Quiz Ch. 8-11 Flashcards
Why Regulation
Government intervention in a free enterprise economy - justified only when market is unable to serve the public interest - such as, in instances of market failure
Market failure attributed to
Imperfect information
Monopoly
Externalities
Public goods
Three general arguments: Philosophy and Polotics
Regulation necessary for the protection and general welfare of public
Regulation developed at the request of industry - operated primarily for the benefit of industry
Bureaucrats who perform government regulation are themselves a powerful force in maintaining and expanding that regulation
Commerce clause of the U.S. Constitution:
Broadly specifies the power accorded to the federal government to regulate business activity
Affords Congress exclusive jurisdiction over foreign commerce
Federal power has broad reach over activities that are economic in some sense
Supremacy clause
sometimes state or local law conflicts with federal law
Confusion in the middle ground of interstate commerce - regulation by the federal government or state governments or both may be permissible
Issue - whether regulation is unconstitutional because
It discriminates against interstate commerce or
It unduly burdens interstate commerce such that the burden imposed clearly exceeds the local benefits
Globalism vs Nationalism
Rules are generally common in Europe
This tendency renders the EU nations less competitive on the world scene
Europeans often regard rules as necessary for safety and fairness
Rules are generally less common in America
For example, proof of chemical safety prior to market entry is not required by law
Standardization
Consistent global rules achieving seamless international trade would bring dramatic savings
But that goal is far off
Summary of State and Local Regulation
States primarily responsible for regulating the insurance industry - involved in regulating banking, securities, and liquor sales
Local regulation is much less economically significant than state regulation
Local government intervention in business typically involves various licensure requirements
Administrative Agencies and the Regulatory Process
Agency - according to federal law, it is any government unit other than the legislature and the courts
The administrative law governing those agencies technically addresses the entire executive branch of government
Two kinds of federal agencies
Executive - located within departments of the executive branch of the government
Independent - created by the Congress via statutes
Agency duties
Control of supply
Control of rates
Control of conduct
Information
Standards
Product banishmentsAgency action guided generally by the 1946 Administrative Procedure Act (APA)
Congress enacted to provide a framework for agency rule-making and to detail broad standards for judicial review of agency decisions
Executive Functions
Basic executive duty - implement the policy provided in the enabling legislation and in the agencies’ own rules and regulations
Agency activity consists of performing mundane, repetitive tasks
Agencies enter into contracts, lease federal lands, register securities offerings
Agencies award grants, resolve tax disputes, settle workers’ compensation claims, administer government benefits to the citizenry
Part of the agencies’ executive duties is the protection of the public by ensuring compliance with laws and regulations
Legislative Functions
Agencies create rules that are laws
Agencies enact three types of rules:
Procedural rules - delineate agency’s internal operating structure and methods
Interpretive rules - offer agency’s view of meaning of those statutes for which agency has administrative responsibility
Legislative rules - policy expressions having the effect of law
The rule-making process: APA provides informal and formal rule-making processes for legislative rules
Hybrid rule-making: informal rule making with additions in the form of some trial elements - has effect of providing a more detailed record without all of the procedural requirements of formal rule-making
Judicial Functions
Agencies commonly must turn to judicial proceedings to enforce agency rules
Issues facing agencies could properly be resolved either by:
Rule-making - involves standards to be applied to the future conduct of a class of unspecified parties
Adjudication - addresses specific parties involved in a specific present or past dispute
Typically, after an investigation, a violation of a statute and/or rule may be alleged - affected parties are notified
Failing a settlement, the parties proceed much as in a civil trial - ordinarily the case is heard by an administrative law judge
Executive constraints
The president appoints top administrators for various agencies
Influences conservative or liberal slant of the agency
Congressional constraints
Congress creates and can dissolve agencies
Congress controls agency budgets
Congress encourage or discourage particular agency action
Judicial review
Agency rules and orders may be challenged in court
