Coase-Sandor Working Paper Series in Law and Economics
Regulatory diffusion occurs when an agency adopts a substantially similar rule to that of another agency. Indeed, regulatory texts proliferate just like other forms of law like constitutions, statutes, and contracts do. While this insight has been explored across countries, this dynamic also occurs closer to home: American administrative agencies regularly borrow language from one another. By our measure, in recent years, agencies reused one out of every ten paragraphs of the Code of Federal Regulations from another rulemaking. These insights are timely given a recent Supreme Court decision calling for judges to engage in less deferential regulatory interpretation. As a result, there is newfound significance as to questions of how legislative rules are written and why.
This Article explores the descriptive and normative implications of regulatory diffusion. The empirical analysis reveals a fairly steady rate of text reuse, with a notable increase during the Trump Administration – perhaps the result of well-documented staffing problems and vacancies. More generally, both the number of borrowing and lending agencies has increased, with a relatively small number of agencies borrowing text from an increasingly larger group. In other words, regulatory text has diffused from more agencies. This behavior appears to vary by whether the agency is executive or independent in nature.
These findings raise important questions about whether such diffusion is desirable, as well as how to interpret the regulations that result. To assess the tradeoffs, we propose that rulewriters should be required to explain why they are emulating other regulatory texts to allow executive branch oversight over the practice. We also argue in favor of the in pari materia canon—the idea that similar regulations should be interpreted similarly by judges—and propose ways for judges to decide when and how to apply it.
Jennifer Nou and Julian Nyarko, "Regulatory Diffusion", Coase-Sandor Working Paper Series in Law and Economics, No. 959 (2022).