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Regulatizing Process and the Boundaries of New Public Governance

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Regulatizing Process and the Boundaries of New Public Governance THE REGULATIZING PROCESS AND THE BOUNDARIES OF NEW PUBLIC GOVERNANCE EDWARD RUBIN* This Article attempts to trace the boundaries of new public governance's cooperative approach to regulation and its rejection of the more traditional command-and-control model. Relying on Norbert Elias's social theory, which he calls the "civilizing process," it claims that the response of private firms to regulation is not a static process but one that is likely to change over time. Specifically, firms tend to be resistant when regulation is first imposed, but more tractable over time as they, and their employees, become acclimated to the regulatory regime. Following Elias, this evolution is referred to as the "regulatizing process." The consequence of the regulatizing process is that new public governance's cooperative approach will generally be more effective once regulation has been in place for some period of time. This explanation is then contrasted with the public choice theory that firms are inevitably opposed to regulation, and that their apparent tractability in certain circumstances occurs only because they can extract rents from the regulatory regime. The Article links the regulatizing process, which operates at the macro to another boundary of new public governance-the difference between tractable firms and recalcitrant ones that has been previously explored. This second boundary, which is a static one and operates at the micro level, works in conjunction with the dynamic boundary created by the regulatizing process to define the area where the new public governance approach will be most effective in securing compliance with the goals of the regulatory program. As an illustration, the Article then applies its theory to the regulation of the commercial airline industry. Introduction ............................................ 536 I. The Macro Level: Boundaries Across Time . ........... 538 A. Elias's Theory of the Civilizing Process . .......... 538 B. The Nature of Regulation and Regulated Entities..........542 C. The Regulatizing Process ....................... 545 D. Public Choice Theory's Alternative Explanation...........555 II. The Micro Level: Distinctions Among Firms ..... ...... 563 III. The Example of Commercial Aviation... ............. 566 A. The Origins of Commercial Airline Regulation ............ 567 B. Comprehensive Regulation and the Executives it Regulated. ............................. ..... 572 C. Airline Regulation and the Regulatizing Process...........580 D. Deregulation and Beyond ....................... 585 * University Professor of Law and Political Science, Vanderbilt University Law School. I want to thank Dean T. Alexander Aleinikoff and the Georgetown New Public Governance Seminar for their comments and suggestions. 536 WISCONSIN LAW REVIEW Conclusion.......................................588 INTRODUCTION New public governance offers important insights into the operation of modem government and promises significant improvements in the way that government develops during the coming decades.' It aspires to emancipate us from the adversarial, zero-sum, command-and-control mentality that has often afflicted regulatory programs, opening up a new realm of cooperation, flexibility, and collectivity-generated creativity for solving the complex problems that beset modern society. But it can also sound naive. There are real wrongdoers out there, selfish people who seek nothing but their own advantage,2 irresponsible people who are too inconsistent to be relied upon, and sociopaths who will frustrate any effort to cooperate with them.' In these situations, 1. This has become a widespread movement during the past two decades in American, British, and Australian legal scholarship. See, e.g., IAN AYRES & JOHN BRAITHWAITE, RESPONSIVE REGULATION: TRANSCENDING THE DEREGULATION DEBATE (1992); NEIL GUNNINGHAM ET AL., SMART REGULATION: DESIGNING ENVIRONMENTAL POLICY (1998); Grdinne de Bilrca & Joanne Scott, Introduction: Narrowing the Gap? Law and New Approaches to Governance in the European Union, 13 COLUM. J. EUR. L. 513 (2007); Michael C. Dorf, Legal Indeterminacy and Institutional Design, 78 N.Y.U. L. REV. 875 (2003); Daniel A. Farber, Revitalizing Regulation, 91 MICH. L. REV. 1278 (1993) (book review); Daniel A. Farber, Taking Slippage Seriously: Noncompliance and Creative Compliance in EnvironmentalLaw, 23 HARV. ENvTL. L. REV. 297 (1999); Jody Freeman, Collaborative Governancein the Administrative State, 45 UCLA L. REV. 1 (1997); Richard H. Pildes & Cass R. Sunstein, Reinventing the Regulatory State, 62 U. CHI. L. REV. 1 (1995); Charles F. Sabel & William H. Simon, DestabilizationRights: How Public Law Litigation Succeeds, 117 HARV. L. REV. 1015 (2004); Joanne Scott & Susan Sturm, Courts as Catalysts: Re-Thinking the Judicial Role in New Governance, 13 COLUM. J. EUR. L. 565 (2007); Susan Sturm, Second Generation Employment Discrimination:A Structural Approach, 101 COLUM. L. REV. 458 (2001). For overviews, see Orly Lobel, The Renew Deal: The Fall of Regulation and the Rise of Governance in ContemporaryLegal Thought, 89 MINN. L. REV. 342 (2004); Victoria Nourse & Gregory Shaffer, Varieties of New Legal Realism: Can A New World Order Prompta New Legal Theory, 95 CORNELL L. REV. 61 (2009). 2. Modem microeconomics is built upon this behavioral assumption, with varying degrees of subtlety. See ROBERT S. PINDYCK & DANIEL L. RUBINFELD, MICROECONOMICS 61-88, 254-55 (5th ed. 2001); George J. Stigler & Gary S. Becker, De Gustibus Non Est Disputandum, 67 AM. ECON. REV. 76 (1977). In the form of rational-actor theory, it has been applied to a broad range of social (i.e., non-economic) behaviors. See GARY S. BECKER, THE ECONOMIC APPROACH TO HUMAN BEHAVIOR (1978); JAMES M. BUCHANAN & GORDON TULLOCK, THE CALCULUS OF CONSENT (1962); MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION (1965); Dennis C. Mueller, Rational Egoism Versus Adaptive Egoism as Fundamental Postulate for a Descriptive Theory of Human Behavior, 51 PUB. CHOICE 3 (1986). 3. See, e.g., DAVID W. JONES, UNDERSTANDING CRIMINAL BEHAVIOR: PSYCHOSOCIAL APPROACHES TO CRIMINALITY (2008); Benjamin B. Lahey & Irwin D. 2010:535 Regulatizing and Boundaries 537 traditional command-and-control regulation, and the even more traditional idea that law is essentially a set of orders backed by sanctions,' seem to exert a renewed appeal. Conclusions about whether cooperative or command-and-control regulation represents the preferable strategy seem to vary from person to person, from discipline to discipline, and sometimes from moment to moment. Some people, by nature or experience, are more trusting or optimistic, some more wary or cynical. Sociologists tend to focus more on cooperative behaviors and social interactions, while economists are typically more inclined to see human behavior as motivated by self- interest, and perhaps "self-interest seeking with guile."' And most people have experienced different moods when they are feeling either charitable or misanthropic toward their fellow human beings. It seems apparent that both new public governance and traditional regulation are well-grounded in empirically observable phenomena and appeal to entirely plausible assessments of human behavior. These personal, methodological, and affective variations in the desirability of cooperation or command raise an important issue for new public governance. The descriptive version of the issue involves the boundaries of the cooperative approaches that new public governance recommends. Under what circumstances is this strategy likely to be effective and under what circumstances should it yield to command- and-control? The prescriptive version involves the circumstances that contribute to the growth of new public governance techniques. How can we create conditions in which cooperative approaches will be effective, so that we can reduce the need for strategies that are adversarial, confrontational, often costly, and sometimes counterproductive? This Article explores the boundaries of the new public governance approach to regulation at both the macro and the micro level. At the macro level, it uses social theory to trace the evolution of cultural attitudes that favor cooperative approaches and identifies the general Waldman, A Developmental Propensity Model of the Origins of Conduct Problems During Childhood and Adolescence, in CAUSES OF CONDUCT DISORDER AND JUVENILE DELINQUENCY 76 (Benjamin Lahey et al. eds., 2003). Becker argues that sociopathic behavior is simply a variant of self-interested behavior. Gary S. Becker, The Economics of Crime, 12 CROss SECTIONS 8 (1995). 4. See HANS KELSEN, GENERAL THEORY OF LAW AND THE STATE (Anders Wedberg trans. 1945) (2009); HANS KELSEN, PURE THEORY OF LAW (Max Knight trans., 1934) (1967). 5. OLIVER E. WILLIAMSON, THE MECHANISMS OF GOVERNANCE 253 (1996). Williamson defines this as opportunism, in "contrast with simple self-interest seeking, according to which economic agents will continuously consult their own preferences but will candidly disclose all pertinent information on inquiry and will reliably discharge all covenants . ." Id. The opportunistic self-interest seeker clearly presents a greater challenge for a new public governance approach to regulation. 538 WISCONSIN LAW REVIEW circumstances where such approaches are more or less likely to be effective. At the micro level, it uses recently developed ideas regarding regulatory implementation derived from game theory to identify the specific actors who are more or less likely to be amenable to cooperative
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