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revenge (Allgeyer v. Louisiana 1897). That clause was broader than the privileges and
immunities clause because it was not limited to citizens, but applied to all persons,
including aliens. Yet this broad reading of the due process clause had to overcome two
objections: first, that the scope of “liberty” only embraced the ability to move about
without hindrance; second, that due process referred only to procedural rights such
as notice and fair hearing. The rejections of both limitations were a self-conscious
effort to undo the initial error in Slaughterhouse. But under either clause, the police
power limited freedom of contract, but not for “labor” or, as we would say, “anticompetitive”
restrictions on contractual freedom, which fell outside the health and
safety provision of the police power. Accordingly, this interpretation struck down
federal and state statutes that required private employers to bargain with union
representatives as improper interferences with liberty of contract (Adair v. United
States 1908; Coppage v. Kansas 1914), or which prevented employers with more than
five employees from hiring more than 20 per cent aliens (Truax v. Raich 1915). The
most famous and controversial decision of the period, Lochner v. New York (1905),
held that a statute prohibiting some bakers from working more than ten hours
per day could not be justified on grounds of health. Lochner has been widely but
mistakenly condemned as an improper interference with legislative power. Sunstein
(1987) has suggested that the decision showed an undefended preference for common
law baselines that were wrongly thought to be “prepolitical” in nature. But Lochner
committed no such vice, for its functional justification was that competition worked
in the long-term interests of employers and employees alike, and that courts must
guard against the factional intrigue that distorts the smooth operation of markets
at both the federal and state level. Strauss (2003) rejects Sunstein’s argument, only
to urge that Lochner was wrong because of its inordinate affection for contractual
freedom. But here too the evidence suggests otherwise. Lochner never challenged the
power of the state to suppress conspiracy, bribery, or extortion, all of which have
negative social consequences. Nor did the court strike down the legislative abolition
of the laissez-faire defense of assumption of risk or the state creation of workers’
compensation schemes. The court also upheld the antitrust laws against claims that
liberty of contract protected cartel formation (see United States v. Addyston Pipe &
Steel Co. 1899). Lochner’s real sin was to repudiate the progressive movement’s fervent
belief that differences in wealth between employer and employee made fair contracting
impossible. But this canonical progressive position involves the elementary
confusion between market power, which is dangerous, and firm size, which is not. To
its credit, Lochner represents a view that high levels of judicial scrutiny are needed to
combat legislative abuses—the very attitude that proves so influential in many First
Amendment cases.
To this day, there is no real evidence of any economic dislocation attributable to
Lochner’s view that, absent monopoly, the terms of private contract should be left
to the parties and not to the minimum wage, labor, or anti-discrimination law. So
Lochner was an efficient decision that was repudiated by the New Deal conviction
that the choice between monopoly and competition was one for legislative choice, not
constitutional structure. The overwhelming weight of legal opinion is, alas, contrary