The Permit Power Revisited: The Theory and Practice of Regulatory Permits in the Administrative State

Abstract

Two decades ago, Professor Richard Epstein fired a shot at the administrative state that has gone largely unanswered in legal scholarship. His target was the “permit power,” under which legislatures prohibit a specified activity by statute and delegate administrative agencies discretionary power to authorize the activity under terms the agency mandates in a regulatory permit. Describing the permit power, accurately, as an “enormous power in the state,” Epstein bemoaned that it had “received scant attention in the academic literature.” He sought to fill that gap. Centered on his premise that the permit power represents “a complete inversion of the proper distribution of power within a legal system,” Epstein launched a scathing critique of regulatory permits in operation, condemning the practice as a “racket” for administrative abuses and excesses. Epstein’s assessment of the permit power was and remains accurate in three respects. First, the permit power is vast. Regulatory permits reach into all corners of modern society and are one of the primary workhorses of the administrative state’s exercise of authority. Second, the permit power is ripe for administrative abuse. Like any government power, it must be closely monitored. Third, the permit power has been largely ignored in legal scholarship. Indeed, it does not stretch things to say that Epstein has had the first and last words on the permit power. The problem is that, beyond what he got right about the permit power, most of Epstein’s critique was based on an incomplete caricature of permitting in theory and practice. This Article is the first to return comprehensively to the permit power since Epstein’s critique and offer a deep account of the theory and practice of regulatory permits in the administrative state. Part I positions regulatory permits within the administrative state. We define what a regulatory permit is, outline the scope and scale of permitting in the regulatory state, and explain the different types and characteristics of permits. Part II compares the pros and cons of different permit design approaches and identifies the conditions under which one type of permit, known as the “general permit,” is most likely to offer significant advantages, including mitigating many of the concerns Epstein advanced. Using environmental degradation problems as examples, Part III applies the theoretical model in concrete policy settings, concluding that general permits, if carefully designed and administered, could be deployed and used to effectively respond to many of the complex policy problems looming in the future. We close by proposing a set of default rules and exceptions for permit design and suggesting how they apply to such problems.