Rethinking Regulation

Kenan Institute faculty workshop takes on challenge of making regulation work

Part of the A New Type of Classroom Series
Law's Jonathan Wiener and historian Ed Balleisen lead a classroom discussion about US regulatory agencies.  The class arose out of a faculty workshop on
Law's Jonathan Wiener and historian Ed Balleisen lead a classroom discussion about US regulatory agencies. The class arose out of a faculty workshop on "Rethinking Regulation." Photo by Les Todd.

Ronnie Endre was livid.  It was 2010, the middle of America's biggest economic meltdown since the Great Depression, and to Endre it appeared financial institutions were attempting to avoid responsibility and gut new regulations.

So he did what thousands of Americans did at that time: He vented in a letter, this one to the federal agency setting new financial rules in the aftermath of passage of the Dodd-Frank Act.

"Just how stupid do you think the working class is? we just passed the two bills of financial reform and here, not even 3 months later, you big banks are at it again to screw joe the plummer. aren't you wondering why everyone is preferring to do business at a credit union?....  whatch [sic] it or we all might just pull all of our money out of the banks and make you go under!"

The agency wanted advice on esoteric rules restricting banks from making speculative investments, but like many of the 1,400 other public comments on Dodd-Frank, Endre's letter instead offered a great deal of earnest and personal passion. And herein lies one great struggle for regulatory governance: How can the process be responsive to the will of the people while still expert and independent enough to effectively implement rules governing some of the most complex and important issues of our time? 

That challenge has been taken up by Duke historian Ed Balleisen and an interdisciplinary collection of 20 colleagues from Duke and UNC-Chapel Hill in a Kenan Institute for Ethics faculty working group.

"Regulatory governance is an enormous topic, one that is of great interest to academics in a variety of fields," said Balleisen. "The amount of governance that now occurs throughout regulation, not just through the state but also through quasi-public institutions, touches upon so many different elements of the lives that we live.  That's why it is a useful place for scholars to do interdisciplinary work and outreach with regulators, public officials and the people who participate in the process."

Government regulation is under assault. Based on a recent track record of failed oversight, including the Gulf oil spill and the 2008 financial meltdown, it's easy to understand why. There's strong evidence of decision-making being distorted by politics and campaign contributions, key players acting in narrow self-interest and a cozy relationship between regulators and the industries they oversee.

However, Balleisen said the goal should not be to bury regulatory governance but to reconsider how to make it effective.

"None of the scholars in Rethinking Regulation is saying that the current regulatory arrangements are necessarily ideal," Balleisen said.  "We believe that thinking hard about the assessment of regulatory policies is important, although the narrow cost-benefit analysis used by many critics of regulation may not be the best way to do it in every instance."

Through monthly meetings and outside lectures, the scholars in the working group are talking across disciplinary barriers, easing up on the jargon to produce research with useful recommendations, which they try to get in the hands of policymakers.

regulation playlist
Watch Duke on Demand videos of Duke faculty and speakers discussing the impact and workings of federal regulation.

Now in its second year, the workshop's results are showing up not only in Duke classrooms and in academic journals, but also in public and industry policy discussions.

"There's an inherent tension between people's legitimate democratic aspirations and the expertise that is needed to oversee complicated fields such as finance, environment or drug safety," said Balleisen, whose own research focuses on the history of financial fraud and the interactions among business, culture, law and politics.   To explore that tension, the workshop provides an interdisciplinary and ethics-based approach.

The opportunity to get interdisciplinary feedback on scholarship attracted Duke Law's Kimberly Krawiec.  She read every one of the 1,400 public comments on the Dodd-Frank regulations for research exploring how much influence the public had in the making of complicated financial regulations. (Read her paper here.)

"My comparative advantage as a lawyer is a willingness to dig deep into the technical aspects of the legislation and proposed rules to uncover the open issues that are likely to impact the effectiveness of the legislation," Krawiec said.  "The broader point of how a piece of legislation progresses from the start through to enforcement is one that can be addressed by researchers in numerous fields, including political science and history."

Krawiec said the challenge of presenting research to faculty outside of Duke Law forced her to stretch her scholarship.  "The benefits from that type of engagement are much more meaningful and really pay off over the long term," she said. 

The workshop is also finding its way into Duke classrooms. This semester, Balleisen and law professor Jonathan Wiener teamed up to teach a university-wide seminar on regulation.  (For a Chronicle of Higher Education story featuring the class, click here.)

"Ethical inquiry," Balleisen said, "adds an element that is frequently missing from   discussion about regulatory institutions. Mainstream scholarship on regulatory governance, he said,  "can benefit from moral concepts more seriously." 

"One idea that is now attracting a great deal of attention," he observed, "is to promote experimental regulation, using actual tests to try something out.  But experimental policy-making may intensify the role of the expert, potentially distancing democratic aspirations.  In that case, we have a situation of clashing political goals. Ethical inquiry is important in resolving these conflicts."