The Raisin Case: A Breeze not a Wind of Economic Freedom

The famous raisin case officially closed last week. As part of an old and ongoing government program to intervene in the raisin market to support the price, the government tried to take raisins away from a California raisin grower, Marvin Horne, and thus off the free market. When Horne and his family refused, the government assessed a huge fine and penalty. But Horne wouldn’t pay, and he went to court. His case eventually went to the Supreme Court. Last week the Court decided that “the Hornes should simply be relieved of the obligation to pay the fine and associated civil penalty they were assessed when they resisted the Government’s effort to take their raisins.”

It took ten years, but it is an important victory for the Hornes, and for my colleague Mike McConnell who represented the Hornes at the Supreme Court. And it is also a victory for economic freedom because it prevents the raisin program from intervening in the market in the way it has been for years (the program began with the Agricultural Marketing Agreement Act of 1937).  For these reasons the case has attracted a lot of attention (see Wall Street Journal opinion and news articles, and my blog pieces here with more references).  And it is kind of exciting that this is happening in this 800 anniversary year of Magna Carta which we celebrated at the Hoover Institution last week. Chief Justice John Roberts noted in the majority opinion that “The principle reflected in the [Takings] Clause goes back at least 800 years to Magna Carta, which specifically protected agricultural crops from uncompensated takings. Clause 28 of that charter forbade any ‘constable or other bailiff’ from taking ‘corn or other provisions from any one without immediately tendering money therefor, unless he can have postponement thereof by permission of the seller’….The colonists brought the principles of Magna Carta with them to the New World, including that charter’s protection against uncompensated takings of personal property.”

Unfortunately, however, the decision itself does not mean the end of the government program.  As Roberts stated in the majority opinion “A physical taking of raisins and a regulatory limit on production may have the same economic impact on a grower. The Constitution, however, is concerned with means as well as ends. The Government has broad powers, but the means it uses to achieve its ends must be “consist[ent] with the letter and spirit of the constitution.” McCulloch v. Maryland, 4 Wheat. 316, 421 (1819).”

In other words, according to Roberts, it is not inconsistent with the Constitution to regulate the amount of land that can be used in the production of raisins and thereby try to affect the price.  So, as legal scholar Richard Epstein (also a colleague) said at the conference on Magna Carta, regulatory limits are still permitted, and “we will have to wait and see” what other cases might be brought. Indeed, many interventions in agriculture involve regulatory limits or set asides of land rather than outright takings of crops.  So in this more fundamental way economic freedom can still be infringed upon, creating inefficiency and deadweight loss, as we show in Economics 1.

For many years in Economics 1, I have used the California raisin program to illustrate the impacts of government intervention, dressing up as a California raisin and dancing to Marvin Gayes’ “Heard It through the Grapevine” to show how crazy the policy is. Perhaps I should get into my California Raisin outfit again and try to turn this breeze into a wind, and really end the program.


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