Leftists Shouldn’t Complain about Corporate Rent-seeking when Leftists Encourage Corporate Rent-seeking

A notice in this morning’s Federal Register gives us insight about how regulatory capture begins.

The Department of Energy is looking to create a a regulatory subcommittee of vetted stakeholders to develop energy efficiency standards for electricity distribution transformers:

SUMMARY: The U.S. Department of Energy (DOE or the Department) is giving notice that it intends to establish a negotiated rulemaking subcommittee under ERAC in accordance with the Federal Advisory Committee Act (FACA) and the Negotiated Rulemaking Act (NRA) to negotiate proposed Federal standards for the energy efficiency of low- voltage dry-type distribution transformers. The purpose of the subcommittee will be to discuss and, if possible, reach consensus on a proposed rule for the energy efficiency of distribution transformers, as authorized by the Energy Policy Conservation Act (EPCA) of 1975, as amended. The subcommittee will consist of representatives of parties having a defined stake in the outcome of the proposed standards, and will consult as appropriate with a range of experts on technical issues. DATES: Written comments and requests to be appointed as members of the subcommittee are welcome and should be submitted by August 29, 2011.

So the government is looking for parties with “a defined stake” — meaning entities operating in distribution transformer space, from electricity companies and device manufacturers to green groups and (probably) well-heeled and connected Democratic donors — to appoint (not elect) to a committee responsible for promulgating efficiency criteria that will eventually have the force of law.

Federal agencies routinely collaborate with industry groups in the promulgation phase of rule-making once Congress has passed and the president has enacted legislation. There are some good reasons for this — reducing information costs, for example. If you think the government is wasting money now, just imagine how much more they’d be wasting trying to hire up everyone with sufficient technical expertise to think intelligently about public policy.

But the story here is the way in which DoE is going about creation of this subcommittee, and that they’re creating a subcommittee at all.

Normally, government creates regulations through a long and arduous tiered process that involves issuing notices that a rule is coming, issuance of a proposed rule, a call-and-response public comment period, some back and forth on amended proposed rules with more public comment, and then issuance of a final rule that carries the full force of law. It’s generally a transparent process, too, to the extent that nerds like me ask the Government Printing Office to send a Table of Contents of what’s published in the Federal Register to their email inbox each day.

Here’s how DoE proposes to go about this rule-making process, and why it matters:

The primary reason for using the negotiated rulemaking process for developing a proposed Federal standard is that stakeholders strongly support a consensual rulemaking effort. DOE believes such a regulatory negotiation process will be less adversarial and better suited to resolving complex technical issues. An important virtue of negotiated rulemaking is that it allows expert dialog that is much better than traditional techniques at getting the facts and issues right and will result in a proposed rule that will effectively reflect Congressional intent. A regulatory negotiation will enable DOE to engage in direct and sustained dialog with informed, interested, and affected parties when drafting the regulation, rather than obtaining input during a public comment period after developing and publishing a proposed rule. Gaining this early understanding of all parties’ perspectives allows DOE to address key issues at an earlier stage of the process, thereby allowing more time for an iterative process to resolve issues. A rule drafted by negotiation with informed and affected parties is expected to be potentially more pragmatic and more easily implemented than a rule arising from the traditional process. Such rulemaking improvement is likely to provide the public with the full benefits of the rule while minimizing the potential negative impact of a proposed regulation conceived or drafted without the full prior input of outside knowledgeable parties. Because a negotiating subcommittee includes representatives from the major stakeholder groups affected by or interested in the rule, the number of public comments on the proposed rule may be decreased. DOE anticipates that there will be a need for fewer substantive changes to a proposed rule developed under a regulatory negotiation process prior to the publication of a final rule.

Got that? The public’s input doesn’t matter to DoE, because the DoE, which serves at the pleasure of democratically-elected Congressmen and a president, doesn’t want to have to do more work, and doesn’t want something a lot of people care about becoming politicized — heaven forbid policymaking be contentious! And don’t forget — they can make a better rule without the public’s input! At any rate, they can more easily ram anything they want to do down our throats with a more exclusive rulemaking process.

Of course, the practical fallout of this process is easy to predict, and the prognosis isn’t good. Government essentially has invited the most highly-organized special interests to participate in this process. It shouldn’t be any surprise that the most highly-organized special interests will be some of the larger corporations in the business of making sure your refrigerator can keep your food cold by getting electricity from a transmission facility to your home. This paves the way for all kinds of collusion, up to and including regulatory capture — the use of law to raise barriers to entry (regulatory compliance costs) into the marketplace by smaller competitors that would drive down consumer prices. Everyone takes a hit when government works like this, and it’s baffling to see a federal agency that leftists love aiding and abetting the very corporate enemies leftists abhor achieve their commercial goals in this way — nevermind everything that’s wrong with having a government that picks winners and losers in the marketplace, instead of letting markets determine the best energy efficiency criteria for distribution transformers, earning them legions of happy consumers with lower monthly electricity prices.

I hope I’ve made the case well that you’re an affected, interested party in this discussion. Why doesn’t the government want you involved? I’m guessing it’s because ideological bureaucrats inside the Beltway want to rule by fiat, without being held accountable by the public.

The sad thing is that DoE has the full force of law and Congressional record defining intent behind this type of process:

Typically, a preliminary analysis is vetted for stakeholder comments after a Framework Document is published and comments taken thereon. After the notice of proposed rulemaking is published for comment, affected parties may submit arguments and data defining and supporting their positions with regard to the issues raised in the proposed rule. Congress noted in the NRA, however, that regulatory development may ``discourage the affected parties from meeting and communicating with each other, and may cause parties with different interests to assume conflicting and antagonistic positions * * *.’’ (5 U.S.C. 561(2)(2)) Congress also stated that ``adversarial rulemaking deprives the affected parties and the public of the benefits of face-to-face negotiations and cooperation in developing and reaching agreement on a rule. It also deprives them of the benefits of shared information, knowledge, expertise, and technical abilities possessed by the affected parties.’’ (5 U.S.C. 561(2)(3))

Got that? Contentious policymaking makes it harder to advance a singular agenda, or to foist a one-size-fits-all “solution” on everyone in the marketplace. It would also prevent government’s business allies from easily securing commercial rents, if not receiving corporate welfare outright.

A lot of libertarians prefer to sit out of politics, and are (rightly) frustrated with the cults of personality engendered by our electoral institutions. But whether or not libertarians vote on Election Day, elections still have consequences.

Please, get involved. Challenge candidates for office on issues like this. Ask them if they supported it. If they voted for it, or if they support measures like it, hold them accountable for it. Work for their opponents. Talk to your neighbors. Lots of people are focused on unseating Barack Obama in the next cycle, and that’s an admirable goal — certainly one that I support. But the presidency is only one small piece to the puzzle. We need to focus intently on the First Branch and bring a swift halt to this nonsense.


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