|The Book's Home Page||Wilson Q. James (ed),
The Politics of Regulation,
Basic Books, New York, 1980.
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James Wilson's (the editor) Introduction:
These essays were written out of a common interest in discovering the relationship between private power and public purpose. This relation-ship is of special importance in a liberal regime such as that of the United States. Liberalism now means many things, but in the beginning it signified a commitment to liberty and, properly understood, it still refers at least to that. A liberal democracy erects, between the public and the private sectors, barriers that, though often porous and always changing, require the government to respect certain matters as private and to impose legal controls on private action only for publicly agreed- to purposes and in accordance with due process of law. That aspect of liberalism is well understood by conservatives.
By the same token, a liberal democracy can only formulate public purpose and protect constitutional procedures if the government itself is not the instrument of some private faction that seeks to use' public powers for narrow or self-seeking ends. No large government such as ours can hope to act only in accordance with the "will of the majority." The majority of citizens do not have a "will" on most political matters, and if they did-and could always insist on it-the resulting policies might be as tyrannical as those of a single despot. But if the majority cannot always rule, then it is important to make certain that narrow interests do not rule in their stead. This aspect of liberalism has been generally understood by liberals.
Finding arrangements that would permit a democratic republic to avoid rule by either impassioned majorities that were heedless of the barriers between public and private life or by self-seeking factions that ignored the distinctions between private and public power was the central problem confronting the Founders. James Madison and his colleagues were at pains to devise a constitutional order that would minimize the possibility of either kind of tyranny. Their solution, of course, was to make "ambition counteract ambition," so that the many factions found in a large nation, operating through a constitutional system that required the sharing of powers and the fragmentation of authority, would make it impossible for one faction to capture the government or for the government to dominate society. They hoped that policy would be enacted only by means of a "coalition of the majority" acting on the principles of "justice and the general good."
This system may have worked well during the century and a half of limited government when Washington was content to operate the post office, issue the currency, devise a tariff, distribute the public lands, and fight the Indians. From time to time some private interest group might dominate one or the other of these policy areas, but a government that did little was but little feared. Federal politics were essentially legislative politics, dominated by political parties and carried out more or less in an arena of clearly competing interests.
Today the federal government is active with respect to virtually the full range of human affairs; much of its power is exercised, and many of its purposes are defined, by a large bureaucratic apparatus. We are aware that the government affects almost every aspect of our lives; moreover, we worry that the agencies that have this effect operate, not in an arena of competing interests to which all affected parties have reasonable access, but in a shadowy world of powerful lobbyists, high- priced attorneys, and manipulative "experts." Many persons believe, in short, that ambition no longer counteracts ambition, but rather that the ambitions of bureaucrats are reinforced by the electoral needs of congressmen and the private claims of interest groups.
This concern is certainly shared by citizens who today complain of the "oil companies" or "the unions" or "the intellectuals" and their alleged grip on the reins of political power. The oft-remarked decline in popular confidence in government has been accompanied by-in-deed, it is in part measured by-a rise in the belief that government works for the benefit of a few large interests. Citizens disagree over the identity of those interests, but not over their power.
Younger, more critically disposed scholars and journalists have sharpened this fear of large interests by asserting that the political order will in large measure reflect underlying economic interests and by directing their inquiries to the discovery of exactly what these interests are and how they operate. Some write in a traditional Marxist perspective; others simply are restless with the formulation, suggested by some older scholars, that the United States is a pluralistic political system in which continuous bargaining among all relevant interests ensures the development of politically, if not philosophically, optimal policies.
The language of these critics has entered the everyday vocabulary of citizens and writers. One cannot mention regulatory agencies without adding the observation that, of course, such agencies are likely to be "captured" by the interests they are supposed to regulate. To suggest that matters are any different from this is to mark oneself as hopelessly naive, or even disingenuous.
If one believes that regulatory agencies are captured, one must explain why business firms so often complain of their decisions. One possibility is that business is lying-pretending to be hurt to disguise the benefits it receives. Another is that complaints are sincere, but they are addressed chiefly to the minutiae of regulatory irritants or to specific decisions affecting a single firm, and not to the pattern of industry protection created by the existence of competition-reducing regulations. Still another possibility is that different regulatory agencies have different effects: those that fix prices or control entry may confer advantages on an industry while those that enforce standards governing the quality of a product or the conditions of its manufacture may impose significant costs. Finally, business may be correct-it is hurt-but of course that leaves open the question of whether the hurts endured by industry are worth the benefits created for citizens.
But if the "capture" theory is correct-at least in some cases-it is unreasonable to assume that only business firms would be able to capture an agency. As government regulates more aspects of our lives, a greater variety of interests-occupations, professions, institutions, associations-acquire a stake in influencing the behavior of the regulatory agencies. If we assume that the airline companies will try to capture the Civil Aeronautics Board, it makes sense to assume that professors will try to capture the National Science Foundation, teachers to capture the Department of Education, environmentalists to capture the Council on Environmental Quality, and civil rights activists to capture the Office for Civil Rights. 'the plausibility of this assumption is sometimes obscured by calling agency-interest relations of which we approve "citizen participation" and agency-interest relations of which we disapprove "capture," but the issue is very much the same whatever rhetorical label we choose to employ.
If we accept the largest implications of the capture theory, we are forced to the unhappy conclusion that the more the government at-tempts to do, the more its various parts will fall under the control of specific and self-seeking groups in society. An activist government win become-at least under existing constitutional arrangements-a government of cartels and clients. That this has already occurred is one of the arguments of Theodore J. Lowi's influential book, The End of Liberalism. If he is right, then only two remedies are available. One, favored by liberals, is new constitutional or legislative devices that will allow the government to be both active and uncaptured (these proposals include "clear standards," "sunset laws," widened court review of agency decisions, and "consumer advocacy"). The second, favored by conservatives, is to have the government do less, thus leaving a greater variety of decisions to the market or to private lawsuits.
The empirical question is whether capture--or clientelism-has become so pervasive and so immune to change that either a very different, or a very much smaller, government is necessary. The essays in this book cannot give a full answer to that question, but they can shed light on agency-interest relations in a variety of important policy areas. It will not be giving away too much of the argument of these chapters to say that, when one examines matters closely, they appear to be a good deal more complicated than is assumed by either liberal or conservative critics of clientelism.
Many people find complexity dull: simple statements are easier to remember; dramatic arguments are more interesting to read. Persons who found the various Ralph Nader books on regulatory agencies memorable will be disappointed by what follows here. Naderite accounts of the Federal Trade Commission and the Antitrust Division are catalogs of real and imagined horror stories, written in the best muckraker tradition and useful precisely because they stimulated many people to take an interest in the shadowy but significant world of the regulatory bureaucracy. But if matters are left where Mr. Nader and his young colleagues left them, we acquire little more than a sense of an antinomian struggle between Good and Evil that can be resolved only by the advent of a new Savonarola who, by preaching and punishment, will, expunge the Devil.
This book is an effort to go beyond an account of the newsworthy scandal to an exposition of how various regulatory agencies ordinarily operate. People-and groups-are affected more by routine performance than by the occasional crisis. The behavior of the Antitrust Division cannot be inferred from what one believes did or did not happen in the ITT case during the Nixon administration any more than the behavior of state public utility commissions can be inferred from the fact that Samuel Insull, the utility magnate, was instrumental in their creation.
The agencies covered by this book were selected by no particular plan: at various times over the last several years, students of mine have expressed an interest in studying regulatory politics and they chose, on the basis of their own inclinations, what agency interested them. The results, however unintended, comprise a reasonably comprehensive selection of such agencies. There are some traditional rate-setting or entry-controlling agencies (the Federal Maritime Commission, the Civil Aeronautics Board, and the state public utility commissions); there are also some major examples of the "new" product- or process-oriented agencies (the Occupational Safety and Health Administration and the Environmental Protection Agency.) There are agencies that deal with only a few industries (the Food and Drug Administration) and agencies that deal with all industries (the Federal Trade Commission and the Antitrust Division of the Department of Justice.) And there is one study of an agency that regulates nonbusiness organizations-the Office for Civil Rights in the Department of Health, Education, and Welfare. Some of these agencies have scarcely changed at all (the Federal Maritime Commission); others have changed greatly (the Civil Aeronautics Board).
Table of Contents
Introduction James Wilson
Chapter 1: State Regulation of Electric Utilities, Douglas Anderson
Origins of State Utility Commissions, 1898-1907
Structural Change in the Process of Regulation
Life-line in California: The Politics of Pricing
Peak-Load Pricing in New York: The Politics of Efficiency
The Environmental Defense Fund
Chapter 2: Federal Maritime Commission, Edward Mansfeld
Among those who are familiar with its operations, the FMC has a reputation for poor performance. This paper discusses some of its problems.
Table of content:
Origins: Conferences and Regulation
The Office of Tariffs
The Office of Agreements
What's Wrong with the FMC?
Congress and the FMC
Chapter 3: Civil Aeronautics Board, Bradley Behrman
Table of content:
The History of the CAB
The Road to Deregulation
Chapter 4: Antitrust Division of the Department of Justice, Suzanne Weaver
The Antitrust Division of the United State Department of Justice is the nation's oldest example of a major federal effort to use the courts to regulate business activity. rather than relying on a commission or administrative agency to oversee some particular industry, Congress, in creating the division, sought to restrain certain business malpractices wherever they occurred by challenging them through the adversary system. Presumably, the industry-wide scope of the division and the involvement of the courts would minimize any tendency toward business "capture"; but, as we shall see, these methods created problems of their own.
Table of content:
The Division Matures
Finding a Case
Managing the Lawyers
Chapter 5: Federal Trade Commission, Robert A. Katzmann
Today, antitrust is once again in the public spotlight. In part, it thrives because the issues which it touches - the extent to which the state should regulate business, the nexus between corporate wealth and political influence, the effect of market concentration on economic problems - are still very much debated. Antitrust is a banner under which many march but fro quite different reasons: politicians grappling with inflation; consumer groups convinced that large manufacturers charge supra-normal prices; populists fearful that corporate giants corrupt the political process; businessmen threatened by the anticompetitive behavior of others; private attorneys dependent on antitrust practice as a source of income; and economists concerned with the welfare costs of monopoly and the estimated consumer gains from its elimination.
Whatever their policy objectives may be - social, political, economic - these sundry groups closely monitor the activities of those public agencies that largely set antitrust policy. This study endeavors to examine the ways in which one such agency, the Federal Trade Commission (FTC), selects cases for antitrust action.
The FTC: Its Antitrust Duties and Powers
The Goals of the FTC's Antitrust Policy
Explaining Outocmes: The Conventional Wisdom
Antitrust Decision-making in the FTC
Conclusion: The Federal Trade Commission, Antitrust and Public Policy
Chapter 6: Food and Drug Administration, Paul J. Quirck
This chapter examines the response of the federal government to the problems of drug safety and efficacy. It will consider first the legislative origins of Food and Drug Administration (FDA) authority to regulate drugs and the terms of that authority. A second section describes various influences on the FDA's behavior and the resulting pattern of its decisions. In the third section, the effects of FDA regulation are discussed. Finally there is a brief consideration of possibilities and prospects for drug regulatory reform.
Through out the chapter there is a persistent theme: The political circumstances of prescription drug regulation have shaped - and continue to maintain - an inefficient basic statutory structure. Consequently, no matter how skillfully the FDA uses its authority, it provides inadequate consumer protection while imposing excessive burdens on the development of valuable drugs.
Content of the Chapter:
The Legislative Politics of Drug Regulation
FDA: Administrative Behavior
The Effects of Regulation
Chapter 7: Occupational Safety and Health Administration, Steven Kelman
Content of the chapter:
The Passage of the Occupational Safety and Health Act of 1970
Explaining Why the Agency Acts as It Does: Setting Regulations
Explaining Why the Agency Acts as It Does: Enforcement
Controversies over OSHA
Conclusion: OSHA - The Policy Issues
Chapter 8: Environmental Protection Agency, Alfred Markus
Even more important than these organizational arrangements were the provisions of the new statutes. Congress sought to reduce the risk that the agency would abuse its discretionary authority by placing sharp limits on that authority. The EPA was required to achieve specific air and water quality goals within a fixed - and short - period of time.
The contrast with older regulatory agencies is clear. The FTC does not have an explicit deadline to eliminate unfair methods of competition, nor is that goal given a clear definition. The Antitrust Division of the Justice Department was not give a timetable t end combinations in restraint of trade, nor was it provided with any legislative determination of what that objectives requires. In contrast, the EPA has been delegated clear goals and given specific timetables to achieve them. The creation of an agency with statutes possessing these attributes was an experiment in regulatory reform that has been called for many times by scholars who criticized the vague language of the older regulatory statutes.
The creation of agency with these attributes tests the theory that the bureaucracy needs clear instructions from Congress to eliminate sloth and to avoid "capture". This chapter aims to offer an account of this experiment.
Table of content:
The Passage of Pollution-Control Laws in 1970 and 1972.
The Tasks of EPA
Controversial Issues in Implementation
The Media, Professional Norms, the Courts, and Interest Groups
Chapter 9: Office for Civil Rights, Jeremy Rabkin
Table of content:
The Statutory Framework
Interpreting the Statutes
Explaining the Expansion of Regulatory Requirements
Chapter 10: The Politics of Regulation, James Wilson
Table of Content:
The Economic Perspective
Evaluating Economic Assumptions
The Origins of Regulation
The Behavior of Regulatory Agencies
The Regulatory Environment
Return to the Regulatory Reforms Course