Bargaining with the State

Bargaining with the State

Richard A. Epstein
Copyright Date: 1993
Pages: 338
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  • Book Info
    Bargaining with the State
    Book Description:

    Bargaining with the Stateexamines the threats to liberty that arise through the power of government selectively to distribute benefits and favors to its citizens. For Richard Epstein, the preservation of individual liberty against government contractual power advances not only the short-term interest of the individual citizen but also the long-term overall social welfare.

    eISBN: 978-1-4008-2109-9
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
  3. Preface
    (pp. xi-xvi)
    • CHAPTER 1 Givings and Takings
      (pp. 3-16)

      In this book I shall explore the extent to which, as a matter of political and constitutional theory, it is proper to impose limits on the power of the state to bargain with its citizens. The inquiry in question is in large part a continuation of some of the themes that I had previously developed in my bookTakings.As with that earlier book the inquiry is conducted at two levels. The first level is abstract, and seeks to determine the answer to this question within the framework of an ideal constitution. The second level, in contrast, is intensely practical,...

    • CHAPTER 2 The Plan of Action
      (pp. 17-24)

      In this book I hope to start anew to develop a comprehensive approach to the problem of bargaining with the state, integrating the discussion of unconstitutional conditions with a discussion of the takings risk. That inquiry is itself an exceedingly complicated one. The canonical statement of the unconstitutional conditions inquiry, for example, leads one into a discussion of baselines and coercion, and rests upon the widespread agreement that a discussion of the latter depends upon the proper identification of the former.¹ Efforts to expose the greater/lesser fallacy therefore take extensive detours into the private law analogies that serve as the...

    • CHAPTER 3 Baselines
      (pp. 25-38)

      The material contained in the first chapter left an overarching project that requires us to identify the baselines against which claims of coercion can be measured. Baselines offer the initial positions against which the propriety of subsequent individual or government action can be judged. The selection of these baselines is the first part of any inquiry into bargaining with the state, and it forms the subject matter of this chapter. The difficulties of the inquiry are always compounded because it is unclear whether these initial baselines should point toward collective or individual entitlements. The choice is not one of mere...

    • CHAPTER 4 Coercion, Force, and Consent
      (pp. 39-49)

      Establishing property baselines in the original position was achieved through a strategy of reverse engineering. The desired outcome is to use resources where they generate the greatest social benefit. The strategy is to make that initial assignment of rights that is most likely to achieve this end. The difficulty is that no individual or group has the knowledge to make those assignments perfectly. The best that can be done, therefore, is to make that initial assignment of rights which allows subsequent adjustments to be made with the lowest level of friction and drag. The assignment of rights in persons and...

    • CHAPTER 5 Competition, Monopoly, and Necessity
      (pp. 50-74)

      The argument in the previous chapter has been designed to erect a libertarian fault line that allows us to distinguish between coercive threats and ordinary market offers. Illegitimate coercion arises where a threat of force is used to acquire an entitlement, or where some prior use of force allowed a person to obtain the resource that is then offered for resale to its original owner. I think that there is little reason to believe that any modification should be made on this side of the divide. Apart from the case of self-defense and similar issues,¹ there is very little sentiment...

    • CHAPTER 6 Forced Exchanges and Just Compensation
      (pp. 75-89)

      The previous discussion of baselines sets the stage for the analysis of coercion. Broadly speaking, coercion is the adoption of some bargaining strategy that leads to an unacceptable deviation from the original set of entitlements. These cases fall into two classes. The first, and obvious, cases involve the threat of force or fraud. The less obvious cases are those which arise from taking certain bargaining strategies in monopoly, necessity, or prisoner’s dilemma situations. These are not coercive in the first sense because force and fraud have been ruled out as bargaining strategies. Nonetheless, in both cases the bargaining strategies adopted...

    • CHAPTER 7 Maximizing Social Surplus
      (pp. 90-104)

      In the previous chapter, I offered an explanation as to why a just compensation requirement offered an effective, if imperfect, limitation against government excesses. The analysis in that chapter did not, however, exhaust the subject because it did not address the division of any surplus created by government action. That surplus, of course, has first to be found, for if none is created, then the just compensation requirement cannot be satisfied for all persons simultaneously, save in the improbable case where a statute (which costs money to enact) leaves everyone in exactly the same position as before. Accordingly, any scheme...

    • CHAPTER 8 State Incorporation Powers
      (pp. 107-126)

      The doctrine of unconstitutional conditions cuts across areas of substantive law because the question that it addresses—the relationship between coercion and consent—is an ubiquitous one for the law. Historically, however, the cases which gave birth to the doctrine tended to gravitate to those areas of the greatest political and legal concerns of their own times. It is not surprising therefore that the origins of the doctrine of unconstitutional conditions were intimately tied to state powers of incorporation, a source of bitter nineteenth-century dispute. When the issue of corporate status first came to the Supreme Court, the precarious juridical...

    • CHAPTER 9 Discriminatory Taxation
      (pp. 127-144)

      The previous chapter analyzed the role of the unconstitutional conditions doctrine in connection with state regulation of foreign corporations. The major point of that analysis was that each state had a monopoly over the power to permit corporations to do business within its borders, and that this power should not be allowed to permit the state to extract economic rents from those corporations which would, if no other choice were allowed to them, be prepared to pay higher rates of taxes than local corporations in order to obtain access to local markets. By preventing each state from extracting surplus from...

    • CHAPTER 10 The United States v. the States
      (pp. 145-158)

      The material covered in chapters 8 and 9 examined the bargaining problems between states and the individuals or corporations that wish to gain access to their markets. In this chapter I extend that analysis to deal with the separate side of federalism, the relationship between the United States and the individual states. This issue was of far greater moment before the constitutional transformation of 1937, for the then-continued validity of the enumerated powers doctrine placed effective limits on the power of the central government to regulate the affairs left within the control of the several states. The political pressures that...

    • CHAPTER 11 Public Roads and Highways
      (pp. 161-176)

      The previous three chapters all addressed the problem of bargaining games generally, and unconstitutional conditions in particular, in connection with issues of federalism. Until the 1920s the operation of the unconstitutional conditions doctrine was confined to these governmental contexts. The legal doctrine escaped from those narrow confines in cases of state regulation of state and local highways, where again state governments enjoy the powerful local monopoly position that for familiar reasons calls into question not only their capacity to regulate, but also to bargain with their citizens. In this new setting the question was whether the doctrine of unconstitutional conditions...

    • CHAPTER 12 Land Use Restrictions and the Police Power
      (pp. 177-195)

      The highway cases mark an area in which the government assertion of absolute ownership rights was properly countered by the doctrine of unconstitutional conditions. In this chapter, I extend my discussion of the limitations on the state’s power to bargain to a second context, one in which the state has no obvious ownership rights but acts as a regulator pursuant to its prerogatives under the “police power” which in the customary formulation pertains to the health, safety, morals, and general welfare of the population at large.

      Within constitutional law generally, the police power addresses the set of justifications that the...

    • CHAPTER 13 Licenses and Permits
      (pp. 196-210)

      Land use regulation is only one area where the state holds amonopoly position by virtue of its ability to act under its police power. The state’s power to license various kinds of business activities creates another domain of monopoly power of great importance and equally subject to abuse. In this chapter, I examine three separate contexts in which the state’s exercise of its licensing power has been challenged, usually under the doctrine of unconstitutional conditions. The first section addresses the licensing of medical and legal professions. The second section deals with the licensing of insurance firms. Finally the third section...

    • CHAPTER 14 Labor and Employment Contracts
      (pp. 211-236)

      The scope of the state’s power to bargain is not confined to its exercise of the police power. Bargaining with the state also can give rise to difficulties in the broad range of labor and employment contracts. The state, of course, can only discharge its public functions through agents, and these agents must be hired by contract, either with individual workers or through independent contractors. These contracts are governed by the ordinary principles applicable to private parties on such matters as offer and acceptance, contract interpretation, and defenses of fraud, incompetence, and duress. But there are also distinctive contracting problems,...

    • CHAPTER 15 Tax Exemptions
      (pp. 239-251)

      The previous three chapters have examined the problems of bargaining with the state in connection with those types of government action routinely undertaken by the traditional minimal state. Within that framework it was both possible and necessary to ask whether the particular restrictions placed on the government’s freedom of contract advanced the competitive ideal. With the rise of the welfare state, the older functions of these contractual restrictions have lost their pride of place in the constitutional hierarchy, as the New Deal has vastly expanded the catalogue of permissible government activities. In celebration of that development, Professor Charles Reich, writing...

    • CHAPTER 16 Unemployment Benefits
      (pp. 252-277)

      The previous fifteen chapters of this book have demonstrated how a rigorous respect for the limits on government power is able to secure the benefits of a competitive regime even where the government’s power to bargain is enhanced by its power to tax and by its monopoly position. With the advent of the welfare state, it is no longer possible to treat public support for a competitive system as the sole proper function of government. The question then arises whether the strategies that were used to constrain the power of the state within its traditional context may be fruitfully applied...

    • CHAPTER 17 Welfare Benefits
      (pp. 278-294)

      The role of the welfare state extends beyond the employment relationship to direct forms of public assistance given to the poor and the needy. These public grants are not simply outright grants of cash, services, or goods to persons who earn less than a certain income, but are typically coupled with conditions that determine who is eligible to receive the grant, the purposes for which it may be spent, and the conditions under which it may be terminated or forfeited. The welfare system is not an ordinary contract, in the sense that it is not a bargain: there is no...

    • CHAPTER 18 Educational Benefits
      (pp. 295-312)

      The ever-expanding role of government in modern life has brought forth public funding of educational, as well as welfare, programs. What kinds of conditions may the government attach to its grants for educational purposes? At one level it seems clear that government may impose some subject-matter restrictions, given the inevitable economic constraint of scarcity. If the government decides to fund programs designed to deal with adolescent education, it is not thereby bound to fund programs to teach physical education to the elderly. No matter how great the level of national prosperity, limited public funds necessitate hard choices about which parties...

  8. Table of Cases
    (pp. 313-318)
  9. Author Index
    (pp. 319-320)
  10. Subject Index
    (pp. 321-324)