Archive | Economic LIberties

Kentucky’s War On The Little Guy…And Nevada’s…and Missouri’s…

Sunday at 10pm Eastern, Fox News will be rebroadcasting John Stossel’s special, War On The Little Guy, which includes a segment about my lawsuit on behalf of Kentucky entrepreneur Raleigh Bruner.

Some years ago, Raleigh started a moving business in Lexington called Wildcat Moving. What he didn’t know was that if you want to start a moving company in Kentucky, the law requires you to basically get permission from all of the state’s existing moving companies.

The law, called a Certificate of Necessity or CON law, works this way: to run a moving company, you need a license. But when you apply for a license, the law requires you to notify all the state’s moving companies and give them the chance to file an objection. And when an objection is filed, you have to go to a hearing and prove to the government that “existing moving services are inadequate,” and that a new moving company would be consistent with the “present or future public convenience and necessity.” What do these phrases mean? Nobody really knows. In fact, the chief lawyer for the state’s Transportation Cabinet testified under oath that there are “no objective criteria” for deciding what services are “inadequate.” And it’s hard to imagine how bureaucrats can predict “future public convenience.”

But one thing is clear: the law gives bureaucrats almost unlimited power to decide who can and who cannot run a moving business. In the past five years, there have been 39 applications for new moving licenses. Of those, 19 were subjected to protests by one or more existing moving companies, giving a total of 114 protests. You can see an example of a protest here. Note that it doesn’t even suggest that the applicant is unqualified or unsafe or untrustworthy. That’s typical; in fact, since [...]

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Unconstitutional to Ban All Felons from Becoming Precious Metals Dealers

So holds last week’s Barletta v. Rilling (D. Conn. Sept. 26, 2013), in a decision that — if upheld — may pave the way for similar decisions with regard to bans on gun ownership by (nearly) all felons. The court applies the “rational basis” test, under which nearly all legal classifications are upheld, but concludes that this classification fails even that highly deferential test:

A rational nexus between a conviction for any and every felony offense and the fitness to act as a precious metals dealer simply does not exist. The legislature has not drawn any distinctions beyond the classification of felon; it has not written the statute to conform to the legitimate state interest of protecting the public from unscrupulous dealers. Many unsuitable applicants can obtain licenses, yet many suitable applicants cannot.

Felony crimes range widely, and many do not implicate the purposes identified by the State as justifying the ban. Federal felonies include mishandling of environmental pollutants, draft dodging, and certain offenses involving fish, wildlife and plants. State felonies include violating a sexton’s burial duties, illegally assisting a disabled voter, injuring a peace officer animal, and violating pollution requirements. See OLR Research Report, 2012-R-0358, Unclassified Felonies (2012). Many, if not most, of the hundreds of federal felonies and more than 265 Connecticut felonies, have no tendency whatsoever to predict unsuitability for licensure based on the interests that the State claims section 21-100(a)’s felony bar was enacted to protect.

At the same time, many misdemeanors reflect conduct that seems to be more relevant to the state’s legitimate goals than the conduct underlying many felonies. For example, illegal sale of used motor vehicle parts, illegal ticket scalping, issuing a bad check, and forgery are all misdemeanors. Moreover, the fortuity of plea bargaining may reduce felonious conduct to a misdemeanor

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Canada Day

Since today is Canada Day, this is an appropriate time to thank that nation for giving us most of the greatest Boston Bruins players, including Bobby Orr, Phil Esposito, Ray Bourque, and Rick “Nifty” Middleton (my favorite player when I was little). I even rooted for Canada more than the US in the 1984 and ’87 Canada Cup tournaments, because Bourque and other Bruins stars were on the Canadian team (also because the US had no chance of winning).

On a (slightly) more serious note, Canada also deserves credit for surpassing the United States on both the Cato/Fraser Institute and Heritage economic freedom ranking. This is partly due to serious backsliding by the US over the last decade. But it is also the result of Canada’s impressive success in getting its government spending under control in the 1990s and early 2000s. Canadian-born economist David David R. Henderson tells the story of that achievement here. Hopefully, the United States can imitate Canada’s achievement in this field, though I’m not optimistic it will happen quickly.

Despite some ongoing problems and periodic secession crises, Canada is also a good example of the use of federalism to reduce ethnic conflict and empower ethnic minorities.

None of this will prevent me from hating the Montreal Canadiens when the next NHL season starts. But in the meantime, Happy Canada Day! [...]

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IQ2US Debate: Abolish The Minimum Wage

At my suggestion, Intelligence Squared is hosting a debate on the motion: Abolish The Minimum Wage. At a time when President Obama is proposing to increase it, I thought it might be useful to go back to first principles and explore whether the minimum wage is good policy in the first place. The debaters are top-notch, and the program promises to be very lively.

Intelligence Squared debates are usually held in New York City, but this one will be in Washington, DC, at the Burke Theater at the U.S. Navy Memorial, 701 Pennsylvania Avenue, NW. Wednesday, April 3. Reception, 4:30-5:15pm; Debate, 5:30-7:00pm.

More information is available here. Tickets to the live debate can be purchased here. And, on April 10, the podcast will be available here. [...]

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Fifth Circuit Strikes Down Casket Sales Limit on Rational Basis Grounds

The decision is St. Joseph Abbey v. Castille (5th Cir. Mar. 20, 2013), and it strikes down “rules issued by the Louisiana Board of Funeral Directors granting funeral homes an exclusive right to sell caskets.” The court concludes that “mere economic protection of a particular industry” is not “a legitimate governmental purpose,” and that the law is not rationally related to any other, more legitimate, purposes. On this, the court agrees with Craigmiles v. Giles (6th Cir. 2002) and disagrees with Powers v. Oklahoma (10th Cir. 2004). Here’s a quote that captures well the court’s reasoning (whether you agree with it or not):

The great deference due state economic regulation does not demand judicial blindness to the history of a challenged rule or the context of its adoption nor does it require courts to accept nonsensical explanations for regulation. The deference we owe expresses mighty principles of federalism and judicial roles. The principle we protect from the hand of the State today protects an equally vital core principle –- the taking of wealth and handing it to others when it comes not as economic protectionism in service of the public good but as “economic” protection of the rulemakers’ pockets.

Another big win for the Institute for Justice, which has shown a rare ability to win economic regulation cases on the grounds that the regulation lacks a “rational basis,” even though the rational basis test in economic liberty cases is usually extremely deferential to the government. [...]

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Debate at Rutgers University Law School in Camden on Whether the Constitution Protects Economic Rights

On Monday, March 11, I will be debating Georgetown Law Professor Michael Seidman at the Rutgers University School of Law in Camden, NJ, on the subject of whether the Constitution protects economic rights, broadly defined to include property rights as well as freedom of contract. The event will begin at 11 AM and continue for about 90 minutes or so. Rutgers Professor Earl Maltz will moderate. [...]

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Another Economic Liberty Victory for the Institute for Justice

These sorts of economic liberty rational basis cases are very hard to win, but the Institute for Justice is remarkably good at winning them. Here’s IJ’s summary:

In a major victory for economic liberty, a federal court ruled late yesterday that Utah’s requirement that hairbraiders have a government-issued cosmetology license is unconstitutional. Jestina Clayton, a Salt Lake city-based African hairbraider with more than 23 years of experience. Along with the Institute for Justice and local counsel Maxwell Miller and Randy Grimshaw of Parsons Behle & Latimer in Salt Lake City, Jestina filed suit to fight the state’s anti-competitive cosmetology regulations.

Under Utah law, Jestina could not be paid to braid hair unless she first spent thousands of dollars on 2,000 hours — one full year — of government-mandated cosmetology training. But Utah never considered African hair braiding when creating its licensing scheme and has never investigated whether African hair braiding is a threat to public health or safety. Moreover, Utah’s mandatory training is almost entirely irrelevant to African hairbraiding; Jestina would have to spend almost all of her 2,000 hours on irrelevant topics, and Utah did not even know whether African hair braiding was taught in its approved cosmetology schools.

The Honorable David Sam of U.S District Court for the District of Utah held, consistent with decades of U.S. Supreme Court precedent, that “The 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 the Constitution was designed to protect.”

Judge Sam further ruled that “Utah’s cosmetology/barbering licensing scheme is so disconnected from the practice of African hairbraiding, much less from whatever minimal threats to public health and safety are connected to braiding, that to premise Jestina’s right to earn a living by braiding hair

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Lochner and the Individual Mandate Revisited

Various defenders of the individual mandate have long argued that if the Court strikes down the law, it is likely to lead to the resuscitation of Lochner v. New York and the invalidation of a wide range of economic regulations. This meme has most recently been taken up by Jeffrey Rosen, who claims that striking down the mandate would be “resurrecting the pre–New Deal era of economic judicial activism with a vengeance.” Others have made similar claims, as I describe here.

I. Why there is no Doctrinal Connection Between Lochner and the Individual Mandate.

In reality, the individual mandate has no doctrinal connection to Lochner or any other economic liberties or property rights cases. I covered the reasons why in detail in this article (pp. 99-101). Co-blogger David Bernstein, a leading academic expert on Lochner, makes some additional relevant points here.

To briefly summarize, this case is different from Lochner for two reasons. First, Lochner restricted some types of economic regulations by the states as well as the federal government. If the Supreme Court invalidates the federal individual mandate because it is beyond the scope of congressional authority, states such as Massachusetts would remain free to adopt mandates of their own.

Second, even the federal government would still have extraordinarily broad authority to regulate actual economic transactions, including employment relationships, manufacturing, the purchase of goods and services, and so on. Congress would only be denied the power to impose mandates under the Commerce Clause in the absence of some preexisting “economic activity.” Even the Court’s most extreme previous Commerce Clause decisions – such as Gonzales v. Raich – would remain in force. I would be very happy to get rid of Raich, a dubious decision that concluded that Congress’ power to regulate interstate commerce [...]

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The Burden of Small Business Licensing

Two recent studies find that state licensing regimes for small businesses impose severe burdens on consumers and entrepreneurs alike. The first, by the libertarian Institute for Justice, finds that licensing is ubiquitous for a wide range of professions, and that it often has little or no public interest justification:

License to Work details licensing requirements for 102 low- and moderate-income occupations in all 50 states and D.C. It is the first national study of licensing to focus on lower-income occupations and to measure the burdens licensing imposes on aspiring workers….

All of the 102 occupations studied in License to Work are licensed in at least one state. On average, these government-mandated licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than one year to earn. At least one exam is required for 79 of the occupations….

Noted licensure expert Morris Kleiner found that in the 1950s, only one in 20 U.S. workers needed government permission to pursue their chosen occupation. Today, it is closer to one in three. Yet research to date provides little evidence that licensing protects public health and safety or improves products and services. Instead, it increases consumer costs and reduces opportunities for workers….

the difficulty of entering an occupation often has little to do with the health or safety risk it poses. Of the 102 occupations studied, the most difficult to enter is interior designer, a harmless occupation licensed in only three states and D.C. By contrast, EMTs hold lives in their hands, yet 66 other occupations face greater average licensure burdens, including barbers and cosmetologists, manicurists and a host of contractor designations. States consider an average of 33 days of training and two exams

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What Milton Friedman Means to Me

Co-blogger Eugene Volokh links to the Free to Choose Foundation’s “What Milton Friedman Means to Me” video competition. The contest marks the occasion of the 100th anniversary of Friedman’s birth. I’m not very good at making videos, but Friedman did mean a great deal to me, as I explained in this 2006 post on the occasion of his passing:

Milton Friedman, who just passed away, was probably one of the two most influential economists of the last century, along with Keynes. Along with F.A. Hayek, Friedman also played a key role in rescuing libertarian and classical liberal political thought from the intellectual oblivion that threatened to engulf it in the period from roughly 1932 to the late 60s. Without Friedman and the scholars he influenced, it is possible that big government conservatism would have become the only intellectually respectable alternative to the left in the wake of the Great Depression and World War II.

In addition to his more technical scholarship in economics, Friedman also invented an impressive range of public policy proposals, many of which remain relevant today. For example, his 1955 essay “The Role of Government in Education” introduced the idea of school vouchers, which recent studies show provide far greater benefits to poor and minority students than any other potential education policy reforms. Friedman was also a longtime proponent of the volunteer military on both economic and individual rights grounds. The abolition of the draft in 1971 was partially a result of his advocacy and its influence on political conservatives (most of whom previously were inclined to support conscription). Other influential Friedman policy ideas include the negative income tax (on which today’s earned income tax credit is partly based), and – of course -the monetary rule…..

On a more personal note, reading Friedman’s book Capitalism and Freedom

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Writings of Vaclav Havel

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

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The Right to Rise

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. [...]

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IJ’s Victory in the Bone Marrow Case

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. [...]

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Clark Neily (Institute for Justice) Guest-Blogging This Week

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. [...]

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New York Times Room for Debate Forum on West Hollywood’s Ban on the Sale of Fur

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 [...]

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