Regulation and Public Interests: The Possibility of Good Regulatory Government.

• Author: Magill, M. Elizabeth
• Position: Book review

REGULATION AND PUBLIC INTERESTS: THE POSSIBILITY OF GOOD REGULATORY GOVERNMENT. By Steven P. Croley. Princeton: Princeton University Press. 2007. Pp. xii, 379. Cloth, $65; paper, $27.95.

INTRODUCTION

There is no hidden agenda in Steven Croley's (1) new book. Franklin D. Roosevelt's words appear in the book's concluding pages. Administrative tribunals, Roosevelt claimed in 1940, leveled the playing field between "a powerful and concentrated interest" and "a diversified mass of individuals" (p. 304). Croley's book likewise defends regulatory agencies from their modern-day public choice critics. And it does so for the reason Roosevelt identified: agencies are able to resist the demands of special interests and regulate on behalf of the public. Croley's book is careful and scholarly, but it is also a spirited defense of regulatory government.

But there is an irony here. Roosevelt issued that statement in 1940 as he vetoed the Walter-Logan Bill. That bill, a precursor to the 1946 Administrative Procedure Act, would have imposed additional procedural requirements on agencies and subjected their actions to more intensive judicial review. (2) Roosevelt saw this bill as an effort to undo his legacy by crippling New Deal agencies. (3) Where Roosevelt saw a threat, Croley finds the possibility of public-interested regulation. Administrative process and judicial review actually provide agencies freedom to regulate in the public interest.

Croley's book has two agendas. Agenda number one is to identify the crucial elements of public choice theory and systematically critique them. Croley argues that regulatory agencies do not play the role that public choice theories assign to them: agencies do not systematically deliver rents to concentrated interests. Agenda number two is to construct and defend an alternative theory that he calls the administrative process account. Croley asserts that, under certain conditions, agencies will regulate to advance social welfare (p. 295). More specifically, agencies will use their autonomy to promote the interests of diffuse majorities at the expense of well-organized, concentrated interests, such as industry groups. George Stigler, the principal expositor of public choice theory, admitted that agencies might regulate in the way Croley asserts they can. In Stigler's memorable words, however, such occasions were "[t]emporary accidents." (4) To Croley, they are not accidents.

One is struck at first by the breadth and rigor of this book. Croley's critique, his alternative account, and his case studies are careful and analytically rigorous. He considers arguments and counterarguments; he traces their origin and shows the reader their flaws. There is nothing here that is casual or tossed off. These features, along with the book's clear, jargon-free, and engaging writing, make it an especially helpful book for those of us who teach in public law fields. I have not read a clearer description than those contained here of Mancur Olson's classic The Logic of Collective Action, (5) or of Russell Hardin's extension of the theory. (6) Nor have I read a better description of Stigler's seminal work, A Theory of Economic Regulation. (7) For someone new to public law, or students in advanced classes and seminars, Croley's book is an invaluable resource.

Croley has done much more than write a lucid and learned book. His analysis of the behavior of agencies is an important contribution to our understanding of government regulation. Croley's foundational argument is that agencies have a great deal of autonomy. The argument is sophisticated, creative, and compelling. The existence of agency autonomy, Croley argues, undermines public choice theory (which treats agencies as agents of the legislature), and it supports his alternative administrative process account of administrative action (agencies can use their autonomy to regulate in the public interest) (p. 73). In the end, I argue that Croley's conclusions about what agencies do with their autonomy are in some respects unpersuasive, but, even so, his argument that agencies possess autonomy stands as a lasting contribution to our grasp of regulatory action.

In Part I of this Review, I will summarize Croley's book, focusing on his powerful critique of public choice theory and the alternative account that he develops and defends. Part II assesses the book, arguing that Croley is successful in demonstrating agency autonomy but less successful in showing that either administrator motivations or the administrative process tend to make agencies regulate in welfare-enhancing ways. As is often the case, the critique is more powerful than the construction of the alternative account. Even so, Croley's book should alter debates over the possibility of good government by placing the agency and how it does its business at the center of our understanding of government regulation.

1. REGULATION AND PUBLIC INTERESTS: A GUIDE

   Start first with a brief overview of Regulation and Public Interests. The book is divided into four parts. In Part I, Croley sets out the public choice account and identifies a variety of objections to it. In this part, he also considers alternative theories of regulation, including a sketch of his own theory, which he calls the "administrative process" account. Part II is devoted to establishing the foundations of the administrative process theory and offering a complete description of it. In Part III, Croley offers extended case studies of several regulatory initiatives, studies that, he argues in Part IV, defy the predictions of public choice theory and support his administrative process theory.

   A. The Public Choice Account and Croley's Critique

   The story is familiar. The state has benefits it can distribute and burdens it can impose. Anyone who can convince the state's decision makers to do what he wishes has a lot to gain. Present members of the coal industry, for instance, would like to have no new competitors or to raise the price of natural gas. Such measures would benefit them, but they might cost the rest of us more. But that doesn't matter to the coal industry, because their interest groups organize to pursue the selfish interest of their members.

   Everyone can be in a group and lobby state decision makers, so why can't the many defeat the few? In theory, everyone can organize, but some groups are (a lot) better at it than others. As Mancur Olson taught us, there are powerful barriers to collective action. (8) We all have limited time and resources. Joining a group and lobbying eats up those scarce resources and we'll only do it if it is worth the costs. Small (industry) groups can more easily overcome these barriers because each member of the group has much to gain and doesn't have to share those benefits with anyone else. Larger groups, by contrast, may have more votes, but they will have trouble organizing. The large aggregate cost is spread out over so many people that the cost to each is small and those who work to change the policy cannot keep the benefit for themselves.

   Asking for benefits is one thing and getting them another. Why would politicians--who are after all elected by all of us paying more for (for example) coal-fired power--give the interest group what it wants? The politician has his own interest too: getting reelected. To achieve that goal, he needs resources. So if the interest group can provide enough resources and those of us paying for what the interest group wants are not complaining too loudly, the politician will supply what the organized group wants.

   One final step: most statutes are turned into on-the-ground reality by bureaucrats who fill in the details, and those details can be critical. There are two ways that the picture of the exchange between interest groups and politicians converts into a similar story about agency action. Politicians can control the bureaucrats--by, for instance, controlling the bureaucrats' budgets or jurisdiction, which bureaucrats want to maximize--and hence make sure that agencies deliver on the promises made in the legislation. Alternatively, even if the politicians cannot completely control the bureaucrats, the bureaucrats, for their own reasons, may give interest groups what they want.

   Familiar, insightful, influential, and depressing. But is it true? Many people--perhaps most importantly Nobel Prize winner George Stigler-have devised and defended elements of this theory. (9) Regulations that contradicted this theory were, in Stigler's words, merely "[t]emporary accidents." (10) Perhaps as many people have devoted themselves to refining, rethinking, or criticizing it. (11)

   It is this description of regulation, which Croley labels the public choice account, that is his target in Regulation and Public Interests. Croley starts by identifying the four central claims of the public choice account (p. 27). First, interest groups seek regulation that advances the selfish interests of their members. Second, some groups--small, narrowly focused groups with a lot to gain--are able to overcome the collective action problems that inhibit organization. Third, legislators provide such groups regulatory favors in exchange for the resources needed to get reelected. Finally, when agencies implement statutes, they assure that those concentrated interests receive the rents, either as a result of legislative control or bureaucrats' own interests.

   Croley not only lays out these claims, he discusses their underlying theoretical foundations and systematically critiques them (pp. 29-52). His most important arguments involve agency behavior. These arguments constitute both his most original critique of public choice theory and the essential building blocks of his own administrative process account of regulation. Croley identifies a series of difficulties with the role agencies play in public choice theory (pp. 47-48). Croley first argues that the legislature does not dominate agencies. To the...