VII.: Perils of the Market-place

We have already noticed that our law is not committed to any particular form of political institutions, but can work with any that will secure the essentials of justice and freedom. Nevertheless the form in which legal doctrine has been expressed from time to time has constantly been affected by prevailing political theories. In like manner our lady the Common Law is not a professed economist and has not (for example) any decided views about tariffs. At one time she was inclined to think that whatever a citizen’s duty about domestic revenue laws might be, it was rather a laudable feat than otherwise to evade foreign ones; but this opinion is no longer of authority, if it ever was. Yet she is not without certain ideas of economic justice which her servants have endeavoured to apply with such consistency as they might to the circumstances of different periods. Those ideas cannot be confined within the dogmatic lines of any particular school; they cannot be invoked in favour of any universal rule of economic policy. If it be asked whether the Common Law is on the side of individual enterprise or governmental interference, we can only answer, as we did to the wider political question whether it is individualist or socialist: Both and neither. There is no doubt that the manner in which the standing principles have been worked out has been largely modified by the doctrines in favour among economists and publicists for the time being, and accordingly the tendency of decisions has inclined one or another way with the fluctuations of theory. The oscillations have been less violent in case-law than in legislation, and they have followed expert opinion, or what was deemed to be such, rather than the voice of the multitude or of a party. For the men who make law, by judicial methods at any rate, are not mere men in the crowd; they rather belong to the educated class who mediate between the leaders of thought and the general public opinion that sooner or later follows them.

With regard to our lady’s most general principles in these matters, they may be put very shortly. The Common Law favours competition wherever free competition is practicable, but prefers regulation by public authority to restrictions imposed by any combination of private interests; and this, in either case, with a view to the common advantage and not on any assumption of absolute natural rights. Now we must be careful at the outset not to be misled into making familiar historical words bear a purely modern significance. Free competition is favoured in the law. That is true, but it did not originally mean unlimited competition between all men. The merchant and the tradesman of the Middle Ages had to be qualified persons. Before they could exercise their business they passed through a stage of apprenticeship; and when they became ‘free’ of their gild or craft, this freedom was the name (as almost always in medieval speech) of a privileged condition, as much earned by a special training as that of the learned professions at this day. The man who had thus made himself a full member of a craft or corporation had a positive right to exercise his calling or ‘lawful mystery’ without hindrance, and his neighbours were entitled on their part to the benefit of his skilled work. Our modern notion of letting every man try his chance, and trusting unchecked competition between all sorts of competent and incompetent persons to secure the public interest automatically, may have its virtues, but it is modern and not medieval. A ‘franchise’ conferring an exclusive right to some kind of local profit is, of course, quite familiar in our law; one example is the exclusive right to work a ferry. Such rights might or might not be seigniorial; feudalism, that much abused antiquarian servant of all work, will not explain them. The old Common Law made no objection to the self-government of the trades, nor, with one material reservation, to the number of one trade in any one place being limited. That reservation was that the privilege must not be abused so as to create a monopoly. For the medieval fathers of the law knew well enough the danger that lay that way; they knew too that in denouncing all forms of monopoly they were supported by a strong popular feeling. It was an unlearned local court, in 1299 or 1300, that fined several chandlers of Norwich for having made a covenant among themselves that none should sell a pound of candles cheaper than another. We need hardly add that presentments for breaking the assize of bread and ale and selling corrupt victual are the commonest items in both municipal and manorial records. Thus the whole system of medieval regulation hangs together. The craftsman has his rights which must be protected; it is also his duty to exercise them for the public good, and he may not disable himself from exercising them. Doubtless abundant mistakes were made in working out such a system, and some which now appear to us childish. Still it was in itself a consistent plan and by no means contemptible. It had to pass away with the condition of society for which it was made, but it left its mark in a continuing hatred of monopoly which has not lost its vigour in the latest jurisprudence and legislation of English-speaking countries; a vigour which, now as much as ever, needs to be guided by well advised judgment.

Accordingly, when monarchs in search of revenue took on themselves to grant monopolies, they found themselves in acute conflict with the people and with the lawyers; and our lady the Common Law showed, not for the first time, that she could and would maintain her ideals even against the King’s authority and whatever learning he could command among his counsellors. But the danger was not exhausted here. Private and local monopolies might be created by agreement; or, short of actual monopoly, capable workers might be tempted by the offers of rivals or successors to deprive the public of their services and unduly narrow the field of competition. From these considerations the whole chapter of the law against contracts in restraint of trade was developed. In the earlier decisions, and still more in dicta which have been carelessly quoted in modern books as if they had positive authority, we find an extreme jealousy of all undertakings by which a man purports to restrain himself in any degree from the exercise of his calling. It is not clear that this attitude was always unreasonable. But as time went on the old merely local conditions disappeared, the volume and scope of trade increased, and the range of business relations in space became practically unlimited. At last it was obvious that no man dealing on a large scale could safely acquire the good-will of a business unless he were protected from destructive competition at the hands of the seller himself; without adequate protection of that kind, indeed, there really would be nothing substantial, in many kinds of business, for the seller to offer, and he would find no buyers. Hence it became needful to recognize that restrictions which appeared extravagant in the sixteenth or eighteenth century might be no more than reasonable in the nineteenth; and here we may see one of our lady’s most remarkable successes. Without any aid of legislation, without express disapproval of a single received authority, the law as to agreements in restraint of trade has in our own time effected a change of front that has brought it completely into line with modern business conditions. It is true that the framers of the draft Civil Code of New York inserted on this subject provisions which were much too narrow even as authority stood fifty years ago, and this with an avowed reactionary intention. Yet these clauses were adopted by the legislature of British India some ten years later, it would seem by improvidence rather than perversity. Such are the drawbacks of unconsidered imitation.

If competition under equal conditions is to be free, then it follows that the consequences must be accepted. A man cannot complain if a more skilful or fortunate competitor diminishes his profit. Monopoly is exactly what the law will not give him. It is curious that our earliest classical authority on the necessary toleration of competition relates not to rival tradesmen but to rival schoolmasters who certainly would have joined in making short work of any unqualified intruder — a process not unknown, it is said, in modern politics. This legal result fitted quite naturally, when the time came, into the political and economic theories of individual freedom which dominated the latter half of the eighteenth and the former half of the nineteenth century. Then, as the extent and variety of trafficking increase, competition assumes more complex forms, and it becomes needful to determine the point at which competition ceases to be fair and must be regarded as fraudulent or oppressive. To enter on details here would be to undertake a purely technical exposition both foreign to the purpose of these lectures and useless in such a context. But it is obvious that in a frame of society which no longer limits competition the claim of the individual to be guaranteed against unfair competition becomes much stronger. Indeed, if we insisted on our institutions being or appearing logical (as happily we do not), the individual might say with some plausibility to the State: ‘You turn us all out to compete with one another, and say that if half of us are ruined the other half have only exercised their common right. You say the result is worth more to the community than it costs. Good: but why should the cost fall wholly on innocent unsuccessful competitors? If they suffer for the common good, why should not the community compensate them? Either go back to the old plan of limiting competition, or insure us as individuals against the consequences of your collective policy.’ Thus the Nemesis of unchecked individualism would lead to something which I suppose would be not improperly described as a form of State Socialism. There is one answer, to be sure, which is decisive if accepted; namely, that these matters do not concern the State at all. It was a fashionable answer during the second and third quarters of the nineteenth century. Whatever may be the ultimate fate of the doctrines it sprang from (whose rise and decline in their influence on British legislation have been admirably set forth by my friend Professor Dicey), I do not think this is such an answer as our lady the Common Law has ever committed herself to, or indeed very well could. But I must avoid the danger of putting an unlicensed sickle into the harvest of political as distinct from legal science.

It may be worth while to notice how the doctrine of free competition has overflowed, so to speak, into the law of property. We have now held for about half a century that an occupier of land who uses it in any ordinary way is not liable, apart from claims founded on some definite special title, for any damage resulting to his neighbour. He is not bound to provide against any such result even if it is apparently probable. On the other hand, if he creates a hazardous state of things by doing anything unusual, he may fall (though not to the same extent in all jurisdictions) into the clutches of a very stringent rule which recalls the most archaic law of trespass, excluding all or almost all questions of intention and negligence. This is a survival from the ancient Germanic principle that a man is liable without any qualification for the consequences of his voluntary acts. Where we have an original rule of this absolute kind, it is natural that the exceptions, also, when exceptions come to be recognized, should be absolute as far as they go. Thus a conception of responsibility which may be called in a relative sense primitive seems to have combined with the modern and expansive notion of individual freedom to produce a set of rules whose extremely sharp contrasts must be a cause of no little surprise to any intelligent foreign critic. On one side of a more or less conventional line I may do as I please without taking any care at all not to damage adjacent owners; on the other side I act at my peril, whatever amount of caution I may have used, or at best, according to the milder opinion held by several American courts, unless I can show that no practicable caution has been wanting. Apart from rules of this kind, it is generally true that our law of property is individualist as between the owner and the State. The Common Law makes no provision for anything like eminent domain. The king may enter on a subject’s land, in time of war within the realm, for reasons of military necessity, but by way of excusable temporary intrusion, not of acquisition. He cannot compel any subject to sell him one square foot of land to improve a highway, still less grant any power of that sort to a corporation. Whatever is done in this kind nowadays (how much is done, and how helpless modern enterprise would be without it, we need not stop to mention) is done under statutory powers. The trend of all recent legislation is to magnify the office of the State in these matters. We may perhaps regret that the Common Law had no means of meeting legislation halfway: the results might have been more harmonious.

So far we have seen the law building on a foundation of common sense, medieval common sense, and yet fairly capable of adjustment to ours. But there ran along with this an assumption that wrought much mischief, and whose ghost has not ceased from troubling us, namely, that there is something intrinsically wicked in all concerted endeavour to raise the price of anything, and in particular of labour. Hence the long and lamentable history of judicial and parliamentary warfare against the persistent efforts of workmen, from the time when the medieval structure of society broke up, to devise organized methods of self-defense. A series of penal enactments from the Statute of Labourers to the latest anti-combination Acts enslaved the Common Law to a policy of mere repression. We were saddled with a confused and obscure doctrine of criminal conspiracy, and with a controversy not yet extinct as to the possibility of conspiracy being in itself a cause of civil action apart from any ulterior object which can be definitely called unlawful. It would be hard to find any adventure in which our lady the Common Law was worse served, or from which she came out, if she has finally come out, with less worship. Not that I think it a hopeless task to extract an acceptable opinion, so far as the common law part of the problem goes, from the seeming chaos of the books, or to show that this opinion is the better supported as well as the better in itself. On this, however, which is a matter of somewhat refined argument, I have said elsewhere what I could say. Whatever view may be taken of the technical points, there is no doubt that the law was dominated by class legislation in these matters, has paid dearly for it, and is now paying in a crude reaction. In England the last instalment of the price has been the Trade Disputes Act of 1906, a barefaced piece of retaliation which remedies some old grievances and some real or supposed new ones, not by constructing a just and comprehensive scheme on rational lines, but by creating fresh partial anomalies in the narrowest spirit of class hostility and with no regard to legal and very little to natural justice.

Another doubtful adventure of our lady the Common Law in the field of social economics has been in the theory for which our professional catchword in England is ‘common employment.’ Here you call it, I think more aptly, the fellow-servant doctrine. It is a very modern exception, grafted, as late as the second quarter of the nineteenth century, on the rule of an employer’s liability for the acts of his servants and agents in the course of their employment. The principal rule itself is not ancient in any general form; it was established, apparently not before the Restoration, by gradual extension from particular cases, and no record of any deliberate exposition has come down to us. When workmen and subaltern employees plucked up courage to bring actions against their masters, orthodox political economy was already in the ascendant, and those judges who had minds above mere empirical routine had one leading idea, that all would be well in the best of possible competitive worlds if one could only reduce all human relations to contract. I do not mean that they proposed to apply the same system to marriage, divorce and other domestic relations; English matrimonial jurisdiction, it will be remembered, was still in the hands of the spiritual courts. The question, therefore, which they asked without a thought of any other being admissible, was the seemingly straightforward one: What were the terms of the contract between the parties? Equity, no doubt, had pursued a different method in times past, but those, in the eyes of the philosophic reformers of 1832, were the dark uneconomic ages; and moreover it was still a pretty fixed assumption of every good common law practitioner that, when he found in equity reports anything he could not quite understand, the equity lawyer must be talking nonsense. Thus, when the workman or small clerk suffered by the negligence of a fellow-workman or a defect in the employer’s plant, the judges did not search for an applicable principle of the Common Law, but relied on a short cut of infallible economic dogma. They retorted: Show us the term of your contract by which your master undertook to compensate you. This he could not do; but still he had a reply. Show me, he said in effect, the term by which I have undertaken to waive the common right of holding a master to answer for his servant’s negligence. But the Court, having gone so far, did not stick at the further step of implying as against the workman a term which was not there. That risk, they said, must have been counted in fixing your wages. It was not a convincing reply to the workman: it hardly seems convincing to the majority of thoughtful lawyers at this day. Such as it was, it dominated English jurisprudence for a generation, and is still of authority so far as not displaced by statute. Now I am not speaking here of England alone. In fact, our first leading case did not raise the question squarely. It was a Massachusetts case in which, within a few years, Chief Justice Shaw fairly took it in hand, and laid down the ‘fellow-servant doctrine’ in one of his most able judgments. I do not think the later authorities (including the decisions by which the House of Lords forced the doctrine on Scotland in its full extent) go much beyond repeating his reasons with variations. This doctrine, I humbly conceive, has been one of the great mistakes of the Common Law. Starting to handle the problem on the ground of contract and of contract alone, our Victorian lawyers found no real agreement at all on the point in dispute, and stultified their own initial assumption by inventing one. It is a sad example of the wrong way to use fiction. And yet this was the same generation of judges who introduced the brilliant, eminently just and wholly successful fiction that a professed agent warrants his authority. Being once established, the perverse doctrine was worked out with relentless logical ability, for the most part in the Court of Exchequer, a court which in our fathers’ time had great qualities and the defects of those qualities. Even of late years the results have been seen in a few cases of this class where for some inscrutable reason plaintiffs have chosen to risk an action at common law. No plain man would say that an actor’s employment has much in common with a scene-shifter’s. It is not an actor’s business to understand the stage machinery; he has no right to interfere in handling it, and would be neglecting his own duties if he attempted to observe how the work was being done. Nevertheless it is held that if a scene-shifter in the flies drops a heavy object on the actor’s head, they are fellow-servants of the manager in a common employment, and the actor cannot recover.

A rule so manifestly one-sided and so remote from ordinary notions of justice could not stand unamended. It is hardly worth while at this day to consider whether some less extensive doctrine on similar lines might have been tolerable. For example, it might have been held that the employer (having used due diligence in finding competent workmen) should not be liable to one workman for the negligence of others employed along with him in the same operation and in a grade not above his own. What was in fact held was that the rule of liability for servants’ negligence exists only for the protection of the outside public, and has nothing to do with what goes on inside the employer’s undertaking, however various its branches and how many soever the degrees of authority and responsibility may be. The case-law of several American states has, I believe, more or less qualified the doctrine in the direction above suggested; I do not know whether such modifications have anywhere been accepted as adequate. On the whole the Common Law had come to a deadlock, and about thirty years ago the period of remedial legislation set in. As usual, the first experiment was empirical and clumsy. Nothing could be much worse in point of form than our Employers’ Liability Act of 1880, which mitigated an anomalous rule by creating an involved series of exceptions and sub-exceptions, further complicated by minute novelties in procedure. However, it was better than nothing, and has, I believe, been rather widely imitated. All this does not touch the real economic problem. From the business point of view it is not a question of individual wrongs, but of insurance on a large scale. If the fellow-servant doctrine had never been invented, employers would have accepted the risk and, when it became considerable, insured against it. The mere lawyer must be excused from determining in what proportions the insurance would ultimately rest on the employer, or fall on the workman in the shape of diminished wages, or on the consumer of the product (anything from an Atlantic liner to an opera) in the shape of enhanced prices. Even so, however, there would remain the difficulty that there is no cause of legal action without proof of negligence somewhere, and that such proof is often troublesome and precarious. In 1897 our Parliament, inspired by Joseph Chamberlain, took the bold course of removing the whole matter out of the litigious region where the first necessary step is to find some person in default. Our Workmen’s Compensation Act makes the employer an insurer not against negligence as such, but against accidents, and leaves him to insure over. This, to go back for a moment upon a question already put, may for anything I know be socialism. Certainly some people take pleasure in calling it so: which, in my poor judgment, makes it neither better nor worse. With or without this or any other classifying label, it deserves the credit of being a courageous endeavour to get behind the technical categories and attack the problem in its real center. In point of form the Act is not a satisfactory piece of work. The use of semi-popular language resembling terms already known to the law but not identical with them has led, as it always does, to tedious and inconclusive controversies on points of construction, in which the real dispute is nine times out of ten on the minute interpretation of the facts. One may hope that this fault, and others which I cannot stop to explain here, may be avoided in other jurisdictions.

We have seen by these examples that the Common Law has passed or is passing through at least three distinct stages of economic assumption in its dealings with industrial affairs and the relations of capital and labour. There was the medieval stage in which every man was supposed to have his proper state of life, and the law had to see that he was kept in it. We cannot fix a point of time when this conception of social welfare ceased to be officially accepted. Official and judicial opinion are rather apt to lag behind the general movement of ideas, but they do move, and older and younger colleagues are not likely to move at the same pace: just as, in dating a manuscript, one has to remember that an ancient scribe may be writing the hand of the last generation at the same time that a young one is eager to display the very newest graces of penmanship. We shall not be far wrong in placing the period of transition between the beginning of the nineteenth century and the reforms of 1832. Next came the reign of utilitarian individualism, under which unlimited competition was to be the universal regulator, and it was thought that the State ought not to hinder this beneficent operation of human nature and could do nothing to help it beyond removing artificial obstacles. In the faith of that doctrine our fathers (I mean the fathers of men now growing old) lived through their active years, and their sons were brought up in its atmosphere. It prevailed for approximately half a century. Then, well within the memory of men not much past the prime of life, it became a tolerated, indeed a probable or plausible, opinion, that the State was abdicating its functions by remaining passive, and should not only leave the road open for ability, but give active assistance in suppressing unfavourable external conditions and equalizing opportunities. The present generation is full of this spirit, and its power seems likely to increase for some time yet. It is not for me to discuss the merits of these different ideals or to point out the perversions and excesses incident to each of them. What we have to note is that in a community pervaded by any of them the law runs no small danger of accepting the current opinion without any critical examination and importing it into judgments that ought to be purely legal. I do not know why lawyers should be readier than other men to take persons holding themselves out as experts at their own valuation, but so it is that they are generally credulous in matters outside their own art, except when they are cross-examining a hostile expert witness; and our lady the Common Law pays for it sooner or later. The conclusion is that judges ought to be very careful about committing themselves to fashionable economic theories: first because they are quite likely to misunderstand or misapply such theories, secondly because the theory may well be discredited after a short time, and thirdly because, when mistakes in this kind are once made, they are pretty sure to call for legislation, and the legislative amendment is almost sure to be unsatisfactory.

We have been speaking of particular failures in the face of social and industrial conflicts, doing our best neither to exaggerate nor to extenuate. It would be disloyal to our lady if we left off on this note without saying a word of her success in keeping her more general methods up to the mark of business requirements. We are so familiar with our learning of Agency, now a common learning in all essentials, that we seldom stop to think how much we owe to its rapid, comprehensive, and elastic development in the course of the past century. Beginning with very simple principles, it has grown to be capable of dealing with the most intricate commercial relations and finding solutions acceptable to men of business as just, and to lawyers as workman-like and scientific. It has enabled us to build up a full and elaborate law of corporations and reserve the thorny speculative problem of corporate personality to be discussed in such learned leisure as we may command, without any fear of unsettling practical foundations. Combined with the equitable doctrine of notice, it has allowed us to enforce the highest standard of honesty and diligence in dealings with every kind of property. If the law has sometimes erred in refinement, it is a fault on the better side. Another weapon of great power is in our lady’s hand for maintaining good faith in all kinds of business, the doctrine of Estoppel, a subtle and far-reaching weapon not to be wielded without skill and judgment, but such is the virtue of all arms of precision. We may safely challenge any other system to show principles of like generality better fitted to advance justice, capable of nicer discrimination in doubtful affairs, or applied with more scientific elegance. A man who has mastered these two branches of our jurisprudence, Agency and Estoppel, may not always, in a complex piece of business, give that opinion which finally prevails in court, but he will surely give one that has to be treated with respect. Equipped with such arms, our lady the Common Law may take to herself the praise of the lover in the Song of Songs. Her justice is fair as the moon, clear as the sun and terrible as an army with banners.