Administrative-Law

AdministrativeLawGiulioNapolitano*LawDepartment,RomaTreUniversity,Rome,ItalyAbstractThelawandeconomicsliteraturehastraditionallypaidverylittleattentiontoadministrativelawhistoryandrules.Economicanalysisoflaw,however,canprovideausefulexplanationofthelogicofadministrativelaw,beyondthepurelylegaltop-downapproach.Ononeside,administrativelawprovidespublicbodieswithalltheneededpowersandprerogativestofaceandovercomedifferenttypesofmarketfailures.Ontheotherside,administrativelawisatypicalregulatorydeviceaimingtofacesomestructuralandfunctionaldistortionsofbureaucracy,asamulti-principalagent.Fromthiseconomic(andpolitical)pointofview,administrativelawismuchlessstablethanwhatitisusuallythoughttobe.Frequentchangesinbothsubstantiveandproceduralrulescanbeexplainedastheoutcomeofrepeatedinteractionsamongthelegislator,thebureaucratsandtheprivatestakeholders.DefinitionAsetofrulesgoverningpublicbodiesandtheirinteractionswithprivateparties.LogicandRatiosofAdministrativeLawThelawandeconomicsliteraturehastraditionallypaidverylittleattentiontoadministrativelawhistoryandrules.Notwithstandingitsgreatexpansionalsoinnonmarketfields,itisstillan“unexpectedguest”inthepubliclawcontext(Ulen2004).Majorcontributionscomefromotherscientificapproaches,likepublicchoice(FarberandFrickey1991)andpoliticaleconomyoflaw(McCubbinsetal.2007).Theyaredifferentfromthelawandeconomicsmovement,ofcourse,buttheyallshareindividualisticmethodologyandtherationalinterpretationofhumanbehaviors.Unfortunately,ononeside,economicandpoliticalliteraturehaslittleconfidencewithhighlytechnicalanddetailedprovisionsofadministrativelaw.Ontheotherside,administrativelawscholarsrepresentaclosecommunity,usuallyunwillingtoopentheirmindstomethodologiesdifferentfromlegalpositivism.That’swhy,atleastuntiltoday,thecapacityoflawandeconomicstoshednewlightintothefieldofadministrativelawhasbeenverylimited:amissedopportunitybothforthelawandeconomicsmovementandforthetraditionalscholarshipofadministrativelaw(Rose-Ackerman2007).Accordingtothestilldominantlegalscholarship,administrativelawisacoherentsetofrules,orderedbysomegeneralprinciples,liketheruleoflaw,impartiality,transparency,andproportion-ality,andcharacterizedbyitsownspecificfeatures,suchastheexistenceofpubliclawentities,thespecialprerogativesoftheExecutiveanditsrelatedbranches,thedecision-makingprocedure,and*Email:[e-mail]onomicsDOI10.1007/978-1-4614-7883-6_526-1#SpringerScience+BusinessMediaNewYork2014Page1of8thejudicialreview.Fromthisperspective,administrativelawisrepresentedasaquitestableinstitution,notwithstandingthefrequentchangeofitsspecificrules.Economicanalysis,however,canplayaveryimportantroleinexplainingtheintimateessenceandthedistinctivefunctionsofadministrativelaw.Tworatiosexplainthelogicofadministrativelaw,outsidethepurelylegaltop-downapproach.Ononeside,administrativelawprovidespublicbodieswithalltheneededpowersandprerogativestofaceandovercomedifferenttypesofmarketfailures.Ontheotherside,administrativelawisatypicalregulatorydeviceaimingtofacesomestructuralandfunctionaldistortionsofbureaucracy,asamulti-principalagent.Fromthiseconomic(andpolitical)pointofview,administrativelawismuchlessstablethanwhatitisusuallythoughttobe.Frequentchangesinbothsubstantiveandproceduralrulescanbeexplainedastheoutcomeofrepeatedinteractionsamongthelegislator,thebureaucrats,andtheprivatestakeholders(Napolitano2014).AdministrativePowersasaMeantoCorrectMarketFailuresThemarketfailurestheoryoffersapowerfulexplanationofthetasksthatmodernbureaucraciesaccomplishinmodernsocietiesandofthepowerstheyexercise.Rolesandprerogativesofpublicbodies,ofcourse,aretheoutcomeofcomplexsocialandpoliticalprocesses.Butthemarketfailurestheoryshowstheexistenceofarationalbasisunderlyingthosehistoricaldevelopmentsandprovidesausefultesttoverifythepersistingneedforthepublicintervention(Barzel2002).Manyoftheso-calledsovereignfunctionsofmoderngovernments(liketheprotectionofpublicsecurityorthedefenseagainstexternalattacks)representasolutiontotheproblemofpublicgoods.Non-excludabilityandnon-rivalrymaketheprivateprovisioninefficient.Onlygovernments,throughthecompulsorypoweroftaxing,cansolvethefree-ridingproblem,whichimpedestheproperworkingofmarkets.Thepublicregulationofmanyeconomicactivitiesaimstofaceothermarketfailures(Posner1997).Entrycontrols,technicalrequirements,andpollutionstandardsaddresstheproblemofnegativespilloversgeneratedespeciallybyindustrialandnoxiousfacilities.Theregulationofpricesandqualitystandards(inmanycountriesenactedbyindependentauthorities)limitsthemarketpowerofnetworkoperatorsinutilitieslikeelectroniccommunicationsandelectricity.Obligationsofdisclosureinfinancialmarketsbalancetheinformationalasymmetrybetweenfinancialinstitutions,investors,andsavers.Moreover,thegovernmentcanmakecompulsorytheconsumptionofmeritgoods,likeeducation(atleastforearlystages)andhealthcare(e.g.,topreventcontagion,incaseofepidemicdiseases).Thepublicprovisionofthoseservicesonalargerscale,however,iscoherentalsowiththeprotectionofconstitutionalrightsandthedesig