The U.S. Supreme Court precedent known as the “Chevron doctrine,” which is based on the court’s 1984 ruling in Chevron USA v. Natural Resources Defense Council, said that when a dispute about interpreting a regulation arises, courts should defer to the regulatory agency’s interpretation of the law — provided the interpretation is reasonable on its face. Now the court has overturned that precedent in a pair of combined cases, Loper Bright Enterprises v. Raimondoand Relentless Inc. v. Department of Commerce, curtailing regulators by giving the courts more influence in resolving regulatory disputes.

Chief Justice John Roberts justified the decision as consistent with the Administrative Procedure Act of 1946, which granted federal courts oversight over all regulatory agency actions. But his justification has not assuaged the public’s growing skepticism toward the court as a political body with a conservative ideology that is aiming to weaken government oversight of market behavior. My own primary concern with the decision is economic, not ideological: the nation’s lower courts are less likely than regulators to even consider how regulations could be more efficient.

It’s Never Simple

If you paid attention in Econ 101, or you read the upscale media, you probably know that mainstream economists argue government intervention in markets is justified when people and firms take actions that do not account for their adverse external effects. In the original Chevron case, the effect was on the environment, but it could be on public health and safety, as well.

The fix could take the form of a tax on the offending behavior. For example, gasoline taxes create incentives to reduce harmful automobile emissions by driving less or by driving a more fuel-efficient vehicle. In other cases, the intervention can consist of “command and control” regulation. For example, the FAA puts limits on the noise pollution of aircraft engines that can make life miserable for those dwelling near airport runways.

But the fact that an intervention can be justified in theory doesn’t mean it improves outcomes in practice. Indeed, in a preliminary draft of my new book, I have synthesized and categorized the evidence on the economic effects of major health, safety and environmental regulations. I found that, notwithstanding their worthy goals, the regulations have generally wasted considerable resources because they are poorly designed and implemented. In the aforementioned case of aircraft noise, the costs to the airlines from the reduced life of their aircraft have far exceeded the benefits to nearby homeowners — some of whom would have been willing to trade off living with noise overhead for lower mortgage payments. By the same token, taxing vehicle miles travelled instead of the quantity of fuel consumed would be a more efficient way to reduce automobile emissions.

Truth is, the evidence shows that regulators have wasted billions of dollars in resources from a host of major policy mistakes. So the Supreme Court is on the right track in overturning the Chevron precedent, right?

The poor economic performance of regulators certainly justifies a hard look at the way we design and implement regulations. But the court’s justification for overturning Chevron was not centered on the efficiency implications. Indeed, the fact that the court’s decision was based on a 6-3 split along partisan lines suggests that ideology played an important role in the court’s decision. What’s more, the evidence indicates that this is hardly the first time that the justices’ ideological preferences have influenced their decisions.

Accordingly, it is difficult to believe that the Loper Bright decision, which allows judges in lower courts to resolve disputes that have arisen from regulatory decisions, would lead to more efficient policies. It is more likely to lead to a chain reaction in which White House occupants focus on appointing judges to lower courts whom they believe would overturn decisions made by lower court judges appointed by previous administrations. That’s why Harvard Law Professor Cass Sunstein has predicted that Loper Bright will lead to a significant increase in ideological divisions in the lower courts. Along with eroding public confidence in the objectivity of the courts, this volatility will raise business costs by increasing uncertainty about the way the laws would be enforced.

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Like other forays into judicial activism, overturning Chevron is likely to generate profound and often unintended consequences. Regulations led by government agencies that have been marred by persistent economic inefficiencies will now be heavily influenced by lower court judges chosen for ideological purity — a change that will do little to reduce those inefficiencies and may foreclose prospects for efficient policy.

How might that occur? After many decades of studying government policy inefficiencies, I have come to think it is a fool’s errand for economists to recommend efficient policy reforms and think that policymakers will heed their recommendations. However, that does not necessarily mean society won’t make some constructive efforts to address social problems efficiently. For example, in the case of environmental costs, the private sector is now developing carbon capture technologies that are intended to reduce carbon emissions. From this perspective, it is clear that overturning Chevron may foreclose an efficient policy because the courts are less likely than regulators to even consider how to provide economic incentives for industrial firms and utilities to use those technologies when they are available on the market.