Académique Documents
Professionnel Documents
Culture Documents
Regulation in America:
A Historical Overview
Thomas K. McCraw
Editor's Note: The following article is excerpted from the concluding chapter of Thomas
McCraw's Prophets of Regulation, an important new study of the history of government
regulation in the United States. The book focuses on four individuals who played a major
role in shaping American regulatory policy: Charles Francis Adams, the Boston aristocrat,
who created and headed the Massachusetts Board of Railroad Commissions, the nation's
first important regulatory agency; Louis D. Brandeis, the noted trial lawyer and supreme
court justice, whose views on bigness and competition influenced the establishment of the
Federal Trade Commission; James M. Landis, who played a critical role in creating one
of the most important regulatory agencies established by the New Dealthe Securities
and Exchange Commission; and Alfred E. Kahn, the Cornell University professor of
economics, whose efforts were instrumental in abolishing the Civil Aeronautics Board and
ending government regulation of the airline industry.
As the historical records sho"w, the regulatory tradition has been adapted
to many different ends and purposes. Regulation has served as a versatile
tool whose handle has been seized at different times by reformers, business
managers, bureaucrats, and la"wyersand manipulated as often for the
particular interests of one of these special groups as for the general interest
of the American public.
Over time, regulation has performed not only economic tasks, but politi-
cal, legal, and cultural ones as well. Among the many particular funtions
that regulation has been used to serve are:
116
REGULATION: A HISTORICAL OVERVIEW 117
containment of monopoly and oligopoly (FPC, FTC, Antitrust Division,
state utility commissions);
promotion of safety for consumers and workers (Consumer Product
Safety Commission, Occupational Safety and Health Administration);
legitimization of the capitalist order (SEC, Environmental Protection
Agency).
References
L The most useful models of agency behavior tend to be based on medium-range generali-
zations. See, for example, the classifications by James Q. Wilson around the themes of
concentration and diffusion of costs and benefits: "The Politics of Regulation," in James
W. McKie, ed.. Social Responsibility and the Business Predicatnent (Washington, D.C.:
Brookings Institution, 1974), pp. 135-168.
2. James Q. Wilson, ed.. The Politics of Regulation (New York, NY: Basic Books, 1980),
p. 393; see also Alfred E. Kahn, "The Political Feasibility of Regulatory Reform: How Did
We Do It?" in LeRoy Graymer and Frederick Thompson, eds., ReformingSocialRegulation:
Alternative Puhlic Policy Strategies (Beverly Hills, CA: Sage Publications, 1982), pp. 249-
251.
3. My point here overlaps but is not identical with the central argument made by Stephen
Breyer in Regulation and Its Reform (Cambridge, MA: Harvard University Press, 1982).
Whereas Breyer quite properly points out the need to match specific regulatory responses
to the type of problem at issue, I am emphasizing the need to tailor regulatory strategies
to industry structures and behaviors. On the relationship between structural and behavioral
models in modem economic scholarship, see the collection of essays edited by John V.
Craven, Industrial Organization, Antitrust and Public Policy {Boston, MA: Kluwer-Nijhoff,
1983), particularly the essays by Alfred E. Kahn and Oliver E. Williamson.
4. On the breakup of the Bell System, see Paul W. MacAvoy and Kenneth Robinson,
"Winning By Losing: The AT&T Settlement and Its Impact on Telecommunications," Yale
foumal on Regulation, 1 (1983): 1--42.
5. For discussions of regulatory theories, see George J. Stigler, "The Theory of Economic
Regulation," Bell foumal of Economics and Management Science, 2 (Spring 1971): 3-21;
Richard Posner, "Theories of Economic Regulation," ibid., 5 (Autumn 1974): 335-358;
Richard B. Stewart, "The Reformation of American Administrative Law," Harvard Law
Review, 88 Gune 1975): 1669-1813; Thomas K. McCraw, "Regulation in America: A
Review Article," Business History Review, 49 (Summer 1975): 159-183; McCraw, "Reg-
ulation, Chicago Style," Reviews in American History, 4 Qune 1976): 297-303; Barry
124 THOMAS K. MCCRAW
Mitnick, The Political Economy of Regulation (New York: NY: Columbia University Press,
1980); Paul Quirk, Industry Influence in Federal Regulatory Agencies (Prmceton, NJ: Prince-
ton University Press, 1981); Douglas Anderson, Regulatory Politics and Electric Utilities:
A Case Study in Political Economy (Boston, MA: Auburn House, 1981); Peter Navarro,
"Theories of Government Regulation: A Survey and Synthesis," unpublished manuscript.
Harvard University, 1981; and William Gormley, The Politics of Public Utility Regulation
(Pittsburgh, PA: University of Pittsburgh Press, 1983).
6. See, especially, Charles L. Schultze, The Public Use of Private Interest (Washington,
D.C.: Brookings Institution, 1977).