Notice & Comment

Considering Regulators in Research on Regulation, by Christopher Carrigan

Regulatory scholars have traditionally viewed the three primary actors in the regulatory process – political overseers, regulatory agencies, and regulated entities – as operating in a set of nested principal-agent relationships. In the first, the overseer, which might be Congress, the president, or the courts, functions as the principal, and the regulator is the agent. In the second, the regulator becomes the principal and the firm, which is typically the regulated entity, acts as the agent.

To study these relationships, the regulatory politics literature has tended to employ one of three perspectives. One focuses on the institutions used by political overseers to constrain the activities of regulatory agencies in what is sometimes called “new institutionalism” research. Although they also consider the implications of various approaches to agency design, scholars in this tradition have concentrated primarily on how procedural requirements governing the rulemaking process – including those mandating that regulators perform benefit-cost analysis, invite comments on their proposed rules, and subject their rules to executive review and judicial scrutiny – work to limit the extent to which agencies can promulgate rules that diverge from their overseers’ preferences. The second literature, referred to as “new governance,” has grown largely in response to the belief that traditional “command-and-control” regulation is too rigid and unyielding to manage the complexities of modern regulatory environments. This scholarship explores creative mechanisms that agencies can use to manage regulated entities, with instruments ranging from market-based approaches to information disclosure and from mandated planning to voluntary programs. Finally, a third set of studies examines the incidence of “regulatory capture,” investigating how firms can act to spearhead the creation of regulatory mandates that inhibit competition and to undermine existing regulation to favor their welfare over the public interest.

Noticeably missing from these three varieties of regulatory politics scholarship is an awareness for how regulatory agencies respond to the institutional constraints imposed on them by their political overseers. Stated differently, while scholars have worked to understand how political principals attempt to control regulators, how regulators attempt to control firms, and how firms respond to regulators’ efforts to control them, they have paid relatively less attention to how regulators counter political overseers’ efforts to curb their discretion. This does not mean that agencies have been completely ignored in scholarship examining the bureaucracy, which has demonstrated, for example, how agency officials secure autonomy from politicians. Even so, when compared to the three other topics, it is clear that much more work needs to be done to appreciate fully how regulators counteract the institutional frameworks designed to restrain them.

Rachel Potter’s Bending the Rules: Procedural Politicking in the Bureaucracy represents a major step toward plugging this sizeable hole in regulatory politics scholarship. Regulators are the stars of Professor Potter’s outstanding book, which explores the ways in which these public servants exploit their superior understanding of the mechanisms intended to restrain their ability to formulate rules that coincide with their preferences. And, as Potter demonstrates, the tactics regulators use to shepherd rule proposals through the process are varied and affect all stages of a rulemaking. They range from modifying the text of draft rules to make them more or less accessible to altering how interest groups provide input on proposed rulemakings to strategically timing when final rules are unveiled. By recognizing, much like the capture literature has demonstrated with respect to regulated firms, that regulators are not passive actors in their institutional environments, Potter’s book breaks new ground, focusing the reader on a largely neglected but important facet of how the regulatory process operates in practice. In the same way that regulated entities actively respond to regulators’ attempts at control, Professor Potter illustrates how bureaucrats themselves use the institutional environment designed to corral their behavior for their benefit.

By drawing attention to a largely overlooked topic, Bending the Rules represents an important advance in research on regulation. Yet what is perhaps most impressive about Potter’s work is the creativity she displays in illustrating the ways in which regulators use procedures to maximize their advantage. Despite sustained interest in regulatory capture, that literature has clearly revealed how much easier it is to allege manipulation than it is to illustrate manipulation exists. Finding evidence of capture remains elusive because establishing that an actor intends to undermine an institutional framework when the actor wants to conceal that fact is difficult. Thus, it is not surprising that knowledge of capture has developed in large part through case studies.

In her book, Potter makes good use of the case study approach as well in an illuminating account of how the Food and Drug Administration employed a variety of tactics to finalize a rule that matched its desire for a broad reaching requirement that food establishments include nutritional information on menus. Still, much of the evidence that Potter marshals to support her theory of “procedural politicking” comes from an impressive dataset that incorporates thousands of rules. Through it, she is able to utilize econometric methods to show that regulators respond to the opposition of their various political principals by attaching indecipherable abstracts to their rules, proposing them during congressional recesses, and slowing down their promulgation to outlast detractors. The end result is a comprehensive assessment of the many ways regulatory agencies work around the edges of their procedural constraints to steer their policies through the rulemaking process.

Commentators who examine regulation have been quick to point out that the myriad procedural constraints imposed on regulators have not necessarily resulted in more responsive policies. By peering inside the administrative agencies responsible for producing these rules, Professor Potter explains why. Given its innovative foray into the world of bureaucratic procedural manipulation, Bending the Rules will undoubtedly inspire regulatory politics research to consider more carefully how regulators try to outwit procedural requirements in designing the policies that govern almost all aspects of people’s lives. Still, the book’s most important contribution can be to motivate reformers to contemplate the incentives of regulators when designing procedures to control them. Stuart Shapiro and I have argued that procedural and analytical requirements governing the rulemaking process are all too often imposed on regulators through simple commands with little consideration of how these public servants might react to them. Professor Potter’s new book provides some of the clearest evidence to date that considering the preferences, motivations, and incentives of the regulators themselves is crucial to designing rulemaking procedures that actually result in better rules.

Christopher Carrigan is Associate Professor of Public Policy and Public Administration at the George Washington University Trachtenberg School and Co-Director of the GW Regulatory Studies Center. 

This post is part of a symposium reviewing Bending the Rules: Procedural Politicking in the Bureaucracy, a new book by Dr. Rachel A. Potter, Assistant Professor of Politics at the University of Virginia. All of the posts can be read here.