Our Property Principle

Monday, March 10, 2014

Last December, my book, The Classical Liberal Constitution was published. In it, I argue that a sound interpretation of the Constitution requires reading its key provisions in light of the comprehensive classical liberal theory that animated their introduction. Constitutional law does not evolve in a self-contained universe, but is embedded in the intellectual tradition of private property and limited government. It is therefore deeply problematic to begin constitutional interpretation with either some preconceived notion of judicial restraint or the equally misguided belief that the justices are handmaidens to some “living constitution.”

How Modern Constitutional Law Falls Short

The classical liberal vision is out of vogue with the prominent strands of modern constitutional thought. Much of this disfavor rests in the implicit assumption that no coherent form of “cosmic constitutional theory” can be drawn from the document with the classic liberal approach. Thus Professor Robert Nagel criticizes my book in National Review for failing to show that classical liberal theory indeed animated the document or is strong enough to decide key cases under it. In so doing, he cites with approval Judge J. Harvey Wilkinson, whose well known-book Cosmic Constitutional Theory, eschews grand theory in favor of the constitutional minimalism of Edmund Burke. Wilkinson in particular takes to task the living constitutionalists like the late Justice William Brennan who insisted that “it is arrogant to pretend that from our vantage we can gauge accurately the intent of the Framers on application of principle to specific, contemporary questions,” in light of the “sparse or ambiguous evidence of the original intention.”

Illustration by Barbara Kelley

Ironically, it is thinkers like Wilkinson who give living constitutionalists like Brennan the cover they need to work their will. And all too often, the result is not “judicial hegemony” that deprives people of their capacity for self-governance, but judicial deference that allows political majorities to run roughshod over political minorities in the name of the living constitution.

Of course, everyone should be against cosmic theories that start nowhere and go nowhere. But it is a much more corrosive hypothesis to assume that all theories have that result. The Constitution is a complex document that gives powers to the legislature and the executive, but also empowers the courts to protect individual rights from encroachments by those branches. The difficulty in all cases is to get that balance right. On this point, Wilkinson’s refusal to adopt an explicit constitutional theory is not a sign of strength; it is an open invitation to expand government, to trample individual rights, to weaken a system of limited government, and to spur American decline. The illustration discussed below shows just how far both Wilkinson and Nagel have departed from an adequate approach to constitutional decisionmaking.

Constitutional Ad Hockery on Private Property

Private property is the central institution of classical liberal theory. The Constitution contains the explicit guarantee of the Fifth Amendment, which provides: “nor shall private property be taken for public use, without just compensation.” It is easy to discern the theory behind this provision. It compromises between an absolutist libertarian vision of private property that holds that the state can never take it from its owner, even with full compensation, and the totalitarian vision that routinely allows the government to take private property for public use without paying any compensation at all. The just compensation requirement splits the difference, letting the government force the transfer of property, but only upon payment of just compensation. The state thus avoids the holdout problem, without creating the alternative risk of expropriation.

This elegant compromise can, however, be eviscerated if read in ignorance of the legal theory on which it rests. Just such an evisceration was perpetrated by Justice Brennan, whose inexcusable ad hockery trampled over private property rights on more than one occasion. Any developed system of private property facilitates enormous gains from trade among individuals by allowing the division of property into its constituent parts. Thus, outright ownership can be divided between a landlord and tenant or a mortgagor and mortgagee. It can also be divided between the holder of air rights (with an easement of support) and ground rights. That division was at stake in the most important takings case of the last half-century, Penn Central Transportation Co. v. City of New York (1978). Justice Brennan’s landmark decision was virulently anti-theoretical and has severely undermined the constitutional protection of private property.   

To see why, it is necessary to start with the 1960 decision of Armstrong v. United States,which also involved divided interests. This prosaic dispute asked whether a subcontractor who did work on a naval vessel in Maine waters was entitled to place a materialman’s lien on the property when his general contractor failed to pay for the services. The government dissolved the lien by taking the vessel out of Maine waters. The standard common law theories of unjust enrichment made it clear that the general owner should not be allowed to get the benefit of the subcontractor’s work for nothing. To protect him against double payment, it was possible for the general contractor to demand a lien waiver from the subcontractor before making payment to the general contractor. But failing that, the creation of the subcontractor’s lien should have been upheld.

In affirming this standard practice, Justice Hugo Black was well aware of the odd state of affairs that would arise if this lonely materialman had to bear a huge fraction of the cost of maintaining a naval vessel used for the defense of a nation. Black’s final sentence shaped the nature of the inquiry: “The Fifth Amendment's guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Note that this provision gains its strength precisely because it purports to rest on the powerful proposition that public goods should be paid for by the public at large, and not by the persons who under contract provide for those services. Professor Nagel, Judge Wilkinson, and Justice Brennan are all too skeptical of the classical liberalism’s ability to create general theories.

More concretely, Justice Brennan’s inability to see how classical principles apply to modern problems led him to overextend Armstrong’s reasoning and make calamitous miscalculations in Penn Central. To be sure, that case does involve a novel social problem embodied in a landmark preservation statute, about which none of the Framers had any views at all. But it hardly follows that it is impossible to apply general principles from a case about a materialman’s liens to one about air rights, which were, after all, also well-recognized property interests under New York law. Had Brennan done so, the correct outcome would have been clear: If the City of New York wants those air rights in order to provide a classic public good—views for its citizens up Park Avenue—then the public must pay for the privilege. There is not one constitutional theory for liens and another for air rights.

But Justice Brennan derailed that sensible result by turning Armstrong inside out. He wrongly insisted that “this Court, quite simply, has been unable to develop any ‘set formula’ for determining when ‘justice and fairness’ require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons.” In consequence, he deferred to the use of “essentially ad hoc factual inquiries” of the sort that Judge Wilkinson defends, only to twist the constitutional text beyond recognition by insisting that one key inquiry is whether the law interferes with “investment-backed expectations” of the property owner—a largely useless term that has no textual warrant whatsoever. Brennan then junked a thousand of years of Anglo-American property law, when he claimed that the proper unit of analysis is the “parcel as a whole,” and concluded that there is no compensation for the air rights taken because of the ground rights that were retained. Penn Central thus severed the constitutional law of property from the common law of property, and the scads of incoherent decisions under that rubric are testimony to the foolishness of the decision.

All of these errors rest on Brennan’s incorrect understanding of constitutional originalism. He assumed that originalism requires the judge to find some specific text of the Framers that addresses the precise legislative scheme in question. But the correct view only seeks to situate the new government scheme within the fundamental structure of property as it was articulated at the time. That scheme of course included the recognition and protection of partial interests in land.

Progressivism and Faction

To this day, we pay a heavy price for Justice Brennan’s anti-theoretical mindset. Brennan clearly chose the wrong benchmark for property rights because he supported the grand progressive tradition of letting governments manage communities as they see fit. But, like Justice Wilkinson after him, he missed the major perils of this worldview—dangers that James Madison grasped in addressing the dangers of faction in Federalist No. 10. The greatest of these dangers is that the majoritarian politics championed by both Brennan and Wilkinson allow strong majorities to confiscate the property of an isolated minority. It was for just that reason that the Framers advocated a republican form of government, in contrast to a democratic one, whose complex voting rules were intended to make it more difficult for majorities to always have their way.

Today, with weak property rights protection, the dangerous dynamic of majoritarian politics can engulf all government actions. In the absence of a strong just compensation requirement, nothing ensures that government takings, even when done for public use, will be worth more to the public at large than to its private owners. Protecting private property does not stand in opposition to the welfare of the community at large, but is thoroughly consistent with it. For example, forcing New York City to put the cost of landmark preservation “on budget” improves the political process by forcing a more candid deliberation of relative costs and benefits. It is the failure to incorporate this check on deliberation that has contributed so much to economic stagnation in New York City and the nation. The City thus labors under the massive misallocations caused by rent stabilization because it refuses to put on budget the losses incurred by landlords from tenants who can force the renewal of their leases at below market rates. It is just this unwillingness to respect financial liens that accounts for the deplorable conduct of the federal government in the continuing scandal over the expropriation of the private shareholders of Fannie and Freddie.

It is not the case that judicial quiescence can return Americans to “Their Inalienable Right to Self-Governance,” to use Wilkinson’s evocative term. What is needed is not the mischief of collective self-governance, but the inalienable right of individual self-governance. The failure to police the line between the private and public space has led to the degeneration of the political debate and the massive destruction of private wealth. It is truly tragic that scholars like Robert Nagel are so uninformed to write that “analytical methods of classical liberalism are . . . often not powerful enough to legitimate authoritative settlement of contested issues.” The truth is that they are not powerful, as they stand. It is just that modern democratic collectivists of all sorts will never master their constitutional theory unless they first learn from the bottom-up how the institutions of private law operate. Unfortunately, this is a lesson that the current crop of constitutional theorists, both conservative and progressive, studiously refuses to learn.