The Rise of Judicial Review for Economic Liberty

Judicial review of state intrusions on economic liberty is on the move. The Fifth, Sixth, and Ninth Circuits have held that pure economic protectionism is an illegitimate government purpose and fails even the most lenient rational basis review. In Craigmiles v. Giles, the Sixth Circuit similarly struck down restriction on casket makers’ ability to sell their wares without following the regulations applicable to funeral homes. In Merrifield v. Lockyer, the Ninth Circuit also held that economic protectionism is not a legitimate government interest. The court struck down a law that created different licensing categories for different types of exterminators, and this classification had no purpose other than helping some exterminators and harming others.

This trend represents a dramatic change from what was the norm—the routine dismissal of claims of interference with economic liberty.  These dismissals were rooted in two famous (or infamous) Supreme Court decisions that decreed an extremely relaxed form of review of economic legislation that was thought to amount to no review at all.  In Williamson v. Lee Optical, the Court considered the requirement that only licensed optometrists or ophthalmologists could fit lenses into a frame or duplicate lenses unless the lenses came with a prescription, except that those who sold ready to wear lenses were exempt from the requirement. And while the legislature never articulated any rationale for the legislation, the Court was willing to hypothesize a rationale—namely that the legislation would encourage more citizens to get eye checkups.

Railway Express Agency v. New York was similarly lenient on the rationality of legislation. There New York banned commercial advertising on vehicles on the theory that such advertising might distract other drivers and thus prove a danger. But it excepted from its prohibitions advertising for the business of owner of the vehicle. The Court dismissed in two sentences the argument that this distinction was irrational and thus violated Equal Protection as unrelated to the hazard sought to be contained: “the local authorities may well have concluded that those who advertised their own wares on their trucks do not present the same traffic problem in view of the nature or extent of the advertising which they use. It would take a degree of omniscience which we lack to say that such is not the case.”

Neither Williamson nor Railway Express actually states that openly protectionist legislation is constitutional, but nevertheless the cases were widely understood to insulate all economic legislation from any substantive review. Thus, until recently, the situation for judicial review of economic legislation resembled that of the Commerce Clause. There the Supreme Court never stated that there were no limits to federal legislation that could be justified under the Commerce Clause, but before United States v. Lopez there was an expectation that all Commerce Clause challenges would fail.

But some courts are no longer falling in line with these expectations. And there are reasons to believe that more such decisions are on the horizon. First, these cases reflect a growing societal concern—that many occupational licensing regimes have become a barrier to social and economic inclusion. This view is not limited to the right side of the political spectrum. The Obama Administration’s Council of Economic Advisers issued a report (link no longer available) decrying too intrusive licensing regimes. Second, and more importantly, the rise of originalism allows us to put judicial review of economic liberty on a more secure constitutional foundation and not rest on policy alone. In the next two posts, I will sketch a tentative view of how this can be done.