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Economic Liberties and the Original Meaning of the Constitution

TL;DR: The authors examines the waxing support for the ideology and practice of economic liberty in the founding era and concludes that the framers envisioned a substantially free market economy based on private property with a large measure of economic freedom for individuals to pursue their own interests.
Abstract: This essay examines the waxing support for the ideology and practice of economic liberty in the founding era. It points out that Americans of the late 18th century increasingly challenged British trade restrictions as well as long-accepted governmental regulation of the economy, raising both practical and philosophical objections. The paper considers various aspects of the colonial economy, including wage controls, regulations governing the price of bread and meat, the establishment of public markets, changes in land and inheritance laws, land speculation, and the growth of contracting in a market economy. It also probes the impact of the Revolutionary War on the emerging commitment to a free market. The paper then links the growing acceptance of economic liberty to the framing of state and federal constitutions. Although recognizing that the United States Constitution does not embody a particular economic theory, the paper concludes that the framers envisioned a substantially free market economy based on private property with a large measure of economic liberty for individuals to pursue their own interests.

Summary (4 min read)

1. Introduction

  • This paper is devoted to the regularization and numerical solution of some geometric inverse problems in linear elasticity.
  • By allowing rather general topology of the shape to be reconstructed, one also needs geometric regularization strategies independent of parametrizations.
  • This paper is organized as follows: in the remaining part of the introduction the authors reduce the full three-dimensional problem (1.1) to two-dimensional problems, and formulate the inverse problems that will be investigated further in the following sections.

1.1. Planar and anti-planar cases

  • The different possible geometric situations are shown in figure 1.
  • Identify the unknown interface from a measurement of the displacement u on M ⊂ N (with M having a strictly positive measure), where u = (u1, u2) is the solution of (1.3) with the constitutive law (1.2).
  • The associated identification problem can then be formulated as Inverse problem, anti-planar case.

1.2. Weak formulations of the direct problem

  • The authors introduce weak formulations of the direct problems (1.3) and (1.4), under minimal assumptions on the regularity of the interface .
  • In order to allow for general Hausdorff-measurable interfaces , the authors use a framework in Deny–Lions spaces, recently used for the mathematical modelling and analysis of crack growth by Chambolle [11], Dal Maso and Toader [35] and Giacomini [19].
  • For smooth interfaces , this solution concept coincides with the standard framework for weak solutions in Sobolev spaces.

2. Geometric regularization

  • Usually inclusion and interface identification problems are ill-posed.
  • The somehow minimal requirements for well posedness in this output space would mean the existence of a solution to the least-squares problem J0( ) = ‖u − θδ‖2L2( M) → min ∈K, in some appropriate class of shapes K together with weak stability of the minimizer with respect to perturbations of the data θδ .
  • Thus, the restriction of un is uniformly bounded in H 1(S) and due to the compactness of the trace operator from H 1(S) to L2( M), there exists a subsequence of fn converging to some f in L2( M), but the sequence n has no subsequence converging to a curve with finite Hausdorff measure H1.
  • In the following parts, the authors consider two different approaches to the regularization of (1.1) and (1.2).

2.1. Penalization by perimeter

  • The authors start with the anti-planar one, for which they use the results of Dal Maso and Toader [35]: Proposition 2.3 (lower semicontinuity in the anti-planar case).
  • The existence of a convergent subsequence in the Hausdorff metric dH follows from n ⊂ and the boundedness of .
  • Now, the authors are able to prove the main result of this section, namely that penalization by perimeter is a convergent regularization method in K̂m equipped with the Hausdorff metric dH : Theorem 2.7 .

3. Numerical solution

  • The authors discuss a level set approach to the solution of the identification problem, respectively to the optimization problem (2.1) obtained from penalization by perimeter.
  • Furthermore, the authors discuss the solution of the arising Hamilton–Jacobi equation as well as the solution of the elliptic problem with moving interface.

3.1. Level set methods

  • The level set approach to geometric motion has been introduced by Osher and Sethian [40].
  • The authors denote only the anti-planar case: Theorem 3.1.
  • As discussed in [7], the authors have several possibilities to choose the velocity via the speed method, in particular they consider the steepest in L2( (t)) and in H 1 2 ( (t)).

3.2. Solving the Hamilton–Jacobi equation (3.1)

  • For solving the Hamilton–Jacobi equation (3.1) numerically, the authors merely use well-known schemes.
  • The explicit time integration of the Hamilton–Jacobi equation requires the fulfilment of the CFL condition to maintain a stable Hamilton–Jacobi solver.
  • Obviously, an increase in the objective Jα( ) during the iteration is not desirable in an optimization context and hence, additionally to the CFL restriction, the authors restricted the time step t such that a decrease in the objective is guaranteed.
  • Due to the possible poor approximation of the normal at the zero level set, the authors additionally reinitialized the level set function to the signed distance function when the step size reached its minimum.
  • Hence, the authors chose to terminate according to a proper chosen number of iterations such that by experience the Hausdorff distance dH did not change.

3.3. Solving the elliptic PDE (1.4)

  • One of the major issues in the numerical solution of inverse obstacle problems, crack identification, shape optimization and also moving boundary problems is the type of discretization used for the underlying elliptic or parabolic partial differential equations, in particular the question of whether the mesh should be changed during the optimization or evolution process.
  • One further advantage of the IIM in their application is that the finite difference grid can also be used to discretize the Hamilton–Jacobi equation (3.1).
  • Using a similar trick as in the fictitious domain method it is also possible to treat inclusion or boundary identification problems with the IIM.
  • In their calculations the authors used the reformulated PDE (3.7) with the Dirichlet restriction u−| = 0.

4. Numerical results

  • In the following, the authors shall report on some numerical experiments carried out with the methods described in the previous section to test the newly developed theory about the perimeter regularization as well as the proposed terminated speed method.
  • Then the authors scaled this artificially produced noise by its L2( N)-norm, which was added, scaled by its noise level δ‖u‖ N 100 , to the measurements.
  • Remark 3. Even for exact measurements their solver faces noisy data.
  • For almost all tests the authors plotted the Hausdorff distance dH ( δα, ∗) versus the noise level δ (in logarithmic scale).

4.1. Ellipse

  • For the first test example, the inclusion is an ellipse with aspect ratio 5/3.
  • One observes that the reconstructed inclusion approaches the exact inclusion with decreasing noise level, as predicted by theory.
  • For the part close to the Dirichlet boundary this is not unexpected, since here the authors have no measurements and so the objective will not be very sensitive to changes close to this boundary.
  • In figure 3, the authors plotted the Hausdorff distance dH , respectively the L1-distance d1, with respect to the noise level δ.

4.2. Sharp ellipse

  • The large aspect ratio causes a rather large curvature which is a challenge for the PDE solver.
  • Also here the reconstruction improves with decreasing noise.
  • This is again in accordance with their theory about the perimeter regularization and confirms the terminated speed method.

4.3. Star shaped

  • Up to now, all test examples were convex which is usually quite a nice property.
  • In order to test a non-convex shape their third example is a star-shaped inclusion.
  • Even worse, figure 7 indicates that the perimeter regularization is not converging which would contradict the theory.
  • Hence, one would expect much better reconstructions for significantly lower noise levels, which seems to be unrealistic in practice.

4.4. Two circles

  • The authors final example is probably the most challenging one.
  • The inclusion consists of two circles, which can in principle be handled by the level set method as opposed to most classical shape reconstruction algorithms based on parametrizations.
  • As for the starshaped problem (section 4.3), figure 9 indicates that the Hausdorff distance for the perimeter regularization increases with the noise.
  • This is either caused by getting stuck in a local minima or since the reconstructions are just too far from the exact solution to allow the application of the theoretical results.

5. Conclusions and open problems

  • The authors have presented a general approach to geometric inverse problems in linear elasticity, for which they also provided a convergent regularization method under very general geometric assumptions.
  • Hence, a possible application of the inclusion detection problem to the general three-dimensional case (with full measurements), which is also of importance in practice, may produce better results.
  • For the terminated speed method, an analysis is still missing but the numerical results compared to the yet theoretically analysed perimeter regularization give good evidence to proceed with analysing this method.
  • Moreover, many theoretical questions related to the solution by the level set method are still open, such as the well posedness of this evolution and its regularizing properties.

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ELY.FINAL.DOC 10/14/2008 12:00:03 PM
673
Economic Liberties and the Original
Meaning of the Constitution
JAMES W. ELY, JR.*
T
ABLE OF CONTENTS
I. THE MERCANTILIST BACKGROUND .................................................................... 674
II. T
HE RISE OF ENTREPRENEURIAL LIBERTY .......................................................... 677
III. W
AGE CONTROLS .............................................................................................. 679
IV. P
RICE REGULATIONS.......................................................................................... 681
V. P
UBLIC MARKETS .............................................................................................. 685
VI. R
EAL PROPERTY LAW........................................................................................ 687
VII. T
HE RISE OF CONTRACT..................................................................................... 692
VIII. I
MPACT OF THE REVOLUTIONARY WAR .............................................................. 693
IX. T
HE CONTRACT CLAUSE .................................................................................... 698
X. E
MERGING CONSTITUTIONAL THOUGHT............................................................. 703
XI. C
ONCLUSION ..................................................................................................... 708
* Milton R. Underwood Professor of Law and Professor of History, Vanderbilt
University. I wish to thank David E. Bernstein, Jon W. Bruce, Robert Faulkner, Scott A.
Shepard, and Todd Zywicki for their insightful comments on earlier versions of this
paper. I am also grateful to Stephen Jordan and Jim Kelly of the Vanderbilt University
Law Library for their skill and patience in locating materials.

ELY.FINAL.DOC 10/14/2008 12:00:03 PM
674
It is well known that Americans of the founding era venerated the
rights of property owners. Property rights were closely linked with individual
liberty.
1
Clearly, one of the principal objectives of the Framers was to
enhance the security of private property.
2
Yet the historical relationship between property rights and free market
values is elusive and warrants careful exploration. How did the concept
of economic liberty impact the framing of the Constitution and Bill of
Rights? To what extent did the Framers embrace economic freedom and
embody this concept in the Constitution? These are not easy questions
to answer.
3
Not only is the historical record sparse, but it is unlikely that
the Framers as a group shared the same outlook.
4
Moreover, economic
liberty is a concept with different shades of meaning. Generalizations
must be approached with caution.
Despite these caveats, in this paper I will examine the growing support
for both the ideology and practice of economic liberty in the founding
era. By the late eighteenth century, Americans were increasingly challenging
British imperial governance, as well as long-accepted governmental
regulation of the economy. I argue that by the time of the Constitutional
Convention in 1787, the growing commitment to a market economy was
eclipsing the older mercantilist regime as the dominant paradigm in
political culture, and that this development in turn influenced the process
of constitution drafting.
I.
THE MERCANTILIST BACKGROUND
To appreciate the emergence of economic liberty, we should briefly
consider the legal and economic landscape of England in the sixteenth
1. JAMES W. ELY, JR., THE GUARDIAN OF EVERY OTHER RIGHT: A CONSTITUTIONAL
HISTORY OF PROPERTY RIGHTS 26–58 (3d ed. 2008); JOHN PHILLIP REID, CONSTITUTIONAL
HISTORY OF THE AMERICAN REVOLUTION: THE AUTHORITY OF RIGHTS 27–33 (2d ed.
1993); Walter Dellinger, The Indivisibility of Economic Rights and Personal Liberty,
2004 CATO SUP. CT. REV. 9, 19 (“Economic rights, property rights, and personal rights
have been joined, appropriately, since the time of the founding.”).
2. Stuart Bruchey, The Impact of Concern for the Security of Property Rights on
the Legal System of the Early American Republic, 1980 W
IS. L. REV. 1135, 1136
(“Perhaps the most important value of the Founding Fathers of the American
constitutional period was their belief in the necessity of securing property rights.”).
3. For a discussion of the link between the Constitution and capitalism, see
Bernard H. Siegan, One People As to Commercial Objects, in L
IBERTY, PROPERTY, AND
THE
FOUNDATIONS OF THE AMERICAN CONSTITUTION 101, 101–19 (Ellen Frankel Paul &
Howard Dickman eds., 1989).
4. See DANIEL A. FARBER & SUZANNA SHERRY, DESPERATELY SEEKING CERTAINTY:
THE MISGUIDED QUEST FOR CONSTITUTIONAL FOUNDATIONS 14–16 (2002) (discussing
difficulties in determining the intent of the Framers and pointing out that “the evidence
of the original intent will often be fragmentary, unreliable, and conflicting”).

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SAN DIEGO LAW REVIEW
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and seventeenth centuries.
5
Under the prevailing doctrine of mercantilism,
government played an active role in regulating commerce and stimulating
economic growth.
6
The objective of the mercantile system was to increase
national wealth by controlling the economy and securing a favorable
balance of trade.
7
Mercantilism encompassed a scheme of tariffs, subsidies,
grants of monopoly, and numerous regulations of private enterprise and
private bargaining.
8
The English colonists of the seventeenth century
brought with them the legal norms and assumptions of the mother country.
Although the economic conditions of North America were much
different than those of England, colonial lawmakers imitated the English
practice of marketplace regulation and promotion.
9
Moreover, as a practical
matter, the precarious existence of isolated North American Colonies in
the seventeenth century reinforced the perceived need for governmental
control of economic life.
A glance at the colonial statutes and ordinances of the seventeenth and
early eighteenth centuries demonstrates the pervasive concern of lawmakers
with economic regulation and protection of the supply of basic necessities.
Following the pattern in England, the colonists sought to regulate the
labor market. In addition to wage controls, there was comprehensive
legislation governing slaves, indentured servants, and apprentices. Likewise,
colonial lawmakers made repeated efforts to control the quality and price
of goods and services. For example, the price and weight of bread was
subject to widespread regulation throughout the Colonies.
10
Local
pricing regulations sometimes also covered meat and beer.
11
Grist mills
and ferryboats were treated as types of quasi-public enterprises, and tolls
for their services were set by law.
12
The fees of attorneys, as well as
licensing requirements to practice law, were similarly fixed, a reflection
5. For a discussion of mercantilism and economic policy in England, see
R
ICHARD B. MORRIS, GOVERNMENT AND LABOR IN EARLY AMERICA 1–54 (1946); JON C.
TEAFORD, THE MUNICIPAL REVOLUTION IN AMERICA 3–15 (1975).
6. MORRIS, supra note 5, at 1–2.
7. Id.
8. For a treatment of mercantilist ideas and actions, see LARS MAGNUSSON,
MERCANTILISM: THE SHAPING OF AN ECONOMIC LANGUAGE 1–173 (1994); D.C. Coleman,
Mercantilism Revisited, 23 HIST. J. 773, 773–91 (1980).
9. See infra notes 51–109 and accompanying text.
10. See infra notes 54–81 and accompanying text.
11. See infra notes 82–90 and accompanying text.
12. LAWRENCE M. FRIEDMAN, A HISTORY OF AMERICAN LAW 38 (3d ed. 2005);
Raymond E. Hayes, Business Regulation in Early Pennsylvania, 10 TEMP. L.Q. 155,
171–72 (1936).

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676
of popular animosity toward the legal profession.
13
Laws to license and
regulate peddlers were common.
14
From England, the colonists adopted
intensive regulation of tavern operations.
15
These laws required that
tavern keepers be licensed annually and fixed the charges for food, drink,
and lodging. Colonial legislators widely enacted usury laws patterned after
English rate ceilings to hold down the rate of interest in the hope of
encouraging trade and settlement.
16
Yet many Colonies set the limit
higher than the prevailing rate in England in an effort to encourage
investment from abroad.
17
Agriculture was also subject to legislative
oversight, particularly with respect to staple crops. Regulation of export
trade was designed to maintain the quality of commodities, and thus to
enhance the reputation of staple products from the Colonies in overseas
markets.
18
The Maryland and Virginia legislatures, for instance, imposed
controls on the production and sale of tobacco, and sought to halt the
export of unsound tobacco.
19
Pennsylvania enacted numerous laws
governing the export of wheat, flour, and meat.
20
Similarly, South
Carolina regulated shipments of indigo abroad.
21
This sketch of colonial
economic regulations is far from complete, but it does suggest a
commitment to mercantilist policies and a distrust of economic
liberty and open competition.
My focus is upon colonial market regulations, but it is important to
bear in mind that the colonial economy developed under the auspices of
the British imperial system. Mercantilist theory held that Colonies existed
primarily to benefit the mother country.
22
For much of the seventeenth
century, however, England largely ignored the fledgling North American
Colonies. This period of neglect changed following the Stuart Restoration.
23
Parliament imposed new controls designed to bind the Colonies more
13. CHARLES WARREN, A HISTORY OF THE AMERICAN BAR 41–42, 53, 112 (1911).
14. Hayes, supra note 12, at 169.
15. See infra note 32 and accompanying text.
16. James M. Ackerman, Interest Rates and the Law: A History of Usury, 1981
A
RIZ. ST. L.J. 61, 85.
17. Id.
18. FRIEDMAN, supra note 12, at 40–41 (discussing colonial efforts “to keep . . .
staple crops under some kind of quality control”); Hayes, supra note 12, at 161–62
(discussing export controls designed to maintain Pennsylvania’s reputation abroad).
19. F
RIEDMAN, supra note 12, at 40.
20. Hayes, supra note 12, at 159–62.
21. ELY, supra note 1, at 21.
22. KERMIT L. HALL & PETER KARSTEN, THE MAGIC MIRROR: LAW IN AMERICAN
HISTORY 43 (2d ed. 2009).
23. For the impact of the Restoration on the Colonies, see generally WESLEY
FRANK CRAVEN, THE COLONIES IN TRANSITION, 1660–1713, at 1–103 (1968).

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closely within the imperial framework.
24
The Navigation Acts sharply
curtailed freedom of trade by requiring that goods imported to the
Colonies must pass through England.
25
Because direct importation from
continental Europe was prohibited, the manufactured goods purchased
by the colonists were largely made in England. Further, most raw
materials exported from the Colonies could be shipped only to England.
26
Although these trade restrictions gave the Colonies privileged access to
the English market, they made the Colonies dependent on the mother
country for manufactured goods. Over time, the Navigation Acts shackled
colonial economic ambitions and engendered ill-feeling toward England.
27
One goal of the American Revolution was to overthrow these controls
on the colonial economy and achieve economic independence. “It was a
commercial restriction which caused the revolution,” the Pennsylvania
Supreme Court recalled in 1853, “and injuries to our trade which
produced the subsequent war against England . . . .”
28
On paper, at least, many facets of colonial economic life appear to
have been closely regulated. One would certainly be hard pressed to
picture colonial Americans as adherents of a strict laissez-faire philosophy.
Indeed, several scholars have suggested that colonial economic controls
anticipated later New Deal regulatory programs.
29
II.
THE RISE OF ENTREPRENEURIAL LIBERTY
How, then, can one maintain that the founding generation valued
economic liberty? Several factors point in this direction. We should
start by stressing the living law rather than focusing on a list of
legislative rules. There is room to doubt the efficacy of colonial
regulatory measures. Colonial governments were feeble institutions that
24. HALL & KARSTEN, supra note 22, at 18 (observing that “the restored Stuart
monarchy in England wished to knit the colonists more fully into the fabric of the
empire”).
25. O
LIVER M. DICKERSON, THE NAVIGATION ACTS AND THE AMERICAN REVOLUTION
7–9 (1951).
26. For the operation of the Navigation Acts, see DICKERSON, supra note 25, at 3–
30; C
RAVEN, supra note 23, at 33–37; Nuala Zahedieh, Making Mercantilism Work:
London Merchants and Atlantic Trade in the Seventeenth Century, 9 TRANSACTIONS
ROYAL HIST. SOCY (6th ser.) 143, 144 (1999).
27. ELY, supra note 1, at 18–19.
28. Sharpless v. Mayor of Phila., 21 Pa. 147, 170 (1853).
29. See FRIEDMAN, supra note 12, at 40 (suggesting that colonial regulation of
staple crops foreshadowed New Deal farm programs); Hayes, supra note 12, at 155
(tracing regulations of New Deal era to Pennsylvania colonial laws).

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Frequently Asked Questions (1)
Q1. What are the contributions in "Economic liberties and the original meaning of the constitution" ?

The economic values embraced by the Constitution and Bill of Rights are hotly contested this paper, and to what extent the Constitution simply neutral regarding economic issues.