State Regulation: Captured Victorian-Era Anachronism or “Re-enforcing” Autonomous Structure?

Abstract

Is American state regulation a quaint anachronism from the nineteenth century, hanging on like a faded Victorian mansion in a twenty-first-century neighborhood increasingly subsumed by modern, international regulatory architectures? Or is it a booming area of devolved powers in our federalist system, creating more innovation and efficient small-scale bargaining than out-of-touch regulators in Washington do? Surprisingly, state regulation is becoming more important in shaping American firms operating in global markets. I present a revised interpretation of American regulatory federalism, including the gap filling or re-enforcement efforts by some state legislatures or attorneys general as federal regulators relax enforcement efforts. I summarize the results of 10 new quantitative studies of major regulated industries across the 50 states and over time. Overall, capture or rent-seeking models do not explain most regulatory areas, which show considerable interest-group contestation and provide room for institutional actors to wield autonomous, influential power. The heightened salience of state regulation is reflected by increased gubernatorial effort in many states, parallel to recent presidential efforts to centralize regulatory policy-making.