Capitalism in America: Lochner v. New York (1905) and the Right to Contract

When one thinks of their constitutional liberties, rights such as the freedom of speech, of the press, of assembly, of religion, and to bear arms often come to mind. Those familiar with criminal rights may think of one’s protection from illegal search and seizure and one’s right to counsel, among others. It is a rare occurrence, however, that one thinks about the constitutional liberties that exist (or, at least, were once said to have existed) in the economic sphere of one’s life. The right to contract, for example, as outlined in the almost singular case of Lochner v. New York (1905), exists only on the long-forgotten peripheries of Supreme Court jurisprudence. It exists, nevertheless, and it should be remembered as one of the Supreme Court’s most auspicious stances for individual liberty.

One of the reasons the right to contract is often overlooked is that contracts are only mentioned twice throughout the whole Constitution, and property is mentioned only once. Besides the mention in Article VI, Clause 1 of the contractual obligation that the new Congress had in paying the debts from the government under the Articles of Confederation, the only other statement that the Constitution makes on contracts is in Article I, Section 10. Clause 1 of that section forbids the states from passing any legislation “impairing the Obligation of Contracts.” While this did not originally preclude the states from regulating the terms of private contracts before they were agreed upon and signed, this clause was designed to prevent state legislatures from freeing one party or another from their pre-existing, contractual obligations (Kens, 1998, p. 96). This way, no party with political clout could use the legislatures to alter the terms of an existing contract to be more favorable to them and detrimental to the other party or parties. Though, in the antebellum version of American federalism, it was still quite possible for those with political clout to receive special treatment to influence the pre-contractual stage to favor themselves rather than other parties – such was the slow development of the 9th Amendment and individual rights at the federal level and the absence of 9th Amendment protections at the state level. Regulations such as these, however, were uncommon and, when they did exist, were often of little importance to the vast majority of the American public.

When it comes to property rights, the original Constitution only speaks of property in Article IV, Section 3, Clause 2 in which Congress is given legislative authority over all federal territory and property. Property rights, however, are implied in Clause 3 of the preceding section which declares all persons bound “to Service or Labour,” meaning slaves who were considered property at the time, must be returned to their masters if they fled into free states – this is certainly an unfortunate contradiction in the philosophy of our Founders, but if I am to point to where “property” rights exist in the original Constitution, that would be the clause. It is not until the Fourth and Fifth Amendments were property rights expanded. The Fourth Amendment guarantees protection from unreasonable searches and seizures of oneself and one’s property by the federal government, and the Fifth Amendment ensures that no man “be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” When the Fourteenth Amendment incorporated equal protection and due process to the states, the previously ill-defined, Fifth Amendment concept of “due process” came under strict scrutiny so that a workable meaning could be discovered along with exactly what “due process” means for civil liberties and governmental authority.

Prior to Lochner, “due process” appeared to be merely a procedural matter. According to Peter Hoffer, Ph.D. History, “due process of law” essentially meant the traditional manner of settling disputes under English Common Law, meaning through the courts or through legal acts of a legislature (2011). The former, from the earliest stages of an investigation through the sentencing and penalization, is best exemplified by Amendments IV, V, and VI to the U.S. Constitution. These addendums to the Constitution explain how the federal government may go about denying someone of their rights lawfully, and they were effectively incorporated to the states through Amendment XIV (albeit, through many decades of court cases).

However, as mentioned, the court system is not the only way in which the government can lawfully deprive an individual of his life, liberty, or property under this kind of procedural due process. Article IV, Section 4 mandates that each state must practice a republican form of government, so acts of the legislature, provided they fall within the prescribed constitutional limitations of the powers allotted to the individual state legislatures, are an example of procedural due process (each state, therefore, could effectively determine for itself the latitude of power that it grants its own government). Noting the existing limitations on each state legislature in the original Constitution, Amendment XIV restricted the range of the state legislatures’ authority to act through the Privileges and Immunities Clause and the Equal Protection Clause. By making federal citizenship superior to state citizenship and by requiring that states apply legislation equally and not discriminate against one person or group of persons (the misguided fifty-eight-year rule of Plessy notwithstanding), the number of avenues for violating rights through this interpretation of procedural due process lessened substantially.

Nevertheless, this does not explain where the right to contract comes from in American jurisprudence. Both the legislatures and the courts could, under antebellum procedural due process, set specific conditions on contracts before they are agreed upon provided that doing so did not violate the constitutional limitations set upon both. Instead, the origins of this right lie in the concept of substantive due process, but before it can be examined, the facts of the case in addition to the historical and ideological context around which it was ruled should be examined.

The right to contract, having been discovered outside of the classical liberalism which formed our Constitution, is actually product of the consistent application of laissez faire economic theory. (I say discovered because rights are a product of reality, not human invention – we develop philosophy to understand our rights and their ultimate origin, man’s life, but not to create them from thin air.) Though they stem from a similar philosophical line, classical liberalism and laissez faire are actually different in several ways. Firstly, classical liberalism allows situations in which the “common good” can supersede individual self-interest, as evidenced by promotions of the “common good” by Hamilton, Jay, and Madison in The Federalist Papers. What is viewed as a sort of “republican responsibility” can be used to justify legislation which assists those who are considered generally disadvantaged – the poor, the working class, children, etc. Ultimately, this demonstrates the classical balancing act (not to mention false dichotomy and equivocation) between liberty and equality – how much individual liberty should be allowed, and how much socioeconomic equality should be sought by the government (Marietta, 2011). To the classical liberals, there were some liberties that could not be infringed upon (such as those listed as generally being on the forefront of people’s minds), but this did not preclude the possibility that there are some liberties which man would have on the proverbial desert island that he gives up when he enters into a society (the possibility is, in reality, nonexistent because man does not become less of a man simply because he enters into a group of other men, and so too do his rights not diminish).

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” – Adam Smith

Outside of the social contract theories of Rousseau and Montesquieu, however, developed the ideas of a Scottish economist known as Adam Smith. Smith’s famous work The Wealth of Nations outlines the framework of a capitalist system of economic theory. Built on the idea that man has a fundamental right to his life, his labor, his liberty, and his property, Smith’s theory holds that the market is most effective when it is unrestricted and all of those rights are respected. A violation of any of those rights, Smith holds, interrupts the self-regulation of the market, produces inefficiency, and slows or even halts progress.

First published in 1776 just a few months before the signing of the Declaration of Independence, Smith’s theories were certainly not unknown to the Framers of the Constitution, but this does not necessarily imply that they were quite as influential to the Framers as they were during the latter half of the 19th Century. In fact, judging by the ideas implicit within procedural due process, it seems that laissez faire was not the perspective from which the Founders wrote, at least not on the state level. For example, while the federal government’s power over interstate commerce was meant to encourage uninhibited commerce between the states (a sort of application of laissez faire principles on the federal level), the states had all constitutional authority under Amendment X to regulate in the manner of classically liberal theory (Kens, 1998, p. 96). With the rise of laissez faire in post-Civil War America, ideas such as the right to contract began to gain traction in intellectual, legal, and political circles.

Additionally, new discoveries in biology coupled with the burgeoning field of sociology influenced the intellectual and political culture of the United States even further. When Darwin published his groundbreaking work The Origin of Species in 1859, the field of biological science was forever changed. The idea of natural selection, the mechanism which determines which traits are passed on from one generation to the next, revolutionized the scientists’ understanding of the world. Unfortunately, the theory was misunderstood and misapplied by social theorists as a means of justifying the inequality which they (erroneously) blamed on a laissez faire system.

The theory known as Social Darwinism takes the idea of natural selection and applies it to socioeconomic relations between human beings. In biological terms, natural selection merely relates to how some traits assist organisms more than others, both in terms of survival and in reproduction. Organisms that are the most successful at surviving and reproducing are consequently more likely to pass along their physical traits to the next generation of offspring. Proponents of Social Darwinism modified the theory in a way that essentially claims that the rich are simply naturally predisposed to being rich, and the poor are naturally predisposed to being poor. It purports a sort of elitism, a kind of socioeconomic predestination, and alters the original arguments of laissez faire (which are those of individual rights and economic efficiency) to become arguments of (misunderstood) biological science. Not only that, but Social Darwinian theory represented the principles of laissez faire so poorly that it went so far as to breed cynicism, a sort of hatred and mistrust for the poor on the grounds that they are only bringing the successful classes down (Kens, 1998, p. 78).

Nevertheless, these theories were deeply popular throughout the middle and late 19th Century. They were deeply engrained in America’s political culture such that they largely influenced the government policies of that era. What is generally known as the “Gilded Age” (though, as proffered by philosopher Andrew Bernstein, I too prefer the term the “Inventive Period”) was one in which the government stepped back from economic affairs (and, unfortunately, civil affairs when it came to internal political corruption and the rights of minorities), and it was all guided by laissez faire theory in some form or another, legitimate (as in the economic sphere) or misunderstood and perverted out of its original meaning (as in the civil sphere).

What, then, was the issue that led to Lochner v. New York? As stated, the constitutional question was whether or not state governments possess the authority to interfere with an individual’s right to contract. The legislation itself, however, was the New York Bakeshop Act of 1895, a unanimously passed bill limiting the hours which bakeshop employees could work to no more than ten per day, and no more than sixty per week. Under such a legislative mandate, public support for the law was presumably comparably high, so where does the issue arise?

Naturally, the issue stems from the continual conflict between the two competing theories of classical liberalism (and one of its Nineteenth Century derivatives known as progressivism) and of laissez faire. Does the state have the right to intervene, as under the reformist ideologies beginning to gain strength, or must the state stay back in the name of the rights of both the employee and the employer to determine the terms of their own contract? First, however, exactly how the law received such a large public mandate should be examined.

Tammany Hall Political BossThe Republican Party of the late 19th Century was well-known for its laissez faire stances. The State of New York, however, was in a peculiar situation in which the massive influx of new immigrants from central and southern Europe were quickly swept from Ellis Island into political machines. These political machines would extend favors to the newcomers in exchange for their votes. In order to combat the political machines (ignoring the corruption within its own), the New York Republican Party formed an uneasy alliance with independent voters in which they passed minor examples of anti-capitalist, economically regulative legislation in order to keep their majority. The resulting product was the Bakeshop Act of 1895 which contained many economic regulations, not the least of which was the setting of an upper limit on how many hours bakeshop workers could labor. Even so, it could have been argued that the clause regarding maximum working hours was simply overlooked and unknown to the state legislature – could have, had it not been for the fact that the this specific clause was altered shortly after the bill was passed to ensure that employers would not be kept from working in their own shops. The amendment passed unanimously, just as the bill had done.

What is more is that similar bills involving economic liberties had already been deemed constitutional by the Supreme Court, even in the context of the new Fourteenth Amendment. The Slaughter-House Cases (1872), for instance, determined that the Louisiana legislature was completely within its realm of authority to confine butchers and their businesses to one section of the city. Munn v. Illinois (1877) affirmed the ability of Illinois to set price ceilings on the use of grain elevators, asserting the authority to regulate “businesses affected with public interest.” And in a case relating specifically to set limits on working hours, the Supreme Court ruled in Holden v. Hardy (1896) that it was entirely permissible for Utah to limit the workday of miners, smelters, and workers in refineries to eight hours. A similar statute (though it applied only to government workers, probably producing enough of a disanalogue between the two cases to justify the separate ruling) was upheld just two years before Lochner in Atkin v. Kansas (1903) which limited the workday of government employees to eight hours.

However, the liberty of contract notion was not entirely unheard of throughout this period. Despite the majority opinion having ruled on the side of procedural due process in the Slaughter-House Cases, the dissents by Justice Stephen Field and Justice Joseph Bradley introduce the idea of substantive due process to the Supreme Court. While conceding that the state has the authority to pass “all regulations affecting the health, good order, morals, peace and safety of society” in his 1872 Slaughter-House dissent, Field denies that this authority extends to affecting the legitimate livelihood of some individuals negatively while granting privilege to others (such was the case in the government-mandated consolidation of seventeen butchers into one corporation while others were excluded, though the fact that Justice Field did not offer further limits on state authority demonstrates the still underdeveloped concept of individual rights in the era). Justice Field claims, instead, that the act by the Louisiana legislature produces a situation in which “…a right to pursue a lawful and necessary calling, previously enjoyed by every citizen, and in connection with which a thousand persons were daily employed, is taken away…” (Slaughter-House Cases, 1872).

Essentially, Justice Field is arguing that there are simply some rights which the legislature cannot legislate away. To him, due process is not merely a procedural matter, but one which describes what rights can and cannot be touched in the first place, and only for certain reasons. This is the idea of substantive due process – the idea that one’s life, liberty, and property are theirs so long as the use of that life, liberty, and property do not violate another’s right to his own life, liberty and property. This is best summed up in a statement by Justice David Josiah Brewer, Justice Field’s nephew, in his own dissent in the Holden v. Hardy: “The utmost possible liberty to the individual, and the fullest possible protection to him and his property, is both the limitation and duty of government” (1896).

Is this a contradiction in the purpose of the Constitution as viewed by its authors? Is this a violation of the objectivity which is necessary in all just laws? No. As a matter of fact, the idea that there exist rights which the government cannot infringe upon, even when there is an unanswerable majority in favor of such infringements, was present at the very beginning of our Constitution in the form of the Bill of Rights, long before Amendment XIV was even conceived. People are fairly quick to decry federal violations of Amendment X, but I am speaking of Amendment IX.

Amendment IX of the U.S. Constitution reads, “The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.” Thus, individuals possess extra-constitutional rights which are just as protected as those in the First Amendment which follow the phrase “Congress shall make no law…” The Founders, because their own philosophies were incomplete, did not leave an ethical standard by which these rights could be determined, though the Fifth Amendment’s protection of “life, liberty, and property” gives a pretty good indication. Because of their wisdom in including the Ninth Amendment, all rights which man possesses, even those which were not elucidated by the Founders, are protected by the Constitution – it is the responsibility of the High Court as a group of both legal and philosophical scholars to give adequate defenses for our rights when their integrity is threatened. The idea of substantive due process was included in our original Constitution at the federal level.

Amendment IX ensures that rights could not and ought not be violated through legislative act, even if the power fell within Congress’s jurisdiction (there are tragic exceptions to this rule, however, such as the Takings Clause in the Fifth Amendment which sanctions eminent domain or the later Sixteenth Amendment which specifically allows an income tax). The Fourteenth Amendment merely applied the Ninth Amendment (and all others) to the states. Despite the changing interpretations of the Constitution and of which rights are and are not protected by Amendment IX, it does not harm the objectivity of the Constitution. There is only one standard, touched upon in Amendment V, by which all legitimate rights can be derived: man’s life. Justices who rule otherwise appeal to a false standard, and their rulings ought to be reversed. (It could be argued, of course, that the standard should be made so explicit that the injury of rights by irrational philosophies on the Supreme Court would be inconceivable, lest the Justices wish to lose their seats. To this, I agree, but it is not necessary in order to argue that, unless specifically contradicted by the unjust clauses within the Constitution, all man’s rights are protected by the Constitution.)

The right to contract itself appeared on several occasions prior to Lochner, first in a state case that also occurred in New York. In re Jacobs (1885) dealt with a New York statute which forbade manufacturing cigars in tenement housing. Jacobs was arrested in violation of the act and appealed his conviction. Upon reaching the highest court of New York, William M. Evarts, the attorney representing Jacobs, argued the case on the grounds that the law violated the rights “both of the workman and of those who might be disposed to employ him” (Kens, 1998, p. 69), even going so far as directly quoting Adam Smith in his oral arguments. The court agreed, thus using a laissez faire intellectual paradigm when interpreting the law. However, it would take a dozen more years for the Supreme Court to recognize the theory of a right to contract.

“The general right to make a contract in relation to his business is part of the liberty of the individual protected by the Fourteenth Amendment of the Federal Constitution.” -Justice Rufus Peckham

In 1897, the High Court decided Allgeyer v. Louisiana. The law in question required all out-of-state marine insurance companies to have at least one appointed agent within the state. Designed to prevent fraud, citizens of Louisiana were forbidden from purchasing insurance from companies that did not comply. The Supreme Court overruled the case and Justice Peckham (the future author of the majority opinion in Lochner) delivered the unanimous opinion. For the first time, the right to contract was constitutionalized, as Justice Peckham argued that Allgeyer’s right to due process was violated when he was denied the ability “to enter into all contracts which may be proper, necessary, and essential” to his life, liberty, and property and the consequent enjoyment of all three (Allgeyer v. Louisiana, 1897). Though it may appear that Atkins v. Kansas (1903) ruled against the right to contract between employee and employer, the fact that the State of Kansas was the employer in question from the outset means that the state legislature can set the terms of contracts which it enters through its own right to contract (pursuant, of course, of one of its constitutional powers).

When it comes to Lochner, the facts are different from Allgeyer insofar as it is not a customer-producer relationship that is being examined, but instead an employee-employer relationship. Joseph Lochner, a known repeat offender of the Bakeshop Act, was charged with compelling (or allowing – it was never determined) one of his employees to work longer than the government permitted. Lochner appealed and, after obtaining council from Henry Weisman, a former supporter of the bill, the Supreme Court heard his case and ruled 5-4 in favor of Lochner.

Here, Justice Peckham was explicit in his ruling, stating blatantly that the Bakeshop Act “necessarily interferes with the right of contract…” (Lochner v. New York, 1905). The laissez faire theories of the late Nineteenth Century and the rights connected to them were, at last, undeniably constitutionalized by the Supreme Court. As a result, the right of two individuals to enter into labor-related contracts free from interference was declared to be a constitutionally protected action under Amendment XIV “‘unless there are circumstances which exclude that right.’ He [Justice Peckham] could find no such circumstances” (Kens, 1998, p. 129). The resulting Lochner Era is often known to have led to several instances in which the Supreme Court struck down anti-capitalist legislative efforts to produce various kinds of social goals, though the influence and results of Lochner during this time are often overstated, as exemplified by some conflicting rulings in favor of anti-capitalist legislation.

It goes without saying that the belief in a constitutional right to contract was not universal, nor did it last. Justices Harlan and Holmes both wrote dissents for Lochner, and both arrived at the conclusion that deference should be granted to the state legislature. Primarily, Justice Harlan wrote from the perspective that there is no way for the Court to ever know the particulars which led to the creation of the Bakeshop Act – the working conditions, the safety of the products, the implications to the public, etc. are all better understood by the state legislature rather than the Supreme Court. Justice Holmes’s dissent centered more around his own brand of philosophical skepticism. Stating rather forcefully that the Constitution does not “embody a particular economic theory,” Holmes argued for a sort of rational man test when it came to identifying violations of the Fourteenth Amendment (Lochner v. New York, 1905). Despite the fact that the only rational test to determine whether or not the government has violated one of man’s rights is by appealing to the moral standard that is man’s life, to Justice Holmes, the Bakeshop Act did not qualify as a violation and, as such, should not have been overturned.

Over the next few decades, the Supreme Court’s opinions on anti-capitalist legislation varied considerably. The Supreme Court upheld state legislative limits on the number of hours in a workday in cases like Muller v. Oregon (1908) and Bunting v. Oregon (1917) while striking down federal bans on child labor and federal minimum wages in Washington, D.C. in Hammer v. Dagenhart (1918) and in Adkins v. Children’s Hospital (1923) respectively. After thirty-two years, the Lochner Era drew to a close when the Supreme Court upheld a minimum wage law by Washington State in West Coast Hotel Co. v. Parrish (1937) and Adkins v. Children’s Hospital was overruled.

However, this was not the end of substantive due process by any standard. The Warren Court often employed the same kind of jurisprudence which resulted in the constitutionalization of the right to contract in its own cases. Instead of using substantive due process in cases involving economic liberties, however, the liberal Warren Court applied the theory to social liberties, much to the dismay of strict textualists like Justice Black. In Griswold v. Connecticut (1965) when the Supreme Court established a right to privacy, Justice William O. Douglas cited the First, Third, Fourth, Fifth, and Ninth Amendments as the source of this right while the concurring Justice Goldberg cited the Ninth Amendment almost exclusively, but neither explained except vaguely how the federal restrictions applied to the states. Justice Black, unhappy with their justifications, made his displeasure apparent in his dissent in which he said that his colleagues were simply afraid to cite the true source of their rulings – Lochner (Kens, 1998, p. 179).

At any rate, this often overlooked case is important for several reasons. First, it offers a window into the ideology of laissez faire at the height of its strength in the United States while simultaneously serving as a prime example as to how ideology can affect the Court. Second, it is one of the strongest examples of substantive due process in the history of Amendment XIV. Third, it established the right to contract, something that has seen a resurgence of support within the late Twentieth Century and early Twenty-First Century. Lastly, it continues to shape how the Court forms its opinions, even if not explicitly.

But the story should not end there. Instead, it is time that we, as individuals, begin to recognize that the true origin of our rights is not the Constitution, but instead the fact that we think; we live; we exist. It is time for the Court to do the same, and do so unabashedly, not to mention explicitly (something that even Justice Peckham failed to do in his own ruling). Man’s life is the root of his rights, and reality the root of man’s life – all rulings in favor of legitimate Ninth Amendment liberties will mean little in the long run if this is not their basis. Regardless, the lessons of Lochner serve as both a reminder of this country’s capitalistic glory, and its philosophic infancy in the system which led to that glory. Though it was effectively overturned in West Coast Hotel v. Parrish (1937), it is abundantly clear, as Paul Kens states at the close of his examination of this case, that “Lochner is not dead” (1998, p. 187).


Adkins v. Children’s Hospital, 261 U.S. 525 (1923).

Allgeyer v. Louisiana, 165 U.S. 578 (1897).

Atkin v. Kansas, 191 U. S. 207 (1903).

Bunting v. Oregon, 243 U.S. 426 (1917).

Griswold v. Connecticut, 381 U.S. 479 (1965).

Hamilton, A., Jay, J., and Madison, J. (1787-1788). The Federalist papers. (I. Shapiro, Ed.). New Haven, CT: Yale University Press.

Hammer v. Dagenhart, 247 U.S. 251 (1918).

Hoffer, P. (2011, September). Lochner v. New York. HIST 4060. Lecture conducted from the University of Georgia, Athens, GA.

Holden v. Hardy, 169 U.S. 366 (1898).

Jacobs, in re, 98 N.Y. 98 (1885).

Kens, P. (1998). Lochner v. New York: economic regulation on trial. Lawrence, KS: The University of Kansas Press.

Lochner v. New York, 198 U.S. 45 (1905).

Marietta, M. (2011, February). Classic dichotomies in political science. POLS 2000. Lecture conducted from the University of Georgia, Athens, GA.

Muller v. Oregon, 208 U.S. 412 (1908).

Munn v. Illinois, 94 U.S. 113 (1877).

Slaughter-House Cases, 83 U.S. 36 (1873).

West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937).


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