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The Politics of Regulatory Reform

Congress is currently considering more than a dozen regulatory reform bills that would modify the procedures by which executive branch agencies issue new regulations.  Supporters of these bills hope they will increase the economic efficiency of regulations and bring more accountability to the regulatory process.  Opponents argue they will make it so hard for regulatory agencies to issue new rules that public health will be compromised.

North Carolina State CapitolIn our new book, The Politics of Regulatory Reformwe argue that both supporters and opponents overstate the impact of procedural reforms on regulatory policymaking.  Instead of seeking to determine whether supporters or opponents are right, scholars and concerned citizens should be asking why, given limited evidence of regulatory reforms’ effectiveness, politicians continue to be fascinated with these kinds of procedural changes.
The academic literature on the efficacy of regulatory reform paints a decidedly mixed picture.  Our book adds to that literature by investigating how the volume of rulemaking in 28 states might be affected by the presence of three regulatory reforms: gubernatorial review of regulations, legislative review of regulations, and economic analysis of regulations.  We find no correlation between these reforms and the number of regulations that a state produces.  Instead, we find that political control of the legislature correlates much better with the number of regulations adopted in a state than does any aspect of regulators’ procedural environment.  States with legislatures controlled by Democrats issue more regulations regardless of the number or type of steps in the regulatory process.
Given the lack of observable effects from regulatory procedures, we turn to the question of why states and the federal government continue to pursue regulatory reforms.  One possible explanation is that regulations are so consequential that even if regulatory reforms have a small impact, they may be worth pursuing.  But the literature on the relationship between regulation and the economy is at best ambiguous, a conclusion that we reinforce.
The Politics of Regulatory ReformAlthough the actual effects of regulation are at best unclear, it is very clear that business owners believe that regulations hinder their profit margins.  In surveying business owners in five Midwestern states, we found widespread concern about regulation inhibiting business activity.  It matters little whether this perception is the result of a genuine phenomenon not picked up in the economic literature or the result of political rhetoric that demonizes regulation.  In order to respond to their constituents’ perceptions about the harmfulness of regulation, elected officials find it politically efficacious to implement regulatory reforms.
If regulations are largely the result of substantive laws passed by legislatures and signed by governors, then the easiest way to address a regulatory problem is by repealing the laws authorizing regulations.  However, repealing such laws entails a political cost.  Few politicians want to bear the burdens associated with repealing statutes that were generally popular when they passed and that likely remain popular.  Thus, procedural reform provides a way for politicians to appear to be addressing concerns about too much regulation – all without actually doing much of anything.
Regulatory reforms also have a second appeal to politicians.  We conducted interviews with officials in Pennsylvania and North Carolina, two states that have been leaders in regulatory reform.  From these interviews, it became clear to us that politicians favored these reforms because they afforded elected officials opportunities to intervene in particular regulatory decisions. Their intervention does not even need to work in order to benefit politicians.
Consider one telling story we heard. After a legislator submitted a comment to a state authority established to review regulations, the legislator explained that he did not care if the officials at the review authority actually read his comment. He just wanted to be able to tell a constituent that he was trying to influence a regulatory decision about which the constituent had expressed concern.
These political motivations – more than any tangible efficacy of new procedures – have led to the explosion of regulatory reform proposals at both the federal and state levels.  The politics of regulatory reform is much more about politics than it is about regulation.

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