No deficits: durable fiat makes regulatory nukes effective by demonstrating firm commitment.

The first decision point that the game presents is the decision of whether or not the agency should threaten to launch its regulatory nuke. “A threat is a response rule that punishes others who fail to cooperate with [the person making the threat].”180 Schelling noted that “[s]uccessful threats are those that do not have to be carried out.”181 As President John F. Kennedy said of nuclear weapons, “Today the expenditure of billions of dollars every year on weapons acquired for the purpose of making sure we never need them is essential to the keeping of peace.”182 Carrying out threats imposes a higher cost to everyone involved.183 In this way, “a promise is different from a threat. . . . [A] promise is costly when it succeeds, and a threat is costly when it fails.”184 So, of course, the agency hopes that the target will buckle when threatened. The art of making a threat to launch a regulatory nuke is in making the threat credible and serious enough that it manipulates the target’s behavior by altering the target’s belief about how the agency will act if the target does not comply. As a reminder of how the threat fits within the larger game, the threat decision node is highlighted in Figure 3.

<<FIGURE 3 OMITTED>>

Often, when regulatory nukes are discussed by scholars and practitioners, the discussion of threats is missing.185 This is because the literature often conflates launching regulatory nukes with using them. This leads students and practitioners to misjudge how agencies operate. While studying environmental law in law school, I came to believe that I would be extremely unlikely to encounter the EPA veto of a wetlands dredge-and-fill permit discussed above.186 However, a few months into practice, I was involved in a case where EPA threatened the very thing I had written off as a red herring. I remember going back to my class notes and textbook and shaking my head, thinking that I had encountered a statistical anomaly right out of the gate. Although EPA and the regulatory target ultimately negotiated a deal, the impression I had as a student was still wrong. The threat to use the regulatory nuke drove the resolution of that entire regulatory conflict. Launching a regulatory nuke is just one of many ways that an agency may use it.

Of course, it is often difficult to determine how often an agency threatens to use a regulatory nuke. Take the EPA veto just discussed as an example. Between 1972 and 2010, EPA only vetoed thirteen dredge-and-fill permits.187 This seems hardly worth mentioning given that between 1988 and 2010, the Army Corps of Engineers processed more than 1.3 million permit applications.188 Yet, focusing on the number of times this particular regulatory nuke was launched misses the larger picture.

Unlike many of the regulatory weapons that agencies are given, it is often difficult to make credible threats with regulatory nukes. Because regulatory nukes carry so much punch and because of the political taboo surrounding them, it is not always easy for agencies to make threats that seem realistic. As Schelling said in the context of nuclear weapons, “Saying so, unfortunately, does not make it true; and if it is true, saying so does not always make it believed.”189 Big threats often sound like big bluffs. The very things that make the power of the regulatory nuke difficult to ignore may make it difficult to execute the threat. As two prominent game theorists have noted, the threat to launch an actual nuclear weapon may prove “too big to be credible, too big to carry out, and too serious to stake a reputation over.”190 With regulatory nukes, launching the weapon may become the fodder for news stories, the rallying cry of industries, the basis of lawsuits, and the subject of congressional hearings. Within this context it certainly rings true that “[t]he size of the threat can be a problem” because “bigger threats cost more . . . than small ones.”191

One of the major contributions of Schelling’s work was to help us understand how we might finesse those threats that do not seem credible to make them more believable. According to Schelling, a threat’s credibility may depend on the costs and risks associated with fulfillment for the party making the threat; therefore, a party’s commitment to fulfilling the threat is key.192 Some examples include (1) stretching of a “tripwire” across the enemy’s path of advance, (2) making fulfillment a matter of national honor and prestige, and (3) placing responsibility for fulfillment in the hands of “those whose resolution is strongest.”193