Professor Susan E. Dudley
Director, Regulatory Studies Center
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Philosophical underpinnings of US regulatory
policy & process
Changing role of regulation in the US
Case studies of regulatory change
◦ Economic regulation
◦ Social regulation
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US regulatory process & policy today
Stories!
◦ OIRA Administrator
◦ Interaction between WH, Agencies, Congress,
Courts
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
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Establish Justice,
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Insure domestic Tranquility,
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Provide for the common defence,
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Promote the general Welfare,
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Secure the Blessings of Liberty to ourselves
and our Posterity
The U.S. Constitution, September 17, 1787
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
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“Justice”
◦ Transparent & accountable
◦ Administrative Procedure Act
◦ Recourse for affected parties
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“General Welfare”
◦ “Public interest” vs. special interest
◦ Role of analysis to define “public interest”
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“Blessings of Liberty”
◦ Value freedom & diversity
◦ Role for market forces
◦ Non-enumerated powers left to States & People
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
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Police power
◦ Restrict individual rights and property rights
◦ To protect general security, health, safety, morals,
welfare
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Federalism
◦ Police power belongs to states
◦ Zoning & property regulation
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Commerce clause
◦ “To regulate Commerce with foreign Nations, and
among the several States, and with the Indian
Tribes"
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
Legislative
Make
laws
Executive
Judicial
Execute
laws
Adjudicate
laws
Laws
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
US

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Legislative Branch
issues & President signs
legislation
Executive Branch
implements regulation
◦ Regulatory analysis
◦ Executive oversight
◦ Public comment
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EU
Judicial Branch hears
appeals
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European
Commission
proposes legislation
◦ Impact Analysis
◦ Inter-service
consultation
◦ Stakeholder
consultation
European Council &
Parliament amend
◦ Additional impact
analysis possible
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
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Taxation & subsequent spending
◦ Fiscal budget
◦ Appropriations
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Legislation & regulation
◦ Police power
◦ “Off-budget”
◦ Benefits and costs less transparent
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OMB’s role
◦ Budget
◦ Regulation
– Management
– Legislation
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
Federal Register Pages: 1940-2009
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
1958
1956
1954
1952
1950
1948
1946
1944
1942
1940
0
Response to concerns over “delegation” of
legislative authority to Executive branch
 Agency can only act within limits set by
statutes
 Agency must follow specified procedures
 Agency actions must be
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◦ Reasonable (supported by record)
◦ Not arbitrary and capricious
◦ Not an abuse of discretion
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
Federal Register Pages: 1940-2009
100000
90000
1970s - 1980s:
Period of regulatory
change
80000
70000
60000
50000
40000
30000
20000
10000
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
1958
1956
1954
1952
1950
1948
1946
1944
1942
1940
0
Budgetary Costs of Federal Regulation
Adjusted for Inflation
$60
Billions of Constant 2005 Dollars
$50
$40
$30
$20
Social
$10
Economic
2010
2005
2000
1995
Years
1990
1985
1980
1975
1970
1965
1960
$0
Source: Weidenbaum Center, Washington University and the Regulatory Studies Center, the George Washington University.
Derived from the Budget of the United States Government and related documents, various fiscal years.
Staffing of Federal Regulatory Agencies
300,000
Full-time Equivalent Personnel
250,000
200,000
150,000
100,000
Social
50,000
Economi
2010
2005
2000
1995
Years
1990
1985
1980
1975
1970
1965
1960
0
Source: Weidenbaum Center, Washington University and the Regulatory Studies Center, the George Washington University.
Derived from the Budget of the United States Government and related documents, various fiscal years.
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Justified by
◦ Natural monopoly
◦ “Destructive competition”
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Generally controls:
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Price (max or min)
Quantity
Service Quality
Number of firms
Often industry-specific/Independent agency
◦ Airlines (CAB)
◦ Rails (ICC)
◦ Telecommunications (FCC)
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
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Goal – mimic competitive market prices
Hard to get regulated price right
◦ Prices > competitive levels reduces consumption
◦ Prices < competitive levels creates shortages
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Cost-of-service regulation inflates costs
Regulation stifles innovation &
entrepreneurship
Encourages “rent-seeking”
◦ Regulation transfers wealth
◦ “Dead-weight losses”
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
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Despite opposition from vested interests:
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Airlines
Interstate trucking
Telecomm
Oil & gas
Outcomes generally a success
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Lower prices for consumers
Increased choices
Service quality & customer preference better aligned
Innovation & real social gains (some unanticipated)
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
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Academic research
◦ Evaluate existing policies
◦ Identify problems
◦ Propose alternatives
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Advise political process
◦ President, Congress, Courts
◦ CWPS, CAB, OMB, CEA
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Policy promotion
◦ Gain political support
◦ Collaboration between analysts & lobbyists
◦ Communication & selling
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
Budgetary Costs of Federal Regulation
Adjusted for Inflation
$60
Billions of Constant 2005 Dollars
$50
$40
$30
$20
Social
$10
Economic
2010
2005
2000
1995
Years
1990
1985
1980
1975
1970
1965
1960
$0
Source: Weidenbaum Center, Washington University and the Regulatory Studies Center, the George Washington University.
Derived from the Budget of the United States Government and related documents, various fiscal years.
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Health, safety, environment
Across industries
◦ Environmental Protection Agency
◦ Dept of Transportation
◦ Occupational Safety & Health Administration
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Different justification
◦ Externalities
◦ Inadequate (asymmetric) information
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Regulatory reform vs. deregulation
◦ “Smarter” or “Better” regulation
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
Authorizing
legislation
 Unified Agenda
 Draft proposal
 Executive review
◦ SBREFA
◦ OIRA
 Public comment

Revisions
 OIRA review
 Final rule
published
 Congressional
review (CRA)
 Judicial review
(lawsuits)
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Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
US – Regulatory impact
analysis
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Economically
significant rules
Issuing agency has
primary responsibility
OIRA reviews &
coordinates
Net benefits focus
• Identify need
• Examine alternatives
• Understand consequences
(benefits & costs)
EU – Impact assessment
•
•
Most important & far
reaching rules
Lead DG has primary
responsibility
• Inter-service Steering
Board
•
•
Impact Assessment
Board reviews
Consider 3 types of
effects
• Economic
• Social
• Environmental
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu
Need for regulation (market failure)?
 Federal role?
 Alternatives?
 Costs, effectiveness, benefits?
 Quality of supporting information?
 Distributional effects?
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www.RegulatoryStudies.gwu.edu
International regulatory coordination
 E-government
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◦ Transparency
◦ Engage public
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Regulatory analysis
◦ Resistance to analysis
◦ Intergenerational & global issues
◦ Behavioral research
Susan E. Dudley, Director
GW Regulatory Studies Center
www.RegulatoryStudies.gwu.edu