In which I propose that professional associations shift some of their money from lobbying to insuring their members against mischief from the regulatory state, and then reflect upon the possible consequences when government is seen as just another insurable hazard, like fires or floods.
THE MADISON FUND is to be an altruistic endeavor, funded by people who do not receive its services and operated on behalf of ordinary Americans who are being harrassed by the regulatory state. Now I turn to the way in which the beachhead established by the Madison Fund can be expanded into a full-scale invasion.
The members of professions and crafts have formed guilds since early medieval times. These associations are not altruistic. Historically, they have organized partly as a brotherhood of people practicing the same vocation, but also to increase their leverage in the marketplace—monopolistic leverage, when possible. Today, professional associations lobby in Washington along with corporations, unions, and nonprofit advocacy groups, all trying to use the power of the state to improve their private interests.
But guilds have had another historic function: to establish standards of best practice and qualifications for attaining membership. It is one of the most natural impulses of people who have learned how to do some specific thing extremely well. They take pride in their work, have strong views about right and wrong ways of doing it, and feel a bond with others who are good at the same craft.
Many such associations certify that their members are skilled. In the crafts, the three traditional levels of proficiency have been apprentice, journeyman, and master. To pass from apprentice to journeyman and from journeyman to master has required submission of work samples to a board composed of masters. In medicine, physicians in specialized fields become “board certified,” meaning they have met the requirements, which include not only completing specified training but passing extensive tests. Accountants can call themselves CPAs because they have passed the rigorous Certified Public Accountant examination.
For our purposes—creating a private counterweight to the regulatory state—professional associations have enormous potential because they exist both to assist their members and to hold them to standards of professional conduct. That’s exactly the combination we need as a method of substituting real expertise for the regulatory proclamations of bureaucracies.
Since I have already used OSHA’s regulation of dental offices as an example (recall the 307-page OSHA Manual for Dentists that I discussed in chapter 2), let’s use the American Dental Association (ADA) for a sample scenario. The ADA conducts national board dental examinations and runs centers for disseminating the latest research on best dentistry practice and developing better performance measures.1 Its Standards Administration Department establishes baseline standards and technical recommendations for the tools of modern dentistry, from toothbrushes to radiographic systems. It issues the ADA Seal of Acceptance to dental products. It has established a code of dental-practice parameters for treatment options. In short, the ADA has all the resources needed to assess whether a dental practice is safe and competent.
Dentists are also tightly regulated. In addition to OSHA’s safety regulations, dentists are subject to the labyrinthine body of federal employment law, EPA regulations, and all the other regulations that impinge on any professional running an office and managing personnel.
The ordinary dentist can almost certainly get away with ignoring a lot of those regulations. As of 2011, the United States contained 131,179 dental offices.2 As noted earlier, OSHA is responsible for 8 million workplaces, and none of the safety priorities used to select workplaces for inspection are likely to involve dental offices. Unless an employee files a formal complaint with OSHA, dental offices are not on OSHA’s radar screen, and the chances that OSHA will conduct an inspection are nearly zero.
But they are not quite zero, and the downside risk of ignoring OSHA’s regulations if you are inspected is substantial. Even though your dental office is safe, you will surely be in violation of a few of OSHA’s rules, and you can be hit with fines of up to $7,000 per violation. So risk-averse dentists are not being irrational when they spend an aggravating amount of time and effort to protect themselves against this low-probability risk.
Step back from the situation for a moment. Stop thinking of government as a fearsome entity that must be obeyed, and think of it instead as an insurable hazard. Why not buy insurance against the low-probability event of an inspection by a regulatory agency?
Suppose that the ADA, acting on this way of looking at things, decides to offer its members low-cost insurance against the government, calling it Dental Shield. It charges a nominal $100 per year. About 90 percent of dental offices take up the offer, producing an annual fund of almost $12 million, which is used to reimburse fines and to pay for costs of litigating cases that meet the ADA’s established criteria. Suppose that the average inspection results in fines of $10,000. That would permit the ADA to reimburse fines for 200 inspections per year and still leave almost $10 million for litigation costs. Given the rarity of inspections, that should be enough.
What has been accomplished?
An Insurance Business Opportunity?
I have presented a scenario in which professional associations establish the insurance. If it’s a sufficiently profitable business opportunity, there’s no reason that for-profit insurance companies couldn’t do it, in the same way that they provide malpractice insurance for physicians.
First, for a negligible price, dentists can go about their lives as if most federal regulations didn’t exist. They will become an insurable hazard on a par with the hazard that a storm will topple a large tree onto the roof of your house. Faced with the risk of a violent storm, you don’t fill out extensive annual paperwork. You don’t pay an arborist to come in once a year and inspect the root system of the tree. You don’t hire a consultant to do a risk assessment of your property. You buy home insurance.
Second, the responsibility for the regulation of crafts and professions will return to the people who care most about it and are most competent to judge. One of the pernicious aspects of the regulatory state is that it makes the operational assumption that large numbers of people engaged in the crafts or professions are either incompetent or charlatans, and only the government’s oversight can protect citizens from them. I accept that all occupations have bad apples, but to treat everyone as a suspect is insulting and wrong. In effect, the ADA’s Dental Shield program will be saying to its members, “You conduct your practice in a manner consistent with ADA’s standards, and we’ll defend you against government nitpicking,” not “ADA members, right or wrong.” If you show yourself to be a reckless driver, your insurance company will cut you off. If Dental Shield, in defending its members, finds itself called upon to defend a dentist who really does run an unsafe office, that dentist faces exclusion from subsequent insurance and other professional sanctions.
The third benefit of a society with many occupational defense funds is more diffuse, but one that I ask you to keep in mind as I work through the ramifications of systematic civil disobedience. A by-product of systematic civil disobedience can be a reinvigoration of civil society. A society in which a central government tries to surveil everyone is on its way to tyranny, no matter what forms of democracy it retains. A society in which people are held to standards of behavior by the approbation and disapprobation of their peers is operating in the way that the great theorists of freedom and the founders both anticipated.3
I am not envisioning an end state in which the federal government has withdrawn from regulation. One of the goals of the Madison Fund and the occupational defense funds alike—I’m going to refer to them jointly as “the defense funds” from now on—is to push the government toward the “no harm, no foul” regime I described in the preceding chapter, forcing the government to identify the regulatory roles that it is best equipped to fill and limiting itself to violations of good practice that the government can enforce better than private entities. What we have forgotten over the last half century is how much can be done by private entities. A feature of American life that attracted the amazed attention of European observers throughout the nineteenth century was the genius of Americans in getting things done by coming together voluntarily to solve problems. Of all the ways in which the regulatory state has damaged the American project, I believe the most damning is its suppression of that genius.
What I am advocating through the defense funds is unquestionably subversive. They will be helping people who have ignored regulations evade the consequences of their actions. They will openly be trying to pour sugar into the regulatory state’s gas tank. Can such things be legal?
We can be certain the government won’t think so, and will try to have their operations declared illegal. Since the Madison Fund will probably be operational before any of the occupational defense funds, one of the Madison Fund’s first tasks is likely to be a defense of its right to operate and establishing the limits within which it can do certain things.
Even though its aims are ultimately subversive, most of the Madison Fund’s operations, and those of the occupational defense funds, are clearly legal. Providing free legal assistance to people who are charged with crimes or misdemeanors is legal. It’s done all the time, by private attorneys working pro bono; by Legal Services; and, for criminal cases, by public defenders.
Does the Madison Fund’s openly stated goal of overloading the enforcement resources of the regulatory agencies amount to a criminal conspiracy? It’s hard to make that case, since no one involved in the fund would be planning on committing a crime. Lawyers for the Madison Fund are not going to be making up evidence, suborning witnesses, or otherwise meeting the legal definition of obstructing justice. On the contrary, they will be meticulously using the rules of legal procedure to make the litigation as expensive and irksome to the government as possible. But by doing so on behalf of guilty clients, aren’t Madison Fund lawyers trying to exploit the system to circumvent justice? Yes—as are attorneys all over the country who use their best efforts to help guilty clients delay convictions on criminal charges or evade them altogether. The only difference is motivation. In the cases we see in the criminal courts, the attorney is helping the defendant avoid the consequences of having done things that are typically malum in se. The Madison Fund wants to prevent people from being subjected to punishment for doing things that are malum prohibitum for no good reason.
However stridently the government and the New York Times might inveigh against the purposes of the defense funds, it is hard to see how their legal advocacy could be shut down. The one area where they are likely to run into snags is in reimbursing clients for fines. This issue will have to be litigated.
In anticipating how that litigation will play out, it is useful to think in terms of the insurance contracts that courts will and won’t enforce. The Second Restatement of Contracts (the most authoritative statement of common law principles) says that the general test for enforceability is “a balancing test between the individual interests in enforcement and the public policy weighing against it.”4 The most relevant factors for striking that balance as specified in the Second Restatement are “the strength of that policy as manifested by legislation or judicial decisions” and “the seriousness of any misconduct involved and the extent to which it was deliberate.”
Few of the cases that the defense funds take on will have had effects “against public policy” in any serious sense. Remember: one of the criteria for selecting cases is that no real harm has occurred. Furthermore, almost all of the cases will involve regulations that have only a tenuous relationship with anything that Congress spelled out in the legislation—the “strength of that policy as manifested by legislation or judicial decisions” will be low. The most plausible scenario is that the government will litigate the reimbursement of fines, but will usually be unsuccessful.
As time goes on, attorneys at the defense funds will be able to fine-tune the body of cases that permit reimbursement of fines. Insofar as the government contests the reimbursement of fines, it will create a body of case law demonstrating that for many regulations, violation does not involve a significant public interest that prevents reimbursement.
Even after the courts have confirmed the legality of the defense funds’ operations, probably with some caveats about the fines that can be reimbursed, the federal government will not stand idly by. We should assume instead that regulatory agencies will be looking for ways to strike back. How might they do so?
Let’s go back to the example of Dental Shield. Suppose that you are the administrator of OSHA. You know that Dental Shield is insuring dentists against OSHA inspections. You correctly interpret this as an attempt by Dental Shield to subvert OSHA’s authority. You want to reestablish that dentists have to take OSHA regulations seriously. How might you go about it?
Your best weapon is the inspection, so you begin conducting wholesale inspections of dental offices, levying the maximum fines. But Dental Shield contests those fines. Not all of them. In the rare case when a dental office really did have an unsafe condition, Dental Shield pays the fine without contesting it and also cancels that dentist’s insurance policy. But in other cases, the insurance company litigates OSHA’s citation to the max, appealing adverse decisions to the full Occupational Safety & Health Review Commission, and, when possible, appealing adverse decisions by the commission to an Article III federal court. Dental Shield understands how limited OSHA’s enforcement resources are. By contesting citations, Dental Shield makes the pursuit of the dental citations more trouble for OSHA than it’s worth.
At this point, you as the administrator are between a rock and a hard place. OSHA cannot afford to devote a grossly disproportionate amount of its limited resources to a vendetta against dentists without degrading its ability to enforce genuinely serious safety regulations elsewhere. But neither can it go to Congress and ask for more inspectors. As OSHA’s administrator, you envision the hearing as you sit before the members of House Committee on the Budget. Why is it that OSHA needs these extra resources? Because, you will have to answer, so many of the current staff are engaged in inspection of dental offices and litigating fines of dentists. It’s not a pleasant prospect, and it is not going to get you any additional enforcement resources from Congress. If a war with Dental Shield is not practical, you are reduced to three options.
The first is to try to win a battle for public opinion. OSHA’s position goes something like this:
We are a duly constituted agency of the federal government, mandated by law to keep America’s workplaces safe. That important mission is being cynically compromised by dentists who, in collusion with Dental Shield, are trying to evade their professional responsibilities, thereby endangering Americans seeking dental care.
It won’t fly. Americans generally like their dentists, or they wouldn’t have continued to be their patients. The reputation of the federal government, and especially of agencies like OSHA, is dismal. The instinctive response of the American people will be to side with the dentists, not the government. That instinctive response will be reinforced by Dental Shield’s ability to cite chapter and verse to demonstrate that the dentists on whom OSHA is levying thousands of dollars in fines were actually running safe dental practices as assessed by the ADA, which knows a lot more about how to go about good dentistry than OSHA does. They just weren’t going through the rigmarole that OSHA specifies.
OSHA’s second option is to get the courts to declare Dental Shield illegal. I already outlined the reasons for thinking that the defense funds’ operations are legal and that such a strategy won’t work. In addition to that, taking Dental Shield to court carries a risk for OSHA. Today, few among the general public are aware how the administrative justice system works. One of the oldest and most obviously essential legal maxims is that no one may be judge in his own cause. In America’s administrative justice system, the regulatory agency is not only the judge in its own cause but the police, prosecuting attorney, and appeals court as well. To destroy Dental Shield, OSHA will have to take its case into the regular court system, in a highly publicized proceeding, revealing to more of the American public just how loaded in favor of government the regulatory system really is. That’s not an attractive option either.
OSHA’s third option is to quietly limit its citations of dental offices to cases in which a genuine safety issue exists, not just a technical violation of a regulation. You tell your staff to adopt “no harm, no foul” as OSHA’s tacit enforcement philosophy.