Fizzy Drink or Fuzzy Thinking?

Questionable arguments in Cass Sunstein and Adrian Vermeule’s critique of anti-administrativism

I have finally started reading Cass Sunstein and Adrian Vermeule’s Law and Leviathan: Redeeming the Administrative State. As it says on the tin, the (very short) book is a defence of the administrative state, and of American administrative law, against criticism by those who ― like me ― would to tear it all, or at least much of it, down. Ostensibly, the book is offered as something of an olive branch, an argument for why those who suspect that the administrative state is inimical to the Rule of Law are mistaken about this, and can, if not embrace powerful government agencies vested with vast discretionary powers, then at least make peace with their existence.

But it gets off to a questionable start in the first chapter, which describes ― and pokes fun at ― anti-administrativist thinking, which Professors Sunstein and Vermeule brand “the New Coke”, ostensibly in reference to Chief Justice Sir Edward Coke, whom anti-administrativists like Philip Hamburger regard as a hero of opposition to executive-branch tyranny but presumably also to one of the biggest flops in the history of marketing. I don’t mind the jab ― it is amusing, although of course the Chief Justice’s name doesn’t sound like that Coke. I do mind that the argument is less forthright than it ought to be.

Professors Sunstein and Vermeule make two main points in their first chapter. One, which is less interesting both to them and surely to most of their non-American readers, is that there is no particularly strong reason to think that the US Constitution’s original meaning outlaws the modern administrative state. The other, in which they are more invested and which will resonate abroad (indeed they assert, in the introduction, that their argument is “promising … for nations all over the world” (18)), is that the administrative state is essential for government to do its rightful work, and that its critics are mistaken to only focus on its alleged dangers for democracy and liberty. This is what interests me here.

One argument I find objectionable has to with the relationship between the administrative state, liberty, and markets, and the relationship of the law, especially the common law, with all three. While anti-administrativists see the administrative state as a threat to be neutralized,

[f]or the theorists and architects of the modern administrative state, private power, exercised through delegation of legal powers and entitlements by the common law and by market ordering, was itself a threat to individual liberty. Hence vigorous government, checking the abuse of corporate and other private power, was deemed just as indispensable to liberty as were constraints on executive abuse. Consider, for example, the question whether the Social Security Administration, the National Labour Relations Board, the Securities and Exchange Commission, and the Federal Trade Commission are threats to freedom or indispensable to it ― questions on which reasonable people differ. (30)

There are several problems with this. First, the claim that private liberty is just something “delegated by the common law” is, at best, taking sides in a contentious debate. The common law itself did not see things that way. A person is free to do that which the law does not prohibit; he or she does not require the law’s permission.

Second, I think it’s quite fair to say that “vigorous government checking the abuse of … private power” is important. Recall Dicey’s example of Voltaire being “lured off from the table of a Duke, and was thrashed by lackeys in the presence of their noble master” and “unable to obtain either legal or honourable redress”. But to say so is not to answer the questions of what forms of “private power” can legitimately be checked by the state, and how they should be checked. Professors Sunstein and Vermeule want us to assume that refusal to deal is the same thing as a private violence in this regard, and that an administrative agency making law and adjudicating claims that the law it made has been infringed is no different from the police and independent courts enforcing the criminal law. These things don’t follow.

And third, the question Professors Sunstein and Vermeule pose is misleading. Reasonable people really should not differ on whether administrative agencies that can create rules backed by the threat of penal sanctions are a threat to liberty. Of course they are! What reasonable people can differ about is whether, all things considered, the threat is offset by, on the one hand, the good these agencies might do and, on the other, the mechanisms that might be devised for controlling and minimizing it. I think that it’s fair for them to argue that the administrative state does good things and that its critics have an unwisely single-minded worldview (whether or not these arguments ultimately succeed is, of course, a different question). But to deny that the administrative state threatens liberty is to peddle a similarly one-sided set of beliefs.

Professors Sunstein and Vermeule go on to give an example of how private law and private power threaten liberty, so that the administrative state is no more coercive than private ordering which it displaces:

If some people have a lot and other people have only a little, it is … not because of purely voluntary achievements and failures, important as those are. It is also because of what the law chose to recognize, protect, or reward. A homeless person, for example, is deprived of access to shelter by virtue of the law of property, which is emphatically coercive. In these circumstances, the creation of modern agencies … did not impose law or coercion where unregulated freedom previously flourished. They substituted one regulatory system for another. (31)

This, again, is quite misleading, and indeed the example comes close to doing the opposite of what Professors Sunstein and Vermeule intend ― it shows the dangers of the administrative state rather than its benefits. A homeless person is not deprived of shelter by “the law of property”, but by refusals to deal on the part of prospective landlords ― and possibly, at one remove, by prospective employers.

I’ll explain why the difference matters presently, but first, it’s important to see that the “law of property” would just as happily assure a person of a home as deny them one. Indeed, when we consider how attempts to interfere with the law of property have fared, we can see that, if anything, it would much rather provide shelter to everyone, as it were. Attempts to abolish private property in land and housing in the Soviet Union did not eliminate homelessness ― but they did result in a dire shortage of housing, such that multiple families were forced to share “communal apartments” with a handful of others if they were lucky, and with dozens if they were not. (My mother was born in such an “apartment” which her parents shared with seven other families.) Less dramatically and closer to us, administrative interference with property rights by means of zoning and building codes raises the cost of housing and prevents enough of it from being built ― which, of course, helps make people homeless in the first place.

In a competitive marketplace, refusal to deal by a prospective landlord or employer will seldom condemn a person to homelessness. Because landlords and employers compete for tenants and employees as much as the latter compete for apartments and jobs, some will moderate their demands to the point when even people who are not well off and/or have limited skills will find something for them. To be sure, some people will still need help ― temporarily in some cases, permanently in others. But this help can take the form of cash transfers, rather than regulation. But once regulation, often enacted by the administrative state, starts restricting the supply of housing or raising the cost of workers beyond what they can produce, refusals to deal by the artificially depressed number of landlords and employers risk becoming much more dramatic. In short, Professors Sunstein and Vermeule, like many well-intentioned pro-administrativists before them, are presenting as solutions mechanisms that often serve to aggravate problems they purport to solve.

This brings me to the last issue I would like to address. Professors Sunstein and Vermeule quote at length a wonderful passage from “The Federalist No. 41“, by James Madison ― a hero for many originalists and supporters of limited government whom they are eager to enlist as an ally to their cause:

It cannot have escaped those who have attended with candor to the arguments employed against the extensive powers of the government, that the authors of them have very little considered how far these powers were necessary means of attaining a necessary end. They have chosen rather to dwell on the inconveniences which must be unavoidably blended with all political advantages; and on the possible abuses which must be incident to every power or trust, of which a beneficial use can be made. … [C]ool and candid people will at once reflect, that the purest of human blessings must have a portion of alloy in them; that the choice must always be made, if not of the lesser evil, at least of the GREATER, not the PERFECT, good; and that in every political institution, a power to advance the public happiness involves a discretion which may be misapplied and abused. They will see, therefore, that in all cases where power is to be conferred, the point first to be decided is, whether such a power be necessary to the public good; as the next will be, in case of an affirmative decision, to guard as effectually as possible against a perversion of the power to the public detriment.

Professors Sunstein and Vermeule rely on Madison in support of their rejection of “a fallacious mode of reasoning that afflicts the New Coke critics of executive power” ― namely,

selective attention … to the risks of … government action, as opposed to inaction; to the risks arising from the functions of government, as opposed to dysfunctional governments … ; to the risks generated by new powers, as opposed to t he risks arising from old powers that the new powers could be used to counter. (34-35)

This is not altogether unfair: it would indeed be a mistake to only assess government institutions by the potential for abuse of their powers, without asking what good they might be able to do.

But Madison does not stop at this. His affirmative prescription is just as important as his critical point. He says that we must always ask whether a proposed government power “is necessary to the public good”. Put to one side the question of whether the public good is a useful or meaningful metric. (I have just argued that it is not.) It’s Madison’s necessity standard that I want to emphasize. Necessity is a high bar; it is not enough that a proposed power might be advantageous ― it has to be necessary. This is not obviously a prescription for expansive government, let alone for an expansive administrative state. And then, even with necessary powers, Madison says that we must “guard as effectually as possible against a perversion of the power to the public detriment”. This dovetails nicely with his concern for dispersing and checking powers explored in later (and better-known) papers.

The anti-administrative case isn’t that the administrative state can do no good. Of course it can, sometimes. It is, first, that the administrative state is often actively harmful ― on balance, even accounting for the good it can do ― such that it cannot be regarded as necessary; and, second, that the structure of administrative institutions is such that they fail to provide effectual guardrails against the perversion of their powers. The rest of Law and Leviathan is meant as a response to this last contention and, if its arguent succeeds, it will address part of the anti-administrativists’ concerns. But it will be less important part, as the order of Madison’s requirements makes clear. Devising protections against the abuse of power can only come after we have established that the power is necessary. And anti-administrativists’ concerns on this first front cannot be assuaged by simply pointing to the good that the administrative state might do ― least of all when, as in the example offered by Professors Sunstein and Vermeule ― the good is an illusion that rests on faulty or misleading claims about the nature and effect of coercion in the administrative state and in the market.

Author: Leonid Sirota

Law nerd. I teach public law at the University of Reading, in the United Kingdom. I studied law at McGill, clerked at the Federal Court of Canada, and did graduate work at the NYU School of Law. I then taught in New Zealand before taking up my current position at Reading.

2 thoughts on “Fizzy Drink or Fuzzy Thinking?”

  1. I think you make an important point in defence of liberal capitalism and the private law in saying that in a competitive market, the authority one person can exercise on another is limited by their option of dealing with someone else. By contrast, if there is a monopoly (in the extreme, the Soviet Union where the party/state had a monopoly on almost all markets), then one side does not have any other realistic options and so there can be domination. And I agree with you that regulation can have the effect of creating monopolies where they otherwise wouldn’t exist: Canadian examples would be self-regulating professions keeping out competition or agricultural marketing boards.

    As I think you accept, for this to be realistic, a person needs some resources (education, disability and health insurance, possibly some income security). Also, competition does not deal with externalities (most notably pollution, but in the early days just basic public health measures) or information asymmetries (which leads to securities laws, some professional standards, sales of goods acts, warrants of merchantability, product liability laws, etc, etc).

    Moreover, in some areas (in economic-speak where there are “increasing returns to scale”), the only sensible way to organize things is as a monopoly or cartel. An important example is the exercise of coercion as part of law enforcement. A more prosaic example is electricity transmission. There are two regulatory responses to this situation: one is anti-trust, where you try to enforce competition. It has problems because competition may range from less efficient to disastrously impracticable. Another would be to impose some requirements of non-discriminatory treatment, reasonable rates (based on cost), etc. Now we clearly need some third party that can adjudicate whether the monopoly met these requirements.

    It is worth observing that at least where classically liberal countries allowed the working class to vote, the result was inevitably that some of these measures had to be extended whether on a social democratic basis (in the tradition Sunstein is sort of a part of) or a more conservative basis (like the christian democratic tradition that Vermeule is sort of a part of). Even modest neoliberalism of the kind Sunstein defends (independent central banks, judiciaries with the power to strike down laws, cost-benefit analysis as a constraint on executive regulation) requires taking large parts of public policy out of the hands of the people. Some liberals like this, but then you ultimately go down the road of Hayek’s support of Pinochet (at least as a lesser evil to the social-democratic Allende).

    Now of course you can argue about whether all this regulatory state is captured, or has gotten too big, or could be done some other way. But you still have a regulatory state, and then you have all the issues of public law that people like Hamburger are grumpy about because seventeenth century thinking isn’t very helpful in resolving those issues.

  2. I wanted to add that the contrast between competitive and monopolistic markets is useful but also simplistic. Take employment. If I work for a firm, I and they both invest in developing human capital, some of it firm-specific. To the extent I have firm-specific skills, there is a surplus in productivity from my working at my current employer compared to any second-best option. Also, I probably have social connections at work: for many people these are their most important connections. If shareholders have specific legal rights to surplus and if management is better organized, then that surplus may not be distributed particularly fairly and I may be vulnerable to domination and abuse (as seen in sexual harassment cases). Yes, I am better off than the Soviet employee or person in the company town in that I could get other options but at significant cost.

    Law-and-Econ people tend to ignore the macro economy so they don’t notice that this domination is greater if there is widespread unemployment. Of course some people will try to protect themselves by creating legal barriers to entry into their occupation or industry. You would be crazy not to. That might be bad for consumers but no one ever promised that all collective action problems would be resolved optimally.

    Again, all of this requires some mechanisms of public law

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