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 umich.edu