The John M. Olin Center

Paper Abstract

Untitled Document

63. Brian Libgober, The Death of Public Purpose (and How to Prevent It), 03/2016.

Abstract: State constitutional law has historically limited the ability of governments to grant economic subsidies. The primary purpose of all governmental spending must be public welfare and courts will invalidate spending whenever private benefit is dominant. This "public purpose requirement" was developed over the course of the 19th century to prevent railroads from engaging in interstate subsidy wars that bankrupted many governments. For at least a century, the doctrine seems to have succeeded at that task. Yet this article argues, on the basis of an exhaustive case survey, that the public purpose requirement is today gasping its dying breaths: governments never have their subsidies invalidated, plaintiffs bring fewer cases each year than they did the last, and if that downward trend continues there may be as few as fifty cases left to be argued on public purpose grounds. Nevertheless, courts and recent law review articles recognize that this doctrine is still good law. I argue that the fundamental weakness of the doctrine stems from courts' tendency to view the doctrine through the lens of contract law, when they should instead view the doctrine as addressed toward problems of agency. I show how courts can appeal to the 3rd Restatement of Agency to rejuvenate this important institutional constraint and improve public policy.