November 04, 2010
Agenda for the 112th: When Nothing Is Good Enough
Posted by Dave Hoffman

I’m sure a clever experimentalist has tested the do-something bias – that when advising others, we are more likely to recommend action than inaction, even when we would sit tight in the advisee’s position.  It’s easy, after all, to charge others with the emergent necessity of action when the costs (like getting it wrong) aren't ours to bear, and the Conglomerate pays its masters by the affirmative word.  [I kid. They pay in prestige.]  The charge of this master’s forum is to consider “a Business Law Agenda for the New Congress and the President.”  My contrarian instinct is to consider whether the right agenda is no agenda: maybe nothing is good enough for the next two years.

By nothing I don’t mean rolling back Dodd-Frank, the Healthcare Omnibus, or reanimating the dying Bush tax cuts.  Rather, I'd advise permitting the status quo to ferment for a little while, and see what bubbles up.  We just had a “do something” congress”.   I am myself still trying to figure out what the 111th Congress did to innovation and entrepreneurship.  Will health care portability enable more small business risk-taking, or will regulatory costs bury main street?  Does Dodd-Frank’s anti-systemic risk and derivative trading apparatus meaningfully increase liquidity and/or transparency, or does it simply drive bad actors into tighter tangles & more shadowy corners.  It seems obviously true to me – as my former colleague Jonathan Lipson observes here -  that very little of Dodd-Frank was empirically tested before its adoption.  Similarly, although health care economics & behavior is a deep and richly mined field, HCR itself is already creating unanticipated effects as the market & consumers react to the unfolding of the State’s new & multi-tentacled regulatory arms.  I believe, moreover, that early reactions to previous reform efforts (like SOX) appeared to be wildly overstated on both sides of the academic aisle. It strikes me what business really need over the next two years is certainty.  This (nothing more but nothing less) are the rules of the game you will play under.  Good or bad, we're sticking with it for a while to see what happens.  Take regulatory change off of the table: grapple with your own competitive demons.

This approach has the notable disadvantage of being over- and under-inclusive at dealing with problems.  It is over-inclusive in that it leaves in place certain problematic aspects of HCR and Dodd-Frank – like the very unclear grants of power by the 111th Congress to new agency heads.  Consider Elizabeth Warren, both brilliant and beloved.  How much power will she have?  What is her agency really going to do?   So even leaving things in place means that there will be a degree of uncertainty.

Similarly, the approach is underinclusive.  It leaves unaddressed serious systemic problems in our system of business regulation.  Among them, what to do about business bankruptcy?  Is sunlight still the best disinfectant in the Digital Age?  Can we preserve a state-federated model of entity governance when duties run across national borders?  How might we best cabin in arbitration & preserve the public good that is corporate and contract doctrinal common law?  What is outsourcing's effect on the the deterrent & expressive reach of our employment, labor, IP, & environmental regulatory regimes?  These aren’t trivial problems – far from it.  But they might be problems that we have to leave on simmer as we see what comes of the grand experiment in economic redesign that we’ve just put into motion.  Let's get some evidence before we decide to rip it all out, root and branch.

There’s an additional advantage to my approach: gridlock is what is most likely to happen in a world where the Republicans aren’t going to be able to override the President’s veto.  Let's make a virtue of necessity.  Better deliberate inaction than inconsiderate stagnation!  A motto for law school faculties and the country alike.

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