In America today, a public official's lawful income consists of a salary. But until a century ago, the law frequently provided for officials to make money on a profit-seeking basis. Prosecutors won a fee for each defendant convicted. Tax collectors received a percentage of each evasion uncovered. Naval officers took a reward for each ship sunk. Numerous other officers were likewise paid for "performance." This book is the first to document the American government's for-profit past, to discover how profit-seeking defined officialdom's relationship to the citizenry, and to explain how lawmakers--by ultimately banishing the profit motive in favor of the salary--transformed that relationship forever.
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About the Author
Nicholas R. Parrillo is associate professor of law at Yale University.
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Against the Profit Motive
The Salary Revolution in American Government, 1780â?"1940
By Nicholas R. Parrillo
Yale UNIVERSITY PRESSCopyright © 2013 Yale University
All rights reserved.
The Old Regime
Lawful Bargaining for Public Services
Part One of this book tells the story of facilitative payments—the moneys that public officials received for providing services to "customers" who wanted them. From the Middle Ages up to the late 1700s and early 1800s, these payments were, to a significant degree, unregulated. That is, officers and the recipients of their services could engage in a fair amount of bargaining. In this chapter, I begin by explaining the doctrines of Anglo-American common law that made such bargaining legal. Next, I show that, while Parliament and American legislatures often enacted statutes to fix the prices of officers' services, these laws had exceptions and limits that allowed for a good deal of lawful negotiation to continue. Finally, I consider how all this bargaining imbued government itself with an ethos of customer-seller reciprocity.
COMMON-LAW BASES FOR NEGOTIATION IN ENGLAND
In reconstructing the legal regime that governed exchanges between officers and service recipients in early modern England and colonial America, one might assume that we should begin with the doctrine on bribery. But that is not so: bribery at common law was a narrow offense with little or no application beyond judges. However, much behavior that we today would label "bribery" was still criminal for any public officer. It was punished under the broad umbrella offense known as extortion, "the main offense used to combat public corruption" in late medieval and early modern England. Our inquiry must, therefore, center on extortion. Largely following Coke, Blackstone in 1769 defined extortion as "any officer's unlawfully taking, by color of his office, from any man, any money or thing of value, that is not due to him, or more than is due, or before it is due." For our purposes, the definition raises two questions. How did one tell what payment was "due"? And what did it mean to "take unlawfully"?
As for the question of what payment was due, the answer was straightforward: any payment established (1) by statute or (2) by immemorial custom, that is, by a usage that stretched back to "time out of mind." The officer had a right to demand such payments. As the chief justice of the Common Pleas said in 1793, an officer could claim a fee "by ancient usage or act of Parliament." Through the 1600s and 1700s, the point appeared in multiple legal abridgments, plus the leading justice-of-the-peace manuals.
Thus, an officer taking a statutory payment, or a customary payment, was not guilty of extortion. But the reverse was not necessarily true. In other words, there were some nonstatutory, noncustomary payments that were still lawful. How could this be? This brings us to the other key element of the offense: that the payment be "unlawfully taken." The meaning of this phrase is not obvious on its face. Fortunately James Lindgren, in his immensely valuable doctrinal history of extortion, describes the facts of more than one hundred English cases on the subject from before the nineteenth century. As to the "mode of taking," the payments held to be extortionary overwhelmingly involved at least one of three elements: (1) the officer engaged in some kind of coercion, such as threatening to withhold a service the payor needed or to take action the payor wished to avoid; (2) the officer deceived the payor, say, by lying about the amount due; or (3) the payor intended to induce the officer to betray his duty, for example, by getting the officer to let the payor escape jury service, or let a suspect out of custody, or grant a license regardless of the applicant's qualifications—that is, what we today call "bribery."
But what did English law say about payments to officers that involved neither coercion nor deception nor bribery? In other words, what if an officer did his duty and the recipient of the service, knowing that he legally owed nothing, voluntarily gave him an unsolicited "tip" for it?
Such tips were, in fact, legal at common law. To be sure, Lindgren's work does not provide affirmative support for making this conclusion, but neither does it stand in the way. Such tips are peripheral to Lindgren's research agenda, and he is not explicit about their legal status. Certain narrow categories of such payments, he rightly notes, were criminalized by specific statutes: there were several legislative acts, in England and the American colonies or states, that (1) fixed or banned payments for certain named officers or named services and (2) criminalized the mere receipt of any payment for official service in violation of those regulations, even without coercion, deception, or bribery. Some of Lindgren's commentary on these anti-receipt statutes might be taken to mean that they declared the common law—that mere receipt was always criminal unless affirmatively authorized by statute (or, perhaps, by custom). But Lindgren is not very explicit about the declaratory reading and certainly does not emphasize it. On the contrary, for offices or services not covered by statute, Lindgren centers his description of extortion not on mere receipt but instead on the unholy trinity of coercion, deception, and bribery. Further, his numerous discussions of individual cases prior to 1800 almost invariably mention coercion, deception, bribery, or violation of an anti-receipt statute. I have researched the only three cases of official extortion with no such mentions and have found that they, too, involved officers subject to anti-receipt statutes. Thus, Lindgren's work does not foreclose the idea that tips were lawful.
Plus, there is affirmative support for the legality of tips at common law in the work of G. E. Aylmer. In the second edition of The King's Servants, which he published after more than twenty years of archival research on seventeenth-century English administration, Aylmer describes a common type of payment to officials known as the gratuity. "[G]ratuities," explains Aylmer, were "not illegal." Using the term bribe in the colloquial sense of an inducement to breach official trust, he elaborates: "Today tipping a public servant ... smacks of impropriety. But it would be a great mistake to equate tips [i.e., gratuities] with bribes in seventeenth-century England. At that time bribery implied an attempt to persuade an official to follow a course of action other than that which he knew he ought to have followed. It implied the acceptance of a present or gratuity by an official, knowing that its purpose was to influence his decision improperly." Aylmer speaks of the 1600s, but the principle survived through the following century. Thus a pair of parliamentary commissions in the 1780s, cataloging the frequent receipt of "gratuities" by numerous officers in various parts of the government, warned that such payments might easily be abused so as to induce officers to betray their duty, but—crucially—the commissioners did not suggest that such payments were unlawful per se. In the case of one office, they were careful to note: "We do not say, or mean to insinuate, that we have discovered any instance of such abuse" among the officers who were receiving gratuities.
A strong affirmation of the legality of gratuities at common law appeared in the third volume of Matthew Bacon's A New Abridgment of the Law (1740), a leading reference. In a passage that remained intact through four subsequent editions during the 1700s, and was reproduced in the authoritative 1819 treatise on criminal law by William Oldnall Russell, Bacon said of extortion: "[A]n officer, who takes a reward which is voluntarily given to him, and which has been usual in certain cases for the more diligent or expeditious performance of his duty, cannot be said to be guilty of extortion; for without such a praemium it would be impossible in many cases to have the laws executed with vigor and success." It is evident from these words that lawyers of the period understood coercion and bribery more loosely than we moderns do. To them, an officer who offered "more diligent or expeditious performance of his duty" in exchange for more money was not (within limits) committing a breach of official trust. Conversely, a citizen who found it otherwise "impossible in many cases to have the laws executed with vigor and success" could still be said to pay the necessary premium "voluntarily." No doubt this looseness provided cover for some exchanges that we (and even people at the time) would say involved coercion or breach of official duty.
But this did not stop eighteenth-century lawyers from believing that some category of lawful gratuities existed. Consider a 1796 case in the King's Bench, where one man usurped the office of another, performed an official service, and received money from the recipient of the service. The justices held that the wronged officer could not recover the money from the usurper if it were "a gratuity" that the service recipient might "have refused to give if he had pleased," as distinct from the "regular fees due" by custom or statute. The justices spoke of gratuities as perfectly ordinary things and did not intimate they were illegal; on the contrary, one justice pointed out that they depended "entirely on the behavior and civility" of the officer. Consider also the testimony of Thomas Davies, one of the highest civilian administrators in the Royal Navy, before a parliamentary commission in 1787. Informing the commission of the gratuities he received for processing the accounts of contractors and naval officers (which added up to big sums), he frankly admitted that there was "no positive authority for receiving them" but also "no prohibition to receiving them." With apparent appreciation of the link between voluntariness and lawfulness, he emphasized that the "whole" of the "gifts" was "voluntary," that "they are never demanded," and that he "never intimated to the party" that a payment was "too small, or less than usually given by others." Many other administrators reported and justified their gratuities along the same lines.
Tipping and "gift-giving" were familiar practices in early modern English administration, particularly when an officer provided quick or extraordinary service: gratuities were optional for the donor, and they were most likely to be given when the officer was providing some new or special service that was optional for him, too. "It is very natural," wrote Jeremy Bentham circa 1780, "that an individual who has been served with an extraordinary expedition [by an officer], should add something to the accustomed fee." Tipping was especially accepted for services during off-hours. In a case before the Common Pleas in 1778, a sealer of writs offered to open his office and provide service on a holiday (the Feast of St. Barnabas), but only for 10s., far more than the usual fee of seven pence. The man seeking the service paid but then sued to get his money back. The chief justice explained that the sealer's "claim must be to keep the office shut, if any thing; and if the officer has a right so to do, he may set his own price on opening it." (The court decided against the sealer, but only because the Feast of St. Barnabas was not a legal holiday.)
The permissibility of gratuities allowed officer and citizen to engage in a degree of negotiation beyond the constraints of statutory and customary fee levels. But there was more to gratuities than that. A gratuity could become a customary fee, thereby altering the baseline of what payments were "due," such that the officer had a right to demand them. "If a gratuity is taken, at a more or less standard rate, for the rendering of the same service over a long enough time," explains Aylmer, "it can sometimes become a fee without anyone being aware of the transition, at least not until after it has happened." The evolution of gratuities into fees, he says, was a "constant process" in the 1400s and 1500s. And it was still going strong in the late 1700s: as the parliamentary commissioners wrote in 1782, a gratuity "very soon assumes the name of custom, and becomes a claim." The commissioners' data on various offices offered snapshots of gratuities at various stages on this evolutionary path. One top administrator said that the "greatest part" of the payors of "gratuities" gave at one particular rate but that "some give more, some less, some differently at different times, and some never give any thing." In several other cases, an officer's "gratuities" were so regular that he kept a written schedule of what amounts were typically paid for what transactions.
Thus, although the notion of immemorial custom and usage might suggest, at first blush, that customary fee schedules dated back for centuries and were extremely stable, they were in fact the result of an ongoing and decentralized process of bargaining between individual officers and the citizens with whom they dealt. The doctrine of "immemorial" usage had the practical effect of providing legal cover for these organically negotiated increases. To be sure, the doctrine on its face might seem strict: by the most extreme definition, an English custom lost its immemorial status if anybody could prove that it had not been continuously in place since the start of legal memory—the year 1189! But as a practical matter, notes one historian of the jurisprudence of custom, inquiries seldom went back farther than sixty or seventy years. Further, officers' assertions regarding customary fees could be difficult to refute. This was because, in any dispute over fees, the fee-taking officers themselves enjoyed an informational advantage: they knew the office's practices, its history, and its records as nobody else did. While customary fees were sometimes ascertained in a relatively official and accessible schedule, in many other cases the most authoritative sources were the interested officers' personal memories, or lists that they drew up and kept. The "distinction between what [payment] is permitted and what [payment] is prohibited," wrote Bentham circa 1780, "in many cases, is exceedingly minute," giving rise to "many temptations" to exploit "the ignorance of strangers" to the office.
A good illustration is the failed royal investigation of alleged fee increases that occurred in the early seventeenth century. James I in 1623 ordered his investigators to gather information "by examination of any person or persons, and by view of any rolls, books, orders, privy seals, certificates, and other records, memorandums, and things whatsoever." When Charles I acceded, he soon made a similar order. It was no accident that under both monarchs, throughout the eighteen years during which the inquiries dragged on, the most active investigator was a career historian, Sir Henry Spelman. The task of discerning lawful fees, when taken seriously, required arduous historical research: "Officials sent in lists of the fees they claimed; in the central courts juries of underclerks, solicitors, and attorneys commented on the officers' statements; in the Court of Common Pleas officials made rejoinders to the jury's report explaining at length the nature of the work of each office. Where increase of fees was suspected, records were searched, orders of the court were collected, and witnesses were examined." Apparently worried that turnover among the offices' clients had made it difficult to find citizens who could remember paying lower fees, Spelman advised his associates to "enquire for old men"—track down elderly witnesses who could remember the fee levels of past decades.
A similar pattern can be seen in several offices in later years. For example, Parliament in 1691 ordered the Barons of the Exchequer to investigate the "ancient legal fees" of the officers in the financial branch of the Exchequer and to reduce those fees to a single accessible schedule. In carrying out this task, the Barons took testimony and did documentary research. They managed to determine some fees on the basis of an official table from the year 1558, but others came from a less formal source—a list of fees that the current officers testified had been passed down to them in 1676 by one William Burges, "a long time clerk in the said office." At the Treasury, up till its salarization in 1782, the customary fee levels were not recorded in any more official source than a list that each clerk kept of the fees he individually took. Things were the same among the dozens of clerks who managed the Royal Navy in the 1780s. Over at the Navy Pay Office, the fees were simply those "usually" taken, "as far back as the memory of the oldest officers now employed in [the] office reaches." At the common-law courts in 1818, according to a parliamentary commission, the "grounds" upon which the clerks and other officers took their fees were, "for the most part," mere "[c]onstant receipt by the present officers and the information as to a similar receipt by their predecessors, derived either verbally or from books of accounts or written memoranda."
Excerpted from Against the Profit Motive by Nicholas R. Parrillo. Copyright © 2013 Yale University. Excerpted by permission of Yale UNIVERSITY PRESS.
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Table of Contents
Part I Facilitative Payments to Salaries
1 The Old Regime: Lawful Bargaining for Public Services 51
2 Bargaining Outlawed 80
3 A Regulatory Nightmare: Salaries as a Remedy for Corrupt Exchange and Official Lucre 111
4 A Government Capable of Saying No: Salaries as a Reaction against Customer Service 125
Part II Bounties to Salaries
5 State and Local Taxation: The Tax Ferrets 183
6 Federal Taxation: The Moiety Men 221
7 Criminal Prosecution: Cash for Convictions 255
8 Incarceration: Jailors' Fees and Penitentiary Profits 295
9 Naval Warfare: Prize Money and Blood Money 307
Epilogue: The Salary Revolution and American State-Building 359
Appendix: Public Prosecutors' Dates of Transition from Fees to Salaries, by Jurisdiction 363
List of Abbreviations 367