Supreme Court hears vital freedom-of-religion case

Today, the Supreme Court heard  the most important case on the intersection of religion and education to arise in decades–Espinoza v. Montana Department of Revenue. A few years back, Montana had passed its first school-choice program, a tax-credit scheme that allowed a small tax credit for donations to scholarship programs that helped kids afford private school.

As in any state, many of Montana’s private schools are religious. Right after the state legislature passed the tax-credit statute, the Montana Department of Revenue promulgated a rule that immediately gutted the program by forbidding students attending religious schools from receiving scholarship money.

The Department based its rule on Montana’s Constitution, which says the legislature can’t “make any direct or indirect appropriation or payment from any public fund or monies . . . for any sectarian purpose or to aid any church, school,” etc. Plenty of states have very similar “no-aid” clauses. Revenue claimed that scholarships for religious students under the tax-credit scheme violated the “no-aid” clause.

It’s worth taking a moment to consider how bizarre this argument is. These scholarships are funded by private donations–the money never enters a public coffer. Yet Revenue thinks such donations would constitute state aid to religion because the donor gets a tiny tax credit (up to $150) for the donation. Underlying this argument is the strange notion that any money the government declines to collect from you is still the government’s money.  This would mean, for instance, that every charitable donation eligible for a tax deduction would likewise constitute a government appropriation. Revenue’s argument has always looked to me like an extremely weak pretext for blatant discrimination against religious students.

So Kendra Espinoza and a few other parents with kids at religious schools sued the Department of Revenue, claiming, among other things, that Revenue’s rule violated their free exercise of religion under the First Amendment. Kendra won at trial, and then lost spectacularly at the Montana Supreme Court. In fact, the Montana Supreme Court did something even worse than the Department of Revenue–it invalidated the entire tax-credit program, such that even students at secular private schools could no longer receive scholarship assistance.

Thankfully, the Supreme Court took up the case, and they heard oral argument today. (My colleagues and I filed an amicus brief with the Court in support of Kendra).

The oral argument transcript shows a Court divided along the typical ideological lines. The liberal justices seemed preoccupied with standing–whether the petitioners had the right to sue. One justice implied that only taxpayers (who have a financial interest because of the tax credit) and schools (who receive the scholarship money) should have the right to sue. This is a weird take, given that families and students are obviously the intended beneficiaries of the scholarship program.

A number of the justices discussed a odd quirk about the Montana Supreme Court’s decision. The basic question they raised is this: since the Montana Supreme Court took the scholarship program away from everyone, are petitioners now being treated equally? But the sole reason the Montana Supreme Court struck down the program was to prevent religious students from receiving scholarship. A government action taken for a discriminatory reason is, well, discriminatory. If the legislature had excluded religious students when it enacted the program, the program would still stand. And if the legislature tried to enact the same program, providing equal treatment to religious and secular students alike, the Court would strike it down. That’s discrimination based on religious status–pretty straightforward.

One justice cited to James Madison’s famous Memorial and Remonstrance Against Religious Assessments, arguing that the founders wouldn’t have wanted public funds flowing to religious schools like this (again no public funds were flowing to Montana religious schools under this program, but why let accuracy get in the way of a good narrative). That’s a terrible misreading of Madison. The Memorial and Remonstrance was an attack on preferential aid to religion, not to a program that provided public benefits to all groups, including religious ones. The difference is vital. Can the government deny churches police protection, fire protection, sewer connections, electrical service, or any other public benefit on the grounds that the government would be providing indirect public funding to religious institutions? Surely not. In fact, that’s exactly what the Supreme Court said in a recent case called Trinity Lutheran, where Missouri denied a church daycare access to a government program that helped renovate playgrounds.

There is a difference between Trinity Lutheran and this case, arguably, which is that here the money goes more directly to religious indoctrination, not something secular like playground materials. But at bottom, public funding is fungible. Providing police protection and other general public benefits obviously makes it easier for a religious institution to fulfill its religious mission.

This case should be an easy one. The government offered a benefit to all private schools. To include religious schools doesn’t “establish” religion. It just treats religious groups equally, as the Constitution requires.

Nomic-nomics?

Perhaps the coolest thing I’ve found on the Small Internet so far is the game Nomic. From where I found it:

Nomic was invented in 1982 by philosopher Peter Suber. It’s a game that starts with a given set of rules, but the players can change the rules over the course of the game, usually using some form of democratic voting. Some online variants exist, like Agora, which has been running since 1993.

It’s a game that’s about changing the game. Besides offering a tempting recreational opportunity, I think this could be formalized in such a way to make it rival the Prisoners’ Dilemma (PD) in shedding light on the big social scientific questions.

The PD is a simple game with simple assumptions and a variable-sum outcome that lets it work for understanding coordination, competition, and cooperation. One of my favorite bits of social science is Axelrod’s Evolution of Cooperation project. It’s basically a contest between different strategies to an iterated PD (you can play a variation of it here). That the “tit for tat” strategy is so successful sheds a lot of light on what makes civilization possible–initial friendliness, willingness to punish transgressions, and willingness to return to friendliness after punishing these transgressions.

A fantastic extension is to create a co-evolutionary simulation of a repeated PD game. Rather than building strategies and pitting them against each other, we can be totally agnostic about strategies (i.e. how people behave) and simply see what strategies can survive each others’ presence.

The evolutionary iterated PD is about as parsimonious a model of conflict/cooperation as we could make. But there is still a lot of structure baked in; what few assumptions remain do a lot of heavy lifting.

But if the structure of the game is up for grabs, then maybe we’ve found a way to generalize the prisoners’ dilemma without assuming on extra layers of complexity.

Of course, the parsimony of the model adds complexity to the implementation. Formalizing Nomic presents a formidable challenge, and getting it to work would surely create a new

But even if it doesn’t lend itself to simulation, it strikes me as the sort of exercise that ought to be happening in classrooms–at least in places where people care about building capacity for self governance (I’ve heard such places exist!).

Let’s play!

A bit of stage setting, then let’s start a game in the comments section. I get the impression that this game is nerdier than Risk, so you’ve been warned (or tempted, as the case may be).

The basic premise is that are mutable rules and immutable rules (like Buchanan’s view of constitutions). Players take turns to propose rule changes (including transmuting rules from a mutable to an immutable state). As part of the process, we will almost surely redefine how the game is won, so the initial rule set starts with a pretty boring definition of winning.

We’ll use Peter Suber’s initial rules with some variations to suit our needs. The rules below will be (initially) immutable.

117. Each round will happen in a new comment thread. A new round cannot start until the rule change proposed in the previous round has been voted on. If technical problems result in having to start a new comment thread, that thread should include the appropriate reference number and it will be understood to be part of the same comment thread.

I will take the first move to demonstrate the format in the comments section.

118. The final vote count will be determined after 24 hours of silence. Players may discuss and cast votes, and change their votes. But after 24 hours of no new comments, the yeas and nays will be tallied and the outcome determined accordingly. In cases requiring unanimity, a single nay vote is enough to allow a player to start a new round without waiting the full 24 hours. The final vote will still occur (for purpose of calculating points) after 24 hours of silence.

Despite being numbered 118, this rule will take priority over rule 105.

119. Anyone who is eligible to comment is eligible to play. If it is possible to start a new round, anyone may start that round. In the event that two people attempt to start a round at the same time (e.g. Brandon and I post a comment within a couple minutes of each other) priority will be given to whichever was posted first and the second comment will be voided.

120. The game will continue until someone wins, or everyone forgets the game, in which case the winner will be the last person to have had their comment replied to.

A happy ten-year anniversary to the case people love to hate

This month marks the ten-year anniversary of one of the most despised and misunderstood Supreme Court cases: Citizens United v. Federal Election Commission.

I love Citizens United. It stands as perhaps the most important First Amendment decision of the last decade. Yet it’s come to symbolize the illicit marriage between money and power, while what actually happened in the case is largely an afterthought. I remember encountering an enraged signature-gatherer outside a Trader Joe’s a few years ago who was engaged in one of the many campaigns to amend the Constitution to put an end to Citizens United. I thought he might have a coronary when I told him that it was one of my favorite Supreme Court decisions. I deeply regret not asking him if he could rehearse for me the facts of the case. Maybe he would’ve surprised me.

So what did Citizens United actually say? The law at issue banned corporations from using general treasury funds for electioneering, with civil and criminal penalties for corporations that spent money to speak on pressing political issues of the day. The Supreme Court said that a small-time political organization (that happened to be incorporated), Citizens United, could not be banned from publishing a film critical of a presidential candidate. It’s hard to find speech of a higher order of significance than that.

Citizens United held that government cannot ban political expenditures just because people choose to speak through the corporate form. This is a classic example of an old rule–government cannot censor speech based on the identity of the speaker.

Much of the fury over Citizens United is premised on a guttural abhorrence for the corporation. But corporations are just groups of people who have chosen to organize through a particular structure. And most don’t realize that the law at issue in Citizens United also banned unions from using general treasury funds for electioneering communications.

Much of the popular criticism of the case that I’ve seen seems to believe that Citizens United was the first case to establish that corporations had First Amendment rights. It wasn’t. In fact, not even the dissenters in the case would’ve held that corporations lack such rights. That was an uncontroversial and settled matter. And it should be obvious as to why. If corporations don’t have First Amendment rights, then the New York Times doesn’t have First Amendment rights, along with many other media organizations. (I’ve heard the excuse that freedom of the press would still protect media organizations independently, which is a misunderstanding of the freedom of the press, which doesn’t offer greater speech protections to media than non-media).

Citizens United gets a bad break, and I wish it a happy anniversary.

A blatant campaign-finance boondoggle

The City of Seattle is poised to pass a plainly unconstitutional campaign-finance law later this month. The bill would limit contributions to political action committees that are not controlled by or connected to a candidate to $5000 per election cycle. The Ninth Circuit Court of Appeals, which would govern the outcome of any litigation, has already said several times that limiting contributions to independent PACs (meaning independent of a candidate’s campaign) violates the First Amendment.

The rationale is pretty straightforward. Any limit on political spending is a limit on speech, so it must satisfy the First Amendment. In Buckley v. Valeo, the United States Supreme Court said that contribution limits directly to candidates are usually okay because they (arguably) reduce the likelihood of corrupt quid pro quo exchanges between candidates and donors. But Buckley struck down limits on independent expenditures (meaning expenditures that aren’t donated to a candidate but speak independently for or against a candidate). Independent expenditures, unlike direct contributions, are not coordinated or controlled by the candidate, so there is less of a risk that an independent expenditure is actually an illicit quid pro quo. Since limits on independent expenditures restrict speech without actually doing anything to prevent corruption, they violate the First Amendment.

Contributions to PACs that engage in independent expenditures are basically the same as independent expenditures–there isn’t a direct connection to a candidate, so there simply is no genuine risk of corruption. The City of Seattle probably knows this, and they either don’t care or they hope to change the state of the law. I look forward to the forthcoming judicial rebuke.

Really, I find the entire premise behind limits on either contributions or expenditures to be highly dubious. While there are no doubt a few instances where a contribution to a candidate is given in direct exchange for some future favor once the candidate wins office, the vast majority of contributions are not that. They’re donations to support a candidate because his platform reflects the donor’s policy preferences. Most corrupt exchanges of money, when they do occur, almost certainly occur under the table and outside the context of highly regulated campaign contributions. Thus, contribution limits penalize a wide range of legitimate political speech to get at a vanishingly small (and unknowable) number of malefactors.

Defenders of campaign-finance laws tend to emphasize the huge amount of political spending as per se evidence of the need for reform. (When you compare the amount of political spending to other spending in the economy, it becomes quite clear that the amount of money in electoral politics simply isn’t that much). This claim that money in elections is fundamentally bad has always struck me as bizarre. That money is spent by both sides on political speech that informs the public. Why should we assume that this is a bad thing? Of course all political speech has a partisan aim–to convince voters to vote for so-and-so. But the information hardly compels voters to do so. At the end of the day, it seems much better to have a public informed by politically motivated communications than to have less information.

Campaign-finance advocates also like to point out that candidates who receive the most money tend to win. Again, it isn’t obvious why this is a bad thing. It seems rather obvious that popular candidates will attract both dollars and votes, not because they get lots of money, but because they’re popular. This is a classic failure to acknowledge the difference between correlation and causation. To date, no significant evidence has surfaced demonstrating that dollars cause votes.

And what about the concern over undue influence? Of course, politicians may be responsive to high-dollar donors. But again, this is a correlation issue. The NRA gives money to candidates who support the NRA’s  policy preferences. When the candidate reaches office and fights gun control, is it because of the NRA’s support, or was the NRA’s support prompted by the candidate’s pre-existing policy platform? Over and over, the deeply felt convictions of campaign-finance advocates seem to rest on a house of cards.

In any case, even if risk of quid pro quo corruption is a valid reason to restrict speech, Seattle’s bill goes well beyond that rationale. PACs engage in core political speech, as do the individuals who donate to them. That speech merits protection.

Hyperinflation and trust in Ancient Rome

Since it hit 1,000,000% in 2018, Venezuelan hyperinflation has actually been not only continuing but accelerating. Recently, Venezuela’s annual inflation hit 10 million percent, as predicted by the IMF; the inflation jumped so quickly that the Venezuelan government actually struggled to print its constantly-inflated money fast enough. This may seem unbelievable, but peak rates of monthly inflation were actually higher than this in Zimbabwe (80 billion percent/month) in 2008, Yugoslavia (313 million percent/month) in 1994, and in Hungary, where inflation reached an astonishing 41.9 quadrillion percent per month in 1946.

The continued struggles to reverse hyperinflation in Venezuela are following a trend that has been played out dozens of times, mostly in the 20th century, including trying to “reset” the currency with fewer zeroes, return to barter, and turning to other countries’ currencies for transactions and storing value. Hyperinflation’s consistent characteristics, including its roots in discretionary/fiat money, large fiscal deficits, and imminent solvency crises are outlined in an excellent in-depth book covering 30 episodes of hyperinflation by Peter Bernholz. I recommend the book (and the Wikipedia page on hyperinflations) to anyone interested in this recurrent phenomenon.

However, I want to focus on one particular inflationary episode that I think receives too little attention as a case study in how value can be robbed from a currency: the 3rd Century AD Roman debasement and inflation. This involved an iterative experiment by Roman emperors in reducing the valuable metal content in their coins, largely driven by the financial needs of the army and countless usurpers, and has some very interesting lessons for leaders facing uncontrollable inflation.

The Ancient Roman Currency

The Romans encountered a system with many currencies, largely based on Greek precedents in weights and measures, and iteratively increased imperial power over hundreds of years by taking over municipal mints and having them create the gold (aureus) and silver (denarius) coins of the emperor (copper/bronze coins were also circulated but had negligible value and less centralization of minting). Minting was intimately related to army leadership, as mints tended to follow armies to the front and the major method of distributing new currency was through payment of the Roman army. Under Nero, the aureus was 99% gold and the denarius was 97% silver, matching the low debasement of eastern/Greek currencies and holding a commodity value roughly commensurate with its value as a currency.

The Crisis of the Third Century

However, a major plague in 160 AD followed by auctions of the imperial seat, major military setbacks, usurpations, loss of gold from mines in Dacia and silver from conquest, and high bread-dole costs drove emperors from 160-274 AD to iterative debase their coinage (by reducing the size and purity of gold coins and by reducing the silver content of coins from 97% to <2%). A major bullion shortage (of both gold and silver) and the demands of the army and imperial maintenance created a situation where a major government with fiscal deficits, huge costs of appeasing the army and urban populace, and diminishing faith in leaders’ abilities drove the governing body to vastly increase the monetary volume. This not only reflects Bernholz’ theories of the causes of hyperinflations but also parallels the high deficits and diminishing public credit of the Maduro regime.

Inflation and debasementFigure 1 for Fiat paper

Unlike modern economies, the Romans did not have paper money, and that meant that to “print” money they had to debase their coins. The question of whether the emperor or his subjects understood the way that coins represented value went beyond the commodity value of the coins has been hotly debated in academic circles, and the debasement of the 3rd century may be the best “test” of whether they understood value as commodity-based or as a representation of social trust in the issuing body and other users of the currency.

Figure 2 for Fiat paper

Given that the silver content of coins decreased by over 95% (gold content decreased slower, at an exchange-adjusted rate shown in Figure 1) from 160-274 AD but inflation over this period was only slightly over 100% (see Figure 2, which shows the prices of wine, wheat, and donkeys in Roman Egypt over that period as attested by papyri). If inflation had followed the commodity value of the coins, it would have been roughly 2,000%, as the coins in 274 had 1/20th of the commodity value of coins in 160 AD. This is a major gap that can only be filled in by some other method of maintaining currency value, namely fiat.

Effectively, a gradual debasement was not followed by insipid ignorance of the reduced silver content (Gresham’s Law continued to influence hoards into the early 3rd Century), but the inflation of prices also did not match the change in commodity value, and in fact lagged behind it for over a century. This shows the influence of market forces (as monetary volume increased, so did prices), but soundly punctures the idea that coins at the time were simply a convenient way to store silver–the value of the coins was in the trust of the emperor and of the community recognition of value in imperial currency. Especially as non-imperial silver and gold currencies disappeared, the emperor no longer had to maintain an equivalence with eastern currencies, and despite enormous military and prestige-related setbacks (including an emperor being captured by the Persians and a single year in which 6 emperors were recognized, sometimes for less than a month), trade within the empire continued without major price shocks following any specific event. This shows that trust in the solvency and currency management by emperors, and trust in merchants and other members of the market to recognize coin values during exchanges, was maintained throughout the Crisis of the Third Century.

Imperial communication through coinage

This idea that fiat and social trust maintained higher-than-commodity-values of coins is bolstered by the fact that coins were a major method of communicating imperial will, trust, and power to subjects. Even as Roman coins began to be rejected in trade with outsiders, legal records from Egypt show that the official values of coins was accepted within the army and bureaucracy (including a 1:25 ratio of aureus-to-denarius value) so long as they depicted an emperor who was not considered a usurper. Amazingly, even after two major portions of the empire split off–the Gallic Empire and the Palmyrene Empire–continued to represent their affiliation with the Roman emperor, including leaders minting coins with their face on one side and the Roman emperor (their foe but the trusted face behind Roman currency) on the other and imitating the symbols and imperial language of Roman coins, through their coins. Despite this, and despite the fact that the Roman coins were more debased (lower commodity value) compared to Gallic ones, the Roman coins tended to be accepted in Gaul but the reverse was not always true.

Interestingly, the aureus, which was used primarily by upper social strata and to pay soldiers, saw far less debasement than the more “common” silver coins (which were so heavily debased that the denarius was replaced with the antoninianus, a coin with barely more silver but that was supposed to be twice as valuable, to maintain the nominal 1:25 gold-to-silver rate). This may show that the army and upper social strata were either suspicious enough of emperors or powerful enough to appease with more “commodity backing.” This differential bimetallist debasing is possibly a singular event in history in the magnitude of difference in nominal vs. commodity value between two interchangeable coins, and it may show that trust in imperial fiat was incomplete and may even have been different across social hierarchies.

Collapse following Reform

In 274 AD, after reconquering both the Gallic and Palmyrene Empire, with an excellent reputation across the empire and in the fourth year of his reign (which was long by 3rd Century standards), the emperor Aurelian recognized that the debasement of his currency was against imperial interests. He decided to double the amount of silver in a new coin to replace the antoninianus, and bumped up the gold content of the aureus. Also, because of the demands of ever-larger bread doles to the urban poor and alongside this reform, Aurelian took far more taxes in kind and far fewer in money. Given that this represented an imperial reform to increase the value of the currency (at least concerning its silver/gold content), shouldn’t it logically lead to a deflation or at least cease the measured inflation over the previous century?

In fact, the opposite occurred. It appears that between 274 AD and 275 AD, under a stable emperor who had brought unity and peace and who had restored some commodity value to the imperial coinage, with a collapse in purchasing power of the currency of over 90% (equivalent to 1,000% inflation) in several months. After a century in which inflation was roughly 3% per year despite debasement (a rate that was unprecedentedly high at the time), the currency simply collapsed in value. How could a currency reform that restricted the monetary volume have such a paradoxical reaction?

Explanation: Social trust and feedback loops

In a paper I published earlier this summer, I argue that this paradoxical collapse is because Aurelian’s reform was a blaring signal from the emperor that he did not trust the fiat value of his own currency. Though he was promising to increase the commodity value of coins, he was also implicitly stating (and explicitly stating by not accepting taxes in coin) that the fiat value that had been maintained throughout the 3rd Century by his predecessors would not be recognized going forward by the imperial bureaucracy in its transactions, thus signalling that for all army payment and other transactions, the social trust in the emperor and in other market members that had undergirded the value of money would now be ignored by the issuing body itself. Once the issuer (and a major market actor) abandoned fiat currency and stated that newly minted coins would have better commodity value than previous coins, the market–rationally–answered by moving quickly toward commodity value of the coins and abandoned the idea of fiat.

Furthermore, not only were taxes taken in kind rather than coin, but there was widespread return to barter as those transacting tried to avoid holding coins as a store of value. This pushed up the velocity of money (as people abandoned it as a store of value and paid higher and higher amounts for commodities to get rid of their currency). The demonetization/return to barter reduced the market size that was transacted in currency, meaning that there were even more coins (mostly aureliani, the new coin, and antoniniani) chasing fewer goods. The high velocity of money, under Quantity Theory of Money, would also contribute to inflation, and the unholy feedback loop of decreasing value causing distrust, which caused demonetization and higher velocity, which led to decreasing value and more distrust in coins as stores of value kept this cycle going until all fiat value was driven out of Roman coinage.

Aftermath

This was followed by Aurelian’s assassination, and there were several monetary collapses from 275 AD forward as successive emperors attempted to recreate the debased/fiat system of their predecessors without success. This continued through the reign of Diocletian, whose major reforms got rid of the previous coinage and included the famous (and famously failed) Edict on Maximum Prices. Inflation continued to be a problem through 312 AD, when Constantine re-instituted commodity-based currencies, largely by seizing the assets of rich competitors and liquidating them to fund his army and public donations. The impact of that sort of private seizure is a topic for another time, but the major lesson of the aftermath is that fiat, once abandoned, is difficult to restore because the very trust on which it was based has been undermined. While later 4th Century emperors managed to again debase without major inflationary consequences, and Byzantine emperors did the same to some extent, the Roman currency was never again divorced from its commodity value and fiat currency would have to wait centuries before the next major experiment.

Lessons for Today?

While this all makes for interesting history, is it relevant to today’s monetary systems? The sophistication of modern markets and communication render some of the signalling discussed above rather archaic and quaint, but the core principles stand:

  1. Fiat currencies are based on social trust in other market actors, but also on the solvency and rule-based systems of the issuing body.
  2. Expansions in monetary volume can lead to inflation, but slow transitions away from commodity value are possible even for a distressed government.
  3. Undermining a currency can have different impacts across social strata and certainly across national borders.
  4. Central abandonment of past promises by an issuer can cause inflationary collapse of their currency through demonetization, increased velocity, and distrust, regardless of intention.
  5. Once rapid inflation begins, it has feedback loops that increase inflation that are hard to stop.

The situation in Venezuela continues to give more lessons to issuing bodies about how to manage hyperinflations, but the major lesson is that those sorts of cycles should be avoided at all costs because of the difficulty in reversing them. Modern governments and independent currency issuers (cryptocurrencies, stablecoins, etc.) should take lessons from the early stages of previous currency trends toward trust and recognition of value, and then how these can be destroyed in a single action against the promised and perceived value of a currency.

The mythology of Lochner v. New York

In the highly competitive world of most misunderstood Supreme Court decisions, Lochner v. New York sits high on the list. The reason is simple enough: it has undergone a transcendent ascent to the world of abstraction, where it now embodies the platonic essence of a black-robed cadre of old, straight, white men hankering to smash the plebeian’s face in the dirt.

Yesterday, the Intelligencer–a publication of New York Magazine–dragged out these old tropes with the galumphing rhetoric typical of someone simply parroting a battered playbook with no real concern for its accuracy. The article is entitled, “Conservatives Want a ‘Republic’ to Protect Privileges.” Its basic premise is to push back against the anti-democratic tendencies of those who oppose direct, untrammeled democracy.

The article lists several “limitations on democracy to justify and even expand privilege.” The second references the conservative legal movement’s supposed attempt to resurrect the “Lochner era,” in order to protect the wealthy from democratic majorities.

First, off, it’s wrong to say that the “conservative legal movement” wants to revive Lochner. Both progressive and conservative jurists are generally united in their rejection of Lochner. Robert Bork, a thoroughly majoritarian conservative, railed against the case, as did Justice Antonin ScaliaGranted, this is because the conservative legal movement, sadly, has largely embraced the progressive juridical project of the 30’s, which was devoted to weakening the judiciary in order to shove the New Deal down the nation’s throat.

Second, Lochner‘s many detractors almost never grapple with the facts of the case. As a result, they frequently misunderstand it. Here’s what actually happened. In the early 1900’s, New York enacted a nitpicky law that saddled bakeries with an avalanche of finite requirements–limits on ceiling heights, limits on the kind of floor, and the demand to whitewash the walls every three months, among other things. But the provision dealt with in Lochner was this: “No employee shall be required or permitted to work in a biscuit, bread or cake bakery or confectionary establishment than 60 hours in one week or more than 10 hours in any one day.”

A Bavarian immigrant named Joseph Lochner who owned a Utica bakery was criminally indicted for violating this law. Aman Schmitter, another immigrant, lived with his family above the bakery and worked for Joseph. Aman happily worked over sixty hours a week in order to care for his family and increase his skills, and he said so in a sworn affidavit.

It is undisputed that New York’s law was not about health, safety, or protecting workers, though New York tried to say so at the time. Rather, New York passed the law at the behest of powerful bakeries and baker unions in a patent attempt to crush small, family-owned bakeries that relied upon flexible work schedules. It gets worse–the law intentionally targeted immigrant bakeries in particular, which tended to be of the small variety that leaned on overtime. The state’s legal brief contained a detestable line that progressives today would certainly associate with Trump: “there have come to [New York] great numbers of foreigners with habits which must be changed.” This is the law that progressives who hate Lochner are defending.

In a 5-4 decision, the Supreme Court thankfully struck down this law that was passed to serve the powerful and crush a weak immigrant population. Put that way, it seems startling that anyone today would wish to stand up for this piece of anti-immigrant, protectionist garbage.

But then again, Lochner is no longer about Lochner. It’s about rejecting a mythical “Lochner era.” Progressives believe that Lochner represented an entire ecosystem of turn-of-the-century jurisprudence in which corrupt judges were smothering the will of the people wholesale. Turns out that era never existed. Law professor David Bernstein has examined old court records concerning state exercises of their police power during that time period and found that there simply was no lengthy period in which courts were whack-a-moling every piece of social legislation that dared to lift its head.

To the extent that courts of that era did strike down social legislation under the liberty of contract, they did so not to serve the wealthy, but to protect weak minorities–which is of course why robust judicial review exists in the first place. For instance, the Illinois state supreme court struck down a deeply misogynistic law limiting women’s maximum work hours. The Court used the same liberty-of-contract reasoning as Lochner, arguing that women “are entitled to the same rights under the Constitution to make contracts with reference to their labor as are secured thereby to men.” And in Bailey v. Alabama, the wicked Lochner Court struck down a Jim Crow law that created a presumption of fraud when a worker quit after getting an advance payment. The law was aimed at penalizing black workers–an attempt essentially to revive peonage. Do progressives really want to own up to disagreeing with these “Lochner era” precedents? Somehow I doubt it.

Lochner did not, as Lochner‘s enemies love to claim, replace the legislature’s judgment with the judgment of the Court. Instead, the Court was willing to look skeptically at the legislature’s motives and demand that the legislature do its work and show that a law burdening a basic right is necessary. The New York law failed that test spectacularly.

Of course, Lochner‘s legacy does demand that courts counter democratic will when it conflicts with fundamental rights. Alexander Bickel famously called this the counter-majoritarian difficulty, something that has preoccupied the judiciary for a century. If you really care about minorities, though, you might consider Judge Janice Rogers Brown’s insight: “But the better view may be that the Constitution created the countermajoritarian difficulty in order to thwart more potent threats to the Republic: the political temptation to exploit the public appetite for other people’s money–either by buying consent with broad-based entitlements or selling subsidies, licensing restrictions, tariffs, or price fixing regimes to benefit narrow special interests.”

In any case, if progressives continue to take a polly-anna view of unfettered democracy despite the evidence, they should at least bother to get the facts right on Lochner.

 

Be Our Guest: “Of Monies and Juries and Freedoms”

Be Our Guest is a new, experimental series at NOL. Basically, NOL is invite-only but you can, and should, submit your thoughts to us. The latest piece is by Michalis Trepas, a Greek national working in the financial sector. An excerpt:

The judicial system was reluctant to intervene, out of respect of the separation of powers (according the Weimar Constitution, currency matters were reserved for the parliament). So, at first, the courts upheld the nominalistic principle and refused to accept a revalorisation of debts. But then, something began to change in the courts’ reasoning. The currency’s slide prior to 1921 could be attributed to the conditions of the “war economy”, whose burden was to be shared by everyone in the country. The unrestrained fall thereafter, the courts said, was a monetary phenomenon, punishing “blindly and unpredictably” only the creditor class.

If you cannot guess by now what Michalis is writing about, read on! If you have figured out what the subject of his piece is about, read on, as it only gets more interesting.

There are cultural and geopolitical considerations to think about here, too, in regards to Greece and Germany and financial markets and constitutionalism.