FIFTEEN: ECONOMIC POLICY AND THE RULE OF LAW
1 Individual Freedom Precludes Certain Methods of Government
Individual freedom requires specific methods of government to function correctly. The classic argument for economic freedom is based on the idea that the rule of law should guide policies, just as it does in other areas. Thinkers like Adam Smith and John Stuart Mill opposed government interference but supported the enforcement of laws that protect individual rights. Their concern was not about the government engaging in economic matters but about certain interventions that violate the framework protecting freedom.
They believed that legitimate laws should apply equally to everyone over time. Interference meant government actions that do not follow the established rules and aim for specific outcomes. While some government interventions can be valid if they align with the rule of law, many proposed measures often fail in effectiveness or become more costly than beneficial.
It's essential to differentiate between harmful measures and those that fit within a free economy. A government that takes inappropriate actions, even if inactive in other aspects, could hinder the economy more than an active government that supports positive initiatives. Ultimately, government actions must adhere to the rule of law to ensure a stable environment for individuals to plan their lives with reduced uncertainty.
2 the Scope of Legitimate Government Activities
There are two main types of government activities: those that involve coercion, like enforcing laws, and those that provide services without forcing anyone. The government has the right to use coercion, but when it comes to providing services, it should act like private citizens do. Some important services, like a trustworthy monetary system and standards for weights and measures, are hard for private companies to provide. These services help people make better decisions. Certain public services, such as health care and road maintenance, should be managed by the government because it’s difficult to charge everyone fairly for them. However, there are concerns that government-run businesses might not compete fairly with private ones. To avoid this, any help the government gives its own businesses should also be given to private companies. While it’s okay for the government to be involved in some areas, it should not control too much to protect individual freedoms and prevent excessive power over the economy.
3 the Scope of Administrative Action
A free system still allows for general rules that everyone must follow in economic activities. These rules often focus on safety and health, but they can limit innovation and experimentation, which may lead to higher costs or lower productivity. Economists usually have doubts about these rules because the overall costs are often underestimated, and their effect on new ideas is often ignored. Regulations, like those about health and safety in factories, should be judged by comparing the costs and benefits rather than relying only on general principles.
Administrative authorities do need some flexibility to enforce these rules, but their power should not be unlimited or beyond the law's control. Historically, many health and safety laws have worked well without giving too much discretion to officials. Making decisions based on clear rules helps ensure fairness and certainty in how the government operates, instead of relying on personal opinions. The main concern is about defining how much power the government has, not where that power comes from. Regulations should be clear and made public to follow the rule of law, showing that it is more important to be consistent in actions than to just make things easier for administration.
4 Measures Excluded in Principle
Certain government measures are excluded from a rule of law because they involve unfair discrimination between individuals. This includes deciding who can provide services or goods, the prices set, and how much can be sold. While some restrictions based on qualifications may be acceptable, everyone who meets these qualifications should have an enforceable right to practice their occupation without arbitrary decisions based on specific circumstances. Additionally, government price controls disrupt a free market system. Prices must change with varying conditions, and fixed prices or rules often lead to unequal supply and demand. This requires discretionary decisions, which are arbitrary. Thus, both price and quantity controls should be avoided in a free system because they give authorities the arbitrary power to control production and distribution, which undermines fairness and efficiency in the market.
5 the Contents of Private Law
Price and quantity controls conflict with a free market system for two main reasons: they are arbitrary and hinder market function. A free system can adapt to various conditions if its pricing mechanism operates effectively. For a market to function well, legal rules must not only be general but also tailored to facilitate smooth operations. Key requirements include preventing violence and fraud, protecting property, enforcing contracts, and ensuring equal rights for all individuals to produce and sell as they wish. The effectiveness of a market relies heavily on the specific details of these rules. Although there has been little study on how legal frameworks impact market operations, ongoing adjustments to the legal system are essential for promoting healthy competition and addressing complex issues surrounding private property rights.
6 “Freedom of Contract”
Freedom of contract is an important part of individual freedom, but it can be misunderstood. The focus should be on which contracts the state will enforce, not on what individuals can agree to. Not all contracts are enforceable, especially those that are illegal or immoral. The idea of freedom of contract means that its validity depends on general legal rules rather than government approval. However, the law may set certain conditions for contracts or interpret them. The enforceability of contracts serves as a legal tool, shaping the consequences of agreements.
7 the Rule of Law and Distributive Justice
The rule of law and distributive justice are connected in a free society. While various types of government action can exist beyond just non-intervention, the rule of law limits what the government can do. This law focuses on enforcing general rules instead of pursuing specific goals, which makes it hard to achieve distributive justice. Distributive justice means ensuring resources are allocated fairly, which requires a central authority to guide how people should act. However, this can interfere with individual freedom.
When people try to change income distribution to make it more equal, it can weaken the rule of law. This could lead the government to make decisions that favor certain goals over individual rights, moving toward a command economy where a central plan decides what happens instead of letting the market function naturally. While the rule of law can help make markets work better, it cannot achieve the modern idea of distributive justice. The struggle between wanting a free society and trying to create fairness in how resources are shared presents serious challenges for how society is governed and organized.
1 Individual Freedom Precludes Certain Methods of Government
Individual freedom requires specific methods of government to function correctly. The classic argument for economic freedom is based on the idea that the rule of law should guide policies, just as it does in other areas. Thinkers like Adam Smith and John Stuart Mill opposed government interference but supported the enforcement of laws that protect individual rights. Their concern was not about the government engaging in economic matters but about certain interventions that violate the framework protecting freedom.
They believed that legitimate laws should apply equally to everyone over time. Interference meant government actions that do not follow the established rules and aim for specific outcomes. While some government interventions can be valid if they align with the rule of law, many proposed measures often fail in effectiveness or become more costly than beneficial.
It's essential to differentiate between harmful measures and those that fit within a free economy. A government that takes inappropriate actions, even if inactive in other aspects, could hinder the economy more than an active government that supports positive initiatives. Ultimately, government actions must adhere to the rule of law to ensure a stable environment for individuals to plan their lives with reduced uncertainty.
2 the Scope of Legitimate Government Activities
There are two main types of government activities: those that involve coercion, like enforcing laws, and those that provide services without forcing anyone. The government has the right to use coercion, but when it comes to providing services, it should act like private citizens do. Some important services, like a trustworthy monetary system and standards for weights and measures, are hard for private companies to provide. These services help people make better decisions. Certain public services, such as health care and road maintenance, should be managed by the government because it’s difficult to charge everyone fairly for them. However, there are concerns that government-run businesses might not compete fairly with private ones. To avoid this, any help the government gives its own businesses should also be given to private companies. While it’s okay for the government to be involved in some areas, it should not control too much to protect individual freedoms and prevent excessive power over the economy.
3 the Scope of Administrative Action
A free system still allows for general rules that everyone must follow in economic activities. These rules often focus on safety and health, but they can limit innovation and experimentation, which may lead to higher costs or lower productivity. Economists usually have doubts about these rules because the overall costs are often underestimated, and their effect on new ideas is often ignored. Regulations, like those about health and safety in factories, should be judged by comparing the costs and benefits rather than relying only on general principles.
Administrative authorities do need some flexibility to enforce these rules, but their power should not be unlimited or beyond the law's control. Historically, many health and safety laws have worked well without giving too much discretion to officials. Making decisions based on clear rules helps ensure fairness and certainty in how the government operates, instead of relying on personal opinions. The main concern is about defining how much power the government has, not where that power comes from. Regulations should be clear and made public to follow the rule of law, showing that it is more important to be consistent in actions than to just make things easier for administration.
4 Measures Excluded in Principle
Certain government measures are excluded from a rule of law because they involve unfair discrimination between individuals. This includes deciding who can provide services or goods, the prices set, and how much can be sold. While some restrictions based on qualifications may be acceptable, everyone who meets these qualifications should have an enforceable right to practice their occupation without arbitrary decisions based on specific circumstances. Additionally, government price controls disrupt a free market system. Prices must change with varying conditions, and fixed prices or rules often lead to unequal supply and demand. This requires discretionary decisions, which are arbitrary. Thus, both price and quantity controls should be avoided in a free system because they give authorities the arbitrary power to control production and distribution, which undermines fairness and efficiency in the market.
5 the Contents of Private Law
Price and quantity controls conflict with a free market system for two main reasons: they are arbitrary and hinder market function. A free system can adapt to various conditions if its pricing mechanism operates effectively. For a market to function well, legal rules must not only be general but also tailored to facilitate smooth operations. Key requirements include preventing violence and fraud, protecting property, enforcing contracts, and ensuring equal rights for all individuals to produce and sell as they wish. The effectiveness of a market relies heavily on the specific details of these rules. Although there has been little study on how legal frameworks impact market operations, ongoing adjustments to the legal system are essential for promoting healthy competition and addressing complex issues surrounding private property rights.
6 “Freedom of Contract”
Freedom of contract is an important part of individual freedom, but it can be misunderstood. The focus should be on which contracts the state will enforce, not on what individuals can agree to. Not all contracts are enforceable, especially those that are illegal or immoral. The idea of freedom of contract means that its validity depends on general legal rules rather than government approval. However, the law may set certain conditions for contracts or interpret them. The enforceability of contracts serves as a legal tool, shaping the consequences of agreements.
7 the Rule of Law and Distributive Justice
The rule of law and distributive justice are connected in a free society. While various types of government action can exist beyond just non-intervention, the rule of law limits what the government can do. This law focuses on enforcing general rules instead of pursuing specific goals, which makes it hard to achieve distributive justice. Distributive justice means ensuring resources are allocated fairly, which requires a central authority to guide how people should act. However, this can interfere with individual freedom.
When people try to change income distribution to make it more equal, it can weaken the rule of law. This could lead the government to make decisions that favor certain goals over individual rights, moving toward a command economy where a central plan decides what happens instead of letting the market function naturally. While the rule of law can help make markets work better, it cannot achieve the modern idea of distributive justice. The struggle between wanting a free society and trying to create fairness in how resources are shared presents serious challenges for how society is governed and organized.