The Administrative State Lacks Its Own Justification: Expertise

Legitimacy notwithstanding, we tend to discuss the administrative state as if it is a functioning expert entity, taking expertise in its divisions for granted.

But the question of whether the administrative state can actually be “expert” at anything has particular ramifications on John Hasnas optimism that we can “outrun” it with regime-changing technologies like Uber, or Airbnb, or Bitcoin, capable of displacing legacy industries or even govenrment oversight functions themselves. If expertise in delegated-power bureaus is something we must question, that makes it all the more important to outrun it, as well as to affirm Congress’s proper role in lawmaking, a step Philip Wallach seems more than willing to achieve by meeting us libertarians half-way to achieve.

I argue that the administrative state is not to be thanked unconditionally for “clean air, clean water” and “product safety” and the like because such values are also forms of wealth that require other disciplinary pressures to advance; that expertise must evolve, and that these are not just features that someone in a central government “regulates” into being.

The stakes are higher at this modern stage in business history given the rise of networked technologies like the internet of things, drones, autonomous vehicles, cars potentially becoming parts of networks, 3D printing, augmented/virtual reality, privacy/cybercecurity concerns and such. Innovators and innovation alike are vulnerable to political predation that could derail the open-ended potential of technologies to better our lives and create not just a richer and freer world but a fairer and safer one than the administrative state can deliver.

One form of political predation is the fact that so-called regulatory “experts” inevitably stop at market socialism in every modern case (for example, “retail wheeling” in electricity reform, net neutrality in telecommunications). Little interest is shown in extending institutions of private property rights in transportation grids, power grids, airspace, airsheds, watersheds, or critical infrastructure. Indeed, resources that were in government hands prior to the progressive era and the rise of the administrative state largely remain there. Expertise has bogged down; it didn’t expand.

Thus a primary threat to the modern tech sector is the hundreds of clinging regulators whose once-convincing justifications for existence no longer apply, even granting that they ever did.

The other ever-present threat is crony capitalism, ranging from the government funding of science and technology that widely displaces private funding and distorts the evolution of free competitive enterprise, to billionaires with their hands out for federal subsidies and favors.

Without being utopian about it, government failure has always been a graver threat than transitory market “failures” in my view. Government doesn’t merely pick winners and losers; it influences business models, and entire industry configurations, and entire economies. In the modern world, the decades-long damage regulators are capable of doing will be worse than in the world of our forebears, who outlawed competition in the communications and electricity sectors for a century, explicitly imposing government-granted monopolies for generations.

Today, “expertise” means drone and self-driving car policy appears poised to morph into 21st century versions of 19th-century public-utility style regulation. Since roads already are primarily government-owned, and since airspace is government-controlled, rest assured that the experts are not troubling themselves with liberalizing alternatives that reduce their power, such as the extension of private property rights into airspaces.

Locational tracking (if government doesn’t meanwhile mangle cybersecurity) could make it possible to (theoretically) pack the sky with commercial and personal drones in highly complex corridors. Some on the ground would allow flyover, some not, but the system would work anyway. There’s no need for one federal answer.

But what is the Federal Aviation Administration (FAA) doing instead? Requiring the registration of drones. That self-interested move undermines the work needed to address the issue of property rights in airspace/airsheds by ignoring it. Air traffic control-style, we’re set to get a handful of licensed, dominant operators with the “rights” and “licenses” to control the likes of the national drone package-delivery market as distinct from new, complex wealth-expanding contracts to ensure property function and protect property and lives. This would be familiar, just as 100 years ago, competitive electricity and communications services were eliminated in favor of monopoly franchises and a permanent regulatory superstructure to manage it.

This basic regulatory malpractice leaves aside the legitimacy questions, particularly the fact that Congress hasn’t passed law to allow regulation of drones. Such authority is taken for granted in enabling legislation here and elsewhere; so one important step for Congress today is to disallow regulation of new technologies unless it explicitly approves such. Similar presumptiveness that calls out for congressional intervention is the FCC campaign communications among driverless cars; private companies are already engaged. Maybe the cars should not communicate, but only detect one another; there are endless options either way. Maybe there won’t be driverless cars as such later on, but husk/chassis devices of various wheel counts that we snap a mobile device into to get where we’re going. In any event, regulation can inappropriately favor particular paths, closing off others.

I’m less sure that technology can outrun the administrative state as currently construed, but I wish it to be the case. Technology, luckily, is capable of exposing prior and ongoing regulatory malpractice if we are vigilant. But the planners are way ahead at this point; they exploit technology to increase centralization and side with rent seekers. They seduce allegedly deregulatory Republicans to go along, as they did with the capitulation to FCC’s net neutrality by proposing to ban so called “throttling” and “blocking.” We may yet see Uber become more like taxis than taxis becoming like Uber. And labor unions have their sights set on the sharing economy and the gig economy as ripe new territories.

The administrative state presupposes that some know everything, or at least a lot; I am sure we do not know everything. Alongside problems with over-delegation and legitimacy, the regulatory state can derail expertise rather than advance it. That undercuts its very justification, even if demands for Congressional oversight were met. Contractual, insurance, and liability innovations, which are forms of regulation, should become easier, not harder, alongside technology itself in the normal course of events. Those are the areas in which expertise must be extended through experiment. Expertise is characterized by discovering ways to expand the ambit of individual freedom and cooperation for the good of all.

Originally posted to Cato Unbound