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Unpublished Paper
Market Corrective Rulemaking: Drawing on EU Insights to Rationalize U.S. Regulation
ExpressO (2015)
  • Reeve T Bull
Abstract

When justifying the government’s role in intervening in the free market, economists and legal scholars alike point to the problem of “market failures”: laissez-faire capitalism may not produce optimal outcomes in certain cases, and government interventions can promote overall market efficiency. The existence of such market failures is not terribly controversial; the question of whether government regulators can correctly identify these flaws and devise appropriate solutions, by contrast, is significantly more contentious. Unfortunately, under the existing regulatory framework, government officials are not especially well-positioned to make these difficult determinations. Congress does not, as a general matter, consider the economic costs and benefits of statutes designed to correct perceived market flaws. Administrative agencies generally do consider these costs and benefits, but they seldom carefully reassess existing interventions and often lack the statutory authorization to tailor regulatory programs to respond to changing market forces. The unfortunate result of this dynamic is partisan gridlock and regulatory inertia: conservatives in Congress refuse to authorize new regulatory programs, fearing that any such intervention will prove impossible to reverse, and progressives strongly defend existing market interventions, fearing that acknowledging any inefficiencies will validate the anti-regulatory narrative.

This article seeks to alter that dynamic, offering a new approach to regulation designed to correct market failures. It proposes a new, optional track for rulemakings aimed at remedying perceived market flaws, dubbed “market corrective rulemaking.” In developing the proposal, the article calls upon several innovations adopted by the European Union. Given the significant differences between the U.S. and EU regulatory regimes, the article adapts these procedures for a U.S. context, drawing from the comparative strengths of both systems. Under market corrective rulemaking procedures, Congress would delegate sweeping powers to agencies to correct certain market flaws, but it would impose certain procedural requirements, including pre-NPRM outreach to relevant stakeholders and comprehensive retrospective review, and would require the rulemaking agencies to assess both economic costs and benefits and disruption to existing market forces. Though Congress would possess complete discretion in determining whether to direct agencies to undertake market corrective rulemaking or instead to rely on the informal rulemaking default, the existence of such an alternative could help resolve much of the prevailing gridlock, offering an opportunity for narrowly tailored market interventions that can be readjusted over time.

Keywords
  • Administrative Law,
  • Rulemaking,
  • Comparative Law,
  • European Union Law,
  • Retrospective Review,
  • Cost-Benefit Analysis,
  • Proportionality Principle
Publication Date
February 19, 2015
Citation Information
Reeve T Bull. "Market Corrective Rulemaking: Drawing on EU Insights to Rationalize U.S. Regulation" ExpressO (2015)
Available at: http://works.bepress.com/reeve_bull/4/