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Carrot and the Stick: What Are the Incentives Inside Regulatory Agencies?

“Incentives of individuals can often lead to different outcomes than originally intended” – Dr. Patrick McLaughlin

I sat down with Dr. Patrick McLaughlin, Senior Research Fellow at the Mercatus Center, George Mason University to discuss the regulatory process of special needs. Patrick points out an interesting forgotten fundamental element in the regulatory process – individual incentive. As procedures are passed down from Congress to the regulatory agencies, the incentives of individual regulators can steer the original intentions in a different direction. Understanding what is incentivizing individuals in the process is as important as the process itself.

Missing in the regulatory process is the critical need for retrospective analysis. Learning what changes to regulation worked vs. failed is an important undertaking that is sorely lacking. One of the reasons it barely exists is because it asks individuals to self-criticize, effectively spotlighting ineffectiveness. It’s like asking a student to grade their paper after they’ve handed in the assignment – you’d be hard pressed to find the honesty necessary to give a poor grade.

Again, it circles back to the theme of individual incentives.

Readings of Interest

Democrats in U.S. Senate try to slow Republican deregulation

Trump Discards Obama Legacy, One Rule at a Time

The Executive Pen May Be Mighty But Congress Has The Sword

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