The Free Hand of the Speech Market: A Dependable Solution (for Some)

Among the many swirling debates in American discourse in these unsettling times, one of the most divisive is the role of speech in a free and open society. While the right to express oneself is facially sacred in the First Amendment, there are distinct categories of speech that have received diminished protection from the Supreme Court on the basis that some content is of such “exceedingly modest, if not de minimis, value”[1] as to warrant legal curtailment. This legal intervention in the marketplace of ideas, however, treads a fine line between protection and paternalism, and the American public has a few notable battle scars to show for it.[2]

Neoclassical economics are underpinned by an invisible hand, one which guides human beings toward prosperity through a series of mutually-beneficial transactions. In 1859, John Stuart Mill integrated these economic principles — among them, human rationality and self-interest — into his seminal On Liberty,[3] a treatise that laid the foundations for free speech jurisprudence. A keystone in First Amendment courses even today, On Liberty mounts a convincing case for laissez-faire governance in the speech market. Collectively, literature from this period provides an optimistic, if not rosy, view of humanity: the arc of discourse will bend toward truth, and bad actors will fall in line.

This study will examine the efficacy of free speech absolutism in addressing commercial discrimination. Beginning with a literature review of Adam Smith and John Stuart Mill, I will argue for the veracity of these principles in the abstract then turn to Craig v. Masterpiece Cakeshop,[4] a case highlighting the dubious reality of the Millsian approach at the ground level. Masterpiece Cakeshop demonstrates the need for anti-discrimination law to curtail the worst forms of commercial discrimination against minority populations, for whom the arc bends too slowly, if at all. This, the study argues, is where the invisible hand may meet a brick wall, one only penetrated by progressive legislative intervention.

I. Literature Review

The Marketplace of Ideas

In On Liberty, John Stuart Mill argues that the “search for truth” takes primacy over other purposes of free speech. This end, On Liberty asserts, justifies an open marketplace of ideas, a forum in which opinions flow freely and collide. To Mill, “The peculiar evil of silencing the expression of an opinion is that it is robbing the human race.”[5] Whether that coercion stems from fellow citizens or from the government is immaterial to Mill; indeed, he is suspicious of any entity claiming “infallibility”[6] in the search for truth: every platform is equal in the marketplace until persuasively proven otherwise.

Enlightenment rationalism hangs in the backdrop of On Liberty,[7] an essay that fiercely rejects dogma in its many forms — religious, political, and otherwise. For Mill, the essence of truth will not avail itself to the passive audience but, instead, those who critically engage with ideas. Most importantly, this process involves open-minded consideration of opposing viewpoints, from which one grows in any case: either by integrating that view into one’s worldview or rejecting it logically, thereby substantiating one’s own convictions.[8] Under this system, an individual is constantly refining his or her worldview according to the most plausible argument on offer.

So ineffable is this “truth” that Mill sought that he even recognized “partial truths” in On Liberty.[9] Indeed, as Mill notes, “Every opinion which embodies somewhat of the portion of truth which the common opinion omits, ought to be considered precious, with whatever amount of error and confusion that truth be blended.”[10] As such, Mill accounted for the possibility that two conflicting doctrines share the truth between them, neither capturing the whole essence of the matter on its own. The implication of the partial truth hypothesis is a profound one: we should strive for maximum availability of information, so as to piece together the closest approximation of the truth possible.

With this groundwork established, Mill contemplates the role of government interference in remedying the worst short-term consequences of free speech, noting the variable attitudes of the time.[11] Mill echoes the governmental suspicion of the libertarian camp, but lays out a sharp exception to hands-off government: “The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.”[12] With this short sentiment, Mill muddies the waters of an otherwise straightforward thesis; indeed, by allowing law to enter the marketplace of ideas in times of perceived exigency, he opens the floodgates to human fallibility, myopia, and (for better or worse) empathy. A bright-line rule for “how much harm” justifies such intrusion continues to evade scholars today. Just how this ongoing search for truth. interferes with larger public safety and equal protection concerns is unclear.

In sum, On Liberty remains an important contribution to free speech jurisprudence, and his central claim is hardly a controversial one. In holding truth as the highest virtue, John Stuart Mill discouraged easy, even convenient, solutions in the short-term. Rather, claims enter the marketplace on equal footing, each just as subject to scrutiny as the next, and either survive or perish through dialogue. On Liberty, while not quite free speech absolutism, remains a gold standard in neoclassical circles.

The Wealth of Nations: Consumers Take the Wheel

Just as John Stuart Mill placed the fate of public discourse in the citizenry, so too did Enlightenment economists have faith in the self-corrective properties of the market for goods and services. In The Wealth of Nations,[13] Adam Smith argued that, through the persuasive power of their pocketbooks, consumers had the tools to reward good producers and sanction the bad. Sellers, keen to maximize their profits, respond to patterns of consumer behavior, without regard to personal ideology. Governmental interference in this process, Smith argued, was unnecessary and, moreover, would reliably distort the valuations that consumers conveyed through their patronage. The Wealth of Nations uses the following parable to illustrate the power of consumer preferences and reputation in bending the will of producers.

In “The Butcher, the Brewer, and the Baker,” Smith stated as follows: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”[14] This simple observation captures a key feature of Smith’s work and reveals a few perilous assumptions. First, producers are not driven by personal pride, altruism, or even a deeper sense of what constitutes a fair transaction; rather, they know that if they do not meet consumer expectations, business will suffer. Additionally, reputation matters: if the butcher, the brewer, or the baker produce suboptimal wares, their establishments will gain notoriety, from both the individual consumer (who eats, say, a stale loaf of bread) and the community that hears about this experience. Smith’s assertion, that producers recognize the positive correlation between reputation and profit and respond accordingly, gives consumers considerable leverage.

In this way, The Wealth of Nations was simple and attractive: the interests of consumers and producers are inherently aligned in the for-profit sector, and the market need not rely upon “benevolence.” Rather, prosperity would stem from the self-interest and rationality of each party. With this formidable foundation laid, a few base-level assumptions are worth noting. First, Smith assumes that all parties are maximally rational, appraising the benefits and costs of each business decision in the short and long term. After conducting this balancing test, Smith argues, human beings will always choose the path that empirically promotes their self-interest.[15] Finally, the ability of consumers to sanction and expose bad actors — bakers, brewers, or blacksmiths — depends on symmetrical information; that is, total transparency of quality. In short, Smith treats consumers as omniscient, apprised of how much the finished product is truly worth versus the advertised price. The wider the disparity, the moldier the bread, the more the baker’s future profits will suffer.

The Wealth of Nations provides a compelling argument for laissez-faire capitalism, a system which relies not upon benevolence (which Smith believed to be in “short supply”[16]) but upon mutual benefit. This principle remains a cornerstone of libertarian thought today, and the invisible hand of the market greatly influenced objectivist works of the twentieth century.[17] While Smith saw this mutually-beneficial capitalism as a force of good in the world, others have remained skeptical, including John Maynard Keynes, who purportedly observed, “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”[18] Indeed, as we will observe in Masterpiece Cakeshop, rational self-interest and concern for reputation alone may be a tough ask of the “wickedest” of actors, for whom ideology may distort the profit motive.

The Balancing Act: The Supreme Court’s Calculus for Intervention

Though questions of free speech are largely fact-specific, the Supreme Court has exercised historical restraint, heeding Mill’s warning. Without compelling evidence of grave “harm to others,”[19] the Court is reluctant to interfere in matters of expression. Sometimes, this means taking the long view, bearing evils in the present if it means preserving constitutional principles. As Justice Marshall warned in Skinner v. Railway Lab. Execs. Ass’n, “History teaches that grave threats to liberty often come in times of urgency, when constitutional rights seem too extravagant to endure. . . when we allow fundamental freedoms to be sacrificed in the name of real or perceived exigency, we invariably come to regret it.”[20] It is with this understanding that the Court considers intervention in the marketplace of ideas.

Since United States v. Dennis,[21] the Supreme Court has utilized a balancing test based upon the Hand Formula.[22] In a speech context, the Court “ask[s] whether the gravity of the ‘evil’ [i.e., if the instigation sought to be prevented or punished succeeds], discounted by its improbability, justifies such invasion of free speech as is necessary to avoid the danger.”[23] Stated mathematically, a court should regulate speech “if but only if B < PL, where B is the cost of the regulation (including any loss from suppression of valuable information), P is the probability that the speech sought to be suppressed will do harm, and L is the magnitude (social cost) of the harm.”[24] In doing so, the government has established a strong, but not impenetrable, presumption against curtailing speech, willing to withstanding even the most gut-wrenching calls for help.[25]

The Court’s application of the balancing test in Dennis is instructive. In Dennis, members of the Communist Party faced prosecution under the Smith Act, under which it was illegal to advocate for the overthrow of the government by force or violence.[26] Ultimately, the Court agreed that “the literature of the Party and the statements and activities of its leaders, petitioners here, advocate, and the general goal of the Party was, during the period in question, to achieve a successful overthrow of the existing order by force and violence.”[27] Noting the “highly organized” nature of the Communist Party, the Court found that the potential threat posed by the Party was sufficiently grave as to warrant prosecution.[28] The magnitude of the harm (L) posed by the Party in this case outweighed the cost of regulation (B), irrespective of the probability (P) of such a revolt.

Interestingly, Justice Marshall included Dennis among the cases the Court had “come to regret” in his famous dissent in Skinner.[29] Just as Korematsu[30] came to pale in the public eye, so too did this judicial intrusion. Magnitude of harm (L) can easily become inflated in the present moment and, it seems, always appears smaller in the rearview mirror. Wary of this distortion, the Supreme Court (and frankly should) meet appeals to “urgency” with suspicion but, given the right set of facts, may step into the marketplace of ideas to serve the public interest.

II. Application

Having reviewed many of the conventional philosophical and judicial approaches to freedom of speech, let us now turn to Masterpiece Cakeshop, a case that has inspired debate about commercial speech. The facts on the ground are slim — the conversation lasted a mere twenty seconds[31] — but the issue is one of keen interest to civil rights advocates on the Left and Right, alike. While Masterpiece Cakeshop most immediately concerns attitudes toward homosexual citizens, it also implicates broader questions of governmental paternalism, corporate social responsibility (CSR), and the critical mass needed to move the invisible hand of the market toward justice. Using principles laid out in the literature above, I will examine the market-oriented solution to abating discrimination in this context, ultimately finding judicial intervention appropriate.

Factual Summary

Partners Charlie Craig and David Mullins entered Masterpiece Cakeshop in July 2012 in search of a cake for their upcoming wedding.[32] Shortly thereafter, they were informed that “because of [the proprietor’s] religious beliefs,” Masterpiece did not create cakes for same-sex weddings.[33] All the same, the customers were told that Masterpiece “would be happy to make and sell them any other baked goods,” but to create a cake for their same-sex marriage would “displease God.”[34] Declining this latter offer, the plaintiffs left the establishment, then filed charges of discrimination with the Colorado Civil Rights Division, alleging discrimination based on sexual orientation under the Colorado Anti–Discrimination Act (CADA), Colo. Stat. §§ 24–34–601(2), C.R.S.2014.

The Division found in favor of Craig and Mullins, a judgment later affirmed by both the Colorado Civil Rights Commission and the Colorado Court of Appeals.[35] On March 6, 2017, the Supreme Court of the United States denied certiorari for the second time.[36] Yesterday, on the final day of its 2016–2017 session, the Supreme Court accepted cert, agreeing to take the case on in the future. With the appointment of Justice Gorsuch and rumors of Justice Kennedy’s possible retirement, the ideological balance of the coming Supreme Court is in flux. Just where this leaves Masterpiece Cakeshop is uncertain.

Revisiting the Above Principles

The stakes in this case go beyond the wedding cake itself; the plaintiffs, who have since been married are after something of greater expressive importance: the obligation of businesses to afford equal treatment to customers, irrespective of identity. As their attorney, James Esseks, explains, “If businesses get to say, ‘We’re not going to serve you or you or you, because my religion tells me I shouldn’t,’ that undermines every non-discrimination law we have in the country.”[37] In this sense, Masterpiece Cakeshop is about what kind of the role of the State in adjudicating discrimination generally, about merchants’ ability to choose who frequents them. While there are certainly moral and humanistic arguments to be made for equal protection, the question can be analyzed from an economic perspective. As noted Professor Sanford Ikeda of Purchase College has observed, producers act (even discriminate) in accordance with incentives available to them.[38] What, then, incentivized Jack Phillips to discriminate against his homosexual customers, if not personal animus?

In the context of discrimination, economists are clear: “Though bigoted managers may hold sway for a time, in the long run the profit penalty makes profit-seeking enterprises tenacious champions of fair treatment.”[39] This, economists like Gary Becker argue,[40] holds true in both the employment and consumer context. Just as the baker in The Wealth of Nations cares deeply about his reputation, so too do modern merchants, taking prevailing social norms and cues into account. Through corporate policy and branding, a company can convey otherwise-asymmetric information to the consumer.[41] To Mills, any corporate expression should remain free of encumbrance, but it should encounter scrutiny in the marketplace (literal and figurative) all the same. Through a series of interactions, the expression would be appraised, and the company would either amplify or modify this message in pursuit of the most profitable course of action.

With that said, then, we must ask, “Would (or do) most consumers empathize with the plight of the consumers in Masterpiece Cakeshop? Would such discrimination on the basis of sexual orientation be enough to push fellow customers over the line, to organize a boycott of the business?” In order for the self-correcting nature of Smith’s market to kick in, a requisite number of individuals would have to send a message, vocal or fiscal, to Masterpiece Bakeshop for it to change its policy. For demographic minorities, such as homosexual Americans, this seems an uphill battle. Indeed, Gallup reports that only 3.8% of Americans identify as LGBT.[42] This coalition, then, cannot likely damage the profit stream enough to sway corporate policy on its own; rather, other individuals, of normative sexual orientation, would have to join the coalition, pledging to forego business at Masterpiece Cakeshop, regardless of price, suitable alternatives (or lack thereof) in the region, or personal views on free market economics.

Furthermore, to assert that Masterpiece Cakeshop would be amenable to changing its policy at all is to suggest that such things are negotiable. If one holds a sincerely belief “that God ordained marriage as the sacred union between one man and one woman, a union that exemplifies the relationship of Christ and His Church,”[43] is supporting same-sex marriage ever on the table? Herein lies the problem with a strictly neoclassical view: it views “self-interest” in empirical terms. There is reason to believe that an actor, with sincere convictions about the wrongness, even inferiority, of a class of Americans would forgo profits, if it meant remaining ideologically consist — just ask Hobby Lobby,[44] whose own policies have generated public controversy and calls for boycott. Even if a corporation were so dogmatic as to choose discrimination over profit-maximization (and many firms do), the costs imposed upon one’s company largely depend on the size, visibility, and social status of the prejudiced party. The Jim Crow Economy represents this very principle: white store owners forewent revenue from willing Black consumers, whose share of the market and prevailing social status was slight enough to be sacrificed in pursuit of larger ideological ambitions — namely, white supremacy.

In this light, the claims made by Mill and Smith require some refinement. Reputation is a powerful engine of change, but it activates only insofar as consumers sanction it. Turning away from the baker’s stale bread — or the cake shop’s discriminatory cake — requires, above all, an understanding that such a thing is worth less than the merchant claims. Once enough individuals in the marketplace of ideas assert their stance on discrimination, producers may well respond, but the damage that producers are willing to endure may depend largely on the issue at hand, the size of the opposing coalition, and percentage loss in profits. It is beyond peradventure that minority groups are at a structural advantage in this marketplace, and it may depend on considerable alliances with majority-member consumers to send a signal of requisite strength back to the producer — and this assumes that the producer is amenable to negotiation.

III. Conclusion

Just as it took Brown,[45] the Civil Rights Act of 1964, and the Voting Rights Act of 1965 to topple Jim Crow, the future frontier of equality will require robust legal intervention to offset the worst distortions in the market. When weighing matters of discrimination in the commercial marketplace, the Courts must lean on Dennis to justify the repression of graves harms for which there is “exceedingly modest, if not de minimis value.”[46] Mill and Smith wrought invaluable contributions to our understanding of economics, but even Mill recognized the need for collective action when “harm to others” is at stake. Such action must be taken to combat discrimination against minority populations, for whom footing is not equal and public approval is divided. As Professor Barry Schwartz has said, “When you rely on incentives, you undermine virtues. Then when you discover that you actually need people who want to do the right thing, those people don’t exist because you’ve crushed anyone’s desire to do the right thing with all these incentives.”[47] We must continue to pursue our constitutional virtues — our first principles of life, liberty, and equality — even if this means artificially aligning market incentives toward justice.

[1] New York v. Ferber, 458 U.S. 747, 762 (1982).

[2] See, e.g., The Sedition Act of 1798, 1 Stat. 596 (criminalizing any false, scandalous, and malicious writing or utterance against the federal government).

[3] John Stuart Mill, On Liberty (1859), accessed at

[4] Craig v. Masterpiece Cakeshop, Inc., 2015 COA 115, ¶ 33, 370 P.3d 272, 281, cert. denied sub nom. Masterpiece Cakeshop, Inc. v. Colorado Civil Rights Comm’n, №15SC738, 2016 WL 1645027 (Colo. Apr. 25, 2016) (hereinafter “Masterpiece Cakeshop”).

[5] Mill, supra note 3, at 11.

[7] Colin Heydt, John Stuart Mill, Internet Encyclopedia of Philosophy,

[8] “He must know [a position’s counterarguments] in their most plausible and persuasive form. If one is equally unable to refute the reasons on the opposite side, he has no ground for preferring either opinion.” Mill, supra note 3, at 23. On Liberty treats no position as beyond reproach, especially those of grave consequence to society. “Whatever people believe, on the subjects which it is of the first importance to believe rightly, they ought to be able to defend against at least the common objections.” Id.

[11] “Some, whenever they see any good to be done or evil to be remedied, are willing for the government to do something about it, while others would rather put up with almost any amount of social evil than add one to the areas of human life that are subject to governmental control.” Id. at 6.

[13] Adam Smith, The Wealth of Nations (1776).

[14] Adam Smith, The Wealth of Nations (5th ed., 1789).

[15] This assumption, that profit will always supersede ideological and prejudice, is especially interesting in Masterpiece Cakeshop. See discussion infra Part II.

[16] “Profit and the Public Good,” The Economist (Jan. 20, 2005), available at

[17] “For a modern interpretation [of Smith’s ideas on self-importance], see, e.g., Robert Nozick, Anarchy, State, and Utopia (1974), and the novels of Ayn Rand, especially The Fountainhead (1943).” Michael Szenberg, Eminent Economists: Their life Philosophies 6 (1992).

[18] An A-Z of business quotations: Capitalism, The Economist (July 6, 2012), accessed at

[19] Mill, supra note 3, at 12.

[20] Skinner v. Railway Lab. Execs. Ass’n, 489 U.S. 602, 635 (1989) (Marshall, J., dissenting).

[21] United States v. Dennis, 183 F.2d 201 (2d Cir. 1950), aff’d, 341 U.S. 494 (1951).

[22] See United States v. Carroll Towing Co. 159 F.2d 169 (2d. Cir. 1947).

[23] Dennis, 183 F.2d at 212.

[24] Richard A. Posner, Free Speech in an Economic Perspective, 20 Suffolk U. L. Rev. 1, 8 (1986). One of the costs of interference (B), Posner noted (in a distinctly Millsian) fashion, was that “truth can be determined only by a competition among ideas.” Id. at 11.

[25] Indeed, in American Booksellers Ass’n, Inc. v. Hudnut, 771 F.2d 323 (7th Cir. 1985) Judge Easterbrook identified this restraint as a distinguishing (and meritorious) characteristic of American jurisprudence: “A belief may be pernicious-the beliefs of Nazis led to the death of millions, those of the Klan to the repression of millions. A pernicious belief may prevail. Totalitarian governments today rule much of the planet, practicing suppression of billions and spreading dogma that may enslave others. One of the things that separates our society from theirs is our absolute right to propagate opinions that the government finds wrong or even hateful.” Id. at 328.

[26] Dennis, 341 U.S at 498.

[28] The Court likened Communist sympathizers to sleeper cells, ready to revolt on call:

“The formation by petitioners of such a highly organized conspiracy, with rigidly disciplined members subject to call when the leaders, these petitioners, felt that the time had come for action, coupled with the inflammable nature of world conditions, similar uprisings in other countries, and the touch-and-go nature of our relations with countries with whom petitioners were in the very least ideologically attuned, convince us that their convictions were justified on this score.” Id. at 510–11.

[29] Skinner, 489 U.S. at 635.

[30] Korematsu v. United States, 323 U. S. 214 (1944).

[31] Roger Parloff, “Christian Bakers, Gay Weddings, and a Question for the Supreme Court,”

The N.Y. Times (Mar. 6, 2017),

[32] Masterpiece Cakeshop, 370 P.3d at 276.

[35] Craig v. Masterpiece Cakeshop, Inc., 2015 COA 115, 370 P.3d 272 (Colo. Aug. 13, 2015).

[36] Parloff, supra note 31, at 1.

[37] Parloff, supra note 31, at 1.

[38] “The degree that people actually discriminate follows logically and indeed inexorably from their taste for discrimination and the structure of the markets in which they operate.” Sanford Ikeda, The Nature and Limits of Gary Becker’s Theory of Racial Discrimination, SUNY-Purchase College, 1, 20 (2017).

[39] Linda Gorman, Discrimination, The Concise Encyclopedia of Economics (2nd ed.),

[40] Gary Becker, Economics of Discrimination (1957).

[41] This conveyance is called a “signal,” which producers can send to their benefit or detriment. See generally Michael Spence, Job Market Signaling, 87 The Quarterly Journal of Economics 3 (1973).

[42] Frank Newport, Americans Greatly Overestimate Percent Gay, Lesbian in the US, Gallup (2015),

[43] Parlott, supra note 31, at 1.

[44] See Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2751 (2014). American opinion was sharply divided while this case was in motion, but a majority of Americans did not agree with Hobby Lobby’s objection to providing birth control under the Affordable Care Act. Tara Culp-Ressler, Most Americans Want Hobby Lobby to Lose its Supreme Court Case, Medium (July 30, 2014),

[45] Brown v. Board of Education, 347 U.S. 483 (1954).

[46] New York v. Ferber, 458 U.S. 747, 762 (1982).

[47] Barry Schwartz, Incentives Are Not Enough, Awakin (Jun. 1, 2009),

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