THE ADMINISTRATIVE STATE WORKS SO WELL ON THE BLACKBOARD.

Technocracy has a number of intellectual sires, including Herbert Croly, Woodrow Wilson, and A. C. Pigou.  Paul (Foundations of Economic Analysis) Samuelson supposedly quipped that he didn't care who got elected as long as he got to write the economics textbooks.  The good news is that there are competing textbooks, such as Armen Alchian and William Allen's Universal Economics and its various precursors, including University Economics.

There is one final point I want to make about Universal Economics that underscores its value. Alchian and Allen never set up a “perfect” market as a standard against which real-world markets are judged and found wanting. They often employ thought experiments involving frictionless markets to ascertain why particular institutions or practices exist. But nowhere do you find the facile, efficiency-engineering approach that, even at introductory levels, permeates economics curricula. Economists are most definitely not plumbers according to Alchian and Allen.

That passage summarizes the structure of textbooks as envisioned by Professor Samuelson, and sets up what I describe as the Welfare Economics Paradigm.  Stated briefly, competitive markets allocate resources efficiently, markets that are not competitive produce allocative inefficiencies we can draw up on a blackboard, and if we can draw them up on a blackboard we can prescribe fixes for all of them.

I've devoted many a post to the ways the structure-conduct-performance approach to industrial economics and competition policy comes up short. In the Pigou-Samuelson world, the monopoly has the ability to raise prices above marginal costs and impose deadweight losses on consumers.  That companies might pursue monopoly by improving products and selling them more cheaply, and increase consumer welfare, that is, the approach to competition policy one Joseph Biden saw as so subversive he and Edward Kennedy had to keep Robert Bork off the Supreme Court, didn't make it into Foundations or into the applied welfare economics approach that serves as an operating manual for Democrats.

Suppose the demand and cost conditions were such that one firm could undersell any combination of two or more smaller firms and it made no sense to break it up?  Well, if you can draw the cost curves, you can surely draw up a regulatory commission and have those Disinterested Experts determine the fair prices and provide a reasonable return on investment.  The problem with that approach, as Leonard Weiss, no Austrian School type he, noted years ago is that businesses learn what their costs are by doing: no such market test exists for regulated monopolies.  About the best you can do is have the regulators make their rulings and let the courts sort it out.  In that tale is the origin of the administrative state, ultimately the field of administrative law, and the concept we know as Chevron deference.  We'll continue the tale, and the fallout from Chevron's recent reversal, below the jump.

How pervasive is the Samuelson-style Welfare Economics Paradigm in the teaching of economics and of public policy?  Think, first, about the creation of the independent regulatory commissions in the late nineteenth century and the Federal Trade Commission with additional competition policy not provided for in the Sherman and Clayton Antitrust Acts.  In the economics class, the future commissioner, or more commonly, the future assistants-to who do the fieldwork for the case, learns about the sorts of departures from the competitive standard that might arise where there is a natural monopoly, an oligopoly, or a crime syndicate, while the litigation is handled by lawyers.  Procedurally, the regulatory commission or the Federal Trade Commission serve as the equivalent of the trier of fact, or district court, with challenges to a commission finding being appealed to the circuit court, and, should the issue be suitably contentious, to the Supreme Court.  Let me note before going on that numerous appellate and Supreme Court findings have noted the "questionable utility" of a court in handling many economic matters, and there is a long history of courts preferring to leave the creation of agencies to legislatures or Congress and to trust the commissioners to do a proper job.

In the economics curriculum, the additional regulatory agencies that have been imposed on the people proliferated from the Great Depression on tends to focus on the additional departures from the competitive model that come under the rubric of Externality or Collective Consumption Good.  I confess to never fully understanding how agencies such as the Environmental Protection Agency or the Occupational Safety and Health Administration made rules.  It sufficed to draw up the distinction between private and social costs on the blackboard and provide some references to the sort of empirical work that might lead to the drafting of a proper standard.  The legal side was left to lawyers and political scientists such as Outside the Beltway's James Joyner.

While I took a graduate Administrative Law course way back in 1988, when Chevron was new, this isn’t an issue I’ve spent much time thinking about. The basic concept underlying Stevens’ ruling—that agency professionals have specialized expertise and deserve deference from judges lacking said expertise—is unassailable. Indeed, Congress recognized this decades before Chevron, creating a whole class of Administrative Law Judges under the Administrative Procedures Act of 1946 precisely because it was understood, even then, that many agency decisions are too complicated to be reviewed by ordinary judges and instead required specialists as overseers.

That's another way of saying the new agencies would function much like the independent regulatory commissions Congress was already familiar with.  "Agency decisions aren’t simply products of bureaucratic fiat. They are—and have been for going on eighty years now—subject to judicial scrutiny. It’s simply by judges who are specialists in the laws applicable to a given agency."  Yes, in much the same way that the utility commissioner follows established procedures in issuing a new rate order.  On paper, so far, so good.  In principle, as Vox explainer Ian Milhiser noted in January, when the Court heard arguments, deferring to subject specialists makes sense.

This method of lawmaking, where Congress declares a broad federal policy goal, then tasks an agency with coming up with the specifics of implementing that goal at any particular moment, is exceedingly common. One of the primary roles of the 15 federal cabinet departments and various other federal agencies is to make regulatory decisions according to the authority delegated to them by Congress.

When Congress delegates power in this way, there will inevitably be cases where reasonable people can disagree about whether federal law permits a particular agency to take a particular action. Scientists might disagree, for example, on whether a specific new technology does a better job of reducing emissions than the one mandated by an older regulation.

Unfortunately, Mr Milhiser was excessively optimistic about those mid-level regulators being sensitive to changes in popular opinion.

[P]lacing policymaking authority in the hands of federal agencies makes sense entirely because control of those agencies will shift with the political winds. “While agencies are not directly accountable to the people,” the Court said in Chevron, the leaders of agencies are political appointees, and they answer to a president who is accountable to the voters. And so “it is entirely appropriate for this political branch of the Government to make such policy choices.”

If voters preferred Carter’s environmental policy to Reagan’s, then they were free to elect a new president who would reinstate the Carter policy. But if federal judges, who are political appointees who serve for life, make an ill-considered policy judgment, voters can do very little to rein in those judges.

Chevron, in other words, was at once a good government decision and a pro-democracy decision. It stands for the dual propositions that policy choices should be made by people who know what they are doing, and that those policymakers should be accountable to the American people.

It's not that simple, and we don't even have to get into Trumpian fulminations about swamps to be drained to see the problem.  Glenn "Insta Pundit" Reynolds, who has taught administrative law, continues.

Under Chevron deference, when an agency interprets a statute it administers (e.g., the EPA and the Clean Air Act), a court will uphold its interpretation so long as it is (generously assessed) a reasonable one, even if it is not the interpretation the court would have come up with on its own.  As you might imagine, this, at least potentially, gives agencies a lot more leeway, particularly when, as is often the case, Congress has drafted the statute ambiguously.

With Chevron overturned, courts will now apply their own judgment instead of deferring to agencies.

The problem lies with Congress, which has some obligation to draft less ambiguous legislation.

[I]f Congress wants agencies to do things, it has to tell them to. If agencies think their statutes are inadequate to their purpose, they can ask Congress to amend them. Rather than a threat to democracy, this is a modest return of decisionmaking to democratically elected legislators, and out of the hands of unelected bureaucrats.

A Congress, though, with more talent at coming up with clever acronyms for misleading legislation than in spelling out clear intentions for the agencies, is likely to continue to give advocates for the Chevron status quo intellectual ammunition.  Back to James Joyner.

While there is certainly a good faith argument to be made that the degree of delegation of Congressional power to Executive agencies that has evolved over the last century or so violates the intent of the Framers of 1787, there is simply no other way to run a continental superpower of 330 million people. Even magically removing the bitter partisan polarization that thas crippled it over the past two decades or so, Congress simply couldn’t perform the regulatory functions of the agencies. It lacks the expertise, manpower, and feedback mechanisms to micro-legislate.

Perhaps so, and yet clarity in spelling out what the Intent of Congress is, what the policy objectives are, and what latitude the departmental secretaries have to issue regulations matters.  The stumbling block, going back to Chevron, has always been turf fights in the swamp, particularly if it's Republican cabinet secretaries taking on long-tenured salaried employees marinated in Progressive Era conceits.  (Yes, even though forty years ago it was Reagan Administration bureaucrats in the early EPA complaining about interference from judges appointed by the likes of Lyndon Johnson and Jimmy Carter!)  That's complicated by the path from "The Secretary shall issue" to the salaried employees who draft the regulations, which Law and Liberty's Adam White recognizes.

Agencies do not approach statutes as detached, neutral interpreters—especially the presidentially appointed, Senate-confirmed officers who lead the agencies. Eugene Scalia, former US Secretary of Labor, recently described the problem: “For an agency interpretation to be authoritative, courts have said, it has to come from a senior official—a cabinet secretary or agency head. But the people actually doing the interpreting often are staff lawyers at a much lower level in the agency.” Indeed, “[s]ome agency heads not only don’t interpret; at times they’re indifferent to—even contemptuous of—the right legal answer.”

Chevron largely assumed away the problem: so long as the agency’s action described and justified its interpretation of the laws in a final rulemaking or other authoritative agency action, the courts generally did not attempt to disaggregate the agency’s reasoning process.

(Consider, dear reader, offices where the regulations are drafted staffed with Kennedy School graduates and others steeped in the Welfare Economics Paradigm and confident in their role as Wise Experts.)

As is the case with many of the essays I'm linking to, a full reading will provide additional insights.  Thus, on Independence Day, does Town Hall contributor Robert Aery consider the Deeper Implications than whether the cost-benefit analysis supporting the latest fuel efficiency standards is valid or not.

[A]s conservative citizens we must determine if we believe in the Framers' view of governance or that of the modern progressive. To be honest, Republican and Democrat lawmakers generally allow the Wilsonian view to exist and expand at all levels. Our federal and state governments largely operate under the assumption that we are best governed by so-called experts.

Big government advocates generally place a false choice before us, between empowering legislators or agency practitioners. However, the genuine choice is between bureaucrats and the people – citizens rule through their elected representatives under our republican form of government.

Yes, and Members of Congress are able to pass detailed legislation.  Consider the efforts throughout the years to spell out precisely how many bullets in a magazine constitute a hazard, or what, exactly, is a bannable assault weapon.  The gnats can be strained out with sufficient will.  That makes an objection by M. J. Stern in Slate ring hollow.  On one hand, he notes, "Congress writes statutes broadly because it expects these agencies to respond to new facts and adjust their enforcement accordingly."  Put in a Koch-funded Cabinet secretary, or a Soros-funded Cabinet secretary, yes, there's plenty of room to find fault, and watch the people who benefit by the existing regulations raise holy hell about any such adjustments.  Read on, and decide for yourself whether the failing is with the courts, or with those broadly written statutes.  "Kagan’s dissent illustrated the stability of Chevron in practice when courts apply it in good faith to the panoply of technical questions that arise when agencies apply a broadly worded mandate to a specific problem."  A National Review contributor, C. C. Severino, saw that at work.

Agencies routinely get away with 180-degree reversals of their prior interpretations, typically after a change in presidential administration. While serving on the D.C. Circuit, then-Judge Brett Kavanaugh charged in a 2016 law review article that “Chevron encourages the Executive Branch (whichever party controls it) to be extremely aggressive in seeking to squeeze its policy goals into ill-fitting statutory authorizations and restraints.” He observed, “In many ways, Chevron is nothing more than a judicially orchestrated shift of power from Congress to the Executive Branch.”

That shift might have taken place because agency decisions are recondite and complex, which is to say, outside the skill set of your average Member of Congress, or it might be because it's easier to pass a law full of "The Secretary shall issue regulations" language and then go back to campaigning and fund raising whilst those Kennedy School graduates in the windowless offices draft the regulations.  That might be the skeptical view taken by Ilya Shapiro in City Journal.

Though intended to empower Congress by limiting the role of courts, Chevron instead enabled agencies to aggrandize their own powers to the greatest extent plausible under their operative statutes, and often beyond. Courts, in turn, have gotten lazy in interpreting statutes. It’s become a vicious cycle of legislative buck-passing and judicial deference to executive overreach.

He continues, "[E]xperience has shown that Congress loves shirking accountability, and agencies love pursuing their own interests."  And the Cult of the Presidency contributes to the cycle, with presidents issuing executive orders turned into pages of the Federal Register.  Jonathan Adler has the dynamic about right.

[Chevron] empowered agencies to revise and reverse their statutory interpretations to align with their policy goals, and so long as no court declared that the statute was clear, they could get away with it.  Chevron itself involved a Reagan Administration reversal of Carter Administration policy, and the doctrine has been used to justify agency about-faces on the meaning of regulatory laws when the White House changes hands.

He further notes,

Ending Chevron sends a signal to lower courts that they need to evaluate agency assertions of regulatory authority more carefully and fulfill their independent obligation to interpret statutory text, but it hardly means an end to the administrative state. The Court is not preventing agencies from regulating. Nor is it telling lower courts to reject agency interpretations. Rather, the Court is reinforcing the point, recently made in its so-called “major questions doctrine” decisions, that agencies are only to exercise power which Congress actually delegated to them.

I repeat, because repeat I must, that is if Congress actually delegates those powers.  Then comes the Swamp, doing what the Swamp does.  Paula Bolyard of Pajamas Media sees it.

Understand that this is all about power and who should have it. To be fair, both sides have used federal agencies and Chevron deference to advance policies they can't get through Congress. It makes a mockery of the separation of powers established in the Constitution, but it works—for as long as a president is in office. Every time there is a new president, all the little hamsters in the federal agencies go to work changing the rules.

The hamsters, er, those Kennedy School graduates, though, harass our people and eat out their substance.  Reason's Jacob Sullum details the costs to citizens crushed by the Swamp in two comments on the cases leading to the reversal of Chevron.  First, he refers to the fishermen compelled to pay for federal inspectors riding their boats.

The dispute at the center of these cases illustrates how vulnerable Americans are to the whims of federal agencies empowered to invent their own authority. The plaintiffs are family-owned businesses that cannot easily bear the financial burden imposed by the requirement that they not only make room on their cramped boats for observers monitoring compliance with fishery regulations but also pay for that dubious privilege.

He repeats the point in a second column after the ruling.  "The victims in such cases are not billionaires like Charles Koch.  They are ordinary Americans who are hopelessly outmatched by government agencies that write their own rules."  That column concludes, "The Goliath in this story is not Koch Industries. It is an administrative state that has usurped the judicial power to interpret the statutes under which it operates."  Yes, the Koch brothers and other libertarian lobbyists provided financial or in-kind support for the appeals that ended Chevron deference, and we'll return to that bogeyman anon.  There might be fundamental governing principles at work: does the end of Chevron make possible a restoration of Madisonian principles of divided powers as against the Wilsonian technocracy?  Power Line's Scott Johnson prays it is so.  "We have a long, long way to go to roll back the depredations of the administrative state against the Constitution."

Congress also has a role, whether it is in crafting legislation more carefully in future, or in codifying Chevron.  The Congressional Progressive Caucus recently offered their attempt to codify.  It includes provisions to identify the rent-seekers and keep them out of the rule-making, that being left solely to the hamsters along Independence Avenue.  But rule-making, whether transparently in Congress or more mysteriously in those bureaucrats' offices, generates rents, and it might be hoping for water from the Moon to preclude that involvement.

The Coalition for Sensible Safeguards, a group of more than 160 organizations mobilizing for stronger public protections, also called on Congress to pass the Stop Corporate Capture Act.

"The bill is a comprehensive blueprint for modernizing, improving, and strengthening the regulatory system to better protect the public," the coalition wrote in response to Friday's ruling. "It would ensure greater public input into regulatory decisions, promote scientific integrity, and restore our government's ability to deliver results for workers, consumers, public health, and our environment."

From the early days of Cold Spring Shops I have had reservations about Utopian Wonkery, of which there is much in that release.  I note, also, that the end of Chevron is likely to gum up Project 2025, which the self-styled progressives are denouncing prospectively.  It's going to take a Trump victory in November, not a foregone conclusion, plus some disciplined staff work during the transition, also not a foregone conclusion, plus the right senior management appointments in the departments, and if the environmental lobby or the abortion lobby or the lavender lobby don't already have litigation outlined in the event that all the above comes to pass that says something about their staff work.