Tuesday, January 26, 2016

The Public Utility Idea in a Progressive Constitutionalism of Equality

Guest Blogger

For the Symposium on the Constitution and Economic Inequality

William J. Novak

To turn a very long paper into a very short post, I’d like to make 3 quick points about the relationship of public utility to the Constitution and economic inequality:

1.  We need to recover the historic function of the public utility idea in American constitutionalism.  Public utility was a broad constitutional rather than residual municipal ideal that played a significant role in the development of the modern legislative, administrative, and regulatory state.  In a nutshell, “public utility” was the political-economic concept through which progressive legal reformers pioneered a more ambitious scope for the police power – ultimately overcoming the retrograde constitutional limitations of Gilded-Age and Lochner-Era conservatism.  By the time of Nebbia v. New York (1934) – at the threshold of the New Deal – the public utility concept had done its major work in building a more general conception of regulation in the public interest and for the public welfare.  Consequently, broad-scale economic regulation no longer depended upon a demonstration that a particular business was especially “affected with a public interest.”  Indeed, as early as World War I, the sweeping regulation of the domestic food supply was justified under the rationale that in time of war all business was “affected with a public interest.”

2.  Public utility embodied a progressive equality ideal and not just an economic “natural” anti-monopoly ideal.  I write this text sitting 55 miles due south of Flint, Michigan where the significant implications of this abstract statement are playing out in real time.  Along with ancient precedents concerning common carriers, the provision of clean, healthy, and affordable water was one of the earliest instantiations of the public utility idea.  Here, the economics of natural monopoly were secondary to the public ethical and legal obligation to serve every member of the community equally in terms of the necessities that underwrote basic public health, safety, and well-being.  Public utility was a vehicle for the kind of foundational equality that was seen as essential to any truly democratic society.  Affordability – price control – was key to the equalitarian impulse at the core of the public utility idea as it expanded from 19th century concerns to broad Progressive-Era extensions in the fields of transportation, communications, banking, energy, food supply, milk, hotels, warehouses, ice, . . . you name it.  If something was viewed as necessary to human welfare – broadly construed in a democratic society – equal, affordable, and non-discriminatory provision was the ultimate goal (indeed, requirement).  Moreover, as the broad mandate of the Public Utility Holding Company Act of 1935 perhaps made most clear, the provision of such basic necessities was itself not to become a source of profiteering, fraud, collusion, discrimination, oppression, or other forms of economic inequality or unfairness or domination.  In Joseph Fishkin and Willy Forbath’s language, the public utility idea in its fullest manifestation was inherently “anti-oligarchic.”  David Hume perhaps first captured the broadest ambitions of the original Enlightenment project of political-economic opportunity when he argued that “Public utility is the sole origin of justice.”

3.  The recent death of the public utility idea has been much exaggerated.  Admittedly, the public utility idea has taken its lumps of late, particularly via the relentless and specifically economic critiques that emerged from Mont Pelerin and the Chicago School at the threshold of our own neoliberal era.  But Randy Picker continues to track its influence in important network or regulated industries.  Tim Wu and Susan Crawford have drawn on its continued vitality and innovative potential in telecommunications.  Sabeel Rahman has suggested public utility as one new way to “curb the new corporate power.”  And my colleague Nick Bagley has recently gone out on a limb to provocatively rethink the provision of healthcare in a predominantly public utility frame.
The public utility project was the product of a century of intellectual and legal and economic development by some of our nation’s most creative thinkers, lawyers, and economists – Charles Francis Adams, Bruce Wyman, Felix Frankfurter, John Commons, Louis Brandeis, Walton Hamilton.   In what some have called a “new Gilded Age” and amid a crumbling infrastructure and confusion about the very possibility of a generalizable public welfare or basic public goods, there’s something here worth revisiting.

In their original post introducing this conference, Fishkin and Forbath quote Oliver Wendell Holmes’s oft-cited line about Herbert Spencer’s Social Statics in Lochner.  But I’ve long felt that Holmes’s opening gambit in that great dissent had even more to say to our current situation:  “This case is decided upon an economic theory which a large part of the country does not entertain. If it were a question whether I agreed with that theory, I should desire to study it further and long before making up my mind. But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law.”
Here Holmes underscores the fundamental priority of democracy over economy in the American constitutional tradition.   Of late, that basic democratic sentiment has been under rather sustained attack.  And the reassertion of the priority of economy over democracy has become something of the new American rule of thumb (if not of law) – almost paradigmatically so, just 55 miles north of Ann Arbor.  In crisis times, American constitutional history invites rediscovery.  An interesting place to start, I contend, is the recovery of the somewhat “lost” progressive tradition of public utility.

William J. Novak is Charles F. and Edith J. Clyne Professor of Law at the University of Michigan Law School. You can reach him by e-mail at wnovak at

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