Thursday, December 14, 2017


Law and the Regulatory State is a little essay, my contribution to American Exceptionalism in a new Era, a volume of such essays by Hoover Fellows. It takes up where Rule of Law in the Regulatory State left off.

A few snippets:
To be a conservative—or, as in my case, an empirical, Pax-Americana, rule-of-law, constitutionalist, conservative libertarian—is pretty much by definition to believe that America is “exceptional”—and that it is perpetually in danger of losing that precious characteristic.  
So why is America exceptional, in the good sense? Here, I think, economics provides a crucial answer. The ideas that American exceptionalism propounds have led to the most dramatic improvement in widely shared well-being in human history.... Without this economic success, I doubt that anyone would call America exceptional. 
Despite the promises of monarchs, autocrats, dictators, commissars, central planners, socialists, industrial policy makers, progressive nudgers, and assorted dirigistes, it is liberty and rule of law that has led to this enormous progress. 
I locate the core source of America’s exceptional nature in our legal system—the nexus of constitutional government, artfully created with checks and balances, and of the rule of law that guides our affairs. And this is also where I locate the greatest danger at the moment. 
The erosion of rule of law is all around us. I see it most clearly in the explosion of the administrative, regulatory state.
This is the main theme:
the rules are so vague and complex that nobody knows what they really mean..  the “rules” really just mean discretion for the regulators to do what they want—often to coerce the behavior they want out of companies by the threat of an arbitrary adverse decision.
The basic rights that citizens are supposed to have in the face of the law are also vanishing in the regulatory state.
Retroactive decisions are common,..
I fear even more the political impact. ... The drive toward criminalizing regulatory witch hunts and going after the executives means one thing: those executives had better make sure their organizations stay in line.
The key attribute that makes America exceptional—and prosperous—is that candidates and their supporters can afford to lose elections. Grumble, sit back, regroup, and try again next time. They won’t lose their jobs or their businesses. They won’t suddenly encounter trouble getting permits and approvals. They won’t have alphabet soup agencies at their doors with investigations and fines... We are losing that attribute.
In many countries, people can’t afford to lose elections. Those in power do not give it up easily. Those out of power are reduced to violence. American exceptionalism does not mean that all the bad things that happen elsewhere in the world cannot happen here.
Always be optimistic though:
The third article in exceptionalist faith, however, is optimism: that despite the ever-gathering clouds, America will once again face the challenge and reform. There is a reason that lovers of liberty tend to be Chicago Cubs fans.
The other essays are great. Niall Ferguson basically thinks exceptionalism is over.


  1. We die hard Cub fans understand. The antecedent to economic freedom must be political freedom. Political freedom requires a free press. It's no mistake the FA makes this clear. Today that freedom is under siege. Witness the U of C's letter to incoming students. Sadly, I despair the future of the species.

  2. From Federalist 62: "... But a continual change even of good measures is inconsistent with every rule of prudence and every prospect of success. ... To trace the mischievous effects of a mutable government would fill a volume. ... (America) is a prey to every nation which has an interest in speculating on her fluctuating councils and embarrassed affairs. The internal effects of a mutable policy are still more calamitous. It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed? ... What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government? In a word, no great improvement or laudable enterprise can go forward which requires the auspices of a steady system of national policy. ... But the most deplorable effect of all is that diminution of attachment and reverence which steals into the hearts of the people, towards a political system which betrays so many marks of infirmity, and disappoints so many of their flattering hopes. No government, any more than an individual, will long be respected without being truly respectable; nor be truly respectable, without possessing a certain portion of order and stability. ..."

    Because of the expansive administrative state, government order and stability is threatened with every election.

  3. Are you oblivious to other enormously prosperous countries that also attribute their success to a constitutional government and the rule of law. People in those countries are wealthier, happier, and live longer and all in peace. Far better than here on every count. Your ‘exceptional’ argument loses meaning, as a result. You cannot be exceptional if you are less than (or even equal to) others.

  4. John-

    I work in the energy business and the notion that energy companies are beholden to regulators doesn't comport with the reality I see. I would argue it's the other way around in at least 20 states. Off the top of my head in 2017 the following state Public Utility Commissions took actions that were pro-utility at the expense of ratepayers: AZ, CO, FL, GA, ID, IN, MT, NC, OH, SC, and VA. Travis Kavulla of the MT PUC has publicly said, "As a rule, customers of regulated utilities pay above market price for energy". Alabama Power doesn't even have a public rate case or public integrated resource plan. Maybe you're thinking of the energy sector more broadly and their interaction with federal agencies to which I defer to your expertise.

    Question: Can you point me to the evidence of "big settlements" with banks being funneled to Democratic advocacy groups?

    Thanks for your excellent posts.


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