- Historic Sites
The Controversial World Of
The Regulatory Agencies
April 1977 | Volume 28, Issue 3
Very often in regulatory proceedings, “the public interest” is far from a simple, self-evident proposition. Besides varying with time, and with the industry involved, it varies with the person or interest group defining it. The current energy-ecology-cost dilemma is perhaps the most dramatic example. It is extraordinarily difficult to say just what “the public interest” is in such matters as the burning of stripmined coal, the price of natural gas, or the comparative virtues of airlines, passenger trains, and automobiles as methods of transporting persons.
That these kinds of issues are the very ones that customarily come before regulatory agencies suggests the overwhelming reason why the agencies themselves are so controversial : the issues they address are steeped in discord. If the issues were not inherently difficult, it would not have been necessary to create regulatory agencies to deal with them.
This is not to say, with Alexander Pope, that whatever is, is right; that all existing agencies are necessary, and are doing a good job. Some of the regulatory functions once essential are now less so. Sometimes the same technology that crippled Adam Smith’s invisible hand can cure it, as has happened in parts of the transportation industry. ICC policies predicated on the existence of railroad monopolies, for example, make little sense in the presence of competition from trucks, barges, automobiles, and airlines. Thus, a natural monopoly in one era can be overtaken by events in another, and can find itself again subject to the discipline of market competition.
Of all the various criticisms of commissions, two seem most valid. The first is that their personnel have not generally been of the highest caliber the nation can offer. Historically speaking, men like Charles Francis Adams, Jr., and James M. Landis were the exceptions, not the rule. Even considering the many dedicated and talented men and women who have served on regulatory agencies, the inescapable conclusion is that, as a whole, commission service has not attracted the talent that, say, the federal judiciary has. The fault, of course, lies as much with the executives who appointed them as with the commissioners themselves. Positions have often gone to political hacks, or to cronies of governors and Presidents, or to defeated legislators who seemed worthy of a consolation prize. If, on the other hand, regulatory appointments go to specialists, the problem of the “revolving door” can arise. Numerous observers have noted the interchangeability of personnel between agency and industry, the easy shifts back and forth between public service and private employment. Reformers argue that the “revolving door” is conclusive evidence of the capture of agencies by regulated interests. Defenders, however, point to the exclusive possession of expertise within the private sector. They say that the choice often lies between someone with an industry background, on the one hand, and someone ignorant of the industry’s characteristics, on the other.
Efforts to halt the spin of the “revolving door” have raised still other difficulties. Such remedies as the “twoyear rule,” prohibiting former regulators from taking positions within regulated industries for two years after leaving an agency, have tended to discourage many capable persons from entering public service at all. Then too, since controversy and public dissatisfaction are largely built into the regulatory process, it could well be that many otherwise interested and talented persons have avoided it as too dangerous to their careers. The problem, in short, is not a simple one. But the one reform all critics of regulation might endorse is that in the future the field might attract, and executives appoint, better-qualified men and women.
The second justifiable criticism would not be easily remedied given the very best personnel. This argument, amply documented by recent studies, is that regulation sometimes wastes large amounts of money. The ICC, for example, has often pursued policies that cause particular kinds of freight to seek out the least efficient mode of transportation. Some mistakes of this nature could be corrected by common sense. But the more serious point is that regulators often face impossible choices between economic efficiency and fairness to all affected parties. The commissions have sometimes succumbed to a temptation to compromise disputes by splitting the difference, giving in now to one interest group, now to another, and occasionally to the consumer. Several conditions have promoted this kind of pattern: the substantial economic and political strength of some of the industries under regulation; the domination of the regulatory process by lawyers, whose stock-in-trade is compromise and due process; and the scant influence, until recently, of economists, whose professional prejudices lie on the side of efficiency at the expense of due process.