RICHARD EPSTEIN: Anyhow,
it is always a great honor to be speaking in front of
the world's most demanding audience, which is you,
a topic about which I am afraid that I do not
count, at least according to recognize standards,
as an expert. I've spent my entire
academic career using the following format-- somebody asked me to speak
about a subject on which I know nothing, and I eagerly accept
the invitation, weighed in, and come up with a series
of conclusions which I hope will offend the
sort of established wisdom in any particular area. And when I started to think
about administrative lore at the request of the NYU
journal on law and liberty to participate in
this symposium, it was a rather
interesting setting because I had thought a
little bit about this topic but not very deeply
or not very long. And I would say the more I
thought about it, the more I became convinced that the
conventional complacency with respect to the
administrative state is, in fact, wrong,
and that there are serious problems
in the way in which it deals with the rule of law. Let me sort of
begin by telling you a kind of an anecdote about
why it is I thought about this. When I was at the Hoover
institution one year we had a big
seminar on land use, and the topic of the
speech that I gave had the following title-- which is whether or
not Palo Alto, in fact, observes the rule of law. And when you start thinking
about this-- in one sense it's obviously
absurd to treat this as though it's a tin
pot dictatorship, lawless and reckless in the
neighborhood of Hugo Chavez. And that is true because,
at least with respect with certain kinds of
interests that we have, there is, in fact, a reasonably
strong and definite set of property rights such
that their deprivation can be governed by very
strict and precise rules. And I refer here
to the rules which deal with matters having
to do with A, incarceration of individuals and B,
with seizures of property. On the other hand, when you
start to deal with things where the situation is a bit more
nebulous to whether or not somebody receives a permit in
order to build land on this, that, or the other
piece of property, the question of whether
or not the rule of law is, in fact, observed strikes me
as being much closer question. The power of
administrative agencies to issue or deny permits will
change the value of properties from $1 million on the one hand
to $10 million on the other. And the question, then, is
can we find any particular way to describe the principles under
which that particular choice ought to be exercised? And in the years that
I've taught land planning, it became very clear to me
that landmark designation and that zoning
situations did not have a set of rules
which allowed you to have the same
degree of precision with that kind of question
that you had with the question as to whether or not somebody
should be put into jail for the commission of certain
kinds of offenses and so forth. And so the central problem
that we have to face is, how do we deal with
the questions of discretion in the modern state? Now when coming to this
particular question, I come to it from the framework
of a decidedly unfashionable philosophy,
particularly if you look at the modern
political situation. I am, in effect, kind of an
old line classical liberal, and the basic
propositions that somebody of my particular
persuasions believe can be summarized
relatively simply if you ignore some of the
inevitable complications. And the first of
them is that you tend to believe in limited
government in which discretion is regarded as a
necessary evil rather than some kind of a welcome good. You therefore, in
effect, try to figure out how you structure public
institutions in a way that will limit [INAUDIBLE]
discretion on the theory that too much of this is much
likely to create an abuse. As opposed to the
opposite situation, in which government officials
have too little kinds of a discretion--
particularly with respect to matters dealing with the
use of liberty and property. And on the private
side, you tend to believe by and
large in the importance of voluntary agreements
and in the strength of private property
types of institutions. If you put all of
this together, it does not lead you into
a no government state. I don't want to sound
like a mad libertarian, although occasionally
on Thursday evenings I feel that way, but
it does, in a sense, create a presumption
against government action which has to be met by
showing that there's some serious defect in the
system of private arrangements that require some kind of
legislative intervention that works with respect
to the public good. And for a very long
time in this country, we essentially had a relatively
small government that kind of fit that particular model. We made it difficult
to pass statutes. It didn't mean that you
didn't get a statute of frauds or a statute of
limitations, but certainly the modern
administrative agency-- which has widespread
discretion to issue rules and to issue permits-- was not a feature of
the American system until some time
after the Civil War. When large industrialization
took place, there became a
real question as to whether or not some
degree of regulation was necessary on a
wide range of issues having to deal with
safety on the one hand, and monopoly on the other
hand, and the exhaustion of common pool resources on
the third hand, as it were. These were the major heads
that we were worried about. And it sort of became
clear that there was no way that you could handle
all of these questions through legislation
which specified each and every element of
the kinds of conduct that should be
allowed or denied. So for example, just to
take one illustration, it is possible, for
example, for a legislature to say that individual
firms running a railroad, for
example, should charge rates that are reasonable
and nondiscriminatory. It is not possible, even for
our Congress, to sit down and to design a set of
railroad tires which would be able to tell
you how much money should be charged for
all sorts of goods under all sorts
of circumstances. So to some extent,
they're for delegation down from the legislative
branch to somewhere else is going to be appropriate. The key question you
have to ask is where. And the first question
that one has to deal with is what's the attitude on
this very simple question? Do we believe in
executive branch agencies, which are subject to
congressional control and under the supervision
of the president? Or do we believe,
in effect, that we ought to have independent
agencies in which the presidential power
to remove and to control are going to be
sharply circumscribed such that these powers
can be exercised only for cause narrowly defined-- massive incompetence, fraud,
or something of the sort? Looking back at the
original doctrine, it's very clear that the
progressives-- who, in a sense, were always the champions of
the administrative state-- cared very much
about the inability to create these
independent agencies. If you go back and you read
Woodrow Wilson in the last half of the 19th century before he
became a horrible president and Governor, he wrote the
leading book on president-- on congressional power in 1885,
and he expresses all sorts of impatience with the
system of separation of powers which
essentially slows down the way in which government
operates by simply having an endless series of hoops,
and checks, and balances that you have to overcome. The basic sense that I
have-- you have from Wilson, which motivates the
progressive era, are assumptions
which are exactly the opposite of those
which took place under the classical
liberal situation. The first of these is that
you assume that all government officials would act
in good faith because of their great concern with
the public welfare writ large. And this is very
much in conflict with the fear of
people like Madison, who thought that the
dangers of faction in public life-- whether
a minority or a minority-- majority or minority-- was so
great that you had to have all of these procedural
devices in place in order to make sure that the
things were not [INAUDIBLE]. And the second
kind of assumption is that whether or not you
have, somehow or other, in government the
level of expertise that will allow you to accomplish
the very ambitious projects that are generally going
to be assigned to an administrative state. If you start to look at the
way in which the progressives thought about this, they really
believed in a form of science, or scientism, in
which they thought that if you collected enough
information about the behavior of various kinds of
industries, you could come up with a set of regulations about
the products to be produced, about the prices to be charged,
and about the various kinds of industrial forms that
should be the authorized to prohibit it. In fact, the progressives
almost uniformally had a very strong predilection
for state monopolies which they borrowed, to some extent,
from the German systems of corporatism which dominated
in the late 19th century over in Europe. Whereas if you start looking at
classical liberals-- my god-- you come up with the
exact opposite on both of these kinds of questions. On the first of
these kinds of issues having to deal with good
faith, what their attitude is that whenever you put
somebody into power there is always the chance
that they will morph from an agent of the public at
large to those of the factional issues that represents them. And to some extent, this
is compounded the moment you get away from
the electoral system because administrative agencies
are almost, by definition, insulated from popular control. So if there is a tendency
from the part of people to move strongly in one
direction or another, there's going to be less by
way of political pressure to hold them accountable. And so one of the
things that you see in modern
administrative agencies is you get a compromise
statute, and then all of the people
who turn out to be so-called experts
in a given field are often very committed to its
expansion so that what you see is a continuous aggressive
over interpretation of statutes in the administrative
process in order to achieve a particular
partisan end. Now, how does one start to
try to counter this situation? Well, the first of
the many obstacles that one had to
face historically was the question
of whether or not you could have these independent
administrative agencies at all. The progressives, when they're
in their expansive mood, always talk about these as the
fourth branch of government, and they mean this in a
very robust, muscular, and optimistic fashion. They have figured
out that the ability to create these
administrative agencies will allow you to combine
executive, legislative, and judicial power in a
single branch of government so that our expertise
and good faith can, in effect, plunge forward
at a very much more rapid rate. And so they sort of treat
this as a kind of a real plus charge. On the other hand, there's
always the Constitution to contend with, and it's
a very annoying doctrine under these circumstances
because the last I looked between Article
III and Article IV, there was not an
Article III-A, which talked about administrative
agencies which were independent of the
control of the president. And so essentially what you had
was a doctrine, or a document, which had very
categorical divisions between the legislature that
legislates the executive that administers, and the
judiciary that size. All of you know
that this is going to take a terrible
beating in practice, but at least that was the basic
assumption on how it works. Now why would a
progressive age want to have a different system? Well, I think it probably stems
from this very simple insight. If in fact you,
the Congress, have a policy that you like which is
at variance to the executive, and if you know that it requires
delegated authority in order to implement, you are
very reluctant to enact your ambitious
program if you think that the charge
of implementation is going to be given to a
president who's interest, to some extent, is different
from and adverse to your own. If you can start to create
administrative agencies, which have some degree
of independence, you could park
some of this power with them so you could expand
your own legislative agenda fairly effectively
without having to run constant resistance
on the part of the president. So there is, I think, a built
in tendency to think that, on average, if you don't have
independent administrative agencies, you will have a kind
of a systematic and structural restraint. And what that
restraint will say is since we have to give this power
over to somebody whom we don't necessarily like, we're going
to be a little bit more cherry on what we do, you're going
to pass a little bit less by way of legislation
generally, and the legislation that you're going
to pass is going to be drafted a little
bit more tightly. Well, given all of
this, it's very clear that one then has to figure
out whether or not you can start to create these agencies. And there's been
a very long battle on this issue for
a very long time, and essentially
there is no question that the New Deal, which favors
multiple and flexible forms, eventually was able to prevail-- chiefly in a case called
Humphrey's Executor where the independence of
people serving on the FTC was generally thought to be
consistent with the basic constitutional scheme. But if we don't have Article
III-A in there, which creates these things explicitly,
then how do we get to the point where they're there? Well what you do
is you engage in constitutional interpretation. And here, the most
vulnerable portion of the Constitution for
dealing with this issue turns out to be the
Necessary and Proper Clause. And that's the clause
which says if you look at all the affirmation
mentioned powers that are vested in the president
and the various departments in the Congress,
they're entitled to use those means which are
necessary and proper in order to carry them out
into execution. So essentially
what they're saying is we don't want to have
niggling interpretations of the various elements. So if the Congress has the
power to establish post roads, it's going to have the power
to basically hire somebody to put the signage
up on the roads without having to worry
about the question of whether or not the delegated authority
turns out to be there. And so you've got to have
a doctrine of that sort. The question, then, is
how do you interpret it? And here-- this is
the Epstein theory of constitutional
interpretation, and it is of such immense
sophistication and subtlety that I'm going to
share it with you now, which is that when
you have something which says that those things which
are necessary and proper, you ask two questions. The first question you ask
is whether they're necessary, and the second question you
ask is whether they are proper. Now you ask, well, why
is this mass of subtlety of interpretation
such an important part of constitutional
interpretation? Because truly great minds,
like Chief Justice Marshall, never had to stoop to such a
lowly form of interpretation. What he did, in
effect, is he said this is only one question,
which is whether or not something turns out to be
appropriate for the achievement of something else. And it turns out if you
use that particular phrase, it changes the level
of scrutiny and review that you will give to the
particular situation at hand. For example, it is not necessary
to have a bank of the United States in order to run a mint. You can have a mint in the
United States without the bank. And one could
argue that it's not proper to do these
sorts of things if what you do, in
effect, by it is to alter the balance between the
federal and state governments over their respective
spheres of influence. And so it is, with respect
to administrative agencies, there is nothing which they do
which cannot be done in some sensible fashion by an
executive branch agency. And if you think that the
separation of powers principle is an important way of
slowing things down, if you think that checks
and balances really matter, then you could ask the question
whether its actually proper to do these sorts of things. So putting the two questions
separately and taking each word and giving it due
emphasis has, in effect, the necessary consequence of
raising the level of scrutiny, which is going to be
given to any exercise of congressional power. If, in fact, you sort of
slur the two things together and come up with the
word appropriate, it is going to have exactly
the opposite consequence. It will, in effect, lower
the standard of review. So to put this in sort
of modern terms, what happens if you apply
necessary and proper, and treat the two
words separately, and give each of them
independent force, you essentially have a kind of
intermediate to strict scrutiny standard of review when
Congress wants to play. By the time you get done
with the word appropriate and trace it through
the other cases, you come to what I think
to be the great curse of modern American
constitutional law. On matters of
government structure, you adopt the
rational basis test so that essentially
anything goes so long as you can identify
at least one advantage to the structure
that is proposed in the legislation
relative to the status quo. And when you're dealing
with constitutional schemes of immense complexity,
and legislative schemes, and great subtlety,
there's always one way in which is better
than the status quo, which means by the time that
you're done with the analysis everything will turn out
to be constitutional-- and that includes independent
administrative agencies. So this sudden mode
of interpretation makes a difference. Does it make a difference
in consequence? Well, here I think the answer
is actually somewhat mixed. If you look at something, like
my least favorite agency-- oh, that's actually
a hard contest-- but the National
Labor Relations Act, it creates an independent
board which kind of has prosecutorial
powers, and then it also has adjudicate powers. And the one thing that I
can tolerate or understand is why it is there has
to be some admixture between the executive functions
and the legislative function, but I do not
understand why it is that the judicial
function has to be mixed in with the other two. And the great danger that I
see in specialized courts that are part of agencies
is that they are much more likely to fall
prey to ideological agendas. And one of the reasons we
know there's serious troubles is that there's a little formal
requirement in the law which says four have-- three come from
one party, and two have to come from the
other party, which is, in effect, the concession
about how political these organizations
are going to be. And in fact, they have
proved, to some extent, true to what has been said. They are much more political. If you don't have
this huge willingness to create
administrative agencies, then you're going to have
to go to the regular courts in order to arbitrate
all these labor cases. That's going to be of you a
very powerful check on the size, and the scope, and ambition
of legislation in general. So all of these kinds of things
start to make a difference. But then you start to say now
we have heard Professor Epstein sing the swan song of lost
causes for the 4,880th time of our law school career. Nobody is going to change the
administrative structure today. Even if somebody were to believe
every word of what he says, there is, in fact,
in social life a kind of prescriptive
easement such that once institutions
are put into place and they operate for
a long period of time, there's nothing that
you can do to undo them. It's a little bit like
the title which is acquired by adverse possession. It may have been
illegitimate at the outset, but we have to accept that
it's legitimate going forward. Well, the next question is
what does it mean to accept it. And here, the real question,
and the great challenge of the administrative state,
was to try to figure out-- once we have a dance with four
priorities instead of a dance with three parties,
what are going to be the relationship of the
fourth party to the other three parties in this
particular situation? And there's absolutely nothing
by way of constitutional text which will talk about
the way in which the administrative agencies,
independent or otherwise, coordinate with the other
branches of government because there's no independent
agencies that are contemplated, I think, under the original
constitutional design. So what you then have
to do is to basically create from whole
cloth some kind of a set of rules to govern
these new beasts which you've introduced into the
system, and have given full and complete
legitimacy by the time that the New Deal
has run its course. Interestingly enough,
one of the major people who were so active
in the creation of the body of administrative
law in the 1940s was a man who taught
here for many years-- Kenneth [INAUDIBLE]
Davis-- whose treatise on administrative laws
of immense influence. And I can assure you since
I knew him directly, this was not a small government guy. This was somebody
who essentially was very comfortable with
the progressive synthesis. And in the effort to
create administrative law, was constantly
worrying about how you expand the power of
administrative agencies rather than trying to figure
out a way in which you could start to compress them. So what would be
the way in which one would want to think about them? Well, this is the way I would
want to think about them. I'd say, well, what
kind of activities are they starting to engage in? And to the extent
that they're engaging in rulemaking activities
of general import, it seems to me, whether
you like it or not, you have to give these
characters at least some degree of discretion in
the way in which they formulate these particular rules. The argument is going to
be, and I don't like it but I accept it, that if it's a
broad enough kind of a mandate enough people will
come to the table such that the
participation rights that people have in
public governance will be strong enough to prevent
the statute from going off the rails one way or another. And sure enough, if anybody
has ever watched or worked in any kind of a
rulemaking procedure, they will realize that the line
to get into those testimonies is every bit as long, and a
hell of a lot more insistent, than the line to get the box
lunches before the talks. I mean, people understand what
the size of the stakes are, they're enormous, they know that
they have a place at the table, they know that they
have to form coalition because essentially
the name of the game is everybody gets a
chip-- some get a big one, some get it a little
one-- but nobody has a chip which is large
enough so that you could put it on one side of
the balance scale, it doesn't matter what
goes on the other. So coalitions and so forth
are the order of the day, and the hope is that this system
of participatory democracy will yield something that
looks like a superior result. In a world in which
you're talking about things that
markets can't control, total levels of pollution
in the environment, you have to go with
this kind of system. But in a world in which
ordinary voluntary markets work rather well, I regard the
system as nothing short of sheer insanity. That is to the
extent that you're trying to figure out, for
example, how you set wages for overtime and so forth,
the thought that you need a government intervention to
handle labor markets is always, I think, a mistake. And now when you run it
through an agency in which every union and every
local government comes in and tries to ask how it is
that you calculate overtime pay throughout the nation, you are
dealing with a problem where, no matter what you
do, you're going to come up with deep
administrative pathology. So the great difficulty
of the New Deal era comes back in the
administrative setting. The New Deal thought that
competitive solutions were just one form of
market failure, I tend to think of them as
a form of market success, and so all sorts of labor
market regulation, for example, was perfectly appropriate
precisely because it would get you away from
what they thought to be the demonic
competitor solution. So that's the large picture. And then what happens is do you
allow the losers to challenge? And in the United
States, the basic answer is you can bring a takings
claim but you can't win it. No matter how you
try, if there's going to be an argument
to that particular sort, the rational basis
test-- the same thing that got you appropriate
administrative agencies-- essentially will insulate them
from constitutional challenges, more or less, up
and down the board. So for example, when there
was this huge reorganization of the telephone industry
in the 1996 statute, when the whole dust settle,
two things happened. First, the court said on
administrative grounds Chevron deference, everything is fine. And then the question
was whether or not you wanted to attack this
on constitutional grounds, but the answer is the
rational basis test is the constitutional law
what the Chevron deference is to administrative work. If you've lost one, you're
going to lose the other so lick your wounds and fight
in the political process. I don't like it,
but I understand it. The second part of
the administrative law is, in many cases, a good
deal more complicated for us to start to handle. And that's the
question about how you deal with individual
applications for such things as permits, and permissions,
and so forth when you start to work. And at this
particular point, I do think that there
is a genuine crisis in the way in which
the American system is operating in which the rule
of law always comes out second best. And it kind of infects
all of these sort of administrative
proceedings that are less than these sort
of gigantic rulemaking sorts of proceedings
where everybody appears. And let me give you some
kind of illustrations about how this thing
can start to work to give you a sense
of why I think that the thing is so terrible. Take another one of my
least favorite statutes, which is Title IX of the
Civil Rights Act, which has to do with the way in
which we preserve gender equality in universities. Now the question
you ask is, well, why do I dislike the statute? Well, let me give you the
sort of the cosmic answer, and then let me give you
the particular answers so that you can see how it is. The cosmic answer is, frankly,
I think that the officials that run the University of Chicago,
or in this particular case of Brown University,
are generally pretty good at
trying to figure out how it is that you balance
the demands that men and women students, and men
and women faculty, have for the various
resources that are associated with the institution. The reason that I mentioned
Brown in this particular case is that they were involved in
the only major lawsuit on Title IX that made its
way to the courts, and they were slapped down with
a fury which would normally be reserved for
conservative institutions, ostensibly like this although
it's not really that way. And so what is it then happens? You start with the
statute, you have in effect this general bromide
that you want to treat all your
students equally, and how do you then
interpret and enforce it? Well the truth about the
matter is, in many areas, you don't have to interpret
or enforce it at all because the market pressures
against various forms of sex discrimination are so
powerful that the thing will take care of itself. I checked-- last time we
had this anxious meeting in the dean's office, and
the issue is whether or not we were going to charge
our male students 10% more than our female students, or
maybe it was the other way around, for tuition. And somehow or other,
by a five to four vote of the executive
committee, we voted it down so you never heard about it. Right? No. I mean, essentially what happens
is in a competitive market when you're providing services
which are basically of equal cost on
both sides there's going to be an incredible
pressure to a uniform price at the competitive
level, and any effort to try to engage in
sex discrimination will result in, first of all,
a huge defection in the market. And second a public
relations catastrophe which I would not want to administer. And so if you kind of
look and figure out the number of cases
brought since 1965 dealing with differential
tuition charges on the grounds of sex
for general education, it turns out you don't find any. So where does the
problem take place? Well, as always
in this situation, it takes place in
those particular areas where, unless you
discriminate, it turns out that you can't function at all. And so you have, in
the world at large, a category which we
would call justified forms of discrimination
widely understood and shared. And then the question is,
how are these regulated? And I see some of you already
bristling and wondering now what could be, in fact, a
form of separated sex driven activities that could
meet the standards of a modern and
enlightened person, and the answer is
it's athletics. One of the ways to
read Title IX is to say that you
can only have one varsity team for every sport. So we have a basketball team, we
give women equal opportunities to play with men. Surprisingly enough,
they don't make the team. And now, in effect,
you said we've managed to satisfy Title IX,
the net effect of which is, in any form of sport in which
men and women participate, the men are going to
have all the spots and the women are
going to have none. And, you know, you
look around and then you ask yourself, well,
how does this square with the consensual
solutions that you reach. And you discover that, by and
large, generally most people think that women athletic
teams are a good idea and that this is not
something which is radical. And in fact, a lot
of feminists insist that what we really
want to do is to have exactly these
teams to encourage the cooperation, the sport,
the athleticism, the leadership skills, and so forth, but we
have to play on a legal field. So what happens is
the statute, then has to make accommodations for
something which, in fact, is not built into its fabric. And it's worth noting
that the actual hearing is on the rules governing sex
segregated teams in college sports got more testimony than
any other issue that has ever appeared before any
administrative agency because it was
the kind of thing, if you know these jock
types, that really grabs them one way or another and they
care about it big time. Well, you've got to figure
out what the rules are. And once you want to say
that you can be separate, the next question
is can you be equal. And everybody says, well, we've
got a nondiscrimination rule. Well, we have to have a
separate but equal regime. You cannot derive a
separate unequal regime from a nondiscrimination principal. What you then have to do is to
import all sorts of other rules which talk about wherein
does equality lie. And it turns out that this is
extremely difficult for you to do. The size of the
teams will differ, the number of sports
that men and women want to enter into differ. It turns out that the
sort of internal economy of every college sports
empire in the world, except here at the University
of Chicago perhaps, is that football is, in effect,
the huge revenue generator and it supports
every other sport. If, in fact, what you do
is you require the football team and the football coach
to get exactly the same amount as the badminton coach gets,
with respect to the women's sport, it kills
football, so you have to have a de facto
football examination. So then there's the
question of what about ratios and participation. And here, you run into
this real problem. Do you want, at the margin, to
create equivalences between men and women such that the net
benefit on this calculation to the last female
athlete is exactly the same as the net contribution
to the last male athlete-- which in effect
is the condition, the equal marginal
condition, that maximizes overall social
welfare within the institution. And it was that model
that Brown, in effect, used when it decided to
reorganize its sports after it took over Pembroke in
the late '60s early '70s. Or do you say nope,
what it is that we have to have a proportionality rule. Now if you think
about it, there's nothing in the statute
which answers that question. But if, in fact, you take
the equal marginal condition essentially Title
IX is a nonstarter with respect to college athletes
because everybody in effect is going to be doing
that voluntarily. They're going to
not have a hard time in explaining why it
is that they'd use the rules that they've used. But if you take the other rule
on an administrative decision-- not by statute, down below-- in which you require
proportionality of some sort, or efforts to
achieve proportionalities of some sort, you have the
following modest difficulty with the exception of the
service academies, which are 85/15 anyhow, every single
university in the United States is in noncompliance. You just do not get
equal participation. And the basic equilibrium
in intramural sports turns out to be
65/35, male to female is the percent of
penetration if they have school bodies of equality. Your run varsity sports,
that's kind of the numbers that you're going
to come up with. You've got to figure out
ways to flip it over. It turns out it's a much more
acute problem now if you're engaged in this situation
because, in the face of ostensible discrimination,
the percentage of women students in colleges
in the United States now is around 58%, and
that number is probably going to go up to 60%
in the next year or two, which suggests that the
sort of discrimination model can't explain the single most
salient feature of the way in which modern educational
institutions have organized. So you now, in effect,
have this question, and the issue is it consistent
with the rule of law to have an administrative
agency have complete discretion to choose between number
one and number two without any guidance
from Congress? And I submit to you
that the answer is no. This kind of delegation
of the fundamental choice with an area that's
never done is completely outside the democratic
political process. And then once it
gets into place, the democratic process
works against you because essentially it becomes
absolutely impossible to find any particular way in which
you could overturn the balance that it takes place. Well, what are the consequences? They're pretty bad,
I'm sorry to say. If you start looking at
the current situation, how do you create this equality? Well, first of all,
you always tend to look the other
way at football, and then the question is what
do you do with minor sports. And so all of a
sudden you decide at the University of Illinois
men don't like to swim, and that means that you can
cut out the swimming team. And then, of course,
you can say since nobody has many female
wrestling teams, you can cut out the
wrestling teams as well. And so by the time
you're done, the only way that you could create quality is
to cut down on the male sports because there's no way
that you can rise up on the female sports no matter
how much of a subsidy you get. So you're creating
a situation in which the wedge between what the
administrative state creates, and what it is that
the statute creates, and what it is that a
voluntary market creates are really quite enormous. And the ability to
reverse this thing is almost impossible
given the difficulty of changing the way in
which legislation works. What makes it even
worse, in many cases, is the actual operative
document which figures out how it is you run these test is
not even done by rule making, it's done by a letter which
is written by some government agency saying these are
the three tests that we use to see whether or not
you are in compliance with Title IX on these points. So again, what you see is
strong administrative creep, and you have a
massive interruption of voluntary institutions,
and it seems to me you have no real legitimacy. And yet when you try to
challenge this in court, it turns out you get slapped
down, and slapped down very hard, in a case called Cohen. What does this then do? It means that all universities
operate, to some extent, under a slight fear of
terror because if you have a world in which everybody
is not in compliance, and that is still true today,
the question of who's going to get hit is going
to depend very heavily on who speaks up. So if it turns out that
you have a vocal coach on the athletic side who really
thinks that this thing is crazy and he starts to speak
up, well then the NCAA or the federal government
runs an investigation. And that's all you need to do
in order to shut somebody down because the key
feature to understand about the administrative
in this particular regard is, since reputation
matters so much, you don't have to worry about
conviction, all you have to do is to initiate unilaterally
this kind of review. And when you create a system
with this much discretion in public people, it seems to
me that it is very difficult, under these
circumstances, to sustain the rule of law
kinds of requirements that we would want. This is not an isolated example. I'll just mention one other, and
then I'll sort of open this up to questions. You start worrying about
the Endangered Species Act, and the kinds of
requirements that it has. And this is not a
statute that I like. I think, in effect, it's
again completely perverse. And so you ask, well,
why does this man think the statute's perverse, right? Well, I mean, the
first part, I think, is relatively non-controversial. When it comes to killing
animals which are unowned, it is perfectly sensible
and it [INAUDIBLE] since the 19th century to
have kind of common pool restrictions, which
I referred to before, which says that you can't
kill the last of a bunch of endangered species. And that to the extent that
you have a uniform prohibition against killing various
kinds of animals, this is something
which is generally going to be an effective way
to deal with the common pool problem, and you're willing to
allow administrative discretion to figure out exactly how
it is that this stuff is going to be implemented. It's not easy to do
this in some cases, but at least it's within
imaginable boundary lines because you understand the
problem you're trying to solve. You're not trying to create
funny cross subsidies as you are in the gender
discrimination cases. What you're trying here to do is
to create a system in which you can improve [INAUDIBLE]
of everybody by imposing restrictions
upon all individuals. But then what happens
is suppose we now shift from the
uniform prohibition against killing to the question
of habitat designation, and all of a sudden the
economics of this situation change absolutely enormously
because once you start designating habitat,
you have exactly the same kinds of
problems that you have whenever you give the
government the power to designate
anything-- whether it be a landmark or
a sacred monument. The power to designate
has the power to destroy. So I can say, well,
here's an entire town, there's one warble--
thresh warble-- hanging out there, and since we
want to keep this thing alive, nobody can now build within
this 100 square mile acre. Value of the
property in question goes down very,
very dramatically. This, in fact, will start
to yield very perverse, private behaviors which
have been documented which is if you think you
have habitat which is of value to the wild species,
in effect, you're now treated as having negative value
to you because it's going to create a government
lean of some biologist comes along, and some
naturalist comes along, and says we're designating it. So what you do is you cut
it down before it's mature. If, on the other hand, you
didn't have the habitat designation system and went back
to the classical liberal model and you said, look, you've
got private property rights we can't restrict your
use unless we pay you, then one of two
things will happen. Either the government
will have to condemn, so the issue goes on budget. Or, in fact, some
voluntary organization will buy so that you can
preserve this kind of habitat through the market. And that's going to work fairly
well because if you think about the illustration
I gave you, and you have some land
which in three years will be valuable habitat
to a native species, and you now know you
could sell it to somebody, you'll put up a sign
habitat maturing, I'll take a bid from
anybody, and we'll figure out a contract so that
if I keep the thing intact, and you can count the number
of animals that are saved, we'll both be better off. Well, how did you get
to all this stuff? It was, again, exactly
the same process. You have a statute
which talks about harm, you then decide misreading, I
might add the Roman law which is always a problem to me, that
habitat designation is in fact a form of harm, then you have
a series of regular rulings which, in effect, indicate
just how tight the noose can, in fact, be put. So this is, I think, what
the issue turns out to be. If you want to talk about this
in neoclassical property terms, the system of property rights
that would develop from the time of Rome [INAUDIBLE],
essentially says about an owner is that it has not only the
right to exclude, it also has-- he also has the right
to enter, and she also has the right to
use and the right to dispose of the property. So essentially the
essence of a system of property rights under
the classical liberal system is one which says that
every useful attribute of any physical or
intellectual asset can be uniquely appropriated
to one individual such that, A, you have compatible
uses at the outset, and B, you facilitate ordinary
markets by giving the right to dispose of property. At that particular point,
the government's discretion is to make sure that this
system of rights works. So you could tax
to enforce it, you could put recordation
systems in, you can put statutes
of frauds in-- anything which will
stop the problems of double dealing or the
problems of physical invasion. This is all fine. You get to the modern
progressive era, they don't believe
any of this stuff. They only see property
as a form of oppression, they never see it as
a form of production. So what do they do? They go into the riff which says
all property is just the right to exclude and
nothing more, and this becomes a modern American
constitutional law when you start talking
about a case of [INAUDIBLE] in the late 1970s. Well what does that mean? It means that any
use of property, and any disposition
of property, is now subject to the
regulation of the state. What does this, in turn, do? It creates the world's most
horrendous bilateral monopoly. It turns out that
the government, by constitutional fiat,
cannot enter the land unless it's willing to pay for it,
and it never wants to do that. But on the other hand, you
can't use or develop the land unless you get their permission. So you have a situation in
which the value of property is, in effect, always to be
contested because of the use and disposition rights of a
piece of land may be worth, conservatively, anywhere
between 98% of its total value, or down as little as 5% or 10%,
depending on what's going on. What the administrative
state does is it says that every one
of these use and disposition rights is now subject to some
form of collective deliberation for which, in effect,
the state which decrees is not the state
which has to come-- to compensate. And so what you do is you
now create what is clearly the most dangerous
situation imaginable is you've created a situation
in which power is completely separated from responsibility. The ability to designate
this land as a wet land, to designate this as an
endangered species habitat, to designate this is a special
monument for precaution can be done through the
political processes. The consequences to the
owner are simply a byproduct of the great deliberation. What does this then do? Well it leads to
very odd behaviors. If, in fact, there are really
pronounced externalities for which you are not
going to bear the cost, you will always be
willing to engage in activities at
your own expense ignoring the cost to others. What does this do? It actually creates
the wrong kind of moral character
because instead of having people saying, look,
I'm willing to do something for my benefit so long as
I compensate those whom I compromise, you have
people figuring out how can we work a deal so
as to essentially circumvent those whom we hurt by forming a
winning alliance amongst those who we like. And so you get all sorts
of zoning type things that take place in which
there's an exclusion here for the benefit of
the developer there, you get rent control
type situations, all which are subject to
administrative discretion. So this is the basic theory,
and I'll end at one o'clock on exactly this note, right,
which is to the extent that rights of use
and disposition are, without question,
in the public domain, there is no system
of administrative law of which I'm aware
which will create a degree of predictability
and regularity which is what we would
associate with the rule of law. Thank you. [APPLAUSE] OK. Got a-- oh, question. STUDENT: I've got two things. One, first-- and I
they're connected-- you said that Congress doesn't
really give these agencies much guidance in the making these
sources of information, and I think the problem
with that is that, you know, there's going to be a lot of
these associations-- taking the harming the species example. The decision of what needs to
be done in order to protect the species is
reasonably one that might require a greater
level of expertise than one would ask
Congress to have. RICARD EPSTEIN: That's true
of everything, but go ahead. STUDENT: Right. And therefore, like,
it might actually make sense for
Congress to delegate to those sorts of decisions. So I think the line drawing
there is more complicated than you'd-- RICARD EPSTEIN: OK. Can I answer-- go ahead. STUDENT: That actually brings
me to the second point, though, which is that if the
problems-- if the agencies are misinterpreting Congress' intent
so intensely so as to create these sort of massive
problem that you described, then why isn't-- why are there never
legislative fixes? Why are they never
coming back to it? RICARD EPSTEIN: Well, OK. Let's just take both
of the questions. On the first one,
there is always the question of what is
the permissible scope of delegated authority. And to answer with the
Endangered Species Act, this is what I think
would be permissible which is that, when you start
looking at species you rank them in terms of their
frequency and their value, and then in effect you put
them on lists of endangered, or threatened, and so forth. And, I mean, the
difficulties you get in those particular cases
are actually doing the counting in the inspections, right? And this is a very
serious problem, but I did not think that
that is the kind of thing that you could object to. When you start talking about the
habitat designation question, that is now a complete,
discrete, and different problem because the implications
are wildly different, given the disparate
impact, and, in effect, that you no longer have the
common pool paradigm, which motivated the statute to
begin with, as an explanation. You have, in effect, the
take and pay situation. So to the extent
that you are trying to say that Congress
has the power, or to give to an
administrative agency, to pay or not to pay when
it decides to do something in a completely unbundled way
where there's no principle, no one would ever
argue that it's inappropriate under Chevron,
right, to require payment and not. I think that is a
level of discretion which is unacceptable because
it's just too much to do. The question is why does
this never get reversed, and that's a very
important question, but I think of it in
this particular way. When this stuff gets
through originally, it's always a compromise. Everybody gives a
little, takes a little, and they assume
that it's not going to move much in one direction
by delegated authority. In fact, all the modernists
on administrative laws are worried about how
these agencies could be made to be faithful
agents of Congress. And I think that they're just
a whistling Dixie when they believe that they can do it. But once you get it in
there to the compromise-- if you're trying to get
the fix, now, in effect, you have to get to-- overcome the objections of
the ardent defenders who have already won, and it's
very difficult to do that. I mean, the basic rule about
winning in Congress on trying to fix legislation
that's in place is the basic rule about how
it isn't you overrun a castle. You have to have five to one
advantages on the outside in order to succeed. So it's easy to
see what happens, you get the compromise
through 60/40, you get it into the
agencies, it goes 85/15, you try to get it back, and all
of a sudden the 15 becomes 20 and now they block
the improvement because the ratio
is only four to one. And I think, in effect,
rather than doing this, you ought to have a court
that looks very tough on it. And what happens is they get
the Sweet Home case, which was the Supreme Court
decision on this thing, and everybody looks at it,
and as usual the judges say, gee, this is hard. We don't know what's
going on, who knows what the word harms means. And so what they do is
they take every term I've love, like harm,
right, and property, and they put quotation
marks around them so they no longer
understand what it means. They throw up their hands
and they say, oh, well it has to be left to Congress
because everybody knows that all harms are reciprocal. And then, in effect,
well, you get to a rape case you say,
well, is that true then? No. Who are you kidding? So you kind of basically
use a different form of metaphysics in these
cases, and that's part of it. I mean, essentially what
you should understand is whenever you see a lawyer,
or a judge, or god forbid a law professor, put quotation
marks around a given word. What he's trying to
say is this word, if it really means something,
hurts my position so I'm going to tell you
it means nothing so that I can ignore it. The most famous article on
property by Frank Michelman puts the word nuisance for
quotation marks 30 times or something like
that because he doesn't want to have it as a
limitation for the [INAUDIBLE]. Whereas somebody, when you
get to the First Amendment where we actually care about
speech, all of a sudden he said, well, you only
enjoin a public nuisance and you can't define it
to mean anything you want. Don't put the word
in quotation marks. There was an iron law of
constitutional interpretation-- quotation marks are always
used in rational basis cases, they are never used in
strict scrutiny cases because in strict scrutiny
cases you're true believers, and if you are true
believers in the things you believe and have to be able
to be stated in coherent terms. So you've got to know what a
nuisance is when you're dealing with a pornography statute. You don't have to know what a
nuisance is when you're dealing with a wetland statute, and
it's that simple and unfortunate as that. So you get this huge fissure
in constitutional law, and that is in part
the framework which was why the courts
don't intervene, which is why the political
dynamic takes place in a way I've talked about. Next question, please? Somebody? Yes? STUDENT: My question
is sort of tied to [INAUDIBLE] second question. RICARD EPSTEIN: That's good. STUDENT: Because it seems
to me that the examples that you've brought, like Title
IX and the Endangered Species Act, et cetera-- RICARD EPSTEIN:
And local zoning. STUDENT: Right. All of those are simply
examples of a bad rule on the executive level,
and it seems to me that your problem with
those is that [INAUDIBLE] is going to be upheld
in the legislature so they don't have to fix it. RICARD EPSTEIN: That's right. That's a big problem. STUDENT: But you
also acknowledge that if Congress passed
the same [INAUDIBLE] administrative
agency, the bad rule that Congress would
come up with was going to be upheld under
the rational basis statute. RICARD EPSTEIN: Which I
also think is a mistake. STUDENT: But you
also [INAUDIBLE]. RICARD EPSTEIN: Yeah, I do. Go ahead, keep going. You're doing fine. STUDENT: I wonder
what the solution is. It seems to me that, under your
fear, all form of government is wrong. RICARD EPSTEIN: No! That's exactly-- wait. You didn't listen to
the full answer, right? If you remember, I
said at the beginning-- the creation of the
administrative state was essentially driven
by three major areas. One, the monopoly
problem and the issue of how you control that. And that led to the rate
regulation movements of the late 19th
century, which said you got to stop the
monopoly position, and then you have to stop on
the other side to confiscation. And the reason that
that body of law was coherent for a
long time is they knew what they were
fighting, and they knew what the lower bound was
on how far they could fight. That is, in those cases-- even through, I think,
Hope Natural Gas-- the just compensation constraint
was a meaningful limitation on what government did. So that's one area. The secondary is the
area of the common pool, and there were many
19th century cases which were designed
with its preservation. And that's actually a
slightly more difficult case because it's very
difficult to figure out what the sort of
minimum rights are to any individual to
a common pool asset, when, in fact,
nobody owns anything if it's out there in nature. And as I said about the
Endangered Species Act to the extent that
government was trying to preserve these things against
all taken by other individuals, and what they were
trying to do as to rank the severity and the
rarity of species, that was perfectly comfortable
within my [INAUDIBLE]. So that's the secondary
that we're talking about. The third area, of course,
was the great safety area. And here-- you know, there
are two kinds of harms. There's the
externality question, and there's the labor
market question. And on the externality
question, I have no doubt that
it is perfectly appropriate for the
government to set through administrative
processes standards on the amount of pollution that
you could emit from a train so that you don't choke
everybody in the neighborhood. I also think, as I've
stressed time and time again in my torts class, since
I'm so tough on this that you should never, ever
allow the administrative agency to say to somebody, oh, you've
complied with our permits, you don't have to pay the people
who you smoke out anymore. So I'm actually very tough on
that on the government side. So essentially what I'm
saying is if, in fact, you tie the
administrative body of law to the defects in markets
that we can all identify-- monopolies, including network
industries, common pool problems, and
externality problems-- and then try to figure
out whether they get the appropriate
means and ratios to them, that's a legitimate
administrative state. But once you get to the
progressive hearing, their view is monopoly's a
problem, who are you kidding, it's competition
that's the problem. It's always ruinist. And so you get a Wickard and
Filburn, you get cartels, you get the National
Labor Relations Act. And at that point,
you've conceived, in my judgment, an original
sin, and all of the things that they do are illegitimate. So the conclusion that
you give is correct is that when a government tries
to take a competitive market and convert it into a
monopolistic market, it should always be struck
down on constitutional grounds. If you're basically
going from a world where you've got
more stuff to a world that you've got
less stuff, somebody has got to be a net
loser under that scheme. Let them come forward and
say, I haven't received just compensation in kind--
because he hasn't-- and no one is going to pay
him in cash, so out it goes. So I think that your
implications are right, but only for the
progressive improvements. They are not right with respect
to administrative state, which understands what
it's supposed to do and then tries to figure
out how it's to do it. And the other point about
the administrative state, which I didn't mention,
is Chevron deliberately misreads the statute. It does not give, essentially,
any deference on questions of law to
administrative agencies, it treats them like
juries, in effect, and it says all questions of
law should be resolved de novo. And I see absolutely no
reason why that cannot hold. We do that in
patent cases, which are every bit as complicated,
we should do it here. And the moment you
start doing that-- the great achievements
that you get with the Army
Corps of Engineers, right, is another
flip over, gone. The basic original
definitions of what was a navigable water
in the United States used to cover rivers and lakes. And then by the
time you're done, it covers every stray hole which
is on the prairie 10,000 miles from anything because an
administrative agency has decided it wants to expand
the scope of its coverage. So what you do is you have
two definitions, each of which is said by Chevron to be
consistent with the basic statute, and the only
difference between them is a factor of one million. And I'm supposed to
think that, you know, as you move from the Carter
to the Ford administration, or back, that the
flip on that switch is something which is
consistent with a rule of law when there's nobody on top
who can stop this thing? I think it's crazy. Just nuts. Welcome to modern America. So I do think that-- I don't think-- I'm not-- I don't think you can trap
me in the anarchist position because that's the
libertarian problem, it's not the classical
liberal problem. Limited government does
not mean no government, and I've already given you
cases in which government can be used above and beyond
the prevention of torts and the enforcement
of contracts. And once you understand
those things, then, in effect, it
works pretty well. Next question. I think? Somebody? Yes. Oh, you [INAUDIBLE]. STUDENT: My question
is-- and I think you've admitted this
already-- but if [INAUDIBLE] use the rational
basis [INAUDIBLE] are you required to evaluate
the administrative statutes, how should they value, and
should they use [INAUDIBLE]? RICARD EPSTEIN: OK. Well, two questions. Well, what should you do? I think, in effect,
the test that you ought to do with respect
to administrative agencies is a relatively simple one. The standard test for
a private injunction is you estimate the two types
of error that can occur. If you enjoin too much
lawful activities to stop, then they have a certain value. If you enjoin too little,
harm is allowed to take place, and, in effect,
what happens is you get too much of the activity. And so what you ask the
administrative agency in every case to do is to
show how it is balanced the two kinds of error. If you looked at the
FDA, at every single one of its determinations
would fail under that test because they only look
at one kind of error. The danger of
leaving a property-- you know, a new drug
into the market, they never worry about the delay
and cost of keeping it off. So I think that's the
first thing to do. The second question
you asked is, in fact, an equally important one,
and it's quite simply is there any case in which
you believe in rational basis tests, right? And the answer is yes. And that I don't want to sound
like a liberal, I'm sorry, but I will, as I
think, in effect, the following basic norm
exists in private law, and I think it carries over
to the public law as well. When you're trying
to figure out how it is that you prevent the
harms that any party inflicts upon a stranger, use
very tough standards. But if you're
trying to figure out how it is that internal
governance takes place within voluntary
organizations, almost invariably there's some degree
of a good faith standard that's going to be imposed. All right? When you have the government,
if it's regulating, it's now essentially
dealing with external stuff and you really
have to justify it. But if, in fact, you
make the decision-- which I find doubtful,
but let's suppose we believe in public schools. If the question is how it
is, let's just suppose, that you now have to run an
affirmative action program or not, my view
about this is you've got to give any organization
on the public side some degree of
discretion that you allow the private organization. And so I think the
Supreme Court was wrong when it was really tough
under the equal protection clause with respect to
Louisville and Seattle the last term because
it did not respect the amount of stuff that takes
place in local government. And so there, in
order to upset it, I think you have to show
some really major perversion of the political process
as opposed to the fact that there was some really
anxious and bitter give and take. Because otherwise
what you do is you have these collective
institutions, they are now going to
be judged by really strict external standards
that a majority of the people in these institutions
don't like, and so you give a
fringe of veto power on what the majorities
want to do in an area where I don't know
of anything else. It's roughly like
saying that when you have a corporate situation,
the single shareholder who wants to invoke, say,
a colorblind norm can, in effect, stop
everybody in that organization from running an
affirmative action program. In fact, the single-- one of the many strong
objections to the Civil Rights Act of 1964 was that
it's uncompromising colorblind standard in the text
made it impossible, by 1966, to introduce affirmative action
programs without difficulty at a time when popular
sentiment on that issue had completely
turned over from what it had been in '63 and '64. I remember living through
this, and after the riots all of a sudden a
lot of businesses says we'd like to do
it, and somebody said, well, look at the statute. You can't do it. So you want to give
discretion in that sense. So there, I would be on
the rational basis side. And I think it's
perfectly coherent. Is it regulated? Are you really a subject to
tough standards as a business manager running these
complex institutions? We give you the
benefit of the doubt. Does that strike
you as unreasonable? Say no. OK. It strikes you-- all
right, one last question. Yes? STUDENT: If you're
going to illuminate administrative agencies when you
have situations like the market power's not working-- RICARD EPSTEIN: Where the
market power is working. STUDENT: --where the
market power is working. Then it's not
necessarily going to push that decision back into the
marketplace, though, is it? It's more likely that it's going
to be pushing that decision into the court system
that has less [INAUDIBLE], less [INAUDIBLE]-- RICARD EPSTEIN: No. Oh, no. I don't think so. I mean, just take something. I mean, one of the
easy statutes that goes is the Fair Labor Standards. Right? That's the ultimate
market mettle. And in fact, most of the
litigation against it has always been done by
state governments who hate its provisions, I
mean, in the recent years. That disappears, there
is no way a court can decide to create and
enforce a minimum wage standard. It's impossible for it to do so. So you're back to
markets, and if somebody wants to bring an
unjust dismissal action it's going to be very
different from that. Or suppose what happens is
you do the sensible thing and you declare the National
Labor Relations Act flatly unconstitutional. You're not going to get
unions that are organized under judicial supervision. Actually what
unions now try to do is, when they can't
organize, they try to bring suits under the
Fair Labor Standards Act. STUDENT: But you have to
look at the other examples, like the sex
discrimination example, the Endangered Species example-- RICARD EPSTEIN: Oh, I
think that you would never get habitat designation. And in fact, with
respect to that-- STUDENT: [INAUDIBLE] RICARD EPSTEIN:
You'll never get it. On the other hand,
as I said, I'm quite happy to keep the
statute in place when you're dealing with a
common pool problem so I don't have the real issue
of the doomsday scenario going there. I mean, I think if I correctly
identify the major sources of market failure, there would
be nothing left for a court to administer if they were
consistent with the theory that I had. The difficulty that I faced
is Democrats and Republicans in life each prefer a world
that, when they are in power, they rule the roost,
so none of them are willing to live in a world
in which they systematically constrain their power. Now why do I say that? Because remember the last
constitutional travesty under the Commerce Clause,
who was the defendant? It was against Gonzales. A Republican attorney general
was defending the vast power of the United States to prevent
the use of medical marijuana under the rules of the
state of California. So I think it's really
very impossible. So all I can do, and I
will end on this note, is I can argue against it. It's not going to
transform it, but this is what I hope it does. I hope when you get out there
and you are in a position to exercise one of these
awesome powers, a slight twinge of guilt come over your
brow so that you'll go a little bit slower and
think a little bit differently. Unfortunately, if you look
at the motley crew that is running for
president on both sides, they are all
essentially creatures of the modern
administrative state. And so it's a lot
of work to be done. But if you don't talk up,
nobody's going to be there. As one of my friends
on the other side said when I wrote
the takings book, you really have made
it much more difficult. We used to have a nice
conversation amongst friends about how to regulate,
and now you're asking why we regulate at all. And that's what I want to do,
I want to crash the party. [LAUGHING] Thank you. [APPLAUSE]
