Chapter 9: Beyond the Logic of the Market: Toward an Institutional Analysis of Regulatory Reforms
Marc Allen Eisner After nearly a century of regulatory expansion, the United States entered a period of regulatory reform in the mid-1970s. During the previous decade, the case for government regulation came under prolonged scrutiny. Academic analysts and activists from the consumer movement identified serious cases of regulatory failure and compiled case studies that reinforced earlier scholarly works on regulatory capture and life cycles (see Herring 1938; Huntington 1952; Bernstein 1955; Kolko 1963). The critique of regulation was not the sole property of the left. Chicago school economists were developing the economic theory of regulation, modeling regulation as a series of mutually beneficial exchanges between profit-maximizing firms and vote-maximizing legislators (see Stigler 1971). Despite the obvious ideological differences, there was a broad consensus that many regulations protected regulated interests, foisting the costs on to the public. As the arguments against regulation mounted, stagflation created a window of opportunity for policy change (see Derthick and Quirk 1985). Excessive regulation was linked – albeit often only rhetorically – to rising inflation, stagnant growth, and flailing competitiveness. Policymakers concluded that the costs of economic regulations often exceeded whatever benefits might be claimed. Deregulatory initiatives were successfully introduced in commercial banking, communications, and air and surface transportation. In some cases, these initiatives mandated the wholesale elimination of well-established regulatory agencies. When combined with the rejection of Keynesian demand management, the promotion of greater trade liberalization, and welfare reform, deregulation became one of the pillars of neoliberalism. If earlier policy regimes had vested authority in state institutions...
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