Friday, August 7, 2015
UK and US regulatory agencies
I am writing and thinking about the present and future of independent regulatory agencies. One interesting thing is the comparison between the US and the UK. The reformers in the UK in the late 1980s did not expect to create a permanent system of regulation (as Jon Stern explained), as they were influenced by the Austrian School view that markets, and not regulation, were the best mechanism to promote efficiency. Independent regulatory agencies to control market power had also existed for decades in the USA since the creation of the Interstate Commerce Commission in 1887. Today there are two federal American anti-trust agencies, one that is part of the executive and therefore not independent, the Antitrust Division of the Justice Department, and the other that is formally independent, the Federal Trade Commission. In addition, there are federal regulatory agencies (such as FERC in energy and the FCC in telecommunications), and state antitrust and regulatory specific instruments, as well as an important role of private litigation. But international institutions such as the World Bank or the European Commission promoted regulatory agencies mirroring the UK model instead of the US model perhaps fearing the political appointments and complexity that characterized the latter. However, the reality is that many countries find it difficult to separate market power objectives from other objectives of regulation: macroeconomic objectives (stabilization and growth), equity, environmental concerns, and others. It is in this sense that perhaps institutional architectures that do not run away from complexity, but at the same time do not exclude the input from independent entitites for specific aspects, would be advisable.