Designing a Better Regulatory State

Arnold Kling

Current Issue

The American ideal is sometimes described as "ordered liberty." We want to grant people the maximum amount of freedom possible, but we also recognize that freedom should be limited by the need for order and the promotion of virtue. To the extent that order and liberty are in tension with each other, we seek the best resolution possible. The principles upon which our constitutional system was built — most notably federalism and the separation of powers — are intended to allow for government to provide order while also preserving liberty.

Given the scale, and especially the complexity, of modern life, the problem of advancing ordered liberty has become much more challenging in the 250 years since the American founding. The task of facilitating order in our systems of transportation, finance, and communications, to name just a few, requires more than simple political negotiation. The framers of the Constitution did not anticipate political leaders having to worry about how drones might affect airline safety, how best to allocate spectrum rights, how to address the promises and perils of facial-recognition technology, or how to determine whether credit-default swaps or cryptocurrencies are safe financial instruments.

Today's governance requires deep, specialized knowledge. This makes the need for a regulatory state — staffed by experts who formulate, implement, and enforce rules of conduct for many interpersonal activities — inevitable. But in its current form, the federal regulatory state performs poorly — that is, it does an inadequate job of both providing order and preserving liberty.

At the moment, the debate about the regulatory state is unproductive. The right treats it as illegitimate and seeks to curtail its power, while the left supports the state as it currently operates and seeks to expand its responsibilities. This leads to naïve views about government regulation in both camps: Conservatives tend to believe we could do without the regulatory state — that we need only return to the original Constitution, with its three discrete branches, delineated federalist structure, and explicit limits on state power — to achieve better results, while progressives tend to believe independent experts know how to solve any problem, and that when agencies fail to achieve their desired results, it is only because agency experts have been foiled by ignorant populists or malevolent special interests.

The upshot of this debate is a futile tug-of-war, with conservatives arguing for less regulation and less deference to agency experts while progressives argue for more. To break free from this impasse, both sides will need to set aside their respective biases toward the regulatory state and consider structural reforms that would make it more effective and less prone to abuses of power.

WHY WE NEED A REGULATORY STATE

Conservatives are reluctant to concede that there is anything fundamentally right with the regulatory state. In their view, it was a mistake to permit executive agencies to develop and coalesce into a "fourth branch" of government. Some even go so far as to describe the regulatory state as an alien tyranny foisted by arrogant progressives on an unwitting public.

While the conservative critique of the regulatory state is not unfounded, from a historical perspective, the rise of regulation — and the attendant rise in the need for institutions to develop, adopt, and enforce new rules — was a necessary response to the dramatic changes that took place in our society after the founding. Such changes led to an increase in the complexity of daily life and, in turn, a rise in the complexity of the challenges facing our governing institutions.

Four historical forces in particular help explain why the challenges of governance are more complicated in the 21st century than they were when the Constitution was written: greater urbanization, the rising importance of intangible sources of wealth, increased specialization, and the digital revolution.

The first — greater urbanization — has meant that people increasingly live in a setting where what one person does with his property affects his neighbor and his neighbor's property. In a city, it matters whether the owner of the lot next door puts up a family residence, a psychiatrist's office, a 24-hour convenience store, or a night club. This is less true of a rural area, where people's property is far more spread out.

Although many of the issues posed by urbanization can be settled by individuals acting privately, life in the city creates various interpersonal conflicts that require more formal solutions. A rural household may be able to keep its pets to itself, but in a city, we all inevitably encounter our neighbors' pets. For everyone to get along, there have to be rules that all pet owners abide by, as well as an entity to issue and hold everyone to those rules.

In addition, some aspects of the urban landscape extend beyond the boundaries of particular cities. Transportation, energy, communications, and water-treatment infrastructure are all examples of modern amenities that spread past the confines of urban locales. Such structures create externalities, both positive and negative, that cannot be confined to a single jurisdiction, calling for regulations and enforcement mechanisms that transcend jurisdictional boundaries.

At the same time, the rise in intangible sources of wealth since the founding has made property rights more complex. The classical-liberal ideal of a minimal state is one in which the government serves only to define and protect these rights. When most wealth is tangible in form, such a government can have a small footprint. But when more sources of wealth are intangible, defining and enforcing property rights becomes far more challenging.

To see why, imagine a Pennsylvania farmer in the year 1800. This farmer might go many months, or even his entire lifetime, without encountering ambiguity in property rights. He knows that he owns his land, his tools, his farm animals, and whatever goods he produces using those resources. He can build whatever he would like on his property. He knows that what he sees in the store in town does not belong to him, but that he can make it his by purchasing it. And what he buys in the store, he can later sell if he no longer wishes to use it.

Compare yourself to this farmer. Every time you look at a smartphone, you are seeing ambiguity in terms of property rights. Who owns the data about which websites you visit? Who owns your email? Who owns information about your location? You may have paid for the apps on the phone, but what rights does that give you? If you no longer wish to use those apps, you delete them; you cannot sell them to someone else.

Determining the ownership of a piece of tangible property, such as a cornfield or a tractor, is relatively straightforward. But determining ownership of intangible property, such as data or a distinctive design, is more complicated. This creates governance challenges that call for greater expertise and regulation.

Enforcing property rights also comes more easily in an economy where tangible property is the primary source of wealth. If you want to use my land or machines without my permission, you have to use physical force of some kind to do so. And to protect my property rights, the government simply has to interfere with this forceful action.

But in an economy where such intangible things as ideas, brand reputation, and management practices are major sources of wealth, protecting ownership is more complex. No force is required for you to use my ideas without my permission, and stopping you from doing so requires officials to conduct a more searching analysis beforehand. To protect my intangible property, the government must undertake considerable effort to verify my ownership and define my rights. It then must work to discover and punish violators and arrange for me to receive compensation. While the same tasks were required when tangible property was the primary source of wealth, they were often far easier — and required far less expertise — to carry out.

Additionally, unlike tangible property, intangible property is not scarce: With the internet, the same music, videos, news updates, and ideas can be shared by everyone. What is scarce is the creativity and effort used to develop, create, and refine such content. This requires government to resolve more — and more ambiguous — types of property disputes than it did 250 years ago. And to do so effectively, it must deploy greater expertise.

Production of tangible property itself is now much more specialized and roundabout than it was in 1800, creating further complications. Back then, the typical household was much closer to being self-sufficient than it is today. A farm family at the time was producing most of what it consumed. It certainly wasn't buying prepared foods, eating out at restaurants, hiring plumbers or electricians, or paying for entertainment.

Most of the goods and services we consume today, by contrast, are the result of many intermediate activities performed by millions of strangers. This is largely because their production requires greater know-how in engineering, materials science, finance, and management than it took to create the goods and services of the past. Promulgating, interpreting, and enforcing laws governing such activity cannot be undertaken by generic elected officials and judges on their own; subject-matter expertise must be brought to bear.

Increased interdependence brought on by the rise in specialization also means increased sources of friction. Modern production and commerce require orders of magnitude more transactions than were conducted 250 years ago to provide the goods and services of that era. A greater number of transactions leads to greater potential for disputes to arise, as well as more ambiguity over who is ultimately responsible for a product's quality and performance. This in turn heightens the need for experts to weigh in and for officials to codify and enforce rules.

To see why, suppose you take a medication that causes a harmful side effect. Who should be held responsible for this failure? Perhaps the manufacturer was at fault for allowing an impurity into the pill. Or perhaps the inventor was at fault for not testing it sufficiently or providing a proper warning. Perhaps the doctor was at fault for overlooking known drug interactions, or the pharmacist was at fault for failing to tell you how to use the medication. Or perhaps you are the one at fault for misusing the medication. Since the responsibility for a product's quality and performance is more diffuse in a more specialized economy, a third party must often step in to determine who is culpable for any given failure and to hold that person or entity responsible.

To be sure, most transactions involved in the production and sale of goods are regulated effectively by private contracts and business norms. Underwriters Laboratories, to take one example, is a private institution that formulates standards to promote the safe use of technologies. But some transactions are made safer and more efficient by government regulation. The Uniform Commercial Code — a uniformly adopted state law that governs commerce — offers a good example of how state-driven regulation can help facilitate the myriad transactions that must take place in order for the 21st-century economy to operate.

The digital revolution has only accelerated modernization. It has increased urbanization, at least thus far. It has increased the variety and importance of intangible assets. It has fostered even more specialization and a greater division of labor. And it has added to the importance of subject-matter expertise.

The internet facilitates the conduct of transactions regardless of whether they are legal, the sending of messages regardless of whether they are offensive, and the implementation of financial innovations regardless of whether they are safe. There is no sign that controversies in these realms will dissipate or be resolved by themselves.

Moreover, the low cost of sending digital information around the world has made it possible for firms to achieve unprecedented scale. These firms are undertaking a kind of regulation of their own, regardless of whether anyone cares to admit it. Whether a social-media powerhouse censors a political leader or vice versa, regulation is taking place, and its impact is broadly felt.

The digital revolution has blurred the line between private-driven and public-driven regulation. If government officials ask a large technology company not to allow certain opinions to be aired on its platform, the state is not directly censoring speech. And yet by using a private company as a cat's paw for its aims, it is arguably engaging in censorship.

Thanks to these and related transformations, America in the 21st century needs more governance — and that governance requires more expertise — than was required 250 years ago. Rather than denying this truth, conservatives would do better to accept it and begin thinking about ways to improve how the regulatory state functions.

THE CASE FOR REFORM

Contra conservatives, who are loath to admit there is anything right with the regulatory state, progressives are reluctant to concede that there is anything fundamentally wrong with it. They believe the creation of regulatory agencies was a necessary response to the economic and social changes that reshaped American life during the early 20th century, and that their continued existence, if not expansion, remains vital to our society today.

Progressives may have been right about the need for a regulatory bureaucracy, but they are much too complacent about the adequacy of our current administrative regime. In truth, today's regulatory state is in desperate need of reform. In recent years, we have witnessed glaring instances of regulatory-state incompetence: The initial rollout of the Obamacare website represents one prominent example; the fateful stumble by the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA) in the early stages of the Covid-19 pandemic — whereby flawed test kits were sent to public laboratories — is another. What led to such failures?

The regulatory state is afflicted by four main problems: First, it lacks effective management, leading to needless incompetence. Second, jurisdictional overlaps and anomalies among agencies, as well as those between federal agencies and the states, frequently go unresolved. Third, the regulatory state suffers from a disordered incentive structure, wherein regulators are not held accountable for poor judgment or abuses of authority. Finally, the culture surrounding regulation fosters a sense of arrogance among regulators.

The first of the regulatory state's problems begins at the top, with the president of the United States. In theory, the president is in charge of overseeing executive agencies in a way that precludes or mitigates failures. But this is much more difficult to accomplish in practice. Presidents often lack experience in managing large, complex organizations. And even if a given president has a managerial background, today's regulatory state is a massive — and massively complex — entity, making it challenging for any one person to lead effectively.

What's more, overseeing the regulatory state is just one of a president's duties — he's also the commander in chief of the nation's armed forces, America's principal diplomat, the de facto leader of his political party, and the official responsible for appointing federal judges and signing or vetoing congressional legislation. This leaves him only a fraction of his time to devote to regulatory matters, which is a full-time job in itself.

Conflict over jurisdiction also afflicts our current regulatory state. Congress did not set out to establish the executive bureaucracy from whole cloth; rather, it added agencies piecemeal over several decades, resulting in something of a patchwork quilt that duplicates responsibilities in some areas and leaves gaps in others. Agencies' jurisdictional overlap may be horizontal — between agencies at the same level of government — as well as vertical — between federal agencies and state and local governments.

Such redundancy leads to confusion among regulators, sometimes with dire consequences. Uncertainty regarding regulatory jurisdiction over financial instruments like credit-default swaps played a role in the financial crisis of 2008. Throughout the pandemic, local school officials have continually fought with state and federal politicians over who has the authority to craft policy governing vaccine requirements and mask mandates. Since no one is in charge of resolving such conflicts or correcting the structural flaws that create them, they continue to fester, leading to repeated political showdowns and endless litigation.

As those familiar with organized sports can attest, some teams of otherwise outstanding athletes prove disappointing, while teams of less-than-stellar athletes perform better than expected. The same is true of corporate officers in the business world. This is because success in these institutions comes from more than just the sum of the skills of the individuals involved; it is also the result of the competence of the organization itself.

Organizational competence does not appear automatically. Instead, it emerges due to a well-ordered incentive structure. In the athletics and business worlds, the Darwinian process of competition motivates coaches and corporate officers to achieve success. In order to maximize wins and profits — the metric of success in each field — these leaders constantly strive to improve their team's or firm's organizational competence. They benchmark themselves against competitors. They seek to identify and adopt best practices. They adapt to meet changing circumstances. Their very survival often depends on their ability to maintain and improve their organization's performance.

In government, meanwhile, there tends to be greater incentive to stay out of trouble than to achieve success. This risk aversion makes it difficult for agencies to retain and advance their best performers, as skilled professionals in government often feel that their talents are being underutilized. At the same time, a thicket of rules and adjudicative procedures make it exceedingly difficult for officials to manage poor performers by firing or redirecting them. When government actors are not held accountable for their missteps, institutional performance suffers. Worker morale suffers, too; one should not overgeneralize, but it seems that worker morale is lower in most government agencies than it is in most private firms.

Successful sports teams and business enterprises also worry about challenges that they have to face as external conditions evolve or competitors seek to gain advantage. As businessman Andrew Grove famously put it, "only the paranoid survive." But in government, the complacent can — and often do — survive. Such complacency can easily slide into hubris.

Indeed, thanks to the regulatory state's disordered incentive and accountability structures, agency bureaucrats often come to believe that their wisdom is greater than is the case, and that exercising power is always better than refraining from doing so. An illustrative example comes from the CDC. During the early months of the Covid-19 pandemic, the agency issued guidelines for disinfecting surfaces (which it endorsed) and wearing masks (which it opposed) based largely on its recommended responses for outbreaks of the flu. As more information about the virus became known, the agency was forced to reverse course on both positions. And yet despite such consequential missteps on matters within its purview, the CDC then claimed for itself the authority to impose a nationwide eviction moratorium. The order was subsequently vacated by the Supreme Court, which held that the agency had exceeded its statutory authority in issuing it.

Lest one believe such hubris is limited to the public-health sphere, the Federal Reserve Board — whose members are charged with promoting economic stability and overseeing the nation's financial-services industry — recently added addressing inequality and climate change to its portfolio. This move came despite the fact that the agency has yet to demonstrate the ability to achieve its core goals of avoiding financial crises and providing for stable macroeconomic performance.

Early progressives viewed centralized management by technical experts — a core component of the administrative state — as a means of promoting efficiency. They did not appreciate that mismanagement from the top, a lack of competition, conflicts over jurisdiction, and an environment that fosters hubris would create a tendency within government agencies toward stagnation and sloth.

Similarly, the progressives of the more recent past saw big government as an antidote to large corporations, which they viewed as a threat to democracy. Yet in practice, the regulatory state has probably been more of a complement than a counterweight to the largest business enterprises. Regulatory complexity has given large firms advantages over small companies in such fields as banking, automobile manufacturing, pharmaceuticals, and primary health care. This propensity toward regulatory capture has only exacerbated the problems progressive reformers sought to cure.

Today's left believes that the problems with the regulatory state come only from its external enemies — populist demagogues, greedy capitalists, and the like. But it's abundantly clear, as many conservatives recognize, that many of the failures and abuses of the regulatory state come from within.

STATE-CAPACITY LIBERTARIANISM

To address the regulatory state's shortcomings, progressives will have to stop pretending that the regulatory state is faultless and need only be given more authority to succeed. This view does not contribute to a constructive debate about how to manage the regulatory agencies in a way that is more likely to foster ordered liberty.

Likewise, conservatives will need to abandon the fantasy of returning to a pre-regulatory-state status quo. Liberty without order is not a sustainable state of affairs. To bring order to contemporary American society, with all its ambiguities and complexities, we will have to look to experts to promulgate, interpret, and enforce rules.

How might conservatives begin to square their aversion to administrative government with the necessity of a regulatory state?

As noted above, conservatives tend to believe the classical-liberal notion that ordered liberty requires limiting the state's functions to protecting property rights and preserving the peace. This is not an illegitimate view. In practice, however, their attempts to rein in the federal government have done more to boost bureaucrats' authoritarian impulses than to weaken them.

A good example of this principle in action comes from the Covid-19 pandemic. The government's initial fumbles in the early months of 2020 allowed the virus to tear through the American population, prompting widespread public outcry. In response, officials took unprecedented steps to attempt to control the spread, from shutting down businesses and closing schools to ordering the nationwide eviction moratorium.

Another emergency that tends to prompt calls for government overreach is a power outage. As we saw when a blizzard ravaged Texas in February of last year, a severe storm can leave tens of thousands of households and businesses without power for several days. Given the role that electricity plays in modern life, such outages are very costly in terms of both money and human life. As technology continues to develop, preventing them will only become more urgent — one need only imagine what a power outage might do to communities as electric cars become predominant.

A classical liberal might argue that the federal government has no authority to issue public-health edicts or regulate the electricity industry. Yet it's not inconceivable that the government's inability to properly respond to the next pandemic or secure the grid against inevitable storms might result in an emergency in which state officials claim — with the backing of an anxious and desperate public — new powers to ration goods and services. In this way, a government that is too weak to maintain order lends itself to authoritarian power grabs.

Recently, George Mason University professor Tyler Cowen coined the expression "state-capacity libertarianism" to describe the view that a strong, competent government is more likely to promote ordered liberty than a weak government. Rather than starving the government to bring it down to size, as conservatives and libertarians alike have attempted in recent decades, a state-capacity libertarian would argue that we need a government with the competence, the resources, and yes, the authority, to respond to novel virus outbreaks and reduce the electricity grid's vulnerability. Competent governance during pandemics, power outages, and other emergencies would diminish calls for greater government intervention during times of crisis.

In keeping with this philosophy, conservatives would do well to think less about abolishing the regulatory state and more about how to reform it in ways that enable it to govern effectively while guarding against abuse.

RESTRUCTURING THE REGULATORY STATE

Modern American society calls for a regulatory state. But we should not be satisfied with the performance of our administrative agencies, which are ineffective, unaccountable, arrogant, and prone to abuses of power. To improve our agencies' performance, we need to think about restructuring the federal bureaucracy itself.

I propose we do so by creating two positions within the executive branch that operate in tension with each other. The first would be the chief operating officer, charged with managing the administrative agencies. The second would be the chief auditor, charged with leading a watchdog agency that monitors the administrative state for effectiveness and abuses of authority. Both the president and Congress would oversee the balance of power between the two positions.

Much like that of a private firm, the chief operating officer (COO) of the regulatory state would direct the operations of the entire executive branch, including independent agencies like the FDA, the Federal Trade Commission, the Federal Communications Commission, the Federal Reserve Board, and the Patent and Trademark Office. The COO's charge would be to maximize operational effectiveness. He would have the authority to make decisions without the approval of the president.

Unlike presidents, who tend to enter the Oval Office without having supervised anything larger than a Senate staff, the COO should come into office with strong organizational-management experience — ideally based on having led a large, private-sector firm. This person should be familiar with the challenges of improving incentive systems, streamlining organizational processes, planning, budgeting, facilitating coordination among disparate units, articulating objectives, and aligning organizational efforts toward those objectives. He should have the authority to put this experience to work within the regulatory state.

To unravel the tangle of agencies that are the legacy of so many congressional bills, the COO should be empowered to re-organize, restructure, merge, or eliminate any existing agencies, refine their missions, and appoint their directors. He might begin by eliminating certain agencies or folding them into others, and then sorting those that remain into about a half-dozen functional domains. There might be a high-level functional domain for human-resource needs, which would consist of agencies governing health, education, social insurance, labor regulation, and the like. Another high-level functional domain might deal with physical infrastructure, which would encompass agencies governing land management, energy, transportation infrastructure, the electricity grid, the communications spectrum, environmental quality, and so on.

With careful forethought, the COO could re-arrange the regulatory state with an eye toward minimizing jurisdictional clashes and should be granted the authority to set up mechanisms for addressing any conflicts that do occur. For instance, if the COO were to create a functional domain governing physical infrastructure and another dealing with domestic security, jurisdictional overlaps will inevitably arise when it comes to securing physical infrastructure. To sort through the ambiguity, the COO might assemble a team from each of these two domains to meet regularly and address issues relevant to both.

The COO would be appointed by the president with the advice and consent of the Senate. The tenure of individuals appointed to this position should be long enough to have an impact on organizational effectiveness but not so long as to accumulate unlimited power or acquire the near-sacred status that was attained by J. Edgar Hoover at the FBI or Alan Greenspan at the Federal Reserve. Each newly elected president should be expected to appoint a new COO, and in no case should a COO remain in office for more than six years.

With a COO in charge of managing government agencies, the roles of Congress and the president would adjust accordingly. Congress would act more like a board of directors with respect to the agencies, and the president would act more like a board chairman. The COO would assume the responsibility of presenting a plan and budget to Congress for approval, while the president would have the authority to hire and fire the COO at will. In a spirit of conservative incrementalism, we could first apply the COO model to one functional domain, such as domestic infrastructure, before extending it to the others.

The second new position — the chief auditor (CA) — would lead a powerful audit agency that provides independent evaluations of agency performance. One might think of this agency as a bulked-up version of the existing Government Accountability Office.

The audit agency envisioned here would provide a substitute for the competitive environment that provides the incentive and accountability structure in the athletic and commercial spheres. It would issue reports to the president and Congress on all executive-branch activities, evaluate and make recommendations concerning the effectiveness of the regulatory state, and spotlight abuses of power. Like the COO, the CA would be appointed by the president with the advice and consent of the Senate. The position should be subject to term limits in order to keep the audit agency from becoming the CA's personal fiefdom.

In some ways, the audit agency would operate like a shadow executive branch. It should have staff with at least as much expertise in relevant subject areas as does the executive branch itself. It should also have the resources to critique policy, processes, and their execution. Its stance toward the executive should be mildly adversarial. And it should be headed by someone who is neither personally friendly with nor hostile toward the COO.

For their part, agency staff should be skeptical of claims made by managers from the executive branch and require proof for those claims. In order to ensure that its ideas do not become stale, the audit agency should have a somewhat higher staff turnover rate than the executive branch.

A regulatory state organized by a COO and overseen by a powerful audit agency would be prone to some pitfalls: It would give greater power to unelected officials, it might become more intrusive in some areas, and the intended balance of power between the COO and the CA might become one-sided on behalf of one or the other, which would lead to adverse outcomes for the population at large.

Yet our government today is already dominated by unelected officials who intrude on Americans' civil liberties. Collectively, the Supreme Court, the Federal Reserve Board, the Department of Homeland Security, and numerous other agencies exercise the awesome power of government without direct electoral accountability. In the absence of a COO, agencies' responsibilities are diffuse. No one is responsible for preventing the next financial crisis, preparing for the next pandemic, or ensuring the reliability of the electricity grid or our telecommunications system. When no one is responsible, no one can be held accountable when things go wrong. Under the model I outline here, we would have a person to hold accountable for agency failures and abuses of power, along with an audit agency to keep him and the agencies he manages in check.

The COO/CA structure would require maintaining a delicate balance of power between the agencies reporting to the COO on the one hand and the CA and his audit agency on the other. If either becomes too weak, the system will degenerate. Agency actors have a natural incentive to avoid accountability for their shortcomings — a case in point is the fact that they tend to be less than cooperative in responding to Freedom of Information Act requests. With an audit agency keeping a watchful eye on their behavior, agency actors might attempt to meet in secret, hide files, manipulate statistics, or otherwise thwart the CA. The audit agency must therefore be sufficiently powerful to compel compliance with its audits.

On the other hand, the audit agency could become too powerful. If adverse audit findings always produce scandals, agencies' goals may shift to satisfying the CA's objectives and gaming the audit score, which may not coincide with the public's best interests.

The proper balance of power requires maintaining independence between the COO and the CA. Here again, the president and Congress will have to adapt their roles to this new regulatory structure. Both will be charged with monitoring the system carefully to ensure that power remains balanced between the two positions. Given that the president would have the power to fire the COO at will, he, not the COO, would be the ultimate boss. He should guarantee that agencies exercise judgment in pursuit of their missions and that auditors are not thwarted in their requests for information. He should take care not become so enamored of the COO that he fails to heed the CA's warnings.

In Congress, lawmakers should be alert to the problem of agency capture by corporations and special interests, and should remind agencies that their duty is to serve the public interest. Congressional committees should hold hearings to discuss issues that the audit agency surfaces, with lawmakers acting as referees when significant conflicts arise between how the COO's agencies want to address a given issue and how the CA believes it ought to be addressed.

For those who might find this proposal outlandish, I would caution them not to measure the ideas described here against an imaginary nirvana in which a regulatory state is unnecessary or one in which the regulatory state would work well if bad actors could be moved offstage. Instead, they should measure them against our federal agencies as they operate today, or against other suggested reforms. It will soon become clear that what I propose is both preferable to the status quo and more realistic than abolishing the administrative state.

A CULTURE OF HUMILITY

Agencies today are able to persistently underperform or misbehave because Congress, the president, and the courts do not have the time, the expertise, or frankly the will to provide sufficient checks against them. As a result, our unofficial fourth branch of government often overpowers the other three. And because the regulatory state suffers from mismanagement, a lack of accountability, structural redundancies and ambiguities, and a tendency to foster hubris, it fails to serve the public well, especially in times of crisis.

People desire a certain level of order. When agencies fail to provide order, their leaders' instinct is to claim a need for more power — and during an emergency, the public may be willing to oblige. After all, the FDA's and the CDC's failure to implement an effective test-and-trace system for the coronavirus led officials to exercise authority over masks, schools, and even evictions — moves that many Americans cheered.

As state-capacity libertarianism teaches us, a stronger regulatory state could achieve order while being less intrusive than the one we have today. With this in mind, we should seek neither to abolish our regulatory agencies nor to venerate them. Instead, we should be conscious of both the need for administrative governance and the need to provide mechanisms to ensure that the power given to regulators is used as wisely as possible. The structural reforms outlined above represent a step in that direction.

For this proposal to work, it's not enough to streamline the regulatory state and infuse it with mechanisms for holding bureaucrats accountable; our public officials — including lawmakers, the president, judges, and agency actors — must also maintain a commitment to ordered liberty. As Judge Learned Hand once observed, "liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can even do much to help it." Regardless of how the regulatory state is ultimately restructured, our governing officials need to recognize that they are first and foremost public servants, and that to serve the public well, they need to maintain order in a way that allows for maximum individual liberty. In this vein, they should err on the side of devolving power to individual households, the market, and local communities. When private organizations provide governance by setting standards, agencies should make use of such entities.

Relatedly, officials will need to work to develop a culture of humility within all our governing institutions. In today's divisive atmosphere, we tend to approach differing viewpoints and ideas as threats to be stamped out rather than opportunities to learn. If regulators broadly share the same values with one another, but their values differ from those of the general public, they are heading for trouble. Officials need to be alert to this possibility and try to avoid taking a superior attitude toward the people they are obliged to serve. Their authority is more likely to be used wisely if they harbor a sense of humility rather than a feeling of entitlement to rule.

At the same time, the public should cultivate an appreciation for expert fallibility. Expertise may be indispensable to good governance today, but experts themselves are not infallible, and the agencies they staff will not have all the answers. After all, even the most educated individuals among us always have more to learn.

It is time to change the conversation about the regulatory state. The sooner we recognize this, the sooner we can work together toward positive reform.

Arnold Kling is an economist and author.


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