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The Costs Of Federal Agency Expertise

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Whether the matter at hand is health, safety, economic or technology policy regulation, federal intervention is legitimized on the basis of presumed impartial expertise of agencies and the administrative state itself.

We should dispel the reflex, as it can sacrifice genuine expertise and attendant economic and social progress.

The administrative state and the accompanying rule by experts was born controversial, but it is increasingly inappropriate to the modern era in which it undermines not just wealth creation but risk mitigation, notably in the tech sector but elsewhere, too. Technology can increasingly render obsolete the market failure arguments used to justify long-ago regulations, such as tight Federal Communications Commission regulation of airwave “scarcity” in the name of protecting the “public interest.”

The progressive vision was noted by Steven F. Hayward in "The Threat to Liberty":

The main reason Progressives like [Woodrow] Wilson no longer shared the older liberal suspicion of government power was the new view that politics and administration could be neatly and cleanly separated, with administration entrusted to scientifically trained and disinterested experts, who by their very expertise should be insulated from political pressure.

And in his book Bureaucracy in America: The Administrative State's Challenge to Constitutional Government, (here's a Federalist Society podcast on it) Joseph Postell noted that:

“Republicanism" was "attacked [by progressive reformers] as antithetical to an administrative state that rested on expertise rather than political accountability. Given the pace of technological and political progress, progressives argued, a modern administrative state needed to put experts in charge who would employ scientific expertise as opposed to following public opinion." (p. 169)

The result? Worldwide, resources not privatized or integrated into wealth-creating institutions of the free competitive marketplace prior to the onset of the progressive era—airsheds, watersheds, lands, ocean resources, environmental entities, low-earth orbit—remain under control of the "expert" state, with allegiance to the political rather than the private world, in the formulation of Fred L. Smith Jr. of the Competitive Enterprise Institute (my organization). That has meant incalculable stagnation rather than progress.

What the administrative state often does is not regulate or “make regular,” but exercise power and control. Rather than enable experts undermine, moving ahead to block and sometimes cause new technologies to be born "captive" to their pre-existing command polices.

The desire to retain that perch presents perhaps the greatest obstacle for tomorrow’s unbounded prosperity, particularly given Congress's largely complete delegation of lawmaking power to these agencies, and their fondness for not only rules but also informal decrees like guidance documents and interpretations.

Consider autonomous navigation. Drones and driverless cars, for example, are arriving on the scene in an era in which governments long since cemented their control of airspace and roads. As I've complained probably too often, at just the moment Internet and digital technologies stand poised to overcome the alleged market failure rationales used to justify airspace and roadway regulation, these new sectors are being channeled into pre-existing public utility-style regulatory frameworks.

So when technology could, at long last, begin to allow superior tracking and allocate airspace and road-space, and when roads could be tolled and privatized, what happened? For one thing, the Federal Aviation Administration took 400 pages to write a rule effectively banning practical commercial drone use, and to affirm its dominion over everything that happens next. Regulators have also sought to regulate vehicle-to-vehicle and vehicle-to- infrastructure communications (V2V and V2I in the jargon) in ways that could preclude the private sector from dominating the role, and also assuming that their versions of communications and information collection are the proper ones. Smart cities, in this scenario, won't be that smart, since the ownership/management of their infrastructure will be chaotic and deeply politicized--and not expert.

You see the dilemma; "expertise" is getting defined by default as embedding the new into decades-old centrally defined models and (infra)structures. Instead of creating a vocabulary and strategy for liberalization, governments impose or perpetuate an increasingly sub-optimal "commons" to divvy up. The failure to allow the development of completely new and necessary institutions of markets and capitalism -- and the failure to even recognize the need for it-- is one of the greatest costs of the regulatory state, unquantified and unquantifiable.

True expertise would entail grappling with the widespread lack of clarity in property rights in frontier sectors, network industries, and vast global “commons” such as spectrum and more, and then figuring out how to get these resources and network assets into the realms of private competitive enterprise and tradeable ownership in fluid, disciplined markets.

Similarly, with respect to emergent private space flight, the Federal Aviation Administration’s approach to regulation of “commercial space activities” could foster a rent-seeking bonanza. In addition, distortionary government investment in what should be private technology projects can displace and misdirect the "organic" trajectory of private research, and even cause the private sector to need to compete with government itself, presenting ongoing challenges for would-be entrepreneurs.

“Expertise,” in essence, should consist of defining and always expanding the new boundaries and frontiers of private property, which in turn form the very basis for future wealth creation. This role seems unrecognized and unrelated to what agencies appear to spend their time doing, going by rules appearing daily in the Federal Register. In fact, many economic sectors are irretrievably siloed and proscribed by their own personal regulatory administrative agency. That in turn means expertise (that word again) in cross-sectoral networks, property and wealth creation can hardly emerge at all (something I often fretted about in the short-sightedness of the so-called net neutrality debate).

To see how far off track things have become, consider Internet regulation. At just the time the Federal Trade Commission is prepping a series of hearings to examine "Competition and Consumer Protection in the 21st Century," which in theory could help rectify some misapprehensions about centralized expertise and control, President Trump's economic adviser Larry Kudlow was asked by reporters about regulating Google search results in the wake of Trump's tweets critical of the company's alleged anti-conservative bias and censorship.

The response? “We’ll let you know....We’re taking a look at it.”

So is Congress, as there is expected to be a House Energy and Commerce hearing on social media platforms September 5.  

Incredibly, the ones-and-zeros of the Internet are vulnerable to getting scrambled and administered, too. Yet Google is already a private entity (unlike the regulated commons discussed already), and search results are supposed to be free speech. As I'd noted elsewhere (not merely recently, but 15 years ago) the entire Internet and its underlying capabilities are all still intact underneath, crawlable, archiveable and catalog-able as ever, unaffected by Google’s existence

Ironically, too, since antitrust "expertise" is an issue now, the only thing that could stop Google opponents from "colluding" in response and creating new search products (I've heard my colleagues note how voice search is a wide-open field) and aggressively going after Google’s customers and advertisers would be the antitrust laws themselves. That antitrust doesn't take the honest approach and penalize Google users (it's supposedly harmful, so this would be for their own good) just reinforces that antitrust’s  purpose is forcibly getting unearned access to the customers (or eyeballs) that someone else has already acquired. 

Government experts' prescription instead should be to leave the successful alone, and simply allow others to take the initiative and set up "parallel universes" online, as challengers remain perfectly free to do on the non-depletable, non-exhaustible Internet (Like Jay Leno's Doritos, "we'll make more.") Google's search results are already there, in that realm of private property I've invoked, and do not deplete the potentially infinite Internet. "Experts" who choose to deny that cannot be expected to do much else right in the name of "consumer protection."

Entire categories of regulatory intervention like antitrust, and not just agencies and their rule-of-the-day, should be reconsidered. Alongside questioning such fallbacks as the market failure rationale, Congress needs to instruct agencies to avoid abuse of the precautionary principle and to embrace Permissionless InnovationReasonable steps the Mercatus Center's Adam Thierer stresses are (1) a proof-of-harm burden for the regulator, (2) a sunsetting requirement for each new rule, (3) and a parity principle ensuring that no provider gets regulated more heavily than the least-regulated, similarly situated peer.

Entrepreneurs and frontier sectors cowering instead in a “Mother-may-I” posture and awaiting "permits" and "waivers" perpetuate expertise-charlatanism.

Regulators tend to erect precautionary barriers to the likes of Uber and Airbnb, payday lending, the flying cars that were invented decades ago, needed pesticides, and golden rice (unavailable decades after its discovery). By the time environmental groups and governments are done protecting charismatic megafauna like elephants and rare rhinos with regulation, there won’t be any left; but perhaps "ecological adoption" and other entrepreneurial approaches like private conservation could have saved them if experts bother to grease the skids for such approaches. Technology could lower costs and expand  medical care if the well-to-do could easily adopt an informed consent approach like that governing “qualified investors” in complex financial instruments, allowing the rich and knowledgeable to be “the white mice of the medical profession.” This would increase affordability and access for others.

Indeed, regulatory barriers to entry ultimately limit which fields can even have entrepreneurs. Over-precaution means there cannot be a Bill Gates of biotechnology, as the Competitive Enterprise Institute’s Fred L. Smith Jr. often notes, because each individual innovation requires a time-consuming regulatory stamp of approval, unlike writing software or creating an app for an iPhone or Android device. Of course, regulators attempt to hobble even the latter, targeting augmented reality technologies, for example.

Innovation could consist of leaps rather than pauses or hiccups; there should be escape valves from heavy regulation, all aimed at maximizing dynamism and well-being. "Administrative Law" would be a different discipline altogether from the perspective I'm struggling to get across here; but today, a half-century after the Administrative Procedure Act, it's like pondering what chairs would look life if our knees bent the other way.

Genuine expertise occupies itself with blueprints for de-escalation of central regulatory power. It strives to keep a foot on the gas and facilitate a "permissionless" world of and general waivers under graspable and coherent rule of law and discipline, not just permits or individual waivers for the well-situated. It means ensuring that the once-public and centralized endeavors of mankind progress (remember progressivism?) into the more adaptable institutions of the voluntary, competitive marketplace.

Congressional overseers of the 116th Congress and beyond have some pondering to do on Separation of Technology and State.

Originally published at Forbes