Topic: Daily Advice
What is Pat’s Commentary: from June 2024 Client Letter
Dear Client,
In July 2024, I commented in our weekly Inner Circle Question & Answer Report that a lot of changes are now going on in the world, particularly in U.S. politics and law. Some of these changes are good and others are bad. Some are trivial and others will have longstanding consequences.
At the time, I said that one of the most far-reaching and beneficial developments in U.S. politics and law occurred on June 28 this year, with a U.S. Supreme Court decision that put an end to the so-called “Chevron deference” rule.
“Chevron” is named after a landmark case from 1984 (an ironically appropriate year, in view of the effect this ruling had on the U.S. economy).
In the Chevron decision, the U.S. Supreme Court instructed lower courts that when a rule issued by a U.S. federal agency conflicts with (or is left ambiguous by) a federal law, the court must disregard the federal law and defer instead to the rule created by the federal agency.
In other words, under the “Chevron deference” rule, federal bureaucrats made the laws themselves—by decree, you might say—when their thoughts differed from the thoughts of legislators chosen by citizen-voters.
For decades, the “Chevron deference” rule justified endless rules and regulations. It put vast numbers of agencies and bureaucrats in charge of environmental, labour, financial and other matters in ways that made tiny or deep dents in the operation and growth of the U.S. economy. Worse, it wove costly, wasteful and frivolous tendencies into U.S. politics and law.
This contributed to what you’ll sometimes hear referred to negatively as “the federal bureaucracy” or “the deep state” or simply “the swamp.” Of course, some observers see this arrangement in a positive light. In particular, some U.S. Senators and members of Congress saw Chevron as a good thing.
For legislators, it freed up time that they might otherwise have been forced to spend on less-important matters—such as making laws. Chevron let them devote their freed-up time to bigger issues, such as, say, winning another term in office in the next election. They can do that by seeking voter support. They could also do it by asking for donations from businesses and other organizations that stood to gain by building a relationship with the lawmakers who, along with bureaucrats, regulate their industry.
Then, too, working in the bureaucracy can lead you onto a much more powerful and profitable career path. A successful bureaucrat who knows how to deal with and influence regulators and lawmakers can go on to a far more lasting and profitable career as a lobbyist.
A good place to work
Generally speaking, U.S. federal government jobs are less demanding than jobs with private companies. When private companies lose money, they tend to cut costs and demand more effort from employees. They may also lay off employees, cut their pay or fire them.
New federal employees start their jobs with a year of probation. During that time, managers are encouraged to spot and get rid of poor performers. Even after the first year ends, jobs of newcomers may still be at risk, depending on how closely they follow their job’s requirements.
The risk of getting fired varies from job to job, agency to agency, manager to manager and so on. Some U.S. federal workers can get away with extensive bending of the rules about work output, deadlines, on-the-job alcohol consumption, and so on. Others have less leeway.
After that first year, it’s still possible to fire poor performers, but it’s more time-consuming. Some managers say it’s rarely worth the effort.
U.S. government employees include good and bad workers, of course. However, bureaucratic regulators may base their regulatory recommendations/decisions on their own personal ambitions or beliefs. They may recommend expensive regulations to protect against overblown or hypothetical risks.
Bureaucrats who are environmental alarmists may justify expensive new regulations on the grounds that the cost of changing current regulations may be high, but new regulations will likely be more efficient or scientific. They may think their regulatory breakthroughs will bring big and sustainable corporate profits, plus faster growth in business and the economy. Of course, the new rules may be utter failures. They may cost more than expected, and fail to work as expected, and they may carry unintended, unimagined flaws. The more seniority the regulatory genius has, the greater the risk.
Modern bureaucrats go to war
In its May 25 issue last year, the National Review ran a light-hearted yet still dead-serious article by Noah Rothman entitled “The War on Things That Work.”
The subtitle: “Like your stove, your dishwasher, your lawnmower? Too bad.”
The article deals with environmentalist qualms about the current state of these three common household devices.
As for your stove, activists believe that natural gas is just another fossil fuel that should be dispensed with ASAP, for the health of the current environment and future generations. Lobbying by local governments has already spurred a number of U.S. municipalities to forbid natural-gas hookups in new buildings. Last year, the U.S. Consumer Product Safety Commission (CPSC) sought public comment on a proposal to ban new gas hook-ups nationwide. By then, California had plans to impose its own ban on the sale of new natural gas-powered appliances. New York State is set to follow suit.
One problem with grass-roots environmental movements like these is that they may stir up public support with the aid of dubious research. The author notes “one example … suggested that cooking with gas in an ‘airtight’ room sealed by ‘clear plastic sheets’ can cause adverse health effects over the long term.”
Who can argue with that? Obviously “it’s best to avoid preparing meals by burning natural gas in a level-four biocontainment facility.”
Other studies purported to prove that gas-stove pollution increased the risk of childhood asthma. When these studies failed to demonstrate the finding that the bureaucrats were looking for, they eliminated them from consideration. Other studies, as the American Gas Association later observed, “conducted no measurements or tests based on real-life appliance usage.”
This “war on things that work” is also being waged against other labour-and-time saving household necessities such as heating and cooling devices, dishwashers and other cleanliness aids, lawn mowers, leaf blowers, toilets, automatic coffee makers, and so on. Activist regulators want to make these devices last longer, cut their fossil fuel consumption and/or water usage, or, best of all, switch them to run on electricity (preferably from wind or solar sources, of course).
Under the “Chevron deference,” bureaucrats could make their environmental rules more extreme and fanciful. With a little tinkering, they were able to conflict with or cast doubt on rules drawn up by the legislators. Under the 1984 rule, the legislators had to defer to the bureaucrats, or take time out to write a new law and get it passed by Congress.
If this doesn’t suit you as a consumer, you’d have the freedom to keep using your own old household devices. When they wear out or break down, you’ll have the option of replacing them with new stuff that costs more or is less useful or practical, but fulfills the new regulations.
Three stages of human development: Hunter-gatherers, farmers, bureaucrats
Bureaucracies started out in the households of kings in the ancient societies of Egypt, Babylonia, Assyria, India and China. Ancient bureaucrats managed nearly every aspect of public life. They were non-elected but served at the whim of the monarch, and had great powers over the people they administered.
China was a leader in developing the bureaucracy. The Qin dynasty (221–206 BC) unified China. The first Qin emperor assigned administrative tasks to dedicated officials, rather than nobility. This ended feudalism in China, replacing it with a centralized, bureaucratic government suitable for a growing empire.
Later dynasties structured their own government systems. The government thrived under this system, as it could spot talented individuals more easily in the transformed society. The Han dynasty (202 BC – 220 AD) established a complicated bureaucracy based on the teachings of Confucius, who emphasized the importance of ritual in family, relationships, and politics. With each subsequent dynasty, the bureaucracy evolved.
It’s fair to say that bureaucracy made great strides in China. The system and its name spread from there. The first known English-language use of the term goes back to a book by 1818 Irish novelist Lady Morgan. She used “the Bureaucratie,” or office tyranny, in the book to refer to the apparatus that the British used to subjugate Ireland. By the mid-19th century, the word took on a more neutral sense, referring to a system of public administration in which offices were held by unelected career officials. In this context bureaucracy was seen as a distinct form of management, often reporting to the monarchy.
Modern bureaucrats at work
Max Planck (1858-1947) was a German theoretical physicist who originated quantum theory, for which he won the 1918 Nobel Prize. He also gets informal credit for a memorable scientific one-liner, “Science progresses one funeral at a time.” This reflects the observation that scientific advances often emerge as old scientists die off with their old beliefs intact, while newcomers are more open to new ideas.
That’s the problem with bureaucracies, especially in government offices. They generally have nothing to gain by speeding things up. Of course, long-time employees in government or company offices do tend to adhere to a fixed rule: “We’ve always done it this way.”
This rule would have made perfect sense in the ancient bureaucracies, where progress in any given year or decade or century was random and mostly negligible. Prior to 1984, the Chevron Deference may have made some sense because knowledge had begun to grow a little faster, if only due to computer-powered gains.
Today, new managers in an office or business are almost certain to try out new routines. They’ll want to see if they can cut costs, raise profits, and raise their own value in the eyes of the boss. Long-tenured bureaucrats may want to do the same, in hopes of earning prestige.
Science is progressing faster than ever before. A growing variety of scientific research is also underway; today’s many computers open up all sorts of leads to a variety of conflicting opinions. As you might expect, most upcoming climate-change disaster predictions fail to come true. (In that respect, they’re a lot like predictions of an upcoming stock-market collapse.)
I started reading about climate change in the 1970s. Back then, predictions of global cooling still scared a lot of people, and global warming was just coming into vogue. I’ve read a great deal about the subject of climate since then. Bjorn Lomborg makes more sense to me than any other climate expert I’ve come across.
Unlike other climate-change commentators, Mr. Lomborg insists on comparing the estimated damage that will come from doing nothing about a particular source of climate change, versus the estimated cost of carrying out a climate-remedial measure. Failing to do that comparison often leads to repairs that cost way more than the problem, and in some cases also make the problem worse.
A $2 trillion write-off
Lomborg wrote an interesting climate opinion piece for the Wall Street Journal in June this year:
The ‘Green Energy Transition’ That Wasn’t.
Governments push heavily subsidized renewables, but fossil-fuel use
continues to increase even faster.
Here’s a synopsis of the Lomborg piece. Regardless of your views on or knowledge of climate change, you may find you learn something from him:
Globally, we spent almost $2 trillion in 2023 to try to force an energy transition from fossil fuels to solar and wind energy. Over the past decade, solar and wind power use have soared to record levels, but fossil fuel use has increased even more.
That’s not unusual. When countries add more renewable energy, it does little to replace coal, gas or oil. It simply adds to energy consumption. For every six units of green energy, less than one unit displaces fossil-fuel energy.
This is an historical pattern. Humans have an unquenchable thirst for affordable energy. During the 19th-century transition to coal from wood, overall wood use rose, but coal use rose faster. The same thing happened during the shift to oil from coal: By 1970, oil, coal, gas and wood all delivered more energy than ever before.
Something like this happened during the 14 energy shifts that took place over the past five centuries, such as when farmers went from plowing fields with animals to tractors powered by fossil fuels. It was easy to see why. Invariably, the new energy source was better and/or cheaper.
Not so for solar and wind. Both failed compared to fossil fuels. For one thing, fossil fuels can produce electricity whenever we need it. Solar and wind can only produce energy when daylight and weather make it possible. At best they are cheaper only when the sun is shining brightly or the wind is blowing at just the right speed. The rest of the time they are expensive and mostly useless.
When we factor in the cost of four hours of storage, wind and solar energy become uncompetitive with fossil fuels. Achieving a sustainable transition to solar or wind would require 10 times more storage, making these options unaffordable.
Today’s solar and wind efforts address only a small part of a vast challenge. They are used almost entirely for electricity, which makes up just one-fifth of all global energy use. We are struggling to find green solutions mostly for transportation and haven’t even begun to address the energy needs of heating, manufacturing or agriculture. We are all but ignoring the hardest and most crucial sectors such as steel, cement, plastics and fertilizers.
An energy transition would require far greater subsidies for solar and wind, as well as batteries and hydrogen. We would have to accept less-efficient technologies for important needs like steel and fertilizers. Politicians would have to impose massive taxes on fossil fuels to make solar or wind a better choice.
McKinsey & Co., one of the world’s top consulting firms in questions like this, estimates that achieving a true “green transition” would cost more than $5 trillion annually. Worse, this outlay would slow economic growth, to the point of making the real cost five times as high.
How to tell a bureaucracy from a Supreme Court
I don’t know if it was due to the history teachers I had in high school growing up in the U.S. or the school program itself, but the students came out knowing a lot more about the U.S. Supreme Court and Constitution than the average person knows today.
In particular, we were all taught that the United States was the longest-living democracy in the world, mainly due to the U.S. Constitution.
The Constitution was a concise document that carried a clear guide to how the U.S. government ought to be run and the complicated, slow-moving procedures needed to change the rules.
The authors of the Constitution, known as the Founding Fathers, deliberately wrote the rules to make sure all rule changes would be complicated and slow. They didn’t want voters to make hasty judgments that might lead to internal strife.
Other nations had constitutions, but didn’t have clear, methodical, peaceful rules for changing them. Some went to war to decide how rules would change. The U.S. had one such civil war, but the government survived and to this day retains its distinction as the world’s longest-living democracy.
When I heard recent calls for snap changes to Supreme Court rules, I found them laughable but chilling. Those who wanted new rules thought of themselves as political leaders, but they were ready to tinker with the Constitution as casually as a city council might tinker with rules on overnight street parking.
That’s the difference between Supreme Court/Constitutional rules and bureaucracy rules. Bureaucracy rules don’t change much, since employees resist change, and insist “we’ve always done it like this” (that is, they followed the current set of rules for as long as anybody remembers.)
When the rules do change, it may be because the boss of the bureaucracy changed his mind, or the boss’s boss decided the department needed some new blood.
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We can expect to hear a lot of public discussion about changes in Supreme Court rules this year, particularly between now and the U.S. Presidential Election on November 5. Meanwhile, Supreme Court Justice Neil Gorsuch has just published a new book entitled Over Ruled. It has great ratings so far. His success to date may have spurred the offhand comments about Constitution-tinkering.
You can get a taste of Over Ruled by listening to an interview with the judge from the Ben Shapiro Sunday Special Show, recorded this past August 11. It’s available on YouTube (look for The Human Toll of Too Much Law). You may also find it on podcast broadcasters.
Gorsuch was Trump’s first choice for a Supreme Court seat, nominated on February 1, 2017. Even if you detest Trump, chances are you’ll like Gorsuch. I think we’ll hear much more from and about him in the years ahead.
Pat
