Two recent Supreme Court decisions produced sweeping changes to how regulation works in the United States, shifting power from agencies to the courts. Investment will now take place against the backdrop of the “judicial veto,” where a wide range of potential litigants and sympathetic judges will decide which regulations actually go into effect, and when. According to conventional wisdom, scaling back the regulatory state will help businesses. However, the court’s rulings will suppress business investment in three unintended ways. The judicial veto doctrine 1) multiplies the number of decision-makers and discounts the value of expertise, 2) increases the timeframe of unpredictability, and 3) tips the scales in favor of incumbent businesses and their shareholders over new entrants and early-stage investors. The overall effect of this will be less innovation and reduced competitive advantage for U.S. businesses.
