ECONOMISTS ON PRIVATE INCENTIVES, ECONOMIC MODELS, AND THE ADMINISTRATIVE STATE: THE CLASH BETWEEN HAPPINESS AND THE SO-CALLED PUBLIC GOOD

This essay examines the administrative state as a ubiquitous phenomenon that results in part from the mismatch of incentives. Using two dramatic episodes in the history of economics, the essay considers two types of mismatch. It then examines how economists increasingly endorsed the “general good” as a unitary goal for society, even at the expense of private hopes and desires. More than this, their procedures and models gave them warrant to design mechanisms and advocate for legislation and regulations to “fix” the supposedly suboptimal choices of individuals in service to the overarching goal. The rise of New Welfare Economics dealt an additional blow to the sovereignty of individual motivations, notwithstanding that Hayek and Buchanan warned that this engineering approach allowed social goals to override individual preferences. Throughout, the argument is that it is important to recognize that people within or advising the administrative state are influenced by the same sorts of (private) motivations as actors throughout the economy.

CONSTITUTIONAL AND LEGAL CHALLENGES IN THE ADMINISTRATIVE STATE

Following the Roosevelt administration’s implementation of New Deal programs in the 1930s, the federal courts began to interpret the Constitution in a way that accommodated the rise of the “administrative state,” and bureaucratic policymaking continues to persist as a central feature of American government today. This essay submits, however, that the three pillars supporting the administrative state—the congressional delegation of Article I powers to the executive branch, the combination of powers within individual administrative entities, and the insulation of administrators from political control—might be reconsidered by the courts in the near future. After showing that the constitutionality of the administrative state has come under recent judicial scrutiny, the essay turns to the administrative law principle of deference, and argues that a reassessment of the Chevron doctrine seems imminent. Finally, the essay examines federal courts’ heavy use of “hard look” review as a means of curtailing agency discretion during recent administrations, and concludes that this judicial practice stands in uneasy tension with republican principles.

FISCAL EQUIVALENCE: PRINCIPLE AND PREDATION IN THE PUBLIC ADMINISTRATION OF JUSTICE

Fiscal equivalence in the public administration of justice requires local police and courts to be financed exclusively by the populations that benefit from their services. Within a polycentric framework, broad based taxation to achieve fiscal equivalence is a desirable principle of public finance because it conceptually allows for the provision of justice to be determined by constituent’s preferences, and increases the political accountability of service providers to constituents. However, the overproduction of justice services can readily occur when the benefits of the justice system are not enjoyed equally. Paradoxically, the same properties that make fiscal equivalence desirable by imposing restraint and control between constituents and local government also create internal pressures for agents of the state to engage in predatory, revenue-generating behavior.

LIBERAL FREEDOM, THE SEPARATION OF POWERS, AND THE ADMINISTRATIVE STATE

Contemporary critiques of the administrative state are closely bound up with the distinctively American doctrine that republican freedom requires that the legislative, executive, and judicial powers be exercised by separate and distinct branches of government. The burden of this essay is to argue that legislative delegation and judicial deference to the administrative state are necessary, or at least highly desirable, features of a democratic separation of powers regime. I begin by examining the historical and conceptual roots of the separation of powers doctrine, paying particular attention to the unique way in which it was adapted to fit the American case. I then examine three concerns that the resulting constitutional system raises about the republican freedom of those who are subject to it—which I call the accountability, legitimacy, and stability concerns—and argue that the administrative state is a useful, albeit imperfect, tool for reducing the unavoidable tension between these concerns. The thrust of this discussion is to push us away from “in principle” objections to the administrative state, and back toward the kinds of prudential considerations that are associated with ordinary liberal politics. More importantly, the aim of the essay is to encourage sober reflection on the real dangers that face the American constitutional system under current circumstances.

SNAP EXCLUSIONS AND THE ROLE OF CITIZEN PARTICIPATION IN POLICY-MAKING

This essay uses a specific example—proposals to exclude sugary drinks from the Supplemental Nutrition Assistance Program (SNAP)—to explore some features of the contemporary U.S. administrative state. Dating back to the Wilsonian origins of the U.S. administrative state there has been uncertainty about whether we can and should separate politics and administration. On the traditional view, the agencies are to be kept separate from politics—technocratic and value-neutral—although they are indirectly accountable to the president and Congress. The SNAP exclusions example shows, however, that agencies often must make complex and controversial decisions on their own, decisions that go beyond value-neutral technocratic administration. When authorizing legislation has multiple goals, as we’ll argue is the case in the SNAP example, an agency will have to choose between conflicting statutory mandates. Moreover, as the SNAP example shows, agencies often face complex normative questions of ethics and justice that go beyond the question of how to balance competing aims. The appropriate response to the SNAP exclusions example is not to keep politics out of administrative decision-making, but to develop procedures that allow ethical and political questions to be addressed in agency policy-making, consistent with overarching commitments to fairness and democracy.

EFFICIENCY, LEGITIMACY, AND THE ADMINISTRATIVE STATE

This essay examines certain epistemic problems facing administrative states’ efforts to draft efficient regulations for their societies. I argue that a basic feature of the administrative state’s authority, namely its monopoly over the production of legally binding rules for all members of a geographically defined society, creates epistemic problems that impede efficient rule-making. Specifically, the administrative state’s monopoly over the production of legally binding rules prevents multiple public policies from being simultaneously implemented and compared. The resulting singularity of administrative states’ regulatory decisions prevents observation of the counterfactual effects of policies that were possible but which were not implemented. The absence of observable policy counterfactuals frustrates efforts to assess the efficiency of administrative states’ decisions, as it is impossible to determine whether different policies would have generated greater benefits at lower cost than the policy the state implemented. As these epistemic problems are derived from the singularity of administrative states’ decisions, they exist independently of principal agent problems, suboptimal incentives, or the preferences and capabilities of administrative personnel.

RICHARD T. ELY, THE GERMAN HISTORICAL SCHOOL OF ECONOMICS, AND THE “SOCIO-TELEOLOGICAL” ASPIRATION OF THE NEW DEAL PLANNERS

Richard T. Ely was one of the most important architects of the administrative welfare state in the United States. His astonishingly influential career was the product of a fundamental re-thinking of the origin and nature of the state. Repudiating the social compact theory of the American founding in favor of a self-consciously “new,” “German,” and frankly “social” conception of the state ordered toward the realization of a collective vision of human perfection, Ely conceived the task of social reform as extending social control over the hereditary and environmental determinants of human character. In the early 1930s, Ely’s vision of social reform would inspire some of his boldest students, especially M. L. Wilson, to formulate a sweeping vision of social planning that would not only inform his little known and rather coyly named Division of Subsistence Homesteads, but also his efforts at the National Resources Board (NRB)—the nation’s first ever agency for comprehensive national planning.