This has led to “the rule of nobody,” with no one having the authority to make government work. In a nutshell, this is the problem that Philip Howard elaborates on, and suggests solutions to, in The Rule of Nobody. His book can be thought of as a call‐to‐action for dismantling the dysfunctional regulatory edifice that is destroying responsible political judgements and paralyzing government.
Let me say upfront that I think The Rule of Nobody is an interesting book and worth reading. Yet I am troubled by what I believe is its narrow focus. There is no doubt in my mind that the expansion of overly detailed government regulations is a serious concern. But there are two very different types of problems with that growth. First, there are the problems created when those detailed regulations are imposed on political decisions, which are the ones that primarily concern Howard. Second, there are the problems created when detailed government regulations are imposed on market decisions, which Howard mentions only occasionally, and then largely as byproducts of the first set of problems.
I believe that Howard takes aim at the smallest part of the problem of government regulation—the mouse, if you will—and misses the far larger part of the problem, the elephant. By doing so he overlooks the very real possibility that the benefit of reducing the problem of the mouse will be more than offset by increasing the problem of the elephant.
Attention‐getting examples / Throughout the book Howard illustrates how multitudes of mindless government regulations—which no one can know completely, and no one can wholly obey because the rules sometimes conflict with each other—are paralyzing the ability of political authorities to take action, no matter how obvious it is that a particular action is needed.
He begins his preface with an account of a tree falling into a creek, causing a neighborhood to be flooded during a New Jersey storm. As the town officials were about to send a tractor to remove the tree, they were informed that they were dealing with a “class C‑1 creek,” which meant approvals had to be obtained from appropriate authorities before the natural condition of the creek could be altered. Consequently, the tree wasn’t removed until after a $12,000 permit was purchased and the necessary government approvals were obtained, which took 12 days. The first chapter contains an example detailing the government studies, approvals, and permits from multiple agencies that had to be made or acquired before permission was given to raise the height of a bridge, making it possible for larger, more efficient ships to use the port of Newark, N.J. Most of the requirements had little relevance to the risks or problems associated with the project. It took over three years before a “finding of no significant impact” was made, at which point the project manager at the Port Authority commented that the wait for the lawsuits that would further delay raising the bridge could begin.
Howard provides many other bizarre, tragic, and infuriating examples of government dysfunction: public school officials being unable to fire incompetent teachers; firemen not permitted to save a drowning swimmer because they had not recertified to perform land‐based water rescues; the thousands of government job classifications in New York City imposing such restrictions as preventing a clerk inputting numbers to calculate the sum; firing a Florida lifeguard for rescuing a drowning man just outside his designated zone; suspending a seventh‐grade girl from school for a week for having momentarily possessed an attention‐deficit‐disorder pill another student put in her hand; and increasing the number of reimbursement categories in Medicare from 18,000 to 140,000, with 21 different categories for “spacecraft accidents” and another 21 for bathtub injuries.
Were the goods worth delivering? / For Howard these examples are illustrative of an attempt to create an automatic government that generates predictable outcomes by replacing the judgement of responsible government officials with a proliferation of detailed regulations. He sees this as a problem that has become much worse over the history of the American republic despite being identified from the very beginning. As noted by James Madison in Federalist 62:
It will be of little avail to the people that the laws are made by men of their own choice if the laws are so voluminous that they cannot be read, or so incoherent that they cannot be understood.
Howard cites Madison’s statement early in the book, and several times he credits the Founders for understanding the threat of too much regulation, as well as the U.S. Constitution for keeping that threat from erupting until after the New Deal and World War II.
Interestingly, Howard favorably quotes a 1937 report on government organization indicating that the relative freedom from detailed regulation helped the New Deal to “deliver the goods.” There is no doubt truth in this view, though whether the goods delivered were a blessing or a curse is certainly debatable.
No less controversial is Howard’s praise for the progressives and the 1960s reformers, although his praise is qualified. As he sees it, “Just as the progressives gave the lie to laissez‐faire, so too the 1960s reformers punctured the illusion that America was fair.” Howard’s qualification is his acknowledgement that attempts to be fair to everyone who complained of unfairness contributed to the creation of the administrative state with increasing reliance on detailed rules. Giving flexibility for a government official to use his or her judgement had to be limited. “No official could decide anything without proving why it was fair to whoever complained.”
Of course, the zero‐sum feature of so many government decisions invariably meant that “fairness” for some meant “unfairness” for others. This led to an increasing number of lawsuits, followed by judges going beyond their judicial roles and making legislative decisions. This created a backlash against “judicial activism” and distrust of decisionmaking latitude by both government officials and judges. In Howard’s view, this sequence of events helps to explain why “rulemaking took off like a rocket” in the late 1960s as Congress began taking greater advantage of a 1946 legislative act “authorizing agencies to write regulations with the force of law,” with these regulations imposing more and tighter strait jackets on public decisionmakers.
While Howard clearly wants to reduce the suffocating details of government regulations, he is far less concerned—if concerned at all—with the increased range of activities subjected to the control of government regulators. He states, for example:
Law in a democracy … provides the organizing framework for government, setting public goals and priorities. This role has been transformed by the rise of global markets and institutions, requiring government to ramp up its oversight responsibilities—setting minimum standards for virtually all social activities, in the workplace, schools, markets, factories, hospitals, and playgrounds.
Maybe Howard believes that having government “ramp up its oversight responsibilities” over “virtually all social activities” can be done while avoiding imposing detailed regulations on the private sector. But later he clearly suggests doubts by pointing out that “using detailed rules to minimize discretion” is now popular with almost everyone. Politicians like being able to shift much of their legislative workload and responsibility to bureaucratic agencies by letting them provide the legislative detail. Corporations, particularly large and well‐established ones, see detailed regulations as effective entry barriers to competition threatened by new and smaller rivals. The more detailed the rules, the easier it is for public employees to avoid responsibility for unfortunate results because they followed the rules.
Missing the elephant / Unfortunately, by limiting his discussion primarily to the negative effects of an avalanche of detailed regulations on government performance, Howard has greatly limited his ability to consider the far greater cost that excessive government regulation imposes on the private sector. His discussion of regulation’s negative effect on economic performance is scattered in a few pages throughout the book and focuses primarily on nursing homes.
Even there, however, the emphasis is on how better regulation could correct the problems. As Howard states, “There’s usually no need for rules telling people how to fulfill their responsibilities if they are accountable when they fail.” But the only accountability he mentions for nursing homes is accountability “to the inspector [presumably with a lot of latitude to enforce general rules], who is accountable to a higher official and, potentially, to a court.” What Howard fails to mention here, or anywhere else in the book, is that government agents, responding to the incentives of the political process, are far less accountable to the public interest than are private‐sector agents responding to the incentives of the market process.
The cost of hampering the performance of government agencies with excessive government regulation is no doubt a problem. But is it a problem we should try to remedy? Howard is unable to make a convincing case that it is because, by focusing on the mouse, he has largely ignored the elephant in the room: the cost of hampering the growth of economic productivity because of excessive government regulation.
Consider some examples that illustrate why the elephant is so big compared to the mouse. Howard says nothing about the Internal Revenue Service. This is not surprising given his primary concern, because there are reasons to believe the IRS is fairly efficient at performing its mission of collecting tax revenue. In the 2014 fiscal year it collected $2.52 trillion in taxes, on a budget of $13.5 billion. That is, the average cost of collecting $100 in tax revenue was about 53 cents. But that cost pales in comparison to the cost of the regulatory quagmire imposed on the private sector by an excessively complicated federal tax code. Just complying with the paperwork demands is estimated to cost around 20 percent of the total revenue raised, with the excess burden resulting from tax‐induced distortions surely adding at least another 15 percent per dollar raised (which is less than estimates of the marginal excess burden). So once the cost of tax regulation on the private sector is considered, a reasonable estimate is that $35 has to be added to the 53 cents it costs for the IRS to collect $100.
Of course, taxes have to be collected, which necessitates some compliance costs and excess burdens. We can quibble over how much cost reduction is possible from tax reform, and how the tax code should be reformed. But it is clear that serious tax reform could reduce the cost of tax regulations on private‐sector performance by several orders of magnitude more than the cost saving from better regulations on the internal operation of the IRS.
The National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC) are not particularly complicated bureaucratically and few would argue that they are paralyzed with rules. (Indeed, if only they were.) Instead they are very good at imposing rules on employment practices and hiring decisions that substitute one‐size‐fits‐all rules for the local information and incentives communicated through labor markets. Who knows how much the recent NLRB ruling on franchise employees will reduce productivity by complicating management practices and increasing labor strife? Or how much being threatened or charged with disparate‐impact discrimination by the EEOC has cost, and continues to cost, countless employers by diverting their otherwise productive efforts and resources into avoiding or fighting ill‐advised criminal charges? Surely the private‐sector cost of the regulations imposed by these two agencies greatly exceeds the cost of any excessive internal regulations they are burdened with.
Finally, no matter how one assigns the blame for the Great Recession, there can be no doubt that the effect of rules promulgated by Fannie Mae, Freddie Mac, and Ginnie Mae were responsible for hundreds of billions of dollars of lost output. This is hardly an argument for focusing on the problem of internal regulations on these agencies hampering their ability to do their jobs while giving little thought to their contribution to the cost of a major recession.
Constrain government to correct it /The most effective thing we could do to reduce the cost of regulation is not correct government by relaxing the constraints on its actions (which might reduce the cost of the regulatory mouse), but by undoing a large number of things government is currently doing and increasing the constraints on its ability to do them again (which would surely reduce the cost of the regulatory elephant).
For example, the federal government’s lack of fiscal responsibility creates “market failures” that are then used to justify regulations that worsen the “market failures,” etc. Consider transfers and subsidies. By some measures the percentage of the federal budget going to transfers and subsidies has increased from about 15 percent in the early 1950s to over 60 percent today. This undeniably reduces market accountability. The availability of subsidies increases business returns from rent seeking for more government advantages relative to the return from serving the interests of consumers. Transfers to consumers, either directly or indirectly (through business subsidies), means the recipients are spending other people’s money, which reduces their accountability to the costs their consumption decisions impose on others. In both cases, the problem is compounded by distortions in market prices, which render the prices less able to provide the information and motivation needed to make productive and accountable decisions.
Having crippled market accountability, government has a justification to impose more of the only accountability it can: the crude and clumsy accountability of central planning—more spending and detailed regulations that are completely innocent of embodying any local knowledge of time and place. Can anyone seriously believe that the growth of government subsidies and transfers in financing medicine and higher education are unrelated to the growth of government regulation that is increasingly bedeviling the supply and consumption of those two important services? If Howard had given this question serious thought, he might have written a different book.
