A Stitch in Haste

To review, the Supreme Court heard oral arguments Monday in a case, Leegin Creative Leather Products v. PSKS, that challenges a longstanding antitrust rule banning any and all "retail price maintenance" as constituting an illegal "anticompetitive" practice.

To libertarians, this rule -- known as the "Dr. Miles rule" from the 1911 case that the Court is now being asked to overturn -- is facially befuddling, and even damnable. Two private parties -- a manufacturer and a retailer -- ought to be able to enter into a private contract for mutual benefit. If a consumer has a problem with it, then she is perfectly free to have no part of it (i.e., to harrumph at home to her heart's content). End of discussion.

But freedom of contract -- "economic substantive due process" -- has been dead ever since the New Deal (and even before that in the case of antitrust law). Instead, the government -- both legislatures and courts -- take a utilitarian/consequentialist view. Infringing economic liberties, they reason, is perfectly hunky-dory if it can be argued -- not proven, but merely argued -- that "consumers" (arbitrarily defined) might -- not will, but might -- benefit (somehow).

This is what passes for enlightened statecraft in the Twenty-First Century.

And yet, even by that haphazard divining process, retail price maintenance should still be allowed, or at least presumptively allowed. There are powerful economic arguments explaining why allowing retail price maintenance can benefit consumers. But at least one of the Justices, Stephen Breyer, arrogantly dismissed "counting economists" as invalid folly.

Ironically, Breyer's pompous position contradicts another disturbing trend by judges, including at the Supreme Court: the increasing prevalence of excessive judicial deference (abdication?) in the form of both substituting rational basis review for heightened scrutiny and, worse, redefining rational basis review into a new policy of absolute deference to the legislature (whether Congress or a statehouse).

This is an untenable contradiction: Why should judges be so willing to defer to legislators but not to the market? If legislators are the "experts" on matters of public policy, then aren't capitalists the "experts" on matters of economic policy? Who is better equipped to determine what maximizes "consumer welfare"? Politicians (most of whom have never been businessmen and have little or no economics training), or entrepreneurs -- whose very existence is perpetually dependent precisely on maximizing consumer welfare (i.e., by giving the customer what he wants, in order to maximize his own profits)?

No single person, and no assemblage of people, can know the market better than the market knows itself. No policy can maximize consumer welfare more than letting those people who are creating consumer welfare go ahead and create it. If "judicial deference" is the proper orientation, then so be it -- defer to the market, not to Congress and not to the archaic and repudiated reasoning of a century-old precedent.

More thoughts at SCOTUSblog, Distributed Intelligence, Truth on the Market.