Decoding Judicial Deference
Should economists care about Chevron deference (and other legal doctrines about judicial deference)?
If you’re not a regulation geek, you may not know what Chevron deference is or care that the Supreme Court may overrule or limit it in the next year or two. And if you are a regulatory economist, concerned about the economic effects of specific regulations or of the regulatory process overall, you might not think that Chevron deference matters that much.
But I suspect the economic implications of Chevron deference are actually quite large. Judicial deference to regulatory agencies isn’t just a procedural issue for legal scholars to spill ink about. Chevron deference and its cousins Skidmore and Auer deference are all a part of the regulatory process as it currently stands, and that process is the reason that federal regulatory accumulation has gotten so big.
Below, I briefly explain Chevron, Skidmore and Auer deference, and then make the case that judicial deference doctrines such as these are problematic from an economics perspective. To be clear – I am not offering an empirical case. To my knowledge, no one has empirically tested whether Chevron deference has changed the regulatory process and the outputs thereof.
Instead, I consider how judicial deference might contribute to the choices of regulatory agencies and how that might, in turn, affect the regulations they make.
What is Chevron (and Skidmore and Auer) deference?
Chevron, Skidmore and Auer deference are legal doctrines in the United States that guide how courts should defer to administrative agencies' interpretations of statutes and regulations.
Chevron Deference
Chevron deference applies when a court reviews a regulator’s interpretation of a congressional statute. The Supreme Court established a two-step test:
If the statute is clear, then the agency must follow the statute.
If the statute is ambiguous, the court will defer to the agency's interpretation as long as it is based on a permissible construction of the statute, i.e., it's reasonable.
This deference is rooted in the idea that agencies have particular expertise in their subject domain and they are politically accountable to the President, at least for the executive branch agencies. The idea that a judge could not develop sufficient expertise in a given subject area is questionable, as the work of Jerry Ellig has arguably shown. Nonetheless, that’s the logic.
Skidmore Deference
Skidmore deference is used when an agency's interpretation of a statute isn't entitled to Chevron deference, such as when an agency is crafting documents that are not regulations per se (e.g., interpretive rules, policy statements or agency manuals), but that still carry weight. The court will defer to the agency's interpretation based on the thoroughness of its consideration, the validity of its reasoning, its consistency with earlier pronouncements and other persuasive factors. This deference is less formal and gives the court more discretion than Chevron deference.
Auer Deference
Auer deference applies to an agency's interpretation of its own regulations. The Court will defer to the agency unless the interpretation is plainly erroneous or inconsistent with the regulation. The rationale behind this deference is that the agency, as the regulation writer, is best positioned to understand its intended meaning.
All three doctrines involve courts deferring to administrative agencies in different contexts. Chevron applies to agency interpretations of statutes they administer; Auer applies to agency interpretations of their own regulations; Skidmore applies to agency interpretations of statutes in more informal settings.
Chevron and Auer deference generally provide stronger deference to agencies because the court defers unless the agency's interpretation is unreasonable (Chevron) or plainly erroneous (Auer). Skidmore deference is more flexible and depends on the persuasiveness of the agency's position.
Critics of these deferential doctrines argue that they allow agencies to consolidate legislative and judicial power, which might violate the separation of powers. These criticisms have led to discussions about limiting or overruling these doctrines, especially Chevron deference.
How might Chevron deference affect regulatory accumulation?
Regulatory accumulation refers to the process through which regulations build up over time. As new regulations are added without removing or updating old ones, the regulatory environment can become increasingly complex and burdensome.
Chevron deference can contribute to regulatory accumulation in several ways:
Encourages regulatory expansion: By deferring to agencies' interpretations of ambiguous statutes, Chevron deference effectively gives agencies latitude to expand their own jurisdictions and responsibilities. This can lead to an increase in the volume of regulations.
Incentivizes ambiguity: Because Chevron deference applies when a statute is ambiguous, Congress may have an incentive to draft more ambiguous legislation, knowing that agencies will be able to fill in the details. This can lead to a greater number of complex regulations as agencies use their expertise to interpret and implement these ambiguous laws.
Reduces judicial checks on regulation: Under Chevron deference courts are less likely to overturn agency regulations unless they are unreasonable interpretations of the statute. This allows more regulations to stay on the books that may otherwise be overturned.
Discourages deregulation or regulatory review: Because agencies know that their interpretations of statutes are likely to be given deference by the courts, they may be less motivated to review or eliminate outdated or unnecessary regulations. This can contribute to the build-up of older regulations.
While Chevron deference can contribute to regulatory accumulation, it is just one factor among many. And I’ll repeat my earlier caveat – these connections between Chevron deference and regulatory accumulation have not yet been empirically tested.