part of the subject matter relative thereto belongs to the allied studies of economics and sociology. A short consideration of some of the accompanying results upon the operation of government will be given in order to illustrate conflicting theories as to the purpose and functions of government.

REGULATION OF BUSINESS AND COMMERCIAL INTERESTS

Laissez-faire Theory and Regulation.-According to the theories and principles of the individualists, business and economic interests were to be regulated as little as possible. It was assumed that the economic struggle for existence would result in the survival of the fit and that this process would bring about the advancement of the public interests. The function of the state was to be limited to the protection of life and property and there was to be no interference between employer and employee or between buyer and seller, except to prevent fraud or monopoly.

The economists, such as Malthus and Ricardo, defended the rights of the mill owners and upheld the doctrine that there should be "no interference of the legislature with freedom of trade, or with the perfect liberty of every individual to dispose of his time and his labor in the way and on the terms which he may judge conducive to his interests." The investigation of the conditions in factories and workshops in England during the early nineteenth century disillusioned some of the individualists and marked the beginning of a series of laws and regulations affecting labor and industry.

The individualist, or laissez-faire, theory had, in many respects, its greatest development in the United States where the sparsity of population, the immense stretches of free land, and the wealth of natural resources rendered it possible for individuals of sufficient energy and physical vigor to make their way without aid from the govern

ment or the need of social control. The pioneer conditions of the United States furnished a fruitful field for the operation of the laissez-faire theory. The governments of state and nation were formed at a time when the individualistic theory was dominant. "Following out the principle of limiting the government as much as possible, there were many restrictions on its action in the state constitutions. In long and eloquent bills of rights notice was served on government not to trespass on certain fields of individual activity." It was this view that led to the insertion of the phrases in constitutions to the effect that private property shall not be taken except for just compensation, and shall not be interfered with except by due process of law, and that the obligation of contracts shall not be impaired. And the protection to property and contracts extended by the guardianship of the courts has resulted in the condition to which President Hadley refers in the dictum that:

The general status of the property owner under the law cannot be changed by the action of the legislature or the executive or the people of the state voting at the polls, or all three put together. . . . The fundamental division of powers in the Constitution of the United States is between the voters on the one hand and property owners on the other, Forces of democracy on one side, divided between the executive and the legislative, are set over against the forces of property on the other side, with the judiciary between them.1

In fact, it was the desire to protect property and contracts, and at the same time to preserve a sphere of individual liberty, that served to strengthen and extend the principle that courts should become the guardians of constitutions and that one of their functions should be that of defining and restricting the limits of legislative authority. The developing doctrine of judicial supremacy became the

A. T. Hadley, "The Constitutional Position of Property in America," The Independent, April 16, 1908; see also Elihu Root, Addresses on Government and Citizenship, p. 539.

mainstay of the supporters of individualism who were known as the defenders of civil liberty.1

It was the same doctrines which gave free reign to individuals and corporations to develop the vast resources of America, and often to prey unhampered upon human weaknesses and ignorance; and it was the same doctrines which led the courts to restrict labor legislation on the ground that it was an interference with the liberty of contract and that it was humiliating and degrading to the laborer to interfere with his right to contract for such wages and hours as he desired. Theories of individualism and laissez-faire retarded for a long time the progress of labor legislation and made it extremely difficult to regulate business and commercial dealings.

Regulation by States. The regulation of business and commercial interests in the American states, in addition to the control exercised over public utilities, has been extended through (a) the granting of charters of incorporation; (b) special supervision over such matters as banking and insurance; and (c) efforts to maintain fair conditions of trade and competition. The granting of charters, which was formerly done by special legislative acts, was later provided for by general laws, the terms of which could be applied and charters granted by the Secretary of State or some other state officer. It was customary to encourage the formation of corporations, to require few conditions, and to grant charters for long terms of years, or in perpetuity. A fee or tax was usually charged and certain states, by a very liberal policy in granting charters, raised a considerable part of state revenue in this way. A charter granted in one state rendered it possible to do business in other states by compliance with certain conditions laid down for foreign corporations.

1 See Francis Lieber, Civil Liberty and Self-Government, and a more recent interpretation of the same view by John W. Burgess, Political Science and Constitutional Law (Ginn & Co., 1902).

2Cf. J. T. Young, The New American Government and Its Work (The Macmillan Company, 1915), p. 342.

Though corporation charters might be annulled by a quo warranto proceeding for an abuse of corporate powers, the process was judicial in nature, was difficult of application, and was rarely used by state authorities. By constitutional enactments and recent laws, however, more stringent requirements have been formulated, particularly with respect to long-term charters and other special privileges frequently accorded to incorporators. A check has also been placed upon the formation of companies to sell bonds, stocks, or other securities by the enactment of so-called "Blue Sky Laws," which are designed to prohibit the granting of permits to do business within the state without authorization from some state officer, and definite assurance that the company aims to do a fair and reputable business.

Banking and insurance have been regarded as semipublic in character, and around these enterprises special safeguards have been placed for the protection of the public. Companies doing business of this character are now subjected to inspection and control by a state commission or commissioner whose duty it is to see that the laws of the state are enforced and by frequent inspection and rigid supervision to place a check upon mismanagement which might mean a loss to the public. Regulation of banking has been extended to require the setting aside of a guaranty fund to reimburse depositors in case of bank failures.

In addition to the ordinary regulations regarding the granting of charters efforts have been made in many states to prevent monopolies and to prohibit unfair competition. Statutory provisions have had a twofold object; first, to protect business men from competitive practices harmful to them; second, to protect the public from dishonest or fraudulent dealings.1

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In the ensuing pages some short extracts are used from an article by Charles Grove Haines on 'Efforts to Define Unfair Competition," Yale Law Journal, vol. xxix, pp. 1 ff.

Antitrust laws in the various states attempt to cover a multitude of alleged business wrongs. Chief among these classes of enactments are the prohibition of monopolies and pooling, of agreements or conspiracies in restraint of trade, and of restraint of competition as distinct from restraint of trade such as price control, increasing prices, fixing a standard price or local price discriminations, limitation of output, division of territory or restraint on resales. Though monopolies and agreements in restraint of trade involve the principle of unfair competition, it has seemed necessary to enact special laws to provide that there may be "reasonable competition," and to uphold the doctrine of "free and fair competition," as an inherent right of the people.

It is difficult to summarize the laws relating to unfair competition. The prohibition of unfair competition is usually combined with the prohibition of combinations and agreements in restraint of trade. Recently, the statutes have dealt more fully and specifically with such unfair practices as are coming to be designated unfair competition. As a result of the experience of the last thirty years almost every state now has statutory provisions covering monopolies or restraint of trade or unfair discrimination, and in a majority of the states an effort is made to cover all three of these types of misdemeanors. There is a tendency to declare illegal all combinations to restrain trade, to limit production, to fix prices, or to prevent competition. Usually a penalty is imposed for a violation of the statute and not infrequently the AttorneyGeneral is charged with the enforcement of the law by criminal prosecution or by quo warranto proceedings or by both remedies against offending combinations.

Regulation by Federal Government.—The first significant efforts on the part of the Federal government to regulate business were made in the enactment of the Interstate Commerce Act of 1887 and the Sherman Anti-trust Act of 1890. The nature of the former act has been previously described with the gradual extension of federal control