¹ Madison, James, “Essay on Property,” in The Writings of James Madison, ed. Hunt, Gaillard (New York: G. P. Putnam's Sons, 1906), vol. 6, pp. 101, 103.Google Scholar

² Macey, Jonathan R., “From Fairness to Contract: The New Direction of the Rules against Insider Trading,” Hofstra Law Review, vol. 13, no. 1 (Fall 1984), pp. 9–52.Google Scholar

³ Forsham v. Harris, 445 U.S. 169 (1980).Google Scholar

⁴ Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102 (1980).Google Scholar

⁵ Manges v. Camp, 474 F.2d 97 (5th Cir. 1973).Google Scholar

⁶ Until the 1930s, Congress and the judiciary in the United States were very respectful of property rights. Prior to the 1930s, “a laissez faire ideology based on classical economics was the dominant ideology of the educated classes in society” (Posner, Richard A., Economic Analysis of law, 3d ed. [Boston; Little, Brown and Co., 1986], p. 21).Google Scholar This ideology was reflected in judicial opinions which strongly protected property rights, e.g., Lochner v. New York, 198 U.S. 45 (1905)Google Scholar (declaring unconstitutional a New York statute limiting the number of hours a baker could work, on the grounds that it impaired the freedom of employers and employees to contract). During the 1930s, the Roosevelt administration launched an intensive legislative assault on property rights and contractual freedom, and the Supreme Court ultimately cooperated in this assault by dramatically curtailing its interpretation of the Constitution with respect to property rights and contractual freedom. For example, in West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937)Google Scholar, the Court upheld the constitutionality of a Washington statute imposing a minimum wage for women. The Court in this case declined to afford any weight to the economic liberty of the parties being regulated. Wholesale judicial approval of every aspect of New Deal legislation followed shortly thereafter. See, e.g., United States v. Darby, 312 U.S. 100 (1941)Google Scholar (upholding the Fair Labor Standards Act); NLRB v. Jones & Laughlin Steel Co., 301 U.S. 1 (1937)Google Scholar (upholding the National Labor Relations Act); Wickard v. Filburn, 317 U.S. 111 (1942)Google Scholar (upholding the Agricultural Adjustment Act).

⁷ This point is most often attributed to Adam Smith. The phrasing here is Richard McKenzie's. See McKenzie, Richard B., “Introduction,” in Constitutional Economics, ed. McKenzie, Richard B. (Lexington, MA: Lexington, 1984), p. 4.Google Scholar

⁸ Macey, Jonathan R., “Transaction Costs and the Normative Elements of the Public Choice Model: An Application to Constitutional Theory,” Virginia law Review, vol. 74, no. 2 (03 1988), p. 478.Google Scholar

⁹ For a full discussion of why rent-seeking legislation often does not attempt to impose direct cash transfers among groups, but instead takes a variety of more subtle forms, see Macey, Jonathan R., “Promoting Public-Regarding Legislation through Statutory Interpretation: An Interest Group Model,” Columbia Law Review, vol. 86, no. 2 (03 1986), pp. 223–68.CrossRefGoogle Scholar

¹⁰ McChesney, Fred S., “Rent Extraction and Rent Creation in the Economic Theory of Regulation,” Journal of Legal Studies, vol. 16, no. 1 (01 1987), p. 103.Google Scholar

¹¹ McKenzie, Richard B., Economics (Boston: Houghton Mifflin Co., 1986), eh. 4, p. 76.Google Scholar

¹² Posner, Richard A., “Hegel and Employment at Will: A Comment,” Cardozo Law Review, vol. 10, nos, 5–6 (03/04 1989), Part II, pp. 1625–36.Google Scholar

¹³ By the term “natural law” I refer to the norms and rules that must exist in order for man to exercise his natural rights without interference either from the state or from other men.

¹⁴ Posner, , “Hegel and Employment at Will: A Comment,” p. 1627.Google Scholar

¹⁵ The foremost exponents of these views of natural rights include Locke, John, Two Treatises of Government, ed. Cook, T. (New York: Hafner Publishing Company, 1947)Google Scholar, Second Treatise, ch. 2; and de Secondat, Charles Louis, de Montesquieu, Baron, The Spirit of the Laws, trans. Nugent, T. (New York: Hafner Publishing Company, 1949), ch. 12.Google Scholar

¹⁶ Posner, , “Hegel and Employment at Will: A Comment,” p. 1626.Google Scholar

¹⁷ One might argue that Posner is at least implicitly acknowledging the rights perspective because individuals cannot lose a right that they never had to begin with. Posner's response would seem to be that the state's rights trump those of individual citizens, although it is not obvious why this is the case. See Posner, , “Hegel and Employment at Will: A Comment,” p. 1627.Google Scholar Alternatively, Posner might respond that the individual had the right at first because the government gave it to him. But this would be factually inaccurate, because the government has not enacted laws covering every activity that individuals can engage in.

¹⁸ The term “Lochner era” derives from the Supreme Court's landmark 1905 decision in Lochner v. New York, 198 U.S. 45 (1905)Google Scholar, which concerned the constitutionality of a New York law limiting the number of hours a baker could work to sixty hours per week or ten hours per day. This New York statute was held unconstitutional in the U.S. Supreme Court on the grounds that it violated the constitutional right to contract of the employers and employees covered by the statute. Richard Epstein has found that the labor practices being regulated by the New York law did not exploit workers. Rather, the proposed legislation placed small, family-owned bakeries at a competitive disadvantage with respect to large, unionized bakeries. Epstein, Richard A., “Toward a Revitalization of the Contract Clause,” University of Chicago Law Review, vol. 51, no. 2 (Spring 1980), pp. 732–34.Google Scholar For a more complete discussion of the evolution of the treatment of economic liberties under the Constitution, see Siegan, Bernard H., Economic Liberties and the Constitution (Chicago: University of Chicago Press, 1980).Google Scholar

¹⁹ The Lochner decision in 1905 began an era in the Court's history, lasting until 1937, in which approximately two hundred economic regulations were struck down on the grounds that they violated citizens' rights to substantive due process. During the Lochner era, the Court protected private property rights from governmental interference and adopted a laissez-faire attitude toward economics and wealth distribution. Regulations of the terms and conditions of employment were routinely struck down by the Court. For example, in Adkins v. Cltildren's Hospital, 261 U.S. 525 (1923)Google Scholar, the Court struck down minimum-wage laws for women on the grounds that these regulations merely promoted wealth redistribution for women, and did not promote a legitimate health objective. Similarly, in Coppage v. Kansas, 236 U.S. 1 (1919)Google Scholar, the Court held that a state statute outlawing so-called “yellow dog” labor contracts, which required employees to sign a waiver of their right to join a union as a condition of employment, was invalid because it infringed upon the employers' and employees' freedom of contract.

The Lochner era began to crumble in 1934 with the Court's decision in Nebbia v. New York, 291 U.S. 502Google Scholar, upholding a regulatory scheme for fixing milk prices. The Court rejected the Lochner-era idea that governmental price regulation could only be extended to business in extremely rare circumstances, and allowed states to enact economic regulations that could be construed by legislators as promoting public welfare. The Lochner era was dealt its most crushing blow in 1937, when the Court overruled Adkins v. Children's Hospital, 261 U.S. 525 (1923)Google Scholar, and upheld a minimum-wage law for women in West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937).Google Scholar The decline of the Lochner era was due, in great part, to the Court's belief that New Deal programs were necessary for the nation's economic survival during the Great Depression. A shift in the membership of the Court contributed to Lochner's demise. New Deal reformers criticized the justices on the Court that decided Lochner for trying to protect the interests of capitalists at the expense of the general public's interest. The New Dealers succeeded overwhelmingly in shifting the Court away from its philosophical orientation in favor of property rights. Since 1937, no economic regulations have been struck down on substantive due process grounds.

²⁰ Sunstein, Cass R., “Beyond the Republican Revival,” Yale Law Journal, vol. 97, no. 8 (07 1988), pp. 1539–80.CrossRefGoogle Scholar

²¹ Perhaps the most famous example of the Court's willingness to overturn legislative enactments that infringe on real or perceived noneconomic rights is Roe v. Wade, 410 U.S. 113 (1973)Google Scholar, which established a constitutional right to abortion on the grounds that women enjoy a fundamental right to privacy. Similarly, in Texas v. Johnson, 491 U.S. 397 (1989)Google Scholar, the Court upheld the right of citizens to burn the American flag by overturning a Texas statute making it a crime to desecrate or otherwise mistreat the flag. The opinion was based on the constitutional right to freedom of speech. And, in Florida Starv. B.J.F., 491 U.S. 524 (1989)Google Scholar, the Court held that free-speech rights allowed newspapers to publish the names of rape victims despite a Rorida statute banning the practice. In Pierce v. Society of Sisters, 268 U.S. 510 (1925)Google Scholar, the Court struck down a statute requiring that children attend only public schools, thereby upholding the rights of parents to send their children to private schools, so long as such schools meet basic educational standards.

²² Nowak, John E., Rotunda, Ronald D., and Young, J. Nelson, Constitutiotial Law (St. Paul: West Publishing Co., 1978), pp. 77–78.Google Scholar

²³ The shift in the Court's reasoning reflected a greater trust in legislative judgments about social issues. The Court disclosed a willingness to defer to the legislature about what sorts of measures would promote public welfare. The change began in Nebbia v. New York, 291 U.S. 502 (1934)Google Scholar, when the Court stated that “a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare” (ibid., 537). Gradually, the Court rejected the idea that substantive due process was a viable legal theory. The result has been a deference to legislative authority that has manifested itself in cases such as Home Building & Loan Association v. Blaisdell, 290 U.S. 398 (1934)Google Scholar (upholding a statute granting local courts the power to relieve a mortgagor from foreclosure sales despite his violation of the terms of the mortgage, so long as he has paid a reasonable portion of the fair rental value of the property); P. F. Peterson Baking Co. v. Bryan, 290 U.S. 570 (1934)Google Scholar (upholding a Nebraska statute regulating the weight of every loaf of bread made for sale in Nebraska on grounds of protecting bakers from unfair competition); and Norman v. Baltimore & Ohio R.R. Co., 294 U.S. 240 (1955)Google Scholar (permitting the government to interfere with private contracts by invalidating agreements specifying that payments for services must be.in gold).

²⁴ Sunstein, , “Beyond the Republican Revival,” pp. 1539–80.Google Scholar

²⁵ Olson, Mancur, The Rise and Decline of Nations (New Haven: Yale University Press, 1982), p. 74.Google Scholar

²⁶ Ibid.

²⁷ Ibid.

²⁸ Ibid.

²⁹ Ibid., p. 77.

³⁰ This analysis presumes that ex ante none of the parties think that they will be net winners in the rent-seeking process. This presumption will be robust in any society in which there are a large number of different factions, groups, and interests. In such a society, individuals will be members of losing factions more often than they will be members of winning factions, because the rent-seeking process is characterized by wealth transfers through the political system from large, disparate groups to small, discrete interest groups. Individuals may receive net benefits when they happen to be allied with small, discrete groups. But these same individuals will find themselves on the giving end of wealth transfers far more often than they find themselves on the receiving end, because they will not be members of most of the small, discrete groups that participate in the rent-seeking process.

³¹ Individuals who expect to be net winners in the political process can be bought off easily because of the threat of exclusion from the new civil society. By demanding a side payment in the first place, those individuals who expect to be net winners reveal themselves as being a net drag on the productivity of the future society. This disclosure will reduce dramatically the willingness of other potential members to include them in the first place.

³² See Madison, James, “Federalist No. 10,” in The Federalist Papers, ed. Rossiter, Clinton (New York: Mentor, 1961), p. 77Google Scholar (“[a]mong the numerous advantages promised by a well-constructed Union, none deserves to be more accurately developed than its tendency to break and control the violence of faction”); Hamilton, Alexander, “Federalist No. 22,”Google Scholar in ibid. (applauding political stalemate and governmental inaction); Madison, , “Federalist No. 37,”Google Scholar in ibid., p. 231 (describing the Framers, ' “deep conviction of the necessity of sacrificing private opinions and partial interests to the public good”)Google Scholar; Madison, , “Federalist No. 51,”Google Scholar in ibid., p. 322 (explaining the Framers, ' “policy of supplying, by opposite and rival interests, the defect of better motives,”Google Scholar in order to ensure stalemate rather than action at the behest of private interests); see also Sunstein, Cass R., “Interest Groups and American Public Law,” Stanford Law Review, vol. 38, no. 1 (11 1985), p. 29CrossRefGoogle Scholar: “[T]he problem of faction has been a central concern of constitutional law and theory since the time of the American Revolution.”

³³ Macey, Jonathan R., “Competing Economic Views of the Constitution,” George Washington Law Review, vol. 56, no. 1 (11 1987), p. 56.Google Scholar

³⁴ See Olson, , Rise and Decline of Nations, pp. 36–74.Google Scholar

³⁵ U.S. Constitution, Amendment V.Google Scholar

³⁶ U.S. Constitution, Amendment III.Google Scholar

³⁷ U.S. Constitution, Amendment IV.Google Scholar

³⁸ U.S. Constitution, Amendment IX.Google Scholar

³⁹ U.S. Constitution, Amendment X.Google Scholar

⁴⁰ The states' independence from the federal government permits them “to provide real, if today very limited, competitive alternatives for consumers of governmental services” (Posner, Richard, “The Constitution as an Economic Document,” George Washington Law Review, vol. 56, no. 1 [11 1987], pp. 4–38).Google Scholar

⁴¹ U.S. Constitution, Article IV, Section 2, Clause 1.

⁴² However, the anti-Federalists did anticipate this transfer of power to the federal government. See “Agrippa,” in The Complete Anti-Federalist, ed. Storing, H. (Chicago: University of Chicago Press, 1981), p. 99.CrossRefGoogle Scholar

⁴³ There has been a great deal of controversy in recent months over the salaries of top corporate officers, in part because executive compensation appears to have been increasing without a corresponding increase in corporate profits. It appears that compensation for top management is not as closely linked to performance as one might expect. See Jensen, Michael C. and Murphy, Kevin J., “Performance Pay and Top Management Incentives,” Journal of Political Economy, vol. 98, no. 2 (Winter 1990), pp. 225–64.CrossRefGoogle Scholar

⁴⁴ McCormick, Robert E. and Tollison, Robert D., Politicians, Legislation, and the Economy: An Inquiry into the Interest Group Theory of Government (Boston: Martinus Nijhoff, 1981), pp. 45–57.CrossRefGoogle Scholar

⁴⁵ Olson, Mancur, The Logic of Collective Action: Public Goods and the Theory of Groups (Cambridge, MA: Harvard University Press, 1971), pp. 53–65.Google Scholar

⁴⁶ U.S. Constitution, Article I, Section 2, Clause 3.

⁴⁷ The most complete expression by the Framers of the role of the independent judiciary in protecting against rent-seeking is contained in “Federalist No. 78”:

But it is not with a view to infractions of the Constitution only that the independence of the judges may be an essential safeguard against the effects of occasional ill humors in the society.… [T]he firmness of the judicial magistracy is of vast importance in mitigating the severity and confining the operation of such [unjust and partial] laws. It not only serves to moderate the immediate mischiefs of those which may have been passed but it operates as a check upon the legislative body in passing them; who, perceiving that obstacles to the success of an iniquitous intention are to be expected from the scruples of the courts, are in a manner compelled, by the very motives of the injustice they meditate, to qualify their attempts. (Hamilton, Alexander, “Federalist No. 78,”Google Scholar in Rossiter, , ed., The Federalist Papers [supra note 32], p. 470)Google Scholar

The Framers intended the judiciary branch to be a distinctly separate, independent mechanism for securing “a steady, upright and impartial administration of the laws” (ibid., p. 471) and for strictly upholding the rights guaranteed by the Constitution. While the judicial branch was intended to serve as a check on legislative excess, it was also designed to be the weakest of the three branches, having only the power of judgment and neither the independent power to enforce its decrees nor the ability to influence or control the financial affairs of the nation. To effectuate this, the Framers believed it was necessary for all federal judges to hold their positions, pending good behavior, for life terms. Life tenure ostensibly would remove the political pressures exerted over other government officers and would allow for the long, detailed study of precedent that was necessary, the Framers believed, to just administration of the laws.

The power of judicial review was not expressly granted by the Constitution. The Supreme Court's role as the final arbiter of the Constitution was a product of judicial construction, in Marbury v. Madison, 1 Cranch 131 (U.S. 1803)Google Scholar, where Chief Justice Marshall reasoned that a denial of judicial review of the constitutionality of legislative enactments would force the courts to ignore the Constitution in violation of their oath of office, which requires them to support the Constitution.

⁴⁸ As an example of the pre-New Deal attitude toward property rights, see the decision handed down in Lochner v. New York, 198 U.S. 45 (1905)Google Scholar (described in note 18 above).

⁴⁹ Madison, James, “Federalist No. 10,”Google Scholar in Rossiter, , ed., The Federalist Papers (supra note 32), p. 79Google Scholar; italics added.

⁵⁰ Ibid., p. 81.

⁵¹ Nowak, , Rotunda, , and Young, , Constitutional Law (supra note 22), pp. 77–78.Google Scholar

⁵² Under Article I, Section 8, of the Constitution, Congress is given explicit authority “[t]o regulate Commerce with foreign Nations, and among the several States and with the Indian Tribes.” In addition to being a positive grant of authority to Congress, this provision has been construed as limiting the power of state legislatures, by depriving them of the power to enact statutes that interfere with interstate commerce. In Gibbons v. Ogden. 9 Wheat 1 (1824)Google Scholar, the Court held that only Congress and not state legislatures could regulate commerce affecting more than one state. States can only regulate commercial activity that does not affect interstate commerce.

The Fifth Amendment to the Constitution provides that “[n]o person shall be … deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” Under current Fifth Amendment jurisprudence, the states and the federal government have the right to take private property so long as the private owner is justly compensated for such use. If property is merely subjected to regulatory restrictions, however, no compensation is required. To avoid having a regulatory act classified as a compensable taking, the government must prove that the regulation substantially promotes legitimate governmental interests and does not deny the owner of the property any economically viable use of his land, see Agins v. City of Tiburon, 447 U.S. 255 (1980).Google Scholar In theory, a taking is never justifiable except for a “public use.” However, the Court has interpreted the public-use requirement so broadly that now any interference with ownership that is “rationally related to a conceivable public purpose” satisfies the public-use requirement; see Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984).Google Scholar

⁵³ In general, the diminution in protections for property rights came when the Court abandoned its belief in the virtues of private property and free markets. In particular, in hundreds of constitutional cases involving the takings clause, the commerce clause, and due-process rights, the Court has balanced the articulated interests of the state against the property interests involved in the case, and has exalted the state interests over the property interests. For example, in Penn Central Transportation Co. v. New York, 438 U.S. 104 (1978)Google Scholar, the Supreme Court held that New York law could prohibit Penn Central from building a multistory office building above Grand Central Station. The Court held that the severe restrictions on property rights that came as a result of the designation of Grand Central Station as a historic landmark did not constitute a taking.

It is simply impossible for a litigant to succeed in persuading a court that a legislative act violates substantive due process norms. And it is extremely difficult for a litigant to succeed in establishing that a regulatory action constitutes an unconstitutional taking. To prevail, a plaintiff must either show a permanent physical occupation of his land, or a complete destruction of the value of the land as a consequence of the government's action, or that the government has reneged on a commitment it has made, thereby frustrating distinct investment-backed expectations on the part of the plaintiff; see Lucas v. South Carolina Coastal Council, 112 S.Ct. 2886 (1992).Google Scholar Thus, unless one can show that the government's action has harmed some particular discrete and insular minority that has been singled out for special protection by the Court, legal protests against government-imposed wealth transfers generally are in vain. For an extended discussion of the reasons why the Court abandoned its protections for property rights, see Macey, Jonathan R., “Some Causes and Consequences of the Bifurcated Treatment of Economic Rights and ‘Other’ Rights under the United States Constitution,” Social Philosophy & Policy, vol. 9, no. 1 (Winter 1992), pp. 141–70.CrossRefGoogle Scholar

⁵⁴ Sunstein, , “Beyond the Republican Revival” (supra note 20), p. 1577.Google Scholar

⁵⁵ Paul, Ellen Frankel, “Moral Constraints and Eminent Domain,”Google Scholar review of Epstein, Richard, Takings: Private Property and the Power of Eminent Domain, George Washington Law Review, vol. 55, no. 1 (11 1986), pp. 174–75.Google Scholar

⁵⁶ See, e.g., Hamilton, , “Federalist No. 78” (supra note 47), p. 470.Google Scholar

⁵⁷ Macey, , “Promoting Public-Regarding Legislation” (supra note 9), pp. 251–56.Google Scholar

⁵⁸ Buchanan, James M. and Tullock, Gordon, The Calculus of Consent: Logical Foundations of Constitutional Democracy (Ann Arbor: University of Michigan Press, 1965), pp. 233–48.Google Scholar

⁵⁹ This example is drawn from Weingast, Barry R. and Marshall, William, “The Industrial Organization of Congress,” Journal of Political Economy, vol. 96, no. 1 (02 1988), pp. 132–63.CrossRefGoogle Scholar

⁶⁰ Weingast, Barry R., “The Political Institutions of Representative Government: Legislatures,” Journal of Institutional and Theoretical Economics, vol. 145, no. 4 (12 1989), pp. 693–703.Google Scholar

⁶¹ Ackerman, Bruce, “The Storrs Lectures: Discovering the Constitution,” Yale Law Journal, vol. 93, no. 6 (05 1984), p. 1015.CrossRefGoogle Scholar

⁶² See Weingast, and Marshall, , “The Industrial Organization of Congress,” pp. 132–43.Google Scholar

⁶³ Mayton, William T., “The Possibilities of Collective Choice: Arrow's Theorem, Article I, and the Delegation of Legislative Power to Administrative Agencies,” Duke Law Journal, vol. 1986, no. 3 (12 1986), pp. 948–56.CrossRefGoogle Scholar

⁶⁴ For a complete discussion of the operation of the committee system, see Weingast, and Marshall, , “The Industrial Organization of Congress.”Google Scholar

⁶⁵ Aranson, P., Gellhom, E., and Robinson, G., “A Theory of Legislative Delegation,” Cornell Law Review, vol. 68, no. 1 (Fall 1982), pp. 1–60.Google Scholar