Are Regulatory Agencies Delivering What They Promise?

Abstract

The wave of re-regulation in Western Europe has been sustained by policy-makers for more than two decades in order to correct market failures, to increase the allocative capacity of markets, and to promote the use of specialized knowledge in the policy process (Majone 1994; Majone 1996; Majone 2001a). Numerous independent regulatory agencies (IRAs) were created, such as telecommunication authorities, banking commissions, and competition agencies, to which a great deal of public authority has been delegated. Two main official rationales for delegation exist: on the one hand, the increasing need for policy credibility through independence from politicians; and, on the other, the aspiration of enhancing decision-making efficiency through expertise (Majone 1996; Majone 2001c). Policy credibility can be defined as the expectation that an announced policy will be properly carried out (Drazen and Masson 1994), so as to create credible policy commitments vis-à-vis stakeholders (e.g. foreign investors), consumers, and citizens (Shepsle 1991). Credibility is considered a crucial condition for solving the time-inconsistency problem related to the political cycle (Kydland and Prescott 1977; Barro and Gordon 1983). Decision-making efficiency designates the resource-saving implementation of predetermined goals (Blühdorn 2006). Accordingly, the purpose of delegation is to reduce decision-making costs by taking advantage of an agency’s expertise, while avoiding the enactment of policies different from those preferred by the political decision-makers (Epstein and O’Halloran 1999; Bendor, Glazer, and Hammond 2001; Majone 2001c).