Regulating the function, not the industry

Abstract

An accepted part of the regulation literature that documents the character and rate of growth of federal regulation in the 1970s uses a simple dichotomy to distinguish the character of social regulation and such things as EPA, OSHA, and EEO regulation from that of economic regulation and the activities of the ICC, CAB, and FCC.' But once the split is made, analysts are left with a puzzlement: Why did social regulation expand at such a rapid rate? Public interest theory, the theory of capture and the newer economic theories of regulation shed some light on the possible causes of certain particular regulations, but none of the theories of regulation explains the apparent shift to social regulation that occurred in the 1970s.2 We believe a feature of social regulation emphasized by Murray L. Weidenbaum provides a bridge to a consistent theoretical explanation of the form taken at the margin when regulation was expanding.3 The crucial Weidenbaum-identified feature is this: Social regulation focuses on economic functions marketing, production, credit practices, and personnel procedures, while economic regulation focuses on single industries and the functions within them.