Chapter 4: The Formal Independence of Regulators: Empirical Analysis
INTRODUCTION Independent regulatory agencies are the cornerstones of the regulatory state that has come into being throughout Europe during the last 15 years. In Chapter 3 we saw that delegation to independent regulators is in many ways puzzling: normally we would not expect political principals to grant signiﬁcant powers to administrative agents and then make them explicitly independent, at least in part, of political control. Therefore, delegation to IRAs cannot be explained simply by the need for specialization and expertise: these factors certainly matter for the creation of specialized agents, but not for making them independent. Therefore, three complementary explanations were developed. The ﬁrst argues that granting formal independence to regulators is a way for policy makers to increase the credibility of their policy commitments, which is a valuable asset especially when one of the main goals of regulation is to maintain an investor-friendly environment. The second explanation is also linked to the inherent instability of policies, but focuses on the dangers posed by the democratic process for the survival of the policy choices of current policy makers. Since majorities come and go, future policy makers with diﬀerent preferences are in a position to undo the achievements of current policy makers. Delegation to independent authorities, from this perspective, is a means for current policy makers to increase the durability of their choices by protecting them from political inﬂuence, both present and future. The third explanation stresses the institutional context: in the presence of many veto players, policies...
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