Reforming Regulation

Many observers agree that federal regulation of business often fails to prevent monopoly profits, promote technological change, or protect consumers against market abuses. Why? President Nixon assigned the task of proposing reforms to his Advisory Council on Executive Organization, called the Ash Council after its chairman, Roy L. Ash. The object of both the Council’s report and this paper is to advance the public search for reform.

The council suggested that a leading cause of regulatory failure lies in the organization of regulatory agencies. This analysis leads to an alternative view—that the regulatory process is inherently flawed regardless of agency organization, and the real sources of weakness may be laws establishing regulatory mandates and the political environment in which regulation operates. Drawing on the insights of economists, political scientists, and lawyers, the author examines a number of federal regulatory agencies and views their performance in the light of regulatory theory. He prescribes no remedies but suggests the route to be followed if regulation is to approach its economic and social goals.

Roger G. Noll is professor of economics at Stanford University and a nonresident senior fellow at the Brookings Institution.