America is in the midst of a potentially transformative moment with regard to regulation. After decades of rapid and steady expansion, the Trump administration promises to deliver an unprecedented retraction of red tape. Candidate Trump called regulation “a hidden tax on American consumers, and a massive lead weight on the American economy,” and he campaigned explicitly to “remove the anchor dragging us down.”1 “Regulations have grown into a massive, job-killing industry,” he said, “and the regulation industry is one business I will put an end to.”2

One year into his administration, it appears that Trump’s promises were not hollow. While, of course, he has not “put an end to” regulation, President Trump has already amassed an unmatched record of regulatory rollback. The Heritage Foundation’s annual “Red Tape Rising” report has been renamed “Red Tape Receding.” As it explains, President Trump’s Unified Agenda of Regulatory and Deregulatory Actions (a plan which contains federal agencies’ rulemaking goals) has cut the number of major rules planned for implementation by two-thirds. Agencies have withdrawn hundreds of rulemakings, and reclassified hundreds more in order to delay or deactivate them.3 While assessments of Trump’s record vary, there is a general consensus that the president has attempted deregulation with a vigor that is previously unmatched, with unmatched results.

Given the steady growth of the modern administrative state over the past century, Trump’s willingness to cut back on regulation will be seen by many as an encouraging development, but it also exposes an intellectual weakness on both the left and the right about the proper role of regulation in a free society. Many scholars on the left refuse to admit the possibility of regulatory overreach, and claim that believers in free markets want to eliminate essential regulatory protections for clean air, safe workplaces, and unadulterated food and drugs.

This point of view is represented well by Edward Burmila, a political scientist at Bradley University and occasional writer for outlets such as the Week, Rolling Stone, and the Nation. Burmila is a liberal, he explains, because he rejects the conservative and libertarian preference for market self-regulation. That preference, in his telling, treats “regulation as a criminal enterprise” and “relies on the free market to solve problems on its own.” In Burmila’s view, people who are not liberal hate regulation and want to rely exclusively on market forces to make airplanes, food, and other necessities and conveniences safe for us to enjoy. Thus, he summarizes:

Inasmuch as I do not think that uncontrolled flight into terrain at 500 mph is a worthy sacrifice for the glories and benefits of unchained race-to-the-bottom capitalism, I am a liberal. Inasmuch as I don’t want to eat the BSE- and e.coli-laced hamburger . . . I’m a liberal. . . . Inasmuch as I don’t want my dad to be the guy in the coal mine that the defunded Mine Safety & Health Administration hasn’t inspected in 6 years, I’m a liberal. Inasmuch as I care more about you not getting injured at work than about the effect of workplace safety on your boss’s bottom line, I’m a liberal.4

Burmila claims, in short, that “market acolytes” want government out of the business of safety inspections for airplanes, food quality inspections for hamburgers, and workplace safety regulations for mines and factories. The free market, in this view, is an unregulated, laissez-faire nightmare reminiscent of Upton Sinclair’s The Jungle.

Although Burmila’s description of the free market is a caricature, it is one to which conservatives are particularly susceptible. Conservatives complain constantly about the evils of overregulation, and everyone understands that one of the central aims of contemporary conservatism is to restrain the modern regulatory state. Conservatives have a much easier time (in this and in many other policy areas) explaining what they are against than articulating what they are for. For many conservatives, cutting regulation is itself the goal, rather than trimming it back in order to restore regulation to its original, beneficial purposes.

Thus, whether or not the liberal understanding of the free market is accurate, it is clear that conservatives today are forced to distinguish between legitimate and illegitimate regulations, not only to avoid caricature but also to understand how they ought to govern. In facing this task, they would do well to understand how regulation was understood at the time of our nation’s founding. Rather than creating an unregulated economy, the lawmakers and jurists of the founding period used natural rights theory as the rationale for certain kinds of regulations, thus avoiding the Scylla of laissez-faire and the Charybdis of regulatory overreach.

The Myth of Laissez-Faire

The myth of laissez-faire has been thoroughly debunked by economic historians over the past few decades. While much of this research has not changed the general public’s understanding of early America, it has given us a good understanding of the kinds of regulations that were frequently employed by the same people who participated in the founding of the country.

We don’t need a full picture of the scope of pre–Civil War regulation in America to understand that regulation was a central feature of municipal governance and that officials saw little tension between individual rights and regulation. It is enough to focus on three categories: occupational licensing, inspections of goods for sale, and environmental nuisances.

Regulations across each of these categories profoundly affected economic life and were widely adopted in all of the states in early America. Doctors, lawyers, and other occupations, such as innkeepers and auctioneers, required licenses for entry into these trades. Historical records show that in Massachusetts a “bonesetter and healer of sprains” was fined for practicing without a license, and the state courts upheld the punishment. Another case—Vadine’s Case (1828)—involved a regulation requiring a license for anyone removing “materials that might cause disease or discomfort.”5 Citizens were often empowered to bring lawsuits to enforce the license’s requirements, and in some cases they could receive half of the penalty for doing so successfully.6

Trade in various commodities was also regulated by a variety of inspections regulations. Massachusetts and Pennsylvania required lumber, beef, tobacco, butter, bar iron, and salt to be inspected before they could be traded. Most states enacted inspection regimes for similar products. It is worth noting that inspection laws transcended regional boundaries—they were implemented in Northern, Southern, and Western states alike. The quality of goods, their description, and other markings and stampings, and the kinds of containers used, could all be governed by inspection laws.

In addition to licensing and inspection regulations, the use of property was regulated by the common law of nuisance and trespass to prevent environmental injuries. Factories that emitted foul smells onto another’s property could be considered a nuisance and plaintiffs could recover damages from the offender. If someone built a pigsty or some other environmental nuisance that affected another’s enjoyment of his property, he could be sued to abate or recover damages for the nuisance. The definitions of nuisance and trespass under the common law afforded judges broad discretion to prevent activity that harmed the quality of water, air, or other parts of the environment.

The above picture of early American regulation is by no means exhaustive. A complete description of early regulatory activity would have to include national regulation as well as a discussion of the vast realm of morals regulation that existed at the state and local levels. But even this limited picture of licensing, inspection, and nuisance is sufficient to illustrate the pervasiveness of regulation in early American history. The American Founders, although committed to commerce and free markets, were not free market fundamentalists or advocates of absolute laissez-faire.

The Founders Were Not Free Market Fundamentalists

The same generation that believed in natural liberty and property rights also accepted the regulation of liberty and property in a variety of contexts. They saw no tension between liberty and property rights, on the one hand, and regulation on the other.

Of course, it is possible that there was a contradiction between the principles of the American Founding and the practice of regulation. The mere existence of these regulations in early America does not prove their consistency with the principles of natural rights. A careful reading of the Founders’ views on regulation, however, indicates that they did not generally embrace laissez-faire, and that they believed natural rights actually provided the foundation for legitimate regulation. Furthermore, when we explore the judicial opinions that addressed the legitimacy of regulation, we find that judges offered sophisticated arguments to reconcile the existence of regulation and the inviolability of natural rights. This history should be a source of inspiration for conservatives who are looking for guidance on how to govern, seeking to differentiate the regulations we need to retain from those we need to scrap.

When they spoke of laissez-faire at all, the American Founders typically distanced themselves from the notion. In his Report on Manufactures, Alexander Hamilton granted that the idea of “leav-[ing] industry to itself . . . is founded upon facts and principles, which have certainly respectable pretensions.” However, he quickly added that these laissez-faire arguments, like all abstract theories, “blend a considerable portion of error with the truths they inculcate.”7 James Madison similarly wrote that the best approach “will be found to lie between the extremes of doing nothing & prescribing everything, between admitting no exception to the rule of ‘laissez faire,’ and converting the exceptions into the rule.”8

Other prominent Founders did not directly address the idea of laissez-faire, but they made it clear that liberty and property rights could be subjected to certain regulations. They argued that legitimate regulations did not limit liberty, but actually expanded it. James Wilson, for instance, admitted in his Lectures on Law that, “by the municipal law, some things may be prohibited, which are not prohibited by the law of nature.” However, he continued, “under a government which is wise and good, every citizen will gain more liberty than he can lose by these prohibitions. . . . He will gain more by the enlarged and undisturbed exercise of his natural liberty in innumerable instances, than he can lose by the restriction of it in a few.”9

Founders such as Hamilton, Madison, and Wilson argued that natural liberty and natural property rights are actually expanded by appropriate regulation. They are expanded because, while the perfect liberty that a person enjoys in the state of nature is prescribed, regulations enable citizens to enjoy their rights much more effectively as a practical matter. When people agree to enter into a society, there are more occasions in which the exercise of individual rights conflicts with others and, in these cases, actions that were previously not harmful to anybody become actually harmful to some. But the restriction of these activities actually supports natural rights by allowing everyone to enjoy their rights to a greater degree. This is why James Wilson believed that legitimate regulations cause people to gain more liberty than they lose.

“For the Better Protection and Enjoyment”

As one would expect, when individuals found themselves subject to regulations that they did not wish to follow, they challenged the validity of the regulations in court. Commonly, they alleged that the regulations were violations of basic liberty and property rights that were guaranteed by their state constitutions. This required courts to square natural rights with regulation, and throughout the states judges typically did so by making the same arguments as those of the Founders just mentioned.

Two cases illustrate the arguments and the language that judges utilized. The first is Vanderbilt v. Adams (1827), a case from New York. Vanderbilt addressed the legitimacy of traffic regulations in the New York Harbor. Harbormasters were authorized by law to force vessels that were not actively unloading cargo to move, making way for newly arriving vessels. Vanderbilt owned a private wharf and refused to obey an order by the harbormaster. He was fined for noncompliance and went to court to challenge the ordinance.

In upholding the order, the New York Supreme Court affirmed that it was “not, in the legitimate sense of the term, a violation of any right.” In fact, the Court argued, “the power exercised in this case is essentially necessary for the purpose of protecting the rights of all concerned,” including Vanderbilt himself. In other words, the regulation actually protected everyone, and therefore benefited all by increasing the rights of all: “It is for the better protection and enjoyment of that absolute dominion which the individual claims . . . so that on the whole, the benefit of all is promoted.”10 Appropriate regulations, in this view, expanded natural rights by establishing “the better protection and enjoyment” of them.

The Court was quick to add, however, that this rationale did not support the legitimacy of regulations that did not promote the rights of all. The regulation, Judge Woodworth emphasized, “would not be upheld, if exerted beyond what may be considered a necessary police regulation.”11 Woodworth implied that judges would scrutinize regulations to determine whether they truly promoted the common good by protecting and expanding natural rights, and that those which did not would not be upheld.

These kinds of promises were not empty. Judges did, on occasion, invalidate regulations on the substantive ground that they failed to advance the rights of everyone. In these cases, judges found the regulations to be means for advancing narrow interests rather than genuine regulations advancing the common good. In an 1834 Massachusetts case, Austin v. Murray, the Massachusetts Supreme Judicial Court invalidated a cemetery regulation as “an unreasonable infringement on private rights.” Murray, the undertaker of the Catholic Church in Boston, was charged with bringing dead bodies into the city for burial in violation of burial regulations made by the selectmen in nearby Charlestown.

The Charlestown bylaw required written permission from the selectmen to bring a body into the town for burial, which appeared to be a perfectly normal health regulation. But when the court looked at the regulation carefully, it reached the opposite conclusion. As Justice Samuel Wilde wrote, “A by-law to be valid, must be reasonable. . . . Now if this regulation or prohibition had been limited to the populous part of the town, and were made in good faith for the purpose of preserving the health of the inhabitants,” then “it would have been a very reasonable regulation.”

The problem was that the regulation was not limited to the highly populated part of Charlestown, but extended “to the utmost limits of the town” where burial regulations were not necessary to protect health.12 While the burial regulation could be reconciled with natural rights in a populated area, where burial of the dead could injure the health and safety of others in the community, it was harder to square with natural rights in a less populated part of the town. When the regulation was applied to these less populated areas, the court no longer saw the natural rights justification for it, and determined that it was “a clear and direct infringement of the right of property . . . and not a police regulation, made in good faith, for the preservation of health.”13

Early American judges, therefore, agreed with the arguments of Founders like Hamilton, Madison, and Wilson that legitimate regulation expanded rather than decreased liberty and property rights, but they refused to apply such regulations where natural rights were not implicated. Lemuel Shaw, who served as chief justice of the Massachusetts Supreme Court from 1830 to 1860, provided the best statement of this view. In a famous case, Commonwealth v. Blackington (1837), he explained, “[inspection] laws are necessary to define, secure, and give practical efficacy to the right [to property] itself. . . . All the inspection laws, providing for the inspecting and marking of the principal products of our agriculture and manufactures, with a view to benefit our commerce in these articles . . . all laws made with a view to revenue, to health, to peace and good morals, are of this description.”14

Appropriate regulations, in Shaw’s view as well as that of the Founders, benefit both society as a whole and the individuals who are regulated, because they provide the foundation for the better enjoyment of natural rights. Inspection regulations enable individuals to engage in truly voluntary transactions because they prevent fraud and injury. They do not violate natural rights because nobody has a right to trade fraudulently or injure another through trade, and they enhance everyone’s rights by expanding commercial opportunities to exchange without uncertainty.

This rationale in favor of regulation continued into the post–Civil War period. Christopher Tiedeman, the classical liberal author of a late nineteenth-century treatise on constitutional law, acknowledged the legitimacy of licensing medical professionals, but also stated that only regulations that advance the underlying purpose of promoting the enjoyment of natural rights would be constitutional. “The only evil, involved in the prosecution of that calling, is that which arises from the admission of incompetent men into the profession,” he wrote. As with inspections, licensing regulations do not violate natural rights because nobody has a right to practice a trade injuriously. A person who advertises as a medical doctor, without being competent, commits an injury to those who contract with him. Licenses indicate that the individual holding the license can be trusted to do the work upon which both parties agree.

As with the pre–Civil War courts, however, this foundation for regulation in natural rights also provided a ground for courts to invalidate illegitimate regulations. Any regulation which infringes natural rights or does not expand liberty and property rights for all is invalid. Tiedeman made the same argument that the early courts made. In Tiedeman’s view, any occupational licensing that does not promote the legitimate aim of ensuring competence in the treating of medical conditions would be illegitimate and a reviewing court could invalidate it on constitutional grounds. As Tiedeman explained, “any prohibition of other restrictive regulation which went beyond the exclusion of ignorant or dishonest men, would be unconstitutional.”15

Tiedeman laid down a general rule for the regulation of entry into professions: “Where the successful prosecution of a calling requires a certain amount of technical knowledge and professional skill, and the lack of them in the practitioner will result in material damage to the one who employs him,” then the profession can be considered a “skilled trade” or a “learned profession” and the regulation of who practices the profession is not contrary to the natural right to acquire property through the use of one’s labor.16

The judicial opinions and legal treatises addressing the legitimacy of regulation all make a simple point: the validity of a regulation is tied to the substantive purpose of the regulation. Courts, applying constitutional principles, will therefore have to evaluate whether a regulation promotes the enjoyment of, or infringes upon, natural rights. This will require a substantive review. Only those regulations that advance natural rights will be permitted to stand.

Lessons for Today

The natural rights rationale for regulation provides a criterion for distinguishing legitimate from illegitimate regulation. Instead of adopting a posture of hostility to all regulation, as conservatives often tend to do, or an unflinching defense of all regulation, as progressives tend to do, it would be wise to revisit this natural rights rationale and consider how it applies to present-day regulation.

It is, of course, not possible to address every aspect of modern regulation, but we can still draw some useful general lessons. The first lesson is that many regulatory goals conservatives often condemn are actually defensible. Workplace safety regulations, food and drug regulations, and regulations of common carriers, all have a firm foundation in the early American natural rights regime.

Two important caveats to this lesson are critical, however. The first caveat is that, even if a regulation is legitimate under the natural rights rationale, this does not make it wise. Just because a government may do something does not mean that the government must do it, or that government action will be the best option for doing it. Food and drug regulations may be legitimate under a natural rights framework, but we are not committed to using government to regulate as the only option. The regulation of the legal profession in early America, for instance, was not done by government officials but by the bar. It might be possible to entrust regulation, in certain cases, to these kinds of groups today.

The second caveat is that we must distinguish the existence of a regulation and the means by which it is administered. A regulation might be legitimate, but the institutions tasked with putting it into effect, illegitimate. Many of the goals of the modern administrative state are legitimate, but the use of the administrative bureaucracy to achieve them can be constitutionally problematic. Workplace safety regulations, for instance, might be a legitimate purpose of government, but it still might be necessary for legislatures to enact them into law, and for specific cases to be adjudicated by independent courts. Today, unelected agency officials commonly carry out all of the parts of the regulatory process—the rulemaking, the investigation, the enforcement, the prosecution, and the adjudication. This threatens the notion that regulation should be compatible with a republican form of government, even if the regulations are compatible with natural rights.17

The second lesson that comes from understanding early American regulation is that, while some modern regulations are consistent with natural rights, a great many are not. In the case of workplace safety regulations or food and drug regulations, the goal is to prevent an injurious use of liberty or property. Many environmental regulations such as those preventing air and water pollution also attempt to prevent injury. The use of permits to prevent air and water pollution could be an acceptable substitute for relying on the common law of nuisance, where the practical difficulties of relying on private lawsuits to enforce widespread injury to air and water are insuperable.18

But the vast majority of regulations have little connection to the prevention of injury. Rather, these kinds of “planning” regulations entail using centralized government power to reshape industries so that they resemble some sort of orderly plan or design. Much of the so-called New Deal regulatory state engages in this kind of planning rather than injury prevention. The Federal Communications Commission issues broadcast licenses based on whether doing so serves “the public interest, convenience, and necessity,” rather than attempting to prevent the injurious exercise of rights. With these kinds of statutes, an administrative agency is empowered not to prevent injury or promote natural rights, but rather to go out and remake an industry so that it produces whatever ideal outcome experts agree is best. As James Landis, one of the architects of the modern administrative state, explained, modern administrative power entailed “the deliberate organization of a governmental unit whose single concern was the well-being, in a broad public sense, of a vital and national industry.”19 The goals of modern regulation, he continued, “must now be directed toward broad and imaginative ends, conceived in terms of management [of industry] rather than of police.”20 This sort of approach, in which administrators are empowered not to prevent specific injuries but rather to remake and manage industries according to their notion of the public interest, describes too much of our modern regulatory state, and it is incompatible with the natural rights framework. Much of our financial services regulation also fits this description, especially after the passage of Dodd-Frank.

Occupational licensing regulations deserve special attention when considering which regulations run afoul of natural rights. Obviously, the evidence in favor of the legitimacy of these regulations is overwhelming. Prior to the Civil War, licenses were required to engage in many occupations. But many occupational licensing schemes today are not intended to prevent incompetent people from practicing the occupation, but rather to prevent new competitors from entering the market. One recent study argues that the licensing requirements for over one hundred low- and moderate-income occupations are often overly burdensome and are tantamount to a tax on lower- and working-class citizens who could benefit from employment.21

As both the Austin v. Murray case and Christopher Tiedeman argue, an otherwise acceptable regulation might be illegitimate if the protection of natural rights is not its end or purpose. A natural rights regulatory framework would allow for occupational licensing only when it promotes natural rights. Many of the occupations currently subject to occupational licensing—such as cosmetologist, massage therapist, manicurist, and taxidermist—have little connection to the original rationale for licensing found in early America. This is an important social justice issue that Republican reformers should continue to press and that can be reformed at the state level. In other words, a natural rights regulatory agenda that involves reform of occupational licensing could promote economic opportunity for lower-income citizens and also be carried out at the state level where there is potentially less gridlock and political inertia (but still many rent-seekers).

A third and final lesson we can take from the pre–Civil War, natural rights regulatory framework has to do with the role of courts. Judges and legal theorists in the nineteenth century argued that regulation was only legitimate if it advanced the appropriate purposes of regulation, namely the protection and expansion of liberty and property rights. Courts would have to determine, in specific cases, whether a particular regulation was enacted to advance those purposes or whether it was enacted to protect vested interests or target specific people or interests. Otherwise legitimate regulations, like burial regulations, could be invalidated by courts if it was clear that the regulation was not intended to promote the common good by protecting the natural rights of all.22

Modern administrative law typically adopts the opposite approach, requiring courts to defer to administrative expertise when examining the substantive enactments of agencies. A better way would be to return to the natural rights approach of nineteenth-century courts, which deferred to administrators when they exercised a purely discretionary act, but reserved the authority to determine the legality of an administrative action to themselves. Even when this required courts to inquire into the substance of a regulation, which is often considered to be the province of administrative experts, they did not shirk their duty to uphold the law and invalidate regulations that crossed constitutional boundaries. In today’s context, a natural rights framework for regulation would entail a less deferential role for courts when reviewing the purposes of a regulation in order to determine its legitimacy.

Conclusions

American conservatives have spent a vast amount of time and effort decrying the evils of regulation and the modern regulatory state. This was a reasonable strategy, given the nearly inexorable expansion of the administrative state and the burdensome regulatory regimes it established.

Although it is critical to push back against the excesses of the regulatory state, it is also important to make the positive case for regulation in those cases where the protection of natural rights requires it. Doing so would not only guard against the caricature of conservatism as a philosophy of government that wants to eradicate all regulation. It would also help us distinguish between the kinds of regulations we need to eliminate and those that we ought to preserve. As the current administration looks at the regulatory landscape and considers where trimming needs to occur, it is especially important to have the tools to differentiate the wheat from the chaff.

This article originally appeared in American Affairs Volume II, Number 1 (Spring 2018): 87–100.

Notes