Bench Memos

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Andrew Napolitano’s Imaginary Constitution


Today’s Wall Street Journal features an exchange on whether the government should cap executive compensation in companies receiving federal assistance.  Harvard law professor Lucian Bebchuk is for ‘em–he thinks, indeed, that they should be more stringent than the administration proposes–and former New Jersey judge Andrew Napolitano is agin ‘em.  Napolitano would have the better argument if he would stick to what’s really wrong with compensation caps–that they’re economically counterproductive, politically unwise, and morally objectionable as a species of envy-driven vindictiveness.

But Napolitano can’t leave well enough alone.  He adds the argument that compensation caps are unconstitutional.  Why?  “[B]ecause freedom of contract is protected by the Constitution.”  Oh, really?  Where?  For about 40 years, from the 1890s to the 1930s, the Court protected (inconsistently, to be sure) something it called “freedom of contract,” but it was based on an illegitimate reading of the due process clauses that was cut from the same “substantive due process” cloth that gave us the protection of slavery in the Dred Scott case and of abortion in Roe v. Wade.  You don’t have to be a fan of the New Deal to recognize how right the Supreme Court got this one when it gave up on this line of reasoning in 1937, with Chief Justice Hughes saying, “What is this freedom?  The Constitution does not speak of freedom of contract.”

Napolitano doesn’t even attempt to defend his remark about “freedom of contract,” but instead moves immediately to saying that compensation caps “also constitute a taking” prohibited by the Fifth Amendment.  It has been a hardy perennial in the imaginary constitutional garden of the libertarians to say that all manner of taxes and regulations are “takings” without “just compensation” ever since Richard Epstein of the University of Chicago published his book Takings in the 1980s.  But this reading of the Constitution is as insupportable as “freedom of contract” under “substantive” due process, and invites rampant judicial activism–only substituting conservative activism for the liberal variety.  All sorts of government regulations of the economy favor some behaviors over others, impinge on people’s earning power, and thus in some extremely remote sense “take” resources people would otherwise acquire or keep.  The Epstein-Napolitano version of the Constitution would sweep like a scythe through good regulations and bad ones, blatant ones and subtler ones, and without any basis in the original understanding of the document.

The idea of executive compensation caps is a very bad one on all sorts of policy grounds.  It is also unjust.  But injustice and unconstitutionality are not the same thing, try as Napolitano may to equate them.


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