Review 3: Limited Government, Individual Liberty and the Rule of Law, edited by Norman Barry (1998)

Allister Heath,
Hertford College, Oxford University,
Journal of The Institute of Economic Affairs, Vol. 19, No. 2 (June 1999)

This remarkable book is an essential read for the specialist, as well as the general reader who wants a really clear account of the law and economics of a free society. Arthur Shenfield died in 1990 at the age of 81, and although he was an extremely prolific interdisciplinary scholar and a key participant in the revival of classical liberal ideas in Britain and America, he is nothing like well enough known outside the cognoscenti. This beautifully produced edition must surely go a long way towards achieving the recognition which is so much his due.

The book starts with an introductory biography by Charles Rowley. Next comes an excellent review essay by Norman Barry which, like the rest of the book, is in itself a model of clarity. What follows is a selection of Shenfield's publications from the 1970s and 1980s, organised under give sections: 'Law, Economy and the State,' 'The Meaning of the Market,' 'Socialism: the Fatal Conceit,' 'Trade Unions: above the law,' and 'The Spirit of Capitalism.'

Arthur Shenfield is a radical free-marketeer, and the ideas he develops all address fundamental contemporary policy issues, although some of the essays were written 25 years ago. He opposes child labour laws as running counter to the best long-term interests of children and their parents: 'such laws in the early days of the Industrial Revolution would have deepened the poverty and shortened the lives of the children ... delayed the economic development which enabled parents ... to take their children out of employment, laws or no laws' (p. 51). He rejects compulsory state schooling: 'is compulsion then consistent with equality before the law? The answer is surely no' (p. 51). He is strongly in favor of freedom of association and contract and has no time for affirmative action, believing that discrimination on any grounds whatsoever is a fundamental legal right. Although it is not necessarily moral 'discrimination in personal or business relations for racial or cultural reasons may be contemptible or cruel ... it is a fundamental right in a society living under the rule of law."

Shenfield also rejects the legal privileges of trade unions which have characterised industrial relations this century. He believes in the sanctity of contract between the employer and the employee. There is therefore no overriding right to strike or to belong to a union, unless contractually agreed upon. Contract-breaking by either side is subject to damages.

Even the intellectual offensive led by Rothbard against the very legitimacy of the state, generally regarded as unworthy of discussion, is welcomed by Shenfield, although he ultimately rejects the idea, preferring limited government.

A recurring theme in Arthur Shenfield's work is the importance of the rule of law, which relates directly to his economics. The section on Hayek is a wonderfully clear and concise introduction to the great economist's work, and would be particularly useful for those who have not yet had the courage to plunge directly into his magnum opus. In fact Shenfield can be seen very much as a Hayekian: his view of the market as a process and his analysis of competition is thoroughly Austrian. He also uses the Mises-Hayek critique of central planning, which demonstrates the impossibility of economic calculation and the existence of an intractable knowledge problem in a socialist economy, to criticise government intervention in the economy.

Shenfield does not shy away from defending the ethics of capitalism. The free market is not only efficient, it is also moral. It is the voluntary nature of the free market and the institutions of civil society such as the family, charities and friendly societies which Shenfield believes to be so important.

These views, combined with an emphasis on the possibility of government failure, eventually led Shenfield to what was one of his most interesting ideas: a total rejection of anti-trust laws. He defends product differentiation as a vehicle for technological progress. He embraces administered prices due to the inherent flexbility of the price of manufactured goods. He defends Rockefeller, basing his case on McGee;s 1958 paper in the Journal of Law and Economics, which claimed that the Standard Oil company did not engage in predatory price-cutting. His absolute rejection of the traditional structure-conduct-performance paradigm, on which most research in the economics of industry was based until the 1970s, culminates in his support of Resale Price Maintenance and his rejection of US and European anti-trust laws.

Arthur Shenfield's stimulating views on competition law alone are enough to make this book an indispensable read.