Why We Need Classical Liberalism

Richard Epstein

Unlike those on the left and right, the proponents of limited government offer viable solutions to our nations most pressing problems.

The single most important fault line in American constitutional law dates back to 1937. In that year, the Supreme Court granted several important victories to the progressive movement, which in the first third of the twentieth century displaced the more classical liberal movement of the so-called old court. The bedrock assumption of the progressives was that a combination of inclusive democratic politics and administrative expertise could forge a more prosperous economy while simultaneously reducing the economic gulf between the rich and the poor. To reach their goals, the progressives needed to win on two key constitutional issues. The first was a broad reading of the “commerce clause”—“Congress shall have the power . . . to regulate commerce with foreign nations, and among the several states, and with the Indian Tribes”—so that virtually all productive economic activities, from agriculture and manufacturing to transportation and communication, would become subject to centralized regulation from the national government. The second was to narrow the scope of economic liberty and private property so they could not block the will of the administrative state.

In my first encounter with progressive thought in college and law school in the 1960s, I thought that the progressive agenda was unpersuasive, both for its cavalier disregard of specific constitutional texts, and for its uncritical embrace of large government. I fancied myself a libertarian who insisted that the sole function of government was the control of force and fraud. Over years, my position evolved toward classical liberalism, which regards it as proper for government to also supply public goods like courts and infrastructure, to regulate monopoly, to tax to raise general revenues, and to use its eminent domain power to acquire specific assets needed for public use. My objective was to take the middle path between anarchy on the one side and state domination on the other. Classical liberalism stands in opposition to both hard-core libertarian minimalism and the unbounded progressive state. My new book, The Classical Liberal Constitution: The Uncertain Quest for Limited Government, offers a comprehensive synthesis of the common law origins of individual rights, the key provisions of the United States Constitution, and the classical liberal theory that undergirds both.

Cass Sunstein and The New Republic

One person who has long appreciated the various nuances of my intellectual odyssey is Cass Sunstein, my former colleague at the University of Chicago. His thoughtful review of my book in The New Republic carries two eye-popping titles. In the print version it reads: “Tea Party Constitutionalism: The unexamined dogmas of the libertarian right.” The online title, with its mix of flattery, condescension, and denunciation, is probably worse: “The Man Who Made Libertarians Wrong About the Constitution: How Richard Epstein’s highly influential, highly politicized scholarship cemented Tea Party dogma.” I am confident that the editors of The New Republic chose both these inflammatory title to discredit my book to its readers. The magazine has little patience for the Tea Party, whose own website exhibits a hard-hitting style of politics that is at sharp variance with my own more cerebral approach. It is easy for them to debunk my book for its supposed Tea Party connections.

There is, of course, a complete disconnect between the inflammatory titles and the article that follows. To his credit, Sunstein’s review goes to great pains to trace out the evolution of my intellectual approach before criticizing it. As he notes, I do not come to constitutional law as a full time teacher of the subject who treats the Supreme Court as its intellectual epicenter. Rather, my view is that we can only understand and interpret the document by explicit resort to its common law, or judge-made, foundations of individual rights and their correlative duties. One strong focus of the common law is on two-person disputes: A has hit B, or C has not kept his promise to D. In these cases, the equities between the parties loom large relative to the litigation costs needed to resolve them. Accordingly, a libertarian framework that prohibits the use of force and fraud and prizes voluntary cooperation helps us analyze particular cases.

Eventually, however, we must move beyond two-party disputes to those legal conflicts that implicate large numbers of people. Consider, for example, the case of pollution, a common form of nuisance, which may come from many sources and harm many people simultaneously. When that happens, ordinary two-party litigation becomes too costly relative to the benefits it generates. As a result, well-crafted direct regulation steps in to control the harmful externalities from pollution at a far lower cost than individual lawsuits. At the same time, many forms of noise or odor pollution are both low-level and widely distributed, such that it is best to adopt, as I argued in 1979, “the live-and-let-live approach” that Baron George Bramwell articulated so brilliantly in his 1862 masterpiece in Bamford v. Turnley.

 The logic behind Bamford was that each landowner was forced to relinquish some of his property rights against all neighbors, in exchange for which they had to release their rights of action against him. Each release from others thus supplied in-kind the just compensation needed to offset the loss of property rights, so that everyone was better off than before.

These forced exchanges for mutual benefit became, in my view, the calling card for collective action. The broad application of the just compensation principle thus supplied the intellectual bridge between private and public law. In the classical liberal framework the government could force exchanges of property rights so long as all parties were left better off than before. That principle is connected to welfare economics through the notion of Pareto improvements, which favor any social change that leaves at least one person better off and no one worse off. It also links to the just compensation provision of the Fifth Amendment, “nor shall private property be taken for public use, without just compensation.”

As I argued in my 1985 Takingsbook, the Fifth Amendment marks a major advance over standard Lockean theory, which sought to ground limited government in the notion of consent. But if individual consent is required for each government action, then the government is paralyzed. If the majority can wipe out the minority, then factions are given free rein. However, if you allow the government to take only if it supplies an equivalent to the property taken, then you neatly avoid the twin problems of holdout and expropriation. The link between public and private law thus runs through this middle way.

Classical Liberal or Progressive?

My classical liberal position forces progressive intellectuals like Sunstein to combat a foe that cannot be dismissed on the ground that it cannot account for the most rudimentary forms of legitimate government action. Sunstein himself, I believe, commits just this error in his 1999 book, with Stephen Holmes, The Cost of Rights: Why Liberty Depends on Taxes. That book offers an elegant explanation of why taxation is needed to provide for public goods like fire prevention and to enforce private rights, including those of contract and property. What is most interesting about their book, however, is that it does not identify any major intellectual figure who thinks that the optimal level of taxation is zero. Indeed, their one quotation from Friedrich Hayek, himself a defender of the flat tax, warned against the excesses of laissez-faire that Hayek found distasteful.

The classical liberal position similarly recognizes the necessity of taxation along the lines found in the United States Constitution. Classical liberalism and the Constitution also both address the question that Holmes and Sunstein avoid in their book: What is the optimal form of taxation? Making the right choices requires a close study of the proper ends for taxation and of different types of taxation—income, real estate, sales, estate, and gift. In all cases, that search has a strong second-best flavor, because all taxes tend to distort the relative prices of the various goods and services subject to taxation.

Classical liberals tend to favor special assessments and user fees whenever individual benefits can be paired with individual burdens. Otherwise they gravitate to a single flat tax on income or consumption, on the ground that neither imposes any explicit limit on government revenues, but both reduce through their fixed forms the overall level of factional intrigue, which is magnified, for example, by blunderbuss egalitarian proposals such as those by Thomas Piketty.

What Constitutional Revolution?

Sunstein’s review never challenges any of the particular places where I claim that the classical liberal approach is superior to its progressive alternative, as both theories relate to government structure or individual rights. Instead, Sunstein notes that many contemporary thinkers have rejected my basic constitutional orientation. He even invokes the authority of Oliver Wendell Holmes, Jr. to push for popular democracy: “If my fellow citizens want to go to Hell I will help them. It’s my job.” After expressing some sympathy with some of my (unidentified) positions, he concludes emphatically that “a judicially engineered constitutional revolution is not what America needs now.”

The argument is too convenient to work. The general public is pessimistic about the current economic situation, and one progressive gimmick after another has not stemmed the retreat. Indeed, if Holmes were right, then the rights of the “discrete and insular minorities” could be trampled at will, both before and after the epic 1954 Supreme Court decision in Brown v. Board of Education.

So the question really is, which items should be left to political processes and which should not? On that score, Sunstein sometimes veers toward libertarianism, like when he writes in praise of Justice Anthony Kennedy’s 2013 Supreme Court decision in United States v. Windsor: “The word ‘dignity’ can’t be found in the Constitution,” and yet Windsor’s “insistence on human dignity as a constitutional value . . . stands at the heart of our longstanding commitment to equal protection of the laws.” One freewheeling constitutional revolution that Sunstein blesses—gay marriage—ultimately rests on the strong libertarian foundations that both Sunstein and The New Republic attack.

If it is possible to support constitutional revolutions that go against the weight of history and tradition, why not support a return to a classical liberal reading of the Constitution that has both strong textual and theoretical support? 

The Classical Liberal Constitution: Panel I, Structure


Panelists respond to Richard Epstein's take on Constituitonal Structure. The panelists focused on separation of powers, and the protections this structure provides for liberty.  But there were questions raised about whether or not the constitution needs an update (every 19 years), because of the rise of modern politics. Checks and balances do not work the same way as they once did, due to the rise of party politics. 

Overall, a reasoned discussion but Professor Michael Greve raised perhaps the most eyebrows and a screetch from Richard Epstein by providing an endorsement, albeit tepid, of Wickard v. Filburn.  In doing so, Greve jokingly stated he was part of the "socialist faction of the George Mason Law faculty, while Ilya Somin is the median voter."

Stay tuned for more updates throughout tht day.

The Journal of Law & Liberty Annual Symposium: "The Classical Liberal Constitution"

On behalf of The Classical Liberal Institute and the New York University Journal of Law & Liberty, we invite you to today's symposium at New York University School of Law. The topic of the conference will be Professor Richard Epstein’s new book The Classical Liberal Constitution: The Uncertain Quest for Limited Government.

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The conference will bring together legal scholars from around the country to analyze and debate Professor Epstein’s The Classical Liberal Constitution. Professor Epstein employs close textual reading, historical analysis, and political and economic theory to urge a return to the classical liberal theory of governance that animated the framers’ original text, and to the limited government this theory supports. Grounded in the thought of Locke, Hume, Madison, and other Enlightenment figures, the classical liberal tradition emphasized federalism, restricted government, separation of powers, property rights, and economic liberties. 

The conference begins at 9:30AM with Opening Remarks by Dean Trevor Morrison and an Introduction by Professor Mario Rizzo. 

Following the Introduction, there will be three panels, each focusing on a different aspect of the book:

1. Constitutional Structure, 10:00 AM: This panel will evaluate the structural aspects of the classical liberal constitution, including the roles of each branch of the federal government, separation of powers, and federalism. Professor Epstein defends the traditional view of separation of powers at the federal level, which cuts against the progressive effort to build administrative agencies into the basic system. He also defends on both structural and textual grounds the pre-1937 view of limited commerce and taxing powers against the progressive position that envisions a broad role for government in both these areas.

Moderator: Professor Troy McKenzie (NYU Law)

Panelists: Michael Greve (George Mason Law), Richard Pildes (NYU Law), Richard Wagner (George Mason University), and John Yoo (Berkeley Law)

2. Individual Rights, 1:15 PM: This panel will evaluate the classical liberal constitution’s theory of individual rights–including property, liberty, contract, speech, religion, and equal protection. On these issues, Professor Epstein argues that the interpretive principles set out above tend to argue for the protection of broad rights which in turn are subject to major public justifications that are often encapsulated in the traditional notion of the police power. That uniform position is then contrasted with the modern two-tier progressive structure that tends to follow this approach with preferred freedom and suspect classification but ignores it in connection with traditional property, contract, and, in some cases, procedural protection.

Moderator: Christopher Sprigman (NYU Law)

Panelists: Daryl Levinson (NYU Law), Deborah Malamud (NYU Law), Thomas Merrill (Columbia Law), and Ilya Somin (George Mason Law)

3. Constitutional Methodology, 3:15 PM: This panel will evaluate Professor Epstein’s theory of constitutional interpretation, which starts from a textualist position that it modifies in two ways. The first involves applying general principles to deal with non-textual issues of circumvention, justification, and remedy. Second, he discusses when the prescriptive
constitution (based on long practice) leads to a departure from the original text. That interpretive background is then applied to the major conceptual shifts from the classical liberal constitution that he defends and the modern progressive world view that he attacks.

Moderator: TBA

Panelists: Barry Friedman(NYU Law), Gary Lawson (Boston University Law), Michael Rappaport (San Diego University Law), Nicholas Rosenkranz (Georgetown Law), and Adam Samaha (NYU Law)

At 11:45 AM and 5:00 PM, Professor Richard Epstein will give  remarks responding to the day's panels.   

Please RSVP

We hope you will be able to join us today.

Libertarianism and Classical Liberalism: Is There a Difference?

Mario Rizzo*

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I consider myself both a libertarian and a classical liberal. I have been teaching a seminar in classical liberalism at the NYU Law School for six semesters. I am always asked about the difference.  My answer is basically this. Classical liberalism is the philosophy of political liberty from the perspective of a vast history of thought. Libertarianism is the philosophy of liberty from the perspective of its modern revival from the late sixties-early seventies on.

The philosophy of liberty has always admitted of gradations or degrees. Consider that in the nineteenth century there were such thinkers as Lysander Spooner, Auberon Herbert, and Benjamin Tucker. These thinkers are sometimes called “individualist anarchists.” Clearly, they espouse a political philosophy that would anathema to most who call themselves “classical liberals.” Yet they do begin from many of the same premises as mainline liberals. They disagree with those who advocated a limited state insofar as they believed that a completely voluntary order based on private property was possible and morally desirable. They elevated the individual to the primary place in their analysis just like the rest of the classical liberal tradition.

Of course, a completely voluntary society might not work. It might degenerate into anarchy in the bad sense or into authoritarian government. If this is true, then of course the perspective is seriously deficient.

In the nineteenth century there was also Herbert Spencer. Although he was, at least later in life, an advocate of limited government, he did not have much on his agenda for government to do. He cast a critical eye on even things like municipal sanitation rules. But as one reads his Principles of Ethics, for example, it easy to see how he builds up a system individualism and extremely limited government based on ideas he shared with many other classical liberals of his day.

There was also the John Stuart Mill of On Liberty and his earlier (and better) inspiration Wilhelm von Humboldt. Von Humboldt wrote his famous treatise The Limits of State Power at the close of the eighteenth century. He was clearly opposed to the government provision of positive welfare and thought the state’s role should be confined to the so-called negative liberties. And yet he made an exception for the government provision of (limited) education. People needed education to become autonomous human beings.

In the late nineteenth century when liberal ideals were perceived as being under attack by the expanding suffrage, “unlimited democracy,” labor movement and so forth, the historian William H. Lecky sometimes sounded like a “conservative” in his defense of the traditional British political system and the House of Lords. The conflict between liberty and democracy, as he saw it, was of a piece with the views of the framers of the U.S. Consititution, John Stuart Mill’s views of representative government, and Herbert Spencer’s idea of political liberty as simply a fallible means to protect fundamental liberties rather than an end in itself.

In the early twentieth century, the classical liberal position was vigorously defended by the economist Ludwig von Mises at a time when it was dying across Europe and the U.S. Mises’s liberalism was in the tradition of Spencer, and earlier of Adam Smith, Jeremy Bentham, John-Baptiste Say, which saw economic liberty and international peace (anti-imperialism) as intimately connected. The warfare state destroys liberalism.  Friedrich Hayek largely followed Mises’s lead, especially in his critique of socialism, but at least in The Constitution of Liberty was much more sympathetic to the welfare state than Mises.

The general point is that classical liberalism or libertarianism is a broad philosophy, united in it elevating property, freedom of contract, and individual autonomy to the center of normative (and positive) analysis. All liberals and libertarians view the state as the central threat to liberty today.

Among those who hold to a philosophy ofliberty there can be two types of issues that separate them. The first (and in my view less important) are the philosophical or issues of principle. As I teach my students, some forms of classical liberalism are grounded in natural law, others in utilitarianism – both direct and indirect, others in contractarianism, and so forth. The more one studies these the more it becomes clear that the differences are often, although not always, marginal in practice.   The second are differences in empirical assessments. For example, to what extent can public goods be provided privately? Clearly, shopping malls are a way of providing certain public goods as are gated housing communities. Clearly, arbitration of disputes need not be provided by the state. How far can this go?

I do not meet classical liberals who object, on principle, to the shrinking of the state with regard to its “traditional” function when they can be reliably provided privately. The argument is generally over empirical assessments and practicality.

On issues of foreign policy and homeland defense there are differences across the classical liberal and libertarian spectrum. But it is a set of differences with the philosophy of liberty for a long time. Are these empirical or philosophical differences? Sometimes empirical differences have a way of being transformed into differences of principle if the participants in a debate see the issue as having very broad implications and if the empirical differences are difficult to resolve.

In 1899 the liberal William Graham Sumner vehemently decried the Spanish-American War as a threat to American liberty. This tradition of non-intervention, interrupted by the Second World War, was the norm. In the postwar world it was reaffirmed by Senator Robert A. Taft. But the threat of communism seemed to warrant a different philosophy to some like William F. Buckley, Jr. Many of his followers, however, were more disaffected communists than they were liberals or libertarians. Nevertheless, with the fall of communism the split on this subject between various kinds of classical liberals was reborn.

As the recent NSA revelations have made clear we have classical liberals on different sides. This issue is not divorced from a broader position of foreign policy. Some liberals contend that the terrorism problem is blowback from an interventionist foreign policy. So how to defend a liberal order (or a relatively liberal order) from outside aggression without destroying its liberal character is the common issue.

So there are important differences among liberals and libertarians but I view these are differences along a spectrum. Some are principled (“Never, ever, initiate the use of force”) and some are empirical (“Many public goods can be provided privately”) and some are hard to classify (“The NSA should not collect masses of meta data”). Some people will want to take these differences and harden them into different political philosophies with different names and so forth. But I suggest that libertarians and classical liberals have too much in common for any divorce. I see the important differences in various positions. I am much more sympathetic to some than to others.

So my answer is simple: Classical liberalism is a spectrum of thought. There are differences regarding the proper philosophical grounding of first principles, the strength of the presumption of these principles, as well as differences of an empirical nature. I prefer the term “classical liberal” because it evokes a long history of intellectual work and because I stubbornly believe that progressives have no right to the term “liberal.” 

*Dr. Mario J. Rizzo is associate professor of economics and co-director of the Austrian Economics Program at New York University.  He received his BA from Fordham University, and his MA and PhD from the University of Chicago.  He was also a fellow in law and economics at the University of Chicago and at Yale University.  He currently lectures for the Institute for Humane Studies and is an adjunct scholar of the Cato Institute. Professor Rizzo is also a member of the NYU Journal of Law & Liberty's Board of Advisors. 

The Problem With Net Neutrality

Richard Epstein

Internet regulation is a losing gambit for a fast moving, innovative industry.

This past week in Verizon v. FCC, the Federal Circuit Court for the District of Columbia once again addressed the mysterious role that net neutrality plays in the Federal Communications Commission’s regulatory arsenal. The simplest definition of net neutrality stresses that a telecommunications company must treat all data on the internet equally, without allowing for any prioritization by content or price differentials among customers.

 The FCC sought to regulate the operations of broadband companies, like Verizon, that routinely speed large amounts of data across the Internet through high-speed technological devices such as cable modems. In order to implement its program, the FCC adopted certain anti-blocking, anti-discrimination, and disclosure rules that limit how these broadband companies can operate. The case thus raises tricky questions of law and profound issues social policy.

The FCC Goes to Court

Federal Circuit Court Judge David Tatel’s lengthy and meticulous decision said little or nothing about the soundness of net neutrality. But it had a great deal to say about the FCC’s tangled regulatory web, especially as it relates to the elusive distinction between a “common carrier” on the one hand and an “information service provider” on the other.

First, it is widely settled that the FCC has extensive power to regulate common carriers. Just as their name implies, these companies carry things, from passengers to telephone messages to electricity. By virtue of being common, and not private, their obligation runs to all persons who request their services. Those two principles, when taken together, form the opening wedge for an extensive system of regulation, as in the present net neutrality dispute.

If a common carrier must take all comers, it cannot be given the option to turn down individual customers: hence the FCC’s anti-blocking rules. And if the common carrier cannot exclude some customers, so too it cannot charge them rates so high that they amount to a de facto exclusion: hence the general injunction to charge only “just and reasonable rates.” It’s no surprise that affected industries often try to circumvent these regulations. Consequently, the vigilant government applies the anti-discrimination norm to all “charges, practices, classifications, regulations, facilities, or services.” Disclosure obligations then enforce these basic regulations.

Information services are said to fall outside the category of common carrier obligations. But how should we distinguish between the two classes? As far back as 1980, the FCC administratively drew a distinction between ‘basic’ and ‘enhanced’ service, whereby only the former could be regulated under common carrier rules. The supposed ground of distinction is that information services do more than transmit information. They also supply content or the processes that transform information. Hence certain “edge providers” like Google, Twitter, and YouTube indisputably fall outside the common carrier rules. But it is a lot harder to see why it is that the rapid speed of broadband should somehow exempt it from common carrier regulation.

It looks, therefore, as though Verizon has to be wrong as a matter of law. But that hasty conclusion overlooks the administrative law complexities of the case. Quite simply, the FCC’s own administrative rules have classified broadband as an information service. The Supreme Court’s usual rules of administrative deference allow the FCC to make that decision.

But like all decisions, this one has consequences. The D.C. Circuit concluded that the FCC could not have it both ways. Judge Tatel held that once the FCC refused to classify the broadband providers as common carriers, it was expressly prohibited from treating them that way. Since its anti-blocking and anti-discrimination regulations were vintage common carrier rules, the FCC could not save its regulations by appealing to broad general statements in the FCC Act holding that “the FCC shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans.” The particular mandate trumps the general exhortation.

Regulation in Limbo

The technical peculiarities of Verizon have vast implications for the future direction of broadband services. The fuzziness of the statutory definition leaves the FCC the option of reclassifying broadband as a common carrier service. As a matter of ordinary language, that looks to be the correct call. Thus, in the future it seems highly unlikely that the District of Columbia Circuit Court would strike down any administrative decision that brought regulation into closer concordance with the statutory language.

The FCC, however, is not obliged to undertake that step, and political pressures currently are mounting on all sides of that reclassification effort. People eagerly ask whether potential losers, like Netflix, will have the power to turn things around. This unfolding spectacle is in itself a strong condemnation of the entire system of telecom regulation, which leaves too much space for destructive political manipulation. One advantage of a strong system of property rights is that the state’s role is limited to enforcing the exclusivity of the property rights, so that millions of dollars are not wasted in trying to shift ceaselessly from one regime to another.

The question then arises, what kind of property regime? In this regard, it is necessary to go back to the first principles of common carrier regulation, starting with the famous work of Sir Matthew Hale, de Portis Maribus, which was incorporated into English law in Allnut v. Inglis in 1810. Under the banner of businesses “affected with the publick interest,” these venerable authorities held that a requirement that a party provide services, to use the modern phrase, on reasonable and nondiscriminatory terms, worked as an offset to monopoly power that arose for some “essential facility” that has no close substitutes.

Note this profound reversal. In competitive markets, a refusal to deal is what makes the economy work, because it prevents any forced interactions that could prove disastrous for one side or the other—hence the sensible rule that the customer who was refused service from one merchant could just do business with another. But in the monopoly setting, there is no other rival merchant next door; rate regulation was intended to reduce monopoly rates to competitive levels. This enterprise of rate regulations poses serious compensation risks, so that the American cases have, for close to 125 years, imposed judicial review to see that the rates imposed allow the firm in question to make a reasonable return on invested capital.

Of course, the entire regulatory process is fraught with abuses that in individual cases could leave the established rates either too high or too low. It follows therefore that with the first whiff of competition a strong case arises for dispensing with the rate regulation process altogether. In the short run, this might lead to higher rates, but, in the long-run, innovation from new entrants will tend to drive rates down to a competitive level that is likely unattainable under sclerotic rate regulation systems.

So in the end, the key substantive decision should not turn on whether broadband providers transmit or create information. It should turn on whether or not they can exert any form of monopoly power in some relevant market. As a general matter, the faster the technological transformation, the less desirable the monopoly regulation. Firms like AOL and Blackberry, once thought to possess monopoly power are now footnotes in modern policy debates. The great danger of regulation is that those intended to foster competition will further entrench the position of incumbent players.

A Defense of Net Neutrality?

Many critics of net neutrality argue that the power to exclude is fraught with the risk of abuse. Writing on Slate,Marvin Ammori raises this concern to a fever pitch, by insisting that only net neutrality prevents Comcast from blocking Facebook or Bing, or Verizon from offering better terms of service to the Huffington Post than Slate. One purported consequence of this high-handed action is that the delay could “stifle innovation.” What is striking about this one-sided account is that it does not address any possible efficiency advantages from rejecting net neutrality.

The first of these efficiency considerations is that it is a lot cheaper to operate a system that makes no pretense of putting in place the elaborate scheme of regulation that now applies to common carriers. Second, we have already had extensive experience with systems, like the internet and cell phone networks, that are not subject to direct rate regulation and we have not seen any of the odious practices that Ammori predicts.

Most importantly, however, he does not attribute any social gains to the ability of carriers to prioritize and price information as they choose. But that cannot be right in light of how firms operate in competitive industries.

Federal Express does not have a monopoly in the shipping business. In order to bolster its service, it engages in extensive forms of price discrimination. It lets its customers decide whether they want same-day, one-day, or two-day delivery, and then charges them in accordance with their preferences, with rate differentials that it sets for itself. The upshot is a wide array of services that is only possible when government does not stand between the conception and execution of a planned program. Product and price differentiation improve consumer welfare.

Similar practices have driven success in hotels and airlines. Indeed, the forces of innovation are so great, that it may well be the case that it is better, especially in rapidly evolving industries, to forget the idea of rate regulation altogether, given that future competitors, sensing opportunity, will attack first those market niches where monopoly power still exists.

Ammori does note, correctly, that there are certain markets in which some service providers may well possess monopoly power. But for those incursions, net neutrality is still not the answer. Even in the short run, rival plays will seek to steal market share from the monopolist. In the long run, the rapid movement of technology has already left us with a new and vibrant landscape that is light years removed from a generation ago when the major premise of the Telecommunications Act of 1996 was that landlines would continue to hold a monopoly position for years to come—about two years, in fact. That false premise led to extensive regulatory battles over all the interchange relations between local exchange carriers and long line carriers. But the rise of cell phones and VoIP technology changed all that, so that the regulation did much to hamper innovation, but virtually nothing to protect consumers.

The lessons apply here. It is always a desperate mistake to allow hypothetical horror stories to set the intellectual stage for evaluating regulatory proposals. Quite simply, Slate will be able to access all major networks because no broadband carrier wants to face the consumer wrath and defections that would surely accompany high-handed and intrusive interventions.

The correct approach therefore is to do nothing. The FCC need not implement any regulations. For now, it should sit back and relax. If some crisis occurs that merits new forms of internet regulations, we can address that situation when it comes. But for the moment, innovation on the internet is doing great. Let’s keep it that way.

Questions for Free Market Moralists? Some Answers

Mario Rizzo *

A philosopher, Amia Srinivasan, fellow in philosophy at All Souls College, University of Oxford, writing in the New York Times Opinionator (online commentary) says that in order to be a consistent defender of Robert Nozick, the free market and classical liberalism, one must answer “yes” to all four questions below. And she believes that such consistent yes answers are not plausible. She is wrong that we are required to answer yes to all four and she is wrong that yes answers on any are implausible. She also misconceives the task of liberalism as a political philosophy.

Let us start with the last point. As Ludwig von Mises constantly reminded us, liberalism is not a philosophy of life. It does not deal with the ultimate questions of man’s place in the universe and the full range of choices human beings must make both in dealing with others and in guiding one’s own life. It is a philosophy about the role of the state in a world in which people differ in their life-philosophies or in the concrete application of a philosophy to different circumstances of time and place.

With this in mind we can briefly answer her questions:

1. Is any exchange between two people in the absence of direct physical compulsion by one party against the other (or the threat thereof) necessarily free?

Has she considered fraud? Fraud is recognized by all liberals as interfering with freedom of contract.  But, aside from that, what does she mean by “freedom”?   Clearly she means some kind of “deep” or moral freedom as her later criticisms of putative liberal answers make clear. What do we require for contractual freedom? A complete knowledge of all the options available is not on the table. Even exchange arising out of the ignorance of one party (say, of the full array of prices available) conveys information to the market as errors are eliminated by profit makers. If I think X is only worth $5 and I am prone to use it for purposes that are relatively unimportant, the profit maker “exploiter” can buy it from me at $5.05 and resell to someone who values it more and will use it for other purposes.

So is it “necessarily free”: Yes by a meaning of freedom that solves the fundamental knowledge problem of society – how to mobilize decentralized knowledge for a social use.

2. Is any free (not physically compelled) exchange morally permissible?

Not if it is causes harm to other protected interests. Can two individuals engage in a free exchange in weapons to be used to kill innocent people? I think not. Can I use my property to pollute the environment? This is complex question to which the answer is both yes and no. What is meant by pollution? How much? What harms?

Often, Progressives (so-called) think that if a person lacks attractive alternatives an exchange is not free. So if a poor person in Bangladesh is offered a low wage or poor working conditions and accepts it because his alternatives are worse, this is not a free exchange. Should we ban it and make him even worse off? Should we be blind to the international process of trade and exchange that tends to raise wages as it increases the demand for labor in poor countries?

3. Do people deserve all they are able, and only what they are able, to get through free exchange?

Life is not a nursery. I am reminded of parents to tell young children that if they are good they will deserve a treat. Life is not a Platonic universe in which human beings are authorized to assign to each what they “deserve.” As Hume warned us, in the realm of law and politics “desert” is an invitation to “avidity” and “partiality.” The man of merit who returns a great fortune to a miser may be thought by some to deserve the fortune. No matter; justice must be done.

When I buy a nice bottle of champagne, I do not ask “Do I deserve it?” I am not God. How do I even know what this means? I gave a dollar to a homeless person. Does that mean I deserve the champagne? In my mind, the only relevant question for political philosophy is: Does anyone have the right to take the champagne from me by force? With the usual liberal caveats, no. That is it, then.

4.  Are people under no obligation to do anything they don’t freely want to do or freely commit themselves to doing?

No. I am not permitted (nor should I be) to steal, murder, rape and pillage. Of course, I am under no moral obligation to obey laws that violate the principles of just conduct. Were Germans obligated to obey Nazi laws on the Jews and so forth?

Of course, questioner seems to mean: Do I have an obligation to be kind, merciful, and beneficent? Obligation in conscience or obligation in law? Liberals are concerned with obligations in law.  Recall the old distinction between duties of imperfect obligation and duties of perfect obligation. The former, like beneficence, are underdetermined as to their appropriate time, place and extent. The latter, like keeping to your contractual obligations, are much more precise and determinate. As Adam Smith argued in his Lectures on Jurisprudence, the duties of perfect obligation belong to law; the others do not. Does Dr. Srinivasan advocate that the State take up the role of moral dirigiste? Instead of making us keep holy the Lord’s Day, the modern progressive dirigiste wants to make sure that we love our neighbors sufficiently and in the “right” way.

Unfortunately, there is much more in her article and I cannot deal with all of the examples and nuances of her view. Yet, for any classical liberal, she seems hopelessly confused, and naïve about economics and political processes.

 

 *Dr. Mario J. Rizzo is associate professor of economics and co-director of the Austrian Economics Program at New York University.  He received his BA from Fordham University, and his MA and PhD from the University of Chicago.  He was also a fellow in law and economics at the University of Chicago and at Yale University.  He currently lectures for the Institute for Humane Studies and is an adjunct scholar of the Cato Institute. Professor Rizzo is also a member of the NYU Journal of Law & Liberty's Board of Advisors.