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Reform Ideas

Regulatory reform is a promising area for bipartisan cooperation. At the national level, deregulation of trucking, airlines, and other major industries started as a Democratic initiative and was carried on by Republican administrations.

The Issue

Paul London, who served in the Clinton administration from 1993 to 1997, says bipartisan support for free trade, judicious use of antitrust laws, and the repeal of price and entry regulation in key sectors of the economy “made the prosperity of the 1990s possible.” More recent examples of deregulation, though, are more difficult to find.

During the 1990s, economist James L. Johnston offered a theory that regulation emerges when three conditions are present: the product or service is subject to substantial shifts in supply and demand, supply reliability cannot be achieved through precautionary stocks or other market techniques, and substantial social costs are incurred when supplies are interrupted or demand suddenly increases.

Our Stance

If an industry has one or two but not all three of the traits of an industry that should be regulated, then a deregulation effort should be tailored to address the one or two areas where markets might not be expected to succeed without high social costs. For example, the high social cost of hurricanes and other extreme weather events could be addressed through insurance programs or nonprofit programs that reward voluntary efforts to preserve fragile shorelines.