Wednesday, October 19, 2016

What's behind the structure of government

Legal scholars Kovacic (former chairman of the US federal Trade Commission) and Hyman have a series of articles on the determinants of regulatory agency structure. Their insights are of interest to those interested in the structure of human organizations in general. To form a new public agency, they argue that one must answer five basic institutional questions: (1) what will be the agency’s substantive mandate; (2) where will the agency reside within the existing framework of government entities; (3) how broad will the agency’s jurisdiction be (e.g., the entire economy, or only selected sectors); (4) how may the agency execute its duties (e.g., by gathering data, issuing reports, filing cases, promulgating rules, educating businesses and consumers, conducting administrative adjudication); and (5) how should the agency be governed (e.g., by a multi-member board, or by one chief executive)? Four basic processes serve to allocate regulatory tasks to public agencies. The first is direct assignment by statute.  A second source of regulatory authority is accident or fortuity. A third process is deliberate expansion into an unoccupied policy domain. The fourth way to allocate regulatory tasks is divestiture or dissolution by statute. Seven criteria help understand the specific structural form of regulatory institutions in a given jurisdiction:
-Policy coherence.
-Branding and credibility.
-Capacity and capability.
-Collateral effects on the regulatory ecosystem.
-Political Implications.
The authors argue that the most important of these criteria are the political implications, which they illustrate looking at the creation and evolution of antitrust and consumer protection agencies in the US. Being more familiar with the experience of sectoral regulators in Europe and Latin America, I agree.

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