Below are the draft papers for the Hoover Institution’s Regulation and Rule of Law Initiative workshop on March 10, 2017, at the Hoover Institution, Stanford University. This private event is taking place in the Annenberg Conference Room, located in the Lou Henry Hoover Building, Room 105.
Reforming Financial Regulation
by Charles W. Calomiris
Post-2008 financial regulatory changes largely have been a failure. They have produced high compliance costs, while constructing regulatory mechanisms that are unlikely to achieve their intended objectives. Furthermore, financial regulation increasingly has adopted processes that are inconsistent with adherence to the rule of law, which not only threaten the fundamental norms on which our democracy is founded, but also undermine the effectiveness of regulation. The combination of high costs, ineffective mechanisms, and inappropriate processes reflects a neglect of the core principles that produce successful financial regulation. This study reviews the shortcomings of current regulatory practice, identifies the principles that should underlie our regulatory architecture, and enumerates a list of specific suggested reforms that are consistent with those principles.
The Unvanquished: The Administrative State and the Federal Communications Commission
by Harold Furchtgott-Roth
Federal agencies regulate the economy at will. Endowed with expansive statutory authority, backed by power-loving administrations, neglected by a distracted Congress, and blessed by indulgent courts, federal agencies have sought and have penetrated the frontiers of legal regulation. Regulation has often become an end in itself, more important than the markets it limits.
Below, I examine how far deregulation might go at one independent agency, the FCC. The FCC is a small agency that regulates a large and important part of the U.S. economy with rapidly changing technology. The FCC staff is filled with talented people who can and do migrate to higher-paying jobs in the private sector. If deregulation can work anywhere, it should be at the FCC. On the other hand, if deregulation is difficult to impose at the FCC, how much harder it must be at other larger, more bureaucratic agencies.
Red State, Blue State: Federalism for All
by Vicki C. Jackson
This paper aims to assist this re-evalution by describing, in capacious terms, three different types of approaches to thinking about the possibilities and challenges of U.S. federalism. First, I briefly discuss a set of doctrinal constraints on national power articulated by the courts. Second, I consider "new nationalism" theories, including those of “disruptive” or “uncooperative” federalism approaches. Third, I consider political forms of federal reconstitution or reconstruction. The discussion is an effort to lay out these approaches as a positive matter; normative arguments will, for the most part, need to await another paper.
The Origins of Economic Regulation in the United States: The Interstate Commerce and Bureau of Animal Industry Acts
by Alan L. Olmstead and Paul W. Rhode
To support our claim as to the BAI’s priority and importance, this paper contrasts several features of the BAI with the ICC: the debate and changing coalitions leading up to the passage of the two acts; the impact of the courts in stimulating the drive for federal legislation; the regulations respective impacts on the economic and firm behavior; and their contributions of the general welfare of the nation. The contrast will show that the BAI legislation and the Bureau’s subsequent regulatory policies confronted a far more complex set of issues than the ICA and subsequent ICC policies. In addition, the BAI policies would establish novel templates for state-federal cooperation, for transferring research to promote economic development, and for what epidemiologists would later call the “area eradication model. A spinoff of this analysis of a disease control bureaucracy is to offer new perspectives into the ICC’s origins and significance and more generally into the broader narrative on the political economy of regulation in the Progressive era. Much has been written on the ICC, and to simplify our comparison, we rely heavily on the framework offered by Thomas Gilligan, William Marshall, and Barry Weingast (GMW).
On the Nature of Limits in the Concept of Limited Government
by John Joseph Wallis
The paper makes two contributions. One is to extend our understanding of the limits on government that developed in the 19th century United States. Like federalism, these limits derive from constitutional provisions, but are themselves not apparent in constitutional texts. When states moved to require general laws for incorporation of businesses, cities, and laws of many other types they changed the balance of how economic and political forces interacted. The changes not only led to a more dynamic economy, they led to new limits on the ability of governments at the national and state level to manipulate the economy for political purposes. The other contribution brings a more critical stance to the old, old idea that modern economic development is the result of secure property rights, limited government, and the rule of law. All three of these are outcomes, not institutions, and despite having established all three conditions by 1800, the United States witnessed a series political economy disasters over the next 60 years.
What needs to be shown first is why Americans adopted the initial constitutional provisions that they did, the provision that created “classic limits” on government. Second, to show that the classic provisions they adopted did not stop legislatures from manipulating the economy for political purposes, what I have called “systematic corruption” (Wallis, 2006). The original constitutional provisions on separation of powers and checks and balances were intended to eliminate systematic corruption, they did not. Third, to show how actions at the state level led to economic disasters. Fourth, how the states responded to the disasters by moving decisively towards general laws for many activities the states promoted and regulated. Fifth, how those innovations spread throughout the states over the 19th century. And finally, to show how the innovations eliminated the kind of disasters that occurred between 1790 and 1860.
The “Administrative Process” in the 1940s Court
by Aditya Bamzai
This article — part of a larger project to unearth the development of administrative law by the 1940s Court — discusses newly found draft opinions by members of the Supreme Court in two seminal cases, Gray v. Powell and Bowles v. Seminole Rock.15 At present, I have selected these two cases because I have sufficient research about them to include a discussion that enhances our knowledge of the development of administrative law during the 1940s. In the Library of Congress, I have also discovered letters between Felix Frankfurter and others touching upon these issues. When I obtain further information about other cases, my intention is to expand this article to create a narrative of the law’s development from 1940 to 1950. There are at least three reasons to explore the development of administrative law in the 1940s. The entire premise of the current Congress’ actions is that something like “APA originalism” will be the methodology that courts use to understand the new reform proposals — if the legislature enacts them. Yet the Court’s simultaneous alterations of the underlying interpretive framework make it hard to establish the backdrop against which the Congress is legislating. The parallels with the state of 1940s administrative law, both statutory and judicial, are striking: Shifting jurisprudence and new statutory enactments. Reflecting on the developments of the 1940s, as a result, may provide tools with which we may assess the developments of our own age.