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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: [Administrative Process Reform]
Box: 1
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Contact a reference archivist at: [email protected]
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1984 DUKE LAW JOURNAL 301 (April 1984)
ADMINISTRATIVE PROCESS REFORM IN A
DISCRETIONARY AGE: THE ROLE OF
the
SOCIAL CONSEQUENCES
WESLEY A. MAGAT*
AND CHRISTOPHER H. SCHROEDER**
The basic rulemaking procedures of the Administrative Procedure
Act have remained intact for thirty-eight years, but now Congress is
seriously considering reform of those generic rules. To evaluate the
merits of these reform proposals, we must develop criteria against which
10 judge them. Although procedural reforms are commonly judged
against the goals of fairness, accuracy, and procedural efficiency,
Professors Schroeder and Magat argue that these are insufficient crite-
ria 10 apply to administrative process reforms at a time when agencies
possess substantial discretion in the rulemaking process. In such a con-
text, procedures have an impact on society in ways not adequately eval-
uated by the traditional criteria. Discretion means that agencies may
choose from a set of possible rules, none of which has been foreclosed
by the enabling legislation of the agency. Procedures influence which
choices the agency makes and, because these choices alter the regula-
tions and restrictions under which society operates, they affect the social
consequences of regulation. This article describes a model of partici-
pant behavior necessary 10 trace the effects of procedures on the social
consequences of regulation, articulates a set of criteria to evaluate these
social consequences, and then analyzes two frequently proposed generic
reforms to the APA: mandatory regulatory impact analysis and over-
sight by the Office of Management and Budget.
I. INTRODUCTION
Last term, in Immigration & Naturalization Service V. Chadha,¹ the
Supreme Court held unconstitutional the legislative veto, a fifty year
old practice in which Congress retained authority to review and cancel
certain executive actions without presidential approval and, in some
cases, without the approval of both houses. In a rare, extemporaneous
oral dissent, Justice White attacked the decision. In his formal written
opinion, Justice White defended the legislative veto as "an important if
not indispensable political invention that allows the President and
Associate Professor of Business Administration, Duke University, Fuqua School of
Business.
**
Associate Professor of Law. Duke University.
1. 103 S. Ct. 2764. 2788 (1983).
301
302
DUKE LAW JOURNAL
[Vol. 1984:301
Congress to resolve major constitutional and policy differences, assures
the accountability of independent regulatory agencies, and preserves
Congress' control over lawmaking."2 Immediately following the deci-
sion, press and congressional attention focused on the ruling's dramatic
shift of power away from Congress and toward a reinvigorated, impe-
rial Presidency, especially in matters of foreign affairs and the budget.³
Chadha's repercussions on domestic regulatory matters, however,
may be just as important as those on congressional-presidential power
relationships in matters of foreign affairs and the budget. Before the
Court's decision, Congress had employed veto provisions designed to
give itself leverage over the rulemaking decisions of a number of fed-
eral agencies.4 Whatever the merits of its specific uses, this veto au-
thority was a legislative response to the problem of controlling
administrative discretion-a problem heightened by the growth of fed-
eral agency influence on the daily affairs of private citizens. Although
the Supreme Court eliminated this device for controlling discretion, the
publicity surrounding the decision may move the problem of control-
ling agency discretion to the foreground of public concern.
Congress, the courts, and critics of the new regulatory state have
wrestled with this problem for some time, and no single, unified cri-
tique or reform strategy has yet evolved because the issues involved are
complicated and perceptions of their precise nature vary. Nevertheless,
a consensus in Congress appears to have concluded that certain admin-
istrative rulemaking procedural reforms could ensure fairer, more ac-
curate, and more sensible regulations. These changes would amend the
basic rulemaking structure of the seminal Administrative Procedure
Act (APA) for the first time since it was enacted thirty-eight years ago.⁵
This article presents a framework for analyzing the merits of ad-
ministrative procedural reforms. Its premise is that procedural reforms
must be analyzed on a broader basis than the traditional inquiry-
whether they will improve the internal workings of agencies by ensur-
ing accurate fact finding, fair opportunity for public input, and consis-
tency with statutory mandates. The wider social impact of procedural
2. Id. at 2795 (White, J., dissenting).
3. See, e.g., Wash. Post, June 24, 1983, at A4, col. 4-6. Among the foreign affairs statutes
affected by Chadha were the veto provisions in the War Powers Resolution, § 5, 50 U.S.C. § 1544
(1976 and Supp. V 1981). and The Arms Export Control Act, § 211, 22 U.S.C. § 2776(b) (1982): on
the budget side. statutes with veto provisions include the Congressional Budget and Impoundment
Control Act of 1974, § 1013, 31 U.S.C. § 1403 (1976). Justice White's dissent in Chadha contains a
long list of legislation containing veto provisions. See 103 S. Ct. at 2811-16 (White, J., dissenting).
4. See 103 S. Ct. 2764, 2811-16 (White, J., dissenting)(appendix of statutes with provisions
authorizing congressional review).
5. Administrative Procedure Act, Pub. L. No. 79-404, 60 Stat. 237 (1946).
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
303
reforms must also be assessed. New procedures tend to lead to differ-
ent agency decisions, which in turn lead to different social conse-
quences. Predicting these new social consequences-no simple task-is
a prerequisite to appraising the merits of suggested reforms. If Chadha
turns Congress's attention to alternative procedural reforms, such an
appraisal takes on immediate importance.
Part II of this article briefly charts the growth of the administrative
state, and relates procedural reform to other reform proposals. Part III
argues that the substantial administrative discretion that agencies pos-
sess compels an analysis of the social consequences of process reform
proposals. Part IV distinguishes an "internal view" of process from our
"social consequences" view and argues that the former is incomplete in
an administrative climate containing such discretion. Part V illustrates
how the social consequences of procedural change can be anticipated
with a simple model of participant behavior. Part VI specifies six crite-
ria for evaluating the consequences of procedural change, and Part VII
applies the model and these criteria to two frequently proposed amend-
ments to the APA's generic rulemaking provisions. The article con-
cludes with some speculation on the prospects for meaningful reform of
the regulatory process.
II. THE APA, THE REGULATORY STATE, AND REFORM PROPOSALS
The Administrative Procedure Act of 1946⁶ was hailed as "a new,
basic and comprehensive regulation of procedures" for federal admin-
istrative agencies. It was a singular achievement that balanced efficient
and effective management of government business with respect for the
rights of individuals. By 1946, government administration was already
extraordinarily complex.8 Congress's enactment of the APA ended a
search for procedural controls on bureaucratic affairs that would both
treat regulated parties fairly and permit the flexibility Congress thought
necessary to ensure sound management of administrative agency tasks.
It is a tribute to the diligent work that preceded the Act and the fore-
sight that accompanied its passage that the APA has remained essen-
tially intact, despite significant changes in the volume and nature of
6. 5 U.S.C. §§ 553-559, 701-706 (1982).
7. Wong Yang Sung V. McGrath, 339 U.S. 33, 36 (1950).
8. In recommending the APA, the Attorney General's Committee on Administrative Proce-
dure emphasized the importance of retaining flexibility in administrative procedure to accommo-
date the wide array of functions agencies had been directed to perform. ATTORNEY GENERAL'S
COMMITTEE ON ADMINISTRATIVE PROCEDURE, FINAL REPORT 34-42 (1941).
304
DUKE LAW JOURNAL
[Vol. 1984:301
federal agency activities and in the public's perception of the values
that must be served when agencies regulate.⁹
Although the APA has remained intact, administrative agencies
have operated under a "recurrent sense of crisis" fueled by criticisms of
their work. 10 Until recently, however, none of this criticism has been
aimed directly at the heart of the APA's basic structure and design.
Instead, the critics claimed that the agencies had faulty structure and
organization. They recommended that single-head agencies replace
multiple-member commissions or that agency officials be directly re-
sponsible to the President rather than able to act semiautonomously."
Others sought either deregulation or more specific statutory stan-
dards.¹ 12 These charges and reforms can be accommodated without
changing the APA's underlying procedural guidelines; to answer such
complaints, Congress need only adjust a particular agency's structure
or the organic act that defines the scope of the agency's power. Other
proponents of administrative reform proposals have sought procedural
changes, but most of these changes would only supplement rather than
supplant the original APA. 13
9. The outstanding single development in administrative law and in the administrative
agencies of the last half-century, unquestionably, is the genesis and enactment of the
Administrative Procedure Act. Oddly, the second most important development has been
the lack of amendment to the Administrative Procedure Act and of radical change in the
structure and function of the administrative agencies, in spite of strong pressures for
change throughout the latter half of the period.
Williams, Fifty Years of the Law of the Federal Administrative Agencies-and Beyond, 29 FED. B.J.
267, 268 (1970).
10. J. FREEDMAN, CRISIS AND LEGITIMACY 3-12 (1978).
11. See, e.g., SENATE COMM. ON GOVERNMENTAL AFFAIRS, 95TH CONG., 2D SESS., STUDY
ON FEDERAL REGULATION 5 (Comm. Print 1977); SUBCOMM. ON OVERSIGHT AND INVESTIGA-
TIONS, HOUSE COMM. ON INTERSTATE AND FOREIGN COMMERCE, 94TH CONG., 2D SESS., FED-
ERAL REGULATION AND REGULATORY REFORM 487-501. 547-49 (Comm. Print
(consolidation of multiple agency functions under single agency): THE PRESIDENT'S ADVI-
SORY COUNCIL ON EXECUTIVE ORGANIZATION, A NEW REGULATORY FRAMEWORK: REPORT ON
SELECTED INDEPENDENT REGULATORY AGENCIES 13-26 (1971)(single administrators in areas of
transportation, power, securities, and consumer protection regulation): Hector, Problems of the
CAB and the Independent Regulatory Commissions, 69 YALE L.J. 931. 960 60)(recommending
abolition of independent commissions).
12. See T. LOWI, THE END OF LIBERALISM 287-314 (2nd ed. 1977) (revival of delegation doc-
trine and return to juridical democracy); THE CRISIS OF THE REGULATORY COMMISSION (P. Mac-
Avoy ed. (deregulation); PROMOTING COMPETITION IN REGULATED MARKETS (A. Phillips
ed. 1975)(deregulation); see also H. FRIENDLY, THE FEDERAL ADMINISTRATIVE AGENCIES: THE
NEED FOR BETTER DEFINITION OF STANDARDS 1-26 (1962)(agencies should create clear standards
by rule if Congress has not done so).
13. For example, the first major change in the APA was the addition of the Freedom of
Information Act (FOIA) in 1966. See Pub. L. No. 89-554, 80 Stat. 378, 383 (1966)(codified as
amended at 5 U.S.C. § 552 (1982)). The FOIA clarified the obligation of agencies to provide
information and documents to the general public, a subject on which the APA had been silent.
Since then the Government in the Sunshine Act, 5 U.S.C. § 552b(1982). and the Regulatory Flexi-
bility Act, 5 U.S.C. §§ 601-612 (1982), have also added discrete requirements for public access to
Vol.
1984:301]
ROLE OF SOCIAL CONSEQUENCES
305
Since the APA became law, constant scrutiny of and dissatisfac-
tion with administrative agencies have produced these demands for re-
form. Pressure for reform has intensified recently because of the growth
in the scope and social impact of federal agency rulemaking. Although
the magnitude of federal rulemaking has increased steadily since
World War II, a significant surge began in the mid-1960's when the
federal government began responding to new social and economic
problems in such fields as consumer protection, environmental quality,
affirmative action, occupational health and safety, and educational
quality.¹⁴ This surge produced both new laws and new agencies;
twenty of the fifty-six federal regulatory agencies were created between
1970 and 1979.15 The number of full-time agency employees increased
from 28,000 to 87,000 in the same period. 16 The size of the Federal
Register, the government periodical in which proposed federal regula-
tions are published and final regulations are announced, grew from
20,000 pages in 1970 to more than 80,000 by 1980.¹⁷ The Code of Fed-
eral Regulations, in turn, expanded from 54,000 pages in 1970 to 93,000
in 1979. 18
The tremendous recent growth in the number of Washington lob-
byists, Washington-based law firms, and law firms with Washington
offices19 attests to the current significance of the federal government in
our society and economy. The practice of these lobbyists to work the
halls of bureaus as frequently as the halls of Congress, and of Washing-
ton lawyers to invest many more hours in practice before agencies than
before courts, signifies the central importance of the agencies in that
government.
The growth in agency work and influence has produced protests
from adversely affected groups. Prompted by this outcry, Congress has
agency deliberations, and for agency consideration of the total effects of its actions, in light of
available alternatives.
14. See P. MACAVOY, THE REGULATED INDUSTRIES AND THE ECONOMY 9 (1975)("This ex-
pansion was gradual at first but, since the late 1960's, the growth of agency control has been
explosive. The motive, then, was to use the regulatory process to increase health, safety, and the
quality of the environment.").
15. S. REP. No. 284, 97th Cong., 1st Sess. 9-13 (1981) (citing to sources).
16. Id.
17. Id. at 11.
18. Id
19. Between 1975 and 1979, the number of lawyers engaged in regulatory practice in the
District of Columbia more than doubled. It's a Bull Market for Lawyers Here, Legal Times of
Wash., June 11, 1979, at 25, col. 1. Until the Reagan Administration took office, however, no glut
was discernible because the government continued to generate new sources of regulatory business
faster than lawyers could flock to them. D.C. "Business as Usual" to Remain So, Legal Times of
Wash., April 21, 1980, at 1, col. 1.
306
DUKE LAW JOURNAL
[Vol. 1984:301
recently been questioning whether the administrative state is funda-
mentally flawed-whether it suffers from "regulatory failure." Al-
though species of regulatory failure are probably as numerous as
species of market failure, they can be divided into two general cate-
gories, substantive and procedural. The term substantive failure de-
scribes an error in designing statutory means to accomplish a stipulated
end, causing failure despite flawless implementation. The term proce-
dural failure denotes undesirable effects that derive from the imple-
mentation process itself.
For example, if Congress enacted a law intended to reduce effi-
ciency losses associated with market failure, such as monopoly power
or prices that do not reflect the true social costs of production, a regula-
tion written to implement that law would fail substantively if, even
when implemented exactly as intended, it did not correct the efficiency
losses. 20 Procedural regulatory failure could occur in two ways in this
example. First, the implementation process itself could interfere with
the desired market failure correction, in this case by reducing the net
benefits that would flow from elimination of the efficiency losses. Sec-
ond, the implementation process could generate undesirable side ef-
fects, such as significant adverse distributional consequences, delays,
20. The Averch-Johnson effect is perhaps the best-known example of substantive regulatory
failure. See Averch & Johnson, Behavior of the Firm Under Regulatory Constraint, 52 AM. ECON.
REV. 1052, 1953-69 (1962). Averch and Johnson constructed a model of rate-of-return regulation
that shows that utilities subject to this form of regulation possess a strong incentive to overutilize
capital when they are granted rates of return exceeding their costs of capital. The design of this
regulatory system itself, while aimed at reducing the allocative inefficiency due to excessive mo-
nopoly pricing, produces inefficiency through overcapitalization. Id.
Note, also, that particular regulations may only partially solve a market failure problem.
Some regulatory solutions will be more successful at reducing the efficiency loss from monopoly
power than will others. Thus, substantive regulatory failure can occur when a particular regula-
tion corrects market failure less effectively than other regulations.
Inefficiency is only one example of market failure; statutes or regulations can be designed to
correct for other types of failure as well. Determining whether those regulations fail substantively
requires comparing the objectives and means of the regulations with their ability to correct those
failures. For instance, a legislature might pass a statute imposing a moratorium on collecting rent
from impecunious widows in order to correct a perceived distributional failure. Its intended re-
sult, therefore, would be a transfer of wealth to widows. Nevertheless, the moratorium might fail
because of secondary reactions in the private sector from, for example, landlords who, having a
choice, might elect to avoid renting to widows or to charge rent premiums for the additional risks
of nonpayment created by the moratorium legislation. See Leff, Economic Analysis of Law: Some
Realism about Nominalism. 60 VA. L. REV. 451, 460-61 (1974); Michelman, Reflections on Profes-
sional Education, Legal Scholarship, and the Law-and-Economies Movement, 33 J. LEGAL EDUC.
197, 206-08, 206 n.31 (1983) (discussing the confounding influences of changes in empirical contin-
gencies on the law's ultimate impact). Furthermore, whether those ultimate effects constitute a
substantive failure of the legislation turns on a more precise definition of the legislative end. Sec-
ond order effects, for example, might bear only minimally on the success of the moratorium if the
intention is just to give short term relief to a specific class of beneficiaries.
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
307
da-
reduced agency productivity, increased participation costs, or reduced
Al-
legitimacy of the agency's rules.²¹
as
Implementing statutes through regulations will always generate
some costs and, so long as individuals have private interests that di-
verge from the goals of the regulation, the effect of the regulation will
always fall short of the ideal. Whether a particular regulatory proce-
dure fails will therefore ultimately rest on a judgment comparing the
shortcomings and side effects of the procedure with those of feasible
alternatives. In addition, the final effect of a regulation depends on
both its design and its implementation, so that any assessment of a reg-
ulatory scheme will require an integrated assessment of substance and
procedure.
22
The regulatory reform movement of the last decade claims to have
identified instances of both substantive and procedural failure in the
his
regulatory state. 23 Substantive failures have received the most atten-
tion, and two political responses have been advanced to eliminate
them. First, it has been suggested that naturally competitive industries
be deregulated. Implemented examples of this response include the
ef-
Airline Deregulation Act of 1978,24 the 1978 Natural Gas Policy Act25
deregulating gas prices, the Motor Carrier Act of 198026 deregulating
trucking, the 1980 Staggers Rail Act2⁷ relaxing railroad regulation, the
1981 administrative deregulation of oil prices,²⁸ and the 1982 settle-
ment between AT&T and the Justice Department deregulating large
portions of the telecommunications industry.29 Second, it has been
this
suggested that flawed regulatory methods be replaced. This suggestion
has generally required discarding traditional command-and-control
21. See infra part VI (discussion of these criteria for evaluating the social desirability of a
regulation).
22. For other methods of organizing types of regulatory failure, see generally S. BREYER,
to
REGULATION AND ITS REFORM (1982); Wolf, A Framework for Implementation Analysis: A Theory
of Non-Market Failure, 22 J. LAW & ECON. 114 (1979).
23. See, e.g., E. BARDACH & R. KAGAN, SOCIAL REGULATION: STRATEGIES FOR REFORM 3-
19, 361-75 (1982); R. LITAN & R. NORDHAUS, REFORMING FEDERAL REGULATION 59-99 (1984).
re-
24. Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 (codified at scattered
fail
sections at 49 U.S.C. (Supp. V. 1981)).
a
25. Natural Gas Policy Act of 1978, Pub. L. No. 95-621, 92 Stat. 3350 (codified at 15 U.S.C.
§§ 3301-3432, 42 U.S.C. § 7255 (Supp. V 1981)).
26. Motor Carrier Act of 1980, Pub. L. No. 96-296, 94 Stat. 793 (codified at 49 U.S.C.
§§ 10,101-11,902a (Supp. V 1981)).
27. Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895 (codified at 11 U.S.C.
§§ 1170, 1172 (1982), 45 U.S.C. §§ 231f-1018 (Supp. V 1981), 49 U.S.C. 88 1654a. 10,101-11,913a
a
(Supp. V 1981)).
Sec-
28. Exec. Order No. 12,287, 3 C.F.R. 124 (1981).
the
29. See United States V. AT&T, 552 F. Supp. 131 (D.D.C. 1982).
308
DUKE LAW JOURNAL
[Vol. 1984:301
regulations in favor of market incentive devices, including taxes, fees,
and property rights that can be traded.³⁰
Despite the reform movement's preoccupation with substantive
failure, it has not neglected the problems of procedural failure. For
some time, Congress has remedied various procedural failures by in-
corporating process reform into specific statutes.³ These case-by-case
adjustments of the administrative process may actually have contrib-
uted to the APA's stability by preventing reform pressures from being
focused on the generic procedural statute. In recent years, however,
Congressmen have regularly proposed bills to amend the APA,³² indi-
cating that such insulation may be wearing thin. These recent reform
bills reflect recurring themes such as tightening judicial review, ex-
panding procedural constraints on informal rulemaking, requiring im-
pact analysis for major regulations, legislating the role of the Office of
Management and Budget (OMB) in the regulatory process, and enact-
ing an across-the-board legislative veto provision.
Having distinguished some possible shortcomings in both the sub-
stance and process of regulation, the remainder of this article focuses
on procedural reform. An implicit assumption in this exercise is one
we alluded to earlier-administrative procedures and the system in
which they reside are vitally important to the sound functioning of
modern government. To define more clearly why reform of the admin-
istrative process raises important questions, and before we can accu-
rately describe our method of evaluating suggested reforms, we must
first clarify and defend this assumption. We must consider why the
process itself warrants such attention.
30. For example, the Environmental Protection Agency's Emissions Trading Policy is
designed to achieve more air pollution control at lower cost than the 1970 Clean Air Act ap-
proach. See Emissions Trading Policy Statement: General Principles for Creation, Banking and
Use of Emission Reduction Credits, 47 Fed. Reg. 15,076 (1982). See generally F. ANDERSON, A.
KNEESE, P. REED, R. STEVENSON & S. TAYLOR, ENVIRONMENTAL IMPROVEMENT THROUGH Eco-
NOMIC INCENTIVES (1977); R. NORDHAUS & R. LITAN, REFORMING FEDERAL REGULATION
(1984); C. SCHULTZ, THE PUBLIC USE OF THE PRIVATE INTEREST (1977); INCENTIVES FOR ENVI-
RONMENTAL PROTECTION (T. Schelling ed. 1983). For a review of some of the Environmental
Protection Agency's ideas under the Carter Administration, see Drayton, Getting Smarter About
Regulation, HARV. Bus. REV. July-Aug. 1981, at 38.
31. For instance, it has imposed additional procedures on agency rulemaking above the APA
minimum for informal rulemaking. See, e.g., Federal Trade Commission Improvements Act, 15
U.S.C. § 57a (1982)(FTC rulemaking); 15 U.S.C. § 78f(e)(4)(A)-(E) (1982)(SEC rulemaking): The
Toxic Substances Control Act of 1976, 15 U.S.C. § 2605 (1982)(EPA rulemaking for toxic chemi-
cals). See generally Verkuil, The Emerging Concept of Administrative Procedure. 78 COLUM. L.
REV. 258, 317-20 (1978)(collecting examples).
32. See infra notes 58-60 and accompanying text.
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
309
III. ADMINISTRATIVE DISCRETION
If agencies closely followed the detailed desires of Congress when
For
carrying out their statutory responsibilities, the problem of improving
in-
agency-made regulations would collapse into the problem of improving
Congress. Agencies do exercise discretion, however, in the sense that
they are empowered to choose from two or more permissible ways to
implement their statutory authority. 33 The sheer power agencies exer-
cise compels us to be concerned about the procedures through which
they operate, because the procedures channel the exercise of that
power.
For some time, a central question for both administrative and
political theory about the democratic state has been how to reconcile
of
the existence and performance of administrative agencies with the ex-
pression of popular will that legitimates legislative governmental au-
thority.34 Only recently, however, have critics focused explicitly on the
existence of agency discretion as the crucial element in that question.
In the past, the problem of discretion was muted by changing combina-
tions of theories and controls-theories justifying discretion, and con-
in
trols channelling it into acceptable avenues. Understanding how these
of
older combinations failed helps to explain discretion's current status.
33. We are using discretion in the same sense as Hart and Sacks: "[D]iscretion means the
power to choose between two or more courses of action each of which is thought of as permissi-
ble." H. HART & A. SACKS, THE LEGAL PROCESS: BASIC PROBLEMS IN THE MAKING AND APPLI-
the
CATION OF LAW 162 (10th ed. 1958); see also L. JAFFE, JUDICIAL CONTROL OF ADMINISTRATIVE
ACTION 586 (1965) ("Discretion
is the power of the administrator to make a choice from
among two or more legally valid solutions."). In Ronald Dworkin's terms, the discretion we mean
corresponds roughly to "strong discretion." See R. DWORKIN, TAKING RIGHTS SERIOUSLY 31-39
is
(1977). The claim that agencies exercise discretion does not depend, however, on choosing sides in
ap-
the debate between Dworkin and Sartorius on the one hand, and H.L.A. Hart and Hart and Sacks
and
on the other, over whether legal questions always have a single right answer. Compare R. DWOR-
A.
KIN, supra, at 81 ("I shall argue that even when no settled rule disposes of the case, one party may
Eco-
nevertheless have a right to win. It remains the judge's duty
to discover what the rights of the
parties are, not to invent new rights retrospectively.") with H.L.A. HART, THE CONCEPT OF LAW
NVI-
124 (1961)( "The discretion thus left to [a judge] may be very wide; so that if he applies the rule,
the conclusion, even though it may not be arbitrary or irrational, is in effect a choice."). Discre-
bout
tion in our terms means (1) the apparent absence of a single, indisputably correct description of
the rule an agency should adopt, after inspection of the statute, the available legislative history.
APA
and other relevant materials, which implies (2) a substantial belief that a reviewing court would
15
uphold any rule that the agency selected from among a set of plausible choices. This discretion
The
cannot be eliminated completely. See Monaghan, Marbury and the Administrative State, 83
COLUM. L. REV. 1, 25 & 148 (1983) (proposals to limit agency discretion concede that substantial
L.
Hart and Sacks discretion would remain); see also infra note 56.
34. See Stewart, The Reformation of American Administrative Law, 88 HARV. L. REV. 1667,
1675 (1975)( "Insofar as statutes do not effectively dictate agency actions, individual autonomy is
vulnerable to the imposition of sanctions at the unruled will of executive officials
who are not
formally accountable to the electorate.").
310
DUKE LAW JOURNAL
[Vol. 1984:301
Early Supreme Court doctrine limited the discretion that Congress
could delegate to agencies.³ Agencies could only exercise the author-
ity given them by legislation, so they had no independent lawmaking
capacity. To transmit authority to them, Congress had to give agencies
an "intelligible principle" to guide administration.³⁶ So confined, the
agencies' work was, in theory, limited to implementing the specific de-
tails-or filling in the gaps-of a well-defined legislative scheme. The
constitutional principle prohibiting the delegation of legislative power
was the foundation of both this theory and the concomitant limitations
on statutory grants of power to the agencies.
The increased delegation of authority to New Deal agencies and
the growth of the modern welfare state stretched this approach to dis-
cretion to the breaking point. The urgent demands of the economy in
the 1930's, the willingness of the people and the Congress to place sub-
stantial power in the hands of the executive, and the consensus that
some central planning and policy measures were essential to economic
recovery and stability combined to produce more powerful regulatory
agencies. In two Depression-era cases, Panama Refining Co. V. Ryan³⁷
and A.L.A. Schechter Poultry Corp. V. United States,³⁸ the Supreme
Court upheld the older interpretation of the delegation doctrine by in-
validating provisions of the National Industrial Recovery Act as un-
constitutional delegations of legislative authority to administrative
agencies. The decisions provoked one of history's most dramatic con-
frontations between the judiciary and the executive. The "switch in
time that saved nine"³⁹ thwarted President Roosevelt's court packing
scheme and led to a Supreme Court majority that upheld the broad
delegation of power to agencies.
35. See, e.g., United States V. Grimaud, 220 U.S. 506, 517 (1911) (Court sustained delegation
to Secretary of Agriculture of power to make rules protecting national forests from fire because
Secretary had simply been given 'the power to fill up the details' of a congressional decision);
Buttfield V. Stranahan, 192 U.S. 470, 494-98 (1904) (Court upheld tea inspection act as proper
delegation of authority); Field V. Clark, 143 U.S. 649, 692-93 (1892)(delegation of authority to
president to invoke a retaliatory tariff schedule was permissible because act "does not, in any real
sense, invest the President with the power of legislation.
[The President was] the mere agent
of the law-making department to ascertain and declare the event upon which [Congress's] ex-
pressed will was to take effect").
36. J.W. Hampton & Co. V. United States, 276 U.S. 394, 409 (1928).
37. 293 U.S. 388, 431 (1935).
38. 295 U.S. 495, 539 (1935).
39. The phrase refers to Supreme Court decisions in 1937 upholding parts of President
Roosevelt's New Deal legislation after the Schechter and Panama Refining decisions had created
speculation that the entire new deal strategy was in jeopardy at the hands of the Court. See
generally Leuchtenburg, Franklin D. Roosevelt's Supreme Court "Packing" Plan, in ESSAYS ON
THE NEW DEAL 49 (H. Hollingsworth & W. Holmes ed. 1969); Leuchtenburg, The Origins of
Franklin D. Roosevelt's "Court-Packing" Plan, 1966 SUP. CT. REV. 347.
Vol. 1984:301] ROLE OF SOCIAL CONSEQUENCES
311
New agencies began operating under instructions no more specific
than to advance the "public interest"⁴⁰ and another theory emerged to
explain agency discretion. Proponents of this theory also described
agency discretion as limited-limited not by lack of agency indepen-
dence as in the old model, but by their mandate to exercise a skilled
judgment in the service of an objective well-defined by the legislature,
an exercise of judgment that was believed to lead to a definite "correct"
result over time.
This expert manager theory dissolved, too, as it became clear that
the public interest does not always dictate a single result in many im-
portant areas of regulation. The public has many interests, and interest
groups, each differently affected by regulatory alternatives and each
with different claims to consider.⁴² Congress theoretically could man-
date a regulatory goal with sufficient specificity to make it consistent
with the model of agencies as experts, but until now it has been either
unable or unwilling to do so.43
Both the expert manager model and the earlier gap-filling model
established substantive criteria that theoretically restricted the agencies'
freedom to formulate policy and promulgate rules. The failure of these
models left the administrative state with agencies with substantial dis-
cretion, but without confidence that the discretion would be sufficiently
controlled. With the decline of these theories, efforts to solve the dis-
40. For example, The Federal Communications Commission is instructed to determine
whether "the public interest, convenience and necessity will be served" by granting an application
for a radio station license. 47 U.S.C. § 309(a) (1976).
41. See Diver, Policymaking Paradigms in Administrative Law, 95 HARV. L. REV. 393, 409-13
(1981): Stewart, supra note 34, at 1678-81. The expectation that expertise could control discretion
and thus avoid arbitrariness is frequently reflected in judicial opinions. See, e.g., ICC V. Chicago,
R.I. & P. Ry., 218 U.S. 88, 102 (1910)(The ICC's authority is "expected to be exercised in the
coldest neutrality.
[T]he training that is required, the comprehensive knowledge that is pos-
sessed, guards or tends to guard against the accidental abuse of its powers
").
42. Stewart, supra note 34, at 1682-83; see Diver, supra note 41, at 422-23.
43. In recent years several commentators, remarking on the congressional tendency to enact
vague laws. have urged revival of the nondelegation doctrine. See, e.g., Industrial Union Dept.,
AFL-CIO V. American Petroleum Inst., 448 U.S. 607, 687-88 (1980)(Rehnquist, J., dissenting)(the
Benzene case); J. ELY, DEMOCRACY AND DISTRUST 131-34 (1980); Gellhorn, Robinson & Aran-
son, A Theory of Legislative Delegation, 68 CORNELL L. REV. I (1983): Gewirtz, The Courts, Con-
gress, and Executive Policy-Making: Notes on Three Doctrines, LAW & CONTEMP. PROBS.,
Summer 1976, at 46, 56-61; McGowan, Congress, Courts and Control of Delegated Power. 77
COLUM. L. REV. 1119, 1127-30 (1977); Wright, Beyond Discretionary Justice, 81 YALE L.J. 575,
582-87 (1972); see also T. LOWI, THE END OF LIBERALISM 287-314 (2nd ed. 1977). Whatever the
merits of greater specificity in statutory language, we doubt that discretion can be removed from
the administrative state through revival of the delegation doctrine. See infra notes 54-56 and
accompanying text; see also Stewart, supra note 34, at 1693-97 (doubting wisdom of a judicial
revitalization of the delegation doctrine).
312
DUKE LAW JOURNAL
[Vol. 1984:301
cretion puzzle turned both to the internal procedures of the agency and
to the more frequent review of agency performance by Congress.
The APA was Congress's first attempt to establish procedural reg-
ularity in agency practice. It recognized two types of rulemaking pro-
cedures: formal⁴⁴ and informal⁴⁵ rulemaking. In the past twenty years,
informal rulemaking, with its minimal notice and comment require-
ments, has become the technique used by many agencies. Because the
number and scope of such agencies increased simultaneously, and be-
cause informal rulemaking is too limited to bear the full weight of
agency discretion, federal courts responded by examining agency ac-
tion more closely and by channeling discretion through additional pro-
cedural safeguards.4 These judicial innovations reflected efforts to
conform agency practices to notions that the judges thought were "in-
herent in the very concept of a fair hearing."4⁷ They also illustrated a
44. 5 U.S.C. §§ 556(e), 557 (1982). Where commanded by law to use formal rulemaking,
agencies must hold hearings resembling customary courtroom trials, with a hearing examiner re-
ceiving evidence from parties who have the right to present testimony, to object, and to CTOSS-
examine witnesses. The trial produces a record. which must be the sole source of factual informa-
tion on which the rule is based. See generally Hamilton, Procedures for the Adoption of Rules of
General Applicability: The Need for Procedural Innovations of Administrative Rulemaking, 60
CALIF. L. REV. 1276 (1972).
45. Informal rulemaking. governed by section 553, 5 U.S.C. § 553(b)-(c) (1982), has only
minimal requirements of notice and comment. The agency is required to provide advance notice
of its intention to promulgate a regulation, and to seek comment from any interested parties.
After a period of time in which such comments, usually in writing. could be considered by the
agency, the agency issues the regulation, taking such account of the comments as it considers
warranted. For a concise summary of the informal rulemaking process, see DeLong, Informal
Rulemaking and the Integration of Law and Policy, 65 VA. L. REV. 257 (1979).
46. See, e.g., Citizens to Preserve Overton Park, Inc. V. Volpe, 401 U.S. 402, 415-16 (1971);
Home Box Office, Inc. V. FCC, 567 F.2d 9, 53-54 (D.C. Cir.), cert. denied, 434 U.S. 829 (1977).
Courts channeled agency discretion by requiring notices of rules to include notice of the data and
methodology on which the agency was relying, Portland Cement Ass'n V. Ruckelshaus, 486 F.2d
375, 391-93 (D.C. Cir. 1973). cert. denied, 417 U.S. 921 (1974); United States V. Nova Scotia Food
Prods. Corp., 568 F.2d 240, 252 (2d Cir. 1977), by requiring agencies to grant rights to present oral
testimony and cross-examination, e.g., Bunker Hill Co. V. EPA, 572 F.2d 1286, 1305 & n.41. (8th
Cir. 1978); Appalachian Power Co. V. EPA, 477 F.2d 495, 503 (4th Cir. 1973) )(dictum); cf. Walter
Holm & Co. V. Hardin, 449 F.2d 1009, 1015 (D.C. Cir. 1971) ("The kind of procedure required
must take into account the kind of questions involved"), and by insisting that agencies issue an
additional general notice if their proposal undergoes significant changes after the proceedings
begin, Portland Cement Ass'n. 486 F.2d at 394; Automotive Parts Accessories Ass'n V. Boyd, 407
F.2d 330, 338 (D.C. Cir. 1968). Courts also required that agencies fully explain their final deci-
sions, particularly by responding to material criticism from interested parties. Rodway V. United
States Dept. of Agriculture, 514 F.2d 809, 816-17 (D.C. Cir. 1975); Office of Communications of
the United Church of Christ V. FCC, 560 F.2d 529. 532-33 (2d Cir. 1977); see Nova Scotia Food
Prods. 568 F.2d at 252. These judicial innovations have been slowed by the Supreme Court's
ruling that courts can impose procedures beyond those specified in the APA only in "extraordi-
nary circumstances." Vermont Yankee Nuclear Power Corp. V. Natural Resources Defense
Council, 435 U.S. 519, 543-44 (1978).
47. American Airlines V. Civil Aeronautics Board, 359 F.2d 624, 632 (D.C. Cir. 1966).
1984.301
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
313
and
shift from a view of agencies as operating with clear mandates and
tightly restrained power to a view of agencies as acting without clearly
reg-
preferable policy options but with substantial discretion. Thus, the ex-
pro-
pert manager model was smothered under a more realistic, even cyni-
years,
cal, appraisal of agency operations.⁴⁸
quire-
While the courts examined agency procedures, Congress also re-
the
acted. During the 1960's and 1970's Congress began to follow a new
be-
agenda for controversial social issues. It involved restraining the client
of
groups of established agencies, or regulating segments of industry and
ac-
commerce in the name of causes such as consumer welfare and envi-
pro-
ronmental protection. Aware of the criticism that the established agen-
to
cies had been captured by their clientele, Congress created new
"in-
agencies to implement its new agenda. Not only were these agencies
a
new, many of them were given statutory instructions quite different
from the older public interest statutes. The new statutory mandates
naking,
re-
often imposed a strict deadline,4 dictated a specific approach to agency
cross-
forma-
Rules
of
48. Studies of agency regulatory actions have shown a pattern of solicitude for the interests of
60
the industries ostensibly the objects of the regulation. See G. SCHUBERT, THE PUBLIC INTEREST
119 (1960); Green & Nader, Economic Regulation vs. Competition: Uncle Sam the Monopoly Man.
only
82 YALE L.J. 871, 876 (1973); see also J. LANDIS, THE ADMINISTRATIVE PROCESS 36-37 (1938). As
notice
the "public interest" disintegrated into a collection of special interests, critics saw agency client
parties.
groups obtaining special advantages, rather than a neutral agency protecting the public interest.
by
the
Students of organizational behavior and economics provided confirming evidence and explana-
nsiders
tions. Agency personnel depended on industry for information and political support. Career bu-
aformal
reaucrats seemed to prefer a work pattern of amiable relations and consensus to one of strife and
tension, and such a pattern required cooperation with and from the industry. The task of regula-
(1971);
tion included maintaining a healthy and stable clientele, and a strong regulated group also pro-
(1977).
moted congressional support and budgetary growth. Diverse evidence and theories merged to
and
create a disturbing picture of bureaus endowed with substantial discretionary powers unchecked
F.2d
by some neutral expertise or discipline, favoring the interests of client industries over broader
Food
interests or less concentrated groups; e.g., M. BERNSTEIN, REGULATING BUSINESS BY INDEPEND-
oral
ENT COMMISSION 87 (1955); R. FELLMETH, THE INTERSTATE COMMERCE OMISSION 1-39 (1970): J.
(8th
LANDIS, REPORT ON REGULATORY AGENCIES TO THE PRESIDENT-ELECT 71 (1960): see also Stig-
Walter
ler, The Theory of Economic Regulation, 2 BELL J. ECON. & MGMT. Sci. 3 (1971).
quired
The studies illustrated a process for rulemaking that was, in important respects, political.
an
Rules were created through negotiation and compromise, and those rules reflected a sense of what
edings
was possible and what was necessary to ensure the political stability of the agency. Rulemaking
407
resembled lawmaking by Congress and congressional committee. Yet. the accepted procedures
deci-
produced a highly skewed political process-one in which only a severely truncated portion of the
United
relevant issues and groups were represented. This allowed the exercise of agency discretion in
of
ways far removed from the popular will. From this perspective, the procedural additions to infor-
Food
mal rulemaking expanded the interests represented and participating in regulation writing. They
ourt's
provided "a surrogate political process to ensure the fair representation of a wide range of affected
aordi-
interests." Stewart. supra note 34, at 1670.
efense
49. For example, Congress gave the Environmental Protection Agency 120 days from the
effective date of the Clean Air Act Amendments of 1970 to issue air quality standards for sulphur
dioxide, particulates, nitrogen oxides, carbon monoxide, and hydrocarbons. 42 U.S.C.
314
DUKE LAW JOURNAL
[Vol. 1984:301
action, 50 or defined a specific result that the regulation was to achieve. 51
These provisions are examples of "agency-forcing" statutes, which at-
tempt to channel agency discretion into more precisely controlled ave-
nues than did the public interest statutes of the established agencies.
They reflect Congress's suspicion of unrestrained discretion in the
hands of agencies. Experience under these recent efforts to cabin dis-
cretion has demonstrated, however, that while they may affect the ways
discretion is employed and the directions in which it can move, they do
not entirely eliminate opportunities for the agency to exercise it.
Despite Congress's agency-forcing intentions, the vast majority of
the new statutes can still be implemented in a variety of ways, and to
that extent they do not remove discretion from the administrative sys-
tem. For instance, under the Clean Air Act, the Environmental Pro-
tection Agency (EPA) must decide what constitutes the "best system of
emission reduction" that "has been adequately demonstrated" for air
pollution from industrial sources. This decision may seem at first
glance to be an objectively determinable, technical one, but it is not.
"Best
adequately demonstrated" may be interpreted as the best
technology currently in use, the best technology for which reliable com-
mercial or pilot plant test results are available, the best technology that
could plausibly be transferred from another industry, or the best tech-
nology that experimental results and theoretical work appear to sup-
port. Any one of these approaches would satisfy the statutory
mandate, yet the definition selected will have dramatic effects on the
§ 7409(a)(1) (Supp. V 1981). The standards also had to be based on scientific. health-based con-
siderations that further limited agency choice. Id. at § 7409(b)(1).
50. For instance, Congress has required that standards be based on technology assessment,
e.g., 42 U.S.C. § 7411 (Supp. V 1981) (Clean Air Act new source performance standards), or solely
on health considerations. See, e.g., supra note 49.
51. For instance, the Clean Air Act Amendments of 1970 instructed the EPA to set automo-
bile emissions standards so as to reduce such emissions by 90%. 42 U.S.C. §§ 1857b-18571 (1976).
52. For further discussion of "agency-forcing" statutes, see B. ACKERMAN & W. HASSLER,
CLEAN COAL/DIRTY AIR 124-28 (1981).
53. 42 U.S.C. § 7411(a)(7)(c) (Supp. V 1981).
54. The EPA has variously interpreted analogous provisions in both the Clean Air Act and
the Clean Water Act to permit each of these definitions. For interpretations of the Clean Air Act,
see Portland Cement Co. V. Ruckelshaus, 486 F.2d 375, 395-402 (D.C. Cir. 1973). cert. denied, 417
U.S. 921 (1974) (commercial plant tests satisfied definition); Essex Chemical Corp. V. Ruckelshaus,
486 F.2d 427, 433-37 (D.C. Cir. 1973)(same): Sierra Club V. Costle, 657 F.2d 298, 360-67 (D.C.
Cir. 1981) (one commercial plant test, one pilot plant test, plus projected design and operation
improvements satisfied definition). For interpretations of the Clean Water Act. see American Pa-
per Inst. V. Train. 543 F.2d 328, 351-52 (D.C. Cir.). cert. dismissed, 429 U.S. 967 (1976)(technology
to be transferred from other industry categories satisfied definition); California & Hawaiian Sugar
Co. V. EPA, 553 F.2d 280, 285-89 (2d Cir. 1977)(same); Hooker Chemicals & Plastics Corp. V.
Train, 537 F.2d 620. 632 (2d Cir. 1976)(results of exemplary commercial plants formed adequate
regulatory basis). The EPA has frequently been reversed in its application of these definitions to
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
315
stringency of emission standards, the speed with which rules can be
written for different industries, and the expense imposed on industry.
Even mandating the use of cost-benefit analysis will not eliminate dis-
cretion, given that many assumptions must be made, hard-to-quantify
factors must be quantified, shadow prices must be approximated for
factors for which no market price is available, and assessments must be
made of regulatory outcomes.⁵⁵ Although agency-forcing may have
other merits, it is unlikely to eliminate discretionary power.
specific industries, but judicial interpretation affirms the EPA's discretion to choose among the
alternative definitions. See, e.g., Portland Cement V. Ruckelshaus, 486 F.2d at 391 (discussing
"adequately demonstrated"); Tanners' Council of America V. Train, 540 F.2d 1188, 1192 (4th Cir.
1976) (adequacy of technology is "almost entirely judgmental"); see also infra note 56.
55. See, e.g., SUBCOMM. ON OVERSIGHT AND INVESTIGATIONS OF HOUSE COMM. ON INTER-
STATE AND FOREIGN COMMERCE, 96TH CONG., 2D SESS. COST-BENEFIT ANALYSIS: WONDER
TOOL OR MIRAGE? 1-31 (Comm. Print. 1980).
56. The EPA's recent revisions of the new source performance standards for coal-fired power
plants provide an excellent example of the discretion that remains in modern rulemaking
processes, even under agency-forcing regimes. Sulphur oxides are among the most critical pollu-
tants produced from fossil fuel combustion, and power plants among the major producers of this
pollutant. Control technologies for sulphur emissions from power plants are extremely expensive.
As the EPA reviewed the proposed standards, it considered controlling both the percentage of
sulphur that had to be removed and a maximum amount that could be emitted for every million
British thermal units (MBtu's) of coal energy consumed. The EPA's final rule established a per-
centage removal requirement varying with the sulphur content of coal as well as a ceiling of 1.2
pounds of sulphur dioxide per MBtu. Utility companies challenged that aspect of the percentage
removal rule requiring 90% removal for high sulphur content coal; the Environmental Defense
Fund (EDF) contested the 1.2 lbs./MBtu ceiling.
Both the rulemaking and the subsequent judicial review were vigorously litigated by utility
consortia, individual utilities, the National Coal Association, the EDF, the EPA, and other inter-
ested parties. Judicial review could have been expected to be, and was, thorough and probing.
Ultimately, the Court of Appeals for the District of Columbia Circuit upheld the EPA rule, in-
cluding the two sulphur content control elements just described. Sierra Club V. Costle, 657 F.2d
298, 360-64 (D.C. Cir. 1981). More important than the actual result. however, is our judgment
about the outcome had the EPA issued a different rule on the basis of precisely the same record
and operating under the identical statute. The court's discussion of the EPA's 90% removal stan-
dard abounds with references to EPA inferences and extrapolations from existing data: the court
remarked several times that parts of the EPA's reasoning cannot be supported by data of perform-
ance from existing or pilot facilities. 657 F.2d at 360-73. To justify the 90% standard, the EPA
had to rely upon its projections of "some design and operational improvements" in new control
technology. Id. at 363. While concluding that the "EPA has plotted a reasonable course through
the evidentiary thicket and stated a logical rationale for the route it chose," id. at 360, the court
almost certainly would have sustained a less stringent standard had the EPA "chosen" to rely less
heavily on such projections and extrapolations, and thus to produce a less stringent standard. Cf.
Ethyl Corp. V. EPA. 541 F.2d 1, 37 (D.C. Cir. 1976)( 'Thus we might well have sustained a deter-
mination by the Administrator not to regulate.
That does not mean, however, that we cannot
sustain his decision to so regulate.").
This reading of Sierra Club shows that the EPA possessed discretion to choose among plausi-
ble alternative standards. It is consistent with the Supreme Court's current view of the authority
agencies have frequently been given by Congress. Where the agency's judgment constitutes 'a
reasonable accommodation of conflicting policies that were committed to the agency's care by the
statute," the court reviews "only to determine whether [it] has exceeded [its] statutory authority
316
DUKE LAW JOURNAL
[Vol. 1984:301
Rather than extracting all discretion from agency directives, Con-
gress might resort to increased post hoc scrutiny of the agencies' work.
In fact, oversight hearings, budget-related hearings, and government
operations subcommittees' hearings have markedly increased in recent
years. Now that control of agency discretion through the legislative
veto has been foreclosed, Congress may rely upon these types of over-
sight even more frequently. Such oversight is unlikely to be continu-
ous, however, and even when present it can be incorporated into the
model we will describe by treating it as another procedural ingredient
in the formulation of agency rules, like judicial review.
Our maturing appreciation of the administration of laws has pro-
duced a sense that substantial discretion is inevitable in any modern
governmental structure that relies upon agencies to implement compli-
cated programs of regulation. We have put aside earlier pretensions
that discretion is merely residual or mechanical or that it can be con-
trolled by neutral application of expert techniques of analysis and ad-
ministration. This observation, however, leaves unresolved the puzzle
of reconciling the rule of administrative agencies with theories of repre-
sentative democracy.
IV. PROCEDURAL REFORM AND ITS SOCIAL CONSEQUENCES
A. The Internal View of Procedure.
1. Procedure Important for Its Own Sake. Since the mid-1960's,
Congress and agency critics have brought pressure to bear on the pro-
cedural aspects of agency operations. Both the House and Senate have
conducted substantial hearings.⁵⁷ In 1982, the Senate formalized its
or acted arbitrarily." Fidelity Federal Sav. & Loan Ass'n V. De la Cuesta, 458 U.S. 141, 154
(1983) (citing United States V. Shimer, 367 U.S. 374, 381-82 (1961)). The court's task, in short, is
not to determine whether it would have reached the same result as the agency, but only to decide
whether the regulation chosen was a "reasonable" one. That distinction presupposes that more
than one "reasonable" rule is generally available to the agency.
57. E.g., COMMITTEE ON GOVERNMENTAL AFFAIRS, STUDY ON FEDERAL REGULATION S.
Doc. Nos. 25-26, 71-72, 95th Cong., 1st Sess. (1977), S. Doc. No. 91, 95th Cong., 2d Sess. (1977),
S. Doc. Nos. 13-14, 96th Cong., 1st Sess. (1978)(six vols. plus an appendix to vol. six, published
between Jan. 1977 and Dec. 1978); Regulatory Reform: Hearings Before the Subcomm. on Adminis-
trative Practice and Procedure of the Senate Comm. on the Judiciary, 96th Cong., 1st Sess. (1979)
(summarized in S. REP. No. 1018, 96th Cong., 2d Sess., pt. 2 at 14-16 (1980)); Administrative Proce-
dure Act Amendments of 1978: Hearings on S. 1463, S. 1720. S. 1721, S. 2011, S. 2490, S. 2862
Before the Subcomm. on Administrative Practice and Procedure of the Senate Comm. on the Judici-
ary, 95th Cong., 2d Sess. (1978); Administrative Procedure Act Amendments of 1976: Hearing S.
796, S. 797, S. 798, S. 799, S. 800, S. 1210, S. 1289, S. 2407, S. 2408, S. 2715, S. 2792, S. 3123, S.
3296, & S. 3297 Before the Subcomm. on Administrative Practice and Procedure of the Senate
Comm. on the Judiciary, 94th Cong., 2d Sess. (1976); Administrative Procedure Act Amendments of
1965: Hearings on S. 1160, S. 1336, S. 1758, S. 1879 Before the Subcomm. on Administrative Prac-
84:301
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
317
Con-
most recent conclusions and unanimously passed S. 1080, the Regula-
vork.
tory Reform Act.⁵⁸ Although S. 1080's companion, H.R. 746, never
reached the House floor, Chadha may have increased the public pres-
sure on Congress to the point that the House may soon consider similar
legislation. In fact, S. 1080 and a similar bill, H.R. 220, were reintro-
duced in 1983.60
To appraise the merits of these legislative proposals, one must first
the
understand the goals that administrative procedures ought to achieve.
Historically, concern about agency bias and unfairness, especially when
agencies favor regulated industries and fail to serve the interests of un-
represented or underrepresented consumers and citizens, has been a
major stimulus of procedural reform.6¹ Evolving notions of fairness,
fueled by the changing role of the administrative state in providing es-
sential goods and services, continue to form the basis of broad critiques
of agency behavior. 62 In addition, agency procedures should be
ad-
designed to determine accurately the facts necessary to implement stat-
utes. Fairness and accuracy are interrelated, because techniques for
ensuring fairness-adequate notice and the opportunity to participate
meaningfully in proceedings affecting one's interests-will also ensure
accuracy. 63 Actually, accuracy may be the primary value. If we pos-
sessed a perfect technique for accurate fact finding that required no
party participation, it is possible that our interests in fairness would be
completely vindicated. Until such a process is devised, however, fair
procedures usually advance the goal of accuracy and perhaps other
goals as well.64 Finally, one ought to be concerned about procedural
ave
its
tice and Procedure of the Senate Comm. on the Judiciary, 89th Cong., 1st Sess. (1965): Administra-
tive Procedure Act Amendments of 1964: Hearings on S. 1663 Before the Subcomm. on
154
Administrative Practice and Procedure of the Senate Comm. on the Judiciary, 88th Cong.. 2d Sess.
is
(1964).
58. S. 1080, 97th Cong., 2d Sess., 128 CONG. REC. S2713 (daily ed. March 24. 1982).
more
59. H.R. 746, 97th Cong., 2d Sess. (as amended). reprinted in H.R. REP. No. 435, 97th Cong.,
2d Sess. 1 (1982).
S.
60. H.R. 220, 98th Cong., 1st Sess., 129 CONG. REC. H45 (daily ed. Jan. 3, 1983).
61. See Stewart, supra note 34. at 1681-88; Weisbrod, Problems of Enhancing the Public Inter-
est, in PUBLIC INTEREST LAW 30, 31-40 (B. Weisbrod ed. 1978): see also Wong Yang Sung V.
McGrath. 339 U.S. 33, 36 0)(concern over agency partiality led to passage of the APA);
979)
Verkuil. The Emerging Concept of Administrative Procedure, 78 COLUM. L. REV. 258, 262 (1978).
62. See supra notes 46-47 and accompanying text.
2862
63. "No better instrument has been devised for arriving at truth than to give a person in
jeopardy of serious loss notice of the case against him and opportunity to meet it." Joint Anti-
S.
Fascist Comm. V. McGrath. 341 U.S. 123, 171-72 (1951) (Frankfurter, J., concurring).
S.
64. Fairness, signifying a concern to allow participation in agency processes affecting one's
life, has also been said to rest on several values not inextricably related to the concern for accu-
of
racy. Participation may be a form of political involvement that gathers its worth not from any
factual information supplied to the proceedings but from its demonstration of concern and interest
318
DUKE LAW JOURNAL
[Vol. 1984:301
efficiency, defined as the low-cost resolution of the business before the
agency. Other things being equal, agencies should prefer procedures
that are speedier, simpler, and less costly.
Various expressions of these criteria-fairness, accuracy, and pro-
cedural efficiency-recur throughout the debate over appropriate ad-
ministrative procedures. 65 There is obvious tension among them;
in the outcome. See Michelman, The Supreme Court and Litigation Access Fees: The Right to
Protect One's Rights-Part 1. 1973 DUKE L.J. 1153, 1174-75. Participation also has been thought
to act as a spine-stiffener for agency officials, thus forestalling the more outrageous incidents of
regulatory capture and producing decisions more consistent with the statutory design. Cramton,
The Why, Where and How of Broadened Public Participation in the Administrative Process. 60 GEO.
L.J. 525, 527-32 (1972); Cramton, A Comment on Trial-Type Hearing in Nuclear Power Plant Sit-
ing, 58 VA. L. REV. 585, 591-93 (1972) [hereinafter cited as Nuclear Plant Siting]. This interest in
producing decisions consistent with the statutory design might, of course, be considered a variant
of administrative accuracy, although it is more complex. A desire for increased participation may
also be implicated in the admonition that each individual be treated with a certain dignity and
respect, including the dignity of being permitted to state his case. A number of commentators have
tried to explain and justify dignitary values in administrative law. See, e.g., Mashaw, Administra-
tive Due Process: The Search for a Dignitary Theory, 61 B.U.L. REV. 885 (1981); Mashaw, The
Supreme Court's Due Process Calculus for Administrative Adjudication in Mathews V. Eldridge:
Three Factors in Search of a Theory of Value, 44 U. CHI. L. REV. 28 (1976); Michelman. Formal
and Associational Aims in Procedural Due Process in Due Process in Nomos XVIII 126 (1977).
65. Similar concepts shine through despite varying terminologies. Professor Verkuil speaks of
the goals of procedure as "fairness, efficiency and satisfaction," Verkuil, supra note 61. at 280, with
our sense of accuracy being subsumed under his category of fairness, see id at 279. Satisfaction
seems dependent on fairness, both in its accuracy-related role and in reflecting some of the nonac-
curacy-related norms described supra note 64. Presumably Verkuil's sense is not that of subjective
happiness in the outcome, which would be too much to expect of a regulatory system. Rather, the
notion is more appropriately a test of procedures from the vantage point of one not immediately
engaged in the substantive tug-of-war. Its affinity to fairness can thus be underscored by noting its
similarity to Rawls's idea of justice as fairness, which appeals to an evaluation detached from the
immediate preferences and passions of the moment. See J. RAWLS, A THEORY OF JUSTICE 11-22
(1971); see also Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations
of "Just Compensation" Law. 80 HARV. L. REV. 1165, 1221 (1967)(applying the fairness idea to
just compensation problems). Professor Cramton speaks of accuracy. efficiency, and acceptability.
Cramton, Nuclear Power Plant Siting, supra note 64, at 592-93 (1972). Acceptability takes much
the same cast we have given to Verkuil's satisfaction. See id. at 593. Professor Mashaw describes
the appropriate goals as accuracy, fairness, and timeliness. Mashaw, The Management Side of Due
Process: Some Theoretical and Litigation Notes on the Assurance of Accuracy, Fairness and Timeli-
ness in the Adjudication of Social Welfare Claims. 59 CORNELL L. REV. 772, 774-76 (1974). Timeli-
ness is an aspect of efficiency, and we believe the more general term more appropriate, because it
may be acceptable to trade off timeliness for other ingredients of efficiency, such as cost.
The Supreme Court's current approach to due process adjudication builds on the three fac-
tors set out in Mathews V. Eldridge, 424 U.S. 319, 336 (1976):
[F]irst, the private interest that will be affected by the official action; second, the risk of
an erroneous deprivation of such interest through the procedures used. and the probable
values. if any, of additional or substitute procedural safeguards; and finally. the Govern-
ment's interest, including the function involved and the fiscal and administrative bur-
"dens that the additional or substitute procedural requisites would entail.
As it stands. this "test" is incomplete as a statement of what values are to be served by the due
process evaluation. Accuracy and efficiency concerns are implicated by the second and third fac-
tors, but no content is provided for the item of "private interest," and the suggestion of the quoted
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
319
honest disagreements can arise about whether particular procedures
define and achieve an appropriate mix. Nevertheless, as goals of a pro-
cedural system, these three criteria are consistent with what we shall
call the internal view of administrative procedure. Viewing procedure
internally simply means viewing procedure as serving the goals of fair-
ness, accuracy, and efficiency-goals that can be defined independently
of the substantive content of the legislation being implemented and the
rule eventually formulated. The social importance of the goals in any
particular case will depend heavily on the significance of the underly-
ing substantive policies that the procedures implement, but proponents
of the internal view see substantive policy formation and procedural
systems design as two logically separate functions. Such an internal
perspective greatly influenced Congress's search for generic procedures
for agencies and led to the eventual passage of the APA.66
language is that "governmental interest" may include features in addition to efficiency. As to
these, the test tells us generally what to look at, but neither how to value it nor how to be more
precise about what we see. The Court has consistently held that one ingredient of due process is
an impartial fact-finder, see Tumey V. Ohio, 273 U.S. 510, 531 (1927); but see Arnett V. Kennedy,
416 U.S. 134, 158 (1974) affirming employee discharge for defamation via procedures under which
supervisor who was the target of employee's statement made the discharge determination); the
Mathews test must either assume that this aspect of fairness is an independent requirement of due
process or capture it in the expanse of the "private interest."
Beyond this minimal fairness content, subsequent decisions strongly suggest that the idea of
private interest coincides with the utility or welfare importance of the private stake in the out-
come. with no collateral dignitary interests present. For example, in Dixon V. Love, 431 U.S. 105
(1977), the Court affirmed a summary revocation of a truck driver's license without a hearing,
finding that the petitioner's plea for a hearing amounted to nothing more than seeking an opportu-
nity to argue for leniency. "Such an appearance might make the licensee feel that he has received
more personal attention. but it would not serve to protect any substantive rights." Id. at 114.
Because the Court also found that no accuracy interest was served by the desired hearing, the state
agency's denial of the hearing was proper. Id. The result leaves scant room for any "dignitary" or
"process values." See supra note 64.
66. Professor Verkuil has proposed that a concern over "procedural tyranny" provides a
thread along which to trace the movement toward adoption of the APA. This tyranny arose when
government attempted to displace judicial tribunals. with their distinctive and trans-substantive
procedures, by using administrative agencies to make important decisions regulating private be-
havior. Verkuil, supra note 61, at 262. Although many people opposed on the merits the New
Deal programs and other regulatory intrusions into the private sphere, there was a consensus that
"general procedural guides in rulemaking and adjudication would be adequate to assure fairness";
this consensus facilitated passage of the APA. Id. at 279. Without some faith in the legitimacy of
isolating procedure from substantive law, the belief that generic procedural legislation alone could
ensure fairness-or any other significant value-would be impossible. Precisely this belief rein-
forced the sense of accomplishment that buoyed proponents of the APA, who treated the statute as
a "comprehensive charter of private liberty and a solemn undertaking of official fairness." McCar-
ran, Foreword to ADMINISTRATIVE PROCEDURE ACT: LEGISLATIVE HISTORY, S. Doc. No. 248,
79th Cong., 2d Sess. iii (1946).
320
DUKE LAW JOURNAL
[Vol. 1984:301
2. Procedure Unimportant. Although proponents of the internal
view regard substantive policy and procedure as independent factors in
the administrative process, they regard both as important factors. Our
working assumption, as well, has been that procedure is important, es-
pecially given that procedure is a means to channel agency discretion.
Before distinguishing our view from the internal one, however, we
should note that some would dissent from that assumption. For some,
procedure is insignificant and ineffectual in the face of substance; in
fact, administration is all substance. Under this view, procedures are
but hurdles to be cleared on the way to achieving a goal the agency has
otherwise determined. Concededly, anyone with much regulatory ex-
perience can recall instances in which the participants in official
rulemaking hearings tacitly understood that they were merely creating
a record to support a decision made elsewhere. It is against this back-
ground, for instance, that Professor Sax has pessimistically opined that
"the emphasis on the redemptive quality of procedural reform is about
nine parts myth and one part coconut oil. "67
This pessimism, however, fails to distinguish between instances of
procedural inefficacy and the underlying tendencies of procedure to in-
fluence results in particular directions. These tendencies may be subtle
or difficult to trace and their impact on specific cases may be negligible.
They are real forces nevertheless, and attempts to gauge the decision-
altering effects of procedural reforms across a broad range of agency
actions have noted the concrete changes such forces produce. For ex-
ample, the Council on Environmental Quality conducted a major re-
view of the National Environmental Policy Act-the specific focus of
Professor Sax's pessimism-and concluded that "environmental assess-
ment and impact statements have substantially improved government
decision over the past six years. "68 More generally, procedures create
67. Sax, The Unhappy Truth About NEPA, 26 OKLA. L. REV. 239, 239 (1973).
68. COUNCIL ON ENVIRONMENTAL QUALITY, ENVIRONMENTAL IMPACT STATEMENTS: AN
ANALYSIS OF Six YEARS' EXPERIENCE BY SEVENTY FEDERAL AGENCIES 2 (1976). A later. more
focused study conducted by the EPA reported that NEPA procedures resulted in at least one
major positive change in the design of 50 out of 51 waste water treatment facilities and 9 out of 9
coal-fired power plants reviewed. COUNCIL ON ENVIRONMENTAL QUALITY. ENVIRONMENTAL
QUALITY-1980 371-72 (1980); see also Rodgers, A Hard Look at Vermont Yankee: Environmental
Law Under Close Scrutiny, 67 GEO. L.J. 699, 710 (1979)( though NEPA is ressentially proce-
dural,' the procedural decisions have had a way of working substantive modifications of agency
action"). Earlier in the 1970's, Professor Stewart was more skeptical, see Stewart, supra note 34 at
1780, but he qualified his conclusion by noting that "there is a pressing need for rigorous empirical
study of the effects in agency decisions of procedural requirements such as those fashioned by the
courts on the basis of NEPA." Id. at 1780 n.526. Although the Council on Environmental Qual-
ity's (CEQ) findings may not be "rigorous," they do support the conclusion that procedures do
make a difference. For an effort to analyze the organizational, structural consequences of NEPA.
984:301
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ROLE OF SOCIAL CONSEQUENCES
321
opportunities for strategic behavior by interested parties; they increase
in
or decrease access and leverage by different groups, coalitions, or af-
Our
fected parties, and they institutionalize tendencies favoring certain
es-
kinds of results over others. All these influences can be translated into
social consequences.69 Because procedures act only indirectly on
we
agency work products, there will always be potential for actions defy-
ing the rules of the game, but to argue that procedures never constrain,
in
channel, or direct work products in desirable ways is wrong.
are
has
B. The Social Consequences View of Procedure.
ex-
fficial
Lying between the internal view's substance-procedure dichotomy
and the pessimistic dismissal of procedure as an unimportant factor in
that
perhaps the most important mechanism through which NEPA influences substance, see COUNCIL
ON ENVIRONMENTAL QUALITY. NEPA IN ACTION: ENVIRONMENTAL OFFICES IN NINETEEN FED-
ERAL AGENCIES (1981). See also Cramton & Berg, On Leading a Horse to Water: NEPA and the
Federal Bureaucracy, 71 MICH. L. REV. 511, 536 (1973)(NEPA can place helpful pressure on
of
agencies).
69. NEPA. for example. aims at producing better informed, and hence different, decisions by
o
in-
forcing administrative agencies to consider the environmental consequences of their actions. The
Act has been attacked for merely imposing paperwork burdens and delays. creating procedural
traps for unwary and hostile agencies and interested parties, and being entirely ineffective in alter-
ing agency policies or decisions, thus not getting at the "real problem." See, e.g., Fairfax. A Disas-
ter in the Environmental Movement, 99 Sci. 743 (1978); Sax, The (Unhappy) Truth About NEPA, 26
OKLA. L. REV. 239, 248 (1973). By conceding that NEPA may have these effects, however, these
ex-
criticisms acknowledge at least some validity to the social consequences model, because delays
reduce the rate of agency output, and paperwork burdens increase costs of participation. Both of
re-
these consequences have measurable impacts on the world of private conduct. If certain dams are
of
built more slowly, opponents have additional time in which to enjoy a world without dams, or to
organize more effectively to prevent their construction. By changing the procedures of agency
decisionmaking, NEPA thus causes some change in the agency work product. It may be that
critics from certain ideological or normative perspectives think that those consequences are bad
and want to criticize NEPA on that ground, but the normative point is distinct from the descrip-
tive one, which the social consequences model attempts to explicate.
Even beyond the delay (which after all may be only transitional, fading away once the agency
learns the ropes of procedural compliance) and beyond the increased costs of participation. NEPA
AN
affects the decisions the agency makes, the yes or no judgments on approvals of permits, the sub-
more
stantive provisions the agency puts into leases of federally owned land, and other such matters. In
one
the short run, any organization with policy perspectives of its own will inevitably view with hostil-
of
9
ity and resistance external impositions designed, with malice aforethought. to alter those perspec-
tives. They will, in other words, view those procedures as hurdles. and may for a time try to
mental
circumvent or ignore them. Gross disregard of procedural requirements is embarrassing and ille-
proce-
gal for an agency, however, and even grudging compliance has dynamic effects on organizations.
Individuals must be hired. or retrained, to respond to the directive to consider environmental
34
at
costs. Those individuals become advocates for their disciplines. New groups of interested parties
pirical
and expert witnesses must be listened to and their arguments at least comprehended, if not em-
by
the
braced. The contents of the administrative record will change to include more systematic and
Qual-
complete recognition of environmental problems, thus providing arguing points for advocates
do
within the agency. All of these structural and process changes translate into different agency deci-
EPA.
sions. See supra note 68.
322
DUKE LAW JOURNAL
[Vol. 1984:301
administration, a third perspective assesses agency procedures and pro-
cedural reforms in terms of the substantive content and effects of the
resulting agency work product. This viewpoint might be called social
rather than internal because it focuses on the social impact that the
administrative apparatus will have on regulated individuals and
groups. It does not succumb to the view that procedure is meaningless,
nor does it assert that procedure can be studied as an isolated disci-
pline. Rather, while the social perspective does not deny the internal
view's validity, it does challenge its sufficiency.⁷⁰
70. See, e.g., Stewart & Sunnstein, Public Programs and Private Rights, 95 HARV. L. REV.
1193, 1221 (1982)("As both an analytical and a practical matter, the procedures for implementing
a regulatory program cannot be separated from its substance."). Several reasons can be advanced
to explain, at least partially, why the internal view proves so enduring, despite its inadequacies.
First, insofar as analysis of administrative procedure concentrates on generic procedural legisla-
tion, namely the APA and proposals to change it, the inquiry strongly reinforces the attractiveness
of the procedure-substance separation of the internal perspective, because it is almost impossible
to abstract from specific agency mandates and procedures. which is what thinking generically
demands, without beginning to think about "procedure" in isolation from any particular substan-
tive statutory regime.
Just as significantly, separating procedure and substance for analytic purposes coincides with
a deeply ingrained image of the proper division of responsibility within our representative democ-
racy. In that image, the legislature controls the selection of substantive mandates, making the
basic policy choices necessary to resolve questions of substantive value conflicts. See, e.g., Stew-
art, supra note 34, at 1671-76 (describing this as the "traditional model"). It is not the only polit-
ical model in the American heritage, however. See, e.g., Michelman, Political Markets and
Community Self-Determination, 53 IND. L.J. 145, 187-99 (1977-78) (contrasting traditional model
with a public interest theory of government, in which courts have a legitimate role in overturning
legislative action that is contrary to basic public values). Of course, given the complexity of many
problems and the world in which their solutions must be implemented, the legislature inevitably
delegates the implementation of its choices to administrative agencies. Yet, since those agencies
are not supposed to be making policy, selections of procedures by which they operate should have
as little effect as is possible on the substantive content or consequences of its work, other than to
require adherence to the statutory command. The internal view holds this image in focus, while
making procedure an important and legitimate object for study. It recognizes that choices of
procedure can have an important influence on the effectuation of some values, but it defines those
values to be independent of the substantive content of the legislation being implemented.
The internal perspective also reinforces claims of neutrality and professionalism important to
the study of administrative process as a discipline separate from the study of legislation. The
Administrative Conference of the United States' reports, for instance, commonly separate proce-
dure as an object of study. See, e.g., Boyer, Phase II Report on the Trade Regulation Rulemaking
Procedures of the Federal Trade Comm'n, in ADMINISTRATIVE CONFERENCE OF THE UNITED
STATES [1980] REPORT AND RECOMMENDATION 33, 64 (1980)("it should be possible to make use-
ful judgments about [procedures] without necessarily having some yardstick to judge the quality
or accuracy of the decisions themselves"). Substantive values in liberal democracy are highly
controversial, especially in the post-New Deal era which denies the existence of a unitary public
interest. Because we have developed no substantive theory to accommodate disputes among sub-
stantive values, the formal resolution of them through legislative choice may be our sole theoreti-
cally legitimate method of selection, at least where affirmative constitutional checks on legislative
selection are not invoked. The procedural values at stake in designing administrative processes
are real and important ones, but their reach and the controversial of methods for vindicating them
1984:301
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
323
pro-
A specific example illuminates the distinction between the social
of
the
consequences view and the internal view. Section 5 of the Federal
social
Trade Commission Act (FTC Act)⁷¹ declares unlawful all "unfair
the
methods of competition
and unfair or deceptive practices in or
and
affecting commerce." Whether the FTC could promulgate rules to
ngless,
carry out its section 5 enforcement responsibilities remained in some
disci-
doubt for years. It began issuing rules in the early 1960's, and eventu-
ally the United States Court of Appeals for the District of Columbia
Circuit approved the practice.⁷² During the pendency of the litigation,
however, Congress independently considered the propriety and form of
REV.
rulemaking under section 5, and enacted the Magnuson-Moss War-
menting
ranty Federal Trade Commission Improvement Act of 1974
dvanced
(Magnuson-Moss Act).⁷³
quacies.
legisla-
The Magnuson-Moss Act modified the FTC Act by adding section
tiveness
18, which prescribes a unique set of rulemaking procedures to enforce
possible
section 5. These procedures build on the informal rulemaking skeleton
erically
ubstan-
of the APA, resulting in a form popularly called "hybrid rulemaking."
Among the most important additions by this hybrid rulemaking to the
with
generic notice and comment process are (1) a requirement that the FTC
democ-
the
hold informal hearings, at which parties may engage in cross-examina-
Stew-
tion on certain "disputed issues of material fact,"74 (2) a right to make
polit-
oral presentations, and (3) a judicial review provision that authorizes
and
courts to set aside a rule if "the Commission's action is not supported
model
turning
by substantial evidence in the rulemaking record
taken as a
many
whole."76
vitably
These hybrid procedures for the FTC can be supported on two
gencies
have
separate grounds. First, they arguably ensure technically accurate and
than
to
sound rulemaking decisions by providing additional opportunities for
while
contesting parties to probe, dispute, and rebut proposals. Opportunities
of
those
for public hearings and oral presentations also provide a sense of fair-
to
are greatly constrained by the premise that the legislature remains the sole repository of the sub-
The
stantive policy making power. If process choices become universally recognized as implicating
proce-
certain substantive choices not made explicitly by the legislature, procedural battles would become
making
even more contentious, while the study of process changes as a logically independent inquiry
INITED
would be indicted.
use-
71. Federal Trade Commission Act § 5. 15 U.S.C. § 45(a)(1) (1982).
quality
72. National Petroleum Refiners Ass'n V. FTC, 482 F.2d 672, 698 (D.C. Cir. 1973), cert. de-
highly
nied, 415 U.S. 951 (1974)(the Octane case).
public
73. Magnuson-Moss Warranty-Federal Trade Commission Improvement Act., Pub. L. No.
sub-
93-637, 88 Stat. 2183 (1975)(codified as amended at 15 U.S.C. § 57a (1982)) [hereinafter cited as
eoreti-
Magnuson-Moss Act].
slative
74. 15 U.S.C. § 57a(c)(2)(B) (1982).
cesses
75. 15 U.S.C. § 57a(c)(2)(A) (1982).
them
76. 15 U.S.C. § 57a(e)(3) (1982).
324
DUKE LAW JOURNAL
[Vol. 1984:301
ness by giving potentially affected parties a more satisfying hearing
than is accomplished by mailing comments to the regulatory agency.
These rationales rest upon the internal view of administrative proce-
dure. They do not depend on any prior assessment of the merits of
FTC objectives or policies; they treat accuracy and fairness as desirable
ends in themselves.
Second, procedures can also control the freedom of an agency to
make decisions, a fact not lost on some proponents of the hybrid form.
Concern with controlling the FTC's broad discretion under the admit-
tedly expansive wording of section 5 runs throughout the Magnuson-
Moss Act's legislative history. Such control could have been accom-
plished by either narrowing the FTC's substantive mandate or revising
its procedures. The Magnuson-Moss Act chose the latter route. 77 Ac-
curate fact-finding requirements control discretion by directing the
agency to develop rules that have firm factual foundations. In addi-
tion, the threat of heightened scrutiny through judicial review channels
discretion away from speculative decisions stretching the outer limits of
delegated authority toward more firmly grounded, less adventurous
ones. Elaborate procedures can control discretion by forcing an agency
with limited resources to commit a greater proportion of those re-
sources to each rulemaking proceeding, thereby reducing the rate at
which the agency can produce rules and the rate at which the attendant
social impacts will follow. Thus, an opponent of section 5 might sup-
port section 18's hybrid rulemaking procedures as a way to slow down
the FTC and render it timid and cautious.⁷⁸
This second ground supporting the hybrid procedures reflects the
social view of administrative procedure. Under this view, processes are
important only insofar as they induce change in the social impact of the
agency's work. In other words, unlike the internal view, the social view
is concerned with how procedures affect people in their daily lives. The
task of assessing the social consequences of an agency's work is far
77. The Magnuson-Moss Act expanded the FTC's jurisdiction beyond businesses "in com-
merce" to include all businesses "affecting commerce." See 15 U.S.C. § 45(a)(1) (1982)(as
amended by the Magnuson-Moss Act, Pub. L. 93-637, § 201(a). 88 Stat. 2183, 2193 (1975)).
78. The experience of the FTC under the Magnuson-Moss Act demonstrates the efficacy of
such a strategy. In the eight Magnuson-Moss rulemaking proceedings that reached the FTC for
final action by April 1980. 27 months, on the average, passed from the end of the oral hearing to
the first Commission meeting to consider the rule. In the three proceedings that ended with pro-
mulgation of a final rule, the average time from the first Commission meeting to consider the rule
to publication in the Federal Register was an additional 8.5 months. Admin. Conf. of the U.S.
Recommendation 80-1, para. A. 1 C.F.R. § 305.80-1 (1983). A completed rule easily costs more
than a million dollars, and most likely consumes more than 10,000 man-hours of staff time.
Boyer, supra note 70, at 120; see also Diver, supra note 41. at 433.
84:301
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ROLE OF SOCIAL CONSEQUENCES
325
from straightforward. It requires assessing agency performance over
time by, for example, considering the rate at which it performs its work.
An agency that acts slowly and on relatively few matters is less likely to
of
generate great numbers of significant social consequences. The cost of
participation in the process is another social consequence of an
agency's work product. A subtler but no less real attribute of adminis-
to
trative agency performance is its ability to change people's attitudes
toward it and its mission. All these factors79 contribute to a perspective
mit-
that evaluates agency procedures only insofar as they alter the social
son-
effects of the agency's work product.
In distinguishing the social from the internal viewpoint, we are
describing pure forms. No observer of the administrative process may
Ac-
hold either of these viewpoints exclusively. The ambiguity surround-
the
ing procedural systems makes it almost impossible to isolate either
ddi-
view. For example, legitimacy is sometimes cited as a value for admin-
istrative processes, but it can be a function of one's perception of the
of
fairness of the process employed to reach a decision-an internal
view-or a function of the substantive decisions agencies reach-a so-
cial view. Most often, legitimacy will mean both. This imprecise lan-
re-
guage makes categorizing what people say and write about
at
administration difficult, but it also provides a reason to make the dis-
tinction. If the social consequences of procedural change are not being
fully appreciated, drawing attention to the differences in the two views
own
can sharpen our understanding of the importance of those conse-
quences and can facilitate analysis of the consequences themselves.
the
The generic nature of the APA, and hence of the proposals to
are
change it, may cause the internal, substance-divorced perspective to
the
eclipse the social, outcome-centered perspective on administrative pro-
view
cess. A full evaluation of the merits of any procedural reform, includ-
The
ing generic reform, however, requires an appreciation of both its
far
internal and social consequences. This point, which seems plain when
considering a specific substantive legislative proposal that includes pro-
com-
cedural mechanisms, should not be lost when Congress turns its atten-
tion to reform of the APA itself.
of
79. For a more complete statement of the factors relevant to social consequences analysis, see
for
infra Part V1.
to
pro-
rule
U.S.
more
326
DUKE LAW JOURNAL
[Vol. 1984:301
V. THE EFFECTS OF PROCESS REFORMS UPON STRATEGY
FORMULATION
A. Rulemaking as a Strategic Game.
Under the social consequences view, the benefits and costs of pro-
cess reform must be evaluated in light of the changes they induce in the
rules that regulatory agencies issue and the impact those changes have
on interested parties. In order to perform this evaluation, one must be
able roughly to anticipate the influence procedural change has on
rulemaking outputs. This anticipation can be accomplished by viewing
the regulatory process as a game participated in by self-interested par-
ties pursuing their own advantage. Because the configurations of par-
ties, process, and substantive law vary from agency to agency, a
thorough deployment of this simple game model would entail agency-
by-agency analysis. Short of such a complete assessment, we can illus-
trate how the model advances analysis of process reform and draw
some conclusions, albeit generalized, about the predictable effects of
several reform proposals.
Regulatory agency decisions depend upon the behavior of all par-
ticipants in the rulemaking process. These participants include the var-
ious offices within the agency, reviewing courts, Congress (through
oversight and budgets), OMB (through oversight), and intervenors such
as individual firms, industry trade associations, environmental organi-
zations, and consumer protection groups. The rules of the game, that
is, the rulemaking procedures, define the instruments, such as written
comments submitted by private parties, technical reports generated by
the agencies, consent decrees sometimes proposed by environmental-
ists, and regulatory impact analyses prepared by the agencies, that each
participant uses to further its own objectives. Because the participants
know that the outcome of a rulemaking process depends upon the ac-
tions of all the participants, to be successful players must each antici-
pate both (1) the likely actions and positions taken by the other
participants and (2) the changes in each participant's behavior likely to
be induced by the actions of the others. Anticipating these two factors
requires a strategy for each participant-a set of actions and reactions
that the participant will take in light of the likely consequences.
This "rulemaking game" perspective illustrates the difficulty of
predicting the full range of effects of a regulatory process reform pro-
posal, especially one so extensive as S. 1080. Process reforms change
the rules of the game, requiring each participant to reevaluate both its
expectations of other participants' behavior and the likely conse-
quences on the others of its strategies. Therefore, to predict the effects
84:301
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ROLE OF SOCIAL CONSEQUENCES
327
of the reform proposal, one must evaluate both the likely changes in
strategy and the combined effects of all changes upon regulatory
decisions.
B. Regulatory Impact Analysis: An Example of the Rulemaking
the
Game.
have
be
A specific example of this type of analysis of players' strategy
on
choices based on other players' actions demonstrates the utility of the
social consequences model. The incomplete example that follows is
par-
merely illustrative because it concentrates primarily on the actions and
par-
reactions of only one player, the agency.
a
S. 1080 would require that agencies submit regulatory impact
analyses with both their notices of proposed rulemaking and their final
llus-
rules.⁸⁰ Because Executive Order 12,291 already requires such analysis
raw
for major rules promulgated by nonindependent regulatory agencies,
of
we can evaluate the proposed amendment by extrapolating information
from those agencies that already have complied with the existing re-
quirement. In a recent study of the regulatory analyses performed by
agencies during 1981, eight individual analyses were singled out to il-
lustrate significant analytical flaws.⁸¹ Although the study did not at-
tempt to explain the causes of the analyses' defects, many analytical
errors were apparent in the eight examples even though the OMB had
that
approved them. This finding suggests that one possible strategic re-
sponse by regulatory agencies to S. 1080's new analytical requirement
by
might be to perform an after-the-fact analysis that neither affects an
agency decision nor provides evidence conflicting with the decision. If
the agencies suspect that the OMB and the courts will accept any state-
ment of regulatory impact analysis, no matter how flawed, and if the
ac-
agencies are satisfied with regulations they are promulgating, then
agencies will continue to follow their own agenda for social change
despite the procedural reform.
to
The opposite strategic response would be for the agency to per-
form high-quality regulatory analyses. An agency might consent to
such an approach for several reasons. First, if the agency wishes to
slow down or halt its rate of rulemaking, perhaps because its manage-
of
ment is unsympathetic to the agency's mission, then the requirement of
80. S. 1080, § 4(a) (amending APA to add § 622(c)(1) and 622 (d)(1)), 128 CONG. REC.
its
S2713, 2715 (daily ed. March 24, 1982).
81. W.N. Grubb. M. Humphries & D. Whittington, The Use (and Abuse) of Cost-Benefit
Analysis in the Federal Government: The Implementation of Executive Order 12.291 (October
)(unpublished manuscript)(copy on file with authors).
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DUKE LAW JOURNAL
[Vol. 1984:301
a regulatory impact analysis statement provides it with a convenient
excuse for delay-a ploy that works particularly well when the OMB
chooses not to prod the agency. Second, when the OMB insists on
strict compliance with the regulatory analysis requirement, the agency
has little choice but to carry out thorough analyses if it wants to issue
any regulations. The agency's best strategy in this case is to devote
substantial agency resources to producing a detailed, though somewhat
biased, regulatory analysis that will support the agency's own rulemak-
ing preferences. The literature on cost-benefit analysis provides ample
guidance on how to "tilt" such studies to support a preferred alterna-
tive. 82 A third alternative explanation involves the reviewing courts. If
they, rather than the OMB, were to require strict adherence to the regu-
latory analysis requirement, then agencies wishing to promulgate any
significant regulations would be forced to comply. Finally, the agency
may be dominated by economists who believe that allocative efficiency
ought to be the main criterion used for framing regulations. One only
need imagine Alfred Kahn or Darius Gaskins as the EPA Administra-
tor to understand how an agency might find virtue in performing
meaningful cost-benefit analysis and using it to make decisions. 83
Whatever the explanation for agencies producing high quality analyses,
however, the result is likely to be the same-fewer, but more efficient,
regulations.
A third agency response to the regulatory analysis requirement is
possible. Rather than either resist or embrace the analytical require-
ment uniformly, the agency could adopt a strategy of performing high
quality analyses on only select regulations. The agency could choose
regulations deserving close scrutiny by assessing early in the rulemak-
ing process whether careful analyses are likely to support or undercut
the agency's preferred regulatory decision. The agency would devote
82. Although studies of cost-benefit analysis seldom are written explicitly to educate agency
personnel as to how they can manipulate such analyses, most do highlight components of such
analyses for which there is no unequivocally correct approach (e.g., determining the proper dis-
count rate) or for which determining the correct value is difficult (e.g., determining the value of
costs or benefits for which there are no close market analogues). For surveys sensitive to such
issues in the public policy context, see COST-BENEFIT ANALYSIS AND WATER POLLUTION POLICY
(H. Peskin & E. Seskin ed. 1975): Prest and Turvey, Cost-Benefit Analysis: A Survey, 75 ECON. J.
683 (1975)). These studies provide clear roadmaps for an analyst inclined to influence the results
of the analysis by the assumptions and values he chooses to use.
83. Kahn and Gaskins. both economists, and both one-time heads of independent regulatory
agencies that underwent significant deregulation during their tenures (Kahn at the Civil Aeronau-
tics Board; Gaskins at the Interstate Commerce Commission). strongly advocate cost-benefit anal-
ysis in assessing the merits of regulation. See Gaskins & Voytko, Managing the Transition to
Deregulation. LAW & CONTEMP. PROBS., Winter 1981. at 9; Kahn, Applications of Economics to an
Imperfect World. 69 AMER. ECON. REV. I (1979).
984:301
Vol. 1984:301] ROLE OF SOCIAL CONSEQUENCES
329
enient
its limited resources toward analysis of those regulations most likely to
OMB
be supported by thorough analyses, or, alternatively, toward those reg-
on
ulations most likely to be highly criticized in the rulemaking process,
gency
especially when those criticisms are supported by other thorough anal-
issue
yses. Of course, if the agency lacks "control" over the outcome of any
levote
such effort, it runs the risk that its own analysis will be used against it.
what
Even if the agency suppresses publication of the contrary analysis, the
agency is in an awkward position as long as other participants know
the contrary analysis exists.⁸⁴ An agency may also find useful this strat-
egy of selective excellence in regulatory analysis when it can anticipate
If
the quality of analysis likely to be offered by the other participants in
the rulemaking process. The agency can then incorporate these expec-
any
tations into its decisions to allocate analytical effort among various reg-
ulations. For example, if, in a major environmental rulemaking
involving the steel industry, both the American Iron and Steel Institute
only
and the Environmental Defense Fund present their own thorough cost-
benefit analyses, then the EPA might want to allocate its resources to
an analysis of the discrepancies in the two studies, rather than initiate
83
an independent, all-inclusive study.
yses,
Note that the choice of which of these three possible agency strate-
gies to adopt-minimal analysis, exhaustive analysis, or selective anal-
ysis-depends both on the agency's substantive preferences and on the
is
likely behavior of other participants in the process. To accurately pre-
dict the net results of the regulatory analysis requirement, several fur-
ther steps must be taken. The strategy choices available to each of
these other participants would have to be identified and then related to
the behavior of all other participants. Finally, some solution concept
must be applied to find a set of strategies with consistent expectations
vote
and the dynamics of the parties' strategy formulation and revision must
be explored to determine what outcome is likely.
such
VI. EVALUATION CRITERIA
dis-
of
As already explained, regulatory process reforms will affect the
such
strategies of rulemaking participants, who in turn collectively can de-
J.
termine how agency decisions, the outcomes of the process, change. To
judge whether the reforms are socially desirable, however, we need to
84. William Ahern. Chairman of the California Coastal Commission. tells a delightful story
about why he would never hire an outside consultant precisely because of this control problem.
nal-
See H. Kunreuther, J. Linnerooth & R. Starnes, Liquified Energy Gas (LEG) Facility Siting:
to
International Comparisons. Proceedings of the IIASA Task Force Meeting. Sept. 23-26, 1980,
an
International Institute for Applied Systems Analysis, Laxenburg. Austria (unpublished manu-
script) (on file with authors).
330
DUKE LAW JOURNAL
[Vol. 1984:301
proceed one step further. The outcomes, influenced as they are by the
process reforms, must be evaluated. We propose six criteria without
specifying how the inevitable trade-offs are to be made among them
and how each affects the others. Two of the criteria, economic effi-
ciency and distributional equity, are more basic than several others:
delay, rate of rulemaking, and costs of participation. The latter are, to
a certain extent, components of the former because they create effi-
ciency or distributional effects. The sixth criterion, the legitimacy of
rules, stands independently of the others.
A. Economic Efficiency.
The specific regulatory process used to translate a statute into reg-
ulations affects the levels of the standards, or, more generally, the strin-
gency of the rules. For example, judging from the negative reaction of
environmental and consumer groups to the use of cost-benefit analysis
as a decisionmaking tool, and from support by business groups for such
analysis, a process change requiring the use of cost-benefit analysis will
generally result in less stringent standards for industry. More stringent
standards might emerge, however, if Congress required agencies to
produce better technical data in support of the regulations most fre-
quently challenged in court by industry groups; the improved data
would lead to fewer court remands of agency decisions. More stringent
rules might also result if agencies provided funds to public participants
who could provide corroborative evidence in support of the agency's
official position, again because remand would be less likely. By alter-
ing the stringency of regulations, process changes alter the efficiency
with which society's resources are used. Thus, some rules or standards
can be judged to be superior to others by determining the extent to
which they increase efficiency. The cost-benefit analysis procedural re-
quirement, for example, will lead to more efficient regulations.
B. Distributional Equity.
Because process changes alter the stringency of regulations, they
also can redistribute wealth, a desirable or undesirable result depend-
ing on one's sense of distributional equity. Distributional equity is,
however, a more subjective criterion than economic efficiency; it re-
flects individual and group judgments about the fairness of the distri-
bution of economic resources. By influencing the stringency of
regulations, process changes cause some parties to gain or lose at the
expense or benefit of others. For example, EPA's recently promulgated
visibility standards for controlling air pollution in national parks pro-
1984:301
Vol. 1984:301] ROLE OF SOCIAL CONSEQUENCES
331
by
the
tect scenic views for park visitors,85 but impose compliance costs upon
without
electric utilities and smelters located near the parks. Because the visi-
them
bility standards apply primarily to new power plants and exempt many
effi-
existing plants, they favor existing plants over new ones. 86 The stan-
others:
dards may also have a disproportionate impact on companies operating
are,
to
in certain geographical regions, such as the western states, where na-
effi-
tional parks protected by the standard abound. Other standards, such
imacy of
as those requiring special scrubbers in power plants that use high sulfur
coal, may impose disproportionate costs on companies and consumers
in the northeastern states.87
C. Delay.
reg-
he
strin-
Delay in the promulgation and enforcement of regulations extends
of
the length of time between the passage of enabling legislation and the
analysis
accrual of its benefits and costs. For example, much of the delay in
for
such
nuclear power plant construction is caused by the regulatory require-
will
ments of the Nuclear Regulatory Commission (NRC). One proposed
tringent
procedural reform would allow the NRC to approve standardized plant
to
designs and reduce these delays.⁸⁸ The Food and Drug Administration
fre-
is also frequently criticized for its slow review of new drug applications.
data
The agency is currently attempting to reduce regulatory lag by adopt-
tringent
ing procedures such as accepting foreign data on the effects of the drugs
icipants
under review. The Securities and Exchange Commission's experi-
agency's
mental shelf registration program is similarly designed to ease regula-
alter-
tory delays; it reduces the time and cost required for a firm to issue new
ficiency
securities.90
andards
85. 40 C.F.R. §§ 51, 300-307 (1983); see also. Protecting Visibility Under the Clean Air Act:
to
EPA Establishes Modest "Phase" I Program. 11 ENVTL L. REP. (ENVTL. L. INST.) 10,053 (1981).
re-
86. The visibility regulations require use of "best available retrofit technology" (BART) on
existing sources or an existing facility when the impaired visibility "is reasonably attributable to"
that facility. 40 C.F.R. § 51.302(c)(4)(i) (1982). This means that no expensive BART will be nec-
essary if the impaired visibility is the result of a "widespread, regionally homogeneous haze from
a multitude of sources." 45 Fed. Reg. 80,084. 80,085 (1980).
87. 40 C.F.R. § 60.43(a) (1983). The power plant regulations are exhaustively analyzed in
they
Sierra Club V. Costle, 657 F.2d 298 (D.C. Cir. 1981). See supra note 56.
epend-
88. See, e.g., ENERGY USERS REP. (BNA), No. 433 at 1668 (Nov. 26, 1981)(NRC task force
is,
formed to study one-step licensing, standardization and early site reviews to speed up licensing).
it
89. See Food and Drug Administration, Proposed Rule-New Drug and Antibiotic Regula-
re-
tions, 47 Fed. Reg. 46,622, 46,642-44 (1982).
distri-
90. 17 C.F.R. § 230.415 (1983).
of
at
the
ilgated
pro-
332
DUKE LAW JOURNAL
[Vol. 1984:301
D. Rate of Rulemaking.
Procedural reforms can also affect the total number of rules an
agency promulgates each year. Given fixed-and for some agencies
declining-budgets, regulatory process changes that require an agency
to devote more resources and more time to each regulation necessarily
result in fewer new regulations and less review of existing rules. The
national park visibility standards are mandated by only one of over a
hundred sections in the 1977 Clean Air Act Amendments.⁹¹ Agency
resources employed in implementing the visibility provisions were un-
available to implement other, perhaps more important, sections of the
Act.
The Reagan Administration takes pride in its reduction of the
number of regulations printed in the Federal Register since it took of-
fice. The decline is to some extent attributable to the procedural re-
quirements imposed by Executive Order 12,291.92 Certainly, codifying
several features of Executive Order 12,291, as in S. 1080, would con-
tinue to reduce the rate of federal rulemaking. The social desirability
of this reduction depends upon whether the delayed or cancelled regu-
lations would have increased efficiency or redistributed benefits to par-
ticular parties. Judge Scalia noted the irony that some industrial
advocates of weaker standards prefer an increased rate of rulemaking
so that sympathetic agencies can more quickly issue those weaker
rules.93
E. Costs of Participation.
Procedural requirements affect the costs of all parties participating
in the regulatory process. For example, increased analytical require-
ments and a more extensive use of hearings would impose higher costs
on the agencies and on parties who must hire representatives to appear
on their behalf. Although only suggestive, some statistics from envi-
ronmental organizations detailing the costs of participating in regula-
tory and judicial proceedings illustrate the point. The Sierra Club
spent $2.31 million in fiscal year 1979 to study and influence public
policy, twenty-eight percent of the club's budget. The Environmental
Defense Fund, a public interest law firm founded in 1967, was spend-
ing $2.6 million per year by 1982. The Natural Resources Defense
Council, a public interest law firm established in 1969, was spending
91. 42 U.S.C. § 7491 (Supp. V 1981).
92. Exec. Order No. 12.291, 3 C.F.R. 127 (1982).
93. Scalia. Regulatory Reform-The Game Has Changed. REG., Jan.-Feb. 1981, at 13.
1984:301
Vol. 1984:301] ROLE OF SOCIAL CONSEQUENCES
333
$0.93 million of its $1.37 million budget on litigation by fiscal year
1975.94
an
gencies
Some procedures can impose significant costs on Congress and the
agency
OMB, too. For example, the House of Representatives responded to
essarily
the Chadha decision by including a congressional review procedure in
The
the Consumer Products Safety Commission's (CPSC) reauthorization
over
a
bill.95 If expanded to many other agencies,⁹⁶ this new procedure will
Agency
pressure Congress to review, subject to the constitutional restrictions
un-
enforced in Chadha, every regulation that CPSC or another agency
of
the
promulgates. Unless Congressmen are willing to substitute regulatory
issues for other issues on their agendas, which would impose higher
of
the
costs on congressional decisionmaking, they will be forced to expand
of-
their staffs to gain the expertise and capability for evaluating the re-
quests for reconsideration of agency decisions that will be made by the
re-
lifying
"losing" participants in the rulemaking process.
con-
ability
F. Legitimacy of Rules.
regu-
Finally, much of the interest in regulatory process reform may be
par-
due to the fact that agency processes affect the legitimacy of agency
ustrial
rules. Parties who voice their views within a well-defined process are
more apt to accept the legitimacy of an agency decision, even if they do
eaker
not influence the stringency of the regulations. Parties that have had
the opportunity to present their views to the agency may be less likely
to seek judicial review, and instead may devote more resources and
effort to find acceptable ways to comply with the agency decision.
There may also be some value in participation per se. After all, many
attorneys enjoy playing the game.
costs
ppear
94. These figures are cited in Downing & Brady, The Role of Citizen Interest Group in Envi-
envi-
ronmental Policy Formulation, in 6 NONPROFIT FIRMS IN A THREE SECTOR ECONOMY, COUPE
PAPERS ON PUBLIC ECONOMICS 73-77 (Michelle White. ed. 1981).
Club
95. Immediately after Chadha, the House approved an amendment introduced by
Represenative Levitas that would prevent substantive CPSC rules from becoming law until Con-
gress approved the rule by joint resolution and either the President signed the joint resolution or
Congress overrode the veto. 129 CONG. REC. H4773-74, 4781 (daily ed. June 29. 1983). The
Levitas amendment eviscerates CPSC rulemaking authority. The House also approved an
amendment introduced by Representative Waxman providing a ninety day period before CPSC
fense
rules could become effective. during which time a rule could be blocked by a joint resolution and a
presidential signature OF congressional veto override. H.R. 2668, 98th Cong.. 1st Sess., 129 CONG.
REC. H4771, 4783-84 (1983). The bill is currently in conference with a Senate version, S. 861, 98th
Cong., 1st Sess., 129 CONG. REC. H4782-83 (1983). that does not contain a provision comparable
to either amendment.
96. On July 20, 1983, Senators Boren, Grassley, Kasten, and Levin introduced legislation
similar to the Waxman amendment to the CPSC authorization bill, see supra note 95. that would
apply to all federal agency rules. See S. 1650. 98th Cong., 1st Sess., 129 CONG. REC. S10,473-77
(daily ed. July 20, 1983).
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DUKE LAW JOURNAL
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VII. APPLYING THE MODEL
Having described a method for analyzing the impact of procedural
reforms on the outcome of regulatory decisions and developed a set of
criteria for evaluating those impacts, we now analyze several contem-
porary regulatory reform proposals. We will examine: (1) the require-
ment that major rules be supported by regulatory impact analyses; and
(2) OMB oversight of agency rulemaking. Both of these proposals are
regularly offered and debated as means to improve regulation,97 and
they comprise part of the core of the latest reform bill, S. 1080.
These reforms continue the post-New Deal effort to control ad-
ministrative discretion through a program of internal agency con-
straints and external review. The reforms would not remove agency
discretion, but would merely recast its modes of expression. As we
noted earlier, the only thorough way to anticipate the effects of ele-
ments of a reform package such as S. 1080 on the various regulatory
participants is to examine the relationships between the particular reg-
ulatory statutes, administrative agencies, and interested parties. For ex-
ample, a reform's effects on deceptive practices rulemaking at the FTC
would differ from its effects on the effluent guideline procedures at the
EPA. Nevertheless, it is possible to outline some generic effects of cer-
tain reform proposals, and thereby illustrate the type of analysis re-
quired to understand the social consequences of such reforms.
A. Regulatory Impact Analysis.
One of the provisions of S. 1080 would require agencies to perform
a regulatory impact analysis of any rule with an annual effect on the
economy of $100 million or more.⁹⁸ The methodology for regulatory
analysis required by the bill mirrors the provisions of Executive Order
12,291, signed by President Reagan early in his term of office. S. 1080
would require an agency to publish a preliminary analysis along with
the notice of the proposed rule and a final analysis to accompany the
97. Presidents Ford, Carter, and Reagan all have imposed regulatory analysis on executive
agencies, indicating their respective administrations' belief that such analysis improves regulation.
See Exec. Order 11,821. 3 C.F.R. 926 (1971-75 Comp.), extended and name changed by Exec.
Order 11.949, 3 C.F.R. 161 (1977)(Ford): Exec. Order 12,044, 3 C.F.R. 152 (1979) (Carter): Exec.
Order 12,291 3 C.F.R. 127 (1982)(Reagan); see also SENATE COMM. ON THE JUDICIARY, S. REP.
No. 97-284, 97th Cong., 1st Sess. 64-93 (1981) )(summarizing commentary on regulatory analysis
and OMB oversight); R. LITAN & R. NORDHAUS, REFORMING FEDERAL REGULATION 136
(1983)(regulatory analysis essential to sound regulation): L. WHITE, REFORMING REGULATION:
PROCESSES AND PROBLEMS 13-26 (1981)(summarizing regulatory impact analysis reform efforts).
98. S. 1080. § 4(a)(amending APA to add §§ 622(c)(1) and 622(d)(1)), 128 CONG. REC.
S2713, 2715 (daily ed. March 24, 1982).
84:301
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
335
rule as promulgated. The analysis must identify the benefits and the
costs of the rule, a description of alternatives, and an explanation by
of
the agency of why it believes the benefits will justify the costs and why
the rule it proposes will be more cost-effective than the alternatives,
subject to the requirements of the agency's enabling statute. The regu-
and
latory analysis requirement is clearly meant to address the reality. of
are
agency discretion by forcing the agency to articulate its rationale for
and
choosing a particular rule from among permissible alternatives.
In assessing this reform, consider first the evaluation criteria of
ad-
economic efficiency. In principle, regulatory impact analyses should
con-
improve the efficiency of major regulations. Whether that result en-
sues, however, will depend on the attempts by the regulatory partici-
we
pants to secure a rule favorable to their own positions-attempts made
possible by the many unresolved issues that lie behind any formalized
cost-benefit or impact analysis requirement. The battles that result will
be fierce in those cases where substantial power shifts or strategic ad-
ex-
vantages hang on the outcomes. For an example of current interest, we
TC
explore the debate between the OMB and the EPA over the use of cost-
the
effectiveness techniques in establishing regulatory standards for the re-
moval of pollutants under the various statutes administered by the
EPA.
re-
The 1977 Clean Water Act imposed a cost-reasonableness test for
those EPA industrial water pollution standards that had previously
been based upon the "best available technology economically achieva-
ble" (BAT). 100 BAT standards meeting the new test were to be
redesignated as "best conventional pollutant control technology"
the
(BCT) standards; BAT standards failing the cost-reasonablenes test
were to be weakened to meet it. 101 The Clean Water Act's cost-reason-
ableness test required that the costs to industry of abating water pollu-
tion be "reasonable" relative to the cost of abatement by privately
owned treatment works (POTWs). Since 1977, the EPA has struggled
he
with this vague mandate. After several years of rulemaking activity
involving the EPA, the Carter Administration's Regulatory Analysis
Review Group, the OMB, and many industrial intervenors, the cost-
reasonableness test finally has been defined to require that the marginal
cost of industrial BCT standards not exceed the marginal cost of
POTW standards. 102
99. Id
100. 33 U.S.C. § 1314 (b)(4)(B) (Supp. V 1981).
101. Id
102. 43 Fed. Reg. 37,591-95 (1978). The definition was subsequently upheld. See American
Paper Inst. V. EPA, 660 F.2d 954, 961-65 (4th Cir. 1981).
336
DUKE LAW JOURNAL
[Vol. 1984:301
Under a variety of simplifying assumptions, such as that the bene-
fits of pollution removal not be systematically related to the location of
discharges from different industry categories, it can be shown that to
the extent future BCT standards are based on the POTW benchmark
marginal cost, they will lead to more efficient water pollution
standards.
The OMB would like to make air pollution regulations more effi-
cient too. Using its authority under Executive Order 12,291, the OMB
argues, in summary, that the EPA should establish a benchmark margi-
nal cost target for each air pollutant, and then write standards for the
various industry groups and subgroups that are consistent with those
benchmarks and therefore cost-effective. 103
Putting aside the issue of whether the specific statutes the EPA
implements can be construed to tolerate such an approach, the use of
such benchmarks for setting either water or air standards will have sub-
stantial consequences on the way the EPA conducts its business. This
approach introduces a decisionmaking criterion that has the potential
to dominate all others in the standard-setting process. It will greatly
reduce the flexibility that the EPA currently has in setting standards on
an industry-by-industry basis because the agency currently feels little
need to base standards on comparative analyses of the standards it has
set for like pollutants in other industries. Any agency interested in
maintaining its ability to set regulations on a case-by-case basis, and
hence its power either to adapt readily to new information and analyses
or to maintain bargaining leverage with the various groups with which
it deals, would be inclined to resist such a standardized approach, as
some groups in the EPA have done.
A single benchmark figure for each water or air pollutant will, fur-
thermore, acquire a gravitational force making deviations from it very
difficult. Once such a marginal cost target has been established as ap-
propriate in a single case, minimal standards of rationality would re-
quire ample justification for failing to employ the benchmark in all
cases. Plausible arguments might be made for treating polluters with
difficult problems differently on the basis of their different abatement
benefit schedules, but such benefit calculations are both difficult and
controversial, and would additionally require the EPA to give idiosyn-
cratic polluters a prominence in the regulatory process that they have
so far avoided. In any event, the burden for justifying deviations from
103. Interview with Christopher DeMuth, 13 ENV'T REP. (BNA), 1574, 1575 (January 14,
1983).
Vol.
1984:301] ROLE OF SOCIAL CONSEQUENCES
337
a standardized norm would fall on the agency, a situation that would
further diminish its flexibility.
Consider next another of the criteria for evaluating process re-
forms, that of distributional equity. Imposition of specific benchmarks
for reasonable costs for pollution abatement would have several likely
distributional effects. If the OMB wins the battle over employing the
device of marginal cost benchmarks for air pollution standards, every
indication is that under the current administration the benchmark level
that the OMB selects would be lower than that favored by the EPA.
With a lower marginal cost target figure, more pollution will result with
a concomitant shift in burden from producers to breathers. Within the
industry a lower benchmark would likely favor small firms over large
ones. Existing standards, which set uniform removal requirements for
all firms, favor large firms, which are generally more able than small
firms to take advantage of the economies of scale associated with most
sophisticated pollution removal technologies. The result has been a
consistent pattern of higher marginal costs for smaller firms under a
uniform standard regime. Even in those instances where small and
large firms are ruled by different standards, the EPA has apparently not
totally compensated for this effect, so that smaller firms' marginal costs
remain higher. 104
The current debate between the EPA and the OMB concerns set-
ting effluent and emission standards for specific industries. The use of
regulatory impact analysis on the ambient air quality standards that the
EPA must set would also have distributional consequences, although to
predict their exact nature one must inquire into the scientific and eco-
nomic data associated with each of the pollutants and pollutant sources
that the EPA monitors. Use of benefit analyses will have the effect of
tightening the standards for some of the pollutants while loosening
them for others, depending on the evidence of benefits and the availa-
bility of removal technologies.
Employing any kind of regulatory analysis will benefit groups with
access to relevant data, as well as groups with the computational and
analytical skills necessary to perform such analyses. Particularly be-
cause many of the assumptions necessary to conduct cost-effectiveness
or cost-benefit analyses are controversial, interested parties in regula-
tory processes employing such techniques will be forced to protect their
interests in the regulatory outcomes by monitoring and attempting to
104. W. MAGAT, A. KRUPNICK & W. HARRINGTON, RULES FOR MAKING RULES: THE RE-
VEALED PREFERENCE APPROACH TO UNDERSTANDING REGULATORY AGENCY BEHAVIOR, Table
6-4 (forthcoming 1984).
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[Vol. 1984:301
influence the analysis process itself. Only groups with the relevant re-
sources and skills will be able to maintain such a vigil and accrue the
advantages that accompany it. In cases of consumer protection and
environmental regulation, for example, industry groups will have an
advantage over consumer and environmental groups, whose more mea-
ger resources will be less able to respond to new analytical require-
ments. Furthermore, because under most regulatory processes the
agency must rely in the first instance on the regulated industry for ac-
curate information, industry groups will continue to enjoy the advan-
tage of their superior familiarity with the relevant data and their ability
to disclose information in potentially favorable formats.
Let us move to two additional evaluation criteria for rulemaking
reform. In the short term, a shift to cost-effectiveness analysis of the
kind contemplated by the OMB in its dispute with the EPA can only
serve to (1) delay rulemaking and hence (2) diminish its rate, assuming
no additional agency resources are committed to the process. Whether
this shift will produce long-term effects on the delay and the rate of
rulemaking will turn heavily on the response of interested parties, the
courts, and the agency to the initial benchmarks. If these benchmarks
acquire acceptance and legitimacy and do not generate pressures to di-
verge from them, the rate of rulemaking may increase, as the partici-
pants focus more narrowly on the cost data necessary to translate each
benchmark into industry-specific rules. If, however, agencies and par-
ticipants regularly devote serious efforts to justifying departures from
the benchmarks through the use of benefit studies that support different
marginal cost targets, then the controversial aspects of such studies
could prolong the effort to write any individual industry rule, and
hence have a long-term dampening effect on the rate of standard
setting.
Of the remaining evaluation criteria, the impact of regulatory
analysis on the cost of participation in the rulemaking process was ad-
dressed above as part of the discussion of the distributional conse-
quences of the procedural reform. The last criteria concerns the
legitimacy of the agency process. Whether the results of a cost-effec-
tiveness approach at the EPA acquire greater legitimacy than does the
agency's current operation rests on elements too contingent to evaluate
in this paper. Any change in legitimacy will be influenced by the de-
gree to which observers of the regulatory process consider a given cost-
effectiveness standard to be consistent with their sense of regulatory
fairness; it is not clear, however, how observers will assess the "fair
share" of pollution control each industry should bear. Complicating
Vol. 1984:301] ROLE OF SOCIAL CONSEQUENCES
339
the issue further are the effects of the various strategic responses on
perceptions of fairness. Even if the principle behind the reform rings
true, the ability of certain participants to influence unduly the regula-
tory outcomes may undermine the legitimacy of the agency procedures,
regardless of any objective change in the results.
B. Office of Management and Budget Oversight.
Executive oversight has become a major feature of the debate over
the design of the rulemaking process since President Carter's 1978 Ex-
ecutive Order 12,044¹⁰⁵ established regulatory review powers for the
President's Regulatory Analysis Review Group and the Council on
Wage and Price Stability, and President Reagan's 1981 Executive Or-
der 12,291 created regulatory review and oversight responsibility for
OMB. One cannot evaluate S. 1080's cost-benefit analysis require-
ments without considering the stage in the regulatory process at which
the cost-benefit analysis would occur. President Reagan's version of
regulatory analysis subtly shifted the prior administration's approach.
Under Executive Order 12,291, the OMB must approve in advance all
initial regulation proposals. Under President Carter's version, the Reg-
ulatory Analysis Review Group and the Council on Wage and Price
Stability performed cost-benefit assessments of selected proposed regu-
lations after the agency issued them, and submitted its results as inter-
agency comments. Thus, the Reagan process gives the OMB
appreciable leverage in determining whether regulations are proposed
at all. Disagreements between the OMB and agency staff over the suffi-
ciency of a preproposal analysis can increase the costs to the agency of
proceeding with the regulation, and effectively discourage or prevent
further agency action.
S. 1080 would give the OMB the same power of preproposal re-
view as it has under Executive Order 12,291, thus granting legislative
approval to the executive order. The bill would go beyond the execu-
tive order by requiring that an agency make public all draft rules sub-
mitted to the OMB and explain any changes prompted by the OMB's
comments.
Consider the OMB oversight reform proposal in light of the six
evaluation criteria established in Part VI. First, by shifting power to
the OMB, the efficiency of the proposal becomes more closely tied to
the predilections of that office-and, therefore, the President-rather
105. Exec. Order No. 12,044, 3 C.F.R. 152 (1978), amended, Exec. Order No. 12,221. 3 C.F.R.
266 (1980). The Order expired on April 30, 1981.
106. Exec. Order No. 12,291, 3 C.F.R. 127 (1982).
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[Vol. 1984:301
than to the particular agency whose goals may not coincide with presi-
dential policy. If the OMB pursues a policy dominated by a goal of
maximizing economic efficiency, any rules that survive the OMB scru-
tiny will more closely reflect that goal, although struggles between the
agency and the OMB may decrease the rate of rule production or delay
controversial cases. If, however, the OMB adopts a "regulatory relief"
objective, seeking to avoid or rescind rules with disadvantageous distri-
butional consequences for favored groups, then efficiency may suffer.
Second, in terms of distributional equity, prior review by the OMB
favors those parties whom the President believes deserve special protec-
tion. Because the OMB's most effective power in the prior review pro-
cess is to delay or stop regulatory initiatives, however, this process more
effectively advances the interests of groups who gain from avoiding
new regulations, rather than the interests of groups concerned with pro-
moting new initiatives. Interestingly, if the OMB promotes efficiency
over regulatory relief, then OMB review could deter agencies from re-
scinding efficient regulations, especially because the Supreme Court re-
cently affirmed that "hard look" judicial review applies when agencies
withdraw as well as promulgate a regulation. 107
The extent to which OMB oversight delays proceedings and slows
the agency's rate of regulation writing depends on the agency's re-
sponse to the OMB's criticism and on the agency's assessment of its
own regulatory agenda. On the one hand, disagreements between the
OMB and agency staff members over the sufficiency of a preproposal
analysis can make additional proceedings so costly to the agency that it
may effectively be deterred from offering future regulatory initiatives
that can be predicted to be troublesome to the OMB. Thus, OMB scru-
tiny may diminish the overall rate of agency production, or it may sim-
ply direct production into less controversial areas. On the other hand,
the agency may decide to negotiate the preproposal obstacles by com-
piling the necessary analyses, particularly when it believes the regula-
tions are highly justifiable. In such cases, the OMB review would add
only that delay associated with the additional advance processing time
between the OMB and the agency.
Analysis of our fifth criterion, the cost of participation, suggests
that the incremental resources devoted by the agency to passing the
OMB review would constitute the additional cost of the regulatory
change. Because outside groups would, by definition, not be participat-
107. Motor Vehicle Manufacturers Ass'n V. State Farm Mutual Auto Ins. Co., 103 S. Ct. 2856,
2866 (1983).
Vol. 1984:301] ROLE OF SOCIAL CONSEQUENCES
341
ing formally in this stage of the rulemaking process, OMB review
would not affect the costs to nonagency participants.
Finally, the legitimacy of the proceedings could suffer. When
OMB approval occurs before public comment, the rulemaking process
proceeds without either prior public notice or, in the case of Executive
Order 12,291, but not S. 1080, a complete record of the interchanges
between the agency and the OMB. 108 Yet, the agency and the OMB
may make critical decisions at this preproposal stage. The OMB may
veto regulatory options proffered by the agency, thus precluding or de-
laying public scrutiny of those options. Even if the OMB does not veto
an option, it may still leave its imprint on the proposed rule, even
though the OMB may lack the substantive expertise to frame such a
rule. Although intra-agency negotiations and deliberations are inevita-
ble and essential to government work, and although these processes in-
variably influence agency proposals in settings not open to formal
public scrutiny, OMB review of an agency proposal that the agency
considers ready for outside study could arguably be made subject to
public participation without disrupting the necessary agency manage-
ment functions. Seen in that light, OMB preproposal scrutiny runs
counter to the trend toward increased public participation at important
stages of the regulatory process, and therefore may diminish that pro-
cess's legitimacy. The extent of this effect will depend, of course, on
how much the hybrid procedural reforms promote public comment.
Reforms that forbid an agency from relying on data and analyses that
are not accessible to public comment as part of the rulemaking file
would surely promote agency legitimacy. Reforms that encourage par-
ticipation by individuals not affiliated with organized interest groups
are also likely to reinforce public confidence in the agency.
VIII. CONCLUDING THOUGHTS
Prior to June 23, 1983, rulemaking reform legislation could have
provided additional levers of control over administrative discretion to
all three branches of government. Through regulatory impact analyses
and the OMB's oversight, the executive branch could have influenced
rulemaking decisions. The federal courts could have been charged
108. Compare Exec. Order 12,291 § 3(c)(2), 3 C.F.R. 128, 129 (1982)(OMB must pre-clear
regulatory analysis, no public notice required) with S. 1080, § 3 (amending APA to add
§ 553(f)(1)(F)-(G)), 128 CONG. REC. S 2713, 2714 (daily ed. March 24, 1982) (copies of draft
impact analysis submitted to OMB, plus any changes in response to OMB comments, must be
placed in the rulemaking record). For a discussion of the importance of differences in the timing
and public disclosure of OMB review, see Viscusi, Presidential Oversight: Controlling the Regula-
tors, 2 J. POL'Y ANALYSIS & MGMT. 157, 159-62 (1983).
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[Vol. 1984:301
with additional oversight through some version of the Bumpers
Amendment. 109 Congress also stood to gain from the pending reforms
because it would have received direct review powers over specific rules
through the legislative veto. Chadha has disrupted that symmetry by
making the last leg of the triad untenable. Congress, which must pass
any proposal to reform the APA, now appears to be the branch of gov-
ernment with the least to gain from the most frequently discussed pack-
age of reforms. Will Chadha change the dynamics of regulatory
process reform by channeling Congress's energy into renewed attempts
to limit agency discretion through more tightly written legislation? Or
will Congress delegate more oversight responsibility to the White
House and the courts? It may seem unlikely that a Congress so con-
cerned with the Chadha shift in the balance of power would shift more
power to the Presidency by enacting a bill strengthening executive
oversight.
The potential effects of Chadha are not so easily predicted, how-
ever. In fact, Chadha may produce the opposite effect. As with all
other participants in the rulemaking game, Congress's behavior must
be assessed with reference to its own strategic interests. In 1982, the
Senate unanimously approved the latest reform package, S. 1080, but
the House leadership vigorously opposed it. 110 The House leaders
feared that the package's legislative veto provision would shift power
away from the leadership toward the committees and subcommittees,
who would decide whether override resolutions were introduced and
passed to the floor for a vote. Furthermore, veto resolutions would
crowd out other items on the House agenda, additionally complicating
the leadership's efforts to control the House. Now, however, it might
support a procedural reform package that does not contain a generic
veto provision. Such a package offers a quick response to the problem
of controlling agency discretion, which the Chadha decision has made a
highly visible public issue, but would not incur opposition from mem-
109. In 1975, Senator Dale Bumpers introduced a proposed amendment to the APA that
would have directed courts to decide all questions of law "de novo" and not to grant any "pre-
sumption of validity" to administrative rules. See S. 2408, 94th Cong., 1st Sess., 121 CONG. REC.
29,956 (1975). Since that time, a variety of similar but not identical amendments generally at-
tempting to tighten judicial review of agency actions have been called "Bumpers Amendments."
See, e.g., Levin, Review of "Jurisdictional" Issues Under the Bumpers Amendment, 1983 DUKE L.J.
355, 358-66 (1983); Levin, Judicial Review and the Bumpers Amendment. 1979 RECOMMENDATIONS
& REPORTS OF THE ADMINISTRATIVE CONFERENCE OF THE UNITED STATES 565 (1979); Pierce &
Shapiro, Political and Judicial Review of Agency Action, 59 TEX. L. REV. 1175. 1189-95 (1981).
110. See ANTITRUST & TRADE REG. REP. (BNA), No. 1095, at 1125 (Dec. 23, 1982)(House
Rules Committee blocking floor vote on regulatory reform measure); ANTITRUST & TRADE REG.
REP. (BNA), No. 1082, at 521 (Sept. 23, 1982)(Speaker O'Neill opposing H.R. 746, but working
with Business Roundtable to draft a compromise).
1984:301
Vol. 1984:301]
ROLE OF SOCIAL CONSEQUENCES
343
impers
bers of the House who opposed previous attempts at generic process
eforms
reform. Although the committee chairmen may be less enthusiastic
rules
about a reform package without the veto, their existing levers of power,
by
oversight, budgeting, and government operations investigations, re-
pass
main intact. Because of the constitutional nature of the bar on the veto,
of
gov-
there is no possibility that committee chairmen could use the legislative
pack-
veto as a bargaining chip, and they might see sufficient merit in the
ulatory
remaining proposals to proceed.
tempts
Chadha has stimulated public interest in the generic problem of
Or
controlling administrative discretion. Organized interest groups may
White
still desire to see enacted the remaining components of the conven-
con-
tional package of reform measures despite the absence of the veto pro-
more
vision. If all of these interests converge in Congress, a procedural
ecutive
reform bill will have a reasonable chance of passage. On the basis of
the debate to date, however, it may pass for the wrong reason. It will
how-
pass because Congress found the veto-less generic process reform bill
all
the only immediately available response to the public cry for a solution
must
to the runaway agency problem. The alternative of redrafting hun-
the
dreds of agency enabling statutes would take years to accomplish.
but
eaders
As this article explains, passage of a procedural reform bill would
not be attributable to an informed conclusion that generic process re-
power
forms would solve the discretion problem. The mistaken premise that
and
procedural reform can be evaluated solely on the basis of its ability to
would
improve factfinding accuracy, procedural fairness, and procedural effi-
icating
ciency ignores the social consequences that procedural reforms can
might
have through their influence on agency decisions. Proponents of the
generic
internal view have assumed that better procedures need only make
oblem
agency actions more consistent. But in an eΓa of substantive adminis-
a
trative discretion, that view is a terrible oversimplification.
mem-
This article has developed a framework for evaluating the desira-
bility of regulatory process changes. Evaluation requires constructing a
PA
that
set of criteria with which to judge whether specific process changes are
"pre-
REC.
desirable, determining how the changes will alter the strategies of the
at-
important participants in the regulatory process, and using the criteria
Iments."
to assess whether the combined effects of the strategy changes will lead
L.J.
to preferable outcomes for society. We have suggested some ways in
Pierce
&
which different parties may employ aspects of S. 1080, the most com-
(1981).
monly considered generic reform, to achieve their own private goals
)(House
and, in so doing, affect the efficiency, equity, timing, rate, costs, and
REG.
working
legitimacy of agency rules. Certainly, this effort should be extended
and refined to take into account several different regulatory settings.
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[Vol. 1984:301
Here, we have carried the exercise only far enough to raise suspicions
about whether a package as complex as S. 1080 can produce univer-
sally desirable results.