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The ReguIatory State - Erica Beecher Monas

Justifying ReguIation When Parties Contract

When a risk is imposed by another person, some form of legal response is at least presumptively
justified. Even economists agree that, in the case of "negative externalities," government action is
warrantied. The case for government intervention is less obvious when the parties' relationship is
governed by a private contract (i.e. employers and employees). Should the risks associated with the
regulation be regulated exclusively by the terms of the parties' agreement? When, if at all, should
legislatures or courts adopt rules that change the allocation of risks found in the parties' agreement?

EGA RESPONSES TO THE PROBEM OF AOCATING RISK


Here we consider a period before the rise of the modern administrative/regulatory state. n the late-nineteenth and
early twentieth centuries, risks were managed through common law. The constitution was read as restricting the
power of legislatures to alter the allocation of risk in contracts between private parties [a reading since abandoned].

FARWE V. THE B&W RAIROAD CORPORATION, 45 MASS. 49 (1842)

: Facts

Farwell was working as a train engineer when his train crashed due to the negligence of another employee working for his
employer, the B&W Rail Road Corp. This employee, Whitcomb, was known to Farwell and is described as careful and
trustworthy. Farwell was thrown to the ground and his right hand was crushed.

: ssues

Can an employee of a corporation sue that corporation for injuries received in the course of employment resulting from the
negligence or carelessness of another employee?

: Main Analysis

BIackstone: f a servant, by his negligence, does any damage to a stranger, the master shall be answerable for
his neglect (if done while actually employed in master's service)
4 This presupposes absence of privity b/w the parties; action sounds in tort (the rule of respondeat
superior)
4 This doesn't cover a case where injury results in the course of employment, where all risks that both
intend to assume may be regulated by express or implied contract
4 Therefore, this case must be maintained if at all on grounds of contract
acking an express contract, the onIy possibIe basis wouId be an impIied contract
FarweII faiIs as a matter of justice
4 No such rule has been established, and the authorities oppose this principle
4 GeneraI ruIe: When someone becomes an empIoyee, they assume the risks incident to
performance of such services and, in prospective consideration of which, can seek to adjust their
wages or contracts
4 njury from another employee is a foreseeable risk & can be guarded against
FarweII faiIs as a matter of poIicy
4 "t is competent for [us] to regard consideration of policy and general convenience. [this is the basis of
implied promises duties legally inferred to promote the benefit of all concerned]
4 There are more effective means than liability of employer for securing safety i.e. observe other
employees, report misconduct and neglect, quit, etc.
4 Farwell's loss resulted from an ordinary injury and must be ruled a pure accident
4 t would be hard to practically separate 'departments' within a single employer as a basis of identifying
cases where there is and isn't liability
Regardless, the master isn't exempt because the servant can better provide for his own safety
from fellow employees; it is because the implied contract of the master doesn't extend to
indemnify the servant against the negligence of anyone but himself
The employee stands toward the master in a contractual relationship of employment rather than
of stranger, so no tort liability
2
The rule of respondeat superior rests on different reasons of policy than implied contract, which
limit this responsibility only to strangers
4 This rule doesn't apply to negligence by the corporation or a range of other cases

V: Holding FeIIow Servant RuIe . An employer is not liable to an employee for injuries resulting from the negligence of a
fellow employee (unless the employer know of such negligence and did nothing to correct it)
Shaw's Argument:

FarweII gets wage increase for higher risk. If he feeIs overexposed, he can quit or demand
higher wages. If he stays, we shouId infer that he is fine with an impIied term that aIIocates risk
to him.

Farwell can see that the job involves both risks and wages, and then choose a package he most
desires
4 But could Farwell have really foreseen this beyond a general awareness of risk?
Shaw: Farwell had some ability to manage risk by pointing them out or reporting them
f Farwell learns that risk is greater than expected, he can quit or demand higher
wages
O However, Farwell can't properly see people in other departments doesn't
really have this option . This calls for a chance to a different department's
policy
4 Shaw: Blacksmith Example [where people in different departments
can see each other and this rule would quite work] and Ropewalk
Example [where people in the same department can't observe each
other]
Shaw: Wages being paid to a contractual employee include the risk

If Shaw ruIed for FarweII, at the next contract renewal, the RR would say "for this wage, bear the risk
or it would pay its employees a lower wage to adjust for this decision

4 Farwell would get a huge one-time windfall
4 The railroad would reduce workers' wages to pay for insurance that covers such major payouts
So are workers better off? f we allocate risk to employers, everyone gets paid the
same and their subjective valuations of risk aren't accounted for . so it might actually
benefit workers to assume risk b/c they gain the opportunity to state and act upon their
evaluation of the risk's value
Either the railroad will buy insurance or the workers each purchase their own
It wouId be better for the raiIroad to bear risk:
O The railroad is the incentivized to reduce risk and (b/c of insurance cost)
O #ailroads enjoy the benefits of an economy of scale for insurance
O Some individuals may not buy insurance. And then really screwed
4 Libertarian: So this is why we have private charity, not government
O This is the major justification for workers compensation Iaws
4 Basically equivalent from a purely economic perspective

Might Shaw be Wrong?

4 To be sound, the empIoyee must be abIe to determine what wage/risk premium to
demand
What if you work with a hazardous chemical and aren't aware, but the employer is?
This will often be difficult for lots of reasons
n some cases, employees will quickly learn about the level of risk and demand wages
to match . compare this to cases of long-term gradual risk (i.e. asbestos,
carcinogens)
This indicates one reason for reguIation: Information
O There are libertarian arguments against requiring even information disclosure
4 Let people pressure companies to disclose by otherwise assuming
that, absent information, the risk is high [and demanding high wages]
4 Competition among employers with respect to safety information
3
Encourages increased disclosure across time there is a risk
that can't be reduced across the entire industry [then
collusion]
This won't get everything, but can lead to quite a bit of
information disclosure by employers
4 Sometimes it might be better to make the workpIace safer than to compensate for risk
Perhaps some risks are just too high?
We may think that you shouldn't be able to place certain kinds of valuations on certain
harms to human bodies
A social interest in safety/well-being of employees
4 Maybe the government shouId protect peopIe from their own desperation?
This prevents people from earning high wages for something they greatly value
Comes down to supply/demand . Shaw's argument works only if Farwell can identify
better wage/risk packages . if the worker doesn't have alternatives that sufficiently
attractive, that would increase the argument for regulation
This regulation, however, can lead to lower wages or fewer available jobs
So then, those who lack choice are then furthered denied more choices

Shaw assumes that, when the contract system functions properIy, each party acts on beIief re:
their subjectiveIy determined best interest. He therefore doesn't see other societal interests as
relevant.

PATRICK WATERS STORY

Walters knew that he was entering a dangerous situation when he took that plumbing apprenticeship. How isn't he
just like Farwell? He accepted a high risk as part of his investment in job training. Moeves didn't comply with
OSHA regulations because of COST. f they had complied, Moeves would have gone out of business [and then
Walters wouldn't have had a job] [he also wouldn't have died]. Why should there be such regulations? Not
information-based. Here, the justification seems to turn on a sense of constrained choice due to tough personal
situation . ultimately paternalistic.

GENERA COMMENTS ON EGA RESPONSES TO RISK:

To say that we have a situation in which risk would be justified is not the same as saying that any given regulation
would be justified, or that any regulation at all could fix the issue in a justifiable manner.


ProbIem: nformation

Description: The contracting parties may lack sufficient information to form a contract that is beneficial as
defined by their own subjective assessment of their well-being (if don't have adequate information,
wage demand will be too low).

Remedy: Provide nformation

Mechanisms: On the job learning (says Shaw in Farwell)
Competition (among employers or sellers of goods)
Mandated provision of information
Regulatory Ban (i.e. on a hazardous chemical in the workplace)
Under what circumstances can an information problem justify a regulatory ban?
A departure from the rational person hypothesis entailing predictable departures
from rationality (i.e. we miss risks really close to zero in probability [hyperbolic
discounting]; excessively devalue future risks [we know that even from your own
point of view, you'll overly discount risk])
There is inevitable slippage b/w mandates of information and implementation. We want
mandates, therefore, to include easy monitoring requirements (i.e. a giant sign). f we can't
easily monitor or solve with information, then we may want to issue a regulatory ban.


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ProbIem: Desperation

Description: This job is the only job he could get, or the only one fitting his life plan and the ergo that one that
forces him to accept a wage/risk premium he otherwise wouldn't prefer

Remedy: Subsidy or Regulatory Ban

Mechanisms: Regulatory Ban
Does this really improve things for the worker? Now he might lose the only job that fits his
life plan . is this the best outcome from his own perspective? We might want to look at
flexibilities of the supply and demand curve to see if the imposition of a regulatory ban
would or would not lead to particular economic outcomes.
Subsidies or Tax ncentives
The government can offer these to help employers deal with the burden of regulation. Or
the government can use these out of the general tax fund to directly remedy employee
desperation . maybe, as Rose Ackerman suggests, we should use subsidies to
supplement base wages instead of introducing regulatory bans. However, in political
reality, bans are typically much easier to achieve.


ProbIem: Negative Externalities

Description: As a society, we may wish to address negative externalities that result from agreements between
privately contracting parties [i.e. impacts on the environment, or on families]. Possibly the result of
transaction costs that prohibit efficient private contracting.

Remedy: Legislation and Regulation + Common Law [i.e. public nuisance law, class actions lawsuits]
This is often more complicated than it seems.



ProbIem: Bad Choices

Description: We think that an employee might be better-off not working under these conditions, even if the
relevant set of employees strongly disagrees and even if the alternative might be not working at all.
Tushnet: "Paternalism is Stalinism . how far does this paternalistic logic extend? Do we
dictate which job the employee accepts instead? Do we make these decisions because
they are better for the person or better for society?

Remedy: Whatever our paternalism ideology deems appropriate [?]


Robert HaIe: Coercion and Distribution in a Supposedly Non-Coercive State

The formuIation "a worId without government" is mistaken. There is a world where government regulation
takes the form of common law rules (property, tort, contract), and there is one where regulation consists of common
law + regulation and legislation. We live in the second world. The paternaIist/Iibertarian dichotomy is artificiaI.
AII regimes are vaIue-Iaden. Lochner suggests that the Constitution guarantees certain parts of common law
against state legislation; this is no longer binding law.

Margaret Jane Radin: arket Inalienability

Would we let someone go out on the market and sell their arm? ntuition: There is something wrong with a "left
arm market. ssue: How does this differ from a wage/risk premium that implicitly places a particular monetary
value on the probability of losing one's left-arm? Point: The evidence is reasonably clear that compensatory wage
premiums actually do exist in our economy [Viscusi: Nobody thinks these are fully compensatory]. Here is Radin's
Argument:

O Market-inaIienabiIity: It's important not to commodify things that are important to one's personhood.
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4 Market-inalienability offers an alternative to the economic perspective on allocating risk (workers should be free to
contract, receiving more money in exchange for taking on more risk a risk premium)
4 Market-inaIienabiIity hoIds that certain aspects of one's personhood shouId not be commodified for any
price.
O Market-inaIienabiIity is not paternaIistic.
4 Laissez-faire people say that market-inalienability is paternalistic, and interferes with people's freedom.
4 Radin responds that a positive view of liberty includes proper self-development as necessary for freedom.
Therefore, inalienabilities needed to foster that development are freedom-enhancing.
O Commodification hurts peopIe's seIf-conceptions
4 One's "particulars one's politics, work, religion, family, sexuality, etc. are integrate parts of one's personhood.
4 To think of any of these facets as monetizable or completely detachable from the person, "is to do violence to our
deepest understanding of what it is to be human.
O Three arguments in favor of market-inaIienabiIity
4 (1) The Prophylactic Argument f someone is selling an aspect of themselves, we have reason to think that
there's coercion involved, that it's not a free transaction. Since society doesn't have the resources to investigation
every transaction of this sort, it's better just to ban all transactions that involve "selling things closely related to
personhood.
4 (2) Assimilation to Prohibition these sorts of transactions both create and expose wealth- and class-based
contingencies for obtaining things that are critical to life itself. This in turn cheapens the value of human life.
4 (3) The Domino Theory slippery slope argument to commodify some things would lead to precluding their
noncommodified versions from existing e.g., if you allow people to sell organs, eventually no one would donate.
O ProbIem with Market-InaIienabiIity: DoubIe Binds
4 n an imperfect world, some people will be adversely affected with commodification OR non-commodification.
4 Example: Women have less power & few opportunities for advancement. Therefore, many women have two basic
options: (1) take a subsistence job that does not involved selling their (freely alienable) labor as, e.g., a waitress or
domestic worker, or (2) sell something that's considered inalienable / part of their personhood, e.g., as a prostitute
or paid "baby producer. (Radin acknowledges that these sorts of dilemmas exist, but does not go beyond this.)

Radin: There is a qualitative difference between a kidney and a car that justifies a ban on selling an arm even to
someone who values it more than you do [an otherwise subjective utility-maximizing transaction].

Also: Discomfort; Undervalue Risk of Future llness; Exploitation Scenario; Runs Down Price of Organs
Perhaps we should worry less re: the sale of renewable body parts [still externalities + risks of
procedure]
Worry about creating a market because might then lead to violent crime but we don't ban cars!

Why should the government intervene if we have appropriately evaluated risks and would value the money?

A choice between two problematic distributional systems
4 But we already ration medical care by price rather than need in our society!
The "no-market position rests on an understanding of what kind of society we are . it is an
independent question whether this is normatively attractive
4 How to choose between competing visions of the social good?
Radian argues that there are some goods that should be inalienable (no market transactions allowed)
4 This category of things is bound up w/ a vision of personhood linked to physical embodiment
We can imagine a non-corporeal vision of personhood
"Double Bind a ban will sometimes prevent desperate people from improving
situation
O Prostitution an obvious example of this situation
One of way of characterizing Patrick Walters issue: Does he have an inalienable right
to safer work conditions such that he can't work in an informed, voluntary
environment?
The automobile is seen as a social good that government can't ban, even though 400,000 death per
year

Duncan Kennedy: Distributive and Paternalist otives in Contract and Tort Law

(1) There are formally adequate efficiency, paternalist, and distributive justifications for virtually any regulation;
whether any one is actually adequate in any given case depends upon empirical judgments, and the
absence of relevant/sufficient empirical evidence is the norm [so we interpret this ambiguous data, or make
a judgment call] on the basis of prior belief (ideology)
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(2) There is a strong preference ranking in our public discourse that favors Efficiency > Distributive >
Paternalist justifications for regulation . this preference-ranking is itself ideological
(3) n fact, when we think of our motives for supporting regulation, we are really motivated by paternalist
motives (we know best!); our ideology then kicks-in and tells us to explain this in efficiency/distributive
grounds

QED: t is fine to use undisguised paternalist justifications on an ad-hoc basis

I: INTRODUCTION

Goal is reveal two generally unacknowledged motives that lie behind legislative, judicial and administrative choices about what
kind of law of agreements we should have.

Main points: (1) distributive and paternalist motives play a central role in explaining the rules of the contract and tort systems
with respect to agreements; (2) These motives explain far better than any notion of rectifying unequal bargaining power the
widespread legal institution of compulsory contract terms; (3) The notion that paternalist intervention can be justified only by the
"incapacity of the person the decision maker is trying to protect is wrong the basis of paternalism is empathy or love, and its
legitimate operation cannot be constricted to situations in which its object lacks free will

Distributive: Wants to increase the success of some group in the struggle for welfare, expecting and intending that this
increase will be at the expense of another group
Accept beneficiary's definition of what will make the beneficiary better off . changes the regime in a way to help
one group over another . sees the situation as zero sum

Paternalist: Changes a rule in order to improve someone's welfare by getting them to behave in their "own real interests,
rather than in the fashion they would have adopted under the previous legal regime
The issue is false consciousness; believes that under the new regime the objects of his benevolence will end up
with set of experience that will be "better for them . those who have supposedly benefited do not agree that they
are better off and would reject the change if given a choice . good or bad consequences for others are seen as
side effects
Willing to persist even when his contribution is not wanted

11iciency: Changes a rule so as to induce people to reach agreements that correspond to those they would have reached
under the previous legal regime had it not been for the existence of transaction costs
Accepts the rules of the previous regime as legitimate from the point of view of fairness, morality, rights,
distribution, or whatever . modifies one of these rules to make everyone affected better off by their own criteria of
better-offness
Speculation about what parties would have done had they not been prevented by transaction costs '
ncludes situations where a term is imposed due to belief that, given perfect information, all buyers and all sellers
would choose to include it

II: THE THREE MOTIVES IN CONTEXT

t has come to be expected that decision makers will account for distributive but not paternalist consequences. A historical
chronology in three parts: (1) free contract provides an exhaustive guide to decision-making, resolving all distributive and
paternalist issues; (2) Breakdown of confidence that free contract should be the motive for all legal action; (3) Life "after the fall
(now), comparing efficiency and paternalism with the semi-legitimate status of the distributive motive.

A. Freedom of Contract as the SoIe Motive in Decision Making

There is a view that sees freedom of contract as the sole basis for legitimate decision-making . if this is indeed possible, one
might see this as a natural right, or believe that it is immoral to break promises, or that free contracts are presumptively efficient
(and that the goal of decision making should be efficiency), or that the people (through their Constitution or otherwise) have
expressed a belief that free contract be the rule for decision makers.

The test of legitimacy is voluntariness distributive and paternalist motives are implicit in the constitutive exceptions to free
contract (i.e. when we find coercion, fraud, etc.).

B. Critiques of Freedom of Contract

Critiques of free contract are motivated by objections to distributive outcomes of 19
th
/20
th
CE economic life or by sense that
masses under capitalist have used freedom against their best interests.

nequalities around us are unjust, irrational and repulsive, even though we live in a culture produced by a mass of people .
also, there is a problem of mass error (as judged against an asserted transcendent standard of the good)
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Free contract and its principles, historical practice, common understanding, etc. fails to tell the decision maker what to do
when asked to change or even just to elaborate the existing law . given a choice, the decision maker can readily draw on
symmetrical and endlessly-repeated "altruist or "individualist arguments, neither of which will therefore be seen as a powerful
determinate of his own views. Gaps in the system leave it radically undetermined when viewed as the product of a rational
decision process rather than of the brute facts of social, economic, or political power. Within the huge limits available to him, the
decision makers choices re: "voluntariness can have huge distributive effects.

C. The Hierarchy of Motives "After the FaII"

The acceptance of distributive motives has never been more than partial and oblique

1. Altruism Does not Equal Egalitarianism

Advocates will argue in the rhetorics of altruism and individualism. Altruism, however, does not equal egalitarianism.
Distinguish b/w altruist concerns re: mutual regard, sharing & sacrifice vs. a more equal distribution of income across groups.

People see law as occasionally & dramatically distributive, but otherwise as a mostly invisible, neutral background.
Still, a series of dramatic one-shot decisions can have a distributive impact because they enrich underdogs who
use their gains to avoid again finding themselves on the bottom
However, this will fail is the transfers are small, or if the underdogs don't know how to use their gains effectively
under a regime whose rules are basically unchanged

t would be possible to change the rules in such a way as to bring about egalitarian outcomes, by eliminating altruistic duty of
weak to strong and increasing this duty from strong to weak . gaps and uncertainties could be resolved in favor of the poor .
could use compulsory contract terms and price controls to reduce the wealth of the rich by depriving them of legal backing for its
use. But this notion has received very little acceptance.

2. The Partial Legitimation of the Distribution Motive

After the fall of free contract, we are more aware of the consequences of decision we make about agreements. n our society,
actual power to make decisions usually resides with moderate liberals or moderate conservatives. Both embrace efficiency,
neither embraces paternalism, and the distributive motive falls between.

Efficiency recreates an aura of unproblematic legitimacy easy to seem neutral, nobody likes transaction costs, the decision
maker is merely a facilitator. Exploited by both sides easy to smuggle paternalist and distributive motives into the analysis
without acknowledging them. Also some negative overtones to efficiency more technical than human or communal.

Distributive motives are always more suspect than efficiency motives, but can be seen more or less suspiciously depending on
how presented. B/c decision maker is part of groups, as soon as she begins to tip the scales, seen with suspicion by some.
This is not minor peace and happiness require that we don't normally think about distributive justice, lest we
always be depressed or angry [or civil war]
Ergo, a taboo on explicit consideration of distributive consequences and goals

Paternalism even more taboo rooted in the realities of group identity and hierarchy. Touchy because the system of class,
sexual, and racial hierarchy derives from an earlier historical experience in which elites thought themselves better, smarter,
more honorable (as well as wealthier) than others "upper class males designed the legal order to preserve both the hierarchy
of wealth and power and that of true consciousness, all while claiming that they acted in the true interests of those
subordinated.

Caught up in battles over consciousness, the paternalist decision maker will incite powerful feelings and opposition in seeming
to recapitulate the old injustice of denying the validity of the psychic being of oppressed groups. Elites won't help, either, b/c
they rest their claim to an unequal share of wealth/power on the supposed neutrality as b/w groups of the ground rules of
economic struggle.

III: COMPUSORY TERMS: DEFINITION AND TYPOOGY

A. Contract versus Tort Duties: Compulsory terms are duties that come into existence for a legal actor as a consequence of
entering some kind of relationship with another legal actor. The other legal actor cannot waive the benefit of these duties.

B. Statutory Schemes: There exists a body of legislation dating back to Progressive Era that imposes all kinds of compulsory
terms. Statutes differ from contract schemes in that can use mild criminal sanctions, fix quantitatively specific solutions, and are
restricted to particular transaction types. But similarities matter more.

IV: EFFICIENCY AND DISTRIBUTIVE MOTIVES FOR COMPUSORY TERMS:

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t is possible to make sense of many regimes by reference to efficiency and distributive motives. This will set up a critique of the
"unequal bargaining power argument in Part V. t also shows that there is a lot left to explain even when these rationales have
been stretched to their limits making way for Part V's paternalist critique.

A. The Efficiency Motives for CompuIsory Terms under Transaction Costs

Assume it is costly to bargain. t is efficient to reduce efficient transaction costs. These arguments, however, depend on easily
manipulable factual assertions and are often no more than a screen for other motives.

1. Two classic efficiency arguments for compulsory terms

Lengthy quote from Posner. Kennedy: But we make tons of judgments about how people would behave "absent transactions
costs that entail all sorts of assumptions. This creates a lot of leeway for decision makers.

2. General reflections on the appeal of efficiency arguments

People love to argue on efficiency grounds. Efficiency arguments are even more subjective, uncertain, and therefore potentially
controversial than the other kinds. Why is it that the patent manipulability of efficiency arguments does not impair their
attractiveness? Because it transposes disputes about justice and truth to a dispute over 'facts' probably unknowable social
science data that no one will ever actually try to collect but which provides ample room for fanciful hypotheses. This makes it
seem like the whole project is less intense and explosive.

Efficiency mediates intensely contradictory feelings aroused by disputes about the shares of groups and the validity of their
choices.

t also legitimates the pretensions to power of liberal and conservative policy-makers most of whom are lawyers, economists,
or planners [a standard professional discourse, mixing normative and descriptive].

B. The effects of the imposition of compuIsory terms

A common response: "the landlord will raise the rent . higher prices passed along to consumers . but this fails as a
generalization! The outcome will always depend on the particular conditions of the market for the commodity!

3. Why don't buyers bargain for the duty?

t is simply wrong that buyers as a group lack bargaining power to force sellers [i.e. in landlord-tenant law] . example of the
implied warranty of habitability . this is imposed, not because buyers can't negotiate, but because the decision maker believes
that people value them so little that they won't purchase them of their own accord.

f both sides have good information, profit motive will induce sellers to provide any legal duty consumers will pay for .
consumers thus control by their desires what is offered for sale. The real limitation is that consumers are too poor to induce
sellers to provide something that, under the free contract model, sellers don't have to provide unless the price is right.

C. CompuIsory Terms and the Rectification of InequaIity

mposition of a regime entails a host of distributive effects i.e. may impoverish sellers and buyers differentially according to the
elasticities of supply and demand curves and according to the competitive structure of the market.

What the decision maker probably cares about is that a class of buyers will get something they want without paying full price,
with the difference made up by sellers who are impoverished for their benefit.

Four intuitively plausible cases described in the article [real distribution; sellers modify their own employees' behavior and
thereby don't need to change costs; a weakening in the sellers' position corrected for by changes that don't increase costs;
buyers are better off (in their own view) at direct expense of sellers as a class].

There are bunch of complex factual and theoretical questions involved in figuring out the real implications of distributive policy
that nobody can possibly answer in each given case; will therefore make intuitive judgments.

V: INEQUAITY OF BARGAINING POWER

The most common justification for compulsory terms. Two parts to this rhetoric: no "assent b/c parties not equal in power; the
remedy is not to throw out the whole contract, but to read in a term favorable to the weaker party.

This rhetoric is distributive because it asserts the desirability of intervention in favor the weaker party in situations where there is
nothing like common law fraud, duress, or incapacity.

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A. InequaIity of Bargaining Power in ight of the Distributive Consequences of CompuIsory Terms

f you set about finding all the situations that are considered 'unequal bargaining power,' and in each case imposed on the
stronger party the duty the weaker party is asking for in the lawsuit, you'd be acting more-or-less randomly from the point of view
of the distributive interest of the beneficiary class (buyers).

B. The IdeoIogicaI Significance of the Doctrine of UnequaI Bargaining Power

UBP is of little use to a person seriously committed to achieving distributive objectives through law. So why use it? Because it
is part of the conflict between liberalism and conservatism in the politics of welfare-state capitalism.

Liberals phrase their position in terms of free contract (UBP) with clear distributive ends. The center-left acknowledges
problems of justice, but remains committed to consent as a valid underpinning of our capitalist structures. UBP is attractive to
them b/c it assumes that most time there is equal bargaining power, and that we can use an unthreatening, exceptional doctrine
to correct egregious cases. Here we see the classic example of the apologetic function of the doctrine. t gives a good feeling
without eliminating real inequalities.

UBP also minimizes conscious recognition of distributive motives and justifies compulsory terms without reference to
paternalism. UPB presents itself as a critique of the weak when it is really a critique of their spending habits.

This doctrine exists as a weapon in the war against the conservative program of reinforcing all kinds of conservative hierarchy,
and for all its flaws is generally on the side of equality

VI: PATERNAISM

A. PaternaIism and CompuIsory Terms

1. How compulsory terms work as paternalism

Requires people to make particular contracts when they would rather make different ones. May not be a redistributive effect.
Distribution treated as a side effect of the real agenda.

2. Varieties of false consciousness "cured by compulsory terms

Paternalist interventions constitute attempts to remedy a mistake on the part of the beneficiary about his real interests (false
consciousness). Might worry about recklessness or babyishness.

3. Critique of principled anti-paternalism [PAP]

The PAP admits that someone must overrule another's choice in his best interest, but argues that those cases are explained by
incapacity (or some other principled exception to the general idea that people are autonomous).

The plausibility of PAP is linked to the ability to dismiss or explain away cases in which one wants to act paternalistically but
can't rationalize the action in terms of capacity. And there are many such cases!
There is no such thing as "capacity we ask the very question with an orientation toward the further question
whether we will have to let the person to do something injurious to herself
To ask if capacity exists, we are already engaging in paternalist analysis
Must be an ad hoc paternalist just to make a job of filling gaps re: where capacity does/doesn't exist

Principle Anti-Paternalism is a defense against taking responsibility for the paternalist choices we must make in our legal order.
So we claim that we "had to do it b/c "incapacity dictated the result. We fear responsibility of making wrong choices.

Sunstein and ThaIer: Libertarian Paternalism

An attempt at finding a middle path between government decision-making aimed at particular ends that still
respects individual preferences. However, it can take a lot of non-libertarian decision-making to arrive at this point.

ibertarian PaternaIism
4 A relatively weak & non-intrusive form of paternalism because choices are not blocked
4 mposes trivial costs on those who depart from planner's preferred option
4 Paternalistic b/c trying to modify behavior to welfare-promoting direction
FaIse Assumption by Economists: RationaI Actor ModeI
4 The idea that almost all people, almost all of the time, make choices in their best interest (or better than
those that would be made by third parties)
4 This claim is testable and false (i.e. a novice chess player could improve with hints)
4 Ergo, some policy could possibly make them better off by improving their decisions
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Misconception I: There exist viabIe aIternatives to paternaIism
4 Often, some organization/agent must make a choice that will affect the behavior of some other people
4 Our choices across a range of preferences are influenced by planners, private & public
4 i.e. a cafeteria . place healthy food toward front, where people tend to select items?
4 Across a certain domain of preferences, consumers often lack well-formed preferences that preexist the
director's own choices about how to order choices
4 True preferences don't exist if arrangement of alternatives significantly effects choices
Misconception II: PaternaIism aIways invoIves coercion
4 The cafeteria example doesn't force anyone to do anything
4 Even an ardent libertarian should accept this form of 'paternalism'
4 Build bridges between paternalist planners and libertarians
4 Reduce risks of poor planning by allowing people to reject the planner's preference
Some form organizationaI decisions are inevitabIe - choose among the possibIe choice-infIuencing
options instead of searching pointIessIy for aIternatives to paternaIism

n class, we discussed an organ donation example at some length . our debated turned on opt-in versus opt-out
. is it paternalist for the default to be donation (with an opt-out option)? s the default position really choice-
respecting?

Objections:

1. Complex, multi-actor scenarios would see issues w/ empirical data re: effects of regulation of choice
2. Modification of my behavior on a cafeteria line could violate more global preferences of mine and is,
therefore, meaningfully paternalist [not so libertarian!]
a. Distinguish our preferences as consumers and voters. Say vote for trans-fats and get
outvoted . then when go into the cafeteria, my consumer choices get subtly modified by
government regulations . my more global preferences are lost when voting, not consuming
[ergo, says someone who defends Sunstein] not paternalist

BiII New, Paternalism and Public Policy

Arguments for why the state is the best institution for paternalist regulation:


More mpartial Weakness of Will / Emotional Failure of
Rationality
Not swayed by immediate gratification;
can force a minority who would
otherwise forgo a long-term benefit to
provide for the future
Wider Perspective Lack of Experience Failure of Rationality State presented with consequences of
risky behavior in way different than
individuals; better positioned for prudent
judgment
Can Acquire and Process More
Technical/Expert nformation
Technical nability Failure of Rationality State can devote more resources and
time than individuals; this improves
welfare; the State better at dealing with
probabilties

The State Advantaged When: ReIevant Conditions
We are tempted to immediate gratification Goods/Services with long-term, not immediate effects (i.e.
pension)
ndividual lacks first-hand experience w/ decision's
consequences
G/S w/ small chance of harmful consequences for any one
individual
An unusual degree of technical expertise is required G/S w/ large/complex quantities of information before
judgment can be made regarding the likely impact on welfare
(airplane safety)

1. Criticisms of this Approach

a. Why the State and not another organization/individual (i.e. unions, families)?
i. The State has a monopoly on the use legitimate use of coercive power
ii. mportant that such interferences include public accountability and debate
b. But government is full of selfishly motivated people, who would over-provide services & grow budgets

Kip Viscusi: #isk by Choice: #egulating Health and Sa1ety in the Workplace [InternationaI PaternaIism]
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Give the preference of US citizens expressed in voting, we think its good to ban child labor. On a paternalist
reading, this is because we think child labor is just bad. So domestically, we simply enact a ban (with lemonade
stand exceptions). But then we may notice foreign-made imports from factories that employ children. What then?

Viscusi argues that it would be a bad idea to ban such imports: Some deveIoping foreign economies are
structured so as to force a choice between work v. poverty/suffering/death. n those countries, factories
might close or experience reduced production rates. Then kids lose their jobs even if, from their viewpoint, it
would be better to work. Now, in the USA we're fine with depriving children of work opportunities. So why act
differently toward those countries? Well, because the next-best option in the USA is above a threshoId of
minimum human decency, whereas this may not be the case without chiId Iabor in some deveIoping
economies.

This is implicit a distributive decision: For at least some kids, even in the USA, the next-best option
could still land beneath a threshold of minimum decency
4 But we think this is a small class, so we accept the distributive effects of a paternalist decision
4 We provide some welfare/subsidies to the poor . and then tell ourselves that this is adequate
nternational: What we are really saying is that, abroad, the base wage rate is too low . ergo, school
is not necessarily a certain better option than work for some children.
4 We could either allow imports or ban imports and send compensatory foreign aid [to increase
the base wage rate or income level]
Then we must choose which is better [or more politically palatable]
4 Viscusi: Aid won't work, so we shouldn't ban imported goods because of child labor

There is a relationship between a society's wealth and its tolerance of risk
This is also true of classes within a single society (wealth versus poor)
4 Wealthy have a lower risk threshold than the poor, who are often forced to work in riskier jobs to win
adequate income
As societies become richer, a widespread decline in accidents both at home & work
4 How does this happen?
ncreased wealth and associated decreased willingness to incur risk changes choices
ncreased wealth alters options available across long periods of time
4 Differences across countries
Available international data yield the surprising result that risks ad per capita income are positive
correlated
Why would this happen?
O High auto accident death rates in the US, Austria, and West Germany
O Lower mortality rate from illnesses so more possible risk victims
O Reporting of accidents more meticulous in wealthy countries
Affluent nations are characterized by more emphasis on risk reduction policies (as expected)
4 Shift in USA from food processing/drug safety to broader regulation during the 1970s, helped along by
proliferation of risk regulation agencies, Ralph Nader et al., and the movement to promote the safety of
nuclear power plants
ssue: policy design can be compromised when those who exert greatest influence over structuring of policies
tend to be richer than those exposed to the risks
4 This can provide the impetus for regulations that would reduce the risk exposures of broad segments of
the population, including the poorer classes who might benefit from higher wage
4 f differential risk preferences are the primary determinant of public policies, the resulting regulations will
be especially misguided . government intervention can reduce welfare of those who are regulated
4 Ethical issue: are policy-makers simply imposing their risk preferences on others?

Discussion re: Tryss-coated pajamas . do we ban export to 3
rd
world nations (cheaper, more flammable)?

Worry about a race to the bottom (whoever has lowest standards set the rule b/c can profit)
4 But maybe we would prefer that another developing world country engage in such behavior;
besides, their lower standards and weaker currency might permit them to produce this product
more cheaply than us and thereby improve their own threshold level of decency
4 Also, morality doesn't only reside in outcomes . there might be something process-related,
about the kind of society we become, by choosing to participate in this behavior
As we get wealthier, we have more wealth to devote to safety improvements
As we get wealthier, our preferences change we come to favor safety and health more highly
A double-bind . ban experts/give aid or allow child-imports
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Risk of being sold into slavery pro-import view assumes total consent re: child labor [a pragmatic
issue]

DoctrinaI and InstitutionaI imits of Common aw

We have begun to consider the distinction between common law and legislative regulations as methods
of allocating risk. Here, we look at the distinctive doctrinal and institutional characteristics of each
method. We also begin to wonder whether, or the extent to which, such characteristics make it
necessary to supplement the common law with legislative regulation.

RISE OF THE MODERN REGUATORY AND ADMINISTRATIVE STATE


There is nothing necessarily distinctive about common law courts they have always engaged in regulation [i.e.
adverse possession, implied terms, etc.]. So we can ask about the difference among regulatory institutions:

(1) A historicaI movement in reguIation from Courts egisIators Administrators

a. The doctrines developed by courts seemed inadequate to the challenges of modern society
i. i.e. using "fraud doctrine in contract to law to deal with information provision . not
good at addressing the problem of differential access to information
b. A sense that new and different regulatory institutions to replace courts in 1900s
i. Qualification: There was nothing inherent in common law doctrine that imposed such
limitations. Judges could have dealt with this with common law rules [i.e. posters must
be up or there is liability]. We can use common law methods to make exceptions the
norm.
1. This didn't happen in large part because legal education can indoctrinate
people to foreclose conceptually available options
2. Also, judges tend to be comfortable, wealthy, etc., and now therefore
interested in shaking things up by creating new doctrine
ii. Seen as slow to respond to industrialization and the huge number of suits (esp. in tort)
c. Legislatures also seemed unable to handle these new challenges
i. They were perceived as slow and controlled by special interests
d. So a desire merged for agencies, staffed with experts, to respond quickly, expertly, and non-
politically to major social and economic problems

(2) There are significant institutionaI differences among courts, IegisIatures, and agencies

a. Courts are staffed by generalist lawyer-judges; Agencies by relevant experts
b. Courts must address issues presented [a single complaint activates the system]; legislatures
don't have to care [a discretion bounded by electoral concerns]
c. Nb: These differences aren't fixed . i.e. use class actions to pool lots of claims in court

AYERS V. TOWNSHIP OF JACKSON, 106 N.J. 557 (1987)

: Facts

Plaintiff residents filed suit against defendant township for damages sustained as the result of the contamination of their well
water by pollutants from a landfill established and operated by defendant. The trial court awarded damages for, inter alia,
plaintiffs' enhanced risk of disease and plaintiffs' medical surveillance expenses. The intermediate appellate court reversed the
decision of the trial court as to the award for enhanced risk of disease and medical surveillance expenses. The court affirmed
the decision of the lower court in part and reversed it in part. t held that plaintiffs' award for damages for enhanced risk of
disease contravened the purposes of the New Jersey Tort Claims Act. t reasoned that the speculative nature of an unquantified
enhanced risk claim, the difficulties inherent in adjudicating such claims, and the policies underlying the Tort Claims Act argued
against the recognition of this cause of action. The court held that the cost of medical surveillance was a compensable item of
damages where the proofs demonstrated that surveillance to monitor the effect of exposure to toxic chemicals was reasonable
and necessary.

: ssue
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Do the plaintiffs' have a claim for damages for impairment of quality of life and enhanced risk of injury?

: Analysis (Justice Stein)

mpairment of quality of life claim:

O Defendant asserts that statute only provides for compensation for "pain and suffering when it meets the statutory
threshold of severity of injury or expense of treatment is met. mpairments of quality of life due to loss of plaintiffs'
water supply was a form of pain and suffering and therefore does not meet the statutory threshold for compensation
O Trial court held (and the Supreme Court affirms) that the inconvenience is associated with the invasion of a property
interest and therefore the compensation is for multiple nuisances related to a lack of running water

Enhanced risk of injury claim:

O Plaintiffs claim that the unquantified injury should be presently compensable, even though no evidence of disease has
manifested. Defendants do not dispute the causal relationship, but argue that the probability of illness is too remote to
warrant compensation under principles of tort law
O Trial and appellate court held that it would not be possible to establish a "reasonable probability that plaintiffs would
sustain future injury. t also observed that the jury would have to speculate on the future health of the plaintiffs to arrive
at a damages award. The court noted that future claims for injury would not be barred by the statute of limitations (the
appellate court held that this last part of the opinion constituted "dictum only). Ergo, any plaintiff that obtains medical
surveillance for the express purpose of determining injury caused by harmful chemicals must bear the cost personally
O Majority holds that medical surveillance costs are reimbursable. t then examines the followings questions:
4 At what stage in the evolution of a toxic injury should tort law intercede by requiring the responsible part to pay
damages? ("tort principles argument)
n the absence of statutory and administrative mechanisms for processing injury claims, courts have
struggled to accommodate common-law tort doctrines. These doctrines have been judged to be
inadequate, and many commentators have concluded that some form of statutorily authorized
compensation is required if the injuries sustained by victims are to be fairly redressed
Judicial resolution of mass exposure claims is generally unworkable because of practical difficulties
endemic to the resolution of injury claims including identification of the responsible parties,
compensation of expert witnesses and temptation for premature settlement
Further problems are posed by statute of Iimitations, although many of these issues have been
remedied by adopting a "discovery rule instead of an "exposure rule. t should also be noted that
neither the singIe controversy doctrine not statute of limitations will preclude future "discovery of a
disease or injury relate to the tortious conduct at issue in this case (i.e. second cause of action does
not accrue until disease has manifested)
Another common obstacle to judicial resolution is the difficulty posed by plaintiffs' in proving
negligence. Negligence standard requires plaintiff to prove that costs of taking precautionary
measures outweighs the probability and gravity of harm. A frequent resolution of this problem
involves substituting strict liability doctrine in place of a negligence standard
Finally, another problem faced by plaintiffs is the burden of proving causation. This is particularly
difficult when the causation is complex due to long latency of illnesses. n Allen (a case involving a
casual relationship between nuclear fallout and cancer), the court invoked analogies to cases that
have relied upon factual connections between the plaintiffs and defendants as a basis for liability,
where proof of causation is unavailable
4 s proof of an unquantified enhanced risk of illness or a need for medical surveillance sufficient to justify
compensation? ("nstitutional argument)
Does exposure to toxic chemicals resulting in an enhanced risk of disease constitute an "injury?
O Yes, because an "injury is used to denote the fact that there has been an invasion of a
legally protected interest.
Was the proof quantifying the likelihood of disease sufficient for submission to a jury?
O Appellate court concluded that there was no way to compensate for enhanced risk without
knowing the degree of enhancement. Supreme Court notes that courts have generally been
reluctant to recognize claims for potential but unrealized injury unless the proof of the injury
is substantial. Courts have noted that there is a risk of speculative lawsuits if such claims
were allowed
O Some courts have acknowledged the propriety of the enhanced risk cause, but emphasized
the requirement that proof of future injury be reasonably certain. Other courts have
permitted recovery if the plaintiff already exhibits some present manifestations of disease
O Without such proof, the claim would be highly contingent and speculative, and therefore
hard to manage. This is different from compensation for assault, trespass, emotion distress,
invasion of privacy or damage to reputation because the events have occurred and can be
proved at trial.
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Court rules that present cause of action cannot be sustained because of the speculative nature of an
unquantified injury, difficulties inherent in adjudicating such claims, and the policies underlying the
Tort Claims Act. The court worries that there will be a flood of litigation if it rules otherwise.
O Majority does not examine whether a claim based on enhanced risk of disease that is supported by testimony
demonstrating that the onset of the disease is reasonably probable would be maintained under the Act.

V: Holding: Affirmed

V: Dissent: Justice Handler

O Court focuses on the inability to measure risk, rather than the fact of contamination, and rules that the residents cannot
recover any damages referable to that enhanced risk. The court holding leaves these grievously wronged persons
uncompensated for the injuries caused by the defendant's palpably unreasonable conduct
O The majority recognizes that plaintiffs have suffered injury. But it dodges compensation because of an unsupported
fear of "vast numbers of claims and a belief that no "clear guidelines exist to determine what level of compensation
may be appropriate.
O The court has previously dealt with many of these issues:
4 n Evers (doctor's negligent diagnosis and treatment enhanced the risk that her cancer would reoccur), the
court allowed recovery for enhanced risk without requiring that the risk be quantified
4 The courts have not allowed difficulty of quantifying injury to prevent recovery in cases of compensation for
assault, trespass, emotional distress, invasion of privacy and damage to reputation. The damages suffered in
these cases are partly assessed on the disvalue of being subjected to an intrinsically harmful event and not
just on the actual consequential damages
O The majority holds that there is a fundamental difference between "reasonable probability and
"significantly.enhanced risk, but it fails to draw a distinction between the two
O Majority ignores the long-term benefits of compensation, which come from deterrence. t also ignores the retributive
justice of such judgments.
O Courts should not allow speculative fears or undifferentiated anxiety over a possible rush to litigate to defeat a sound
and fair cause of action
O Therefore, the court errs in severely limiting the damages available to the plaintiffs

n Ayers, the Court says that courts/common law aren't well-adapted to dealing with mass tort issues

PIaintiffs Seek Damages For: Stein HandIer

QuaIity of ife [repIacing dirty water Yes Yes
with cIean = time, money, effort]

MedicaI Monitoring [extra cost for Yes Yes ["injury = modification of
genes]
Monitoring water-reIated diseases]

Enhanced Risk of Disease No [for future injury?] Yes [damages for injury at present]

The enhanced risk of disease claim raises sharp disagreements:

Single rule controversy bars another claim for this incident [NJ's SCR rule was extremely stringent]
4 Held: We, judges, can always waive the SCR for these cases when they reach us in the future
Statute of limitations when does it start running? Time of exposure? Or discovery of injury?
4 Held: For this kind of problem, SoL starts to run from discovery of exposure-related ailment
Causation hard to prove that cancer was caused by exposure
Analysis of the Holding in this case
4 Stein: t makes more sense for the legislature to modify the law on this point
4 Why can't the Court do this itself?
Stein offers policy arguments on this point:
O A lot of litigation would result a flood of 'speculative claims'
4 Handler: Juries can sort things out (and do so all the time)
4 Handler: This policy will block many valid claims
Handler can also argue that Stein's policy break the deterrence goal of tort law
O Stein: Maintain deterrence by allowing full future recovery
O Stein: Also, an economic analysis:
4 Amount for reach plaintiff to insure themselves against cancer = X
4 Total damages from cancer = #ppl w/ cancer x cost per cancer = X
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Handler: But this seems to rest on unreliable assumptions
about perfect insurance market, no major change in costs
across time
Regardless, we still need to choose a policy response and it
isn't clear that either courts or legislature is necessarily better
O There is a tension in Stein's view, because the amount for medical monitoring
should be MM + "enhanced risk of damages . so there is a tension in Stein's
view given his Yes/No split on these points
Under Handler's view, recovery now but not in the future if you do get cancer
O So some are dramatically undercompensated, others overcompensated
O Stein: better to do nothing and reserve possibility of proper future awards
Contrast a theoretical v. realistic view of courts and legislatures
O Townships are better at lobbying legislatures than are individual plaintiffs
O Courts require expensive and complicated litigation to take meaningful action
4 Political Consequences of Stein's Holding
The injured plaintiffs will probably get together and lobby the legislature
O A "punitive theory make people worse off to motivate political action
O This wouldn't happen on Handler's view (though the township might lobby the
state legislature to change the law to prevent holdings like this one)
"Assume legislative inertia:
O f Stein wins, no action and a few victims get screwed
O f Handler wins, no action, some overcompensation, some under-
compensation
"Assume an idealized world:
O Stein's opinion prompts the legislature to enact a clear and comprehensive
remedy re: the threshold of causation; or to reverse the burden of proof for
cancer cases post-exposure
O Stein envisions a "toxic exposure fund similar to workers compensation that
might come into play above a certain level of exposure
4 ssue: Some will want to opt-out of this system and go for big
damages
4 Why no criminal charges against mayor/directors of the Township of Ayers?
Well, if they lose the township takes a devastating financial blow that is ultimately
shared by the tax-payers . do we punish residents of the town for electing these
councilors?
Why can't the Court create a funded compensation scheme for toxic torts? Why only the legislature?
4 A compensation fund is necessarily arbitrary and cannot be defended on non-principled
grounds
4 Legislatures can be non-rational this way, but courts cannot be because their reasoned
opinions serve as precedent for future reasoned opinions
4 Why shouldn't legislatures also be held to this standard of principles reasonableness?
Elections versus Appointment?
4 Stein: t is okay when windfalls and under-compensation result from legislative actions, but
okay when the same result is achieved through judicial action
This is basically distributive, he says, and legislatures the more appropriate forum
Here, elections are more persuasive re: institutional legitimacy
4 Why about elected judges?
Voters use different criteria to elect judges versus legislators
Legislators are generalists, but collectively have a wide range of expertise . the
"wisdom of crowds suggest that they will make a better decision
But in real life, committees make these decisions [raises problems for this argument]
O But this is circular: f we change public expectations of judges, then people
might vote on the basis of different criteria to reflect view of judges as policy
makers
Agency bureaucrats are at best indirectly responsible to the public, like judges, but they are experts
4 So with funded compensation, have the legislature create an agency and have them tell it to
work out the best public policy for compensating victims of such contamination
4 f the Courts did this, how would a court identify all relevant factors?
The adversarial process doesn't seem ideal for this process!
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The legislatures can commission a non-partisan study, unlike the courts, and can then
evaluate that evidence as generalists
So all interests groups that would appear in court can still appear in the legislature, but
at lease the legislators benefit from independent perspective
This hinges on maintenance of a purely adversarial system could be more like
Europe
4 Agencies can assess information on an ongoing basis . judges would be hard-pressed to do
this

Do agencies with technicaI expertise have speciaI Iegitimacy or competence to achieve distributionaI
justice?
No. A scientifically valid outcome may not be distributionally just. n contrast, juries might be better at
achieving distributional justice but without a sound basis in scientific fact.

METRO NORTH V. BUCKEY, 521 U.S. 424 (1997)

PROCEDURA POSTURE: The United States Court of Appeals for the Second Circuit reversed the district court's dismissal of
respondent employee's action for damages due to the employee's exposure to asbestos in his employment for petitioner
employer, pursuant to the Federal Employers' Liability Act (FELA). The appellate court held that employee had incurred a
"physical impact."

OVERVIEW: As a pipefitter for employer railroad, the employee was daily exposed to asbestos while removing insulation from
pipes, often covering himself with insulation dust containing asbestos. The employee attended an "asbestos awareness" class
and feared that he would develop cancer. Periodic medical check-ups revealed no evidence of cancer or any other asbestos-
related disease. The employee sued for damages for emotional distress and the cost of future medical check-ups. The employer
conceded negligence, but argued that FELA did not permit damages in the absence of physical harm. The Court concluded that
the employee could not recover damages and medical monitoring costs unless or until he manifested symptoms of a disease.
The Court relied on Gottshall and held that (1) recovery for emotional distress required immediate traumatic harm from
threatened physical contact, (2) "physical impact" was not mere exposure, (3) common-law precedent disfavored recovery, and
(4) the employee exhibited no evidence of distress. The employee continued to work with insulating material, did not request a
transfer, continued to smoke cigarettes, and had not been referred to a psychologist or social worker.

OUTCOME: The Court reversed the appellate court's decision in favor of the employee for damages from exposure to asbestos
in his employment pursuant to the FELA and remanded for further proceedings.

ssue: Did Buckley suffer "injuries as understood by FELA?

Breyer's opinion here sounds a lot like Stein's in Ayers, even though he is interpreting a statute rather
than applying a common law doctrine [tort law]
Breyer relies on institutional competencies re: the administration of remedies to guide his policy
analysis

EGA THEORY

Flourished 1910-1940, a modest decline in the 1940s, revived in 1950s, substantial decline in 1960s, revived in
1970s/1980s under the guise of critical legal studies. Now the foundation of modern legal pedagogy.

(1) In any reasonabIy compIex system of IegaI ruIes, IegaI resources are avaiIabIe to support
contradictory but individuaIIy reasonabIe concIusions about an reasonabIy interesting IegaI
question

(2) Decisions by the decision-makers must be made on the basis of something other than pureIy IegaI
materiaIs, because the given materiaIs can produce muItipIe reasonabIe concIusions

(3) The onIy avaiIabIe basis for choosing one resuIt over another is the choice of what constitutes
good pubIic poIicy ("the outcome that makes sense for aII of us").

a. A different branch of legal realism adopted a sociological/external perspective, the so-called "bad
man view of law articulated by Holmes in "The Path of the Law . only worry about what decision-
makers will actually do given their "priors

17
(4) PoIicy arguments are inevitabIy part of IegaI materiaIs

a. "nternal View: Within the terms of the law, we must use policy
b. "External View: Holmesian "Bad Man . what is law? = what will happen if do X?
i. 5 judges pro-Y, 4 judges not pro-Y, so Y will probably happen
ii. Try to explain outcomes from party affiliation
iii. This isn't especially helpful when making arguments before a judge, or when judging
iv. Very cynical! ts decline in 1940s was linked to a sense that it is compatible with fascism
. and indeed, Carl Schmidt (major Nazi theorist) identified as a legal realist
v. Not a "jurisprudence of futility still leaves room for talented lawyers to change outcomes
by compellingly manipulating legal materials, or to change larger social/cultural context and
thereby indirectly modify judicial predispositions
c. Some cases are "hard and others are "easy [easy when legal materials seem to dictate outcome]
i. This distinction is objectionable even apparently 'easy' cases can be made 'hard'
d. Message to judges: "go for it, and don't worry about doing so
i. A savvy realist judge in a world of legalists will "fake it to some extent as a matter of
strategy to gain credibility/legitimacy for real objectives
ii. Judges who identify as legalists are delusional; those who feel bound by materials just
aren't smart enough to get around them

(5) Two kinds of poIicies: substantive [good for society] & institutionaI [aIIocative of decision-making]

a. People came to realize that substantive policies are just as indeterminate of outcomes as the
purely legal materials . how to resolve this?
i. Resolve disputes through reference to politics/preferences
b. Ergo, we should focus on institutions
i. f a problem can only be resolved by aggregating preferences, it is legislative
ii. f principles can resolve the matter, leave it to courts
c. A displacement of political battles onto institutions based on their characteristics and competences

1950s: "The egaI Process" pubIished by Hart & Sachs

The point is to flag institutional differences relevant to the outcome, and to show that there are cases
where political ideology doesn't matter

1970s/1980s: CriticaI egaI Studies

Claims about non-political institutional characteristics are just as false as formalist claims about the
binding nature of legal materials; similar instances of indetermination affect institutional allocation
There is a policy choice at the stage of deciding which institution will resolve disputes!
Okay, so what do we do next?
4 Scientize the study of law Law and Economics + Public Choice Theory movements
Law and Economics an effort to reconstruct the school of process on more scientific
grounds, but this ultimately failed when CLS theorists were able to provide formally
adequate arguments that confounded the determinacy of their conclusions
4 But this is just a move within the domain of legal materials; hardly determines legal outcomes
4 Now just seen as a set of techniques available to lawyers, but not as definitive

on FuIIer: The Forms and Limits o1 Adjudication

Courts are good at bi-polar disputes, legislatures are good at poly-centric disputes.
What do these terms actually mean?
And why the varied institutional competence?

Courts Legislature
Bipolar Polycentric
Narrowly confined to parties Decision of one part affects all the other parts
Right/principle clear damages Equity/welfare no rule to explain amount you get

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a) Nothing in the courts is really confined to the case b/c of precedent
i) Future courts decide the precedent, so the judge personally can't know what it is or if its bi or poly
b) n Ayers, court saw quality of life as bi award damages, but enhanced risk as poly decline/defer to leg.
c) Judicial role has changed somewhat
d) Courts ask if torts/contracts/criminal law can deal with a problem
i) f no, hope that legislature can
(1) Tools: specific statutes, create an agency
(2) ncentives: votes, political
(3) Advantages: don't need to worry about principles, can say we did "x because we wanted to
(a) f legislature can't b/c problem needs a specialist or b/c of competing interests like industry v.
consumers agency
e) LEGSLATURE: generalist, unprincipled, politically accountable
f) AGENCES: professionals, indirectly politically accountable
i) Politically appointed heads for agencies w/in the executive branch
ii) Politically accountable thru Congress budget control and hearing oversight

Polycentric Disputes: Metaphor of a spider-web

dea of unanticipateable consequences
Government must be in a position to exercise continuous regulatory control over the stream of complex
and unforeseeable effects of a decision
Courts just can't do this [oh really?]
4 Fuller wrote in 1950s, just as courts began to develop tools of continuous regulation for schools
and prisons (public interest institutional reform litigation)
i.e. inadequate medical care in prisons cruel and unusual punishment a remedial
order of steps to be taken to meet minimum constitutional standards plaintiff can
return, sue again, and get the court to modify the order in some way
Limits:
O Territorial limits of judicial jurisdiction
O Courts exercising too much power of state budgets?
O Courts have largely backed away from an active role in such disputes
FuIIer and egaI Process didn't reaIIy ask the comparative question about whether other
institutions wouId do a better job . and used essentiaIized views of the reIevant institutions

Bipolar Disputes:

Resolve disputes with reference to preexisting rights and principles (not just preferences)
But this seems like a fuzzy distinction b/w preference and principle!
4 Why not call a living wage a principle or right?
ssue: Can we give principled reasons for preferring one outcome over another, or do we see a
number of non-lexigraphically ordered acceptable outcomes and choose without rational justification?
Because the resolution of any case has precedential effect, the dispute is also polycentric!
Also, "precedent only assumes meaning if the court chooses to recognize it as such . a big issue for
Fuller
What to do if all decisions have a non-trivial polycentric character?
4 Can argue that judicial responses have a higher likelihood of failure
t is unfair to compare courts as they actually are with idealized versions of legislatures
and administrative agencies!
4 Courts will ignore judicial proprieties, i.e. by reading around in other materials via judicial notice
But this again essentializes courts! Why can't they look around?
4 Courts will reshape polycentric disputes into bipolar contests and thus distort the issue
So? Can always re-litigate if this results in too dramatic a shifting of burden

Now we turn to the development of Fuller's ideas re: varied institutional characteristics and incentives.

n the following reading, we start to ask deeper questions about different incentives, biases, and competencies.

2-stage anaIysis of institutions and pubIic poIicy:

19
(1) What are the incentives of the peopIe staffing different institutions?
(a) Other characteristics reIevant to poIicy-making in these institutions?
(2) What kinds of pubIic probIems are better addressed by each institution
given these incentives and characteristics?

Discussion - CIayton GiIIette and James Krier: #isk, Courts, and Agencies

Legislators are generalists, who respond to political pressure and scandals
4 This doesn't bode well for public interest, technical, or non-crisis causes
Administrative agencies are indirectly politically responsive, are expert, and can view problems more
comprehensively (don't just respond to scandals)

1rame their analysis by 1ixing the issue o1 public policy around PUBLIC #IS [risks the costs of which
are not internalized by its producers]. They assume without argument that markets are not sufficient to the task of
regulating such risk, nor do they discuss the possibility o1 speci1ying background tort/contract rules to
achieve this goal.

Access
Bias
Characteristics
Courts Mobilized by ndividuals
Costly to mobilize requires time and money
Discounted recovery (% chance of success v. investment of energy)
For public risks, costs often > recovery
Free riders an issue when the remedy is an injunction [+ geographic dispersion of plaintiffs]
Cause-Effect relationships are often very hard to prove in public risk litigation
Entrepreneurial lawyer, class action, and contingent fee do not solve the problem
Too few claims, too little vigorous prosecution
egisIatures Mobilized by Votes
nterest groups can skew policy, or can benefit the process by raising new issues
Generalist decision-makers require information (mostly acquired from lobbyists)
Care deeply about "advertising their efforts and receiving public attention
Discretionary agenda-setting [hard to bring issues to legislative attention]
Markets Must have MONEY, at least enough to contract
Agencies Mobilized by interest groups [who gets heard?]
Those who create right are often more highly organized to lobby than the public
A risk of agency capture by regulated industries
nterest groups often provide much of the higher-level agency staff

Process Bias: Systematic differences in decision-making for pubIic poIicy across institutions

Process
Bias

Agencies Agency experts systematicaIIy over-priviIege and undervaIue cost as compared to the
pubIic

Mission Commitment: Agency reguIators feeI Iike it is there job to reguIate, so they broadIy
tend to over-reguIate with regard to their mission
This can be difficult to supervise [courts seem like a good candidate but can go too
far!]
People tend to seek out jobs that advance regulatory aims they value [at staff level]
egisIatures Often produce pork-laden solutions
nstability in outcomes because of access biases
A preference for simple solutions
Legislators are typically generalists
Simple solutions often win more public attention
Courts Process Biases of the Courts: MostIy proceduraI and ex post in nature
4 Easy to administer rules [lawyers are generalists]
4 Reliance on traditional doctrine [even for new problems]
20
4 Prefers to assign the burden of proof to one party or the other
4 ProceduraI soIutions might prove costIy to operate (must satisfy due process)
4 t might just be cheaper for another institution to act given these costs
4 Ex ante incentives can resuIt from ex post ruIings given precedentiaI vaIue
There are communication effectiveness issues here
An agency might more effectiveIy communicate desired ex ante reguIations

The Courts: Having identified access issues, what to do next?
4 Can assign these problems to administrative agencies
4 CouId aIter the ruIes of courts as an institution
This makes crude institutionaI comparison more compIex . we can reduce ruIes
for an institution to reduce access obstacIes

CAIMING EGA RIGHTS: NAMING, BAMING, CAIMING

Key Point: At every stage in the NBC process, there is a social process associated with injury that leads people to
either blame/not-blame, etc. . this must be taken into account when thinking about regulatory institutions

f the process is such that people who blame someone don't claim, maybe we should create a private
enforcement mechanisms [legislative or agency]
Trickier at the "naming phase, where people are involved in injuries but don't blame anyone in
particular

FeIstiner, AbeI and Sarat: The Emergence and Transformation of Disputes: Naming, BIaming, CIaiming.

"Disputes are not things: they are social constructs

Stages of transformation: This transformation process is key to improving access to justice

O Naming: he first transformation is to identify an incident as injurious
O BIaming: The next step is to indentify someone else who is at fault and therefore a "grievance
O CIaiming: Finally, the last transformation is when the person asks someone for a remedy

Characteristics of transformation:

O Subjective transformations need not be accompanied by obvious behavior changes
O UnstabIe they are based on emotions that can change
O Reactive people define disputes based on communications, behavior and interactions w/ a range of
parties
O CompIicated A lot of ambiguous behavior inc. uncertain norms, conflicting objectives & complex
institutions
O IncompIete Based on an imperfect understanding of the other parties position and perspectives

Subjects and agents of transformation:

O Parties: Parties keep changing based on new information. Sometime they become allies, or adversaries
O Attributions: Causes a person assigns for an experience will determine what actions they take in
response
O Scope: The extent of the dispute is affected by behavior and objectives of the parties involved and the
character of the institutions involved. Sometimes the scope should be expanded to reflect the underlying
problems. Sometimes it makes more sense to focus narrowly on the problem at hand
O Objectives sought: Parties change objectives in two ways: what he seeks/is willing to concede and how
much
O IdeoIogy: Sense of entitlement is linked to prevailing ideology.
4 Choosing a narrow dispute can make the problem individualized and depoliticized
4 Choosing a broad dispute can make the issue collectivized and politicized
O Reference groups: Disputes may be transformed through interactions with audiences or sponsors
21
O Representations and OfficiaIs: Outside parties like lawyers, union officials and public servants transform
the dispute by defining the needs in terms of consumer or profession services
O Dispute institutions: characteristics of dispute institutions is important
4 Courts may transform disputes by individualizing remedies.
Also, court judgments can harden the opinions of the disputants
4 Psychotherapy, by contrast, may lead to a better understanding of the adversary's position, and
therefore lead to a change in attitudes
4 n between courts and psychotherapy, there is a large range of institutions, including arbitration,
mediation, administrative hearings and investigations

UJAN V. DEFENDERS OF WIDIFE, 504 U.S. 555

Court decides that injury-free, pubIic interest cases need to go to Congress and Chief Executive

A case about ACCESS to the COURTS. Three questions: Plaintiffs' njury? Causality between conduct and
injury? Likelihood that a favorable decision could redress the injury?

Shows how important we might consider the different activation mechanisms of courts versus
agencies and IegisIatures [onIy courts require actuaI injury]
Here, we determine whether or not there has been "injury by asking whether courts or legislatures
should handle this issue. But ticket/no-ticket is a patently arbitrary resolution of this issue.
This is more about Scalia's ideology of individualism that the actual merits.
i) Court protects individual rights
b) Who do we want to act when the Executive branch doesn't compIy w/the Iaw?
i) Court says that the Constitution designated Congress

ujan Pro Con
Court Low cost access, has to decide Bad priority setting, policy not by elected
egisIature Responsive to voters, can set priorities Priority setting by politics, high costs to access,
over-responsive to industry

More general consideration of restritions on access to the courts:

The best argument for restrictive standing = we want the best possible plaintiffs to increase the efficacy
of the adversarial process
4 3 Objections
Won't the special interest groups here fight to the hilt regardless of which plaintiff?
There may not be a "best plaintiff just lots of "good ones
Also, in this case there is a civil society interest at stake






A QUICK DISCUSSION OF WORKERS' COMPENSATION & AGENCIES:

Barebones Story: Told by progenitors/theorists of the administrative state (Progressives 1900s-1930s)

Earl 19
th
CE: Start with a nation of farmers and trades-people, where ordinary contracts/tort/property law works
basically fine to resolve issues Rapid economic change and industrialization New social issues [i.e. higher rates
of more gruesome workplace injury] A need for new institutions to address this problems:

Courts/Common Law: Yields bad results because (1) too many of these cases and (2) The nature of
the problem changes too quickly for courts to properly fashion remedies
Legislatures and Statutes: i.e. prohibitions on sleeping in the workplace, limited work-hours/day
4 nadequate because:
Change is too rapid for legislators to handle [hard to mobilize, slow moving]
22
These problems require expertise that legislators lack
Special interests exert powerful control over legislators
Administrative agency: Staff with experts, confine jurisdiction to particular problems, allow them to
operate nimbly in response to rapid social change

This narrative can be applied to the emergence of workers' compensation [Friedman and adinsky Reading]:

Courts failed to rework doctrine well in response to industrialization-related injuries
Statutory bans on certain defenses [fellow servant rule strict liability] and schedules of disability fees
were quickly outdated
So then give WC Board's the power to set the compensation level appropriately

However, there were some problems with the administrative state at the time this all occurred:

Staff not so expert during the earIy administrative/reguIatory state
4 Many of them received patronage positions
4 Led to the creation of civiI servants at the line-level, w/ examinations and job security
4 Also led to creation of appointed positions with fixed terms or terms longer than 4-years [to
achieve continuity of policy-formation across administrations]
Also a partiaI judiciaIization of agencies (by the 1940s)
4 nitially resisted by the Progressives
4 Constituencies wanted judiciaI review to guard against mission-overcommitted agencies
4 Driven in party by the need to buy-off Iawyers, ensuring that lawyers would have enough of a
stake in the new system of regulation and administration

Statutory Interpretation

Two contexts in which we wiII consider the probIem of statutory interpretation:

(1) The IegisIature has enacted a statute and the court is asked directIy what it means

(2) The IegisIature has passes a statute and deIegated enforcement to an administrative
agency; in the course of enforcement, the agency interprets the statute. What effect on its
interpretation shouId the agencies' interpretation receive, asks the court?

Textualism: Look to ordinary meaning at the time of the statute's enactment; what other words in context suggest
about the key word; meaning-based canons of interpretation

ntentionalism: Figure out what the people who adopted the statute actually wanted it to cover/achieve, to the best
extent possible i.e. look at legislative history ["expected application ntentionalism]. One serious problem is that
in many cases no such intent exists . the statute might just have been the result of a compromise agreement.

Purposivism: What were enactors trying to accomplish? Unlike ntentionalism because it assumes that legislators
are reasonable people pursuing reasonable goals in a reasonable manner [no real interest in subjective intent].
The interpreter posits reasonable goals and implementations on behalf of the legislators. A lot of room for creativity
here!

KarI IeweIIyn, Remarks on the Theory of AppeIIate Decision & the RuIes or Canons about How Statutes Are to Be
Construed

There is no singIe/right way to read a case:

1. A case holds only what is necessary to sustain the ruling; if it rests on several lines of reasoning, any of these can
be potentially ignored as unnecessary
2. A case holds whatever rule was used to reach the judgment; this rule covers cases which are plainly
distinguishable on fact and issue whenever the reason for the rule applies . even when the rule or principle
wasn't even explicit in the first case (we there said . )

These confIicting ways of handIing a prior case have counterparts in handIing series of cases:

23
1. Correct: The rule is too well settled to be disturbed, so apply to a novel situation
2. Correct: The rule has never been extended to such a case, so let us limit it here
3. Correct: Look over past application and reformulate a "true rule by knocking out some past cases as
misapplications and building up others

There are many correct ways of handling prior cases. These constitute application, development, and sound continuation of the
system of precedent. The issue is that many lawyers mistakenly believe that there is, in fact, a correct answer. The really
important question does not concern which answer is correct; rather, it concerns which answer the court will select.

Selection is usually automatic. Sometimes a distinction/expansion seems unavailable because of:

1. The current tradition of the court
2. The current temper of the court
3. The sense of the situation as the court sees that sense

1. The Current Tradition of the Court (given as a historicaI narrative re: period-styIe):

1820-1850 = freedom in the courts (Marshall and Mansfield), with precedent guiding and principle (a.k.a. the
wisdom-in-result for the welfare of all-of-us) in control
4 The Grand Style
1880-1910 = courts focused on order within the law and resistance to outside influence. Precedent controls,
tested by whether it made for order in the law rather than wisdom in result. Legal principle not open to political
examination.
4 The Formal Style
Since the 1920s = the Grand Style working its way back, even as the language of opinions still moves dominantly
in the Formal Style

2. The Current Temper of the Court: RefIected in Reports; equaIs traditions + personneI

Two eternal types of being:

1. an who loves creativeness, takes risks, sees and feels institutions as things built to serve functions, who sees the
functions as vital and law as a tool to be eternally reoriented to justice and to general welfare

2. The an who loves order, finds risk uncomfortable, has seen enough irresponsible or unwise innovation that
responsibility means caution, sees and feels institutions as the tested, slow-built ways which for all their faults are
man's sole safeguard against relapse into barbarism, and who regards reorientation of the law in our polity as
essentially committed to the legislature

Judges range across this spectrum. The composition of the bench at any tie will urge the court toward more literal or creative
selection among 'correct' ways of handling precedent.

3. The Sense of the Situation As Seen by the Court

The most vital consideration. Powerful enough that it moved Formal judges to creatively expand labor injunction and due
process law, and that it led Grand judges to literally apply formulae in cases where they felt comfortable and familiar. Certain
generalization can be made here:

1. n 6/10 appealed cases, the court feels this sense to clearly that it is almost automatic to line up the relevant
authorities. Distinctions lead to the eye and these reveal 'all' that a series of cases hold (the clear and true rule).
Trouble comes when the cases don't line-up semi-automatically and there1ore require intellectual labor.
Or when the sense of the situation is not sufficiently clear to permit this to happen.
2. otives can determine which techniques are 'correct.' Technical leeways correctly available when the sense
of the situation and the case call for their use cease to be correctly available unless used in furtherance of what the
court sees as such sense.
3. The greater the 1elt need, because o1 1elt sense, the wider the leeway correctly and properly available in
reshaping an authority or the authorities . would is both proper and to be expected in an extreme case would
be abuse if made daily practice.

We can further distinguish "sense in two relevant respects:

1. Sense of the type of situation
2. Sense of a particular controversy between two litigants

24
t matters which of these senses the court responds to. Response to the sense of a particular controversy is generally
dangerous (may not be typical, leads to a finding for this case only). t is better to focus on the type of situation (focus on
reasonable simplicity and broader vision; prevents confusion of sympathy for long-range justice-for-all).

AII of This is ParaIIeIed in Statutory Interpretation

t is the right doctrine and going practice for our highest courts to find leeway in which to narrow or avoid unfortunate prior
rulings, or to develop/expand fortunate prior rulings. This is not to twist precedent. t is, rather, to make the laws always a little
better but always within limits set, not only by precedents, but equally by the traditions of right conduct in judicial office.

This is paralleled in statutory interpretation because of:

1. The power of legislatures both to choose policy and to select measures
2. The necessity that the legislature shall, in so doing, use fixed language
3. The continuing duty of the courts to make sense, under and within the law

A court must strive to make sense as a whole out of our law as a whole it must play the legislature's music in tune with the
other music of the legal system . even given "correct rules/canons, we find variant possible directions.

The real guide is Sense-for-All-of-Us. t must be so, even if we maintain the illusion of correct rules which make themselves
available as duty and sense may require. Until then, the problem will recur: which of the technically correct answers should be
given, and which will be given . and Why?

Grand Style interpreters interpreted statutes freely to implement their purpose, focusing on legislature's choice of
policy and trying to implement it
Formal Style interpreters limited and eviscerated statutes with wooden and literal reading, leading to a long battle
between a stiff-necked court and a legislature wielding only weapons of language
Today the courts have cheerfully accepted legislative choice, a happy occurrence hampered only by a remnant
Formal insistence on precise language

For a statute to make sense, it must be read in light of an assumed purpose. Moreover, it must merge with a larger system of
law (taking policy into account). Creating reshaping by the court is thus inevitable. Although it is often easy to determine
legislative intent re: particulars evils to be cured, things get more tricky when the statute must be applied to circumstances
unforeseen by its drafters. n such cases, the quest is not for sense was originally put into the law, but rather what sense can be
quarried out of the statute in light of the new situation.

Because the canons of interpretation can always lead in multiple directions, and there are two opposing canons on almost every
single point, any canon can only take hold in a given instance by means other than itself a.k.a. the good sense of the situation
and a simple construction of the available language to achieve that sense, tenably, out of the statutory language.

Stephen Breyer. "On the Uses of egisIative History in Interpreting Statutes."

Thesis: Courts ought to examine statutes' legislative history (e.g., comm. reports, testimony at hearings, etc.) when
interpreting uncIear statutory Ianguage. AIthough there are pitfaIIs to be avoided with using IegisIative history, the
benefits re- better understanding statutes outweigh the costs associated with their misuse.

1) Breyer takes a pragmatic approach
a) Courts are (in part) administrative institutions, which clarify laws
b) Goal: interpret the law in accordance with "reasonable expectations
2) ExampIes of the usefuIness of using IegisIative history
a) aws can be uncIear. Therefore, look at "the background of a statute, the terms of debate over its enactment, the
factual assumptions the legislators made, the conventions they thought applicable, and their expressed objectives
b) Ways in which examining legislative history can clear up confusing passages in laws
i) Avoiding an absurd resuIt
ii) Correcting for IegisIators' "drafting errors"
(1) Example: A statute makes it a crime to possess a "counterfeit coin. On the face of it, this should apply to
possessors of any currency (foreign as well as US). But before this statute was slightly reworded in 1965, it
had included language that specified US coins for the previous 150 years. Looking at the House and Senate
Reports on the 1965 legislation, it appears that Congress wanted a narrow, technical revision of existing
counterfeiting law so it appears that Congress did not intend on replacing "any American coin with "any coin
in the world. Using these legislative reports as guidance, a court could uncover and undo a drafting error.
iii) Defining uncIear terms
(1) Words with speciaIized meanings: Possibility that a particular word or phrase in a statute is used as a term
of art, with a specialized meaning. But how to tell? Look at legislative history.
25
(2) Vague terms: E.g., does "persons in a welfare law include children? . f the term "core proceedings in a
bankruptcy statutes includes 15 examples of core proceedings, but notes that the definition is "not limited to
these 15, then what to do when faced with a possible "core proceeding not on the list?
(3) Terms that have muItipIe interpretations, aII of which seem reasonabIe: E.g., does a provision in the
Urban Mass Transportation Act of 1964 stating that "fair and equitable arrangement [must be made] . to
protect the interests of employees affected preempt state laws? According to witness testimony at
congressional hearings and floor debate between senators favoring and opposing the bill, the answer is
clearly no. One wouldn't be able to answer that question without reference to legislative materials.
3) Counterargument: CongressionaI inattention to detaiI Why give weight to Ieg. history?
a) Most member of Congress aren't really that involved with crafting laws, right? They're reading prepared statements
during hearings and floor speeches, and the actual writing of legislation is often farmed out to staffers, interest groups,
the White House, etc. So why should we pay any attention to legislative history?
b) Breyer's response: Congress is a compIex bureaucratic organization, whose members essentiaIIy serve as
managers, deIegating responsibiIity downward. t's the same in other large organizations (e.g., businesses, unions,
etc.). Yet in those organizations we have no probIem assigning responsibiIity to those at the top (even if the
actual work is being done by employees further down the chain)..so we shouIdn't have simiIar quaIms about
members of Congress deIegating work to their subordinates & extra-congressionaI actors.
Notes on the IeweIIyn and Breyer Readings

Llewellyn Reading:

Most famous for the Iist of opposed canons cited at the end
Two kinds of canons: poIicy-based [i.e. always favor ndians] and meaning-based [i.e. ejusdem
generis]
Advanced egaI ReaIism
4 If we Iook at the materiaIs of Iaw, we see a Iimited set of argument forms
4 The Iaw IS the use of these argumentative form - the technique of depIoying these
arguments in recognized "IegaI" contexts
4 Something counts as a IegaI argument when it is recognized at a particuIar historicaI
moment as an accepted form of argument [a sociaI process of agreement and
contestation]
Statutory Interpretation
4 Distinguish GRAND STYLE and FORMAL STYLE
4 Grand StyIe: Wisdom in resuIt that makes sense for aII of us
Hart & Sachs: Read statutes as though written by reasonabIe peopIe for
reasonabIe means by reasonabIe ends [an assumption, not an actuaI cIaim
about the reIevant IegisIators]
This is purposivism leaves lots of room for creativity by interpreter
Wisdom in ResuIt: t's be great to arrive at an interpretation that produces a just/wise
outcome in this particular case
For aII of us: But we also need to think about what would happen if this result were
generalized to other cases of a similar sort
O Realism does allow that future judges can ignore/manipulate such precedent
O "Joy of Singing Reason an intuition that one has arrived at the right legal
rule
4 FormaI StyIe: Temperamentally different from Grand Style
There is a good defense of the FS that makes it a component of GS judging
One may think that, as a matter of abstract jurisprudence, GS is great, but believe that
" am not very good at this and will therefore look to texts, common-understanding,
etc.
So the goal = largest number of results that are wide for all of us
One might thus beIieve that FS is the best means by which to achieve GS goaIs

What would this argument for FS within GS look like?

(1) By engaging in formaIism today, we get future benefits when interpreting statutes Iater .
we will forgo decision wise in result and best for all of us today, because if we interpret formally, the
legislature will learn to clean up its act and write good laws
26
(i) The Punitive Theory of Statutory Interpretation
(ii) But there are issues here re: communicative efficacy between courts and legislatures, as
well as the motives that lead legislators to avoid hard choices
(iii) This doesn't really bind our future-selves, because in the future we may come to see
ourselves as capable of all-things-considered best judgments regardless of initial formalist
choice
(2) FormaIism works re: my idiot-coIIeagues, who make bad aII-things-considered judgments,
and so I wiII try to foist formaIist judgments as a norm so as to achieve better net resuIts
(a) Assumes that my behaving as a formalist will influence my colleagues not effective!
(3) To infIuence judges on the Iower courts, who are terribIe at aII-things-considered judgments
(a) Use power of appellate review; can only review some of their decision, so many will become
law
(b) Tell them that they just should be formalist by reversing their judgments on formalist grounds
(c) Leaves room for me to think that can make great all-things-considered judgments

But does formalism meaningfully constrain judges to produce particular outcomes (as it professes)? Analytically,
legal realism supports the possibility of creativity. However, it takes more "work to be a Grand Style interpreter
than a Formalist . less talented judges will feel "stuck at particular conclusions w/in formalism in a predictable
manner [so we can, to some degree, predict the outcomes that formalism will produce].

Jerome Frank saw Oliver Wendell Holmes, Jr. as a fully mature justice, and treated every effort to locate a source
of authority outside of yourself as a sign of "psychological immaturity [now we'd say "false consciousness].

Easterbrook has two things to say about the Urban Mass Transit problem discussed in his article

Everyone knows that this provision is just a deal between competing interest groups, so enforce the deal as written
A wide range of legislation in simple interest group deals, so judges should just enforce it
There are some public interest statutes that courts should interpret as best-for-us-all
Problem: What if the statute lacks a provision? What "deal should be enforced?
4 Easterbrook: "put the statute down

Leave actors to rely on "common law entitlements [libertarianism] . let this dispute be resolved by background
principles of contract law. n this case, a complication because of the presence of a state law.
So Easterbrook would say "put down the federal law and look to state statutes and common law
People's arrangements prevail unless expressly displaced by law.

FORMA GRAND
Statutory Interp. Common aw Common aw Statutory Interp.
TextuaIism RuIes w/ Exceptions Standards w/ QuaIifications Purposivism
(exceptions have standard-Iike quaIities) (quaIifications are often ruIe-Iike)









HOW TO PERFORM STATUTORY INTERPRETATION:

Purposovist: Aims at a rule that is wise in result and best for all of us
Try to enlist text, try to enlist canons [or show clash and say, "ah, ambiguous]
4 The main thing is to conclude with best rule (and to give reasons for this too)
t is always good to use any style helpful . use formalism and grand style, mixed in the ideal case
t is also crucial to address, w/in chosen modes/styles, why the other result is not as good, even if
aware that one could make good arguments for that too

Convergence oI rules and standards will
occur as exceptions multiply and
qualiIications expend |in short or long term|
Intentionalism is
just a Ilawed
subcategory oI
purposivism;
always preIer rule
wise Ior all oI us
27
Cases Considered:

hurch of the Holy Trinity v. United States
4 Uses all three styles of interpretation; note imbrications with historical context
United States v. arshall
4 Absurdity and Unconstitutional Avoidance Canons
hickasaw Nation v. United States
4 mportance of embedded policy preferences here [re: ndians]

United States v. MarshaII

a) LSD weight inc. or doesn't carrier weight? Are we ok w/ carrier weight deciding the length of the sentence?

i) Easterbrook: includes carrier (there is a code..), statute is constitutional, so don't have to worry about
the canon dissent points to
(1) Finds some reasons we would be ok w/carrier weight
ii) Posner: Doesn't include carrier, that could make it unconstitutional (so must interpret it the other way)
(1) Emphasizes the absurd possible results
b) Problem w/ the avoid unconstitutional canon is it allows decisions to turn on const. w/out addressing it
i) Shadow of constitutional norms
c) Posner loses constitutionality issue left with the terms
i) He has to deal w/the terms
(1) Easterbrook can't pick a grain of LSD off the paper, it's a mixture
(2) Posner is LSD in a plane a mixture? Mixture or substance should be a the dose
(a) Goes through calculations to compare sentences w/other drugs GRAND STYLE

Chickasaw Nation v. US

d) Can list "including specific sections which "concern reporting and withholding of taxes be interpreted to
mean that under 35, which imposes taxes and exempts state-entities from taxes, they don't have to pay
taxes?
i) 6: explicit reference to 35 must mean something, can't just be surplusage
(1) either they meant to have them be exempt
(2) or its ambiguous and should be read to favor ndians re: canon
(a) Dissent: agrees w/ 6; when nothing else is really working, go w/canons
ii) decision: too bad if its surplusage, there is no other reasonable interpretation
(1) language outside of ( ) controls and its unambiguous
(2) bigger change to statute to include than to ignore
(3) mistake, not ambiguous
e) Formal: plain, common, technical meaning of words, if there is none, say (1) intentional delegation of
interpretory discretion to courts or (2) put it down
f) ntentionalism: if enacting legislature had been presented with the problem what would they have done?
i) Removed "taxation from the statute at some point that must have meant something
(1) BUT they added Ch 35
g) Purposivism: come up w/interpretation that furthers the purpose
i) Concern that statutes = deals struck, so purposivism means giving one side a better deal than one
party could get through leg process
h) Provision says that reporting law is the same at ndian Casinos as at other casinos
i) Chickasaw Nation wants 35 to apply b/c it removes a tax from them, makes then like state lottery
i) Existence of canons not determinative; just adds moves that judges and lawyers can make

Statutory Interpretation by Administrative Agencies

Creators of the modern regulatory state provided for enforcement of regulatory statutes in the first instance by
administrative agencies, subject to judicial oversight. This raises questions about relationship to judiciary.

Here we look at the degree to which courts should defer to agencies in their interpretation of the statute that
created it, sometimes referred to as the agency's "organic statute.

28
A range of possible views: no deference; accept brief from agency as an amicus curiae; should defer unless there
are strong reasons not to do so . but what role are agencies then playing in a rule-of-law system determined by
courts?

The Supreme Court has said that the choice among these options should be made with reference to the agency's
organic statute [which itself should indicate the relevant level of deference].

n United States v. ead (2001), the Court noted that: "t is fair to assume generally that Congress contemplates
administrative action with the effect of law when it provides for a relatively formal administrative procedure tending
to foster the fairness and deliberation that should underline a pronouncement of such force, but Congress may
sometimes intend that courts give substantial deference to agency interpretations even without such formalities.

ssue: Did Congress mean "to delegate authority . to issue . rulings with the force of law?

Chevron, U.S.A., Inc. v. NaturaI Resources Defense CounciI
Supreme Court of the United States, 1984
467 U.S. 837

Facts

Congress passed the Clean Air Act Amendments in 1977, enacting requirements applicable to States who had had
not achieved national air quality standards established by the EPA pursuant to earlier regulation. These
amendments required non-attainment States to establish a permit program regulating "new or modified major
stationary sources of air pollution. EPA promulgated regulation in 1981 that allowed States to adopt a plant-wide
definition of "stationary sources (a change from 1980). The Court of Appeals struck down this interpretation.

ssue

Does the EPA's decision allowing States to treat all of the pollution-emitting devices within the same industrial
grouping as though they were encased within a single "bubble rest upon a reasonably construction of the statutory
term "stationary source?

Analysis (Stevens)

A. Two part test for courts reviewing agency construction of statutes
a. Chevron I: Did Congress speak directIy to the precise question at issue
i. If yes, that is the end of the matter for both the court and the agency
b. Chevron II: If Congress was siIent on the precise question, is the agency's
interpretation based on a reasonabIe construction of the statute?
B. If Congress expIicitIy Ieft a gap for the agency to fiII, this constitutes express deIegation of
authority to the agency to eIucidate a specific provision of the statute by reguIation
a. Such agency interpretations are controIIing unIess arbitrary, capricious, or contrary to
statute
b. A IegisIative deIegation may be impIicit as weII as expIicit
c. ConsiderabIe weight shouId be accorded to agency constructions of statutory schemes
i. Depends upon expert knowIedge; reconciIiation of confIicting poIicy goaIs
d. Question: Is the Administrator's view a reasonabIe one?
C. egisIative history non-specific on this point; generaI poIicy interests baIance economic
interest in capitaI improvements and the environmentaI interest in improving air quaIity
D. Statutory anguage
a. n 111(a)(3), "stationary source refers to "any building, structure, facility, or installation
b. The text of the statute does not apply this definition to the permit program
c. Reject petitioners claim that 111(a)(3) is therefore completely irrelevant
d. 302(h) defines "major but is non-dispositive re: "stationary source
e. 111(a)(3) sheds some light & may be reasonably interpreted as a "bubble concept
f. Parsing of terms here reveals no intent of Congress; precise language non-dispositive
g. The only intent we see is an effort to enlarge, not limit, EPA's regulatory power on this matter
E. egisIative History
a. Unilluminating, but consistent w/ view that EPA should have broad discretion
b. Plainly identifies conflicting policy interests (air quality v. economic growth)
29
c. EPA has advanced a reasonable explanation for it conclusions
d. EPA regulations not less reasonable for having varied across time; this makes sense
F. PoIicy
a. Briefs for this case reveal a battle of policy . address to Congress or Executive, not Court
b. Administrator's interpretation reasonably accommodates competing interests gets deference
c. Congress didn't deal with this, couldn't build a coalition, didn't consider the matter, etc.
d. Judges are not experts in the field . defer to policy choices by expert administrators
e. Let the more accountable branches either Congress or Executive deal w/ policy choices
f. "When a challenge to an agency construction . really centers on the wisdom of the agency's
policy, rather than whether it is a reasonable choice within a gap left open by Congress, the
challenge must fail.

SO, TO RECAP THE MOST IMPORTANT PARTS OF THE CHEVRON OPINION:

TWO PART TEST FOR COURTS REVIEWING AGENCY CONSTRUCTION OF STATUTES

CHEVRON I: DID CONGRESS SPEAK DIRECTY TO THE PRECISE QUESTION AT ISSUE
[IF YES, THAT IS THE END OF THE MATTER FOR BOTH THE COURT AND THE AGENCY]

CHEVRON II: IF CONGRESS WAS SIENT ON THE PRECISE QUESTION, IS THE AGENCY'S INTERPRETATION
BASED ON A REASONABE CONSTRUCTION OF THE STATUTE?

If Congress expIicitIy Ieft a gap for the agency to fiII, this constitutes express deIegation of authority to the
agency to eIucidate a specific provision of the statute by reguIation

Such agency interpretations are controIIing unIess arbitrary, capricious, or contrary to statute
A legislative delegation may be implicit as well as explicit
ConsiderabIe weight shouId be accorded to agency constructions of statutory schemes
Depends upon expert knowledge; reconciliation of conflicting policy goals
Question: Is the Administrator's view a reasonabIe one?

An impIicit premise of Chevron: Administrative agencies combine expertise and political responsiveness, and
can deploy this expertise with respect to statutory interpretation [we might put pressure on this claim!].
Congress uses technical terms in the statute that are best understood by experts in the field
Statutes may outlast policy preferences of citizens . agencies allow responsiveness w/o statutory
change
4 SIPPAGE - EIections endorse generaI Iines of poIicy deveIopment, not specific poIicy
impIementation in any particuIar area
Agencies might be more responsive to electoral change than the citizenry would
prefer!
O One solution is to create independent agencies, rather than executive
agencies, that are less responsive to sudden changes in the political
landscape

FDA v. Brown Williamson, 529 U.S. 120, U.S. Supreme Court (2000)
A CHEVRON STEP #1 CASE


During the Clinton presidency, FDA asserted its right to regulate tobacco. t promulgated a rule re: jurisdiction over
cigarettes. The relevant statutory language covered "Drugs and "Devices.

Here, the FDA's position re: definition of "drug is clearly not unreasonable (Chevron #2). The majority rejects the
FDA's stance, so we can therefore assume that this is a Chevron #1 ssue [Congress has addressed to this issue].

Section A

O'Connor: f nicotine were a drug here, the FDA would have to ban it b/c it is unsafe in intended use. The FDA
wants to regulate it, not ban it, but the language does not permit this.
30
Breyer: But that is perverse! Either ban or do nothing given a finding that it is unsafe? No! The FDA has
remedial discretion in circumstances such as this one.
ReaIIy? But surely the FDA doesn't always have such discretion!
Fine, maybe not always . but if an outright ban would cause more harm over time than
remedial regulation, then it is okay for the FDA to regulate (b/c goal of agency is to protect
the public)
Breyer has the better o1 this exchange

Section B

O'Connor: Congress has spoken here: Tobacco-specific legislation; rejection of legislation to give the FDA this
power; less extensive regulation under FCLAA . this tobacco-specific law post-FDCA weighs against the FDA
Breyer: These laws show no express intent to bar FDA jurisdiction; can't infer intent given equally plausible
readings that Congress just didn't want to change FDA jurisdiction + it is hazardous to rely on subsequent
developments in determining Congressional action for hevron analysis

Section C

O'Connor: Congress wouldn't give FDA such extraordinary power non-expressly b/c of Tobacco's unique political
history . the "Big DeaI Theory [i1 issue is a big deal and there is a chunk o1 Congressional legislation in the
neighborhood, in1er that Congress pre1ers the status quo . or; this big deal issue 1alls to Congress within
our constitutional scheme since agencies should 1ill-in the gaps o1 law and not make major policy]
Congress could act here, but the President picked the EPA administrator and probably agrees with the
EPA . so will probably veto such a bill [plus, it can take a long time for this machinery to be activated]
Breyer: Yeah, and that is why we have election . people can change their vote and lead to
changes in this area of law

I. Facts

O The Food, Drug, and Cosmetic Act (FDCA) grants the FDA the authority to regulate "drugs and "devices, as well as
"combination products. The FDA has construed its authority to regulate combination products as giving it the discretion to
regulate them as drugs, devices, or both, "depending on how the public health goals of the act can best be accomplished.
O "Drugs= articles other than food intended to affect the structure or any function of the body.
O "Device= instrument/apparatus/etc. intended to affect the structure or any function of the body.
O "Combination products= products that constitute a combination of a drug, device, or biological products
O n 1996, the FDA, after having previously claimed that it lacked the authority to do so, asserted jurisdiction to regulate
tobacco products.
O The FDA based this jurisdiction on its conclusion that nicotine is a "drug within the meaning of the FDCA and that
cigarettes and smokeless tobacco are "combination products that deliver nicotine to the body.
O Pursuant to this authority, the FDA enacted regulations intended to reduce tobacco consumption among children and
adolescents. Because of the greater flexibility the FDCA allows for in regulating devices, the FDA determined that
regulating cigarettes as devices was the best way to accomplish the public health goals of the FDCA. This allowed them to
restrict the sale, use, or distribution of tobacco where the FDA deemed such measures necessary for providing a
reasonable assurance of safety.

II. Posture
O A group of tobacco manufacturers, retailers, and advertisers filed suite in the US District Court for the Middle District of
North Carolina. The district court held that the FDA had jurisdiction to regulate tobacco products.
O The Court of Appeals for the Fourth Circuit reversed, holding that Congress had not granted this jurisdiction to the FDA.

III. Issue: Does the FDA have authority under the FDCA to regulate tobacco products as customarily marketed?

IV. AnaIysis by O'Connor

1. The Chevron Test
a) Because this case involves an administrative agency's construction of a statute that it administers, the Court's analysis
is guided by hevron. hevron Test:
O Has Congress directly spoken to the precise question at issue?
O f not, then a reviewing court must respect the agency's construction of the statute so long as it is reasonable.
b) n determining whether Congress has specifically addressed the question, the reviewing Court needs to look at more
than the statutory provision in isolation. The meaning of certain words may require context. Similarly, then meaning of
one statute may be affected by other Acts. Must also be guided by common sense as to how Congress is likely to
delegate such a significant policy decision to an administrative agency. Bearing all of this in mind, the Court finds that
31
Congress has directly spoke to the issue and has precluded the FDA's jurisdiction to regulate tobacco products.
2. "Safe and Effective for ntended Use
a) A core objective of the FDCA is to ensure that any product regulated by the FDA is "safe and "effective for its
intended use. The FDA has repeatedly made it clear that tobacco products are inherently unsafe. Thus, if tobacco
products were "devices under the FDCA, the FDA would be required to remove them from the market.
O Example: FDCA's provisions concerning the misbranding of drugs or devices- The Act prohibits the introduction or
delivery for introduction into interstate commerce of any food, drug, device, or cosmetic that is misbranded. 2
distinct FDCA provisions would render cigarettes and smokeless tobacco misbranded devices:
O S 352(j) deems a drug or device misbranded if it is dangerous to health when used in the dosage or
manner prescribed/recommended
O A drug or device is misbranded unless its labeling bears adequate directions as are necessary for
protection of users.
b) FCDA requires the FDA to place all devices that it regulates into one of 3 categories. The FDA has not yet classified
tobacco products, but if it did, it would have to place them in Class , because even after the application of the FCDA's
controls, it would still present a potential unreasonable risk of illness or injury. As class devices, tobacco products
would be subject to the FDCA's pre-market approval process. The FDA would be prohibited from approving an
application for pre-market approval without showing that the device is safe. Thus, once the FDA fulfilled its statutory
obligation to classify tobacco products, it could not allow them to be marketed.
c) n short, were the FDA to regulate cigarettes and smokeless tobacco, the FDCA would require the FDA to ban them.
3. BUT, the FDA can't ban them. Why?
a) For one thing, a provision of the United States code states that marketing of tobacco constitutes one of the greatest
basic industries of the US, and stable conditions therein are necessary to the general welfare.
b) More significantly, Congress has directly addressed the problem of tobacco and health a number of times, and it has
never ordered a ban. A ban of tobacco products by the FDA would thus clearly contradict congressional policy.
c) The Court argues that the FDA recognizes this, and it is for this reason that the FDA has concluded (ironically) that
tobacco products are "safe within the meaning of the FDCA.
4. Tobacco products are "safe under the FDCA
a) FDA notes that tobacco products are unsafe as the term is conventionally understood, but reasoned that, under the
FDCA, to determine whether a device is safe, it must consider not only the risks presented by a product but also any
countervailing effects of the use of the product, including the consequences of not permitting the product to be
marketed.
O Applying this standard, the FDA found that because of the high levels of addiction among tobacco users, a ban
would be dangerous (because of extreme withdraw, high health costs, and the like...)
b) Even if it is true that these factors need to be considered, several provisions in the FDCA require the FDA to determine
that the product itself is safe (that its therapeutic benefits outweigh its harm). This is a totally different question from
the one the FDA is employing above.
c) The FDA's conception of safety is also incompatible with the FDCA's misbranding provision.
O S 352(j) provides that a product is 'misbranded' if it is dangerous to health when used as suggested. But according
to the FDA's understanding of safety, a product would be dangerous to health and therefore misbranded when, in
comparison to leaving the product on the market, a bad would not produce "adverse health consequences in the
aggregate. These are two very different understandings of what S 352(j) requires, rooted in two different
meanings of "safety
5. A Response to the Dissent
a) Dissent contends that the Court's conclusion means that the FDCA requires the FDA to ban outright dangerous drugs
or devices, and further contends that this is a perverse reading of the statute. But the FDA, consistent with the FDCA,
can regulate many dangerous products without banning. They just cannot concluded that a drug or device cannot be
used safely for any therapeutic purpose and still allow the drug to remain on the market.
6. History of tobacco-specific legislation
a) n determining whether Congress has directly spoken on this issue, the Court says we must also consider the tobacco-
specific legislation that Congress has enacted over the past 35 years.
O Congress has considered six separate pieces of legislation since 1965 re: tobacco use and health. n adopting
each statute, Congress has acted against the backdrop of the FDA's repeated claims that it lacked the authority to
regulate tobacco.
O Congress considered and rejected bills that would have granted the FDA this jurisdiction.
b) FDA admits that there is no evidence in the text of the FDCA or its legislative history that Congress in 1938 even
considered the applicability of the Act to tobacco products. This is not determinative, but it is certainly relevant to
understanding the basis for the FDA's representations to Congress and the background against which Congress
adopted legislation.
c) Congress considered and rejected bills that would give the FDA the authority to regulate tobacco, but decided to
subject tobacco products to a less extensive regulatory scheme in 1966.
d) Give all this, it is clear that Congress's tobacco-specific legislation has ratified the FDA's previous position that it lacks
regulatory authority.
7. "This is hardly an ordinary case
a) Deference to an agency's construction of a statute that it administers is premised on the theory that a statue's
ambiguity is an implicitly designation of authority from Congress to the agency to fill in the statutory gaps. Such a
theory may not be warranted in a case like this. Congress is more likely to have answered a major question like this
32
one than to have implicitly delegated it to someone else.
b) "Given [the unique political history of tobacco] and the breadth of the authority that the FDA has asserted, we are
obliged to defer not to the agency's expansive construction of the statute but to Congress's consistent judgment to
deny the FDA this power.

Dissent by Breyer

1. The Majority does not, in its opinion, deny either of the following 2 points.
a) Tobacco products, including cigarettes, are literally speaking within the scope of the what the FCDA gives the FDA
the authority to regulate ("articles (other than food) intended to affect the structure or any function of the body...).
b) The FCDA's basic purposethe protection of public healthsupports the inclusion of cigarettes within its scope.
2. Majority's reasoning is rooted in two basic reasons
a) The FDCA does not "fit the case of tobacco because the statute requires the FDA to prohibit dangerous
drugs/devices outright, and the agency concedes that simply banning the sale of cigarettes is not proper.
b) Congress has enacted other statutes which, viewed in light of the FDA's long history of denying its jurisdiction and
Congress's failure to explicitly grant the FDA authority, demonstrate that Congress did not intend for the FDA to
have the authority to regulate tobacco.
3. The dissent thinks neither of these two points is valid. FDCA does not limit the FDA's remedies to an outright ban on
tobacco, and the later statutes don't tell the FDA it can't exercise jurisdiction, they just leave FDA jurisdictional law
where Congress found it.
4. The FDA's broad discretionary power
a) n 1938, Congress added a new definition of "drug: articles (other than food) intended to affect the structure or any
function of the body. This was the definition used in the FDCA.
O The purpose of this new definition was to expand the scope of regulation
O Scholars have found the language of the FDCA so broad that it should be regarded as a constitution
establishing general principles.
5. The tobacco companies on the meaning of the FDCA (This is something the majority opinion does not discuss much).
a) Tobacco companies contend that the FDCA's words cannot be read to mean what they literally say, because it
defines a "device, for example, as "an instrument...or other article intended to affect the structure or any function
of the body. This definition is so broad that it would include things like air conditioners. As such, the companies
argue that the meaning of "drug or "device should be confined to medical or therapeutic products.
O Breyer argues that the statute itself supplies a more suitable limitation: that a drug must be a chemical agent.
Nicotine obviously fits this more limited definition.
b) The meaning of the word "intended
O Tobacco companies argued that "intended (in the context of "intended to affect the structure or function of the
body) is a term of art. They assert that "intended means that the product's maker has made an express
claim. According to the companies, it is because they have made no such express claim that the FDA cannot
regulate tobacco.
O But the FDA has ruled that intent doesn't require an express claim. The FDA requires something more like
"objective intent inferable from context.
O Moreover, cigarette companies have made express claims like this in the past ("For Digestion's Sake, Smoke
Camels!)
O Plus, it is now clear that tobacco companies have long known that nicotine has these effects, and they
intended their products to produce these effects, so the "objective intent standard is met. Clear that tobacco
companies "intended their products to "affect the body within the meaning of the FDCA.
6. n response to the majority's argument that the FDCA would require the FDA to ban outright dangerous drugs or
devices, but that the FDA cannot do that.
a) Breyer argues that an equally "inescapable conclusion would be that the FDA does have the authority to regulate
tobacco, and that it must therefore ban cigarettes.
b) More importantly, this argument fails to recognize that an interpretation of the statute which required the FDA to
pick a more dangerous remedy over a less dangerous one would be perverse.
O Example: Suppose a mildly addictive sleeping pill within regulatory jurisdiction of the FDA were banned
because of serious health risks. Suppose further that many consumers would ignore an outright ban and
would turn to the black market instead, while a less draconian measure would wean them gradually away to a
safer product. n such a case, the FDCA surely would not force the FDA to impose the more dangerous
remedy, for the following reasons:
O FDCA grants the FDA wide remedial discretion in regulating combination products.
O Not true that the FDA must place cigarettes in Class , and it's not clear that even if they did place
cigarettes in Class , this would require them to remove them form the market.
O Contrary to the majority's opinion, the FDCA does not require the FDA to distinguish among the kinds of
health effects that the agency may take into account when assessing safety. n other words, it's okay to
determine safety comparatively.
O Finally, it's just not smart to engage in an overly rigid interpretation of the FDCA that is divorced from the
statute's overall health-protecting purposes.
7. n response to the majority's argument that laws enacted since 1965 require the denial of jurisdiction
a) The majority must concede that these laws do not expressly bar the FDA's jurisdiction.
33
b) We cannot automatically infer an anti-jurisdiction intent. An equally plausible possibility is that Congress, in
deference to the FDA's claims that it lacked jurisdiction, just intended to leave things as they stood.
8. n response to the majority's appeals to the FDA's former denials of its authority to regulate
a) FDA denied its authority to regulate based on (a) its belief that the "intent requirement precluded its regulatory
authority, (b) "enormous social consequences
b) But the FDA now has evidence necessary to prove "intent. Moreover, there is more scientific evidence of adverse
health effects. Finally, administration policy changed. All of these are sound reasons for a change in the FDA's
position.
9. n response to the idea that this is a huge area of responsibility for Congress to delegate to a regulatory agency
a) "nsofar as the decision to regulate tobacco reflects the policy of an administration, it is a decision for which the
administration, and those politically elected officials who support it, must (and will) take responsibility. There is
going to be a lot of accountability on the part of the FDA, so we shouldn't let this concern us.

assachusetts v. nvironmental Protection Agency, 549 U.S. 497, U.S. Supreme Court (2007)
A CHEVRON STEP #1 CASE

Issue of Standing . and of Substance [is the EPA required to regulate tailpipe CO
2
emissions?]

A petition comes into the EPA urging a rule-making as required by the Clean Air Act vis--vis tailpipe CO
2
emissions.

The EPA Administrator goes through a rule-making procedure and concludes that

(1) The CAA doesn't authorize such regulations

(2) Even if it did, he would refuse under his discretionary authority.

He notes that

(1) Congress rejected language to this effect in 1990 and since to directly establish limitations . ergo,
interpret the statute in light of subsequent Congressional (in)action

(2) DA v. Brown & Williamson sets a precedent for the EPA to avoid "Big Deal regulation without express
statutory authority

(3) This piecemeal law would conflict w/ President's comprehensive approach to the issue global warming.

Justice Stevens holds that the EPA does have authority and that its stated reasons for not doing so are inconsistent
with the statute: CO
2
emissions are "air pollutants and the EPA hasn't addressed this issue. Therefore, they get
no Chevron deference because Congress has spoken to this issue [if grant Chevron deference, we get an
unreasonable definition at Chevron Step #2 that we reject]. This is therefore a Chevron Step #1 case.

But what about the "Big Deal argument?

This is unlike B&W because Congress hasn't done anything here
4 EPA can't identify any affirmative actions that conflicts with regulation
Also, this requires "regulation, not a "ban [so not a Big Deal]
Everyone agrees that regulation of tailpipe CO
2
emissions is an inefficient way of dealing with global
warming . so the EPA doesn't want to waste effort on what it considers a bad policy
4 Stevens: Tough do what Congress told you do, even if you only get a little improvement

. Facts
O A group of states, local governments, and private organizations allege that, by declining to regulate the emissions of
CO2 & other greenhouse gases, the EPA has abdicated its responsibility under the Clean Air Act.
O Petitioners (Massachusetts, et al) argue:
4 Global warming is a big problem
4 Petitioner Massachusetts has standing b/c the rise of ocean levels will reduce the size of the state.
4 EPA is authorized to take action to address it. For instance, the Clinton-era EPA has confirmed that it has the
power to regulate CO2 (even though it did not exercise its authority to do so).
4 Therefore, EPA should take action to address global warming.
O Respondent EPA argues that:
4 Clean Air Act does not authorize it to regulate areas related to climate change.
34
Congress was aware of global warming when in amended the Clean Air Act in 1990, yet it declined to
adopt proposed language that would have expressly regulated greenhouse gases
Other section of the Act involve "specifically tailored solutions re- climate change, so therefore EPA
is off the hook on Section 202(a)(1)
Department of Transportation is already responsible for regulating CO2 emissions in new cars, so
additional EPA regulation would either conflict with DOT regs or be superfluous.
Clean Air Act was designed to deal with localized pollution, not global warming
EPA notes that the Court, in DA v. Brown & Williamson Tobacco orp., invalided the FDA's reliance
on general statutory language to assert jurisdiction over tobacco
Even if it did have the authority to set greenhouse gas emissions standards, it would be unwise to do
so, because
O There's no "unequivocally established causal link between human activity and global
warming.
O Any EPA action would be "piecemeal, and would conflict with President Bush's
"comprehensive approach to global warming. (seriously)

. ssues
(1) Does EPA have the statutory authority to regulate greenhouse gases emitted from new motor vehicles?
(2) f so, are EPA's reasons for not doing so consistent with the statute?
(3) A third (but more minor) issue: Do the petitioners have standing?

. Statute

Section 202(a)(1) of the Clean Air Act (as amended, 1990): EPA "shall by regulation prescribe . standards applicable to
the mission of any air pollutant from any class or classes of new motor vehicles .. which in [EPA's] judgment cause, or
contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.
4 Air Pollution is defined to include "any air pollution agent or combo or agents, including any . substance or matter
which is emitted into or otherwise enters ambient air.
4 Welfare is defined broadly, and includes the "effects on . weather . and climate

V. Analysis (Stevens)

1) Standing:
a. Mass. has standing, since it would suffer "injury in fact if ocean levels rise.
b. The remedy that Mass. proposes, although it would not "solve the problem of global warming (and therefore
probably wouldn't address Massachusett's injury, since nothing EPA could plausibly do would be likely to halt
rising oceans, still would do something. ncremental change is okay.
2) Clean Air Act gives EPA authority to regulate greenhouse gas emissions from new cars. [Chevron Step I anaIysis]
a. The Act uses sweeping language "any air pollution agent or combination or agents. The statute is unambiguous
here.
b. Postenactment congressional cues (e.g., floor debates) are irrelevant.
c. Brown & Williamson Tobacco standard does not apply.
i. n that case, the court reasoned that FDA jurisdiction would lead to banning tobacco products, which
would be too sweeping of a change to justify. By contrast, EPA action on CO2 would not be as extreme.
ii. Plus, FDA had a long history of stating that it could not regulate tobacco, and Congress had enacted
other "pro-tobacco statutes as well.. No similarities here: EPA cannot point to any other congressional
enactments that conflict with the regulation of greenhouse gases
3) EPA's reasons for not regulating greenhouse gases are inconsistent with the statute. [Chevron Step II anaIysis]
a. While it's true that the EPA can use its judgment re- what sorts of air pollution endanger public health or welfare,
that "judgment isn't a roving license to ignore the statutory text. There are clear limits to the discretion that EPA
has.
b. f EPA finds that greenhouse gases endanger health & welfare of the public, the Clean Air Act requires EPA to
regulate emissions of the gases.
c. EPA can't avoid regulating by saying it's uncertain whether greenhouse gases are harmful. EPA hasn't given a
reason for its uncertainty. EPA must give a reasoned explanation, grounded in the Clean Air Act, for any finding
that greenhouse gases aren't harmful / don't contribute to global warming.

35
V. Holding: Reversed and remanded for further proceedings. (.e., if EPA wants to decline to regulate greenhouse gases, it
must state a suitable reason, grounded in the Clean Air Act, of why greenhouse gases aren't harmful.




Administrative aw and egaI History

Two types of federal administrative agencies: Executive and ndependent

Executive: Located within the executive branch, there is typically a single agency-head appointed by POTUS who
can be dismissed at will [i.e. FDA, OSHA, EPA]

Subject to APA, must follow its rule-making procedures
POTUS can formally remove agency-heads at will, but these agencies do have interest-group and
Congressional support . political contours of operation constrain the president's formal power

Independent: Typically multi-member, members serve fixed terms that usually extend beyond a single president's
term; there are usually statutory limits on presidential power to remove members (although sometimes unclear) [ex:
NLRA, EEOC, SEC, CPSC, FCC, OSHRC]

Subject to APA, must follow its rule-making procedures
n some cases, the Chair serves at President's discretion as chair, but not as a member of the
commission (i.e. the FTC and SEC)
ndependent of the president, but over the course of the late-20
th
century presidents have tried to
influence these agencies through other means
4 Oversight by the OMB and ORA
4 Regulatory Czars and Special Assistants to the President that compete with independent
agencies in the same regulatory area . counter-locations of political influence to the agencies

HISTORY OF ADMINISTRATIVE AW

Born in the late-19
th
century a project of the Progressives, who argued that rapid social change and economic
development posed new problems for the regulatory state to address. Courts and legislatures were no longer
adequate to the task, so they looked to administrative agencies that could handle problems expertly and rapidly.
They wanted these organizations to be apolitical and unconcerned with democratic accountability experts
unconstrained by political forces. Eventually, during the New Deal, Land and Frankfurter theorized an ideology of
unrestrained administrative agency discretion [because, they argued, legislatures could only screw things up].

Their core example was the nterstate Commerce Commission (CC) (created in 1887). The FTC, on the other
hand, was created in 1915/6 and distrusted by Progressives because it was seen as controlled by partisan hacks.

But courts and regulated entities did not share this enthusiasm for agencies, esp. re: rate-setting for railroads by the
CC. Courts were unhappy because of their fondness for freedom of contract ideology, and because the agencies
seemed to impinge quasi-unconstitutionally on their turf. They responded with sets of doctrines:

(1) When a delegation of authority to agencies occurs, the legislation must be reasonably clear re: the limits on
discretion [the "non-deIegation doctrine] (by the 1920s/30s, Courts gave up on a strong version of this
doctrine b/c they were persuaded that well-run agencies with general standards were not threatening constitutional
values);

(2) ConstitutionaI/judiciaI review of agency decisions . initially aggressive, but over time came to accept
agencies and increased their deference in exchange for the judicialization of agency process [more formaI
procedures at agencies more judiciaI deference].

36
By the 1920s, agencies were reasonably well judicialized and received a fair amount of deference. One long-
running theme born in this area: judicialization of agency processes bought-off opposition by lawyers in regulated
industries (b/c now their skill set was still valuable) (helpful to the still-youthful corporate bar).

Regulation of radio frequencies was sett by many as a model in the 1920s a matter of real technical expertise,
bolstered by positive experiences during WW and the post-war recovery.

Real change came with new agencies born of New Deal political controversy. Here, the model agency was the
SEC (by general agreement operated quite well) and the NLRB the whipping-boy (nobody saw expertise; only
power relations between unions and industry + a pro-union staff).

The corporate bar mobilized to create a more regular regime to deal with agencies, and pushed for aggressive
judicial review. FDR vetoed legislation to this effect. His AG then chaired a committee that produced the APA.

Lawyers again played a crucial role here the New Deal saw the creation of powerful Washington, D.C. Law Firm,
i.e. Arnold, Fortas & Porter) . many of these were prominent lawyers in New Deal agencies who used insider
knowledge to help clients forced to navigate new regulatory structures.

The Administrative Procedure Act sets out mandatory procedures for rule-making and rules re: the proper scope
of judicial review of agency decisions. t crystallized and transformed developments up through the New Deal a
generaIized tradeoff between judiciaIization and judiciaI review across aII agencies; hearing processes,
originally court-like, transformed to resembIed IegisIative decision-making (rule-making involved, not just staff
and regulated entities, but other public and private interests too] . this Ied to the intrusion of poIiticaI pIuraIism
and bargaining among interest groups within the administrative process.

People began to realize, however, that the agencies constitute an essentiaIIy poIiticaI adjustment of competing
interests, and that Progressives were wrong to claim that expertise can substitute for politics. This paradigm shift
in the 1940s/50s led to renewed demands for poIiticaI accountabiIity.

Through the 1950s-1970s, a heightened sense of agencies as political actors open to analysis via political process.
A sense emerged that the wrong kinds of politics dominated a major critique in 1960s/70s focused on "agency
capture by the regulated industries because of differential access, greater interest, and greater resources. This
was seen as a faiIure of pIuraIist processes within agencies, and proposed remedies included:

(1) expansion of the idea of standing give more access to agencies and to judicial review . birth of the liberal
1960s pubIic interest bar to serve otherwise unrepresented groups in agency decisions [complemented by public-
defense post-Gideon; funded by Ford Foundation];

(2) The creation of specialized sub-agencies within agencies had increased the risk of capture . so many sector-
speciaIized sub-agencies were eIiminated in favor of generaI jurisdiction agencies (i.e. OSHA instead of a
mining-safety-specific organization) . do get a more pIuraIized process at the expense of reduced expertise.

This pluralization in the 1960s/1970s led to more agency action more political controversy. Regan introduced an
era of deregulation through the end of the 20
th
century. Deregulators, however, faced two challenges:

(1) Agency staff hostiIe to Reagan's new poIiticaI agenda

(2) The "Iron TriangIe


PRESIDENT AGENCY





CZAR

raws interest group
pressure, money, and
patronage away Irom
Congress and the
Agency, weakening the
agency`s support base
37
CONGRESSIONA COMMITTEE INTEREST GROUPS
[that oppose
Reagan]

So agencies had political resources sufficient to mount a significant resistance to Reagan et al. Remedies:

(1) Theory of Unitary Executive: Give Reagan and his appointees a larger say in agency activity [aimed at
increasing control within the office of the President and increasing the power of political appointees];

(2) Ossification: n 1990s, agencies stopped doing things as a result of decisions like State Farm [to satisfy
Courts under the APA, agencies must do way too much . so lacked resources for too much significant action .
consumes too many resources to do anything big, so instead do lots of small things] [Nb: Ossification = a form of
deregulation because it produced a failure to act where action otherwise would have occurred].

The story as toId since the 1950s has been about poIitics, not expertise.

The main controversy right now = figuring out how to overcome ossification without reproducing older pathologies
of capture, overregulation, and backlash. This is often called "New Governance regulation, much more advanced
in the European Union than the United Stated. We will likely see an effort to reproduce these program in the USA.

(1) Regulation by information provision (mandate disclosure)
(2) nteraction between regulated entities, consumers, and government in negotiated ways
(a) Not legal under status quo laws
(b) Likely a more toward ADR

The Reformation of American Administrative aw
Richard Stewart

Administrative Procedure Act (APA) of 1946 offered a procedural solution to the problems of accommodating agency expertise
with constitutional accountability. Agencies had to base their decisions on a record complied after the public had an opportunity
to comment, and they also had to offer explanations for the rules they adopted

After the passage of the act, courts turned to a number of alternative techniques to control administrative discretion:

O Undertaking a searching scrutiny of the substantiality of the evidence supporting agency fact finding and by insisting on
procedural safeguards
O Requirement of reasoned consistency in agency decision making
O Demanding a clear statement of legislative purpose as a means of restraining agency choice when individual liberties
were at risk

Critics have alleged that agencies are particularly susceptible to favoring organized interests at the expense of diffuse interests.
This may be because:

O The division of responsibility places the administrator in an inherently weak position. His position is negative, whereby
he will be held responsible for any serious economic dislocation. Therefore, he will be more likely to take conservative
policies
O The regulatory bureaucracy becomes regulation minded it seeks to elaborate and perfect the controls it exercise
O Resources of regulators is limited when compared to those of the regulated
O Limited agency resources means that the agency depends on outside sources of information, policy development and
political support

Courts have recently changed their focus from prevention of unauthorized intrusions into private autonomy to the assurance of
fair representation to all affected interests. mplicit in this assumption is the idea that there is no transcendent "public interest,
but only the distinct interests of various parties.

However, the expansion of participation rights at the agency level is unlikely to resolve the fundamental problem of bias in
agency choice. By emphasizing the polycentric character of the disputes, it will be harder to rely on general rules, and increase
the discretionary character of the resolution.

RUE-MAKING UNDER THE ADMINISTRATIVE PROCEDURE ACT


38
t is sometimes hard to distinguish between adjudication and rule-making:

The court has said that adjudication affects a small number of entities; rule-making affects many
For our purposes it doesn't matter
Agencies have complete discretion over whether to adjudicate or make rules
Rule making can be formal or informal:
4 FormaI: Happens rarely, "must be conducted on the record [a statute requiring a "hearing
doesn't imply formal rule-making] . fairIy eIaborate procedures of oral testimony and cross-
examination, widespread notice must be given to potentially-affected entities, all of whom are
entitled to fuII procedure
4 InformaI: Most common form of rule making. The agency publishes a notice of proposed
ruIe-making in the FederaI Register [we plan on doing something about X, here are the
broad outlines of what we plan on doing, comments are welcome] ANYBODY can
comment.

VERMONT YANKEE N.P.C. V. NRDC, UNITED STATES SUPREME COURT, 435 U.S. 419 (1978)

HeId: Courts cannot impose ruIe-making procedures on a federaI administrative agency. APA and organic
statute dictate minimum required procedures. An agency can choose to grant more proceduraI protections
during a ruIe-making or adjudicatory process, but a reviewing court cannot "impose upon the agency its
own notion of which procedures are 'best' or most IikeIy to further some vague, undefined pubIic good."

Under APA, courts cannot demand that an agency uses more procedure than it decides on independently as long
as they meet the minimum demanded in the APA
"Best procedures would mean that there was always a full hearing demanded
4 Even when Congress didn't demand otherwise!
Language and intentions of the statute Congress wanted to rely on agency discretion, not courts' .
leaves Congress in control of power to innovate procedurally re: agencies
limits courts to reviewing the merits of the agency's rules

Contributed to ossification. APA 553(c) if a court doesn't like a rule, they can say that it missed "reIevant
matter" in the "concise generaI statement" so we can't be sure it was considered; also, this statement is illogical
and ergo insufficient; or an interest group can go through all comments, find a "relevant comment missed by the
agency in its statement, and argue for violation of 553(c) . agencies must be crazy thorough in deaIing with
comments

Nb: More compIex procedure harder to deveIop a ruIe that withstands judiciaI review

JUDICIA REVIEW OF AGENCY RUES ON THE MERITS:
THE ARBITRARY AND CAPRICIOUS STANDARD


MVMA V. STATE FARM, UNITED STATES SUPREME COURT, 463 U.S. 29 (1983)

Issue: Was rescission by the NHTSA arbitrary and capricious?
HeId: When an agency proposes a rule, the comments will include objections. The courts will check to see if the
agency responded meaningfully to significant objections. This is called "Hard ook Review
A hard look at the agency's deployment of its expertise
Even though the courts are generalists and the agencies are specialists
So some tension between deference to expertise and hard look review

An agency-head might respond to Hard Look Review by increasing procedure [indirectIy Ieading to the same
effect that the Court disowned in 'ermont Yankee].
This contributes to agency ossification because it increases costs and reduced total regulation

hevron says that it is fine for agency statutory interpretation to be influenced by the administration in office .
here, the Court is not receptive to political change as a basis for substantive change
Agency's "concise and generaI statement" shouId answer objections (don't wait untiI you get to
court to do so) . so it shouId reaIIy be an "exhaustive and specific" statement
39

State Farm to context where expertise is now seen as a matter of poIiticaI controversy; Court trying to
modulate wild changes between pro- and anti-regulatory administrations while still responding change in the
political winds.

POITICA MECHANISMS OF CONTRO: CONSTITUTIONA IMITS AND POSSIBIITIES


Control of Agencies Statutory nterp. Rule-Making Procedure Substance of Rules
By Courts Chevron Step #2 Vermont Yankee v. NRDC
[Deferential]
MVMA v. State Farm
[Hard Look]
By
President/Congress
Chevron Step #1 APA 553
[Baseline Procedures]
APA 706
[Arbitrary or Capricious]

Non-DeIegation: Legislatures delegate some amount of policy-making power to agencies. But not too much!
Agencies do detail, Congress shapes the fundamental contours of policy. Congress must provide "intelligible
standards.
Looking at the history of this "intelligibility standard, it seems to come from nowhere
This is the "non-deIegation" standard
4 A vigorous non-deIegation doctrine wouId require Congress to draft specific IegisIation
setting reasonabIy weII-defined boundaries on agency action
4 Such laws require the House + Senate + President
4 This can be complicated when different parties control different parts of the government
4 But we don't have such a requirement of specificity in IegisIation governing agencies
4 So there exist other mechanisms of poIiticaI controI
So basicaIIy, it is now very easy for Congress to deIegate because the Court aIways aIIows it
t seems like virtually any agency action would satisfy this standard

There is a body of constitutionaI Iaw addressing executive and congressional control of agencies. The Court
tends to worry about the aggrandizement of power in one branch over the other [treats independent & executive
agencies diff.].

PoIiticaI ControI CongressionaI PresidentiaI
Front-End DetaiIed egisIation
[tough to craft/update best rules; also worry re:
presidential vetoes]

DeIegate with Constrained GuideIines

Appointment [Bowsher]
[Bowsher says that Congress can't do much with
appointment . Senate still has confirmation
power]

Appointment [nominate or name administrators]
Back-End egisIative Veto [banned by hadha]

Oversight [occurs after an agency has pissed off
a legislator . doesn't create change, but warns
agency-heads to be careful . plus, lots of
informal contact]

Continued Enactment of Vetoes [as a way of
sending strong signals post-hadha]

Report and Wait Provisions [rules take effect X
days after finalized, giving Congress time to pass
legislation displacing agency action] [again,
presidential vetoes are an issue here]

Corrections Day [a day on which both houses of
Congress consider specific agency regulations to
overturn; only actually used once]
Firing [Humphrey's Executor and yers v. United
States]
40

Use of Budgetary Powers


Theory of the Unitary Executive (TUE): Politics are key to the modern administrative and regulatory state. A key
issue: is the government unified or divided (between political parties)? TUE began with Regan. After 30 years of
Democratic domination of Congress and New Deal-friendly presidents, he faced effective opposition from liberal
servants. He didn't have enough allies to appoint as agency-heads [because the GOP was mostly dominated by
Rockefeller and SW constituencies]. So he asserted personal control over everything the power to fire, overturn
bureaucrats, and to destroy independent agencies. TUE was never fully implemented, in large part b/c he lacked
sufficient conservative staff. Repeated electoral success and the growth of think-tanks made it easier to staff
friendly bureaucrats but Reagan and Bush still faced a hostile Congress, so asserted power to make policy that
Congress could only respond to via legislation (which they'd veto). When George W. Bush wanted to advance
policy, he used these ideas to deny Congress any role in areas that cared most about.

INS v. Chadha

A mechanism for the House to communicate to the AG that he is improperly using deportation discretion arguably
a reasonable way to organize government [more efficient that acting person-by-person]

s there a good government account of why the House adopted this resolution without debate?

4 Breyer's ideas re: bureaucracy, staffers, etc. [no debate isn't an issue]
4 Everyone trusts the level beneath a way of organizing the House to capitalize on expertise
4 The President presumably supports his AG and will veto a proper bill passed by Congress; this
is a way for the House to circumvent this feature of legislation
Burger says that the Constitution sometimes imposes "unworkable burdens
4 Why on earth would it do this? Heavy burdens, yes, but unworkable?
We face this issue because (1) we want to delegate and (2) want some control over agents
4 So can either pass a bill-per-person, or use "categorical legislation . but it might be really
hard to phrase a bill that precisely excludes a group, so we rely on post hoc
interpretation/enforcement
An Executive might dislike the hadha decision because Congress might prefer to do things itself
rather than delegate without some kind of post hoc review to occasionally check the executive
So now we have an argument of good governance to defend the IegisIative veto
4 Alternatives are unattractive because they involve:
A cumbersome legislative process
Terms of delegation that are necessarily non-specific
Presidential veto of a full Congressional bill meant to assert control over agents

Why would we consider a conditional grant of power to the Executive unconstitutional?

The Court argues that this isn't a "good government matter, that it is a constitutional obligation
4 Powell: This looks too much like adjudication by Congress (deals with 6 people)
4 Burger: "Formal Analysis of Article of the Constitution
White: This bill didn't pass the House and Senate, so therefore it doesn't need to go to
the President . concurrence of both houses not necessary (not an order, resolution,
or vote)
O Burger: The structure of the Constitution speaks to acts legislative in
character; purpose and effect of altering legal rights and duties of persons
4 White: But this didn't change Chadha's legal rights because he didn't
have any vested rights until all of the procedures dealing with
deportation were concluded, and these procedures included the AG's
submission of a list to Congress
We might come to Burger's aid with other arguments
4 Worry about Congressional actions against individuals without proper procedure
But as far as we can tell, absolutely no personal animus toward Chadha (good faith)
O Maybe worry about future cases where the possibility for abuse exists
4 Also Powell-like concerns about who Congress is accountable to in this proceedings
But why think that Congress is more/less accountable than executive agents?
41
There is a case to be made for due process and individuaI rights concerns that favors the
majority; BUT THIS RUING GETS EXTENDED TO A WIDE CONTEXT of cases that don't
impIicate such concerns

What can Congress do in response to missed discretion post-Chadha:

(1) Destroy the agency via IegisIation (the president might veto!)
(2) Sunset provisions
(3) FIuctuate the agency budget
(4) Oversight hearings (administrators HATE hearings - takes tons of time to prepare)
(5) Appropriations riders

Every year, Congress passes statutes that contain IegisIative vetoes. The president signs, adds a comment
that this won't be enforceable under hadha. Why? Congress uses such provisions to communicate their
concerns to the relevant agency-head a warning to tread carefully for fear of actual, future backlash from
Congress.

A formaIistic opinion w/ IittIe significant functionaI effect b/c work-arounds are obvious & weII-known

PROCEDURA POSTURE: Petitioner appealed the decision of the United States Court of Appeals for the Ninth Circuit holding
unconstitutional the provision in 244(c)(2) of the mmigration and Nationality Act, authorizing one House of Congress to
invalidate the decision of the Executive Branch, pursuant to authority delegated by Congress to the Attorney General, to allow
respondent deportable alien to remain in the United States.

OVERVIEW: Respondent deportable alien initially brought an action to challenge the constitutionality of the provision in
244(c)(2) of the mmigration and Nationality Act (Act), authorizing the House of Representatives, by resolution, to invalidate the
decision of the Executive Branch, pursuant to authority delegated by Congress to the Attorney General, to allow respondent to
remain in the United States. The lower court held that the House was without constitutional authority to order respondent alien's
deportation because 244(c)(2) violated the doctrine of separation of powers. The U.S. Supreme Court affirmed and held that the
House's action pursuant to 244(c)(2) was legislative in function and did not fit within any exceptions authorizing one House to act
alone. As a result, the House's action was subject to certain checks contained in U.S. Const. art. , such as the bicameral
requirement, presentment to the President, and the Presidential veto. Because the House failed to act in conformity with the
express procedures for enacting legislation, the Court held that the congressional veto provision in 244(c)(2) was severable from
the Act and unconstitutional.

OUTCOME: The Supreme Court affirmed and held that the House's action was legislative in function and did not fit within any
exceptions authorizing one House of Congress to act alone. Because the House failed to act in conformity with the express
constitutional procedures for enacting legislation, the Court held that the congressional veto provision was unconstitutional, but
severable from the rest of the mmigration and Nationality Act.

In an opinion by Burger, Ch. J., joined by Brennan, Marshall, Blackmun, Stevens, and O'Connor, JJ., it was held that the
legislative veto provision in 244(c)(2) was unconstitutional since the one-house veto was legislative in purpose and effect and
subject to the procedures set out in Article of the Constitution requiring passage by a majority of both Houses and presentment
to the President.

PoweII, J., concurring in the judgment, expressed the view that the case should be decided on a narrower ground and
declared that when Congress finds that a particular person does not satisfy the statutory criteria for permanent residence it has
assumed a judicial function in violation of the principle of separation of powers.

White, J., dissented, expressing the view that the legislative veto is an important if not indispensable political invention and that
neither Article nor the doctrine of separation of powers is violated by this mechanism.

Rehnquist, J., joined by White, J., dissenting, expressed the view that 244(c)(2) was not severable from the rest of the
statute.

Bowsher v. Synar

HeId: Congress can't participate directIy in the appointment of agency heads except for Senate
confirmation

CongressionaI front-end controI is quite weak no guarantees re: how appointees will behave in the future.
Congress can specify broad requirements, but can't "substantially narrow presidential choice

42
. Facts
O Background nfo on the Gramm-Rudman-Hollings Act
4 To address the federal deficit, Congress passed the Gramm-Rudman-Hollings Act, which mandated automatic,
across-the-board spending cuts.
4 G-R-H proposed budget-reducing mechanism A: f OMB and the CBO determine that the deficit exceeds statutory
targets, the Act directs the Comptroller General to propose spending cuts. The President to follow the Comptroller
General's proposal.
4 G-R-H proposed budget-reducing mechanism B: f the above mechanism is declared unconstitutional, Congress
would consider a joint resolution (subject to presidential veto) adopting the OMB and CBO reports. This joint
resolution would then be treated the same as the Comptroller General's recommendation.
O Who is the Comptroller General?
4 The Comptroller General heads the GAO, a congressional support agency (then known as the General Accounting
Office, now the Government Accountability Office).
4 The Comptroller General is nominated by the President from a list of 3 individuals recommended by the Speaker of
the House and President pro tempore of the Senate. S/he can be removed from office only in very limited
circumstances.

. ssue: s the Gramm-Rudman-Hollings Act constitutional?

. Holding: t's unconstitutional.

V. Analysis (Burger)
O t's unconstitutional to require the Comptroller General, an agent of Congress, to execute laws. This is essentially
equivalent to (an unconstitutional) legislative veto.
O Comptroller General can be removed from office by Congress for "inefficiency, "neglect of duty, or "malfeasance
(according to Budget & Accounting Act of 1921). This are vague categories, and theoretically, could justify Congress's
removal of the Comptroller General for a wide variety of reasons. Therefore, the Comptroller General is a subservient
to Congress.
O Because of this principal-agent relationship with Congress, the Comptroller General may not be assigned executive
functions.
O The Gramm-Rudman-Hollings Act effectively assigns executive functions to the Comptroller General. S/he must: (1)
determine whether the budgetary situation requires application of the Act, and (2) determine precisely what budget cuts
are required. Both (1) and (2) are executive functions.

V. Concurrence (Stevens)
O Agrees with the majority's conclusion that the Act is unconst., but does not agree with its reasoning.
4 The majority's emphasis of the fact that Congress can remove the Comptroller General isn't relevant.
4 The majority's labeling of the Comptroller-General's functions as "executive in nature isn't relevant.
O Rather, the Comptroller General is characterized as an agent of Congress because of his/her longstanding statutory
responsibilities.
O Congress can't authorize a "lesser representative of [itself] to make policy. Rather, it must follow the traditional Article
procedures: passage by both Houses, & presidential signature or legislative veto override.

V. Dissent (White)
O No issue with the majority's view that (1) the Act requires the Comptroller General to perform an "executive function
and that (2) Congress cannot designate itself or its agents to execute legislation.
O However, the majority is wrong to view Congress as "controlling the Comptroller General just because Congress can
remove the Comptroller General if it passes a joint resolution (which the President signs). Being able to fire an agent
(with presidential buy-in) is not analogous to Congress executing the law itself.
O After all, Congress can "control executive branch administration through variety of (constitutional) means so what's
so different about Congress being able to fire the Comptroller General via a joint resolution?
O Therefore, the Act satisfies the bicameralism & separation-of-power issues that Chadha requires.

Myers v. United States (1926)

President has the power to remove executive officiaIs.

Wilson fired Myers; a law required Senate confirmation & approval of firing. Senate refused to confirm a
replacement.

The Court (opinion by Chief Justice) held that removal was unlawful under Article because it constituted an
attempted limitation on President's removal power:
a. The act of removal is executive in nature and therefore must be performed by the President
b. t is the President, not his subordinates, who must take care that the laws be faithfully executed
43
c. Article vests executive power in the President, not subordinate officials

Justice Holmes' dissent contended that since the office owes its existence to Congress, and that Congress may
abolish the office, Congress has the power to prescribe a term of life for it free from any interference.

Humphrey's Executor v. United States (1935)

CIarified constitutionaIity of independent administrative agencies.

FDR used the FTC to do important anti-trust work; Humphrey a conservative member at a time before the SEC [so
FTC still regulated securities]. FDR fired him; he died shortly thereafter; his estate sued for damages; SCOTUS
found that FTC engages in quasi-legislative/quasi-judicial tasks, so Congress has some control [because the FTC
was created by Congress to carry into effect legislative policies and other legislative/judicial tasks]

Here, FDR's rationale was disagreement over policy but he asserted the right to remove a commissioner 'at will.'
t is still unresolved whether a president can properly remove someone 'for cause,' citing policy disagreement.

Morrison v. OIson (1988)

SuccessfuI effort to create a position of significant power over whom president has Iimited/indirect
authority.

. Facts
O Title V of the Ethics Government Act allows for the appointment of an "independent counsel to investigate and, where
appropriate, prosecute certain high ranking government officials for violations of federal law
O The Act requires the Attorney General, upon receiving information that he considers sufficient to constitute grounds for
investigation, to conduct a preliminary investigation.
O When the AG has completed the investigation, if the AG has determined that there are reasonable grounds to believe
that further investigation is warranted, then he will apply to the court for the appointment of an independent counsel.
O The Counsel can only be removed from office by impeachment or by personal action of the AG for "good cause
O The Counsel can also be terminated if the matters she has been appointed for have been completed.

. ssue Presented: Does the ndependent Counsel Act undermine separation of powers? s it constitutional?

V. Analysis - Majority

The Counsel is an inferior officer.
b) The line between "inferior and "principal officers is difficult to draw, but it is clear that the appellant (i.e. the
independent Counsel) is an inferior officer because:
O the Counsel can be removed by the AG
O the Counsel is authorized only to perform certain duties and is limited in her tenure
O The Act is not invalid under the constitutional provision of separation of powers
O Appellees argue that even if the appellant is an inferior officer, the Clause does not empower Congress to place
the power to appoint such an officer outside the Executive Branch
O Two issues must be addressed with regard to the separation of powers question:
O Whether the provision of the Act restricting the AG's power to remove the counsel to only those instances
where he can show "good cause, taken by itself, impermissibly interferes with the President's exercise of his
constitutional functions.
O Unlike in Bosher and yers, this case does not involve any attempt by Congress itself to gain a role in the
removal of an executive official. The Act instead puts the power squarely in the hands of the executive
branch.
O The Court argues that the President's need to control the counsel's discretion is not central to the
functioning of the executive branch
O Moreover, the Court does not think that the :good cause removal provision impermissibly burdens the
President's power to control the counsel
O Whether, taken as a whole, the Act violates the separation of powers by interfering with the role of the
Executive Branch
O this case does not involve an attempt by congress to increase its own powers at the expense of the
executive branch; nor does the act usurp executive powers and give them to the judiciary.
O Nor does the Act impermissibly undermine the power of the Executive Branch. (The Court asserts this
more than offering an argument for it)

Dissent (Scalia)
44

O Article says that "The executive power shall be vested in a President of the United States. t does not say some of
the executive power; it implies all of the executive power
O Scalia argues that the decision of the Court of Appeals must be upheld if the following two questions are answered
affirmatively:
(1) s the conduct of a criminal prosecution (and the accompanying investigation) the exercise of purely
executive power?
(2) Does the statute deprive the President of exclusive control over the exercise of that power
O Scalia argues that the Court answers both of these questions in the affirmative, but still avoids the "inevitable
conclusions that since the state vests some purely executive power in a person who is not the President...it is void
O Scalia also notes that it is not unreasonable for the President to have exclusive power over this area, even when
alleged crimes by himself or associates are at issue, any more than it is problematic that Congress has exclusive
legislative power even when what is at issue is its own exemption from certain laws.
O The Court has replaced the "clear constitutional prescription with a "balancing test and does not provide us with an
answer as to how we are to apply this test.

BuckIey v. VaIeo

FACTS
O Federal Election Campaign act created an 8 member Federal Election Commission to oversee federal elections. 6 of
those members were appointed, and only 2 of those 6 were to be appointed by the President.
ANALYSS
O Court stated that "any appointee exercising significant authority pursuant to the laws of the U.S. is an 'Officer of the
U.S.' and must, therefore, be Appointed in the manner prescribed by the appointments clause.
HOLDNG
O Court unanimously held that vesting a commission whose members were appointed in this manner with these functions
violated the appointments clause of article which provides that: [The President] shall nominate, and by and with the
Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the
supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for,
and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as
they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

Assessing ReguIation

Summary of the course thus far: We have seen general justification for regulation without regard to the regulators.
We saw this in common law, where we identified problems resulting from institutional characteristics of the judiciary
[access bias, standing issues, decisions by generalists, etc]. Then we turned to general justifications for the rise of
the modern administrative-regulatory state. We saw its origins in statutes and examined the basics of
administrative law replacing slow/generalist legislators with quick/expert administrators to face the problems of
modern life.

Now we evaluate modern regulations in action. The modern Ad/Reg state is justified on the ground that experts
solve modern problems better than judges or legislators because they blend expertise with political accountability to
produce better regulation. Agencies adopt a synoptic view of the whole problem; courts only see one part.

ORA is an office within OMB, itself within the White House.
Congress authorized its creation to coordinate and manage regulation
Heads of OMB and ORA are Senate-confirmed appointees
Agencies produce regulatory agendas/calendars of proposed significant regulations
4 Executive agencies are ordered by the President; ndependent agencies strongly urged
ORA looks at review these, with input from POTUS, Agencies, and anyone else it feels like consulting
ORA process much less transparent no need to respond to all input
We might worry about economist "mission commitment at ORA re: CBA

General Point: Empirical evidence on issues of regulatory success or failure is rarely good enough to persuade
people whose prior inclinations lean the other way

FAIURES OF REGUATION

CASS SUNSTEIN, PARADOXES OF THE REGUATORY STATE (1990)

INTRODUCTION
45

"Paradoxes refer to "seIf-defeating reguIatory strategies strategies that achieve an end precisely opposite to the one
intended, or to the only public-regarding justification that can be brought forward in their support . i.e. a Clean Air Act that
makes air dirtier, or a civil rights law that increases discrimination.

The appropriate response to a reguIatory paradox is not to abandon reguIation

The market may itseIf produce harmfuI or disastrous resuIts vis--vis efficiency or justice
4 Reject arguments that expenditure of resources on law-making is an evil as compared to production of
wealth in the markets, since all laws are redistributive (and this can be a good thing!) and the expenditure
of resources on laws is part of the practice of citizenship
AIso reject a return to "Iaissez faire"
4 Which makes no sense anyway, since private law always operates in the background
The goaI shouId be to Iearn from past mistakes
4 ncorporate flexibility, respect for individual autonomy and initiative, and produce potential of economic
markets into reformist restructuring of regulatory institutions

THE PERFORMANCE OF THE REGUATORY STATE

Empirical studies of regulatory intervention are strikingly infrequent. This is too bad, since evaluation of regulatory controls and
legal doctrines should hinge on real-world influence re: the conduct of private actors. We can, however, draw several broad
conclusions [Nb: there do exist severe methodological problems and an inherently normative dimension to the following
analysis]

1. The view that reguIation has generaIIy proved unsuccessfuI is too crude

a. Air and Water pollution control constitute examples of success
b. Automobile safety regulation has significantly reduced deaths and serious injuries
c. Examples of major benefits achieved at low cost include: OSHA regulation of asbestos, EPA regulation
of trihalomethanes, NHTSA fuel system integrity controls + roadside hazard removal rules, and Consumer
Product Safety Commission mandatory smoke detector rules
d. The Civil Rights Act of 1964 has led to a decrease in racial discrimination
e. We have seen gains against sexual discrimination too
f. The Endangered Species Act has saved a number of species from extinction/endangerment

2. ReguIation has frequentIy faiIed

a. This failure might consist of high cost for speculative benefits, or failure to accomplish anything, or
aggravation of the problem it was designed to solve
b. $632 billion spent on pollution control 1972-1985 . could have spent 1/5 this amount
c. Fuel economy standards for new cars produce no gains, result in more dangerous cars
d. Natural Gas Act helped produce energy crisis of the late 1970s
e. OSHA carcinogen regulations impose enormous costs for uncertain gains . plus, take the form of a
crazy quilt of high cost regulations in some areas and none in others
f. EPA has promulgated only 7 regulations re: toxic substances, so many are uncontrolled
g. FDA has delayed the entry of beneficial life-saving drugs into the market

Soviet-Style command and controI reguIation doesn't appIy weII in a nation exceptionaIIy diverse in terms of geography,
costs and benefits, attitudes, etc. and is a major source of American regulatory failure.

THE PARADOXES

Defining "Purpose": Any statute that fails to produce a net benefit to society can be described as self-defeating if its purpose
is general improvement. But when a law's purpose is to benefit a particular group, must define self-defeat differently. Here,
purposes are described at an intermediate IeveI of generaIity and as pubIic-regarding rather than as benefiting speciaI
interest groups.

Assess self-defeat by comparing result achieved to likely state of affairs if congress has enacted a different/better statute or no
statute at all.

Paradoxes are the result of faiIure to understand how the reIevant actors wiII adapt to reguIatory programs . we can't
hold the world constant after regulations have been issued, but must adopt strategies that take account of change to produce
savings in both compIiance costs and safety/heaIth gains.

PARADOX I: OVERREGUATION PRODUCES UNDERREGUATION

46
"EspeciaIIy aggressive statutory controIs frequentIy produce too IittIe reguIation in the private market . [this] arises
when Congress mandates overIy stringent controIs, so that administrators issue no reguIations at aII or reduce to
enforce whatever reguIations they or Congress have issued."

Not the result of powerful regulated industries, or of intransigence of government officials
4 See patterns of underregulation in both Carter and Reagan administrations
Elaborate and costly procedural requirements for promulgation of regulations are part of the explanation [add
enormous delays and perverse incentives], but are not adequate either because organized interests have not
prevented agencies from aggressive action in other settings

A large part of the explanation lies in the stringency of the regulatory standard itself

"Stringency forbids balancing or calls for regulation at or beyond the point of "feasibility
All incentives favor the issuance of fewer regulations given a stringent standard
4 Belief that statute requires an absurd result
4 Would drain all resources into a ridiculous outcome
4 Domestic industry costs would increase
4 Harmful to global competitiveness of US industry
4 Higher likelihood of judicial invalidation
4 Requires increased industry cooperation even as it discourages such support
Produces a crazy quilt pattern of severe controls in some areas and none in others
Levels of enforcement (inspections and fines) will reflect agency's reluctance
4 i.e. OSHA's safety and health regulations

lass Discussion of this Paradox

echanism: #equirement of greater stringency high costs to make and defend rules so allocate resources
away from either creating or enforcing new rules

Generally: odern administrative law [hard look review] ossification . b/c agencies, with limited
budgets/resources can only adopt a few stringent regulations or can adopt a greater number of non-stringent
regulations

ssue: Why don't agencies adopt the endeloff approach of more, less stringent regulations?

rganic statutes of the agencies sometimes require strict regulation
ndustry will fight aggressively anyway, might as well go for broke
The public, regulation-by-regulation, tends to prefer strong/stringent regulation
4 This doesn't always scale-up to a systematic pro-regulatory view
4 Agency pushed politically by (1) sheer public demand triggered by a scandal or crisis; (2) some
important committee chair who really cares about the issue [4-5 oversight chairs can quickly
dictate the focus of most policy]
High costs of enforcement after creation inveigh generally against extensive regulation

PARADOX II: STRINGENT REGUATION OF NEW RISKS CAN INCREASE AGGREGATION RISK EVES

Congress often faces risks/problems found in both preexisting entities and potential entrants . a common strategy, for
poIiticaI and other reasons, has been to impose severe Iimitations prospectiveIy whiIe exempting oIder sources of
harm [political prerequisite for enactment of regulation; retroactive application carries high costs; prospective enactment can
bring significant savings; seems unfair to punish retroactively].

This is self-defeating because it discourages the addition of new sources and encourages the perpetuation of old ones . old
risks become more common and last longer than they otherwise would.

1. Those who plan regulatory programs often assume that programs won't influence private choices; these, however,
are a function of supply and demand, and reguIation that increases cost for new products wiII shift choice
toward oIder, riskier ones
a. EPA programs requiring installation of anti-pollution technology in new cars prolongs the use of old,
dirty vehicles and retards their ordinary retirement
b. ncentives to use existing facilities longer result from command and control regulation of new pollution
sources
c. Prescriptions requirements discourage people from purchasing beneficial drugs
d. mposition of high, safety-related costs on new airplanes encourages airlines to retain (and repair) older,
riskier planes
47

2. A focus on new risks reduces the entry of potentiaIIy superior sources or technologies and thus perpetuates
oId ones [eliminates possibilities safer than currently available options]
a. EPA requirements of "scrubbing strategies for new sources of sulfur dioxide has aggravated the problem
in many parts of the country
b. Stringent barriers to nuclear plants perpetuated greater risks of coal plants
c. FDA's stringent drug-approval standards force consumers to resort to old drugs, which are more
dangerous or less beneficial than those kept off the market
d. Delaney Clause prohibits manufacturers from using food additives containing carcinogens, probably
increasing overall safety and health risks (b/c substitutes might be more dangerous). The Clause defeats
its own purpose.

This can be explained by pubIic choice theory . a system of prospective regulation has considerable appeal for existing
producers by giving them a partial cartel ["a common interest among current producers [that gives] them a significant
competitive advantage over potential new entrants] . victims are hard to identify, since they usually do not yet exist, don't
perceive themselves as victims, and are not politically organized [victims include consumers and new entrants without the
political strength to counter such proposals].

Possible #esponses [Discussed in lass]

(1) Engage in a government sponsored public education campaign to change preferences
a. ay raise willingness to pay, but won't increase ability to pay!
(2) Tax-redits or other Positive ncentives
a. #equires legislative support for agency proposal
b. There may be disagreements over the amount required
(3) Negative ncentives, depending on the kind of issue (fines?) [this may mostly hurt the poor!]
(4) Depending on the life-time of an item (i.e. car versus power-plant), can just wait to adopt changes later
(5) an require retrofitting of preexisting facilities

Nb: We assume that replacement cars will be more efficiency because of a regulatory requirement (and not
just because the market will achieve this on its own) (incentives push the market to move more quickly)
Also: We assume here a product with a long life-time; otherwise, no risk of people hanging onto bad
products
Also: We assume that it is easier to regulate prospectively than retrospectively

PARADOX III: TO REQUIRE THE BEST AVAIABE TECHNOOGY (BAT) IS TO RETARD TECHNOOGICA DEVEOPMENT

ndustry frequently fails to adopt the BAT for controlling pollution; Congress and EPA respond by requiring it. This regulatory
strategy is pervasive in federal environmental law aIthough motivated by a desire to produce technoIogicaI innovation,
however, it can actuaIIy achieve the opposite resuIt.

BAT is a clumsy strategy because it decreases incentives across the industry to innovate, since it imposes an economic
punishment on innovators [almost all of whom are likely industry-insiders will the relevant expertise, resources, and incentive to
care about technological innovation]. Further, BAT encourages industries to seek any means to delay and deter new regulation
by bringing to bear their expertise and resources in persuading administrators and courts that a suggested technology is not
"feasible and should not be required.

BAT also raises the cost of retiring old facilities, thus delaying capital turnover and thereby aggaravating environmental
degradation.

One might respond that BAT encourages outsiders to innovate, but this argument fails because no well-functioning market in
pollution control technology exists for those outside the regulation markets [lack relevant information and expertise, depend on
cooperation from regulated class members, high start-up costs, and the uncertainty of regulation that changes across time
unstable markets in such technology].

PARADOX V: DISCOSURE REQUIREMENT MAY MAKE PEOPE ESS INFORMED

ReguIators commonIy respond to market faiIures of deception or inadequate information by requiring correction or fuII
discIosure. This can be seIf-defeating.

1. PeopIe sometimes process information poorIy

a. After receiving information, will sometimes "know less than they did beforehand
b. Especially true for probabilities, which play on system-distorting cognitive heuristics
c. Disclosure can increase the level of other kinds of false beliefs
48
d. A risk of information overload large amount of information = none at all
e. Less may be more

2. ReguIation may incentive reguIated entities not to provide any information at aII

a. May not advertise at all if the costs of obtaining or specifying required information are high
b. The result is the removal from the market of information that is useful overall
c. Efforts to eliminate deception may reduce advertising with substantive content

DiscIosure requirements sometimes ensure that peopIe are actuaIIy Iess informed.

Possible #esponses [Discussed in lass]

(1) Engage in a government sponsored public education campaign to change preferences
a. ay raise willingness to pay, but won't increase ability to pay!
(2) Tax-redits or other Positive ncentives
a. #equires legislative support for agency proposal
b. There may be disagreements over the amount required
(3) Negative ncentives, depending on the kind of issue (fines?) [this may mostly hurt the poor!]
(4) Depending on the life-time of an item (i.e. car versus power-plant), can just wait to adopt changes later
(5) an require retrofitting of preexisting facilities

Nb: We assume that replacement cars will be more efficiency because of a regulatory requirement (and not
just because the market will achieve this on its own) (incentives push the market to move more quickly)
Also: We assume here a product with a long life-time; otherwise, no risk of people hanging onto bad
products
Also: We assume that it is easier to regulate prospectively than retrospectively
John MendeIoff. The Dilemma o1 Toxic Substance #egulation
O n the 1960s and 1970s, Congress created detailed, new federal regulatory programs. Given the prevailing "iron
triangles / "capture theory view of agency-interest group-subcommittee interactions, Congress was mistrustful
of administrative discretion.
O Therefore, Congress wrote precise, detaiIed statutory Ianguage, Ieaving bureaus with IittIe discretion.
These constraints include:
4 Language precluding bureaus sacrificing safety to other objectives
4 Mandating agency procedures allowing outside parties to request action
4 Requiring agencies to respond to them in a timely fashion
4 Requiring agency decisions to be well documented.
O Net effect: prevented pro-business backsliding by Reagan appointees.
O Criticisms of this "don't give agencies too much discretion approach:
4 Goals have been pursued through unnecessarily costly methods
4 Moreover, the goaIs are set too high, beyond the point at which the benefits of reducing hazards
justify the costs.
Examples: (1) EPA anti-smog regs cost $12 billion per year. s reduction in smog worth it? (2)
OSHA chemical regs may cost tens of millions of dollars per fatality prevented.
4 Red tape slows down agency standard-setting, resulting in many serious hazards being ignored.
O MendeIoff's Theses:
4 1- Society would be better off with regulatory standards that are less strict but more extensive.
Lester Lave: "f Congress writes rigid frameworks into law, a few substances will arbitarily be
selected for special treatment, while the rest will alnguish until some real or imagined disaster
elevates them to the spotlight.
4 2- The current practice of setting too-strict standards slows down the standard-setting process.
How to reach the goal of less-strict-but-more-extensive regulation? Need to conduct cost-benefit anaIyses.
O Without such analyses, we have a one-size-fits-all solution: any regulations run the risk of overregulating (e.g.,
$100 million in costs per life saved), so policymakers will choose instead not to regulate. Thus, the end result
49
with overregulation, paradoxically, is that we end up with underregulation. OverreguIation causes
underreguIation.
O Two types of regulatory programs, which require different regulatory calculi:
O Screening Programs:
4 Definition: Product can't get to market until firms prove that it's safe. (see FDA, Nuc. Regulatory
Comm.). Burden of proof is on the firm, so the costs of delay is borne by the firm.
4 Only one relevant policy issue in crafting regulations for screening programs: How high to set the
standard that firms have to meet to show that their products are not too risky.
O Standard-Setting Programs:
4 Definition: These programs set standards to address the hazards of products that are already on the
market. (see EPA air pollutant programs, NHTSA's auto safety measures.) Burden of proof is on the
agency, so the costs of delay are borne by the agency (or, more generally, society at large)
4 Relevant policy issues in crafting regulations for standard-setting programs: (1) what's the burden of
proof that the agency should bear? (2) which hazards shoudl the agency address? (3) how many
hazards to address? (4) how strict should the standards be?
O Having strict, unyieIding standards causes deIays.
4 Court appeals by industry of strict standards is more likely and better funded.
1

4 Strict standards face a higher probabilty of failing judicial scrutiny.
4 nformation that an agency needs to justify a standard is more likely to be withheld if industry believes
that agency is acting unreasonably.
2

4 Politicians are more likely to try to delay rules that they (or industry) perceive as particularly inefficient
or burdensome.
4 The political and symbolic attractions of strict standards may wear thin when it becomes more
extensive.
O nstitutional reasons why regulatory standards are set at such a slow pace:
4 Political conflict interest groups appeal agency actions to the courts
4 The effects of standards are complex & uncertain
4 The burden of proof falls on the agency.
4 Agency has limited resources.

WiIdavsky, "Richer is Safer" Argument

O Existing public policy is based on the belief that the way to reduce risk is to do so directly for each and
every group of adversely affected people. This inevitably leads to the result that institutional actors try
make the nation safer by making it poorer by over regulating activity
O However, if it can be shown that a richer nation is safer, then by making a nation poorer, the government is
paradoxically also making it riskier rather than safer
4 Consider poor countries. Death rates go up as income goes down.
4 Health progress may depend upon economic progress
More efficient technologies releases individuals to work in the health care sector
Richness leads to better nutrition, improved housing, healthier and better working
conditions
Evidence suggests that further reductions in death rates in the US can come from
programs designed to improve the socioeconomic conditions of disadvantaged groups

What are the impIications of this argument?

f regulation for safety imposes high costs, the money spent on satisfying this will decrease consumer income,
making consumers less well-to-do and therefore less able to purchase added security out of their own resources.
This could be significant enough to actually have a net overall effect on desired safety levels (leading to a
reduction).

Response: This expensive life-saving investment by regulation is aimed at lowering cancer rates . but if
costs are above a tipping point, we might lose 15 lives to stop 10 . does this make sense?
[here we assume that deaths are fungible . should we?]

1
BF: That`s lame. He`s essentially arguing that the Iact that industry is more likely to object to strict standards somehow
counts as a 'disadvantage oI strict standards.
2
itto.
50

Response: Look at the distribution of health/safety benefits across classes in a society if we decrease
the wealth of the rich but increase the health of the poor, maybe a slight decrease in health of the wealthy
but a net gain from the more signification benefits to the poor . distributional perspective might make us
more okay with 15 rich deaths exchanged for 10 poor lives saved (?)

ssue: How do we consider the weighting of risk? Breyer and Sunstein see a more objective basis for calculating
risk. Experts and laypeople, however, often disagree. BS would say that, as a normative matter, expert
assessments should serve as the basis o1 policy. However, it is unclear that this vision is appropriate to a
democratic society.

COST-BENEFIT ANAYSIS: DESCRIPTIVE ACCOUNTS

The ideas of CBA are fairly well known. ave's cataIogue (below) of different things that CBA might be will be
helpful in considering different uses of this term [accounting framework optimizing tooI]. As move from 1 13,
we see increasing constraints pIaced on a reguIator. People use the term CBA to describe all 13 practices.

Over time, OIRA has become more aggressive in demanding CBA. Created under Regan, it was originally okay
with a net-cost . eventually began demanding net-gains . then started redoing CBA itself to check agency
analysis. As a matter of formal law, ORA never claimed to be able to override an agency's CBA it can only send
it back to be redone if it disbelieved the numbers. Under Bush, most agencies stuck by their numbers even when
challenged and still got ORA approval. t is still unclear what Obama's ORA will do under Sunstein's direction.

Cost Effectiveness: Given either a fixed budget or a goal, how to most effectively achieve mission?
About as close to a requirement of instrumental rationality as we can come [it'd be crazy to do
otherwise]
Assumes exogenously set goals or budget; may be politically unstable [interest groups can screw
things up]
4 People will change the fixedness of the budget
But separate of these challenges, it is rational to use CEA (+/- some distributional concerns)

ESTER AVE: 13 VERSIONS OF COST-BENEFIT ANAYSIS

(1) Systematic statement of goals
(2) dentify and evaluate range of options
(3) Effects of options
(4) Trade-offs
(5) Externalities
(6) To today FRST SX ARE ACCOUNTNG STEPS
(7) Least cost
(8) Figure out missing info
(9) Figure out how to get missing info
(10) solate and quantify social interest
(11) Characterize each aspect as benefits and costs
(12) Objective analysis MYTH
(13) Option w/greatest net benefit

PRICING THE PRICEESS: COST-BENEFIT ANAYSIS OF ENVIRONMENTA PROTECTION (2002)
FRANK ACKERMAN AND ISA HEINZERING

INTRODUCTION

CBA seeks to perform, for public policy, a calculation that happens routinely in the private sector: in evaluating a
proposed new initiative, how do we know if it is worth doing or not?

Private businesses only produce things that they believe people will be willing to pay for . government, critics
argue, doesn't face the test of the marketplace and is therefore in constant danger of making bad choices at public
expense. Lacking a single quantitative objective for the public sector comparable to profit maximization for
51
business, government has no objective standard by which to measure satisfaction of citizens' needs. CBA offers
itself as a fix, adding up the benefits of public policy and comparing this to cost.

ESTIMATING COSTS

Generally considered relatively straightforward estimate costs through research into available technologies and
business strategies for compliance by the regulated entities.

MONETIZING BENEFITS

The hardest part of the process because it requires creation of artificial, monetized costs. Two models prevail:

1. "Contingent Valuation an opinion poll that surveys self-reported valuations

a. Leads to figures like $257 to prevent extinction of bald eagles, $208 to protect humpback
whales, and $80 to protect gray wolves

2. nfer from behavior in other markets i.e. "wage premium as a proxy for value of human life

a. f workers understand risk and voluntarily accept dangerous jobs, they are implicitly setting a
price on risk by accepting the increased risk of death for increased wages
b. Avoided deaths are the most thoroughly studied benefits of environmental regulation

DISCOUNTING THE FUTURE

Costs and benefits typically occur at different times costs today or in the near future, benefits in the more distant
future. When analysis spans a number of years, future costs and benefits are discounted, or treated as equivalent
to smaller amounts of money in today's dollars. Discount is amplified as time-span increases.

CBA routinely compares current costs to the present value of future benefits (discounted accordingly). An
important issue for environmental regulation is whether this logic should apply to outcomes far in the future, and to
opportunities like long life that are not naturally stated in dollar terms.

COST-BENEFIT ANAYSIS: NORMATIVE ANAYSIS


t is difficult to incorporate paternalist motives into systematic evaluation of regulatory policies

The Morrall article, discussed below, is widely cited for two propositions

(1) A large number of regulations proposed by agencies couldn't pass CBA assessment
(2) Safety-related regulations are generally easier to justify on CBA than health regulations

Problems with this interpretation

(1) Only looks at lived saved, not injuries or illnesses avoided
a. We would expect this to really matter for health-related regulations
b. "Lived saved not a good proxy for asbestos regulations, for example
(2) His discount rate underestimates the benefits (again, more for health benefits)
(3) Agencies are not experts at determining the costs of compliance with their regulation they often get
this information from regulated industries, which have a powerful incentive to regularly overestimate
this value [independent of the technology-forcing aspects of regulation] . if forced to comply, they
may innovate and reduce costs
a. Ergo a bias in proposed cost estimates for rejected v. accepted regulations
(4) Given this list, there is a general trend of good regulations being propagated and bad ones rejected .
not uniformly, but noteworthily so
52
(5) t is fine that agencies have proposed absurd rules . the point of notice and comment rule-making is
for agencies, in response to pressure, to propose some rules about which they learn more [still, it is
crucial that we do ultimately reject "absurd rules]

A constant issue: f not via CBA, how will we evaluate regulations?

Heinzerling and Ackerman argue for technology-based regulations and cap-&-trade policies . but it is
worth asking if these would provide a fully satisfactory alternative
We must make some kinds of decisions . costs and benefits seem relevant to decisions

Some attempts at adding nuance to CBA

(1) Look to the different values that we place on lives-lost to see if these value by context (i.e. high sense
of control, low sense of control)
(2) Sometimes we prefer a high cost, low value regulation for "expressive purposes
a. This is "wild card argument . can be used to justify anything
(3) There are some regulations where, at T
1
, we do CBA by monetizing preferences at the time the
regulation is proposed, but by T
2
, preferences have changed as a result of the regulation itself [initially
C > B, but his can change across time]
a. i.e. pooper-scooper laws, mandatory seat-belt use, no smoking inside buildings
b. Regulations adopted at T
x
can produce preference changes that alter C/B at T
x+y

c. This might justify the adoption of non-C/B justified regulations
i. Criticism: n these cases, we dealt with relatively weak initial preferences, so we could
change them with fairly weak coercion on the part of the government . but this is of
limited relevance to major regulation

Possible justifications/evaluations of regulation given CBA and its flaws

(1) Let this be resolved politically
a. Justified = a regulation with sufficient political support to be adopted
(2) A strong version of CBA ("comprehensive deliberate rationality)
a. High numbers on Lave's list
(3) dentify all costs and benefits, mull them over, and then make a decision
a. "Grocking to understand so thoroughly that become part of the observed . so drawn into it
that just see the right solution
b. Similar to "heavenly choir analysis a decision maker exhibits a faculty called "practical
judgment = the ability to see a problem and find the right solution
c. How does this translate into policy?
i. A non-trivial element of "trust me on part of the administrator on the basis of
previously-demonstrated capability and judgment

PRICING THE PRICEESS: COST-BENEFIT ANAYSIS OF ENVIRONMENTA PROTECTION (2002)
FRANK ACKERMAN AND ISA HEINZERING

Cost-Benefit Analysis (CBA) involves the creation of artificial markets for things that are not bought and sold. t
also involves the devaluation of future events through discounting. This is inconsistent with how most people view
of the world, the teachings of most major religions, and how we make daily decisions.

More importantly, CBA suffers from four fundamentaI faiIures when applied to environmental protection

1. The standard economic approaches to valuations are inaccurate and impIausibIe

2. The use of discounting improperly triviaIizes future harms and the irreversibiIity of some
environmentaI probIems

3. The reliance on aggregate, monetized benefits excIudes questions of fairness and moraIity

4. The vaIue-Iaden and compIex cost-benefit process is neither objective nor transparent

1. DOARS WITHOUT SENSE: STANDARD ECONOMIC APPROACHES ARE INACCURATE AND IMPAUSIBE

53
"Absent a credible monetary metric for calculating the benefits of regulation, [CBA] is inherently unreliable. But
such a credible metric is impossible, because standard methods of valuation are inaccurate & defy common sense.
The following critique of valuing human life extends also to valuing clean water, biodiversity, and entire ecosystems.

A. There Are No 'Statistical" People
a. Human life is not a commodity; can't buy the right to kill someone for $6.3 million
b. Economists say that this is merely a way of expression the value of small risks of death
c. Analysts often ignore the distinction between valuing risk and valuing life
i. Many regulations reduce risk for many and avoid actual death for only a few
ii. Complete CBA should account for both; in practice, only calculate value for "statistical
life and ignore life itself
d. OMB discounts benefits of life-saving regulations from the moment of avoided death, rather
than from the time when the risk of death is reduced [inconsistent w/ claim to only evaluate risk
b/c don't discount from the date of a change in risk, but rather from avoided death]
e. Economist analysts blur the line by calculating the value of reduced risk while pretending that
they have produced a valuation of life itself
B. PeopIe Care about Other PeopIe
a. Standard valuation only asks people about their attitudes re: risks to themselves
b. What is the existence value of a person you will never meet? To prevent a death far away?
c. We can't deduce answers to these questions sole from responses re: risk to oneself
d. Most belief systems affirm that the value of life of a stranger, relative, or friend is substantial
C. Voting is Different from Buying
a. Estimates of individuals' preferences as consumers fails to address collective choices that
society must make re: public health and environmental problems
b. ndividuals' private decision don't reflect public values as citizens
c. Policies for environmental protection aren't available for purchase in individual portions
d. mpossible to arrive at meaningful social valuation by adding up individual willingness to pay
e. CBA forecloses process of democratic deliberation essential to intelligent decision-making
f. CBA turns public citizens into selfish consumers and inter-connected communities into
atomized individuals, thereby distorting the essentially social questions at issue
D. Numbers Don't TeII Us Everything
a. Numerically equal risks are not always equally deserving of regulatory response
b. Equal risk does not imply equal societal responsibility to reduce risk
c. Risks imposed by others, w/o consent, are more worthy of government intervention
d. Social context is decisive in evaluation of risk, but CBA assumes a generic, acontextual risk
and therefore ignored contextual information that determined how people really value risk
E. ArtificiaI Prices are Expensive
a. Beyond practical capacity of our society to generate consistently update information for CBA
b. To create artificial process is much harder than market processes of valuation, must be
repeated every time an updated price is required
c. Constant pressure to use outdated or inappropriate valuations [too expensive not to do so]
d. Lacking time and money to fill in the blanks carefully, economists simply pick a number
e. This is not remotely close to the level of rigor we properly demand of science; and cannot be

2. TRIVIAIZING THE FUTURE

Environmental law focused on the future. We seek to prevent unpleasant surprises borne of discontinuity and
irreversibility (outstrip our powers of quantitative prediction). CBA downgrades the importance of the future by
discounting and through predictive methodologies that inadequately account for catastrophic or irreversible events.
Logics which dictate that it is better to suffer harms later rather than sooner are flawed here.

A. Do Future Generations Count?
a. Many environmental programs protect the far future, beyond our lifetime
b. The choice implicit to discounting is between preventing harms to the current generation or
preventing similar harms to future generations
c. Looks like a fancy justification for foisting our problems onto the people who come after us
d. Discount rates create absurd results the death of a billion people in 500 years = 1 today
B. Does Haste Prevent Waste?
a. Justification for discounting assumes that the problem won't get worse if we wait to act
b. i.e. wait for future technological progress and use that to address environmental issues
54
c. However, if we wait too long, irreversible and sudden crises might sink this logic
d. Therefore we should adopt a precautionary principle err on the side of caution
e. CBA doesn't assume the possibility of crisis and is therefore flawed
C. Begging the Question?
a. Discounting of future environmental problem lies at the heart of analyses that result in
environmental protection always seeming less important than safety or health
b. This is because discounting doesn't have a huge effect on programs that start saving lives
tomorrow, but has a huge effect on environmental worries in the far future
c. Analysts thereby assume that answer to the question they purport to address: which programs
are most worthwhile? They do so by beginning with premises that programs designed for the
long haul are less important than those looking to the shorter term
D. Citizens and Consumers - Reprise
a. Discounting reflects people's preferences, as expressed in market decision concerning risk
b. But, people have different preferences when they act as citizens (rather than consumers)
c. Private preferences for current over future consumption should not be used to subvert public
judgments that future harms are as important as immediate ones

3. EXACERBATING INEQUAITY

CBA tends to ignore, and thereby reinforce, patterns of economic and social inequality. t does so by assuming that
it does not matter who gets the benefits and who pays the costs.

Benefits are typically measured via willingness to pay; however, the rich are able and willing to pay more than the
poor. For example, wealth more willing to pay not have a waste facility in their neighborhood than poor people, so
the poor get stuck with it [Nb: the wealthy don't actually pay for this; their mere ability to do so suffices for CBA]

Relying solely on CBA, most environmental burdens will be imposed upon countries, communities, and individuals
with the least resources. CBA rationalizes and reinforces preexisting distributive injustices. t is hard to see this as
part of an economically optimal or politically objective method of decision making.

Equity, Morality, Rights Principle all important, all excluded from CBA. Calculations that seem fine for financial
matters are absurd or objectionable when applied to moral issues.

4. ESS OBJECTIVITY AND TRANSPARENCY

CBA is unable to deliver on the promise of more objective and transparent decision-making; the opposite results.

There is nothing objective about the basic and value-laden premises of CBA. CBA relies on a byzantine array of
approximations, simplifications, and counterfactual hypotheticals. ts use demands countless judgment calls.
Sunstein's work shows the huge range of results within which manipulation and/or uncertainty reside. The
assumptions employed beg fundamental questions of ethics and equity that are not subject to obvious resolution.

"Pricing the priceless merely translates out inquiry into a different, and foreign, language one with a painfully
impoverished vocabulary.

CBA also fails goal of transparency complex, resource-intensive, expert-driven. Few community groups can
evaluate the results of a CBA and the public cannot meaningfully participate. The specific dollar values that CBA
emits obscure the underlying issues rather than encourage full public debate about them.

PRACTICA PROBEMS: A THESE THEORETICA PROBEMS ARE EVEN WORSE IN PRACTICE!

1. imits of Quantification
a. Many proposed benefits of environmental programs can't be or haven't been quantified
b. However, one can virtually always come up with some number for costs
c. So CBA tends to skew decision-making against protecting public health and the environment
2. Ignoring What Cannot be Counted
a. mportance of un-quantified factors often ignored
b. This kind of judgment often forgotten once all the numbers are crunched
3. Overstated Costs
a. A tendency to overestimate the costs of regulation in advance of implementation
55
b. n party b/c regulations encourage new technologies and efficiencies, which reduce the cost of
compliance post-enactment
c. Cost estimates usually provided by the regulated industry, which has a powerful incentive to
offer high estimates of costs as a way of warding off new regulatory requirements
d. CBA frequently ignores the profits that can flow to businesses that adopt green habits

THE MANY ATERNATIVES TO CBA

For 30 years, the government has protected human health and the environment without CBA. There is a large
menu of alternatives to CBA that can be employed in different contexts:

Technology-based regulation [required best-available technology]
Performance-based regulations [clean up by X% through whatever means you find preferable]
Pollution trading regulation [create a market in pollution permits]
nformational regulation ["risk to know regimes]

These regulatory regimes that their goals from elected representatives rather than economic analysts (even though
attention to cost is important to the strategies employed) . This can be contrasted to the arrogance of CBA, which
purports to use economics to identify both the means AND the ends.

CONCUSION

CBA distinguished from other approaches in two ways: (1) translation of lives, health, and environment into
quantitative terms; and (2) discounting of harms to human health and the environment that are expected to occur in
the future.

CBA not worth keeping around just for 'perspective' or 'information.' t is exceedingly time and resource intensive,
and its flaws are so huge that these efforts are wasted. Moreover, its bottom line numbers offer irresistible sound-
bites that drown out more reasoned deliberation. Plus, b/c it excludes equity, CBA can't be given any weight
without undermining the fundamental equality of all citizens.



John F. MorraII III, A #eview o1 the #ecord

O Analyzed 44 rules in health and safety (see table in the article for details) with the following qualifications
4 The numbers are agency projections, with some modifications by the author
4 Regulations had ancillary benefits, which the author converted to monetary equivalents
4 To discount future costs and benefits, author uses a 10% discount rate

O Record highlights

4 Large share of benefits (75%) come from just four rules, all dealing with auto safety
4 EPA has just one rule that saves a lot of loves. There other 6 save a total of 5 lives per year
4 OSHA's eight rules save a total of 725 lives, mostly from asbestos and chemical labeling
requirements
4 Cost effectiveness (measured as cost per live saved varies hugely)

O Health vs. Safety

4 Safety regulations are more cost effective than health regulations. This maybe because:
Safety regulation statutes use the words "reasonable and "appropriate whereas health
ones like Clean Air Act and OSHA speak in terms of absolute or near absolute protection
Health risk are overestimated
Private behavior is able to deal with health risks b/c of histrionic concerns re: stuff like
cancer

POITICA CHOICE THEORY AND REGUATION

56
What does political choice theory (PT) tell us about the administrative and regulatory state?

PCA has almost no place for accounts in which decision-makers act on the merits of what they consider good
public policy . PCA sound like "we know what's really going in, an air of insider status that many find annoying

Distinguish two versions of politics:

(1) Perfect Agents: Citizens/Voters have policy preferences and politicians do their best to satisfy this
(2) Agency-SIack: Politicians are agents, but have some slack to do things that principals don't prefer
a. Because of misinformation or ignorance or disinformation on the part of voters
b. Politicians can buy slack by providing "pork

Collective Action Problem

Government can impose costs and benefits; people get one or the other. CAP occurs when a small
group gets concentrated benefits with a small per capita cost for a large group of people . P
B
have an
incentive to advocate policies that P
C
lack
4 i.e. for P
B
, a $1,000 investment can $100,000 pay-off . C spread across the whole
population, so very little C per P
C
. Ergo not worth it for P
C
to oppose (maybe more than cost of
a stamp!).
4 So regulations get adopted even though they are, on net, costly to society
4 This is why "special interest legislation gets adopted

PCA Response to the "Problem of Public nterest Legislation:

(1) PCT can search within the details of apparently publicly-interested statutes to find specially-interested
provisions . if it finds enough, can say that all things considered this isn't really public interest law
(2) n serving the public interest, a statute can also serve private interests (i.e. the ochner law statute)
(3) Creation of administrative agencies aIIows Congress to deIegate the decision-making process,
especiaIIy when IegisIators are torn between competing, powerfuI interests
a. If the agency does something right, the IegisIator can cIaim credit
b. If the agency does something wrong, IegisIator can bIame its Administrator (or
President)
c. The existence of agencies aIIows IegisIators to do "casework" on behaIf of constituents
i. On one IeveI, IegisIators want agencies to function badIy (so that they can ride in
as a white knight to save the day and buiId good-wiII with constituents)
ii. Agency = opportunity for IegisIator to provide benefits to constituents
iii. A major issue from the sociaI view, because onIy a % of peopIe compIain to
IegisIators and get reIief from harmfuI agency action . the rest are just screwed

Advertising, Credit-CIaiming, and Position-Taking = Main PCT Motives of egisIators [no connection to public
good]

What do we think of Public Choice Theory?

(1) Contrast with public interest theories of the 1950s/1960s
(2) There are some kinds of laws that PCT has a tough time explaining
a. Clean Air Act of 1970s
b. Deregulation of Airline Fares under Carter
(3) Leaves out the underlying ideological agendas of legislators when they choose to run for office
a. PCT: Over time, such legislators will lose to those who solely prioritize reelection
b. PCT: Many legislators are incentivized to run by the promise of high lobbying salaries
afterward
i. This seems unjustifiably myopic as an account of why people run for office
c. PACT isn't good at accounting for reformers, ideologues, altruists, etc.
i. Democrats raising taxes in 1994
ii. Johnson + Vietnam/Civil Rights
(4) There is clearly something right about PCT especially re: the role of delegation in avoiding
responsibility
57
a. But just as clearly leaves out personal motivations to achieve legislators' vision of the public
good
(5) PCT puts boundaries around what any legislator can do to achieve their vision of the public good . will
want to conserve political capital for a small set of high priority issues (that the would be willing to take
a potentially politically fatal stance against/for), so most of the time will act under PCT's terms

David Mayhew, Congress: The lectoral Connection
3


Three activities that members of Congress (MCs) find it eIectoraIIy usefuI to engage in: (1) advertising, (2)
position-taking, and (3) credit-cIaiming.

O (1) Advertising
4 Purpose: create a favorable brand image among constituents.
4 Emphasis not on political issues, but on MC's personal qualities: experience, knowledge, ethics, etc.
4 Forms of advertising: visits to the district, nonpolitical speeches to home audiences, "congratulations on
the birth of your child-type letters, etc.
O (2) Credit-cIaiming
4 Purpose: create the appearance that the MC is responsible for some favorable outcome.
4 Emphasis on individual accomplishment, as opposed to party or govt accomplishments.
4 Given that there are 535 MCs, it's nearly impossible for any 1 to plausibly take credit for any large-
scale, "universalistic government program.
4 So, instead, the focus is on particuIarized benefits
SmaII-scaIe benefits doIed out to an interest group or geographic constituency
Benefits are given out not by the bureaucracy, but by the MC (or in some way that's
traceabIe back to the MC.
Forms of particularized benefits: pork projects and casework. (Casework = favors that
congressional staffers perform for constituents, e.g., seniors asking about missing social
security checks, students who want essay materials, etc.).
O (3) Position-taking
4 Definition: Any statement delivery by the MC that would of interest to political actors.
4 Adopts the role of a "speaker, not a doer. purely symbolic speech.
4 This category can include even "big legislation, where the electoral payment is for positions, not for
policy outcomes. (E.g., civil rights legislation intended to please northern liberals, not (nonvoting)
southern African Americans.)
4 Consequences:
Congress passes bills that emphasize vague goals, but short on details re- how to achieve
goals
Bureaucrats may sense that there is little congressional interest in enforcement.

CASES AND MATERIAS ON EGISATION: STATUTES AND THE CREATION OF PUBIC POICY
WIIAM ESKRIDGE AND PHIIP FRICKEY

INTRODUCTION

n obbyists and egislators: A Theory of the Political Process, Michael Hayes posits a transactional theory to
explain how the interest group system works. Consistent with public choice theory that political markets are
analogous to economic markets, Hayes outlines demand and supply patterns for political issues.


3
BrieI background: This book is probably the best-known / most Irequently assigned / most-cited publication on Congress. It`s
entirely theoretical and even though it doesn`t have any equations, numbers, etc., you can consider it as a sort oI law & econ
approach to politics: members oI Congress are rational actors single-mindedly pursuing the goal oI reelection, and virtually all
oI their activity as well as the design oI Congress`s internal institutions) is in support oI that goal. Seems pretty basic, so why
is Mayhew cited so much? The cynical answer is that his central thesis serves as a useIul Iirst principle Ior lots oI theoretical &
empirical work. In the course oI laying out assumptions needed to get to whatever substantive hypothesis on the role oI
committees, negative campaign ads, oversight activity in my own research), etc.) an author is pushing, the idea that 'members
oI Congress are entirely reelection-oriented is oIten a very useIul simpliIying assumption. Whether or not it`s correct is highly
debatable, and Mayhew oIIers very little 'evidence in support oI it. Oh well.

58
n defining demand [groups and their lobbyists], he notes that legislators are often faced with myriad interest groups
for each issue and that groups may either agree or disagree. f everyone agrees, everyone can win; f there is
conflict, resolution results in some winners and some losers.

DEMAND PATTERNS IN POITICA MARKETS

Demand occurs within an interest group framework. Formal organization is key to effective lobbying provide
useful information and frame issues more effectively.

urray Edelman: Two types of interests groups A (highly organized, few in number, interest in tangible
resources) and B (disorganized, inadequate information, large membership, susceptible to symbolic reassurances)

A-type groups will monopolize tangible benefits through the manipulation of the distribution of symbolic
reassurances to B-type groups + B voters are misinformed and A groups are more attentive to legislator behavior
(and more willing to punish). However, misinformation may block symbolic reassurance for B and A groups aren't
always rational/monolithic (b/c main priority is organizational survival).

James Wilson: Posits that degree/nature of interest group organization shaped by perceived incidence of costs
and benefits . concentrated costs or benefits are more likely to affect small/privileged groups and thereby
stimulate organizational activity. Distributed activity doesn't tend to do so [free riders, weak individual incentive to
join]

SUPPY PATTERNS IN EGISATIVE MARKETS

Hayes rejects premise that politicians will vote for the optimum "public good. nstead, legislative behavior is best
explained by rational choice theory on the assumption that primary goal = reelection

Conflictual demand is an issue can be ameliorated by abstention (not voting) or casework (doting out individual
favors to groups voted against). The most effective goal is for the legislator to act such that each of the conflicting
groups will believe that it has won . political deception a powerful tool, in party b/c of misinformation. Passing an
ambiguous bill that delegates responsibility to an administrative agency = one form of such deception.

Given concentrated costs, legislators will not want to allocate in the public interest . instead, avoid policy choices
and delegates to regulatory agencies. Given concentrated benefits and distributed costs, legislators reward friendly
interest groups with self-regulation or distributive-benefits b/c cost-bearers don't realize it or can be deceived with
half-truths about statutory purpose.

THE IMPICATIONS OF HAYES' MODE

Hayes leaves us with considerable pessimism regarding the results of imperfect political markets, such as the size
of the public sector and the distribution of outcome

Some argue that public sector is too large . Congresses discusses how much to increase spending, not whether it
should be cut . results in government spending disconnected from growth rate of the economy

Others argue that public sector is too small . benefits are spread too thin for any individual to be guaranteed
receipt . in many cases, Congress in unaware of demand b/c formal organization precluded by free rider problem
. most people are unaware of benefits of policies, but are acutely aware of taxes and ergo favor cutting certain
programs because they receive no concrete benefit from them . legislators, as vote-maximizers, only spend to the
extent that the return will be more votes.

Hayes agrees with both groups too much distributive and self-regulatory and too little appropriate redistributive
policy in our government [b/c the "haves will be opposed]. Congress tend to bail through delegation or non-
decision to avoid adverse electoral consequences. Ergo especially hard for previously excluded groups to
challenge the status quo. Ostensibly redistributive legislation is often distributive or even self-regulative.

The Future of the Administrative State

59
COMPARATIVE APPROACHES

Questions to ask: (1) s a style so embedded in cultural/constitutional features of a particular society that it can't be
transplanted to the United States? (2) s there room on the margins to innovate on the basis of foreign
approaches?

Notes from taIk by Robert Kagan on "AdversariaI egaIism"

The basic socio-legal norms of American versus other rich democratic societies are quite different in style:

US regulations are more details and prescriptive, with harsher penalties for violations
A greater role for litigation in court over policy; courts more adversarial
Legal institutions in the US are more fragmented, less hierarchical
Regulatory agencies are more fragmented in the USA, often checking-and-balancing each other
There is less room for administrative judgment and official discretion
We rely more on legal accountability and appeals from state decisions (not just political accountability)
We rely less on bureaucratic legalism and on expert political judgment, more on adversarial legalism

What are the consequences of adversarial legalism?

Benefits: new justice claims, checks on power, protection of individual rights, and more!
Costs: More litigation . can decrease rationality of decisions, increase lawyering costs, adds to the
opportunity cost of delays, increases accountability costs, induces mutual resentment and distrust,
blocks cooperation, engenders hostility to even justifiable regulation
t is hard to weigh these costs against these benefits (a degree of incommensurability)
The goal is to engage in critical reflection and identify some possible reforms

What are the origins of adversarial legalism in the United States?

iberaIism: Distrust of concentrated power [so fragment it and make it accountable legally]
PopuIism: Distrust of business power in particular [corrupting influence on government]
4 More fragmented markets and strong anti-trust law more competition, strong labor, no cartels
4 Prevents a "corporatist approach to regulation
4 Resistance to higher taxes results in less government bureaucracy and greater
decentralization
Many courts, agencies and local governments are under-funded, increasing frustration
an distrust on all sides
4 Changes in government with elections tend to change the personnel at government agencies
Reduces the prestige/professionalism of government bureaucrats
Each party fears that the other will control agencies, so draft details statutes that
reduce discretion and increase powers of judicial review . also, more federalization of
policy (because nobody trusts state and local government)
4 We don't trust businesses to comply or government to enforce regulations stricter reporting
requirements and punishments, leading to lawsuits and distrust

Summary: Political Culture and Legal deology

Competitive electoral system more political uncertainty for both parties a desire for predictability by all groups
more adversarial legalism (lawsuits as an insurance policy for groups that don't trust government discretion)
powerful opposition to proposals to reduce legalism hostility to corporatist alternatives [especially here, where
specialist interests aren't well-organized and nobody trusts an interest-group to properly represent them].

Tushnet's Comments:

This is another account of the "overregulation produces underregulation paradox
We see the limits of Mendeloff's argument to regulate less intensively and more extensively
With the demise of non-delegation doctrine, 2 possible results
4 More prescriptive rules by Congress (we are more prescriptive than other countries)
60
4 Hard Look Doctrine occupies a similar function it ensures that administrators are tightly
constrained by statutory language [tightens up loose statutes]
AL exalts a particular technocratic class lawyers who are to bring order and rationality to our
systems . a kind of professional managerial class

Robert Kagan. Adversarial Legalism: The American Way o1 Law

U.S. regulatory state tends to be more adversarial than other countries (e.g., U.S.-Japan contrast re- environmental regs).

Features of the U.S. system:

O 1- Places more weight on IegaIistic interpretation of formaI ruIes
4 more detailed, prescriptive, and complex . and also confusing & difficult to comply with
4 More specific mandatory methods/procedures
4 Other countries place more of an emphasis on informal "administrative guidance & custom-tailored agreements
between regulator & individual firms.
O 2- Greater emphasis on IegaIistic enforcement
4 likely to impose formaI sanctions to change firms' behavior
4 severe penaIties: large economic costs imposed on regulated entities
4 Agencies often measure their performance in terms of prosecutions brought and fines recovered.
CriminaI PenaIties: No other nation authorizes or imposes such weighty criminaI penaIties for
vioIations of reguIatory Iaw.
CiviI PenaIties: AIso much harsher than other countries.
4 US system encourages private enforcement (i.e., Iawsuits) of pubIic Iaw.
This can lead to dupIicative resuIts. E.g., When the Exxon Valdez oil spill occurred, Exxon was
penaIized three times - criminaI prosecution, govt-imposed civiI penaIties, and damages awarded
in private Iawsuits - for the same event.
Laws are crafted to provide incentives for plaintiffs' lawyers to bring class action suits. E.g., one-way fee
shifting: in some statutory areas, defendants who lose have to compensate plaintiffs for their attorney
fees, but losing plaintiffs don't have to compensate defendants.
4 U.S. admin state is more deterrence-oriented, whereas other advanced democracies tend to employ a problem-
solving, cooperation-seeking style, where govt & industry cooperate in formulating and implementing regulations
4 Other countries focus more on outcomes (i.e., "performance standards) than procedures
O More adversariaI / antagonistic relationship between regulator and regulated.
4 IegaI contestation of reguIatory ruIes and decisions, in administrative appeaIs boards & courts, is more
common.
O More enmeshed in poIiticaI confIict
4 Politicians & rival interest groups battle over regulatory policy & appointments to regulatory agencies as part of the
normal political process.

s Adversarial Legalism Necessary?

t doesn't necessarily lead to better regulatory outcomes, but imposes significant costs. These costs include:

O SociaI & Economic Costs
4 egaI uncertainty for reguIated firms
4 arge expenditures on paperwork (reporting, record-keeping, certifications, etc.)
4 arge expenditures on Iawyers
4 Opportunity costs
E.g., each month's further scrutiny of whether a new pesticide shouId be pIaced on the market
means another month's deIay in suppIanting a more harmfuI pesticide currentIy on the market.
4 Divisive reIations between government and business
O DeIays in issuing new ruIes
O Divisive reIations between government and business

David VogeI, NationaI StyIes of ReguIation: EnvironmentaI PoIicy in Great Britain and the United States

O American approach to environmentaI reguIation is the most rigid and ruIe oriented in the industriaI
worId; the British, the most fIexibIe and informaI
O Thrust of US regulation has been to restrict administrative discretion; in Britain regulatory officials remain
insulated from political and judicial control
O ReIationship with business is very different
4 UK - very cooperative
Officials believe that companies are making a good faith effort to comply
61
Companies believe that requests are reasonable
4 America - Iots of tension
Regulatory agencies are accused of raising the cost of doing business
Shifting resources from productive to unproductive uses
O However, reguIatory outcomes have been reasonabIy comparabIe in both countries
4 Both countries devote a similar amount to pollution abatement
n some instances, US regulators are pressured by the courts and regulators to make and
enforce rules that are perceived as unreasonable and arbitrary
n the UK, rules tend to be based on a consensus among engineers and scientists
4 American companies, however, spend more administrative and IegaI costs to deaI with the
adversariaI system (this is where excessive compIiance costs come from)
O Origins of regulatory system are different
4 UK (Victorian)
Highly respected civil service
Deference to public authority
Public that is unsuspicious of industry
4 US (1960s angst)
CiviI servants have Iow respect
Business is mistrustfuI of government
PubIic is mistrustfuI of both

Joseph Sander, Courts and aw in Japan

O Pollution problems began to surface in the mid-1950s
O Japanese pollution disputes are linked with Minamata, a small city in a fishing and agricultural region of Japan
4 Minamata was the home of the Chisso Corporation, which made chemical fertilizers and plastics
4 n the 1950s, many residents became very ill, and 40 percent died
By 1956 it was discovered that the probable cause of the illness was the consumption of local fish
poisoned with mercury
Victims formed a mutual assistance society to negotiate with Chisso
Victims and fisherman tried to negotiate with Chisso, but Chisso refused
After a whole bunch of drama and a minor hostage situation, Chisso agreed to mediation with the
local union
O The result of the mediation was a really pathetic settlement offer $830 per person for
deaths, $280 annual payment for the disabled, and $55 for funeral expenses
4 The victims refused, but the mayor and other town officials threatened that they would get nothing if they didn't
accept, so they did, and in the process signed a document agreeing that this was a full settlement of present
and future claims
4 There was some government cover-up of the issue, and research into the problem ceased
4 n 1964, another strange disease with similar symptoms arose elsewhere in Japan, where victims also
consumed local fish
A study by the Niigata University Medical School, which tied the illnesses to pollution caused by a
factory owned by Showa Denko (which used the same process Chisso used in Minamata) was
suppressed by the government originally, but was made public
O As a result, the victims, with the help of leftist lawyers, sued Showa Denko in 1967
4 Within two years, suits followed in the Yokkaichi air pollution case, the Toyama
cadmium poisoning case, and the Minimata case
4 These became known as the Big Four pollution cases
O The Chisso litigation
4 The Chisso victims broke into three factions; those who brought suit, those who entered into a direct
negotiation, and those who agreed to more mediation
4 Those who chose to litigate were amply rewarded; the courts liberalized a lot of rules, leading to something
like strict liability, and awarding damages up to nine times the mediation awards; nevertheless, the plaintiffs
demanded and received a promise that all victims, including those who had not been a party to the suit, would
receive equal treatment
The president of Chisso also knelt before the victims and apologized, and the Chisso Corporation
issued a public apology
4 The government lost face as their role in the cover-up became known
O Ramifications
4 The pollution suits threatened to undermine the mediation and conciliation based approaches
4 To avoid potentiaI confIict, the government passed a series of strict poIIution controI statutes and
created a new system to identify and mediate poIIution disputes
O Government's legal response
62
4 The Law for the Resolution of Pollution Disputes was the centerpiece of this new program
This creates a three-tiered system to identify, investigate, and resolve disputes
The law attempts to investigate and resolve disputes while they are still small and is similar to
mediation systems in other areas
4 The law was very effective, and many claims were processed and handled through mechanisms established
under the dispute law, the compensation law, and environmental impact hearings
The Supreme Court also helped to minimize the benefits of bringing suits by denying them the right
to injunctive relief against the government
4 Japanese culture promotes harmony, and so adversarial things like lawsuits were not very well regarded
This has led to the myth of the reluctant litigant; it suggests that a Japanese disputant not only would
prefer to settle disputes in some forum other than formal adjudication but also would altruistically
forgo or compromise an entitlement or a benefit to avoid formal litigation
O Generally
4 Use of the courts has not grown enormously during the post-World War period
E.g. in 1993, the Japanese civil litigation rate was approximately three cases per thousand, as
compared to sixty-four per thousand in Arizona
O The real reason for the low rates of litigation
4 The courts are congested, imposing substantial delays on those who choose to litigate
4 n pollution cases, mediation structures and statutory compensation schemes provide a surer route to
recovery than litigation
4 Similar statutes to the pollution statutes have been enacted to deal with other tort problems
The general pattern: events generate a substantial number of suits, and the government responds
with a statutory scheme that rejects the judicial system as an appropriate institution for allocating
loss, deprives the legal profession of a central role, and significantly reduces the role of individuals as
an instrument of law enforcement or law reform through the enforcement, reinforcement, or assertion
of individual rights
O Ties between actors in Japan are more complex and more enduring than those of
Americans
O Historically in Japan law has been left in the hands of local communities
O Throughout the interwar period the movement toward mandatory conciliation was justified
as a way to ensure that outcomes would reflect the morality of the specific circumstances
surrounding a dispute, not the formal legal rights of the parties
4 The postwar solutions to pollution injuries are a part of this long tradition
4 By restricting the ability and the incentive of individuals to litigate, the Japanese legal structure reinforces
cultural norms about the relationship of people and society
The postwar pollution controversies reveal the limits of this set of arrangements
n the pollution cases the courts played the invaluable role of an institution one could turn to when
ordinary governmental institutions fail
O n Japan, as in other societies, meditative structures cannot work without a substantial
degree of trust and good faith on the part of the parties; when these break down, litigation
provides a valuable alternative
4 The pollution cases also reveal that governmental efforts to restrict the use of formal litigation is most
successful when there are effective alternatives. Only when non-litigation alternatives offer results equal to or
better than litigation will efforts to suppress litigation meet with substantial success
t is not an accident that after the enactment of the pollution Dispute Law, pollution litigation dropped
dramatically




RUSSE KOROBKIN & CHRIS GUTHRIE, PSYCHOOGICA BARRIERS TO ITIGATION SETTEMENT: AN EXPERIMENTA APPROACH

Subjects given facts re: a landlord-tenant dispute where they had no heat for 4/6 months during the winter and, despite repeated
complaints, never heard back from landlord. At pre-trial negotiation, the landlord offered to settle for $900 [when it was possible
that the landlord could win more (or less) at trial]. Three groups:

1. Group A got no apology, no explanation
2. Group B told that landlord was called out of the country on a family emergency
3. Group C given no apology at the time, but did receive one at a pre-trial discussion

Apology subjects were more inclined to accept the settlement offer (not statistically significant).

EE TAFT, APOOGY SUBVERTED: THE COMMODIFICATION OF APOOGY

Example of Carole Coe, who was released from a suspension on charges of contempt in exchange for an apology. Some
judges dissenting, pointing to what Taft calls the "commodification of apology: "where everything ahs a price, where as moral
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process becomes a market trade. The moral dimension of an apology is lost when it is injected into the legal arena. t
becomes subverted.

A truly apology involves moral and didactic functions, as well as a full admission of responsibility and a willingness to accept
responsibility for the consequences of actions. n law, this moral and didactic process is corrupted "full of words but devoid of
meaning. When faced with such an apology, one should "hold on to one's self-respect . [not[ trade resentment for air.

The law recognizes that an apology, freely made, is an unequivocal statement of wrongdoing, and permits such an
acknowledgment to enter the legal process. This requires great courage, "one of the markers of a truly moral act.

STEVEN KEEVA, DOES AW MEAN NEVER HAVING TO SAY YOU'RE SORRY?

Distinguish between apologies and expressions of empathy. One lawyer argues that "the role of the tort system is
compensation, not apology. Others, however, see apology as a means to resolve disputes, lubricate settlement talks, and
contribute to a solution that looks to client's full needs.

Some have argued for a therapeutic/healing ethic, instead of the dominant adversarial ethos

Worries exist that an apology may be tantamount to an admission of guilty or liability. Still, the legal system, some argue, should
foster apology to break a vicious cycle wherein both parties want an apology to happen, but one doesn't out of fear, and the
other sues because never got an apology. Some states have begun to address this was laws preventing apologies from being
used in court.

Distinguish physical from emotional harms an apology won't pay hospital bills. But empathy and compassion are still
important.

t is best to apologize during settlement discussions b/c legal protection there is stronger (though not perfect).

REFORM PROPOSAS

Two Questions:

(1) Assuming the need for reform, what possibilities exist?
(2) How to achieve these reforms given realities of politics?

Begin with the 2
nd
Question:

Consider how the regulatory state came about. n both major periods of growth (1930s/1960s), a convergence of
(1) substantial intellectual base [Progressives; Process Scholars]; and (2) the victory of a significant political
movement organized around other issues (New Deal/Great Society).

t is clear that we've got a stockpile of ideas. t is unclear whether a political movement will arrive. Will Obama et
al. put these new ideas to use? t is possible that we are in a post-Reagan Era, where support could materialize.
Obama has appointed a bunch of people familiar with this scholarship, so the next 3-7 years could be quite
interesting.

As to the 1
st
Question: What are these reform ideas? . Reconstitutive aw / New Governance Mechanisms

Corporate Reform: BuiId into reguIated entities themseIves the capacity to reduce waste/emissions/risk
and to buiId-in internaI incentives to engage in this activity

Human Resource Departments
4 n large corporations they have been quite effective at reducing discrimination
Set up internal complaint mechanisms and ADR
Make this the "mission commitment of the HR department
Studies show that HR is good at identifying discriminating and less good at responding
O But this is better than nothing; and can effectively forestall litigation because of
the nature of the naming-blaming-claiming process

Maine 200 Program/EMAS
4 Say to regulated entities that, if you have an appropriate system, we'll focus review on your
system and scale back individual review / workplace inspections (i.e. OSHA)
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4 EMAS: f you tell us that you have an EMAS system, we will first look at the system; if it is well
designed, we won't take direct measures of emission
4 This shifts attention from outcomes process
Agency experts will see a lot of different processes and may become experts . they
can work with management to disseminate best practices information . gives
agencies information advantages over regulated entities
4 Outcome: Higher quality processes with the real possibility of reduced effect on outcomes
A trade-off of sorts
Might allow more extensive but less intensive regulation (Mendeloff)

Release of nformation to the Public [a form of libertarian-paternalism]
4 Require disclosure of accident rates, emission, management reforms, etc.
4 n some cases, perhaps create a rule that no cause of action can rely on something thus
disclosed as the basis for liability (i.e. for nuisance claims)
4 Studies are clear that the mere requirement of disclosure leads to a decrease in discharges of
toxic waste (not just b/c of the threat of lawsuits; corporations don't want to be known as
polluters)

Shift responsibility from government regulated entities
4 Might allow less prescriptive rules b/c not forced to enact them by our distrust of government
4 More efficient, less distrust and tension
4 Goal still remains the reduction of bad stuff (same public interest objective)
4 The thought is that local, on-the-ground actors can reduce risk at lower cost

There are already efficiency-gain incentives for regulated entities to reduce risk
4 So why not do it on their own?
Maybe incentives aren't strong enough w/in current legal regime?
Perhaps a worry about lawsuits resulting from disclosure?

There is a serious disagreement over whether we can achieve better results by creating these kinds of
incentives and working with entities, or by increasing liability in private law
4 Either approach changes the incentives to force internal change
4 We might worry that a liability/private-law approach will encourage ossification and exacerbate
current dysfunction

But what if you are suspicious of both agencies and corporations?

The above-mentioned ideas give quite a bit of unconstrained discretion to agencies and corporate
actors, all with little democratic accountability [and we don't trust special interest groups either]

Democratic AccountabiIity:

The existing structure of administrative law makes it tough to implement new governance mechanisms
4 We wouId need to change substantive IegaI doctrine to make these ideas reaIIy work
f we suspect agencies on grounds of democratic accountability, then what?
4 We try to increase democratic accountabiIity at the agency IeveI!
Example: Negotiated Rule-Making
4 Congress would have to change the APA b/c NRM is inconsistent with notice-&-comment rule
4 ssue: Who gets to be in the room during rule-making negotiations?
Which people?
When are the meetings? And where?
4 Still, this is certainly more democratic than N&C, which, in practice, is only open to participation
by organized, well-funded interest groups
Example: Administrative Democracy
4 Make agencies more directly democratically accountable
4 Random panels of citizens to help run agencies
They actually did something like this in British Columbia to change voting rules
4 "Optimistically Populist: The public itself is competent to make good decisions
Nb: am neither optimistic nor populist

65
Richard B. Stewart, adison's Nightmare

On Madisonian premises, the growth of federal programs should be welcomed as an authentic expression of public interest and
a consequence of the federal government's superior ability to promote it. Founders clearly intended for a politics of the national
good to override state and local measures.
O However, it is now widely understood that the processes through which national measures are adopted and enforced
does not always ensure that these assertions of national power serve the public good. Rather, they invite the very sort
of domination by faction that Madison wanted to avoid.
O This realization has been sharpened by the development of public choice theory, which looks behind stated goals
and focuses on political incentives
O Factors explaining the vulnerability of national policy to factional control:
O (1) Strength of traditional political parties has been replaced by a political system dominated by well organized and
ideological single-issue interest groups
O (2) Federal conditional grant programs are used to co-opt state and local interest groups and officials.
O (3) Dominant reliance on "command and control strategies to achieve national goals involves a shift of decision-
making power away from Congress and the President, toward federal bureaucracies and courts, undermining
federalism and separation of powers safeguards against factions.
O Command and control strategies attempt to achieve national goals by requiring specific conduct on the part of
regulated entities, such as the adoption of particular workplace safety measures.
O The rapid growth of federal controls has outstripped the ability of Congress or the President to make all of
these decisions. As a result, these decisions are delegated to Congressional subcommittees or federal
bureaucracies or courts, all of whom have weak political accountability (subject to capture, outside influence).
O Rather than offsetting each other, interest groups have divided power among themselves through congressional
delegation of authority to functionally specialized bureaucracies.
O So the centralizing solution to factional domination has in fact produced a "faction-ridden maze of fragmented and
often irresponsible micro-politics within the government.
O What's the solution? Not indiscriminate deregulation. Not constitutional counterrevolution by the courts. Not
stiffer judicial controls on administrators.
O Rather, the best solution is to adopt new strategies for achieving national goals in place of the command and
control model.
O Command & control regulation attempts to achieve harmonization between state/local/private decisions and
national goals by dictating precise outcomes of decisions within these institutions.
O nstead of doing this, the laws governing these institutions should be "reconstituted to steer the overall
tendency of the institutions' decisions without dictating particular outcomes.
O The idea here seems to be something more like libertarian paternalism. ncentivize private industry and
state and local governments.
O This will in turn reduce the need for delegations via the command and control model.
O Can we make this work?
O t's true that the the factions that have embedded themselves in congressional and administrative subsystems
will not yield power easily. But there are two powerful external constrains on continuing the command and
control model
O (1) We just don't have enough money. Command and control is less efficient than reconstituted
alternatives.
O (2) nternational competitiveness. The command and control model penalizes investment and innovation
because of high compliance costs in a way that it incompatible with our place in a competitive
international market.

OrIy obeI, InterIocking ReguIatory & IndustriaI ReIations

O Clinton administration introduced "New OSHA initiative designed to enhance safety and reduce paperwork
4 Cut obsolete regulations
4 Reward results, not red tape
4 Grassroots partnerships
4 Negotiate rather than dictate
O Employees given the choice to cooperate w/ OHSA to design effective programs or be subject to traditional
regs./enforce.
4 Pilot case: Maine 200
Existing problems
O No deterrence
O No ability to change behavior post inspection
O Fines and violations were counter productive as firms believed there was no pleasing OHSA
O Disconnect between compliance with regulations and actual safety
200 workplaces that had the greatest claims (40% of total) due to injuries
66
O Through cooperation, workplaces managed to identify 14 times as many hazards and
significantly reduced injury rates
4 National program
Cooperative Compliance Program (CCP)
O Designed to develop Comprehensive Safety and Health Program (CSHP)
4 CSHP includes planning on routine employer-conducted inspections and means by
which employees can complain about problems without fear of reprisal
4 ncluded problems like ergonomics, which were not covered by existing regulations
APA Rule-Making
O APA excludes interpretive rules, general statements of policy, or rules of agency
organization, produce or practice from notice and comment
4 dea is to balance public participation while retaining agency discretion in
organizing internal operations
4 Courts have held that agency instructions guidelines and manual books are not
legislative rules
O APA also doesn't impose strict requirements on procedural rules as opposed to substantive
rules
4 Procedural rules do not alter rights or interests of parties, although they may alter
way that agency interacts with parties. Generally courts have viewed inspection
policy as procedural rules
4 Substantive rules change the underlying behavior of parties
O Business argued that this was introducing ergonomic standards through the back door
4 CCP was issued as a directive rather than a rule
4 Court overruled the program, arguing that it was a rule, which should been adopted
through notice and comment procedure
Practical effect of CCP was to change behavior or face the consequences
4 Therefore, targeted enforcement and voluntary participation is procedural, but a
carrot-and-stick approach is substantive
4 As a result, OHSA dumped the CCP program, and expanded the voluntary
programs
O Criticism of court opinion
4 Targeting decisions is an inevitable part of agency discretion
OHSA Act has a general duty clause as well as the requirement to comply
with regulations
nspection and investigation decisions are themselves used as sanctions
Settlements can be sued to deal with nonstandard issues like ergonomics
4 New admin law looks to cooperative relationships rather than adversarial formalism
Cooperative programs are available to firms that wish to avoid routine
inspections and are willing to implement internal safety plans
Court overruled attempt to integrate these corporate governance schemes
into the core enforcement functions
O Strategies function best when they are integrated and dynamic

Jody Freeman, CoIIaborative Governance in the Administrative State

FaII Protection Negotiated RuIe Making

O n 1994, OSHA initiated a negotiated rule making on part of a regulation (reg-neg) which governed fall protection during
the erection of steel structures
4 Members of the chartered committee, chosen by OSHA from over sixty requests for membership, included
representatives of labor, management, and state and federal agencies
4 The initially focused on the height at which ironworkers would be "tied off
4 How it went
Each of the parties was committed to different starting points, and it appeared that the purpose of the
negotiation would be to bargain until the parties could arrive at a compromise number
Parties would have to define what constitutes a particular activity, agree on the degree of risk, settle
on a height at which to be tied off, and choose the device by which tie-off would be accomplished
The parties exchanged information and corrected false assumptions
n the course of the discussion over different heights, parties began to generate an enormous
amount of information about the causes of accidents, and the focus gradually began to shift towards
creating a safer work environment
Participants began sharing safety tips and data, such as the best shoes to wear on various surfaces
in order to prevent slips
They discussed the possibility of a certification program
Despite the emergence of information about safety practices, the facilitator continued to press the
importance of choosing heights at which to tie workers off
67
O As the deadline for concluding the reg-neg approached, the facilitator distributed a split the
difference compromise
4 One still make the case in favor of reg-neg over traditional notice and comment
Because the parties were forced to defend their positions face-to-face, they resisted being extreme
or unrealistic
They produced a regulation better informed by the parties' views about the most dangerous activities
and the best tie-off requirements
O The resulting rule is also more likely to be implementable because labor and management
had a direct hand in fashioning it
Because the rule was produced through consensus, it will likely be less vulnerable to challenge,
potentially saving all sides the costs of financing prolonged litigation
4 This analysis, while accurate, fails to adequately capture what transpired
The reg-neg's potential to illustrate collaborative governance appears in the revelations about safety
and the possibilities for alternatives to a tie-off rule that emerged when information was pooled during
discussions
O The reg-neg provided a forum in which that information was more likely to emerge
O n the relatively sterile and adversarial notice and comment process, there is virtually no
opportunity to build on ideas and develop solutions as a group. Here, the parties to some
extent reconceived the initial problem and jointly generated an unanticipated and
implementable solution. They began to engage in problem solving
The OSHA reg-neg was pregnant with the possibility of alternatives to traditional rules, produced in
traditional notice and comment, and enforced by the agency in the traditional way. Nonetheless,
much of that potential went unrealized
imited Scope
O Reg-negs often generate a great deal of wasted information because of the limited scope of a rule
4 Agencies confine reg-negs to specific and well-defined problems on the theory that narrowly defined issues
are easier for parties to resolve
4 advocates of reg-neg unanimously agree that deadlines are critical to their success
O The impulse to limit the reg-neg's scope conflicts with the reality that problem solving requires an effort not to foreclose
creative ideas or new conceptions of the issues to be negotiated
4 The OSHA intended that part of the regulation to cover only tie-off heights for predefined activities

The Pursuit of CoIIaboration

-egitimacy
O Reg-neg has some potential to address the most significant weaknesses of the administrative process
4 None of the various stakeholders are likely to commit themselves to collaboration as a normative goal,
however, without some reassurance that the model provides accountability
O How can we be sure that the products of collaboration (the rules, the permits, the institutional arrangements) will be
legitimate?
O Reasons for concern
4 Collusion
Some critics worry that collaborative processes might be vehicles through which agencies, industry,
and powerful public interest groups can collude to undermine the public interest
Unless agencies can somehow level the bargaining power of all groups, consensus agreements will
inevitably lower standards because of industry's resource advantage
4 Subdelegation
The potential for collaboration to result in broad subdelegation of agency authority might also be
viewed as problematic
The need to rely on public-private cooperation arises only because legislators delegate more and
more responsibility to agencies, together with increasingly demanding analytic requirements such as
cost-benefit and risk-assessment analysis, while denying them adequate resources to implement and
enforce their mandates
The impetus to delegate policy making and implementation is not driven by a new collaborative ethic,
critics would say, but rather by desperation
4 Corporatism
Antipathy toward a greater or reconceived role for traditionally private groups in public policy making
might also be rooted in an American intolerance for corporatism
This risk might be minimized in what David Johnson calls a "meso-corporatist system, in which
private groups have authority to participate with government in only limited arenas over a limited
number of policy issues
Some organizations will view the participation and responsibility that collaboration portends as
ultimately disempowering
4 Unfettered Agency Discretion
Collaboration may augment unchecked agency discretion
68
All of these proposals require that agencies enjoy broad enough enforcement discretion to waive
existing requirements under some circumstances and to negotiate "individuated agreements with
firms that may depart form the letter of the law


JERRY FRUG, ADMINISTRATIVE DEMOCRACY, 40 U. TORONTO .J. 559 (1990)

One way to foster administrative democracy would be to strengthen democratic control of government

Number, membership, and power of citizen advisory committees could be expanded
These groups could engage in government decision-making
4 Administrative Board of Directors: practice of joint decision-making by workers and members of the
public [at administrative agencies, get a majority of public representatives and a minority of agency
employees]
This would change the role of politically appointed administrators, whose work would now focus
on coordinating relations between these two groups
Closer to a "town meeting model of decision-making
O Difficulty: Finding an acceptable method of selecting public representatives; might be
frustrated by interest group pluralism . this issue is unavoidable so long as look to
group representatives rather than the public as a whole to articulate the public interest
4 RadicaI Strategy: Allow the public at large to debate the recommendations of government employees
and to reject them when they think it is appropriate to do so
We already allow the initiative and referendum
Historical precedent for government by assembly
We could find a way to navigate between mob-rule and expert-dominance

The question isn't whether such popular governance is possible, but rather how to implement it

New institutional structures would be required
Empower pubIic hearings to decide, rather than just debate, certain issues
A period of experimentation clearly necessary
ntroduce public officials to the practice, not just theory, of public control
CouId create a citizen group of 100 peopIe to serve for a stated period of time as pubIic representatives in
an administrative agency (chosen by Iot, not eIection)
4 This group could meet with employees, discuss agency issues, and make decisions
4 See as a modified form of jury; similarly allow judicial oversight to keep w/in mandate
4 An expectations that citizens devote a certain part of their time to public policy formation
4 Certainly possible to implement such a strategy
Important to reguIarIy reconnect such democratic structures in the nationaI government with IocaI
democracy to keep their "democratic" nature credibIe
4 Example of an EPA administrator holding extensive public hearings in Tacoma, Washington to discuss
the possible effects of a locally significant decision . one way to involve the local public in a federal
agency's decision-making
4 Federal agencies could select representative localities to help resolve national policy issues
PubIic couId be incorporated into the district offices of nationaI administrative agencies
4 Would require a readjustment in hierarchical relationships
4 Allows district offices to serve as vehicles for local democratic participation

Bureaucratic versus Democratic Consciousness

We are prevented by making these changes by anti-democratic prejudice rooted in a bureaucratic vision of
democratic government and expertise
But we know that smoothIy-functioning bureaucracy is no Iess a myth than perfect democratic governance
We distrust democracy: people are too lazy, stupid, incapable of deciding; don't want to make decisions
4 This distrust is rarely based on empirical evidence or theoretical explanation
4 Rarely voiced by people with any experience in public policy formation
4 Reflects an anti-democratic prejudice
The notion of democracy can take many forms; not just one big meetings
Democracy and expertise are not mutuaIIy inconsistent
4 Three good reasons to think that expert knowledge contributes to political decision-making, but is not a
workable substitute:
Stupidity knows no class
Expertise cannot solve political problems (experts often divided)
Knowledge can't answer questions about what we as a community want and think right
SuccessfuI democratic systems accommodate expertise w/o automatic deference or rejection
Experience in democracy is rare; our prejudice is the result of bureaucratic pressures to defend expertise
69