ECONOMIC REGULATION (Update)

The term "economic regulation" has no clearly defined meaning. In its narrowest sense, it is probably limited to government control of prices, outputs, and market entry. At one time, such regulation was widespread, covering major industries such as transportation, energy, telecommunications, and agriculture. Beginning in the mid-1970s, however, such traditional forms of government regulation have been in retreat, and "deregulation" has been the watchword. Since the 1930s, constitutional law has been thought to place little restriction on these traditional forms of economic regulation. Even less constitutional guidance has been found relating to deregulation.

In the meantime, business activities have been subjected to new federal forms of regulation governing employment discrimination, worker safety, pollution, and other "social" issues. We might more broadly define economic regulation, then, as government regulation of activities relating to market transactions, actual or potential. Given this very broad subject matter, it is obvious that in specific cases economic regulations might happen to implicate all manner of constitutional doctrines. Thus, in some sense, the constitutional topic of "economic regulation" is indeed a broad one.

Yet, the fact that some constitutional rule may happen to apply to an economic activity as well as to noneconomic activities is of no particular interest. Rather, the interesting question is the distinctive constitutional status of economic regulation. In other words, we need to ask when the government's power is either increased or decreased by virtue of the fact that the regulated activity is connected with the marketplace.

Although this distinction does not play a central role in current doctrine, the Supreme Court does sometimes give distinctive treatment to regulation of economic activities. A familiar example is the commercial speech doctrine, which provides a lower protection for speech that is integrally related to market transactions. Two recent cases from other areas of constitutional law also provide illustrations that the marketplace nexus retains significance in constitutional analysis.

The first example is united states v. lÓpez (1995). López involved a federal statute that criminalized possession of firearms in school zones. The Court held, for the first time since the new deal, that a federal regulation of private activity exceeded congressional power under the commerce clause. What is most notable for present purposes, however, is the Court's care to distinguish the case from precedents involving economic regulation. For instance, the Court observed that even wickard v. filburn (1942) (which the Court called "perhaps the most far reaching example of commerce clause authority over intrastate activity"), "involved economic activity in a way that the possession of a gun in a school zone does not." In contrast, the statute before the Court had "nothing to do with 'commerce' or any sort of economic enterprise, however broadly one might define those terms." Nor was it "an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated." Hence, the firearms statute could not be sustained "under our cases upholding regulations of activities that arise out of or are connected with a commercial transaction, which viewed in the aggregate, substantially affects interstate commerce."

Justice anthony m. kennedy'sconcurring opinion (joined by Justice sandra day o'connor), also stressed the distinction between congressional power over economic and noneconomic activity. He felt bound by precedent to recognize "congressional power to regulate transactions of a commercial nature." Hence, he argued, the Court was foreclosed "from reverting to an understanding of commerce that would serve only an eighteenth-century economy"; precedent also precluded "returning to the time when congressional activity was limited by a judicial determination that those matters had an insufficient connection to an interstate system." In short, he said, "Congress can regulate in the commercial sphere on the assumption that we have a single market and a unified purpose to build a stable national economy."

Although governmental authority to restrict economic activity is broad, it is not unlimited. That is the teaching of lucas v. south carolina coastal council (1992). Lucas involved a state regulation that, as construed by the lower courts, completely eliminated the economic value of certain beachfront land. With narrow exceptions, the Court held, a regulation must be considered a taking of property if it "denies all economically beneficial or productive use of land." Note that it is only economically beneficial uses that are protected; that is, only the ways in which the land or its product might enter into some market transaction. The Court found "the notion … that title is somehow held subject to the 'implied limitation' that the State may subsequently eliminate all economically valuable use is inconsistent with the historical compact recorded in the Takings Clause that has become part of our constitutional culture." But Lucas, assuming it would continue to receive the support of a majority today, is a narrow holding, applying only to direct regulations of land (as opposed to personal property) that destroy 100 percent of its economic value. The holdings in other recent takings cases are also quite narrow. Land is protected from economic regulation, but apparently only in extreme cases.

In short, the commercial sphere continues to be subject to nearly plenary regulation. (Contrast the much broader protection given to the "noneconomic" spheres of politics, media, religion, and family.) federalism plays little role in restraining national legislation of commercial activities, and the right to enter into such activities receives special protection only in the case of extreme restrictions on land use. Thus, despite its critics, the post–New Deal distinction between personal and economic rights seems largely intact.

Daniel A. Farber
(2000)

Bibliography

Farber, Daniel A.; Eskdrige, William N., Jr. ; and Frickey, Philip P. 1998 Constitutional Law: Themes for the Constitution's Third Century, 2nd ed. St. Paul, Minn.: West Group.

Lazarus, Richard 1997 Counting Votes and Discounting Holdings in the Supreme Court's Taking Cases. William and Mary Law Review 38:1099.

Lessig, Lawrence 1995 Translating Federalism: United States v. López. Supreme Court Review 1995:125–215.

Economic Regulation (Update)