All Commentary
Friday, June 8, 2012

There’s No Such Thing as Economic Freedom

There is only freedom.

In 1938 the U.S. Supreme Court ruled that a federal law prohibiting the interstate shipping of filled milk violated neither the commerce clause nor the due process clause of the Constitution. What is best remembered about that opinion is “Footnote Four,” which has influenced American jurisprudence ever since.

Writing for the majority in United States v. Carolene Products Company, Justice Harlan F. Stone set out the doctrine that some kinds of freedom are more equal than others. Specifically, certain government acts warrant a higher judicial scrutiny than other kinds. The latter are to begin with a presumption of constitutionality. Harlan wrote:

There may be narrower scope for operation of the presumption of constitutionality when legislation appears on its face to be within a specific prohibition of the Constitution, such as those of the first ten amendments.

In other words, when the court decides that a government regulation lies beyond an explicit constitutional prohibition, for example, one found in the Bill of Rights, the court should presume it is constitutional and not subject to the strict scrutiny that regulations lying within some explicit prohibition deserve. The footnote is better understood when we see the text it is attached to:

[T]he existence of facts supporting the legislative judgment is to be presumed, for regulatory legislation affecting ordinary commercial transactions is not to be pronounced unconstitutional unless, in the light of the facts made known or generally assumed, it is of such a character as to preclude the assumption that it rests upon some rational basis within the knowledge and experience of the legislators. [Emphasis added.]

That is, the court will simply assume members of Congress had a good reason to regulate some aspect of commerce unless it can be shown otherwise. When it comes to economic activity, there is to be no presumption of liberty as there is in other matters.

Hence the bifurcated system of freedoms—noneconomic and economic—we labor under today.

Advocates of freedom know this doctrine is based on an error and invoke the indivisibility of freedom in response to it. But too often they undercut their own case by talking about . . . economic freedom.

The Indivisibility of Freedom

I realize this phrase may be meant only to emphasize the depreciated aspect of freedom, but as free-market advocates know, intentions don’t nullify effects. Whenever one says “economic freedom,” one implies that other kinds of freedom exist. That of course does not imply that some freedoms are more equal than others, but it certainly opens the possibility. That can’t happen if we insist that freedom is indivisible.

The case for the indivisibility of freedom is not hard to make when one remembers that there are no economic ends. There are only ends, namely, the values we pursue in the course of our lives. I recall first hearing Thomas Sowell make this point about 30 years ago. He writes in Basic Economics:

One of the last refuges of someone whose pet project or theory has been exposed as economic nonsense is to say: “Economics is all very well, but there are also non-economic values to consider.” Presumably, these are supposed to be higher and nobler concerns that soar above the level of crass materialism.

Of course there are non-economic values. In fact, there are only non-economic values. Economics is not a value in and of itself. It is only a way of weighing one value against another.

There are only non-economic values. If that is so, then there is no economic freedom. There is only freedom. Full stop.

No Economic Purposes

People act to achieve objectives that they believe will help them to flourish (however they may conceive that). Sometimes they pursue material values; other times they pursue nonmaterial, or spiritual, values. But the material values serve the same purpose as the nonmaterial ones. They are not pursued for economic purposes.

Now this works very well with the Austrian insight—developed also by the British economist Philip Wicksteed—that the classical economists erred in thinking their discipline applies only to the self-interested pursuit of material wealth. As I explained here, economics (or praxeology, to use Ludwig von Mises’s term for the broader discipline) analyzes purposeful action in itself. It doesn’t matter what the objective is; the principles of action are universal. As Wicksteed put it in his introduction to The Common Sense of Political Economy,

It will easily be shown that the [marginal utility] principle . . . is not exclusively applicable to industrial or commercial affairs, but runs as a universal and vital force through the administration of all our resources. It follows that the general principles which regulate our conduct in business are identical with those which regulate our deliberations, our selections between alternatives, and our decisions, in all other branches of life.

And as Mises wrote in Epistemological Problems of Economics,

Everything that we say about action is independent of the motives that cause it and of the goals toward which it strives in the individual case. It makes no difference . . . whether it is directed toward the attainment of materialistic or idealistic ends. . . .

Living a human life consists in the pursuit of a variety of values, some material, some not. Thus dividing freedom into spheres is both arbitrary and ultimately destructive. There is no economic freedom and non-economic freedom. There is only freedom.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.