News Scrapbooks 1977-1979

FINANCIAL NEWS AFTER 40 YEARS Economic Liberty Regains Favor With High Court Slnce 1937, the U.S. Supreme Court has not considered eco~mic freedom to be important. However, some recent deciSJOns indicate that things may be changing. recent cases - dealing with advertising and promotion - suggest that econorruc freedom is at least malting modest headway with the present court, said .Se?Jiicd. H. Siegan, distinguished profe~r of law at the ~tyol"SaiilJ!ego, in an interview. Next~g Feb. 16, Siegan will present a By DO, ALD C. BAUDER FIOCllldel Eclllor, ne son Diego u-

·roe only exceptions in these intervening years have been ~pec•al situations, 'where some action might in- terfere with a fundamental right winch is accorded special status, such as freedom of speech, the press, religion, travel, vo_tmg or something of that nature," he said. S1egan 1s encourag~d by three recent cases. In 1976, the ~ourt fo~nd that citizens have a right to free flow of mfonna_t1on which advertising can provide to them. Thus, 111 Virg1ma State Board of Pharmacy versus Citizens' Con. 1mer Co~ncil, the court struck down a Virginia court decision bamng advertising of certain prescription . ver i 1ng Gains Status In esse~ce. the court extPnded First Amendment r!ghts lo advertJSlng, m statlng that, "Commercial speec-h is P~ected .undP.r _the First Amen<1ment, too," Siegan said . The court said that people need advertising to Inform them of many thmgs which are pertinent to their Jives " and the court also stated that non-politiraJ factors may be as important or mor' important to mdividuals than the politic,11 facets normally protected by tree S"""ch provi- sions. ""· "The dectslon reads like the old (I 3-1937) decisions " beamed SI gan. It was the first time in 40 years that the h ~h court was talking glowingly of econonuc rights, he said. This case was th<'n used as a ba · for two other drc1~lons In Bates versus the State Bar of Ari,.ona prohibitions of legal advPrtislng were struck down, ' Also, m Lmmark Assocmtes vi'rsus W!lllngboro Town- ship, N.J , the co_urt held that the town ·htp did not have l~e rlght lo restnet u. e of !<'or Sale and Sold real est.ate signs. (Tlie r~strirllon had result d from a changing racial balance m the township's neighborhoods, whieh the :.i~!15 were exac:erbatlng, the community believed,) Justice (Thurgood) \farshall wrote the court's dL'l:'l• slon, stating that the action would lnterlere with the frc,-e flo of Information In the marketplac.e," said S1egan, who o e ~gain saw signs of th l -1 7 court's Jin of reasonmg. lmllar question will ('()me up at the USD debates whJ hare. Feb; 16, Tempi ' Uniwrslty Prof. Walter E'. Williams debatmg Rep. Stephen D-N Y., on wheth r the minimum wage law. hould bP abohshPd· Feb 23, Sen. Hart debating UCLA's Demsetz on whethe; government deregulation should be eoupled with dl'<'on• centratlon of industry; March 2 D an Don Id T Wt•ck stein of t:SD's law school _and Sen'. Jacob r.arn, R-Utah, 0 ~ hether collectl~e barga1rung and striki• righLc; •hould be e~tended to public employees; arch 9, Mlrh1gan's Prof Edward Mitchell and Lee White of the Con. umer J<'edera- tlon of Amenca on whether government controls of energy should be limited and Apnl 6, Howard Phillips of Conserv- ative Caucus and USC Prof. Earl Johnson on whether the !.€gal Senices Corp. should abolished.

W n day, Morch 29, 1978 DECISIONS GET TOUGHER

oted Economist ays Job oses I s Charm

•

lDI Il

series of debates on economic lib- erty at USD, featuring such speak- ers as U.S. Sen. Gary Hart, D- Colo., Prof, Harold Demsetz UCLA economist, and Prof. Ed: ward Mitchell of the University of Michigan's graduate school of business. Each debate will deal with economic freedom - pnmari- Jy, the question of whether govern- ment or the private sector should be the final arbiter of distribution of goods and services in the econo- my Contempt From Historians "Between I and 1937, the U.S Su~":me Court ar.corded economic act1V1ty a high degree of status

Be-man! Sieg

The court was cognizant of economic Hbcrty - it was up tc a Iegu;l~ture to show that it h~d very good reason to pa bill which restricted economic freedom. Hi&orians hav1 treated the 1893-1937 court With contempt - labeling It tht 'la z faire' court," Slegan said, But In the 1 37 case, West Coast Hotel versus Parrish a ca involving a state-imposed minimum wage io worn n, "Th court specifically said that restnctions ol economir IJ~rty were acceptable unless they were arbi• tr:iry, ~pnc1ous or unreasonable," Siegan said. But 111 practice, econorruc liberty became so eroded that the arbitrary, capricious and unreasonable guid Jines didn't even apply UnlPss a legislature could be shown to be in a complete statr of lunacy, an act restricting economic liberty has been considered acceptable," said

S1egan.

8-7

TH( SAN DIEGO UNION

Thuridoy, Morch 30, 1978

ent ·curbs: 0 e Expert Says Yes, Another No

Gover

Benefits, Drawbacks Are Debated At USD

years there has been an ex- incomes of big power blocs) ceptionally profound change as the lesser of the evils. in the way markets function "We are almost certainly - or the way markets don't headed in this direction function." (government-administered Big labor and big business price and wage controls of - although they will engage some kind)," Galbraith said. in "acnmonlous interchange Although it was a discus- to show that the class strug- slon between academicians, gle isn't dead" - basically there was a paucity of on- are at peace with one anoth- the-other-hand-but-also er. Labor demands and gets squirming. Indeed, there huge wage increases. were more buts than Ifs and But the comparues do not ands - particularly in the have to swallow these higher rebuttal session. wage costs. Because 1,000 to Replying to Siegan's high 2,000 large companies con- praise of Houston because of trol half of U.S. industrial its lack of zoning, Galbraith production, competition is played magnificently to the often more of a slogan than gallery: "A well-zoned city a reality. The wage increas- like beautiful San Diego is a es get passed along to the much better place to live consumer - and that's why than that hideous Houston," government has a legitimate he said, to great applause. role in being a referee, But Siegan got his horns into Ga\braith's hide, too -, tives: Inflation, creation of particularly as he noted that unemployment to stop infla-. some of the distinguished re- tion, or some kind of an search exposing regulatory incomes policy to contain fallacies ls coming from inflation. I would accept the Galbraith's Harvard, rather latter (an incomes policy - than Siegan's Chicago or a way to regulate the school. "There are three alterna-

By DO, not less, government regula- tion of the marketplace. Siegan demurred. "Feder- F1nanc1o11c111or, no San 01 090 union It wa Harva~ versus th_ al and state governments University of Chicago Tu ~- should move to eliminate the day night on the ~SD cam'. vast bulk of existing eco- P.u~ - and th~ wmn r wa nomlc regulal!on - govern- t,;SD, for hostmg a lively, mental restraints on entry, provocative debate which price and output," he said, kept an overflow audlen<: arguing that bureaucratic atlngle for well over l\\O mtervention simply doesn't LD C. B UDER

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vast number fail a cost-bene- fit analysis; overall, the dis- advantages outweigh the advantages." Galbraith agreed that business behavior is often hypocritical : "I am amused at how the most vigorous free enterpriser becomes a socialist when his banker tells him to to go Washington and get relief," Galbraith chuckled, citing the steel industry's recent successful efforts to get import protec- tion. "The steel industry quick- ly changed its advertising from touting less govern- ment to touting more gov- ernment when it needed pro- tec ti on from Japanese competition," said Gal- braith, whose rapier wit and steeltrap mind seem ideally suited to piercing the armor of the steel industry.

mission (ICC).

They believed the ICC would help them impose an industry-wide cartel, some- thing they had not been able to accomplish by them- selves. And they were not wrong."

work

hours.

"Rates for airline travel

alomon

ar na was

Th

Lecture llall. The combat- controlled by the CAB (Civil But, said Siegan, "For- a.nL~ were Professor John Aeronautics Board) are rar tunately, the unholy coali• Kenneth Galbraith, II beral higher than those 011 routes tion of reformers and mdus- Har., ard economist (now It docs not regulate," said trialist~. is becoming emeritus), author and teleVJ• Siegan adding that the unglued. Even llberals sion per onality, and Profes- "most 'significant accom- such as Sen. Edward M. sor Bernard H. S egan, Dis pllshment" of airline regula- Kennedy, D-Mass. , and con- Unguished Professor of Law lion "is the raismg of airline s~mer advocat~ Ralph at the USD Law School, for- fares ,.

ader are now taking up the •·~•·--•"'-

Similarly, said Siegan, cudgels for deregulation, he

merly of th~ Chicago Law

hool, an~.•ery much of th ~ "Very persuasive evidence said. SQ-called Chicago school_ exists that railroad regula-

Indeed, big business onen

lion in the late ;9th Century schemes to extend regula- d.: not come about slmply lion - despite persistent and

rvati\

of free l!larket, con

econom1cs.

They dtsru ed govern- beca of public outrage at conspicuous displays of free ment regulation. Galbralth the robber barons. It turns, enterprise pendants. "Busi- said 1 is imperfect, but it 1s out that most railroad sup- nessmen continually seek to Inevitable - because of a ported regulalion in 1887, impose regulation, presuma- e market when Congress created the bly in the belief that it is tors than the marketplace," system, there will be more, Interstate Commerce Com- easier to outwit the regula- sald Siegan, adding that JOH. GALBRAITH , .. called Inevitable breakclown of

BER; ARD SIEGAN ... opposes curbs

while some regulation might Galbraith's basic thesis is achieve some good, "the that, "In the last 10 or 20

(D

Saturday, April 1, 1978

THE SAN DIEGO UNION

A-12

DEREGULATION VS. DECONCENTRATION

eeeep Debate Delightful

Camara, Galbraith among famous sf eakers at USO J.-.,3/-7 s1 t n professorofscnp South rn Cross Report r ture at St Me1nr d (Ind) Tt,e Un vers,ty of San Schoo of .,.h •ology; Sister 01 o attract1ngb1g m,ryEllenSheehan,ass1s c lar ind reli• tant professor of systema s spe.ik r'S tic theology at t John's

m. tz f car d up noting that Hart's statlstics 1 although lhe top 2 U.S. firms have grown rapidly by acquisition, close examina- tion reveals that it is the second 100 not to the largest 100, that has been doing the acquuing. Also, he said, "In- dependent studies based on data gathered by the govern- ments of the U.S. and Aus- tralia, covering many years, offer strong statistical evi- dence that in highly concen- trated industry structures, the largest finns produce at the lowest cost, but that in highly unconcentrated struc- tures, large firms possess no strong cost advantages.'' HARDLY SIMPLE In any case, ''The elation- ship between co etitlon and industry structure is hardly simple and clear. The Congress simply does not know, nor 1s it ever likely to know, the proper structures for American industry." He said that in the 1930s, both the British and U.S. governments attempted to use coercion to reduce the number of firms competing - "and now we are told that the Congress should seek to deconcentrate industry," h said, shouting, "A plague o' both your houses '" (Ironi- cally enough, the quote is from a classic love yarn, Shakespeare's Romeo and Juliet.)

plifles, such as "Jeffersoruan Democracy" and "checks and balances," whllif' De setz jabbed with finely honed micro-economic statistical stilettos. "Decentralized decision• making" is a venerable American tradition, ~~id Hart. Today, the top 200 p s. firms control two-thirds of manufacturing assets, and · will have three-fourths in a few years. "Only 20 oil companies are vertically Integrated, and they control 90 percent of the oil flowing from the wellhead to the pump," he said. ENOUGH FOR CASE "The evidence is per• suasive that this concentra- tion exacerbates mfiation," said Hart. But the concen- tration itself lS enough to make the case: "There doesn't need to be a conspir- acy for anti-competitive behavior. We don't need the so-called smoking gun," he said. Therefore, Hart explained, he has introduced his Com- petition Review Act, which would set up a commlss1on "for viewing concentration in both minagement and labor." He wound up by quoting Franklin Delano Roosevelt, "It's not that free enterprise has fa!l~d It's that it hasn't been tned yet.•:•~• ~~-~---........J

By DO. ALD C. BAUDER F nanclal EclHar, TINI San0- Union There is nothmg as de- lightful as debaters declaim• ing on deregulation and deconcen lion. After one denounced the other's deductions, the sec• 1 ond de recated the first's demumrs, only to have the first demollsh the second's depositions - while both de- tected deceitfulness in the other's declarations. Oh, it was delicious. For those of us not smart enough to follow it all, it was debili- tating, deflating to the ego. I But oh, my, it was deeeeeep. USD \H S ACAi.' Once again, USD was a winner On Thursday rught, Sen Gary Har , llberal Democrat from ( 01orado, tackl d Prof. P.arold Dem-

art wasn t uu 111g Demsetz's statistics, either, and tossed some more ge eralizations into tire ring - for example, he noted that the important inventions have come from independ- ent entrepreneurs and tink- erers, not big corporations. Throughout, Hart chided Demsetz for his obvious dis• trust of politicians and the political process. Occasion- ally. noted Hart, a shady character will get cited for ''contempt of Congress." Demsetz should be hauled in for "contempt for Congress," Hart suggested. Demsetz proudly pleaded guilty.

MaJor Sem n ry Plymouth, Mich and Patric. a Cooney, 11 doctoral t..id nt in rel, g1ous education at Catholic Univ rs1ty of Am nca Two prornin nt theolo g,ans ,md the off1c1ah,; of the San D1 go d1oc se will lead th nstitute on "Un• d rstandin Morality" June 12 16 JESUIT Father Richard A. McCor1"11Ck IS the Rose F. KennPdy Pro.lessor of Chr1st1an Ett->1cs t the Kennedy Institute Center for B,oeth1c , Georgetown, Un111ers1ty, Washington, DC

SE.. GARY HART ••• liberal Democrat

HAROLD DEMSETZ ... UCLA economist

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Hart, who several years desirable, but said that de- setz, UCLA econonust, on ago Introduced legislauon to concentration would be a fat- the question of "Should Gov- restructure the oil mdustry, uous exercise. Indeed, ar- ernment Deregulation Be and recently has introduced gued Demsetz, deregulation Couple