Matthew C. Stephenson

“When the Devil Turns … ”: The Political Foundations of Independent Judicial Review

An independent judiciary with the power to constrain the executive and legislative branches is commonly thought to be the foundation of government under the rule of law. However, it is not obvious why those with political power would ever tolerate the constraints imposed by an independent court. I offer an explanation for independent judicial review that is based on ongoing political competition between risk‐averse parties. An independent judiciary is a mechanism through which these political competitors can enforce mutual restraint. But support for independent judicial review is sustainable only when (1) the political system is sufficiently competitive, (2) judicial doctrine is sufficiently moderate, and (3) parties are both sufficiently risk averse and forward looking. I employ a simple formal model to show how these variables influence the political sustainability of independent judicial review, and I also present the results of a preliminary empirical test that confirms the central hypotheses.

Informative Precedent and Intrajudicial Communication

We develop an informational model of judicial decision-making in which deference to precedent is useful to policy-oriented appellate judges because it improves the accuracy with which they can communicate legal rules to trial judges. Our simple model yields new implications and hypotheses regarding conditions under which judges will maintain or break with precedent, the constraining effect that precedent has on judicial decision-making, the voting behavior of Supreme Court Justices, the relationship between a precedents age and its authority, the effect of legal complexity on the level of deference to precedent, the relative stability of rules and standards, and long-term patterns of legal evolution. Perhaps most importantly, we demonstrate that “legalist” features of judicial decision-making are consistent with an assumption of policy-oriented judges.

Judicial Review as a Response to Political Posturing

We use an agency model to analyze the impact of judicial review on the incentives of elected leaders to “posture” by enacting bold but ill-advised policies. We find that judicial review may exacerbate posturing by rescuing leaders from the consequences of unwise policies, but may also discourage posturing by alerting voters to unjustified government action. We further find that judges will defer to the decision of elected leaders unless posturing is sufficiently likely. We then show how judicial review affects voter welfare, both through its effect on policy choice and through its effect on the efficacy of the electoral process in selecting leaders. We also analyze how the desirability of judicial review is affected by characteristics of the leaders and the judges.

Regulatory Quality Under Imperfect Oversight

We analyze the positive and normative implications of regulatory oversight when the policymaking agency can improve the quality of regulation through effort, but only some kinds of effort are observable by the overseer, and the overseers only power is the ability to veto new regulation. Such oversight can increase the quality of agency regulation, but it also introduces inefficiencies—the agency underinvests in unobservable effort and overinvests in observable effort. Agencies have no incentive to conceal their activities from the overseer; the reforms that are likely to reduce inefficiency are therefore those that improve overseer expertise or lower the costs of agency disclosure, not those that compel disclosure. The normative implications depend on the relative severity of bureaucratic drift and slack problems. When slack is paramount, an overseer that is more anti-regulation than the agency or society improves social welfare, as long as it does not deter the agency from regulating entirely. When drift is paramount, oversight improves social welfare only when it deters regulation. In this case, regulatory oversight is weakly dominated by one of two alternatives: eliminating oversight or banning regulation.

A Costly Signaling Theory of Hard Look Review

Judges often review decisions made by government actors, such as agencies or legislatures, with greater expertise about the effects of different policy choices. One judicial response to this asymmetric information problem has been to shift the focus of review from a substantive evaluation of the policy to an assessment of the quality of the explanation the government offers in support of that choice. Proponents of this type of “hard look” review argue that it improves the quality of government decisions; critics charge that it imposes costs on government policymakers without providing useful information to reviewing courts. This paper offers an alternative perspective: Judicially-imposed explanation requirements can help reviewing courts overcome their informational disadvantage for reasons that are independent of their ability to assess the substantive content of government explanations. If producing impressive explanations is expensive, then the court can reason that the government’s willingness to produce a high-quality explanation signals the government’s belief that the proposed policy has large benefits. Furthermore, if the preferences of the court and government are positively correlated in expectation, then the fact that the government places a high value on the policy means the policy is more likely to be acceptable to the court. Therefore, judicial evaluation of explanation quality ameliorates the court’s informational disadvantage, and may induce a court to uphold a government decision it would otherwise invalidate. The paper develops this costly signaling perspective on hard look review in the administrative law context, and then considers other applications in constitutional and criminal law. * Assistant Professor of Law, Harvard Law School. I am grateful to David Barron, Ethan Bueno de Mesquita, Jody Freeman, Barry Friedman, Elizabeth Garrett, Bert Huang, Howell Jackson, Louis Kaplow, Adriaan Lanni, Daryl Levinson, John Manning, Gerry Neuman, Eric Posner, Matt Price, Mark Ramseyer, Fred Schauer, Dan Schwarcz, Ken Shepsle, Jed Shugerman, Bill Stuntz, Cass Sunstein, Judge Stephen Williams, Adrian Vermeule, and the participants in the Harvard Law School Law & Economics Workshop for helpful comments on earlier drafts. A SIGNALING THEORY OF HARD LOOK REVIEW A COSTLY SIGNALING THEORY OF “HARD LOOK” JUDICIAL REVIEW Matthew C. Stephenson

Legal Institutions and Informal Networks

The relationship between third-party contract enforcement and informal networks raises important sociological, political, and economic questions. When economic activity is embedded in social structures, what are the implications of third-party contract enforcement for the scope and nature of economic relations? What determines whether individuals rely on formal legal institutions or informal networks to sustain trade relationships? Do legal institutions erode informal networks? We develop a model in which a trade-off exists between size and sustainability of networks. By adding the possibility of fee-based, enforceable contracts, we provide a theoretical explanation for the coexistence of legal contract enforcement and an informal economy. We find that legal enforcement has little effect on networks until law becomes sufficiently inexpensive, at which point small decreases in the cost of law have dramatic effects on network size and the frequency of use of the legal system.

Political Accountability Under Alternative Institutional Regimes

We analyze the interaction between electoral accountability and separation-of-powers by comparing three regimes: ‘Unilateral Authority’ (the President has exclusive decision-making power); ‘Mandatory Checks’ (the President cannot change policy without congressional assent); and ‘Opt-in Checks’ (the President may seek congressional authorization or act unilaterally). We find: (1) voters use asymmetric electoral rewards and punishments to offset the risk of politician bias, but voters rely less on this blunt instrument if there are internal checks; (2) adding a veto player need not alter the ex ante likelihood of policy change; and (3) voter welfare is highest under Opt-In Checks and lowest under Unilateral Authority.

The Price of Public Action: Constitutional Doctrine and the Judicial Manipulation of Legislative Enactment Costs

This Article argues that courts can, and often should, implement constitutional guarantees by crafting doctrines that raise the costs to government decisionmakers of enacting constitutionally problematic policies. This indirect approach may implement a kind of implicit balancing of interests, in which the damage to constitutional values is weighed against the strength of the government’s interest in the challenged policy, more effectively than alternative approaches. When the government has better information than the reviewing court about the effect of the challenged policy on constitutionally relevant interests, heightened enactment costs act as a kind of screening device: if the government would still enact a given policy in the face of substantial additional enactment costs, the probability that the policy serves significant government interests is likely to be higher. This Article first develops the theoretical argument as to how (and under what conditions) doctrines that manipulate legislative enactment costs may be more effective tools for judicial implementation of the Constitution than doctrines that require direct judicial assessment of the relative strength of the competing interests. The Article further contends that the federal judiciary already has the capacity to fashion doctrines that function in this way, and indeed current doctrine influences legislative enactment costs more than has generally been appreciated. author. Assistant Professor, Harvard Law School. I am grateful to Richard Fallon, Eugene Kontorovich, Daryl Levinson, John Manning, Jonathan Masur, John McGinnis, Martha Minow, Bob Powell, Mark Tushnet, Adrian Vermeule, and participants in the 2007 Harvard-Berkeley Conference on Constitutions & Consequences for helpful comments on earlier drafts. STEPHENSON OP 10/14/2008 11:21:15 AM the price of public action

Chevron Has Only One Step

Chevron, U.S.A. v. Natural Resources Defense Council lays out a two-step process that courts must follow when they review a federal agencys construction of a federal statute. We argue that Chevron, rightly understood, has only one step. The single question is whether the agencys construction is permissible as a matter of statutory interpretation. The two Chevron steps both ask this question, just in different ways, and are thus mutually convertible: any opinion written in terms of one step can be written, without loss of content, in terms of the other step. Chevrons artificial division of a unitary inquiry causes material confusion among commentators and courts, and has no benefits; administrative law should jettison the two-step framework.

The welfare effects of minority-protective judicial review

Constitutional theorists usually assume that minority-protective judicial review leads to outcomes more favorable to the protected minority and less favorable to the majority. Our analysis highlights an indirect effect of judicial review that complicates this conventional wisdom. Without judicial review, pro-majority and pro-minority leaders adopt different policies. Because judicial review limits the degree to which pro-majority leaders can adopt anti-minority policies, it becomes easier for pro-minority leaders to ‘mimic’ pro-majority leaders by adopting the most anti-minority policy that the judiciary would uphold. Furthermore, if judicial invalidation of anti-minority policies is probabilistic rather than certain, pro-majority leaders may propose even more extreme anti-minority policies in order to deter pro-minority leaders from mimicking. These effects can sometimes nullify, or even reverse, the assumed relationship between minority-protective judicial review and pro-minority outcomes. When such reversal occurs, majoritarian democrats should favor minority-protective judicial review, while those concerned with protecting unpopular minorities should oppose it.