The Burden of Judging Part I: Public Choice Constitutionalism

November 9th, 2014

In the Burden of Judging,  I explore the connection between public choice theory, and rational basis review. When governments are captured, and provide rents for favored groups, the rational basis review for economic regulations asks courts to turn a blind eye to this process.  In the afterword to the updated edition of Restoring the Lost Constitution, Randy Barnett points out that under rational basis review, courts routinely uphold “interest group” or “rent seeking” laws without directly examining the motives of the legislatures. Barnett observes that when a law “singles out specific groups or classes for special treatment,” it will withstand “constitutional scrutiny only if [it] could be justified as really related to the welfare of the community as a whole.

In my article, I address a concept first introduced by Mark Tushnet, called “Public Choice Constitutionalism.” That is, how various aspects of our Constitution provide a judicially-imposed check to this rent-seeking and capture. Public choice constitutionalism provides a judicially-imposed check to this rent-seeking and capture. There are shades of public choice constitutionalism embedded in our Constitution, as evidenced by the text and history of the doctrine of Enumerated Powers and Federalism, the Contracts Clause, the Takings Clause, the 14th Amendment, and elsewhere in our founding documents such as The Federalist. Through engaged judicial review, public choice constitutionalism can serve to correct “government failures” in the sense that judicially-enforced antitrust law corrects “market failures.”

In this post, I will explore how public choice theory is baked into our Constitution, in the doctrines of Enumerated Powers and Federalism, the Contracts Clause, and the Takings Clause.

Enumerated Powers and Federalism

With respect to enumerated powers and federalism, when the federal government assumes various aspects of the police power once reserved for the states—thereby diminishing our vertical federalism—rent seeking becomes much easier. It takes much less time, effort, and money to lobby and petition a single government in Washington that can easily impose nationwide rules, than to lobby in 50 state capitols to achieve rules that can have an impact within one state’s borders. In this way federalism increases the cost of rent-seeking. It makes capture more difficult, and diminishes the impact of special interest legislation. Federalism also permits states to engage as laboratories of democracy, to experiment in different forms of government. These differences allow people to vote with their feet and move to a state more advantageous to their particular situations.

Perhaps the only way to stop rent seeking is to eliminate the ability of government to have power to hand out rents. If Congress can do less, there is less incentive for interest groups to seek unavailable rents. Enumerated powers and federalism would do just that. Yet, limiting what the government has the power to do, as a means to defeat rent seeking, would be wielding a bludgeon, rather than a scalpel, to fight back against special interest legislation.

The Contracts Clause

The Contracts Clause of Article I of the Constitution provides “No State shall pass any Law impairing the Obligation of Con- tracts.” Though this clause descended into desuetude during the New Deal, it was a central element of constitutional litigation during the nineteenth century. This provision, perhaps more than any other in our Constitution, sounds in public choice theory. Eliminating the ability of the states to abrogate contracts ensures that special interests can’t seek legislative favors to rescind debts. The “contracts clause was designed to preserve the sanctity of contract, and especially to protect debtor/creditor contracts from interference by the states.” The Contracts Clause imposes serious costs to, and limitations on the power of self-governance.

The framers of the Contract Clause, Clark Neily writes, “were well aware of the harsh results that might sometimes follow from this choice, but they understood too that giving democratic majorities the power to vote their way out of debt would be equally disastrous for the nation’s economic well- being and, even more importantly, for the rule of law.” This is a classic demonstration of public choice theory. A politically powerful special interest—debtors—will capture the legislature and concentrate the cost of their rents on a specific group—creditors. The Constitution, if faithfully engaged, would eliminate this species of rent seeking.

The Takings Clause

The takings clause of the Fifth Amendment also reflects a strong recognition of public choice theory. The Takings Clause “protects property owners from confiscations by the national government by providing that ‘takings’ be accompanied by ‘just compensation’ and that the power only be exercised for the ‘public use.’”I have argued that the Takings Clause embodies a natural guard against unlawful rent-seeking. Specifically, by its textual command that property can only be taken for “public use,” the Constitution excludes private parties who could stand to benefit from governmental appropriation. Textually, because only the “public” can benefit, there are no private rents to seek.

This constitutional requirement would protect homeowners from rent-seeking interest groups enabled by complicit rent-providing legislatures through one very important procedural bar. The rents—in this case private property— cannot be taken to benefit private uses, only public uses. These are not worthwhile rents to seek. If Pfizer can’t build a facility on Suzette Kelo’s land, it will have no incentive to lobby to have Kelo’s home condemned. Alas, the public choice teeth of the Takings Clause were extracted in Kelo v. City of New London, which upheld the power of the state to exercise the power of eminent domain over private property for private development.

Allowing the government to condemn properties for private development “relegates rent seekers to preying upon the poorest and least politically connected segment of society” where the property can be taken with the least costs.210 As Ilya Somin has noted, “there are three major reasons why economic development takings are especially vulnerable to this threat: the nearly limitless applicability of the development rationale [post-Kelo], this rationale is infinitely limitless], severe limits on electoral accountability caused by low transparency [of certain voters], and time horizon problems.”

Stated simply, following Kelo, takings are more likely to be supported by wealthy special interests and target those who are least able to fight them (usually poor, minority, and uneducated landowners). “Factoring in the large statistical overlap between ‘poor’ and ‘minority’ homeowners, tragically the burden of eminent domain disproportionately falls on those least prepared to fight it.” Because of Kelo, the Takings Clause, a constitutional bulwark against rent seeking, has been captured.