Episode Transcript
Speaker 0 00:00:00 Uh, so I will just kick it off. My name is Jennifer Grossman. My friends call me JAG. Uh, I'm the CEO of the Atlas society. We are the leading nonprofit, introducing young people to the ideas of Iran in fun, creative ways. I'm here with my colleagues, Scott Schiff. Um, and also of course our senior scholar, professor Richard Salman's where have all the capitalists, Richard, why don't the room for?
Speaker 1 00:00:38 Great, thank you, Jen. For, uh, today, I, I wanna talk about, um, the regulatory state sometimes referred to as the administrative state sometimes also referred to the deep state or colloquially the swamp. Those are the, uh, Trump, Trump people say it's the swamp. Um, now this is in the field of philosophy of law and I'm, I'm pretty good at law, but I'm largely an economist. So bear with me here, but I have studied law in great detail over the years and actually majored in it in early, uh, college, uh, degrees. I'm gonna, I wanna argue that there should be no regulations, none, no agencies at all. And that strikes, uh, many pro capitalists, maybe even some Objectivists as a way out there problematic. And I, and I'm thinking that it is mainly the, because it's not fully understood what laws would remain if there are no regulations.
Speaker 1 00:01:39 So I don't wanna keep this semantic, but there, there are distinctions between laws say, rules, regulations, guidance, and I want to, and I wanna make those, but before I critique regulation and, and, and with the theme, by the way, that regulations presume that you're guilty and that, that you have to prove you're innocence. So it is a complete just on philosoph grounds alone. It's a complete inversion of that major test of Anglo American jurisprudence, which is that you're innocent until proven guilty. So that's part of my theme and that's not the only part of it. Let me just say something positive about what a capitalist legal constitutional system should be. So you get a, and I'll be very brief here because most of the listeners will know this, but I just wanna get it on the record for those of, uh, you who are in cap, which I'm told means Anar capitalist.
Speaker 1 00:02:36 Then I think it'll be more clear how awful the regulatory state is and where we got it and what to do about it. So for those of you who wanna engage in political action, it's a guideline for that. But also if you just wanna understand and get your head around, why is government seemingly out of control? I mean, certainly the major branches we know of the executive legislative and judicial may be seen as out of control, but this is this amounts to a fourth branch, the regulatory state. So it is really out of control. The original American system was based on a tripartite division of government functions, proper government functions. So the legislative branch, which is article one of the constitution would make law. The executive would, uh, administer law or enforce the law and the judicial branch, which is article three, would adjudicate or, or judge the law and reject any laws that were inconsistent with the constitution and, uh, the rights respecting aspects of the constitution, rights to life, Liberty, property, all of which are in the right to property, especially in the constitution.
Speaker 1 00:03:51 Now, a couple things with that, not just that those are the only three that that's philosophically sound argumentation, that those are the only three, but the founders and the founders were influenced here largely by, um, not just Locke by the way, but heavily by Montesquieu, uh, the French, uh, uh, political theorist and philosopher of the 18th century. It was Montesquieu who set out the notion of separation of powers and checks and balances. So not only that these three, uh, branches should exist and know more, but that they should check each other, that there sh should be checks and balances precisely to keep government limited in its and bound in its proper functions that didn't come from lock that came from Montesquieu. Another influence here is Blackstone. The great, uh, British, uh, ju heavily influenced the Federalists, uh, Madison and Hamilton at the time.
Speaker 1 00:04:48 Uh, so that's kind of civics 1 0 1, although civics 1 0 1 isn't taught anymore. The idea of three branches checks and balances, separation of powers, that these were things to preserve Liberty, to preserve. Government's proper function as a protector and preserver of individual rights. Now, I want to add something that is often not added in this kind of a discussion, which is federalism. Federalism is the idea that there are not that there are branches in a horizontal, horizontal sense, but in a vertical sense that the same tripartite setup exists at the state and local levels. And so in a Federalist system, this is not true of every country. Other countries have what they call uni unified systems, where, uh, there is no state and local level. Everyone is governed by the same, uh, national laws. The us has a federal system. So in a way that is a further check, it's not only checks and balances at the state level.
Speaker 1 00:05:44 And of course there are 50 states, uh, but there are ways to have interactions between the states and the federal government that separate out the powers and permit people. If they don't like what's happening, they can move. They can quote, vote with their feet, at least by going to different states. And so that's another check on government power. And so any kind of move away from federalism, which would be so toward call it centralization, which usually means moving things away from the state and local up into the central government. Uh, it there's reasons why people suspect that as a potentially illiberal move.
Speaker 1 00:06:27 So, uh, one more thing in the courts in that third branch, the judiciary, there are both civil and criminal courts and the most important for purposes of fighting back on the regulatory argument would be the civil courts. So the civil courts are dealing with torts to RTS, uh, word for wrongs, committed by people, and the remedies are, uh, commercial or monetary. So, whereas crimes put you in jail or give you capital punishment, civil wrongs lead to settling up in court where the evidence is brought forth. Someone has wronged me. Someone has hurt me in some way, someone has hurt me or my property in some way. And we make the case in court and the jury or, and, or the judge gavel down a decision which warrants restitution. And in cases of real negligence on the part of the wrongdoer, there can be added to the compensatory settlement, punitive damages, signifying that the person who did the wrong, not only committed, uh, material harms, that can be quantified, but that they should be extra punished, you know, with an additional pun penalty.
Speaker 1 00:07:48 Um, now I say all that, because in the absence of that, if you just say there should be no regulations, it sounds like anything goes, it sounds like, uh, you can do anything you want to anyone, uh, unregulated unfettered, as they sometimes say, they'll say unfettered capitals. Now, what is the regulatory state before I give you the quick history on the us, which is very fascinating, the regulatory state, or just take any regulatory agency. I just take obvious one like the EPA, the environmental protection. It is neither in, it's not either the three branches. It's an entity created by Congress. There are laws creating these agencies, but once the agency is established, it writes its own rules, which means it's a law making entity. Well, I'm mixing terms here. Aren't I it's writing regulations and rules, uh, which you could argue are lawless in the sense that they aren't checked by the other branches.
Speaker 1 00:08:52 Now here's the other oddity that some of these agencies exist and are put into the executive branch. And in specifically, this is done with cabinet agencies and further, not only do these agencies write rules, that you must obey, uh, they can penalize you. And in some cases, jail, you, and further, if you appeal, the judges don't exist in the judiciary branch, they exist in the agencies. So there's no independent judiciary like there, if you, if you oppose say an IRS ruling against you, there are tax courts, but they're overseen by IRS tax judges. So who you get the sense that if separation of powers and, uh, checks and balances is, is, is a crucial part. It, uh, procedurally really, I'm not talking about the substance of whether the constitution actually protects rights, but let's stipulate that it does. It does need this further procedural guarantee and assurance that the workings of it will carry out the substative, uh, aim to protect individual rights.
Speaker 1 00:10:03 And that is lost when you well would be the opposite of separation of powers. The unification of powers, the, the essence of tiering when constitutional government was discovered and, and, and discussed and implemented in the Anglo-American world. That prior to that, the king of course, had all power judge, jury, and execution, or as they say, and, and the great invention was to get away from that. But how by, by erecting, this constitutionally limited government, the Reagan story, state throws all that away. It basically is fundamentally unconstitutional, uh, in the American sense of what a constitution, uh, truly means. Now that's just as a, um, a kind of, um, institutional description of it to be a little more philosophical now, uh, uh, you are innocent until proven guilty to have harmed someone, right? But in the regulatory state, what they do in, in erecting, these rules is they tell you what to do in advance.
Speaker 1 00:11:08 They basically tell you how to run your business, how to undertake safety measures, a whole range of whether to pay, uh, a minimum wage to your McDonald's employee or not. Now these, these are dictates in effect they're decrees. They're just mandates they're requirement. We saw these heavily, of course, in COVID they're just mandates and you haven't done anything yet. You haven't harmed anybody yet. The presumption is that you might, and therefore you are subject to what's called by SCOTUS SCOTUS calls it prior restraint. Prior restraint is actually a phrase in Supreme court decisions that refer to the idea of the government restraining you before you did anything. It's fundamentally unjust. It's fundamentally wrong. It's a violation of, of rights. And of course, it's subject to no restriction. Once the government starts doing that, they can start profiling you. Well, you're likely to harm someone. You are likely to do a harm and do a tort.
Speaker 1 00:12:07 So let's restrict you in advance, and there's an unlimited number of ways they can restrict you in advance. Now, interestingly, just as a sidebar, the prior restraint doctrine has been applied in first amendment cases and ha and the Supreme court has thrown out regulations of speech and worship and other things on the grounds of prior restraint. In other words, they've said you cannot prior restrain. I don't know what would be an example. Suppose the New York times could potentially libel and slander someone. Everybody knows that it, it could potentially do that, but until it does, so you, you can't Sue it right. Well, what if you had prior restraint? What if, what if you had a rule, uh, that said the New York times has to submit its editorials to a regulatory agency in advance, uh, to make sure it doesn't slander or liable. Everybody knows that would be a violation of free speech.
Speaker 1 00:13:02 And the Supreme court has said that's prior restraint, unacceptable unconstitutional, but they do not do that in commercial cases. They do not do that when it comes to economic and other kind of behavioral, uh, conditions and situations. Uh, now, um, a little bit on the, the history, um, there are now in the us, uh, last time I counted something like 17 or 18 executive branch agencies, what they call cabinet department. Now I'll, I'll, I'll mention some of these as to when then when they came in, but it's interesting. I think an, a counter to the anarchist argument that there were cabinet agencies at the outset when the us was put together in the 1790s by the Federalists. And it's interesting like that the four cabinet agencies that existed and there were only four of them, not 17 were legitimate in the sense of, they were legitimately related to a proper government function.
Speaker 1 00:14:07 So, so what were the first four? Uh, treasury, obviously the government has to take in revenues and spend revenues, uh, the treasury department, the state department, uh, for, uh, for inter relations with other governments. Uh, I think Jefferson was the first secretary of state under Washington, uh, a defense department at the time they called it the army, uh, or naturally department of war. I think they called it. But what is today called the defense department? That's a legitimate government function. And finally, although there wasn't a full-fledged justice department, there was a legal team that advised Washington, but that ultimately came to be called the justice department. And so that's obviously relates to the judiciary in the judicial branch. So again, a legitimate government function. Now, if I ticked off all the cabinet agencies that have been since added, and by the way, they've been since added only in the last hundred years.
Speaker 1 00:15:02 So the cabinet list did not grow in the 18 hundreds when we were more or less fair. Uh, but just in, um, alphabetical order, agriculture, commerce, education, energy, health, and human services, Homeland security, housing, and urban development, interior, labor, transportation, veterans affairs, um, education, energy and veteran affairs all came in since 1979, Reagan added veteran affairs after saying he would get rid of energy and education. Now, the agriculture department does not produce food. Uh, the education department does not educate kids. The energy department produces no energy. I could go on and on these cabinet agencies exist to restrain and restrict and regulate sometimes subsidize, which is cronyism. Um, the various sectors they're attached to. So they're no part of a capitalist, uh, government. Um, but there they are. Now, these are separate from what's called, but really closely related to what's called the alphabet agencies, not cabinet agencies, but the so-called alphabet agencies, many, many starting with F for federal.
Speaker 1 00:16:22 So for example, the federal trade commission FTC, or the FCC federal, uh, communications commission, the F FAA, the F D the EPA, the FBI, the F D I C the CFTC, there's hundreds of them, literally hundreds of 'em, I've named some of the most famous, uh, they're the ones also, uh, uh, extensively writing the rules and regulations that restrict us. Now, there's something called the federal register. You may have heard of which documents as best it can, all these rules, and it's just a huge shelf of books. And you can go online and find out how many pages are in the federal register. But as you know, it's not, it's not just page count alone, although that's a crude measure of the growth of the regulatory state, but of course, what, what is written on each page is what's important, but, but as a crude measure of the growth of regulation, uh, it's just an enormous increase.
Speaker 1 00:17:21 And by the way, it didn't, uh, slow down much under Trump. Everyone thinks Trump ran around and deregulated things, not true under Reagan who was known as a deregulated as well. And so was Carter. Actually, again, if you look at the trend lines, they're mostly just slowing down, not shrinking, uh, the regulatory state now, big picture. I, I think there is no doubt that really what this comes down to is a, is a couple of things. One is just the size and scope of government and the other one is more philosophical. So on, on the size and scope of government, you have to have this regulatory state, you have to have, it's unavoidable this fourth branch of government, if a democracy votes to increase the size and scope and power of government, which has been true for the last 120 years, this is what people have been voting for.
Speaker 1 00:18:15 So by and by doing that understand, it is impossible for 435 elected officials. That's just at the federal level Congress, really 535 congressmen plus senators to sit down and write out all the rules and regulations that would be required for the laws they pass. So their argument, if a Congressman were in front of me today, and for the welfare state, for the regulatory state, I mean, it was listening to me. He would recount by saying something like we have properly delegated Richard, our law, making powers to these agencies. So there's nothing wrong here. They're just kind of, uh, subsidiaries of the Congress. And then of course, if you say to them, yeah, but they also have enforcement power and they can also jail you and then break into your house. And, and they have judges there. They'll ignore all that. But see, from their standpoint, they're saying it's just a delegation.
Speaker 1 00:19:18 We delegate stuff to our staff. So what our staffers, you know, write some of the, we can't do everything. This is a division of labor, the stop criticizing us. Um, now, um, the other thing they would say is we have oversight now. That's true. Actually, there are what they call oversight committees in Congress where, uh, they allegedly bring in, you know, you've seen these, you'll, you'll see some kind of hearing or testimony where the EPA administrators or the federal reserves testifying before Cong. Why did they do that? Uh, partly to gather information so they can pass more laws. But partly what they're saying is we're overseeing, uh, these agencies and that's a kind of check and balance and we're making sure they do what we said they were gonna do. So everything's, uh, fine. Everything's fine. Don't worry about it. And I'm just giving you arguments that you hear that come back, uh, to, um, justify this now.
Speaker 1 00:20:21 Uh, it was the progressives, um, in the turn of the prior century. So in the 1890 to 1920 period, there was a big argument against the constitution, limiting the size and scope and power of government. There was a look to Europe which was becoming more and more status, and the argument was, well, the us is handcuffed and restricted in some way by the constitution. Well, of course it was. And so the argument was what can we do to, to minimize the constitutional restrictions on the size and scope and growth of government. And that certainly was done and especially was done during the, the new deal. But that really is what gave rise, that movement. That argument is really what gave rise to the regulatory state. And it has just grown by leaps and bounds since then. But if you did a timeline, not only of those cabinet agencies I talked about, but of these regulatory agencies, you will see that most of them came in and then they were two big, uh, cascades, the thirties and forties, and then the seventies under Nixon and Ford.
Speaker 1 00:21:30 So the two great regulatory waves of setting, I mean, EPA, for example, and OSHA were set up in 1970 under Nixon. And, um, uh, so those are the two great waves, but there were still more agencies being added. And more importantly, the existing agencies, uh, generating a whole slew of new regulations and restrictions. So, um, that's worth putting on the record. Now, a couple of, of things I wanna say a way to not argue against this, to not argue against this regulatory monstrosity. Sometimes the populace today will say, well, the problem is not the regulatory state, it's their hubris, it's these so-called experts. And these so-called elites who think they know better than us and are telling us what to do now. That that is not really the fundamental problem. I mean, in if government was acting properly and within its proper domain, we want smart people.
Speaker 1 00:22:32 We want credentialed people. We would want experienced people. The problem is not that they're the cream of the crop, so to speak, or that they have the highest degrees and, and things like that. It's that they're doing the wrong thing. They're doing an improper thing and you're not gonna attract good people to do an improper thing. So Hayek has a great chapter in the road to surf them. Why the worst get to the top? Really the subset of that was why the worst kind of people get to the top in a government that's unlimited and a government that's unlimited. It attracts power lusters. It attracts people who love to rule arbitrarily. If government were really restricted to doing its three main functions, it would attract the best kind of people because they wouldn't have great power. Now, the other thing is to avoid is calling them, although they are unelected bureaucrats. Now they are unelected bureaucrats in these agencies, but that's not, again, all also not the fundamental problem. It would, it it's as if you're saying, well, all their stupid regulations and all their illiberal interventions would be just fine. If I only could vote for them, that that's not the issue, that that's not the issue.
Speaker 1 00:23:49 Um, one other thing I noticed, and this again, is mostly from people who are critical of the regulatory state. Sometimes people drop the context and argue against regulations, not remembering that there are subsidization. So I know the field of finance pretty well of money in banking. So here's a perfect example. Someone will say, someone will say, well, the crisis of oh 8 0 9, the financial crisis was due to too much regulation. Of course, the critics of capitalism will say that occurred because of deregulation too little regulation. But even the critics will say regulation, you know, on housing, on mortgages, on mortgage backed securities on wall street. True. True, true, true, true. However, one of the reasons regulations come into play is because there's reckless behavior on the part of some industry, but the reckless behavior is subsidized by government. So for example, in finance, there's a doctrine you may have heard called too big to fail.
Speaker 1 00:24:54 Where, where if a bank gets big enough and reckless enough, a government will bail it out. If it does bad things. Well, that's obviously a subsidy for reckless behavior. What economists call moral hazard. Another one would be deposit insurance. You know, the idea of the government providing insurance that deposits won't run away from a bad bank. Well, that just promotes more bad banking. Um, there's various other things that I won't go into, but to get the government out of sectors like this, it isn't enough just to deregulate. You see why cuz the subsidies would still be there. And it's in that regard that the opponents of deregulation are sometimes correct in saying, ah, the problem is we deregulated. Yeah. But we have to come along and say, yeah, but you didn't de subsidize also gotta do both. You gotta take away the subsidies. And then of course, if you did that first, you wouldn't have the reckless behavior.
Speaker 1 00:25:51 And then the regulations, um, I'd say I'm running out of time. So kinda say one more thing I've been in, in recent presentations talking about how, uh, the us really the west in general, but the us is not moving toward from capitalism to socialism. It's moving from capitalism to fascism. And the distinction I've made in my, my two by two matrix is there's ownership and control of not only the means of production, but of your body and your personal possession and things. And whereas capitalism is private ownership and private control and socialism is public or government ownership. And government control. Fascism is a hybrid. Fascism is not the government nationalizing things notice it's not nationalizing things. It's not taking over businesses in the sense of the, the old socialist prescription of nationalizing them and having the government own and own them what they're keeping them in private hands, but telling them what to do.
Speaker 1 00:27:02 So there's private ownership in title only, but public control and not just public control, increasing intensive, arbitrary, despotic control. And so this whole red problem of the regulatory state is, is part and parcel of that broader theme I've been working on, which is we're moving toward fascism, not socialism. So again, it's not just terminological it's, it helps us, I think, understand what's happening and where we're going. And in terms of solutions, um, we need to get back to the fundamental recognition of what the proper function of government is. I know most of the listeners here know that I don't think the anarchists do. I think the anarchists might point to the same danger I see of the regulatory state being tyrannical. And, and they might say, see, we told you, government just gets worse and worse and it, and it naturally must. And there's no control over that. So get rid of the whole damn thing. Um, here, I think we can specifically identify exactly the problem, namely having lost the concept of not just individual rights, but then even if you knew the concept of individual rights, not knowing the architecture or call it the political engineering that the founders knew and specialized in, which is this idea of separation of powers, checks and balances. And, and then to recognize that the reason these agencies are looking so tyrannical is precisely because they represent unified power, not separation of powers. I'll draw line there.
Speaker 0 00:28:47 Great. Thank you, Richard. And, um, want to thank those of you who had shared the room. Thank you, Vanessa. Thanks, Scott. Um, and, uh, ask the others in the room, please do use that button down below to, to share on clubhouse and on social media. Uh, we've got our founder, David Kelly in the room and my friend Roger as well. So, uh, David, why don't I go to you first to see if you had any questions or comments and wanted to invite the rest of you to raise your hands and we'll bring you on up.
Speaker 3 00:29:25 Okay. Just a question for Richard, um, uh, about the distinction between, I mean, law, proper laws and law in general and on one hand and regulation on the other, I mean, obviously some, uh, any law, um, sets a kind of prior restraint that is, it restrains me from stealing or, or, uh, using force against others. And that's fine because, um, uh, that would be a violation of that person's rights. Um, but there are other, I I'm, I'm, I'm wondering if, um, you, if there aren't any regulations, anything that would be classified as a regulation that, um, involves something like that, just a rule of behavior, rule of action. Um, I was talking with Jay the other day, he gave the example of, you know, driving on the right side of the street now, given that's an artifact of the public ownership of the roads. So that may be problematic, but, uh, anyway, that things that are, that are, uh, prior to restraint, not, not in defense of, of, in of individual rights, but, um, simply did make for orderly, you know, coordinated, um, social behavior in, uh, yeah. Uh, so I, I, I guess what I'm asking is a little more clarity on the view on the, uh, distinction between, uh, law and regulation.
Speaker 1 00:31:10 Yeah. This is unclear even in the philosophy of law I've learned, but I would, this is a good question, David. I I'm grappling with a lot of this myself. I would argue that the law should refer to violations of rights. So obviously a law, uh, uh, specifying, uh, I don't know the degrees of murder, uh, or theft or rape or things like that, um, or property right violations. Um, and I, I think one of the art, well, I think one of the problems with arguing against the regulatory state is some of the regulations do do that. They just carry out in specific form those things, but way more than half, I would guess of it is not that. So for example, um, suppose you dump pollutants onto somebody else's property, that's a violation of their property, right? So you'd have to take it to court of course, and have a tort.
Speaker 1 00:32:14 Um, or if they were threatening to, you know, they were like pulling up the dump trucks or setting up the pipe and they were like the, the, it was imminent <laugh> you could have restraining what the heck, all restraining orders or stays, you know, uh, perfectly legitimate, I think. But now if the EPA says in advance, you know, you must operate your factory this way or that way, because I think you might, you haven't yet, but I think you might pollute your neighbor. That is a viol, I think a violation of rights. It's a presumption that you might be prone to violating somebody else's rights unless you're restrained, um, literally in advance. So I don't know if that's helpful to you, but there's many, many cases we could think of where you classify 'em as one or the other, but that would be one example and the driving on the right.
Speaker 1 00:33:09 I, I think, I think part of my argument has, which I didn't include has to include something like, listen, it isn't that rules aren't adopted privately by private actors. They are all the time. Right. And that is, uh, what's the word that is, um, dis not displaced. I don't know what the word would be. Co-opted displaced by, uh, regulations, you know, so, so, and when we talk about getting rid of these regulations, people think, well, this should be just be chaos. People be driving all over the road. No, it's, uh, these kind of things are, I, I say to, I say to students sometimes notice that, uh, when people walk down the sidewalk, they tend not to bump into each other. And yet, I don't know of any traffic cop on the sidewalk doing this. It's just in one self interest, you know, not to do that, but then also this kind of norm of walking to the right, um, also helps. And, uh, anyway, the, uh, the idea of norms and things like that, that aren't quite concrete rules and regulations yet is a big part of human interaction. But you ask a good question, David, yet I is your, is your point really that all laws prior restraint. And so that I have a problem referring to prior restraint as the main problem.
Speaker 3 00:34:37 Well, prior restraint, I think is usually important concept as it's, uh, applied to first amendment issues. And, um, you know, it's protected a lot of, um, speakers and I think that's eroding now, um, yeah, under the HCC and, and other agencies involved with communication, but still it's, um, significant and yet, um, I, I'm not sure I, what the scope of that concept would be because, um, in a, I'm saying in a sense, you know, any law is a prior restraint and we need some of them, uh, um, you know, to protect against the people who don't comply with, uh, don't individually, um, autonomously protect, you know, respect other people's rights. And there are IE criminals and there are some in any society. So, um,
Speaker 1 00:35:33 But we still have, but I'm, I'm saying we still have a criminal system and a torch system where until they do the act, you leave them free.
Speaker 3 00:35:47 This is true. Yeah.
Speaker 1 00:35:49 Um, and that that's, that's troubling to some people, of course, cuz they'll say if you could, if you could only prior restrain them, then they won't even end up in court, you know, but the problem there is it violates their rights. And I guess I'm argu. What I'm arguing for is I know prior restraint is still, there's a residue of it in, uh, first amendment cases. I'm arguing for that principle to be extended across all human behavior, including commercial. And we know, we know the Supreme court generally starting in the 1930s, separated out civil rights versus economic rights and said that, you know, you can regulate bakeries in the way you can't regulate speech. And that bifurcation and dichotomy I thought was always wrong. So in a way I'm arguing for reunification of that. Um, but, but in, in speech cases, for example, we wait for the liable or the slander, right? Yes. We don't say, we don't say, uh, wow, there's gonna be a lot more liable in slander unless we regulate this in advance. So,
Speaker 3 00:36:53 Um, no, I, I, I, I understand actually we talked about the, uh, uh, in, in uh, the, the, uh, current events webinar that Rob and I did yesterday, we talked a bit about the, um, the 1930s, uh, separation of, or demotion of economic Liberty to second plus citizenship, uh, in the courts. Yeah. And so, yeah, that's, that's huge. And um, but I guess what I'm, um,
Speaker 0 00:37:26 David, I, I just, uh, if you don't mind, I wanted to try to get Roger in cuz I know he has to leave.
Speaker 3 00:37:33 Okay. Yeah, go ahead. I'm thank
Speaker 0 00:37:35 You. Hey Roger.
Speaker 4 00:37:37 Oh my God. This feels awkward now. Um, uh, prioritizing my speech over David Kelly, who I would line up to see speak any day. Uh, but I appreciate getting a chance to, uh, to chime in here. Um, I, I just wanna ask Richard in return in, in terms of this regulatory state, uh, it seems to be a part like a bigger, uh, of a bigger piece, which is the administrative state. Uh, and, and within that, there's, there's several pillars. Uh, and, and the one that concerns me most, uh, and as it works with these regulatory agencies is judicial deference where, uh, where judges will actually prioritize and utilize the definitions that are created by these, uh, these, uh, these regulatory agencies. And so to, if we were to use an example of, you know, uh, of a field that, that you, you would be most familiar with, uh, if we looked at finance, for example, uh, there's different regulatory bodies, whether we're looking at the federal reserve board, uh, F D I C, uh, S E C, uh, and even the OCC.
Speaker 4 00:38:42 Right. Um, and, and then if you wanna even talk credit unions, we could talk the N C a. So to tie this into a question, how do we stop, uh, judges from, or should we stop judges from looking at these agencies, uh, as their interpretation of a particular regulation as what the judge should rule upon, uh, when these agencies are filled with former lawyers, not from just any organization within these different industries, but it's the lawyers from the top companies. So for example, like the N C a, which is, uh, you know, the, the governing agency over credit unions, they set up rules that apply differently to companies that are, uh, over 50 billion in assets, and then different rules for people that are, uh, that are for credit unions, less than 50 billion in assets. And the reason for that is that there's preferential treatment for companies that, uh, that have over 50 billion in assets.
Speaker 4 00:39:45 However, there's also some additional expense that's incurred. So if you're a regional credit union, and now this regulatory agency is telling you that you must do all of these things that will incur a cost that makes it, uh, you know, uh, well, where it makes it not advantageous for you to do that credit unions that might have very well operating businesses may prefer to stay under 50 billion in assets to, to not fall under these additional regulations, which incur new cost. And, and, and so just giving that as an example, how do you propose that we could fix this problem because, uh, you, you said we have people that'll line up in, uh, in favor of deregulation and those that will say, no, we need it more regulated. Uh, when I look at the nuts and bolts of this, it's, the regulation is, is it's, it's the process of hiring lawyers for within that industry to create the regulations and then judges deferring to the wisdom of that agency. And so I'm just asking, how do you fix that?
Speaker 1 00:40:53 Uh, good points. The, um, principle of controls, breeding controls is very operative here when something goes wrong, like there's a financial crisis, or there's a spread of, uh, COVID or something like that. Uh, if you, if you keep an eye on the anti-capitalist, they always say it's due to in either insufficient regulation, or there was some previous deregulation. So it's as if their standard is total controls. Well, that is their standard totalitarianism. And anything short of that, if there's just like one smidgen of free action left in the world, that's to them is the cause of any problem. First of all, we have to show that it is precisely this regulatory spread, this cancer, which is causing the problems, which is causing the, the, uh, problem, which is causing the problem. So the, so the principle of controls breeding more and more controls. That's only operative because people think the original system, uh, of freedom doesn't work, uh, once that's thrown away, then the controls won't breed controls.
Speaker 1 00:42:01 So you'll see the controls like in finance and say, get rid of those controls. They just cause the, the mortgage crisis. But another thing I wanted to say, Roger is it is true that we have a problem here also of judicial review. So the principle of judicial review, which is in Federalist 78, and which was incorporated in Supreme court decision making, starting with, uh, not Jay, but, uh, he, his, my, his Marshall John Marshall adopted another Federalist Hamiltonian said, it's the proper function of the judiciary to review whether other laws are unconstitutional or not. So judicial review was very important. It was really the only power the judiciary have as Hamilton once said, Congress has the power of the purse. Executive has the power of the army. What's what is the, what do the robed people have other than their credibility and their ability to, to review and reject law?
Speaker 1 00:42:54 Well, sadly there's deferential absolutely that the Supreme court, at least since the thirties and forties, but especially since the Chevron case of 1984, where the Reagan administration was trying to restrict the EPA, um, uh, mention, basically adopted this doctrine of deference. We don't know any better than the regulators do. We're gonna presume they know what they're talking about. So even if they have some crazy regulations, we're gonna defer to them, that's called the Def the, the deferential or deference Chevron deference standard. Now, one of the reasons I brought this topic up is the case of last month, actually June now, West Virginia versus EPA six three, the court Clarence Thomas wrote against that. So th that was good news. It was a narrow decision. It was also against the EPA, but it questioned and kind of threw off the Chevron due deference, uh, standard and said, no, the Supreme court gets to reject the EPAs regulatory overreach.
Speaker 1 00:43:57 Now it didn't go so far as to say the EPA shouldn't exist, but at least for the first time in years, the Supreme court said, no, the, the EPA can't do that. Now, what did they refer to? They referred to something called the major questions doctrine, not to get too technical here, but they said, listen, if there's a big issue involved, the EPA can't just pass laws. Congress has to be very explicit in its own law, making it, can't just turn this over to bureaucrats on major stuff. I won't say what it is. It's not important. Uh, so there's at least some attempt to restrict this, but, but, uh, that's, what's going on. And the third thing I hear from your question, Roger is, uh, there is something called regulatory capture. Now, guess how this works. This has been identified decades ago, the Chicago economist Stigler and others recognize this here's regulatory capture.
Speaker 1 00:44:47 You set up a regulatory agency. I don't know, say it's the FCC federal communications commission who is best fit to regulate someone who knows something about communications. Where are you gonna get those people from the, from the sector, from at and T lawyers, business people. So there tends to be a revolving door between the regulatory agency and the sector that's regulated. And that's why people that's called regulatory capture. It's the idea that the industry in time captures the regulators and tells the regulators what to do for the benefit of the entrenched businesses. That absolutely does happen, but the problem is not to further restrict the sectors, but to get rid of the agency. Uh, but that is very common. And of course, the longer the agency is in play. Uh, the worse, this is now, some people have the idea that the way to counter that is to put people say in the FCC or the EPA that have nothing to do, have no knowledge, you know, whatever about energy or anything, like that's even worse because, uh, they're just, well, I don't have to tell you why it would be worse.
Speaker 1 00:45:54 A regulator has no idea anything about the industry. This would be like Pete Buttigieg, running transportation literally knows nothing about the field. That's, that's worse probably than being a regulator who knows about the field, by the way, the one good thing the progressives did, let's be clear about this. And the British did this. And the, and they did this in Hong Kong too, which is very interesting around that time of the progressive era, they passed what they called civil service reform and civil service reform was the idea that we, we should have professionals administering in the government instead of now would've this replace, it replaced what was called the spoil system. So the spoil system was a very corrupt system whereby once you got into office, you fired everyone in the agencies limited as they might have been at the time and put in all your buddies and put in all your family members and business associates and stuff like that.
Speaker 1 00:46:54 So that was corrupt. That led to a lot of corruption. We have way more corruption today, but, but that idea of a civil service reforms were proper, but that is why, by the way, today, you get many people in these bureaucracies who can't be fired. So now you should be able to fire them for poor performance or for corruption, but you could see why it evolved into that. The idea was, well, we should immunize them from being fired. Uh, you know, every time a new administration comes in and there's something to be said for that. Uh, but I just wanted to mention that and put it on the record, cuz that I think is a good thing. It's just not, it's just not the main problem.
Speaker 0 00:47:37 All right. I
Speaker 1 00:47:38 D I D I dunno if people know this, but when, when a president comes in and puts in cabinet heads, they change, they can change like ahead of energy. They can change only something like 10% of the people in that department at the top, you know, deputy assistant, deputy, blah, blah, blah. At some point they can't change anything down below. So there they have people working for them that, you know, might have been hired, you know, in the Carter years.
Speaker 0 00:48:07 Okay. Uh, Roger, I hope that gives you something to chew on.
Speaker 5 00:48:12 Absolutely. Appreciate it.
Speaker 0 00:48:14 Thanks and Lawrence, um, looking at your profile there, I'm not sure you're gonna be, can you unmute, if not, you might need to check out and check back in. All right, John, you up.
Speaker 5 00:48:30 Thank you. Um, I just add that historically, the interstate commerce commission and the FDA go way back. The interstate commerce commission, I think is 1887 Grover Cleveland. Yeah. And the FDA begins, I think, 1906 with a pure drug act. Correct. Um, those were excellent examples of regulatory capture from inception. Yeah. Um, the thing with the ICC was that, um, when the states and the federal government granted land for rights of way for the railroads, they also created, uh, monopolies similar to, uh, cable TV in territories. So that farmers had to buy their goods or their machine tools, the tractors, what have you by freight over one railroad and their food product, their grain had to be shipped out by the same railroad. So there were complaints about rates and the politicians naturally responded. And the excuse for the F ICC was we have to have regulation of the rates.
Speaker 5 00:49:39 Uh, but the other side of the story is that they sold protection to the railroads from lawsuits in the states where the juries hated the railroads for the same reasons I just referenced. So every time a farmer's cow got sick, he'd tie it off on the railroad tracks and the training run it over. And he'd Sue the railroad for the loss of his cow. That kind of stuff was happening according to the railroad industry. So the ICC and his origins in railroading was selling protection by making exclusive jurisdiction and, uh, administrative ruling on torts by the railroads, uh, exclusively within the jurisdiction of the ICC and taking it away from local juries. You had a similar arguments with the, uh, uh, pure drug act in the early beginnings of the FDA, where there are arguments about whiskey between country distillers and big city, big tank distillers, and whether one was better than other, or also
Speaker 0 00:50:49 Between you have a question or, oh, I'm kinda food for thought, not at all. We just, we have nine more minutes and I've got, uh, on deck and also, um, anybody else in the audience, if you'd like to squeeze into question, I also want to recognize Steven Hicks, uh, professor of philosophy at Rockford and a senior scholar at the ATLA society in the room. So thanks for joining us, Laura.
Speaker 7 00:51:22 Thank you. Uh, so Richard, I'm sure you've probably heard, uh, this argument made before, but kind of wanted to hear your take on the matter. Um, pretty sure the answer, a common argument by progressive the type when it comes to regulations versus individual rights is they tell the example of the river going through people's property and say, if someone is further up the river decides to dam the rumor for, to make themselves a lake, well, then they're denying everyone further down the access to, uh, water. So in that case, this is a violation of other people being able to get access to water and their lives could be in danger. So the property owner doesn't really have ownership of his property because it's for expedient to serve the whole does your, your, your property rights are, uh, to be damned because of, of helping out other people. So I'm curious what your thoughts are to that argument that left us often make
Speaker 1 00:52:20 Yeah. A good question. You
Speaker 0 00:52:22 Had any, um, observations on some of the excellent examples that John shared as well?
Speaker 1 00:52:29 Um, yeah, the ones John shared, I mean, those are the two first regulatory agencies and they were put in place to help a certain group that's for sure. So that's not equality before the law, even if it was law on Lawrence's point Lawrence, the, when you get this kind of thing, the first thing to distinguish, and I noticed even the way you described what you did was a mix of private and public property. So this is th this thing that the leftist is talking about is his problem in the following sense, it's a, it's, what's called the tragedy of the commons. So there's a famous 1968 essay called tragedy of the commons. And commons means communal ownership of something. And the tragedy is when it's communally owned, it's not taken care of. And, um, so the, the solution is to privatize it. I know that sounds radical to some people, but all of these things, the lakes, the rivers, the things that are polluted, the things that are contested should be privatized.
Speaker 1 00:53:23 And now just because it's privatized doesn't mean that there's necessarily one monopoly owner of it, excluding all others from it. It, that makes no sense from the self-interest standpoint, the, even if they were a monopoly owner of it to profit by it, he'd have to gain, he'd have to give access to it, which means he'd have to charge people for it, which means he'd have to charge an affordable price for it. So all those arguments about if everything, but that's the first step, the first step is to say, Hey, left this, the problem you're talking about is communal ownership of pro relates to the communal ownership of property. But that's what you advocate you advocate, not only communal ownership of property in that lake, you want to extend communal ownership of property. You want to make the problem, you are talking about ubiquitous and I'm a capitalist, and I'm saying everything should be privatized. Now we can, we can talk about the techniques of how to do that, but at least I'm going in the right direction. Something like that. Yeah. If that helps.
Speaker 0 00:54:20 Thank you. Excellent. Scott, you've been so quiet that I know you always have questions and thoughts. Did you wanna chime in?
Speaker 8 00:54:31 Yeah. Uh, just quickly, um, you know, I learned that, uh, in Hong Kong they had loosened things up so much that, um, you know, people actually started complaining and while, you know, I don't think you're an endcap. I think that some of that same worry that if, if there are no regulations that in some ways the people are gonna be demanding, at least some, you know, keeping streets clean or what have you,
Speaker 1 00:54:59 <laugh>, that's a good question. I think the, uh, the, the enormously wonderful performance of Hong Kong, uh, under British rule largely had to do with, uh, the British legal system restrict and, and the clean kind of non corrupting, uh, civil service setup they had there. I interpret I'm, I'm different here. I think from others, I interpret the recent problems in, in Hong Kong as not really having to do with Beijing, uh, wanting to turn it into a, a socialist island, but rather the spread of democracy, the spread of people demanding, uh, basically what happened in America. We're sick of this prosperity. We're sick of inequality of wealth. We wanna be able to vote away the rights of others. We want more representation in, uh, the assembly there. I mean, they had represented, they had, they still do have to some degree representative government, but the, the cancer invading Hong Kong is the cancer of democracy, not autocracy.
Speaker 1 00:56:11 And ironically enough, Beijing's crackdown was a peak of students in the streets demanding that Hong Kong public policy be turned into redistributive policy, which is what happened in the us. So, uh, I, I don't think Hong Kong's problems is due to the fact that they were too free or too constitutionally limited. The problem is, uh, the younger people in Hong Kong don't like that anymore. It's funny that Beijing would oppose that because that seems to go in the direction of what Beijing wanted, but it really was the lawlessness and anarchy in the streets that was happening. It wasn't that their, it wasn't that these students rights. Yes. Some of their rights to protest were being limited, but they were asking for a more redistributive state, which is unjust. They gotta do a whole session on Hong Kong.
Speaker 0 00:57:04 <laugh> that would be great. Of course, we have our, uh, draw my life video. My name is Hong Kong. Ah,
Speaker 1 00:57:11 Forgot that,
Speaker 0 00:57:12 Your perspective on that. But, um, anyway, well, that takes us just about to the top of the hour here. I wanna thanks everybody who joined us. Um, also thank you, Richard. Thank you, David. Thank you. Robert John Lawrence, Scott, and everybody who tuned in, we've got a lot of great events coming up on tap. Uh, I put the link to that section on our website and I'll let, uh,
Speaker 8 00:57:42 Thank you. Um, big week, next week, Monday at 7:30 PM. Our August book club, uh, has senior fellow Rob truns on his book. What went right and objective theory of history Tuesday at 4:00 PM. Lawrence and I will be on clubhouse for a happy hour on moral equivalence, as moral agnosticism. Uh, your scholars are welcome as well. Uh, then at 7:00 PM Eastern on clubhouse, Rob Tru Zinsky will be back for and ask me anything Thursday at 4:00 PM. Uh, TAs, founder, David Kelly will be doing an ask me anything. Uh, then right after that at 5:00 PM, the Atlass society asks Charles Nagy. A professor fired from UCF for speaking out against woke narratives. Uh, then Thursday at 8:00 PM. Uh, Richard Salzman will round out the week with morals and markets. This one on how markets elevate morals, almost the tie in with, uh, how regulations, uh, press our morals. Um, so lots of great content next week. Hope you're able to join, uh, Ja back to you.
Speaker 0 00:58:49 Thanks. Um, I also wanna send the people in this room. I recognize some of our donors, um, not going to put you on the spot, but there are donors, uh, in more ways than one, obviously people who are financially supporting the ATLA society to make rooms like this possible friends and allies that help to amplify our work. Uh, we should send you a, uh, form, so you get, get a tax deduction for that. Um, and uh, obviously all of us subscribe to this idea of value for value we're Notre. We're not looters. So I just slapped the donate link up there. Um, if you haven't made a donation to the society yet, we'd love for you to put something in the tip. And I look forward to seeing you guys next week. Thank you so much.
Speaker 1 00:59:39 Thanks everyone. Thanks Scott, Jennifer. Thanks everyone.
