DELEGATING FOR TRUST.

Author:Stiglitz, Edward H.
Position:ARTICLE
 
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Introduction 635 I. The Conventional Account and Dependencies 642 A. The Conventional Account 642 B. Doctrinal and Normative Dependencies 645 C. The Democratic Price 647 II. The Problem of Trust and Legislative Delegations 649 A. The Problem of Trust 650 B. Legislative Delegations 653 C. Judicial Review: Credibility and Constitutional Inferiors 658 III. Implications and Complications 663 A. Fairness and Administrative Procedures 663 B. Historical Sequencing and Procedures 665 C. Heterogeneous Policies: Tax and Financial Regulation 670 IV. Erosion and Anxiety? 673 A. Procedural Erosion and Distrust 674 B. Tentative Empirical Assessment 680 V. Lessons : Procedural Reform and Vestigial Doctrines 683 A. Trust-Building Procedures 683 1. Procedural Formality and Transparency 683 2. Equilibria 684 3. Arbitrariness Review 686 B. Vestigial Doctrines and the Democratic Price 687 Conclusion 680 Analytical Appendix 690 A. Legislation 690 1. Preliminaries 690 2. Equilibria 692 3. Commentary 693 B. Delegation and Administrative Procedures 694 1. Preliminaries 694 2. Equilibria 3. Commentary 696 C. Thoughts on Transitions 607 697 INTRODUCTION

The administrative state is an awkward creature in our constitutional system--in the eyes of many, an unseemly chimera that dangerously collapses the lawmaking institutions envisioned by the framers. For this reason, from the administrative state's earliest days its supporters have felt the need to justify it. Looking to judicial opinions or academic writing, the dominant explanation of and justification for the administrative state is based on administrative agencies' expertise and expansive rulemaking and adjudicatory capacities.i The administrative state, in this view, emerges from crippling congressional limitations: the institution has neither the time nor the information to resolve the problems that our complex society presents, so it creates and delegates authority to other entities that have the time and capacity to resolve them.

This common justification no doubt captures part of the truth. (2) Yet it also leaves us with a number of puzzles. Observers such as John Hart Ely have long wondered why Congress has not invested in its own institutional capacity. (3) If information and capacity are the binding constraints, why not expand the institution's ability to collect and process information? Similarly, if expertise is the limitation, agencies in much their current form might perform an advisory rather than lawmaking role, (4) with Congress itself making the laws. (5) But agencies of course issue thousands of rules that carry the force of law every year. (6) Also puzzling, the administrative state is more expert and able than at any time in history, (7) and its place in American society should be correspondingly secure under this standard justification. But instead, anxiety over the administrative state appears at a new height, with many calling for radical overhauls of it and renewed interest in the non-delegation doctrine seemingly on the rise in the Court. (8)

The standard account, moreover, arguably most falters on the most consequential rulemaking efforts by agencies--that is, on high-impact, non-time-sensitive rules. For example, many have questioned the widespread delegation of authority in the Dodd-Frank Act of 2010, (9) including the delegation of how to separate commercial and investment banking services. (10) Congress might instead have established the relevant rule itself, subjecting it to subsequent refinement by administrative agencies. Indeed, this is largely how Congress approached the question of separating commercial and investment banking services in the Banking Act of 1933. (11) Similarly, the Department of Labor's rule laying out who is a fiduciary with respect to employee benefit plans might easily have been handled legislatively. (12) Much the same could be said of the Department of Transportation's periodic regulations that set fuel economy standards for automobiles sold in the United States. (13) Expertise and capacity are but part of the story, and perhaps not the most important part of the story.

Unrecognized in this debate over the puzzles of delegation is that Congress may delegate to take advantage of another distinctive attribute of administrative decisionmaking: the credible rationality and transparency afforded by administrative procedures. Drawing on positive political theory, (14) this Article is the first to show that Congress may delegate, not for expertise, but for public trust. The core of the theory is straightforward: what limits Congress is not expertise, but public trust; what Congress gains from delegation is not expertise, as such, but instead public trust. The main task of this Article is to articulate why the public distrusts elected representatives, (15) why elected representatives cannot solve the problem of trust internally, (16) and under what conditions administrative lawmaking generates superior public trust. (17) As part of this exercise, the Article shows how Members of Congress delegate in their own interest--how, though administrative lawmaking may serve a public interest, legislators delegate authority for self-interested and parochial electoral reasons. (18)

This idea that legislative delegation and the much-maligned bureaucracy address problems of public trust likely seems absurd to many. The administrative state is the source of our ills, not of our relief. This reaction is understandable, particularly given the standard view that, if Congress had sufficient information and time, it would be better on democratic grounds for it to resolve questions rather than the administrative state. Even those who defend the administrative state tend to view it as a distinct second-best, a necessary concession to the complex demands that our society places on government. (19) But this is only the standard view because jurists and administrative law scholars have tended not to focus on the pathologies of other potential lawmaking bodies. Problems of distrust between the public and the elected come hand-in-glove with modern representative democracy. (20) Voters do not do particularly well by legislative lawmaking in complex societies, and by helping to resolve this distrust, the administrative state--at least with adequate safeguards--furthers rather than compromises democratic values. (21)

The administrative state offers advantages over the legislature in terms of the values of transparency and fairness. (22) These advantages do not emerge simply by virtue of the fact that an agency is not the legislature, but instead from the fact that agencies operate under a set of constraints that do not apply to the legislature. (23) Under the Administrative Procedure Act (APA) and related administrative law doctrines, (24) agencies must follow certain procedures before issuing a valid order or rule: formal adjudication and rulemakings require proper notice and other procedural safeguards that approach the protections afforded at a court of law. (25) Even informal rulemakings require notice and, as glossed by courts, a notable degree of dialogue between agencies and regulated parties. (26) The APA's generic standards of review, likewise, demand from agencies a minimum of rationality in policymaking; the agency must provide reasons for its actions and justify its choices in light of statutory text and objectives. (27) This transparency is important because it allows the administrative state to act as a verification mechanism that constrains policymaking behavior and thereby fosters public trust in policy choices. Against the backdrop of administrative procedures and judicial review, it is relatively challenging to engage in at least the most obscene forms of misfeasance through administrative lawmaking. (28)

Notably, this type of trust cannot be achieved through direct legislation, which lacks a meaningful record, and is inevitably reviewed far more deferentially by courts, with little regard to rationality or to the nexus of stated objectives and chosen means. (29) Whereas courts have no problem reviewing and reprimanding administrative agencies--that is, constitutional inferiors--for procedural failures or flaws in reasoning, they cannot be expected to regularly do so with respect to the legislation produced by a coordinate branch of government. (30) In a complex society, the absence of meaningful judicial review--to say nothing of safeguards like those afforded by administrative procedures--in the legislative context implies that voters will often question the fidelity of legislation to their interests. (31) This public distrust represents a significant electoral risk for Members of Congress, leading them to favor administrative policymaking over direct legislation for self-interested reasons. (32) At its core, this theory contends that the modern administrative state ameliorates a problem of public distrust and legislative credibility: by delegating to a procedurally constrained, constitutional inferior, the legislature addresses a critical information problem between the public and legislators that naturally arises in complex representative democracies.

This theory of delegating for trust resolves a number of puzzles. First, it addresses John Hart Ely's question of why amplifying legislative capacity is not a tenable solution. Trust, not information, is the binding constraint on legislators' behavior, and it is comparatively difficult for the legislature to generate public trust internally. In this way, it also helps us to understand why we have prolific delegation in some areas, such as financial regulation, where we have very good reasons to suspect that special interest groups would capture the legislative process, but less delegation in other areas, where trust is less of a concern. (33) Second, it provides a positive rather than normative rationale for valuing fairness and transparency in administrative procedures...

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