Every Historian should read Horwitz. Twice.

The Transformation of American Law, 1780-1860
Morton J. Horwitz, 1977

Harvard Law professor Morton Horwitz’s opus is not an EnvHist text, by any stretch. Nor is it a well-known volume outside legal history circles, unfortunately, in spite of winning the Bancroft Prize in 1978.
Transformation is not an easy read, but it answers an important question. That question, basically, is “How the hell did we get here?” This is a longish review, but please bear with me. Transformation is possibly the indispensable book in American History. No kidding.

According to Horwitz, changes in American law only rarely arise from headline cases like the Supreme Court decisions on Dred Scott, Brown v Board of Education or the more recent Citizens United debacle. More often, legal changes are invisible to most people. We turn around one day, and things are (often distressingly) different, but we can’t say how it happened.

Horwitz says in his introduction, “I seek to show that one of the crucial choices made during the antebellum period was to promote economic growth primarily through the legal, not the tax, system, a choice which had major consequences for the distribution of wealth and power in American society.” The legal system he’s talking about, though, isn’t the legislative lawmaking process where changes can be debated and representatives accountable to constituencies can vote on them. It’s not even the Supreme Court, where judgments usually receive a lot of scrutiny and comment. Most frequently, Horwitz says, major changes in American law happened incrementally, in lower (often even local) court decisions, and also in evolving laws and social conventions governing contracts.

Horwitz argues a fairly radical case, which unfortunately is not widely understood because of the book’s subject matter and style. Horwitz also has some interesting ideas about the way “the internal technical life of a field generates autonomous forces that determine its history” (xi). We make a mistake, Horwitz believes, if we fail to account for the activities and
interests of lawyers, judges, the legal profession, law schools, etc., when looking at how “the law” influenced history. The same could probably be said, with equally interesting results, for religion, medicine, or the study of history itself.

Horwitz focuses on common law. Constitutional law, he says, “represents episodic legal intervention buttressed by a rhetorical tradition that is often an unreliable guide to the slower (and often more unconscious) processes of legal change in America” (xii). Constitutional law also focuses on judicial review and not on what Horwitz characterizes as a very active, constructive, legislative role assumed by nineteenth century jurists. “By 1820,” he says, “the process of common law decision making had taken on many of the qualities of legislation. As judges began to conceive of common law adjudication as a process of
making and not merely discovering legal rules, they were led to frame general doctrines based on a self-conscious consideration of social and economic policies” (my emphasis, 2). The august tradition of “an eternal set of principles expressed in custom and derived from natural law” gave way to an understanding of law as “an instrument of policy” that could be used “for governing society and promoting socially desirable conduct” (30). Once this change had been accomplished, the game became defining the terms “socially desirable.”

The major examples Horwitz uses to illustrate the creeping, nearly invisible change in American law are the competing uses for water (mill power, irrigation, navigation, fishing) which he says illustrate the problems that arose when “a conception of ownership [including] a commitment to absolute dominion” pushed aside any notion of common use rights (31). Water resources’ “natural use” came to be seen as a lowest common denominator, that would block socially desirable improvements like the building and operation of mills (33). The problem was, this reconception opened a pandora’s box. While it made sense to grant initial exclusivity to a developer (how many grist mills did a new town need, after all?), where would society draw the line? “Can the claims of still greater efficiency through competition be denied?” Horwitz asks (34).
Transformation fails to really examine whether the “greater efficiency” that justified these decisions ever really produced its claimed social benefits (or even existed, other than as short-term paper gains) -- but probably people at the time didn’t ask these questions either. The point is that “By changing the rules and disguising the changes in the complexities of technical legal doctrine, the facade of economic security can be maintained even as new property is allowed to sweep away the old” (again, my emphasis 34). This is Horwitz’s major point, and it’s a radical one. The legal system, he says, was used to not only change the rules of the game to benefit an increasingly elite class, but also to hide the fact that these changes were being made.

This is a great argument. What it needs, to be more widely understood, is some people in the story to show how it happened and how people reacted, assuming anyone on the short end of the transaction knew it was happening. That's where Steinberg jumps in, with
Nature Incorporated. But going forward from there, this raises an interesting historical question. How do we tell stories about things we now see were happening, but that people of the time were unaware of? Because the evidence was hidden, or they just didn’t see things the way we do. Especially when people know something is wrong, but can’t quite put their finger on it -- or blame the effects they see on the wrong cause? Maybe in twenty or thirty years, that’s how they’ll tell the story of Climate Change. The story isn’t just about unintended consequences, it’s about misunderstood consequences.

Horwitz says the court’s decision in the landmark 1844 water mill case Cary v. Daniels was “premised on the desirability of maximizing economic development even at the cost of equal distribution” (41). The precedent opened the door for courts to support business by citing the public good and “enabled common law judges to choose the direction of American economic development,” at least when it came into contact with older legal ideas of property and equity (42). Horwitz says some people at the time responded to these changes, pointing out the “storm of bitter protest” caused by the “extension of the mill act to manufacturing establishments” (51). So apparently there were some people able to see through the court decisions. They complained that while early mills had been almost communal in nature, “manufacturing establishments were private institutions” benefiting the few (51). Citizen activists also saw through the law’s provisions for relief, arguing “Generally, the mills and mill seats are in the hands of the active and wealthy -- able to make the sufferers repent, if they resort to the law” (52).

One of the state’s main tools for economic development was eminent domain. But tied up with it was the idea of chartered monopoly and of limited liability. A State grant was no good if “the grantee cannot exercise it without being subject to ruinous damages, so as to swell the cost of their enterprise” beyond its ability to make a profit, one pro-business commentator warned (69). Rather than examine whether these social costs were an effective argument against the business going forward (especially in the cases of railroads in the 1840s-60s), Horwitz says the courts socialized “consequential damages.” This allowed the pro-business faction to ignore social costs and other externalities, using the legal justification that “The law gives no private remedy for anything but a private wrong” (quoting Blackstone, 76). So the costs were socialized (in economic terms, externalized) at the same time the benefits were privatized in the form of corporate profits. Horwitz doesn’t say much about the decision to do projects like Canals and Railroads in the private rather than the public sector; but it seems the legal changes he describes were the foundation for that choice.

Over the course of the nineteenth century, Horwitz says the basic “attitude toward legal liability” became “based on the assumption that the ‘quiet citizen must keep out of the way of the exuberantly active one.’ Indeed, the law of negligence became a leading means by which the dynamic and growing forces in American society were able to challenge and eventually overwhelm the weak...After 1840 the principal that one could not be held liable for socially useful activity exercised with due care became a commonplace in American law” (99). The effect of this change was “to create immunities from legal liability and thereby to provide substantial subsidies” to developers (100). “Change brought about through technical legal doctrine,” Horwitz says, “can more easily disguise underlying political choices [than] Subsidy through the tax system” (101). He concludes, “there is reason to suppose” that this “was not simply an abstract effort to avoid political contention but that it entailed more conscious decisions about who would bear the burdens of economic growth.” This is a really interesting claim, but it needs a smoking gun. Luckily, students of Horwitz such as Ted Steinberg began telling the stories of some of these conscious decisions.

“In every state after 1790,” Horwitz says, “a political decision to avoid promoting economic growth primarily through taxing seems to have crystallized” (109). Shays’s and the Whiskey Rebellions probably helped that crystalization, and also a recognition that there wasn’t really that much money out there to get through taxing. Horwitz continues, “By 1800 a pattern of private ownership of banks, insurance companies, and transportation facilities had become dominant in America” (110). Attributing change in the definition of corporations (from state-chartered public-service organizations to for-profit private enterprises) to an individualist spirit as we usually do seems to put the cart before the horse, since early corporations “continued to argue both that their charters were grants of exclusive property interests and that economic rivalry was, in effect, a private law nuisance to property” (114). This seems like a blatantly opportunistic attempt to have your cake and eat it too. Corporations were capitalizing on their existence in the limbo between public and private, and claiming the benefits of both.

Horwitz says “eighteenth century...contract law was essentially antagonistic to the interests of commercial classes,” because it sought to judge the underlying fairness or justice of the exchange in question (167). But that means all commerce is local and personal. Judging each contract on its particular terms was based on the idea that value was subjective and circumstantial — that the two parties in a transaction (or a dispute) had differing interests and thus valued things differently. But wait: promissory notes (contracts for future payment on present goods or services) were used in place of specie. These notes became paper money, and “in order to make notes negotiable a subsequent endorsee [must] be allowed to recover on the note regardless of the consideration between the original parties” (177). In other words, the note must represent a fixed, objective sum, not a contingent, subjective value. Eliminating local variables was absolutely crucial to establishing the wide, impersonal commerce we associate with the "market transition." After the judges revised contract law, price could be viewed as an impersonal intersection of the seller’s value (supply) and the buyer’s value (demand) decisions. In addition to enabling the entire field of economics, the same-as-specie nature of the new money enabled “merchants to exclude the question of the equality of a bargain by transacting their business through promissory notes.” Notes also excluded the courts from playing a role in judging the fairness of a transaction. The contract became an authority unto itself, and was no longer seen as part of a tradition of local dealings between peers based on just prices or practices. Contract law also changed the laborers’ world through the “doctrine of ‘assumption of risk,’ [in which] contract ideology...emasculated all prior conceptions of substantive justice.” The fiction of “equal bargaining power inevitably became established as the inarticulate major premise of all legal and economic analysis. The circle was completed: the law had come simply to ratify those forms of inequality that the market system produced” (210).

Horwitz concludes by describing the “rise of legal formalism” in the 1840s and 50s. “If a flexible, instrumental conception of law was necessary” to promote economic development, he says, “it was no longer needed once the major beneficiaries...had obtained the bulk of their objectives” (254). In fact, just the opposite. Just as money had become formalized as an objective standard of value, the law needed to become — and
be seen as — “self-contained, apolitical, and inexorable;” built on scientific logic and practiced by disinterested professionals. Having changed the law to get to power, Horwitz says, the ruling class used legal formalism as a way of “disguising and suppressing the inevitably political and redistributive functions of law” (266). This is a startling conclusion, if a reader came to this book thinking the law was apolitical or objective. It might even be argued that when a society treats the law as an eternal set of objective rules (as many Americans seem to do today, especially when discussing Supreme Court decisions), that’s a clue that the ruling class has achieved its goal. Horwitz says at the outset that recent (1960s and early 70s) historians have been “more concerned with finding evidence of governmental intervention than they were in asking in whose interest these regulations were forged” (xiv). His depiction of the law as a battleground for class war, and of court decisions as the tools of legislation and social engineering, deserve to be more widely appreciated. Horwitz’s student Ted Steinberg’s 1989 dissertation, which became the EnvHist classic Nature Incorporated, illustrates Transformation’s argument in the story of the New England textile industry.