The December issue of the Review of Network Economics is a special issue on regulation in network industries. I’ll have more to say on some of the other papers later, but for now I’d like to recommend reading Ray Gifford’s paper on regulatory impressionism. It’s a really superb analysis of what regulators can and cannot do. Ray reminds us that the institutions we inherit from our predecessors matter a great deal in determining our policy choicese, and that we have to address regulatory institutions as they are, not as we wish they were or as some stereotype of rent seeking. His conclusion certainly gives me pause:
Truth be told, state regluators do not have the time, resources, or abilities to innovate or found new schools of competition policy … In the end, regulators cannot do more than they can do. Burdened with multiple subject-matter jurisdictions, limited background and training in the subject matter of network econoimcs, limited resources, and limited means to get the “right” regulatory answers, it is a wonder that state regulatory institutions can manage the job at all.
This is an important paper, one that I’ll reread several times, and one that I recommend to all interested in the reality of regulation of network industries.