Then there is the rarefied air of master craftsmen, which aptly describes the late Jerry Ellig. His posthumous book, Jerry Ellig on Dynamic Competition and Rational Regulation, highlights the range of issues he worked on in his career as a scholar and government economist.
Cost–benefit analysis / Ellig’s research focused on regulatory impact analysis, regulation of network industries, and the performance of management in government. With the aid of his academic colleagues, this collection of published works wonderfully amplifies his approach to the statutory mandates for regulatory procedures, including the use of cost–benefit analysis (CBA). What the book could never do is sufficiently capture the good-natured and happy-warrior attitude with which he pursued his vision for regulatory enlightenment.
Ellig and I briefly worked together at the Federal Communications Commission when he served as its chief economist. While my very public goal was to codify many of the foundational principles that he and I agreed upon, I surmised that he saw the value of improving the overall system for rulemaking so that it applied a more rigorous CBA. I appreciated the view, which I think Ellig espoused, that a lot more good can be done if the focus is on improving the process rather than using temporary political advantage to generate short-term policy victories. In the end, the FCC approved a more rigorous CBA regime that should not only improve rulemakings but help set a standard that can be used by other agencies. While the improvement was less than I had hoped for, the fact that Ellig was engaged helped convince me that a partial improvement is still an improvement, and that it did not preclude further advancements down the road.
Greater efficiency and rationality / This book’s selected scholarship is both refreshing and sober. The opening piece is Ellig’s 2015 testimony before the U.S. Senate Committee on Homeland Security and Governmental Affairs, which captures his worldview and a key theme in his work. He told the senators, “The persistence of mediocre regulatory impact analysis across administrations is an institutional problem, not a personnel or partisan problem.” Indeed, the Mercatus Center’s Regulatory Report Card governing 2008–2012, a prized effort of Ellig, found that not one of the 108 examined regulations by various agencies produced a passing score. He succinctly graded each analysis as deserving an ‘F’.
Other essays in the book explore the recalcitrant agency approaches to thoughtful and justified regulatory processes. These works probe the value — and general agency rejection — of required regulatory impact analysis for significant regulations. One case study in the book calls out the Securities and Exchange Commission for court rejections in multiple proceedings for “faulty economic analysis” and the refreshing move toward doing CBA in its regulatory guidance. From there, Ellig and others set forth principles that should be expected from agencies — including independent agencies — contemplating new burdens and suggesting improvements via best practices. Ultimately, it serves as a treatise to nudge the regulatory state’s relentless paper pushing toward greater efficiency and rationality.
A secondary theme in the book is the correlation between competition and regulation, which Ellig explored through a diversity of subjects. Known as an expert of industries that have a network design, he and Daniel Lin carefully reviewed the competing approaches in their introductory chapter “A Taxonomy of Dynamic Competition Theories,” which opened the Ellig-edited 2001 Cambridge University Press book Dynamic Competition and Public Policy. They argue that seemingly different industries have important economic similarities and should have similar competitive freedoms. Select lessons in rail, trucking, shipping, natural gas, and electric market restructuring also apply to funeral caskets and wine.
Ellig’s papers in collaboration with colleagues examine the growth in regulation and the effects of its counterpart, deregulation. “Wine Wars” and “Market and Nonmarket Barriers to Internet Wine Sales,” explore a variety of arguments put forth to prohibit internet wine sales in New York, Michigan, and Virginia. Opponents’ appeals to the Dormant Commerce Clause, underaged drinking, the 21st Amendment, physical presence obligations, and more were appropriately dismissed in favor of allowing consumers direct shipment and the greater variety and lower prices likely to result.
Ellig’s greatest asset may have been his willingness to accept agencies’ gradual improvements in their regulatory impact analysis.
The last portion of the book outlines the role of Congress and the courts to force proper regulatory action by federal agencies. These traditional checks on regulatory bodies serve important functions in correcting agency ignorance or haphazardness. For example, the essay “Courts Have a Role to Play Reining in Federal Agencies” declares that “a clear statutory standard [by Congress] could promote consistency and rein in any potential judicial tendencies toward either excessive activism or excessive deference.” Further, “courts are quite capable of evaluating the evidence agencies provide that underlies major regulatory decision — including economic analysis.” While the current Congress may not be so receptive to this message, more aggressive engagement could come if party control flips or if the right cases are presented to the Supreme Court.
Conclusion / Beyond his gregarious personality, Jerry’s greatest asset may have been his willingness to accept agencies’ gradual improvements in their regulatory impact analysis and efforts to devote real resources to it. Unlike many in Washington, he never seemed to see this as a battle or personal war but a means to more fully ground the regulatory process in economics and facts and improve the outcomes for everyone. I believe those elements will cement his legacy as a regulatory visionary.
