The political economy of regulation has long been dominated by well-organized interest groups that use the regulatory process to defend their own self-interest from public harms. As a result, the regulatory system often fails to protect citizens from monopoly abuses, threats to health and safety, and degradation of the environment.
A policy reform that does not address these shortcomings is likely to be short-lived. It will be subject to the same kinds of political pressures that generate the resistance that thwarts most reform efforts. In a polarized society, it is difficult for any one interest group to generate the countervailing political pressure necessary to overcome industry resistance.
Consequently, the success of any policy reform depends on a broad coalition of interests that can build momentum for its implementation. It also requires an ability to identify and exploit “win-win” opportunities. A good example is a policy that promotes private ownership of the utility networks, which will produce higher investment levels (based on tariffs better aligned with underlying costs), productivity gains, service coverage expansion and improved customer satisfaction.
The demand for policy reform is generally tied to a perception of growing government breakdowns, declining confidence in the effectiveness of government overall and recent or current events that have stimulated a public outcry. Americans have a particularly keen sensitivity to government breakdowns, and they will not forget tragedies like the 9/11 terrorist attacks, the Shuttle Challenger disaster, the sluggish response to Hurricane Katrina, vaccine and medical supply shortages and stimulus checks sent to dead people.