Two Non-Constitutional Ways of Protecting Economic Liberty

In two recent posts, I have suggested that the Fourteenth Amendment of the Constitution does protect economic liberty against the states but in a modest way. Legislation, like a state granted monopoly,  that merely protects one group of people over another is illegal.  But states are free to pass inefficient legislation that trenches on liberty so long as it has a bona fide police power rationale, like health and safety. The Fourteenth Amendment does not enact cost-benefit analysis.

Thus, the direct results for economic liberty of hewing to a more originalist understanding of the Fourteenth Amendment will be modest, because much legislation is inefficient, but not simply protectionist.  But there are other means of achieving the goals sought by a more stringent judicial review of economic legislation, most importantly more vigorous use of the federal antitrust law and the establishment of state and local agencies that impose cost-benefit analysis on regulations.

In North Carolina State Board of Dental Examiners v. FTC, The Supreme Court recently made clear that agencies that are composed of a majority of industry representatives are subject to antitrust scrutiny, unless they are “actively supervised by the state.” This scrutiny prevents actors in the same industry from constraining competition unless they can show that the productive efficiencies generated by their regulations clearly outweigh the loss to competition. Thus, courts under the antitrust law are now justified in overturning regulations that had some public regarding aspect but were outweighed by their costs to consumers, if they are created by boards made up of self-interested private actors.   In my view, public interest litigation firms that advance economic liberty should be combing through state and local agencies to find the many that are subject to attack on these grounds.

My second recommendation is the creation of agencies like the federal Office of Information and Regulatory Affairs at the state and local level. Such agencies could impose cost-benefit requirements on state and local legislation. This process can police inefficient regulations far more stringently than can the proper constitutional standard of review. First, by weighing costs and benefits, this process encourages the most efficient regulation (and thus generally the regulation that trenches less on liberty). Second, by providing an overview of a technocratic agency without a substantive regulatory mission, cost-benefit analysis also tends to compensate for the tunnel vision of regulatory agencies or their capture by interest groups.