Ideas on Liberty

Law, Economics, and Freedom

BY SYLVESTER PETRO

THE IDEA OF freedom has for millennia fascinated thinkers ranging from monarchs to metaphysicians. Natural scientists, ethicists, moralists, jurists, philosophers, general intellectuals—have tried their hands. Economists, especially, tend to write and speak as though the subject belongs peculiarly to them, possibly because they think of the free market as an economic institution.

However, lawyers, judges, and legal institutions carry the responsibility, for better or (too often) for worse, of administering freedom in society. It falls to them to set the metes and bounds of freedom, just as it falls to them to settle all other boundary disputes, all the conflicts dealt with by property, contract, and tort law.

Scientists, philosophers, and economists have had to put in cold storage their analysis and development of the ideas of freedom when the going gets rough and practical action is required. No matter how much their disciplines might contribute to the amplification of the idea of freedom, they, as such, have had no jurisdiction, no authority, no practical role in the administration of freedom in crises. When human beings can take no more, when they finally find control of their persons or their possessions—their freedom—intolerably invaded, they resort to arms, not to philosophers, not even to economists. They wield sticks and stones, guns, swords, tooth and claw, when there is nothing else, as the Hungarians did in 1956. But they will prefer to resort to the arms hidden in legal institutions, if those institutions are available and in decent working order.

It is not surprising, therefore, that such definite contours as personal freedom possesses are traceable today to decisions that have been handed down by courts. Philosophers and others have perhaps evolved the best general definition of freedom—in John Stuart Mill’s words: “The only freedom which deserves the name, is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.” But I doubt that they would ever have arrived at even that definition had it not been for the long years of juridical experience that preceded it. Moreover, the guidance provided by this definition is limited; it leaves the law with challenging problems in deciding in concrete cases when the pursuit of “our own good” deprives others of theirs; when, in fact, our actions invade rather than exercise freedom. If without reasonable justification your neighbor disturbs your slumbers, is he exercising his or invading your freedom?

The “Paradoxes of Freedom”

These deceptively simple issues, daily fare in the law, are hellishly difficult to resolve. But I propose to do the best I can to indicate how the law goes about resolving what statists like to call the “paradoxes of freedom.”

Abstract “natural rights” thinking helps so little at this point that jurists have often thrown up their hands in despair, as Jeremy Bentham did, calling the whole mode of thought useless as even a mere starting point in the practical administration of justice.

Closer to home, Ludwig von Mises (whose degree was in law) turned his brilliant lamp briefly on the question, seeking freedom’s first principle, and illuminated one of its deepest shadows by pointing out that the issue of freedom could never arise except in ordered society, and that, therefore, there is no point in talking about it in the state of nature. He said:

Freedom and liberty are not to be found in nature. In nature there is no phenomenon to which these terms could be meaningfully applied. Whatever man does, he can never free himself from the restraints which nature imposes upon him. If he wants to succeed in acting, he must submit unconditionally to the laws of nature.

Freedom and liberty always refer to interhuman relations. A man is free as far as he can live and get on without being at the mercy of arbitrary decisions on the part of other people. In the frame of society everybody depends upon his fellow citizens. Social man cannot become independent without forsaking all the advantages of social cooperation. The self-sufficient individual is independent, but he is not free. He is at the mercy of everybody who is stronger than himself. The stronger fellow has the power to kill him with impunity. It is therefore nonsense to rant about an alleged “natural” and “inborn” freedom which people are supposed to have enjoyed in the ages preceding the emergence of social bonds. Man was not created free; what freedom he may possess has been given to him by society. Only societal conditions can present a man with an orbit within the limits of which he can obtain liberty. (Human Action, pp. 279–80)

Mises goes on to say that “Freedom as people enjoyed it in the democratic countries of Western civilization in the years of the old liberalism’s triumph, was not a product of constitutions, bills of rights, laws, and statutes. Those documents aimed only at safeguarding liberty and freedom, firmly established by the operation of the market economy, against encroachments on the part of officeholders. No government and no civil law can guarantee and bring about freedom otherwise than by supporting and defending the fundamental institutions of the market economy . . . Where there is no market economy, the best-intentioned provisions of constitutions and laws remain a dead letter.” (Ibid., p. 283)

In opposing government to freedom in this statement, Mises has apparently slipped a cog. For what if the “fundamental institutions of the market economy” are themselves products of law and government? If private property and freedom of contract, the institutions that Mises himself (p. 280) calls the framework of the market economy, are juristic principles—creatures of kings, of the judges they appointed, and of the legislatures—why not recognize the state as the friend of freedom rather than treat it as an implacable enemy?

Another legally trained European, Bruno Leoni (but he more lawyer than economist), pointed out the problem in this part of Mises’ analysis. He emphasized that the market economy is nothing if not a legal institution. In Freedom and the Law he said:

The free market . . . inevitably implies the idea of a “constraint” in that all the members of a market society have the power to exercise restraint against people like robbers or thieves. There is no such thing as a free market with some constraining power superadded. A free market is rooted in a situation in which those engaged in market transactions have some power to constrain the enemies of a free market. This point probably is not emphasized sufficiently by those authors who, in focusing their attention on the free market, end by treating it as the very antithesis of government restraint.

Thus, for instance, Professor Mises . . . says that “liberty and freedom are terms employed for the description of the social conditions of the individual members of a market society in which the power of the indispensable hegemonic bond, the state, is curbed lest the operation of the market be endangered.” We notice here that he has qualified as “indispensable” the hegemonic bond of the state, but he means by liberty, as he also says, “restraint imposed upon the exercise of the police power” without adding exactly, as I would consider it reasonable to add from the point of view of a free trader, that liberty means also restraint imposed on the exercise of the power of anyone else to interfere with the free market. As soon as we admit this meaning of liberty, the hegemonic bond of the state is not only something to be curbed, but also, and I would say first of all, something we make use of to curb other people’s actions. (Freedom and the Law, pp. 49–50)

I accused Mises a moment ago only of slipping a cog because he fully understood the role that private property and freedom of contract play in the market economy. He himself said in Human Action that “[1] liberty and freedom are the conditions of man within a contractual society.” (Human Action, p. 280). And there can be no doubt that Mises was aware of the juristic character of contract. There can be promises, perhaps, in the “state of nature.” But a contract is an enforceable promise, and enforcement implies the state and legal institutions, as Mises very well knew.

Thus, while Mises may have slipped a cog, Leon’s criticism was not free of pettifoggery. It is true that in the passage quoted by Leoni, Mises seems to have regarded the state as exclusively the opponent of freedom, and in no sense its protagonist. But there can be no question in the mind of anyone who has read him fully and fairly that Mises had a perfect grasp of the positive relationship between law and freedom. He was fully aware that such private persons as union thugs, can invade freedom as savagely as the state can. He said: “The self-sufficient individual is independent, but he is not free. He is at the mercy of everybody who is stronger than himself. The stronger fellow has the power to kill him with impunity [in the state of nature].” Mises thought that the state—the “indispensable hegemonic bond”—is as indispensable to freedom as it is perilous; that the police can be both friend and foe of freedom, as every other human being can be. He may have loathed and distrusted the state, but he distrusted the state of nature—anarchy—even more.

Seeking the Ultimate Source of Our Liberties

To say that the law is the guarantor of our liberties, it must be emphasized, is not to say that it is also the ultimate source. That source is as inscrutable as the prime mover of the universe. We can verbalize the obscurity—trace it back into the human mind, the human spirit, the “soul,” if you prefer. I have myself said that freedom, well-being, and security are the built-in, the ultimate, human values. (See The Labor Policy of the Free Society [1957].) But I believe that objective, nonmetaphysical analysis must stop with some such self-evident postulate. We are capable of such words and ideas as “God,” “nature,” “divine consciousness,” but they seem to me to be invitations to argument rather than clarifications. Efforts by Nozick and Epstein to trace back property and contract and liberty to more primal sources seem to me to be bootless whistling in the dark.

In any event, I content myself here with the profound concept of the commonwealth stated by Dante Alighieri in De Monarchia—“The aim of rightful commonwealths is liberty, to wit that men may live for their own sake,” and with the intimately related definition of law offered by Thomas Aquinas: “an ordinance of reason directed to the common good,” with the common good being defined as freedom, well-being, and security, the ends that Western man has sought.

Reflection on this conception of law and the common good suggests that the “fumbling around” theory of legal development associated with Edmund Burke and Friedrich Hayek does not amount to much. Certainly, no one can deny that the legal institutions and principles of the Western world have had their ups and downs; or that it has taken centuries for them to fix on a direction and to follow it with some consistency. But no one in his right mind expects perfection from any human being or any institution—in any field of human action. Of course, the law has fumbled around. But fumbling, too, can be a rational activity; trial and error is not only a rational methodology, it is about the best and most rational one available to mankind, in all areas of human action, including “scientific” laboratories.

Bear in mind here the remarkable fact that all over the West the legal institutions came roughly to the same conclusions at roughly the same time. In all Western countries, the “common good” to which their reason directed them was freedom and its handmaidens, property and contract, good not only in themselves but also in the well-being and security they promoted by way of increasingly free markets. The actual historical process was endlessly complicated, tragic, full of false moves, crammed with good results from bad motives and bad results from well-motivated actions. And yet, from it all, there emerged the most useful and productive juridical principles ever conceived: private property and freedom of contract.

Sir Henry Maine was simply summing up these developments when he said that “the movement in the progressive societies has hitherto been a movement from status to contract.” In saying this, he was not only stating a fact; he was also challenging Burke’s muddled anti-rationalism. The pursuit of freedom, well-being, and security—man’s ultimate social values—was about as deliberate as it could very well be. And Maine’s dictum was not confined to England, or France, or even to Europe. As he stated it, it applied to all progressive societies.

It fell to the best court of this country in 1870, about the same time that Maine was writing, to say in an important decision that:

Freedom is the policy of this country. But freedom does not imply a right in one person, either alone or in combination with others, to disturb or annoy another, either directly or indirectly in his lawful business or occupation, or to threaten him with annoyance or injury, for the sake of compelling him to buy his peace; or . . . to compel him to do any act against his will. The acts alleged and proved in this case [extortionate strike-threats] are peculiarly offensive to the free principles which prevail in this country; and if such practices could enjoy impunity, they would tend to establish a tyranny of irresponsible persons over labor and mechanical business which would be extremely injurious to both.” (Carew v Rutherford, 106 Mass. 1, 15)

Carew v Rutherford, like a thousand other decisions that might be cited, reveals how the common-law judges of this country, when their heads were clearer than they are now, were systematically, that is, rationally (not blindly), developing our free institutions. At the same time it serves to expose some deficiencies in current libertarian thought about freedom. I am thinking here of the libertarian belief that in order to be free persons must be privileged to engage in any activity so long as it is peaceful, the equally widespread libertarian notion that some types of action are or should be absolutely privileged, and the quasi-libertarian idea that the common law courts took as their guiding principle of decision that it was the function of law to maximize wealth.

Anything That’s Peaceful?

Perhaps the most seriously defective of these libertarian beliefs was summed up in the title of one of Leonard Read’s books, Anything That’s Peaceful. The shortcomings of this formula are sharply brought out in the thousands of court decisions holding wrongful many kinds of peaceful acts ranging from deception, to blackmail, to passing off one’s goods as those of another, to spite fences, to diversion of streams solely in order to hurt one’s neighbor, to such extortionate strike-threats as were held wrongful in Carew, to peacefully inducing one party to break his contracts with another, and, in general to secondary boycotts.

This is not the place for an exhaustive coverage of all these examples of peaceful wrongdoing, so let us be content with the strike-threat in Carew as an illustration. Prima facie, peaceful strikes were held to be acts of privileged freedom at common law. Yet the judges were very often confronted with instances in which such strikes did the kind of harm that a legal system intent on advancing freedom could not tolerate. Therefore, for the reasons set forth in the quotation above from Carew, the court held the strike-threat wrongful.

This case by itself shows that no legal system intent upon maximizing freedom could possibly hold every kind of peaceful act, privileged. However, it has a lot more than that to teach.

The Carew case serves well also to expose the deficiency in the belief that freedom requires absolutely privileged status for certain activities. One would think that if any act should be absolutely privileged, certainly a simple refusal to work should be—for is not the essence of slavery and the antithesis of liberty the activity known as forced labor? In order to display the weakness in this view, and in the belief that some acts should be absolutely privileged, I quote here a small part of one of the most incisive pieces of legal analysis I have ever encountered. The writer was Professor William Draper Lewis, and the article was in the Harvard Law Review of 1905 (pp. 449–50):

The act of selling one’s labor or one’s goods is an act which in the past has usually gone unquestioned, because it was never performed under circumstances which shocked the moral sense of the community. The idea that there is an inherent right to buy or sell, to work or not to work as one pleases, was the natural result. But the act of selling one’s labor or one’s goods does not differ essentially from any other act. There is no less and no more inherent right to sell labor or goods than to chop a tree. The legality of the act of tree-chopping depends on the surrounding circumstances; so with the sale. The law of torts in the past has not sprung, and could not spring, from an examination [only] of the rights of those who injured others.

Professor Lewis’s powerful point, often overlooked in the legal literature, was that freedom is a two-sided affair, as the valuable dictum of John Stuart Mill, quoted earlier, declares. Personal freedom extends only to the point where it infringes the freedom of others. At that point there can be no absolute privilege. There must be accommodation of equal rights and privileges and immunities. If taking a breath at a certain time and place is designed to hurt someone else, even that may be an invasion rather than an exercise of freedom, and so too with every other conceivable peaceful act. And any legal system which stopped in such circumstances with evaluating the right to breathe in the abstract, without inquiring into the purpose and effect of a deep breath which just happened to kill someone else, would be a stupid enemy of freedom, not its servant.

The fact that emerges from long legal experience is that no act can be regarded as absolutely privileged, regardless of time, place, circumstance, intention, and consequential harm to others. If no act can be absolutely privileged, it goes without saying that many kinds of peaceful conduct can constitute wrongful and actionable invasions of freedom.

This conclusion, by the way, provides an essential clue to the way in which systematic jurisprudence may be admitted into the ranks of the sciences of human action, praxeology, the discipline that encompasses all purposive conduct. As a great jurist, Professor N. Korkunov, pointed out in his General Theory of Law (N.Y.: Macmillan Company 1922, p. 42), law and its norms are all ends-oriented. They are not concerned essentially with the facts or even with the principles related to the arts and sciences. As Mises would have it for all praxeology, the law too is essentially teleological; it looks not only to the purpose and effect of actions but to the social ends that its rules and principles serve:

Man cannot guide himself through life [said Korkunov] merely by technical norms [e.g., engineering principles] suited only to the attainment of separate ends. He is guided necessarily by another principle which determines the choice of ends themselves . . .

. . . Technical norms are the rules directly applicable to the realization of the distinct ends of human activity, ethical norms [i.e., the rules of law] to the realization simultaneously of all human ends.

And this is why in filling its role as an ordinance of reason directed to the common good, the law must constantly be preoccupied with the teleological components of the facts which it confronts daily. It must look to the purpose of the actor and to the effects of his actions on the purposes of the other party, the victim, the person injured.

Law and Economics

In recent years the idea has been advanced by a number of lawyers who fancy themselves economists as well, that our legal system either has, or should have, maximizing wealth as its main objective—not maximizing freedom or any other version of the “common good.”

This is a big subject. To do it justice would require much more time and space than is available to me now. Yet I cannot resist saying a few words about it.

I wish to say in the first place that the idea cannot pass muster as an accurate account of either what the common law judges thought they were doing or of what they actually did. In thousands of cases, especially “nuisance” cases, large mining and manufacturing firms tried to defend themselves in suits brought by homeowners, small farmers, and others suffering physical harm, by proving to the courts that the harm they did was infinitely smaller than the wealth they created. Once in a while a court would accept such a defense. But as a rule the judges rejected the notion that harm to one party’s property rights could be justified by the other party’s greater productivity. See, for example, Arizona Copper Co. v. Gillespie, 12 Ariz. 190, 203, 100 Pac. 465, 470 [1909].

I would suggest in the second place that it is bad economics to believe that social wealth can be increased by tolerating conduct that destroys the property and freedom of others, even if it results in greater wealth for the actor. Besides amounting to a justification of the acts of muggers, embezzlers, and burglars, it also misconceives the nature of wealth. Wealth is a subjective thing, as economists of all schools have come to realize. More than that, wealth is not confined to material possessions. A man who possesses few or no material goods can be as well off as a person who owns so many material goods that he cannot even count them. He might even be better off.

Consider the case of the owner of an acre of vacant land on 5th Avenue and 42nd Street in Manhattan who refuses to sell it for millions, even though the buyer would use it in an extremely productive enterprise, while the owner lets it lie vacant. Would the wealth of society be increased by forcing the owner to sell? I asked an economist of the positivist Chicago School that question once. He gave the right answer: “of course not.” But I wonder whether he realized just how sharply his correct answer refuted the positivist economics associated with the Chicago School.

The trouble with the idea that judges should be driven by wealth-maximizing objectives runs very deeply. I wish to say in the third place that it misconceives the nature of law. Without understanding the nature of either law or economics, it would nevertheless hold that law is a branch of economics. But law can no more be identified with economics than it can with any other truth-seeking activity. Law does not seek truth except as a means to gain its larger ethical ends. Its aim is justice, not wealth, and it aims at justice because its ultimate function is to promote social peace and harmony.

So far, social peace and harmony have tended to promote the increase of creature comforts, and life has grown longer with more material goods. But these results, however good or bad they may seem, do not prove that the role of law is to increase physical wealth; only that when people have lived in a regime of peaceful freedom they have tended thus far to prefer goods-increasing activities to more leisure, to quietism, or to a mindless descent back into the primal slime. A legal system successfully producing peace and harmony in a society dominated by values contrary to those prevailing thus far in the West will produce other results, perhaps even the disintegration of human society.

It is as absurd to view the law as a branch of economics as it would be to view it as a branch of physics or chemistry merely because judges must often resort to the laws and the truths uncovered by those disciplines in order to decide certain cases properly. Law is a moral-ethical activity preoccupied with what ought to be—and with what is only incidentally to its main purpose. Like religion, which is also concerned with right and wrong, law must not contradict facts which have been established in an epistemologically sound way, that is, in accordance with the approved methodologies of scientific research and analysis. It must respect the truth because if it does not it cannot achieve any ends. The Clayton Act of 1914, for example, could not succeed because it contradicted economic truth in declaring that “the labor of a human being is not an article of commerce.”

The function of law is to serve human aspiration in the broadest sense. If human aspiration is incompatible with reality, if it contradicts the laws of nature, of physics, chemistry, economics, or any other branch of knowledge, both humanity and law will fail. The law is failing today as an institution because the law schools and their products—lawyers, judges, legislators—have been too far out of touch with reality, not only the reality with which economics deals, but the realities of chemistry and physics and almost everything else as well.

I do not know whether Paul Poirot, my old and dear friend, will be happy with the conclusion I have reached, but just the same I dedicate this essay to him and to the years and the thoughts we have shared.

Professor Petro is the author of numerous books and articles on labor law and policy and other politico-economic matters. He is Director of The Institute for Law and Policy Analysis in Winston-Salem, North Carolina, and is a former FEE Trustee.