MICHAEL A. LIVERMORE The Perils of Experimentation ABSTRACT. More than eighty years after Justice Brandeis coined the phrase "laboratories of democracy;" the concept of policy experimentation retains its currency as a leading justification for decentralized governance. This Article examines the downsides of experimentation, and in particular the potential for decentralization to lead to the production of information that exacer- bates public choice failures. Standard accounts of experimentation and policy learning focus on information concerning the social welfare effects of alternative policies. But leaming can also oc- cur along a political dimension as information about ideological preferences, campaign tech- niques, and electoral incentives is revealed. Both types of information can be put to use in the policy arena by a host of individual and institutional actors that have a wide range of motives, from a public-spirited concern for the general welfare to a desire to maximize personal financial returns. In this complex environment, there is no guarantee that the information that is generat- ed by experimentation will lead to social benefits. This Article applies this insight to prior models of federalism developed in the legal and political science literatures to show that decentralization can lead to the overproduction of socially harmful information. As a consequence, policymakers undertaking a decentralization calculation should seek a level of decentralization that best bal- ances the costs and benefits of information production. To illustrate the legal and policy implica- tions of the arguments developed here, this Article examines two contemporary environmental rulemakings of substantial political, legal, and economic significance: a rule to define the juris- dictional reach of the Clean Water Act, and a rule to limit greenhouse gas emissions from the electricity-generating sector. A UT H OR. Associate Professor, University of Virginia School of Law. My thanks for helpful feedback from participants at faculty workshops at the University of Chicago Law School, Cor- nell Law School, the Elisabeth Haub School of Law at Pace University, and the University of Vir- ginia School of Law as well as the University of Virginia Law School Faculty Scholarship series, the Yale Law journal reading group, and the Yale/Stanford/Harvard Junior Faculty Forum. Spe- cial thanks to Ann Carlson, Barry Friedman, Michael Gilbert, Deborah Hellman, Bert Huang, William Hubbard, Aziz Huq, Leslie Kendrick, Douglas Kysar, Margot Pollans, Jeffrey Rachlinski, Richard L. Revesz, Richard Schragger, Gerald Torres, and Craig Volden for their insights. I also thank the editors at the Yale Law journal for their excellent editorial assistance as well as their substantive comments. 636 ARTICLE CONTENTS INTRODUCTION 638 I. EXPERIMENTATION AND DECENTRALIZATION 645 II. THE EFFECTS OF POLICY LEARNING 654 A. Deliberative and Political Information 654 B. Beneficial and Mischievous Uses 658 C. Incentives and Timing 666 D. Applying the Model 670 III. TURBULENT WATERS 676 A. Limited Deliberative Information 68o B. Risks of Harmful Political Information 683 C. Conclusion 689 IV. CLIMATE LABORATORIES 689 A. Limited Deliberative Information 692 B. Potential for Beneficial Political Information 696 C. Conclusion 703 V. CONTRASTING POLICY ENVIRONMENTS 704 637 THE YALE LAW JOURNAL 126:636 2017 INTRODUCTION American political culture values decentralized governance. The preference toward decentralization shows up in the federalist constitutional structure as well as in numerous national regulatory programs that preserve a significant role for the states. From a policy perspective, this preference is typically grounded in considerations of interjurisdictional diversity, political accounta- bility, and policy experimentation.' In recent years, the experimentation angle in particular has enjoyed enthusiastic supporters, who argue that decentraliza- tion engenders innovation and learning that has wide-ranging benefits for democratic policymaking.2 The nub of the argument in this Article is that, although policy experimen- tation may tend to generate information, that information can be a mixed blessing that brings mischief along with insight. As a consequence, policy ex- perimentation has both costs and benefits; policy learning is not an unalloyed advantage of decentralization; and, in the decentralization calculus, the poten- tial for policy experimentation may just as often count against decentralization as for it. Accordingly, well-designed governance regimes will decentralize in ways that promote useful experimentation, while cutting off, or at least declin- ing to facilitate, experimentation that is more likely to cause harm. Classically, policy experimentation has been described as a technocratic, even scientific process. Injustice Brandeis's famous terminology, states are akin to "laboratories" in which impartial researchers search for effective means to 1. See Barry Friedman, Valuing Federalism, 82 MINN. L. REv. 317, 318-19 (1997) (arguing that the policy justifications given for state autonomy are often expressed but infrequently exam- ined). 2. The experimentalist turn in federalism scholarship was particularly influenced by Michael C. Dorf & Charles F. Sabel, A Constitution of DemocraticExperimentalism, 98 COLUM. L. REv. 267 (1998). 3. This Article focuses on information produced through decentralized policy regimes. Follow- ing convention, this Article uses the word "experimentation" to describe this process, alt- hough it may be better characterized as innovation or simply variation rather than experi- mentation. It is also worth noting that policy-relevant information can be produced in many other ways, including through centrally planned experimentation (as when the government funds scientific research or pilot programs), through the imposition of analytic requirements (such as the environmental impact assessments carried out under the National Environmen- tal Policy Act), through decentralized research activities carried out by academics, or through the innovating behavior of private actors operating in the marketplace. Some of the arguments developed here may be applicable to these other contexts, but that possibility is not explored in this Article. 638 THE PERILS OF EXPERIMENTATION promote social ends.4 More recently, federalism scholars have focused on "the discursive benefits of structure."' They describe a federalism in which decen- tralization makes room for a diversity of views within the national conversation and provides "democratic churn" that enlivens national politics.6 Under the dis- cursive conception, federalist structures facilitate democratic deliberation be- tween a range of interests and perspectives. This process ultimately helps con- stitute a national polity that is more dynamic, inclusive, and resilient. But there is also a downside of experimentation that demands its due.' In an imperfect democracy, there are many kinds of lessons to be learned, and not all of them will promote social well-being. Politicians are interested in learning how to exploit the benefits of incumbency. Well-organized interest groups want to learn how to translate their collective action advantages into economic rents. Ideologically extreme activists are interested in learning how to take ad- vantage of voter inattention to drive policy away from median preferences. All of these actors are hungry for information that confirms the validity of their policy positions or undermines their opponents. In the messy world of policy- making, information might not always be put to its highest and best use. This Article takes as its starting place the Jekyll-and-Hyde nature of policy experimentation. Given the dual social potential of information, ceteris paribus, the goal of policy designers should be to maximize the net benefits of experi- mentation through efficient forms and levels of decentralization. To facilitate this inquiry, I develop a general framework that disaggregates policy infor- mation according to type of information and the ways in which that infor- mation is likely to be put to use. This framework can be applied to different contexts to anticipate the social effects of policy learning and to evaluate whether more, less, or differently structured decentralization is appropriate. Of course, this analysis does not end the calculation -there are legal and constitu- 4. New State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932) (Brandeis, J., dissenting). 5. Heather K. Gerken, Federalism as the New Nationalism:An Overview, 123 YALE L.J. 1889, 1894 (2014). 6. Heather K. Gerken, The Supreme Court 2oo9 Term -Foreword: Federalism All the Way Down, 124 HARV. L. REV. 4, 7-10 (2010). 7. See David A. Super, Laboratories of Destitution: DemocraticExperimentalism and the Failure of Antipoverty Law, 157 U. PA. L. REv. 541, 546-48 (2008) (discussing the failure of local exper- imentation to generate sound policies to address poverty); see also Jessica Bulman-Pozen & Heather K. Gerken, Uncooperative Federalism, 118 YALE L.J. 1256, 1258-60 (2009) (exploring downsides of cooperative federalism for national power); Edward L. Glaeser & Andrei Shleifer, The Curley Effect: The Economics of Shaping the Electorate, 21 J.L. ECON. & ORG. 1, 2 (2005) (discussing political incentives in decentralized regimes to drive out unfavorable con- stituencies). 639 THE YALE LAW JOURNAL 126:636 2017 tional constraints to consider, as well as other policy factors to accommodate. But departing