Many people who appreciate free markets are hailing the recent Chevron decision. Striking down Chevron curtails the powers of many officials in regulatory agencies, but how does this really affect entrepreneurs and markets? There are two important things to note here. First, striking down Chevron didn’t remove any regulations from US industry, this ruling transferred powers to interpret regulatory rules. Second, there are two sides to regulatory capture.
Former lobbyist Jack Abramoff has pointed out that entrepreneurs lobby for two reasons. Sometimes entrepreneurs’ lobby regulatory agencies to gain an advantage over rivals. Other times entrepreneurs lobby regulatory agencies just to be left alone. Most entrepreneurs engage in regulatory capture to protect their businesses.1
Abramoff is right, regulatory capture is both means for protecting property rights and a path to the dark side of monopoly/crony capitalism. The Chevron decision increased the returns from regulatory capture. Striking down Chevron means entrepreneurs have one less reason to lobby for regulatory capture. But now they are incentivized to invest more in lawsuits aimed at influencing judges.
“Judicial capture” is likely more difficult than regulatory capture. Judges in the US are not quite so easily tempted or bribed as are regulatory officials. The relative difficulty of performing judicial capture has a good side in a post Chevron legal environment, this could make it harder for entrepreneurs to use regulatory powers against rivals. Consequently, the US economy could become more competitive without Chevron. However, judges are now empowered to interpret regulations in ways that may or may not be reasonable, that may be shaped by their own ideological beliefs, and may in some cases effectively socialize some businesses.
The Chevron decision may yield some positive benefits, or not. There is only one real solution to our problems with the regulatory state; deregulation. Those who perceive the benefits of free markets should focus on the goal of repealing more regulations, and not worry about who defines or wields regulatory powers.
Originally posted at “On the Other Hand...”
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“Most people hire lobbyists because they want to stop the government from doing something that will harm their business… playing defense isn’t the only reason people hire lobbyists. Some use government to get a competitive advantage. Forcing your competition to be over-regulated is an age-old method if getting a leg-up in business” (Jack Abramoff Capitol Punishment page 63, WND Books 2011)
