Reducing the power of technocrats will strengthen democratic legitimacy and political stability.
In the United States, the marginal lawmaker in many fields is an unelected technocrat, sitting in a court or administrative agency. This is because the U.S. Congress has powerful incentives to delegate without setting clear goals or objectives, and the Supreme Court has incentives to let such delegations stand if government is to proceed. The effect is to leave judges at all levels with a choice between “deferring” to agency policy or imposing their own.
Meanwhile, one part of the administrative system, central banking, has emerged as a third pillar of unelected power, alongside the judiciary and the military. Unlike most agencies, central banking spans almost all the functions of government: fiscal, through monetary policy’s latent powers; regulatory, through banking supervision; services, by effecting payments transfers and collecting statistics; and the emergency state’s crisis management, by acting as the lender of last resort.
It will not do to declare the administrative state unlawful, as that is not going to lead anywhere very much. But nor will it do to fall back into acquiescence in or even celebration of the rise of government by technocracy. If nothing else, passive acceptance is unlikely to be sustainable. One of representative democracy’s many remarkable characteristics is that it separates how we, citizens, feel about the government of the day from how we feel about the system of government. When, inevitably, parts of government fail or underperform—sometimes massively, as in the run up to the financial crisis—we can vote out our governors. But we cannot vote out our unelected governors.
This predicament cannot be remedied solely by a certain kind of liberalism, centered on legal checks on the proper excise of power. Liberal constraints are necessary, but not sufficient. If a democratic deficit afflicts central banks and independent regulators, the judiciary cannot cure it.
My recently published book, Unelected Power, tries to make sense of this predicament, offering a solution framed as “principles for delegation” in healthy constitutional democracies. I sketch only a few of the principles here.
In order to address the problem, legislators and commentators should take seriously the different degrees of insulation agencies have from day-to-day politics: insulation from the elected executive, through job security and instrumental autonomy, or insulation from the legislature, through budgetary autonomy, or from both. Although the book outlines some precepts for delegating to executive agencies and to semi-independent agencies like the U.S. Securities and Exchange Commission (SEC), I focus primarily on agencies insulated from both elected branches—the only group that deserves the label “independent agencies.” Few truly independent agencies exist in the United States compared with some European countries.
The case for delegating to independent agencies cannot be expertise. Although expertise is necessary, expert bodies could be charged with publishing advice to political decisionmakers rather than deciding policy themselves. The most compelling rationale for delegation-with-insulation is, rather, the value of making credible commitments to policy objectives that enjoy wide support across the political community. Insulated technocrats, who are not engaged in a contest for short-term popularity, can better commit if their professional and public reputation can be harnessed to delivering a delegated mandate.
But if, as I argue, independent agencies are institutional technology for committing to the people’s purposes, the people had better be let in via public debate centered on the elected legislature. More specifically, the objective set by the legislature had better be clear and monitorable. Otherwise, how would people know what the policy commitment was, and so how could the technocrats’ self-regard be harnessed?
That call for cross-party and public consensus before insulting agencies from day-to-day politics is not as innocuous as it might seem. In many fields, sufficient consensus on policy purposes does not exist to warrant delegation-with-insulation. To state the obvious, while there are not serious calls for high and volatile inflation or for more financial crises, the constituency for environmental policy is, putting it mildly, fractured.
Moreover, across the advanced economy democracies, many, perhaps most, independent regulators have multiple equally ranked objectives, each vague. Whatever remains of the U.S. non-delegation doctrine that Congress cannot give law-making powers to administrative agencies unless the delegating statute constrains the regulators via an “intelligible principle,” judicial practice has reduced those words to rather peculiar—and, to citizens, opaque—terms of art.
But even if clear and monitorable objectives were suddenly to descend from the ether, there is something incomplete in this analysis. Problems of commitment run right through every part of government, so making that a sufficient condition could easily become a recipe for delegating pretty much everything to independent agencies like the Federal Reserve, as tantalizingly proposed two decades ago in an essay by Alan S. Blinder. Instinctively, as citizens we know the answer: Under the West’s system of representative government, the public does not want to let independent agencies make big choices on distributional questions or basic values.
Contrary, however, to President Woodrow Wilson’s hopes at the turn of the last century, a neat dichotomy between politics and administration does not exist. What counts as politics can be determined only through politics itself—another reason why delegation-with-insulation requires careful public debate.
The aim cannot simply be to find the lowest common denominator or overlapping consensus. Instead, the design of delegated-but-insulated power must heed the rich and diverse conceptions of the rule of law, constitutionalism, and democracy that, given the West’s political history, variously have some purchase on the community today.
Unelected Power applies that kind of “robustness test” to the delegation principles it develops and espouses. It entails combining liberal constraints with republican values, and draws on Edmund Burke’s notion of prescriptive legitimacy (or, test of time). The package that emerges from this exercise in constitutionalism respects the Hamiltonian value of efficiency, a Madisonian aversion to concentrated power, and a Jeffersonian voice for the people.
As a putative political norm, the book’s principles for delegation present quite a challenge to prevailing institutional structures in the United States—such as the Consumer Financial Protection Bureau (CFPB) and the SEC—and elsewhere. Whatever one thinks of its mission, the CFPB’s sole policymaker has too much delegated power, and the agency’s statutory objectives are too vague and cross-cutting for insulation to be decent and, thus, sustainable.
The SEC is rightly not fully insulated given its obligation to trade off competing values, but its proximity to day-to-day politics undermines its credibility as a necessary trustee of financial system stability. In the world of central banking, alongside various procedural reforms, banking supervision needs clearer objectives; there should be a bar on their providing liquidity support to fundamentally bust firms; and they should not try to steer the allocation of credit. And in the vital field of antitrust, the principles for delegation shine an uncomfortable light on high policy having been set by the judiciary, rather than by elected legislators, when the switch from Harvard School to Chicago School doctrine took hold a few decades ago.
So, returning to where I began, the community should be very concerned that unprincipled delegation to independent agencies is too easy for both legislators and judges. Politicians know that technocrats will be compelled to fill the vacuum they leave—hence, the disturbing refrain that central bankers are the “only game in town.” Surely, this state of affairs is inconsistent with the political values that animated and have sustained the American republic. Indeed, the problem of an incompatibility between incentives and values that seems to characterize U.S. government is, perhaps, the most important conclusion of Unelected Power for American readers. Even if, as I believe, technocrats need to retreat somewhat, the larger recommendation is that elected legislators need to step up.
This essay draws on Sir Tucker’s book, Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State.