Peter Robinson’s post on Professor Richard Epstein took me back to something I spent a lot of time thinking about when I was in law school Richard Epstein had by then already achieved some notoriety because of his high-profile defense of the tobacco companies in the class action lawsuits; and if memory serves he testified before Congress when the federal government got involved. The Chicago School of the law (Robert Bork, Richard Posner, Richard Epstein, etc.) was then much in vogue in jurisprudence–their appeal being their understanding of sociology and economics, as well as the cogency and brilliance of their theoretical work, to which the other side, generally in the majority, generally had no answer. During the ’70s, ’80s and ’90s, the Chicago School knocked down (in academia and in the courts) many of the restraints on “voluntary markets” which a combination of socialist and anti-states’ rights tendencies had erected in previous decades. Helping to free Americans to generate the highest sustained productivity growth of any mature economy in modern times, the beneficial contributions of the jurists of the Chicago School to our society was out of all proportion to their tiny numbers.

Still, difficult issues remain, and the Epstein excerpt posted yesterday highlights one that is deeply entrenched at the intersection of law and political economy in modern democracies.

In most areas of law, the policy is clear. For example, the securities regulations seek to protect investors. But those protections are also costly restraints on financial fluidity, and sophisticated investors (who can appreciate and absorb the risk of their investments) need less protection than passive “mom-and-pop” investors in the public at large. So the securities regulations carefully calibrate market freedom vs. the countervailing interest of investor protection, across a range of investor types.

But in some areas of the law, such as Antitrust (at the root of which is the Sherman Act, which outlaws monopolies and restraints of trade) the very purpose of the law is a matter of debate. And the debate often occurs where it shouldn’t–in the courts–rather than where it should–in the legislature, or in the society as a whole.

Is it the purpose of the Sherman Act to protect mom-and-pop businesses across the land–and the culture and way-of-life their conservation will preserve? Wasn’t Congress at least partly motivated by the ruthlessness of John Rockefeller’s drive to build Standard Oil Trust heedless of the consequences for the families of the Pennsylvania “wildcatters” whom he wiped out as an economic class? Or does the evil of monopoly inhere solely in its dead-weight economic loss, which results in a combination of higher prices and lower output? If that is the case than the purpose of the Sherman Act is to seek the greatest aggregate benefits through the most productive uses of human and material resources–not to protect those whose interests are vested in yesterday’s economy from the market forces of tomorrow.

This question is central to the free-trade agenda. Free trade may be better in the aggregate, but when its costs are visited upon a few small communities in devastating fashion, while its benefits are so diffuse throughout society that nobody notices them, is the question really so simple? And what about the non-economic cultural and way-of-life intangibles that are lost when economic productivity becomes the overriding priority? What makes a society rich is not necessarily what makes it happy, after all. Or is it?

I’ve never been able to come up with an answer for this, and maybe there isn’t one. I look forward to any comments readers may have. Meantime, I agree with Epstein about the dangers of piecemeal collectivism. And collectivism has a way of popping up where you least expect it.