Delegating for Trust

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Delegating for Trust ARTICLE DELEGATING FOR TRUST EDWARD H. STIGLITZ † Courts and legal observers have long been concerned by the scope of authority delegated to administrative agencies. The dominant explanation of delegated authority is that it is necessary to take advantage of administrative agencies’ expertise and expansive rulemaking capacity. Though this explanation makes sense in many settings, it falters in many areas and has given rise to a number of longstanding puzzles, such as why Congress does not invest in its own institutional capacity. 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, this Article shows that Congress may delegate, not for expertise, but for public trust, which the legislature itself (appropriately) lacks due to concerns over the influence of special interest lucre, among other reasons. The procedural constraints that bind administrative agencies, as made credible by judicial review, encourage fairness and rationality and discourage the most egregious abuses of lawmaking authority. In delegating, Congress takes advantage of these credible constraints, which the institution cannot easily develop internally; and in relieving Members of Congress from public suspicion, it also advances their parochial electoral objectives. † Associate Professor of Law, Jia Jonathan Zhu & Ruyin Ruby Ye Sesquicentennial Faculty Fellow, Cornell Law School. I am grateful to David Bateman, Ryan Bubb, Josh Chafetz, Zach Clopton, Anuj Desai, Mike Dorf, Dan Farber, Cynthia Farina, John Ferejohn, Sandy Gordon, Tonja Jacobi, Daryl Levinson, Zach Liscow, Adam McCall, Andrew McDonough, Gillian Metzger, Jon Michaels, Anne Joseph O’Connell, Saule Omarova, Jeff Rachlinski, Roberta Romano, Richard Seamon, Matthew Spitzer, Kevin Stack, Nick Stephanopoulos, Matthew Stephenson, Emerson Tiller, Adrian Vermeule, Barry Weingast, and participants at workshops or conferences at Cornell Law School, Michigan State Law School, Northwestern Law School, NYU Law School, and the University of Wisconsin Law School. (633) 634 University of Pennsylvania Law Review [Vol. 166: 633 This vision of the administrative state accounts for a number of features of our legal and political system. It explains, for instance, why Congress has generally not invested in greater internal capacity—because trust, not capacity is the binding constraint; why, as a positive matter, fairness and transparency are essential to administrative procedures; and why, if those administrative procedures undergo erosion, as some suggest has occurred, anxiety about administrative lawmaking might arise. The Article concludes with a discussion of normative and doctrinal implications of this trust-based conception of administration, including a call for reorienting administrative procedures to more fully promote credible rationality. 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. Cost–Benefit Analysis ........................................................ 684 3. Arbitrariness Review.......................................................... 686 B. Vestigial Doctrines and the Democratic Price................................... 687 CONCLUSION ................................................................................. 689 ANALYTICAL APPENDIX.................................................................. 690 A. Legislation ................................................................................. 690 1. Preliminaries ..................................................................... 690 2. Equilibria .......................................................................... 692 3. Commentary ..................................................................... 693 B. Delegation and Administrative Procedures ..................................... 694 1. Preliminaries ..................................................................... 694 2018] Delegating for Trust 635 2. Equilibria .......................................................................... 696 3. Commentary ..................................................................... 697 C. Thoughts on Transitions .............................................................. 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.1 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 1 For judicial thinking, see Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 865 (1984) (discussing how Congress delegates authority to agencies, “those with great expertise”). For classic academic thinking, see JAMES M. LANDIS, THE ADMINISTRATIVE PROCESS 23 (1938) (explaining the need for and the “advantages of specialization in the field of regulatory activity”), or, for an account of many of the conventional views on this topic, see generally John M. de Figueiredo & Edward H. Stiglitz, Democratic Rulemaking, in 3 THE OXFORD HANDBOOK OF LAW AND ECONOMICS 52 (Francesco Parisi ed., 2017) (examining four prominent views of administrative rulemaking: the unitary executive theory, the structure and process school of thought, the insulation perspective, and the deliberative perspective). See also WILLIAM N. ESKRIDGE & JOHN FEREJOHN, A REPUBLIC OF STATUTES: THE NEW AMERICAN CONSTITUTION 276 (2010). Part I of this Article discusses the conventional view at length. 2 It is difficult to imagine, for instance, Congress somehow writing fine enough legislative standards to displace the roughly 1500 Administrative Law Judges who adjudicate Social Security claims. U.S. OFFICE OF PERS. MGMT., FEDERAL ADMINISTRATIVE LAW JUDGES BY AGENCY AND LEVEL (2016), https://www.opm.gov/services-for-agencies/administrative-law-judges/#url=ALJs-by- Agency [https://perma.cc/PAF8-3DJU]. There may likewise be other areas where the relevant expertise cannot be suitably internalized with the legislature: the policy question may be highly time sensitive, or it may be of an interstitial nature, better sorted by those with experience “on the ground.” A more difficult case is when knowledge acquired through enforcement or other “on the ground” experience interacts with and is complementary to rule-making activities. Sometimes that enforcement-derived information may plausibly be transferred to other entities, such as the legislature, and sometimes it may not be. For more strongly skeptical takes on the common expertise account, see Peter H. Aranson et al., A Theory of Legislative Delegation, 68 CORNELL L. REV. 1, 21- 27 (1982) (arguing that “[c]onventional rationalizations for the delegation of legislative authority” do not “withstand close scrutiny”). 636 University of Pennsylvania Law Review [Vol. 166: 633 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
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