Christopher Carrigan

Clarity or collaboration: Balancing competing aims in bureaucratic design:

Following the Gulf oil spill and US housing meltdown, policy-makers revamped the associated administrative infrastructure in an effort to sharpen each agency’s focus, based on the perspective that asking an organization to fulfill competing missions undermines performance. Using a formal model, I demonstrate that priority goal ambiguity introduced when an agency balances multiple roles does have detrimental effects. Yet, assigning competing missions to one organization can be better than separating them, as the underlying tasks supporting the goals may require coordination. In fact, it is precisely when ambiguity becomes more debilitating that the importance of coordination intensifies. Moreover, if the bureau is misinformed about which goals are more valued politically, fostering uncertainty in agencies charged with multiple goals can even be beneficial. The article thus describes how such organizations function and why these arrangements persist, demonstrating that structural choices impact behavior even when agencies and overseers agree on policy objectives.

Capturing Regulatory Reality: Stigler's The Theory of Economic Regulation

This paper offers a retrospective assessment of economist George Stigler’s classic article, The Theory of Economic Regulation. Stigler argued that regulation is a product that, just like any other product, is produced in a market, and that it can be acquired from the governmental “marketplace” by business firms to serve their private interests and create barriers to entry for potential competitors. He challenged the idea that regulation arises solely to serve the public interest and demonstrated that important political advantages held by businesses can contribute to industry capture of the regulatory process. Although his argument was largely based on the theoretical framework he developed, Stigler also illustrated his insights with empirical evidence from state-level regulatory schemes, including trucking regulation and occupational licensing. In this paper, we re-examine Stigler’s argument and analysis more than forty years later. Despite the great value of Stigler’s work in illuminating the problem of regulatory capture, his influential article nevertheless did exaggerate the power of business over regulators, as he suggested the existence of nearly an iron law of business control that clearly does not exist. He also confusingly conflated elected legislators with more independent agency bureaucrats, failed to rule out the public interest theory of regulation, and relied in part on unrealistic assumptions about the political economy of regulation. Notwithstanding these shortcomings, Stigler’s ground-breaking theory holds enduring value to both scholars and policymakers, and his innovative use of economic principles and empirical analysis provides a much-needed template for the further study of regulation and regulatory institutions even today.

Chapter 1. Oversight in Hindsight Assessing the U.S. Regulatory System in the Wake of Calamity

Has the United States suffered a regulatory breakdown? The answer to this question might appear to be an obvious “yes.” Over the past several years, the nation has suffered not only a sustained economic downturn triggered by a cataclysmic financial crisis but also one of the worst environmental disasters in American history as well as numerous other industrial accidents and explosions. Following each calamity, regulation takes the blame. The regulatory system is too slow or too lax. Or, on another account, it is excessively costly, killing jobs and hampering economic recovery. No one lauds the regulatory system today – but in truth, regulation is far less clearly to blame for the nation’s problems than most of us think. In this paper, we explain how psychological and political factors have contributed to the current crisis of confidence over regulation, as politicians and the public inevitably seek something to blame when calamities occur. Yet regulation manages risk; it does not eliminate it altogether, at least not if it does not ban a risky business activity outright. When a disaster does occur it may not necessarily reflect the failure of regulation but may instead simply be the expected but rare and tragic consequence of a regulatory policy that responds to and makes tradeoffs in society’s competing values. For these reasons, we caution against leaping to the conclusion that regulation has failed whenever disaster occurs.