Lerner on “Enlightenment Economics and the Framing of the U.S. Constitution”

February 25th, 2013

I have previously blogged about what I saw as the relationship between certain structural components of our Constitution–namely the doctrine of enumerated powers and federalism–and the power of the Constitution to constrain rent-seeking (See here, here, and here). I have focues on the link between Madison’s Federalist No. 10 and rent-seeking:

As Madison wrote, factionalism and rent seeking cannot be eliminated without eliminating liberty itself. All you can do is “control[] its effects.” With classic republican representatives in office, one need not worry so much about the effects of rent seeking. But this will not always be the case. Madison recognized this inherent failure in elected officeholders:

It is in vain to say that enlightened statesmen will be able to adjust these clashing interests, and render them all subservient to the public good. Enlightened statesmen will not always be at the helm. Nor, in many cases, can such an adjustment be made at all without taking into view indirect and remote considerations, which will rarely prevail over the immediate interest which one party may find in disregarding the rights of another or the good of the whole. The inference to which we are brought is, that the causes of faction cannot be removed, and that relief is only to be sought in the means of controlling its effects.

So how does our Constitution “control[] the effects” of factionalism,or rent seeking?

By what means is this object attainable? Evidently by one of two only. Either the existence of the same passion or interest in a majority at the same time must be prevented, or the majority, having such coexistent passion or interest, must be rendered, by their number and local situation, unable to concert and carry into effect schemes of oppression.

This last sentence has always intrigued me, especially when I consider it against the backdrop of the document the Federalist was championing–our Constitution. If republican principles fail, how do you render majorities “unable to concert and carry into effect schemes of oppression.” The answer to this question lies in what I see as part of the genius of our Constitution–structure. Federalist 10 focuses heavily on our federalist system, with the checks of the states on the federal government.

Renee Lettow Lerner wrote a great essay in the Harvard JLPP looking at just this issue, titled “Enlightenment Economics and the Framing of the U.S. Constitution.”

Some scholars have argued that the Framers of the U.S. Constitution did not have a common set of views on economics, or that the Constitution, except perhaps in isolated clauses, does not reflect any specific economic views. The principal Framers did, in fact, share a basic set of economic views, though of course they did not agree on all economic questions. Their shared economic views were common to enlightenment thinkers: promoting free trade, curtailing rent-seeking (the transfer of wealth from producers to non-producers through political power), and, in most instances, eliminating monopolies.

These economic views permeate the Constitution and are not manifest only in odd clauses. The Framers designed many features of the Constitution to further these economic ends. I discuss four of them here: (1) the Commerce Clause; (2) the interstate and alien diversity clauses; (3) the elaborate procedures of bicameralism and presentment for enacting bills (and the provision allowing the Senate to amend financial bills); and (4) the enumerated constitutional limitations on legislative power.

Lettow Lerner also comments on factionalism from Federalist No. 10 and rent-seeking:

The Framers also designed the legislative process to further commerce and to prevent rent‐seeking indirectly. They viewed faction as one of the greatest dangers to a republic. Madison defined a faction in Federalist No. 10 as a “number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of pas‐ sion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.”28 One form of faction is the modern, rent‐seeking interest group. In Federalist No. 10, Madison confidently declared that factions would not easily be able to attain their ends under the Consti‐ tution because of the diversity of interests in a large republic.29 He referred to the difficulty of a faction getting its program through “the national council.”30 He and his fellow Framers had carefully designed the federal legislative process as a sys‐ tem of checks and balances to thwart faction. Through bicam‐ eralism and presentment, each chamber could check the other, and the President could check both.31 The Framers believed that this elaborate process would help to weed out faction‐ inspired measures that were rent‐seeking.

From the article, here is the section on enumerated powers:

Finally, the Framers intended the enumerated powers of Con‐ gress to limit the subjects the national legislature could address. This limitation served not only to preserve powers in the States, but also to control the possibilities for national rent‐seeking and congressional interference in the economy.

I recently attended a workshop on Hayek’s Law, Legislation and Liberty, which gave me a lot of food for thought. Combined with my writings about Black Swan theory, I have the makings of a pretty interesting article about the relationship between the structural protections of our constitution, public choice theory, and classical liberal thought.