When Friedrich Hayek Met Bruno Leoni

This year would have been Bruno Leoni’s 101st birthday but for his tragically early death in 1967. Leoni was an Italian lawyer cum academic who was one of Europe’s leading classical liberal thinkers in the post-War era. Friend to the leading classical liberals of the age—counting Hayek, Buchanan, and Alchian as friends—Leoni was not only a pioneer of law and economics thinking but also an early adopter of public choice theory.

I first read Leoni before I went to law school as an intern at the Institute for Humane Studies when Walter Grinder gave me a copy of Freedom and the Law and a Redweld binder full of copies (more likely copies of copies of copies) of unpublished essays. (Today the entire book can be downloaded in pdf format here). Those unpublished essays would later be included in the Liberty Fund edition of Freedom and the Law released many years later. Having read Leoni’s inspiring vision of the relationship between law and liberty, law school came as quite a shock when I discovered that modern law was defined by the twin pillars of realism and positivism (as best exemplified, perhaps, by the unthinking worship of Erie Railroad).

And indeed, I soon learned that Leoni had a somewhat different view of the law than that which prevails today. And it is necessary to understand Leoni’s vision of law to understand why he was so concerned about the direction the law was taking even then—and why he would be both unsurprised and horrified by the current state of the law and constitutional government.

To examine Leoni’s continuing relevance to the law, I want to take as my text today a provocative statement that Leoni says in his introduction to Freedom and the Law:

My earnest suggestion is that those who value individual freedom should reassess the place of the individual within the legal system as a whole. It is no longer a question of defending this or that particular freedom—to trade, to speak, to associate with other people, etc.; nor is it a question of deciding what special ‘good’ kind of legislation we should adopt instead of a ‘bad’ one.

Instead, he continues, “It is a question of deciding whether individual freedom is compatible in principle with the present system centered on and almost completely identified with legislation. This may seem like a radical view; I do not deny that it is. But radical views are sometimes more fruitful than syncretistic theories that serve to conceal the problems more than to solve them.”

I want to take up Leoni’s radical challenge to ask: is individual freedom compatible in principle with a legislation-centered system? And, as will be discussed, even more so, a system centered on executive fiat (“rule-making” hardly being an accurate term to describe the mandates and the like emanating from the current executive branch)?

Law and Legislation

The essence of Leoni’s argument is a contrast between law-making by legislatures versus law-making via a common law-like process, which he describes broadly as “judicial decisions, the settlement of disputes by private arbiters, conventions, customs, and similar kinds of spontaneous adjustments on the part of individuals.” Now, for those who have not read Leoni—which is, I suspect, is most—to give you a sense of Leoni’s approach, I commend you to think of Leoni at least for a shorthand as being very similar to Hayek’s argument in the first volume of Law, Legislation and Liberty (“LLL”) of common law as a spontaneous order process (as distinguished, for example, from other philosophies that see the common law process through a lens of legal positivism, effectively treating judges as functionally equivalent to legislators). And, in fact, there is more than just an analogy or similarity between Leoni and Hayek: it appears that it was Leoni that introduced Hayek to the common law, which then became the heart of LLL. In so doing, of course, Leoni also introduced Hayek to his distinctive interpretation of the common law, rather than the modern realist-positivist view. Indeed, the novelty of the focus on the common law in LLL is striking: up until that time, the common law gets very little mention in either The Road to Serfdom or The Constitution of Liberty, both of which focus on the formalist Rechstaat notion of the rule of law. Then, the common law appears full-blown in LLL, with virtually no prior mention, and with a distinctive similarity to Leoni’s version.

What happened during the period between Constitution of Liberty and Law, Legislation, and Liberty? By all indications, the intellectual change from a single, identifiable influence: Hayek met Leoni and Leoni turned him on to the importance of the common law. In “Freedom and the Law,” Leoni grounds his understanding of law in his interpretation of the Roman jurisconsult. He compares the law-making process by the Roman jurisconsults to the common law judge that Hayek talks about in LLL. Indeed, Leoni uses the Roman law and English common law essentially interchangeably as an analytical matter, so that the structure Leoni uses in describing Roman law developed by the jurisconsult is effectively and essentially the same process that Hayek talks about in the common law process under the English common law.

So what is the nature of law for Leoni, under the jurisconsults and the common law judges? Leoni essentially describes the law as a spontaneous order focused on the way in which the law emerges from the resolution of discrete disputes between private individuals and an ongoing conversation among different judges to determine what the law should be. As Leoni writes, “[I]t means that the whole process can be described as a sort of vast, continuous, and chiefly spontaneous collaboration between the judges and the judged in order to discover what the people’s will is in a series of definite instances—a collaboration that in many respects may be compared to that existing among all the participants in a free market.”

For Leoni, the significance of Roman law (and later English common law), and its unique compatibility with individual liberty, stems from distinctive characteristics of the common law lacking in the legislative process. At the heart of his model is the importance of what he calls “law as individual claim.” What does he mean by that and why is it significant?

Common Law Liberty

For Leoni, the idea of “law as individual claim” means that the law essentially leaves you alone unless you ask the law to help you by invoking a judge to resolve a dispute that has risen between two people. Significantly, that particular ruling is technically applicable only to those two parties (although by the force of precedent it may by extension potentially be invoked by other parties as applicable to their situations). He observes,

[J]udges or lawyers or others in a similar position are to intervene only when they are asked to do so by the people concerned [and] the decision of judges is to be effective mainly in regard to the parties to the dispute, only occasionally in regard to third persons, and practically never in regard to people who have no connection to people who have no connection with the parties involved.

So that basically you can go about your business, and if everything works, fine, you never have to call in the state. What this means, Leoni observes, is “that the authors of these decisions have no real power over other citizens beyond that which those citizens themselves are prepared to give them by virtue of requesting a decision in a particular case.”

But what about precedent—doesn’t the rendering of a precedent mean that the resolution of a dispute in fact does impact and bind third parties? Not as Leoni sees it. Embedded in the nature of the traditional common law—and this is an idea that was later developed by economist Robert Staaf and Louis De Alessi—is the ability of private parties to contract around the common law rules. Thus, the whole point of common law rules are that they are there for parties to help them to coordinate their affairs—but where the rules are not useful to that end, the parties are at liberty to ignore them and create their own rules by contracting around them. And this is the essence of his idea that the common law is a “spontaneous order” similar to the market—there is sort of back and forth between individuals making individual claims, judges resolving those claims and improving the law to better meet individual demands, and that coming back in as an input into people’s decision-making, as well as an ongoing conversation among different judges. From this enterprise of private, uncoordinated litigants seeking to vindicate their individual claims, an entire legal system springs up. In the common law the judges played the key role; for Leoni it was the Jurisconsult under the Roman law who performed that function.

Legislation, by contrast, is enforced on everyone, whether you like it or not, and legislative commands are binding regardless of whether sensible, persuasive, or conducive to the needs of those bound by it. So for instance, you and I could enter into a contract for me to have you work at my shop. And we could contract about the terms—wages, benefits, hours—and everything else, in a way that makes each of us happy and is mutually beneficial. But assume the legislator passes a law that prohibits you for working for any wage rate below a certain dollar amount. The very definition of a minimum wage is that I’m not allowed to contract with you even if both of us believe the contract would be mutually advantageous. Thus, in this example, legislation is a barrier to private ordering and mutually-advantageous exchange. Rather than law facilitating our exchange and allowing us to pursue our desired ends, legislation becomes the vehicle for dis-coordination and an obstacle to pursuit of our plans. In turn, Leoni (an early adopter of public choice theory) observes that this creates certain incentives in the legislative process for rent-seeking. As Leoni observes,

In this way, legislation has undergone a very peculiar development. It has come to resemble more and more a sort of diktat that the winning majorities in the legislative assembly impose upon the minorities, often with the result of overturning long-established individual expectations and creating completely unprecedented ones. The succumbing minorities, in their turn, adjust themselves to their defeat only because they hope to become sooner or later a winning majority and to be in the position of treating in a similar way the people belonging to the contingent majority today.

It is this notion of the Roman law and the English common law as emerging as a by-product from this private effort of individuals to vindicate their rights that leads Leoni (presaging Hayek) to observe that law in this sense is something to be discovered not something to be made: “Both the Romans and English shared the idea that the law is something to be discovered more than to be enacted and that nobody is so powerful in his society as to be in a position to identify his own will with the law of the land”—unlike a legislature, or apparently now President, who claims the power to make or unmake laws with the stroke of his pen.

Discovering the Law

And what does Leoni mean by the notion that the Roman magistrates “discovered” the law instead of “making” it? He writes (p. 83):

The Roman jurist was a sort of scientist: the objects of his research were the solutions to cases that citizens submitted to him for study, just as industrialists might today submit to a physicist or to an engineer a technical problem concerning their plants or their production. Hence, private Roman law was something to be described or discovered, not something to be enacted—a world of things that were there, forming part of the common heritage of all Roman citizens. Nobody enacted that law; nobody could change it by any exercise of this personal will. This did not mean absence of change, but it certainly meant that nobody went to bed at night making his plans on the basis of a present rule only to get up the next morning and find that the rule had been overturned by a legislative innovation.

This attitude of judges as law “discoverers” rather than law “makers” thus speaks to a certain humility in law-making conducive to the preservation of liberty that distinguishes judge from legislators that create law.

And this is the crucial argument for Leoni as to why he believes that in the long run a system centered on legislation is fundamentally incompatible with the maintenance of a free society. Partly it is the inherent temptations that legislation provides for rent-seekers and other parties seeking to oppress or plunder nonconsenting losers in the political process. But partly it also has to do with the inherent instability of the legislative process and the relative predictability of the common law process, properly understood. And this is perhaps Leoni’s greatest contribution to jurisprudence.

Leoni makes the unremarkable observation that for the free market to function effectively it is necessary for private individuals to have a stable legal framework in which to plan and be confident that their plans will be carried through to fruition. Moreover, for individuals to free from oppression it is necessary for government to be announce their rules in advance so that individuals can know what is their permitted range of freedom (what is often, although imprecisely, referred to as the “rule of law”). For many modern thinkers this primacy on predictability and certainty has led them to advocate for greater legislation—spelling out the rules in precise detail.

But this is where Leoni differs from the modern consensus, by arguing that it is common law, not legislation, that is more predictable, certain, and conducive to liberty and the rule of law. Even more surprising, he argues the superiority of the common law on this point derives from its unwritten nature and the “discovery” process of judges. How can this be?

For Leoni, as for Hayek later, to understand why they believe the common law to be more certain and predictable—despite its unwritten characteristics—derives from recognizing that the common law is a conceptual system, as opposed to legislation, which is a verbal system of commands. What does that mean? The underlying “law” to be discovered, for both Leoni and Hayek, is a sense of shared concepts that emerge from this spontaneous collaboration among private litigants, judges, and citizens that give rise to a certain shared sense of law and justice. It is the underlying substantive notions of shared expectations of right and wrong, as well as the “artificial logic” of the common law that creates legal concepts such as consideration in contract, duty and causation in tort, and rules of conveyance in property, that constitute the law. And while these underlying norms are constantly changing gradually and often imperceptibly, over time they are relatively constant and they change in a gradual and predictable manner that comports with individual expectations, even as those expectations may change over time.

Thus, the common law is a conceptual system for which the articulation of judicial decisions (and making rules as a by-product) are verbal attempts to articulate the underlying concepts. But it’s the concepts—the concepts—of the common law that are the law, not the precise linguistic formulation of judges in particular cases. And it is from this that Leoni says that the common law—although lacking precise verbal formulations—is more predictable. Moreover, because this law exists outside the creation of judges, legislatures, or anyone else, it is largely insulated from the distorting rent-seeking and other distortions inherent in legislation.

In describing the law in this manner, Leoni’s views are distinct from modern thinkers, who under the sway of legal positivism have come to think of the precise verbal articulations by judges as being the law. Why do they do that? Because they have this flawed Benthamite concept that is borrowed from legislation that basically says, “All legislators make the law and judges make the law when they decide cases.” Thus, judicial opinions should be read like statutes—the verbal formulations matter more than the unexpressed concepts that those verbal formulations are attempting to express.

Having said that, Leoni also admits that this jurisprudential revolution has taken its toll on the common law, such that today’s common law often bears scant resemblance to the classical common law—indeed, he admits that his vision of the common law is often deemed “old-fashioned” (pp. 85-86). He writes (p. 24), “On the other hand, it cannot be denied that the lawyer’s law or the judiciary law may tend to acquire the characteristics of legislation, including its undesirable ones, whenever jurists or judges are entitled to decide ultimately on a case.” Indeed, he refers to the fact that for at least the first millennium of the common law there was no concept of binding precedent or “stare decisis” (i.e., that one ruling makes the law and is binding on subsequent courts).

He singles out for specific criticism the establishment of “supreme courts” that have the ability to render definitive judgments binding on other courts and which results in the “imposition of the personal views of members of those courts, or of a majority of them, on all the other people concerned whenever there is a great deal of disagreement between the opinion of the former and the convictions of the latter.” Nevertheless, he argues that this bastardization of court processes into quasi-legislative outcomes is not an inevitable evolution of judicial law-making but can be prevented with proper diligence and institutional design.

Lawful Certainty

Leaving aside the later corruption of the common law and returning to Leoni’s classical vision, he thus provides his great insight: a crucial distinction between what he calls the “short-run” certainty of the law, embodied in legislation, and the “long-run” certainty of the law promoted by the common law. So he writes,

While legislation is almost always certain, that is, precise and recognizable, as long as it is ‘in force,’ people can never be certain that the legislation in force today will be enforced tomorrow or even tomorrow morning. The legislation-centered legal system, while involving the possibility that other people (the legislators) may interfere with our interactions every day, also involves the possibility that they may change their way of interfering every day. As a result, people are prevented not only from freely deciding what to do, but from foreseeing the legal effects of their daily behavior.

Moreover, because legislation changes unpredictably and largely arbitrarily in response to shifting political coalitions, changes in legislation are often abrupt, discontinuous, and illogical, in that their justification derives not from their reason or good sense, but simply the relative influence of competing interest groups and unintended consequences.

Now raise your hand if this sounds like something you may have read in the newspaper recently—indeed, virtually every day for the past several years. But yet it is even worse than Leoni feared. While Leoni expressed concern that legislators might “change their way of interfering every day” could he have even imagined today’s world in which the President of the United States asserts “I’ve got a pen”—by which he claims the authority to write or re-write any law and effectively retroactively veto laws by refusing to enforce them or defend them in court when challenged. Not only can legislatures potentially change the law from day-to-day, but today the law can be different after lunch than it was before lunch.

Fifty years ago, Bruno Leoni observed that “Sometimes the radical observations illuminate things that are otherwise obscured,” namely whether freedom could survive in a system centered on and almost completely associated with a legal system premised on legislation. What would Leoni think of the current system of lawmaking not only by legislation—which itself has unleashed an orgy of unprecedented special-interest rent-seeking—but a system degraded to lawmaking by blog post and press release? While he certainly would be dismayed—as is any person concerned about the rule of law and constitutional government, of course—I suspect that Leoni would not necessarily be surprised. For he saw 50 years ago the principles underlying the path we were on, and he pointed the direction in which we were headed. He warned us that it may not look this bad today, but the logic of our descent from the rule of law is inexorable.

So if we return to his opening question: Is individual freedom compatible in principle with our present system of legislation as law? Leoni’s question is even more relevant today than it was 50 years ago.


Lady Justice with books behind

Finding The Law

The common law understanding that what judges do is a matter of finding the law is enjoying a welcome return.