax and must be apportioned to be constitutional.  None of this is likely to matter, however.  Barring exceedingly poor draftsmanship, I doubt any court would strike down the tax, should it be enacted.  If the AIG bonus tax would pass muster in the courts (as discussed in this thread), I don’t see any likelihood a more broad-based tax on banks would face any difficulty at all.

I’ve just posted this article, co-authored with Tim Leonard of the Princeton Economics department, on SSRN.  Here’s the abstract:

Contrary to their modern reputation as egalitarian liberals, many of the original progressive architects of American labor reform were partisans of human inequality. The labor legislation they pioneered was, in important respects, designed to exclude immigrants, women, and African Americans from some or all of the labor market.

The first part of this article discusses the origins and development of a progressive economic ideology that favored, indeed demanded, the exclusion of various so-called “defective” groups from the American labor market. Xenophobia, race prejudice, and sexism certainly were not new to the United States in the Progressive Era. What was new was, first, the idea that protecting deserving workers required the social control of undeserving workers, enough so that labor-legislation advocates defended the exclusion of purportedly unfit minority workers not as an ostensibly necessary evil, but as a positive social benefit. Second, the exclusion of undesirables acquired a new scientific legitimacy: the Progressive Era marked not only the advent of the welfare state but also an extraordinary vogue for race thinking and for eugenics, the social control of human breeding. The new science of eugenics turned “undesirables” into the “hereditarily unfit” and elevated exclusion to a matter of national and racial health. And the new sciences of society, especially economics, showed how unfit workers wrongly lowered the wages and employment of racially superior groups.

The second part of this article discusses the practical impact progressive ideology had on labor reform in the 1930s. The intellectual heirs of progressivism used the prevailing economic crisis to promote previously unachievable government involvement in the labor market to the detriment of those deemed excludable.

The Davis-Bacon Act of 1931, which regulated the wages paid on construction projects paid for by the federal government, was designed to exclude African Americans and other workers deemed “defective” from the labor market for federal construction projects.

The influence of the progressive economists’ belief that low-paid African American workers were “defectives” who should not be permitted to compete on price with white workers continued during the New Deal. Like jobs held by women and children, jobs held by African Americans were often considered “substandard” by New Dealers and were slated for permanent elimination. This mentality was reflected in the Fair Labor Standards Act of 1938, which imposed a high uniform national minimum wage, even though its architects knew that this would lead to substantial unemployment among African Americans.

Finally, the 1930s witnessed the resurrection and expansion of single-sex, state minimum-wage laws in the 1930s. These laws were upheld by a Progressive Supreme Court in 1937. The Court adopted the conventional wisdom in contemporary liberal circles: women who could not command a “living wage” as defined by statute should be expunged from the labor force.

In short, in the early 20th century American labor reformers promoted an ideology that advocated excluding from the workplace those they regarded undesirable, undeserving, or defective. Once progressive ideology came to dominate government policy during the Great Depression, labor legislation was enacted that intentionally set out to exclude “undesirable” workers from the workplace.

The Financial Times runs a story today by Francesco Guerrera and Nicole Bullock on the looming problems of underfunded public pensions at the state and local level in the United States.  The news story cites a new study by Orin Kramer, chairman of New Jersey’s pension fund:

The estimate by Orin Kramer will fuel investors’ concerns over the deteriorating financial health of US states after the recession. “State and local governments are correctly perceived to be in serious difficulty,” Mr Kramer told the Financial Times.

“If you factor in the reality of these unfunded promises, their deficits will rise exponentially.”

Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer’s analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations.

Two trillion dollars?  One question about these obligations is whether taxpayers will stick around to pay them, or instead will vote with their feet.  (“Vote with their feet” is something that has been discussed in various ways at VC – as an aspect of a federal system and states with their own laws.)  Many of these pension obligations have been incurred by municipalities and others by states, and in some cases the obligations are intertwined.  But what happens if voters-taxpayers move out?

The assumption has long been that taxpayers are stuck, on account of jobs and other circumstance.  But query whether that is necessarily true as the baby boom generation retires.  In that case, it might find itself far more mobile, in circumstances where rising taxes at every level make relocation a more valuable decision at the margin.  For that matter, if otherwise desirable locales manage to tax their businesses away, will the baby boomers’ kids and grandkids have reason ever to locate in places that lack jobs?  They might have been raised there – but would they go back?

Would people leave California? They are leaving now, true, but would they leave in the future specifically for this reason or generally on account of the tax burden, particularly as retirees?  Or New Jersey?  What about the city of Oakland?  Or even smaller cities, such as the towns in California – not large at all, small towns, that have already declared bankruptcy over pension obligations?  It’s easy to move out of those towns.  For that matter, what about a municipality declaring bankruptcy in anticipation of un-meetable pension burdens down the road – in other words, you know it can’t be met, you know that your tax base will move out, and even though you are solvent now, you see that you won’t be down the road – and if you restructure now, you can save a much worse situation by not driving out your taxpayers.  But is that available under bankruptcy?  I’m not a bankruptcy specialist – it might not be possible to do so as a matter of law; someone can tell me in the comments.

In theory, all parties should be able to see the train wreck coming and renegotiate now, but the reality is, parties won’t do that, because they will lock horns over how much of promised benefits can get paid by increased taxation, and many other things.  That’s why bankruptcy judges have much of their discretionary power to impose things on parties nearly all of whom have varying degrees of hold-up.  Query too whether less heavily obligated jurisdictions might woo people to come, and perhaps pass measures as part of state constitutions limiting levels of indebtedness and writing in provisions that would cover future contingent pension payments.

How might the heavily indebted jurisdictions respond to taxpayer exit?  (Their position becomes a little like the position of utilities with “stranded” costs – and presumably that is how they would present their case, not as having profligately promised benefits as politicians to favored public employee constituencies, but instead as having provided services to taxpayers over decades but now getting stuck with the check.)  One way would be to try and impose taxes (and perhaps “fees”) that “follow” people who leave the jurisdiction.  More likely, I would think, would be an effort to federalize the pension bill.  Alternative one would simply  have the federal government assume the burdens, and presumably set the rules for future pensions.  Alternative two would be to leave the debts where they are, but have series of federal transfers to state and local jurisdictions to cover them, the unending bailout-stimulus.

The alternative to all of these, of course, would be for states and localities to declare bankruptcy and have a judge restructure the obligations and, one assumes, lower the obligations and the benefits.  It is an alternative often touted.  I worry, however, that people who call for it assume that the bankruptcy system, which was created to deal with mostly manageable private bankruptcies and the occasional huge corporate wipeout and the occasional public finance disaster, would somehow stay above politics and remain the same essentially apolitical system it is now.  That, after all, is what people who look to the bankruptcy system to resolve all these public finance messes seek – a set of neutral, apolitical rules of the kinds that govern private bankruptcy.

When relatively apolitical systems of these kinds are asked to take on, however, not just the occasional role in deeply politicized issues, but instead to take them on as a whole endemic category, now and into the future – it is very hard to see that the apolitical nature of the system is not inevitably changed.  How could it not be, over time?  (The same is true of the Fed, I would think.)  A bankruptcy system that contains, for good reasons, much discretionary authority on the part of the judge, and the ability of Congress to revise the rules, and then gradually takes on as its most visible and public function the resolution of public (and hence political) finance questions, it seems to me, will sooner or later lose the elements of neutral, apolitical decision-making arising from a system fundamentally about private bankruptcy and corporate restructuring.  It will become something else.  Institutions and systems of governance are not static.

(Realistically, however, what happens regarding public pensions is a political function of  the political power of the public employee unions, at all levels of government, as highly organized, interested, focused political groups – as against disorganized publics as taxpayers, represented in theory, but often not in fact, by politicians in state and local government.)

The Institute for Justice has recently filed a new case challenging an especially egregious infringement on economic liberties under the Constitution:

A civil liberties law firm has filed suit against the state of Texas on behalf of eight eyebrow-threading entrepreneurs, several of whom are based in San Antonio.

The Institute for Justice, Texas Chapter, is alleging the state government has violated the entrepreneurs’ constitutional rights by requiring them to go through a licensing process that mandates 1,500 hours of instruction at an estimated cost of $20,000…..

Wesley Hottot, lead attorney for the Institute for Justice Texas Chapter, says Texas’ proud heritage as a beacon for entrepreneurship is in danger “when the state tries to regulate every new industry rather than trusting entrepreneurs and consumers.”

Hottot says eyebrow threading is an ancient technique for removing unwanted eyebrow hairs using tightly wound cotton thread. “Threading is a booming industry in Texas because it is cheaper, faster and less painful than waxing,” he says.

But now the TDLR has threatened this small business-based industry by requiring practitioners to obtain what Hottot says are “expensive and irrelevant licenses in Western-style cosmetology.”

“Threading is not mentioned anywhere in state law, yet TDLR expects threaders, some with over 20 years of experience, to immediately stop working and spend $20,000 obtaining up to 1,500 hours of instruction in government-approved beauty schools that do not even teach threading,” Hottot says. “Further, threaders must pass government-approved cosmetology exams that do not test threading.”

Here is a link to an IJ video on the case. Despite the longstanding claim that judicial protection for economic liberties is just “judicial activism,” such protection actually has strong support in the original meaning of the Privileges or Immunities Clause of the Fourteenth Amendment, and other clauses. The original meaning evidence is discussed at great length in Bernard Siegan’s classic book Economic Liberties and the Constitution, and some of it is summarized in Alan Gura’s brief for the petitioners in the McDonald gun rights case currently before the Supreme Court.

Even if we accept the idea that economic liberties deserve significant judicial protection, there is room for debate as to how broad that protection should be. However, this case is sufficiently egregious that it is difficult to imagine any reasonable basis for judicial protection of economic liberties that would allow this regulation to be upheld.

CONFLICT OF INTEREST WATCH: As regular readers probably know, I have done various pro bono projects for the Institute for Justice over the years, and was a summer clerk there when I was a law student.