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The Gresham’s Law of Law

In economics, Gresham’s Law is the law that say “bad money drives out good money.” In law, there is a similar law – deviant or problematic lawmaking drives out orthodox or legitimate lawmaking. This occurs in both constitutional law and administrative law.

Let’s start with constitutional law. The law of the Constitution is supposed to be established through the constitutional enactment process and the constitutional amendment process. Yet, it is well known that the Supreme Court does not always follow this legitimate method of constitutional law making, and instead changes or updates the Constitution through judicial lawmaking.

It is sometimes thought that these two types of lawmaking can coexist, but it has become increasingly clear that this is not the case. Since the New Deal, and especially as the Court has engaged in more judicial updating, the constitutional amendment process has atrophied. The main reason is that a constitutional amendment can only pass if it is supported by a consensus of the country. And developing a consensus may take a long time and may require compromise.

But if five members of the Supreme Court feel free to update the Constitution anytime they believe there is something wrong with it, then the consensus necessary for a constitutional amendment may never develop. The Court will act before the time necessary to form the consensus. And the five members may not have to compromise, instead getting the result they desire. Moreover, once the Court acts, there is no opportunity for a consensus to develop since a significant portion of the public will have already gotten what they want.

So illegitimate constitutional lawmaking (judicial updating) will displace legitimate constitutional lawmaking (constitutional amendments).

Now consider administrative law. The Congress generally delegates the power to enact regulations to administrative agencies. As a result, most rules at the federal level that govern the public are passed by administrative agencies rather than by Congress. Put differently, most federal law – at least regulatory law – is enacted by administrative agencies rather than by Congress.

But why does this occur? There are many reasons but one of them is the difficulty of Congress passing new laws on its own. We usually live in a world of divided government and the two parties cannot agree on passing laws.  Therefore, it is necessary for the agencies to promulgate regulations on their own, without requiring the consent of the Congress.

Yet, it is not clear that this analysis is correct. Instead, the problem may be that Congress has delegated power to administrative agencies. If Congress were prohibited from delegating legislative power to agencies, then the agencies could not act on their own. That would put pressure on Congress to compromise in order to pass needed regulations.

At present, no such compromises occur. Instead, the President’s party to a significant extent gets the regulations it desires out of the agencies. And therefore the President and his party are unwilling to compromise in passing new regulations.

Once again, the existence of problematic lawmaking (delegated lawmaking) operates to drive out orthodox lawmaking (statutes by Congress).

There are other areas where this same problem occurs (such as the initiation of military hostilities).  But the basic point remains. Deviant lawmaking displaces legitimate lawmaking. You cannot have it both ways. Just as bad money is a sign of corruption that undermines the currency, so deviant lawmaking is a sign of corruption that undermines legitimate lawmaking.

Reader Discussion

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on February 13, 2018 at 10:33:18 am

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The Gresham’s Law of Law | Top 100 Blog Review
on February 13, 2018 at 11:07:50 am

Welcome back, Rappaport! A fine post. That said....

Gresham's law says that bad money drives out good money when a person has the option of circulating either the bad or the good. Thus, given the choice of buying something with my silver dollar or my paper dollar, I'll be inclined to keep the silver and part with the paper. After all, the silver has both intrinsic and symbolic value; the paper merely has symbolic value. But if you don't have some of each kind of currency, then this dynamic doesn't apply.

"Amending the Constitution" via Supreme Court decision has existed since Marbury v. Madison. But this is only a substitute for the longer version of Constitutional amendment for people who control the Supreme Court. If you don't control the Supreme Court, then this dynamic doesn't apply to you. And few groups can count on controlling the Supreme Court. That said, the fact that the Court can issue sweeping decisions motivates people to seek to control it--and perhaps that causes a reallocation of resources that would otherwise have gone toward a Constitutional amendment drive. Who knows?

I sense the larger dynamic Rappaport identifies is that politicians compromise when they clearly lack a better alternative. So long as constituents can hold out hope of a minimalist outcome, they will punish representatives who compromise. "Backdoor" methods for achieving outcomes (via court decision or rulemaking/interpretation) leave constituents with such hopes, making compromise harder.

But ultimately in such dynamics, whoever hates the default position the most (the Best Alternative to Negotiated Agreement, or BATNA) will be most inclined to compromise. There is no such thing as a "neutral" context in which to negotiate. Thus, "backdoor" methods to create policy may alter the default context, but they don't render it biased because there is no standard by which to judge bias.

Now, with THAT said....

1. To what extent do people get minimalist outcomes via court decisions? The Court upheld/created abortion rights, gun rights, and some kind of religious exception to providing contraceptive coverage, but the resulting rights are far from maximal. In contrast, gay marriage rights and campaign spending rights seem pretty maximal to me. So it's a mixed bag.

2. Recall that prior to the federal Administrative Procedures Act, agencies were not hamstrung. To the contrary, they ruled by fiat. APA rulemaking was created to constrain agencies. Thus, it's far from clear that rulemaking is really the great encroachment on legislating that Rappaport suggests.

After all, Congress has the discretion to overrule any rule it likes; it's merely constrained by gridlock. That's quite different than Congress's ability to overrule a constitutional decision. (Well, it's somewhat different, anyway.) And where agencies act in response to the Executive, at least the voters can weigh in on the matter during the next election. In contrast, consider the Dormant Commerce Clause: It creates a bias in favor of government inaction, even when no one has expressed such a preference.

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nobody.really
on February 13, 2018 at 11:26:15 am

Weird. At various points in my comment the word "minimalist" appears instead of "maximalist." It appears that Autocorrect substitutes the former for the latter--which is unfortunate.

I had a similar problem elsewhere: Autocorrect decided that when I talked about “disaggregating” data (separating previously-combined data into constituent parts), I really meant to say “desegregating” data—an odd turn of phrase which, if taken seriously, would imply the opposite of what I intended. But at least the two words look similar--unlike the worlds maximalist and minimalist.

I can't wait to see how this post turns out when I hit Post Comments.

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nobody.really
on February 13, 2018 at 12:35:26 pm

Interesting, and as usual, perceptive comments.

Question for you: re #2

"Recall that prior to the federal Administrative Procedures Act, agencies were not hamstrung. To the contrary, they ruled by fiat. APA rulemaking was created to constrain agencies. Thus, it’s far from clear that rulemaking is really the great encroachment on legislating that Rappaport suggests. "

Yep, prior to APA, agencies were unfettered in their discretion AND APA was "intended" to limit that discretion.

Yet, one must consider the effectiveness of the "reforms" contained within APA before determining whether or not the APA has reduced the "institutional" encroachment of the Executive upon the Legislative. Moreover, one can not reach such a determination without also considering the role of the Judicial in the matter. How has the Judicial's *invention* of deference, Chevron, Auer, etc. affected the ability / tendency of the Agencies to "encroach"?
How has the Judicial's repeated acquiescence to this encroachment fostered both additional "rulemaking" and the continued pursuit by the agencies of their own "institutional ambitions"?

It is, to my mind, far from clear that Judicial deference HAS NOT fostered such encroachment.

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gabe
on February 13, 2018 at 13:01:10 pm

Why is Congress constrained by gridlock? Because of the Senate's filibuster rules.

One of the first axioms of republicanism is that within the constraints of the constitution, whether the constitution written and ratified or established by custom and tradition, the enfranchised political majority rules.

Also, the APA has proved to be the vehicle by which Congress and the Executive cede power and accountability to the Judiciary; which is unaccountable so long as it suits the purposes of the Senate and Executive.

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EK
on February 13, 2018 at 13:09:19 pm

Well, for what it's worth....

1. The procedural requirements established by the Administrative Procedures Act are not hypothetical; they are quite real, and quite a constraint on agencies. Indeed, Trump has been able to repeal/suspend a number of Obama-era rulemakings not because the agencies lacked a sound basis for their rules, but because the rulemakings took so long to finalize that the Trump Administration could then kill them regardless of their merits. So no, the APA has imposes real constraints.

2. I can't say what the practical consequences of Chevron/Auer deference is. Yeah, as a matter of separation of powers, those doctrines are odd. But I surmise that the doctrines apply under circumstances in which courts would be prone to defer to agency discretion anyway. That is, I expect that Chevron/Auer are just a shorter road to the same destination. Can't prove it, but that's how it looks to me.

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nobody.really
on February 13, 2018 at 13:27:39 pm

I am suspicious of the claim that FRD's agencies were unfettered. They were all subject to judicial review and some survived review, like Social Security; some did not, like the NRA. Further, they all had to be funded by Congress back in the days when budgets had some connection to reality and the funds were then allocated annually under regular order.

Notice and comment rule making is usually an annoying a charade for the agencies SES apparatchiks and is relevant only when the aims of the Executive conflict with the aims of the Judiciary.

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EK
on February 13, 2018 at 14:35:19 pm

1) It's a tactical error to accept the Left's rhetoric about "updating," which in their Whiggish account of constitutional history equals "change for the better." Quite often, their arrogations don't change things for the better.

2) Pace Antonin Scalia, Marbury v. Madison was not a constitutional amendment if we read the Constitution in the way James Madison preferred--by reference to the ratification conventions. In Virginia's and New York's, at least, Federalists said federal courts would exercise the power of judicial review. In New York, Antifederalists argued that would be unrepublican (which elicited Federalist 78), while in Virginia, Patrick Henry responded that we should be so lucky, but he doubted we would be.

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Kevin R. C. Gutzman
on February 13, 2018 at 15:36:19 pm

I don't mean to say that pre-APA, agencies were unfettered. I mean to say that the APA only served to add fetters. I am not aware of any provision of the APA that limits a court's powers or Congress's.

Is notice and comment rulemaking is just a charade? Then why has Trump been able to repeal more than a dozen Obama-era rules using the Congressional Review Act? Trump was able to do so because Obama was unable to get the rules finalized more than 60 legislative days before his term expired. Rulemaking is HARD. Yes, agencies have a lot of discretion, but they still have to solicit comments and respond to them. It's an enormous time-suck.

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nobody.really
on February 13, 2018 at 15:42:34 pm

Marbury v. Madison was not a constitutional amendment if we read the Constitution in the way James Madison preferred....

But that's the point: No one characterizes a judicial decision as a "constitutional amendment" if they read the Constitution in the same manner as the majority decision; we characterize a decision as an amendment if we DON'T read the Constitution in that manner. Thus, there is no substance to this argument; we're just taking arguments about competing judicial philosophies and dressing them up in different clothes.

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nobody.really
on February 13, 2018 at 21:05:39 pm

"It’s an enormous time-suck."

Better that they expend energy "sucking time" than sucking energy out of the economy!

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gabe

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