"Diminishing the price of law"

Todd Henderson —  18 December 2009

The lesson from Jones, see my post below, is that law untamed can be very costly, and with little benefit. This is, of course, not a new idea. In a critical essay of “Southey’s Colloquies on Society,” Lord Thomas Macaulay wrote eloquently about the cost of law and government:

“Our rulers will best promote the improvement of the nation by strictly confining themselves to their own legitimate duties, by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property, by diminishing the price of law, and by observing strict economy in every department of the state. Let the Government do this: the People will assuredly do the rest.”

This short passage was intended as a rebuttal to the source of prosperity claimed by Mr. Southey — “the omniscient and omnipotent State.”

Thus our arguments today about the size and scope of government, way bigger battles than the rule in Jones but of similar foundation, are centuries old. Those on the Right believe, as Aaron Director said, that “extensions of government activity should be viewed under a presumption of error,” while those on the Left believe the opposite — that extensions of private activity should be thought of as presumptively bad. See the debate about health care, climate change, retirement security, and on and on. As a matter of sloganeering, one can see this in the treatment of “profits.” To the Left, profits (or the profit motive) are bad.They are signs of power, abuse, advantage taking, and excess. To the Right, profits are a sign that the market is working. Profits are evidence of consumer preferences and help the market allocate resources in the economy. Profits by computer companies tell us that we as a society should spend more money on computers and less on other things. We cannot resolve the debate here but to say that the issue is simply one of government power.

The battle rages at the level of politics, with the forces attempting to constrain government failing miserably. Government spending as a percentage of the size of the economy has grown from less than 10 percent in 1900 to over 45 percent today. See useful charts and graphs here. It is, of course, possible that spending could be higher and government power more excessive if we did not have strong voices arguing in the tradition of Macaulay and Director, but the efficient role of government imagined by Macaulay and prescribed in our Constitution seems quaint. The fight must go on, but politicians of both parties in this country can’t seem to help themselves when in power. Of course, we shouldn’t blame them anymore than any individual who simply responds to the incentives of the rules of the game they are playing. To change behavior, we must rewrite the rules.

Which is why the battle raging at the local level of law, as in Jones, is so important. Finding the efficient role for law in ordering our affairs — what Macaulay called “diminishing the price of law” — is a battle that still can be won. This is just a variant of a slogan of the environmental movement: Think Globally, Act Locally. Those who believe that liberty and free markets are the best mechanism of prosperity can win battles and skirmishes about what the right rules should be for government and law, and hopefully achieve a larger victory in an uncoordinated manner that would make Hayek proud.

3 responses to "Diminishing the price of law"


    I didn’t mean to suggest that “untrammeled private action” has no costs. Surely it does. No sensible person would say otherwise. The point of the post was simply to say that most disagreements about public policy are about the role the state plays on the margin. In general, conservatives lose these battles, since the state is growing and growing and growing. My call to arms, so to speak, was to try to convince conservatives not to give up the fight, since even in lost causes, margins matter.

    As for the comparison between private and public, institutional labels do matter. Public institutions have a monopoly on legal violence, and this makes them different. If I don’t want to interact with a private supplier of a good or service, I can choose to go to another one; if I don’t want to interact with my government, I can lose my liberty. Another way of saying this is to point out that private monopolies and other bad actions tend to be unstable, unless, of course, the business interests are able to capture the government to support their position. Government bad actions, in contrast, are less unstable, since there is less of a market check on government.

    This doesn’t mean that government is bad and private institutions are good. Far from it. There are bad actors everywhere, and CEOs are as selfish and greedy as politicians. The question is whether, on the margin, we prefer more market or more government. That was my only point.


    This dichotomy makes me yawn. There is a price of untrammeled private action to match the price of law. The question is not what form of public institution is most efficient, but what forms of institution are most efficient. Let the question of whether an institution should be called public or private not confuse the issue of whether it is the best means for coordinating dispersed activity into ends we consider beneficial at lowest cost.