All Commentary
Tuesday, February 1, 2000

Regulation, the Constitution, and the Economy: The Regulatory Road to Serfdom by James Rolph Edwards

Edwards Examines Government Regulation from Three Perspectives

University Press of America • 1998 • 256 pages • $52.00 cloth; $32.50 paperback

James Rolph Edwards invokes a Hayekian legacy in the title of his book, Regulation, the Constitution, and the Economy: The Regulatory Road to Serfdom. In light of Hayek’s belief that freedom cannot endure unless every generation restates and reemphasizes its value, this book is quite timely. The message is not new, but it is certainly one that needs to be stressed again and again.

Edwards, professor of economics at Montana State University-Northern, examines regulation from three perspectives: historical, constitutional, and economic. The command-and-control mechanisms of the modern welfare state, he observes, are not modern innovations, but musty relics mirroring the authoritarian, mercantilist policies of bygone centuries. In the social evolution from relationships based on status to relationships based on contract, regulatory agencies are an about-face.

Furthermore, by combining legislative, executive, and judicial powers, regulatory agencies obliterate the constitutional system of checks and balances. Even some so-called liberals are now starting to see the dangers in permitting so much power in one place.

From an economic perspective, regulation often cartelizes industries and stifles competition, thereby artificially raising prices above what would prevail in a competitive market. Far from helping consumers, as widely believed, regulation benefits interest groups that know how to manipulate the political process.

Summarizing the literature on regulation, Edwards exposes both the inefficiency and immorality of modern regulatory agencies like the National Labor Relations Board, the Food and Drug Administration, National Highway Traffic Safety Administration, and Occupational Safety and Health Administration. Edwards asserts that the ideologues staffing these agencies “wish to exercise coercive power over others, either because that is what they enjoy or from [an] egotistical belief that others are too stupid or immoral to be left free.”

On the basis of his historical, political, and economic analyses, Edwards explains why the nature of the federal government changed so dramatically between 1870 and 1937. He maintains that “government growth in America has been related to episodic crises.” Robert Higgs has made that point about the consequences of both world wars. Edwards argues, however, that these changes are the outcome of more fundamental changes that followed the Civil War, conferring on the federal government greater powers than it had ever enjoyed.

He discusses how a series of obscure but critical Supreme Court decisions following the Civil War, culminating in the fateful “switch in time that saved nine” in 1937, permitted and even endorsed socialist redistributionist principles. To cite but one decision, in the 1877 case. In Munn v. Illinois the Justices stated that “Property used in a ‘public’ fashion, affecting the public at large, grants the public the right to control it for the public good.” This amounts to saying that the act of employing private assets in business automatically transforms them into public property, to be politically regulated at will. A clearer expression of socialist principle would be difficult to find.

While subsequent Courts tried to narrow the application of this principle, none have recognized that this principle knows no bounds. As the Court demonstrated in the infamous case Wickard v. Filburn, even grain that never went, or even was supposed to go, to market can be subjected to public control.

While his assessment of regulation is accurate, Edwards has overlooked a fundamental issue. The Founders believed that a constitutional system that depends on good behavior by politicians would fail. In establishing a system of constitutional checks and balances, the Framers felt they had avoided that defect. However, as Edwards shows, a mere change of judicial opinion sufficed to upset the constitutional order. He rightly laments America’s departure from its constitutional order, but never asks why the Framers’ system failed. If the defect lies not in ephemeral academic or public opinion, but in the Constitution’s vulnerability to such changes, then we must continue to endure burgeoning regulation and other forms of extra-constitutional controls over our lives and property.

Edwards also fails to adequately acknowledge his debt to Hayek’s The Road to Serfdom. Aside from the subtitle, the only reference to it is an oblique mention buried in the last footnote of chapter three. Those familiar with Hayek’s classic will quickly recognize the reference; however, it cannot speak to those unfamiliar with his great work. In a book specifically referring to Hayek, the author ought to have clearly articulated the origin and importance of the phrase “The Road to Serfdom.”

Finally, because of the numerous editing errors permeating the book, I would recommend waiting for the second, and hopefully cleaner, edition.

Royce Van Tassell is director of research with the American Civil Rights Institute in Sacramento, California (