The Anti Rent-Seeking Amendment, Part II: The Amendment

by James Hanley

So assuming that my previous post persuaded you that rent-seeking is a bad thing–or at least that you’re generous enough to agree that it’s not wholly unreasonable for me to think it’s a bad thing–here’s my proposed amendment.

Section 1. Neither Congress nor any state or political subunit of a state shall make any law privileging any business, firm, industry or economic competitor (potential or real) over any other, or that serves to create a barrier to entry to any industry or occupation, or that limits competition between potential competitors within any industry through any form of cartelization, or that provides to any business, firm, industry or economic competitor any form of subsidy, including preferential tax treatment, other than for not-for-profit entities.

Section 2. This provision shall not be construed to deny any authority granted to Congress under Article 1, section 8, provided such regulations do not conflict with this provision, and provided that no intellectual property rights may last more than 20 years beyond the life of the creator, or a maximum of 50 years, whichever limit is first met.

Nor shall this provision be construed to deny the authority of states and their political subunits to create economic regulations or to regulate for the health, safety and welfare of the people, provided such regulations do not conflict with this provision.

Section 3. Any existing such laws or regulations will become inoperative 3 years after the date of ratification of this amendment.

Section 4. Any person harmed by any such law or regulation, even if the harm is diffuse and individually insubstantial, shall have standing to challenge said law or regulation in the federal courts.

Explanations
I’m not wedded to any particular phrasings here. I have experience in policy writing and the writing of constitutions for volunteer organizations, and I know from experience that first passes are always subject to improvement. I’m not a god, just trying to be the agenda-setter for a constitutional amendment convention. But I’ve tried to be precise because I know that when rules are interpreted it is most often what the rule actually says, rather than what the author actually meant, that controls. So suggestions for improvement are welcome, especially from any lawyerly types who’ve spent time thinking about constitutional terminology. Just understand that for me such improvements must serve to better achieve the intended purpose of the proposed amendment, not to limit or change that purpose.

Section 1. This is the meat of the amendment, to prevent the granting of special privileges to any economic competitors that protect them from competition. I do, however, exclude not-for-profit entities so as to protect de facto subsidies, including favorable tax treatment, for educational and charitable organizations.

Section 2. Not all regulations are of the rent-seeking type, and so this clarifies that the amendment is not a general stripping of regulatory power—even power of economic regulation—from Congress. This means minimum wage laws, maximum work hour laws, workplace safety laws, consumer protection laws, etc., would still be constitutionally allowable, so long as they are laws of general applicability.

Fellow libertarians might object that I’m not going far enough, but assuming I were in agreement with them in the abstract, getting support for this amendment would be tough enough without seeking to strip all of Congress’s or states’ regulatory authority. Passage of this amendment would require support from liberals, which will be hard enough to get without telling them that the types of regulation mentioned in the previous paragraph are on the block.

Some might also object that I’m not taking the opportunity to do away with copyright. That’s right, I’m not. I understand intellectual property rights are a form of monopoly, and so can be criticized as rent-seeking. But I also think the original purpose of promoting “the progress of science and useful arts” has merit. And completely eliminating it would, I think, be a political non-starter. But while patents have actually been effectively shortened by the WTO agreements, the extensions of copyright under the Sonny Sucks Mickey Copyright Act are indisputably pure rent-seeking. So this constitutional limit would be justifiable and, I’m pretty sure, politically palatable. In fact I think the terms I’ve given here are probably too generous, but I’m just spitballing. Feel free to argue for shorter terms. Just be specific.

Section 3. This prevents the grandfathering in of existing special privileges, while giving some time for adaptation. Again, I’m not wedded to the specific number of years. I think much less would be unnecessarily problematic, and too much more would be unnecessary (except, perhaps, to get buy-in from sectors of the business community), but I’m open to arguments for a different term. Keep in mind we’re looking at the long term, so if this amendment were to pass, a few more years of the status quo would be a cheap price to pay for the long range gains.

Section 4. I don’t want to offer the courts wiggle room to apply standing doctrine to keep people from challenging such regulations by saying their harm is not significant.

Why I Think Liberals Could—Conceivably—Buy In
Liberals are opposed to corporate influence on government. Granted that corporate influence can never be completely eliminated, and granted that this does not prevent businesses from lobbying against, say, environmental protection laws (I think nothing could without either rescinding Congress’s authority to pass environmental protection laws or altering the First Amendment), this prevents businesses and business associations from getting special privileges from any level of government. And if they do manage to do so, any affected citizen can challenge their privilege in federal court.

Further, this leaves in place regulations of general applicability. Environmental laws that are generally applicable are untouched. Workplace safety laws that are generally applicable are untouched. Consumer protection laws are untouched. Social Security and welfare programs should be untouched, other than that this might require a shift away from programs like Section 8 that approve certain landlords to be recipients of public housing subsidies and toward direct payments to welfare recipients, which would be a side-effect, but a welcome one.

But there are at least two effects on which liberals might balk. First, subsidies to green energy companies would be eliminated. But if you see that as a loss, please compare it to what is gained. And additionally, this would not (or should not, see my comment below on judicial interpretation) prevent something like emissions taxes on fossil fuels because those simply internalize a business cost, and so when done right actually promote a more properly competitive energy market that is more conducive to the success of green alternatives. So that’s at worst a half-a-loaf deal for environmentalists, I think.

Second, while unions would be legal under this provision, I doubt whether laws mandating that firms bargain with them could stand, because that’s a form of special privilege for the union. With the decline in unioniziation, perhaps this is an acceptable price to pay. Perhaps it would stimulate unions to quit relying on what is clearly no longer a successful formula for promoting membership and force them to get more creative about their mission and methods. They might even find ways to provide sufficient value to firms that the firms are voluntarily willing to engage in collective bargaining. I do believe those things, but I don’t anticipate that I’ve been very persuasive. So this caveat may be a killer. Or maybe you can persuade me that enforced collective bargaining is not a special privilege, but just an evening of the playing field. I doubt I’ll be persuaded, but possibly a majority of the Supreme Court would.

But politics is the art of compromise, and I have no patience with all-or-nothing demands or nirvana fallacies. So I would ask liberals to think about how much corporate rent-seeking really offends them; if there is a cost–even a painful one–to eliminating these corporate privileges, in terms of losing some policies you like, is the tradeoff ultimately a net gain compared to the status quo of corporate privilege? I can’t pretend to tell you what your evaluation of that is, of course. Only that you won’t, I think, be able to eliminate corporate special privileges without bearing some substantial cost.

Real-world Application
Of course everyone will want to know about the real-world application. It’s important to note that making definitive claims about the effects in specific cases is tricky because it would ultimately depend on the Supreme Court’s interpretation. I can only suggest advisory opinions, and I am (we are) constrained in our judgements for the same reasons the Court doesn’t do advisory opinions—unless there’s an actual case or controversy it’s hard to flesh out all the arguments on each side to their fullest. But by discussing actual application, however incompletely, we can create a sort of legislative history that helps shape the public understanding of the amendment’s application.

In any case, one should first look at a particular law/regulation and ask if its purpose or effect is to constrain, limit, or prevent market competition in some way. If so, the law/regulation is probably contra the amendment. If not, it should pass muster. For example, Roger asked:

Would it prohibit incumbent protection? By this term I mean people restricting the freedom of others to play the game? Entrance barriers? Taxi medallions? Occupational license requirements? Import restrictions?

Yes, to all of the above. Each of those rules has the effect—and in fact most have the actual purpose—of restricting competition to, as he notes, protect incumbents in the industry from full market competition.

Patrick Bridges asks a more difficult question:

Would your amendment outlaw any shall-carry/shall-issue healthcare system? Only ones that insurance companies lobby in favor of?

It could, if the effect is cartelization. But is that the effect here? Or is this just a generally applicable regulation saying that when you open your door as an insurer you cannot exclude anyone, whether on race, religion, or any other factor except (perhaps) ability to pay? I’m not sure.

I won’t pretend every case is an easy call—I’ve studied much too much constitutional law, and read far too many cases where I found both the majority opinion and the dissent very convincing, to make the erroneous assumption that I could predict every outcome. (In fact it’s the boundary cases, the tough calls, that make Constitutional law an interesting field of study.) Nor will I try to gain support by breezily assuring everyone that the cases they care about (or even all the cases I care about) would turn out the “right” way. Arguments in favor or against the constitutionality (under the proposed amendment) of Patrick’s example are welcome. We could even convene a mini-court of the League’s legally-minded folk to review those arguments and make a ruling.

Feel free to toss out other examples, and I will do my best to answer them, with the caveat that I can only answer as I personally see them within the intended purpose of the law, with the general purpose of guiding future understanding and application (should the unthinkable happen and this amendment gain real political momentum), and that I am not pretending to assert what the Supreme Court would necessarily rule.