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Administrative Law
University of Pennsylvania School of Law
Coglianese, Cary

Administrative Law, Prof. Coglianese (Fall 2014)
·         Administrative Law
o   Principal-agent theory
§  Principal: Person on whose behalf an agency operates
§  Agent: Actor who makes decisions about principal
o   Principle mechanisms for addressing problems
§  Delineating
·         Cabin the bonds of relationship and delegation
§  Sharing
·         Give consent and share. Principal will act in best interest
§  Monitoring
·         Oversee activity
§  Reversibility
·         Take back delegation
§  Control discretion
o   Public choice
§  Legislators are interested in getting reelected
o   Public interest
§  Agencies’ expertise and importance of promoting public welfare
·         Sources of administrative law
o   Constitutional law
o   Separation of powers
o   Due process concerns
o   Statutes
o   APA
o   Substantive and organic statutes
o   Agency’s own procedures
o   Executive orders
o   Judge-made “common law”
·         Legal directives issued by governmental bodies
·         Good government concerns
o   Regulatory capture
§  Concern that agency will regulate its duties in a way that favors discrete set of private interests over and above the interests of the public
§  The concern is that government regulators become controlled by the targets.
·         Justifications for Administrative Regulations
o   Two answers
§  (1) Positive: How things actually are
§  (2) Normative: How things should be
o   Types of Market failures (basis for regulation under the public interest model)
§  (1) Need to correct for externalities
·         Price of product does not reflect costs that production and use impose on society
·         Coasean theory: Efficient result would come about if the parties were able to bargain with each other
§  (2) Collective action problems
·         Individually rationale private behavior will produce collective or public harm
·         Individuals create problems that might be avoided if they ensure mutual cooperation
·         Regulation can be a form of mutual cooperation to provide a public good that the market will not
·         Markets are poor at producing public goods for 2 reasons
o   (1) Transaction costs: too difficult to negotiate cooperation
o   (2) “Free-rider” problem: people receive free benefit
·         Examples: Public goods, nonrivalrous competition and nonexcludability. i.e. national defense, clean air/water, scenic parkland,
§  (3) Information asymmetries: Need to compensate for inadequate information
·         People need information to evaluate products if the market is going to work well
·         Consumers have an interest in obtaining information
·         People face cognitive and motivational problems processing information
o   Cognitive: People think events are more likely when and if an example can come to mind
o   Motivational: People can be too optimistic and wishful
§  (4) The need to control monopoly
·         Key rationale for regulation of prices and profits rests on need to control exercise of economic power
·         For economists, natural monopoly exists when average costs of production decline with increased output
o   Less accepted economic arguments
§  Control windfall profits: Windfall profits may result from sudden, generally unanticipated increases in commodity prices
§  Eliminate excessive competition: If prices are too low, competing firms will go out of business. Two arguments
·         (1) Historic: Airline regulation
·         (2) Industries with large fixed costs and cyclical demands
§  Alleviate scarcity
·         Sudden, dramatic price increases have led to claim that allocation will cause sudden/serious hardship
§  Agency problems
·         Person other than buyer makes purchasing decisions
o   Non-economic reasons
§  Paternalism: Government should protect individuals
§  Pursuit of “justice”
o   Private interest rationale
§  Legislators’ motivation
·         Desire to be reelected
§  Regulatory capture
·         Big firms want to lock out governments
·         Public Interest Theory
o   Rationale: Agencies should be structured to optimize the level of achievement of public interest goals
o   Regulation is desirable in several situations: preventing parties from externalizing costs, preventing monopolies that lead to higher prices, providing subsidies, information
·         Public Choice Theory
o   Rationale: Desire of government officials to increase their power and maximize their benefits from the regulatory scheme. This focuses on Congressional intent; Congress gets the credit for dealing with the problems
o   People who lead agencies are self-interested
o   Public choice theory often looks behind public int

egulate tobacco, so the regulations were invalid. Court held that Congress had clearly not spoken to the precise question at issue of whether the FDA had authority to regulate tobacco
Agency Design
·         Government agencies
o   Legislative branch
§  Government accounting office
§  Congressional budget office
§  Congressional research
o   Judicial branch
§  Administrative office
o   Executive branch
§  White House agencies
·         OMB
§  Cabinet departments
·         Dep’t of defense
§  Free standing executive agencies
·         EPA
·         Run by people under Executive control
§  Independent regulatory commissions
·         FTC
·         Multi-member leadership, appointed by president, but more independent
·         Can only be fired “for cause”
§  Government-owned corporations
·         US Postal Service
·         Considerations
o   Efficiency, power, control
o   Policy swing of current administration
o   Democratic legitimacy
·         Rationale for agencies
o   Legislators don’t have time or expertise to make the kind of judgments necessary for public programs
o   Legislators can build coalitions
o   Public choice: Easier to get agreement on broad terms, then delegate and leave it up to agencies
Delegation and its limits
·         Delegation and its contours
o   Constitutional authority
o   Vesting Clause
§  Art. 1, §1: “All legislative powers shall be vested in Congress…”
o   Presentment clause
§  Art. 1, §7
·         Non-delegation doctrine
o   Congress may not delegate its legislative power to President, agency, or any entity outside of the government. It prevents Congress from avoiding basic restriction by delegating discretionary power.
o   Concerns: If Congress can delegate freely, the federal government can easily make law. Excessive delegation contributes to democracy deficit.
·         Key characteristics of authority