Hadfield’s Institutional Innovation Agenda and the Administrative State

In Rules for a Flat World, Gillian Hadfield takes an ambitious looks at the rise of and the role of the rule of law. Motivating her argument is the observation, now accepted as received wisdom in the technology world, that we are moving from a world of hierarchies to one of networks. For Hadfield, Boeing’s experience with the 787 Dreamliner provides a case in point: “What Boeing needed from its contracts,” she explains on p. 136, was a means of supporting “a more networked approach to innovation and production.” As she explains, it was not a smooth transition.

The transition from hierarchies to networks continues to challenge how institutions built in the 20th century adapt to a 21st century economy. In commenting on Hadfield’s argument, I will focus on this challenge as it applies to the modern administrative state, as my most recent project focuses squarely on the need for entrepreneurial administration. In that context, it is not Boeing’s Dreamliner contract, but the building of the healthcare.gov website that is a notable case in point. The original website, created using the traditional government procurement model of “waterfall” development, was a disaster. By contrast, version 2.0, built using agile and lean-startup techniques, was a notable success. This success paved the way for the United States Digital Service, which develops professionals who can “hack the technology, as well as people who can hack the bureaucracy.”

Hadfield’s call for institutional innovation and a commitment to developing new models for regulatory oversight is essential in a world where regulatory regimes governing everything from food safety to energy efficient buildings must take account of globalization and technological change. Unfortunately, as Hadfield notes, there are powerful forces that hem in entrepreneurially minded public servants who face incentives “to avoid scandal” rather than experiment with new approaches. Stated differently, the ethos of “fail fast,” which is a core lesson in the technology world, is not tolerated in government. For leaders of agencies in a twenty-first century economy, failure must not be viewed as a scandal—at least if born through competent experimentation. Rather, failure provides data on what does not work and enables institutional designers to iterate and create a better system.

Hadfield sees great institutional promise in private regulatory systems overseen by governmental agencies. I share her interest in such systems and have written about how some of them do or could operate in the telecommunications arena, aiding resolution of network neutrality disputes, spectrum matters, and Internet governance more generally. In encouraging the use of such systems, I must underscore a point she adds about their promise: “private regulators have to fear losing their approval status” for any such system to operate effectively. This means that the governmental agencies who certify such bodies must remain vigilant and able to monitor private bodies operating under their oversight.

For Hadfield’s vision of institutional innovation to be realized, we need entrepreneurial leaders like former Civil Aeronautics Board Chair Fred Kahn to drive experimentation in the development and administration of regulatory regimes. For leaders open to such approaches, there are a range of models, including private regulatory authorities, that can provide more adaptable and effective regulatory regimes. And contrary to the impression left by much of modern administrative law scholarship, the practice of governmental administration is not defined by notice-and-comment rulemaking, let alone by public sector actors. Consequently, in line with Hadfield’s encouragement, regulators would be well served by a scholarly discourse informed by studies of regulatory regimes in practice, creative designs for how regulatory solutions can be developed, and suggestions on how to develop entrepreneurial leaders who can oversee such institutions.