Enterprise Hall, 318
October 21, 2008, 08:00 PM to 07:00 PM
Independent regulatory agencies like the Federal Communications Commission (FCC) ostensibly are created and sustained to provide expert and non-politicized regulation of industries in which market failure is alleged to be likely. An alternative explanation is that these agencies are created for or are sustained in order to provide legislators a hard-to-detect means of favoring special interests. Additionally, it is important to examine whether top officials at these agencies will receive the proper incentives to promulgate efficient regulation. This study examines these issues with the hypothesis that the structure for regulating industries under independent regulatory agencies is unlikely to result in efficient regulation, and that legislators and regulators are more likely to distribute government-created rents. This hypothesis is examined with a combination of analytical history, public choice theory, theoretical models, and empirical testing. An important implication is that the costs of regulation are under-estimated, resulting in excessive regulation relative to the optimum.