Will the Courts Return to Protecting Economic Liberty?
Last week, the United States Court of Appeals for the Fifth Circuit released a revised opinion in St. Joseph Abbey v. Castille. At stake in this case was a challenge by the Monks of St. Joseph Abbey against rules issued by the Louisiana State Board of Embalmers that forbade anyone but funeral homes from selling caskets to consumers within the state.
The Abbey had the effrontery to sell its simple wooden caskets for prices far below those offered by licensed producers, who sought by state decree to shut them down. Unfortunately, there was some precedents on the book that pointed in that direction, most notably the decision of the Tenth Circuit in Powers v. Harris, which took the position that economic protectionism is a legitimate state interest, which, by definition, means that all bans on new competition are constitutional.
Fortunately, Judge Patrick Higginbotham, speaking for a unanimous panel, had nothing but contempt for this blatant abuse of the legislative process. In dealing with this case, Higginbotham was forced to contend with the all-too-forgiving "rational basis" test, which allows the weakest of health and safety rationalizations to be sufficient to support any law.
Indeed, some key Supreme Court precedents on the point are virtually ludicrous insofar as they allow, as in Williamson v. Lee Optical (1955), the state to stipulate that only licensed ophthalmologists or optometrists can legally fit or replace eyeglass lens in existing frames. The opticians could grind the lenses as well as these more highly paid professionals, but the Supreme Court said that the prohibition could be defended as a health law because it forced individuals to come into contact with eye doctors in ways that could allow them to detect a dangerous eye condition. Similarly, in City of New Orleans v. Dukes (1976), the Supreme Court upheld a New Orleans ordinance that limited sales by pushcart vendors in the French Quarter to those with eight or more years experience. Their deep connections to the local area were said to justify this overt act of grandfather protection.
With precedents like these on the books, it should not have been too difficult to explain why the bereaved should be forced into the hands of funeral directors for care that they don’t need in exchange for thousands of dollars in fees that they would rather not pay. But Higginbotham’s exasperation came through in his denunciation of the web of interlocking definitions that led to this sorry state of affairs. He then distinguished the two cases mentioned above on the ground “that protecting or favoring a particular intrastate industry is not an illegitimate interest when protection of the industry can be linked to advancement of the public interest or general welfare.”
The only way to get to that result is to spend some time and effort to demolish the supposed health and safety justification for a restrictive trade practice. Judge Higginbotham did just this when he wrote:
That Louisiana does not even require a casket for burial, does not impose requirements for their construction or design, does not require a casket to be sealed before burial, and does not require funeral directors to have any special expertise in caskets makes us doubt that a relationship exists between public health and safety and limiting intrastate sales of caskets to funeral establishments.
The question that remains is just how much further that, or any other, court is prepared to go. In writing his opinion, Judge Higginbotham cited Cass Sunstein’s well known 1984 article that condemned “naked preferences” under the Constitution. It is a great phrase, but it does not go nearly far enough, because it fails to offer any guidance on what should be done with those cases in which economic preferences are scantily clad in some health and safety regulation that supplies only a trivial social benefit.
The correct approach is to heighten the level of scrutiny to a point where a court will strike down those statutes that have a predominantly anti-competitive purpose. It may not sound like much of a verbal shift, but it is one that makes all the difference in the world. Any close look at virtually all of our labor statutes -- including minimum wage laws, overtime laws, and union laws -- shows that they all fall comfortably into the category of restricting entry into established markets in order to protect the monopoly profits of existing workers and firms.
The insight in the earlier era named after Lochner v. New York (1905) was that these mixed cases were, if anything, a far more serious abuse than the ridiculous casket law struck down in Louisiana, because the monopolies that they protected were far larger and more entrenched. Lochner used that insight to strike down a state maximum hours law chiefly supported for its protectionist effect. The Fifth Circuit made it clear that it was not prepared to go that extra mile by noting with approval its earlier decision in favor of a local ordinance that disfavored small cab companies in the Houston market for protectionist reasons. Too bad, but hardly unexpected. But even the first step is welcome, especially if it leads to the slow erosion of some of the most restrictive labor laws that have done so much to promote unemployment and to undermine the efficiency of our labor markets.