The Costs Of Federal Agency Expertise

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.

Photo: Chip Somodevilla/Getty Images