Law and Economics from an Evolutionary Perspective

Law and Economics from an Evolutionary Perspective

New Horizons in Institutional and Evolutionary Economics series

Glen Atkinson and Stephen P. Paschall

Law and economics are interdependent. Using a historical case analysis approach, this book demonstrates how the legal process relates to and is affected by economic circumstances. Glen Atkinson and Stephen P. Paschall examine this co-evolution in the context of the economic development that occurred in the nineteenth and early twentieth centuries as well as the impact of the law on that development. Specifically, the authors explore the development of a national market, the transformation of the corporation, and the conflict between state and federal control over businesses. Their focus on dynamic, integrated systems presents an alternative to mainstream law and economics.

Chapter 4: Interstate commerce and state regulation of business

Glen Atkinson and Stephen P. Paschall

Subjects: economics and finance, economic psychology, evolutionary economics, law and economics, law - academic, law and economics

Extract

The US Constitution, having been developed out of a failed national-state government relationship under the Articles of Confederation, granted enumerated powers to the new national government. Among those powers was the power under the Commerce Clause to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes” (US Const. art. I, §8). Charles A. Beard assessed that the driving force behind this federal power over commerce was the need to protect domestic producers from competition by imports. That innumerable manufacturing, shipping, trading, and commercial interests did, however, look upon the adoption of the Constitution as the sure guarantee that protection could be procured against foreign competition is fully evidenced in the memorials laid before Congress in April, May, and June, 1789, asking for the immediate enactment of discriminatory tariff laws. (Beard [1913] 1986, pp. 41–2) The implications for interstate commerce within the boundaries of the United States were not of such immediate interest. Forty-five years after the adoption of the Constitution, initial interpretation of this power as it applied to the powers of the states to regulate commerce was decided by the Supreme Court under John Marshall’s leadership. John Marshall, a Federalist, sought to project the authority of the national government (Burns 2009, p. 37). As was the case with the relationship between a state and its corporations, the parameters of the Commerce Clause were decided during the first quarter of the nineteenth century. In a period where the expansion of business and widening of the market beyond localities to interstate markets was only beginning, the implications of the Commerce Clause for regulation of business were largely unexplored.

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