The assault that failed: the progressive critique of laissez faire.

• Date: 01 May 1999
• Author: Epstein, Richard A.

THE PROGRESSIVE ASSAULT ON LAISSEZ FAIRE: ROBERT HALE AND THE FIRST LAW AND ECONOMICS MOVEMENT. By Barbara H. Fried. Cambridge: Harvard University Press. 1998. Pp. x, 338. $55.

PLAYING FOR ALL THE MARBLES

Robert Lee Hale has long been an intellectual thorn in the side of the defenders of laissez faire, among whom I am quite happy to count myself. As Barbara Fried(1) notes in her meticulous study of Hale's work, his name is hardly a household word. But both directly and indirectly, his influence continues to be great. His best known work is perhaps Coercion and Distribution in a Supposedly Non-Coercive State,(2) published in 1923 as a review of Thomas Nixon Carver's Principles of National Economy,(3) itself a defense of the classical principles of laissez faire, remembered today only for the drubbing that it took at Hale's hands. Hale also wrote one of the early influential treatments of the problem of "unconstitutional conditions," which addressed the still-perplexing question of the implicit coercion in the government's power to attach unpalatable conditions to its own contracts or grants.(4) He wrote a number of influential attacks on the principle of freedom of contract.(5) He took an active role (pp. 186-89) in overthrowing the dominance of Smyth v. Ames,(6) which for the better part of two generations fixed the "fair value" limitation as a restraint on the state power to regulate railroads and other public utilities. Although his work is not as well known in general intellectual circles today as that of T.H. Green(7) or Leonard Hobhouse,(8) (who both receive much attention from Fried), Hale has a low-key durability that ranks him as one of the most formidable and persistent foes of laissez faire in the first half of this century.

To be sure, a steady stream of distinguished authors has taken note of his positions and has sought, generally, to build upon them.(9) But Fried is the first writer to devote a long-overdue, full-length monograph to his work. Hers is, without question, a careful and sympathetic portrait of Hale. Her mission is to persuade the reader that his insights are lasting and his continued influence fully deserved. Fried has had access to Hale's private papers and is thoroughly conversant in nineteenth century intellectual forces in both Great Britain and the United States. At every point she gives due credit to the many earlier writers who helped to shape Hale's views. Indeed, her copious footnotes are a treasure trove of information for anyone who wants to study further the intellectual origins of the progressive tradition.(10)

Not surprisingly, Fried also identifies strongly with Hale's substantive positions. Most concretely, she claims that his conceptual framework "allowed him to make three crucial and largely irrefutable points" (p. 18). These are, first, that coercion, properly understood, is "ubiquitous, inevitable, and, to a considerable extent, desirable"; second, that coercion is measured by its target and not by its source, so that individuals can be coerced either by natural necessities or by legal rules; and third (in consequence of the first two), that the Supreme Court could not rely on any constitutional theory that sought to "condemn state interference with private choices merely on the ground that it was factually coercive" (p. 18). In the end, however, Fried cannot rehabilitate ideas that, however alluring, were unsound the day they were penned and have proved ever more untenable with the passage of time. The bottom line is this: Hale was an ingenious scholar, but a systematic failure.

To defend this harsh conclusion, it is necessary to recap in brief form the main principles of laissez faire theory, with its economic, institutional, and constitutional dimensions. Its central tenets attach great importance to individual liberty, private property, freedom of contract, and limited government. In its negative frame of mind, laissez faire takes a dim view of the use of force and fraud in human relations, and (in its sensible versions at least) worries about the dangers that flow from the use of monopoly power, whether acquired by legal grant or by hard labor mixed with good fortune. This last qualification is important, for, as Fried notes, the American version of the theory allowed a good deal more leeway to government than some of its Spencerian forbearers. More specifically, American laissez faire allowed government intervention to create infrastructure and other public goods. It also found the control of monopolies to be a legitimate government function, not only when these were created by operation of law, but also when they arose solely by private means.(11)

By the same token, laissez faire also takes a cautious view of government power. Laissez faire is not a disguised form of anarchism, and it recognizes the need for state power to preserve public safety, health, and good order. It understands that the government must supply public infrastructure, and, in line with the Fifth Amendment, recognizes that the state may properly take private property for public use so long as it pays just compensation for it. Laissez faire constitutionalism had its strong defenders in the nineteenth century, among whom Thomas Cooley(12) and Christopher Tiedeman(13) figure prominently.

Writing at the height of the progressive movement in American politics, Hale would have none of this. His major negative mission was to rip down the institutional and constitutional infrastructure upon which laissez faire rested. He thought that vast levels of legislative discretion over the regulation of economic affairs were proper. Toward that end, he believed that the major function of government was to improve the economic position of the working class. This single desire made him a staunch early defender of the Wagner Act, and a defender of various systems of wage and price controls that could prevent the rentiers who owned private property from reaping "supernormal returns" (p. 6), that is, any gains from the use of the property that were not necessary to prevent that property from being turned to another use.

Yet for all his obsessions, Hale curiously failed to defend his positive mission. Even though his political positions were relatively clear, he never quite tells us what the legislature should do with its power, or why it should do it, once it extricated itself from the false gods of classical constitutional law and laissez faire economics. Hale was much more comfortable whipping his enemies than developing his own positive vision. Indeed, given his methods, that is just what should be expected. Hale worked by intellectual demolition. The titles of Fried's key chapters capture his intensity. Her neutrally labeled "Introduction" is followed by heavy artillery. Chapter Two is devoted to "The Empty Idea of Liberty." Hard on its heels comes Chapter Three, "The Empty Idea of Property Rights." The term "empty" is meant to convey the strong philosophical condemnation of these bellwether conceptions of laissez faire. Hale was not content to show how liberty and property had lost their practical punch in the modern industrial age. Rather, emptiness stands for the intellectual bankruptcy on which it is impossible to build a coherent system of legal rights and duties, no matter what the social context. According to Hale, laissez faire could do no better by simple rustic societies than complex industrial economies.

But if these terms are incoherent, what philosophical vocabulary could do better? It seems equally likely that some astute critic will find some fatal contradiction in "human equality," "public interest," or "common good." Surely any determined critic could have a field day with "gender equality," or with "equalizing people's functional capacity to achieve a meaningful life,"(14) or the countless egalitarian variations on these themes. The battle over political and legal theory will not be won by any deductive assault that proclaims the logical necessity of its own position and the conceptual incoherence of all rival camps -- a lesson that applies to libertarian theorists as well as to champions of the welfare state.(15) The great danger of throwing knockout punches is that they often backfire to cold-cock those who throw them.

Alas, Hale never quite understood the force of that observation. His great weakness was his determination to slay the dragon without pausing to consider what he would put in its place. The more sensible theoretical position starts from the premise that any legal order necessarily depends on second-best accommodations that are needed precisely because first-best solutions are never obtainable. Pure conceptual arguments are necessarily limited in their scope and power. They can remove ambiguity; they can eliminate contradiction. But, in the end, these preliminaries only serve to beef up the rival theories -- libertarianism, socialism, progressivism, liberalism, egalitarianism, totalitarianism -- which have to stand or fall on some rough empirical estimation of their relative strengths and weaknesses. Because he never quite grasped this point, Hale was too confident in his negative case against traditional laissez faire, and too sketchy in his own affirmative case. As Fried lamely concludes, "while Hale's argument was analytically radical, it did not lead necessarily to politically radical conclusions" (p. 210). Hale was too knowledgeable about the merits of competition as a socialist, and too concerned with incentives to be an unstinting egalitarian. Fried is right to say that he is best understood to be part of the tradition of Hobhouse, Dewey, Lippmann, and other social democrats who sought to find "a middle way between the new socialism and the old liberalism" (p. 233 n.35).

Nevertheless, the team of Hale and Fried has been touted as having made "one of the best demolitions, in law or political theory, of that contested concept [of laissez faire]."(16)...