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Taming Regulation
Superfund and the Challenge of Regulatory Reform
By Robert T. Nakamura Brookings Institution Press
Copyright © 2003 Robert T. Nakamura
All right reserved. ISBN: 0815759428
Chapter One
Regulation, Coercion, and Popular Support This book deals with an intrinsic problem facing democratic government: How to reconcile the necessary use of coercion in regulatory programs with the need to retain popular support. It is also about the more practical and prosaic issue of how governmental agencies in the business of regulation might be transformed to succeed in this endeavor. Our analysis is wrapped around a case study of how a highly coercive, and extraordinarily unpopular program-the federal Superfund program, charged with cleaning up the nation's abandoned hazardous waste sites-saved itself from the ax of an antiregulation Congress bent on gutting the program. We believe this story holds lessons for how regulation can be made more acceptable, and more functional, while still retaining its inherently coercive qualities.
It is not surprising that coercion as a tool of government is universally disliked; this unpopularity is, of course, a particular problem in democratic polities. Economist Charles Schultze made the case for avoiding governmental compulsion in 1977 in his seminal book The Public Use of Private Interest. There he notes the irony of America's reliance on command-and-control policy tools: "For a society that traditionally has boasted about the economic and social advantages of Adam Smith's invisible hand, ours has been strangely loath to employ the same techniques for creative intervention. Instead of creating incentives so that public goals become private interests, private interests are left unchanged and obedience to the public goals is commanded." The closing decades of the twentieth century saw waves of policy initiatives aimed at achieving the ends of government through means that depended on voluntary choice rather than coercion. Market-based reforms continue to be favored alternatives to command-and-control regulation in environmental policy, health care delivery, welfare, and a host of other policy domains. The Reinventing Government movement in vogue during the administration of President Bill Clinton had at its heart a consumer- and market-based notion of how government should interact with the public-an orientation in which coercion has little place. The recent corporate accounting scandals may have temporarily dulled this enthusiasm for deregulation and reliance on self-regulation and markets, but regulation-bashing remains a hardy perennial in the American political landscape.
Interestingly, the normative evils of coercion as a tool of government are seldom subjected to theoretical analysis. Most commentators accept what has been termed the Moral Superiority of Voluntary Compliance as largely self-evident. That much being said, we have uncovered no serious commentator who entertains the notion that coercion can be entirely removed from the government's tool box. Our analysis thus proceeds from the commonsense notion that although the mix of coercive and noncoercive policy tools may well be optimized at a different level than currently exists, government will need to retain the quintessentially coercive penal law to restrain the most elemental aspects of antisocial behavior. There is as well substantial evidence of the continuing need for command-and-control regulation. One need look only at the more egregious recent examples of unrestrained corporate greed: the recent accounting scandals and accompanying imposition of a new regulatory framework on heretofore sacrosanct corporate auditors, the catastrophic saving and loan and arbitrage scandals of the early 1990s, and the continuing evidence of failed environmental stewardship on the part of a wide variety of business interests. This book thus raises two critical questions: First, how might government use its coercive regulatory tools more effectively-in both a political and a programmatic sense? Second, how might existing regulatory agencies, seldom known for innovation and risk-taking, overcome institutional inertia, individual resistance, and external obstacles to such changes?
Regulation as a Policy Tool
Policy tools are identifiable methods through which collective action is structured to address a public problem. They are the means by which government uses its inherent resources-the legitimate power to coerce and the attendant ability to tax and spend-to achieve policy goals such as a cleaner environment, a more productive economy, and public safety. Each policy tool, writes Lester Salamon, has "its own operating procedures, skill requirements, and delivery mechanisms, indeed its own 'political economy.'" In addition, each tool generates a distinctive politics.
Policy scholars have produced a number of different taxonomies of policy tools. However arrayed, they differ on two important dimensions: the extent to which the identified tool relies on governmental coercion, and whether it focuses on providing either the motivation or the requisite capacity of individuals to behave as the government wishes. The more voluntary tools achieve their ends by augmenting capacity (by providing subsidies, loans, vouchers, or information,) or affecting motivation through "soft" techniques such as exhortation or market-like incentives. The less voluntary tools use coercion or its threat to motivate the desired behavior. Examples include social and economic regulation, mandating mechanisms, and the criminal law. All these latter techniques assume that the regulated or mandated parties are capable of doing what the state wants but that they must be motivated to do so by the threat of various punishments at the government's disposal.
We begin with two propositions drawn from the policy literature. The first is that policies cause politics. Policies shape the politics of policy-making and implementation by making issues of what is to be done, how participants are to relate to one another, and the basic challenges to be faced. The second proposition is that policy tools differ in their implementation. Regulation is among the most difficult of tools to use successfully because it typically requires government agencies with insufficient resources to meet broad responsibilities in a polarized environment. Moreover, regulatory policies are frequently unpopular because they rely on coercion, thereby promoting an adversarial relationship between government and at least some of its citizens.
Policies Cause Politics
Policies cause politics, Theodore Lowi argued, because the choice of policies influences who wins and who loses. Lowi, a political scientist, was analyzing policies and politics on a grand scale, but a similar point has been made about the relationship between policy tools and the politics of tool choice. Lowi distinguished the politics of policies in terms of how the potential winners and losers are distributed and aggregated: the most polarizing policies redistribute resources between classes, while the least controversial programs distribute benefits to particular individuals or groups.
Distributive policies are popular among recipients and create supportive constituencies. Such policies pose administrative problems primarily related to determining eligibility. Their main political problem is keeping benefits targeted amid calls for greater dispersion. More coercive policy tools are seldom popular with the groups most directly affected, while the constituencies that support the use of such tools tend to be dispersed and disorganized. Administrative problems include the whole panoply of regulatory conundrums, especially definition of rules and standards, and choice of enforcement policies and practices.
Distributive and coercive tools also differ in how they define those who pay and those who benefit. Distributive policies often depend on the success of a strategy of collecting money as quietly as possible and distributing it as noisily as possible. Sustaining political support for distributive policies, then, depends on dispersing the costs to minimize the pain, or at least the awareness of pain, and concentrating the benefits to maximize gratitude. Regulatory and other coercive policies turn the equation around-a small population is forced to do things they do not want to do so that a larger public will benefit. The costs of regulation are borne by the regulated while most benefits go to others. Here pain is concentrated while whatever pleasure is to be derived is spread over a much larger population, one that may not even be aware that it is benefiting from harms that do not occur or catastrophes that do not happen. The central political problem of using coercive techniques is maintaining essential political support for such policies when detractors are often unified and powerful and supporters are diffused across a population. At a minimum, regulatory policies depend for their support on keeping beneficiaries aware of benefits received while finessing serious hostility from powerful interests in the regulated population. Experience has shown that few regulatory agencies are successful in this balancing act for extended periods of time.
Controversial Means
Policy tools are accompanied by characteristic machinery for putting policies into effect. Particular tools deliver distinctive social benefits and rely on characteristic delivery vehicles, with accompanying rules and procedures suited to implementing the policy. Coercion is cheap, at least in the short run, and promises to be effective, since the compliance that spells policy success is required of-and paid for by-others. But coercive programs inevitably create an adversarial relationship between government and those whose behavior the government is trying to influence. The hard edge of such programs is captured by Malcolm Sparrow, a professor at Harvard's Kennedy School, who has written that:
The core mission [of regulatory and law enforcement agencies] involves the imposition of duties. They deliver obligations rather than services.... Society entrusts regulatory and enforcement agencies with awesome powers. They can impose economic penalties, place liens upon or seize property, limit business practices, suspend professional licenses, destroy livelihoods. They can restrict liberty, use force, and even kill-either in the heat of some dangerous moment on the street or through the cold calculations of the execution room. They use these powers not against foreigners in war but against citizens in peacetime. How regulatory and enforcement agencies use these powers fundamentally affects the nature and quality of life in a democracy. Not surprisingly, regulators are scrutinized more closely and criticized more regularly for their uses or abuses of power than for their stewardship of public resources.
With power comes the possibility of the abuse of power and the virtual certainty of distrust and disagreement from those toward whom the coercive power is directed. In the case of law enforcement and the criminal law, the target population has little political muscle, at least outside the area of white collar and corporate crime. Moreover, the social need for a criminal justice system is undisputed. Regulation, conversely, negatively affects powerful social and economic interests, and the need, effectiveness, reach, and operation of regulatory agencies is more controversial. Indeed, controversy and criticism seem to inhere in regulation.
Perhaps just as important, the fundamental regulatory tasks-deciding how people should behave, monitoring their behavior, and enforcing standards against resistance-are seldom easy. Eugene Bardach has suggested some of the characteristic difficulties encountered by command-and-control regulatory programs: "Regulation is vulnerable to errors of underregulation or overregulation or to both simultaneously. Political pressures and scientific uncertainty can lead to overly stringent or overly lax standards. Standards can also be too prescriptive or too ambiguous. The enforcement process is vulnerable to budgetary strictures, over-concentration on symbolic targets, go-by-the-book rigidity, and in some cases corruption."
Statutory obligations on regulators are often demanding because the public wants high levels of protection, particularly if someone else is paying for it. Legislators often avoid making trade-offs between competing values, leaving this determination to regulators. The scientific base for making regulatory decisions about how-safe-is-safe-enough or how-clean-is-clean-enough is typically weak. Final decisions are therefore shaped by cultural dispositions, the politics of conflicting interests or, increasingly, in adversary proceedings in court.
Though critics of command-and-control policy tools may be unhappy with the activities of regulatory agencies, they have had limited success in repealing or significantly modifying major regulatory legislation. As a result, legislators have frequently resorted to placing procedural and resource obstacles in the way of agencies that are attempting to issue and enforce rules and regulations. These developments have not spawned an extensive literature, however, on how government regulators should respond to the problems presented by broad, often conflicting, statutory obligations, with too few resources, against the resistance and opposition of motivated opponents.
Organizational Change in Regulatory Agencies
If regulatory agencies are to respond to these challenges, they must change the way they do business. Of course, statutory provisions can be revised to force changes in the behavior of regulators. Repeal of authorizing legislation or sunset provisions, for example, can effectively terminate a program. And less draconian legislative or budgetary attacks can effectively cripple an agency or fundamentally alter its mission and mode of operation. But much of the criticism of regulation centers more on the behavior of regulators than on the design of statutes, and there is frequently inadequate political support for fundamental alteration in statutory frameworks. Given the difficulty of obtaining legislative consensus on major alterations in ongoing regulatory programs, many of the hopes for more effective regulation come from efforts to change the behavior of regulators without an accompanying modification in their statutory responsibilities or powers.
Achieving regulatory reform through administrative, rather than statutory, means has been advocated in the literature on regulatory enforcement, much of which focuses on the evils of "regulatory unreasonableness" and the practice of "going by the book." It has also been advocated in more general terms as a means by which regulators can moderate some of the inherent difficulties in regulation.
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Excerpted from Taming Regulation by Robert T. Nakamura Copyright © 2003 by Robert T. Nakamura. Excerpted by permission.
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