Judge Stephen F. Williams of the U.S. Court of Appeals for the District of Columbia Circuit applied the classical-liberal ideas of economist and philosopher Friedrich A. von Hayek to interest groups and a society’s market structure when he delivered the fifth annual Friedrich A. von Hayek Lecture, “Transitions Into—and Out of—Liberal Democracy,” on November 18.

Laying out his argument, Williams asserted that a society can become a liberal democracy including private property and rule of law “only if producer groups can organize and exert enough influence to prevent government predation,” but that, paradoxically, groups with sufficient strength to do so would also be powerful enough “to mobilize government for predation against others. The resultant rent-seeking society may hollow out liberal democracy to a barely recognizable shell.”

Contrasting limited-access, “patrimonial” regimes with open-access exchange societies, Williams explored the conditions necessary for a society’s transition from the former to the latter state. While the existence of groups who can “constrain government predation” is essential to this change, he said, the groups’ potential use of their power to “mobilize predation against others” could bring the open-access society into a more patrimonial form again.

Williams focused on rent-seeking, an economic term describing efforts to obtain gains greater than what one has contributed to a society through manipulation of the economic environment: “Thus, we should hope for broadly encompassing interest groups. We should prefer the Chamber of Commerce to the ethanol alliance, the AFL-CIO to the UAW.... But, you might say, isn’t the current public loathing of lobbyists evidence of revulsion against rent-seeking?”

The problem, he said, is that the public’s distrust of special-interest players fails to distinguish between “ones engaged in purely defensive activity...and those engaged in rent-seeking aggression.” And the difficulty of making that distinction, he continued, meant that a judicial doctrine to address rent-seeking would likely be untenable: “I find it hard to imagine standards for distinguishing rent-seeking from permissible legislation that would be clear enough to yield much uniformity of decision.... In the end, changes in legal doctrine seem to me unlikely to be more than trivially effective. Either the public will develop a nose to sniff out rent-seeking, or it will not.”

Developing that sense, Williams suggested, would entail changes in the media’s coverage of policy arguments and a stronger economics component in the high-school curriculum. “We should not see rent-seeking as a mere wart on the body politic,” he said. “It is a fundamental and perhaps fatal disease.”

The Hayek Lecture was introduced and organized by Visiting Professor Richard Epstein, who credited Williams with "finding a body of law which is incoherent and then finding a way, through smart interpretation and subtle criticism, to domesticate it to the point where it becomes tolerable as opposed to simply abominable." The lecture series is sponsored by the Journal of Law & Liberty.

Posted on December 14, 2009