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The trilogy’s three installments appeared in 1973, 1976, and 1979. The first volume, Rules and Order, sets out Hayek’s broad vision of the roles of reason and evolution, and formulates his distinction between “cosmos” and “taxis”—spontaneous order and planned order, respectively. Later chapters explore the distinction between law, by which Hayek means general rules of just conduct, and legislation, the rules that govern the designed order of the administrative state.
Hayek’s work here has been central to later thinking by Austrian, public choice, and new-institutionalist economists about the importance of rules and of institutions such as the law, money, and property rights in framing our ability to generate beneficial social orders without a designer. Rules and institutions matter because the incentives and knowledge signals they generate are what determine whether broadly self-interested behavior will produce socially beneficial or harmful results. In a culture of bailouts, for example, a capitalist’s profits do not necessarily mean he has pleased consumers; he may have just pleased politicians. If misguided housing policy and an unconstrained central bank distort the incentives and knowledge facing mortgage lenders and potential homeowners, we should not be surprised when a boom turns to bust.
The second volume, The Mirage of Social Justice, contains Hayek’s famous critique of fairness. He argues that the pattern of incomes that emerges in a market economy is an unintended consequence of numerous independent actions. If justice refers to whether a given action obeys what Hayek calls “rules of just conduct,” then an outcome that is the product of no one’s intention can be neither just nor unjust. The concept of “social justice” as a claim about the pattern of incomes that emerges in a truly free market is therefore nonsensical.
This argument, and specifically the chapter “The Market Order or Catallaxy,” has been incredibly influential not just on economists working in the traditions noted above, but also on political and legal theorists and philosophers. The Catallaxy chapter might be one of the single best pieces ever written on the nature of the market as an undesigned order.
The third volume, The Political Order of a Free People, offers a positive proposal for political reform. Despite its emphasis on the importance of constitutional rules, this segment has been rightly criticized for being too much of an attempt at design in a work that is highly critical of central planning. But the volume’s epilogue, “The Three Sources of Human Values,” is one of Hayek’s best essays on the relationship between a free society and human social evolution.
Law, Legislation, and Liberty opened up new ways of thinking about reason, social evolution, social justice, the nature of social rules, and the market as a spontaneous order. The book is indispensable for understanding modern political economy.
Richard Epstein’s Takings: Private Property and Eminent Domain resounded like a thunderclap in constitutional theory when it arrived in 1985.
The word “takings” refers to the government’s power under the Fifth Amendment to take private property for public use upon payment of just compensation. Epstein states in his opening sentence, “The book is an extended essay about the proper relationship between the individual and the state.” Within a few pages, one can see just how profound, indeed radical, this extended essay would become. Takings is no routine academic exercise. Epstein boldly challenges the very premise of the New Deal jurisprudence that unleashed the modern regulatory state.
The New Deal rested upon government’s power to impose vast regulations on property and economic affairs. But this power could flourish only if government didn’t need to compensate people for the negative impact that regulations had on property rights. A series of U.S. Supreme Court decisions removed any such constraint by relegating property rights to second-class constitutional status. Those decisions ushered in a presumption in favor of regulation, and the regulatory state was unleashed. By 1985, it had grown to enormous proportions, and the constitutional theory upon which it was based held hegemonic status in law schools and courts.
Then Epstein asserted that the presumption should be that “all regulation, all taxes, and all modifications of liability are takings of private property prima facie compensable by the state.” His book builds a rigorous and compelling case for this presumption. Critics immediately pounced and sought to dismiss Takings as being beyond the pale. But Epstein never flinched, courageously defending his position in countless debates. The force of his genius won respect from adversaries and inspired a property-rights movement that continues to grow to this day. Takings served notice that the statist status quo rests on dubious moral and constitutional grounds.
Nearly 20 years later, Randy Barnett’s Restoring the Lost Constitution: The Presumption of Liberty (2004) thrust other key provisions of the Constitution into the national spotlight and transformed the legal debate over constitutional interpretation. Legal interpretation during the preceding 70 years had increasingly read key provisions out of the Constitution, effectively amending it even though the words remained the same. As a result, the original meanings of the Commerce Clause, Necessary and Proper Clause, Ninth Amendment, 10th Amendment, and Privileges or Immunities Clause, among other provisions, disappeared, and with them the Constitution’s core purpose of protecting individual liberty. Barnett sets out to restore this “lost Constitution.”
Restoring the Lost Constitution has many virtues, but two merit particular attention, because they go to the heart of how we get from where we are today to a rule of law that respects individual liberty. The first is Barnett’s recognition that the courts have a vital role in constitutional interpretation and that this interpretation should be guided by the original meaning of the Constitution. He rebuts advocates of judicial restraint while calling for an engaged judiciary to review both federal and state laws.
The second is the presumption of liberty. Sadly, the Supreme Court has created a presumption of constitutionality under which most laws—even those that flagrantly flout clear constitutional constraints—survive constitutional challenge. Barnett rebuts this misguided precedent. Through penetrating analysis and historical research, he explains that the burden should fall upon the government to justify a law through reference to either an enumerated power (in the case of the federal government) or a properly limited police power (in the case of the states). In each instance, the result would be a dramatic reduction in government latitude.
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