The Birth of a Transfer Society
Anderson, Terry L. & Hill, Peter J.
THE BIRTH OF A TRANSFER SOCIETY Terry L. Anderson and Peter J. Hill Hoover Institution Press / $6.95 Karl O'Lessker VV nen government has the authority to transfer wealth from one person to...
...Does anyone suppose for a moment that present policies would yield to a new-found revelation of what the Framers really thought was sound political economic policy for the sparsely settled agrarian society of two centuries ago...
...Yet, as Alfred H. Kelly and Winfred A. Harbison note in The American Constitution, the Chief Justice in his majority opinion was able to cite "several precedents from English and American law in which wharfs, warehouses, and private businesses had been subjected to regulation in the public interest" and to demonstrate "that the legislative power to regulate private property in the public welfare had passed unchallenged for centuries...
...Their position may fairly be summarized as follows: The original constitutional contract (of 1787 plus the Bill of Rights) was designed to promote productive activities and hold transfers to a minimum...
...Under these circumstances it is uniquely the responsibility of the Supreme Court to maintain the original contract in forceto sit, in other words, not merely as a court but as a Supreme Legislature...
...Even those of us who share the authors' economic and social-philosophical views may be inclined to question their interpretation of constitutional history and, more importantly, their view as to whom we should look to for protection of property rights and a healthy economy...
...The utmost possible liberty to the individual , and the fullest possible protection to him and his property, is both the limitation and the duty of government...
...benefits denominated in such terms as "social justice" or preserving the domestic dairy (or steel or merchant marine or tobacco) industry...
...One of the many merits of this excellent short book by two young economists at Montana State University is that they show clearly enough even for academic liberals to grasp that "Because transfers consume resources, such activities decrease the total product of society...
...only they are ever so much more powerful, being answerable to no one...
...THE BIRTH OF A TRANSFER SOCIETY Terry L. Anderson and Peter J. Hill Hoover Institution Press / $6.95 Karl O'Lessker VV nen government has the authority to transfer wealth from one person to another, he who stands to'gain or lose from such a transfer would be well advised to devote considerable resources to influencing government to act on his behalf...
...So it is that literally tens of thousands of lobbyists and lawyers earn comfortable livings in that line of work, but it is not at all clear that society as a whole benefits...
...A Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez-faire...
...There is another problem with this sort of analysis...
...This is not, however, Anderson and Hill's view of the matter...
...To the contrary, they claim that "By 1915 . . . the major barriers erected by the Founding Fathers against large-scale legislative transfers had been dramatically lessened or removed altogether . . . [T]he groundwork had been laid for the birth of a transfer society...
...And so, after two brief introductory chapters defining their terms and establishing an analytical framework, they turn to a historical review, primarily of the role of the Supreme Court in bringing about "the birth of a transfer society.'' It is here that problems arise...
...The authors quote Irving Kristol's confident assertion that the Founding Fathers "understood what their contemporary, Adam Smith, understood . . . that poverty is abolished by economic growth, not by economic redistribution...
...Anderson and Hill come awfully close to asserting some such proposition, but Holmes certainly didn't think so and I don't either...
...It has -to do with evaluating the long-term consequences of particular Supreme Court decisions...
...Justice Holmes had little doubt that that responsibility must lie with the elected representatives of the people...
...decreases the size of the pie...
...But of course that is not the largest, or even a very serious, problem with transfers...
...Anderson and Hill are concerned not so much to argue the case against transfersthough they do so very effectively and state at the outset that their purpose in writing the book is to change people's minds in favor of the free marketas to trace the history of how we got from a constitutional regime that largely guaranteed the integrity of market operations to one in which the federal government has become the nation's principal allocator of resources, possessing virtually unlimited regulatory power...
...Messrs...
...According to this conception, it is entirely proper, indeed praiseworthy, for a judge to assert as Justice David Brewer did in an 1892 opinion that "The paternal theory of government is to me odious...
...Did it, in other words, confer upon the new nation an ivory-pure laissez-faire political economy which the Supreme Court was duty bound to preserve...
...but which institution in a democracy should have the responsibility for elevating such sentiments into lawthe court or the legislature...
...The Founding Fathers, for all their brilliance, were children of their age, an age in which the doctrines of laissez-faire were brand new and very far from being generally accepted...
...When government decides, for instance, to transfer vast sums of money from the pockets of consumers to the bank accounts of milk producers, our primary concern is not likely to be over what better things the lobbyists, legislators, and bureaucrats might have been doing with their time...
...Now it may be that, as a practical matter, the American people are so unsuited for self-government that they must be protected against themselves by some such device as a Supreme Court of unelected philosopher-kings...
...Consider the landmark case of 1877, Munn v. Illinois, to which Anderson and Hill rightly pay great attention...
...If the authors' hope is ever realized for "an intellectual revolution strengthening our ideological commitment to basic rules limiting transfer activity and a constitutional revolution embodying that commitment,'' this book will have contributed materially to that happy outcome...
...But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law...
...And, save for sporadic concessions to the power of the several states to regulate working conditions for women and children, it remained overuled till the Court did its historic ibout-face in 1937...
...The problem, then, is to determine what the Fathers regarded as permissible intrusions of state and national governments into the free exercise of property rights and contract-making...
...To be sure, the architects of our constitutional system were passionate defenders of private property and powerful advocates of limited government...
...And that is why Holmes's doctrine of judicial self-restraint deserves the assent of conservative free-marketeers even more than of liberals...
...Jid the Constitution of 1787 (as Justice Holmes wondered in a slightly different context) "enact Mr...
...In most respects it is a model of analysis economically (no pun intended) stated...
...But as Bruce Ackerman has noted in Private Property and the Constitution, "the Framers were neither blind worshipers of the market nor principled opponents of active government in all its forms...
...These disagreements aside, I have nothing but admiration for the in-sightfulness and lucidity of the book...
...Anderson and Hill claim that this decision "revolutionized regulation law" and so indeed opponents of the decision, including Justice Stephen Field, vehemently averred...
...It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States...
...If it were a question whether I agreed with that theory, I should desire to study it further and long before making up my mind...
...In his classic dissent in Lochner v. New York (1905) he wrote: This case is decided upon an economic theory which a large part of the country does not entertain...
...Let us suppose the impossible, that we were able to solve this problem say, by discovering a cache of papers setting forth the explicit views of all or most of the authors of the Constitution on just these questions...
...But Court justices turn out to be just as variable, inconstant, and error-prone as any of the rest of us...
...Paul Railway Co...
...A society as generally affluent as ours won't be measurably impoverished by the loss of product resulting from so many people working as lobbyists rather than as chemists or farmers or tool-and-die makers...
...But democratic legislatures are always and everywhere prone to yield to majoritarian and special-interest pressures to engage in transfer (i.e., non-productive) activities...
...And in fact, contrary to the view expressed by Anderson and Hill, Munn v. Illinois, in its expansive view of the police powers of the state, was a lot closer in spirit to the Slaughterhouse cases of 1873 than to the great majority of all property rights cases of the succeeding half century when the doctrine of "substantive due process'' was repeatedly invoked by a conservative majority on the Court to strike down regulatory legislation of which it disapproved...
...In that case the Court upheld an Illinois statute regulating the rates that grain elevators located in Chicago could charge...
...v. Minnesota, as dissenting Justice Bradley pointed out, for all practical purposes overruled Munn v. Illinois...
...When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created...
...Let me deal with these in turn...
...Transfer activity . . . is a negative sum gamea series of social interactions that Karl O 'Lessker is senior editor of The American Spectator and Professor of Public and Environmental Affairs at Indiana University...
...Admirable sentiments...
...Herbert Spencer's Social Statics...
...s I have suggested, there are problems both historical and analytical with this viewbut I greatly admire the ingenuity with which the authors develop it in a remarkably brief and readable account...
...Indeed, the 1890 case of Chicago, Milwaukee and St...
...What then would we do about nearly 200 years of wildly conflicting Supreme Court decisions "interpreting" the Constitution...
...The far more serious reservation I hold lies with their conception of the proper role of the Supreme Court in the American political system...
...Writing for the majority, Chief Justice Waite enunciated the now famous doctrine that private property becomes clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large...
...My purpose in raising this point is not to defend the Court's decision in Munn but to observe how hard it is to establish that any single decision is truly revolutionary in either character or effect...
...It remained only for state and national legislatures, unchecked by a largely complaisant Supreme Court, to deliver the nasty squalling child...
...By the same token, proponents of coerced transferswelfare is what most conservatives think of in this connection, though in fact large-scale transfer activity long antedated welfare in the United Statesmay well concede the costs to "the total product of society" but still insist that the alleged benefits to society far outweigh the costs...
...That can hardly be correct...
Vol. 14 • March 1981 • No. 3
