Charles River Bridge v. Warren Bridge 1837

1. Charles River Bridge v. Warren Bridge (1837) Ken Holland Kansas State University July 13, 2005

2. Free Market Economy An economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions. Individuals are free to make economic decisions concerning their employment, how to use or accumulate capital, what expenditures to make, and whether to use their resources now or to save them for later consumption.

3. Free Market Economy The principles underlying free-market economies are based on laissez-faire (non-intervention by government) economics and can be traced to the 18th century British economist Adam Smith. According to Smith, individuals acting in their own economic self-interest will maximize the economic situation of society as a whole, as if guided by an �invisible hand.� In a free-market economy the government's function is limited to providing what are known as �public goods� and performing a regulatory role in certain situations.

4. Free Market Economy Public goods include defense, law and order, and education. Government's role in a free-market economy also includes protecting private property, enforcing contracts, and regulating certain economic activities. Governments generally regulate �natural monopolies� such as utilities or rail service. These industries require such a large investment that it would not be profitable to have more than one provider. Regulation is used in place of competition to prevent these monopolies from making excessive profits.

5. Alternative Economies Alternative economic systems include feudalism and communism. In feudalism, the king owns all property and distributes it to knights in exchange for military service. The king grants royal monopolies and patents. In communism, the government plans the economy and all means of production are publicly owned.

6. Journal Write #1 Most economists consider education to be a public good. Is Kansas City, KS, Public Schools a monopoly? What would the consequences be if we privatized education? Would a system in which all schools were privately owned, by both non-profit and for-profit firms, work if the government provided vouchers to poor children?

7. Article I, Section 10 �No State shall pass any . . . Law impairing the Obligation of Contracts.� A reaction to Shay�s Rebellion of 1786, in which indebted farmers used force to close the courthouses in western Massachusetts to prevent judges from foreclosing on their property and to the law passed by the Rhode Island legislature at the same time authorizing debtors to pay their mortgages with paper money issued by the state.

8. Charles River Bridge v. Warren Bridge (1837) Facts of the Case In 1785, the Massachusetts legislature incorporated the Charles River Bridge Company to construct a bridge and collect tolls. In 1828, the legislature established the Warren Bridge Company to build a free bridge nearby. Unsurprisingly, the new bridge deprived the old one of traffic and tolls. The Charles River Bridge Company filed suit, claiming the legislature had defaulted on its initial contract.

9. Question Presented Did the legislature enter into an economic contract with the Charles River Bridge Company that was impaired by the second charter in violation of Article I Section 10 of the Constitution?

10. Conclusion In a 6-to-2 decision, the Court held that the state had not entered a contract that prohibited the construction of another bridge on the river at a later date. The Court held that the legislature neither gave exclusive control over the waters of the river nor invaded corporate privilege by interfering with the company's profit-making ability. In balancing the rights of private property against the need for economic development, the Court found that the community interest in creating new channels of travel and trade had priority.

11. Chief Justice Roger B. Taney Speaking for the majority, he stated there was no "implied" obligation that prevented the state from building another bridge even if it "diminished the amount" of the tolls. "No exclusive privilege" had been granted to the proprietors of the first bridge. Such a monopoly would jeopardize progress. "The whole community ... have a right to require that the power of promoting their comfort and convenience, and of advancing the public prosperity, by providing safe, convenient, and cheap ways for the transportation of produce and the purposes of travel, shall not be construed to have been surrendered ... by the State, unless it shall appear by plain words that it was intended to be done."

12. How to Encourage Economic Growth According to John Marshall, the government will best encourage economic growth by granting monopolies in order to encourage large investments in projects used by the public, such as bridges. According to Roger Taney, the government will best encourage economic growth by encouraging free competition and the use of new technology.

13. Journal Write #2 Tennessee has no toll roads. Kansas has the Kansas Turnpike, connecting Kansas City, Topeka and Wichita. Why do you think the Kansas legislature chartered the Kansas Turnpike Authority and authorized it to charge tolls? What is the alternative to toll roads? What are the advantages and disadvantages of toll roads and toll bridges?

14. Rights of Private Property v. Good of the Community Taney declared that "the object and end of all government is to promote the happiness and prosperity of the community by which it is established." The Constitution reserved to the states "power over their own internal police and improvement, which is so necessary to their well-being and prosperity."