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Monday, November 1, 1999

Principles for a Free Society: Reconciling Individual Liberty with the Common Good

What Is the Proper Role of the State?

Law and economics were once openly tied, as witness the title of John Stuart Mill’s 1848 work, Principles of Political Economy. Or consider that Ludwig von Mises and F. A. Hayek both held doctorates from the University of Vienna not in economics but in jurisprudence.

Economics came into its own as a “pure” science, however, with the establishment of the American Economic Association (AEA) in 1885 and publication of Alfred Marshall’s Principles of Economics in 1890. Has its independence been for the better? Economics has since become increasingly uncertain, mathematical, and state-oriented. But the relationship between state and society at home and abroad in the stormy twentieth century has been anything but calm and stable. The welfare state has arrived, and liberty retreats far more often than it advances.

As AEA cofounder and first president Richard T. Ely contended, a “new world is coming into existence,” and “we must have a new economics to go along with it.” The state should no longer be only an umpire, said Ely, but should become an agency “whose positive assistance is one of the indispensable conditions of human progress.”

What is the proper role of the state? Was Ely correct in advocating a highly interventionist state? Or is it possible to reconcile laissez faire, private property, individual choice, and minimal government with the common good?

That reconciliation constitutes the broad mission of this book by Professor Richard A. Epstein of the University of Chicago Law School. Epstein is a constitutionalist, one who upholds natural law for its utilitarian value and asks for a return to our limited government roots. He is a meticulous thinker who approaches his job here by analyzing scores of law cases. His philosophy can be seen in his endorsement of this quotation from the Edinburgh Review in 1843: “Be assured that freedom of trade, freedom of thought, freedom of speech, and freedom of action, are but modifications of one great fundamental truth, and that all must be maintained or all risked; they stand and fall together.”

Epstein believes that private property rights are vital in the quest for the common good and registers his approval of recent Supreme Court decisions that have moved in the direction of greater protection for property owners against the grabbiness of government. For example, in Dolan v. City of Tigard (1994), the city had maintained that it had the right to compel Mrs. Florence Dolan, the owner of a plumbing-supply store, to dedicate land for a bicycle path without any compensation. The Supreme Court disagreed, with Chief Justice William Rehnquist writing, “We see no reason why the takings clause of the Fifth Amendment, as much a part of the Bill of Rights as the First Amendment or Fourth Amendment, should be relegated to the status of a poor relation.”

Epstein is also skeptical of government regulation that is supposed to improve the working of the market for consumers. He takes a dim view of the antitrust suit against Microsoft, arguing that while it may be beneficial to Microsoft’s competitors, it ill-serves the legions of Internet consumers who continue to enjoy the competition and downward drift in prices. Epstein fears that use of state coercion to compel Microsoft to vary its product offerings along government-acceptable (that is, competitor-acceptable) lines mocks true competition and risks stifling the sort of innovations that sparked the Information Revolution in the first place.

On the whole, the book offers a splendid defense of laissez faire, but Epstein’s Chicago School utilitarianism sometimes leads him into questionable positions. He accepts, for example, some “forced exchanges” such as public highways and utilities. In granting the state some right to coerce in selected pragmatic cases, Epstein seems to open windows of opportunity for both inefficiency and political hanky-panky. Debates between Epstein and the Rothbardian free marketers over the advisability of permitting government to make people participate in forced exchanges would be intellectual events to savor.

But do not allow this reservation to deter you from reading Principles for a Free Society. Epstein’s focus is on the need to preserve and indeed to expand freedom, not on the rare instances where he concludes that government coercion is justified. His strong argument that freedom and the common good can be reconciled is one that we must make again and again.

William Peterson is adjunct scholar with the Heritage Foundation in Washington and Distinguished Lundy Professor Emeritus of Business Philosophy at Campbell University in North Carolina.

  • William H. Peterson (1921-2012) was an economist, businessman and author who wrote extensively on Austrian Economics. He completed his PhD at New York University in 1952 under the supervision of Ludwig von Mises. 

  • Richard Allen Epstein is an American scholar, educator, lawyer, and author, best known for his writings and studies on classical liberalism, libertarianism, torts, and a wide variety of topics in law and economics.